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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended March 31, 2020
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission File Number: 001-38906
IMMUNOVANT, INC.
(Exact name of Registrant as specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
320 West 37th Street
New York, NY
(Address of principal executive offices)
83-2771572
(I.R.S. Employer
Identification No.)
10018
(Zip Code)
Registrant’s telephone number, including area code: (917) 580-3099
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 par value per share
Trading
symbol(s)
IMVT
Name of each exchange
on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to section 12(g) of the Act: None.
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ NO ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ☐ NO ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). YES ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. YES ☐ NO ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the Registrant’s common stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s
common stock on the Nasdaq Capital Market as of September 30, 2019, the last business day of the Registrant’s most recently completed second fiscal
quarter, was approximately $115.3 million, based on the closing price of the Registrant’s common stock on the Nasdaq Capital Market of $10.02 per share.
As of June 29, 2020, the Registrant had 81,811,727 shares of common Stock, $0.0001 par value per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent
stated herein. Such Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended March 31, 2020.
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IMMUNOVANT, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended March 31, 2020 (this “Annual Report”) contains forward-looking statements that involve
substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,”
“estimate,” “expect,” “forecast,” “goal,” “hope,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,”
“target,” “will” and “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or
achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have
a reasonable basis for each forward-looking statement contained in this Annual Report, we caution you that these statements are based on a combination of
facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include
statements about:
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•
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future operating or financial results;
the effect of the COVID-19 pandemic on our business, operations and supply chain, including the potential impact on our clinical trial
plans and timelines, such as the enrollment, activation and initiation of additional clinical trial sites, and the results of our clinical trials;
future acquisitions, business strategy and expected capital spending;
the timing, progress, costs and results of our clinical trials for IMVT-1401, including its ASCEND MG, ASCEND GO and ASCEND
WAIHA trials;
the timing of meetings with and feedback from regulatory authorities as well as any submission of filings for regulatory approval of
IMVT-1401;
the potential advantages and differentiated profile of IMVT-1401 compared to existing therapies for the applicable indications;
our ability to successfully manufacture or have manufactured drug product for clinical trials and commercialization;
our ability to successfully commercialize IMVT-1401, if approved;
the rate and degree of market acceptance of IMVT-1401, if approved;
our expectations regarding the size of the patient populations for and opportunity for and clinical utility of IMVT-1401, if approved for
commercial use;
our estimates of our expenses, ongoing losses, future revenue, capital requirements and needs for or ability to obtain future financing to
complete the clinical trials for and commercialize IMVT-1401;
our dependence on and plans to leverage third parties for research and development, clinical trials, manufacturing, and other activities;
our ability to maintain intellectual property protection for IMVT-1401;
our ability to identify, acquire or in-license and develop new product candidates;
our ability to identify, recruit and retain key personnel;
developments and projections relating to our competitors or industry; and
future payments of dividends and the availability of cash for payment of dividends.
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You should refer to “Item 1A. Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those
expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this
Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material.
In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or
any other person that we will achieve our objectives and plans in any specified time frame, or at all.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this Annual Report, and while we believe such information forms a reasonable basis for such statements, such
information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review
of, all potentially available relevant information.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except
as required by law. We qualify all of our forward-looking statements by these cautionary statements.
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website
(www.immunovant.com), SEC filings, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with
our stockholders and the public about our company, our product candidates, and other matters. It is possible that the information that we make available
may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make
available on our website.
Unless the context otherwise indicates, references in this report to the terms “Immunovant,” “the Company,” “we,” “our” and “us” refer to Immunovant,
Inc. and its subsidiaries. Prior to December 18, 2019, we were known as Health Sciences Acquisitions Corporation (“HSAC”). On December 18, 2019,
HSAC completed the acquisition of 100% of the outstanding shares of Immunovant Sciences Ltd. (“ISL”), which we refer to as the “Business
Combination.” References herein to “we,” “our” and “us” may refer, as context requires, to ISL and its subsidiaries prior to the Business Combination.
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Item 1. Business
Overview
PART I
We are a clinical-stage biopharmaceutical company focused on enabling normal lives for patients with autoimmune diseases. We are developing a novel,
fully human monoclonal antibody, IMVT-1401 (formerly referred to as RVT-1401), that selectively binds to and inhibits the neonatal fragment
crystallizable receptor (“FcRn”). IMVT-1401 is the product of a multi-step, multi-year research program conducted by HanAll Biopharma Co., Ltd.
(“HanAll”) to design a highly potent anti-FcRn antibody optimized for subcutaneous delivery. These efforts have resulted in a product candidate that has
been dosed in small volumes (e.g. 2 mL) and with a 27-gauge needle, while still generating therapeutically relevant pharmacodynamic activity, important
attributes that we believe will drive patient preference and market adoption. In nonclinical studies and in clinical trials conducted to date, IMVT-1401 has
been observed to reduce immunoglobulin G (“IgG”) antibody levels. High levels of pathogenic IgG antibodies drive a variety of autoimmune diseases and,
as a result, we believe IMVT-1401 has the potential for broad application in related disease areas. We intend to develop IMVT-1401 for the treatment of
autoimmune diseases for which there is robust evidence that pathogenic IgG antibodies drive disease manifestation and for which reduction of IgG
antibodies should lead to clinical benefit.
Autoimmune diseases are conditions where an immune response is inappropriately directed against the body’s own healthy cells and tissues. According to
a 2012 study by the American Autoimmune Related Diseases Association, approximately 50 million people in the United States suffer from one of more
than 100 diagnosed autoimmune diseases. Predisposing factors may include genetic susceptibility, environmental triggers and other factors not yet known.
Many of these diseases are associated with high levels of pathogenic IgG antibodies, which are the most abundant type of antibody produced by the human
immune system, accounting for approximately 75% of antibodies in the plasma of healthy people. IgG antibodies are important in the defense against
pathogens, such as viruses and bacteria. In many autoimmune diseases, IgG antibodies inappropriately develop against normal proteins found in the body,
directing the immune system to attack specific organs or organ systems.
Unfortunately, safe and effective treatment options for patients suffering from autoimmune diseases are lacking. Currently available treatments are
generally limited to corticosteroids and immunosuppressants in early-stage disease and intravenous immunoglobulin (“IVIg”) or plasma exchange in later-
stage disease. These approaches often fail to address patients’ needs since they are limited by delayed onset of action, waning therapeutic benefit over time
and unfavorable safety profiles.
FcRn plays a pivotal role in preventing the degradation of IgG antibodies. The physiologic function of FcRn is to modulate the catabolism of IgG
antibodies, and inhibition of FcRn, such as through use of an anti-FcRn antibody, has been shown to reduce levels of pathogenic IgG antibodies.
Completed clinical trials of Immunovant and other anti-FcRn antibodies in IgG-mediated autoimmune diseases have generated promising results,
suggesting that FcRn is a therapeutically important pharmacologic target to reduce levels of these disease-causing IgG antibodies.
In several nonclinical studies and a multi-part Phase 1 clinical trial in healthy volunteers, intravenous and subcutaneous delivery of IMVT-1401
demonstrated dose-dependent IgG antibody reductions and was observed to be well tolerated. In the highest dose cohort from the multiple-ascending dose
portion of the Phase 1 clinical trial, four weekly subcutaneous administrations of 680 mg resulted in a mean maximum reduction of serum IgG levels of
78%, with a standard deviation of 2%. IMVT-1401 was generally well-tolerated in this study, and the majority of adverse events reported were mild or
moderate. Injection site reactions were similar between IMVT-1401 and placebo arms.
We are developing IMVT-1401 as a fixed-dose, self-administered subcutaneous injection on a convenient weekly, or less frequent, dosing schedule. As a
result of our rational design, we believe that IMVT-1401, if approved for commercial sale, would be differentiated from currently available, more invasive
treatments for advanced IgG-mediated autoimmune diseases, (e.g., myasthenia gravis (“MG”), thyroid eye disease (“TED”, also known as Graves’
ophthalmopathy, or “GO”), warm autoimmune hemolytic anemia (“WAIHA”), idiopathic thrombocytopenic purpura, pemphigus vulgaris, chronic
inflammatory demyelinating polyneuropathy, bullous pemphigoid, neuromyelitis optica, pemphigus foliaceus, Guillain-Barré syndrome and PLA2R+
membranous nephropathy). In 2019, these diseases had an aggregate prevalence of approximately 243,000 patients in the United States and 388,000
patients in Europe. To the extent we choose to develop IMVT-1401 for certain of these rare diseases, we plan to seek orphan drug designation in the United
States and Europe. Such designations would primarily provide financial and exclusivity incentives intended to make the development of orphan drugs
financially viable. However, we have not yet sought such designation for any of our three target indications, and there is no certainty that we would obtain
such designation, or maintain the benefits associated with such designation, if or when we do.
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We are developing IMVT-1401 as a fixed-dose subcutaneous injection, with an initial focus on the treatment of MG, TED and WAIHA. MG is an
autoimmune disease associated with muscle weakness with an estimated prevalence of one in 5,000, with up to 66,000 cases in the United States. In MG,
patients develop pathogenic IgG antibodies that attack critical signaling proteins at the junction between nerve and muscle cells. The majority of MG
patients suffer from progressive muscle weakness, with maximum weakness occurring within six months of disease onset in most patients. In severe cases,
MG patients can experience myasthenic crisis, in which respiratory function is weakened to the point where it becomes life-threatening, requiring
intubation and mechanical ventilation. In August 2019, we initiated dosing in our ASCEND MG trial, a Phase 2a clinical trial in patients with MG. We
expect to report results from the placebo-controlled treatment phase of this trial in the late third quarter or early fourth quarter of calendar year 2020.
TED is an autoimmune inflammatory disorder that affects the muscles and other tissues around the eyes, which can be sight-threatening. TED has an
estimated annual incidence of 16 in 100,000 women and 2.9 in 100,000 men in North America and Europe. Initial symptoms may include a dry and gritty
ocular sensation, sensitivity to light, excessive tearing, double vision and a sensation of pressure behind the eyes.
In May 2019, we initiated dosing in our ASCEND GO-1 trial, a Phase 2a clinical trial in Canada in patients with TED. On March 30, 2020, we announced
initial results from this trial. Mean reduction in total IgG levels from baseline to end of treatment was 65%. As evaluated at the end of treatment, four of
seven patients (57%) improved by ³ 2 points on the Clinical Activity Score (“CAS”). Clinicians use CAS to measure disease activity in TED patients.
CAS is based on seven parameters, including spontaneous pain behind the eye, pain with eye movement, redness of the eyelids, redness of the conjunctiva,
swelling of the eyelids, swelling of the caruncle and swelling of the conjunctiva. A score is calculated based on the number of parameters that are positive
with scores of four or above considered to be cases of active disease. Of six patients with baseline diplopia, four patients (67%) demonstrated
improvement in diplopia. Three of seven patients (43%) were proptosis responders. The safety and tolerability profile observed was consistent with the
prior Phase 1 trial of IMVT-1401 in 99 healthy volunteers. All AEs were mild or moderate and there were no headaches reported. Enrollment is ongoing
in our ASCEND GO-2 trial, a Phase 2b clinical trial for TED in the United States, Canada and Europe. As previously communicated, results from this trial
are still possible in the first half of calendar year 2021. We intend to provide an update on the timing for this trial in the third quarter of calendar year 2020.
WAIHA is a rare hematologic disease in which autoantibodies mediate hemolysis, or the destruction of red blood cells (“RBCs”). Based on published
estimates, we believe that there are approximately 42,000 patients in the United States and 66,000 patients in Europe living with WAIHA. The clinical
presentation is variable and most commonly includes symptoms of anemia, such as fatigue, weakness, skin paleness and shortness of breath. In severe
cases, hemoglobin levels are unable to meet the body’s oxygen demand, which can lead to heart attacks, heart failure and even death. In November 2019,
we submitted our investigational new drug application (“IND”) to the U.S. Food and Drug Administration (“FDA”) for WAIHA and, in December 2019,
our IND was cleared for Phase 2 trial initiation. As previously communicated, results from this trial are still possible by the end of second half of calendar
year 2020. We intend to provide an update on the timing for this trial in the third quarter of calendar year 2020.
We obtained rights to IMVT-1401 pursuant to our license agreement (the “HanAll Agreement”) with HanAll. Pursuant to the HanAll Agreement, we will
be responsible for future contingent payments and royalties, including up to an aggregate of $442.5 million upon the achievement of certain development,
regulatory and sales milestone events. We are also obligated to pay HanAll tiered royalties ranging from the mid-single digits to mid-teens on net sales of
licensed products, subject to standard offsets and reductions as set forth in the HanAll Agreement.
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Our goal is to become a leading biopharmaceutical company in the development and commercialization of innovative therapies for autoimmune diseases
with significant unmet need. To execute our strategy, we plan to:
•
Maximize the probability of success of IMVT-1401. We plan to leverage IMVT-1401’s differentiated profile in target indications where the
anti-FcRn mechanism has already established clinical proof-of-concept. We intend to identify and target a variety of IgG-mediated
autoimmune indications based on the following factors:
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Inadequacy of the standard of care;
Disease severity that warrants novel therapies;
Ability to rapidly establish proof-of-concept through comparatively short duration clinical trials using validated clinical
endpoints; and
Ability to rapidly initiate pivotal trial programs and potentially receive regulatory approval.
•
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Select new indications for IMVT-1401 in areas of high unmet needs. We intend to be the first to study FcRn inhibition in autoimmune
indications with clear biologic rationale and no known in-class competitors in clinical development.
Rapidly advance development of IMVT-1401 for the treatment of MG, TED and WAIHA. We are currently developing IMVT-1401 for the
treatment of MG, TED and WAIHA by leveraging the strong biologic rationale of targeting FcRn to reduce IgG antibody levels and the
clinical and regulatory insights gained from other FcRn-targeted therapies in MG.
Identify and acquire or in-license additional innovative therapies for autoimmune diseases. Our controlling stockholder, Roivant Sciences
Ltd. (“RSL”), and its subsidiaries have a track record of acquiring or in-licensing products in a range of therapeutic areas. We will continue to
partner and collaborate with RSL in identifying and evaluating potential acquisition and in-licensing opportunities in support of our goal to
develop and commercialize innovative therapies for autoimmune diseases with significant unmet need.
The prevalence of certain IgG-mediated autoimmune diseases are set forth in the following table:
Indication
Myasthenia Gravis
Warm Autoimmune Hemolytic Anemia
Thyroid Eye Disease
Idiopathic Thrombocytopenic Purpura
Pemphigus Vulgaris
Chronic Inflammatory Demyelinating Polyneuropathy
Bullous Pemphigoid
Neuromyelitis Optica
Pemphigus Foliaceus
Guillain-Barré Syndrome
PLA2R+ Membranous Nephropathy
Total
* Europe includes all E.U. countries, the U.K. and Switzerland
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Estimated Prevalence (2019)
Europe*
104,000
67,000
52,000
50,000
45,000
25,000
13,000
12,000
11,000
5,000
4,000
388,000
U.S.
66,000
42,000
33,000
31,000
28,000
16,000
8,000
7,000
7,000
3,000
2,000
243,000
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FcRn, IgG Antibody Recycling and IMVT-1401 Mechanism of Action
The neonatal fragment crystallizable receptor is a cellular receptor that can bind IgG antibodies and guide their transport through cells. FcRn is named as
such given its critical role in transferring maternal IgG antibodies contained in breast milk across the gut into the neonate’s bloodstream, providing passive
immunity until such time as the child is sufficiently mature to produce its own antibodies. FcRn is also involved in the transfer of maternal IgG antibodies
across the placenta in the developing fetus.
In adults, FcRn is the primary protein responsible for preventing the degradation of IgG antibodies and albumin, the most abundant protein found in the
blood. IgG antibodies are constantly being removed from circulation and internalized in cellular organelles called endosomes. The role of FcRn is to bind
to the IgG antibodies under the more acidic conditions of the endosome and transport them to the cell surface, where the neutral pH causes them to be
released back into circulation. This FcRn mechanism of action and IgG antibody recycling is depicted in the graphic below.
FcRn and IgG Antibody Recycling
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Our product candidate, IMVT-1401, is designed to block the recycling of IgG antibodies, resulting in their removal from circulation. IMVT-1401 binds to
FcRn, blocking the ability of FcRn to bind to IgG antibodies under the more acidic conditions of the endosome. As a result, the bound IMVT-1401 and
FcRn are transported to the cell surface, where FcRn is prevented from further recycling IgG antibodies as IMVT-1401 remains bound to FcRn even in the
pH neutral environment outside the endosome. Meanwhile, the unbound IgG antibodies are degraded in the lysosome rather than being transported by
FcRn for release back into circulation. This IMVT-1401 mechanism of action is depicted in the graphic below.
IMVT-1401’s Mechanism of Action
IMVT-1401
Overview
IMVT-1401 (formerly referred to as RVT-1401) is a novel, fully human monoclonal antibody that selectively binds to and inhibits FcRn. In a Phase 1
clinical trial, IMVT-1401 has demonstrated dose-dependent reductions in serum levels of IgG antibodies and was well-tolerated following subcutaneous
and intravenous administration to healthy volunteers. In addition, completed clinical trials of other anti-FcRn antibodies have produced positive
proof-of-concept activity in multiple IgG-mediated autoimmune diseases. We believe that these data support FcRn as a viable pharmacologic target with
the potential to address multiple IgG-mediated autoimmune diseases. We intend to develop IMVT-1401 as a fixed-dose, self-administered subcutaneous
injection on a convenient weekly, or less frequent, dosing schedule.
IMVT-1401 has been assigned the nonproprietary name batoclimab on the World Health Organization’s Recommended International Nonproprietary
Names List.
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Generation of IMVT-1401 and In Vitro Properties
IMVT-1401 is the result of a multi-step, multi-year research program conducted by our partner, HanAll, to engineer an antibody with the potency,
specificity, safety, and pharmacokinetic (“PK”) properties optimized for subcutaneous administration. The selection of initial candidates was the result of
screening a library of nearly 10,000 antibodies generated from both transgenic animal systems as well as phage-display libraries. These initial candidates
were prioritized based on:
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Potency and specificity for FcRn;
Ability to block the IgG-FcRn interaction;
Ability to remain bound to FcRn regardless of pH;
High production and stability in standard antibody production cell lines;
Ability to achieve high concentrations appropriate for subcutaneous delivery; and
Lack of immunogenicity.
IMVT-1401 was generated using the OmniAb transgenic rat platform from Open Monoclonal Technology (“OMT”). OMT was later acquired by Ligand
Pharmaceuticals in 2015.
IMVT-1401 has been engineered to express specific known mutations that eliminate effector function. Traditional antibodies contain amino acid
sequences that can trigger antibody-dependent cell-mediated cytotoxicity (“ADCC”) or complement-dependent cytotoxicity (“CDC”) in which bound
antibodies are recognized by effector components of the immune system which leads to inflammation. While this is an important mechanism for
elimination of pathogens, triggering ADCC or CDC can lead to unintended immune activation and side effects. For this reason, IMVT-1401 was
engineered with specific and validated mutations known to reduce ADCC and CDC.
Potential Benefits of IMVT-1401
As a result of the rational design of IMVT-1401, we believe that IMVT-1401, if approved for use, could provide the following benefits:
•
•
•
•
Subcutaneous delivery. Based on clinical data, we believe that we will be able to obtain therapeutically relevant levels of IgG reduction using
2-mL volume subcutaneous injections. Our current formulation is concentrated at 170 mg/mL.
Simple dosing schedule. We are developing IMVT-1401 as a fixed-dose subcutaneously administered regimen without the need for preceding
intravenous induction doses or lengthy subcutaneous infusions. If approved, we intend to market IMVT-1401 as a fixed-dose pre-filled
syringe or auto-injector, which would allow for convenient self-administration, eliminating the need for frequent and costly clinic visits, and
reduce complexity and errors associated with calculating individual doses.
Low immunogenicity risk. IMVT-1401 is a fully human monoclonal antibody, and therefore contains only amino acid sequences native to
humans.
Low effector function. IMVT-1401 has been engineered to prevent activation of other components of the immune system, and, as a result,
unintended immune response to IMVT-1401 is not expected. Specifically, well-characterized and validated mutations introduced into the
fragment crystallizable domain of IMVT-1401 have reduced its ability to cause ADCC and CDC. There have been no reports of severe
systemic allergic reactions to study therapy reported to-date.
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Clinical Development of IMVT-1401
We are developing IMVT-1401 as a fixed-dose subcutaneous injection for a variety of IgG-mediated autoimmune diseases, with an initial focus on the
treatment of MG, TED and WAIHA. In light of the COVID-19 pandemic, we have taken several actions designed to protect the safety and well-being of
our patients and ensure quality trial execution. Our very experienced clinical development team has successfully maintained robust communication with
our sites. New patients enrolled in our programs from March to June 2020 did not miss any in-person clinic visits during the initial treatment period. We
have also been working with our partners to ensure that backup services are in place, which has enabled some virtual visits to replace in-person visits
during the follow-up period after initial treatment. As always, we continue to stay abreast of evolving guidance from regulatory agencies emphasizing
patient safety, flexibility within certain guardrails and very good documentation. While we continue to evaluate the impact of the COVID-19 pandemic,
we intend to provide an update on our anticipated clinical development timelines for TED and WAIHA in the third quarter of calendar year 2020.
Phase 1 Clinical Trials of IMVT-1401 in Healthy Volunteers
We have completed a multi-part, placebo-controlled Phase 1 clinical trial involving 99 healthy volunteers in Australia and Canada, administering IMVT-
1401 both as an intravenous infusion and as a subcutaneous injection. In this trial, 77 subjects received at least one dose of IMVT-1401 and 22 subjects
received placebo. The results of our Phase 1 trial are presented below:
Trial Design of Multi-Part Phase 1 Clinical Trial of IMVT-1401
Australian Trial data is not presented
Pharmacokinetic Data
In the single-ascending dose portion of our Phase 1 clinical trial, IMVT-1401 demonstrated a PK profile that varies with increase in dose, consistent with
the characteristics expected of a drug exhibiting target-mediated disposition. Following subcutaneous administration of IMVT-1401, the median time to
peak concentrations ranged from less than a day for the lowest dose administered to approximately three days for the highest dose of 765 mg. Following
subcutaneous (“SC”) administration of single doses of IMVT-1401, Cmax and AUC increased in a greater than dose proportional manner. Following four-
weekly SC doses of IMVT-1401, accumulation for Cmax and AUC0-t were dose-dependent.
Pharmacodynamic Data
We tested single administrations of fixed intravenous doses of IMVT-1401, ranging from 0.1 mg/kg to 1530 mg as a fixed dose. The 1530 mg fixed
intravenous dose resulted in mean maximum reduction of serum IgG levels of 67%. Maximal reductions were observed between 10 and 14 days after dose
administration. In addition, single subcutaneous doses of IMVT-1401, ranging from 0.5 to 5 mg/kg and 340 mg to 765 mg led to dose-dependent mean
maximum reductions in serum IgG levels of between 14% and 48%. Maximal reductions were observed between seven and 14 days after dose
administration. Following four-weekly SC doses of IMVT-1401 at 340 mg and 680 mg, mean maximum reduction of serum IgG levels were 63% and
78%, respectively, compared with 11% for placebo. Maximal reductions were observed between 21 and 28 days after the first dose of IMVT-1401.
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Total Mean Reduction of IgG Levels in Phase 1 Clinical Trial of IMVT-1401
After Single Dose in Healthy Volunteers
In the multiple-ascending dose portion of our Phase 1 clinical trial, two dose levels were tested. After four weekly subcutaneous administrations of 340
mg, a mean maximum reduction of serum IgG levels of 63% was observed during the treatment period, and the standard deviation of the reduction was
11%. In the second and final multiple-dose cohort, four weekly subcutaneous administrations resulted in a mean maximum reduction of serum IgG levels
of 78% during the treatment period, and the standard deviation of the reduction was 2%.
Total Mean Reduction of IgG Levels in Phase 1 Clinical Trial of IMVT-1401
After Four Weekly Doses in Healthy Volunteers
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In this Phase 1 clinical trial, we also analyzed reductions in lgG antibodies by subclasses. The lgG class of antibodies is composed of four different
subtypes of lgG molecules, called the lgG subclasses, which are designated lgG1, lgG2, lgG3 and lgG4. In the multiple-dose cohorts, administration of
IMVT-1401 resulted in dose-dependent reductions across all lgG subclasses. We observed mean maximal reductions of greater than 78% and 63% for the
lgG1, lgG3 and lgG4 subclasses in subjects receiving the 680 mg and 340 mg fixed subcutaneous doses, respectively. lgG2 was reduced from baseline
following 680 mg and 340 mg fixed subcutaneous doses with observed mean maximum reductions of 70% and 50%, respectively.
The IgG reductions we observed in this multi-part, placebo-controlled Phase 1 clinical trial support the continued development of IMVT-1401, however,
this trial did not include pre-specified endpoints for IgG reduction, and we cannot be certain that similar IgG reductions will be observed in any future
clinical trials.
Safety Data
In our multi-part, placebo-controlled Phase 1 clinical trial, IMVT-1401 has been observed to be well-tolerated with no Grade 3 or Grade 4 treatment-
emergent AEs and no discontinuations due to AEs. The most commonly reported AE has been mild erythema and swelling at the injection site, which
typically resolved within hours and had a similar incidence between subjects receiving IMVT-1401 and placebo. These reactions at the injection site were
not considered dose-related and did not increase with multiple administrations of IMVT-1401 in the multiple-dose cohorts. To date, two serious AEs have
been reported, both of which have been assessed as unrelated to IMVT-1401 by the study investigator. There have been no treatment-related serious AEs
reported.
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A summary of the most commonly reported AEs, meaning the AE reported occurred in more than one subject, is set forth in the table below:
Most Common Adverse Events Reported in Phase 1 Clinical Trial of IMVT-1401
Intravenous Infusion
Subcutaneous Injection
Multiple Ascending Dose
Subcutaneous Injection
Single Ascending Dose
0.1
MG/
KG
N=4
100
MG
N=6
340
MG
N=6
765
MG
N=6
1530
MG
N=6
Placebo
0.5
MG/KG
1.5
MG/KG
5
MG/KG
N=8
N=3
N=6
N=6
340
MG
N=6
500
MG
N=6
765
MG
N=6
Placebo
N=10
340
MG
N=8
680
MG
N=8
Placebo
N=4
1
2
1
1
1
1 1 1 1 1
1 1
1
1
1
1
Number of Subjects
MedDRA Preferred Term
Abdominal pain
Abdominal pain upper
Abnormal sensation in eye
Back pain
Constipation
Cough
Diarrhea
Dizziness
Dry skin
Erythema
Fatigue
Headache
Injection site erythema
Injection site pain
Injection site swelling
Insomnia
Myalgia
Nasal congestion
Nausea
Ocular hyperaemia
Oropharyngeal pain
Pain in extremity
Procedural complication
Procedural dizziness
Pyrexia
Rash
Rhinorrhoea
Sinusitis
Somnolence
Upper respiratory tract infection 1 1 1
Vision blurred
1
1
1
1 2
1
2
1
1
1
1 1
2
1
3
1
2
1
1
1 1
1
1
1
1
1
1
1 4 1
5 1 5 6
1
2 4
3
1
1
1
1 1
1
1
1
4
1
2
1
1
2 1
1 1
1
2
2
1
1
1
1
1
1 2
7 8 7
2
3 7 6
4
1 1
1 1
1
1
2
1 2
1
1
2
2
1
1
In November 2018, one serious AE (malpighian carcinoma) occurred in a 51-year-old subject who had received a single 765 mg subcutaneous
administration of IMVT-1401. Fifty-five days after study drug administration, the subject presented to his personal physician with a left-sided neck mass.
Biopsy results determined the mass to be a poorly differentiated malpighian carcinoma, which was assessed as unrelated to IMVT-1401 by the study
investigator. In February 2019, a 25-year-old subject who received a single dose 1530 mg of IMVT-1401 by intravenous infusion presented five days later
with uncomplicated acute appendicitis and the presence of an appendiceal stone. The subject underwent laparoscopic appendectomy and recovered with an
uneventful post-operative course. The event was considered unrelated to study drug by the study investigator.
While headaches, some of which have been considered severe, have been reported in third-party clinical trials of some other anti-FcRn antibodies, no
headaches have been noted in any of the subjects receiving IMVT-1401 in the 680 mg multiple-dose cohort. In the 340 mg cohort, two of eight subjects
experienced headaches, one mild and one moderate. The moderate headache occurred six days after the final dose of IMVT-1401 was administered.
Dose-dependent and reversible albumin reductions were observed in the single-ascending and multiple-ascending dose cohorts. In the 680 mg multiple-
ascending dose cohort, most subjects reached nadir before administration of the final dose. Mean reduction in albumin levels at day 28 were 20% in the
340 mg multiple-dose cohort, and 31% in the 680 mg multiple-dose cohort. For subjects in the 340 mg and 680 mg cohorts, the mean albumin levels at
day 28 were 37.5 g/L and 32.4 g/L, respectively (normal range 36-51 g/L). These reductions were not associated with any AEs or clinical symptoms and
did not lead to any study discontinuations. The clinical relevance of isolated, mild hypoalbuminemia is unknown, however, a hereditary syndrome
associated with deficient albumin production has been described (Congenital Analbumenia). In this syndrome, despite extremely low or absent levels of
albumin, those affected have only mild symptoms, including fatigue, low blood pressure and edema. It is believed that compensatory mechanisms through
the production of other proteins may allow for relatively normal physiologic function in this population.
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Immunogenicity Data
The development of anti-drug antibodies (ADA) to IMVT-1401 was assessed across all dosed cohorts following single (IV and SC formulations) and
multiple (SC formulation) administrations of IMVT-1401. Preliminary data show a similar frequency of treatment-emergent ADA development among
subjects who received at least one administration of IMVT-1401 or placebo (8% and 6%, respectively). The antibody titers were low (£ 1:16) consistent
with the high sensitivity of the ADA assay. No subjects in either the 340 mg or 680 mg multiple ascending dose (MAD) cohorts developed ADAs with
treatment. ADAs will continue to be monitored throughout the development program.
Nonclinical Studies of IMVT-1401
Cynomolgus monkeys were selected as the primary species for nonclinical testing, given the high degree of sequence homology to human FcRn and
IMVT-1401’s strong binding affinity for monkey FcRn. Our partner, HanAll, completed five nonclinical studies of IMVT-1401 (referred as HL161BKN
for the purposes of these studies) in cynomolgus monkeys. We have conducted two additional studies in cynomolgus monkeys. These studies are listed in
the table below:
Name of Study
Evaluation of IgG Catabolism and PK of HL161
Candidates (HL161AN and HL161BKN) in
Cynomolgus Monkey (Study TR-127-161)
Evaluation of IgG Catabolism and PK of HL161AN
and HL161BKN Following IV and SC
Administration (Study TR-140-161)
Evaluation of Low-dose PK-PD Cynomolgus Monkey
Duration
Animals
Tested
Route of Administrations Dose
(Frequency)
4 weeks
N = 20a
2 weeks
N =
36a
IV: 5, 20 mg/kg/dose (Days 0,
7, 14, 21)
IV: 5, 10 mg/kg/dose; SC: 5,
10 mg/kg/dose (Days 0, 3, 7,
10)
for Selection of Maximum Recommended Start Dose (MRSD) of HL161BKN in Humans (Study
TR-166-161)
2 weeks
N = 12
IV: 0.5, 1.5, 5 mg/kg/dose
(Days 0, 3, 7, 10)
HL161BKN 1-Week Repeat-Dose Range-Finding
Toxicity, PK, and PD Study in the Cynomolgus
Monkey (Study 8348379)
HL161BKN A Six-Week Subcutaneous and
Intravenous Administration Toxicity Study in Cynomolgus Monkeys with a Nine-Week
Treatment-Free Period (Study 8348381)
12-Week Subcutaneous Injection and Intravenous
Infusion Toxicity and Toxicokinetic Study with
RVT-1401 in Cynomolgus Monkeys Followed by a
10-Week Recovery Period (Study 8386882)
26-Week Subcutaneous Injection and Intravenous
Infusion Toxicity and Toxicokinetic Study with
RVT-1401 in Cynomolgus Monkeys Followed by a
10-Week Recovery Phase (Study 8391434)
a: includes vehicle control group animals.
15
1 week
6 weeks
N =
16a
N =
48a
SC: 25, 100 mg/kg/dose IV:
100 mg/kg/dose (Days 1, 4, 8)
SC: 25, 50, 100 mg/kg/dose;
IV: 25, 100 mg/kg/dose (twice
weekly)
12 weeks
N =
60a
SC: 10, 25, 100 mg/kg/dose;
IV: 10, 100 mg/kg/dose
SC: 100 mg/kg/dose (twice
weekly); IV: 50, 100 mg/kg/
dose
N =
40a
26 weeks
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Three pharmacology studies were performed to screen molecules and to define the efficacious dose based on the PK and pharmacodynamics (“PD”),
profile, and two toxicology studies were performed. In the pharmacology studies, IMVT-1401 demonstrated a consistent PD response of reduced IgG
levels that correlated with the PK of IMVT-1401 with observed IgG reductions ranging between approximately 53%, and 78% across all three studies. The
following chart sets forth the range of trough IgG levels from percentage of baseline:
Pharmacology Studies
Evaluation of IgG Catabolism and PK of HL161 Candidates (HL161AN
and HL161BKN) in Cynomolgus Monkey (Study TR-127-161)
Evaluation of IgG Catabolism and PK of HL161AN and HL161BKN
Following IV and SC Administration (Study TR-140-161)
Evaluation of Low-dose PK-PD Cynomolgus Monkey for Selection of
Maximum Recommended Start Dose (MRSD) of HL161BKN in
Humans (Study TR-166-161)
Trough IgG
% of Baseline
(Mean ± SD)
IV 5 mg/kg: -57 ± 5
IV 20 mg/kg: -74 ± 7
IV 5 mg/kg: -78 ± 7
IV 10 mg/kg: -73 ± 10
SC 5 mg/kg: -74 ± 4
SC 10 mg/kg: -77 ± 10
IV 0.5 mg/kg: -53 ± 16
IV 1.5 mg/kg: -58 ± 9
IV 5 mg/kg: -75 ± 13
In the 6-week and 12-week toxicology studies (Study 8348381, Study 8386882, respectively), exposure to IMVT-1401, a fully human monoclonal
antibody, resulted in the development of an ADA response that led to immune complex formation in isolated animals. In the six-week study, at least one
sampling point tested positive for ADA in 37 of the 38 animals that received IMVT-1401 twice weekly by subcutaneous or intravenous administration.
Some animals with ADA had reduced TK and PD responses. However, the majority of animals still had measurable circulating levels of IMVT-1401 that
translated to reduced IgG levels. In the 12-week toxicology study all animals developed ADA by Day 22 of the treatment phase of the study, and IMVT-
1401 exposures on Days 43 and 78 were generally lower compared to Day 1, particularly with low subcutaneous doses. An abrogation of the PD response
was observed following development of ADA in the lower dose cohorts but was maintained in the higher dose cohorts. In the 26-week toxicology study
(Study 8391434), animals administered by IV infusion resulted in higher incidence of ADA positive responses compared to animals dosed by SC
injections. Over the course of the study, PD effect of total IgG reductions was observed in all animals. The decrease in total IgG was more pronounced in
animals administered with 100 mg/kg/week IV compared to animals administered 200 mg/kg/week SC. Reversibility of the total IgG reduction in the SC
animals was evident by Day 64 in the recovery phase. Importantly from the subchronic 26-week toxicity study, based on the overall toxicity profile
following 26 weeks of SC injections (200 mg/kg/week), the No-Observed-Adverse-Effect-Level (NOAEL) of IMVT-1401 following SC injection was
concluded to be 100 mg/kg/dose or 200 mg/kg/week; this represents a 3-fold safety margin (100 mg/kg/dose) when compared to the clinical dose of 680
mg/dose taking into account allometric corrections between monkeys and humans. Moreover, the safety margin is increased to 6-fold when considering
IMVT-1401 was administered twice per week at 200 mg/kg/week. Overall, in these nonclinical studies, there was a robust PK/TK and PD correlation in
cynomolgus monkeys after removing the confounding element of ADA.
The immunogenicity response to human proteins generated in nonclinical species is generally not predictive of that in the human. Nevertheless, subjects in
clinical trials with IMVT-1401 will be carefully monitored for any AEs, including those related to immunogenicity.
IMVT-1401 for the Treatment of Myasthenia Gravis
Myasthenia Gravis Overview
MG is an autoimmune disorder associated with muscle weakness and fatigue. MG patients develop antibodies that lead to an immunological attack on
critical signaling receptor proteins at the junction between nerve and muscle cells, thereby inhibiting the ability of nerves to communicate properly with
muscles. This leads to muscle weakness intensified by activity, which can be localized to exclusively to ocular muscles or which can be more generalized
throughout the body including muscles of respiration. Patients with localized ocular disease suffer from more limited symptoms, including droopy eyelids
and blurred or double vision due to compromise of eye movements. The vast majority of MG patients demonstrate elevated serum levels of acetylcholine
receptor (“AChR”) antibodies which disrupt signal transmission between nerve fibers and muscle fibers. These antibodies ultimately lead to fluctuating
muscle weakness and fatigue.
The prevalence of MG is estimated to be one in 5,000, with up to 66,000 cases expected in the United States. MG can occur at any age; however, the age
of onset tends to follow a bimodal distribution. Early onset disease usually occurs in individuals between 10 to 30 years old and predominantly affects
females. Later onset disease usually occurs in individuals over 50 years old and predominantly affects males. As with many autoimmune diseases, there
are no known genetic alterations that specifically cause MG, and in most patients, it arises spontaneously. Approximately 3% of patients have a primary
relative with MG, suggesting that there are genetic factors that may predispose development of the disease, but these genes have yet to be identified.
The symptoms of the disease can be transient and in the early stages of the disease can remit spontaneously. However, as the disease progresses, symptom-
free periods become less frequent and disease exacerbations can last for months or remain chronic. After 15 to 20 years, some weakness often becomes
fixed, with the most severely affected muscles frequently becoming atrophic. Many patients find it difficult to perform daily activities due to both
insufficient improvement in symptoms even after treatment and in some the complicating long-term side effects of oral corticosteroids, a common
treatment for MG. Approximately 15% to 20% of MG patients will experience at least one myasthenic crisis over their lifetimes. During myasthenic crisis,
the impairment of muscles required to breathe can become life-threatening, leading to death in approximately 2% to 5% of cases. Up to 90% of patients in
myasthenic crisis require intubation and mechanical ventilation leading to hospital stays lasting a median of 17 days. Over half of the patients who survive
such a crisis remain functionally dependent upon discharge from the hospital.
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These broad classes of MG severity are often referred to by a clinical classification system described by the Myasthenia Gravis Foundation of America
(“MGFA”) the only national volunteer health agency in the United States dedicated solely to the fight against MG. The MGFA clinical classification
divides MG patients into five classes: Class I represents patients with weakness restricted to ocular muscles, while Classes II through V represent
generalized MG with severity of symptoms increasing in each Class.
Weakness in ocular muscles
Class
I
II Mild weakness in limb, head and trunk, or respiratory muscles
III Moderate weakness in limb, head and trunk, or respiratory muscles
IVa
MGFA Clinical Classification
Symptoms
Severe weakness in non-ocular muscles, predominantly affecting muscles in limb, axial muscles, or
both. May also have lesser involvement of oropharyngeal muscles
Severe weakness in non-ocular muscles, predominantly affecting oropharyngeal, respiratory muscles,
or both. May also have lesser or equal involvement of limb, axial muscles, or both.
IVb
V Requires intubation
Clinicians have developed a quantitative examination-based scoring system to follow a patient’s disease severity called the Quantitative Myasthenia
Gravis (“QMG score”), which measures muscle weakness. The QMG score is divided into 13 sections, each measuring the weakness of different sets of
muscles such as that of outstretched limbs, grip strength, breathing, swallowing, eye movement, speech and neck strength. Each item is assessed on a four-
point scale where a score of zero represents no weakness and a score of three represents severe weakness for a maximum total score of 39. Clinicians also
use the MG Activities of Daily Living (“MG-ADL”) score, a clinically validated, patient-reported measurement of the severity of MG symptoms. The
MG-ADL score measures the effect of MG symptoms on eight functions as reported by the patient, including talking, chewing, swallowing, breathing and
vision. Each item is assessed on a three-point scale where a score of zero represents no symptoms and a score of three represents severe symptoms for a
maximum total of 24.
Previously completed clinical trials of anti-FcRn antibodies have generated promising results. In a recently completed Phase 3 clinical trial conducted by
argenx SE to evaluate efgartigimod, an anti-FcRn antibody fragment for the treatment of MG, patients dosed with intravenous drug product demonstrated
clinically meaningful and statistically significant responder rate in MG-ADL score compared to those receiving placebo after four weeks of treatment.
Note that detailed and longer term safety data has not yet been reported.
The most common target of autoimmune antibodies in MG are the AChR protein within the neuromuscular junction that binds to the acetylcholine
neurotransmitter released by the nerve fiber terminal, and muscle-specific kinase (“MuSK”), a tyrosine kinase, which is involved in propagating neuronal
signals. Anti-AChR and anti-MuSK antibodies are found in approximately 85% and 8% of MG patients, respectively. The presence of these autoimmune
antibodies blocks the signaling from neurons to muscles which results in an impaired ability for the muscle to contract or sustain contraction and results in
outward signs of muscle weakness and fatigue.
Current Treatment Paradigm
Very early stage MG is symptomatically treated with acetylcholinesterase inhibitors such as pyridostigmine, which block the breakdown of acetylcholine
at the neuromuscular junction, thereby increasing its concentration and capacity to activate the muscle. As the disease progresses, patients are typically
treated with immunosuppressive agents such as glucocorticoids, azathioprine, mycophenolate mofetil and cyclosporine. Thymectomy may be indicated for
treatment in patients with evidence of a thymoma and can be considered for treatment in some younger patients who do not have evidence of thymoma. As
MG becomes more advanced, patients can be treated during exacerbations with IVIg, which provides therapeutic benefit through multiple potential
mechanisms including the saturation of FcRn. However, IVIg requires recurrent, burdensome infusions to obtain significant reductions in symptoms, and
the large volumes of intravenous fluid associated with the administration of IVIg can lead to significant side effects, including pulmonary edema and renal
complications and treatment can be complicated by events associated with intravascular thrombosis.
Physicians direct patients with more advanced chronic disease and patients in times of crisis to therapies that reduce levels of circulating IgG antibodies.
One method of reducing IgG levels is to take blood from a patient and physically remove the patient’s plasma before returning the red blood cells as well
as outside obtained albumin or plasma to the patient in a process called plasma exchange. This is a slow process that typically takes several hours.
Furthermore, this process often requires multiple treatment sequences due to limited daily tolerance (a reported mean of 6 treatments in MG) over a
number of days in order to achieve a significant reduction in IgG antibody levels. A variant of this procedure is immunoadsorption, in which bacterial
proteins are used to selectively remove IgG antibodies from serum. The table below sets forth an overview of these treatments for MG. The most recent
agent approved for MG is eculizumab, a complement C5 inhibitor, the use of which is limited to patients refractory to available therapy with anti-AChR-
positive MG. Anti-MuSK antibodies have a low propensity to activate complement proteins, thus C5 inhibition may not be therapeutically relevant in anti-
MuSK-positive patients. Studies indicating that patients with MuSK-positive disease are more likely to become treatment refractory thus present an
additional unmet need. Approximately 10% of MG patients are refractory to current treatments, while up to 80% fail to achieve complete stable remission.
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Table of Contents
Overview of Current Treatment Options for Advanced Myasthenia Gravis
Mechanism of Action
Pathogenic IgG
Reduction*
IVIg
Not fully known
Immunoadsorption
Removal of
autoantibodies
Plasma Exchange
Removal of autoantibodies
Eculizumab
Complement inhibition (only
approved in anti- AChR MG)
~30% to 70%
~55% to 90%
~65% to 75%
N/A
Mode of Administration
Intravenous or subcutaneous
Intravenous
Intravenous
Intravenous
Typical Regimen
Setting
Each session requires 2-4
hours over 2-5 consecutive
days Subcutaneous options
require ~ 1 hour
Home or clinic
administration
Each session requires 3-4
hours over 2-4 consecutive
days Repeat every 2-4 weeks
Each session requires ~2 hours
Repeat daily, weekly or
monthly
Weekly for the first five
weeks, then every other week
Clinic
Clinic
Clinic
* Company estimates based on literature review across autoimmune indications.
ASCEND MG Trial
In August 2019, we initiated dosing in a randomized, blinded, placebo-controlled Phase 2a clinical trial of IMVT-1401 for the treatment of MG. The
ASCEND MG trial assesses safety and efficacy of IMVT-1401 in an anticipated 21 patients with MG symptoms, as defined by MGFA Class II through
IVa, and QMG scores greater than or equal to 12. In the ASCEND MG trial, patients with MG who have confirmed anti-AChR antibodies will receive one
of two dose levels of IMVT-1401 (680 mg or 340 mg) or placebo delivered by subcutaneous injection on a weekly schedule for six weeks followed by a
six-week open-label extension period, in which patients will be able to receive up to three further injections of IMVT-1401 administered every other week.
There are then three follow-up visits during a six-week post-dosing period. The primary endpoints of this trial are assessment of the safety and tolerability
of IMVT-1401 and measurement of the changes from baseline in levels of total IgG subclasses and anti-AChR IgG. Secondary endpoints include PK and
changes from baseline in various clinical scores such as QMG, MG-ADL and quality of life measures. Exploratory endpoints include assessment of
multiple biomarkers including gene expression profiles, pro-inflammatory markers and receptor occupancy. We expect to report results from the placebo-
controlled treatment phase of this trial in the late third quarter or early fourth quarter of calendar year 2020.
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Trial Design of ASCEND MG Trial
On June 29, 2020, we announced that we have begun preparation to initiate a Phase 3 registrational trial of IMVT-1401 in MG. We expect to engage the
FDA on the design and conduct of this pivotal program and expect the FDA’s feedback to be an important part of the final plan.
IMVT-1401 for the Treatment of Thyroid Eye Disease
Thyroid Eye Disease Overview
TED, also referred to as GO, is an autoimmune inflammatory disorder that affects the muscles and other tissues around the eyes, which can be sight-
threatening. Initial symptoms may include a dry and gritty ocular sensation, sensitivity to light, excessive tearing, double vision and a sensation of
pressure behind the eyes. By the time that TED is clinically diagnosed, many patients have retraction of their upper eyelids, swelling and redness
surrounding the eyes and protrusion of the eyes. In some cases, swelling and stiffness of the muscles that move the eyes cause the eyes to no longer line up
with each other or for the eyelids to no longer be able to close. Approximately 3% to 5% of TED patients have a severe manifestation of the disease, with
intense pain, inflammation and sight-threatening corneal ulcers or optic neuropathy that requires surgical intervention. Decompression surgery to improve
ocular function or rehabilitative surgery to improve quality of life is required in up to 20% of TED patients.
TED is most commonly caused by IgG autoantibodies that form against the thyroid-stimulating hormone receptor (“TSHR”). These antibodies activate
certain cell types, such as fibroblasts and adipocytes, present in the extraocular space, which are known to highly express TSHR. The activation of these
fibroblasts causes them to proliferate and to produce hyaluronan, a substance that contributes directly to the swelling associated with TED. Hyaluronan
also serves as an inflammatory signal leading to the synthesis of cytokines that cause recruitment of lymphocytes and extensive tissue inflammation and
remodeling. Exposure to other inflammatory agents, such as cigarette smoke, lead to exacerbation of the disease resulting in more severe symptoms. Anti-
TSHR antibodies also increase the proliferation of adipose or fat cells as well as myofibroblasts, smooth muscle-like cells. Levels of anti-TSHR
autoantibodies correlate positively with clinical features of TED and influence its prognosis.
In addition to anti-TSHR autoantibodies, antibodies that activate the insulin-like growth factor 1 receptor (“IGF1R”) have been described in the literature.
TSHR and IGF1R have functional overlaps and stimulation of either receptor may lead to activation of similar biochemical pathways in certain cell types,
including the ones implicated in TED. Published studies investing this pathway have led to the discovery that the IGF1R and TSHR form a receptor
complex where IGF1R can augment the signaling of TSHR. The exact nature of the interaction between IGF1R and TSHR continues to be investigated;
however, experimental evidence suggest that the effects of TSHR stimulating antibodies are only partially blocked by an IGF1R antagonist while they may
be completely blocked with a TSHR antagonist.
TED has an estimated annual incidence of 16 in 100,000 women and 2.9 in 100,000 men in North America and Europe. The natural history of TED begins
with an inflammatory phase lasting between six and 24 months that is characterized by lymphocyte infiltration, fibroblast proliferation and increases in
adipose tissue. Treatment of patients with immunosuppressive therapies during this active inflammatory phase can lead to reduction in symptoms and can
alter the course of the disease. However, once the initial inflammatory phase is over, immunosuppressive therapies are ineffective and levels of fibrosis
that have developed as the result of acute inflammation are only reversible by surgery. We estimate that 15,000 to 20,000 patients in the United States have
active inflammatory TED and are eligible for treatment.
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Clinicians use the CAS to measure disease activity in TED patients. CAS is based on seven parameters, including spontaneous pain behind the eye, pain
with eye movement, redness of the eyelids, redness of the conjunctiva, swelling of the eyelids, swelling of the caruncle and swelling of the conjunctiva. A
score is calculated based on the number of parameters that are positive with scores of four or above considered to be cases of active disease. Changes in
disease severity over time are determined by changes in proptosis, or protrusion of the eyeball, eye movements and visual acuity.
Relationship between TED and Graves’ Disease
TED often develops in parallel with Graves’ disease, a related but clinically distinct autoimmune disease. In Graves’ disease, anti-TSHR autoantibodies
cause the thyroid to become overactive, resulting in a condition called hyperthyroidism, in which the thyroid overproduces thyroid hormone. If left
untreated, hyperthyroidism can cause serious problems with the heart, bones, muscles, menstrual cycle and fertility.
A close temporal relationship exists between the onset of Graves’ disease and the onset of TED. Regardless of which condition occurs first, in 80% of
patients, the other condition develops within 18 months. Approximately one in 20 patients with Graves’ disease present with moderate-to-severe TED,
which is characterized by swelling and redness of eyelids, proptosis, double vision and, in severe cases, corneal ulceration and decreased visual acuity.
Graves’ disease can be treated with antithyroid drugs or removal of the thyroid through a procedure called a thyroidectomy. While some studies of these
treatments have shown autoimmune antibodies decreasing or disappearing with treatment, others have shown no change in antibody levels after treatment.
Current Treatment Paradigm
As a first option, patients with active TED are treated with immunosuppressive therapy such as high-doses of corticosteroids, typically administered
intravenously or orally. Corticosteroids are not effective in all patients, and approximately one-third of patients will relapse. This therapy is associated with
an increased risk of acute and severe organ damage, bone thinning, weight gain, diabetes, hypertension, osteoporosis and depression. In January 2020, the
FDA approved Horizon Therapeutics’ Tepezza (teprotumumab), an anti-IGF-1R antibody, for the treatment of TED.
Orbital radiation therapy is used as a means of reducing the infiltration of lymphocytes and can be used in conjunction with corticosteroids or
immunosuppressive therapy. Similar to these anti-inflammatory and immunosuppressive drugs, radiation therapy is most effective in the active stage of
TED.
Patients with moderate-to-severe active TED which is still in the active stage and who do not respond adequately to corticosteroids can be treated with
cyclosporine or mycophenolate mofetil, two broad immunosuppressive drugs. These powerful drugs are associated with numerous side effects related both
to their general immunosuppressive effects as well as to inherent toxicities, such as hypertension, kidney disease and gastrointestinal toxicity.
Small case studies have identified rituximab as an alternate way of inducing immunosuppression in patients with TED. Rituximab (Roche) is a
monoclonal antibody that binds to an antigen specific to B cells, leading to their destruction. However, rituximab is associated with the potential for
serious side effects, such as infusion-related reactions. Rare cases of progressive multifocal encephalopathy and other viral infections have also been
reported.
Surgery is considered to be a treatment option in patients with a high CAS who have been treated with corticosteroids or immunosuppressive therapy but
continue to have progressive disease. The goal of surgery is to reduce the pressure causing proptosis, reduced eye movement and loss of visual acuity.
Because of its invasive nature, surgery is typically reserved for inactive disease.
We believe that a therapy for TED focused on addressing the cause of the disease, namely the presence of autoimmune antibodies, represents an attractive
approach that has the potential to avoid many of the serious side effects of current therapies. In previously conducted third-party studies, levels of
autoimmune antibodies were reduced through plasmapheresis and IVIg and resulted in therapeutic benefit. We expect that IMVT-1401 has the potential to
deliver similar benefits. Because the mode of action of IMVT-1401 is independent of the antigen recognized by the autoimmune antibodies, we believe
that IMVT-1401 can address TED that arises through any IgG autoantibody mechanism whether it be anti-TSHR, anti-IGF1R, or any other IgG
autoantibodies.
ASCEND GO-1 Trial
In May 2019, we initiated dosing in our ASCEND GO-1 trial, an open label single-arm Phase 2a clinical trial of IMVT-1401 in Canada in patients with
TED. We announced initial results from this trial in March 2020. Patients recruited for this trial have moderate-to-severe active TED with confirmed
autoantibodies to TSHR. A total of seven patients were dosed weekly with subcutaneous injections for six weeks. The trial utilized an induction and
maintenance strategy, using only subcutaneous injections. Patients received a 680 mg dose for the first two administrations of study followed by a 340 mg
dose for the final four administrations. The primary endpoints of this trial are safety and tolerability of IMVT-1401 over the six-week treatment period, as
well as the change from baseline in levels of anti-TSHR antibodies, total IgG antibodies and IgG antibodies by subclasses. Secondary clinical endpoints
include mean changes in proptosis, or protrusion of the eyeball, the proptosis responder rate, defined as the percentage of patients with a greater than or
equal to 2 mm reduction in proptosis in the study eye without deterioration in the fellow eye, PK and anti-drug antibodies. Exploratory endpoints include
assessment of change from baseline in the CAS, change from baseline in the Gorman diplopia score, multiple biomarkers including gene expression
profiles, pro-inflammatory markers, receptor occupancy and changes as measured by computerized tomography (CT) scans.
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Trial Design of ASCEND GO-1 Trial
All seven patients have completed the six-week treatment phase of the trial and have entered the 12-week follow-up phase. Mean reduction in total IgG
levels from baseline to end of treatment was 65%. As evaluated at the end of treatment, four of seven patients (57%) improved by ³ 2 points on the CAS.
