As previously announced, Roivant Sciences Ltd. (“Roivant”), a majority stockholder of Myovant Sciences Ltd. (“Myovant”), and Sumitomo Dainippon Pharma,
Co., Ltd. (“Sumitomo”), entered into a Transaction Agreement dated October 31, 2019 (the “Sumitomo-Roivant Agreement”), which provided for, among other things, Sumitomo to acquire all of the Myovant common shares (“Common Shares”) held by Roivant. In
addition, as previously announced, Myovant and Sumitomo entered into a letter agreement pursuant to which, among other things, Myovant and Sumitomo would enter into an investor rights agreement and loan agreement upon the closing of the transactions
contemplated by the Sumitomo-Roivant Agreement (the “Closing”).
On December 27, 2019, the Closing occurred and, as a result, all of the Common Shares held directly or indirectly by Roivant and not already held by
Sumitovant Biopharma Ltd. (formerly known as Vant Alliance Ltd.) (“Sumitovant Biopharma”), a subsidiary of Roivant, were transferred to Sumitovant Biopharma, and all of the outstanding equity of Sumitovant Biopharma was transferred to Sumitomo,
resulting in Sumitovant Biopharma directly, and Sumitomo indirectly, owning approximately 45,008,604 Common Shares, or 50.2% of the outstanding Common Shares. In connection with the Closing, Myovant, Sumitomo and Sumitovant Biopharma entered into an
Investor Rights Agreement (the “Investor Rights Agreement”), and Myovant, Sumitomo and a subsidiary of Myovant, Myovant Sciences GmbH (“MSG”), entered into a Loan Agreement (the “Loan Agreement”)
each as described below.
Investor Rights Agreement
Pursuant to the Investor Rights Agreement, among other things:
1. Myovant agreed to register for resale the
Common Shares held by Sumitovant Biopharma at the request of Sumitovant Biopharma, or to include Common Shares held by Sumitovant Biopharma in a registration statement filed by Myovant for the offer and sale of Common Shares by Myovant, subject
to specified conditions and limitations;
2. Myovant granted to Sumitomo and
Sumitovant Biopharma rights to receive specified financial information from Myovant, and inspect Myovant’s facilities, accounts and records, subject to specified limitations;
3. The Myovant Board of Directors (the
“Board”) following the Closing will consist of (i) three Sumitomo-designated directors, who are Myrtle Potter (who shall also serve as the Chair of the Board), Adele Gulfo and Hiroshi Nomura, (ii) three Independent Directors (as defined below),
who shall be Terrie Curran, Mark Guinan and Kathleen Sebelius (who shall serve as Lead Independent Director) (collectively, the “Initial Independent Directors”), and (iii) the Principal Executive Officer, who is Lynn Seely. An “Independent
Director” is a director who (A) the Board reasonably determines qualifies as an “independent director” under the New York Stock Exchange listing rules, (B) is not and within the last three years has not been a director, officer or employee of an
entity of Sumitomo and its affiliated entities (the “Sumitomo Group”), and (C) does not have any immediate family member who is or within the last three year has been a director, officer or employee of an entity within the Sumitomo Group;
4. The Myovant Nominating and Corporate
Governance Committee following the time the Bye-Laws (as defined in Item 5.03 below) become effective will consist of (i) two Sumitomo-designated directors, who are Adele Gulfo and Myrtle Potter, and (ii) one Independent Director, who is Terrie
Curran;
5. The Myovant Compensation Committee
following the time the Bye-Laws become effective will consist of (i) one Sumitomo-designated director, who is Hiroshi Nomura, and (ii) two Independent Directors, who are Terrie Curran and Kathleen Sebelius;
6. The Audit Committee following the Closing
will consist of the three Independent Directors, who are Terrie Curran, Mark Guinan and Kathleen Sebelius;
7. At all times until the Sumitomo Group
holds no longer holds more than 50% of the outstanding Common Shares, among other things:
(i) the Audit Committee of the Board will be
composed solely of three Independent Directors, each of whom is an Initial Independent Director or has been nominated or appointed to the Board in accordance with specified provisions of the Bye-Laws, and at least one of whom will meet the
requirements of an “Audit Committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K under the Exchange Act;
(ii) the Nominating and Corporate Governance
Committee of the Board will be composed of (A) two Sumitomo-designated directors and (B) one Independent Director who also a member of the Audit Committee;
(iii) the Compensation Committee of the Board
will be composed of (A) one Sumitomo-designated director and (B) two Independent Directors, each of whom is also a member of the Audit Committee;
(iv) except as may be required by applicable
laws, regulations or stock exchange rules, any other standing or ad hoc committee of the Board will be composed of a majority of Sumitomo-designated directors, subject to
specified exceptions;
(v) specified provisions of the Bye-Laws may
not be amended, revised or removed without the prior written consent of Sumitovant Biopharma; and
(vi) all entities within the Sumitomo Group
will vote the Common Shares owned by them in connection with any election of Independent Directors in a manner that is either in accordance with the recommendation of the Board or in direct proportion to the manner in which the Myovant
shareholders not affiliated with the Sumitomo Group vote their Common Shares in respect of the election of such Independent Directors.
