PRER14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Amendment No. 1)

PRELIMINARY COPY—SUBJECT TO COMPLETION

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Material
  Soliciting Material under §240.14a-12

Urovant Sciences Ltd.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies: Urovant Sciences Ltd. common shares (the “Urovant common shares”)

 

     

  (2)  

Aggregate number of securities to which transaction applies: The number of Urovant common shares to which this transaction applies (which excludes Urovant common shares owned by Sumitovant) is estimated to be 15,304,470, which consists of (a) 11,452,949 Urovant common shares issued and outstanding and held by holders other than Sumitovant, as of December 22, 2020, including any such shares underlying issued and outstanding restricted shares and restricted stock units, (b) 3,005,789 Urovant common shares issuable pursuant to outstanding options and warrants with exercise prices below $16.25, which is the per share merger consideration payable as described in the proxy statement, and (c) 845,732 Urovant common shares underlying issued and outstanding stock appreciation rights with a strike price per Urovant common share below $16.25.

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated based on the sum of (a) the product of 11,452,949 Urovant common shares and the per share merger consideration, (b) the product of (i) 3,005,789 Urovant common shares issuable upon exercise of options and warrants to purchase Urovant common shares and (ii) the difference between the per share merger consideration and the weighted average exercise price of such options and warrants of $8.07, and (c) the product of (i) 845,732 Urovant common shares underlying issued and outstanding stock appreciation rights and (ii) the difference between the per share merger consideration and the strike price of such stock appreciation rights of $9.16, as of December 22, 2020.

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

$216,694,015.15

  (5)  

Total fee paid:

 

$23,641.32

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

Suite 1, 3rd Floor

11-12 St. James’s Square

London

SW1Y 4LB

United Kingdom

PRELIMINARY COPY—SUBJECT TO COMPLETION

MERGER PROPOSAL – YOUR VOTE IS VERY IMPORTANT

[●], 2021

Dear Shareholder:

You are cordially invited to attend a special general meeting of the shareholders of Urovant Sciences Ltd., which we refer to as “Urovant,” on [●], 2021 at [●] (Pacific Time). In light of the COVID-19 pandemic, for the safety of our employees, directors and shareholders, and taking into account recent federal, state, and local guidance that has been issued, the special general meeting will be held solely in a virtual meeting format via the Internet. You will be able to attend and participate in the special general meeting online by visiting [●].

At the special general meeting, holders of our common shares, par value $0.000037453 per share, which we refer to as the “Urovant common shares,” will be asked to consider and vote upon a proposal to approve an Agreement and Plan of Merger, dated as of November 12, 2020, which, as it may be amended from time to time, we refer to as the “merger agreement” and a related statutory merger agreement, which we refer to as the “statutory merger agreement,” by and among Urovant, Sumitovant Biopharma Ltd., a Bermuda exempted company limited by shares, which we refer to as “Sumitovant,” Titan Ltd., a Bermuda exempted company limited by shares and a wholly owned subsidiary of Sumitovant, which we refer to as “merger sub,” and, solely with respect to Section 9.13 of the merger agreement, Sumitomo Dainippon Pharma Co., Ltd., a company organized under the laws of Japan, which we refer to as “Sumitomo Dainippon.” Pursuant to the merger agreement and the statutory merger agreement, merger sub will merge with and into Urovant, with Urovant surviving the merger as a wholly owned subsidiary of Sumitovant. We refer to this transaction as the “merger.” If the merger is completed, and upon the satisfaction of the conditions set forth in the merger agreement and the statutory merger agreement, holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act (as such term is defined below), (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) will be entitled to receive $16.25 in cash for each Urovant common share held, which we refer to as the “per share merger consideration.”

The proposed merger is a “going-private” transaction under the rules of the Securities and Exchange Commission, which we refer to as the “SEC.” Sumitovant and its affiliates own approximately 70.6% of the outstanding Urovant common shares. If the merger is completed, Urovant will become a privately held company, wholly owned by Sumitovant. Sumitovant is a wholly owned subsidiary of Sumitomo Dainippon, and Sumitomo Dainippon and Sumitovant are affiliates of Sumitomo Chemical Co., Ltd., which we refer to as “Sumitomo Chemical.”

The board of directors of Urovant, which we refer to as the “Urovant board,” formed a committee, which we refer to as the “special committee,” consisting solely of independent and disinterested directors of Urovant to, among other things, (i) determine whether to pursue a strategic transaction, including the proposed merger,


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(ii) consider and negotiate the terms of any such transaction, and (iii) if deemed advisable to the special committee, approve and adopt any such transaction. Pursuant to the authority delegated by the Urovant board, the special committee has unanimously (w) determined that the per share merger consideration constitutes fair value for each Urovant common share in accordance with the Companies Act 1981 of Bermuda, as amended, which we refer to as the “Bermuda Companies Act,” (x) determined that the terms of the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement are fair to and in the best interests of Urovant and its shareholders (including unaffiliated security holders, as defined in Rule 13e-3 of the Securities Exchange Act of 1934, as amended), (y) approved and declared advisable the execution, delivery and performance of the merger agreement and the statutory merger agreement, the merger and the other transactions contemplated by the merger agreement and the statutory merger agreement by Urovant, and (z) subject to the conditions set forth in the merger agreement, recommended that Urovant’s shareholders vote in favor of the adoption and approval of the merger agreement and the statutory merger agreement, the merger and the other transactions contemplated by the merger agreement and the statutory merger agreement, at a duly held meeting of such holders for such purpose, which we refer to as the “Merger Proposal.” The special committee made these determinations after consultation with its legal and financial advisors and after consideration of a number of factors. Members of the Urovant board that are affiliated with Sumitovant or Sumitomo Dainippon did not participate in the deliberations or the vote of the special committee. The special committee recommends unanimously that you vote “FOR” the Merger Proposal, and “FOR” the adjournment of the special general meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the special general meeting to approve the Merger Proposal.

The accompanying proxy statement describes the merger agreement, the statutory merger agreement, the merger and related agreements and provides specific information concerning the special general meeting. In addition, you may obtain information about Urovant from documents filed with the SEC. We urge you to read the entire proxy statement, including the annexes, carefully, as it sets forth the details of the merger agreement and other important information related to the merger.

In considering the recommendation of the special committee, you should be aware that certain of our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Urovant’s shareholders generally, as further described in the accompanying proxy statement.

Any holder of Urovant common shares who does not vote in favor of the Merger Proposal and who is not satisfied that they have been offered fair value for their Urovant common shares will, if the merger is completed, have the right to seek appraisal of the fair value of such holder’s Urovant common shares in lieu of receiving $16.25 in cash for each Urovant common share held as the per share merger consideration, but only if such holder complies with the procedures of Section 106 of the Bermuda Companies Act, which is the appraisal rights statute applicable to Bermuda companies. These appraisal rights are summarized in the accompanying proxy statement. The accompanying proxy statement constitutes notice to you from Urovant of the availability of appraisal rights under the Bermuda Companies Act.

Your vote is very important, regardless of the number of Urovant common shares you own. The affirmative vote of the holders of at least 66 23% of the issued and outstanding Urovant common shares entitled to vote on the Merger Proposal and voting at the special general meeting is required to approve the merger agreement and the statutory merger agreement, which vote is referred to herein as the “General Shareholder Approval.” In addition, the merger agreement makes it a condition to the parties’ obligations to complete the merger that holders of at least a majority of the outstanding Urovant common shares that are not held by Sumitovant or its affiliates vote in favor of the approval of the merger agreement and the statutory merger agreement, which vote is referred to herein as the “Public Shareholder Approval.” If you fail to vote on the Merger Proposal or abstain from voting on the Merger Proposal, the effect will be the same as a vote against the Merger Proposal.

Sumitovant has agreed to vote all of the Urovant common shares held by it in favor of the Merger Proposal pursuant to a voting and support agreement that was entered into between Urovant and Sumitovant concurrently with the execution of the merger agreement, which we refer to as the “Sumitovant voting agreement.” If


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Sumitovant votes in compliance with the terms of the Sumitovant voting agreement, the General Shareholder Approval will be obtained, but such vote will have no effect on the Public Shareholder Approval.

If you own Urovant common shares of record, you will find enclosed a proxy card or cards and an envelope in which to return the card(s). Whether or not you plan to attend this meeting, please sign, date and return your enclosed proxy card(s), or vote via the Internet or over the phone, as soon as possible so that your shares can be voted at the special general meeting in accordance with your instructions. You can revoke your proxy before the special general meeting and issue a new proxy as you deem appropriate. If you wish to revoke your proxy, you will find the procedures to follow in the accompanying proxy statement.

If you hold your Urovant common shares in “street name” through a broker, bank or other nominee, you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your Urovant common shares. If you do not follow those instructions, your Urovant common shares will not be voted, which will have the same effect as voting against the Merger Proposal.

If you have any questions or need assistance voting your shares, please contact our proxy solicitation agent:

 

 

LOGO

1407 Broadway – 27th Floor

New York, New York 10018

Call Collect: (212) 929-5500

Call Toll-Free: (800) 322-2884

Email: proxy@mackenziepartners.com

Thank you for your cooperation and we look forward to the successful completion of the merger.

Sincerely yours,

James A. Robinson

Principal Executive Officer

NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The obligations of Urovant, Sumitovant and merger sub to complete the merger are subject to the satisfaction or waiver of the conditions set forth in the merger agreement, a copy of which is included as part of the accompanying proxy statement.

The accompanying proxy statement is dated [●], 2021 and, together with the enclosed form of proxy, is first being mailed to Urovant’s shareholders on [●], 2021.


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LOGO

Suite 1, 3rd Floor

11-12 St. James’s Square

London

SW1Y 4LB

United Kingdom

PRELIMINARY COPY—SUBJECT TO COMPLETION

NOTICE OF SPECIAL GENERAL MEETING OF SHAREHOLDERS

To Be Held On: [], 2021

NOTICE IS HEREBY GIVEN that a Special General Meeting of Shareholders of Urovant Sciences Ltd., which we refer to as “Urovant,” will be held on [●], 2021 at [●] (Pacific Time) in a virtual meeting format at [●] to consider and vote upon:

 

  (1)

a proposal to approve and adopt an Agreement and Plan of Merger, dated as of November 12, 2020 (as it may be amended from time to time, which we refer to as the “merger agreement”) and a related statutory merger agreement, which we refer to as the “statutory merger agreement,” by and among Urovant, Sumitovant Biopharma Ltd., a Bermuda exempted company limited by shares which we refer to as “Sumitovant,” Titan Ltd., a Bermuda exempted company limited by shares and a wholly owned subsidiary of Sumitovant, referred to herein as “merger sub,” and, solely with respect to Section 9.13 of the merger agreement, Sumitomo Dainippon Pharma Co., Ltd., a company organized under the laws of Japan, referred to herein as “Sumitomo Dainippon,” and the transactions contemplated by the merger agreement and the statutory merger agreement, including a merger pursuant to which merger sub will merge with and into Urovant, with Urovant surviving the merger as a wholly owned subsidiary of Sumitovant, which merger we refer to as the “merger” and which proposal we refer to as the “Merger Proposal”; and

 

  (2)

a proposal to approve an adjournment of the special general meeting, if necessary or appropriate (as determined in good faith by Urovant), to solicit additional proxies if there are insufficient votes at the time of the special general meeting to approve the Merger Proposal, which we refer to as the “Adjournment Proposal.”

The holders of our common shares, par value $0.000037453 per share, referred to herein as the “Urovant common shares,” registered in our records or our agents’ records at the close of business on [●], which we refer to as the “record date,” are entitled to notice of and to vote at the special general meeting and at any adjournment or postponement thereof. All shareholders of record are invited to attend the special general meeting virtually. A quorum of shareholders representing, in person or by proxy, a majority of the issued and outstanding Urovant common shares entitled to vote at the special general meeting as of the record date is required to conduct business and vote on the proposals at the special general meeting.

The proposed merger is a “going-private” transaction under the rules of the Securities and Exchange Commission, referred to herein as the “SEC.” Sumitovant and its affiliates own approximately 70.6% of the outstanding Urovant common shares. If the merger is consummated, Urovant will become a privately held company, wholly owned by Sumitovant.

Your vote is important, regardless of the number of Urovant common shares you own. The merger cannot be completed unless holders of at least 66 23% of the issued and outstanding Urovant common shares


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entitled to vote on the Merger Proposal and voting at the special general meeting vote in favor of the Merger Proposal, which vote is referred to herein as the “General Shareholder Approval.” In addition, the merger agreement makes it a condition to the parties’ obligations to complete the merger that the holders of at least a majority of the outstanding Urovant common shares held by Urovant’s shareholders other than Sumitovant or its affiliates, which shareholders are referred to herein as the “Public Shareholders,” vote in favor of the approval of the Merger Proposal, which vote is referred to herein as the “Public Shareholder Approval.” We refer to the Public Shareholder Approval and the General Shareholder Approval collectively as the “Required Shareholder Approval.” As a result of the Public Shareholder Approval, if you fail to vote on the Merger Proposal or abstain from voting on the Merger Proposal, the effect will be the same as a vote against the Merger Proposal.

Sumitovant has agreed to vote all of the Urovant common shares held by it in favor of the Merger Proposal pursuant to a voting and support agreement that was entered into between Urovant and Sumitovant concurrently with the execution of the merger agreement, which we refer to as the “Sumitovant voting agreement.” If Sumitovant votes in compliance with the terms of the Sumitovant voting agreement, the General Shareholder Approval will be obtained, but such vote will have no effect on the Public Shareholder Approval.

The Adjournment Proposal will be approved if holders of a majority of the issued and outstanding Urovant common shares entitled to vote on the Adjournment Proposal and voting at the special general meeting vote in favor of the Adjournment Proposal. Approval of the Adjournment Proposal is not a condition to the completion of the merger.

A special committee of the board of directors of Urovant, consisting solely of three independent and disinterested directors of Urovant, has determined the fair value of the Urovant common shares to be the per share merger consideration, i.e., $16.25 per Urovant common share. Any holder of Urovant common shares who does not vote in favor of the Merger Proposal and who is not satisfied that they have been offered fair value for their Urovant common shares will, if the Merger is completed, have the right to seek appraisal of the fair value of such holder’s Urovant common shares by the Supreme Court of Bermuda in lieu of receiving $16.25 in cash for each Urovant common share held as the per share merger consideration but only if such holder complies with the procedures of Section 106 of the Companies Act 1981 of Bermuda, as amended, which we refer to as the “Bermuda Companies Act,” which is the appraisal rights statute applicable to Bermuda companies (a “Dissenting Holder”). A Dissenting Holder shall receive the per share merger consideration for the Dissenting Holder’s shares if the Merger is completed prior to the appraisal (plus, if the per share merger consideration paid to the Dissenting Holder is less than the value appraised by the Supreme Court of Bermuda, the difference between the per share merger consideration for the Dissenting Holder’s shares and the value appraised), and shall otherwise be entitled to receive an amount equal to the value of the Dissenting Holder’s shares as appraised by the Supreme Court of Bermuda. These appraisal rights are summarized in the accompanying proxy statement. The accompanying proxy statement constitutes notice to you from Urovant of the availability of appraisal rights under the Bermuda Companies Act.

The special general meeting will be held solely in a virtual meeting format via the Internet. To participate, vote or submit questions during the special general meeting, enter the control number located on your proxy card or voting instruction form by accessing the special general meeting log in page at [●]. Online check-in for the virtual special general meeting will begin at [●] (Pacific Time), and the special general meeting webcast will begin promptly at [●] (Pacific Time). Please allow ample time for the check-in procedures. You will not be able to attend the special general meeting in person.

Whether or not you plan to attend the special general meeting, please sign, date, and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or submit your proxy electronically over the Internet or by telephone. If you hold your shares in “street name,” you should instruct your broker, bank or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your broker, bank or other nominee. Your broker, bank or other nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions.


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You may revoke your proxy at any time before the vote at the special general meeting by following the procedures outlined in the accompanying proxy statement. If you are a shareholder of record, attend the special general meeting and vote your shares at the special general meeting, your vote will revoke any proxy or voting instructions that you have previously submitted.

The merger is described in the accompanying proxy statement, which we urge you to read carefully. A copy of the merger agreement is included as Annex A to the accompanying proxy statement.

By order of the Special Committee of the Board of Directors of Urovant Sciences Ltd.

Pierre Legault

Chair of the Special Committee

Dated: [●], 2021

WHETHER OR NOT YOU INTEND TO ATTEND THE SPECIAL GENERAL MEETING, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS PROMPTLY ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE. ALTERNATIVELY, IF YOU RECEIVED A PAPER PROXY OR VOTING INSTRUCTION CARD, PLEASE COMPLETE, SIGN AND RETURN IT BY MAIL.


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TABLE OF CONTENTS

 

     PAGE  

SUMMARY TERM SHEET

     1  

The Parties to the Merger Agreement

     1  

The Merger Proposal

     2  

Conditions to the Merger

     3  

When the Merger Becomes Effective

     3  

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

     3  

Opinion of Financial Advisor to the Special Committee

     3  

Purposes and Reasons of the Controlling Purchaser for the Merger

     4  

Position of the Controlling Purchaser as to Fairness of the Merger

     4  

Treatment of Company Equity Awards

     5  

Treatment of Company Warrants

     5  

Interests of Urovant’s Directors and Executive Officers in the Merger

     5  

No Solicitation; No Adverse Company Recommendation

     6  

Termination

     6  

Termination Fee

     7  

Guaranty by Sumitomo Dainippon

     7  

Voting and Support Agreement

     7  

Material U.S. Federal Income Tax Consequences of the Merger

     7  

The Special General Meeting

     8  

Record Date and Quorum

     8  

Required Votes

     8  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL GENERAL MEETING AND THE MERGER

     10  

SPECIAL FACTORS

     17  

Background of the Merger

     17  

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

     35  

Opinion of Financial Advisor to the Special Committee

     39  

Summary of Presentations Provided by Citi

     50  

Controlling Purchaser’s Purposes and Reasons for the Merger

     56  

Position of the Controlling Purchaser as to Fairness of the Merger

     58  

Sources and Amounts of Funds or other Consideration; Expenses

     62  

Plans for Urovant After the Merger

     62  

Certain Effects of the Merger

     63  

Alternatives to the Merger

     64  

Projected Financial Information

     64  

Interests of Urovant’s Directors and Executive Officers in the Merger

     72  

Material U.S. Federal Income Tax Consequences of the Merger

     75  

Regulatory Approvals

     78  

Fees and Expenses

     78  

Anticipated Accounting Treatment of the Merger

     78  

Litigation

     78  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

     80  

THE PARTIES TO THE MERGER

     81  

Urovant Sciences Ltd.