Of six patients with baseline diplopia, four patients (67%) demonstrated improvement in diplopia. Three of seven patients (43%) were proptosis
responders. The safety and tolerability profile observed was consistent with the prior Phase 1 trial of IMVT-1401 in 99 healthy volunteers. Mean albumin
reduction from baseline to end of treatment was 24%. All AEs were mild or moderate and there were no headaches reported.
ASCEND GO-2 Trial
In October 2019, we initiated dosing in our ASCEND GO-2 trial, a randomized, masked, placebo-controlled Phase 2b clinical trial in 77 patients with
moderate-to-severe active TED with confirmed autoantibodies to TSHR. The ASCEND GO-2 trial explores the potential of IMVT-1401 to improve
proptosis and assesses the safety and tolerability of IMVT-1401 in this population. Patients in this trial will be treated with one of three doses of IMVT-
1401 (680 mg, 340 mg or 255 mg) or placebo administered weekly by subcutaneous injection for 12 weeks. The primary endpoints of this trial are the
proptosis responder rate measured at week 13, defined as the percentage of patients with a greater than or equal to 2 mm reduction in proptosis in the study
eye without deterioration in the fellow eye, and safety and tolerability. Secondary endpoints include the proptosis responder rate measured at weeks 2, 3,
4, 5, 6, 8, 10, 12, 14, 16 and 20, the proportion of patients with a CAS of 0 or 1, the mean change from baseline in proptosis, CAS, diplopia, ophthalmic
improvement and GO-QOL and PK, PD, defined as anti-TSHR antibodies and total IgG and IgG antibodies by subclasses, and anti-drug antibodies.
Exploratory endpoints include assessment of CT-measured muscle volume, fat volume, total orbital volume and proptosis, as well as multiple biomarkers
including gene expression profiles, pro-inflammatory markers and receptor occupancy. As previously communicated, results from this trial are still
possible in the first half of calendar year 2021. We intend to provide an update on the timing for this trial in the third quarter of calendar year 2020.
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Trial Design of ASCEND GO-2 Trial
IMVT-1401 for the Treatment of Warm Autoimmune Hemolytic Anemia
Warm Autoimmune Hemolytic Anemia Overview
WAIHA is a rare hematologic disease in which autoantibodies mediate hemolysis, or the destruction of RBCs. The clinical presentation is variable and
most commonly includes non-specific symptoms of anemia such as fatigue, weakness, skin paleness and shortness of breath. Symptoms typically develop
chronically over several weeks to months, however rapid progression over a span of days has also been observed.
In severe cases, hemoglobin levels are unable to meet the body’s oxygen demand, which can lead to heart attacks, heart failure and even death. Though the
exact causes of WAIHA are unknown, roughly half of cases occur in patients with an underlying lymphoproliferative or autoimmune disease, most
commonly chronic lymphocytic leukemia, rheumatoid arthritis or systemic lupus erythematosus.
In WAIHA, autoantibodies react with surface proteins on RBCs at temperatures at or above 37° Celsius, or normal body temperature. These antibodies are
of the IgG subtype in the majority of patients. WAIHA is differentiated from cold autoimmune hemolytic anemia, or cold agglutinin disease, which shares
a similar clinical presentation but is triggered by autoantibodies that react at temperatures below 37° Celsius. In WAIHA, antibody-coated RBCs are
removed from circulation primarily in the spleen, where they are destroyed by macrophages. Studies have suggested the severity of WAIHA correlates
with the amount and potency of autoantibodies present.
The laboratory evaluation of WAIHA begins with a peripheral blood analysis revealing evidence of extravascular hemolysis (spherocytes, low
haptoglobin, elevated bilirubin and elevated LDH). In over 97% of cases, patients have a positive direct antiglobulin test, which detects the presence of
IgG or complement proteins bound to the surface of RBCs.
The annual incidence of WAIHA in the United States and Europe is estimated at one to three in 100,000 persons. Based on published estimates, we believe
that there are approximately 42,000 patients in the United States and 66,000 patients in Europe living with WAIHA. The disease may be more common in
females, with some sources suggesting a 2:1 female predominance. Peak incidence occurs during the sixth and seventh decades of life, however, WAIHA
can occur in children as well.
Current Treatment Paradigm
High doses of corticosteroids (>1 mg/kg of prednisone) are typically the first-line treatment option for WAIHA and lead to initial disease control in
approximately 70-85% of cases. Once initial disease control is achieved, doses of steroids are tapered. However, only 33% of patients maintain sustained
disease control once steroids are discontinued and, as a result, the majority of patients will require either long-term steroid treatment or additional
therapies.
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There are few studies to guide which treatment options to use in patients failing corticosteroids. Until recently, splenectomy had been a common second-
line treatment option for patients not responding adequately to corticosteroids. The therapeutic benefit of splenectomy is thought to be twofold: first, it
eliminates the major site of RBC destruction in WAIHA; second, removal of the spleen reduces the total lymphoid tissue capable of producing
autoantibodies. However, because of the lack of reliable predictors of the outcome, morbidity and potential operative complications of splenectomy,
rituximab has become the default second-line option despite not being approved for use in WAIHA. In case studies looking at patients with relapsed
disease after treatment with steroids, single-agent rituximab led to responses in 65% to 90% of patients. In such a course of treatment, maximal therapeutic
effect is not immediate.
Patients with persistent disease despite use of corticosteroids and rituximab may be offered a course of other immunosuppressive drugs, such as
cyclophosphamide, mycophenolate mofetil or azathioprine sirolimus.
IVIg is not routinely used alone for the treatment of WAIHA, however, small case series have suggested some evidence for a therapeutic effect in patients
suffering from life-threatening complications of the disease. In these reports, IVIg has been given at high doses (greater than or equal to 1 g/kg per day),
and the results have been inconsistent, requiring repeated courses of treatment in at least one case.
RBC transfusions are indicated in patients who require immediate stabilization. Such patients are monitored closely for evidence of a transfusion reaction.
In contrast to other treatment modalities that lead to nonspecific suppression of the immune system, IMVT-1401 may offer a more targeted approach for
reducing levels of the causative IgG species responsible for most cases of WAIHA. We believe this could provide a favorable therapeutic window and
avoid the significant side effects associated with less targeted immunosuppression.
ASCEND WAIHA Trial
In November 2019, we submitted our IND to the FDA for WAIHA and, in December 2019, our IND was cleared for Phase 2 trial initiation. The ASCEND
WAIHA trial will explore the potential of IMVT-1401 to increase hemoglobin levels and assess the safety and tolerability of IMVT-1401 in this
population. Patients in this trial will be treated with one of two doses of IMVT-1401 (680 mg or 340 mg) administered weekly by subcutaneous injection
for 12 weeks. The primary endpoint of this trial is the proportion of responders, defined as patients achieving a hemoglobin level of at least 10 g/dL and at
least a 2 g/dL increase from baseline. Secondary endpoints include change from baseline in other hematologic and chemistry parameters, time to response,
patient reported outcome measures, total IgG antibodies and IgG antibodies by subclasses. As previously communicated, results from this trial are still
possible by the end of second half of calendar year 2020. We intend to provide an update on the timing for this trial in the third quarter of calendar year
2020.
Trial Design of ASCEND WAIHA Trial
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Key Agreements
License Agreement with HanAll Biopharma Co., Ltd.
In December 2017, Roivant Sciences GmbH (“RSG”), a wholly owned subsidiary of RSL, entered into the HanAll Agreement. Under the HanAll
Agreement, RSG received (1) the non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import and use the antibody
referred to as IMVT-1401 and certain back-up and next-generation antibodies, and products containing such antibodies, and to commercialize such
products, in the United States, Canada, Mexico, the E.U., the U.K., Switzerland, the Middle East, North Africa and Latin America (the “Licensed
Territory”) for all human and animal uses, during the term of the agreement. With respect to these licenses, RSG also received the right to grant a
sublicense, with prior written notice to HanAll of such sublicense, to: (1) a third party in any country in the Licensed Territory outside of the United States
and E.U.; (2) an affiliate of RSG in any country in the Licensed Territory; and (3) a third party in the United States and E.U. only after submission of a
biologics license application (“BLA”) in the United States or a Marketing Authorization Application in the E.U. Pursuant to the HanAll Agreement, RSG
granted to HanAll an exclusive, royalty-free license under certain RSG patents, know-how and other intellectual property controlled by RSG relating to
such antibodies and products to develop, manufacture and commercialize such antibodies and products for use outside of the Licensed Territory. HanAll
also reserves the right to conduct discovery or research activities with the IMVT-1401 antibody, and certain back-up and next-generation antibodies, with
or through a contract research organization or service provider in the Licensed Territory.
In December 2018, we obtained and assumed all rights, title, interest and obligations under the HanAll Agreement from RSG, including all rights to
IMVT-1401 from RSG in the Licensed Territory, pursuant to an assignment and assumption agreement between RSG and our wholly owned subsidiary,
Immunovant Sciences GmbH (“ISG”), for an aggregate purchase price of $37.8 million plus Swiss value-added tax of $2.9 million.
Under the HanAll Agreement, the parties may choose to collaborate on a research program directed to the research and development of next generation
FcRn inhibitors in accordance with an agreed plan and budget. We are obligated to reimburse HanAll for half of such research and development expenses
incurred by HanAll, up to an aggregate reimbursement amount of $20.0 million. Intellectual property created by HanAll pursuant to this research program
will be included in our license; intellectual property created by us pursuant to this research program will be included in HanAll’s license.
Pursuant to the HanAll Agreement, RSG made an upfront payment of $30.0 million to HanAll. In May 2019, we achieved our first development and
regulatory milestone, which resulted in a $10.0 million milestone payment that we subsequently paid in August 2019. We will be responsible for future
contingent payments and royalties, including up to an aggregate of $442.5 million upon the achievement of certain development, regulatory and sales
milestone events. We are also obligated to pay HanAll tiered royalties ranging from the mid-single digits to mid-teens on net sales of licensed products,
subject to standard offsets and reductions as set forth in the HanAll Agreement. These royalty obligations apply on a product-by-product and
country-by-country basis and end upon the latest of: (A) the date on which the last valid claim of the licensed patents expire, (B) the date on which the data
or market exclusivity expires or (C) 11 years after the first commercial sale of the licensed product, in each case, with respect to a given product in a given
country.
Except for cost-sharing in connection with the research program, we are solely responsible, at our expense, for all other activities related to the research,
development and commercialization of licensed products for the Licensed Territory. We may use a third party for manufacturing activities necessary for
the research, development and commercialization of licensed products for the Licensed Territory. In addition, under the HanAll Agreement, we have
agreed to use commercially reasonable efforts to develop and commercialize licensed products in the Licensed Territory. Each party has agreed that
neither it nor certain of its affiliates will clinically develop or commercialize certain competitive products in the Licensed Territory.
Under the HanAll Agreement, we have the sole right, but not the obligation, to control the prosecution, defense and enforcement of the licensed patents in
the Licensed Territory, and HanAll has backup rights to prosecution, defense and enforcement with respect to any licensed patents for which we elect not
to exercise such rights.
The HanAll Agreement will expire on a product-by-product basis on the expiration of the last royalty term with respect to a given licensed product, unless
earlier terminated. We may terminate the HanAll Agreement in its entirety without cause upon 180 days’ written notice following 30 days of discussion.
Either party may terminate the HanAll Agreement upon 60 days’ written notice for uncured material breach (or 30 days in the case of non-payment), or
immediately upon written notice if the other party files a voluntary petition, is subject to a substantiated involuntary petition or for certain other solvency
events. HanAll may terminate the HanAll Agreement if we or our affiliates challenge the validity or enforceability of any of the licensed patents.
Services Agreements with RSI and RSG
In August 2018, we entered into services agreements (the “Services Agreements”) with Roivant Sciences Inc. (“RSI”) and RSG, under which RSI and
RSG agreed to provide services related to development, administrative and financial activities to us during our formative period. Under each Services
Agreement, we will pay or reimburse RSI or RSG, as applicable, for any expenses they, or third parties acting on our behalf, incur. For any general and
administrative and research and development activities performed by RSI or RSG employees, RSI or RSG, as applicable, will charge back the employee
compensation expense plus a pre-determined markup. RSI and RSG also provided such services prior to the formalization of the Services Agreements, and
such costs have been recognized by us in the period in which the services were rendered. Employee compensation expense, inclusive of base salary and
fringe benefits, is determined based upon the relative percentage of time utilized on our matters. All other costs will be billed back at cost. The term of the
Services Agreements will continue until terminated by us, RSI or RSG, as applicable, upon 90 days’ written notice.
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RSL Information Sharing and Cooperation Agreement
In December 2018, we entered into an amended and restated information sharing and cooperation agreement (the “Cooperation Agreement”) with RSL.
The Cooperation Agreement, among other things: (1) obligates us to deliver to RSL periodic financial statements and other information upon reasonable
request and to comply with other specified financial reporting requirements; (2) requires us to supply certain material information to RSL to assist it in
preparing any future SEC filings; and (3) requires us to implement and observe certain policies and procedures related to applicable laws and regulations.
We have agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in
connection with RSL’s status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their
respective officers, employees or directors to us or any of our subsidiaries, subject to certain limitations set forth in the Cooperation Agreement. No
amounts have been paid or received under this agreement; however, we believe this agreement is material to our business and operations.
Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of
when RSL no longer (a) is required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) to consolidate our results
of operations and financial position, account for its investment in us under the equity method of accounting or, by any rule of the SEC, include our separate
financial statements in any filings it may make with the SEC and (b) has the right to elect directors constituting a majority of our board of directors.
We are a Member of the Roivant Family of Companies
We are a majority-owned subsidiary of RSL and have benefited from our ability to leverage the Roivant model and the greater Roivant platform. The
period of time between our formation and operational maturation was shortened based on the support from centralized Roivant functions available since
creation. This includes operational functions as well as access to Roivant’s proprietary technology and digital innovation platforms. Consistent with its
model, Roivant has also provided us with access to an embedded team of scientific experts, physicians and technologists to help optimize clinical
development and commercial strategies. In the future, we may have the ability to benefit from Roivant’s economies of scale and scope, including but not
limited to the opportunity to:
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leverage Roivant’s business development engine and vast network of industry relationships for the identification of, and access to, new
assets and synergistic partnerships;
enter channel partnerships with other members of the Roivant family of companies (including but not limited to technology-focused
companies built by Roivant), with the goal of delivering efficiencies in the development and commercialization process;
access Roivant’s human capital engine to recruit new employees from within and beyond the biopharmaceutical industry;
enable its employees to participate in Roivant’s career development program which facilitates employee mobility across members of
the Roivant family of companies;
benefit from shared learnings, best practices, and external industry relationships across the Roivant family of companies; and
derive certain benefits of scale upon becoming a commercial-stage company.
Sales and Marketing
We do not currently have our own marketing, sales or distribution capabilities. In order to commercialize IMVT-1401 or any future product candidate, if
approved for commercial sale, we would have to develop a sales and marketing infrastructure. We intend to build a small, targeted sales organization in the
United States, targeting specialist physicians that treat high numbers of patients with autoimmune conditions. We believe these physicians treat a majority
of patients with the autoimmune indications that we intend to target and most often serve as the diagnosing and treating physicians for such indications.
We may opportunistically seek strategic collaborations to maximize the commercial opportunities for IMVT-1401 or any future product candidates inside
and outside the United States.
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Manufacturing
We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of IMVT-1401, and there are a limited
number of manufacturers that operate under the FDA’s current Good Manufacturing Practice (“cGMP”) requirements (particularly for the development of
antibodies) of the FDA that might be capable of manufacturing for us. We currently rely and intend to continue to rely on contract manufacturing
organizations (“CMOs”), for both drug substance and drug product. Currently, we contract with two well-established third-party manufacturers, one for the
manufacture of our drug substance and another for the manufacture of our drug product. We expect to engage additional third-party manufacturers to
support any pivotal clinical trials for IMVT-1401 as well as commercialization of IMVT-1401, if approved, in the United States or other jurisdictions. In
addition, we intend to recruit personnel with experience to manage the CMOs producing our product candidate and other product candidates or products
that we may develop in the future.
Our outsourced approach to manufacturing relies on CMOs to first develop cell lines and manufacturing processes that are compliant with cGMP then
produce material for nonclinical studies and clinical trials. Our agreements with CMOs may obligate them to develop a production cell line, establish
master and working cell banks, develop and qualify upstream and downstream processes, develop drug product process, validate (and in some cases
develop) suitable analytical methods for test and release as well as stability testing, produce drug substance for nonclinical testing, produce cGMP-
compliant drug substance, or produce cGMP-compliant drug product. We conduct audits of CMOs prior to initiation of activities under these agreements
and monitor operations to ensure compliance with the mutually agreed process descriptions and cGMP regulations.
Competition
We expect to face intense competition from other biopharmaceutical companies who are developing agents for the treatment of autoimmune diseases,
including multiple agents which are in the same class as IMVT-1401. We are aware of several FcRn inhibitors that are in clinical development. These
include efgartigimod (argenx SE), nipocalimab (Momenta Pharmaceuticals), rozanolixizumab (UCB) and ALXN1830 (Alexion Pharmaceuticals). Each of
efgartigimod, nipocalimab, and rozanolixizumab is currently under development for the treatment of MG. In addition, for WAIHA, Alexion has announced
plans to begin a Phase 2 trial for ALXN1830 in 2021 and Momenta is conducting an adaptive Phase 2/3 clinical study for nipocalimab. Momenta also
announced that the FDA has granted Fast Track Designation for nipocalimab in WAIHA.
In a Phase 1 trial conducted by argenx SE, efgartigimod was observed to reduce mean IgG levels by approximately 50% after two 20 mg/kg intravenous
induction doses followed by eight weekly 300 mg subcutaneous doses. In a Phase 2 trial conducted in MG, UCB’s rozanolixizumab was infused
subcutaneously, over 30 minutes, and was observed to reduce mean IgG levels by approximately 56% and approximately 68% after three and six weekly 7
mg/kg infusions, respectively. Momenta’s nipocalimab is not yet in clinical development with a subcutaneous formulation and no clinical results for
Alexion’s subcutaneous formulation of ALXN1830 are available.
IMVT-1401, if approved, may also face competition from agents with different mechanisms of action. In January 2020, the FDA approved Horizon
Therapeutics’ Tepezza (teprotumumab), an anti-IGF-1R antibody, for the treatment of TED. The most commonly prescribed first-line agents for the
treatment of MG are acetylcholinesterase inhibitors, such as pyridostigmine, which are marketed by several manufacturers of generic medicines. IVIg is
also routinely used for patients with MG. Eculizumab (marketed by Alexion), an antibody inhibitor of the C5 protein, was approved in 2017 for the
treatment of generalized MG in patients who are positive for anti-AChR antibodies. The first line of treatment for TED and WAIHA patients is generally
immunosuppressive therapy, including high doses of corticosteroids. Other broad immunosuppressive drugs, such as cyclosporine, cyclophosphamide,
mycophenolate mofetil and azathioprine, are used when patients do not respond adequately to corticosteroids. Rituximab (Roche), a monoclonal antibody
that binds to an antigen specific to antibody-producing B cells, may also be used as a treatment for TED, WAIHA and other IgG-mediated autoimmune
diseases. Momenta is developing its hypersialylated IVIg, M254, in a variety of autoimmune indications.
Other product candidates in development for the treatment of MG include: zilucoplan (UCB), a peptide inhibitor of C5, currently in a Phase 3 trial in a
similar patient population; amifampridine (Catalyst Pharmaceuticals), a neuronal potassium channel blocker, for MG patients positive for the MuSK
antibody, which is currently in Phase 3; and Myasterix (CuraVac), a therapeutic vaccine against B and T cells, which is being tested in early stage trials in
MG patients. Moreover, Viela Bio has announced plans to initiate a pivotal trial in MG for inebilizumab, a CD19-targeted humanized monoclonal
antibody, in 2020. Toleranzia has announced its intention to initiate Ph1/2a program in MG patients for its immunomodulating complex, TOL2, in 2020.
Numerous product candidates are currently in development for the treatment of WAIHA. Fostamatinib (Rigel Pharmaceuticals), a syk inhibitor, is currently
in Phase 3 development. A Phase 2 investigator-initiated study of ibrutinib (AbbVie), a BTK inhibitor, in steroid-refractory WAIHA is ongoing. Kezar
Life Sciences is running a Phase 2 trial including WAIHA patients for its immunoproteasome inhibitor, KZR-616.
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Drug development is highly competitive and subject to rapid and significant technological advancements. Our ability to compete will significantly depend
upon its ability to complete necessary clinical trials and regulatory approval processes, and effectively market any drug that it may successfully develop.
Our current and potential future competitors include pharmaceutical and biotechnology companies, as well as academic institutions and government
agencies. The primary competitive factors that will affect the commercial success of any product candidate for which we may receive marketing approval
include efficacy, safety and tolerability profile, dosing convenience, price, coverage, reimbursement and public opinion. Many of our existing or potential
competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and
development of product candidates, as well as in obtaining regulatory approvals of those product candidates in the United States and in foreign countries.
Our current and potential future competitors also have significantly more experience commercializing drugs that have been approved for marketing.
Mergers and acquisitions in the pharmaceutical, biotechnology and gene therapy industries could result in even more resources being concentrated among
a small number of our competitors.
Accordingly, competitors may be more successful than us in obtaining regulatory approval for therapies and in achieving widespread market acceptance of
their drugs. It is also possible that the development of a cure or more effective treatment method for any of our targeted indications by a competitor could
render our product candidate non-competitive or obsolete, or reduce the demand for its product candidate before it can recover its development and
commercialization expenses.
Intellectual Property
Our commercial success depends in part on its ability to obtain and maintain proprietary protection for IMVT-1401 and any of its future product
candidates, novel discoveries, product development technologies and know-how; to operate without infringing on the proprietary rights of others; and to
prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing or
in-licensing U.S. and foreign patents and patent applications related to our proprietary technology, inventions and improvements that are important to the
development and implementation of our business. We also rely on trademarks, trade secrets, know-how, continuing technological innovation and potential
in-licensing opportunities to develop and maintain our proprietary position.
While we seek broad coverage under our existing patent applications, there is always a risk that an alteration to any products we develop or processes we
use may provide sufficient basis for a competitor to avoid infringing our patent claims. In addition, patents, if granted, expire and we cannot provide any
assurance that any patents will be issued from our pending or any future applications or that any potentially issued patents will adequately protect our
products or product candidates.
Following our assumption of all rights, title, interest and obligations under the HanAll Agreement from RSG in December 2018, by virtue of the license of
patent rights under the HanAll Agreement, we are the exclusive licensee of a patent family directed to IMVT-1401, and certain back-up and next-
generation antibodies, and products containing such antibodies, in the Licensed Territory. As of May 14, 2020, this licensed patent family includes patent
applications pending in the United States, Argentina, Brazil, Canada, European Patent Office, Egypt, Israel, Mexico and Saudi Arabia. These patent
applications disclose the antibody, pharmaceutical composition thereof, methods of treating autoimmune disease using the same, polynucleotide encoding
the antibody, expression vector including such polynucleotide, host cell transfected with such recombinant expression vector, methods of manufacturing
the antibody and methods of detecting FcRn in vivo or in vitro using the antibody. Additionally, as of May 14, 2020, independent of the licensed patent
family, ISG has a patent family that includes an internationally filed patent application and patent application pending in Argentina. This patent family is
directed to methods of treating thyroid eye disease using anti-FcRn antibodies. Generally, the term of any patent granted from a patent application in the
in-licensed HanAll patent family directed to the IMVT-1401 composition of matter and methods of use has a projected natural expiration and will expire
on April 30, 2035 in the United States and in other jurisdictions, subject to such terms as may be modified by, for example, terminal disclaimer or any
adjustment or extension of patent term that may be available in a particular jurisdiction. Notably, in this patent family, a U.S. patent in the patent family
was issued on July 2, 2019, with claims directed to an isolated anti-FcRn antibody or antigen–binding fragment thereof, and a pharmaceutical composition
comprising such antibody or antigen-binding fragment thereof. Furthermore, another U.S. patent was issued in this patent family on January 28, 2020, with
claims directed to an isolated anti-FcRn antibody or antigen-binding fragment thereof, a pharmaceutical composition comprising such antibody or antigen-
binding fragment thereof as well as methods of treating various autoimmune diseases using the antibody, polynucleotides and expression vectors encoding
the antibody, host cells capable of expressing the antibody and methods of producing the antibody.
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In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional
filing date, as the term of a patent granted on a utility patent application filed after June 8, 1995 expires 20 years after the non-provisional U.S. filing date
(or any earlier filing date relied upon under 35 U.S.C. 120, 121, or 365(c)), with the timely payment of maintenance fees. In certain instances, the patent
term may be adjusted to add additional days to compensate for certain delays incurred by the U.S. Patent and Trademark Office (“USPTO”) in the
examination process, issuing the patent and/or the patent term may be extended for a period of time to compensate for at least a portion of the time a
product candidate was undergoing FDA regulatory review. However, the patent extension granted for FDA regulatory review is only applied to a single
patent that covers either the product candidate or a method of using or manufacturing the same which has not expired at the time of FDA approval.
Additionally, the period of time the patent is extended may not exceed five years, and the total patent term, including the period of time the patent is
extended, must not exceed 14 years following FDA approval. The duration of foreign patents varies in accordance with provisions of applicable local law,
but typically is also 20 years from the earliest effective non-provisional filing date. The protection afforded by a patent with respect to a particular product
varies on a product-by-product basis, from country to country, and depends upon many factors, including the type of patent, its coverage, the availability of
regulatory-related extensions, the availability of legal remedies in the particular country and the validity and enforceability of the patent under the local
laws. ISG owns a trademark for IMMUNOVANT, the corporate logo, and a composite trademark for its corporate logo with the IMMUNOVANT mark.
As of May 14, 2020, this trademark portfolio included registration of the Immunovant trademark in the United States, Argentina, Brazil, Chile, China,
Colombia, EU, Hong Kong Israel, the International Register, Japan, Mexico, Monaco, New Zealand, Norway, Philippines, Russian Federation, Saudi
Arabia, Serbia, Singapore, South Korea and Switzerland, plus registration of the Immunovant logo trademark in Switzerland, and registration of the
composite trademark in Chile, EU, the International Register, Monaco, Saudi Arabia, Switzerland and the United Kingdom. Additionally, trademark
applications are pending for the Immunovant trademark in 22 foreign jurisdictions and for the composite trademark in the United States and 19 foreign
jurisdictions. Under the HanAll Agreement, we have the right to market IMVT-1401 in the Licensed Territory under the trademark(s) of our choice,
subject to regulatory approval. However, upon termination of the HanAll Agreement, we must assign to HanAll all right, title and interest in and to any and
all trademarks we use in the development, manufacture or commercialization of the licensed products.
Furthermore, we rely upon trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position. We
seek to protect our proprietary information, in part, by using confidentiality and invention assignment agreements with its commercial partners,
collaborators, employees and consultants. These agreements are designed to protect our proprietary information and, in the case of the invention
assignment agreements, to grant it ownership of technologies that are developed through a relationship with a third party. These agreements may be
breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently
discovered by competitors. To the extent that our commercial partners, collaborators, employees and consultants use intellectual property owned by others
in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties. It is uncertain whether the issuance of any
third-party patent would require us to alter its development or commercial strategies for our product candidates or processes, or to obtain licenses or cease
certain activities. Our breach of any license agreements or failure to obtain a license to proprietary rights that it may require to develop or commercialize its
future products may have an adverse impact on us. If third parties prepare and file patent applications in the United States that also claim technology to
which we have rights, we may have to participate in interference or derivation proceedings in the USPTO to determine priority of invention.
Government Regulation
The FDA and other regulatory authorities at federal, state, and local levels, as well as in foreign countries, extensively regulate, among other things, the
research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging, storage, distribution, record
keeping, approval, advertising, promotion, marketing, post-approval monitoring, and post-approval reporting of biologics such as those we are developing.
We, along with third-party contractors, will be required to navigate the various nonclinical, clinical and commercial approval requirements of the
governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of IMVT-1401 or any future product
candidate.
FDA Drug Approval Process
In the United States, the FDA regulates biologics under both the Federal Food, Drug and Cosmetic Act and the Public Health Services Act and their
implementing regulations. The process required by the FDA before biologic product candidates may be marketed in the United States generally involves
the following:
•
•
•
completion of preclinical laboratory tests and animal studies performed in accordance with applicable regulations, including the FDA’s
current Good Laboratory Practices (“GLP”) regulations and applicable requirements for the humane use of laboratory animals or other
applicable regulations;
submission to the FDA of an IND, which must become effective before clinical trials may begin and must be updated annually or
when significant changes are made;
approval by an institutional review board (“IRB”) or ethics committee at each clinical site before the trial is commenced;
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•
•
•
•
•
•
•
performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, Good Clinical
Practice (“GCP”), and other clinical-trial related regulations and guidance to evaluate the safety, purity and potency of the proposed
biologic product candidate for each proposed indication;
preparation of and submission to the FDA of a BLA after completion of all pivotal clinical trials that includes substantial evidence of
safety, purity and potency from results of nonclinical testing and clinical trials;
a determination by the FDA within 60 days of its receipt of a BLA to file the application for review;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed product is
produced to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the biological
product’s continued safety, purity and potency, and of selected clinical investigation sites, preclinical studies, and/or Immunovant as
clinical trial sponsor to assess compliance with FDA’s GCP standards;
payment of user fees for FDA review of the BLA (unless a fee waiver applies);
agreement with FDA on the final labeling for the product and the design and implementation of any required Risk Evaluation and
Mitigation Strategy (“REMS”); and
FDA review and approval, or licensure, of the BLA, including satisfactory completion of an FDA Advisory Committee review, if
applicable, to permit commercial marketing or sale of the product for particular indications for use in the United States.
Our product candidates are being developed as pre-filled syringes, which means that they are subject to regulation as combination products because they
are composed of both a biologic product and device product. If approved and marketed individually, each component would be subject to different
regulatory pathways and reviewed by different centers within the FDA. A combination product, however, is assigned to a center that will have primary
jurisdiction over its regulation based on a determination of the combination product’s primary mode of action, which is the single mode of action that
provides the most important therapeutic action. In the case of our product candidates, the primary mode of action is attributable to the biologic component
of the product, which means that the FDA’s Center for Drug Evaluation and Research has primary jurisdiction over the premarket development, review
and approval of our product candidates. Accordingly, our product candidates are subject to the IND framework for premarket development and approval
through the BLA pathway. Based on our understanding of FDA’s combination device expectations, we do not anticipate that the FDA will require a
separate medical device authorization for the syringe, but this could change during the course of its review of any marketing application that we may
submit.
European Union Drug Approval Process
In the European Union (the “E.U.”), there are three existing regulatory procedures for a medicinal product to be authorized for use in the Member States of
the E.U. and the European Economic Area under the E.U. pharmaceutical legislation that harmonizes the regulatory standards and requirements for
assessing safety, quality and efficacy.
A medicinal product for human use may be authorized either by the European Commission through the centralized procedure or by national competent
authorities through a mutual recognition, decentralized or national procedure.
The centralized procedure applies to a medicinal product for human use containing a new active substance which was not authorized in the E.U. for which
the therapeutic indication is the treatment of any of the following diseases: acquired immune deficiency syndrome, cancer, neurodegenerative disorder,
diabetes, auto-immune diseases and other immune dysfunctions, and viral diseases. In addition, the following product categories must also be centrally
authorized: a medicinal product developed by means of recombinant DNA technology, controlled expression of genes coding for biologically active
proteins in prokaryotes and eukaryotes including transformed mammalian cells and hybridoma and monoclonal antibody methods. A medicinal product
that has been designated as an orphan medicinal product must also be evaluated through the centralized procedure. A medicinal product that is considered
as constituting a significant therapeutic, scientific or technical innovation or its approval is in the interests of E.U. patients is also eligible for the optional
centralized assessment. The centralized procedure requires applicants to submit an application for marketing authorization to the European Medicines
Agency (“EMA”) which is responsible for the coordinating the scientific assessment to be performed by its relevant advisory committees. Once a positive
benefit/risk assessment is adopted by the EMA, the European Commission will issue a binding decision on granting the centralized marketing
authorization which is valid throughout the Member States of the E.U. and the European Economic Area (Norway, Iceland and Liechtenstein).
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The mutual recognition procedure is applicable to the majority of conventional medicinal products. To be eligible for the mutual recognition procedure, a
medicinal product must have already received a marketing authorization in one E.U. Member State which will become the Reference Member State. An
application for mutual recognition may involve one or more E.U. Member States, known as Concerned Member States, for the medicinal product to be
progressively authorized in these E.U. Member States. The decentralized procedure permits the common assessment of an application submitted
simultaneously to two or more Member States. One of the Member States will take the lead in evaluating the application as the Reference Member State.
National authorization procedure is still available for medicinal products sold in an individual E.U. Member State only.
A reference medicinal product containing a new active substance enjoys a period of 10 years data and market protection or exclusivity upon grant of a
marketing authorization. This period is divided into 8 years of data protection within which no generic applicant including a biosimilar applicant can cross-
reference the non-clinical and clinical data contained in the file of the reference medicinal product. Even if an authorization is granted based on data cross-
referencing, the follow-on manufacturer cannot market the product until the 10-year protection period expires. This period can be extended to a total period
of 11 years if during the first 8 years of the protection period one or more new therapeutic indications which are held, during the regulatory review, to
bring a significant clinical benefit in comparison with existing therapies.
On January 31, 2020, the United Kingdom (the “U.K.”) left the E.U. and accordingly is no longer a Member State. However, the U.K. primary legislation
permits all E.U. law to continue being applied in the U.K. as part of the domestic law. The Withdrawal Agreement with the E.U. sets out a specific
transition arrangement for the E.U. law to be applicable in the U.K. until the expiry of the transition period at the end of 2020 while the U.K. and E.U.
negotiate additional future relationship arrangements.
As the U.K. is no longer an E.U. Member State, the U.K.’s participation in the European Medicines Regulatory Network would cease and the U.K.
Medicines and Healthcare products Regulatory Agency (“MHRA”) would take on the functions currently undertaken by the E.U. for human medicines on
the U.K. market. All existing centralized marketing authorizations are or will be converted into the U.K. marketing authorizations during the transition
period.
The MHRA would offer the following new assessment procedures for applications for products containing new active substances and biosimilars
alongside our existing 210-day national licensing route (which, for the time being, will continue to operate as now):
•
•
•
A targeted assessment of new applications for products containing new active substances or biosimilars which have been submitted to
the EMA and received a Committee for Medicinal Products for Human Use (“CHMP”) positive opinion, based on submission of all
relevant information and the CHMP assessment reports to MHRA. The MHRA review will be completed within 67 days of submission
of the application;
A full accelerated assessment, that industry can choose for new active substances, with a timeline of no more than 150 days; and
A ‘rolling review’, for new active substances and biosimilars, which would allow companies to make an application in stages,
throughout the product’s development, to better manage development risk.
Nonclinical and Clinical Development
Prior to beginning the first clinical trial with a product candidate in the United States, we must submit an IND to the FDA. An IND is a request for
authorization from the FDA to administer an investigational new drug product to humans. The central focus of an IND submission is on the general
investigational plan and the protocol(s) for clinical studies. The IND also includes results of animal and in vitro studies assessing the toxicology, PK,
pharmacology, and PD characteristics of the product candidate; chemistry, manufacturing, and controls information; and any available human data or
literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically
becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed
clinical trial. In such a case, the IND may be placed on clinical hold until the IND sponsor and the FDA resolve the outstanding concerns or questions. The
FDA also may impose clinical holds at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinical
hold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Submission of an IND therefore does not
guarantee that FDA authorization to begin a clinical trial will be granted or that, once begun, issues will not arise that suspend or terminate such studies.
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Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance
with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical study. Clinical
trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the
effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product
development and for any subsequent protocol amendments. For new indications, a separate new IND may be required. Outside of the U.S., clinical trial
applications are generally required to conduct clinical studies in each country. Furthermore, an independent IRB for each site proposing to conduct the
clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must
monitor the study until completed to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to
anticipated benefits. Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the
subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some studies also include oversight by
an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board, which provides authorization
for whether or not a study may move forward at designated check points based on access to certain data from the study and may halt the clinical trial if it
determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy. There are also requirements
governing the reporting of ongoing clinical studies and clinical study results to public registries. Information about most clinical trials must be submitted
within specific timeframes for publication on the www.clinicaltrials.gov website. For purposes of BLA/MAA approval, human clinical trials are typically
conducted in three sequential phases that may overlap or be combined.
•
Phase 1 — The investigational product is initially introduced into healthy human subjects or patients with the target disease or
condition. These studies are designed to test the safety, dosage tolerance, absorption, metabolism, distribution and elimination of the
investigational product in humans, the side effects associated with increasing doses, and, if possible, to gain early evidence on
effectiveness.
•
•
Phase 2 — The investigational product is administered to a limited patient population with a specified disease or condition to evaluate
the preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple
Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3 — The investigational product is administered to an expanded patient population to further evaluate dosage, to provide
statistically significant evidence of clinical efficacy and to further test for safety, generally at multiple geographically dispersed clinical
trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an
adequate basis for product approval. These trials may include comparisons with placebo and/or other comparator treatments. The
duration of treatment is often extended to mimic the actual use of a product during marketing.
In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information
about the product. These so-called Phase 4 studies may be made a condition to approval of the BLA or, in certain circumstances, mandated after approval.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical
study investigators. Annual progress reports detailing the results of the clinical studies must be submitted to the FDA, and IND safety reports must be
submitted to the FDA, other regulators, and investigators within a regulated timeframe for serious and unexpected adverse events, any findings from other
studies, tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a
serious suspected adverse reaction over that listed in the protocol or investigator brochure.
Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics
of the product candidate and must finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods
for testing the identity, strength, quality and purity of the final product, or for biologics, the safety, purity and potency. The FDA may require such testing
to occur on a lot-by-lot basis in order to release product for clinical use. Additionally, appropriate packaging must be selected and tested, and stability
studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
BLA Submission, Review and Approval
Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development,
nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or more indications. The
BLA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive
findings, together with detailed information relating to the product’s chemistry, manufacturing, controls, and proposed labeling, among other information.
The submission of a BLA requires payment of a substantial application user fee to FDA, unless a waiver or exemption applies. There can be no assurance
that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.
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Once a BLA has been submitted, the FDA reviews the BLA within 60 days to determine if it is substantially complete before the agency accepts it for
filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may request additional
information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review before the
FDA accepts it for filing. Under the goals and policies agreed to by the FDA under the Prescription Drug User Fee Act (“PDUFA”), the FDA’s goal is to
review standard applications within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after
the FDA accepts the application for filing. In both standard and priority reviews, the FDA does not always meet PDUFA goal dates, and the review process
can be significantly extended by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things,
whether a product is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the
product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions
and provide a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Before approving a BLA, the FDA
will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical sites, preclinical studies, and/or the
sponsor to assure compliance with GCP. If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable,
it will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested
additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its drug substance will be
produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter authorizes commercial marketing of the product with
specific prescribing information for specific indications. A Complete Response letter will describe all of the deficiencies that the FDA has identified in the
BLA, and where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete
Response letter without first conducting required inspections, testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete
Response letter, the FDA may recommend actions that the applicant might take to place the BLA in condition for approval, including requests for
additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, require
additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product.
If regulatory approval of a product is granted, such approval will be granted for particular indications and may entail limitations on the indicated uses for
which such product may be marketed, which could limit the commercial value of the product. For example, the FDA may approve the BLA with a REMS,
to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known or potential serious risk associated with a product
and to enable patients to have continued access to such medicines by managing their safe use, and could include medication guides, physician
communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA
also may condition approval on, among other things, changes to proposed labeling or the development of adequate controls and specifications. Once
approved, the FDA may withdraw the product approval if compliance with pre-and post-marketing requirements is not maintained or if problems occur
after the product reaches the marketplace. The FDA may require one or more Phase 4 post-market studies and surveillance to further assess and monitor
the product’s safety and effectiveness after commercialization and may limit further marketing of the product based on the results of these post-marketing
studies.
Expedited Development and Review Programs
Any marketing application for a biologic submitted to the FDA for approval may be eligible for FDA programs intended to expedite the FDA review and
approval process, such as priority review, fast track designation, breakthrough therapy and accelerated approval.
A product is eligible for priority review if it is intended to treat a serious condition and, if approved, would provide a significant improvement in safety or
effectiveness. Priority review designation means the FDA’s goal under PDUFA is to take action on the marketing application within six months of the
60-day filing date (compared with ten months under standard review). In addition, if a sponsor submits a BLA for a product intended to treat certain rare
pediatric or tropical diseases or for use as a medical countermeasure for a material threat, and that meets other eligibility criteria, upon approval such
sponsor may be granted a priority review voucher that can be used for a subsequent application or sold to another applicant.
To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-
threatening disease or condition and demonstrates the potential to address an unmet medical need by providing a therapy where none exists or a therapy
that may be potentially superior to existing therapy based on efficacy or safety factors. Fast track designation provides opportunities for frequent
interactions with the FDA review team to expedite development and review of the product. The FDA may also review sections of the BLA for a fast track
product on a rolling basis before the complete application is submitted, if the sponsor and FDA agree on a schedule for the submission of the application
sections, and the sponsor pays any required user fees upon submission of the first section of the BLA. The review clock generally does not begin until the
final section of the BLA is submitted.
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In addition, under the provisions of the Food and Drug Administration Safety and Innovation Act (“FDASIA”) passed in July 2012, a sponsor can request
designation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug or biologic that is intended, alone or in
combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence
indicates that the drug or biologic may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such
as substantial treatment effects observed early in clinical development. Drugs or biologics designated as breakthrough therapies are also eligible for
accelerated approval. The FDA must take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and
review of an application for approval of a breakthrough therapy.
Additionally, products studied for their safety and effectiveness in treating serious or life-threatening diseases or conditions and that provide meaningful
therapeutic benefit over existing treatments may receive accelerated approval, which means that they may be approved on the basis of adequate and well-
controlled clinical studies establishing that the product has an effect on a validated surrogate endpoint that is reasonably likely to predict a clinical benefit,
or on the basis of an effect on a clinical endpoint that can be measured earlier than survival or irreversible morbidity and is reasonably likely to predict an
effect on survival, irreversible morbidity or another clinical benefit. As a condition of accelerated approval, the FDA will generally require the sponsor to
perform adequate and well-controlled post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or
other clinical benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which could
adversely impact the timing of the commercial launch of the product.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or
decide that the time period for FDA review and approval will not be shortened. Furthermore, priority review, fast track designation, breakthrough therapy
designation, and accelerated approval do not change the standards for approval and may not ultimately expedite the development or approval process.
Orphan Drug Designation
Under the Orphan Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is a disease or
condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States for which there is no
reasonable expectation that the cost of developing and making available in the United States a drug or biologic for this type of disease or condition will be
recovered from sales in the United States for that drug or biologic. Orphan designation must be requested before submitting a BLA. After the FDA grants
orphan designation, the generic identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. The orphan drug
designation does not convey any advantage in, or automatically shorten the duration of, the regulatory review or approval process.
If a product that has orphan designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is
entitled to orphan exclusivity, which means that the FDA may not approve any other applications, including a full BLA, to market the same product for the
same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity.
Orphan exclusivity does not prevent FDA from approving a different drug or biologic for the same disease or condition, or the same drug or biologic for a
different disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the BLA application
fee. A designated orphan product may not receive orphan exclusivity if it is approved for a use that is broader than the indication for which it received
orphan designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was
materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or
condition.
Similarly, in the E.U., the European Commission grants binding decision on orphan designations after a satisfactory scientific assessment provided by the
EMA’s Committee for Orphan Medicinal Products. To qualify for orphan designation, a medicinal product must meet the following criteria set out in E.U.
Orphan Medicinal Products Regulation:
•
•
•
it must be intended for the treatment, prevention or diagnosis of a disease that is life-threatening or chronically debilitating;
the prevalence of the condition in the E.U. must not be more than 5 in 10,000 or it must be unlikely that marketing of the medicine
would generate sufficient returns to justify the investment needed for its development; and
no satisfactory method of diagnosis, prevention or treatment of the condition concerned can be authorized, or, if such a method exists,
the medicine must be of significant benefit to those affected by the condition.
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The orphan designation granted is re-assessed at the time when the marketing authorization is granted in order to confirm whether the statutory criteria
continue to be met. If the criteria are no longer met, then the orphan designation is removed.
If the orphan designation is maintained when the marketing authorization is granted, then the orphan medicinal product will enjoy 10-year orphan market
exclusivity in respect of the approved indication. This exclusivity period prevents a similar medicinal product being accepted by the E.U. regulatory
authorities for approval. This exclusivity period can be extended to a total period of 12 years under the E.U. Pediatric Regulation in lieu of six-month
extension of the supplementary protection certificate. The orphan exclusivity is run in parallel with the basic regulatory data/market protection or
exclusivity period of 10 years in the E.U. However, this period can be reduced to six years if at the end of the fifth year, it is established that the criteria for
orphan designation are no longer met where it is shown on the basis of available evidence that the product is sufficiently profitable not to justify
maintenance of market exclusivity.
After its departure from the E.U., there will be a U.K. system for regulating medicinal products for treating rare diseases including granting of orphan
status determined by the MHRA as is the case in the current E.U. system. Overall, the orphan criteria would still be based on the current E.U. criteria, but
U.K.-specific considerations will be incorporated into the local system. These will be based on the prevalence of the rare disease in the U.K., the
availability of satisfactory alternative treatment methods in the U.K. and the significant benefit of the product. The evaluation of compliance with orphan
criteria would be conducted in parallel with the review of quality, safety and efficacy of the medicine at the time of the marketing authorization
application.
Where a medicine receives orphan status the initial marketing authorization (“MA”) application fee will be refunded at 100% for SMEs and 10% for all
other manufacturers. For these medicines small medium sized enterprises will also receive a fee waiver for variations in the first year after the MA is
granted. The 10 years market exclusivity from competition from similar products in the approved orphan indication would be retained. If criteria for
orphan status are met, this incentive would be awarded following grant of a U.K. marketing authorization.
According to the MHRA, the E.U. pre-marketing authorization orphan designation will not be replicated in the U.K., given that this will be available at
E.U. level and that a separate U.K.-only designation is unlikely to further incentivize industry to warrant the investment required to resource a separate
system. As it has been proposed to have a U.K.-specific criteria for determining whether a drug qualifies as ‘orphan’, it would not be possible simply to
accept the E.U. designation for these high value drugs; however, the government has committed to monitor these incentives and will consider any further
evidence to support this.
Pediatric Information
Under the Pediatric Research Equity Act (“PREA”), a BLA or supplement to a BLA must contain data that are adequate to assess the safety and efficacy of
the product candidate for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of pediatric data or full or partial waivers. The
FDASIA amended the FDCA to require that a sponsor who is planning to submit a marketing application for a product that includes a new active
ingredient, new indication, new dosage form, new dosing regimen or new route of administration submit an initial Pediatric Study Plan (“PSP”), within
sixty days of an end-of-Phase 2 meeting or, if there is no such meeting, as early as practicable before the initiation of the Phase 3 or Phase 2/3 study. The
initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups,
relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric
assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information. The FDA and the
sponsor must reach an agreement on the PSP. A sponsor can submit amendments to an agreed upon initial PSP at any time if changes to the pediatric plan
need to be considered based on data collected from preclinical studies, early phase clinical trials or other clinical development programs.
In the E.U., a sponsor is required to obtain an agreed Pediatric Investigation Plan (“PIP”) which describes a program of pediatric studies to generate
meaningful data to inform the use of the product in the pediatric population. The data derived from the PIP must be submitted with the marketing
authorization application unless a waiver or a deferral is granted. Otherwise, the application will not be accepted by the EMA for review. If the pediatric
data required by the PIP are submitted, irrespective of whether the data have led to approval of a pediatric indication, the orphan exclusivity period is
extended to a total period of 12 years. For a product which is not an orphan medicinal product, the supplementary protection certificate can be extended to
a further 6 months under the E.U. pediatric rules. For a medicinal product which is no longer protected by a subsisting patent, a pediatric use marketing
authorization can be sought and upon approval, a period of 10 years regulatory data exclusivity or protection is granted.
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Post-Approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including,
among other things, requirements relating to quality control and quality assurance, record-keeping, reporting of adverse experiences, periodic reporting,
product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding
new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing user fee requirements, under which FDA
assesses an annual program fee for each product identified in an approved BLA. Biologic manufacturers and their subcontractors are required to register
their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies
for compliance with cGMP, which impose certain procedural and documentation requirements upon us and our third-party manufacturers. Changes to the
manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.
FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting requirements upon us and any third-party
manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and
quality control to maintain compliance with cGMP and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product
reaches the market. Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;
imposition of post-market studies or clinical studies to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS
program. Other potential consequences include, among other things:
•
•
•
•
•
restrictions on the marketing or manufacturing of a product, mandated modification of promotional materials or issuance of corrective
information, issuance by FDA or other regulatory authorities of safety alerts, Dear Healthcare Provider letters, press releases or other
communications containing warnings or other safety information about the product, or complete withdrawal of the product from the
market or product recalls;
fines, warnings or untitled letters or holds on post-approval clinical studies;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing
product approvals;
product seizure or detention, or refusal of the FDA to permit the import or export of products; or
injunctions, consent decrees or the imposition of civil or criminal penalties.
The FDA closely regulates the marketing, labeling, advertising and promotion of biologics. A company can make only those claims relating to safety and
efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the approved label. The FDA and other agencies
actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other
things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available
products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. The FDA does not
regulate the behavior of physicians in their choice of treatments. The FDA does, however, restrict manufacturer’s communications on the subject of
off-label use of their products.
Biosimilars and Reference Product Exclusivity
The Affordable Care Act signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which
created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological
product. To date, a number of biosimilars have been licensed under the BPCIA, and numerous biosimilars have been approved in Europe, but no
interchangeable biologic has been approved in the United States. The FDA has issued several guidance documents outlining its approach to the review and
approval of biosimilars.
Biosimilarity, which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactive
components and that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and
potency, can be shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to
the reference product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given
patient and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or switched after
one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic.
Complexities associated with the larger, and often more complex, structures of biological products, as well as the processes by which such products are
manufactured, pose significant hurdles to implementation of the abbreviated approval pathway that are still being worked out by the FDA.
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Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product
was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on
which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the
reference product if the FDA approves a full BLA for the competing product containing that applicant’s own preclinical data and data from adequate and
well-controlled clinical trials to demonstrate the safety, purity and potency of its product. The BPCIA also created certain exclusivity periods for
biosimilars approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be
readily substituted by pharmacies, which are governed by state pharmacy law.
The BPCIA is complex and continues to be interpreted and implemented by the FDA. In addition, government proposals have sought to reduce the 12-year
reference product exclusivity period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the
subject of recent litigation. As a result, the ultimate impact, implementation, and impact of the BPCIA is subject to significant uncertainty.
On December 20, 2019, the Further Consolidated Appropriations Act, 2020 (“FCAA 2020”) became law. Section 610, entitled “Actions for Delays of
Generic Drugs and Biological Products”, provides generic drug (ANDA and 505(b)(2)) and biosimilar developers with a private right of action to obtain
sufficient quantities of reference product from the brand manufacturer, or a generic or biosimilar manufacturer, necessary for approval of the developers’
generic or biosimilar product. If a generic drug or biosimilar developer is successful in its suit, the defendant manufacturer would be required to provide
sufficient quantities of product on commercially-reasonable, market-based terms and may be required to pay the developer’s reasonable attorney’s fees
and costs as well as financial compensation under certain circumstances. The purpose of section 610 is to promote competition in the market for drugs and
biological products by facilitating the timely entry of lower-cost generic and biosimilar products. We cannot determine what effect section 610 of the
FCAA 2020 may have on manufacturers that may develop biosimilar or other competing versions of our products once approved.
In the E.U., a biosimilar product is approved under a different regulatory pathway, recognizing that a biosimilar product does not meet the conditions set
out in the definition of a generic medicinal product owing to in particular differences relating to raw materials or differences in manufacturing processes of
the biological medicinal product and the reference biological medicinal. In view of these differences, a biosimilar is required to provide the results of
appropriate pre-clinical tests or clinical trials. However, the biosimilar manufacturer is not required to replicate the testing results or trial data contained in
the dossier of the reference biological medicinal product. The regulatory data/market protection or exclusivity period is the same as a conventional
medicinal product as discussed above.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our current and future operations are subject to regulation and oversight by various federal, state and local authorities in addition to
the FDA, including but not limited to, Centers for Medicare & Medicaid Services (“CMS”) or other divisions of the U.S. Department of Health and
Human Services (“HHS”) (such as the Office of Inspector General, Office for Civil Rights and the Health Resources and Service Administration), the U.S.
Department of Justice (“DOJ”) and individual U.S. Attorney offices within the DOJ, and state and local governments and regulatory authorities. For
example, our clinical research, sales, marketing and scientific/educational grant programs may have to comply with the anti-fraud and abuse provisions of
the Social Security Act, the false claims laws, the privacy and security provisions of the Health Insurance Portability and Accountability Act of 1996
(“HIPAA”) and similar state laws, each as amended, as applicable. Our business operations and current and future arrangements with investigators,
healthcare professionals, consultants, third-party payors and customers may be subject to healthcare laws, regulations and enforcement by the federal
government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and
federal anti-kickback, fraud and abuse, false claims, privacy and security, price reporting and transparency, and physician sunshine laws. Some of our
pre-commercial activities are subject to certain of these laws.
The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or
receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or
arranging for the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare
programs. The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply to
arrangements between therapeutic product manufacturers on one hand and, for example, prescribers, purchasers, third party payors, pharmacies, and
pharmacy benefit managers on the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from
the reach of the Anti-Kickback Statute. The exceptions and safe harbors are interpreted narrowly by enforcement authorities, and practices that involve
remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending any product payable by the federal health care
programs may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular statutory
exception or regulatory safe harbor does not make the conduct per se illegal under the Anti-Kickback Statute. Instead, where an arrangement does not
clearly meet the terms of an applicable exception or safe harbor, the legality of the arrangement will be evaluated on a case-by-case basis based on
prudential factors that authorities, including the Department of Health and Human Services Office of Inspector General, utilize to determine whether a
particular arrangement poses a risk of fraud and abuse to the federal health care programs (e.g., increasing costs to government payors). Our practices may
not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor, and we cannot rule out the possibility that
enforcement authorities, including the Office of Inspector General, could scrutinize our practices in the future.