8. A standstill provision (the “Standstill
Provision”), which provides that until the earlier of such time as (A) the Sumitomo Group owns less than 35% of the outstanding Common Shares, (B) another entity beneficially owns a majority of the outstanding Common Shares, (C) the completion of
a merger, consolidation or other business combination or transaction to which Myovant is a party (but to which no member of the Sumitomo Group is a party) if the shareholders of Myovant immediately prior to the effective date of such transaction
beneficially own less than 50% of the outstanding voting securities power of the surviving corporation following such transaction, (D) a sale of all or substantially all of Myovant’s assets, (E) a bankruptcy or liquidation of Myovant, or (C)
specified transactions in which the Sumitomo Group acquires all of the outstanding Common Shares of Myovant or its assets (any such event, a “Standstill Termination Event”), no member of the Sumitomo Group will make a tender offer, exchange
offer, merger proposal or any other offer the effect of which if completed would result in the Sumitomo Group holding beneficial ownership of greater than 60% of the outstanding voting power of Myovant or acquiring all or substantially all of
Myovant’s assets unless such transaction is effected (a) in accordance with a specified provision of Myovant’s Bye-Laws or (b) in compliance with the following:
(i) A member of the Sumitomo Group may, at
any time, propose, negotiate and consummate a transaction at the written request of a majority of the members of the Audit Committee that would result in the Sumitomo Group owning all of the Common Shares or assets of Myovant, subject to an
obligation that such transaction receive approval of a majority of the Common Shares not owned by the Sumitomo Group (a “Qualified Acquisition Transaction”);
(ii) Any member of the Sumitomo Group may, at
any time, make a proposal on a confidential basis to the Audit Committee; provided that after the three-year anniversary of the Closing, this requirement with respect to a Qualified Acquisition Transaction will only require a period of
confidential discussions with the Audit Committee prior to making a public announcement thereof and except disclosures that are required by law;
(iii) Until the three-year anniversary of the
Closing, be subject to approval by the Audit Committee, and
(iv) The closing of any such transaction is
conditioned (which condition may not be waived) on a majority of the outstanding Common Shares held by entities not affiliated with the Sumitomo Group being voted in favor of such transaction.
9. Until a Standstill
Termination Event, except for an acquisition transaction governed by the Standstill Provision, certain specified Myovant corporate actions will not be taken without approval by the Audit Committee, including:
(i) any services to be provided by the
Sumitomo Group to Myovant which would require disclosure pursuant to SEC rules or specified other transactions with the Sumitomo Group;
(ii) amendments to specified provisions of
Myovant’s organizational document or agreements;
(iii) the taking of specified actions or
amendments of the Loan Agreement; or
(iv) amending the Investor Rights Agreement in
a manner that would expand the Sumitomo Group’s rights, or reduce its obligations, under the Investor Rights Agreement.
10. At all times that the Sumitomo Group hold
more than 50% of the outstanding Common Shares, the Sumitomo Group, by purchasing Common Shares in the open market or from the Company in certain specified circumstances, will have the right to maintain its percentage ownership in Common Shares
in the event of a financing event or acquisition event conducted by Myovant, or specified other events, subject to specified conditions.
The description of the Investor Rights Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Investor Rights Agreement,
which will be filed as an exhibit to Myovant’s Quarterly Report on Form 10-Q for the quarter ending December 31, 2019.
Loan Agreement
Pursuant to the Loan Agreement Sumitomo agreed to make revolving loans to MSG in an aggregate principal amount up to $400 million. MSG is borrowing approximately $113.7 million to repay the outstanding obligations of Myovant and its subsidiaries under the loan and security agreement with Hercules Capital Inc. and the securities purchase agreement with NovaQuest Pharma
Opportunities Fund IV, L.P. and the other purchasers party thereto and to pay for certain costs and expenses.
The Loan Agreement will terminate, and all obligations thereunder will become due and
payable, on the fifth anniversary of the closing date. Pursuant to the Loan Agreement, until the date occurring three months prior to the fifth anniversary of the closing date, MSG will be entitled to borrow amounts on a quarterly basis to cover
budgeted expenses for such quarter. If Sumitomo fails to own at least a majority of the outstanding common shares of Myovant, it may become unlawful under
Japanese law for Sumitomo to fund loans to MSG, in which case MSG would not be able to continue to borrow amounts under the Loan Agreement. Interest on outstanding loans under the Loan
Agreement will accrue at a rate per annum equal to 3-month LIBOR plus 3% and will be payable quarterly on the last day of each calendar quarter. Loans under the Loan Agreement are prepayable at any time without premium or penalty upon 10
business days’ prior written notice.
MSG’s obligations under the Loan Agreement are guaranteed on a full and unconditional basis by Myovant and Myovant’s other subsidiaries. The loans
and other obligations are the senior unsecured obligations of Myovant, MSG and the subsidiary guarantors.
The Loan Agreement includes customary representations and warranties and affirmative
and negative covenants. The Loan Agreement also includes customary events of default, including payment defaults, breaches of representations and warranties, breaches of covenants following any applicable cure period, cross acceleration to
certain other debt, failure to pay certain final judgments, certain events relating to bankruptcy or insolvency and failure of material provisions of the loan documents to remain in full force and effect or any contest thereto by Myovant or any
of its subsidiaries. Upon the occurrence of an event of default, a default interest rate of an additional 5.0% will apply to the outstanding principal amount of the loans, Sumitomo may terminate its obligations to make loans to MSG and declare the principal amount of Loans to immediately due and payable, and Sumitomo may take such other actions as
set forth in the Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations of Sumitomo to make loans to MSG would automatically terminate and the
principal amount of the loans would automatically become due and payable. In addition, if it becomes unlawful for Sumitomo to maintain
the loans under the Loan Agreement, MSG would be required to repay the outstanding principal amount of the Loans.
The description of the Loan Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete
text of the Loan Agreement, which will be filed as an exhibit to Myovant’s Quarterly Report on Form 10-Q for the quarter ending December 31, 2019.
In connection with the entering into of the Loan Agreement, Myovant obtained waivers from each of Hercules
Capital Inc. and NovaQuest Pharma Opportunities Fund IV, L.P. to repay the outstanding obligations of Myovant and its subsidiaries under the loan and security agreement with Hercules Capital Inc. and the securities purchase agreement with NovaQuest
Pharma Opportunities Fund IV, L.P.