     81  

Sumitovant Biopharma Ltd.

     81  

Titan Ltd. (merger sub)

     81  

Sumitomo Dainippon Pharma Co., Ltd.

     81  


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THE SPECIAL GENERAL MEETING

     82  

Date, Time and Place

     82  

Purpose of the Special General Meeting

     82  

Recommendation of the Special Committee

     82  

Record Date and Quorum

     82  

Required Vote

     83  

Votes You Have

     84  

Voting by Company’s Directors and Executive Officers

     84  

Voting and Support Agreement

     84  

Voting; Proxies; Revocation

     84  

Adjournments and Postponements

     85  

Solicitation of Proxies

     85  

THE MERGER PROPOSAL

     87  

General

     87  

Required Vote

     87  

Vote Recommendation

     87  

THE MERGER AGREEMENT

     88  

Explanatory Note Regarding the Merger Agreement

     88  

The Merger

     88  

Closing; Effective Time of the Merger

     88  

Effect of the Merger on the Urovant Common Shares and Merger Sub

     89  

Treatment of Company Equity Awards

     90  

Payment for Urovant Common Shares and Equity Awards

     90  

Treatment of Company Warrants

     91  

Representations and Warranties

     91  

Conduct of Business Pending the Merger

     94  

No Solicitation; No Adverse Company Recommendation

     96  

Other Covenants and Agreements

     99  

Conditions to the Merger

     101  

Termination

     102  

Termination Fees and Limited Expense Reimbursement; Limitations on Liability

     103  

Specific Performance

     104  

Amendments; Waivers

     104  

Guaranty by Sumitomo Dainippon

     104  

VOTING AND SUPPORT AGREEMENT

     105  

PROVISIONS FOR UNAFFILIATED SHAREHOLDERS

     106  

IMPORTANT INFORMATION REGARDING UROVANT SCIENCES LTD.

     107  

Company Background

     107  

Directors and Executive Officers

     108  

Prior Public Offerings

     111  

Book Value Per Share

     111  

Market Price of the Urovant Common Shares

     111  

Dividends

     112  

Issuer Purchases of Equity Securities

     112  

Security Ownership of Management and Certain Beneficial Owners

     112  

Transactions in Urovant Common Shares by Controlling Purchaser

     113  

Transactions Between Urovant and the Controlling Purchaser

     114  

RIGHTS OF APPRAISAL

     117  

DELISTING AND DEREGISTRATION OF COMMON SHARES

     119  


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ADJOURNMENT PROPOSAL

     120  

General

     120  

Required Vote

     120  

Vote Recommendation

     120  

SUBMISSION OF SHAREHOLDER PROPOSALS

     121  

IMPORTANT INFORMATION REGARDING THE CONTROLLING PURCHASER

     122  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

     132  

ANNEX A—AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B—OPINION OF LAZARD

     B-1  

ANNEX C—BERMUDA LAW APPRAISAL SECTIONS

     C-1  


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PRELIMINARY COPY—SUBJECT TO COMPLETION

SUMMARY TERM SHEET

This proxy statement, including this Summary Term Sheet, is being furnished to our shareholders as part of the solicitation of proxies by the special committee for use at the special general meeting to be held on [], 2021, starting at [], Pacific Time, in a virtual meeting format at [], or at any adjournment or postponement thereof. This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on [], 2021.

This Summary Term Sheet, together with “Questions and Answers About the Special General Meeting and Merger” beginning on page 10, highlights certain information in this proxy statement but may not contain all of the information that may be important to you. To understand the merger more fully and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement. Each item in this Summary Term Sheet includes a page reference directing you to a more complete description of that topic. You may obtain any additional information referred to in this proxy statement without charge by following the instructions under the caption “Where You Can Find Additional Information” beginning on page 132.

Except as otherwise specifically noted in this proxy statement, “Urovant,” the “surviving company,” “we,” “our,” “us” and similar words refer to Urovant Sciences Ltd., including, in certain cases, our subsidiaries. Throughout this proxy statement, we refer to: Sumitomo Dainippon Pharma Co., Ltd. as “Sumitomo Dainippon”; Sumitovant Biopharma Ltd. as “Sumitovant”; and Titan Ltd. as “merger sub,” and we refer to Sumitomo Dainippon, Sumitovant, and merger sub collectively as the “Sumitomo Dainippon Group,” and we refer to the Sumitomo Dainippon Group together with Sumitomo Chemical Co., Ltd., as the “Sumitomo Group.” In addition, throughout this proxy statement we also refer to the Agreement and Plan of Merger, dated November 12, 2020, by and among Urovant, Sumitovant, merger sub, and solely with respect to Section 9.13 thereof, Sumitomo Dainippon, as it may be amended from time to time, as the “merger agreement”; and we refer to the related statutory merger agreement contemplated to be executed and delivered by Urovant, Sumitovant and merger sub, as the “statutory merger agreement.”

The merger agreement provides that upon satisfaction of the conditions to closing, merger sub will merge with and into Urovant, which we refer to as the “merger,” and Urovant will continue as the surviving corporation in the merger and a wholly owned subsidiary of Sumitovant. Upon completion of the merger, Urovant will cease to be a publicly traded company, and you will cease to have any rights in Urovant as a shareholder.

The merger agreement is attached as Annex A to this proxy statement. We encourage you to read the merger agreement, which is the legal document that governs the merger, carefully and in its entirety.

Because the merger is a “going private” transaction, Urovant, Sumitovant and Sumitomo Dainippon have filed with the Securities and Exchange Commission, which we refer to as the “SEC,” a Transaction Statement on Schedule 13E-3 with respect to the merger, which, as amended from time to time, we refer to as the “Schedule 13E-3.” You may obtain additional information about the Schedule 13E-3 under the caption “Where You Can Find Additional Information” beginning on page 132.

The Parties to the Merger Agreement

Urovant Sciences Ltd.

Urovant is a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapies for urologic conditions. For information about Urovant, please see the sections entitled “Important Information Regarding Urovant Sciences Ltd.—Company Background” beginning on page 107 and “Where You Can Find Additional Information” beginning on page 132.

 

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Sumitomo Dainippon Pharma Co., Ltd.

Sumitomo Dainippon is among the top-ten listed pharmaceutical companies in Japan, operating globally in major pharmaceutical markets, including Japan, the United States, China, and the European Union. For information about Sumitomo Dainippon, please see the section entitled “Parties to the Merger—Sumitomo Dainippon Pharma Co., Ltd” beginning on page 81.

Sumitovant Biopharma Ltd.

Sumitovant is a global biopharmaceutical company that is a wholly owned subsidiary of Sumitomo Dainippon. Sumitovant is the majority shareholder of Urovant. For more information about Sumitovant, please see the section entitled “Parties to the Merger—Sumitovant Biopharma Ltd.” beginning on page 81.

Titan Ltd.

Titan Ltd. is a newly formed Bermuda exempted company limited by shares and a wholly owned direct subsidiary of Sumitovant and was formed solely for the purpose of engaging in the merger and other related transactions. For more information about Titan Ltd., please see the section entitled “Parties to the Merger—Titan Ltd.” beginning on page 81.

The Merger Proposal

You are being asked to consider and vote upon a proposal to approve and adopt the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement, which proposal we refer to as the “Merger Proposal.” For more information regarding the Merger Proposal, please see the section entitled “The Merger Proposal” beginning on page 87.

The merger agreement provides that subject to the terms and conditions set forth in the merger agreement and the statutory merger agreement, at the time the merger becomes effective:

 

   

each common share of Urovant, par value US$0.000037453 per share, referred to herein as a “Urovant common share,” that is issued and outstanding immediately prior to the effective time of the merger (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act (as such term is defined below), (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) will be cancelled and automatically cease to exist, and each holder of such Urovant common shares will cease to have any rights with respect thereto, except for the right to receive $16.25 per share, without interest and less any applicable withholding taxes, which we refer to as the “per share merger consideration”; and

 

   

each Urovant common share held by a holder who, as of the effective time of the merger (i) did not vote in favor of the Merger Proposal, (ii) complied with all of the provisions of the Companies Act 1981 of Bermuda, as amended, which we refer to as the “Bermuda Companies Act,” concerning the right of holders of Urovant common shares to require appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, and (iii) did not fail to exercise such appraisal rights or effectively withdraw or otherwise waive any rights to appraisal, will be cancelled and automatically cease to exist, and unless otherwise required by applicable law, the holder of such Urovant common share will cease to have any rights with respect thereto, except for (x) the right to receive the per share merger consideration and (y) in the event that the fair value of a Urovant common share as appraised by the Supreme Court of Bermuda under Section 106(6) of the Bermuda Companies Act is greater than $16.25, the right to receive such difference from the surviving company by payment made within 30 days after such appraised fair value is finally determined. Please see the section of this proxy statement entitled “Rights of Appraisal” beginning on page 117 for a more detailed description of the appraisal rights of our shareholders.

 

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For more information regarding the merger and the merger agreement, please see the section entitled “The Merger Agreement” beginning on page 88.

Conditions to the Merger

The respective obligations of Urovant, Sumitovant and merger sub to effect the merger are subject to the satisfaction or, to the extent permitted by applicable law, waiver, of certain customary conditions, including the receipt of the General Shareholder Approval and the Public Shareholder Approval (each as defined below), the absence of any legal prohibitions on the consummation of the merger, the accuracy of the representations and warranties of the parties, compliance in all material respects by the parties with their respective obligations under the merger agreement, and, with respect to the obligations of Sumitovant and merger sub, the absence of any circumstance, occurrence, effect, change, or development that has had or would reasonably be expected to have a Company Material Adverse Effect (as such term is defined in the merger agreement).

For more information regarding the conditions to the merger, please see the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 101.

When the Merger Becomes Effective

We anticipate completing the merger in the first quarter of 2021, subject to approval of the merger agreement and the statutory merger agreement by Urovant’s shareholders as specified herein, and the satisfaction of the other conditions to the completion of the merger.

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

In connection with the transactions contemplated by the merger agreement, the board of directors of Urovant, which we refer to as the “Urovant board,” formed a committee, which we refer to as the “special committee,” consisting solely of independent and disinterested directors of Urovant. The special committee, acting with the advice and assistance of its independent legal and financial advisors, unanimously (i) determined that the per share merger consideration constitutes fair value for each Urovant common share in accordance with the Bermuda Companies Act, (ii) determined that the terms of the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement are fair to and in the best interests of Urovant and its shareholders (including unaffiliated security holders as defined in Rule 13e-3 of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act”), (iii) approved and declared advisable the execution, delivery and performance of the merger agreement and the statutory merger agreement, the merger and the other transactions contemplated by the merger agreement and the statutory merger agreement by Urovant, and (iv) subject to the conditions set forth in the merger agreement, recommended that Urovant’s shareholders vote in favor of the adoption and approval of the merger agreement and the statutory merger agreement, the merger and the other transactions contemplated by the merger agreement and the statutory merger agreement, at a duly held meeting of such holders for such purpose.

For a more complete discussion of the factors considered by the special committee in reaching its decision to approve the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement, please see the section entitled “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” beginning on page 35.

Opinion of Financial Advisor to the Special Committee

In connection with the merger, the special committee’s financial advisor, Lazard Frères & Co. LLC, which we refer to as “Lazard,” rendered its oral opinion to the special committee, subsequently confirmed in writing, to

 

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the effect that, as of November 12, 2020, and based upon and subject to the assumptions, procedures, factors, qualifications, limitations and other matters set forth in such written opinion, the $16.25 per share merger consideration to be paid to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant), pursuant to the merger agreement was fair, from a financial point of view, to such holders.

For additional information regarding the opinion delivered by Lazard to Urovant, please see the section entitled “Special Factors—Opinion of Financial Advisor to the Special Committee” beginning on page 39.

Purposes and Reasons of the Controlling Purchaser for the Merger

For Sumitomo Dainippon, Sumitovant and merger sub, collectively referred to herein as the “Controlling Purchaser,” the purpose of the merger is to enable Sumitovant to acquire 100% ownership and control of Urovant in a transaction in which holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) will receive $16.25, without interest and less any applicable tax withholding, per Urovant common share.

For a more complete discussion of the factors considered by the Controlling Purchaser in reaching its decision to approve the merger agreement and the merger, please see the section entitled “Special Factors — Controlling Purchaser’s Purposes and Reasons for the Merger” beginning on page 56.

Position of the Controlling Purchaser as to Fairness of the Merger

The holders of Urovant common shares other than Sumitovant and its affiliates, which shareholders are referred to herein as the “Public Shareholders,” are represented by the special committee, which negotiated the terms and conditions of the merger agreement on the Public Shareholders’ behalf, with the assistance of the special committee’s independent financial and legal advisors. While the members of the Controlling Purchaser are represented by Ms. Myrtle S. Potter and Dr. Shigeyuki Nishinaka on the Urovant board, the merger was

negotiated and approved by the special committee. Ms. Potter and Dr. Nishinaka were not members of the special committee and did not participate in the deliberations of the special committee regarding, or receive advice from the special committee’s legal or financial advisors as to, the substantive and procedural fairness of the merger to the Public Shareholders. The Controlling Purchaser did not undertake any independent evaluation of the fairness of the merger or the per share merger consideration to the Public Shareholders, nor did it request or obtain any opinion or analysis with respect to the fairness of the merger or the per share merger consideration to the Public Shareholders.

The Controlling Purchaser believes, based on, among other things, the factors considered by, and the analysis and resulting conclusions of, the special committee described in the section entitled “Special Factors — Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” (which analysis and resulting conclusions the Controlling Purchaser adopts), that the merger is substantively and procedurally fair to the Public Shareholders.

For a more complete discussion of the Controlling Purchaser’s position as to the fairness of the merger, please see the section entitled “Special Factors — Position of the Controlling Purchaser as to the Fairness of the Merger” beginning on page 58.

 

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Treatment of Company Equity Awards

At the effective time of the merger, which we refer to as the “effective time,” certain equity awards granted under our 2017 Equity Incentive Plan will be treated as set forth below:

 

   

each option to purchase Urovant common shares that is outstanding and unexercised immediately prior to the effective time, whether vested or unvested, and that has an exercise price per Urovant common share that is less than $16.25 will be canceled, and the holder of such option will have the right to receive a cash amount for each Urovant common share that is subject to such option that is equal to the difference between $16.25 and the per share exercise price of such option (without interest and less any applicable withholding for taxes);

 

   

each right to receive an appreciation on Urovant common shares, which we refer to as a “SAR,” that is outstanding and unexercised immediately prior to the effective time, whether vested or unvested, and that has a strike price per Urovant common share that is less than $16.25 will be canceled, and the holder of such SAR will have the right to receive a cash amount for each Urovant common share that is subject to such SAR that is equal to the difference between $16.25 and the strike price per Urovant common share of such SAR (without interest and less any applicable withholding for taxes); and

 

   

each then-outstanding time-based restricted share unit, which we refer to as an “RSU,” and each Urovant common share that is subject to a restriction on transfer that lapses at the end of a specified period or periods, which we refer to as a “restricted share,” whether vested or unvested, that has not been settled in Urovant common shares prior to the effective time will be canceled, and the holder of such RSU or restricted share will have the right to receive, in respect of each such RSU or restricted share, a single lump sum cash payment equal to $16.25 (without interest and less any applicable withholding for taxes).

For more information regarding the treatment of equity awards granted under our 2017 Equity Incentive Plan, please see the section entitled “The Merger Agreement—Treatment of Company Equity Awards” beginning on page 90.

Treatment of Company Warrants

To the extent any portion of the warrants we issued to Hercules Capital, Inc., which we refer to as “Hercules,” on February 20, 2019 and September 20, 2019 to purchase an aggregate of 99,777 Urovant common shares have not been exercised in full prior to the effective time, such warrants will be deemed to have been automatically exercised in full with respect to any remaining Urovant common shares subject to purchase thereunder immediately prior to the effective time.

For more information regarding these warrants and their treatment in connection with the merger, please see the section entitled “The Merger Agreement—Treatment of Company Warrants” beginning on page 91.

Interests of Urovant’s Directors and Executive Officers in the Merger

In considering the recommendation of the special committee that you vote to approve the Merger Proposal, you should be aware that, aside from their interests as shareholders of Urovant, our directors and executive officers have interests in the merger that are different from, or in addition to, those of other shareholders of Urovant generally. In particular, Ms. Myrtle S. Potter and Dr. Shigeyuki Nishinaka are members of the Urovant board who have been designated to serve by Sumitovant pursuant its right to designate such directors as set forth

in our bye-laws. Ms. Potter is the Chief Executive Officer of Sumitovant, and Dr. Nishinaka is the Senior Executive Officer, Global Corporate Strategy/Global Business Development/International Business Management of Sumitomo Dainippon. Other interests of our directors and executive officers that may be different from or in addition to the interests of Urovant’s shareholders are discussed in the section entitled “Special Factors—Interests of Urovant’s Directors and Executive Officers in the Merger” beginning on page 72.

 

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The special committee was aware of the different or additional interests described herein and considered those interests along with other matters in recommending and/or approving, as applicable, the merger agreement, the statutory merger agreement, the merger and the other transactions contemplated by the merger agreement and the statutory merger agreement.