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Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person or
entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Violations of the Anti-
Kickback Statute can result in significant civil and criminal fines and penalties, imprisonment, and exclusion from federal healthcare programs. In
addition, the Affordable Care Act codified case law that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the federal False Claims Act (“FCA”) (discussed below).
The federal false claims laws, including the FCA, which can be enforced by private citizens through civil whistleblower or “qui tam” actions, and civil
monetary penalty laws, prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent
claim for payment to, or approval by, the federal government, including federal healthcare programs, such as Medicare and Medicaid, knowingly making,
using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the federal government, or knowingly making a
false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government. A claim includes “any request or demand”
for money or property presented to the U.S. government. Pharmaceutical and other healthcare companies have been, and continue to be, prosecuted under
these laws, among other things, for various conduct. For example, enforcement has pursued manufacturers allegedly providing free product to customers
with the expectation that the customers would bill federal programs for the product, and also for causing false claims to be submitted because of the
marketing of the product for unapproved, off-label, and thus generally non-reimbursable, uses.
HIPAA created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a
scheme to defraud or to obtain, by means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the
control or custody of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare
offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially false,
fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the Anti-Kickback Statute,
the Affordable Care Act amended the intent standard for certain healthcare fraud statutes that were added by HIPAA such that a person or entity no longer
needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
We may be subject to data privacy, security, and breach notification regulations administered by the federal government and the states in which we conduct
our business. If we were to enter into a “business associate” relationship with a “covered entity” (“covered entities” being group health plans, certain
healthcare providers, and “healthcare clearinghouses”), we would be subject to the HHS regulations related data privacy, security and security breach
notification under the Administrative Simplification provisions of HIPAA (Title II, Subtitle F of HIPAA), as amended by the Health Information
Technology for Economic and Clinical Health Act (“HITECH”). Those regulations authorize the imposition of civil and criminal penalties, damages,
injunctions, attorneys’ fees and costs. In addition, many state laws govern the privacy and security of health information in specified circumstances, many
of which differ from each other in significant ways, are often not pre-empted by HIPAA, and may have a more prohibitive effect than HIPAA, thus
complicating compliance efforts.
Although the HIPAA privacy, security and breach notification regulations may not necessarily apply to us, a growing body of state privacy and data
security laws and regulations governing the collection, use, disclosure, transfer, storage, disposal, and protection of personal information may apply and
could create compliance, investigation, and other risks The definition of “personal information” in these laws differs and in some cases can be quite broad.
These laws and regulations may be more restrictive and not preempted by U.S. federal laws. To the extent we hold personally identifiable information, we
may be at risk of data security breaches, which could require us to notify affected individuals, regulators, media, credit reporting agencies, and others, and
might expose us to regulatory investigations or private claims of negligence or violation of state law standards for adequately protecting personal
information. Relevant state laws include the California Consumer Privacy Act (“CCPA”), which contains significant privacy and data security obligations.
The CCPA and other state privacy, security, and breach notification laws may impose substantial penalties for violations, as well as incurring costs
associated with investigations, compliance, and private class-action litigation.
Additionally, the federal Physician Payments Sunshine Act (the “Sunshine Act”) within the Affordable Care Act, and its implementing regulations, require
that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s
Health Insurance Program (with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or
distributed to physicians, as defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the
physicians and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family
members. Failure to report accurately could result in penalties.
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Many states have similar statutes or regulations to the above federal laws that may be broader in scope and may apply regardless of payor (i.e., are not
exclusive to government payors). We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical
industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state laws that require
drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers, drug pricing or
marketing expenditures. These laws may differ from each other in significant ways and may not have the same effect, further complicating compliance
efforts.
We are subject to the Federal Drug Supply Chain Security Act (“DSCSA”) enacted by the U.S. government, which requires development of an electronic
pedigree to track and trace each prescription biologic at the salable unit level through the distribution system, which will be effective incrementally over a
10-year period from its enactment on November 27, 2013. In addition, we must comply with state laws that require the registration of manufacturers and
wholesale distributors of drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the state
even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers and
distributors to establish the pedigree of product in the chain of distribution. Compliance with DSCSA and future U.S. federal or state electronic pedigree
requirements could require significant capital expenditures, increase our operating costs and impose significant administrative burdens. Several states have
enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance programs, file periodic reports with the
state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities, and/or register their sales representatives, as well as
to prohibit pharmacies and other healthcare entities from providing certain physician prescribing data to pharmaceutical and biotechnology companies for
use in sales and marketing, and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state
consumer protection and unfair competition laws. Additionally, to the extent that we have business operations in foreign countries or sell any of our
products in foreign countries and jurisdictions, including Canada or the E.U., we may be subject to additional regulation.
Ensuring business arrangements with third parties comply with applicable healthcare laws and regulations is a costly endeavor. If our operations are found
to be in violation of any of the federal and state healthcare laws described above or any other current or future governmental regulations that apply to us,
we may be subject to penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages, fines, disgorgement,
imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by
individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm,
administrative burdens, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity
agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of
which could adversely affect its ability to operate our business and results of operations.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any product candidates for which Immunovant may obtain regulatory
approval. In the United States and in foreign markets, sales of any products for which Immunovant receives regulatory approval for commercial sale will
depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products. In the United
States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations. Adequate
coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are
critical to new product acceptance.
Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products and
related treatments will be available from third-party payors, which decide which therapeutics they will pay for and establish reimbursement levels.
Coverage and reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination that use of a
therapeutic is:
•
•
•
•
•
a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
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We cannot be sure that coverage or reimbursement will be available for any product that we commercialize and, if coverage and reimbursement are
available, what the level of reimbursement will be. Coverage may also be more limited than the purposes for which the product is approved by the FDA or
comparable foreign regulatory authorities. Reimbursement may impact the demand for, or the price of, any product for which we obtain regulatory
approval.
We may develop products that, once approved, may be administered by a physician, and these products also may have difficulty obtaining coverage and
adequate reimbursement levels based on payor cost sensitivities and the potential application of formulary management controls (e.g., step edits through
alternative therapies). Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be
available, which may impact physician utilization.
Third-party payors are increasingly challenging the price, examining the medical necessity, and reviewing the cost-effectiveness of medical products,
therapies and services, in addition to closely evaluating their safety and efficacy. Obtaining reimbursement for our products may be particularly difficult
given the potential cost sensitivities often associated with branded drugs and drugs administered under the supervision of a physician. It is not clear that
third party payors will accept the pharmacoeconomic benefits of products that we commercialize, and we also may need to undertake detailed studies of
any therapies that we commercialize in order to demonstrate their pharmacoeconomic benefits, in addition to the costs required to obtain FDA approvals.
Our product candidates may not be considered medically necessary or cost-effective for certain patients, including depending on the nature of the FDA
approvals that we may receive. There is no assurance of coverage or adequate reimbursement for our products under either government programs or from
commercial payors. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for
the product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on its
investment in product development. If reimbursement is not available or is available only at limited levels, we may not be able to successfully
commercialize any product candidate that we successfully develop.
Different pricing and reimbursement schemes exist in other countries. In the E.U., governments influence the price of biopharmaceutical products through
their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some
jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed. To
obtain reimbursement or pricing approval, some of these countries may require the completion of clinical trials that compare the cost effectiveness of a
particular product candidate to currently available therapies. Other member states allow companies to establish their own prices for medicines but monitor
and control company profits. The downward pressure on health care costs has become intense. As a result, increasingly high barriers are being erected to
the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a
country.
The marketability of any product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party
payors fail to provide adequate coverage and reimbursement. In addition, emphasis on managed care, the increasing influence of health maintenance
organizations, and additional legislative changes in the United States has increased, and we expect will continue to increase, the pressure on healthcare
pricing. The downward pressure on the rise in healthcare costs in general, particularly prescription medicines, medical devices and surgical procedures and
other treatments, has become a close focus of government and state regulators. Coverage policies and third-party reimbursement rates may change at any
time. Even if favorable coverage and reimbursement rates are attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future, which could have a downward pressure on our commercialization efforts.
Healthcare Reform
In the United States and some foreign jurisdictions, there have been, and continue to be, several legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and
affect the ability to profitably sell product candidates for which marketing approval is obtained. Among policy makers and payors in the United States and
elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality
and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected
by major legislative initiatives.
For example, the Affordable Care Act has substantially changed healthcare financing and delivery by both governmental and private insurers. Among the
Affordable Care Act provisions of importance to the pharmaceutical and biotechnology industries, in addition to those otherwise described above, are the
following:
•
•
an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic
agents apportioned among these entities according to their market share in some government healthcare programs;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23% and 13% of
the average manufacturer price for most branded and generic drugs, respectively, and capped the total rebate amount for innovator
drugs at 100% of the Average Manufacturer Price;
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•
•
•
•
•
•
•
•
•
•
•
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off
negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the
manufacturers’ outpatient drugs to be covered under Medicare Part D;
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed
care organizations;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty
level, thereby potentially increasing manufacturers’ Medicaid rebate liability;
expansion of the entities eligible for discounts under the 340B Drug Discount Program;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research;
expansion of healthcare fraud and abuse laws, including the FCA and the Anti-Kickback Statute, new government investigative
powers, and enhanced penalties for noncompliance;
a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that
are inhaled, infused, instilled, implanted, or injected;
requirements to report certain financial arrangements with certain healthcare providers and teaching hospitals;
a requirement to annually report certain information regarding drug samples that manufacturers and distributors provide to physicians;
establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models to
lower Medicare and Medicaid spending; and
a licensure framework for follow on biologic products.
Since its enactment, there have been legal and political challenges to certain aspects of the Affordable Care Act. By way of example, the Tax Cuts and
Jobs Act of 2017 (“TCJA”) included a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the
Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the
“individual mandate.” On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical
and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the TCJA, the remaining provisions of the Affordable
Care Act are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional
but remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid as well. On
March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when a decision will be made
or how the Supreme Court will rule. In addition, there may be other efforts to challenge, repeal or replace the Affordable Care Act.
Further legislation or regulation could be passed that could harm our business, financial condition and results of operations. Other legislative changes have
been proposed and adopted since the Affordable Care Act was enacted. For example, in August 2011, President Obama signed into law the Budget Control
Act of 2011, which, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect
beginning on April 1, 2013 and will stay in effect through 2029 unless additional Congressional action is taken. These Medicare sequester reductions will
be suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012
was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and
cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. Congressional inquiries and proposed federal legislation designed to, among other things, bring more
transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient
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programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for
fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket
drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration sent
“principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy
expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases.
Further, the Trump administration previously released a “Blueprint,” or plan, to lower drug prices and reduce out of pocket costs of drugs that contained
proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to
lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. For example, in May 2019, CMS issued a
final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s
policy change that was effective January 1, 2019.
While some of these and other measures may require additional authorization to become effective, Congress and the Trump administration have each
indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also
become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biologic product pricing, including
price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and,
in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower
reimbursement, and in additional downward pressure on the price that we receive for any approved product. It is possible that additional governmental
action is taken to address the COVID-19 pandemic. Any reduction in reimbursement from Medicare and other government programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from
being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect on anticipated revenue from
product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and
ability to develop product candidates.
The Foreign Corrupt Practices Act
The United States Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing payment or
offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of
the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are
listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions
of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety and
Health Act, the Resource Conservancy and Recovery Act and the Toxic Substances Control Act, affect our business. These and other laws govern our use,
handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result
in contamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe
that we are in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on
our business. We cannot predict, however, how changes in these laws may affect our future operations.
Other Regulations
We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws
and regulations now or in the future.
Employees
As of June 29, 2020, we had no employees, and our wholly owned subsidiary, IMVT Corporation (formerly Immunovant, Inc.) had 42 employees,
including 25 who are engaged in research and development activities. The employees of IMVT Corporation provide services to us and our subsidiaries
pursuant to an intercompany services agreement by and among Immunovant Sciences Ltd. (“ISL”), IMVT Corporation and ISG.
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Corporate Information
Prior to December 18, 2019, we were known as Health Sciences Acquisitions Corporation (“HSAC”). HSAC was incorporated in Delaware on
December 6, 2018 and formed as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or similar business combination with one or more businesses. On December 18, 2019, HSAC completed the Business
Combination, pursuant to which HSAC acquired 100% of the outstanding shares of ISL, a Bermuda exempted limited company. Subsequent to the
acquisition, ISL became a wholly owned subsidiary of HSAC and we were renamed “Immunovant, Inc.”
We maintain our headquarters at 320 West 37th Street, New York, New York 10018 and also conduct business operations at 1000 Park Forty Plaza, Suite
210, Durham, North Carolina 27713. ISL’s registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and ISL’s
principal office is located at Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB, United Kingdom. ISG maintains its headquarters at
Viaduktstrasse 8, 4051 Basel, Switzerland.
Available Information
Our website is www.immunovant.com. We are subject to the informational requirements of the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”), and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, proxy statements and other information with the Securities and
Exchange Commission (the “SEC”). We make copies of these reports and other information available free of charge through our website as soon as
reasonably practicable after we file or furnish them with the SEC. The SEC maintains a website that contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information contained on the websites referenced in this
Annual Report is not incorporated by reference into this filing, and the website addresses are provided only as inactive textual references.
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Item 1A. Risk Factors
Our business involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this
Annual Report, including our combined and consolidated financial statements and the related notes appearing elsewhere in this Annual Report. We
cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our
business, results of operations, financial condition and cash flows and, if so, our future prospects would likely be materially and adversely affected. If any
of such events were to happen, the trading price of shares of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Business, Financial Position and Capital Requirements
Our business, operations and clinical development plans and timelines and supply chain could be adversely affected by the effects of health epidemics,
including the ongoing COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with
whom we conduct business, including our contract manufacturers, CROs, shippers and others.
Our business could be adversely affected by health epidemics wherever we have clinical trial sites or other business operations. In addition, health
epidemics could cause significant disruption in the operations of third-party manufacturers, CROs and other third parties upon whom we rely. For
example, the COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting employees,
patients, communities and business operations, as well as the U.S. economy and financial markets. Many geographic regions have imposed, or in the
future may impose, “shelter-in-place” orders, quarantines or similar orders or restrictions to control the spread of COVID-19. Our headquarters is located
in New York City, we have business operations in North Carolina, and our contract manufacturers are located in the United States and in South Korea. At
present, we have implemented work-from-home policies for all employees. The effects of the executive order and our work-from-home policies may
negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the
length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps
more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
We are dependent on a worldwide supply chain for products to be used in our clinical trials and, if approved by the regulatory authorities, for
commercialization. Quarantines, shelter-in-place and similar government orders, or the expectation that such orders, shutdowns or other restrictions could
occur, whether related to COVID-19 or other infectious diseases, could impact personnel at third-party manufacturing facilities in the United States and
other countries, or the availability or cost of materials, which could disrupt our supply chain. For example, any manufacturing supply interruption of
IMVT-1401, which is currently manufactured at facilities in the United States and in South Korea, or any future product candidates, could adversely affect
our ability to conduct ongoing and future clinical trials of IMVT-1401 and any future product candidates. In addition, closures of transportation carriers and
modal hubs could materially impact our clinical development and any future commercialization timelines.
If our relationships with our suppliers or other vendors are terminated or scaled back as a result of the COVID-19 pandemic or other health epidemics, we
may not be able to enter into arrangements with alternative suppliers or vendors or do so on commercially reasonable terms or in a timely manner.
Switching or adding additional suppliers or vendors involves substantial cost and requires management time and focus. In addition, there is a natural
transition period when a new supplier or vendor commences work. As a result, delays generally occur, which could adversely impact our ability to meet
our desired clinical development and any future commercialization timelines. Although we carefully manage our relationships with our suppliers and
vendors, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have an adverse
impact on our business, financial condition and prospects. See “Risks Related to Our Dependence on Third Parties.”
In addition, our clinical trials have been and may continue to be affected by the COVID-19 pandemic. Clinical site initiation and patient enrollment may
be delayed due to prioritization of hospital resources toward the COVID-19 pandemic or concerns among patients about participating in clinical trials
during a pandemic and public health measures imposed by the respective national governments of countries in which the clinical sites are located. Some
patients may have difficulty following certain aspects of clinical trial protocols if quarantines impede patient movement or interrupt healthcare services.
Similarly, our inability to successfully recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have
heightened exposure to COVID-19 or experience additional restrictions by their institutions, city, or state governments could adversely impact our clinical
trial operations. We continue to evaluate the impact of the COVID-19 pandemic on our clinical development timelines previously provided. We will
provide an update on our clinical development timelines in the third quarter of calendar year 2020 once we have more information about how the COVID-
19 pandemic progressed.
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The spread of COVID-19 has also led to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access
to, capital and increases economic uncertainty. The trading prices for our common stock and other biopharmaceutical companies have, at times, been
highly volatile as a result of COVID-19. To the extent the COVID-19 pandemic adversely affects our business, financial results and value of our common
stock, it may also affect our ability to access capital, which could in the future negatively affect our liquidity.
The global pandemic of COVID-19 continues to evolve rapidly. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly
uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, healthcare systems or
the global economy as a whole. However, these effects could have a material impact on our operations, and we will continue to monitor the COVID-19
situation closely.
We have a limited operating history and have never generated any product revenue.
We are a clinical-stage biopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfully complete a
large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or
conduct sales and marketing activities necessary for successful product commercialization. Consequently, we have no meaningful operations upon which
to evaluate our business, and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history
or a history of successfully developing, manufacturing and commercializing pharmaceutical products, including antibody-based products.
Our ability to generate product revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the
necessary regulatory approvals for, IMVT-1401 and any future product candidates. We have never been profitable, have no products approved for
commercial sale, and have not generated any product revenue.
Even if we receive regulatory approval for IMVT-1401 or any future product candidate, we do not know when or if we will generate product revenue. Our
ability to generate product revenue depends on a number of factors, including, but not limited to, our ability to:
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successfully complete clinical trials and obtain regulatory approval for the marketing of IMVT-1401 or any future product candidate in
the United States and in other jurisdictions;
add operational, financial and management information systems personnel, including personnel to support our clinical, manufacturing
and planned future commercialization efforts and operations as a public company;
initiate and continue relationships with third-party suppliers and manufacturers and have commercial quantities of IMVT-1401 or any
future product candidate manufactured at acceptable cost and quality levels and in compliance with FDA and other regulatory
requirements;
attract and retain experienced management and advisory teams;
raise additional funds when needed and on terms acceptable to us;
commercially launch IMVT-1401 or any future product candidate, if approved, whether alone or in collaboration with others, including
establishing sales, marketing and distribution systems;
set an acceptable price for any approved product and obtain coverage and adequate reimbursement from third-party payors;
achieve market acceptance of any approved product in the medical community and with third-party payors and consumers;
compete effectively with other biotechnology and pharmaceutical companies targeting autoimmune disease indications; and
maintain, expand and protect our intellectual property portfolio.
Because of the numerous risks and uncertainties associated with product development, including delays in subject enrollment or interruptions in clinical
trial supplies or investigational product, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or
maintain profitability. Our expenses could increase beyond expectations if we are required by the FDA or comparable non-U.S. regulatory authorities to
perform studies or clinical trials in addition to those that we currently anticipate. Even if IMVT-1401 or any future product candidate is approved for
commercial sale, we anticipate incurring significant costs associated with its commercial launch. If we cannot successfully execute any one of the
foregoing, our business may not succeed, and you may lose some or all of your investment.
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We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk
that a product candidate will fail to gain regulatory approval or fail to become commercially viable. We have never generated any product revenue, and we
cannot estimate with precision the extent of our future losses. We do not currently have any products that are available for commercial sale and we may
never generate product revenue or achieve profitability. Our net loss was $66.4 million and $28.6 million for the fiscal years ended March 31, 2020 and
2019, respectively. As of March 31, 2020, we had an accumulated deficit of $91.2 million.
We expect to continue to incur substantial and increasing losses through the commercialization of IMVT-1401 or any future product candidate, if
approved. We currently have no products that are approved for commercial sale. As a result, we are uncertain when or if we will achieve profitability and,
if so, whether we will be able to sustain it. Our ability to generate product revenue and achieve profitability is dependent on our ability to complete the
development of IMVT-1401 or any future product candidate, obtain necessary regulatory approvals for such product candidate, and manufacture and
successfully commercialize such product candidate alone or in collaboration with others. We cannot assure you that we will be profitable even if we
successfully commercialize IMVT-1401 or any future product candidate. If we do successfully obtain regulatory approval to market a product candidate,
our revenue will be dependent upon, in part and among other things, the size of the markets in the territories for which we gain regulatory approval, the
number of competitors in such markets, the accepted price for our product candidate, the reimbursement environment for our product candidate and
whether we own the commercial rights for those territories. If the indication approved by regulatory authorities for IMVT-1401 or any future product
candidate is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not
generate significant revenue from sales of such product candidate, even if approved. Even if we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of shares of our
common stock and our ability to raise capital and continue operations.
We expect our research and development expenses in connection with our development program for IMVT-1401 to continue to be significant. In addition,
if we obtain regulatory approval for IMVT-1401, we expect to incur increased sales, marketing and manufacturing expenses. As a result, we expect to
continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses had and will continue to have
an adverse effect on our results of operations, financial position and working capital.
Our business is heavily dependent on the successful development, regulatory approval and commercialization of our sole product candidate, IMVT-
1401.
We currently have no products that are approved for commercial sale and may never be able to develop marketable products. We expect that a substantial
portion of our efforts and expenditures over the next few years will be devoted to the advancement of IMVT-1401. Accordingly, our business currently
depends heavily on the successful completion of our clinical trials for IMVT-1401 and subsequent regulatory approval and commercialization of this
product candidate.
We cannot be certain that IMVT-1401 will receive regulatory approval or be successfully commercialized even if we receive regulatory approval. The
research, testing, manufacturing, labeling, approval, sale, marketing and distribution of pharmaceutical products, including antibody-based products, are,
and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have
differing regulations. We are not permitted to market our product candidate in the United States until we receive approval of a BLA, or in any foreign
country until we receive the requisite approvals from the appropriate authorities in such countries for marketing authorization. In addition, we have not yet
demonstrated our ability to complete later-stage or pivotal clinical trials for our product candidate.
We have not submitted a BLA for IMVT-1401 to the FDA or any comparable application to any other regulatory authority. Obtaining approval of a BLA
or similar regulatory approval is an extensive, lengthy, expensive and inherently uncertain process, and the FDA or other foreign regulatory authorities
may delay, limit or deny approval of IMVT-1401 for many reasons, including:
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we may not be able to demonstrate that our product candidate is safe and effective as a treatment for any of our currently targeted
indications to the satisfaction of the FDA or other relevant regulatory authorities;
the relevant regulatory authorities may require additional pre-approval studies or clinical trials, which would increase our costs and
prolong our development timelines;
the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or other relevant
regulatory authorities for marketing approval;
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the FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical
trials, including the design of our clinical trials of IMVT-1401 for the treatment of MG, TED and WAIHA;
the contract research organizations (“CROs”) that we retain to conduct clinical trials may take actions outside of our control, or
otherwise commit errors or breaches of protocols, that materially adversely impact our clinical trials and ability to obtain market
approvals;
the FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient to
demonstrate that the clinical and other benefits of our product candidate outweigh its safety risks;
the FDA or other relevant regulatory authorities may disagree with our interpretation of data or significance of results from the
nonclinical studies and clinical trials of our product candidate, or may require additional studies;
the FDA or other relevant regulatory authorities may not accept data generated from our clinical trial sites;
if our BLA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory authority, as the
case may be, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may
recommend against approval of our application or may recommend that the FDA or other relevant regulatory authority, as the case
may be, require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or
distribution and use restrictions;
the FDA or other relevant regulatory authorities may require development of a REMS, or its equivalent, as a condition of approval;
the FDA or other relevant regulatory authorities may require additional post-marketing studies and/or a patient registry, which would
be costly;
the FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to support the
quality of our product candidate;
the FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-
party manufacturers; or
the FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.
Even if we do receive regulatory approval to market IMVT-1401, any such approval may be subject to limitations on the indicated uses or patient
populations for which we may market IMVT-1401. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development
programs, we cannot assure you that our product candidate will be successfully developed or commercialized.
In addition, if our product candidate encounters safety or efficacy problems, developmental delays, regulatory issues, supply issues, or other problems in
one of our target indications, our development plans for our product candidate could be significantly harmed in other indications, which would have a
material adverse effect on our business. Further, competitors who are developing product candidates in the autoimmune disease field, including
IgG-mediated autoimmune indications, or that target the same indications or use the same mechanism of action as us, may experience problems with their
product candidates that could suggest problems with our product candidate that would potentially harm our business.
We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development
and commercialization of IMVT-1401.
We expect to spend substantial capital to complete the development of, seek regulatory approvals for, and commercialize IMVT-1401. These expenditures
will include costs associated with the HanAll Agreement, pursuant to which we are required to reimburse HanAll for half of budgeted research and
development costs incurred by them with respect to IMVT-1401 (up to an aggregate reimbursement amount of $20.0 million), make payments in
connection with the achievement of certain regulatory milestones prior to generating any product sales (including the initiation of certain clinical trials for
IMVT-1401), make significant further payments upon the achievement of certain sales milestones and make tiered royalty payments in connection with the
commercial sale of IMVT-1401, if approved.
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We will require additional capital to complete the development and potential commercialization of IMVT-1401. Because the length of time and activities
associated with successful development of our product candidate are highly uncertain, we are unable to estimate with certainty the actual funds we will
require for development and any approved marketing and commercialization activities. Additional capital may not be available in sufficient amounts or on
reasonable terms, if at all, and 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 resulting from the ongoing COVID-19 pandemic.
Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:
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the timing, progress, costs and results of our clinical trials for IMVT-1401, including our clinical trials of IMVT-1401 for the treatment
of MG, TED and WAIHA;
the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory
authorities;
the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;
the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us
or any of our current or future product candidates;
the cost of future product candidates or technologies that we may acquire or in-license;
the effect of competing market developments;
the cost and timing of completion of commercial-scale and other manufacturing activities;
the cost of establishing sales, marketing and distribution capabilities for IMVT-1401 or any future product candidate in regions where
we choose to commercialize such product candidate on our own; and
the initiation, progress, timing and results of our commercialization of our product candidate, if approved for commercial sale.
We do not have any committed external source of funds. If we are unable to raise additional 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 IMVT-1401 and any future product candidates, or
potentially discontinue operations altogether. In addition, attempting to secure additional capital may divert the time and attention of our management
from day-to-day activities and harm our product candidate development efforts. Because of the numerous risks and uncertainties associated with the
development and potential commercialization of IMVT-1401, we are unable to estimate the associated amounts of increased capital outlays, operating
expenditures and capital requirements.
Raising additional funds by issuing securities may cause dilution to existing stockholders, raising additional funds through debt financings may
involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish
proprietary rights.
We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, if ever, that we can generate
substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, strategic alliances and license
and development agreements or other collaborations. To the extent that we raise additional capital by issuing equity securities, our existing stockholders’
ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that could adversely affect
the rights of a common stockholder. 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 future revenue streams, research programs or IMVT-1401 or any future product candidate, or grant licenses on terms
that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product
development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market
ourselves.
We rely on the HanAll Agreement to provide rights to the core intellectual property relating to IMVT-1401. Any termination or loss of significant rights
under the HanAll Agreement would adversely affect our development or commercialization of IMVT-1401.
We have licensed our core intellectual property relating to IMVT-1401 from HanAll under the HanAll Agreement. See “Business—License Agreement
with HanAll Biopharma Co., Ltd.” If, for any reason, the HanAll Agreement is terminated or we otherwise lose those rights, it would adversely affect our
business. The HanAll Agreement imposes on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment,
diligence, sublicensing, insurance, intellectual property protection and other matters. We are also required to reimburse HanAll for half of budgeted
research and development costs incurred by them with respect to IMVT-1401, up to an aggregate reimbursement amount of $20.0 million. If we breach
any material obligations, or use the intellectual property licensed to us in an unauthorized manner, under the HanAll Agreement, we may be required to
pay damages to our collaborators and they may have the right to terminate the applicable licenses, which would result in us being unable to develop,
manufacture and sell IMVT-1401, if approved.
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The HanAll Agreement obligates us to make certain milestone payments, some of which will be triggered prior to our commercialization of IMVT-
1401.
We will be responsible for future contingent payments and royalties under the HanAll Agreement, including up to an aggregate of $442.5 million upon the
achievement of certain development and regulatory milestone events, which events will occur prior to our planned commercialization of IMVT-1401.
Accordingly, we will be required to make such payments prior to the time at which we are able to generate any revenue, if any, from commercial sales of
IMVT-1401. There can be no assurance that we will have the funds necessary to make such payments, or be able to raise such funds when needed, on
terms acceptable to us, or at all. As a result, we may be required to delay, limit, reduce or terminate our product development or future commercialization
efforts.
We currently have a limited number of employees who are employed by our wholly owned subsidiary and we rely on RSI and RSG to provide various
administrative, business development, clinical development and other services.
As of June 29, 2020, we had no employees, and our wholly owned subsidiary, IMVT Corporation, had 42 employees, including 25 who are engaged in
research and development activities. We rely on the administrative support, business development, clinical development and other services provided by RSI
and RSG, wholly owned subsidiaries of RSL, which provide services to us pursuant to the Services Agreements, as further described under the section
titled “Certain Relationships and Related Party Transactions—Affiliate Services Agreements.” For example, we currently rely and expect to continue to
rely on RSI to support our nonclinical and clinical development programs. Personnel and support staff that provide services to us under the Services
Agreements are not required to, and we do not expect that they will, have the management and administration of our business as their primary
responsibility, or act exclusively for us. RSI and RSG have limited finance, accounting, clinical development and other resources. Furthermore, RSI and
RSG engage in other business activities and provide support for other of our affiliates and subsidiaries of RSL. If their focus is diverted or their limited
resources are otherwise employed, we could face potential delays or disruptions in the conduct of our ongoing clinical trial programs and the
commercialization of our product candidate, if approved, which could harm our business.
In the event of a default under or termination of the Services Agreements, we may be unable to contract with substitute service providers on similar terms,
in a timely fashion, or at all, and the costs of substituting service providers may be substantial. In addition, a substitute service provider may not be able to
provide the same level of services due to a lack of pre-existing knowledge or synergies. Any termination of our relationship with RSI or RSG, or decrease
in provision of services by RSI and RSG, and any delay in appointing or finding a suitable replacement provider, if one exists, could make it difficult for us
to operate our business and continue the clinical development and potential commercialization of IMVT-1401 or any future product candidate.
We may not be able to manage our business effectively if we are unable to attract and retain key personnel.
We may not be able to attract or retain qualified management and commercial, scientific and clinical personnel due to the intense competition for qualified
personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel to accomplish our
business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise
additional capital and our ability to implement our business strategies.
We are highly dependent on the skills and leadership of our senior management team and key employees. Our senior management and key employees may
terminate their positions with us at any time. If we lose one or more members of our senior management team or key employees, our ability to successfully
implement our business strategies could be adversely affected. Replacing these individuals may be difficult, cause disruption and may take an extended
period of time due to the limited number of individuals in our industry with the breadth of skills and experience required to develop, manufacture, gain
regulatory approval of and commercialize products successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train,
retain or motivate additional key personnel. We do not maintain “key person” insurance for any members of our senior management team or other
employees.
We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
We expect to hire, either directly, or through any current or future subsidiaries of ours, additional employees for our managerial, finance and accounting,
legal, clinical, scientific and engineering, regulatory, operational, manufacturing, medical affairs, business development and sales and marketing teams.
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We may have difficulties identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our
management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our
management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to
managing these growth activities. We may not be able to effectively manage the expansion of our operations across our entities, which may result in
weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among
remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as
the development of IMVT-1401 and any future product candidate. If our management is unable to effectively manage our growth, our expenses may
increase more than expected, our ability to generate or grow revenue could be reduced, and we may not be able to implement our business strategy. Our
future financial performance and our ability to commercialize IMVT-1401 or any future product candidate and compete effectively will partly depend on
our ability to effectively manage any future growth.
Many of the other pharmaceutical companies we compete against for qualified personnel and consultants have greater financial and other resources,
different risk profiles and a longer operating history in the industry than we do. They also may provide more diverse opportunities and better chances for
career advancement. Some of these opportunities may be more appealing to high-quality candidates and consultants than what we have to offer. If we are
unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can develop product candidates and our
business will be harmed.
Our or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other
vendors or potential collaborators may engage in misconduct or other improper activities, including noncompliance with regulatory standards and
requirements, which could have an adverse effect on our results of operations.
We are exposed to the risk that our or our affiliates’ employees and contractors, including principal investigators, CROs, consultants, commercial
collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include
intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA or other similar regulatory
bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing and the GCP or
cGMP standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting
of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws
intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations and other abusive practices. These laws may restrict or prohibit a
wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission,
customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use or misrepresentation of
information obtained in the course of clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug
product, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-
party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations.
Additionally, we are subject to the risk that a person, including any person who may have engaged in any fraud or misconduct, or government agency
could allege such fraud or other misconduct, even if none occurred. Furthermore, we rely on our CROs and clinical trial sites to adequately report data
from our ongoing clinical trials. For example, any failure by such parties to adequately report safety signals to us in a timely manner from any such trials
may also affect the approvability of our product candidate or cause delays and disruptions for the approval of our product candidate, if at all. If our or our
affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors are
alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar
agreement and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant
civil, criminal and administrative penalties, damages, monetary fines, suspension or delay in our clinical trials, possible exclusion from participation in
Medicare, Medicaid and other federal and state healthcare programs, FDA debarment, contractual damages, reputational harm, diminished profits and
future earnings, and additional reporting requirements and oversight, any of which could adversely affect our ability to operate our business and our results
of operations.
We may not be successful in our efforts to identify and acquire or in-license additional product candidates or technologies, or to enter into
collaborations or strategic alliances for the development and commercialization of any such future product candidates.
We may seek to identify and acquire or in-license novel product candidates or technologies in the autoimmune disease field. The process by which we
identify product candidates and technologies may fail to yield product candidates for clinical development for a number of reasons, including those
discussed in these risk factors and also:
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the process by which we identify and decide to acquire product candidates or technologies, including through the business development
support we receive from RSL and its subsidiaries pursuant to the Services Agreements, may not be successful;
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potential product candidates may, upon further study, be shown to have harmful side effects or other characteristics that indicate that
they are unlikely to be products that will receive marketing approval and achieve market acceptance;
potential product candidates may not be effective in treating their targeted diseases; or
the acquisition or in-licensing transactions can entail numerous operational and functional risks, including exposure to unknown
liabilities, disruption of our business, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction
consideration or costs, or higher than expected acquisition or integration costs.
We may choose to focus our efforts and resources on a potential product candidate or technology that ultimately proves to be unsuccessful. We also cannot
be certain that, following an acquisition or in-licensing transaction, we will achieve the revenue or specific net income that justifies such transaction.
Further, time and resources spent identifying, acquiring and developing potential product candidates or technologies may distract management’s attention
from our primary business or other development programs. If we are unable to identify and acquire suitable product candidates for clinical development,
this could adversely impact our business strategy, our financial position and share price.
In the future, we may also decide to collaborate with other pharmaceutical companies for the development and potential commercialization of our product
candidates in the United States or other countries or territories of the world. We will face significant competition in seeking appropriate collaborators. We
may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be
deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite
potential to demonstrate safety and efficacy. If and when we collaborate with a third party for development and commercialization of a product candidate,
we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Our ability to reach a definitive
agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions
of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.
International expansion of our business exposes us to business, legal, regulatory, political, operational, financial and economic risks associated with
conducting business outside of the United States.
Part of our business strategy involves potentially expanding internationally with third-party collaborators to seek regulatory approval for IMVT-1401 and
any future product candidates outside the United States. Doing business internationally involves a number of risks, including but not limited to:
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multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery
and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses;
failure by us or our collaborators to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, if
approved, in various countries;
delays or interruptions in the supply of clinical trial materials resulting from any events affecting raw material supply or manufacturing
capabilities abroad, including those that may result from the ongoing COVID-19 pandemic;
difficulties in managing foreign operations;
complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;
financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign
currency exchange rate fluctuations;
reduced protection for intellectual property rights;
natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, including the
COVID-19 pandemic and related shelter-in-place orders, travel, social distancing and quarantine policies, boycotts, curtailment of
trade and other business restrictions; and
failure to comply with the FCPA, including its books and records provisions and its anti-bribery provisions, the United Kingdom
Bribery Act 2010 (“U.K. Bribery Act”), and similar antibribery and anticorruption laws in other jurisdictions, for example by failing to
maintain accurate information and control over sales or distributors’ activities.
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Any of these risks, if encountered, could significantly harm our future international expansion and operations and, consequently, negatively impact our
financial condition and results of operations.
Legal, political and economic uncertainty surrounding the exit of the United Kingdom from the European Union is a source of instability and
uncertainty.
Following the result of a referendum in 2016, the United Kingdom (the “U.K.”) formally left the European Union (the “E.U.”) on January 31, 2020,
commonly referred to as “Brexit.” Pursuant to the formal withdrawal arrangements agreed between the U.K. and E.U., the U.K. will be subject to a
transition period until December 31, 2020 (the “Transition Period”) during which E.U. rules will continue to apply to the U.K. Pharmaceutical companies
can continue to carry out activities in the U.K. until the end of the Transition Period. However, the U.K. no longer participates in EU institutions after the
Transition Period. EMA’s public statement indicates that as of February 1, 2020, no U.K. representative will be appointed or nominated to participate in
any EMA scientific committee meeting, working party meeting or the EMA’s management board. Negotiations between the U.K. and the E.U. are
expected to continue in relation to the customs and trading relationship between the U.K. and the E.U. following the expiry of the Transition Period.
The uncertainty concerning the U.K’s legal, political and economic relationship with the E.U. after the Transition Period may be a source of instability in
the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border cooperation
arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).
These developments, or the perception that any of them could occur, have had, and may continue to have, a significant adverse effect on global economic
conditions and the stability of global financial markets, and could significantly reduce global market liquidity and limit the ability of key market
participants to operate in certain financial markets. In particular, it could also lead to a period of considerable uncertainty in relation to the U.K. financial
and banking markets, as well as on the regulatory process in Europe. Asset valuations, currency exchange rates and credit ratings may also be subject to
increased market volatility.
If the U.K. and the E.U. are unable to negotiate acceptable trading and customs terms, barrier-free access under the single internal market principle
between the U.K. and other E.U. Member States or among the European Economic Area (the “E.E.A.”) overall could be diminished or eliminated. The
long-term effects of Brexit will depend on any agreements (or lack thereof) between the U.K. and the E.U. and, in particular, any arrangements for the
U.K. to retain access to E.U. markets after the Transition Period. Such a withdrawal from the E.U. is unprecedented, and it is unclear how the U.K. access
to the European single market for goods, capital, services and labor within the E.U., or single market, and the wider commercial, legal and regulatory
environment, will impact our U.K. operations.
We may also face new regulatory costs and challenges that could have an adverse effect on our operations and development programs. For example, the
U.K. could lose the benefits of global trade agreements negotiated by the E.U. on behalf of its members, which may result in increased trade barriers that
could make our doing business in the E.U., the E.E.A. and other territories more difficult. There may continue to be economic uncertainty surrounding the
consequences of Brexit, which could adversely affect our financial condition, results of operations and the market price of our common stock.
Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.
Our computer systems, as well as those of various third parties on which we rely, including RSL and its affiliates, our CROs and other contractors,
consultants and law and accounting firms, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks,
cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. We rely on our
third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. The risk of a
security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber-
terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If
such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For
example, the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to
our data or applications, or inappropriate disclosure of personal, confidential or proprietary information, we could incur liability and the further
development of our product candidate or any future product candidate that we may develop could be delayed.
The failure to successfully implement an enterprise resource planning system could adversely impact our business and results of operations.
We completed the implementation of a company-wide enterprise resource planning (“ERP”) system to upgrade certain existing business, operational, and
financial processes, upon which we rely. ERP implementations are complex and time-consuming projects that require transformations of business and
finance processes to reap the benefits of the ERP system. Any such transformation involves risk inherent in the conversion to a new system,
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including loss of information and potential disruption to normal operations. Additionally, if the ERP system does not operate as intended, the effectiveness
of our internal control over financial reporting could be adversely affected or our ability to assess those controls adequately could be delayed. Significant
delays in documenting, reviewing and testing our internal control over financial reporting could cause us to fail to comply with the Securities and
Exchange Commission (the “SEC”) reporting obligations related to our management’s assessment of our internal control over financial reporting. In
addition, if we experience interruptions in service or operational difficulties and are unable to effectively manage our business during or following the
implementation of the ERP system, our business and results of operations could be harmed.
Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may
develop.
The use of IMVT-1401 and any future product candidate in clinical trials and the sale of any products for which we obtain marketing approval exposes us
to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, other pharmaceutical
companies or others taking or otherwise coming into contact with any approved products. On occasion, large monetary judgments have been awarded in
class action lawsuits where drugs have had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur
substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:
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impairment of our business reputation and significant negative media attention;
delay or termination of clinical trials, or withdrawal of participants from our clinical trials;
significant costs to defend related litigation;
distraction of management’s attention from our primary business;
substantial monetary awards to patients or other claimants;
inability to commercialize any product candidate, if approved;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
decreased demand for any product candidate, if approved; and
loss of revenue.
The product liability insurance we currently carry, and any additional product liability insurance coverage we acquire in the future, may not be sufficient to
reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be
able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If we obtain marketing
approval for IMVT-1401 or any future product candidate, we intend to acquire insurance coverage to include the sale of commercial products; however, we
may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or
series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our
results of operations and business, including preventing or limiting the commercialization any approved product.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain
or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a
timely manner or at all, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels,
statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may
otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition,
government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently
fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics or modifications to
approved drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For
example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain
regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
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Separately, in response to the global pandemic of Novel Coronavirus Disease 2019, or COVID-19, on March 10, 2020 the FDA announced its intention to
postpone most foreign inspections of manufacturing facilities and products through April 2020, and regulatory authorities outside the United States may
adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. The FDA is continuing to evaluate and utilize alternative
regulatory tools while postponing non-critical inspections. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the
FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the
ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on
our business.
Risks Related to Development, Regulatory Approval and Commercialization
Clinical trials are very expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes.
Our product candidate is still in clinical development and will require extensive clinical testing before we are prepared to submit a BLA or other similar
application for regulatory approval. We cannot provide you any assurance that we will submit a BLA for regulatory approval for our product candidate
within our projected timeframes or whether any such application will be approved by the relevant regulatory authorities. Clinical trials are very expensive
and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For instance, the FDA or other regulatory
authorities may not agree with our proposed analysis plans or trial design for any clinical trials for IMVT-1401, including our ASCEND MG, ASCEND
GO and ASCEND WAIHA trials; and during any such review, may identify unexpected efficacy or safety concerns, which may delay the approval of an
BLA or similar application. The FDA may also find that the benefits of IMVT-1401 in any of our target indications do not outweigh its risks in a manner
sufficient to grant regulatory approval. The clinical trial process is also time-consuming and costly and relies on the collaboration with many CROs and
clinical trial sites.
Failures can occur at any stage of clinical trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In addition, results from
clinical trials may require further evaluation, delaying the next stage of clinical development or submission of a BLA. Further, product candidates in later
stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical studies and initial clinical
trials, and such product candidates may exhibit negative safety signals in later stage clinical trials that they did not exhibit in nonclinical or earlier-stage
clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in, or the discontinuation of, advanced clinical
trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Likewise, the results of early nonclinical studies
and clinical trials of IMVT-1401, some of which were not conducted by us, may not be predictive of the results of our planned development programs, and
there can be no assurance that the results of studies conducted by collaborators or other third parties will be viewed favorably or are indicative of our own
future trial results.
The commencement and completion of clinical trials may be delayed by several factors, including:
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failure to obtain regulatory authorization to commence a trial or reaching consensus with regulatory authorities regarding the design or
implementation of our studies;
unforeseen safety issues, or subjects experiencing severe or unexpected AEs;
occurrence of serious AEs in trials of the same class of agents conducted by other sponsors;
lack of effectiveness during clinical trials;
resolving any dosing issues or limitations, including those raised by the FDA;
inability to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs and trial sites;
slower than expected rates of patient recruitment or failure to recruit suitable patients to participate in a trial;
failure to add a sufficient number of clinical trial sites;
unanticipated impact from changes in or modifications to protocols or clinical trial design, including those that may be required by the
FDA or other regulatory authorities;
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inability or unwillingness of clinical investigators or study participants to follow our clinical and other applicable protocols or
applicable regulatory requirements;
an IRB refusing to approve, suspending, or terminating the trial at an investigational site, precluding enrollment of additional subjects,
or withdrawing their approval of the trial;
premature discontinuation of study participants from clinical trials or missing data;
failure to manufacture or release sufficient quantities of our product candidate or placebo or failure to obtain sufficient quantities of
active comparator medications for our clinical trials, if applicable, that in each case meet our quality standards, for use in clinical trials;
inability to monitor patients adequately during or after treatment; or
inappropriate unmasking of trial results.
In addition, disruptions caused by the COVID-19 pandemic increase the likelihood that we encounter such difficulties or delays in initiating, enrolling,
conducting or completing our planned and ongoing clinical trials. Further, we, the FDA or another regulatory authority may suspend our clinical trials in
an entire country at any time, or an IRB may suspend its clinical trial sites within any country, if it appears that we or our collaborators are failing to
conduct a trial in accordance with regulatory requirements, including GCP, that we are exposing participants to unacceptable health risks, or if the FDA or
other regulatory authority, as the case may be, finds deficiencies in our IND or equivalent applications for other countries or the manner in which the
clinical trials are conducted. Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we
experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects
of our product candidate could be harmed, and our ability to generate product revenue from our product candidate, if approved, may be delayed. In
addition, any delays in our clinical trials could increase our costs, cause a decline in our share price, slow down the approval process, and jeopardize our
ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and results of operations. In
addition, many of the factors that cause or lead to a termination or suspension of, or delay in the commencement or completion of clinical trials may also
ultimately lead to the denial of regulatory approval of our product candidate. We may make formulation or manufacturing changes to our product
candidate, in which case we may need to conduct additional nonclinical or clinical studies to bridge our modified product candidate to earlier versions. Any
delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product
candidate and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidate could be
significantly reduced.
Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in
connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory
authorities. The FDA or other regulatory authorities may conclude that a financial relationship between us and a principal investigator has created a
conflict of interest or otherwise affected the integrity of the study. The FDA or other regulatory authority may therefore question the integrity of the data
generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or
rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing
approval of our product candidate.
In addition, we had no involvement with or control over the nonclinical or clinical development of IMVT-1401 prior to its in-license from HanAll. We are
dependent on our licensing partner having conducted such research and development in accordance with the applicable protocols and legal, regulatory and
scientific standards, having accurately reported the results of all nonclinical studies and clinical trials and other research they conducted prior to our
acquisition of the rights to our product candidate, having correctly collected and interpreted the data from these studies, trials and other research, and
having supplied us with complete information, data sets and reports required to adequately demonstrate the results reported through the date of our
acquisition of this asset. Problems related to our predecessor could result in increased costs and delays in the development of our product candidate, which
could adversely affect our ability to generate any future revenue from sales of our product candidate, if approved.
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The results of our nonclinical and clinical trials may not support our proposed claims for our product candidate, or regulatory approval on a timely
basis or at all, and the results of earlier studies and trials may not be predictive of future trial results.
Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of
later clinical trials will replicate the results of prior nonclinical testing and clinical trials. In particular, we cannot assure you that the reductions in IgG
antibodies that we have observed to date in our Phase 1 clinical trial of IMVT-1401, which did not include pre-specified endpoints for IgG reduction, will
be observed in any future clinical trials. Likewise, promising results in interim analyses or other preliminary analyses do not ensure that the clinical trial as
a whole will be successful. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks
in clinical trials, even after promising results in earlier nonclinical studies or clinical trials. These setbacks have been caused by, among other things,
nonclinical findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported
AEs. The results of nonclinical studies and early clinical trials of our product candidate may not be predictive of the results of later-stage clinical trials.
Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical and
initial clinical trials. A future failure of a clinical trial to meet its pre-specified endpoints would likely cause us to abandon our product candidate. Any
delay in, or termination of, our clinical trials will delay the submission of a BLA to the FDA or other similar applications with other relevant foreign
regulatory authorities and, ultimately, our ability to commercialize our product candidate, if approved, and generate product revenue. Even if our clinical
trials are completed as planned, we cannot be certain that their results will support our claims for differentiation or the effectiveness or safety of our
product candidate. The FDA has substantial discretion in the review and approval process and may disagree that our data support the differentiated claims
we propose. In addition, only a small percentage of biologics under development result in the submission of a BLA to the FDA and even fewer are
approved for commercialization.
Interim, “top-line” or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data
become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary or “top-line” data from our clinical trials, which is based on a preliminary analysis of then-
available top-line data, and the results and related findings and conclusions are subject to change following a full analyses of all data related to the
particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had
the opportunity to fully and carefully evaluate all data. As a result, the top-line results that we report may differ from future results of the same trials, or
different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also remain
subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.
As a result, top-line data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim
data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment
continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our
business prospects. Further, disclosure of preliminary or interim data by us or by our competitors could result in volatility in the price of shares of our
common stock.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may
interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the
particular product candidate or product and our business in general. In addition, the information we choose to publicly disclose regarding a particular study
or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise
appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect
to future decisions, conclusions, views, activities or otherwise regarding a particular drug, product candidate or our business. If the top-line data that we
report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and
commercialize IMVT-1401 or any future product candidate, our business, operating results, prospects or financial condition may be harmed.
We are at an early stage in our development efforts for IMVT-1401 and we may not be able to successfully develop and commercialize our product
candidate on a timely basis or at all.
IMVT-1401 is a novel therapeutic antibody and its potential therapeutic benefit is unproven. While several FcRn inhibitor candidates are under
development by other companies, there is currently no approved therapy inhibiting FcRn for the treatment of autoimmune diseases, and, as a result, the
regulatory pathway for IMVT-1401 may present novel issues that could cause delays in development or approval. While results from early clinical trials of
IMVT-1401 have shown meaningful reductions in IgG antibody levels in healthy volunteers, IMVT-1401 may not demonstrate in patients any or all of the
pharmacological benefits we believe it may possess. We have not yet succeeded and may never succeed in demonstrating efficacy and safety for IMVT-
1401 in pivotal clinical trials or in obtaining marketing approval thereafter. For example, although we and our licensing partner have evaluated
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IMVT-1401 nonclinical studies and in early-stage clinical trials, we have not yet advanced IMVT-1401 into a large-scale, pivotal clinical trial for any
indication. Positive results from our early-stage clinical trials are not necessarily predictive of the results of our planned clinical trials of IMVT-1401. If we
cannot replicate the positive results from our Phase 1 clinical trial in our later clinical trials, we may be unable to successfully develop, obtain regulatory
approval for and commercialize IMVT-1401 for the treatment of MG, TED, WAIHA or any other autoimmune indication. As a result, our focus on
exploring FcRn inhibition may fail to result in the identification of viable additional indications for IMVT-1401. If we are unsuccessful in our development
efforts, we may not be able to advance the development of or commercialize IMVT-1401, raise capital, expand our business or continue our operations.
We have licensed the rights to IMVT-1401 in limited territories. Any adverse developments that occur during any clinical trials or manufacturing
conducted by third parties, including HanAll, in other jurisdictions may affect our ability to obtain regulatory approval or commercialize IMVT-1401.
We have licensed the right to develop, manufacture and commercialize IMVT-1401 in the United States, Canada, Mexico, the E.U., the U.K., Switzerland,
the Middle East, North Africa and Latin America (the “Licensed Territory”). HanAll or any of its sublicensees or collaborators, over which we have no
control, has the right to develop, manufacture and commercialize IMVT-1401 in geographies outside of our Licensed Territory. If AEs occur with patients
using IMVT-1401 or during any clinical trials of IMVT-1401 conducted by HanAll or third parties in other jurisdictions outside of our Licensed Territory,
the FDA may delay, limit or deny approval of IMVT-1401 or require us to conduct additional clinical trials as a condition to marketing approval, which
would increase our costs and time to market. If we receive FDA approval for IMVT-1401 and a new and serious safety issue is identified in connection
with clinical trials of IMVT-1401 conducted by third parties in other jurisdictions outside of our Licensed Territory, the FDA may withdraw their approval
of the product or otherwise restrict our ability to market and sell IMVT-1401. In addition, treating physicians may be less willing to administer our product
candidate due to concerns over such AEs, which would limit our ability to commercialize IMVT-1401. In addition, issues may arise in connection with the
manufacturing process for IMVT-1401 utilized by HanAll or any of its sublicensees or collaborators, which could affect our ability to obtain regulatory
approval for, or commercialize, IMVT-1401.
Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered
impossible by multiple factors outside our control.
We may encounter delays or difficulties in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials on our
current timelines, or at all, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Enrollment in
our clinical trials may be slower than we anticipate, leading to delays in our development timelines. For example, we may face difficulty enrolling or
maintaining a sufficient number of patients in our clinical trials for MG, TED and WAIHA due to the existing alternative treatments available for the
treatment of MG, TED and WAIHA, as patients may decline to enroll or decide to withdraw from our clinical trials due to the risk of receiving placebo.
Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, our
ability to recruit clinical trial investigators with the appropriate competencies and experience, delays in enrollment due to travel or quarantine policies, or
other factors, related to COVID-19, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing
treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, the eligibility criteria for the
trial and the proportion of patients screened that meets those criteria, our ability to obtain and maintain patient consents, our ability to successfully
complete prerequisite studies before enrolling certain patient populations. Our product candidate is focused in part on addressing rare autoimmune
indications, including MG, TED and WAIHA with limited patient pools from which to draw in order to complete our clinical trials in a timely and cost-
effective manner.
Furthermore, any negative results or new safety signals we may report in clinical trials of our product candidate may make it difficult or impossible to
recruit and retain patients in other clinical trials we are conducting. Similarly, negative results reported by our competitors about their drug candidates may
negatively affect patient recruitment in our clinical trials. Also, marketing authorization of competitors in this same class of drugs may impair our ability to
enroll patients into our clinical trials, delaying or potentially preventing us from completing recruitment of one or more of our trials.
Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on
our ability to develop our product candidate, or could render further development impossible. In addition, we expect to rely on CROs and clinical trial sites
to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing their services, we will be limited in
our ability to compel their actual performance.
We face significant competition from other biotechnology and pharmaceutical companies targeting autoimmune disease indications, and our operating
results will suffer if we fail to compete effectively.
The markets for autoimmune disease therapies are competitive and are characterized by significant technological development and new product
introduction. For example, there are several large and small pharmaceutical companies focused on delivering therapeutics for our targeted autoimmune
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disease indications, including MG, TED and WAIHA. We anticipate that, if we obtain regulatory approval of our product candidate, we will face
significant competition from other approved therapies or drugs that become available in the future for the treatment of our target indications. If approved,
our product candidate may also compete with unregulated, unapproved and off-label treatments. Even if a biosimilar product is less effective than our
product candidate, a less effective biosimilar may be more quickly adopted by physicians and patients than our competing product candidate based upon
cost or convenience. Our product candidate, if approved, is expected to present a novel therapeutic approach for MG, TED and WAIHA and other targeted
indications and will have to compete with existing therapies, some of which are widely known and accepted by physicians and patients. To compete
successfully in this market, we will have to demonstrate that the relative cost, safety and efficacy of our product, if approved, provide an attractive
alternative to existing and other new therapies to gain a share of some patients’ discretionary budgets and to gain physicians’ attention within their clinical
practices. Some of the companies that may offer competing products also have a broad range of other product offerings, large direct sales forces and long-
term customer relationships with our target physicians, which could inhibit our market penetration efforts. Such competition could lead to reduced market
share for our product candidate and contribute to downward pressure on the pricing of our product candidate, which could harm our business, financial
condition, operating results and prospects.
We expect to face intense competition from other biopharmaceutical companies who are developing agents for the treatment of autoimmune diseases,
including multiple agents which are in the same class as IMVT-1401. We are aware of several FcRn inhibitors that are in clinical development. These
include, efgartigimod (argenx SE), nipocalimab, (Momenta Pharmaceuticals), rozanolixizumab (UCB) and ALXN1830 (Alexion Pharmaceuticals). Each
of efgartigimod, nipocalimab, rozanolixizumab and ALXN1830 is currently under development for the treatment of MG. In addition, for WAIHA, Alexion
has announced plans to begin a Phase 2 trial for ALXN1830 in early 2020 and Momenta has announced the launch of an adaptive Phase 2/3 clinical study
for nipocalimab. Momenta also announced that the FDA has granted Fast Track Designation for nipocalimab in WAIHA.
We also expect to face competition from agents with different mechanisms of action. In January 2020, the FDA approved Horizon Therapeutics’ Tepezza
(teprotumumab), an anti-IGF-1R antibody, for the treatment of TED. The most commonly prescribed first-line agents for the treatment of MG are
acetylcholinesterase inhibitors, such as pyridostigmine, which are marketed by several manufacturers of generic medicines. IVIg is also routinely used for
patients with MG. Eculizumab (marketed by Alexion Pharmaceuticals), an antibody inhibitor of the C5 protein, was recently approved in 2017 for the
treatment of generalized MG in patients who are positive for anti-AChR antibodies. The first line of treatment for patients with TED or WAIHA is
generally immunosuppressive therapy, including high doses of corticosteroids. Other broad immunosuppressive drugs, such as cyclosporine,
cyclophosphamide, mycophenolate mofetil and azathioprine, are used when patients do not respond adequately to corticosteroids. Rituximab, a
monoclonal antibody that binds to an antigen specific to antibody-producing B cells, may also be used as a treatment for TED, WAIHA and other
IgG-mediated autoimmune diseases. Momenta is developing its hypersialylated IVIg, M254, in a variety of autoimmune indications.
Other product candidates in development for the treatment of MG include: zilucoplan (UCB), a peptide inhibitor of C5, currently in a Phase 3 trial in a
similar patient population; amifampridine (Catalyst Pharmaceuticals), a neuronal potassium channel blocker, for MG patients with the MuSK form of the
disease, which is currently in Phase 3; and Myasterix (CuraVac), a therapeutic vaccine against B and T cells, which is being tested in early stage trials in
MG patients. Moreover, Viela Bio has announced plans to initiate a pivotal trial in MG for inebilizumab, a CD19-targeted humanized monoclonal
antibody, in 2020. Toleranzia has announced its intention to initiate Ph1/2a program in MG patients for its immunomodulating complex, TOL2, in 2020.
Numerous product candidates are currently in development for the treatment of WAIHA. Fostamatinib (Rigel Pharmaceuticals), a syk inhibitor, is currently
in Phase 3 development. A Phase 2 investigator-initiated study of ibrutinib (AbbVie), a BTK inhibitor, in steroid-refractory WAIHA is ongoing. Kezar
Life Sciences is running a Phase 2 trial including WAIHA patients for its immunoproteasome inhibitor, KZR-616.
Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater
experience in the discovery and development of product candidates, as well as in obtaining regulatory approvals of those product candidates in the United
States and in foreign countries. Many of our current and potential future competitors also have significantly more experience commercializing drugs that
have been approved for marketing. Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more resources being
concentrated among a smaller number of our competitors. Competition may reduce the number and types of patients available to us to participate in
clinical trials, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our
competitors.
Due to less stringent regulatory requirements in certain foreign countries, there are many more products and procedures available for use to treat
autoimmune diseases in those international markets than are approved for use in the United States. In certain international markets, there are also fewer
limitations on the claims that our competitors can make about the effectiveness of their products and the manner in which they can market their products.
As a result, we expect to face more competition in these markets than in the United States.
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Our ability to compete successfully will depend largely on our ability to:
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develop and commercialize therapies in our target indications that are superior to other products in the market;
demonstrate through our clinical trials that IMVT-1401 or any future product candidate is differentiated from existing and future
therapies;
attract qualified scientific, product development, manufacturing and commercial personnel;
obtain patent or other proprietary protection for IMVT-1401 and any future product candidates;
obtain required regulatory approvals, including approvals to market IMVT-1401 or any future product candidate we develop, in ways
that are differentiated from existing and future products and treatments;
have commercial quantities of any approved product manufactured at acceptable cost and quality levels and in compliance with FDA
and other regulatory requirements;
successfully commercialize IMVT-1401 or any future product candidate, if approved;
obtain coverage and adequate reimbursement from, and negotiate competitive pricing with, third-party payors;
successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new therapies; and
avoid regulatory exclusivities or patents held by competitors that may inhibit our products’ entry to the market.
The availability of our competitors’ products could limit the demand and the price we are able to charge for any product candidate we develop. The
inability to compete with existing or subsequently introduced treatments would have an adverse impact on our business, financial condition and prospects.
If we are not able to obtain required regulatory approvals, we will not be able to commercialize IMVT-1401 or any future product candidate, and our
ability to generate product revenue will be impaired.
IMVT-1401 and any future product candidate that we may develop, as well as the activities associated with their development and commercialization,
including their design, research, testing, manufacture, safety, efficacy, recordkeeping, labeling, packaging, storage, approval, advertising, promotion, sale
and distribution are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by similar regulatory
authorities outside the United States. Failure to obtain marketing approval for, and thus commercialize any product candidate, could negatively impact our
ability to generate any revenue from product sales.
We have not received approval from regulatory authorities to market any product candidate in any jurisdiction, and it is possible that our product candidate
will never obtain the appropriate regulatory approvals necessary for us to commence product sales. Neither we nor any collaborator is permitted to market
our product candidate in the United States or any other jurisdiction until we receive regulatory approval of a BLA from the FDA or similar regulatory
authorities outside of the United States.
The time required to obtain approval of a BLA by the FDA or similar regulatory authorities outside of the United States is unpredictable but typically takes
many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory
authority. Prior to submitting a BLA to the FDA or any comparable application to any other foreign regulatory authorities for approval of any product
candidate, we will need to complete pivotal Phase 3 clinical trials to demonstrate favorable results with respect to safety, tolerability and efficacy. In
addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product
candidate’s clinical development and may vary among jurisdictions.
Securing marketing approvals requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for
each therapeutic indication to establish the safety and efficacy of our product candidate for the specified indications. We expect to rely on third-party
CROs, consultants, our collaborators and personnel from RSI and RSG to assist us in filing and supporting the applications necessary to gain marketing
approvals. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of
manufacturing facilities by, the regulatory authorities. Errors in the submission of applications for marketing approval or issues, including those related to
gathering the appropriate data and the inspection process, may ultimately delay or affect our ability to obtain regulatory approval, commercialize our
product candidate and generate product revenue.
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Additional time may be required to obtain marketing authorizations for our IMVT-1401 pre-filled syringe product candidate because it would be
subject to regulation as a combination product.
Combination products are therapeutic and diagnostic products that combine drugs, devices, and/or biological products. Our IMVT-1401 pre-filled syringe
product candidate would be considered a combination product that requires coordination within the FDA and similar foreign regulatory agencies for
review of its device and biologic components. Although the FDA and similar foreign regulatory agencies have systems in place for the review and
approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidate due to
uncertainties in the product development and approval process.
Our product candidate may cause adverse events or have other properties that could delay or prevent their regulatory approval, cause us to suspend or
discontinue clinical trials, abandon further development or limit the scope of any approved label or market acceptance.
Adverse events associated with our product candidate in our clinical trials could cause us, other reviewing entities, clinical trial sites or regulatory
authorities to interrupt, delay or halt clinical trials and could result in the denial of regulatory approval. The most commonly reported AE in our Phase 1
clinical trial was mild erythema and swelling at the injection site, which typically resolved within hours. If an unacceptable frequency or severity of AEs or
new safety signals are reported in our clinical trials for our product candidate, our ability to obtain regulatory approval for such product candidate may be
negatively impacted. Treatment-related side effects arising from, or those perceived to arise from, our product candidate or those from other companies
targeting similar autoimmune indications, including incidence of headache from other product candidates targeting IgG antibody reductions, could also
affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects
may not be appropriately recognized or managed by the treating medical staff. Any of these occurrences may harm our business, financial condition and
prospects.
If our product candidate is approved and then causes serious or unexpected side effects, a number of potentially significant negative consequences could
result, including:
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regulatory authorities may withdraw, suspend or limit their approval of the product or require a REMS (or equivalent outside the
United States) to impose restrictions on its distribution or other risk management measures;
we may be required to recall a product;
additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any
component thereof;
regulatory authorities may require the addition of labeling statements, such as warnings or contraindications, require other labeling
changes or require field alerts or other communications to physicians, pharmacies or the public;
we may be required to change the way the product is administered or distributed, conduct additional clinical trials, change the labeling
of a product or be required to conduct additional post-marketing studies or surveillance;
we may be required to repeat a nonclinical study or clinical trial or terminate a program, even if other studies or trials related to the
program are ongoing or have been successfully completed;
we may be sued and held liable for harm caused to patients;
physicians may stop prescribing the product;
reimbursement may not be available for the product;
we may elect to discontinue the sale of our product;
the product may become less competitive; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase
the costs of commercializing our product candidate, if approved.
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IMVT-1401 is an antibody protein that could cause an immune response in patients, resulting in the creation of harmful or neutralizing antibodies
against these therapeutic proteins, preventing or limiting regulatory approval or our ability to commercialize IMVT-1401.
In addition to the safety, efficacy, manufacturing, and regulatory hurdles faced by our product candidate, IMVT-1401, the administration of proteins such
as monoclonal antibodies, even those that are fully human in nature including our product candidate, can cause an immune response, resulting in the
creation of antibodies against the therapeutic protein. These anti-drug antibodies can have no effect or can neutralize the effectiveness of the protein, or
require that higher doses be used to obtain a therapeutic effect. Whether anti-drug antibodies will be created and how they react can often not be predicted
from nonclinical or even clinical studies, and their detection or appearance is often delayed. As a result, neutralizing antibodies may be detected at a later
date or upon longer exposure of patients with our product candidates, such as following more chronic administration in longer lasting clinical trials. In
some cases, detection of such neutralizing antibodies can even occur after pivotal clinical trials have been completed. Therefore, there can be no assurance
that neutralizing antibodies will not be detected in future clinical trials or at a later date upon longer exposure (including after commercialization). If anti-
drug antibodies reduce or neutralize the effectiveness of our product candidate, the continued clinical development or receipt of marketing approval for our
product candidate could be delayed or prevented and, even if our product candidate is approved, its commercial success could be limited, any of which
would impair our ability to generate revenue and continue operations.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and even
if we obtain approval for a product candidate in one country or jurisdiction, we may never obtain approval for or commercialize it in any other
jurisdiction, which would limit our ability to realize our full market potential.
Prior to obtaining approval to commercialize a product candidate in any jurisdiction, we or our collaborators must demonstrate with substantial evidence
from well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory agencies, that such product candidate is safe and
effective for its intended use. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or
clinical data for a product candidate are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. In
order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a
country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in any other country or
jurisdiction outside the United States. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries,
and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can
involve additional product testing and validation, as well as additional administrative review periods. Seeking regulatory approval could result in
difficulties and costs for us and require additional nonclinical studies or clinical trials, which could be costly and time consuming. Regulatory requirements
can vary widely from country to country and could delay or prevent the introduction of our products in those countries. We do not have any product
candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval. If we
fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in
international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be
unrealized.
Even if we obtain regulatory approval for a product candidate, we will still face extensive ongoing regulatory requirements and our product may face
future development and regulatory difficulties.
Any product candidate for which we obtain marketing approval will be subject to extensive and ongoing regulatory requirements, including for the
manufacturing processes, post-approval clinical data, labeling, packaging, distribution, AE reporting, storage, recordkeeping, conduct of potential post-
market studies and post-market submission requirements, export, import, advertising and promotional activities for such product, among other things, by
the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports,
establishment of registration and drug listing requirements, continued compliance with cGMP requirements relating to manufacturing, quality control,
quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of drug product samples to
physicians, recordkeeping and GCP requirements for any clinical trials that we conduct post-approval. Even if marketing approval of a product candidate
is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval or the
FDA or other regulatory authorities may require that contraindications, warnings or precautions, including in some cases, a boxed warning be included in
the product labeling, which could limit sales of the product. Regulatory authorities closely regulate the post-approval marketing and promotion of drugs to
ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. Regulatory authorities impose
stringent restrictions on manufacturers’ communications regarding off-label use, and if we do not market our products for their approved indications, we
may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act in the United States and other
comparable regulations in foreign jurisdictions relating to the promotion of prescription drugs may lead to enforcement actions and investigations by the
FDA, DOJ, State Attorneys General and other foreign regulatory agencies alleging violations of United States federal and state health care fraud and abuse
laws, as well as state consumer protection laws and comparable laws in foreign jurisdictions.
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In addition, later discovery of previously unknown AEs or other problems with our product, manufacturers or manufacturing processes, or failure to
comply with regulatory requirements may yield various results, including:
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restrictions on the manufacture of such product;
restrictions on the labeling or marketing of such product, including a “black box” warning or contraindication on the product label or
communications containing warnings or other safety information about the product;
restrictions on product distribution or use;
requirements to conduct post-marketing studies or clinical trials, or any regulatory holds on our clinical trials;
requirement of a REMS (or equivalent outside the United States);
Warning or Untitled Letters;
withdrawal of the product from the market;
recall of a product;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of such product;
product seizure; or
lawsuits, injunctions or the imposition of civil or criminal penalties.
The FDA and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay
regulatory approval of IMVT-1401 or any future product candidate. We cannot predict the likelihood, nature or extent of government regulation that may
arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing
requirements or to the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing
approval that we may have obtained.
For example, certain policies of the current U.S. administration may impact our business and industry. Namely, the current U.S. administration has taken
several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay,
the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and
review and approval of marketing applications. It is difficult to predict how these executive actions, including the Executive Orders will be implemented,
and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s
ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
Non-compliance by us or any future collaborator with regulatory requirements, including safety monitoring or pharmacovigilance, and with requirements
related to the development of products for the pediatric population can also result in significant financial penalties.
Even if we receive marketing approval for IMVT-1401 or any future product candidate, it may fail to achieve market acceptance by physicians,
patients, third-party payors or others in the medical community necessary for commercial success.
Even if we receive marketing approval for a product candidate, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-
party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant product revenue
or become profitable. The degree of market acceptance of any product candidate, if approved for commercial sale, will depend on a number of factors,
including but not limited to:
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the safety, efficacy, risk-benefit profile and potential advantages, including in the case of IMVT-1401 subcutaneous delivery method,
compared to alternative, competing or existing treatments, which physicians may perceive to be adequately effective for some or all
patients;
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limitations or warnings contained in the labeling approved for our product candidate by the FDA or other applicable regulatory
authorities;
any restrictions on the use of the product candidate, and the prevalence and severity of any side effects;
the content of the approved product label;
the effectiveness of sales and marketing efforts;
the cost of treatment in relation to alternative treatments, including any biosimilar treatments;
our ability to offer our products for sale at competitive prices;
the cost, convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies over existing or
competing therapies;
the strength of marketing and distribution support;
the availability of third-party coverage and adequate reimbursement at any given price level of our product candidate;
utilization controls imposed by third-party payors, such as prior authorizations and step edits; and
any restrictions on the use of our product candidate, if approved, together with other medications.
Market acceptance of IMVT-1401 for the treatment of MG, TED and WAIHA may also be affected by the perception that existing available treatments,
such as pyridostigmine, corticosteroids and immunosuppressants, may be sufficient to treat the majority of these patients. In addition, IMVT-1401, if
approved, may compete with other FcRn inhibitors under development that have demonstrated similar levels of IgG reductions as IMVT-1401 in
completed clinical trials to date. In addition, the potential patient population for our initial indication and other autoimmune indications that we may target
are relatively small. This could affect the rate of adoption and as a result, market acceptance of our product candidate, if approved, could be much slower
than anticipated.
We cannot assure you that IMVT-1401 or any future product candidate, if approved, will achieve broad market acceptance among physicians, patients and
third-party payors. The failure of any such product candidate that receives regulatory approval or clearance to achieve market acceptance or commercial
success would adversely affect our business and results of operations.
We may expend our limited resources to pursue one or more particular indications and fail to capitalize on indications that may be more profitable or
for which there is a greater likelihood of success.
We have limited financial and management resources. As a result, we may forego or delay pursuit of opportunities with other indications that later prove to
have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market
opportunities. Our spending on current and future development programs for specific indications may not yield any commercially viable products. Any
such failures would adversely affect our business and results of operations.
If we are unable to establish sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we may not be
successful in commercializing our product candidate, if approved.
We do not currently have any infrastructure for the sales, marketing, or distribution of any product, and the cost of establishing and maintaining such an
organization may exceed the cost-effectiveness of doing so. In order to market any product that may be approved, we must build our sales, distribution,
marketing, compliance, managerial and other nontechnical capabilities or make arrangements with third parties to perform these services. To achieve
commercial success for any product for which we obtain marketing approval, we will need a sales and marketing organization.
We expect to build a focused sales, distribution and marketing infrastructure to market our product candidate in the United States, if approved. There are
significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability to hire, retain and
appropriately incentivize qualified individuals, develop an appropriate compliance function, provide adequate training to sales and marketing personnel,
and effectively manage geographically dispersed sales and marketing teams to generate sufficient demand. Any failure or delay in the development of
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our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact its commercialization. If the
commercial launch of our product candidate, if approved, for which we recruit a sales force and establish marketing capabilities is delayed or does not
occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment
would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or attain adequate numbers of physicians to prescribe any drugs;
the inability to obtain sufficient access and reimbursement for our product candidate, if approved; and
unforeseen costs and expenses associated with creating a sales and marketing organization.
If we are unable to build our own sales force or negotiate a collaborative relationship for the commercialization of any product candidate, we may be
forced to delay potential commercialization or reduce the scope of our sales or marketing activities. If we elect to increase our expenditures to fund
commercialization activities ourselves, we will need to obtain additional capital, which may not be available to us on acceptable terms, or at all. If we do
not have sufficient funds, we will not be able to bring any product candidate to market or generate product revenue. We could enter into arrangements with
collaborative partners at an earlier stage than otherwise would be ideal and we may be required to relinquish certain rights to our product candidate or
otherwise agree to terms unfavorable to us, any of which may have an adverse effect on our business, operating results and prospects.
If we are unable to establish adequate sales, marketing, and distribution capabilities, either on our own or in collaboration with third parties, we will not be
successful in commercializing our product candidate and may not become profitable. We may be competing with many companies that currently have
extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales
functions, we may be unable to compete successfully against these more established companies.
We plan to seek orphan drug designation for IMVT-1401, but we may be unable to obtain such designation or to maintain the benefits associated with
orphan drug status, including market exclusivity, even if that designation is granted.
We plan to seek orphan drug designation from the FDA for IMVT-1401 for the treatment of MG, TED and WAIHA and potentially in other orphan
indications in which there is a medically plausible basis for its use, and we may seek orphan drug designation for IMVT-1401 in the E.U. Under the
Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population
of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that
the cost of developing the drug will be recovered from sales in the United States. In the E.U., the European Medicine Agency’s Committee for Orphan
Medicinal Products assesses orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment
of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the E.U. or a serious and chronic condition
when, without incentives, it is unlikely that sales of the drug in the E.U. would be sufficient to justify the necessary investment in developing the drug or
biological product, and where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of
significant benefit to those affected by the condition.
In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax
advantages, and user-fee waivers. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed
publicly by the FDA. In addition, if a product that has orphan drug designation from the FDA subsequently receives the first FDA approval for a particular
active ingredient for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not
approve any other applications, including a BLA, to market the same drug for the same indication for seven years, except in limited circumstances such as
if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to
meet the needs of patients with the disease or condition for which the drug was designated. Similarly, the FDA can subsequently approve a drug with the
same active moiety for the same condition during the exclusivity period if the FDA concludes that the later drug is clinically superior, meaning the later
drug is safer, more effective, or makes a major contribution to patient care. In the E.U., orphan drug designation entitles a party to financial incentives such
as reduction of fees or fee waivers and ten years of market exclusivity following drug or biological product approval in respect of the approved therapeutic
indication if the designation is maintained at the time of granting the EU product approval. The 10-year market exclusivity can be extended to 12 years
under the E.U. pediatric regulation if the studies contained in an agreed pediatric investigation plan are completed with the data submitted for regulatory
review as part of the compliance check. This period of exclusivity may be reduced to six years if the orphan drug designation criteria are no longer met,
including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
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As indicated above, following the U.K.’s departure from the E.U., the U.K. will establish its own system for regulating medicinal products for rare
diseases by granting orphan designations by MHRA as is the case in the current E.U. system. Overall, the orphan criteria would still be based on the
current E.U. criteria, but U.K.-specific considerations will be incorporated.
Although we intend to seek orphan drug designation for IMVT-1401 from the FDA, we may never receive such designation. Moreover, obtaining orphan
drug designation for IMVT-1401 for the treatment of MG, TED or WAIHA does not mean we will be able to obtain such designation for any other
indications. Even if we were to obtain orphan drug designation for IMVT-1401 from the FDA, we may not be the first to obtain marketing approval for any
particular orphan indication due to the uncertainties associated with developing pharmaceutical products, and thus approval of IMVT-1401 could be
blocked for seven years if another company obtains approval and orphan drug exclusivity for the same drug and same condition before us. If we do obtain
exclusive marketing rights in the United States, they may be limited if we seek approval for an indication broader than the orphan designated indication
and may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of
the product to meet the needs of the relevant patients. Further, exclusivity may not effectively protect the product from competition because different drugs
with different active moieties can be approved for the same condition, the same drugs can be approved for different indications and might then be used
off-label in our approved indication, and different drugs for the same condition may already be approved and commercially available. Orphan drug
designation does not convey any advantage in, or shorten the duration of, the development or FDA review and approval process.
If we obtain approval to commercialize our product outside of the United States, a variety of risks associated with international operations could
adversely affect our business.
If our product candidate is approved for commercialization outside of the United States, we expect that we will be subject to additional risks related to
entering into international business relationships, including:
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different regulatory requirements for drug approvals and rules governing drug commercialization in foreign countries;
reduced or no protection of intellectual property rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation, or political instability in particular foreign economies and markets;
compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;
foreign reimbursement, pricing and insurance regimes;
foreign taxes;
any foreign partners or collaborators not fulfilling their respective regulatory reporting requirements and any foreign regulatory
authorities taking actions with respect to such failures, which would be reportable to the FDA;
any foreign partners or collaborators not informing us of any new post-marketing safety signals in a timely manner;
foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident
to doing business in another country;
workforce uncertainty in countries where labor unrest is more common than in the United States;
potential noncompliance with the FCPA, the U.K. Bribery Act or similar antibribery and anticorruption laws in other jurisdictions;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes,
typhoons, floods and fires.
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We have no prior experience in commercializing any product, and many biopharmaceutical companies have found the process of marketing their products
in foreign countries to be very challenging.
Our current and future relationships with investigators, health care professionals, consultants, third-party payors, and customers are subject to
applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future arrangements with investigators, healthcare professionals, consultants, third-party payors, patient support
efforts, charitable organizations and customers expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws
regulate the business or financial arrangements and relationships through which we conduct our operations, including how we research, market, sell, and
distribute any product for which we obtain marketing approval. Such laws include, among others:
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the federal Anti-Kickback Statute, which broadly prohibits the exchange of any “remuneration”, related to items or services for which
payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. Violations of the
federal Anti-Kickback Statute also may constitute a false or fraudulent claim for purposes of the FCA;
the federal criminal and civil false claims laws, including the FCA, which imposes criminal and civil penalties, including through civil
whistleblower or “qui tam” actions, against individuals or entities for, among other things, causing false or fraudulent claims to be
presented, for payment to the federal government;
HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to
execute, a scheme to defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters;
similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent
to violate it to have committed a violation;
the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics, and medical supplies
for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to
report annually to the government information related to payments or other “transfers of value” made to physicians, as defined by law,
and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the ownership
and investment interests held by such physicians and their immediate family members and payments or other “transfers of value” to
such physician owners (covered manufacturers are required to submit reports to the CMS by the 90th day of each calendar year);
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to our business
practices;
state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal government, and state laws that require drug manufacturers to report
information related to payments and other transfers of value to physicians and other healthcare providers, marketing expenditures or
drug pricing; and state and local laws require the registration of pharmaceutical sales representatives; and
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federal, state and foreign laws governing the privacy and security of personal information, including health information, which may
require us to, among other data protection measures, provide notices, obtain individual consents to use and disclose information, give
individuals rights with respect to their information, and to keep the information secure. Enforcement of such laws could result in civil
and criminal penalties as well as, in some circumstances, damages and related costs in defending private actions, including class
actions.
Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations will
involve substantial costs. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes,
regulations, agency guidance or case law involving applicable healthcare laws. If our operations are found to be in violation of any of these or any other
health regulatory laws that may apply to us, we may be subject to significant penalties, including the imposition of significant civil, criminal and
administrative penalties, damages, monetary fines, disgorgement, imprisonment, possible exclusion from participation in Medicare, Medicaid and other
federal healthcare programs or similar programs in other countries or jurisdictions, contractual damages, reputational harm, diminished profits and future
earnings, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement and curtailment or
restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Even the mere
issuance of a subpoena or the fact of an investigation alone, regardless of the merit, may result in negative publicity, a drop in our share price and other
harm to our business, financial condition and results of operations. Defending against any such actions can be costly, time-consuming and may require
significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us,
our business may be impaired.
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Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot
currently predict and may have a significant adverse effect on our business and results of operations.
There have been, and continue to be, several executive, legislative and regulatory changes and proposed changes regarding the healthcare system that
could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any
product candidates for which we obtain marketing approval. Among policy makers and payors in the United States there is significant interest in promoting
changes in healthcare systems with the stated goals of containing healthcare costs, boosting pricing transparency, improving quality and/or expanding
access and the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 and related legislation
(collectively, the “Affordable Care Act”) substantially changed the way healthcare is financed by both the government and private insurers, and
significantly impacts the United States pharmaceutical industry. The Affordable Care Act, among other things: (1) introduced a new “average
manufacturer price” calculation for drugs and biologics that are inhaled, infused, instilled, implanted or injected and that are not generally dispensed
through retail community pharmacies; (2) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and
expanded rebate liability from fee-for-service Medicaid utilization to include the utilization of Medicaid managed care organizations as well;
(3) established a branded prescription drug fee that pharmaceutical manufacturers of branded prescription drugs must pay to the federal government;
(4) expanded the list of covered entities eligible to participate in the 340B drug pricing program by adding new entities to the program; (5) established a
new Medicare Part D coverage gap discount program, in which manufacturers currently must agree to offer 70% point-of-sale discounts off negotiated
prices of applicable branded drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be
covered under Medicare Part D; (6) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage
to additional individuals, including individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’
Medicaid rebate liability; (7) created a licensure framework for follow-on biologic products; and (8) established a Center for Medicare and Medicaid
Innovation at the Centers for Medicare and Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid
spending.
There remain judicial and Congressional challenges to certain aspects of the Affordable Care Act, as well as efforts by the Trump administration to repeal
or replace certain aspects of the Affordable Care Act. For example, the TCJA was enacted, which included a provision that repealed, effective January 1,
2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health
coverage for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a U.S. District Court Judge in the
Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was
repealed as part of the TCJA, the remaining provisions of the Affordable Care Act are invalid as well. On December 18, 2019, the U.S. Court of Appeals
for the 5th Circuit ruled that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the
remaining provisions of the Affordable Care Act are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari
to review the case, although it is unclear when a decision will be made or how the Supreme Court will rule. In addition, there may be other efforts to
challenge, repeal or replace the Affordable Care Act. We are continuing to monitor any changes to the Affordable Care Act that, in turn, may potentially
impact our business in the future.
Other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. These changes include aggregate reductions to
Medicare payments to providers of 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and will
remain in effect through 2029, unless additional Congressional action is taken. These Medicare sequester reductions will be suspended from May 1, 2020
through December 31, 2020 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which,
among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers,
and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in
additional reductions in Medicare and other healthcare funding, which may materially adversely affect customer demand and affordability for our products
and, accordingly, the results of our financial operations. Also, there has been heightened governmental scrutiny recently over the manner in which
pharmaceutical companies set prices for their marketed products, which have resulted in several Congressional inquiries and proposed federal legislation,
as well as state efforts, designed to, among other things, bring more transparency to product pricing, reduce the cost of prescription drugs under Medicare,
review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug
products. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative
proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic
and biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling for legislation that would,
among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare
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Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Further, the Trump administration previously
released a “Blueprint,” or plan, to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase drug manufacturer
competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and
reduce the out of pocket costs of drug products paid by consumers. The HHS has solicited feedback on some of these measures and has implemented
others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy
for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. While some of these and
other measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue
to seek new legislative and/or administrative measures to control drug costs. At the state level, individual states in the United States are increasingly active
in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,
designed to encourage importation from other countries and bulk purchasing.
We expect that these and other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower
reimbursement, and in additional downward pressure on the price that we receive for any approved product. It is possible that additional governmental
action is taken to address the COVID-19 pandemic. Any reduction in reimbursement from Medicare or other government-funded programs may result in a
similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from
being able to generate revenue, attain profitability or commercialize our drugs, once marketing approval is obtained.
Coverage and adequate reimbursement may not be available for our product candidate, which could make it difficult for us to sell it profitably, if
approved.
Market acceptance and sales of any approved product that we develop will depend in part on the extent to which coverage and adequate reimbursement for
these products and related treatments will be available from third-party payors, including government health administration authorities and private health
insurers. There is no assurance that our product candidate, if approved, would achieve adequate coverage and reimbursement levels.
In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Third-party payors decide which
drugs they will pay for and establish reimbursement levels. Third-party payors often rely upon Medicare coverage policy and payment limitations in
setting their own coverage and reimbursement policies. However, decisions regarding the extent of coverage and amount of reimbursement to be provided
for any product candidates that we develop through approval will be made on a plan-by-plan basis. One payor’s determination to provide coverage for a
product does not assure that other payors will also provide coverage and adequate reimbursement for the product. Additionally, a third-party payor’s
decision to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved. Each plan determines whether or not it will
provide coverage for a drug, what amount it will pay the manufacturer for the drug, on what tier of its formulary the drug will be placed and whether to
require step therapy. The position of a drug on a formulary generally determines the co-payment that a patient will need to make to obtain the drug and can
strongly influence the adoption of a drug by patients and physicians. Patients who are prescribed treatments for their conditions and providers prescribing
such services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless
coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Further, from time to time, typically on an
annual basis, payment rates are updated and revised by third-party payors. Such updates could impact the demand for our products, to the extent that
patients who are prescribed our products, if approved, are not separately reimbursed for the cost of the product.
The process for determining whether a third-party payor will provide coverage for a product may be separate from the process for setting the price of a
product or for establishing the reimbursement rate that such a payor will pay for the product. Even if we do obtain adequate levels of reimbursement, third-
party payors, such as government or private healthcare insurers, carefully review and increasingly question the coverage of, and challenge the prices
charged for, products. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Increasingly, third-party payors are requiring that
pharmaceutical companies provide them with predetermined discounts from list prices and are challenging the prices charged for products. We may also be
required to conduct expensive pharmacoeconomic studies to justify the coverage and the amount of reimbursement for particular medications. We cannot
be sure that coverage and reimbursement will be available for any product that we commercialize and, if reimbursement is available, what the level of
reimbursement will be. Inadequate coverage or reimbursement may impact the demand for, or the price of, any product for which we obtain marketing
approval. If coverage and adequate reimbursement are not available, or are available only to limited levels, we may not be able to successfully
commercialize any product candidates that we develop. Additionally, there have been a number of legislative and regulatory proposals to change the
healthcare system in the United States and in some foreign jurisdictions that could affect our ability to sell any future drugs profitably. There can be no
assurance that our product candidate, if approved, will be considered medically reasonable and necessary, that it will be considered cost-effective by third-
party payors, that coverage or an adequate level of reimbursement will be available, or that reimbursement policies and practices in the United States and
in foreign countries where our products are sold will not adversely affect our ability to sell our product candidate profitably, if approved for sale.
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Risks Related to Our Dependence on Third Parties
We do not have our own manufacturing capabilities and will rely on third parties to produce clinical supplies and commercial supplies of our product
candidate. The manufacture of biologics is complex and we or our third-party manufacturers may encounter difficulties in production that may delay
or prevent our ability to obtain marketing approval or commercialize our product candidates, if approved.
We have no experience in biologic manufacturing and do not own or operate, and we do not expect to own or operate, facilities for product manufacturing,
storage and distribution or testing. Third-party vendors may be difficult to identify for our product candidate process and formulation development and
manufacturing due to special capabilities required, and they may not be able to meet our quality standards. Any significant delay in the supply of a product
candidate, or the raw material components thereof, or in placebo controls for an ongoing clinical trial due to the need to replace a third-party manufacturer
could considerably delay completion of our clinical trials, product testing and potential regulatory approval of IMVT-1401 or any future product
candidate. If our manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for any product candidate, the
commercial launch of such product candidate would be delayed or there would be a shortage in supply, due to COVID-19 or otherwise, which would
impair our ability to generate revenue from the sale of such product candidate. In addition, IMVT-1401 is a biologic and requires processing steps that are
more difficult than those required for most chemical pharmaceuticals. Accordingly, multiple steps are needed to control the manufacturing processes.
Problems with these manufacturing processes, even minor deviations from the normal process or from the materials used in the manufacturing process,
which may not be detectable by us in a timely manner, could lead to product defects or manufacturing failures, resulting in lot failures, product recalls,
product liability claims and insufficient inventory.
The facilities used by our contract manufacturers to manufacture our product candidate must be approved by the FDA pursuant to inspections that will be
conducted after we submit our BLA to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract
manufacturing partners for compliance with cGMP requirements for manufacture of drug products. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or comparable foreign regulatory authorities,
we will not be able to secure or maintain regulatory approval for our product candidates. In addition, we have no control over the ability of our contract
manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or comparable foreign regulatory authorities do
not approve these facilities for the manufacture of our product candidate or if they withdraw any such approval in the future, we may need to find
alternative manufacturing facilities, which could significantly impact our ability to develop, obtain regulatory approval for or market our product
candidate, if approved. Further, our reliance on third-party manufacturers entails risks, including:
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inability to meet our product specifications and quality requirements consistently;
delay or inability to procure or expand sufficient manufacturing capacity;
manufacturing and product quality issues related to scale-up of manufacturing, which can be difficult for a biologic product;
costs and validation of new equipment and facilities required for scale-up;
failure to comply with applicable laws, regulations and standards, including cGMP and similar foreign standards;
deficient or improper record-keeping;
inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
potential disputes with third parties that might delay work under third-party contracts;
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;
reliance on a limited number of sources, and in some cases, single sources for product components, such that if we are unable to secure a
sufficient supply of these product components, we will be unable to manufacture and sell any product candidate, if approved, in a timely
fashion, in sufficient quantities or under acceptable terms;
lack of qualified backup suppliers for those components that are currently purchased from a sole or single source supplier;
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operations of our third-party manufacturers or suppliers could be disrupted by conditions unrelated to our business or operations, including
the bankruptcy of the manufacturer or supplier or other regulatory sanctions related to the manufacture of another company’s products;
carrier disruptions or increased costs that are beyond our control; and
failure to deliver our products under specified storage conditions and in a timely manner.
Any of these events could lead to clinical trial delays, cost overruns, delay or failure to obtain regulatory approval or impact our ability to successfully
commercialize our products, as well as potential product liability litigation, product recalls or product withdrawals. Some of these events could be the basis
for FDA or other regulatory authority action, including injunction, recall, seizure, or total or partial suspension of production.
Changes in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates proceed through nonclinical studies to late-stage clinical trials towards potential approval and commercialization, it is common that
various aspects of the development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize processes
and results. Such changes carry the risk that they will not achieve these intended objectives. Any of these changes could cause IMVT-1401 or any future
product candidate to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials.
Such changes may also require additional testing, FDA notification or FDA approval. This could delay completion of clinical trials, require the conduct of
bridging clinical trials or the repetition of one or more clinical trials, increase clinical trial costs, delay approval of IMVT-1401 or any future product
candidate or jeopardize our ability to commence sales and generate revenue.
We are reliant on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory manner or
fail to comply with applicable requirements, it may harm our business.
We currently do not have the ability to independently conduct nonclinical studies that comply with GLP requirements. We also do not currently have the
ability to independently conduct any clinical trials. We rely exclusively on CROs and clinical trial sites, which need to comply with GCP, to ensure the
proper and timely conduct of our clinical trials, and we have limited influence over their actual performance.
We rely upon CROs to monitor and manage data for our clinical programs, as well as for the execution of nonclinical studies. We control only certain
aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable
protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with GLP and GCP regulations and guidelines enforced by the FDA, and are also required by the competent
authorities of the member states of the European Economic Area and other comparable foreign regulatory authorities to comply with the International
Council for Harmonization guidelines for any of our product candidates that are in nonclinical and clinical development. The regulatory authorities enforce
GCP regulations through periodic inspections of trial sponsors, principal investigators and clinical trial sites. Although we rely on CROs to conduct our
GLP-compliant nonclinical studies and GCP-compliant clinical trials, we remain responsible for ensuring that each of our GLP nonclinical studies and
GCP clinical trials is conducted in accordance with its investigational plan and protocol and applicable laws and regulations, and our reliance on the CROs
does not relieve us of our regulatory responsibilities. If we or our CROs fail to comply with GCP requirements, the clinical data generated in our clinical
trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may reject our marketing applications or require us to perform
additional clinical trials before approving our marketing applications. Accordingly, if we or our CROs fail to comply with these regulations or other
applicable laws, regulations or standards, or fail to recruit a sufficient number of subjects, we may be required to repeat clinical trials, which would delay
the relevant regulatory approval process. Failure by our CROs to properly execute study protocols in accordance with applicable law could also create
product liability and healthcare regulatory risks for us as sponsors of those studies.
While we will have agreements governing their activities, our CROs are not our employees, and we will not control whether or not they devote sufficient
time and resources to our future clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our
competitors, for whom they may also be conducting clinical trials, or other drug development activities, which could harm our competitive position. We
face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by CROs, which may reduce our trade secret and
intellectual property protection and allow our potential competitors to access and exploit our proprietary technology. If our CROs do not successfully carry
out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain
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is compromised due to the failure to adhere to our (or their own) clinical protocols or regulatory requirements or for any other reasons, our clinical trials
may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate
that we develop. As a result, our financial results and the commercial prospects for any product candidate that we develop could be harmed, our costs
could increase and our ability to generate revenue could be delayed.
If our relationships with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable
terms or in a timely manner. Switching or adding additional CROs involves substantial cost and requires management time and focus. In addition, there is
a natural transition period when a new CRO commences work. As a result, delays occur, which could adversely impact our ability to meet our desired
clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter
challenges or delays in the future or that these delays or challenges will not have an adverse impact on our business, financial condition and prospects.
Risks Related to Our Intellectual Property
Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
In the United States, the BPCIA created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an
FDA-licensed reference biological product. New biologics, such as IMVT-1401, may be entitled to regulatory exclusivity under the BPCIA. The BPCIA
grants new biologics 12 years of FDA-granted exclusivity. Further, under the BPCIA, an application for a biosimilar product may not be submitted to the
FDA until four years following the date that the reference product was first licensed by the FDA. During the period of exclusivity, however, another
company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the
sponsor’s own nonclinical and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. After
the expiration of the exclusivity period, the FDA can approve a biosimilar product through an abbreviated approval process. The law is complex and is still
being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty.
We believe that our product candidate, as a biological product, should qualify for the 12-year period of exclusivity. However, there is a risk that this
exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidate to be a reference product
for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which
may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved,
will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet
clear, and will depend on a number of marketplace and regulatory factors that are still developing.
In addition, while we cannot determine what effect section 610 of the FCAA 2020 may have on manufacturers that may develop biosimilar or other
competing versions of our products once approved, it may ultimately facilitate their entry to the market.
If we are unable to obtain and maintain patent protection for IMVT-1401 or any future product candidates, or if the scope of the patent protection
obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
We rely, and will continue to rely, upon a combination of patents, trademarks, trade secret protection and confidentiality agreements with employees,
consultants, collaborators, advisors and other third parties to protect the intellectual property related to our brand, current and future drug development
programs and product candidate. Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other
countries with respect to IMVT-1401 and any future product candidates. We seek to protect our proprietary position by filing patent applications in the
United States and abroad related to our current and future drug development programs and product candidates, successfully defending our intellectual
property rights against third-party challenges and successfully enforcing our intellectual property rights to prevent third-party infringement. The patent
prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a
reasonable cost or in a timely manner.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We
may choose not to seek patent protection for certain innovations or products and may choose not to pursue patent protection in certain jurisdictions, and
under the laws of certain jurisdictions, patents or other intellectual property rights may be unavailable or limited in scope and, in any event, any patent
protection we obtain may be limited. We generally apply for patents in those countries where we intend to make, have made, use, offer for sale, or sell
products and where we assess the risk of infringement to justify the cost of seeking patent protection. However, we do not seek protection in all countries
where we intend to sell products and we may not accurately predict all the countries where patent protection would ultimately be desirable. If we fail to
timely file a patent application in any such country or major market, we may be precluded from doing so at a later date. We may also make statements to
regulatory agencies during the regulatory approval process that may be inconsistent with positions that have been taken during prosecution of our patents,
which may result in such patents being narrowed, invalidated or held unenforceable.
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The patent applications that we in-license in the United States or in other foreign countries may fail to result in issued patents with claims that protect our
product candidate or result in patents that are narrowed, invalidated or held unenforceable following challenge in certain jurisdictions. We cannot
guarantee any current or future patents will provide us with any meaningful protection or competitive advantage. There is no assurance that all of the
potentially relevant prior art relating to our patents and patent applications has been found, which can prevent a patent from issuing from a pending patent
application or be used to invalidate an issued patent. The examination process may require us to narrow our claims, which may limit the scope of any
patent protection we obtain. Even if patents do successfully issue based on our patent applications, and even if such patents cover our product candidate,
uses of our product candidate or other aspects related to our product candidate, third parties may challenge their validity, ownership, enforceability or
scope, which may result in such patents being narrowed, invalidated or held unenforceable or circumvented, any of which could limit our ability to prevent
competitors and other third parties from developing and marketing similar products or limit the length of terms of patent protection we may have for our
product candidate, if approved, and technologies. Other companies may also design around our patents. Third parties may have blocking patents that could
prevent us from marketing our product candidate, if approved, or practicing our own patented technology. Further, if we encounter delays in regulatory
approvals, the period of time during which we could market a product candidate while under patent protection could be reduced. If any of our patents
expire or are challenged, invalidated, circumvented or otherwise limited by third parties prior to the commercialization of our product candidate, and if we
do not own or have exclusive rights to other enforceable patents protecting our product candidate, competitors and other third parties could market
products that are substantially similar to ours and our business would suffer.
If the patent applications we hold or have in-licensed with respect to our development programs and product candidates fail to issue, if their breadth or
strength of protection is threatened, or if they fail to provide meaningful exclusivity for our product candidate, it could dissuade companies from
collaborating with us to develop our product candidate, and threaten our ability to commercialize future drugs. Any such outcome could have an adverse
effect on our business. Our pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications
unless and until a patent issues from such applications.
The patent position of biotechnology and pharmaceutical companies is generally highly uncertain, involves complex legal, scientific and factual questions,
and has in recent years been the subject of much litigation. The standards that the U.S. Patent and Trademark Office (the “USPTO”) and its foreign
counterparts use to grant patents are not always applied predictably or uniformly. In addition, the laws of foreign countries may not protect our rights to
the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in
foreign jurisdictions.
Patent reform legislation in the United States could increase those uncertainties and costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents. For example, the Leahy Smith America Invents Act (the “Leahy-Smith Act”) was signed into law in 2011
and includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine
prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. These include allowing third-party
submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-
grant proceedings, including post-grant review, inter partes review, and derivation proceedings. After March 2013, under the Leahy-Smith Act, the United
States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent
application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.
Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions
are typically not published until 18 months after filing, or in some cases not until a patent issue. Therefore, we cannot know with certainty whether we
were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent
protection of such inventions. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. Our
pending and future patent applications may not result in patents being issued which protect IMVT-1401 or any future product candidates, in whole or in
part, or which effectively prevent others from commercializing competitive products. Changes in either the patent laws or interpretation of the patent laws
in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation,
reexamination, inter partes review, post-grant review or interference proceedings challenging our owned or licensed patent rights. An adverse
determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to
commercialize IMVT-1401 or any future product candidates and compete directly with us, without payment to us, or result in our inability to manufacture
or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our patents and
patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize IMVT-1401 or any future
product candidates.
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The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in
the courts or patent offices, both in the United States and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed,
invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical
products, or limit the duration of the patent protection of our products. Moreover, patents have a limited lifespan. In the United States, if all maintenance
fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. In certain instances, the patent
term may be adjusted to add additional days to compensate for delays incurred by the USPTO in issuing the patent. Also, the patent term may be extended
for a period of time to compensate for at least a portion of the time a product candidate was undergoing FDA regulatory review. However, the life of a
patent, and the protection it affords, is limited. Without patent protection for IMVT-1401 or any future product candidates, we may be open to competition
from generic versions of such products. Given the amount of time required for the development, testing and regulatory review of new product candidates,
patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent
portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
The validity, scope and enforceability of any patents that cover a biologic subject to approval by the FDA via a BLA, such as IMVT-1401, can be
challenged by third parties.
For biologics subject to approval by the FDA via a BLA, such as IMVT-1401, the BPCIA provides a mechanism for one or more third parties to seek FDA
approval to manufacture or sell a biosimilar or interchangeable versions of brand name biological products. Due to the large size and complexity of
biological products, as compared to small molecules, a biosimilar must be “highly similar” to the reference product with “no clinically meaningful
differences between the two.” The BPCIA does not require reference product sponsors to list patents in an Orange Book and does not include an automatic
30-month stay of FDA approval upon the timely filing of a lawsuit. The BPCIA, however, does require a formal pre-litigation process which includes the
exchange of information between a biosimilar applicant and a reference biologic sponsor that includes the identification of relevant patents and each
parties’ basis for infringement and invalidity. After the exchange of this information, we may then initiate a lawsuit within 30 days to defend the patents
identified in the exchange. If the biosimilar applicant successfully challenges the asserted patent claims it could result in the invalidation of, or render
unenforceable, some or all of the relevant patent claims or result in a finding of non-infringement. Such litigation or other proceedings to enforce or defend
intellectual property rights are often very complex in nature, may be very expensive and time-consuming, may divert our management’s attention from
our core business, and may result in unfavorable results that could limit our ability to prevent third parties from competing with IMVT-1401 or any future
product candidates.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our product candidate in all countries throughout the world would be prohibitively expensive, and even in
countries where we have sought protection for our intellectual property, such protection may be less extensive than that provided in the United States. The
requirements for patentability may differ in certain countries, particularly developing countries, and the breadth of patent claims allowed can be
inconsistent. In addition, the laws of some foreign countries do not protect patent rights to the same extent as federal laws in the United States.
Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or
importing products made using our inventions in and into the United States or other jurisdictions. Competitors may exploit our inventions in jurisdictions
where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we
have patent protection, but where enforcement is not as strong as that in the United States. These products may compete with our products and our patents
or other intellectual property rights may not be effective or sufficient to prevent them from competing.
We do not have patent rights in certain foreign countries in which a market may exist. Moreover, in foreign jurisdictions where we may obtain patent
rights, proceedings to enforce such rights could result in substantial costs and divert our efforts and attention from other aspects of our business, could put
our patents at risk of being invalidated or interpreted narrowly, and our patent applications at risk of not issuing. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, particularly
those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in
violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in
substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted
narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Thus, we may not be able to stop a
competitor from marketing and selling in foreign countries products and services that are the same as or similar to our products and services, and our
competitive position in the international market would be harmed.
Many countries, including E.U. countries have compulsory licensing laws under which a patent owner may be compelled under specified circumstances to
grant licenses to third parties. In those countries, we may have limited remedies if patents are infringed or if we are compelled to grant a license to a third
party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce
our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we
develop or license.
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Patent terms may be inadequate to protect our competitive position on our product candidate for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its
earliest U.S. non-provisional filing date. In certain instances, the patent term may be adjusted to add additional days to compensate for delays incurred by
the USPTO in issuing the patent. Also, the patent term may be extended for a period of time to compensate for at least a portion of the time a product
candidate was undergoing FDA regulatory review. However, the life of a patent, and the protection it affords, is limited. Even if patents covering our
product candidate are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or
biosimilars. The patent family directed to the composition of matter of IMVT-1401 has a natural projected expiration date in 2035 in the United States and
in foreign jurisdictions. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents
protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If we are not able to obtain patent term extension in the United States under the Hatch-Waxman Act and in foreign countries under similar legislation,
thereby potentially extending the term of our marketing exclusivity for IMVT-1401 or other product candidates that we may identify, our business may
be harmed.
Our commercial success will largely depend on our ability to obtain and maintain patent and other intellectual property rights in the United States and
other countries with respect to our proprietary technology, product candidate and our target indications. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting our product candidate might expire before or shortly after such
candidates begin to be commercialized. Depending upon the timing, duration and specifics of FDA marketing approval of IMVT-1401 or other product
candidates that we may identify, one of the U.S. patents covering each of such product candidates or the use thereof may be eligible for up to five years of
patent term extension under the Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one patent to be extended per FDA approved product
as compensation for the patent term lost during the FDA premarket regulatory review process. A patent term extension cannot extend the remaining term
of a patent beyond a total of 14 years from the date of product approval, and only claims covering such approved drug product, a method for using it or a
method for manufacturing it may be extended. Patent term extension also may be available in certain foreign countries, including the E.U., upon regulatory
approval of our product candidates, based on similar legislation. Nevertheless, we may not be granted patent term extension either in the United States or
in any foreign country because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply
within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the
term of extension, as well as the scope of patent protection during any such extension, afforded by the governmental authority could be less than we
request.
If we are unable to obtain patent term extension, or the term of any such extension is less than we request, the period during which we will have the right to
exclusively market our product may be shortened and our competitors may obtain approval to market competing products sooner, and our revenue could
be reduced, possibly materially.
It is possible that we will not obtain patent term extension under the Hatch-Waxman Act for a U.S. patent covering IMVT-1401 or other product
candidates that we may identify even where that patent is eligible for patent term extension, or if we obtain such an extension, it may be for a shorter
period than we had sought. Further, for patents we may later in-license or jointly own, we may not have the right to control patent prosecution, including
filing with the USPTO a petition for patent term extension under the Hatch-Waxman Act. Thus, if one of these patents was eligible for patent term
extension under the Hatch-Waxman Act, we might not be able to control whether a petition to obtain a patent term extension would be filed, or obtained,
from the USPTO.
We do not have rights to protect or enforce intellectual property rights in certain territories and jurisdictions.
We do not have rights to develop, manufacture, use or commercialize IMVT-1401 or file or enforce patents relating to these assets in territories other than
the Licensed Territory, as such rights in other jurisdictions have been retained by HanAll or licensed by HanAll to third parties. One or more third parties
may challenge the current patents, or patents that may issue in the future, in such territories for which HanAll retains rights or has licensed out rights to
defend and enforce such patents. HanAll may not coordinate the defense and enforcement of such patents with us, which could impair our ability to defend
or enforce corresponding patents in other jurisdictions.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose
intellectual property rights that are necessary for developing and protecting our product candidate.
We have licensed certain intellectual property rights covering IMVT-1401 from HanAll. We are heavily dependent on the HanAll Agreement for the
development, manufacture and commercialization of our product candidate. If, for any reason, our licenses under the HanAll Agreement are terminated or
we otherwise lose those rights, it could adversely affect our business. The HanAll Agreement imposes, and any future collaboration agreements or license
agreements we enter into are likely to impose various development, commercialization, funding, milestone payment, royalty, diligence, sublicensing,
insurance, patent prosecution and enforcement or other obligations on us. If we breach any material obligations, or use the intellectual property licensed to
us in an unauthorized manner, we may be required to pay damages and HanAll, as the licensor, may have the right to terminate the license, which could
result in us being unable to develop, manufacture and sell products that are covered by the licensed technology, or having to negotiate new or reinstated
licenses on less favorable terms, or enable a competitor to gain access to the licensed technology.
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Moreover, disputes may arise regarding intellectual property subject to a licensing agreement, including:
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the scope of rights granted under the license agreement and other interpretation-related issues;
the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
the sublicensing of patent and other rights under our third-party relationships;
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors
and us and our partners; and
the priority of invention of patented technology.