No Solicitation; No Adverse Company Recommendation

Pursuant to the merger agreement, Urovant agreed to be subject to certain customary non-solicitation provisions, whereby, among other things, Urovant agreed to not, and agreed to cause its subsidiaries not to, solicit, initiate, knowingly encourage or knowingly facilitate any inquiry, discussion, offer or request that constitutes, or would reasonably be expected to lead to, an alternative acquisition proposal. However, following the date of the merger agreement and until the special general meeting contemplated by this proxy statement, Urovant will be able to respond to and engage in discussions of certain acquisition proposals, subject to certain conditions, if Urovant receives a bona fide written acquisition proposal that did not result from a material breach of Urovant’s obligations not to solicit acquisition proposals or engage in discussions regarding acquisition proposals, and the special committee determines in its good faith judgment (after consultation with its financial advisor and outside legal counsel) that (i) such alternative acquisition proposal constitutes or would reasonably be expected to lead to a superior proposal and (ii) the failure of the special committee to take such action would reasonably be likely to constitute a breach of its fiduciary duties under applicable law.

The non-solicitation provisions are described in more detail in the section entitled “The Merger Agreement—No Solicitation; No Adverse Company Recommendation” beginning on page 96.

Termination

Urovant and Sumitovant may terminate the merger agreement by mutual written consent (provided that the special committee has approved such termination) at any time before the effective time. In addition, either Urovant or Sumitovant may terminate the merger agreement if, among other situations:

 

   

the merger is not consummated on or before 5:00 p.m. Pacific Time on May 12, 2021, except that a party cannot terminate the merger agreement for such failure if the breach of any provision of the merger agreement or the Sumitovant voting agreement (as such term is defined below) by such party causes or results in the failure of the merger to close by such time;

 

   

an applicable law or judgment, order or other determination by any court or other governmental entity of valid jurisdiction in effect that prevents, makes illegal or prohibits the completion of the merger becomes final and non-appealable;

 

   

the Public Shareholder Approval is not obtained at a duly convened meeting of Urovant’s shareholders or at any due adjournment or postponement thereof at which a vote on the merger was taken; or

 

   

if the other party has breached any of its representations or warranties, or failed to perform any of its covenants or agreements, in a way that results in the failure to satisfy a condition to the completion of the merger, and such breach has not been cured within the earlier of (i) 20 business days after written notice by the other party informing the breaching party of such breach and (ii) May 12, 2021, provided that the party seeking to terminate is not then in material breach of its own obligations.

Urovant may also terminate the merger agreement if the General Shareholder Approval has not been obtained at a duly convened meeting of Urovant’s shareholders or any due adjournment or postponement thereof at which a vote on the merger was taken.

Additional information regarding the situations pursuant to which the merger agreement can be terminated are described in more detail in the section entitled “The Merger Agreement—Termination” beginning on page 102.

 

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Termination Fee

Urovant will be required to pay to Sumitovant a termination fee of $13,620,000, which we refer to as the “Termination Fee,” if:

 

   

Urovant terminates the merger agreement prior to obtaining the General Shareholder Approval to enter into an agreement providing for a superior proposal;

 

   

Sumitovant terminates the merger agreement prior to the special general meeting of Urovant’s shareholders contemplated by this proxy statement if (i) the special committee made an adverse change to its recommendation that Urovant’s shareholders approve and adopt the merger, (ii) the special committee fails to recommend rejection of any intervening third-party tender or exchange offer, (iii) after the public disclosure of an alternative acquisition proposal, the special committee fails to publicly reaffirm its recommendation to approve and adopt the merger agreement within 10 business days of Sumitovant requesting the same (or before May 10, 2021), or (iv) there was an intentional and material breach of Urovant’s non-solicitation obligations set forth in the merger agreement; or

 

   

(i) after the merger agreement was signed on November 12, 2020 and prior to its termination by either party or by mutual agreement, a third party makes an alternative acquisition proposal to Urovant, the special committee or Urovant’s shareholders (prior to the special general meeting contemplated by this proxy statement), (ii) following such proposal, the merger agreement is terminated by (x) Urovant or Sumitovant because the merger has not been completed by May 12, 2021 or the Public Shareholder Approval has not been obtained, or (y) Sumitovant following a material breach by Urovant of its covenants or its representations and warranties set forth in the merger agreement, and (iii) within 12 months following such termination, Urovant enters into a definitive agreement with respect to an acquisition proposal or consummates such acquisition.

For more information regarding the Termination Fee, please see the section entitled “The Merger Agreement—Termination Fees and Limited Expense Reimbursement; Limitations on Liability” beginning on page 103.

Guaranty by Sumitomo Dainippon

In order to induce Urovant to enter into the merger agreement, Sumitomo Dainippon agreed to irrevocably guarantee to Urovant the due and punctual payment of all amounts payable by Sumitovant or merger sub under the merger agreement, in each case, as and when due.

Voting and Support Agreement

As a condition to Urovant’s willingness to enter into the merger agreement and to proceed with the transactions contemplated thereby, including the merger, Sumitovant entered into a voting and support agreement with Urovant on November 12, 2020, which we refer to as the “Sumitovant voting agreement,” Pursuant to the Sumitovant voting agreement, Sumitovant agreed to be present for the purposes of quorum and to vote, or cause to be voted, each Urovant common share owned by it or its affiliates (other than Urovant and its subsidiaries) in favor of the Merger Proposal at any meeting of Urovant’s shareholders held during the term of the merger agreement and at any permitted adjournment thereof. For more information regarding the Sumitovant voting agreement, please see the section entitled “Voting and Support Agreement” beginning on page 105.

Material U.S. Federal Income Tax Consequences of the Merger

The receipt of cash in exchange for Urovant common shares pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. Holder (as defined below in “Special Factors-Material

U.S. Federal Income Tax Consequences of the Merger” beginning on page 75) of Urovant common shares who receives cash in the merger generally will recognize gain or loss in an amount equal to the difference, if any,

 

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between (1) the amount of cash received and (2) such U.S. Holder’s adjusted tax basis in the Urovant common shares exchanged therefor. You should consult your own tax advisors regarding the particular tax consequences to you of the exchange of Urovant common shares for cash pursuant to the merger in light of your particular circumstances (including the application and effect of any federal, state, local, or foreign tax laws). For more information, please see the section entitled “Special Factors—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 75.

The Special General Meeting

The special general meeting of shareholders will be held at [●] (Pacific Time), on [●], 2021, solely in a virtual meeting format via the Internet. You will be able to attend and participate in the special general meeting online by visiting [●]. At the special general meeting, shareholders will be asked to consider and vote upon:

 

   

the Merger Proposal; and

 

   

a proposal to approve an adjournment of the special general meeting, if necessary or appropriate (as determined in good faith by Urovant), to solicit additional proxies if there are insufficient votes at the time of the special general meeting to approve the Merger Proposal, which we refer to as the “Adjournment Proposal.”

Record Date and Quorum

The holders of record of the Urovant common shares as of the close of business on [●], 2021 (the “record date”) are entitled to receive notice of and to vote at the special general meeting. On the record date, [●] Urovant common shares were issued and outstanding.

The presence at the special general meeting of holders of Urovant common shares representing, in person or by proxy, a majority of the issued and outstanding Urovant common shares entitled to vote at the meeting as of the record date will constitute a quorum, permitting Urovant to conduct its business at the special general meeting.

For more information, please see the section entitled “The Special General Meeting—Record Date and Quorum” beginning on page 82.

Required Votes

Merger Proposal

The affirmative vote of the holders of at least 66 23% of the issued and outstanding Urovant common shares entitled to vote on the Merger Proposal and voting at the special general meeting is required to approve the Merger Proposal, which is referred to herein as the “General Shareholder Approval.” In addition, the merger agreement makes it a condition to the parties’ obligation to complete the merger that the holders of at least a majority of the outstanding Urovant common shares held by the Public Shareholders vote in favor of the approval of the Merger Proposal, which approval is referred to herein as the “Public Shareholder Approval.” We refer to the Public Shareholder Approval and the General Shareholder Approval collectively as the “Required Shareholder Approval.” As a result of the Public Shareholder Approval, if you fail to vote on the Merger Proposal or abstain from voting on the Merger Proposal, the effect will be the same as a vote against the Merger Proposal. Sumitovant has agreed in the Sumitovant voting agreement that it will cause each Urovant common share beneficially held by Sumitovant and its affiliates (other than Urovant and its subsidiaries) to vote in favor of the approval of the Merger Proposal.

Sumitovant has agreed in the Sumitovant voting agreement that it will cause each Urovant common share beneficially held by Sumitovant and its affiliates (other than Urovant and its subsidiaries) to vote in favor of the

 

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approval of the Merger Proposal. If Sumitovant votes in compliance with the terms of the Sumitovant voting agreement, the General Shareholder Approval will be obtained, but such vote will have no effect on the Public Shareholder Approval.

Adjournment Proposal

The Adjournment Proposal requires approval by the holders of a majority of the issued and outstanding Urovant common shares entitled to vote on such matter and voting at the special general meeting. If you fail to vote on the Adjournment Proposal or abstain from voting on the Adjournment Proposal, your Urovant common shares will not be counted in determining, and will have no effect on, the outcome of such proposal.

 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL GENERAL MEETING AND THE MERGER

The following questions and answers address briefly some questions you may have regarding the special general meeting, the merger agreement, the statutory merger agreement, and the merger. These questions and answers may not address all questions that may be important to you as a shareholder of Urovant. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

 

Q:

When and where will the special general meeting be held?

 

A:

The special general meeting of shareholders will be held at [●] (Pacific Time), on [●], 2021. The special general meeting will be held solely in a virtual meeting format via the Internet. You will be able to attend and participate in the special general meeting online by visiting [●]. You will not be able to attend the special general meeting in person.

The special general meeting webcast will begin promptly at [●] (Pacific Time). We encourage you to access the virtual special general meeting prior to the start time. Online check-in will begin at [●] (Pacific Time), and you should allow ample time for the check-in procedures.

 

Q:

How can I attend and participate in the special general meeting?

Anyone may attend the special general meeting virtually through the online virtual meeting platform at [●], but you will need the control number included on your proxy card or voting instruction form in order to be able to vote your Urovant common shares or submit questions during the special general meeting. Instructions on how to connect to the special general meeting and participate virtually, including how to vote your shares at the meeting, are posted at [●]. If you do not have your control number, you will be able to access and listen to the special general meeting, but you will not be able to vote your Urovant common shares or submit questions during the meeting.

During the special general meeting, you may submit questions through the online virtual meeting platform. We will answer as many shareholder-submitted questions as time permits, and any questions that we are unable to address during the special general meeting will be published and answered on the investor relations page of our website, at https://investors.urovant.com. We will not answer any questions that are irrelevant to the purpose of the special general meeting or that contain inappropriate or derogatory references. If we receive substantially similar questions, we will group those questions together and provide a single response to avoid repetition.

We will have technicians ready to assist you with any technical difficulties that you may have in accessing the virtual meeting or submitting questions. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time or submitting questions, please call the technical support number that will be posted on the special general meeting log in page at [●].

 

Q:

Who can vote at the special general meeting?

 

A:

Only shareholders of record at the close of business on [●], 2021, or the record date, will be entitled to vote at the special general meeting. On the record date, there were [●] Urovant common shares issued and outstanding and entitled to vote at the special general meeting.

Shareholder of Record: Urovant common shares Registered in Your Name

If, on the record date, your Urovant common shares were registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are a shareholder of record. As a shareholder of record, you may vote at the special general meeting or vote by proxy. Whether or not you

 

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plan to attend the special general meeting, we urge you to submit your proxy or voting instructions as soon as possible. For more information, please see our response to the question “How do I vote?” below beginning on page 11.

Beneficial Owner: Urovant common shares Registered in the Name of a Broker, Bank or Other Nominee

If, on the record date, your Urovant common shares were held, not in your name, but rather through a broker, bank or other nominee, then you are the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by that organization. The organization holding your Urovant common shares is considered to be the shareholder of record for purposes of voting at the special general meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account. You are also invited to attend the special general meeting. For more information, please see our response to the question “When and where will the special general meeting be held?” beginning on page 10.

 

Q:

What am I voting on?

 

A:

You will be asked to vote on the following proposals:

 

   

the Merger Proposal; and

 

   

the Adjournment Proposal.

For more information, please see the sections entitled “The Merger Proposal” beginning on page 87 and “Adjournment Proposal” beginning on page 120.

 

Q:

How do I vote?

 

A:

On each proposal, you may vote “For,” “Against” or “Abstain.” The procedures for voting are described below.

Shareholder of Record: Urovant Common Shares Registered in Your Name

We urge you to submit a proxy by Internet, telephone or mail to authorize how your Urovant common shares are voted at the special general meeting. This will ensure that your shares are represented and your vote is counted at the special general meeting whether or not you plan to attend the special general meeting. You may still attend and vote at the special general meeting, even if you have already submitted a proxy to authorize the voting of your shares at the special general meeting. You may submit a proxy or vote your shares by one of the following methods:

 

   

By Internet. You may submit a proxy over the Internet to vote your shares at the special general meeting by following the instructions on the enclosed proxy card.

 

   

By Telephone. You may submit a proxy by telephone to vote your shares at the special general meeting by following the instructions on the enclosed proxy card.

 

   

By Mail. You may submit a proxy by mail by completing, signing and dating the enclosed proxy card and returning it promptly in the accompanying postage-paid envelope.

 

   

At the Special General Meeting. To vote at the special general meeting, you must do so through the online virtual meeting platform at [●]. For more information, please see our response to the question “How can I attend and participate in the special general meeting?” beginning on page 10.

Beneficial Owner: Urovant common shares Registered in the Name of Broker, Bank or Other Nominee

If you are a beneficial owner of Urovant common shares registered in the name of your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee on how to vote your

 

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shares. Your broker, bank, or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to vote by telephone. You may also submit your voting instructions by completing, signing and dating the voting instruction form that was included with this proxy statement and returning it in the accompanying postage-paid envelope.

To vote at the special general meeting, a beneficial owner of Urovant common shares must do so through the online virtual meeting platform at [●]. For more information, please see our response to the question “How can I attend and participate in the special general meeting?” beginning on page 10.

 

Q:

How many votes do I have?

 

A:

On each matter to be voted upon, you have one vote for each Urovant common share you owned as of the close of business on the record date.

 

Q:

How many votes are needed to approve each proposal?

 

A:

Merger Proposal

Under our bye-laws, approval of the Merger Proposal requires the affirmative vote of the holders of at least 66 23% of the issued and outstanding Urovant common shares entitled to vote on the Merger Proposal and voting at the special general meeting, which we refer to as the General Shareholder Approval. In addition, the merger agreement makes it a condition to the parties’ obligation to complete the merger that the holders of at least a majority of the outstanding Urovant common shares held by Public Shareholders vote in favor of the approval of the Merger Proposal, which we refer to as the Public Shareholder Approval. As a result of the Public Shareholder Approval, if you fail to vote on the Merger Proposal (including if you do not submit a valid proxy or attend the special general meeting to vote your Urovant common shares on the Merger Proposal, or if you fail to instruct your broker, bank or other nominee how to vote your Urovant common shares on the Merger Proposal) or if you abstain from voting on the Merger Proposal, the effect will be the same as a vote against the Merger Proposal. Sumitovant has agreed in the Sumitovant voting agreement that it will cause each Urovant common share beneficially held by Sumitovant and its affiliates (other than Urovant and its subsidiaries) to vote in favor of the approval of the Merger Proposal. Sumitovant has agreed in the Sumitovant voting agreement that it will cause each Urovant common share beneficially held by Sumitovant and its affiliates (other than Urovant and its subsidiaries) to vote in favor of the approval of the Merger Proposal. If Sumitovant votes in compliance with the terms of the Sumitovant voting agreement, the General Shareholder Approval will be obtained.

Adjournment Proposal

The Adjournment Proposal requires approval by the holders of a majority of the issued and outstanding Urovant common shares entitled to vote on such matter and voting at the special general meeting. For the Adjournment Proposal, only votes “For” or “Against” will be counted as a vote cast. If you fail to vote on the Adjournment Proposal (including if you do not submit a valid proxy or attend the special general meeting to vote your Urovant common shares on the Adjournment Proposal, or if you fail to instruct your broker, bank or other nominee how to vote your Urovant common shares on the Adjournment Proposal) or if you abstain from voting on the Adjournment Proposal, your Urovant common shares will not be counted in determining, and will have no effect on, the outcome of such proposal.

 

Q:

What is the quorum requirement?

 

A:

A quorum of shareholders is necessary to conduct business at the special general meeting. A quorum will be present if holders of Urovant common shares representing a majority of the issued and outstanding Urovant common shares entitled to vote at the special general meeting as of the record date are present or represented by proxy at the special general meeting. Your Urovant common shares will be counted towards

 

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  the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote at the special general meeting. Abstentions will be counted towards the quorum requirement.

 

Q:

What will shareholders receive in the merger?

 

A:

If the merger is completed, shareholders will have the right to receive $16.25 in cash, without interest and less any applicable withholding taxes, for each Urovant common share they hold immediately prior to the effective time (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)), and any such Urovant common shares will cease to exist, and each holder of such Urovant common shares will cease to have any other rights with respect thereto as of the effective time of the merger.

 

Q:

How does the per share merger consideration compare to the market price of the Urovant common shares prior to the announcement of the merger?

 

A:

The per share merger consideration represents: (i) a premium of approximately 96% over the closing price of the Urovant common shares on November 12, 2020 (the last trading day preceding the public announcement of the merger, at which date the closing price was $8.28) and (ii) a premium of approximately 92% over the 30-day volume weighted average price of the Urovant common shares ending on November 12, 2020 (which was approximately $8.48).

 

Q:

How does the Special Committee recommend that I vote?

 

A:

The special committee recommends unanimously that our shareholders vote:

 

   

“FOR” the Merger Proposal; and

 

   

“FOR” the Adjournment Proposal.

You should read the section entitled “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” beginning on page 35 for a discussion of the factors that the special committee considered in deciding to recommend and approve the merger agreement and the statutory merger agreement. Please also see the section entitled “Special Factors—Interests of Urovant’s Directors and Executive Officers in the Merger” beginning on page 72.