In addition, the agreement under which we currently license intellectual property or technology from HanAll is complex, and certain provisions in the
agreement may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we
believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations
under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and
prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing
arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidate, which
could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these
requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and other foreign patent agencies in several stages over the lifetime of the
patent. The USPTO and various foreign national or international patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee
or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment
or lapse of patent rights include, but are not limited to, failure to timely file national and regional stage patent applications based on our international
patent application, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit
formal documents. If we or our licensors fail to maintain the patents and patent applications covering our product candidate, our competitors might be able
to enter the market earlier than anticipated, which would have an adverse effect on our business.
We may need to license intellectual property from third parties, and such licenses may not be available or may not be available on commercially
reasonable terms.
A third party may hold intellectual property, including patent rights that are important or necessary to the development of our product candidate. It may be
necessary for us to use the patented or proprietary technology of third parties to commercialize IMVT-1401 or any future product candidates, in which case
we would be required to obtain a license from these third parties on commercially reasonable terms. Such a license may not be available, or it may not be
available on commercially reasonable terms. Our business would be harmed if we are not able to obtain such a license on commercially reasonable terms
or at all, or if a non-exclusive license is offered and our competitors gain access to the same technology.
The risks described elsewhere pertaining to our intellectual property rights also apply to the intellectual property rights that we in-license, and any failure
by us or our licensors to obtain, maintain, defend and enforce these rights could have an adverse effect on our business. In some cases we may not have
control over the prosecution, maintenance or enforcement of the patents that we license, and may not have sufficient ability to provide input into the patent
prosecution, maintenance and defense process with respect to such patents, and our licensors may fail to take the steps that we believe are necessary or
desirable in order to obtain, maintain, defend and enforce the licensed patents.
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Third-party claims or litigation alleging infringement of patents or other proprietary rights, or seeking to invalidate patents or other proprietary rights,
may delay or prevent the development and commercialization of our product candidate.
Our commercial success depends in part on our ability to operate while avoiding infringement and other violations of the patents and proprietary rights of
third parties. However, our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents
or other intellectual property rights owned or controlled by third parties. There is a substantial amount of litigation, both within and outside the United
States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits,
interferences, derivation and administrative law proceedings, inter partes review and post-grant review before the USPTO, as well as oppositions and
similar processes in foreign jurisdictions. Our competitors in both the United States and abroad, many of which have substantially greater resources and
have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for or
obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell, if approved, our product candidate. Numerous United
States and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we and our collaborators
are developing a product candidate. As the biotechnology and pharmaceutical industries expand and more patents are issued, and as we gain greater
visibility and market exposure as a public company, the risk increases that our product candidate or other business activities may be subject to claims of
infringement of the patent and other proprietary rights of third parties. Third parties may assert that we are infringing their patents or employing their
proprietary technology without authorization.
There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to
the use or manufacture of our product candidate. Because patent applications can take many years to issue, there may be currently pending patent
applications that may later result in issued patents that our product candidate may infringe. In addition, third parties may obtain patents in the future and
claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the
manufacturing process of our product candidate, any molecules formed during the manufacturing process or any final product itself, the holders of any
such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until
such patents expire. Similarly, if any third-party patent was to be held by a court of competent jurisdiction to cover aspects of our formulations, processes
for manufacture or methods of use, including combination therapy, the holders of any such patent may be able to block our ability to develop and
commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be
available on commercially reasonable terms or at all. In addition, we may be subject to claims that we are infringing other intellectual property rights, such
as trademarks or copyrights, or misappropriating the trade secrets of others, and to the extent that our employees, consultants or contractors use intellectual
property or proprietary information owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and
inventions.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialize our product candidate. Defending these claims, regardless of their merit, would involve substantial litigation expense and would be a
substantial diversion of employee resources from our business. In the event of a successful infringement or other intellectual property claim against us, we
may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties,
pay royalties or redesign our affected products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether
any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of
litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidate. We may fail to
obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize
our product candidate, which could harm our business significantly. Claims that we have misappropriated the confidential information or trade secrets of
third parties could have a similar negative impact on our business.
Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have
substantially greater resources. In addition, intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact
prospective customers, cause product shipment delays, or prohibit us from manufacturing, importing, marketing or otherwise commercializing our product
candidate or any future product candidates. Any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse
effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operation, financial condition or cash
flows.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our
confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments, which could have a material adverse effect on the price of shares of our common stock. If
securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock.
The occurrence of any of these events may have a material adverse effect on our business, results of operation, financial condition or cash flows.
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We cannot provide any assurances that third-party patents do not exist which might be enforced against our product candidate or any future product
candidates, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties or other forms of
compensation to third parties.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might
adversely affect our ability to develop and market our product candidate or any future product candidates.
We cannot guarantee that any of our or our licensors’ patent searches or analyses, including the identification of relevant patents, the scope of patent
claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third-party patent and
pending application in the United States and abroad that is or may be relevant to or necessary for the commercialization of our product candidate or any
future product candidates in any jurisdiction. Patent applications in the United States and elsewhere are not published until approximately 18 months after
the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. In addition, U.S. patent
applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain
confidential until patents issue. Therefore, patent applications covering our product candidate or any future product candidates could have been filed by
others without our knowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a
manner that could cover our product candidate or any future product candidates, the use thereof, provided such pending patent applications result in issued
patents, our ability to develop and market our product candidate or any future product candidates can be adversely affected in jurisdictions where such
patents issue.
The scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our
interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our
product candidate, if approved. We may incorrectly determine that our product candidate is not covered by a third-party patent or may incorrectly predict
whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United
States or abroad that we consider relevant may be incorrect, and our failure to identify and correctly interpret relevant patents may negatively impact our
ability to develop and market our product candidate or any future product candidates, if approved.
If we fail to identify and correctly interpret relevant patents, we may be subject to infringement claims. We cannot guarantee that we will be able to
successfully settle or otherwise resolve such infringement claims. If we fail in any such dispute, in addition to being forced to pay damages, we may be
temporarily or permanently prohibited from commercializing any of our products that are held to be infringing. We might, if possible, also be forced to
redesign products so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could
require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
We may become involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which
could be expensive, time consuming and unsuccessful.
Competitors may infringe or otherwise violate our patents, the patents of our licensors or our other intellectual property rights. To counter infringement or
unauthorized use, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court
may decide that a patent of ours or our licensors is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on
the grounds that our patents do not cover the technology in question. The standards that courts use to interpret patents are not always applied predictably or
uniformly and can change, particularly as new technologies develop. As a result, we cannot predict with certainty how much protection, if any, will be
given to our patents if we attempt to enforce them and they are challenged in court. Further, even if we prevail against an infringer in U.S. district court,
there is always the risk that the infringer will file an appeal and the district court judgment will be overturned at the appeals court and/or that an adverse
decision will be issued by the appeals court relating to the validity or enforceability of our patents. An adverse result in any litigation or defense proceeding
could put one or more of our patents at risk of being invalidated or interpreted narrowly in a manner insufficient to achieve our business objectives, or
could put our patent applications at risk of not issuing. The initiation of a claim against a third party may also cause the third party to bring counter claims
against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging
invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements,
including lack of novelty, obviousness, non-enablement or lack of written description or statutory subject matter. Grounds for an unenforceability assertion
could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the USPTO, or made a
materially misleading statement, during prosecution. Third parties may also raise similar validity claims before the USPTO in post-grant proceedings such
as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar
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proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of
invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were
unaware during prosecution. For patents and patent applications that we may in-license, we may have a limited right or no right to participate in the
defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we
would lose at least part, and perhaps all, of any future patent protection on IMVT-1401 or any future product candidate. Such a loss of patent protection
could harm our business.
We may not be able to detect or prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where
the laws may not protect those rights as fully as in the United States. Our business could be harmed if in litigation the prevailing party does not offer us a
license on commercially reasonable terms. Any litigation or other proceedings to enforce our intellectual property rights may fail, and even if successful,
may result in substantial costs and distract our management and other employees.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary
damages, which may or may not be an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could have an adverse effect on the price of shares of our common stock.
Because the patents we own are owned by our wholly owned subsidiary, ISG, we may not be in a position to obtain a permanent injunction against a
third party that is found to infringe our patents.
Any patents that we own are assigned to our wholly owned subsidiary, ISG. If a third party is found to be infringing such patents, we may not be able to
permanently enjoin the third party from making, using, offering for sale or selling the infringing product or activity for the remaining life of such patent in
the United States or foreign jurisdictions because the patent is assigned to our wholly owned subsidiary, ISG, which is not the entity that would be
commercializing a potentially competitive product or service.
Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties.
Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our issued patent, any patents that may be
issued as a result of our pending or future patent applications or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a
claim or action may be too high or not in the best interest of our company or our stockholders. In such cases, we may decide that the more prudent course
of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution.
Changes in United States patent law or the patent law of other countries or jurisdictions could diminish the value of patents in general, thereby
impairing our ability to protect our product candidate.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents relating to our
product candidate, IMVT-1401, and any future product candidates. Obtaining and enforcing patents in the biopharmaceutical industry involves both
technological and legal complexity and is therefore costly, time consuming and inherently uncertain. Changes in either the patent laws or interpretation of
the patent laws in the United States or USPTO rules and regulations could increase the uncertainties and costs.
In addition, the United States federal government retains certain rights in inventions produced with its financial assistance under the Bayh-Dole Act. The
federal government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act also provides federal
agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to require the contractor or successors in title to the
patent to grant a “nonexclusive, partially exclusive, or exclusive license” to a “responsible applicant or applicants.” If the patent owner refuses to do so, the
government may grant the license itself.
The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain
circumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the U.S. Congress, the U.S. courts, the
USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable ways that would
weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
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Similarly, changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes in
how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we
have licensed or that we may obtain in the future. We cannot predict future changes in the interpretation of patent laws or changes to patent laws that might
be enacted into law by United States and foreign legislative bodies. Those changes may materially affect our patents or patent applications and our ability
to obtain additional patent protection in the future.
If we are unable to protect the confidentiality of our trade secrets and other proprietary information, including as a result of our reliance on third
parties, our business and competitive position would be harmed.
In addition to seeking patents for our product candidate, we also rely on trade secrets, including unpatented know-how, technology and other proprietary
information, to maintain our competitive position. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if
applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and
consultants prior to beginning research or disclosing proprietary information. Despite these efforts and the contractual provisions employed when working
with third parties, the need to share trade secrets and other confidential information due to our reliance on third parties, increases the risk that such trade
secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these
agreements. Any disclosure, either intentional or unintentional, by our employees, the employees of third parties with whom we share our facilities or
third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities, or misappropriation by third parties
(such as through a cybersecurity breach) of our trade secrets or proprietary information could enable competitors to duplicate or surpass our technological
achievements, thus eroding our competitive position in our market.
Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our
intellectual property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that a party
illegally disclosed or misappropriated a trade secret is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, some courts
inside and outside the United States are less willing or unwilling to protect trade secrets. Further, our key employees, consultants, suppliers or other
individuals with access to our proprietary technology and know-how may incorporate that technology and know-how into projects and inventions
developed independently or with third parties. As a result, disputes may arise regarding the ownership of the proprietary rights to such technology or
know-how, and any such dispute may not be resolved in our favor. If any of our trade secrets were to be lawfully obtained or independently developed by
a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with
us. If any of our trade secrets or other proprietary information were to be disclosed to or independently developed by a competitor, our competitive
position would be harmed.
We may be subject to claims that our licensors, employees, consultants, independent contractors or we have wrongfully used or disclosed confidential
information of their former employers or other third parties.
We do and may employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our
licensors, competitors or potential competitors. Although we seek to protect our ownership of intellectual property rights by ensuring that our agreements
with our employees, consultants, collaborators, independent contractors and other third parties with whom we do business include provisions requiring
such parties to assign rights in inventions to us and to not use the know-how or confidential information of their former employer or other third parties, we
may be subject to claims that we or our employees, consultants, collaborators or independent contractors have inadvertently or otherwise used or disclosed
know-how or confidential information of their former employers or other third parties. Litigation may be necessary to defend against these claims. There
is no guarantee of success in defending these claims, and if we fail in defending any such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights or personnel, which could result in customers seeking other sources for the technology, or in ceasing from doing
business with us. Such intellectual property rights could be awarded to a third party, and we could be required to obtain a license from such third party to
commercialize our technology or product candidate. Such a license may not be available on commercially reasonable terms or at all. Even if we are
successful, litigation could result in substantial cost and be a distraction to our management and other employees. Moreover, any such litigation or the
threat thereof may adversely affect our reputation, our ability to form strategic alliances or sublicense our rights to collaborators, engage with scientific
advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed
patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise
from conflicting obligations of employees, consultants or others who are involved in developing our product candidate. Litigation may be necessary to
defend against these and other claims challenging inventorship or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other
intellectual property.
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In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute
agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops
intellectual property that we regard as our own. Our and their assignment agreements may not be self-executing or may be breached, and we may be
forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual
property. We are still in the process of obtaining certain assignments for some of our owned patent applications.
If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable personnel or intellectual property
rights, such as exclusive ownership of, or right to use, intellectual property that is important to our product candidate. Even if we and our licensors are
successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management and other
employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities and have a
material adverse effect on the success of our business.
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and
could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results
of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could
have an adverse effect on the price of shares of our common stock. Such litigation or proceedings could substantially increase our operating losses and
reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or
other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or
proceedings more effectively than we can because of their greater financial resources. Accordingly, despite our efforts, we may not be able to prevent third
parties from infringing upon or misappropriating our intellectual property. In addition, the uncertainties associated with litigation could compromise our
ability to raise the funds necessary to continue our clinical trials and internal research programs, or in-license needed technology or other product
candidates. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to compete in
the marketplace, including compromising our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license
necessary technology from third parties, or enter into development collaborations that would help us commercialize our product candidate or any future
product candidates, if approved.
Any trademarks and trade names we have obtained or may obtain may be infringed or successfully challenged, resulting in harm to our business.
We expect to rely on trademarks and trade names as one means to distinguish any of our drug candidates that are approved for marketing from the products
of our competitors. Once we select new trademarks and apply to register them, our trademark applications may not be approved. We may not be able to
protect our rights in these trademarks and trade names, which we need in order to build name recognition with potential partners or customers in our
markets of interest. In addition, third parties may have used trademarks similar and identical to our trademarks in certain jurisdictions and may have filed
or may in the future file for registration of such trademarks. Third parties may oppose or attempt to cancel our trademark applications or trademarks, or
otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we may not be able to use these trademarks to
market our products in those countries and could be forced to rebrand our drugs, which could result in loss of brand recognition and could require us to
devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks and we may not have adequate resources to
enforce our trademarks. If we attempt to enforce our trademarks and assert trademark infringement claims, a court may determine that the marks we have
asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.
In this case, we could ultimately be forced to cease use of such trademarks. In any case, if we are unable to establish name recognition based on our
trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
Our intellectual property agreements with third parties may be subject to disagreements over contract interpretation, which could narrow the scope of
our rights to the relevant intellectual property.
Certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation
disagreement that may arise could affect the scope of our rights to the relevant intellectual property, or affect financial or other obligations under the
relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
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We may not be successful in obtaining necessary intellectual property rights to future products through acquisitions and in-licenses.
We may seek to acquire or in-license additional product candidates or technologies to grow our product offerings and intellectual property portfolio.
However, we may be unable to acquire or in-license intellectual property rights relating to, or necessary for, any such product candidates from third parties
on commercially reasonable terms or at all. In that event, we may be unable to develop or commercialize such product candidates or technology. We may
also be unable to identify product candidates or technology that we believe are an appropriate strategic fit for our company and protect intellectual
property relating to, or necessary for, such product candidates and technology.
The in-licensing and acquisition of third-party intellectual property rights for product candidates is a competitive area, and a number of more established
companies are also pursuing strategies to in-license or acquire third-party intellectual property rights for products that we may consider attractive or
necessary. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and
commercialization capabilities. Furthermore, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. If we are
unable to successfully obtain rights to additional technologies or products, our business, financial condition, results of operations and prospects for growth
could suffer.
In addition, we expect that competition for the in-licensing or acquisition of third-party intellectual property rights for product candidates and technologies
that are attractive to us may increase in the future, which may mean fewer suitable opportunities for us as well as higher acquisition or licensing costs. We
may be unable to in-license or acquire the third-party intellectual property rights for product candidates or technology on terms that would allow us to
make an appropriate return on our investment.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
Once granted, patents may remain open to invalidity challenges including opposition, interference, re-examination, post-grant review, inter partes review,
nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third
parties can raise objections against such grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner
may be compelled to limit the scope of the allowed or granted claims thus challenged, or may lose the allowed or granted claims altogether.
In addition, the degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights afford only limited
protection, and may not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to
maintain our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may not be
able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
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others may be able to make formulations or compositions that are the same as or similar to our product candidate, but that are not covered by
the claims of the patents that we own;
others may be able to make a product that is similar to our product candidate and not covered by the patents that we exclusively licensed and
have the right to enforce;
we, our licensor or any collaborators might not have been the first to make or reduce to practice the inventions covered by the issued patents
or pending patent applications that we own or have exclusively licensed;
we or our licensor or any collaborators might not have been the first to file patent applications covering certain of our or our licensor’s
inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights;
it is possible that our pending patent applications will not lead to issued patents;
patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or
unenforceable as a result of legal challenges;
our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from
patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and
then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
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we may not develop additional proprietary technologies that are patentable;
third parties performing manufacturing or testing for us using our product candidate or technologies could use the intellectual property of
others without obtaining a proper license;
parties may assert an ownership interest in our intellectual property and, if successful, such disputes may preclude us from exercising
exclusive rights over that intellectual property;
we may not develop or in-license additional proprietary technologies that are patentable;
we may not be able to obtain and maintain necessary licenses on commercially reasonable terms, or at all; and
the patents of others may have an adverse effect on our business.
Should any of these events occur, they could harm our business and results of operations.
Risks Related to Our Common Stock
The market price of shares of our common stock is likely to be highly volatile, and you may lose some or all of your investment.
The market price of shares of our common stock has been and is likely to continue to be highly volatile and may be subject to wide fluctuations in
response to a variety of factors, including the following:
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any delay in the commencement, enrollment and ultimate completion of our clinical trials;
results of clinical trials for IMVT-1401 or any future product candidate or those of our competitors;
any delay in filing a BLA or similar application for IMVT-1401 or any future product candidate and any adverse development or perceived
adverse development with respect to the FDA or other regulatory authority’s review of that BLA or similar application, as the case may be;
failure to successfully develop and commercialize IMVT-1401 or any future product candidate;
inability to obtain additional funding;
regulatory or legal developments in the United States or other countries or jurisdictions applicable to IMVT-1401 or any future product
candidate;
adverse regulatory decisions;
changes in the structure of healthcare payment systems;
inability to obtain adequate product supply for IMVT-1401 or any future product candidate, or the inability to do so at acceptable prices;
introduction of new products, services or technologies by our competitors;
failure to meet or exceed financial projections we provide to the public;
failure to meet or exceed the estimates and projections of the investment community;
changes in the market valuations of similar companies;
market conditions in the pharmaceutical and biotechnology sectors and the issuance of new or changed securities analysts’ reports or
recommendations;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
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variations in our financial results or the financial results of companies that are perceived to be similar to us;
changes in estimates of financial results or investment recommendations by securities analysts;
significant lawsuits, including patent or stockholder litigation and disputes or other developments relating to our proprietary rights, including
patents, litigation matters and our ability to obtain patent protection for our technologies;
additions or departures of key scientific or management personnel;
short sales of shares of our common stock;
sales of a substantial number of shares of shares of our common stock in the public market, or the perception in the market that the holders of
a large number of shares intend to sell shares;
sales or purchases of shares of our common stock by our directors or Section 16 officers;
sales of shares of our common stock by us or sales or purchases of our common stock by our stockholders in the future, including RSL;
negative coverage in the media or analyst reports, whether accurate or not;
issuance of subpoenas or investigative demands, or the public fact of an investigation by a government agency, whether meritorious or not;
the size of our public float;
trading liquidity of shares of our common stock;
investors’ general perception of our company and our business;
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies, including very recently in connection with the ongoing COVID-19 pandemic, which has resulted in decreased stock prices
for many companies notwithstanding the lack of a fundamental change in their underlying business models or prospects. These fluctuations have often
been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors, including potentially worsening
economic conditions and other adverse effects or developments relating to the ongoing COVID-19 pandemic, political, regulatory and other market
conditions, may negatively affect the market price of shares of our common stock, regardless of our actual operating performance. The market price of
shares of our common stock may decline, and you may lose some or all of your investment.
Volatility in our share price could subject us to securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is
especially relevant for us because pharmaceutical companies have experienced significant share price volatility in recent years. If we face such litigation, it
could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.
We are a “controlled company” within the meaning of the applicable Nasdaq listing rules and, as a result, qualify for exemptions from certain
corporate governance requirements. If we rely on these exemptions, you will not have the same protections afforded to stockholders of companies that
are subject to such requirements.
RSL controls a majority of the voting power of our outstanding shares of common stock. As a result, we are a “controlled company” within the meaning of
applicable Nasdaq listing rules. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an
individual, group or another company is a “controlled company.” In addition, for so long as the RSL designated directors control all matters presented to
our board of directors for a vote, we will be a “controlled company.” For so long as we remain a “controlled company,” we may elect not to comply with
certain corporate governance requirements, including the requirements:
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for an annual performance evaluation of the nominating and corporate governance and compensation committees;
that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter
addressing the committee’s purpose and responsibilities; and
that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s
purpose and responsibility.
We intend to use all or some of these exemptions. As a result, you may not have the same protections afforded to stockholders of companies that are
subject to all of the Nasdaq corporate governance requirements.
RSL owns a significant percentage of shares of our common stock and may exert significant control over matters subject to stockholder approval.
As of June 29, 2020, RSL beneficially owned approximately 57.7% of the voting power of our outstanding shares of common stock. Therefore, we are
controlled by RSL and RSL has the ability to substantially influence us and exert significant control through this ownership position. For example, RSL
may be able to control elections of directors, the issuance of equity, including to our employees under equity incentive plans, amendments of our
organizational documents, or approval of any merger, amalgamation, sale of assets or other major corporate transaction. RSL’s interests may not always
coincide with our corporate interests or the interests of other stockholders, and it may exercise its voting and other rights in a manner with which you may
not agree or that may not be in the best interests of our other stockholders. Further, RSL is a privately held company whose ownership and governance
structure is not transparent to our other stockholders. There may be changes to the management or ownership of RSL, or to RSL’s business model, that
could impact RSL’s interests in a way that may not coincide with our corporate interests or the interests of other stockholders. Any such changes may
diminish, or eliminate entirely, any benefits we expect to derive from our membership in the Roivant family of companies. So long as RSL continues to
own a significant amount of our equity, it will continue to be able to strongly influence and effectively control our decisions.
RSL has the right to elect a certain number of directors to our board of directors.
RSL has the right to elect a certain number of Series A Preferred Directors to our board of directors, in accordance with our amended and restated
certificate of incorporation. While the directors appointed by RSL are obligated to act in accordance with their applicable fiduciary duties, they may have
equity or other interests in RSL and, accordingly, their interests may be aligned with RSL’s interests, which may not always coincide with our corporate
interests or the interests of our other stockholders. Until such time as Roivant holds less than 50% of the voting power of our outstanding shares of capital
stock entitled to vote generally at an election of directors, the directors appointed by Roivant will be able to determine the outcome of all matters presented
to the board of directors.
Our organizational and ownership structure may create significant conflicts of interests.
Our organizational and ownership structure involves a number of relationships that may give rise to certain conflicts of interest between us and minority
holders of shares of our common stock, on the one hand, and RSL, on the other hand. Certain of our directors and employees have equity interests in RSL
and, accordingly, their interests may be aligned with RSL’s interests, which may not always coincide with our corporate interests or the interests of our
other stockholders. Further, our other stockholders may not have visibility into the RSL ownership of any of our directors or officers, which may change at
any time through acquisition, disposition, dilution, or otherwise. Any change in our directors’ or officers’ RSL ownership could impact the interests of
those holders.
In addition, we are party to certain related party agreements with RSL, RSI and RSG. These entities and their stockholders, including certain of our
directors and employees, may have interests which differ from our interests or those of the minority holders of shares of our common stock. Any material
transaction between us and RSL, RSI, RSG or any other affiliate of RSL is subject to our related party transaction policy, which requires prior approval of
such transaction by our audit committee. To the extent we fail to appropriately deal with any such conflicts of interests, it could negatively impact our
reputation and ability to raise additional funds and the willingness of counterparties to do business with us, all of which could have an adverse effect on our
business, financial condition, results of operations, and cash flows.
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If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our share price
and trading volume could decline.
The trading market for shares of our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or
our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts
who cover us downgrade shares of our common stock or change their opinion of shares of our common stock, our share price would likely decline. If one
or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which
could cause our share price or trading volume to decline.
Because we do not anticipate paying any cash dividends on shares of our common stock in the foreseeable future, capital appreciation, if any, would
be your sole source of gain.
We have never declared or paid any cash dividends on shares of our common stock. We currently anticipate that we will retain future earnings for the
development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result,
capital appreciation, if any, of shares of our common stock would be your sole source of gain on an investment in shares of our common stock for the
foreseeable future.
We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to
compliance with our public company responsibilities and corporate governance practices.
As a public company, and particularly after we are no longer an “emerging growth company,” we will incur significant legal, accounting and other
expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”), the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the listing requirements of Nasdaq and other applicable securities rules and regulations impose various requirements on
public companies. Our management and other personnel will need to devote a substantial amount of time to compliance with these requirements.
Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and
costly. If, notwithstanding our efforts to comply with new or changing laws, regulations and standards, we fail to comply, regulatory authorities may
initiate legal proceedings against us, and our business may be harmed. Further, failure to comply with these laws, regulations and standards may make it
more difficult and more expensive for us to obtain directors’ and officers’ liability insurance, which could make it more difficult for us to attract and retain
qualified members to serve on our board of directors or committees or as members of senior management. We cannot predict or estimate the amount of
additional costs we will incur as a public company or the timing of such costs.
As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting
and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the
value of shares of our common stock.
We will be required, pursuant to Section 404 of the Sarbanes Oxley Act (“Section 404”), to furnish a report by management on, among other things, the
effectiveness of our internal controls over financial reporting for the first fiscal year beginning after the effective date of the registration statement of which
this Annual Report forms a part. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal
controls over financial reporting. Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal
controls over financial reporting until our first annual report required to be filed with the SEC following the date we are no longer an emerging growth
company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). At such time as we are required to obtain auditor attestation, if
we then have a material weakness, we would receive an adverse opinion regarding our internal control over financial reporting from our independent
registered public accounting firm. We will be required to disclose significant changes made in our internal controls procedures on a quarterly basis.
We have begun the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to
comply with Section 404, and we may not be able to complete our evaluation, testing and any required remediation in a timely fashion. Our compliance
with Section 404 will require that we incur substantial legal, accounting and other compliance expense and expend significant management efforts. We
currently do not have an internal audit group, and we will need to hire additional accounting and finance staff and consultants with appropriate public
company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed
to comply with Section 404.
During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal controls over financial
reporting, we will be unable to assert that our internal controls over financial reporting are effective. We cannot assure you that there will not be material
weaknesses or significant deficiencies in our internal controls over financial reporting in the future. Any failure to maintain effective internal controls over
financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that
our internal controls over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness
or significant deficiency in our internal controls over financial reporting, we could lose investor confidence in the accuracy and completeness of our
financial reports, the market price of shares of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC
or other regulatory authorities. Failure to remedy any material weakness in our internal controls over financial reporting, or to implement or maintain other
effective control systems required of public companies, could also negatively impact our ability to access to the capital markets.
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In addition, effective disclosure controls and procedures enable us to make timely and accurate disclosure of financial and non-financial information that
we are required to disclose. As a public company, if our disclosure controls and procedures are ineffective, we may be unable to report our financial results
or make other disclosures accurately on a timely basis, which could cause our reported financial results or other disclosures to be materially misstated and
result in the loss of investor confidence and cause the market price of shares of our common stock to decline.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will
make shares of our common stock less attractive to investors.
We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage
of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including
exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved. 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 closing of HSAC’s initial public offering (“IPO”), (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in
which we are deemed to be a large accelerated filer, which means the market value of shares of our common stock that are held by non-affiliates exceeds
$700 million as of September 30 of such fiscal year, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the
prior three-year period.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards
apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore,
we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take
advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements
of Section 404 and reduced disclosure obligations regarding executive compensation in this Annual Report and our periodic reports and proxy statements.
We cannot predict if investors will find shares of our common stock less attractive because we may rely on these exemptions. If some investors find shares
of our common stock less attractive as a result, there may be a less active trading market for shares of our common stock and our share price may be more
volatile.
We may become subject to unanticipated tax liabilities and higher effective tax rates.
Our wholly owned subsidiary, ISL, is incorporated under the laws of Bermuda, where it is not subject to any income or withholding taxes. Further, ISL is
centrally managed and controlled in the U. K., and, under current U. K. tax law, a company which is centrally managed and controlled in the U.K. is
regarded as resident in the U. K. for taxation purposes. Accordingly, we expect ISL to be subject to U.K. taxation on its income and gains and subject to
the U.K.’s controlled foreign company rules, except where an exemption applies. ISL may be treated as a dual resident company for U.K. tax purposes.
As a result, ISL’s right to claim certain reliefs from U.K. tax may be restricted, and changes in law or practice in the U.K. could result in the imposition of
further restrictions on ISL’s right to claim U.K. tax reliefs. ISL may also become subject to income, withholding or other taxes in certain jurisdictions by
reason of its activities and operations, and it is also possible that taxing authorities in any such jurisdictions could assert that ISL is subject to greater
taxation than we currently anticipate. Any such additional tax liability could adversely affect our results of operations.
The intended tax effects of our corporate structure and intercompany arrangements depend on the application of the tax laws of various jurisdictions
and on how we operate our business.
Our wholly owned subsidiary, ISL, and our controlling stockholder, RSL, are incorporated under the laws of Bermuda and are tax residents of the U.K.
Further, we currently have other subsidiaries that are domiciled in the U. K., Switzerland and the United States. If we succeed in growing our business, we
expect to conduct increased operations through our subsidiaries in various countries and tax jurisdictions, in part through intercompany service agreements
between us, our parent company and our subsidiaries. In that case, our corporate structure and intercompany transactions, including the manner in which
we develop and use our intellectual property, will be organized so that we can achieve our business objectives in a tax-efficient manner and in compliance
with applicable transfer pricing rules and regulations. If two or more affiliated companies are located in different countries or tax jurisdictions, the tax laws
and regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arms’ length and
that appropriate documentation be maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer
pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities. If tax authorities in any of these
countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices
and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. In addition, if the country from
which the income is reallocated does not agree with the reallocation, both countries could tax the same income, potentially resulting in double taxation. If
tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase
our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.
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Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business,
there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely
affected by changes in foreign currency exchange rates or by changes in the relevant tax, accounting and other laws, regulations, principles and
interpretations. As we intend to operate in numerous countries and taxing jurisdictions, the application of tax laws can be subject to diverging and
sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have
conflicting views, for instance, with respect to, among other things, the manner in which the arm’s length standard is applied for transfer pricing purposes,
or with respect to the valuation of intellectual property. In addition, tax laws are dynamic and subject to change as new laws are passed and new
interpretations of the law are issued or applied. Moreover, certain relevant tax, accounting and other laws have special application with respect to
“affiliated,” “combined” or similar groups, which may include RSL, ISL and their respective subsidiaries, and which may impact the tax liabilities of the
companies. We continue to assess the impact of such changes in tax laws on our business and may determine that changes to our structure, practice or tax
positions are necessary in light of such changes and developments in the tax laws of other jurisdictions in which we operate. Such changes may
nevertheless be ineffective in avoiding an increase in our consolidated tax liability, which could harm our financial condition, results of operations and
cash flows.
Changes in our effective tax rate may reduce our net income in future periods.
Our tax position could be adversely impacted by changes in tax rates, tax laws, tax practice, tax treaties or tax regulations or changes in the interpretation
thereof by the tax authorities in Europe (including the U.K. and Switzerland), the United States, Bermuda and other jurisdictions as well as being affected
by certain changes currently proposed by the Organization for Economic Co-operation and Development and their action plan on Base Erosion and Profit
Shifting. Such changes may become more likely as a result of recent economic trends in the jurisdictions in which we operate, particularly if such trends
continue. If such a situation was to arise, it could adversely impact our tax position and our effective tax rate. Failure to manage the risks associated with
such changes, or misinterpretation of the laws providing such changes, could result in costly audits, interest, penalties and reputational damage, which
could adversely affect our business, results of our operations and our financial condition.
Our actual effective tax rate may vary from our expectation and that variance may be material. A number of factors may increase our future effective tax
rates, including: (1) the jurisdictions in which profits are determined to be earned and taxed; (2) the resolution of issues arising from any future tax audits
with various tax authorities; (3) changes in the valuation of our deferred tax assets and liabilities; (4) increases in expenses not deductible for tax purposes,
including transaction costs and impairments of goodwill in connection with acquisitions; (5) changes in the taxation of stock-based compensation;
(6) changes in tax laws or the interpretation of such tax laws, and changes in generally accepted accounting principles; and (7) challenges to the transfer
pricing policies related to our structure.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by
our stockholders to replace or remove our current management and limit the market price of our common stock.
Provisions in our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or
changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:
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authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights,
and preferences determined by our board of directors that may be senior to our common stock;
specify that the holder of our Series A preferred stock, RSL, has the right to appoint a certain number of Series A Preferred Directors to our
board of directors;
require that, from and after such time as we are no longer a “controlled company” within the meaning of Nasdaq rules, any action to be taken
by our holders of common stock be effected at a duly called annual or special meeting and not by written consent;
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specify that special meetings of our stockholders can be called only by the chairperson of our board of directors, our chief executive officer
or our board of directors;
establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of
persons for election to our board of directors;
provide that, subject to the rights of our Series A preferred stockholder, our directors may be removed only upon the vote of at least 66 2/3%
of our outstanding shares of voting stock;
require the approval of our board of directors or, from and after such time as we are no longer a “controlled company” within the meaning of
Nasdaq rules, the holders of at least 66 2/3% of our outstanding shares of voting stock to amend our bylaws and certain provisions of our
certificate of incorporation;
provide that the number of directors is set at seven and may only be changed by resolution of the board of directors, including a majority of
Series A Preferred Directors then serving;
prohibit cumulative voting in the election of directors; and
provide that, subject to the rights of our Series A preferred stockholder, vacancies on our board of directors may be filled only by a majority
of directors then in office, even though less than a quorum.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for
stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. Any of the foregoing
provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers
of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the
United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which will restrict our stockholders’
ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for the
following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action
asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and
restated certificate of incorporation, or our amended and restated bylaws; any action as to which Delaware General Corporation Law confers jurisdiction to
the Court of Chancery of the State of Delaware; and any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions
would not apply to suits brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal
courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation provides that the federal district courts of the United
States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our
directors, officers, or other employees. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder
may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to
vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may
require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be
enforced by a court in those other jurisdictions.
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Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
We maintain our headquarters at 320 West 37th Street, New York, New York 10018 and also conduct business operations at 1000 Park Forty Plaza, Suite
210, Durham, North Carolina 27713. ISL’s registered office is located at Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and ISL’s
principal office is located at Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB, United Kingdom. ISG maintains its headquarters at
Viaduktstrasse 8, 4051 Basel, Switzerland. In June 2020, we entered into two sublease agreements for our headquarters in New York, New York which
expire in February 2024 and April 2024, respectively.
We intend to add new facilities or expand our existing facilities as we add employees, and we believe that suitable additional or substitute space will be
available as needed to accommodate any such expansion of our operations.
Item 3.
Legal Proceedings
From time to time, we may become involved in legal proceedings related to claims arising from the ordinary course of business. We are not currently a
party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a
material adverse effect on our business, operating results or financial condition.
Item 4.
Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Prior to the closing of the Business Combination, HSAC common stock, units and warrants were traded on The Nasdaq Capital Market under the ticker
symbols “HSAC,” “HSACU” and “HSACW,” respectively. On December 19, 2019, the Company’s common stock, units and warrants began trading on
The Nasdaq Capital Market under the ticker symbols “IMVT”, “IMVTU” and “IMVTW,” respectively. We no longer have any outstanding units or
warrants.
Our common stock currently trades on The Nasdaq Global Select Market under the ticker symbol “IMVT”.
Holders of Record
Continental Stock Transfer & Trust Company is the transfer agent and registrar for our common stock. As of the close of business on June 19, 2020, we
had 10 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes shareholders
who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include
shareholders whose shares may be held in trust by other entities.
Dividend Policy
We have never declared or paid any dividends on shares of our common stock. We anticipate that we will retain all of our future earnings, if any, for use in
the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any decision to declare and pay
dividends in the future will be made at the sole discretion of our board of directors and will depend on, among other things, our results of operations, cash
requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
None.
Use of Proceeds
On May 14, 2019, HSAC consummated its IPO of 11,500,000 units, which included the full exercise by the underwriters of the over-allotment option. The
units were sold at an offering price of $10.00 per unit, generating total gross proceeds of $115.0 million. Chardan Capital Markets LLC and UBS
Securities LLC acted as joint book running managers. The securities sold in the IPO were registered under the Securities Act on a registration statement on
Form S-1 (No. 333-230893) which was declared effective on May 9, 2019.
Simultaneously with the closing of the IPO, HSAC consummated a private placement of 10,000,000 private warrants to its sponsor at a price of $0.50 per
warrant, generating total proceeds of $5.0 million. The private warrants were issued pursuant to the exemption from registration contained in Section 4(a)
(2) of the Securities Act. On December 18, 2019, upon the closing of the Business Combination pursuant to which HSAC acquired 100% of the issued and
outstanding common shares of ISL, the private warrants were canceled.
Following the closing of the IPO, $115.0 million in net proceeds from the sale of the units and the private warrants was placed in a trust account. HSAC
paid a total of $2.3 million in underwriting discounts and commissions and $0.6 million for other costs and expenses related to the IPO. Upon the closing
of the Business Combination, the underwriters were paid an additional $4.0 million in deferred underwriting discounts and commissions. Following the
closing of the Business Combination, $116.5 million net of $6.3 million in expenses related to Business Combination was released to us from the trust
account.
We have been using and will continue to use these proceeds primarily (1) to fund our ASCEND MG trial, ASCEND GO-1 trial, ASCEND GO-2 trial, our
planned ASCEND WAIHA trial, and other clinical development activities, (2) to expand our research and development capabilities, and (3) for general
corporate purposes.
Issuer Purchases of Equity Securities
None.
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Item 6. Selected Financial Data
Because we are considered to be a “smaller reporting company” under SEC rules and regulations, we are not required to provide the information required
by this item in this report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition, results of operations, and cash flows together with the audited combined
and consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. Some of the information contained in this
discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business,
includes forward-looking statements that involve risks and uncertainties. You should review the “Cautionary Note Regarding Forward-Looking
Statements” and “Item 1A Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year ends on March 31.
Prior to December 18, 2019, we were known as Health Sciences Acquisitions Corporation. On December 18, 2019, we completed the Business
Combination, with Immunovant Sciences Ltd., a private company. For accounting purposes, Health Sciences Acquisitions Corporation was deemed to be
the acquired entity.
Overview
We are a clinical-stage biopharmaceutical company focused on enabling normal lives for patients with autoimmune diseases. We are developing a novel,
fully human monoclonal antibody, IMVT-1401 (formerly referred to as RVT-1401), that selectively binds to and inhibits the FcRn. IMVT-1401 is the
product of a multi-step, multi-year research program conducted by HanAll Biopharma Co., Ltd. to design a highly potent anti-FcRn antibody optimized for
subcutaneous delivery. These efforts have resulted in a product candidate that has been dosed in small volumes (e.g. 2 mL) and with a 27-gauge needle,
while still generating therapeutically relevant pharmacodynamic activity, important attributes that we believe will drive patient preference and market
adoption. In nonclinical studies and in clinical trials conducted to date, IMVT-1401 has been observed to reduce IgG antibody levels. High levels of
pathogenic IgG antibodies drive a variety of autoimmune diseases and, as a result, we believe IMVT-1401 has the potential for broad application in these
disease areas. We intend to develop IMVT-1401 in autoimmune diseases for which there is robust evidence that pathogenic IgG antibodies drive disease
manifestation and for which reduction of IgG antibodies should lead to clinical benefit.
We are developing IMVT-1401 as a fixed-dose, self-administered subcutaneous injection on a convenient weekly, or less frequent, dosing schedule. As a
result of our rational design, we believe that IMVT-1401, if approved for commercial sale, would be differentiated from currently available, more invasive
treatments for advanced IgG-mediated autoimmune diseases, (e.g., MG, TED, WAIHA, idiopathic thrombocytopenic purpura, pemphigus vulgaris, chronic
inflammatory demyelinating polyneuropathy, bullous pemphigoid, neuromyelitis optica, pemphigus foliaceus, Guillain-Barré syndrome and PLA2R+
membranous nephropathy). In 2019, these diseases had an aggregate prevalence of approximately 243,000 patients in the United States and 388,000
patients in Europe. To the extent we choose to develop IMVT-1401 for certain of these rare diseases, we plan to seek orphan drug designation in the United
States and Europe. Such designations would primarily provide financial and exclusivity incentives intended to make the development of orphan drugs
financially viable. However, we have not yet sought such designation for any of our three target indications, and there is no certainty that it would obtain
such designation, or maintain the benefits associated with such designation, if or when we do.
In August 2019, we initiated dosing in our ASCEND MG trial, a Phase 2a clinical trial in patients with MG. We expect to report results from the placebo-
controlled treatment phase of this trial in the late third quarter or early fourth quarter of calendar year 2020. In May 2019, we initiated dosing in our
ASCEND GO-1 trial, a Phase 2a clinical trial in Canada in patients with TED. We announced initial results from this trial in March 2020. Enrollment is
ongoing in our ASCEND GO-2 trial, a Phase 2b clinical trial for TED in the United States, Canada and Europe. As previously communicated, results from
this trial are still possible in the first half of calendar year 2021. We intend to provide an update on the timing for this trial in the third quarter of calendar
year 2020. In November 2019, we submitted an IND to the FDA for WAIHA and, in December 2019, our IND was cleared for Phase 2 trial initiation. As
previously communicated, results from this trial are still possible by the end of second half of calendar year 2020. We intend to provide an update on the
timing for this trial in the third quarter of calendar year 2020.
ISL was incorporated in July 2018 and its operations prior to the closing of the Business Combination were limited to organizing and staffing ISL,
acquiring the rights to IMVT-1401, and preparing for and conducting clinical trials. To date, we have not generated any revenue and have generated
significant operating losses since our inception. As of March 31, 2020 and 2019, we had an accumulated deficit of $91.2 million and $24.8 million,
respectively. For the years ended March 31, 2020 and 2019, we recorded net losses of $66.4 million and $28.6 million, respectively.
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Our financial statements are derived by carving out the historical results of operations and historical cost basis of the assets and liabilities associated with
IMVT-1401 that have been contributed to us by RSL, from RSL’s financial statements and have been presented as if we had been a separate business since
the acquisition of IMVT-1401 by RSG on December 19, 2017. Accordingly, the financial statements as of and for the year ended March 31, 2019 include
reasonable allocations for assets and liabilities and expenses attributable to our operations. Beginning on July 6, 2018 (date of formation), the combined
and consolidated financial statements include our accounts and those of our wholly owned subsidiaries.
COVID-19 Business Update
We have been actively monitoring the impact of the global COVID-19 pandemic on our employees and our business. Based on guidance issued by federal,
state and local authorities, we transitioned to a remote work model for our employees, effective mid-March 2020. Our operations continue as we seek to
comply with guidance from governmental authorities and adjust our activities as appropriate.
The COVID-19 pandemic had a variable impact on our clinical trials from March through June 2020. Some sites closed enrollment for new patients in
early March and remain closed today, whereas other sites remained partially open for new patient enrollment. At this time, we expect most sites globally to
re-open for new enrollment in the coming months, but given the uncertain course of the pandemic this is impossible to predict with certainty.
In the conduct of our business activities, we are also taking actions designed to protect the safety and well-being of our patients and employees. For
patients already enrolled in our clinical trials, we are working closely with clinical trial investigators and site staff to continue treatment in compliance with
trial protocols and observe government and institutional guidelines designed to safeguard the health and safety of patients, clinical trial investigators and
site staff. Our very experienced clinical development team has successfully maintained robust communication with our sites. New patients enrolled in our
programs from March to June 2020 did not miss any in-person clinic visits during the initial treatment period. We have also been working with our
partners to ensure that backup services are in place, which has enabled some virtual visits to replace in-person visits during the follow-up period after
initial treatment. These internal and external efforts have allowed us to continue progress across our clinical development programs. While we continue to
evaluate the impact of the COVID-19 pandemic, we intend to provide an update on our clinical development timelines for TED and WAIHA in the third
quarter of calendar year 2020.
The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with
confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, the ultimate impact of the 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 and treat the disease.
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” under Part II, Item 1A in this Annual Report on Form 10-K.
Business Combination and Recapitalization
On December 18, 2019, HSAC completed its acquisition of ISL pursuant to that certain share exchange agreement dated as of September 29, 2019 (the
“Share Exchange Agreement”), by and among HSAC, ISL, the stockholders of ISL (the “Sellers”), and RSL, as representative of the Sellers. At the
closing, HSAC acquired 100% of the issued and outstanding common shares of ISL. The aggregate value of the consideration paid by HSAC in the
Business Combination was $420.9 million, consisting of 42,080,376 shares of HSAC’s common stock and 10,000 shares of HSAC’s Series A preferred
stock, in each case, valued at $10.00 per share (the deemed value of the shares issued pursuant to the Share Exchange Agreement). Upon the closing of the
Business Combination, ISL became a wholly owned subsidiary of HSAC and HSAC was renamed “Immunovant, Inc.”
ISL was founded on July 6, 2018 as a Bermuda exempted limited company and a wholly owned subsidiary of RSL. HSAC was incorporated in Delaware
on December 6, 2018 and was formed as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase,
recapitalization, reorganization or similar business combination with one or more businesses.
The Business Combination was accounted for as a reverse recapitalization and HSAC was treated as the “acquired” company for accounting purposes.
Accordingly, the Business Combination was accounted as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a
recapitalization. Reported amounts from operations included herein prior to the Business Combination are those of ISL.
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Our Key Agreements
License Agreement with HanAll Biopharma Co., Ltd.
In December 2017, RSG entered into the HanAll Agreement. Under the HanAll Agreement, RSG, a wholly owned subsidiary of RSL, received (1) the
non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import and use the antibody referred to as IMVT-1401 and
certain back-up and next-generation antibodies, and products containing such antibodies, and to commercialize such products, in the United States,
Canada, Mexico, the E.U., the U.K., Switzerland, the Middle East, North Africa and Latin America (the “Licensed Territory”) for all human and animal
uses, during the term of the agreement.
In December 2018, we obtained and assumed all rights, title, interest and obligations under the HanAll Agreement from RSG, including all rights to
IMVT-1401 from RSG in the Licensed Territory, pursuant to an assignment and assumption agreement between RSG and its wholly owned subsidiary,
ISG, for an aggregate purchase price of $37.8 million plus Swiss value-added tax of $2.9 million.
Under the HanAll Agreement, the parties may choose to collaborate on a research program directed to the research and development of next generation
FcRn inhibitors in accordance with an agreed plan and budget. We are obligated to reimburse HanAll for half of such research and development expenses
incurred by HanAll, up to an aggregate reimbursement amount of $20.0 million. Intellectual property created by HanAll pursuant to this research program
will be included in our license; intellectual property created by us pursuant to this research program will be included in HanAll’s license. Since the
acquisition of IMVT-1401, we, along with RSL, have performed all the development associated with IMVT-1401 and no amounts were due to HanAll for
further research or development of the technology for the years ended March 31, 2020 and 2019.
Pursuant to the HanAll Agreement, RSG made an upfront payment of $30.0 million to HanAll. In May 2019, we achieved our first development and
regulatory milestone which resulted in a $10.0 million milestone payment that we subsequently paid in August 2019. We will be responsible for future
contingent payments and royalties, including up to an aggregate of $442.5 million upon the achievement of certain development, regulatory and sales
milestone events. We are also obligated to pay HanAll tiered royalties ranging from the mid-single digits to mid-teens on net sales of licensed products,
subject to standard offsets and reductions as set forth in the HanAll Agreement. These royalty obligations apply on a product-by-product and
country-by-country basis and end upon the latest of: (A) the date on which the last valid claim of the licensed patents expire, (B) the date on which the data
or market exclusivity expires or (C) 11 years after the first commercial sale of the licensed product, in each case, with respect to a given product in a given
country. See “Business—License Agreement with HanAll Biopharma Co., Ltd.” for further information.
Services Agreements with RSI and RSG
In August 2018, we entered into Services Agreements with RSI and RSG, under which RSI and RSG agreed to provide services related to development,
administrative and financial activities to us during our formative period. Under each Services Agreement, we will pay or reimburse RSI or RSG, as
applicable, for any expenses they, or third parties acting on our behalf, incur. For any general and administrative and research and development activities
performed by RSI or RSG employees, RSI or RSG, as applicable, will charge back the employee compensation expense plus a pre-determined markup.
RSI and RSG also provided such services prior to the formalization of the Services Agreements, and such costs have been recognized by us in the period in
which the services were rendered. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative
percentage of time utilized on our matters. All other costs will be billed back at cost. The term of the Services Agreements will continue until terminated
by us, RSI or RSG, as applicable, upon 90 days’ written notice.
RSL Information Sharing and Cooperation Agreement
In December 2018, we entered into an amended and restated information sharing and cooperation agreement (the “Cooperation Agreement”) with RSL.
The Cooperation Agreement, among other things: (1) obligates us to deliver to RSL periodic financial statements and other information upon reasonable
request and to comply with other specified financial reporting requirements; (2) requires us to supply certain material information to RSL to assist it in
preparing any future SEC filings; and (3) requires us to implement and observe certain policies and procedures related to applicable laws and regulations.
We have agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in
connection with RSL’s status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their
respective officers, employees or directors to us or any of our subsidiaries, subject to certain limitations set forth in the Cooperation Agreement. No
amounts have been paid or received under this agreement; however, we believe this agreement is material to our business and operations.
Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of
when RSL no longer (a) is required by accounting principles generally accepted in the U.S. GAAP to consolidate our results of operations and financial
position, account for its investment in us under the equity method of accounting or, by any rule of the SEC, include our separate financial statements in any
filings it may make with the SEC and (b) has the right to elect directors constituting a majority of our board of directors.
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Financial Operations Overview
Revenue
We have not generated any revenue and have incurred significant operating losses since inception, and we do not expect to generate any revenue from the
sale of any products unless or until we obtain regulatory approval of and commercialize IMVT-1401 or any future product candidates. Our ability to
generate revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of IMVT-1401 and
any future product candidates.
Research and Development Expenses
Since our incorporation, our operations have primarily been limited to organizing and staffing our company, acquiring rights to our product candidate,
IMVT-1401, and preparing for and conducting clinical trials. Research and development expenses primarily consist of salaries, benefits, and other staff-
related costs, including associated stock-based compensation, laboratory supplies, clinical studies and trials and related clinical manufacturing costs. Costs
related to manufacturing preparation, fees paid to other entities that conduct certain research and development activities on our behalf, and facilities and
allocated overhead and facility costs are also included within research and development. We expect to significantly increase our research and development
efforts as we initiate and conduct our Phase 2 and Phase 3 clinical trials for IMVT-1401. Research and development expenses will include:
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employee-related expenses, such as salaries, stock-based compensation, benefits and travel expense for the research and development
personnel that we plan to hire;
expenses incurred under agreements with CROs, as well as consultants that conduct nonclinical studies designed to assist with the lead
optimization of our product candidate;
manufacturing costs in connection with conducting nonclinical studies and clinical trials;
milestone payments and other costs associated with the HanAll Agreement;
costs for sponsored research;
cost incurred under patent, technology, and know-how sublicense agreements;
upfront payments for the purchase of in-process research and development; and
costs allocated to us under our Services Agreements with RSI and RSG.
Research and development activities will continue to be central to our business model. We expect our research and development expenses to be significant
over the next several years as we increase personnel and compensation costs and commence additional expected clinical trials for IMVT-1401 and prepare
to seek regulatory approval for our product candidate. It is difficult to determine with certainty the duration and completion costs of any clinical trial we
may conduct.
The duration, costs and timing of clinical trials of IMVT-1401 and any future product candidates will depend on a variety of factors that include, but are
not limited to:
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the number of trials required for approval;
the per patient trial costs;
the number of patients that participate in the trials;
the number of sites included in the trials;
the countries in which the trial is conducted;
the length of time required to enroll eligible patients;
the number of doses that patients receive;
the drop-out or discontinuation rates of patients;
the potential additional safety monitoring or other studies requested by regulatory agencies;
the duration of patient follow-up;
the timing and receipt of regulatory approvals;
the potential impact of the recent COVID-19 pandemic;
the efficacy and safety profile of the product candidate; and
the cost of manufacturing.
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In addition, the probability of success for IMVT-1401 and any other product candidate will depend on numerous factors, including competition,
manufacturing capability and commercial viability.
General and Administrative Expenses
General and administrative expenses consist primarily of employee salaries and related benefits, costs allocated under the Services Agreements and stock-
based compensation for general and administrative personnel services and legal and accounting fees and consulting services relating to our formation and
corporate matters.
We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and
increased costs of operating as a public company. These increases will likely include patent costs for our product candidates and increased costs related to
the hiring of additional personnel and fees to outside consultants for professional services. Additionally, we anticipate increased costs associated with
being a public company, including expenses related to services associated with maintaining compliance with Nasdaq rules and SEC requirements,
insurance and investor relations costs. In addition, whenever IMVT-1401 obtains regulatory approval, we expect that we would incur expenses associated
with building a sales and marketing team.
Interest Expense
Interest expense consisted of interest incurred on our convertible promissory notes that were settled through conversion upon the closing of the Business
Combination.
Results of Operations
Comparison of the Years Ended March 31, 2020 and 2019
The following table sets forth our results of operations for the years ended March 31, 2020 and 2019 (in thousands):
Years Ended March 31, Change
2019
2020
$
Operating expenses:
Research and development
General and administrative
Total operating expenses
Interest expense
Other (income) expense, net
Loss before provision for income taxes
Provision for income taxes
Net loss
$ 47,927 $ 25,733 $ 22,194
15,459
18,151
37,653
66,078
625
625
(567)
(412)
(37,711)
(66,291)
78
97
$(66,388) $(28,599) $(37,789)
2,692
28,425
—
155
(28,580)
19
Research and Development Expenses
Research and development expenses increased by $22.2 million, from $25.7 million for the year ended March 31, 2019 to $47.9 million for the year ended
March 31, 2020. This increase was primarily due to $10.0 million related to the achievement of the first development and regulatory milestone under the
HanAll Agreement in May 2019. Other increases mainly include higher clinical trial costs of $7.5 million, contract manufacturing costs of $5.7 million,
and other costs of $1.3 million, all of which were driven by the advancement of our clinical trials for the treatment of autoimmune disease, as well as
higher personnel-related expenses of $2.6 million and stock-based compensation expense of $1.9 million, both of which were due to higher headcount to
support our clinical operations. The overall increase was partially offset by decreases in costs billed to us under the Services Agreements of $4.9 million,
and nonclinical studies of $1.9 million.
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General and Administrative Expenses
General and administrative expenses increased by $15.5 million, from $2.7 million for the year ended March 31, 2019 to $18.2 million for the year ended
March 31, 2020. This increase was primarily due to higher legal and professional fees of $6.4 million, driven by advisory fees incurred in relation to the
Business Combination and increased accounting and legal services to support our higher operating activities and SEC filings. Additional increases include
higher stock-based compensation expense of $3.7 million and higher personnel-related costs of $3.8 million, both of which were due to higher headcount,
and an increase in other costs of $1.6 million.
Interest Expense
Interest expense was $0.6 million for the year ended March 31, 2020 and was related to the interest accrued on our convertible promissory notes issued
during the year that were settled through conversion upon the closing of the Business Combination.
Liquidity and Capital Resources
Overview
We had cash of $100.6 million and $7.0 million as of March 31, 2020 and 2019, respectively. For the years ended March 31, 2020 and 2019, we had net
losses of $66.4 million and $28.6 million, respectively. Prior to the Business Combination, our operations were historically financed through capital
contributions from RSL or its affiliates, the issuance of equity instruments, and the issuance of notes payable.
In April 2020, we completed an underwritten public offering of 9,613,365 shares of our common stock (including 1,034,483 shares of common stock
purchased by RSL and the full exercise of the underwriters’ option to purchase 1,253,917 additional shares of common stock) at a price to the public of
$14.50 per share, for net proceeds to us of approximately $131.0 million, after deducting underwriting discounts and commissions and estimated offering
expenses.
From May 14, 2020 through June 15, 2020, an aggregate of 11,438,290 outstanding warrants were exercised for an aggregate of 5,719,145 shares of our
common stock at a price of $11.50 per share, for net proceeds to us of approximately $65.8 million.
Our cash balance as of June 29, 2020 is approximately $280.4 million.
We expect to continue to incur significant and increasing operating losses at least for the next several years. We have never generated any revenue and we
do not expect to generate product revenue unless and until we successfully complete development and obtain regulatory approval for IMVT-1401 or any
future product candidate. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our planned
clinical trials and our expenditures on other research and development activities. We anticipate that our expenses will increase substantially as we:
•
•
•
•
•
•
•
•
•
•
fund our ongoing ASCEND-MG trial;
fund our ongoing ASCEND-GO 1 and ASCEND-GO 2 trials;
fund our ongoing ASCEND-WAIHA trial;
launch any potential Phase 2 proof-of-concept studies of IMVT-1401 in additional indications;
achieve milestones under our agreements with third parties, including the HanAll Agreement, that will require us to make substantial
payments to those parties;
seek to identify, acquire, develop and commercialize additional product candidates;
integrate acquired technologies into a comprehensive regulatory and product development strategy;
maintain, expand and protect our intellectual property portfolio;
hire scientific, clinical, quality control and administrative personnel;
add operational, financial and management information systems and personnel, including personnel to support our drug development efforts;
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•
•
•
•
commence the number of trials required for approval;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any
drug candidates for which we may obtain regulatory approval; and
operate as a public company.
Our primary use of cash is to fund our ASCEND-MG trial, our ASCEND-GO 1 trial, our ASCEND-GO 2 trial, our planned ASCEND-WAIHA trial, and
other clinical development activities. Our current funds will not be sufficient to enable us to complete all necessary development and commercially launch
IMVT-1401. We anticipate that we will continue to incur net losses for the foreseeable future.
Until such time, if ever, as we can generate substantial product revenue from sales of IMVT-1401 or any future product candidate, we expect to finance our
cash needs through a combination of equity offerings, debt financings and potential collaboration, license or development agreements. 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 resulting from the ongoing COVID-19 pandemic. We do not currently have any committed
external source of funds. 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 these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt
financing and preferred equity financing, if available, may involve agreements that include 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 be
required to relinquish valuable rights to 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 be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or 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, 2020 and 2019 (in thousands):
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
2020
Years Ended March 31,
2019
$(28,547)
(52)
35,584
$ (53,357)
(31)
146,974
Operating Activities
Cash provided by operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing
activities. Operating cash flow is derived by adjusting our net loss for non-cash items and changes in operating assets and liabilities. For the year ended
March 31, 2020, $53.4 million of cash was used in operating activities. This was primarily attributable to a net loss from operations for the year of
$66.4 million, non-cash charges of $8.2 million and a net change in operating assets and liabilities of $4.8 million. The non-cash charges consisted mainly
of stock-based compensation of $7.0 million and $1.6 million from the write-off of deferred offering costs. The change in our operating assets and
liabilities was primarily due to an increase of $7.5 million in accounts payable and accrued expenses, primarily driven by increased research and
development efforts and general and administrative activities, partially offset by an increase of $2.8 million in prepaid expenses.
For the year ended March 31, 2019, $28.5 million of cash was used in operating activities. This was primarily attributable to a net loss from operations for
the year of $28.6 million and a net change in operating assets and liabilities of $1.4 million, which were partially offset by stock-based compensation of
$1.3 million. The change in our operating assets and liabilities was due to an increase of $2.5 million in prepaid expenses and an increase of $2.9 million
in the Swiss value-added tax receivable related to the assignment of the HanAll License Agreement, partially offset by a net increase in accounts payable
and accrued expenses of $4.0 million due to a ramp up in our research and development efforts.
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Investing Activities
For the years ended March 31, 2020 and 2019, cash used in investing activities was related to the purchase of property and equipment.
Financing Activities
For the year ended March 31, 2020, $147.0 million of cash provided by financing activities consisted of $111.0 million in cash received as a result of the
Business Combination, $35.0 million in proceeds from the issuance of convertible promissory notes, $7.9 million from the issuance of promissory notes to
RSL, and $1.2 million in capital contributions by RSL, partially offset by $5.0 million in repayments of convertible promissory notes and the payment of
offering costs of $3.1 million.
For the year ended March 31, 2019, $35.6 million of cash provided by financing activities consisted of $16.1 million in capital contributions by RSL,
$14.9 million of net proceeds from the issuance of common stock and $5.1 million of investments made by RSL.
Outlook
Based on our existing cash balance as of June 29, 2020 of approximately $280.4 million, our research and development plans and our timing expectations
related to our development programs for IMVT-1401, we expect to be able to fund our operating expenses and capital expenditure requirements into the
first half of 2022. However, we have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than
we expect.
Contractual Obligations and Commitments
As of March 31, 2020, other than contingent payments pursuant to the HanAll Agreement, we did not have any ongoing material financial commitments,
such as lines of credit or guarantees, that we expect to affect our liquidity over the next several years.
In the normal course of business, we enter into agreements with CROs for clinical trials and with vendors for nonclinical studies, manufacturing and other
services and products for operating purposes, which agreements are cancelable by us at any time, subject to payment of remaining obligations under
binding purchase orders and, in certain cases, nominal early-termination fees. These commitments are not deemed significant.
We have not included potential future payments due under the HanAll Agreement in a table of contractual obligations because the payment obligations
under this agreement are contingent upon future events. As of March 31, 2020, the aggregate maximum amount of milestone payments we could be
required to make under the HanAll Agreement is $442.5 million upon the achievement of certain development, regulatory and sales milestone events. In
May 2019, we achieved our first development and regulatory milestone under the HanAll Agreement resulting in a $10.0 million milestone payment that
was paid by us in August 2019. We are also required to reimburse HanAll for half of budgeted research and development costs incurred by HanAll with
respect to IMVT-1401, up to an aggregate of $20.0 million.
Our office leases are short-term in nature and cancelable at any time. Subsequent to March 31, 2020, we entered into two sublease agreements with RSI for
office space expiring in 2024. For more information on such subleases, see “Note 12 — Subsequent Events” to our combined and consolidated financial
statements.
Off-Balance Sheet Arrangements
During the periods presented, we did not have any off-balance sheet arrangements, as defined under SEC rules.
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 combined and consolidated financial
statements, which have been prepared in accordance with U.S. GAAP. The preparation of these combined and consolidated financial statements requires
us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as
of the date of the balance sheet, and the reported amounts of expenses during the reporting period. 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.
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Our combined and consolidated financial statements are derived by carving out the historical results of operations and historical cost basis of the assets and
liabilities associated with product candidate IMVT-1401, that have been contributed to us by RSL, from RSL’s financial statements. Because the transfer
of assets and liabilities in our formation on July 6, 2018 was between entities under the common control of RSL and/or its wholly owned subsidiaries, our
combined and consolidated financial statements have been presented as if we had been a separate business when RSG acquired IMVT-1401 on
December 19, 2017, and accordingly, the assets, liabilities and expenses relating to our operations have been separated from RSL in the combined and
consolidated financial statements for periods prior to and after our formation through March 31, 2020.
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 more fully described in “Note 2 — Summary of Significant Accounting Policies” to our
combined and consolidated financial statements included elsewhere in this Annual Report, we believe the following are the critical accounting policies
used in the preparation of our combined and consolidated financial statements that require significant estimates and judgments.
Stock-Based Compensation
We recognize stock-based compensation expense related to stock options based on the estimated fair value of the awards on the date of grant. We estimate
the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option pricing model. The grant date fair value of
the stock-based awards with graded vesting is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of
the respective awards. We account for forfeitures as they occur. The Black-Scholes option pricing model requires the use of highly subjective assumptions,
which determine the fair value of stock-based awards. These assumptions include:
Expected Term. The expected term represents the period that our stock-based awards are expected to be outstanding and is determined using the
simplified method (based on the mid-point between the vesting date and the end of the contractual term).
Expected Volatility. Prior to the Business Combination, we were a privately-held company and did not have any trading history for our common stock.
The expected volatility was estimated using weighted average measures of implied volatility and the historical volatility of our peer group of
companies for a period equal to the expected life of the stock options. Our peer group of publicly-traded biopharmaceutical companies was chosen
based on their similar size, stage in the life cycle or area of specialty. 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 interest rate is based on the rates paid on securities issued by the U.S. Treasury with a term approximating the
expected life of the stock options.
Expected Dividend. We have never paid, and do not anticipate paying, cash dividends on our common stock. Therefore, the expected dividend yield
was assumed to be zero.
Prior to the closing of the Business Combination, the fair value of our common stock was estimated on each grant date by our board of directors. In order
to determine the fair value of our common stock, our board of directors considered, among other things, timely valuations of our common stock 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. Given the absence of a public trading market for our common
stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of
the fair value of our common stock, including (1) our business, financial condition and results of operations, including related industry trends affecting our
operations; (2) our forecasted operating performance and projected future cash flows; (3) the illiquid nature of our common stock; (4) the rights and
privileges of our common stock; (5) market multiples of our most comparable public peers and (6) market conditions affecting our industry.
After the closing of the Business Combination, our board of directors determined the fair value of each share of common stock underlying stock-based
awards based on the closing price of our common stock as reported by Nasdaq on the date of grant.
A component of total stock-based compensation expense relates to the RSL common stock awards and options issued by RSL to its employees. Stock-
based compensation expense is allocated to us by RSL based upon the relative percentage of time utilized by RSL employees on our matters. The fair value
of the RSL common stock awards is determined on the date of grant and that fair value is recognized over the requisite service period. Significant
judgment and estimates were used to estimate the fair value of these awards and options, as they are not publicly traded. RSL common share awards and
options are subject to specified vesting schedules and requirements (a combination of time-based, performance-based and corporate event-based vesting
terms, including targets for post-IPO market capitalization and future financing events of RSL). The fair value of each RSL option is estimated on the date
of grant using the Black-Scholes option pricing model.
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Research and Development Expense
Research and development costs with no alternative future use are expensed as incurred. Clinical trial costs are accrued over the service periods specified
in the contracts and are adjusted as necessary based on an ongoing review of the level of effort and costs actually incurred. Payments for a product license
prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period
incurred as research and development. Research and development costs are charged to expense when incurred and primarily consist of employee
compensation, allocated costs from RSL and expenses from third parties who conduct research and development activities on our behalf.
Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes. Under the assets and liability method of ASC 740, 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. Under ASC 740, 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.
We account for uncertain tax positions in accordance with the provisions of ASC 740. 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. As of March 31, 2020, we
did not have any significant uncertain tax positions.
Jumpstart Our Business Startups Act
In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an emerging growth company can take advantage of an extended
transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain
accounting standards until those standards would otherwise apply to private companies. We have irrevocably 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.
Recent Accounting Pronouncements
For information with respect to recently issued accounting standards and the impact of these standards on our combined and consolidated financial
statements, refer to “Note 2 — Summary of Significant Accounting Policies” in our combined and consolidated financial statements in Part II, Item 8 of
this Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Under SEC rules and regulations, because we are considered to be a “smaller reporting company”, we are not required to provide the information required
by this item in this report.
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Item 8. Financial Statements and Supplementary Data
Immunovant, Inc.
Index to Combined and Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Combined and Consolidated Financial Statements:
Combined and Consolidated Balance Sheets as of March 31, 2020 and 2019
Combined and Consolidated Statements of Operations for the Years Ended March 31, 2020 and 2019
Combined and Consolidated Statements of Comprehensive Loss for the Years Ended March 31, 2020 and 2019
Combined and Consolidated Statements of Stockholders’ Equity for the Years Ended March 31, 2020 and 2019
Combined and Consolidated Statements of Cash Flows for the Years Ended March 31, 2020 and 2019
Notes to Combined and Consolidated Financial Statements
100
Page
101
102
103
104
105
106
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Immunovant, Inc.
Opinion on the Financial Statements
We have audited the accompanying combined and consolidated balance sheets of Immunovant, Inc. (the Company) as of March 31, 2020 and 2019, the
related combined and consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the two years in the
period ended March 31, 2020, and the related notes (collectively referred to as the “combined and consolidated financial statements”). In our opinion, the
combined and consolidated financial statements present fairly, in all material respects, the financial position of the Company at March 31, 2020 and 2019,
and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2020, in conformity with U.S. generally
accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2018.
Iselin, New Jersey
June 29, 2020
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IMMUNOVANT, INC.
Combined and Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
Current assets:
Cash
Prepaid expenses
Income tax receivable
Value-added tax receivable
Total current assets
Property and equipment, net
Deferred offering costs
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Due to Roivant Sciences Ltd.
Total liabilities
Commitments and contingencies (Note 11)
Stockholders’ equity:(1)
Series A preferred stock, par value $0.0001 per share, 10,000 shares authorized, issued and outstanding at March 31, 2020 and
no shares authorized at March 31, 2019
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding at March 31,
2020 and no shares authorized at March 31, 2019
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 56,455,376 shares issued and 54,655,376 shares
outstanding at March 31, 2020 and 489,066,238 shares authorized, 38,590,381 shares issued and outstanding at March 31,
2019
Common stock subscribed
Additional paid-in capital
Accumulated other comprehensive (loss) income
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
(1)
Retroactively restated for the reverse recapitalization as described in Note 1.
The accompanying notes are an integral part of these combined and consolidated financial statements.
102
March 31,
2020
2019
5,460
36
3,009
$100,571 $ 6,985
2,632
49
2,913
109,076 12,579
54
65
246
1,195
$109,387 $ 13,828
1,190 $
$
10,938
3,190
15,318
206
6,225
58
6,489
— —
— —
4
5
—
(3)
185,306 31,830
(16)
346
(91,226) (24,838)
7,339
94,069
$109,387 $ 13,828
Table of Contents
IMMUNOVANT, INC.
Combined and Consolidated Statements of Operations
(In thousands, except share and per share data)
Operating expenses:
Research and development (includes $3,130 and $1,193 of stock-based compensation expense for the years
ended March 31, 2020 and 2019, respectively)(1)
General and administrative (includes $3,833 and $115 of stock-based compensation expense for the years
ended March 31, 2020 and 2019, respectively)(2)
Total operating expenses
Interest expense
Other (income) expense, net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per common share — basic and diluted(3)
Weighted average shares outstanding — basic and diluted(3)
Years Ended March 31,
2020
2019
$
47,927
$
25,733
18,151
66,078
625
(412)
(66,291)
97
(66,388)
(1.54)
$
$
2,692
28,425
—
155
(28,580)
19
(28,599)
(1.29)
$
$
43,199,191
22,170,862
(1)
(2)
(3)
Includes $159 and $3,582 of costs allocated from Roivant Sciences Ltd. for the years ended March 31, 2020 and 2019, respectively.
Includes $1,381 and $1,180 of costs allocated from Roivant Sciences Ltd. for the years ended March 31, 2020 and 2019, respectively.
Retroactively restated for the reverse recapitalization as described in Note 1.
The accompanying notes are an integral part of these combined and consolidated financial statements.
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IMMUNOVANT, INC.
Combined and Consolidated Statements of Comprehensive Loss
(In thousands)
Net loss
Other comprehensive (loss) income:
Foreign currency translation adjustments
Total other comprehensive (loss) income
Comprehensive loss
The accompanying notes are an integral part of these combined and consolidated financial statements.
104
Years Ended
March 31,
2020
2019
$(66,388) $(28,599)
(362)
(362)
185
185
$(66,750) $(28,414)
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IMMUNOVANT, INC.
Combined and Consolidated Statements of Stockholders’ Equity(1)
(In thousands, except share data)
Series A
preferred stock
Common stock
Balance at March 31, 2018
Net transfers from parent(2)
Foreign currency translation
Shares Amount
— $ —
— —
Shares
Common
stock
subscribed
— $ — $ — $ — $
—
— —
Additional
paid-in
capital
Amount
—
Net parent
investment(2)
(1,658) $
5,419
adjustments
— —
Net loss
— —
Common stock subscription — — 4,890,662 —
— —
— —
—
—
—
—
—
—
—
(4,368)
—
Balance at July 6, 2018 (date of
formation)
Common stock subscription — — 31,789,305
Issuance of common stock,
— $ — 4,890,662 $ — $ — $ — $
—
(3)
3
(607) $
—
Accumulated
other
comprehensive
(loss)
income
Accumulated
deficit
Total
stockholders’
equity
161 $
—
35
—
—
196 $
—
— $
—
(1,497)
5,419
—
—
—
— $
—
35
(4,368)
—
(411)
—
net
— — 1,910,414
1
— 14,746
—
—
—
14,747
Transfer to accumulated
deficit
Cash contribution
Capital contribution – stock-
based compensation
Capital contribution –
expenses allocated from
Roivant Sciences Ltd.
Stock-based compensation
Foreign currency translation
adjustments
Net loss
Balance at March 31, 2019
Settlement of common stock
— —
— —
— —
— —
—
—
— 13,901
607
—
—
—
(607)
—
—
13,901
— —
— —
—
922
—
—
—
922
— —
— —
— —
—
—
—
2,230
31
— —
— —
— $ — 38,590,381 $
— —
— —
4 $
—
—
—
—
(3) $ 31,830 $
—
—
—
—
— $
—
—
—
—
2,230
31
150
—
346 $
—
(24,231)
(24,838) $
150
(24,231)
7,339
subscription
— —
— —
3
(2)
—
—
—
1
Issuance of preferred and
common stock, net of
deferred offering costs
upon Business
Combination and
Recapitalization (See
Note 3)
Conversion of convertible
10,000 — 12,565,000
1
— 109,771
—
—
—
109,772
promissory notes
— — 3,499,995 —
— 35,587
—
—
—
35,587
Capital contribution – stock-
based compensation
Capital contribution –
expenses allocated from
Roivant Sciences Ltd.
Stock-based compensation
Foreign currency translation
adjustments
Net loss
Balance at March 31, 2020
— —
— —
—
175
—
—
—
175
— —
— —
— —
— —
—
—
1,157
6,788
— —
— —
10,000 $ — 54,655,376 $
— —
— —
—
—
—
—
5 $ — $ 185,306 $
—
—
—
—
— $
—
—
—
—
1,157
6,788
(362)
—
(16) $
—
(66,388)
(91,226) $
(362)
(66,388)
94,069
(1)
(2)
Retroactively restated for reverse recapitalization as described in Note 1.
Prior to formation of the Company, Roivant Sciences Ltd. was the Company’s parent with 100% ownership interest (See Note 2[A]).
The accompanying notes are an integral part of these combined and consolidated financial statements.
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IMMUNOVANT, INC.
Combined and Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation
Depreciation on property and equipment
Foreign currency translation adjustments
Loss on disposal of property and equipment
Gain on extinguishment of convertible notes
Write-off of deferred offering costs
Changes in operating assets and liabilities:
Prepaid expenses
Income tax receivable
Value-added tax receivable
Accounts payable
Accrued expenses
Due to Roivant Sciences Ltd.
Net cash used in operating activities
Cash flows from investing activities
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Capital contributions
Net parent investment
Proceeds from issuance of common stock
Payment of offering costs
Proceeds from notes payable to Roivant Sciences Ltd.
Repayment of convertible promissory note payable to Roivant Sciences Ltd.
Proceeds from convertible promissory notes
Repayment of convertible promissory notes
Settlement of common stock subscribed
Recapitalization transaction (See Note 3)
Net cash provided by financing activities
Net change in cash
Cash – beginning of period
Cash – end of period
Non-cash investing activities
Payable for purchase of property and equipment
Non-cash financing activities
Reclassification of net parent investment to accumulated deficit
Conversion of convertible promissory notes to common stock
Common stock issuance costs in accrued expenses
Deferred offering costs in accrued expenses
Cancelation of interest on convertible promissory notes recorded in equity
Supplemental disclosure of cash paid:
Income taxes
The accompanying notes are an integral part of these combined and consolidated financial statements.
106
Years Ended March 31,
2020
2019
$ (66,388) $(28,599)
6,963
21
(362)
1,308
10
185
13 —
(38) —
1,628 —
(2,824)
13
(96)
967
6,502
244
(2,519)
(49)
(2,913)
(928)
4,912
46
(53,357) (28,547)
(31)
(31)
(52)
(52)
1,157 16,131
—
5,064
— 14,910
(3,107)
(521)
7,907 —
(2,500) —
35,000 —
(2,500) —
1 —
111,016 —
146,974 35,584
6,985
93,586
6,985 —
$100,571 $ 6,985
$
9 $
13
$ — $
607
$ 35,000 $ —
$ — $
246 $
165
674
587 $ —
61 $
68
$
$
$
Table of Contents
IMMUNOVANT, INC.
Notes to Combined and Consolidated Financial Statements
Note 1 — Organization and Nature of Business
[A] Description of Business
Immunovant, Inc. together with its wholly owned subsidiaries (the “Company” or “Immunovant”) (formerly known as Health Sciences Acquisitions
Corporation) is a clinical-stage biopharmaceutical company focused on enabling normal lives for patients with autoimmune diseases. The Company is
developing a novel, fully human monoclonal antibody, IMVT-1401 (formerly referred to as RVT-1401), that selectively binds to and inhibits the neonatal
fragment crystallizable receptor (FcRn). The Company intends to develop IMVT-1401 for indications in which there is robust evidence that pathogenic
immunoglobulin G antibodies drive disease manifestation and for which reduction of these antibodies should lead to clinical benefit for patients with
autoimmune diseases.
The Company has determined that it has one operating and reporting segment.
Reverse Recapitalization
On December 18, 2019, Health Sciences Acquisitions Corporation (“HSAC”) completed the acquisition of Immunovant Sciences Ltd. (“ISL”) pursuant to
the share exchange agreement dated as of September 29, 2019 (the “Share Exchange Agreement”), by and among HSAC, ISL, the stockholders of ISL (the
“Sellers”), and Roivant Sciences Ltd. (“RSL”), as representative of the Sellers (the “Business Combination”). As of immediately prior to the closing of the
Business Combination, the Sellers owned 100% of the issued and outstanding common shares of ISL (“ISL Shares”). At the closing of the Business
Combination, HSAC acquired 100% of the issued and outstanding ISL Shares, in exchange for 42,080,376 shares of HSAC’s common stock issued to the
Sellers and 10,000 shares of HSAC Series A preferred stock issued to RSL (the “Business Combination”). Upon the closing of the Business Combination,
ISL became a wholly owned subsidiary of HSAC and HSAC was renamed “Immunovant, Inc.”
The Business Combination was accounted for as a reverse recapitalization and HSAC was treated as the “acquired” company for accounting purposes. The
Business Combination was accounted as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a recapitalization. Accordingly,
all historical financial information presented in these combined and consolidated financial statements represents the accounts of ISL and its wholly owned
subsidiaries “as if” ISL is the predecessor to the Company. The shares and net loss per common share, prior to the Business Combination, have been
retroactively restated as shares reflecting the exchange ratio established in the Business Combination (0.48906624 Immunovant, Inc. shares for 1 ISL
Share).
ISL was founded on July 6, 2018 as a Bermuda exempted limited company and a wholly owned subsidiary of RSL. In July and August 2018, ISL
incorporated its wholly owned subsidiaries, Immunovant Sciences Holdings Ltd. (“ISHL”), a private limited company incorporated in the United
Kingdom under the laws of England and Wales, IMVT Corporation (formerly, Immunovant, Inc.), a Delaware corporation based in the United States of
America, and Immunovant Sciences GmbH (“ISG”), a limited liability company formed under the laws of Switzerland. ISG holds all of the Company’s
intellectual property rights. HSAC was incorporated in Delaware on December 6, 2018 and was formed as a blank check company for the purpose of
effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more
businesses. References herein to “date of formation” or “date of inception” refer to the founding of ISL.
Prior to the closing of the Business Combination, HSAC common stock, units and warrants were traded on The Nasdaq Capital Market (“Nasdaq”) under
the ticker symbols “HSAC,” “HSACU” and “HSACW,” respectively. On December 19, 2019, the Company’s common stock, units and warrants began
trading on Nasdaq under the ticker symbols “IMVT”, “IMVTU” and “IMVTW,” respectively. One of the primary purposes of the Business Combination
was to provide a platform for ISL to gain access to the U.S. capital markets. See Note 3 – Business Combination and Recapitalization for additional details
on the Business Combination.
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[B] Liquidity
The Company has incurred significant losses and negative cash flows from operations since its inception. As of March 31, 2020, the Company’s cash
totaled $100.6 million and its accumulated deficit was $91.2 million.
Prior to the Business Combination, ISL’s operations were financed through capital contributions from RSL or RSL’s wholly owned subsidiaries, Roivant
Sciences Inc. (“RSI”) and Roivant Sciences GmbH (“RSG”), the issuance of equity instruments, and the issuance of promissory notes. The Company has
not generated any revenues to date and does not anticipate generating any revenues unless and until it successfully completes development and obtains
regulatory approval for IMVT-1401 or any future product candidate. Management expects to incur additional losses in the future to fund its operations and
conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.
The Company intends to raise such additional capital through the issuance of equity securities, debt financings or other sources in order to further
implement its business plan. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and
may be required to delay the development of its product candidates. Based on anticipated spend and timing of expenditure assumptions, the Company
currently expects that its existing cash as of March 31, 2020 together with funds raised in April 2020 and proceeds from warrants redemption as detailed in
Note 12 – Subsequent Events, will be sufficient to fund its operating expenses and capital expenditure requirements into the first half of 2022 from the date
the combined and consolidated financial statements are issued.
Note 2 — Summary of Significant Accounting Policies
[A] Basis of Presentation
The Company’s fiscal year ends on March 31, and its first three fiscal quarters end on June 30, September 30, and December 31. The accompanying
combined and consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of
America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting
Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Prior to July 6, 2018 (date of formation), the Company’s financial statements were derived by carving out the historical results of operations and historical
cost basis of the assets and liabilities associated with product candidate IMVT-1401, that have been contributed to the Company by RSL, from RSL’s
financial statements. Because the transfer of assets and liabilities in the formation of the Company were between entities under the common control of
RSL and/or its wholly owned subsidiaries, the financial statements of the Company have been presented as if the Company had been a separate business
since the acquisition of IMVT-1401 by RSG on December 19, 2017. Prior to July 6, 2018 (date of formation), the Company’s financial statements include
reasonable allocations for assets and liabilities and expenses attributable to the Company’s operations. Beginning on July 6, 2018 (date of formation), the
combined and consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company has no
unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The Company believes that the assumptions underlying the allocations of expenses as well as assets and liabilities in financial information are reasonable,
however, the financial position, results of operations and cash flows may have been materially different if the Company had operated as a stand-alone
entity prior to July 6, 2018 (date of formation).
The Company has calculated its income tax amounts using a separate return methodology and it has presented these amounts as if it were a separate
taxpayer from RSL.
In April 2012, the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) was enacted. Section 107(b) of the JOBS Act provides that an emerging
growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth
company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has
irrevocably elected not to avail itself of this extended transition period, and, as a result, the Company will adopt new or revised accounting standards on the
relevant dates on which adoption of such standards is required for other public companies.
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All share and per-share data reported in the combined and consolidated financial statements herein have been retrospectively restated to reflect the effect
of the Business Combination (as discussed in Note 3).
[B] Use of Estimates
The preparation of combined and consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the amounts reported in the combined and consolidated financial statements and accompanying notes. The Company regularly
evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, research and development costs and income taxes. The
Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results could differ from those estimates.
Additionally, the Company assessed the impact of COVID-19 pandemic has had on its operations and financial results as of March 31, 2020 and through
the issuance of this report. The Company’s analysis was informed by the facts and circumstances as they were known to the Company. This assessment
considered the impact COVID-19 may have on financial estimates and assumptions that affect the reported amounts of assets and liabilities and expenses.
[C] Risks and Uncertainties
The Company is subject to risks common to early stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to
commercialization of products, regulatory approvals, dependence on key products, third-party service providers such as contract research organizations,
protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply
agreements.
[D] Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk include cash. At March 31, 2020, the cash balance is kept in one
banking institution that the Company believes is of high credit quality and is in excess of federally insured levels. The Company maintains its cash with an
accredited financial institution and accordingly, such funds are subject to minimal credit risk. The Company has not experienced any losses on its cash.
[E] Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. At
March 31, 2020, cash consisted of cash held at a financial institution. There were no cash equivalents as of March 31, 2020 and 2019.
[F] Property and Equipment
Property and equipment, consisting of computers, is recorded at cost. Maintenance and repairs that do not improve or extend the lives of the respective
assets are expensed to operations as incurred. Depreciation is recorded using the straight-line method over the estimated useful life of three years. Upon
disposal, retirement or sale, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the
combined and consolidated statements of operations.
[G] Impairment of Long-lived Assets
The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate
that the carrying amount of a long-lived asset might not be recoverable. Recoverability is measured by comparison of the book values of the assets to
future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discounted future net cash
flows arising from the assets.
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[H] Contingencies
The Company, from time to time, may be a party to various disputes and claims arising from normal business activities. The Company continually
assesses litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. The
Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of
such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the
Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the
facts and circumstances of the litigation, including an estimable range, if possible.
[I] Research and Development Expense
Research and development costs with no alternative future use are expensed as incurred. Payments for a product license prior to regulatory approval of the
product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and
development. Milestone payments made in connection with regulatory approvals are capitalized and amortized to cost of product sales over the remaining
useful life of the asset. Research and development expenses primarily consist of employee-related costs and expenses from third parties who conduct
research and development activities on behalf of the Company. The estimated costs of research and development activities conducted by third-party service
providers, which primarily include the conduct of clinical trials and contract manufacturing activities, are accrued over the service periods specified in the
contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. The estimate of the work completed is
developed through discussions with internal personnel and external services providers as to the progress toward completion of the services and the agreed-
upon fee to be paid for such services. As actual costs become known, the accrued estimates are adjusted. Such estimates are not expected to be materially
different from amounts actually incurred, however the Company’s understanding of the status and timing of services performed, the number of subjects
enrolled, and the rate of subject enrollment may vary from estimates and could result in reporting amounts that are higher or lower than incurred in any
particular period. The estimate of accrued research and development expense is dependent, in part, upon the receipt of timely and accurate reporting from
clinical research organizations and other third-party service providers.
[J] Leases
In accordance with ASC 842, Leases, as adopted by the Company on April 1, 2019, the Company determines if an arrangement is a lease at inception.
Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities
represent the Company’s obligation to make lease payments arising from the lease.
Operating lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease
term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily
determinable. Operating lease ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives
received. The Company determines the lease term as the non-cancelable period of the lease and may include options to extend or terminate the lease when
it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the combined and
consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company accounts for lease and non-lease components as a single lease component for all its facilities leases.
The Company’s leases are short-term in nature and cancelable at any time. Subsequent to March 31, 2020, the Company entered into two sublease
agreements with RSI for office space expiring in 2024. For more information on such subleases, see Note 12 — Subsequent Events.
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[K] Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined on the
basis of the differences between amounts in the combined and consolidated financial statements and the tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is
recognized in income tax expense (benefit) in the accompanying combined and consolidated statements of operations in the period that includes the
enactment date.
The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. In making such a
determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences,
projected future taxable income, tax-planning strategies and results of recent operations. If the Company determines that it would be able to realize its
deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation
allowance, which would reduce the provision for income taxes.
When uncertain tax positions exist, the Company recognizes 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. The Company’s policy is to recognize interest and/or penalties related to income tax matters in
provision for income taxes.
[L] Stock-based Compensation
Stock-based awards to employees and directors are valued at fair value on the date of the grant and that fair value is recognized as stock-based
compensation expense over the requisite service period. The grant date fair value of the stock-based awards with graded vesting is recognized on a
straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. The Company values its stock options
that only have service vesting requirements or performance-based awards without market conditions using the Black-Scholes option pricing model. For
performance-based awards with market conditions, the Company determines the fair value of awards as of the grant date using a Monte Carlo simulation
model.
Certain assumptions need to be made with respect to utilizing the Black-Scholes option pricing model, including the expected life of the award, volatility of
the underlying shares, the risk-free interest rate, expected dividend yield and the fair value of the Company’s common stock. Since the Company has no
option exercise history, it has generally elected to estimate the expected life of an award based upon the “simplified method” with the continued use of this
method extended until such time the Company has sufficient exercise history. The expected share price volatility for the Company’s common stock is
estimated by taking the average historical price volatility for industry peers. The risk-free interest rate is based on the rates paid on securities issued by the
U.S. Treasury with a term approximating the expected life of the equity award. As the Company has never paid and does not anticipate paying cash
dividends on its common stock, the expected dividend yield is assumed to be zero. The Company accounts for pre-vesting award forfeitures when they
occur.
As part of the valuation of stock-based compensation under the Black-Scholes option pricing model, it is necessary for the Company to estimate the fair
value of its common stock. Prior to the closing of the Business Combination, the fair value of the Company’s common stock was estimated on each grant
date by the Company’s board of directors. Given the absence of a public trading market, and in accordance with the American Institute of Certified Public
Accountants’ Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, the Company exercised reasonable
judgment and considered numerous objective and subjective factors to determine its best estimate of the fair value of its common stock. The estimation of
the fair value of the common stock considered factors including the following: the estimated present value of the Company’s future cash flows; the
Company’s business, financial condition and results of operations; the Company’s forecasted operating performance; the illiquid nature of the Company’s
common stock; industry information such as market size and growth; market capitalization of comparable companies and the estimated value of
transactions such companies have engaged in; and macroeconomic conditions.
After the closing of the Business Combination, the Company’s board of directors determined the fair value of each share of common stock underlying
stock-based awards based on the closing price of the Company’s common stock as reported by Nasdaq on the date of grant.
Determining the appropriate amount to expense for performance-based awards based on the achievement of stated goals requires judgment. The estimate
of expense is revised periodically based on the probability of achieving the required performance targets and adjustments are made as appropriate. The
cumulative impact of any revisions is reflected in the period of change. If any applicable financial performance goals are not met, no compensation
expense is recognized, and any previously recognized compensation cost is reversed.
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[M] Fair Value of Financial Instruments
The Company applies a fair value framework in order to measure and disclose its financial assets and liabilities. Fair value is defined as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable
inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to
measure fair value:
•
•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term
of the assets or liabilities. Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or
other market observable inputs such as interest rates and yield curves.
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or
liabilities.
To the extent the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires
more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in
Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement.
The Company’s financial instruments consist of cash, accounts payable, accrued expenses and amounts due to Roivant Sciences Ltd. These financial
instruments are stated at their respective historical carrying amounts, which approximates fair value due to their short-term nature.
[N] Foreign Currency
The Company has operations in the United States, the United Kingdom, Bermuda, and Switzerland. The results of its non-U.S. dollar based functional
currency operations are translated to U.S. dollars at the average exchange rates during the period. The Company’s assets and liabilities are translated using
the current exchange rate as of the combined and consolidated balance sheet date and equity is translated using historical rates. Adjustments resulting from
the translation of the combined and consolidated financial statements of the Company’s foreign functional currency subsidiaries into U.S. dollars are
excluded from the determination of net loss and are recognized in accumulated other comprehensive (loss) income. Foreign exchange transaction gains and
losses are included in other income (expense), net in the combined and consolidated statements of operations.
[O] Net Loss per Common Share
Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted-average number of common stock
outstanding during the period. Diluted net loss per common share is computed by dividing the net loss applicable to common stockholders by the diluted
weighted-average number of common stock outstanding during the period. In periods in which the Company reports a net loss, all common stock
equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equivalent. Potentially dilutive
common stocks have been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-
dilutive effect on net loss per common share due to the Company’s net loss. There are no reconciling items used to calculate the weighted-average number
of total common stock outstanding for basic and diluted net loss per common share data.
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The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:
Preferred stock as converted
Restricted stock (unvested) (See Note 3)
Options
Warrants (See Note 9)
Earnout shares (See Note 3)
Total
Years Ended March 31,
2019
2020
10,000 —
1,800,000 —
3,873,888 189,269
5,750,000 —
20,000,000 —
31,433,888 189,269
The Company was formed on July 6, 2018 and basic and diluted net loss per common share was calculated assuming the shares issued at formation were
outstanding for the period prior to incorporation adjusted for subsequent share issuances during the period.
[P] Deferred Offering Costs
Legal, accounting and other costs directly attributable to the issuance of the Company’s equity are capitalized within deferred offering costs on the
combined and consolidated balance sheets and reclassified to equity upon issuance of the shares. Offering costs comprised of legal, and accounting fees
and other costs incurred through June 30, 2019 were directly related to ISL’s proposed initial public offering (“IPO”). In August 2019, ISL’s board of
directors determined to suspend ISL’s IPO registration process. Accordingly, the Company has written off deferred offering costs previously capitalized to
general and administrative expense within the accompanying combined and consolidated statements of operations for the year ended March 31, 2020.
[Q] Common Stock Warrants
The Company accounts for the issuance of common stock warrants based on the terms of the contract and whether there are any requirements for the
Company to net cash settle the contract under any terms or conditions. Warrants for the purchase of 5,750,000 shares of common stock were issued by
HSAC as part of the units sold in its IPO in May 2019. Each unit was comprised of one share of common stock and a warrant to purchase one half of one
share of common stock upon the consummation of a business combination by HSAC. None of the terms of the warrants were modified as a result of the
Business Combination.
[R] Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU No. 2016-02”), a comprehensive new lease standard that amends
various aspects of existing accounting guidance for leases. The core principle of ASU No. 2016-02 requires lessees to present the assets and liabilities that
arise from leases on their consolidated balance sheets. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and interim
periods within fiscal years beginning after December 15, 2018, with early adoption permitted. The Company has adopted this ASU as of April 1, 2019.
The Company elected the optional transition method to apply the standard as of the effective date and therefore will not apply the standard to the
comparative periods presented in the combined and consolidated financial statements. The Company elected the transition package of three practical
expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification,
and initial direct costs. The Company did not elect the hindsight practical expedient, which permits the use of hindsight when determining lease term and
impairment of right-of-use assets. Further, the Company elected a short-term lease exception policy to not apply the recognition requirements of this
standard to short-term leases with terms of 12 months or less and an accounting policy to account for lease and non-lease components as a single
component for certain classes of assets. As all of the Company’s leases are short-term in nature and the Company has elected to not apply the recognition
requirements of the standard to such leases, there was no impact on the Company’s combined and consolidated financial statements and related disclosures
from the adoption of the standard.
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In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting (“ASU No. 2018-07”). ASU No. 2018-07 simplifies the accounting for share-based payments to nonemployees by aligning it with the
accounting for share-based payments to employees, with certain exceptions. ASU No. 2018-07 is effective for interim and annual reporting periods
beginning after December 15, 2018 and early adoption is permitted. The Company has adopted this ASU as of April 1, 2019, with no impact on the
Company’s condensed combined and consolidated financial statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes (“ASU No. 2019-12”). The
new guidance eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes
in interim periods. It also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for taxable goodwill and allocating
taxes to members of a consolidated group. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2020. Early adoption is permitted. The Company early adopted ASU 2019-12 as of January 1, 2020. The adoption did not have an impact
on the Company’s combined and consolidated financial position, results of operations, or cash flows.
[S] Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments (“ASU No. 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.
ASU No. 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information
to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt
securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. ASU No. 2016-13 is
effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including
adoption in any interim period. The Company is currently evaluating the new standard and expects it to have no material impact on the Company’s
combined and consolidated financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure
Requirements for Fair Value Measurement (“ASU No. 2018-13”). ASU No. 2018-13 removes, modifies, and adds certain recurring and nonrecurring fair
value measurement disclosures, including removing disclosures around the amount(s) of and reasons for transfers between Level 1 and Level 2 of the fair
value hierarchy, the policy for timing of transfers between levels, and the valuation process for Level 3 fair value measurements, among other things. ASU
No. 2018-13 adds disclosure requirements around changes in unrealized gains and losses included in other comprehensive income for recurring Level 3
fair value measurements held at the end of the reporting period, the range and weighted average of significant unobservable inputs used to develop Level 3
fair value measurements, and a narrative description of measurement uncertainty. The amendments in ASU No. 2018-13 are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the new
standard and its impact on the combined and consolidated financial statements.
Other recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification), the American Institute
of Certified Public Accountants, and the Securities and Exchange Commission (“SEC”) did not, or are not expected to, have a material impact on the
Company’s combined and consolidated financial statements and related disclosures.
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Note 3 — Business Combination and Recapitalization
As discussed in Note 1, on December 18, 2019, HSAC completed the acquisition of ISL and acquired 100% of the ISL Shares in exchange for 42,080,376
shares of HSAC common stock issued to the Sellers and 10,000 shares of HSAC Series A preferred stock issued to RSL. The Business Combination was
accounted for as a reverse recapitalization whereby HSAC was treated as the “acquired” company for accounting purposes. This determination was
primarily based on the fact that subsequent to the Business Combination, the Sellers have a majority of the voting power of the combined company, ISL
will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the combined company, and ISL’s senior
management will comprise all of the senior management of the combined company. The Business Combination was accounted as the equivalent of ISL
issuing stock for the net assets of HSAC, accompanied by a recapitalization. The net assets of HSAC were stated at historical cost with no goodwill or
other intangible assets recorded. Reported amounts from operations included herein prior to the Business Combination are those of ISL. The shares,
options and net loss per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as
shares reflecting the exchange ratio established in the Business Combination (0.48906624 Immunovant, Inc. shares for 1 ISL Share).
The aggregate value of the consideration paid by HSAC in the Business Combination was $420.9 million, consisting of 42,080,376 shares of HSAC’s
common stock and 10,000 shares of HSAC’s Series A preferred stock, in each case, valued at $10.00 per share (the deemed value of the shares issued
pursuant to the Share Exchange Agreement). The closing price per share on the date of the closing of the Business Combination on December 18, 2019
was $13.88. As the Business Combination was accounted for as a reverse recapitalization, the $10.00 per share value is disclosed for informational
purposes only in order to indicate the fair value of shares transferred. In addition, pursuant to the Share Exchange Agreement, all vested or unvested
outstanding options to purchase common shares of ISL under its 2018 Equity Incentive Plan were automatically assumed by the Company and converted
into options to purchase 4,408,287 shares of the Company’s common stock with no changes to the terms of the awards.
In connection with the Business Combination and Recapitalization, the Company incurred direct and incremental costs of $2.8 million, consisting of legal,
accounting, financial advisory and other professional fees, which are included in additional paid-in capital in the combined and consolidated balance sheets
as of March 31, 2020. The Company incurred additional financial advisory fees related to the Business Combination of $2.3 million that have been
included in general and administrative expense within the accompanying combined and consolidated statements of operations for the year ended March 31,
2020.
Immediately after giving effect to the Business Combination, there were 56,455,376 shares of common stock issued, 54,655,376 shares of common stock
outstanding, 10,000 shares of Series A preferred stock and 11,500,000 warrants to purchase 5,750,000 shares of common stock issued and outstanding.
Earnout Shares
The Sellers are entitled to receive up to an additional 20,000,000 shares of the Company’s common stock (the “Earnout Shares”) if the volume-weighted
average price of the Company’s shares equals or exceeds the following prices for any 20 trading days within any 30 trading-day period (the “Trading
Period”) following December 18, 2019, the date of the closing of the Business Combination:
(i)
(ii)
during any Trading Period prior to March 31, 2023, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of
at least $17.50 per share; and
during any Trading Period prior to March 31, 2025, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of
at least $31.50 per share (each of (i) and (ii) are a “Milestone”).
If prior to March 31, 2025, (i) there is a change of control of the Company, (ii) any liquidation, dissolution or winding up of the Company is initiated,
(iii) any bankruptcy, dissolution or liquidation proceeding is instituted by or against the Company, or (iv) the Company makes an assignment for the
benefit of creditors or consents to the appointment of a custodian, receiver or trustee for all or substantial part of its assets or properties (each, an
“Acceleration Event”), then any Earnout Shares that have not been previously issued by the Company (whether or not previously earned) shall be deemed
earned and due by the Company to the Sellers, unless in a change of control, the value of the consideration to be received in exchange for a share of the
Company’s common stock is lower than the share price thresholds described above.
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The Earnout Shares are indexed to the company’s equity and meet the criteria for equity classification. On May 12, 2020, the Company issued 10,000,000
shares of common stock to former stockholders of ISL, (including 8,773,969 shares of common stock issued to RSL) on achievement of first milestone
earnout. See Note 12 – Subsequent Events for details related to first earnout milestone.
Sponsor Restricted Stock Agreement
In accordance with that certain restricted stock agreement, dated September 29, 2019, by and between HSAC and Health Sciences Holdings, LLC (the
“Sponsor”), the Sponsor subjected 1,800,000 shares of its common stock based on the vesting of 900,000 shares for each milestone (“Sponsor Restricted
Shares”) to potential forfeiture in the event that the Milestones (as defined above) are not achieved. In the event of an Acceleration Event (as defined
above), all of such shares will vest and no longer be subject to forfeiture, unless in a change of control, the value of the consideration to be received in
exchange for one share of common stock is lower than the applicable Milestone share price thresholds. Any shares that have not vested on or prior to
March 31, 2025 will be forfeited by the Sponsor after such date.
For accounting purposes, the Sponsor Restricted Shares are considered issued but not outstanding as of March 31, 2020. On May 12, 2020, 900,000
shares of the Sponsor Restricted Shares vested and are no longer subject to forfeiture. See Note 12 – Subsequent Events for details related to Sponsor
Restricted Stock Agreement.
Registration Rights
In May 2019, HSAC entered into a registration rights agreement with the Sponsor, pursuant to which the Sponsor was granted certain rights relating to the
registration of securities of HSAC held by the Sponsor.
In September 2019, concurrent with the execution of the Share Exchange Agreement, HSAC, the Sponsor and the Sellers entered into an amended and
restated registration rights agreement (the “Registration Rights Agreement”), which became effective as of the closing of the Business Combination. Under
the Registration Rights Agreement, the Sponsor and the Sellers hold registration rights that obligate the Company to register for resale under the Securities
Act of 1933, as amended (the “Securities Act”) all or any portion of the Registrable Securities (as defined in the Registration Rights Agreement) held by
the Sponsor and the Sellers. Each of the Sponsor, RSL and stockholders holding a majority-in-interest of all such Registrable Securities will be entitled to
make a written demand for registration under the Securities Act of all or part of their Registrable Securities, so long as such shares are not then restricted
under certain lock-up agreements. Subject to certain exceptions, if the Company proposes to file a registration statement under the Securities Act with
respect to the Company’s securities, under the Registration Rights Agreement, the Company will give notice to the Sponsor and the Sellers as to the
proposed filing and offer such stockholders an opportunity to register the resale of such number of their Registrable Securities as they request in writing,
subject to certain exceptions. In addition, subject to certain exceptions, such stockholders will be entitled under the Registration Rights Agreement to
request in writing that the Company register the resale of any or all of their Registrable Securities on Form S-3 or any other registration statement that may
be available at such time.
The Registration Rights do not meet the definition of a registration payment arrangement as there are no terms that require the Company to transfer
consideration to the various securityholders if a registration statement is not declared effective or effectiveness is not maintained.
See Note 9 – Stockholders’ Equity for details of the Company’s capital stock prior to and subsequent to the Business Combination and Recapitalization
transaction.
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Note 4 — Material Agreements
On December 19, 2017, RSG, a wholly owned subsidiary of RSL, entered into a license agreement (the “HanAll Agreement”) with HanAll. Under the
HanAll Agreement, RSG received (1) the non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import, use and
commercialize the antibody referred to as IMVT-1401 and certain back-up and next-generation antibodies, and products containing such antibodies, in the
United States, Canada, Mexico, the European Union, the United Kingdom, Switzerland, the Middle East, North Africa and Latin America (the “Licensed
Territory”).
In exchange for this license, RSG provided or agreed to provide the following consideration:
•
•
•
•
Upfront, non-refundable payment of $30.0 million;
Up to $20.0 million in shared (50%) research, development, and out-of-pocket costs incurred by HanAll;
Up to an aggregate of $452.5 million upon the achievement of certain development, regulatory and sales milestones; and
Tiered royalties ranging from the mid-single digits to mid-teens on net product sales subject to reduction on a product-by-product and
country-by-country basis, until the later of (1) expiration of patent and regulatory exclusivity or (2) the 11th anniversary of the first
commercial sale of such product in such country.
Since the acquisition of IMVT-1401, RSL and the Company have performed all the development associated with IMVT-1401 and no amounts were
incurred by HanAll to research or develop the technology for the years ended March 31, 2020 and 2019.
On August 18, 2018, RSG entered into a sublicense agreement (the “Sublicense Agreement”) with ISG to sublicense this technology, as well as RSG’s
knowhow and patents necessary for the development, manufacture or commercialization of any compound or product that pertain to immunology. On
December 7, 2018, RSG issued a notice to terminate the Sublicense Agreement with ISG and entered into the Assignment and Assumption Agreement to
assign to ISG all the rights, title, interest, and future obligations under the HanAll Agreement from RSG, including all rights to IMVT-1401 from RSG in
the Licensed Territory, for an aggregate purchase price of $37.8 million. As a result of the assignment of IMVT-1401 by RSG to ISG, the Company
recorded a Swiss value-added tax receivable of $3.0 million and $2.9 million as of March 31, 2020 and 2019, respectively and is reflected as a capital
contribution from RSL as of March 31, 2020.
In May 2019, the Company achieved its first development and regulatory milestone under the HanAll Agreement which resulted in a $10.0 million
milestone payment that the Company subsequently paid in August 2019. The milestone payment was recorded as research and development expense in the
accompanying combined and consolidated statements of operations for the year ended March 31, 2020.
Note 5 — Accrued Expenses
Accrued expenses consist of the following (in thousands):
Research and development expenses
Legal and other professional fees
Accrued bonuses
Other expenses
Total accrued expenses
117
March 31,
2020
$ 8,332
1,231
859
516
$10,938
2019
$4,815
1,106
288
16
$6,225
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Note 6 — Related Party Transactions
In addition to the agreements discussed in Note 4, in August 2018, the Company entered into services agreement (the “Services Agreements”) with RSI
and RSG, under which RSI and RSG agreed to provide services related to development, administrative and financial activities to the Company during its
formative period. Under each Services Agreement, the Company will pay or reimburse RSI or RSG, as applicable, for any expenses it, or third parties
acting on its behalf, incurs for the Company. For any general and administrative and research and development activities performed by RSI or RSG
employees, RSI or RSG, as applicable, will charge back the employee compensation expense plus a pre-determined mark-up. RSI and RSG also provided
such services prior to the formalization of the Services Agreements, and such costs have been recognized by the Company in the period in which the
services were rendered. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative percentage of
time utilized on Company matters. All other costs will be billed back at cost. The term of the Services Agreements will continue until terminated by the
Company, RSI or RSG, as applicable, upon 90 days’ written notice. The combined and consolidated financial statements also include third-party expenses
that have been paid by RSI, RSG and RSL since the inception of the Company. Total expense, inclusive of salary, fringe benefits and stock-based
compensation, is proportionately allocated to the Company based upon the relative percentage of time utilized on the Company’s matters. For the year
ended March 31, 2020, the Company was charged $1.4 million by RSI, RSG and RSL of which $1.2 million and $0.2 million were treated as capital
contributions and amounts due to Roivant Sciences Ltd., respectively, in the accompanying combined and consolidated financial statements. For the year
ended March 31, 2019, the Company was charged $2.3 million by RSI, RSG and RSL of which $2.2 million and $0.1 million were treated as capital
contributions and amounts due to Roivant Sciences Ltd., respectively, in the accompanying combined and consolidated financial statements.
On June 11, 2019, the Company entered into an interest-free promissory note payable with RSL in the amount of $5.0 million (the “June Promissory
Note”). The June Promissory Note was due and payable at the earlier of December 12, 2019 or upon demand by RSL. Subsequently, on August 7, 2019,
the Company replaced the June Promissory Note and entered into a convertible promissory note with RSL in the amount of $5.0 million (the “RSL
Convertible Promissory Note”) under the same terms as other convertible promissory notes entered into with RTW Master Fund, Ltd. and RTW
Innovation Master Fund, Ltd. (the “RTW Entities”) (see Note 8). On September 26, 2019, $2.5 million principal amount of the RSL Convertible
Promissory Note was prepaid and the accrued interest on such principal amount was forgiven, bringing the principal balance of the RSL Convertible
Promissory Note to $2.5 million. Immediately prior to the closing of the Business Combination, the remaining $2.5 million principal balance of the RSL
Convertible Promissory note was automatically converted into an aggregate of 511,178 ISL Shares, which were then exchanged for an aggregate of
250,000 shares of the Company’s common stock upon the closing of the Business Combination. In accordance with the terms of the RSL Convertible
Promissory Note, all interest on the RSL Convertible Promissory Note was waived and canceled immediately prior to the closing of the Business
Combination and recorded in additional paid-in capital upon conversion of the underlying note.