 

Q:

If my shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

A:

No. In accordance with the rules of the Nasdaq Stock Market LLC, which we refer to as “Nasdaq,” banks, brokers and other nominees who hold Urovant common shares in “street name” for their customers do not have discretionary authority to vote those shares with respect to the Merger Proposal or the Adjournment Proposal. Accordingly, if banks, brokers or other nominees do not receive specific voting instructions from the beneficial owners of those shares, they are not permitted to vote those shares with respect to any of the proposals to be presented at the special general meeting. As a result, if you hold your Urovant common shares in “street name” and you do not provide voting instructions, your Urovant common shares will (i) not be counted for purposes of determining whether a quorum is present at the special general meeting, (ii) assuming a quorum is present, have the same effect as a vote “AGAINST” the Merger Proposal with respect to the Public Shareholder Approval requirement, and (iii) assuming a quorum is present, have no effect on the Merger Proposal with respect to the General Shareholder Approval and no effect on the Adjournment Proposal.

 

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Q:

What will happen if the merger is not consummated?

 

A:

If the merger is not consummated for any reason, Urovant’s shareholders will not receive any payment for their Urovant common shares in connection with the merger. Instead, Urovant will remain a public company. The Urovant common shares will continue to be listed and traded on Nasdaq. Under certain specified circumstances, Urovant will be required to pay Sumitovant the Termination Fee if the merger agreement is terminated. For more information on the circumstances under which Urovant would be required to pay the Termination Fee, please see the section entitled “The Merger Agreement—Termination Fees and Limited Expense Reimbursement; Limitations on Liability” beginning on page 103.

 

Q:

What do I need to do now?

 

A:

We urge you to read this proxy statement carefully, including its annexes and the documents to which it refers as incorporated by reference, as well as the related Schedule 13E-3, including the exhibits thereto, filed with the SEC, and to consider how the merger affects you. For more information, please see the section entitled “Where You Can Find Additional Information” beginning on page 132. Once you have reviewed the relevant materials, please ensure that your Urovant common shares are voted at the special general meeting by following the instructions set forth in our response to the question “How do I vote?” beginning on page 11.

 

Q:

What is the deadline for voting my shares if I do not attend the special general meeting?

 

A.

Shareholder of Record: Shares Registered in Your Name

Your proxy must be received by telephone or the Internet by the time the polls close at the special general meeting in order for your shares to be voted at the special general meeting. If you received a printed set of proxy materials, you also have the option of completing, signing, dating and returning the proxy card enclosed with the proxy materials, which must be received before the start of the special general meeting in order for your shares to be voted at the meeting.

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee

Please comply with the deadlines included in the voting instructions provided by the broker, bank or other nominee that holds your shares.

 

Q:

Can I change or revoke my vote after submitting my proxy?

 

A:

Shareholder of Record: Shares Registered in Your Name

Yes. You can change your vote or revoke your proxy at any time before the polls close at the special general meeting. If you are the record holder of your Urovant common shares, you may change your vote or revoke your proxy in any one of the following ways:

 

   

You may properly submit a new proxy by Internet, telephone or mail. Please see our response to the question “How do I vote?” beginning on page 11.

 

   

You may send a written notice that you are revoking your proxy to Urovant Sciences Ltd., Attn: Corporate Secretary, at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

 

   

You may attend and vote at the special general meeting. However, simply attending the special general meeting will not, by itself, revoke your proxy.

Unless you attend and vote at the special general meeting, your most recently submitted proxy is the one that is counted.

 

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Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee

If your Urovant common shares are held by your broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee to change or revoke your vote.

 

Q:

Should I send in my stock certificates or other evidence of ownership now?

 

A:

No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your Urovant common shares for the per share merger consideration. If your Urovant common shares are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the per share merger consideration. Do not send in any certificate or evidence of ownership now.

 

Q:

What happens if I sell my Urovant common shares before completion of the merger?

 

A:

If you transfer your Urovant common shares, you will have transferred your right to receive the per share merger consideration in the merger. In order to receive the per share merger consideration, you must hold your Urovant common shares through completion of the merger.

 

Q:

What does it mean if I receive more than one set of proxy materials?

 

A:

If you receive more than one set of proxy materials, your Urovant common shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the proxy card or voting instruction form in each set of proxy materials to ensure that all of your shares are voted.

 

Q:

How can I find out the results of the voting at the special general meeting?

 

A:

Preliminary voting results will be announced at the special general meeting. In addition, final voting results will be published in a Current Report on Form 8-K that we expect to file with the SEC within four business days after the special general meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the date of the special general meeting, we intend to file a Current Report on Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Current Report on Form 8-K to publish the final results.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Urovant has retained Mackenzie Partners, Inc., which we refer to as “Mackenzie Partners,” a proxy solicitation firm, to assist it in the solicitation of proxies for the special general meeting. For more information regarding Mackenzie Partners’ solicitation of proxies, please see the section entitled “The Special General Meeting—Solicitation of Proxies” beginning on page 85.

 

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Q:

Who can help answer my other questions?

 

A:

If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card(s), please contact Mackenzie Partners.

 

 

LOGO

1407 Broadway – 27th Floor

New York, New York 10018

Call Collect: (212) 929-5500

Call Toll-Free: (800) 322-2884

Email: proxy@mackenziepartners.com

If your broker, bank or other nominee holds your shares, you can also call your broker, bank or other nominee for additional information.

 

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SPECIAL FACTORS

The following, together with the summary of the merger agreement set forth under the section entitled “The Merger Agreement” beginning on page 88 is a description of the material aspects of the merger. While we believe that the following description covers the material aspects of the merger, the description may not contain all of the information that is important to you. We encourage you to read carefully this entire document, including the merger agreement attached to this proxy statement as Annex A, for a more complete understanding of the merger. The following description is subject to, and is qualified in its entirety by reference to, the merger agreement. You may obtain additional information without charge by following the instructions set forth in the section entitled “Where You Can Find Additional Information” beginning on page 132.

Background of the Merger

Sumitovant has maintained a significant equity interest in, and Sumitovant, Sumitomo Dainippon and certain of their officers and directors have been involved with the management and operation of, Urovant since Sumitovant acquired a majority of Urovant’s outstanding Urovant common shares on December 27, 2019. For example, members of Urovant’s management team and representatives from Sumitovant meet periodically to discuss Urovant’s business, as well as pending and anticipated developments. These meetings and discussions have continued throughout 2020 and during the pendency of the events culminating in the execution of the merger agreement. For additional information regarding certain agreements between Urovant and its subsidiaries, on the one hand, and the Sumitomo Group and its affiliates, on the other hand, please see the section entitled “Important Information Regarding Urovant Sciences Ltd.—Transactions Between Urovant and the Controlling Purchaser” beginning on page 114.

Urovant’s management and the Urovant board, including the directors appointed by Sumitovant, regularly review Urovant’s performance, prospects and strategy in light of current business and economic conditions, as well as developments in the urology and pharmaceutical sectors. These regular reviews have, from time-to-time, included evaluation of potential financial alternatives.

On September 6, 2019, Sumitomo Dainippon entered into a non-binding memorandum of understanding, or the “MOU,” with Roivant Sciences Ltd., which we refer to as “Roivant Sciences.” Roivant Sciences held a majority of the outstanding Urovant common shares as of the execution of the MOU. The MOU related to a potential strategic alliance between Roivant Sciences and Sumitomo Dainippon that would include, among other things, Sumitomo Dainippon’s acquisition of all Urovant common shares held by Roivant Sciences. Following the execution of the MOU, Sumitomo Dainippon commenced negotiations (i) with Roivant Sciences related to a definitive transaction agreement that would effectuate the potential strategic alliance contemplated in the MOU, and (ii) with Urovant related to Sumitomo Dainippon’s potential acquisition of all Urovant common shares held by Roivant Sciences.

On October 31, 2019, Sumitomo Dainippon, Sumitovant, Roivant Sciences, and certain other parties entered into a definitive transaction agreement, which we refer to as the “Roivant transaction agreement” governing the strategic alliance between the entities, including Sumitomo Dainippon’s contemplated acquisition (through Sumitovant) of all Urovant common shares held by Roivant Sciences on the terms and subject to the conditions set forth in the Roivant transaction agreement. In connection with the execution of the Roivant transaction agreement, also on October 31, 2019, Urovant entered into a letter agreement with Sumitomo Dainippon, which we refer to as the “2019 letter agreement,” pursuant to which, among other things, the parties agreed that:

 

   

the Urovant board would approve (a) Sumitomo Dainippon’s (or one of its designated subsidiaries’) acquisition of the Urovant common shares held by Roivant Sciences for the purposes of exempting such acquisition from the restrictions on business combinations that were set forth in Urovant’s Amended and Restated Bye-laws, which we refer to as the “A&R Bye-laws,” and (b) an amendment to the A&R Bye-laws that would transfer Roivant Sciences’ right under the A&R Bye-laws to appoint

 

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two directors to the Urovant board (each of whom had three votes on all matters before the Urovant board) to Sumitomo Dainippon, provided, that Sumitomo Dainippon’s right to make such appointments would terminate if Sumitomo Dainippon and its affiliates ceased to hold at least a majority of the aggregate voting rights attached to our outstanding Urovant common shares;

 

   

Sumitomo Dainippon would provide Urovant with a $200 million low-interest, five-year term loan facility, with no principal repayments required to be made until the end of the term; and

 

   

Sumitomo Dainippon and Urovant would enter into an investor rights agreement that would, among other things, include certain protections for Urovant’s minority shareholders so long as Sumitomo Dainippon and its affiliates continued to hold at least a majority of the aggregate voting rights attached to the outstanding Urovant common shares.

On December 27, 2019, pursuant to the Roivant transaction agreement, Roivant Sciences contributed all of the 22,860,013 Urovant common shares held by Roivant Sciences to Sumitovant. Sumitovant was a wholly owned subsidiary of Roivant Sciences at the time of such contribution, and subsequent to such contribution, Roivant Sciences transferred all issued and outstanding equity securities of Sumitovant to Sumitomo Dainippon. Upon the completion of such transactions, Sumitovant became the record holder of a majority of the outstanding Urovant common shares, and Sumitomo Dainippon became the indirect beneficial owner of such Urovant common shares. Because Sumitomo Dainippon’s acquisition of the Urovant common shares owned by Roivant Sciences was only one component of the transaction contemplated by the Roivant transaction agreement, the parties to the Roivant transaction agreement did not indicate or assign a specific consideration amount with respect to Sumitomo Dainippon’s acquisition of the Urovant common shares from Roivant Sciences.

In connection with Sumitomo Dainippon’s acquisition of such Urovant common shares from Roivant Sciences and pursuant to the 2019 letter agreement, on December 27, 2019, Urovant entered into:

 

   

a $300 million unsecured revolving debt financing arrangement, which we refer to as the “Sumitomo loan agreement,” with Sumitomo Dainippon as the lender; and

 

   

an investor rights agreement with Sumitovant and Sumitomo Dainippon, which we refer to as the “investor rights agreement,” pursuant to which Urovant agreed to, among other things (a) comply with certain demands by Sumitovant to register for sale under the Securities Act of 1933 any Urovant common shares beneficially owned by Sumitomo Dainippon, subject to certain customary exceptions and limitations, (b) periodically provide Sumitovant certain financial statements, projections, capitalization summaries and certain other information and access to our books, records, facilities and employees during normal business hours as Sumitovant may reasonably request, and (c) for so long as Sumitomo Dainippon and its controlled affiliates beneficially own between 50% and 90% of the total number of votes entitled to be cast at elections of our directors, inform Sumitovant before issuing any new Urovant common shares and allow Sumitovant to participate in such issuances up to its pro rata share or make sufficient open market purchases to ensure its beneficial ownership percentage does not decline as a result of such issuance.

The investor rights agreement also contains certain protections for the Public Shareholders for so long as Sumitomo Dainippon and its controlled affiliates beneficially own 50% or more of the total number of votes entitled to be cast at elections of our directors, including, among other things:

 

   

a requirement that the Urovant board have a minimum of three independent directors; and

 

   

a requirement that the audit committee be composed solely of independent directors (each of whom cannot be removed by Sumitomo Dainippon or its controlled affiliates without the approval of the Public Shareholders holding a majority of the Urovant common shares not held by Sumitomo Dainippon or its controlled affiliates).

The investor rights agreement also requires that for so long as Sumitomo Dainippon and its controlled affiliates beneficially own between 50% and 90% of the total number of votes entitled to be cast at elections of

 

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our directors, among other things, the audit committee must approve any transaction between Sumitomo Dainippon or any of its controlled affiliates, on the one hand, and Urovant or any of its subsidiaries, on the other hand, that would constitute a transaction with a related person under Item 404 of Regulation S-K under the Exchange Act, subject to certain exceptions relating to, among other things: (i) acquisition transactions, which are discussed below; (ii) any action, transaction or arrangement related to the Sumitomo loan agreement; (iii) the payment of any dividends or distributions in respect of, or the repurchase or redemption of, Urovant’s outstanding equity securities in which holders of such class of securities participate pro rata; and (iv) executive compensation arrangements entered into in the ordinary course of business.

The investor rights agreement also provides that for so long as Sumitomo Dainippon and its controlled affiliates beneficially own between 50% and 90% of the total number of votes entitled to be cast at elections of our directors, then any transaction proposed by Sumitomo Dainippon or its controlled affiliates that would increase Sumitomo Dainippon’s and its controlled affiliates’ beneficial ownership to over 76% of the total votes entitled to be cast at elections of our directors must be approved by a majority of our independent directors that comprise the audit committee (if occurring prior to December 27, 2021) and, if such transaction would increase Sumitomo Dainippon’s beneficial ownership to over 80% of the total votes entitled to be cast at elections of our directors, the Public Shareholders holding a majority of the Urovant common shares not held by Sumitomo Dainippon or its controlled affiliates. Sumitomo Dainippon and its controlled affiliates are also restricted from proposing a transaction that would increase their beneficial ownership to over 76% of the total votes entitled to be cast at elections of our directors unless (i) such proposal is made on a confidential basis in a manner that would not reasonably be expected to require us to make a public announcement regarding the receipt of such a proposal (provided that Sumitomo Dainippon and its controlled affiliates are not prohibited from making any disclosure required by law), (ii) a majority of our independent directors who comprise the audit committee request such proposal or (iii) after December 27, 2021, Sumitomo Dainippon or one of its controlled affiliates has engaged in confidential discussions with the audit committee regarding such proposal for at least 15 business days prior to making such proposal.

Also on December 27, 2019 and pursuant to the 2019 letter agreement, the Urovant board approved an amendment and restatement of the A&R Bye-laws in the form attached as Exhibit 3.3 to our Annual Report on Form 10-K that we filed with the SEC on June 19, 2020, which we refer to as the “Second A&R Bye-laws,” which, among other things, transferred Roivant Sciences’ right under the A&R Bye-laws to appoint two directors to the Urovant board to Sumitomo Dainippon, so long as Sumitomo Dainippon and its affiliates continue to hold at least a majority of the aggregate voting rights attached to the outstanding Urovant common shares. The Second A&R Bye-laws were subsequently approved by a written consent of Sumitovant, as holder of greater than a majority of the outstanding Urovant common shares, and became effective on January 27, 2020.

On May 21, 2020, we entered into an Information Sharing and Cooperation Agreement, which we refer to as the “Sumitovant information sharing agreement,” with Sumitovant, pursuant to which, among other things, we agreed to deliver to Sumitovant drafts of (i) our quarterly and annual financial statements and (ii) the discussion and analysis by our management of Urovant’s financial condition and the results of our operations for such fiscal periods, prior to the applicable deadlines for filing such information with the SEC. The Sumitovant information sharing agreement also requires us to (w) coordinate with Sumitovant before releasing earnings results or any interim financial guidance, (x) notify Sumitovant before issuing any other material press releases, (y) give Sumitovant’s auditors access to our auditors and our books and records to facilitate the completion of Sumitovant’s own internal audit and their review of Urovant’s financial statements and internal accounting controls and operations, and (z) provide Sumitovant any documents or materials relating to our business and access to our senior management to discuss any matters, in each case as Sumitovant may reasonably request.

On June 16, 2020, the audit committee held a meeting with members of Urovant’s management attending. At the request of the audit committee, members of Urovant’s management discussed Urovant’s projected cash flow and capital requirements through its 2024 fiscal year. The audit committee then discussed the need for Urovant to raise additional capital to fund its operations and avoid a potential going concern qualification in the

 

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report to be delivered by Urovant’s independent registered public accounting firm, and requested that Urovant’s management provide information regarding potential alternatives for raising such capital. Pursuant to the audit committee’s request, members of Urovant’s management provided the audit committee information regarding potential sources of financing and the perspectives provided by certain investment banks regarding such alternatives. The audit committee and members of Urovant’s management then discussed various potential alternatives for equity and debt financing, including sales of shares in a marketed offering (with or without the Sumitomo Dainippon Group participating), sales of shares to the Sumitomo Dainippon Group alone, the utilization of Urovant’s at-the-market equity offering program implemented in November 2019, and a new or revised debt facility. After this discussion, the audit committee met in executive session with Urovant’s General Counsel present. The audit committee further discussed an appropriate process for any contemplated sale of additional Urovant common shares to the Sumitomo Dainippon Group and to the public.

On June 17, 2020, Urovant Sciences GmbH, or “USG,” our wholly owned subsidiary, entered into a market access services agreement, which we refer to as the “market access services agreement,” with Sunovion Pharmaceuticals Inc., or “Sunovion,” which is a subsidiary of Sumitomo Dainippon. Pursuant to the market access services agreement, among other things, USG appointed Sunovion as the exclusive distributor of vibegron in the United States, including all of its territories and possessions. For a description of the terms of the market access services agreement, please refer to the section entitled “Important Information Regarding Urovant Sciences Ltd.—Transactions Between Urovant and the Controlling Purchaser” beginning on page 114.

On July 13, 2020, Mr. Pierre Legault (Urovant’s lead independent director) and Dr. Shigeyuki Nishinaka telephonically discussed Urovant’s capital requirements, in light of potential political and economic instability resulting from the upcoming U.S. presidential election and to avoid a potential going concern qualification in the report to be delivered by Urovant’s independent registered public accounting firm. Mr. Legault and Dr. Nishinaka also discussed various potential alternatives for equity or debt financing.

On August 4, 2020, the audit committee held a meeting with members of Urovant’s management, and representatives from O’Melveny & Myers, LLP, or “O’Melveny,” which serves as outside counsel to Urovant, and a financial advisor used by Urovant in connection with a potential securities offering, which we refer to as the “Offering Financial Advisor,” attending. At the request of the audit committee, representatives from the Offering Financial Advisor discussed the status of capital markets generally and various factors impacting such markets generally and the healthcare sector specifically. After the conclusion of this discussion, at the request of the audit committee, representatives from the Offering Financial Advisor left the meeting. Urovant’s management then presented its initial budget estimations to fund its operations through 2023, which included an additional capital raise of at least $350 million necessary to commercialize, launch and market its product candidate, vibegron. The audit committee, members of Urovant’s management and representatives from O’Melveny then discussed and considered various potential alternatives for raising additional capital for Urovant (as well as certain potential risks associated with such alternatives), including, without limitation: (i) a fully marketed equity offering with or without the Sumitomo Dainippon Group participating (and the dilutive effect of such an offering on Urovant’s existing shareholders); (ii) sales of Urovant common shares solely to the Sumitomo Dainippon Group at a premium to the trading price of Urovant common shares (and the potential increase of the Sumitomo Dainippon Group’s ownership and control over Urovant as a result of such sales); (iii) borrowing additional funds from the Sumitomo Dainippon Group (as well as the potential burden on Urovant’s balance sheet as a result of such additional loans, the continued risk of receiving a “going concern” determination, and the possibility that Public Shareholders would view a higher leverage ratio more negatively, all of which could be negatively reflected in Urovant’s share price); and (iv) issuing additional debt securities to the Sumitomo Dainippon Group that would be either convertible into Urovant common shares or are subject to a put option (as well as the longer timeline required to issue more complex debt securities and the potential increase of the Sumitomo Dainippon Group’s ownership and control over Urovant as a result of such issuance).

On September 8, 2020, the audit committee held a meeting with Ms. Myrtle Potter, members of Urovant’s management and representatives from O’Melveny attending. At the request of the audit committee, members of Urovant’s management led a discussion regarding Urovant’s cash position, Urovant’s need to raise additional capital to fund its operations through 2023, and potential alternatives for financing. Members of Urovant’s

 

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management also discussed the possibility, and the potential timing, of Urovant receiving a “going concern” opinion from its auditors in the absence of securing additional financing in the near term. The audit committee asked questions regarding Urovant’s cash position and potential financing alternatives, and a discussion regarding financing alternatives ensued, including the potential risks associated with such alternatives. Following this discussion, the audit committee noted to Ms. Potter that incurring additional debt (by borrowing additional funds from the Sumitomo Dainippon Group or issuing additional debt securities to the Sumitomo Dainippon Group) was not a viable alternative for satisfying Urovant’s capital requirements due to, among other factors, the potential risks associated with debt financing discussed at the August 4, 2020 audit committee meeting. The audit committee then requested that Ms. Potter and the Sumitomo Dainippon Group consider equity financing alternatives for Urovant, including a fully marketed equity offering (with or without the Sumitomo Dainippon Group participating) and sales of Urovant common shares solely to Sumitomo Dainippon Group limited to sales up to the 80% threshold allowed by the investor rights agreement, at a premium to the trading price of Urovant common shares. Ms. Potter confirmed she would discuss the audit committee’s comments internally within the Sumitomo Dainippon Group.

On September 22, 2020, the Urovant board held a meeting with members of Urovant’s management attending. At the request of the Urovant board, members of Urovant’s management presented an update regarding Urovant’s research and development efforts, and its manufacturing efforts to support vibegron’s new drug application for treatment of overactive bladder and vibegron’s anticipated commercial launch in the first quarter of 2021, subject to approval from the FDA. In particular, members of Urovant’s management discussed with the Urovant board that due to potential delays in Urovant’s manufacturing process, the supply of vibegron samples may be limited during the first quarter of 2021, and as a result the initial commercial launch of vibegron in the first quarter of 2021 may be more limited. The Urovant board then asked various questions regarding the presentation by members of Urovant’s management, and a discussion regarding the manufacture and commercial launch of vibegron ensued. Following the conclusion of this discussion, members of Urovant’s management discussed with the Urovant board Urovant’s cash position, its projected future capital needs, and various potential financing alternatives, including the various potential financing alternatives that were discussed among the audit committee and members of Urovant’s management at the September 8, 2020 meeting of the audit committee. As part of this discussion, members of the Urovant board could not reach a consensus as to the appropriate path forward to meet Urovant’s future capital needs. Following this discussion, the Urovant board instructed Urovant’s management to continue to explore with the Offering Financial Advisor a potential marketed equity offering (with or without the Sumitomo Dainippon Group participating).

On September 28, 2020, Sumitovant delivered a letter to the audit committee, which we refer to as the “September 28 letter,” inquiring, on a confidential basis, whether the audit committee would be willing to receive a potential proposal from Sumitovant to acquire the remaining Urovant common shares that Sumitovant does not already own. The September 28 letter noted that although Sumitovant had considered the potential of making such a proposal internally and through preliminary discussions with Sumitomo Dainippon, it had not made any plans to do so. The September 28 letter further noted that since Sumitovant would need to seek internal approvals from the Sumitovant board of directors as well as the management and board of directors of Sumitomo Dainippon before making any such proposal, no proposal would be forthcoming until late October or early November of 2020, if at all. In addition, the September 28 letter indicated that any acquisition proposal made by Sumitovant would comply with the requirements set forth in the investor rights agreement with respect to such transaction, including the requirement that the Public Shareholders holding a majority of the Urovant common shares not held by Sumitomo Dainippon and its controlled affiliates approve any such transaction. The September 28 letter also informed the audit committee that Sumitovant was not interested in selling its stake in Urovant and that the members of the Urovant board who are also members of the Sumitovant and Sumitomo Dainippon executive teams (Ms. Myrtle Potter and Dr. Shigeyuki Nishinaka) would recuse themselves from any process or deliberation undertaken by the Urovant board or any of its committees relating to any potential offer. Finally, the September 28 letter noted that it was being submitted to the audit committee on a confidential basis (and would be deemed automatically withdrawn in the event of its public disclosure).

Later on September 28, 2020, the audit committee shared a copy of the September 28 letter with the remaining members of the Urovant board, other than Ms. Potter and Dr. Nishinaka, and the Urovant board

 

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subsequently held a meeting to discuss the September 28 letter. Following an introductory discussion, each of Ms. Potter and Dr. Nishinaka left the meeting. After discussion, the Urovant board determined that it would form a special committee of the Urovant board comprised of independent directors to, among other things, review, evaluate, negotiate, and approve or reject, any potential proposal from Sumitovant on behalf of the Urovant board, and, if applicable, to approve and recommend, or not approve, any such proposal to Urovant’s shareholders. The Urovant board then reviewed and confirmed the independence of each of Mr. Pierre Legault, Mr. Sef Kurstjens, MD, Ph.D., and Mr. James Hindman with respect to the Sumitomo Group and the potential transaction with Sumitovant. The Urovant board, with Ms. Potter and Dr. Nishinaka recusing themselves from voting, subsequently approved the formation of the special committee by unanimous written resolution and appointed each of Mr. Legault, Mr. Kurstjens, and Mr. Hindman, who collectively also comprised the audit committee, to serve as the members of the special committee. In accordance with Section 91 of the Bermuda Companies Act and Section 46.1 of the Second A&R Bye-laws, the Urovant board delegated to the special committee full and exclusive authority to review, evaluate, negotiate, and approve or reject any potential proposal from Sumitovant, including, to the extent permitted under Bermuda law, exercising all the power and authority of the Urovant board in its sole discretion (and where applicable, on behalf of Urovant).

Thereafter, also on September 28, 2020, the special committee held a meeting with a representative from O’Melveny, which the special committee selected and engaged as its legal advisor. After discussion and deliberation, the special committee elected Mr. Legault as the chair of the special committee. The representative from O’Melveny then discussed the roles and responsibilities of the special committee in connection with the potential transaction with Sumitovant. The special committee next discussed the retention of a financial advisor and reviewed the qualifications that the members of the special committee desired in a financial advisor. After reviewing and discussing various financial advisors, the special committee narrowed its consideration to four potential financial advisors, and the members of the special committee agreed to reach out to each such firm in connection with evaluating its potential retention. At the request of the special committee, the representative from O’Melveny also discussed the expected process and schedule for a potential transaction with Sumitovant and, at the request of the special committee, agreed to contact Jones Day, outside legal counsel to Sumitovant and Sumitomo Dainippon, to discuss the anticipated schedule related to a potential transaction and update the special committee following such discussions. The special committee and the representative from O’Melveny then reviewed the need for strict confidentiality and compliance with securities and insider trading laws in connection with a potential transaction.

Between September 28, 2020 and October 1, 2020, members of the special committee reached out to the four potential financial advisors to determine whether or not any or all of such financial advisors would be an appropriate choice to act as the financial advisor to the special committee in connection with a potential transaction with Sumitovant. After initial discussions with each firm, and after reviewing each firm’s willingness and ability to assist the special committee in connection with the potential transaction, the special committee was able to further narrow its decision to two potential firms that were willing to make a proposal to the special committee.

On October 1, 2020, representatives from O’Melveny and Jones Day met telephonically to discuss the process and timing of any potential proposal and due diligence related thereto.

On October 2, 2020, the special committee held separate meetings with representatives from the two potential financial advisors for the potential transaction (one of which was Lazard), with representatives from O’Melveny present at each meeting. Each firm made a presentation to the special committee highlighting its team’s experience and qualifications, including their history of work in the pharmaceutical and healthcare industries and on comparable transactions, and their familiarity with Urovant. The firms also provided information to the special committee regarding the results of their respective independence analyses and their proposed approach to a potential transaction. Both firms provided their proposed terms of engagement, including their proposed fees. After listening to the presentations of both firms and their responses to certain clarifying questions, the special committee met again later on October 2, 2020 with representatives from O’Melveny present to discuss its search for a financial advisor. The special committee discussed and contrasted the presentations provided by the two firms, the likely compositions of the transaction teams for each firm, the

 

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relative experience and qualifications of the members of each team, the reputation of each firm and its proposed team members, and the terms of engagement proposed by each firm. Following discussion and deliberation, the special committee selected Lazard as its financial advisor, subject to the negotiation of a mutually acceptable engagement letter and review of the firm’s written relationship disclosure. The special committee selected Lazard on the basis of the experience and qualifications of the Lazard transaction team, the quality of Lazard’s presentation and preparation for the meeting, the familiarity of the Lazard team with Urovant’s public disclosures, and the superiority of the engagement terms proposed by Lazard.

Later on October 2, 2020, Lazard sent its proposed draft engagement letter to the special committee.

Also on October 2, 2020, following approval by members of the audit committee, O’Melveny delivered a response letter from the audit committee to the September 28 letter from Sumitovant, which we refer to as the “October 2 letter.” The October 2 letter informed Sumitovant that the audit committee would (i) permit Sumitovant to make the proposal contemplated in the September 28 letter, on the timing and subject to the terms and conditions set forth in the September 28 letter, and (ii) review and consider any such proposal, if one is submitted, to determine whether it is fair to and in the best interests of Urovant and the Public Shareholders. The October 2 letter also noted the engagement of O’Melveny as a legal advisor, and the intention to engage a financial advisor. Finally, the October 2 letter requested that any further inquiries and communications be directed to the special committee.

On October 6, 2020, the special committee held a meeting with representatives from O’Melveny present. The special committee discussed Urovant’s existing three-year plan and Urovant’s management’s financial projections associated with such plan, both of which had been prepared in the ordinary course of business by Urovant’s management prior to the audit committee’s receipt of the September 28 letter. The special committee and representatives from O’Melveny then discussed certain process considerations with respect to the valuation of Urovant, including the importance of considering and, as appropriate, updating the three-year financial projections that were previously presented to the Urovant board to reflect the current status of Urovant’s business and the anticipated future financial performance of Urovant in connection with the special committee’s evaluation of potential strategic transactions. The special committee also discussed the anticipated timing of a U.S. Food and Drug Administration, which we refer to as the “FDA,” response regarding the draft label for vibegron and other product approvals and how the release of such label may impact the financial analysis to be prepared by Lazard. The special committee then scheduled its next meeting for October 9, 2020 and determined to invite representatives from O’Melveny and Lazard and certain members of Urovant’s management to attend. The special committee asked Mr. Legault to contact Urovant’s management in advance of such meeting and request that Urovant’s management review and consider whether updates to the three-year projections previously presented to the Urovant board were needed to reflect the current status of Urovant’s business and its anticipated future financial performance, and if so, to present management’s updated financial projections for the special committee to consider in its evaluation of such potential strategic alternatives. After review of the proposed terms and conditions regarding the engagement of Lazard, the special committee authorized O’Melveny to send a revised draft of the engagement letter back to Lazard.

After the special committee meeting, on October 6, 2020, Mr. Legault instructed members of Urovant’s management to review and consider whether updates to the three-year projections previously presented to the Urovant board were needed to reflect the current status of Urovant’s business and its anticipated future financial performance, and he invited them to attend the October 9, 2020 meeting of the special committee.

Also on October 6, 2020, Urovant received a request for certain financial, operational, and technical information regarding Urovant and its business from Sumitovant pursuant to the Sumitovant information sharing agreement. Urovant provided relevant information to Sumitovant in accordance with the Sumitovant information sharing agreement and continued to provide such responses to inquiries from Sumitovant until November 11, 2020. On or about October 6, 2020, Jones Day contacted O’Melveny to discuss a potential letter agreement whereby Urovant would confirm that Sumitovant is authorized to use the information provided by Urovant

 

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pursuant to the Sumitovant information sharing agreement for the purpose of performing its due diligence review in connection with a potential acquisition of the Urovant common shares held by our Public Shareholders. After discussions between Jones Day and O’Melveny regarding the content of the contemplated letter agreement and an exchange of drafts, Urovant and Sumitovant executed such letter agreement on October 12, 2020.

On October 9, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard, O’Melveny, and Conyers, Dill & Pearman, Bermuda outside counsel to the special committee, which we refer to as “Conyers,” present. At the meeting, representatives from O’Melveny and Conyers led a discussion of the special committee’s fiduciary duties and responsibilities with respect to the potential transaction. Representatives from Lazard noted that they would begin conducting their valuation analyses after they received financial projections approved by the special committee for Lazard’s use in connection with its fairness analysis. Representatives from Lazard offered preliminary perspectives on a valuation of Urovant, and provided an overview of various valuation methodologies they may use in their valuation analysis. In particular, representatives from Lazard discussed the relevance of the “product run-off” discounted cash flow analysis, historical stock prices, tax valuations, and premiums paid in comparable transactions, analyst price targets, and on a preliminary and illustrative basis only, a potential cost of capital analysis. Representatives from Lazard also noted some of the unique features presented by a potential transaction with Sumitovant, such as the absence of a change of control of Urovant given Sumitovant’s ownership and the limited public float for Urovant common shares. The special committee, members of Urovant’s management and representatives from Lazard also discussed a timeline for Urovant’s management to prepare the financial projection updates requested by the special committee at its October 6, 2020 meeting, and the overall timeline for the potential transaction. The special committee also discussed the timing for providing such financial projection updates to Sumitovant, and determined to do so as soon as practicable. Finally, representatives from O’Melveny led a discussion of employee compensation matters related to the potential transaction, including deferring any discussion of post-transaction compensation or employment matters until after price and deal terms have been reached. A copy of the presentation materials provided to the special committee by Lazard for the October 9, 2020 meeting is filed as Exhibit (c)(7) to the Schedule 13E-3.

On October 11, 2020, representatives from O’Melveny discussed Lazard’s engagement letter with Mr. Legault and representatives from Lazard. Based upon such discussion, the parties were able to resolve all open issues related to Lazard’s engagement letter.

On October 12, 2020, Lazard delivered its relationship disclosure to O’Melveny and the special committee, which disclosure is summarized in the section entitled “Special Factors—Opinion of the Financial Advisor to the Special Committee—Miscellaneous” beginning on page 48. After reviewing such relationship disclosure and confirming all open issues related to Lazard’s engagement had been addressed, the special committee entered into an Engagement Letter and Indemnification Agreement with Lazard on October 12, 2020.

On October 13, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard and O’Melveny attending. At the meeting, members of Urovant’s management presented their preliminary financial projections through fiscal year 2030 in response to the special committee’s request on October 6, 2020. Members of Urovant’s management explained certain factors and assumptions underlying their preliminary financial projections, including the current status of Urovant’s FDA approval process for its drug candidates, the co-promotion agreement between Urovant and Sunovion, the effects of the COVID-19 pandemic, and management’s expectations regarding the potential product label for vibegron. The special committee, representatives from Lazard, and members of Urovant’s management then discussed how certain business factors and assumptions, including those related to market share, discounts and pricing, could affect management’s preliminary financial projections. The special committee then discussed other negative factors that may have to be taken into account with respect to the financial projections, including the potential for new competitors, such as generic alternatives, or technologies. The special committee advised Urovant’s management that the preliminary financial projections presented should take into consideration certain of the factors discussed during the meeting. After confirming they would take such factors into consideration in the preliminary financial projections, members of Urovant’s management provided the special committee an update on Sumitovant’s ongoing diligence process related to the potential transaction.

 

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Also on October 13, 2020 and pursuant to the Sumitovant information sharing agreement, Urovant’s management shared with Sumitovant certain net revenue projections through fiscal year 2030 that were part of the preliminary financial projections that Urovant’s management prepared and presented at the October 13, 2020 meeting of the special committee. Neither Sumitovant nor any of its respective advisors used or otherwise relied upon these net sales projections in connection with their respective analysis regarding the potential transaction.

Between October 13, 2020 and October 16, 2020, Urovant’s management revised the preliminary financial projections presented at the October 13, 2020 special committee meeting to reflect the additional considerations that the special committee had instructed Urovant’s management to consider at such meeting.