On July 17, 2019, the Company entered into an interest-free promissory note payable with RSL in the amount of $2.9 million (the “July Promissory
Note”). The July Promissory Note has a 180-day term and is payable on demand upon the expiration of the term. The July Promissory Note along with
$0.3 million other payables due to RSL are included in amounts due to Roivant Sciences Ltd. in the accompanying combined and consolidated balance
sheets as of March 31, 2020. In May 2020, the Company paid and settled the July Promissory Note with RSL. See Note 12 – Subsequent Events for details
related to the repayment of the July Promissory Note.
RSL Information Sharing and Cooperation Agreement
In December 2018, the Company entered into an amended and restated information sharing and cooperation agreement (the “Cooperation Agreement”)
with RSL. The Cooperation Agreement, among other things: (1) obligates the Company to deliver to RSL periodic financial statements and other
information upon reasonable request and to comply with other specified financial reporting requirements; (2) requires the Company to supply certain
material information to RSL to assist it in preparing any future SEC filings; and (3) requires the Company to implement and observe certain policies and
procedures related to applicable laws and regulations. The Company has agreed to indemnify RSL and its affiliates and their respective officers,
employees and directors against all losses arising out of, due to or in connection with RSL’s status as a stockholder under the Cooperation Agreement and
the operations of or services provided by RSL or its affiliates or their respective officers, employees or directors to the Company or any of its subsidiaries,
subject to certain limitations set forth in the Cooperation Agreement. No amounts have been paid or received under this agreement; however, the Company
believes this agreement is material to its business and operations.
Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of
when RSL no longer (a) is required by U.S. GAAP to consolidate the Company’s results of operations and financial position, account for its investment in
the Company under the equity method of accounting or, by any rule of the SEC, include the Company’s separate financial statements in any filings it may
make with the SEC and (b) has the right to elect directors constituting a majority of the Company’s board of directors.
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Note 7 — Income Taxes
The loss before income taxes and the related tax provision are as follows (in thousands):
(Loss) income before income taxes
United States
Switzerland
Bermuda
United Kingdom
Other
Total loss before income taxes
Current taxes
United States – Federal
United States – State
Other
Total current tax expense
Deferred tax expense
Total provision for income taxes
Years Ended March 31,
2020
2019
$ (9,245) $ (1,035)
(27,247)
(53,413)
(405)
(3,661)
(20)
10
127
18
$(66,291) $(28,580)
$
61 $
34
2
97
—
$
7
12
—
19
—
19
97 $
A reconciliation of the provision for income taxes computed at the U.S. statutory rate (21%) for the year ended March 31, 2020 and at the Bermuda
statutory rate (0%) for the year ended March 31, 2019 to the provision for income taxes reflected in the combined and consolidated statements of
operations is as follows (in thousands):
Income tax at statutory rate
Foreign rate differential
Tax rate changes
Research and development credits
Valuation allowance
Non-deductible expense
Other
Total provision for income taxes
2020
Years Ended March 31,
2019
$ —
(3,877)
(674)
(605)
5,122
57
(4)
19
$(13,921)
4,255
—
(1,093)
9,988
951
(83)
97
$
$
The Company’s effective tax rate was (0.15)% and (0.07)% for the years ended March 31, 2020 and March 31, 2019, respectively, primarily driven by the
Company’s jurisdictional earnings by location, certain non-deductible expenditures, research and development credits, and a valuation allowance that
eliminates the Company’s global net deferred tax assets. Additionally, the Company’s effective tax rate for the year ended March 31, 2019 was favorably
impacted by an income tax rate change in Switzerland. However, this impact was entirely offset by a change in the valuation allowance.
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Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the
comparable amounts recorded for income tax purposes. Significant components of the deferred tax assets (liabilities) at March 31, 2020 and 2019 are as
follows (in thousands):
Deferred tax assets
Intangible assets
Net operating losses
Stock-based compensation
Research and development credits
Accrued bonuses
Total deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities
Depreciation
Others
Total deferred tax liabilities
Total net deferred taxes
March 31,
2020
2019
$ 6,445
9,443
1,610
1,487
187
19,172
(19,129)
43
$
$
(13)
(30)
(43)
$ —
$ 5,000
3,023
290
560
65
8,938
(8,910)
28
$
$
(11)
(17)
(28)
$ —
As of March 31, 2020, the Company has net operating loss carryforwards in the following jurisdictions: Switzerland of approximately $67.7 million,
which will expire as of March 31, 2027, the United Kingdom of approximately $1.2 million, which can be carried forward indefinitely with an annual
usage limitation, and the United States of approximately $1.9 million, which can be carried forward indefinitely with an annual usage limitation. The
Company has research and development credit carryforwards in the United States in the amount of $1.5 million which will begin to expire in the fiscal
year ending March 31, 2039.
The Company assesses the realizability of the net deferred tax assets at each balance sheet date based on available positive and negative evidence in order
to determine the amount which is more likely than not to be realized and record a valuation allowance as necessary. Due to the Company’s cumulative loss
position which provides significant negative evidence difficult to overcome, the Company has recorded a valuation allowance of $19.1 million for the year
ended March 31, 2020, and $8.9 million for the year ended March 31, 2019, representing the portion of the net deferred tax assets that is not more likely
than not to be realized. The amount of the net deferred tax assets considered realizable could be adjusted for future factors that would impact the
assessment of the objective and subjective evidence of the Company. The Company will continue to assess the realizability of net deferred tax assets at
each balance sheet date in order to determine the proper amount, if any, required for a valuation allowance.
The Company intends that undistributed earnings of its foreign subsidiaries of approximately $2.0 million are to be indefinitely reinvested. Should these
earnings be distributed in the future in the form of dividends or otherwise, the Company may be subject to withholding taxes and income taxes. As of
March 31, 2020, any unrecognized deferred tax liabilities, including any withholding taxes, on these undistributed earnings are expected to be immaterial
and have not been recorded. The Company regularly evaluates whether foreign earnings are expected to be indefinitely reinvested. This evaluation requires
judgment about the future operating and liquidity needs of the Company. Changes in economic and business conditions, foreign or U.S. tax laws, or the
Company’s financial situation could result in a change to the Company’s position.
The Company is subject to tax and files income tax returns in the United Kingdom, Switzerland, and United States federal, state, and local jurisdictions.
The Company’s March 31, 2020 and 2019 tax returns remain open for tax examinations in all applicable income tax jurisdictions. Tax audits and
examinations can involve complex issues, interpretations and judgments. The resolution of matters may span multiple years particularly if subject to
litigation or negotiation. The Company believes it has appropriately recorded its tax position using reasonable estimates and assumptions, however the
potential tax benefits may impact the combined and consolidated results of operations or cash flows in the period of resolution, settlement or when the
statutes of limitations expire. There are no uncertain tax benefits recorded as of March 31, 2020 and 2019.
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Note 8 — Convertible Notes Payable
On August 1, 2019, the Company issued two convertible promissory notes for an aggregate principal amount of $25.0 million (the “RTW Convertible
Promissory Notes”) payable to the RTW Entities, investors of the Company. The RTW Convertible Promissory Notes accrued interest at 5% per annum
and had a maturity date of March 31, 2020, the date upon which all unpaid interest and principal would have been due and payable. Prepayment of the
RTW Convertible Promissory Notes prior to the maturity date was not permitted without the consent of the note holders of at least a majority of the
outstanding principal amount of the convertible promissory notes issued by the Company. On September 26, 2019, such consent was obtained and
$2.5 million aggregate principal amount of the RTW Convertible Promissory Notes was prepaid and the accrued interest on such principal amount was
forgiven, bringing the aggregate principal balance of the RTW Convertible Promissory Notes to $22.5 million.
On September 26, 2019, the Company issued four convertible promissory notes for an aggregate principal amount of $10.0 million (the “BVF Convertible
Promissory Notes”) payable to entities affiliated with Biotechnology Value Fund, L.P. (“BVF”) under the same terms as the RTW Convertible Promissory
Notes.
The RSL Convertible Promissory Note (see Note 5), RTW Convertible Promissory Notes and BVF Convertible Promissory Notes (together, the
“Convertible Promissory Notes”) included various conversion and redemption rights upon merger, certain financing events, change in control or maturity.
Immediately prior to the closing of the Business Combination, the Convertible Promissory Notes were automatically converted into an aggregate of
7,156,495 ISL Shares, which were then exchanged for an aggregate of 3,499,995 shares of the Company’s common stock upon the closing of the Business
Combination. Accrued interest of $0.6 million on the Convertible Promissory Notes was waived and canceled immediately prior to the closing of the
Business Combination in accordance with the terms of the Convertible Promissory Notes and was recorded within additional paid-in capital on the
accompanying combined and consolidated statements of stockholders’ equity upon conversion of the underlying notes.
Note 9 — Stockholders’ Equity
Series A Preferred Stock
In connection with the closing of the Business Combination, the Company designated and issued 10,000 shares of Series A preferred stock, par value
$0.0001 per share, to RSL, all of which shares are outstanding as of March 31, 2020.
The holder(s) of the Series A preferred stock are entitled to cast the number of votes equal to the number of whole shares of common stock into which the
shares of Series A preferred stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter,
and do not have cumulative voting rights.
The holder(s) of a majority of outstanding shares of Series A preferred stock, exclusively and as a separate class, are entitled to elect: (i) four Series A
preferred directors, as long as the holder(s) of Series A preferred stock hold 50% or more of the voting power of all then-outstanding shares of capital
stock entitled to vote generally at an election of directors, (ii) three Series A preferred directors, as long as the holder(s) of Series A preferred stock hold
40% or more but less than 50% of the voting power of all then-outstanding shares of capital stock entitled to vote generally at an election of directors, and
(iii) two Series A preferred directors, as long as the holder(s) of Series A preferred stock hold 25% or more but less than 40% of the voting power of all
then-outstanding shares of capital stock entitled to vote generally at an election of directors. Any Series A preferred director so elected may be removed
without cause by, and only by, the affirmative vote of the holder(s) of Series A preferred stock given either at a special meeting of the holder(s) of Series
A preferred stock duly called for that purpose or pursuant to a written consent of the holder(s) of Series A preferred stock.
Each share of Series A preferred stock is convertible at any time at the option of the holder into one share of common stock. On any transfer of shares of
Series A preferred stock, whether or not for value, each such transferred share will automatically convert into one share of common stock, except for
certain transfers described in the amended and restated certificate of incorporation.
Each share of Series A preferred stock will automatically convert into one share of common stock at such time as the holder(s) of Series A preferred stock
hold less than 25% of the total voting power of the Company’s outstanding shares.
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The Company shall not, without the consent of the holder(s) of at least a majority of Series A preferred stock, alter or repeal any provisions of the
Company’s amended and restated certificate of incorporation or bylaws that adversely affect the powers, preferences or rights of the Series A preferred
stock.
In the event of the Company’s liquidation, dissolution, or winding up, the holder(s) of the Series A preferred stock will receive first an amount per share
equal to $0.01 and then the holders of the Series A preferred stock and the common stock will be entitled to share ratably in the assets legally available for
distribution to stockholders after the payment of or provision for all of the Company’s debts and other liabilities, subject to the rights of any blank check
preferred stock then outstanding.
Preferred Stock
In connection with the closing of the Business Combination, the Company authorized 10,010,000 shares of preferred stock par value $0.0001 per share.
The board of directors has the authority, without further action by the stockholders to issue such shares of preferred stock in one or more series, to
establish from time to time the number of shares to be included in each such series, and to fix the dividend, voting, and other rights, preferences and
privileges of the shares. Other than the 10,000 shares designated Series A preferred stock, there were no issued and outstanding shares of preferred stock
as of March 31, 2020.
Common Stock
In connection with the closing of the Business Combination, the Company authorized 500,000,000 shares of common stock, par value $0.0001 per share.
Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally
available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to
dividends. No dividends have been declared by the board of directors since the Company’s inception.
The Company has reserved the following shares of common stock for issuance:
Conversion of Series A preferred stock
Options outstanding
Options available for future option grants
Common stock warrants
Earnout shares
Total
March 31,
2020
2019
—
10,000
3,873,888
189,269
5,283,520 3,478,728
—
5,750,000
20,000,000
—
34,917,408 3,667,997
Common Stock Warrants
In May 2019, the Sponsor purchased from HSAC an aggregate of 10,000,000 warrants (the “private warrants”) at $0.50 per private warrant (for a total
purchase price of $5.0 million), with each warrant exercisable for one-half share of common stock at an exercise price of $11.50 per share simultaneously
with the closing of HSAC’s IPO in May 2019. Pursuant to the Share Exchange Agreement, all of the private warrants were canceled upon the closing of
the Business Combination. The Company did not recognize any expense on the cancelation of the private warrants.
As of March 31, 2020, 11,500,000 warrants were outstanding for the purchase one-half of one share of common stock (an aggregate of 5,750,000 shares)
at a price of $11.50 per whole share, subject to adjustment. The warrants were issued by HSAC as part of the units sold in its IPO in May 2019 and are
classified in equity. The warrants are exercisable commencing on May 14, 2020 and expire in December 2024 or earlier upon redemption or liquidation.
The warrants are redeemable, at the Company’s option, in whole and not in part, at a price of $0.01 per warrant, upon a minimum of 30 days’ prior written
notice of redemption, and if, and only if, the last sale price of the Company’s common stock equals or exceeds $16.50 per share for any 20 trading days
within a 30-trading day period ending on the third trading day prior to the date on which the Company sends a notice of redemption to the warrant holders.
The warrant holders have 30 days to exercise the warrants upon receipt of notice of redemption. See Note 3 – Business Combination and Recapitalization
for a description of the Company’s Earnout Shares and Sponsor Restricted Shares, and related impact on Stockholders’ Equity.
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From May 14, 2020 through June 15, 2020, 11,438,290 warrants were exercised for an aggregate of 5,719,145 shares of the Company’s common stock at
a price of $11.50 per share, for net proceeds of approximately $65.8 million. See Note 12 – Subsequent Events for details related to redemption of
warrants.
Note 10 — Stock-Based Compensation
2019 Equity Incentive Plan
In December 2019, in connection with the Business Combination, the Company’s stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”)
and reserved 5,500,000 shares of common stock for issuance thereunder. The 2019 Plan became effective immediately upon the closing of the Business
Combination. The number of shares of common stock reserved for issuance under the 2019 Plan will automatically increase on April 1 of each year,
beginning on April 1, 2020 and continuing through April 1, 2029, by 4.0% of the total number of shares of common stock outstanding on the last day of
the preceding month, or a lesser number of shares as may be determined by the board of directors. The maximum number of shares of common stock that
may be issued pursuant to the exercise of incentive options under the 2019 Plan is 16,500,000. The Company’s employees, directors and consultants are
eligible to receive non-qualified and incentive stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, other stock
awards, and performance awards under the plan. Generally, each option will have an exercise price equal to the fair market value of the Company’s
common stock on the date of grant and a ten-year contractual term. For grants of incentive stock options, if the grantee owns, or is deemed to own, 10% or
more of the total voting power of the Company, then the exercise price shall be 110% of the fair market value of the Company’s common stock on the date
of grant and the option will have a five-year contractual term. Options that are forfeited, canceled or have expired are available for future grants. As of
March 31, 2020, options to purchase 216,480 shares of common stock had been granted under the 2019 Plan and 5,283,520 shares remained available for
future grant.
2018 Equity Incentive Plan
In September 2018, ISL adopted its 2018 Equity Incentive Plan (the “2018 Plan”), under which 3,667,997 shares of common stock were reserved for
grant. In July 2019, the 2018 Plan was amended and restated to increase the number of shares of common stock reserved for grant to 4,768,396. As
discussed in Note 3, upon the closing of the Business Combination, the Company assumed all outstanding options, whether or not vested, under the 2018
Plan, with such options henceforth representing the right to purchase a number of shares of the Company’s common stock equal to approximately
0.48906624 multiplied by the number of shares of ISL common stock previously represented by such options. For accounting purposes, however, the
Company is deemed to have assumed the 2018 Plan. The exchange of the stock options did not result in any incremental compensation expense, since
there were no changes to the vesting terms of the awards. As of the effective date of the 2019 Plan, no further stock awards have been or will be made
under 2018 Plan. As of March 31, 2020, 3,657,408 stock options were outstanding under the 2018 Plan.
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Stock Option Activity
A summary of the stock option activity under the Company’s equity incentive plans is as follows:
Balance – March 31, 2019
Granted
Forfeited
Canceled
Balance – March 31, 2020
Exercisable – March 31, 2020
Number of
options
189,269
4,785,939
(719,051)
(382,269)
3,873,888
306,735
$
Weighted-
average
exercise
price
$
4.12
8.30
7.23
7.86
8.33
7.31
Weighted average
remaining
contractual
term (years)
9.64
Aggregate
intrinsic value
(in thousands)
707
$
9.37
9.17
28,029
2,532
$
The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of
the Company’s common stock at March 31, 2020. There were no options exercised during the year ended March 31, 2020. The options granted during the
year ended March 31, 2020 and 2019 had a weighted-average fair value of $5.54 and $2.76 per share, respectively at the grant date.
The Company estimated the fair value of each option on the date of grant using the Black-Scholes option pricing model applying the weighted-average
assumptions in the following table:
Risk-free interest rate
Expected term, in years
Expected volatility
Expected dividend yield
Years Ended March 31,
2020
0.51% – 2.25%
5.75 – 6.11
74.69% – 77.93%
— %
2019
2.38% – 2.97%
6.04 – 6.07
74.79% – 75.11%
— %
For the years ended March 31, 2020 and 2019, stock-based compensation expense under the Company’s equity incentive plans was as follows (in
thousands):
Research and development expenses
General and administrative expenses
Total stock-based compensation
Years Ended March 31,
2020
3,125
3,663
6,788
$
$
2019
29
2
31
$
$
At March 31, 2020, total unrecognized compensation expense related to non-vested stock option awards was $17.3 million and is expected to be
recognized over the remaining weighted-average service period of 3.1 years.
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Stock-based Compensation Allocated to the Company by RSL
In relation to the RSL common share awards and options issued by RSL to employees of RSL, RSI, RSG and the Company, stock-based compensation
expense of $0.2 million and $1.3 million was recorded for years ended March 31, 2020 and 2019, respectively, in the accompanying combined and
consolidated statements of operations.
The RSL common share awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period. Significant
judgment and estimates were used to estimate the fair value of these awards, as they are not publicly traded. RSL common share awards are subject to
specified vesting schedules and requirements (a mix of time-based and performance-based events). The fair value of each RSL common share award is
based on various corporate event-based considerations, including targets for RSL’s post-IPO market capitalization and future financing events. The fair
value of each RSL option on the date of grant is estimated using the Black-Scholes option-pricing model.
Stock-based compensation expense is allocated to the Company over the required service period over which these RSL common share awards and RSL
options would vest and is based upon the relative percentage of time utilized by RSL, RSI, and RSG employees on Company matters.
Note 11 — Commitments and Contingencies
In March 2020, COVID-19 disease was declared a pandemic by the World Health Organization. The COVID-19 pandemic is disrupting supply chains and
affecting production and sales across a range of industries. Currently, the Company has not suffered significant adverse consequences as a result of the
COVID-19 pandemic, but the extent of the impact of COVID-19 on the Company’s future operational and financial performance will depend on certain
developments, including the duration and spread of the outbreak, impact on employees and vendors all of which are uncertain and cannot be predicted. At
this point, the extent to which COVID-19 may impact the Company’s future financial condition or results of operations is uncertain.
As of March 31, 2020, the Company did not have any ongoing material financial commitments. The Company expects to enter into other commitments as
the business further develops. In the normal course of business, the Company enters into agreements with contract service providers to assist in the
performance of its research and development activities. Subject to required notice periods and the Company’s obligations under binding purchase orders,
the Company can elect to discontinue the work under these agreements at any time. The Company expects to enter into additional collaborative research,
contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of capital
resources.
Note 12 — Subsequent Events
The Company has evaluated subsequent events through June 29, 2020, the date these combined and consolidated financial statements were available to be
issued.
In April 2020, the Company completed an underwritten public offering of 9,613,365 shares of its common stock (including 1,034,483 shares of common
stock purchased by RSL and the full exercise of the underwriters’ option to purchase 1,253,917 additional shares of common stock) at a price to the public
of $14.50 per share, for net proceeds to the Company of approximately $131.0 million, after deducting underwriting discounts and commissions and
estimated offering expenses.
In April 2020, the Company received $2.9 million of the Swiss value-added tax receivable that is included in the combined and consolidated balance sheet
as of March 31, 2020. In May 2020, the proceeds were used to repay the July Promissory Note which is payable to RSL in the amount of $2.9 million.
On May 12, 2020, the Company achieved the first milestone earnout under the Share Exchange Agreement and, as a result, 10,000,000 shares of the
Company’s common stock were issued to former stockholders of ISL, (including 8,773,969 shares of common stock issued to RSL) pursuant to thereto. In
addition, upon the satisfaction of this condition and pursuant to the Sponsor Restricted Stock Agreement, 900,000 shares of the Sponsor Restricted Shares
vested and are no longer subject to forfeiture.
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Table of Contents
On May 14, 2020, the Company’s 11,500,000 outstanding warrants became exercisable for an aggregate of 5,750,000 shares of the Company’s common
stock at a price of $11.50 per share. From May 14, 2020 through June 15, 2020, an aggregate of 11,438,290 outstanding warrants were exercised for an
aggregate of 5,719,145 shares of the Company’s common stock at a price of $11.50 per share, for net proceeds of approximately $65.8 million.
In June 2020, the Company entered into two sublease agreements with RSI, for the two floors of the building the Company currently occupies as its
headquarters in New York. The subleases will expire on February 27, 2024 and April 29, 2024, respectively, and have scheduled rent increases each year.
The future operating lease payments under both sublease agreements is $4.3 million over a lease period of approximately four years.
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Table of Contents
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or
the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures as of March 31, 2020, the end of the period covered by this Annual Report. Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2020 at the reasonable assurance level.
Management’s Report on Internal Controls over Financial Reporting.
This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of
our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
Changes in Internal Control Over Financial Reporting.
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during the fiscal quarter ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Inherent Limitation on the Effectiveness of Internal Control.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures, or our
internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
Attestation Report of the Registered Public Accounting Firm.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial
reporting due to an exemption established by the JOBS Act for “emerging growth companies.”
Item 9B. Other Information
None.
127
Table of Contents
PART III
We intend to file a definitive proxy statement for our 2020 Annual General Meeting of Stockholders (“2020 Proxy Statement”) with the SEC, pursuant to
Regulation 14A, not later than 120 days after March 31, 2020. Accordingly, certain information required by Part III has been omitted under General
Instruction G(3) to Form 10-K. Only those sections of the 2020 Proxy Statement that specifically address the items set forth herein are incorporated by
reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item will be contained in our 2020 Proxy Statement under the captions “Information Regarding the Board of Directors
and Corporate Governance”, “Meetings of the Board and its Committees” and “Executive Officers” and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be contained in our 2020 Proxy Statement under the captions “Information Regarding the Board of Directors
and Corporate Governance”, “Executive Compensation” and “Director Compensation” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be contained in our 2020 Proxy Statement under the captions “Security Ownership of Certain Beneficial
Owners and Management” and “Equity Compensation Plans at March 31, 2020” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be contained in our 2020 Proxy Statement under the captions “Certain Relationships and Related Party
Transactions” and “Information Regarding the Board of Directors and Corporate Governance” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this item will be contained in our 2020 Proxy Statement under the caption “Ratification of Selection of Independent
Registered Public Accounting Firm” and is incorporated herein by reference.
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Table of Contents
Item 15. Exhibits, Financial Statement Schedules
(a) Documents filed as part of this report
(1) All financial statements
Information in response to this Item is included in Part II, Item 8 of this Annual Report.
PART IV
(2) Financial Statement Schedules
All financial schedules have been omitted because the required information is either presented in the consolidated financial statements filed as part of this
Annual Report or the notes thereto or is not applicable or required.
(3) Exhibits
Exhibit
Number
2.1+
Description
Share Exchange Agreement, dated September 29, 2019, by and among Immunovant
Sciences Ltd., the stockholders of Immunovant Sciences Ltd., Roivant Sciences Ltd.,
and Health Sciences Acquisitions Corporation.
Schedule/
Form
Incorporated by Reference
File No.
Exhibit
Filing Date
8-K
001-38906
2.1
October 2, 2019
3.1
3.2
4.1
4.2
4.3
10.1
10.2
Amended and Restated Certificate of Incorporation of Immunovant, Inc.
8-K 001-38906 3.1
December 20, 2019
Amended and Restated Bylaws of Immunovant, Inc.
8-K 001-38906 3.2
December 20, 2019
Specimen Warrant Certificate.
S-1/A 333-230893 4.3
April 29, 2019
Form of Warrant Agreement by and between Continental Stock Transfer & Trust
Company and Health Sciences Acquisitions Corporation.
S-1/A 333-230893 4.4
April 29, 2019
Description of Securities.
Amended and Restated Registration Rights Agreement, dated September 29, 2019, by
and among Health Sciences Acquisitions Corporation and the Investors party thereto.
8-K 001-38906 10.1
December 20, 2019
Restricted Stock Agreement, dated September 29, 2019, by and between Health
Sciences Acquisitions Corporation and Health Sciences Holdings, LLC.
8-K 001-38906 10.2
December 20, 2019
10.3†
2019 Equity Incentive Plan of Immunovant, Inc.
10.3.1†
Forms of Option Grant Notices and Option Agreements under 2019 Equity Incentive
Plan of Immunovant, Inc.
129
Table of Contents
Exhibit
Number
10.3.2†
10.4†
Description
Schedule/
Form
Incorporated by Reference
File No.
Exhibit
Filing Date
Forms of Restricted Stock Unit Grant Notices and Award Agreements under 2019
Equity Incentive Plan of Immunovant, Inc.
2018 Equity Incentive Plan of Immunovant Sciences Ltd., and forms of award
agreements thereunder.
10.5†
Form of Indemnification Agreement.
10.6^
10.7
10.8
10.9
10.10
License Agreement, dated December 19, 2017, by and between Roivant Sciences
GmbH and HanAll BioPharma Co., Ltd.
Assignment and Assumption Agreement, dated as of December 7, 2018, by and
between Immunovant Sciences GmbH and Roivant Sciences GmbH, relating to the
License Agreement by and between Roivant Sciences GmbH and HanAll
BioPharma Co., Ltd.
Services Agreement, effective as of August 20, 2018, by and between Roivant
Sciences, Inc., Immunovant Sciences GmbH, IMVT Corporation (formerly
Immunovant, Inc.) and Immunovant Sciences Ltd.
Services Agreement, effective as of August 20, 2018, by and between Roivant
Sciences GmbH and Immunovant Sciences GmbH.
Amended and Restated Information Sharing and Cooperation Agreement, effective
as of December 28, 2018, by and between Immunovant Sciences Ltd. and Roivant
Sciences Ltd.
8-K 001-38906 10.4 December 20, 2019
8-K 001-38906 10.5 December 20, 2019
8-K 001-38906 10.6 December 20, 2019
8-K 001-38906 10.7 December 20, 2019
8-K 001-38906 10.8 December 20, 2019
8-K 001-38906 10.9 December 20, 2019
8-K 001-38906 10.10 December 20, 2019
10.11†
Employment Agreement with Peter Salzmann, dated as of May 30, 2019.
8-K 001-38906 10.11 December 20, 2019
10.12†
Employment Agreement with Pamela Connealy, dated as of October 22, 2019, as
amended November 20, 2019.
8-K 001-38906 10.12 December 20, 2019
10.13†
Employment Agreement with Julia G. Butchko, dated as of October 9, 2019.
8-K 001-38906 10.13 December 20, 2019
10.14†
Employment Agreement with W. Bradford Middlekauff, dated as of April 15, 2019.
8-K 001-38906 10.14 December 20, 2019
10.15†
10.16†
Employment Agreement with Robert K. Zeldin, dated as of July 8, 2019, as
amended July 21, 2019.
Separation Agreement and General Release, dated April 7, 2020, by and between
Robert K. Zeldin and Immunovant, Inc.
16.1
Letter from WithumSmith+Brown, PC.
8-K 001-38906 10.15 December 20, 2019
S-1/A 333-235975 10.16 April 8, 2020
8-K 001-38906 16.1 December 20, 2019
130
Schedule/
Form
Incorporated by Reference
File No.
Exhibit
Filing Date
8-K
001-38906
21.1 December 20, 2019
Table of Contents
Exhibit
Number
21.1
23.1
24.1
31.1
31.2
32.1#
32.2#
List of Subsidiaries.
Description
Consent of Ernst & Young LLP, independent registered public accounting
firm.
Power of Attorney (included on signature page to this Annual Report on
Form 10-K)
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and
15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Certification of Principal Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
+
†
^
#
The annexes, schedules, and certain exhibits to the Share Exchange Agreement have been omitted pursuant to Item 601 of Regulation S-K.
Immunovant, Inc. hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the Commission upon request.
Indicates a management contract or compensatory plan, contract or arrangement.
Portions of this exhibit have been omitted as we have determined that the omitted information (i) is not material and (ii) would likely cause
competitive harm to us if publicly disclosed.
In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release Nos. 33-8238 and 34-47986, Final Rule: Management’s Reports on
Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits
32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purpose of Section 18 of the
Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act,
except to the extent that the registrant specifically incorporates it by reference.
Item 16. Form 10-K Summary
None.
131
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: June 29, 2020
IMMUNOVANT, INC.
By: /s/ Peter Salzmann
Peter Salzmann, M.D.
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Salzmann, M.D. and
Pamela Yanchik Connealy, and each one of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in their name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form
10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to
be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
132
Table of Contents
SIGNATURE
TITLE
/s/ Peter Salzmann
Peter Salzmann, M.D.
/s/ Pamela Yanchik Connealy
Pamela Yanchik Connealy
/s/ Frank M. Torti
Frank M. Torti, M.D.
/s/ Andrew Fromkin
Andrew Fromkin
/s/ Douglas Hughes
Douglas Hughes
/s/ George Migausky
George Migausky
/s/ Atul Pande
Atul Pande, M.D.
/s/ Eric Venker
Eric Venker, M.D., Pharm.D.
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
DATE
June 29, 2020
June 29, 2020
Chairperson of the Board of Directors
June 29, 2020
Director
Director
Director
Director
Director
133
June 29, 2020
June 29, 2020
June 29, 2020
June 29, 2020
June 29, 2020
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.3
The descriptions below of Immunovant, Inc.’s (“our” or “we”) common stock and provisions of our amended and restated certificate of incorporation
(“Restated Certificate”) and amended and restated bylaws (“Bylaws”) are summaries and are qualified by reference to our Restated Certificate and the
Bylaws, which are filed as exhibits to this Annual Report on Form 10-K, and by the applicable provisions of the Delaware General Corporation Law (the
“DGCL”).
General
Our authorized capital stock consists of 500,000,000 shares of common stock, par value $0.0001 per share, 10,000 shares of Series A Preferred Stock, par
value $0.0001 per share, and 10,000,000 shares of blank check preferred stock, par value $0.0001 per share.
Common Stock
Holders of the common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of
directors, and do not have cumulative voting rights. Accordingly, the holders of a majority of the outstanding shares of common stock entitled to vote in
any election of directors can elect all of the directors standing for election, if they so choose, other than the directors that holders of Series A Preferred
Stock are entitled to elect or any directors that the holders of any undesignated preferred stock that may be issued in the future may be entitled to elect.
Subject to preferences of the Series A Preferred Stock and any preferences that may be applicable to any then outstanding blank check preferred stock,
holders of common stock are entitled to receive ratably those dividends, if any, as may be declared by the board of directors out of legally available funds.
Series A Preferred Stock
Holders of the Series A Preferred Stock are entitled to cast the number of votes equal to the number of whole shares of common stock into which the
shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter,
and do not have cumulative voting rights.
The holder(s) of a majority of outstanding shares of Series A Preferred Stock, exclusively and as a separate class, are entitled to elect: (1) four Series A
Preferred Directors, as long as the holder(s) of Series A Preferred Stock hold 50% or more of the voting power of all then-outstanding shares of capital
stock entitled to vote generally at an election of directors, (2) three Series A Preferred Directors, as long as the holder(s) of Series A Preferred Stock hold
40% or more but less than 50% of the voting power of all then-outstanding shares of capital stock entitled to vote generally at an election of directors, and
(3) two Series A Preferred Directors, as long as the holder(s) of Series A Preferred Stock hold 25% or more but less than 40% of the voting power of all
then-outstanding shares of capital stock entitled to vote generally at an election of directors. Any Series A Preferred Director so elected may be removed
without cause by, and only by, the affirmative vote of the Series A Preferred Holders, given either at a special meeting of the Series A Preferred Holders
duly called for that purpose or pursuant to a written consent of the Series A Preferred Holder(s).
Each share of Series A Preferred Stock is convertible at any time at the option of the holder into one share of common stock. On any transfer of shares of
Series A Preferred Stock, whether or not for value, each such transferred share will automatically convert into one share of common stock, except for
certain transfers described in the Restated Certificate.
Each share of Series A Preferred Stock will automatically convert into one share of common stock at such time as the holders of Series A Preferred Stock
hold less than 25% of the total voting power of our outstanding shares.
Blank Check Preferred Stock
Under the terms of the Restated Certificate, the board of directors has the authority, without further action by its stockholders, to issue up to 10,000,000
shares of preferred stock in one or more series, to establish from time to
time the number of shares to be included in each such series, to fix the dividend, voting, and other rights, preferences and privileges of the shares of each
wholly unissued series and any qualifications, limitations, or restrictions thereon, and to increase or decrease the number of shares of any such series, but
not below the number of shares of such series then outstanding.
The board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other
rights of the holders of the common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of us and may adversely affect the
market price of the common stock and the voting and other rights of the holders of common stock.
Liquidation Rights
In the event of our liquidation, dissolution, or winding up, the holders of the Series A Preferred Stock will receive first an amount per share equal to $0.01
and then the holders of the Series A Preferred stock and the common stock will be entitled to share ratably in the assets legally available for distribution to
stockholders after the payment of or provision for all of our debts and other liabilities, subject any blank check preferred stock then outstanding.
No Preemptive or Similar Rights
Holders of our Series A Preferred Stock and common stock have no preemptive or conversion rights or other subscription rights and there are no
redemption or sinking funds provisions applicable to the Series A Preferred Stock and common stock.
Registration Rights
In May 2019, Health Sciences Acquisitions Corporation (“HSAC”) entered into a registration rights agreement with Health Sciences Holdings, LLC (the
“Sponsor”), pursuant to which the Sponsor was granted certain rights relating to the registration of securities of HSAC held by the Sponsor. In September
2019, HSAC, the Sponsor and the stockholders of Immunovant Sciences Ltd. (the “Sellers”) entered into an amended and restated registration rights
agreement (the “Registration Rights Agreement”), which became effective as of the closing of our business combination with HSAC. Under the
Registration Rights Agreement, the Sponsor and the Sellers hold registration rights that obligate us to register for resale under the Securities Act of 1933,
as amended (the “Securities Act”), all or any portion of the Registrable Securities (as defined in the Registration Rights Agreement) held by the Sponsor
and the Sellers. Each of the Sponsor, Roivant Sciences Ltd. and stockholders holding a majority-in-interest of all such Registrable Securities will be
entitled to make a written demand for registration under the Securities Act of all or part of the their Registrable Securities. Subject to certain exceptions, if
we propose to file a registration statement under the Securities Act with respect to our securities, under the Registration Rights Agreement, we will give
notice to the Sponsor and the Sellers as to the proposed filing and offer such stockholders an opportunity to register the resale of such number of their
Registrable Securities as they request in writing. In addition, subject to certain exceptions, such stockholders will be entitled under the Registration Rights
Agreement to request in writing that we register the resale of any or all of their Registrable Securities on Form S-3 or any other registration statement that
may be available at such time.
Anti-Takeover Provisions
Restated Certificate and Bylaws
Among other things, our Restated Certificate and Bylaws:
•
•
•
•
authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock, the rights, preferences and privileges of which may
be designated from time to time by the our board of directors to increase the number of outstanding shares and discourage a takeover
attempt;
provide that the authorized number of directors will be fixed at no less than seven and may be changed only by resolution of our board
of directors, including the Series A Preferred Directors;
authorize the issuance of Series A Preferred Stock and the appointment of Series A Preferred Directors;
provide that directors may be removed with or without cause by the affirmative vote of the holders of at least 66 2/3% of the voting
power of all then-outstanding shares of our capital stock entitled to vote generally at an election of directors; provided that the Series
A Preferred Directors may be removed without cause only by the holder(s) of Series A Preferred Stock;
•
provide that, as long as we are a “controlled company,” as such term is defined under the rules of the exchange on which our securities
are listed, the chairperson of the board of directors will be entitled to a casting vote and be entitled to two votes on any matter or
resolution presented to the full board of directors or any committee on which he or she then serves for which a majority vote cannot be
obtained; and
•
provide that from and after such time as we are no longer a “controlled company,” as such term is defined under the rules of the
exchange on which our securities are listed:
•
•
any amendment to our Bylaws will require the approval of the holders of at least 66 2/3% of our then-outstanding shares of
capital stock entitled to vote generally at an election of directors; and
any amendment to certain provisions of our Restated Certificate will require the approval of the holders of at least 66 2/3% of
our then-outstanding shares of capital stock entitled to vote generally at an election of directors; provided that we shall not
amend any provision of our Restated Certificate in a manner that adversely affects the powers, preferences or rights of the
Series A Preferred Stock without the approval of the holder(s) of a majority of the Series A Preferred Stock.
The combination of these provisions will make it more difficult for our existing stockholders to replace our board of directors as well as for another party
to obtain control of us by replacing our board of directors. Because our board of directors has the power to retain and discharge our officers, these
provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of
undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change our control.
These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and our policies and to
discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers
and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making
tender offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may also
inhibit fluctuations in the market price of our stock.
Choice of Forum
Our Restated Certificate provides that the Court of Chancery of the State of Delaware be the exclusive forum for actions or proceedings brought under
Delaware statutory or common law: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a breach of fiduciary duty;
(3) any action asserting a claim against us arising under the Delaware General Corporation Law; (4) any action regarding our Restated Certificate or our
Bylaws; (5) any action as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; or
(6) any action asserting a claim against us that is governed by the internal affairs doctrine. This provision would not apply to claims brought to enforce a
duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our Restated
Certificate further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting
a cause of action arising under the Securities Act.
Transfer Agent
The transfer agent for our securities is Continental Stock Transfer & Trust Company. The transfer agent’s address is 1 State Street, 30th Floor, New York,
New York 10004.
Listing
Our common stock is listed on The Nasdaq Global Select Market under the trading symbol “IMVT.”
IMMUNOVANT, INC.
2019 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: DECEMBER 16, 2019
APPROVED BY THE SHAREHOLDERS: DECEMBER 16, 2019
EFFECTIVE DATE: DECEMBER 18, 2019
EXHIBIT 10.3
1. GENERAL.
(a) Eligible Award Recipients. Employees, Directors and Consultants are eligible to receive Awards.
(b) Available Awards. The Plan provides for the grant of the following types of Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock Awards,
(vii) Performance Cash Awards, and (viii) Other Stock Awards.
(c) Purpose. The Plan, through the granting of Awards, is intended to help the Company and its Affiliates secure and retain the services of
eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide a
means by which the eligible recipients may benefit from increases in value of the Common Stock.
2. ADMINISTRATION.
(a) Administration by Board. The Board will administer the Plan. The Board may delegate administration of the Plan to a Committee or
Committees, as provided in Section 2(c).
(b) Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be
granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash
or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value
applicable to an Award.
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for
administration of the Plan and Awards. The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any
Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it deems necessary or expedient to make the Plan or
Award fully effective.
1.
(iii) To settle all controversies regarding the Plan and Awards granted under it.
Stock may be issued).
(iv) To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or at which cash or shares of Common
(v) To suspend or terminate the Plan at any time. Except as otherwise provided in the Plan or an Award Agreement, suspension or
termination of the Plan will not impair a Participant’s rights under his or her then-outstanding Award without his or her written consent, except as provided
in subsection (viii) below.
(vi) To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, by adopting amendments
relating to Incentive Stock Options and certain nonqualified deferred compensation under Section 409A of the Code and/or to make the Plan or Awards
granted under the Plan compliant with the requirements for Incentive Stock Options or exempt from or compliant with the requirements for nonqualified
deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. However, if required by applicable law or
listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek shareholder approval of any
amendment of the Plan that: (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands
the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan,
(D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan,
or (F) materially expands the types of Awards available for issuance under the Plan. Except as otherwise provided in the Plan or an Award Agreement, no
amendment of the Plan will materially impair a Participant’s rights under an outstanding Award unless (1) the Company requests the consent of the
affected Participant, and (2) such Participant consents in writing.
satisfy the requirements of (A) Section 422 of the Code regarding Incentive Stock Options, or (B) Rule 16b-3.
(vii) To submit any amendment to the Plan for shareholder approval, including, but not limited to, amendments to the Plan intended to
(viii) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including,
but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any
specified limits in the Plan that are not subject to Board discretion; provided however, that a Participant’s rights under any Award will not be impaired by
any such amendment unless: (A) the Company requests the consent of the affected Participant, and (B) such Participant consents in writing.
Notwithstanding the foregoing, (1) a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole
discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights, and (2) subject to the limitations of
applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to maintain the qualified
status of the Award as an Incentive Stock Option under Section 422 of the Code; (B) to change the terms of an Incentive Stock Option, if such change
results in impairment of the Stock Award solely because it impairs the qualified status of the Stock Award as an Incentive Stock Option under Section 422
of the Code; (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code; or (D) to comply with
other applicable laws or listing requirements.
2.
interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
(ix) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best
(x) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees, Directors
or Consultants who are foreign nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial
modifications to the Plan or any Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction).
(xi) To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any
outstanding Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefor of a new (1) Option or SAR, (2) Restricted
Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash and/or (6) other valuable consideration determined by the Board, in its
sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and
(y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally
accepted accounting principles.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of
the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the
Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers
the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee, as applicable). Any
delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the
Board or Committee (as applicable). The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time,
revest in the Board some or all of the powers previously delegated.
16b-3.
(ii) Rule 16b-3 Compliance. The Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule
(d) Delegation to an Officer. The Board may delegate to one (1) or more Officers the authority to do one or both of the following:
(i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Stock Awards)
and, to the extent permitted by applicable law, the terms of such Stock Awards, and (ii) determine the number of shares of Common Stock to be subject to
such Stock Awards granted to such Employees; provided, however, that the Board resolutions regarding such delegation will specify the total number of
shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself
or herself. Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board,
unless otherwise provided in the resolutions approving the delegation authority. The Board may not delegate authority to an Officer who is acting solely in
the capacity of an Officer (and not also as a Director) to determine the Fair Market Value pursuant to clause (iii) of the definition thereof.
3.
(e) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to
review by any person and will be final, binding and conclusive on all persons.
3. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve.
(i) Subject to Section 9(a) relating to Capitalization Adjustments, and the following sentence regarding the annual increase, the
aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards will not exceed 5,500,000 shares (the “Share Reserve”). In
addition, the Share Reserve will automatically increase on April 1st of each year, for the period commencing on (and including) April 1, 2020 and ending
on (and including) April 1, 2029, in an amount equal to four percent (4%) of the total number of shares of Capital Stock outstanding on the last day of the
preceding month. Notwithstanding the foregoing, the Board may act on or prior to March 31st of a given year to provide that there will be no increase in
the Share Reserve effective on the subsequent April 1 or that the increase in the Share Reserve for such period commencing on the subsequent April 1 will
be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.
pursuant to the Plan. Accordingly, this Section 3(a) does not limit the granting of Stock Awards except as provided in Section 7(a).
(ii) For clarity, the Share Reserve in this Section 3(a) is a limitation on the number of shares of Common Stock that may be issued
(iii) Shares may be issued in connection with a merger or acquisition as permitted by Nasdaq Listing Rule 5635(c) or, if applicable,
NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the
number of shares available for issuance under the Plan.
(b) Reversion of Shares to the Share Reserve. If a Stock Award or any portion thereof (i) expires or otherwise terminates without all of the
shares covered by such Stock Award having been issued or (ii) is settled in cash (i.e., the Participant receives cash rather than stock), such expiration,
termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that may be available for issuance under the Plan. If
any shares of Common Stock issued pursuant to a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a
contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become
available for issuance under the Plan. Any shares reacquired by the Company in satisfaction of tax withholding obligations with respect to a Stock Award
or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.
4.
(c) Incentive Stock Option Limit. Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, the aggregate maximum
number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options will be 16,500,000 shares of Common Stock.
(d) Limitation on Grants to Non-Employee Directors. The maximum number of shares of Common Stock subject to Stock Awards
granted under the Plan or otherwise during any one calendar year to any Non-Employee Director, taken together with any cash fees paid by the Company
to such Non-Employee Director during such calendar year for service on the Board, will not exceed $1,000,000 in total value (calculating the value of any
such Stock Awards based on the grant date fair value of such Stock Awards for financial reporting purposes).
(e) Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including
shares repurchased by the Company on the open market or otherwise.
4. ELIGIBILITY.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of the Company or a “parent
corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code). Stock Awards other than Incentive
Stock Options may be granted to Employees, Directors and Consultants; provided, however, that Stock Awards may not be granted to Employees,
Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405, unless (i) the
stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are
granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal counsel, has determined that
such Stock Awards are otherwise exempt from Section 409A of the Code, or (iii) the Company, in consultation with its legal counsel, has determined that
such Stock Awards comply with the distribution requirements of Section 409A of the Code.
(b) Ten Percent Shareholders. A Ten Percent Shareholder will not be granted an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five
(5) years from the date of grant.
5. PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.
Each Option or SAR will be in such form and will contain such terms and conditions as the Board or its authorized delegee deems appropriate. All Options
will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. If an Option is not specifically
designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as
an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate
Options or SARs need not be identical; provided, however, that each Stock Award Agreement will conform to (through incorporation of provisions hereof
by reference in the applicable Stock Award Agreement or otherwise) the substance of each of the following provisions:
5.
(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Shareholders, no Option or SAR will be exercisable after the
expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Award Agreement.
(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Shareholders, the exercise or strike price of each Option
or SAR will be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the
Stock Award is granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Stock Award if such Stock Award is granted pursuant to an assumption of or
substitution for another option or stock appreciation right pursuant to a Transaction and in a manner consistent with the provisions of Section 409A of the
Code and, if applicable, Section 424(a) of the Code. Each SAR will be denominated in shares of Common Stock equivalents.
(c) Purchase Price for Options. The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the
extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.
The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use
certain methods) and to grant Options that require the consent of the Company to use a particular method of payment. The permitted methods of payment
are as follows:
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the
stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
6.
(iv) if an Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the
number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the
aggregate exercise price; provided, however, that the Company will accept a cash or other payment from the Participant to the extent of any remaining
balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued. Shares of Common Stock will no longer
be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant
to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding
obligations; or
Agreement.
(v) in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Stock Award
(d) Exercise and Payment of a SAR. To exercise any outstanding SAR, the Participant must provide written notice of exercise to the
Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR. The appreciation distribution payable on
the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the
SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR, and
with respect to which the Participant is exercising the SAR on such date, over (B) the aggregate strike price of the number of Common Stock equivalents
with respect to which the Participant is exercising the SAR on such date. The appreciation distribution may be paid in Common Stock, in cash, in any
combination of the two or in any other form of consideration, as determined by the Board and contained in the Stock Award Agreement evidencing such
SAR.
(e) Transferability of Options and SARs. The Board may, in its sole discretion, impose such limitations on the transferability of Options
and SARs as the Board will determine. In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability
of Options and SARs will apply:
(i) Restrictions on Transfer. An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or
pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant. The Board may permit
transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided herein, neither an
Option nor a SAR may be transferred for consideration.
(ii) Domestic Relations Orders. Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be
transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted
by Treasury Regulation 1.421-1(b)(2). If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a
result of such transfer.
7.
(iii) Beneficiary Designation. Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering
written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, upon the death of the
Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise. In
the absence of such a designation, upon the death of the Participant, the executor or administrator of the Participant’s estate will be entitled to exercise the
Option or SAR and receive the Common Stock or other consideration resulting from such exercise. However, the Company may prohibit designation of a
beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable
laws.
(f) Vesting Generally. The total number of shares of Common Stock subject to an Option or SAR may vest and become exercisable in
periodic installments that may or may not be equal. The Option or SAR may be subject to such other terms and conditions on the time or times when it
may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate. The
vesting provisions of individual Options or SARs may vary. The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the
minimum number of shares of Common Stock as to which an Option or SAR may be exercised.
(g) Termination of Continuous Service. Except as otherwise provided in the applicable Stock Award Agreement or other agreement
between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s
death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Stock Award as
of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date three (3) months following the termination
of the Participant’s Continuous Service (or such longer or shorter period specified in the applicable Stock Award Agreement), and (ii) the expiration of the
term of the Option or SAR as set forth in the Stock Award Agreement. If, after termination of Continuous Service, the Participant does not exercise his or
her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
(h) Extension of Termination Date. If the exercise of an Option or SAR following the termination of the Participant’s Continuous Service
(other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of
Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the
expiration of a total period of time (that need not be consecutive) equal to the applicable post termination exercise period, as set forth in Section 5(g), after
the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration
requirements, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Stock Award Agreement. In addition, unless otherwise
provided in a Participant’s Stock Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the
termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR
will terminate on the earlier of (i) the expiration of a period of time (that need not be consecutive) equal to the applicable post-termination exercise period,
as set forth in Section 5(g), after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon
exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as
set forth in the applicable Stock Award Agreement.
8.
(i) Disability of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the
Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or
her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but
only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination of Continuous Service (or such longer
or shorter period specified in the Stock Award Agreement), and (ii) the expiration of the term of the Option or SAR as set forth in the Stock Award
Agreement. If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the
Option or SAR (as applicable) will terminate.
(j) Death of Participant. Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the
Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the
period (if any) specified in the Stock Award Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other
than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by
the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise
the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of
death (or such longer or shorter period specified in the Stock Award Agreement), and (ii) the expiration of the term of such Option or SAR as set forth in
the Stock Award Agreement. If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR (as
applicable) will terminate.
(k) Termination for Cause. Except as explicitly provided otherwise in a Participant’s Stock Award Agreement or other individual written
agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will
terminate immediately upon such Participant’s termination of Continuous Service, and the Participant will be prohibited from exercising his or her Option
or SAR from and after the time of such termination of Continuous Service.
(l) Non-Exempt Employees. If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor
Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least six (6) months following
the date of grant of the Option or SAR (although the Stock Award may vest prior to such date). Consistent with the provisions of the Worker Economic
Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Transaction in which such Option or SAR is not assumed,
continued, or substituted, (iii) upon a Change in Control, or (iv) upon the Participant’s retirement (as such term may be defined in the
9.
Participant’s Stock Award Agreement, in another agreement between the Participant and the Company, or, if no such definition, in accordance with the
Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than six (6) months
following the date of grant. The foregoing provision is intended to operate so that any income derived by a non-exempt employee in connection with the
exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with
the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt employee in connection with the exercise, vesting or issuance
of any shares under any other Stock Award will be exempt from the employee’s regular rate of pay, the provisions of this Section 5(l) will apply to all
Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.
6. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.
(a) Restricted Stock Awards. Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as
the Board deems appropriate. To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock underlying a
Restricted Stock Award may be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock
Award lapse; or (ii) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. The terms and
conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award
Agreements need not be identical. Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in
the agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable
to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration that may be acceptable to the Board, in its
sole discretion, and permissible under applicable law.
Company in accordance with a vesting schedule to be determined by the Board.
(ii) Vesting. Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the
(iii) Termination of Participant’s Continuous Service. If a Participant’s Continuous Service terminates, the Company may receive
through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant as of the date of termination of
Continuous Service under the terms of the Restricted Stock Award Agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by
the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole
discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award
Agreement.
10.
same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
(v) Dividends. A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the
(b) Restricted Stock Unit Awards. Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and
conditions as the Board deems appropriate. The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the
terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical. Each Restricted Stock Unit Award Agreement will
conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
(i) Consideration. At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid
by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award. The consideration to be paid (if any) by the
Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be
acceptable to the Board, in its sole discretion, and permissible under applicable law.
vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
(ii) Vesting. At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the
combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
(iii) Payment. A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any
(iv) Additional Restrictions. At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose
such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to
a time after the vesting of such Restricted Stock Unit Award.
(v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock
Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the
Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same
terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
(vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the applicable Restricted Stock Unit Award
11.
(c) Performance Awards.
(i) Performance Stock Awards. A Performance Stock Award is a Stock Award that is payable or that may be granted, may vest or
may be exercised, contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need
not, require the Participant’s completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be
achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively
determined by the Board in its sole discretion. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may
determine that cash may be used in payment of Performance Stock Awards.
(ii) Performance Cash Awards. A Performance Cash Award is a cash award that is payable contingent upon the attainment during a
Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous
Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the
Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the
Board in its sole discretion. The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may
provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole
or in part in cash or other property.
(iii) Board Discretion. The Board retains the discretion to equitably adjust the compensation or economic benefit due upon attainment
of Performance Goals to take into account unforeseen circumstances (e.g., acquisitions and dispositions) and to define the manner of calculating the
Performance Criteria it selects to use for a Performance Period. Partial achievement of the specified criteria may result in the payment or vesting
corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.
(d) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock,
including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than one hundred percent (100%) of the
Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and
the preceding provisions of this Section 6. Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to
whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to
be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.
12.
7. COVENANTS OF THE COMPANY.
(a) Availability of Shares. The Company will keep available at all times the number of shares of Common Stock reasonably required to
satisfy then-outstanding Stock Awards.
(b) Securities Law Compliance. The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise or vesting of the Stock
Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act (or other applicable law) the Plan, any
Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts and at a reasonable cost, the
Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon
exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent
issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.
(c) No Obligation to Notify or Minimize Taxes. The Company will have no duty or obligation to any Participant to advise such holder as to
the time or manner of exercising such Stock Award. Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of
a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to
minimize the tax consequences of an Award to the holder of such Award.