On October 16, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard and O’Melveny attending. At the request of the special committee, Urovant’s management, with the assistance of Lazard, discussed certain updates to the preliminary financial projections presented by Urovant’s management on October 13, 2020, and the basis for such revisions, including considerations of industry medians, benchmarking (including revenue curves for related products), analogous drug revenue growth rate curves and historical drug price increases. The special committee, representatives from Lazard and members of Urovant’s management then discussed how assumptions about the performance of each of Urovant’s products in European and other non-US markets and the performance of URO-902, Urovant’s second drug candidate, were addressed in the preliminary financial projections. Lazard then discussed, on a preliminary and illustrative basis only, and based upon the updated financial projections prepared by Urovant’s management and presented at such meeting, preliminary potential summary profit and loss results. In particular, this discussion covered marketing and research and development expenses as well as other components of the preliminary financial projections. The special committee and representatives from Lazard discussed the various assumptions underlying these models, as well as the dilutive impact and other costs that would be incurred in connection with a contemplated equity financing if Urovant remained as an independent public company and did not engage in a transaction that would result in Sumitovant owning all of the outstanding Urovant common shares. The special committee also discussed how to potentially sensitize the preliminary financial projections to account for variability in the safety and efficacy risk of each of the pipeline products and performance of each of Urovant’s products in non-US markets, for example. At the conclusion of this discussion, members of the special committee met in executive session to discuss further the information provided by Urovant’s management and representatives of Lazard. The special committee, members of Urovant’s management, and representatives from Lazard and O’Melveny then reconvened after the conclusion of the executive session. The special committee confirmed that it supported the overall approach to the revisions to the preliminary financial projections presented by Urovant’s management, but also provided additional feedback regarding additional potential factors and considerations for Urovant’s management to consider. The special committee then instructed Urovant’s management, with the assistance of Lazard, to review further the benchmarking data (including the revenue curves for related products), update their analyses related to the outer years of such preliminary financial projections, and provide the special committee additional information regarding markets for Urovant’s potential products outside of the United States and for the potential performance of URO-902. Members of Urovant’s management and representatives from Lazard confirmed the feedback of the special committee and agreed to provide updated forecasts as promptly as possible. Representatives from Lazard and O’Melveny then led a discussion regarding the status and potential timeline of a transaction if Sumitovant determined to make a proposal to acquire the Urovant common shares that it did not already own.

Also on October 16, 2020, representatives from Urovant, O’Melveny, Sumitovant, Jones Day and Foley & Lardner LLP, outside intellectual property legal counsel to Sumitovant, met telephonically to discuss diligence matters relating to intellectual property.

Between October 16, 2020 and October 23, 2020, Urovant’s management further revised the preliminary financial projections previously presented to the special committee at its October 16, 2020 meeting.

On October 19, 2020, representatives from Urovant, O’Melveny, Sumitovant and Jones Day met telephonically to discuss diligence matters related to employee benefits and executive compensation.

 

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On October 21, 2020 and pursuant to the Sumitovant information sharing agreement, Urovant’s management shared with Sumitovant projections of certain net sales through Urovant’s 2030 fiscal year that were eventually included as part of the Management Case (as such term is defined below), with such differences from the Management Case as set forth in footnote 7 to the Management Case Forecast on page 67. Neither Sumitovant nor any of its respective advisors used or otherwise relied upon these net sales projections in connection with their respective analysis regarding the potential transaction. No other net sales forecast or other financial projections were provided by Urovant’s management or the special committee (or their respective advisors) to Sumitovant (or its advisors) after October 21, 2020.

Also on October 21, 2020, representatives from Urovant, O’Melveny, Sumitovant and Jones Day met telephonically to discuss diligence related to regulatory matters.

On October 23, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard and O’Melveny attending. Representatives from Lazard and the special committee discussed, on a preliminary and illustrative basis only, an overview of certain information that Lazard planned to consider in its valuation of Urovant, including the historical price of the Urovant common shares, the performance of comparable companies, the outcome of comparable transactions and the evaluation of various stock analysts. Representatives from Lazard also discussed with the special committee Lazard’s consideration, in analyzing the value of the Urovant common shares, some comparable companies and transactions, the impact of the limited public float for the Urovant common shares and the effect of Sumitovant’s majority ownership stake in Urovant. At the instruction of the special committee, members of Urovant’s management then presented the updates to the financial projections that were discussed at the October 16, 2020 meeting of the special committee, including projections regarding the commercialization of vibegron and a market opportunity assessment for URO-902 that was prepared for Urovant by an outside consultant to Urovant. The special committee then discussed with Urovant’s management various assumptions regarding pricing, market share, aggregate net sales amounts and other inputs that informed management’s projections presented at such meeting, and discussed with Urovant’s management and Lazard how changes to such assumptions could impact the financial projections. The special committee noted it would continue reviewing such financial projections. Next, representatives from Lazard offered perspectives regarding the valuation impact of a contemplated equity financing if Urovant remained as an independent public company. The special committee and representatives from Lazard discussed the impact of the limited public float of the Urovant common shares, broader market conditions, the potential participation of existing investors, the amount of capital that would be sought, and other factors affecting the share price at which Urovant would be able to raise additional capital. In particular, there was a discussion of comparable financing and the range of discounts in those transactions. Members of Urovant’s management discussed information regarding the market for the previously planned equity offering by Urovant. The special committee instructed management to continue discussions with the Offering Financial Advisor regarding the previously planned equity offering. Following such instructions, members of Urovant’s management left the meeting and the special committee convened an executive session with representatives from O’Melveny and Lazard present. The special committee then discussed its review and consideration of financial projections for Urovant with representatives from Lazard and O’Melveny. During this discussion, the special committee provided Lazard feedback regarding some potential considerations and changes to the financial projections presented by Urovant’s management at such meeting, including changes to certain assumptions regarding the pricing and market share of vibegron. The special committee then instructed Lazard to revise the Urovant management’s financial projections to reflect these considerations.

Between October 23, 2020 and October 30, 2020, Urovant’s management further revised the financial projections presented to the special committee at its October 23, 2020 meeting, and we refer to these further revised projections herein as the “Management Case.” Also between October 23, 2020 and October 30, 2020, at the instruction of the special committee, Lazard revised the financial projections presented to the special committee at its October 23, 2020 meeting to reflect the special committee’s input and other information discussed at the October 23, 2020 meeting, and we refer to these revised financial projections herein as the “Original Special Committee Case.”

 

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On October 30, 2020, the special committee held a meeting with representatives from Lazard and O’Melveny attending. Representatives from Lazard and the special committee discussed Lazard’s preliminary benchmark analysis comparing Urovant management’s projected drug revenue growth rate curve for the launch of vibegron against comparable medication available in the market. This discussion included a consideration of various assumptions and conditions regarding pricing, market share, and other factors, as well as how those assumptions would affect projections of revenue for Urovant’s business. The special committee and representatives from Lazard then discussed the likely applicability of such assumptions and conditions to Urovant’s business. Representatives from Lazard then showed the special committee the preliminary updated, probability-adjusted financial projections that incorporated the revisions requested by the special committee at its October 23, 2020 meeting, which updated financial projections comprise the Original Special Committee Case. After reviewing and discussing the Original Special Committee Case with representatives from Lazard, the special committee noted it did not have further comments on the Original Special Committee Case. Representatives from Lazard then discussed recent follow-on offerings by biotech companies with market capitalizations that were comparable to Urovant and their historical pricing. The special committee and representatives from Lazard discussed how the Urovant common shares may be priced in a similar equity offering by Urovant, including the impact of current market conditions, Urovant’s public float, Sumitovant’s stake in Urovant, the potential for participation by existing investors in Urovant, and other potential factors, and how such projected pricing could impact Lazard’s financial valuation analysis. Representatives from Lazard then shared information obtained from the Offering Financial Advisor regarding current market conditions for an equity offering. The special committee discussed the potential valuation impact of a contemplated equity financing if Urovant remained as an independent public company. Representatives from Lazard next discussed a summary of the various assumptions that would underlie Lazard’s preliminary discounted cash-flow analysis, including assumptions regarding the potential discount to market price at which an equity offering would be conducted, the potential size of the equity offering, the appropriate discount rate for preparing a present value of future cash flows, and other components. After discussion and based on input from the Offering Financial Advisor, the special committee instructed Lazard to use an assumed offering amount of $350 million, net of an assumed 6% underwriters’ fee, to be raised at an assumed 17.5% discount to the 15-day volume weighted average price of a Urovant common share. The special committee and representatives from Lazard then discussed how changes to such assumptions could impact the results of the analysis. The special committee, and the representatives from Lazard and O’Melveny also discussed the process involved for responding to a potential offer from Sumitovant, including the various negotiating strategies that could be employed based on the content of any such offer.

After the close of trading on November 6, 2020, Sumitovant delivered a letter to the audit committee containing a non-binding proposal to acquire all of the Urovant common shares held by the Public Shareholders for $12.50 per share in cash, which the letter noted would represent a premium over the recent trading prices of the Urovant common shares, which we refer to as the “proposal letter.” The proposal letter indicated that completion of the proposed transaction would remove Urovant’s burden of obtaining the extensive and dilutive future funding necessary to execute on Urovant’s strategic plan, particularly given the resources that will be needed in connection with Urovant’s anticipated launch of vibegron. The proposal letter also noted that, for the purposes of the proposal, Sumitovant assumed that vibegron will be approved by the FDA for marketing in late December 2020, and that the consideration would not be adjusted in the event that such approval is not obtained. Sumitovant also reiterated that it was only interested in acquiring additional Urovant common shares and not interested in selling any of the Urovant common shares it owned or supporting any alternative sale, merger, or similar transaction involving Urovant. The proposal letter further noted that consistent with the investor rights agreement, the proposed transaction would be conditioned on a non-waivable condition requiring the approval of the special committee and of Public Shareholders holding a majority of the Urovant common shares that are not owned by Sumitovant or its affiliates. In addition, the proposal letter noted that Sumitomo Dainippon would guaranty payment of the consideration payable to the Public Shareholders in connection with the proposed transaction. Sumitovant also stated that in compliance with its obligations under Section 13(d) of the Exchange Act, Sumitovant would be required to file an amendment to its Schedule 13D promptly to reflect the contents of the proposal letter. The proposal letter further indicated that Jones Day would send a draft merger agreement for Urovant’s review. A copy of the proposal letter was provided to management for review.

 

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Later in the evening on November 6, 2020, Jones Day provided initial drafts of the merger agreement, the Sumitovant voting agreement and Urovant’s disclosure letter that would be issued pursuant to the merger agreement to O’Melveny.

After receipt of the proposal letter and draft documentation, the special committee held a meeting on November 6, 2020 with representatives from Lazard and O’Melveny attending. The special committee discussed the proposal letter, including the offer price and other terms of the proposal. The special committee and representatives from Lazard and O’Melveny then discussed Sumitovant’s identification of the trading price of the Urovant common shares as one basis for Sumitovant’s offer price. The special committee and representatives from O’Melveny and Lazard discussed various factors that Sumitovant may or may not have fully considered in making its offer reflected in the proposal letter, including the limited trading volume of the Urovant common shares, that there had been perceived selling pressure on the price of the Urovant common shares as a result of sales made by what Urovant believed to be a single large shareholder, which had resulted in downward pressure on the trading price of Urovant common shares, the expectation of a near-term response from the FDA with respect to the product label for vibegron, the dilutive impact and costs of a contemplated equity financing if Urovant continued as an independent company, and other business aspects affecting Urovant’s intrinsic value. At the request of the special committee, representatives from O’Melveny and Lazard then presented an overview of certain strategic, legal and business-related considerations for responding to the proposal. Representatives from Lazard provided perspectives with respect to negotiating a price with Sumitovant and its advisors. Following this discussion, the special committee directed Lazard to contact Citigroup Global Markets Inc., which we refer to as “Citi,” financial advisor to Sumitovant with respect to the potential transaction, to pursue a revised proposal at a higher price. The special committee and representatives from O’Melveny next discussed the process for negotiation of the transaction documents and process for providing drafts to the special committee for its review. Following the conclusion of such meeting, and at the direction of the special committee, representatives from Lazard communicated with Citi and requested a revised offer at a higher price.

On November 7, 2020, representatives from Citi communicated a revised offer price of $14.25 per share to Lazard.

Later on November 7, 2020, the special committee held a meeting with representatives from Lazard and O’Melveny attending. At the request of the special committee, representatives from Lazard provided an update regarding its discussions with Citi, including that Citi represented that Sumitovant’s offer was based on its internal financial models and accounted for Urovant’s 52-week high share price, the dilutive effect of the previously planned alternative equity financing, premiums of similar comparable transactions and Sumitovant’s existing stake in Urovant. Lazard confirmed they had requested a higher offer price from Citi and informed the special committee that it received a revised offer at $14.25 per share. The special committee then engaged Lazard in a discussion regarding the new offer, including the timing of the offer, premiums in precedent transactions, analyst reports and expectations, and the preliminary and illustrative draft financial analyses being prepared by Lazard using the Original Special Committee Case. Based on the foregoing discussion, the special committee directed that Lazard promptly contact Citi to (i) request additional information on the financial analyses used in determining the current offer price, (ii) seek a higher price in connection with the potential transaction, and (iii) report that the special committee had not reached a consensus regarding price considerations at that time. The special committee and representatives from O’Melveny then discussed the draft transaction documents received from Jones Day and the material issues therein. The special committee provided guidance to representatives from O’Melveny on certain terms and conditions and asked representatives from O’Melveny to coordinate with Urovant’s management regarding certain interim operating covenants and other business-oriented aspects of the documentation. The special committee directed representatives from O’Melveny to contact Jones Day to negotiate the terms and conditions of the transaction documents based on the special committee’s instructions and management’s input. The special committee also discussed whether it would be advisable and in the best interests of the Public Shareholders to solicit other offers to acquire the outstanding shares of Urovant, other than the proposed offer from Sumitovant. Following discussion, and after considering input from representatives from O’Melveny and Lazard, the special committee concluded that obtaining an

 

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alternative proposal was not likely given that Sumitovant owned greater than a majority of the Urovant common shares and had represented in the proposal letter and in the September 28 letter that Sumitovant would not agree to sell any of its Urovant common shares or agree to any alternative transaction. Finally, at the request of the special committee, representatives from O’Melveny led a discussion regarding the treatment of employee retention matters in the transaction documents. The special committee determined to request the attendance of Urovant’s management at its next meeting to discuss employee retention matters.

Following the special committee meeting on November 7, 2020, at the request of the special committee, representatives from O’Melveny received input on various operational matters in the merger agreement from Urovant’s management.

Later on November 7, 2020, representatives from Jones Day and O’Melveny discussed various provisions of the draft merger agreement provided by Jones Day. Following such discussion, O’Melveny sent a revised draft of the merger agreement to Jones Day.

Also on November 7, 2020, representatives from Lazard and Citi discussed the offer price for the potential transaction. As instructed by the special committee, Lazard requested additional information on the financial analyses used in determining the current offer price, sought a higher price in connection with the potential transaction, and informed Citi that the special committee had not reached a consensus regarding price considerations at that time. Citi provided Lazard a general overview of Sumitovant’s valuation model without providing specific information regarding how inputs were utilized in Sumitovant’s model.

On November 8, 2020, the special committee had a conversation with representatives from Lazard to discuss the offer price proposed by Sumitovant. After considering various strategic factors (including the fact that a reputable Wall Street analyst had recently revised its price target for Urovant) and preliminary information communicated by Lazard regarding the valuation of Urovant based on a preliminary analysis, the members of the special committee directed Lazard to submit a counterproposal to Citi at a price of $18 per share.

On November 8, 2020, as instructed by the members of the special committee, representatives from Lazard communicated the special committee’s counterproposal of $18 per share to Citi.

Later on November 8, 2020, the special committee held a meeting with James Robinson, Urovant’s Principal Executive Officer and a member of the Urovant board, and with representatives from Lazard and O’Melveny attending. At the request of the special committee, representatives from O’Melveny provided an update on the negotiations of the draft transaction documents and responded to the special committee’s inquiries regarding certain terms and conditions. Representatives from O’Melveny confirmed that they would update the special committee regarding any significant substantive issues. After this discussion, representatives from Lazard provided an update on their discussions with Citi, confirming that they had communicated the special committee’s counterproposal of $18 per share to Citi earlier that day. The special committee, representatives from Lazard and O’Melveny, and Mr. Robinson then engaged in a discussion regarding Sumitovant’s possible responses to the counteroffer and corresponding strategies the special committee could utilize based on such response. Contingent on Sumitovant’s response, the special committee directed Lazard to make a counteroffer of $16.50 per share, plus contingent consideration of (i) $0.75 per share if Urovant’s fiscal annual sales reach $300 million by 2023, and (ii) an additional $0.75 per share if Urovant’s fiscal annual sales reach $400 million in the same period. At the request of the special committee, Mr. Robinson then provided an update regarding the status of the draft label for vibegron and confirmed that the label was still under FDA review. Mr. Robinson also provided an update on employee retention matters, including a draft employee retention program proposed by Urovant’s management that had been provided to the special committee in advance of the meeting. Mr. Robinson indicated that the new program was substantially similar to a previous program implemented by Urovant following Sumitovant’s acquisition of a majority of Urovant common shares from Roivant Sciences, and accounted for Urovant’s need to retain employees through critical approval, launch and development phases, particularly if a transaction with Sumitovant was to proceed.

 

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Following the special committee meeting, also on November 8, 2020, O’Melveny provided Jones Day with a revised draft of the Sumitovant voting agreement. O’Melveny and Jones Day also discussed potential revisions to various provisions in the merger agreement.

On November 9, 2020, representatives from Citi provided representatives from Lazard with a revised offer of $15.25 per share. Later on November 9, 2020, pursuant to the authorization provided at the previous special committee meeting on November 8, 2020 and after further confirmatory discussions with Mr. Legault, Lazard submitted a counter-proposal to Citi of $16.50 per share, plus contingent consideration of (i) $0.75 per share if Urovant’s fiscal annual sales reach $300 million by 2023, and (ii) an additional $0.75 per share if fiscal annual sales reach $400 million in the same period.

Later on November 9, 2020, the special committee held a meeting with representatives from Lazard and O’Melveny attending. Representatives from Lazard provided an update on its latest discussions with Citi, including Sumitovant’s revised offer price of $15.25 per share, and Lazard’s counter-proposal that it delivered at the direction of the special committee. The special committee and Lazard then discussed Sumitovant’s possible responses to the counteroffer and corresponding strategies and next steps depending on such response. Representatives from O’Melveny then provided an update on the legal negotiations and draft documentation for the potential transaction, including their conversations with Jones Day since the previous special committee meeting. Representatives from O’Melveny informed the special committee that while no significant obstacles were anticipated in finalizing the documents, certain terms were still under negotiation, including certain terms related to certainty of closing, the interim operating covenants and the termination fee payable by Urovant to Sumitovant upon certain conditions. The special committee affirmed O’Melveny’s approach to the legal negotiations and requested that O’Melveny keep the special committee informed of any significant substantive issues.

Also on November 9, 2020, Jones Day sent revised drafts of the merger agreement and the Sumitovant voting agreement to O’Melveny, and O’Melveny, after reviewing and revising the same, sent further revised drafts of the merger agreement and the Sumitovant voting agreement back to Jones Day.

Also on November 9, 2020, representatives from Sumitovant and Urovant discussed matters relating to compensation and communication strategies in connection with the proposed transaction.

On the morning of November 10, 2020, Ms. Potter, on behalf of Sumitovant, communicated to Mr. Legault that Sumitovant had rejected Urovant’s most recent price proposal and instead provided a counter-proposal of $15.75 per share.

Following Mr. Legault’s receipt of such counterproposal, the special committee held a meeting on November 10, 2020 with representatives from Lazard and O’Melveny attending. Representatives from Lazard provided an update on its discussions with Citi and informed the special committee of the $15.75 counterproposal. The special committee then engaged representatives from Lazard and O’Melveny in a discussion regarding the revised offer, including considerations related to the increase in the offer price since Sumitovant’s initial offer of $12.50, Lazard’s analysis of Urovant’s 52-week stock price high, certain precedent transaction prices, Urovant’s intrinsic value, the potential timing of the transaction, and strategies for responding to the revised proposal. The special committee solicited advice of representatives from Lazard and O’Melveny throughout the discussion, and each member of the special committee provided such member’s views on the benefits and risks of certain potential responses and next steps. Based on the foregoing discussion, the special committee agreed to return with a counteroffer of $17.25 per share, representing the previous offer of $16.50 per share plus the first portion of the $0.75 contingent consideration. Further, the special committee discussed providing direction to Mr. Legault to guide negotiation, if required, toward a price of $16.50, if necessary. The special committee asked Mr. Legault to follow up with Sumitovant management to conduct further price negotiations.

Following such meeting of the special committee, on November 10, 2020, Mr. Legault communicated the special committee’s proposal of $17.25 per share to Ms. Potter. Ms. Potter rejected the $17.25 proposal and informed Mr. Legault that the highest price Sumitovant was then willing to offer was $16.00 per share. Mr. Legault communicated to Ms. Potter that $16.00 per share was an inadequate offer, and that while the special committee would reject any such offer, it may be willing to approve an offer at $16.50 per share.

 

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Following this discussion, Ms. Potter provided the Sumitovant board of directors and members of Sumitomo Dainippon’s senior management with an update on the status of negotiations. The Sumitovant board of directors and members of Sumitomo Dainippon’s senior management team authorized Ms. Potter to increase Sumitovant’s offer to $16.25 per share. Substantially concurrently, Mr. Legault met telephonically with the other members of the special committee and provided an update on his discussions with Ms. Potter. Following Mr. Legault’s update, members of the special committee discussed and agreed that if Ms. Potter proposed $16.25 per share, Mr. Legault was authorized to agree to such offer, subject to satisfactory finalization of the transaction documentation and review of the presentation to be provided by Lazard regarding the fairness of the proposed price. After the conclusion of Ms. Potter’s and the special committee’s respective discussions, Ms. Potter informed Mr. Legault that Sumitovant had increased its offer to $16.25 per share, and Mr. Legault confirmed that a price of $16.25 per share was acceptable subject to the final authorization of the special committee reaching a satisfactory agreement regarding the terms of the transaction documentation and the special committee’s receipt of Lazard’s financial analysis.

Also on November 10, 2020, representatives from O’Melveny and Jones Day discussed potential revisions to certain provisions of the draft merger agreement and the Sumitovant voting agreement and exchanged drafts of each document, reaching a general agreement on terms related to certainty of closing, the interim operating covenants and the Termination Fee payable by Urovant to Sumitovant upon certain conditions.

After these discussions, the special committee held a meeting on the evening of November 10, 2020 with members of Urovant’s management and representatives from Lazard and O’Melveny attending. At such meeting, Mr. Legault provided an update on his discussions with Ms. Potter and the preliminary agreement on a price of $16.25 per share, subject to final approval of the special committee. At the request of the special committee, representatives from O’Melveny provided an update on the legal negotiations and draft transaction documents. Representatives from O’Melveny summarized the matters that had been agreed upon since the special committee’s previous meeting and reported that negotiations were ongoing with regard to certain terms, including certain termination rights, certain representations, the definition of material adverse effect, certain interim operating covenants, and obtaining a proxy in connection with the Sumitovant voting agreement. Representatives from O’Melveny confirmed that the transaction documents were in generally agreed upon form and would be finalized and in an agreed upon form by the following day. The special committee then reviewed the Original Special Committee Case, and representatives from Lazard presented a preliminary draft analysis of the proposed transaction economics from a financial perspective, based on the price of $16.25 per share. The special committee asked questions and engaged representatives from Lazard in a discussion of their assumptions and analysis throughout the presentation. The special committee then instructed Lazard to use the Original Special Committee Case to finalize its financial analysis of the fairness of the proposed merger consideration and determine whether it could provide an opinion as to the fairness of the potential transaction. A copy of the presentation materials provided to the special committee by Lazard for the November 10, 2020 meeting is filed as Exhibit (c)(8) to the Schedule 13E-3. The special committee and representatives from Lazard and O’Melveny then discussed the procedures and timeline for executing a definitive merger agreement.

On November 11, 2020, Urovant received a draft label for its drug candidate vibegron from the FDA, which we refer to herein as the “draft vibegron label.”

Also on November 11, 2020, representatives from O’Melveny and Jones Day discussed potential revisions to certain provisions of the draft merger agreement and the Sumitovant voting agreement and exchanged drafts of each document.

Later on November 11, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard, Conyers and O’Melveny attending. At the request of the special committee, Urovant’s management presented the draft vibegron label it had received earlier that day. The special committee and members of Urovant’s management engaged in discussions regarding the draft vibegron label, including how the content of the draft vibegron label may or may not affect the Original Special Committee Case. The special committee considered different aspects of the draft vibegron label and whether such factors had already been addressed in the Original Special Committee Case. At the request of the special committee,

 

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representatives from O’Melveny and Conyers provided a review of the special committee’s fiduciary duties. The special committee discussed, together with representatives from Lazard, that most of the financial projections included in the Original Special Committee Case were not label dependent and therefore would not be materially impacted, but that certain aspects of the projections could be impacted, the significance of which would need to be determined. After discussion with Urovant’s management, and representatives from O’Melveny, Conyers and Lazard, the special committee determined it needed to further evaluate and consider this development and its impact on the Original Special Committee Case. Following this discussion, representatives from O’Melveny presented to the special committee a summary of the terms and conditions of the draft merger agreement and the Sumitovant voting agreement. The special committee asked questions of representatives from O’Melveny regarding certain aspects of the documentation and asked O’Melveny to finalize the transaction documentation. Based on its discussions with Urovant’s management, and representatives from O’Melveny, Lazard and Conyers, the special committee determined it would need additional time to consider the draft vibegron label and its potential impact on the financial forecasts contained in the Original Special Committee Case. The special committee instructed Urovant’s management to work together to update the financial forecasts contained in the Management Case and the Original Special Committee Case and instructed Lazard to incorporate the changes to the Original Special Committee Case into the financial analysis being prepared by Lazard. The special committee asked Mr. Legault to communicate this delay in the process to Sumitovant.

Subsequently, on November 11, 2020, Mr. Legault telephonically communicated the delay in the negotiation process to Ms. Potter, and representatives from O’Melveny and Lazard provided similar messages to representatives from Jones Day and Citi, respectively.

Between the end of the November 11, 2020 meeting of the special committee and the commencement of the first special committee meeting held on November 12, 2020, at the instruction of the special committee, Urovant’s management made corresponding revisions to each of the Management Case and the Original Special Committee Case to address the impact of the draft vibegron label.

On November 12, 2020, the special committee held a meeting with members of Urovant’s management and representatives from Lazard and O’Melveny attending. At the request of the special committee, Urovant’s management discussed the draft vibegron label that was received by Urovant from the FDA on November 11, 2020 and then presented information regarding how Urovant’s management believed Urovant’s financial projections could be revised to reflect the impact of the draft vibegron label. The special committee then reviewed updated versions of each of the Management Case and the Original Special Committee Case prepared by Urovant’s management, which reflected the impact of the draft vibegron label and which we refer to herein as the “Revised Management Case” and the “Revised Special Committee Case,” respectively.1 The special committee, members of Urovant’s management, and representatives from Lazard discussed how the draft vibegron label was assumed to affect the projected market share and revenues of Urovant and the differences between the Management Case and the Revised Management Case, as well as the differences between the Original Special Committee Case and the Revised Special Committee Case, in each case reflecting the impact of the draft vibegron label. Representatives from Lazard then presented to the special committee its preliminary and illustrative valuation summary after incorporating such Revised Special Committee Case. At the request of the special committee, Urovant’s management left the meeting, and the special committee meeting continued in executive session with representatives from O’Melveny and Lazard present. The special committee, based on its

 

1 

Although the Revised Management Case was prepared by Urovant’s management in the process of preparing the Revised Special Committee Case, the Revised Management Case was not provided to Sumitovant, and Urovant’s management provided the Revised Management Case to the special committee for reference purposes only in connection with evaluating the proposed transaction. In addition, for informational purposes only, Lazard performed a discounted cash flow analysis using the projections derived from the Revised Management Case. However, at the instruction of the Special Committee this analysis did not provide the basis for, and was not material to, the rendering of Lazard’s opinion. For additional information regarding this analysis, please see the section entitled “Special Factors—Opinion of Financial Advisor to the Special Committee—Financial Analyses” beginning on page 42.

 

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discussion with representatives from Lazard, concluded that the cumulative increase in sales and market share as a result of the draft vibegron label was not material to the financial projections that were included in the Original Special Committee Case. Representatives from Lazard further stated that, based on their updated analysis, the draft vibegron label results had been materially incorporated into the financial forecasts contained in the Original Special Committee Case. The special committee then engaged representatives from Lazard and O’Melveny in a discussion of the draft vibegron label’s impact on the potential transaction with Sumitovant, including its effects on the financial analysis, whether there was a possibility that the new information would cause Sumitovant to agree to a higher price per share than $16.25, that the draft vibegron label results had been materially provided for in the previous financial projections, and the potential benefits and risks of pursuing an increased offer price. In addition, the special committee discussed various strategic alternatives for raising capital for Urovant in light of the draft vibegron label outcome and considered the potential benefits and risks that each alternative posed to the Public Shareholders, including the risk of the transaction not moving forward and the potential valuation and dilutive effects of a contemplated equity financing if Urovant remained as an independent public company. Based on the foregoing discussion, the special committee agreed to present a counteroffer to Sumitovant of $16.50 per share, representing an increase of $0.25 per share over the previously agreed upon price of $16.25. Moreover, the special committee agreed that, if Sumitovant rejected such offer, Mr. Legault was authorized on behalf of the special committee to accept any agreed-upon price greater than or equal to $16.25, as opposed to not moving forward with the transaction. A copy of the presentation materials provided to the special committee by Lazard for the November 12, 2020 meeting is filed as Exhibit (c)(9) to the Schedule 13E-3.

Mr. Legault then left the meeting, contacted Ms. Potter telephonically and presented the counteroffer of $16.50 per share. Ms. Potter informed Mr. Legault that even after taking the draft vibegron label into account (which Sumitovant had already assumed in its previous offer), Sumitovant’s best and final offer was still $16.25, and the transaction would not move forward if the special committee required additional consideration beyond $16.25. Mr. Legault then accepted the $16.25 per share offer.

Upon Mr. Legault’s return to the meeting, the special committee instructed representatives from Lazard to use the Revised Special Committee Case to finalize its financial analysis of the fairness of the proposed merger consideration. The special committee and representatives from Lazard and O’Melveny then discussed the process for final approval and execution of the merger agreement and the Sumitovant voting agreement.

Later on November 12, 2020, the special committee met again with members of Urovant’s management and representatives from Lazard and O’Melveny attending. Representatives from Lazard presented to the special committee a detailed analysis of the proposed transaction from a financial perspective, including an overview of the transaction process, the valuation of the assets to be acquired, the history of Urovant’s share price, the terms and premiums seen in precedent transactions, the range of analyst price targets, ratings and benchmarks for Urovant common shares, and Lazard’s financial analysis, underlying assumptions, and sensitivity analyses. Lazard then delivered to the special committee an oral opinion, which was confirmed by delivery of a written opinion dated November 12, 2020, to the effect that, as of that date, and based upon and subject to the assumptions, procedures, factors, qualifications, limitations and other matters set forth in such written opinion, the $16.25 per share that would be paid to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, or (ii) Sumitovant) in the Merger was fair from a financial point of view to such holders. Representatives from Lazard then summarized the terms of its written fairness opinion, which had been approved by Lazard’s opinion committee. Following such presentation, representatives from Lazard left the meeting at the request of the special committee, and the meeting continued in executive session with representatives from O’Melveny present. The special committee then engaged in a discussion of Lazard’s fairness opinion and financial analysis, as well as certain other considerations, which are described in the section below entitled “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger,” and unanimously (a) determined that the per share merger consideration constitutes fair value for each Urovant common share in accordance with the Bermuda Companies Act, (b) determined that the terms of the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by

 

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the merger agreement and the statutory merger agreement are fair to and in the best interests of Urovant and its shareholders, (including unaffiliated security holders, as defined in Rule 13e-3 of the Exchange Act) (c) approved and declared advisable the execution, delivery and performance of the merger agreement and the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement by Urovant, and (d) recommended that Urovant’s shareholders vote in favor of the adoption and approval of the merger agreement and the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement, at a duly held meeting of such holders for such purpose. A copy of Lazard’s November 12, 2020 presentation materials to the special committee is filed as Exhibit (c)(9) to the Schedule 13E-3.

Following conclusion of the special committee meeting on November 12, 2020, the parties executed the merger agreement and the Sumitovant voting agreement, and Sumitovant and Urovant issued press releases announcing the transaction.

On November 24, 2020, Astellas Pharma Inc., or “Astellas,” was issued an additional patent related to Myrbetriq, Astellas’ treatment for overactive bladder, which patent we refer to herein as the “Additional Patent.”

On December 14, 2020, the special committee met with members of Urovant’s management and representatives from Lazard and O’Melveny attending. At the request of the special committee, Urovant’s management led a discussion regarding the issuance of the Additional Patent to Astellas, the potential impact of the Additional Patent on certain pending intellectual property patent litigation involving Astellas and its OAB product, Myrbetriq, which we refer to herein as the “Astellas Litigation,” and how the Additional Patent and the Astellas Litigation may impact the timing of potential generic alternatives to Myrbetriq and vibegron. Urovant’s management reviewed with the special committee a preliminary analyses of the Additional Patent and the Astellas Litigation prepared by Urovant with the assistance of outside intellectual property counsel. The special committee then discussed the impact of the Additional Patent and the Astellas Litigation on Urovant and the future sales of vibegron. The special committee also discussed other developments subsequent to its approval of the merger agreement that may impact Urovant and the future sales of vibegron, including that the primary efficacy analysis of the topline data from Urovant’s Phase 2a study of vibegron for the treatment of irritable bowel syndrome, or “IBS,” showed that the study did not meet its primary endpoint. We refer to these results as the “Phase 2a Study Results for IBS.” Following such discussion, the special committee determined, on a preliminary basis, that the impact on Urovant and the future sales of vibegron from the Phase 2a Study Results for IBS and the Additional Patent were not likely to be material; however, in an effort to gain a better understanding of the potential impact of the Additional Patent, the special committee discussed the need to obtain additional information regarding (i) the potential strengths and weaknesses of the Additional Patent, (ii) the potential outcome of the Astellas Litigation, including any settlements thereof, (iii) how such outcome may impact the timing of whether and when generic alternatives to Myrbetriq and vibegron would be brought to market, (iv) the impact of such changes to the timing of generic alternatives on the commercialization of vibegron, including the potential for increased market competition for vibegron from generic alternatives and the potential increase or decline of Myrbetriq’s market share, and (v) the potential impact of Urovant having to continue to compete with Astellas prior to the entry of generic alternatives into the marketplace. At the conclusion of the discussion, the special committee requested additional information from Urovant and its outside intellectual property legal advisors to better understand the potential impact of the Additional Patent.

On December 15, 2020, the special committee met with a representative from Urovant’s outside intellectual property counsel engaged to review the Additional Patent and its potential impact on the Astellas Litigation, which we refer to the “Outside IP Counsel,” with O’Melveny attending. At the request of the special committee, the representative from the Outside IP Counsel summarized their legal team’s background and qualifications, and then explained the scope of their review of the Additional Patent and its potential impact on the Astellas Litigation, as well as the possible outcomes thereof. The representative from the Outside IP Counsel noted that, while the litigants launching generic versions of Myrbetriq may possess certain arguments against the strength of the Additional Patent, it was the judgment of the representative from the Outside IP Counsel that Astellas had reasonably persuasive arguments in its favor. The representative from the Outside IP Counsel reported that, due

 

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to the uncertainties of litigation, it was difficult to determine how the litigation may be resolved, but such representative expected the Astellas Litigation to continue for a minimum of several additional years, which could delay the entrance of generic alternatives to Myrbetriq into the market. The representative from the Outside IP Counsel noted while this was the mostly likely outcome in their judgment, the ultimate results were uncertain and would depend on various factors related to the litigation process and Astellas’ continuing prosecution of its related patents. After this discussion, the representative from the Outside IP Counsel left the special committee meeting, and representatives from Lazard joined the meeting. The special committee then engaged representatives from Lazard and O’Melveny in a discussion regarding the Additional Patent and the Astellas Litigation in light of the Outside IP Counsel’s discussion. The special committee discussed various potential impacts the Additional Patent could have on Urovant’s business and the future sales of vibegron, including both positive and negative impacts. The special committee also discussed the potential impact of other developments occurring subsequent to its approval of the merger agreement, including the Phase 2a Study Results for IBS, on Urovant’s business. At the conclusion of these discussions, based on the information available, the special committee did not view the Additional Patent or the Phase 2a Study Results for IBS as collectively having a material impact on Urovant or the future sales of vibegron.