8. MISCELLANEOUS.
(a) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Stock Awards will
constitute general funds of the Company.
(b) Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any
Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records
(e.g., Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms (e.g., exercise price, vesting schedule
or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the papering of
the Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect
term in the Award Agreement or related grant documents.
(c) Shareholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to an Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of
Common Stock under, the Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to the Award has been entered into the books
and records of the Company.
13.
(d) No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or
in connection with any Stock Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state or foreign jurisdiction in which the Company or the Affiliate is domiciled or incorporated, as the case may be.
(e) Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services
for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee
has a change in status from a full-time Employee to a part-time Employee) after the date of grant of any Award to the Participant, the Board has the right
in its sole discretion to (x) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled
to vest or become payable after the date of such change in time commitment, and (y) in lieu of or in combination with such a reduction, extend the vesting
or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the
Award that is so reduced or extended.
(f) Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the
Company and any Affiliates) exceeds one hundred thousand dollars ($100,000) (or such other limit established in the Code) or otherwise does not comply
with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were
granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the
applicable Option Agreement(s).
(g) Investment Assurances. The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any
Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and
that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Award; and (ii) to give
written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given
pursuant to such requirements, will be inoperative if (A) the issuance of the shares upon the exercise or acquisition of Common Stock under the Award has
been registered under a then currently effective registration statement under the Securities Act, or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company
may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in
order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
14.
(h) Withholding Obligations. Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any
federal, state or local tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the
Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the
Participant in connection with the Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the maximum amount
of tax required to be withheld by law (or such lesser amount as may be necessary to avoid classification of the Award as a liability for financial accounting
purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; or
(v) by such other method as may be set forth in the Award Agreement.
(i) Electronic Delivery. Any reference herein to a “written” agreement or document will include any agreement or document delivered
electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium
controlled by the Company to which the Participant has access).
(j) Deferrals. To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock
or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Stock Award may be deferred and may establish programs and
procedures for deferral elections to be made by Participants. Deferrals by Participants will be made in accordance with Section 409A of the Code.
Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services
to the Company. The Board is authorized to make deferrals of Stock Awards and determine when, and in what annual percentages, Participants may
receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and
conditions consistent with the provisions of the Plan and in accordance with applicable law.
(k) Compliance with Section 409A of the Code. Unless otherwise expressly provided for in an Award Agreement, the Plan and Award
Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from
Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Award granted
hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement evidencing such Award will incorporate the
terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on
terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to the contrary in
this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant
holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the
Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code without regard
to alternative definitions thereunder) will be issued or paid before the date that is six (6) months following the date of such Participant’s “separation from
service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of
the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on
the original schedule.
15.
(l) Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the
Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are
listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may
impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but
not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of an event
constituting Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or
“constructive termination” (or similar term) under any agreement with the Company or an Affiliate.
9. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the
class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities that may be
issued pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c) and, (iii) the class(es) and number of securities and price per share of
stock subject to outstanding Stock Awards. The Board will make such adjustments, and its determination will be final, binding and conclusive.
(b) Dissolution. Except as otherwise provided in the Stock Award Agreement, in the event of a Dissolution of the Company, all outstanding
Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the
Company’s right of repurchase) will terminate immediately prior to the completion of such Dissolution, and the shares of Common Stock subject to the
Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the
holder of such Stock Award is providing Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock
Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the Dissolution is completed but contingent on its completion.
16.
(c) Transactions. The following provisions will apply to Stock Awards in the event of a Transaction unless otherwise provided in the Stock
Award Agreement or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the
Board at the time of grant of a Stock Award. In the event of a Transaction, then, notwithstanding any other provision of the Plan, the Board may take one
or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Transaction:
(i) arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to
assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same
consideration paid to the shareholders of the Company pursuant to the Transaction);
pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
(ii) arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued
(iii) accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be
exercised) to a date prior to the effective time of such Transaction as the Board determines (or, if the Board does not determine such a date, to the date that
is five (5) days prior to the effective date of the Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective
time of the Transaction; provided, however, that the Board may require Participants to complete and deliver to the Company a notice of exercise before the
effective date of a Transaction, which exercise is contingent upon the effectiveness of such Transaction;
Award;
(iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock
Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, determines is appropriate; and
(v) cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the
(vi) make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the
Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Transaction, over (B) any exercise
price payable by such holder in connection with such exercise. For clarity, this payment may be zero ($0) if the value of the property is equal to or less
than the exercise price. Payments under this provision may be delayed to the same extent that payment of consideration to the holders of the Company’s
Common Stock in connection with the Transaction is delayed as a result of escrows, earn outs, holdbacks or any other contingencies.
The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may
take different actions with respect to the vested and unvested portions of a Stock Award.
17.
(d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in
Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the
Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.
10. PLAN TERM; EARLIER TERMINATION OR SUSPENSION OF THE PLAN.
The Board may suspend or terminate the Plan at any time. No Incentive Stock Option will be granted after the tenth (10th) anniversary of the
earlier of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the shareholders of the Company. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
11. EXISTENCE OF THE PLAN. The Plan will take effect concurrently with the closing of the share exchange pursuant to that certain Share
Exchange Agreement (the “Share Exchange Agreement”), dated September 29, 2019, between and among the Company, Immunovant Sciences Ltd., a
Bermuda exempted limited company, and the shareholders named therein (the “Effective Date”).
12. CHOICE OF LAW.
The laws of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without
regard to that state’s conflict of law rules.
13. DEFINITIONS. As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405. The
Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(b) “Award” means a Stock Award or a Performance Cash Award.
(c) “Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of an
Award.
(d) “Board” means the Board of Directors of the Company.
(e) “Capital Stock” means each and every class of common stock of the Company, regardless of the number of votes per share.
(f) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to
the Plan or subject to any Stock Award after the Effective Date without the receipt of consideration by the Company through merger, consolidation,
reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split,
reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or any similar equity restructuring
transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor
thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
18.
(g) “Cause” will have the meaning ascribed to such term in any written agreement between the Participant and the Company defining such
term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) such
Participant’s willful and continued failure substantially to perform his or her duties and responsibilities to the Company or deliberate violation of a
Company policy; (ii) such Participant’s commission of any (a) act of fraud, embezzlement, dishonesty or any other willful misconduct or gross negligence
that has caused or is reasonably expected to result in material injury to the Company or (b) any felony; (iii) unauthorized use or disclosure by such
Participant of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure
as a result of his or her relationship with the Company; or (iv) such Participant’s willful breach of any of his or her obligations under any written
agreement or covenant with the Company. The determination that a termination of the Participant’s Continuous Service is either for Cause or without
Cause will be made by the Company, in its sole discretion. Any determination by the Company that the Continuous Service of a Participant was terminated
with or without Cause for the purposes of outstanding Stock Awards held by such Participant will have no effect upon any determination of the rights or
obligations of the Company or such Participant for any other purpose.
(h) “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the
following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar
transaction. Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the
Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain
financing for the Company through the issuance of equity securities; (C) on account of the future acquisition of securities of the Company by an Effective
Date Majority Owner (as defined herein); or (D) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds
the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company
reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the
acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting
securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by
the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
19.
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar transaction with another entity (the “Surviving Entity”), the shareholders of
the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent
(50%) of the combined outstanding voting power of the Surviving Entity or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the Surviving Entity, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the
Company immediately prior to such transaction; provided, however, that a merger, consolidation or similar transaction will not constitute a Change in
Control under prong (A) or (B) herein, if either (a) the outstanding voting securities representing more than fifty percent (50%) of the combined voting
power of the Surviving Entity or the parent of the Surviving Entity are owned, directly or indirectly, by an Effective Date Majority Owner or (B) the right
to appoint directors entitled to cast a majority of the votes on each matter presented to the board of directors of the Surviving Entity or the parent of the
Surviving Entity is held, directly or indirectly, by an Effective Date Majority Owner;
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and
its Subsidiaries to an Entity (the “Acquiring Entity”) of which more than fifty percent (50%) of the combined voting power of the voting securities are
Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; provided, however, that a sale, lease, license or other disposition of all or substantially all
of the consolidated assets of the Company and its Subsidiaries will not constitute a Change in Control under this subsection if either (a) the outstanding
voting securities representing more than fifty percent (50%) of the combined voting power of the Acquiring Entity or the parent of the Acquiring Entity are
owned, directly or indirectly, by an Effective Date Majority Owner or (B) the right to appoint directors entitled to cast a majority of the votes on each
matter presented to the board of directors of the Acquiring Entity or the parent of the Acquiring Entity is held, directly or indirectly, by an Effective Date
Majority Owner; or
(iv) individuals who, on the Effective Date, are members of the Board entitled to cast a majority of the votes on each matter presented
to the Board (the “Incumbent Board”) cease for any reason to be entitled to cast a majority of the votes on each matter presented to the Board; provided,
however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of
the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent
Board.
Notwithstanding the foregoing definition or any other provision of the Plan, (A) the term Change in Control will not include a change in the ownership of
any Effective Date Majority Owner or a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the
Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate
and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of
Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.
20.
(i) “Code” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(j) “Committee” means a committee of two (2) or more Directors to whom authority has been delegated by the Board in accordance with
Section 2(c).
(k) “Common Stock” means the common shares of the Company.
(l) “Company” means, prior to the Effective Date, Health Sciences Acquisitions Corporation, a Delaware corporation, and immediately
following the Effective Date, the combined company after giving effect to the share exchange pursuant to the Share Exchange Agreement, which company
shall be renamed Immunovant, Inc.
(m) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or
advisory services and is compensated for such services or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes
of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the
Securities Act is available to register either the offer or the sale of the Company’s securities to such person.
(n) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an
Employee, Director or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or
termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however, that if
the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s
Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an
Employee of the Company to a Consultant of the Company or an Affiliate, or to a Director will not constitute an interruption of Continuous Service.
Notwithstanding the foregoing, to the extent permitted by law, the Board or the chief executive officer of the Company or any of its Subsidiaries, as
applicable, in that party’s sole discretion, may determine (at any time, including upon the date of a grant of the applicable Award or upon the
commencement of the applicable leave of absence or the date of transfer) whether Continuous Service will be considered interrupted and when Continuous
Service will be considered terminated in the case of (i) any leave of absence approved by the Board or the chief executive officer, including sick leave,
military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors; provided, further, that a leave of
absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of
absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law. In addition,
to the extent required for exemption from or compliance with Section 409A of the Code, the determination of whether there has been a termination of
Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as
defined under Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder).
21.
(o) “Corporate Transaction” means a sale of all or substantially all of the Company’s assets, or a merger, consolidation or other capital
reorganization or business combination transaction of the Company with or into another corporation, entity or person, or the direct or indirect acquisition
(including by way of a tender or exchange offer) by any person, or persons acting as a group, of beneficial ownership or a right to acquire beneficial
ownership of shares representing a majority of the voting power of the then outstanding shares of capital stock of the Company.
(p) “Director” means a member of the Board.
(q) “Disability” means, with respect to a Participant, the inability of such Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a
continuous period of not less than twelve (12) months as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the
Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(r) “Dissolution” means when the Company, after having executed a certificate of dissolution with the State of Delaware (or other applicable
state), has completely wound up its affairs.
(s) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for
such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(t) “Entity” means a corporation, partnership, limited liability company or other entity.
(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(v) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange
Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the
Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any
Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned, directly or
indirectly, by the shareholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any
22.
natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, (A) is the Owner,
directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities or (B) has the right to appoint directors entitled to cast a majority of the votes on each matter presented to the Board (such natural
person, Entity or Group described in this prong (v), an “Effective Date Majority Owner”).
(w) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a
share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or
the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems
reliable.
the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(ii) Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then
a manner that complies with Sections 409A and 422 of the Code.
(iii) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in
(x) “Incentive Stock Option” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an
“incentive stock option” within the meaning of Section 422 of the Code.
(y) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not
receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as
a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation
S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise
considered a “non-employee director” for purposes of Rule 16b-3.
(z) “Nonstatutory Stock Option” means any option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock
Option.
the Plan.
(aa) “Officer” means a person who is an officer of the Company or an Affiliate within the meaning of Section 16 of the Exchange Act.
(bb) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to
23.
(cc) “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an
Option grant. Each Option Agreement will be subject to the terms and conditions of the Plan.
(dd) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.
(ee) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the
terms and conditions of Section 6(c).
(ff) “Other Stock Award Agreement” means a written agreement between the Company and a holder of an Other Stock Award evidencing
the terms and conditions of an Other Stock Award grant. Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.
(gg) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to
have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(hh) “Participant” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Award.
(ii) “Performance Cash Award” means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii).
(jj) “Performance Criteria” means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for
a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the
following as determined by the Board: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation;
(3) earnings before interest, taxes, depreciation and amortization; (4) earnings before interest, taxes, depreciation, amortization and legal settlements;
(5) earnings before interest, taxes, depreciation, amortization, legal settlements and other income (expense); (6) earnings before interest, taxes,
depreciation, amortization, legal settlements, other income (expense) and stock-based compensation; (7) earnings before interest, taxes, depreciation,
amortization, legal settlements, other income (expense), stock-based compensation and changes in deferred revenue; (8) total shareholder return; (9) return
on equity or average shareholders’ equity; (10) return on assets, investment, or capital employed; (11) stock price; (12) margin (including gross margin);
(13) income (before or after taxes); (14) operating income; (15) operating income after taxes; (16) pre-tax profit; (17) operating cash flow; (18) sales or
revenue targets; (19) increases in revenue or product revenue; (20) expenses and cost reduction goals; (21) improvement in or attainment of working
capital levels; (22) economic value added (or an equivalent metric); (23) market share; (24) cash flow; (25) cash flow per share; (26) share price
performance; (27) debt reduction; (28) implementation or completion of projects or processes; (29) employee retention; (30) shareholders’ equity;
(31) capital expenditures; (32) debt levels; (33) operating profit or net operating profit; (34) workforce diversity; (35) growth of net income or operating
income; (36) billings; (37) bookings; (38) initiation or completion of phases of clinical trials and/or studies by specified dates; (39) patient enrollment
rates, (40) budget management; (41) regulatory body and/or pricing approval with respect to products, studies and/or trials; (42) commercial launch of
products; (43) progress of partnered programs; (44) strategic partnerships or transactions; and (45) any other measures of performance selected by the
Board.
24.
(kk) “Performance Goals” means, for a Performance Period, the one or more goals established by the Board for the Performance Period
based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, or with respect to one or more business units, divisions,
Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of
one or more relevant indices. Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other
document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the
method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring
charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of
any statutory adjustments to corporate tax rates; (5) to exclude the dilutive effects of acquisitions or joint ventures; (6) to assume that any business divested
by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (7) to exclude
the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin off, combination or exchange of shares or other similar corporate change, or any distributions
to common shareholders other than regular cash dividends; (8) to exclude the effects of stock based compensation and the award of bonuses under the
Company’s bonus plans; (9) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under
generally accepted accounting principles; (10) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under
generally accepted accounting principles; (11) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under
generally accepted accounting principles; (12) to exclude the effect of any other unusual, non-recurring gain or loss; (13) to exclude the effects of the
timing of acceptance for review and/or approval of submissions to the Food and Drug Administration or any other regulatory body and (14) to exclude the
effects of entering into or achieving milestones involved in licensing, collaboration, or other business development transactions. In addition, the Board
retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of
calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or
vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.
(ll) “Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will
be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award. Performance Periods
may be of varying and overlapping duration, at the sole discretion of the Board.
25.
(mm) “Performance Stock Award” means a Stock Award granted under the terms and conditions of Section 6(c)(i).
(nn) “Plan” means this Immunovant, Inc. 2019 Equity Incentive Plan, as it may be amended from time to time.
(oo) “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of
Section 6(a).
(pp) “Restricted Stock Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Award
evidencing the terms and conditions of a Restricted Stock Award grant. Each Restricted Stock Award Agreement will be subject to the terms and
conditions of the Plan.
(qq) “Restricted Stock Unit Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions
of Section 6(b).
(rr) “Restricted Stock Unit Award Agreement” means a written agreement between the Company and a holder of a Restricted Stock Unit
Award evidencing the terms and conditions of a Restricted Stock Unit Award grant. Each Restricted Stock Unit Award Agreement will be subject to the
terms and conditions of the Plan.
(ss) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(tt) “Rule 405” means Rule 405 promulgated under the Securities Act.
(uu) “Securities Act” means the Securities Act of 1933, as amended.
(vv) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms
and conditions of Section 5.
(ww) “Stock Appreciation Right Agreement” means a written agreement between the Company and a holder of a Stock Appreciation Right
evidencing the terms and conditions of a Stock Appreciation Right grant. Each Stock Appreciation Right Agreement will be subject to the terms and
conditions of the Plan.
(xx) “Stock Award” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory
Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award, or any Other Stock
Award.
(yy) “Stock Award Agreement” means a written agreement between the Company and a Participant evidencing the terms and conditions of
a Stock Award grant. Each Stock Award Agreement will be subject to the terms and conditions of the Plan.
26.
(zz) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or
indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect
interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) .
(aaa) “Ten Percent Shareholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) shares
possessing more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or any Affiliate.
(bbb) “Transaction” means a Corporate Transaction or a Change in Control. To the extent required for compliance with Section 409A of
the Code, in no event will a Transaction be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the
Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulations
Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder). The Board may, in its sole discretion and without a Participant’s consent,
amend the definition of “Transaction” to conform to the definition of “Change in Control” under Section 409A of the Code, and the regulations thereunder,
to the extent required for compliance with Section 409A of the Code.
27.
IMMUNOVANT, INC.
STOCK OPTION GRANT NOTICE
(2019 EQUITY INCENTIVE PLAN)
Exhibit 10.3.1
Immunovant, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the
number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth in this notice, in
the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not
explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option Agreement. If there is
any conflict between the terms in this notice and the Plan, the terms of the Plan will control.
Optionholder:
ID:
Date of Grant:
Grant Number:
Vesting Commencement Date:
Number of Shares Subject to Option:
Exercise Price (Per Share):
Total Exercise Price:
Expiration Date:
Type of Grant:
☐ Incentive Stock Option1
☐ Nonstatutory Stock Option
Exercise Schedule:
Same as Vesting Schedule
Vesting Schedule:
[____________________________, subject to Optionholder’s Continuous Service as of each such date]
Payment:
By one or a combination of the following items (described in the Option Agreement):
☐ By cash, check, bank draft or money order payable to the Company
☐ Pursuant to a Regulation T Program if the shares are publicly traded
☐ By delivery of already-owned shares if the shares are publicly traded
☐ If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company’s consent at the time of
exercise, by a “net exercise” arrangement
Additional Terms/Acknowledgements: Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option
Agreement and the Plan. Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified,
amended or revised except as provided in the Plan. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the
Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and supersede all
prior oral and written agreements, promises and/or representations on that subject with the exception, if applicable, of (i) equity awards previously granted
and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and
(iii) any written employment or severance arrangement that would provide for vesting acceleration of this option upon the terms and conditions set forth
therein.
1
If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value
(measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.
1.
By accepting this option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an online or
electronic system established and maintained by the Company or another third party designated by the Company.
IMMUNOVANT, INC.
OPTIONHOLDER:
By:
Title:
Date:
Signature
Signature
Date:
ATTACHMENTS: Option Agreement, 2019 Equity Incentive Plan and Notice of Exercise
2.
ATTACHMENT I
OPTION AGREEMENT
IMMUNOVANT, INC.
2019 EQUITY INCENTIVE PLAN
OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option Agreement, Immunovant, Inc. (the “Company”) has granted you an
option under its 2019 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock (the “Shares”) indicated in
your Grant Notice at the exercise price indicated in your Grant Notice. The option is granted to you effective as of the date of grant set forth in the Grant
Notice (the “Date of Grant”). If there is any conflict between the terms in this Option Agreement and the Plan, the terms of the Plan will control.
Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the
Plan.
The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1. VESTING. Subject to the provisions contained herein, your option will vest as provided in your Grant Notice. Vesting will cease upon the
termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of Shares subject to your option and your exercise price per share in your Grant
Notice will be adjusted for Capitalization Adjustments.
3. EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES. If you are an Employee eligible for overtime compensation under the Fair Labor
Standards Act of 1938, as amended (that is, a “Non-Exempt Employee”), and except as otherwise provided in the Plan, you may not exercise your option
until you have completed at least six (6) months of Continuous Service measured from the Date of Grant, even if you have already been an employee for
more than six (6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion
prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your option is not assumed,
continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s
benefit plans).
4. METHOD OF PAYMENT. You must pay the full amount of the exercise price for the shares you wish to exercise. You may pay the exercise price
in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one
or more of the following:
(a) Provided that at the time of exercise the Shares are publicly traded, pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board that, prior to the issuance of Shares, results in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a “broker-
assisted exercise”, “same day sale”, or “sell to cover”.
(b) Provided that at the time of exercise the Shares are publicly traded, by delivery to the Company (either by actual delivery or attestation)
of already-owned Shares that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the
Company of your attestation of ownership of such Shares in a form approved by the Company. You may not exercise your option by delivery to the
Company of Shares if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s Common
Stock.
1.
(c) If this option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of your option by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price. You must pay any remaining balance of the aggregate exercise price not
satisfied by the “net exercise” in cash or other permitted form of payment. Shares will no longer be outstanding under your option and will not be
exercisable thereafter if those shares (i) are used to pay the exercise price pursuant to the “net exercise,” (ii) are delivered to you as a result of such
exercise, and (iii) are withheld to satisfy your tax withholding obligations.
5. WHOLE SHARES. You may exercise your option only for whole Shares.
6. SECURITIES LAW COMPLIANCE. In no event may you exercise your option unless the Shares issuable upon exercise are then registered under
the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the
registration requirements of the Securities Act. The exercise of your option also must comply with all other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and
regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
7. TERM. You may not exercise your option before the Date of Grant or after the expiration of the option’s term. The term of your option expires,
subject to the provisions of Sections 5(h) and 9(c) of the Plan, upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for Cause;
(b) three (3) months after the termination of your Continuous Service for any reason other than Cause, your Disability or your death (except
as otherwise provided in Section 7(d) below); provided, however, that if during any part of such three (3) month period your option is not exercisable solely
because of the condition set forth in the section above relating to “Securities Law Compliance,” your option will not expire until the earlier of the
Expiration Date or until it has been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service; provided
further, if during any part of such three (3) month period, the sale of any Shares received upon exercise of your option would violate the Company’s
insider trading policy, then your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of
three (3) months after the termination of your Continuous Service during which the sale of the Shares received upon exercise of your option would not be
in violation of the Company’s insider trading policy. Notwithstanding the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Continuous Service
terminates within six (6) months after the Date of Grant, and (iii) you have vested in a portion of your option at the time of your termination of Continuous
Service, your option will not expire until the earlier of (x) the later of (A) the date that is seven (7) months after the Date of Grant, and (B) the date that is
three (3) months after the termination of your Continuous Service, and (y) the Expiration Date;
(c) twelve (12) months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 7(d))
below;
2.
(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous
Service terminates for any reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the day before the tenth (10th) anniversary of the Date of Grant.
If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the
Code requires that at all times beginning on the Date of Grant and ending on the day three (3) months before the date of your option’s exercise, you must
be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of
your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if
you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise
your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its
term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by
the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or
such other person as the Company may designate, together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, (ii) the lapse of any substantial risk of forfeiture to which the Shares are subject at the time of exercise, or (iii) the disposition of Shares
acquired upon such exercise.
(c) If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the Shares issued upon exercise of your option that occurs within two (2) years after the Date of
Grant or within one (1) year after such Shares are transferred upon exercise of your option.
9. TRANSFERABILITY. Except as otherwise provided in this Section 9, your option is not transferable, except by will or by the laws of descent and
distribution, and is exercisable during your life only by you.
(a) Certain Trusts. Upon receiving written permission from the Board or its duly authorized designee, you may transfer your option to a
trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in
the trust. You and the trustee must enter into transfer and other agreements required by the Company.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you
and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a
domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2)
that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this
option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is
contained within the domestic relations order or marital settlement agreement. If this option is an Incentive Stock Option, this option may be deemed to be
a Nonstatutory Stock Option as a result of such transfer.
3.
(c) Beneficiary Designation. Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering
written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a
third party who, on your death, will thereafter be entitled to exercise this option and receive the Shares or other consideration resulting from such exercise.
In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on behalf of your
estate, the Shares or other consideration resulting from such exercise.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option will be deemed to
create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors,
officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day
sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any
sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection
with the exercise of your option.
(b) If this option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any
applicable legal conditions or restrictions, the Company may withhold from fully vested Shares otherwise issuable to you upon the exercise of your option
a number of whole Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting
purposes). Notwithstanding the filing of such election, Shares shall be withheld solely from fully vested Shares determined as of the date of exercise of
your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding
procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly,
you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate
for such Shares or release such Shares from any escrow provided for herein, if applicable, unless such obligations are satisfied.
12. TAX CONSEQUENCES. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation
programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees
or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from
Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the
Company’s Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option.
4.
13. NOTICES. Any notices provided for in your option or the Plan will be given in writing (including electronically) and will be deemed effectively
given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to
participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this
option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company.
14. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant
to the Plan. If there is any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control. In addition, your
option (and any compensation paid or shares issued under your option) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform
and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation
recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to
voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or
agreement with the Company.
15. OTHER DOCUMENTS. You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule
428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy
permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
16. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of this option will not be included as compensation, earnings, salaries, or other
similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan
otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee
benefit plans.
17. VOTING RIGHTS. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant
to this option until such shares are issued to you. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.
Nothing contained in this option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary
relationship between you and the Company or any other person.
18. SEVERABILITY. If all or any part of this Option Agreement or the Plan is declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity will not invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid. Any
5.
Section of this Option Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will
give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
19. MISCELLANEOUS.
(a) The rights and obligations of the Company under your option will be transferable to any one or more persons or entities, and all
covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company
to carry out the purposes or intent of your option.
(c) You acknowledge and agree that you have reviewed your option in its entirety, have had an opportunity to obtain the advice of counsel
prior to executing and accepting your option, and fully understand all provisions of your option.
(d) This Option Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Option Agreement will be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
This Option Agreement will be deemed to be signed by you upon the signing by you of the Grant Notice to which it is attached.
6.
* * *
ATTACHMENT II
2019 EQUITY INCENTIVE PLAN
ATTACHMENT III
NOTICE OF EXERCISE
Immunovant, Inc.
Attention: Stock Plan Administrator
NOTICE OF EXERCISE
This constitutes notice to Immunovant, Inc. (the “Company”) under my stock option that I elect to purchase the below number of shares of Common
Stock of the Company (the “Shares”) for the price set forth below.
Date of Exercise: ______________
Type of option (check one):
Stock option dated:
Number of Shares as to which option is exercised:
Certificates to be issued in name of:
Total exercise price:
Cash payment delivered herewith:
[Value of ________ Shares delivered herewith2:
[Value of ________ Shares pursuant to net exercise3:
[Regulation T Program (cashless exercise):
Incentive ☐
________
________
________
$ ________
$ ________
$ ________
$ ________
$ ________
Nonstatutory ☐
________
________
________
________
________
________]
________]
________]4
$
$
$
$
$
By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Immunovant, Inc. 2019 Equity
Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the
exercise of this option, and (iii) if this exercise relates to an Incentive Stock Option, to notify you in writing within fifteen (15) days after the date of any
disposition of any of the Shares issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one
(1) year after such Shares are issued upon exercise of this option.
Very truly yours,
2
3
4
Shares must meet the public trading requirements set forth in the option. Shares must be valued in accordance with the terms of the option being
exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied
by an executed assignment separate from certificate.
The option must be a Nonstatutory Stock Option, and the Company must have established net exercise procedures at the time of exercise, in order to
utilize this payment method.
Delete bracketed methods of payment that are not provided for in the grant notice.
IMMUNOVANT, INC.
STOCK OPTION GRANT NOTICE (NON-EMPLOYEE DIRECTOR)
(2019 EQUITY INCENTIVE PLAN)
Immunovant, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the
number of shares of the Company’s Common Stock set forth below. This option is subject to all of the terms and conditions as set forth in this notice, in
the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not
explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option Agreement. If there is
any conflict between the terms in this notice and the Plan, the terms of the Plan will control.
Optionholder:
ID:
Date of Grant:
Grant Number:
Vesting Commencement Date:
Number of Shares Subject to Option:
Exercise Price (Per Share):
Total Exercise Price:
Expiration Date:
Type of Grant:
☐ Nonstatutory Stock Option
Exercise Schedule:
Same as Vesting Schedule
Vesting Schedule:
[____________________________, subject to Optionholder’s Continuous Service as of each such date]
Payment:
By one or a combination of the following items (described in the Option Agreement):
☐ By cash, check, bank draft or money order payable to the Company
☐ Pursuant to a Regulation T Program if the shares are publicly traded
☐ By delivery of already-owned shares if the shares are publicly traded
☐ If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company’s consent at the time of
exercise, by a “net exercise” arrangement
Additional Terms/Acknowledgements: Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option
Agreement and the Plan. Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified,
amended or revised except as provided in the Plan. Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the
Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and supersede all
prior oral and written agreements, promises and/or representations on that subject with the exception, if applicable, of (i) equity awards previously granted
and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and
(iii) any written employment or severance arrangement that would provide for vesting acceleration of this option upon the terms and conditions set forth
therein.
1.
By accepting this option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an online or
electronic system established and maintained by the Company or another third party designated by the Company.
IMMUNOVANT, INC.
OPTIONHOLDER:
By:
Title:
Date:
Signature
Signature
Date:
ATTACHMENTS: Option Agreement, 2019 Equity Incentive Plan and Notice of Exercise
2.
ATTACHMENT I
OPTION AGREEMENT
IMMUNOVANT, INC.
2019 EQUITY INCENTIVE PLAN
NON-EMPLOYEE DIRECTOR OPTION AGREEMENT
(NONSTATUTORY STOCK OPTION)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option Agreement, Immunovant, Inc. (the “Company”) has granted you an
option under its 2019 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock (the “Shares”) indicated in
your Grant Notice at the exercise price indicated in your Grant Notice. The option is granted to you effective as of the date of grant set forth in the Grant
Notice (the “Date of Grant”). If there is any conflict between the terms in this Option Agreement and the Plan, the terms of the Plan will control.
Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the
Plan.
The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1. VESTING. Subject to the provisions contained herein, your option will vest as provided in your Grant Notice. Vesting will cease upon the
termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of Shares subject to your option and your exercise price per share in your Grant
Notice will be adjusted for Capitalization Adjustments.
3. EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES. If you are an Employee eligible for overtime compensation under the Fair Labor
Standards Act of 1938, as amended (that is, a “Non-Exempt Employee”), and except as otherwise provided in the Plan, you may not exercise your option
until you have completed at least six (6) months of Continuous Service measured from the Date of Grant, even if you have already been an employee for
more than six (6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion
prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your option is not assumed,
continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s
benefit plans).
4. METHOD OF PAYMENT. You must pay the full amount of the exercise price for the shares you wish to exercise. You may pay the exercise price
in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one
or more of the following:
(a) Provided that at the time of exercise the Shares are publicly traded, pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board that, prior to the issuance of Shares, results in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a “broker-
assisted exercise”, “same day sale”, or “sell to cover”.
(b) Provided that at the time of exercise the Shares are publicly traded, by delivery to the Company (either by actual delivery or attestation)
of already-owned Shares that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on
the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the
Company of your attestation of ownership of such Shares in a form approved by the Company. You may not exercise your option by delivery to the
Company of Shares if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s Common
Stock.
1.
(c) If this option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise of your option by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price. You must pay any remaining balance of the aggregate exercise price not
satisfied by the “net exercise” in cash or other permitted form of payment. Shares will no longer be outstanding under your option and will not be
exercisable thereafter if those shares (i) are used to pay the exercise price pursuant to the “net exercise,” (ii) are delivered to you as a result of such
exercise, and (iii) are withheld to satisfy your tax withholding obligations.
5. WHOLE SHARES. You may exercise your option only for whole Shares.
6. SECURITIES LAW COMPLIANCE. In no event may you exercise your option unless the Shares issuable upon exercise are then registered under
the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the
registration requirements of the Securities Act. The exercise of your option also must comply with all other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and
regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
7. TERM. You may not exercise your option before the Date of Grant or after the expiration of the option’s term. The term of your option expires,
subject to the provisions of Sections 5(h) and 9(c) of the Plan, upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for Cause;
(b) five (5) years after the termination of your Continuous Service for any reason other than Cause;
(c) twelve (12) months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 7(d)
below);
(d) eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous
Service terminates for any reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the day before the tenth (10th) anniversary of the Date of Grant.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its
term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by
the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or
such other person as the Company may designate, together with such additional documents as the Company may then require.
2.
(b) By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, (ii) the lapse of any substantial risk of forfeiture to which the Shares are subject at the time of exercise, or (iii) the disposition of Shares
acquired upon such exercise.
9. TRANSFERABILITY. Except as otherwise provided in this Section 9, your option is not transferable, except by will or by the laws of descent and
distribution, and is exercisable during your life only by you.
(a) Certain Trusts. Upon receiving written permission from the Board or its duly authorized designee, you may transfer your option to a
trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in
the trust. You and the trustee must enter into transfer and other agreements required by the Company.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you
and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a
domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2)
that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this
option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is
contained within the domestic relations order or marital settlement agreement.
(c) Beneficiary Designation. Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering
written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a
third party who, on your death, will thereafter be entitled to exercise this option and receive the Shares or other consideration resulting from such exercise.
In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on behalf of your
estate, the Shares or other consideration resulting from such exercise.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or service contract, and nothing in your option will be deemed to
create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors,
officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day
sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any
sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection
with the exercise of your option.
3.
(b) If this option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any
applicable legal conditions or restrictions, the Company may withhold from fully vested Shares otherwise issuable to you upon the exercise of your option
a number of whole Shares having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting
purposes). Notwithstanding the filing of such election, Shares shall be withheld solely from fully vested Shares determined as of the date of exercise of
your option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding
procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly,
you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate
for such Shares or release such Shares from any escrow provided for herein, if applicable, unless such obligations are satisfied.
12. TAX CONSEQUENCES. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation
programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees
or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from
Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the
Company’s Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option.
13. NOTICES. Any notices provided for in your option or the Plan will be given in writing (including electronically) and will be deemed effectively
given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to
participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this
option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and
maintained by the Company or another third party designated by the Company.
14. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant
to the Plan. If there is any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control. In addition, your
option (and any compensation paid or shares issued under your option) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform
and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation
recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to
voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any plan of or
agreement with the Company.
4.
15. OTHER DOCUMENTS. You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule
428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus. In addition, you acknowledge receipt of the Company’s policy
permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
16. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of this option will not be included as compensation, earnings, salaries, or other
similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan
otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee
benefit plans.
17. VOTING RIGHTS. You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant
to this option until such shares are issued to you. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.
Nothing contained in this option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary
relationship between you and the Company or any other person.
18. SEVERABILITY. If all or any part of this Option Agreement or the Plan is declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity will not invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid. Any
Section of this Option Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will
give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
19. MISCELLANEOUS.
(a) The rights and obligations of the Company under your option will be transferable to any one or more persons or entities, and all
covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company
to carry out the purposes or intent of your option.
(c) You acknowledge and agree that you have reviewed your option in its entirety, have had an opportunity to obtain the advice of counsel
prior to executing and accepting your option, and fully understand all provisions of your option.
(d) This Option Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Option Agreement will be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
* * *
5.
This Option Agreement will be deemed to be signed by you upon the signing by you of the Grant Notice to which it is attached.
6.
ATTACHMENT II
2019 EQUITY INCENTIVE PLAN
ATTACHMENT III
NOTICE OF EXERCISE
Immunovant, Inc.
Attention: Stock Plan Administrator
NOTICE OF EXERCISE
This constitutes notice to Immunovant, Inc. (the “Company”) under my stock option that I elect to purchase the below number of shares of Common
Stock of the Company (the “Shares”) for the price set forth below.
Date of Exercise: ______________
Type of option (check one):
Stock option dated:
Number of Shares as to which option is exercised:
Certificates to be issued in name of:
Total exercise price:
Cash payment delivered herewith:
[Value of ________ Shares delivered herewith3:
[Value of ________ Shares pursuant to net exercise2:
[Regulation T Program (cashless exercise):
Incentive ☐
________
________
________
$ ________
$ ________
$ ________
$ ________
$ ________
Nonstatutory ☐
________
________
________
________
________
________]
________]
________]1
$
$
$
$
$
By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Immunovant, Inc. 2019 Equity
Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the
exercise of this option, and (iii) if this exercise relates to an Incentive Stock Option, to notify you in writing within fifteen (15) days after the date of any
disposition of any of the Shares issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one
(1) year after such Shares are issued upon exercise of this option.
Very truly yours,
3
2
1
Shares must meet the public trading requirements set forth in the option. Shares must be valued in accordance with the terms of the option being
exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied
by an executed assignment separate from certificate.
The option must be a Nonstatutory Stock Option, and the Company must have established net exercise procedures at the time of exercise, in order to
utilize this payment method.
Delete bracketed methods of payment that are not provided for in the grant notice.
IMMUNOVANT, INC.
RESTRICTED STOCK UNIT GRANT NOTICE
(2019 EQUITY INCENTIVE PLAN)
Exhibit 10.3.2
Immunovant, Inc. (the “Company”), pursuant to its 2019 Equity Incentive Plan (the “Plan”), hereby awards to the individual whose name is set forth
below (“Participant”) a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock (“Restricted Stock Units”) set forth
below (the “Award”). The Award is subject to all of the terms and conditions as set forth in this notice of grant (this “Restricted Stock Unit Grant
Notice”), and in the Plan and the Restricted Stock Unit Award Agreement (the “Award Agreement”), both of which are attached hereto and incorporated
herein in their entirety. Capitalized terms not explicitly defined herein shall have the meanings set forth in the Plan or the Award Agreement. In the event
of any conflict between the terms in this Restricted Stock Unit Grant Notice or the Award Agreement and the Plan, the terms of the Plan shall control.
Participant:
Date of Grant:
Vesting Commencement Date:
Number of Restricted Stock Units:
Vesting Schedule:
[__________________, subject to Participant’s Continuous Service through each such vesting date.]
Issuance Schedule:
Subject to any Capitalization Adjustment, one share of Common Stock (or its cash equivalent, at the discretion of the Company)
will be issued for each Restricted Stock Unit that vests at the time set forth in Section 6 of the Award Agreement.
Additional Terms/Acknowledgements: Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the
Award Agreement and the Plan. Participant further acknowledges that as of the Date of Grant (as set forth above), this Restricted Stock Unit Grant Notice,
the Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding the acquisition of the Common
Stock pursuant to the Award specified above and supersede all prior oral and written agreements on the terms of this Award, with the exception, if
applicable, of (i) restricted stock unit awards or options previously granted and delivered to Participant, (ii) the written employment agreement, offer letter
or other written agreement entered into between the Company and Participant specifying the terms that should govern this specific Award, and (iii) any
compensation recovery policy that is adopted by the Company or is otherwise required by applicable law.
By accepting this Award, Participant acknowledges having received and read the Restricted Stock Unit Grant Notice, the Award Agreement and the Plan
and agrees to all of the terms and conditions set forth in these documents. Participant consents to receive Plan documents by electronic delivery and to
participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the
Company.
IMMUNOVANT, INC.
By:
Title:
Date:
Signature
ATTACHMENTS: Award Agreement and 2019 Equity Incentive Plan
PARTICIPANT
Date:
Signature
ATTACHMENT I
IMMUNOVANT, INC.
2019 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Award Agreement (the “Agreement”),
Immunovant, Inc. (the “Company”) has awarded you (“Participant”) a Restricted Stock Unit Award (the “Award”) pursuant to the Company’s 2019
Equity Incentive Plan (the “Plan”) for the number of Restricted Stock Units/shares indicated in the Grant Notice. Capitalized terms not explicitly defined
in this Agreement or the Grant Notice shall have the same meanings given to them in the Plan. The terms of your Award, in addition to those set forth in
the Grant Notice, are as follows.
1. GRANT OF THE AWARD. This Award represents the right to be issued on a future date one (1) share of Common Stock for each Restricted Stock
Unit that vests on the applicable vesting date(s) (subject to any adjustment under Section 3 below) as indicated in the Grant Notice. As of the Date of
Grant, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of Restricted Stock
Units/shares of Common Stock subject to the Award. Notwithstanding the foregoing, the Company reserves the right to issue you the cash equivalent of
Common Stock, in part or in full satisfaction of the delivery of Common Stock in connection with the vesting of the Restricted Stock Units, and, to the
extent applicable, references in this Agreement and the Grant Notice to Common Stock issuable in connection with your Restricted Stock Units will
include the potential issuance of its cash equivalent pursuant to such right. This Award was granted in consideration of your services to the Company.
2. VESTING. Subject to the limitations contained herein, your Award will vest, if at all, in accordance with the vesting schedule provided in the
Grant Notice. Vesting will cease upon the termination of your Continuous Service and the Restricted Stock Units credited to the Account that were not
vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such Award or
the shares of Common Stock to be issued in respect of such portion of the Award.
3. NUMBER OF SHARES. The number of Restricted Stock Units subject to your Award may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan. Any additional Restricted Stock Units, shares, cash or other property that becomes subject to the Award pursuant to
this Section 3, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and
manner of delivery as applicable to the other Restricted Stock Units and shares covered by your Award. Notwithstanding the provisions of this Section 3,
no fractional shares or rights for fractional shares of Common Stock shall be created pursuant to this Section 3. Any fraction of a share will be rounded
down to the nearest whole share.
4. SECURITIES LAW COMPLIANCE. You may not be issued any Common Stock under your Award unless the shares of Common Stock underlying
the Restricted Stock Units are either (i) then registered under the Securities Act, or (ii) the Company has determined that such issuance would be exempt
from the registration requirements of the Securities Act. Your Award must also comply with other applicable laws and regulations governing the Award,
and you shall not receive such Common Stock if the Company determines that such receipt would not be in material compliance with such laws and
regulations.
5. TRANSFER RESTRICTIONS. Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or
otherwise dispose of this Award or the shares issuable in respect of your Award, except as expressly provided in this Section 5. For example, you may not
use shares that may be issued in respect of your Restricted Stock Units as security for a loan. The restrictions on transfer set forth herein will lapse upon
delivery to you of shares in respect of your vested Restricted Stock Units.
(a) Death. Your Award is transferable by will and by the laws of descent and distribution. At your death, vesting of your Award will cease
and your executor or administrator of your estate shall be entitled to receive, on behalf of your estate, any Common Stock or other consideration that
vested but was not issued before your death.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you
and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your right to receive the distribution of
Common Stock or other consideration hereunder, pursuant to a domestic relations order, marital settlement agreement or other divorce or separation
instrument as permitted by applicable law that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss
the proposed terms of any division of this Award with the Company General Counsel prior to finalizing the domestic relations order or marital settlement
agreement to verify that you may make such transfer, and if so, to help ensure the required information is contained within the domestic relations order or
marital settlement agreement.
6. DATE OF ISSUANCE.
(a) Subject to the satisfaction of the Withholding Obligation set forth in Section 11 of this Agreement, in the event one or more Restricted
Stock Units vests, the Company shall issue to you one (1) share of Common Stock for each Restricted Stock Unit that vests (subject to any adjustment
under Section 3 above, and subject to any different provisions in the Grant Notice). Each vesting date determined by this paragraph is referred to as an
“Original Issuance Date”. The issuance of shares in respect of the Restricted Stock Units is intended to comply with Treasury Regulations
Section 1.409A-1(b)(4) and will be construed and administered in such a manner, such that issuance of shares may occur at any time through March 15 of
the year following the year in which the vesting date occurs, or such earlier date as may be required to avoid the application of taxes under Section 409A
of the Code.
(b) If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the next following business day. In
addition, if:
(i) the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in
accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of
Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that
meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1
Arrangement”)), and
(ii) either (1) a Withholding Obligation does not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to
satisfy the Withholding Obligation by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under
this Award, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 11 of this Agreement
(including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit you to pay your Withholding Obligation in cash,
then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead
be delivered on the first business day when you are not prohibited from selling shares of the Company’s Common Stock in the open public market, but in
no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the
Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulations Section 1.409A-1(b)(4), no later than the
date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are
no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulations Section 1.409A-1(d).
(c) The form of delivery (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.
7. DIVIDENDS. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that
does not result from a Capitalization Adjustment; provided, however, that this sentence will not apply with respect to any shares of Common Stock that are
delivered to you in connection with your Award after such shares have been delivered to you.
8. RESTRICTIVE LEGENDS. The shares of Common Stock issued in respect of your Award shall be endorsed with appropriate legends as
determined by the Company.
9. EXECUTION OF DOCUMENTS. You hereby acknowledge and agree that the manner selected by the Company by which you indicate your consent
to your Grant Notice is also deemed to be your execution of your Grant Notice and of this Agreement. You further agree that such manner of indicating
consent may be relied upon as your signature for establishing your execution of any documents to be executed in the future in connection with your
Award.
10. AWARD NOT A SERVICE CONTRACT.
(a) Nothing in this Agreement (including, but not limited to, the vesting of your Award or the issuance of the shares in respect of your
Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan shall: (i) confer upon you any
right to continue in the employ or service of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company
or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment
or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this
Agreement or Plan; or (iv) deprive the Company of the right to terminate you at will and without regard to any future vesting opportunity that you may
have.
(b) By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to the vesting schedule
provided in the Grant Notice may not be earned unless (in addition to any other conditions described in the Grant Notice and this Agreement) you continue
as an employee, director or consultant at the will of the Company or an Affiliate, as applicable (not through the act of being hired, being granted this
Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or otherwise restructure one or more of its businesses
or Affiliates at any time or from time to time, as it deems appropriate (a “reorganization”). You acknowledge and agree that such a reorganization could
result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under
this Agreement, including but not limited to, the termination of the right to continue vesting in the Award. You further acknowledge and agree that this
Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth herein or any covenant of good faith and fair dealing that
may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant for the term
of this Agreement, for any period, or at all, and shall not interfere in any way with the Company’s right to terminate your Continuous Service at any time,
with or without your cause or notice, or to conduct a reorganization.
11. WITHHOLDING OBLIGATION.
(a) On each vesting date, and on or before the time you receive a distribution of the shares of Common Stock in respect of your Restricted
Stock Units, and at any other time as reasonably requested by the Company in accordance with applicable tax laws, you hereby authorize any required
withholding from the Common Stock issuable to you and/or otherwise agree to make adequate provision, including in cash, for any sums required to
satisfy the federal, state, local and foreign tax withholding obligations of the Company or any Affiliate that arise in connection with your Award (the
“Withholding Obligation”).
(b) By accepting this Award, you acknowledge and agree that the Company or any Affiliate may, in its sole discretion, satisfy all or any
portion of the Withholding Obligation relating to your Restricted Stock Units by any of the following means or by a combination of such means:
(i) causing you to pay any portion of the Withholding Obligation in cash; (ii) withholding from any compensation otherwise payable to you by the
Company; (iii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award
with a Fair Market Value (measured as of the date shares of Common Stock are issued pursuant to Section 6) equal to the amount of such Withholding
Obligation; provided, however, that the number of such shares of Common Stock so withheld will not exceed the amount necessary to satisfy the
Withholding Obligation using the minimum statutory withholding rates for federal, state, local and foreign tax purposes, including payroll taxes, that are
applicable to supplemental taxable income; and provided, further, that to the extent necessary to qualify for an exemption from application of
Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Board or the
Company’s Compensation Committee; and/or (iv) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-
dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”), pursuant to this authorization and without further consent,
whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Restricted Stock Units to satisfy the Withholding
Obligation and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Obligation directly to the
Company and/or its Affiliates. Unless the Withholding Obligation is satisfied, the Company shall have no obligation to deliver to you any Common Stock
or any other consideration pursuant to this Award.
(c) In the event the Withholding Obligation arises prior to the delivery to you of Common Stock or it is determined after the delivery of
Common Stock to you that the amount of the Withholding Obligation was greater than the amount withheld by the Company, you agree to indemnify and
hold the Company harmless from any failure by the Company to withhold the proper amount.
12. TAX CONSEQUENCES. The Company has no duty or obligation to minimize the tax consequences to you of this Award and shall not be liable to
you for any adverse tax consequences to you arising in connection with this Award. You are hereby advised to consult with your own personal tax,
financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or
knowingly and voluntarily declined to do so. You understand that you (and not the Company) shall be responsible for your own tax liability that may arise
as a result of this investment or the transactions contemplated by this Agreement.
13. UNSECURED OBLIGATION. Your Award is unfunded, and as a holder of a vested Award, you shall be considered an unsecured creditor of the
Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Agreement. You shall not have voting or any
other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant
to Section 6 of this Agreement. Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind or a fiduciary relationship between
you and the Company or any other person.
14. NOTICES. Any notice or request required or permitted hereunder shall be given in writing (including electronically) and will be deemed
effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail,
postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any
documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.
By accepting this Award, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic
system established and maintained by the Company or another third party designated by the Company.
15. HEADINGS. The headings of the Sections in this Agreement are inserted for convenience only and shall not be deemed to constitute a part of this
Agreement or to affect the meaning of this Agreement.
16. MISCELLANEOUS.
(a) The rights and obligations of the Company under your Award shall be transferable by the Company to any one or more persons or
entities, and all covenants and agreements hereunder shall inure to the benefit of, and be enforceable by, the Company’s successors and assigns.
(b) You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company
to carry out the purposes or intent of your Award.
(c) You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel
prior to executing and accepting your Award and fully understand all provisions of your Award.
(d) This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
(e) All obligations of the Company under the Plan and this Agreement shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or
assets of the Company.
17. GOVERNING PLAN DOCUMENT. Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your
Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant
to the Plan. Your Award (and any compensation paid or shares issued under your Award) is subject to recoupment in accordance with The Dodd–Frank
Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any
compensation recovery policy otherwise required by applicable law. No recovery of compensation under such a clawback policy will be an event giving
rise to a right to voluntarily terminate employment upon a resignation for “good reason,” or for a “constructive termination” or any similar term under any
plan of or agreement with the Company.
18. EFFECT ON OTHER EMPLOYEE BENEFIT PLANS. The value of the Award subject to this Agreement shall not be included as compensation,
earnings, salaries, or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the Company
or any Affiliate except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any or all of
the employee benefit plans of the Company or any Affiliate.
19. SEVERABILITY. If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid,
such unlawfulness or invalidity shall not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this
Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms
of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
20. OTHER DOCUMENTS. You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)
(1) promulgated under the Securities Act. In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only
during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
21. AMENDMENT. This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly
authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which
specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise
expressly provided in the Plan, no such amendment materially adversely affecting your rights hereunder may be made without your written consent.
Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem
necessary or advisable to carry out the purpose of the Award as a result of any change in applicable laws or regulations or any future law, regulation,
ruling, or judicial decision, provided that any such change shall be applicable only to rights relating to that portion of the Award which is then subject to
restrictions as provided herein.
22. COMPLIANCE WITH SECTION 409A OF THE CODE. This Award is intended to be exempt from the application of Section 409A of the Code,
including but not limited to by reason of complying with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and any
ambiguities herein shall be interpreted accordingly. Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of
the short-term deferral rule and is otherwise not exempt from, and determined to be deferred compensation subject to Section 409A of the Code, this
Award shall comply with Section 409A to the extent necessary to avoid adverse personal tax consequences and any ambiguities herein shall be interpreted
accordingly. If it is determined that the Award is deferred compensation subject to Section 409A and you are a “Specified Employee” (within the meaning
set forth in Section 409A(a)(2)(B)(i) of the Code) as of the date of your “Separation from Service” (as defined in Section 409A), then the issuance of any
shares that would otherwise be made upon the date of your Separation from Service or within the first six (6) months thereafter will not be made on the
originally scheduled date(s) and will instead be issued in a lump sum on the date that is six (6) months and one day after the date of the Separation from
Service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if
such delay in the issuance of the shares is necessary to avoid the imposition of adverse taxation on you in respect of the shares under Section 409A of the
Code. Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
This Restricted Stock Unit Award Agreement shall be deemed to be signed by the Company and the Participant upon the signing by the Participant of the
Restricted Stock Unit Grant Notice to which it is attached.
* * * * *
ATTACHMENT II
2019 EQUITY INCENTIVE PLAN
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statement of Immunovant, Inc.:
(1) Registration Statement (Form S-8 No. 333-236665) pertaining to the Immunovant, Inc. 2019 Equity Incentive Plan and the Immunovant
Sciences Ltd. 2018 Equity Incentive Plan;
of our report dated June 29, 2020, with respect to the combined and consolidated financial statements of Immunovant, Inc. included in this Annual Report
(Form 10-K) of Immunovant, Inc. for the year ended March 31, 2020.
Exhibit 23.1
/s/ Ernst & Young LLP
Iselin, New Jersey
June 29, 2020
Exhibit 31.1
I, Peter Salzmann, M.D., certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Immunovant, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
[Reserved]
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: June 29, 2020
/s/ PETER SALZMANN, M.D.
Peter Salzmann, M.D.
Chief Executive Officer
Exhibit 31.2
I, Pamela Yanchik Connealy, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this Annual Report Form 10-K of Immunovant, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
[Reserved]
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most
recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.
Date: June 29, 2020
/s/ PAMELA YANCHIK CONNEALY
Pamela Yanchik Connealy
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Peter Salzmann, M.D., Chief Executive Officer of Immunovant, Inc. (the
“Company”), hereby certifies that, to the best of his knowledge:
1.
2.
The Company’s Annual Report on Form 10-K for the period ended March 31, 2020, to which this Certification is attached as Exhibit 32.1 (the
“Annual Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: June 29, 2020
/S/ PETER SALZMANN, M.D.
Peter Salzmann, M.D.
Chief Executive Officer
A signed original of this written statement required by Section 906 of 18 U.S.C. § 1350 has been provided to the Company, and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after
the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.
Exhibit 32.2
CERTIFICATION
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) and Section 1350 of
Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), Pamela Yanchik Connealy, Chief Financial Officer of Immunovant, Inc. (the
“Company”), hereby certifies that, to the best of her knowledge:
1.
2.
The Company’s Annual Report on Form 10-K for the period ended March 31, 2020, to which this Certification is attached as Exhibit 32.2 (the
“Annual Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Dated: June 29, 2020
/S/ PAMELA YANCHIK CONNEALY
Pamela Yanchik Connealy
Chief Financial Officer
A signed original of this written statement required by Section 906 of 18 U.S.C. § 1350 has been provided to the Company, and will be retained by the
Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be
incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after
the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.