On December 23, 2020, consistent with the draft vibegron label received by Urovant on November 11, 2020, the FDA notified Urovant of its approval of the New Drug Application (NDA) for an oral, once-daily tablet containing 75 mg of vibegron, for the treatment of OAB with symptoms of urge urinary incontinence, urgency, and urinary frequency in adults. This approval marks the first new oral branded OAB medication approved by the FDA since 2012, and it is the first product approval for Urovant.

Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger

The special committee, pursuant to the authority delegated to the special committee by the Urovant board, and acting on behalf of Urovant, with the advice and assistance of its independent legal and financial advisors, unanimously (i) determined that the per share merger consideration constitutes fair value for each Urovant common share in accordance with the Bermuda Companies Act, (b) determined that the terms of the merger agreement, the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement are fair to and in the best interests of Urovant and its shareholders (including unaffiliated security holders, as defined in Rule 13e-3 of the Exchange Act), (c) approved and declared advisable the execution, delivery and performance of the merger agreement and the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement by Urovant, and (d) recommended that Urovant’s shareholders vote in favor of the adoption and approval of the merger agreement and the statutory merger agreement, the merger, and the other transactions contemplated by the merger agreement and the statutory merger agreement, at a duly held meeting of such holders for such purpose.

Reasons for the Merger; Recommendation of the Special Committee

The special committee held nineteen meetings to discuss, among other things, the proposal from Sumitovant (as it was revised from time to time), the merger agreement, and the transactions contemplated thereby, including the merger. In the course of its determination and making its recommendations, the special committee considered, in consultation with its financial and legal advisors, information with respect to Urovant’s financial condition, results of operations, businesses, competitive position and business strategy, on a historical and prospective basis, as well as current industry, economic and market conditions and trends.

The special committee considered the following factors as being generally supportive of its determination and recommendations:

 

   

historical information regarding (i) Urovant’s business, financial performance and results of operations as a pre-revenue company, (ii) market prices, volatility and the relatively limited trading activity with respect to the Urovant common shares, including the decline in the trading price of the Urovant common shares since its 52-week high price of $15.75, and (iii) market prices with respect to other industry participants and recent increases in general market indices;

 

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current information regarding (i) Urovant’s business, prospects, financial condition (including its imminent need for additional capital), operations (including concerns about potential delays in Urovant’s manufacturing processes and the resulting limited supply of product samples for the initial launch of vibegron), technology, limited scope of product candidates, services, management (including its ability to retain executive leadership with the knowledge and experience necessary to commercialize its product candidates), competitive position (including against future generic competition) and strategic business goals and objectives, (ii) general economic, industry and financial market conditions, and (iii) opportunities and competitive factors within Urovant’s industry (including future competition from generics);

 

   

the per share merger consideration provides certainty, immediate value and liquidity to the Public Shareholders, particularly in light of the relatively limited trading volume of the Urovant common shares;

 

   

the per share merger consideration represents a 105% premium to the closing price of the Urovant common shares on November 11, 2020 (the second to last trading day preceding the public announcement of the merger, at which date the closing price was $7.91) and represents a 104% premium to the 15-day volume weighted average price of the Urovant common shares ending on November 11, 2020 (which was $7.96);

 

   

the prospects and likelihood of realizing superior benefits through remaining an independent company, risks associated with remaining an independent company, and possible alternative business strategies;

 

   

the relative confidence of the special committee in the ability of Urovant to achieve its projected financial performance;

 

   

the fact that Sumitovant communicated to the special committee in its Proposal Letter, and confirmed in subsequent discussions, that Sumitovant is interested only in acquiring Urovant common shares not already owned by Sumitovant and that Sumitovant has no interest in selling any Urovant common shares it owns and has no interest in supporting any alternative sale, merger or similar transaction involving Urovant, which could discourage the making of a competing proposal;

 

   

the likely inability of Urovant to consummate any other strategic alternative sale, merger or other similar transaction as a result of the communication made by Sumitovant to the special committee in the Proposal Letter and in subsequent discussions;

 

   

the acknowledgement by the special committee that the price offered under the merger agreement represents a premium to the 52-week stock price high as of November 11, 2020;

 

   

the timing of the merger and the risk that if Urovant does not accept Sumitovant’s offer now, it may not have another opportunity to do so or to pursue an opportunity offering the same value and certainty of closing to Urovant’s shareholders;

 

   

the fact that, during the course of Urovant’s negotiations with Sumitovant, Sumitovant raised the value of the consideration per Urovant common share offered by Sumitovant from $12.50 to $16.25, which the special committee believes, after such negotiations with Sumitovant and its representatives, is the highest price per share that Sumitovant is willing to pay for the outstanding Urovant common shares not already owned by Sumitovant;

 

   

the belief of the special committee that Urovant was unlikely to be able to consummate an alternative strategic transaction that would be more favorable to Urovant’s shareholders from a financial point of view than the merger, including, without limitation, as a result of the communications made by Sumitovant to the special committee in the Proposal Letter;

 

   

that Urovant would be permitted, under certain circumstances described in the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a Superior Proposal (as defined in the merger agreement) after giving Sumitovant the opportunity to match the Superior Proposal and upon payment of the Termination Fee equal to $13,620,000;

 

   

the likelihood that the merger will be completed, based on, among other things, (i) the reputation of Sumitomo Dainippon and its ability to complete an acquisition transaction involving the Urovant

 

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common shares that Sumitovant does not already own, (ii) the limited number and nature of the conditions to the completion of the merger, including the fact that there is no financing condition and no antitrust filings or notifications will be required in connection with the merger in any jurisdiction in the world, and (iii) Urovant’s ability, pursuant to the merger agreement, to seek specific performance to prevent breaches of the merger agreement by Sumitovant and merger sub and to specifically enforce the terms of the merger agreement;

 

   

(i) the financial analyses presented to the special committee by Lazard (which financial analyses the special committee adopted as its own) and (ii) the opinion of Lazard that, as of the date of such opinion, and based upon and subject to the limitations, qualification, assumptions and other matters set forth therein, that the per share merger consideration to be paid to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant) pursuant to the merger agreement is fair, from a financial point of view, to such holders;

 

   

the fact that Sumitomo Dainippon has guaranteed the payment obligations of Sumitovant and merger sub under the merger agreement;

 

   

the fact that (i) Sumitovant is representing to Urovant in the merger agreement that, as of the date of the merger agreement, Sumitovant and merger sub, together with Sumitomo Dainippon, have access to funds sufficient to enable merger sub to consummate the merger and to make all payments contemplated by the merger agreement, including the payment of the aggregate amount of per share merger consideration payable in connection with the merger, and will also have at the closing of the merger sufficient funds to pay the aggregate per share merger consideration, and (ii) that Sumitovant’s and merger sub’s obligations to complete the merger and pay the aggregate per share merger consideration are not conditioned on Sumitovant or merger sub obtaining financing; and

 

   

the availability of appraisal rights to shareholders of Urovant in connection with the merger, as discussed in the section entitled “Rights of Appraisal.”

In the course of reaching its determinations and making its recommendations, the special committee also considered the following countervailing factors concerning the merger agreement, the statutory merger agreement and the merger:

 

   

the fact that Urovant will no longer exist as an independent public company and Urovant’s shareholders will forego any future increase in its value as an independent public company that might result from its possible growth;

 

   

the possible negative effects of the merger and public announcement of the merger on Urovant’s financial performance, operating results and stock price and Urovant’s relationships with customers, suppliers, distributors, other business partners, management and employees;

 

   

the fact that the merger agreement (i) precludes Urovant from actively soliciting competing acquisition proposals and (ii) obligates Urovant (or its successor) to pay Sumitovant the Termination Fee equal to $13,620,000 under specified circumstances, which could discourage the making of a competing acquisition proposal or adversely impact the price offered in such a proposal;

 

   

the fact that the merger agreement imposes restrictions on the conduct of Urovant’s business in the pre-closing period, which may adversely affect Urovant’s business in the event the merger is not completed (including by delaying or preventing Urovant from pursuing business opportunities that may arise or precluding actions that would be advisable if Urovant were to remain an independent company);

 

   

the risks involved with the merger and the likelihood that Urovant and Sumitovant will be able to complete the merger, the possibility that the merger might not be consummated and Urovant’s prospects going forward without the combination with Sumitovant;

 

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the substantial transaction expenses to be incurred in connection with the merger and the negative impact of such expenses on Urovant’s cash reserves and operating results should the merger not be completed; and

 

   

all known interests of directors and executive officers of Urovant in the merger that may be different from, or in addition to, their interests as shareholders of Urovant or the interests of Urovant’s other shareholders generally.

The above discussion of the information and factors considered by the special committee is not intended to be exhaustive, but indicates the material matters considered. In reaching its determination and recommendation, the special committee did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the special committee may have considered various factors differently. The special committee did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. Moreover, in considering the information and factors described above, individual members of the special committee may have given differing weights to differing factors. The special committee based its unanimous recommendation on the totality of the information presented, including, among other information, the financial analyses presented to the special committee by Lazard and the opinion of Lazard set forth in Annex B to this proxy statement. The Lazard opinion addressed the fairness determination from a financial point of view of the per share merger consideration to be paid to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant) pursuant to the merger agreement. While holders of Urovant common shares addressed by the Lazard opinion include holders that are affiliates of Urovant (such as its officers and directors), the special committee determined that such affiliates would receive the same per share merger consideration for their Urovant common shares as our unaffiliated shareholders. Therefore, the special committee believed there was no material distinction between the fairness of the contemplated transaction to our unaffiliated shareholders and the fairness of such transaction to holders of Urovant common shares that are affiliates of Urovant (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant).

Other than its review and adoption of financial analyses presented by Lazard, the special committee did not conduct a going-concern valuation of Urovant in evaluating the merger because of its belief that the financial analyses presented by Lazard, as more fully summarized below in the section entitled “Opinion of Financial Advisor to the Special Committee (See Annex B),” represented potential valuations of Urovant as it continues to operate its business as a going concern.

In addition, the special committee did not consider the net book value of Urovant in evaluating the merger because of its belief that net book value does not adequately reflect Urovant’s value as a going concern because it does not take into account Urovant’s future business prospects, including revenues Urovant is projected to realize from the commercialization of vibegron or its drug candidate, URO-902. The special committee also did not consider liquidation value in evaluating the merger because of its belief that Urovant’s remains a viable going concern and that any prospective acquirer of Urovant, including Sumitovant, would continue to operate Urovant as a going concern following the consummation of such transaction.

Moreover, when evaluating the merger, the special committee did not consider the discounted cash flow analyses that had been prepared by Lazard for informational purposes only using (i) projections derived from the Revised Management Case or (ii) projections from published, publicly available Wall Street equity research reports. Please see the section entitled “Special Factors—Opinion of Financial Advisor to the Special Committee—Financial Analyses” beginning on page 42 for additional information regarding these discounted cash flow analyses prepared by Lazard. In particular, the special committee did not consider the discounted cash flow analysis prepared using the Revised Management Case because of its belief that assumptions regarding the future pricing and market share of vibegron underlying the Revised Management Case did not adequately take into account the impact of competition from potential generic alternatives and overstated the prospective

 

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financial performance of Urovant. Please see the section entitled “Background of the Merger” beginning on page 17 for additional information regarding the special committee’s review of the Revised Management Case.

Likewise, while the special committee considered selected equity research analyst price targets based on published, publicly-available Wall Street equity research reports, as one factor in its analysis, it gave less weight to these targets because the special committee believed that the discounted cash flow analysis prepared by research analysts in deriving these targets did not take into account the significant dilutive impact of an equity financing that the special committee believed would be necessary for Urovant to continue as an independent public company.

The special committee unanimously recommends that Urovant’s shareholders vote “FOR” the Merger Proposal and “FOR” the Adjournment Proposal.

Opinion of the Financial Advisor to the Special Committee (See Annex B)

Opinion of Lazard Frères & Co. LLC

The special committee retained Lazard to provide it with financial advisory services and to render to the special committee a fairness opinion in connection with the merger. Lazard delivered its oral opinion to the special committee on November 12, 2020, which opinion was subsequently confirmed in a written opinion of the same date, that, as of November 12, 2020 and based upon and subject to the assumptions, procedures, factors, qualifications, limitations and other matters set forth in such written opinion, the per share merger consideration to be paid to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant) in the merger was fair from a financial point of view to such holders.

The full text of the written opinion of Lazard, dated November 12, 2020, which sets forth the assumptions made, procedures followed, factors considered and qualifications and limitations on the review undertaken by Lazard in connection with its opinion, is attached to this document as Annex B and is incorporated by reference herein in its entirety. The summary of Lazard’s opinion is qualified in its entirety by reference to the full text of the opinion, and we encourage you to read the opinion carefully and in its entirety.

Lazard’s engagement and its opinion were for the benefit of the special committee (in its capacity as such) and its opinion was rendered to the special committee in connection with its evaluation of the merger and addressed only the fairness as of the date of the opinion, from a financial point of view, to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant) of the consideration to be paid to such holders in the merger. Lazard’s opinion was not intended to and did not constitute a recommendation to any shareholder as to whether such shareholder should act or vote with respect to the merger or any matter relating thereto.

Lazard’s opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, November 12, 2020. Lazard assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after November 12, 2020. The current volatility and disruption in the credit and financial markets relating to, among others, the COVID-19 pandemic, may or may not have an effect on Urovant and Lazard did not express an opinion as to the effects of such volatility or such disruption on Urovant. Lazard did not express any opinion as to the price at which Urovant common shares may trade at any time subsequent to the announcement of the merger. In connection with Lazard’s engagement, Lazard was not authorized to, and it did not, solicit indications of interest from third parties regarding a potential transaction with Urovant. Lazard’s opinion did not address the relative merits of the merger as compared to any other transaction or business strategy in which Urovant might engage or the merits of the underlying decision by Urovant to engage in the merger.

 

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In connection with its opinion, Lazard:

 

   

Reviewed the financial terms and conditions of a draft, dated November 11, 2020, of the merger agreement;

 

   

reviewed certain publicly available historical business and financial information relating to Urovant and historical business and financial information provided to Lazard by Urovant;

 

   

reviewed various financial forecasts and other data provided to Lazard by Urovant relating to the business of Urovant (including financial projections that have been identified as the “Revised Special Committee Case,” and the “Revised Management Case”), as well as the terms and size of the Assumed Equity Raise (as defined below));

 

   

held discussions with members of the senior management of Urovant with respect to the business and prospects of Urovant;

 

   

reviewed public information with respect to certain other companies in lines of business Lazard believed to be generally relevant in evaluating the business of Urovant;

 

   

reviewed the financial terms of certain business combinations involving companies in lines of business Lazard believed to be generally relevant in evaluating the business of Urovant;

 

   

reviewed historical stock prices and trading volumes of the Urovant common shares; and

 

   

conducted such other financial studies, analyses and investigations as Lazard deemed appropriate.

Lazard assumed and relied upon the accuracy and completeness of the foregoing information, without independent verification of such information. Lazard did not conduct any independent valuation or appraisal of any of the assets or liabilities (contingent or otherwise) of Urovant or concerning the solvency or fair value of Urovant, and Lazard was not furnished with any such valuation or appraisal. The special committee advised Lazard that the Revised Special Committee Case, which reflects the special committee’s adjustments to the Revised Management Case, best reflects the anticipated future financial performance of Urovant; accordingly, at the direction of the special committee, Lazard utilized the Revised Special Committee Case, which is summarized in the section entitled “Projected Financial Information,” for purposes of its analyses in connection with its opinion. In addition, in light of the capital needs anticipated by the special committee and management of Urovant in order to fund the operations and business plan of Urovant, at the direction of the special committee, Lazard assumed that Urovant would consummate an equity raise consistent with the Assumed Equity Raise and incorporated the Assumed Equity Raise into its analyses in connection with its opinion. Lazard assumed, with the consent of the special committee, that such forecasts and adjustments were reasonably prepared on bases reflecting the best available estimates and judgments as to the future financial performance of Urovant. Lazard relied, with the consent of the special committee, on the assessments of Urovant as to the validity of, and risks associated with, the product candidates of Urovant (including, without limitation, the timing and probability of successful development, testing, and marketing of such products and product candidates and approval thereof by appropriate governmental authorities). Lazard assumed no responsibility for and expressed no view as to any such forecasts or the assumptions on which they are based, including with respect to the potential effects of the COVID-19 pandemic on such forecasts or assumptions.

In rendering its opinion, Lazard assumed, with the consent of the special committee, that the merger will be consummated on the terms described in the merger agreement, without any waiver or modification of any material terms or conditions. Representatives of the special committee advised Lazard, and Lazard assumed, that the merger agreement, when executed, conformed to the draft reviewed by Lazard in all material respects. Lazard also assumed, with the consent of the special committee, that obtaining the necessary governmental, regulatory or third party approvals and consents for the merger will not have an adverse effect on Urovant or the merger. Lazard did not express any opinion as to any tax or other consequences that might result from the merger, nor did Lazard’s opinion address any legal, tax, regulatory or accounting matters, as to which Lazard understood that the special committee obtained such advice as it deemed necessary from qualified professionals. Lazard expressed no view or opinion as to any terms or other aspects (other than the per share merger consideration to the extent

 

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expressly specified therein) of the merger, including, without limitation, the form or structure of the merger, the Sumitovant voting agreement, or any other agreements or arrangements entered into in connection with, or contemplated by, the merger. In addition, Lazard expressed no view or opinion as to the fairness of the amount or nature of, or any other aspects relating to, the compensation to any officers, directors or employees of any parties to the merger, or class of such persons, relative to the per share merger consideration or otherwise.

Summary of Lazard’s Financial Analyses

The following is a summary of the material financial analyses reviewed with the special committee in connection with Lazard’s opinion, dated November 12, 2020. The full text of the written presentation by Lazard to the special committee has been attached as Exhibit (c)(9) to the Schedule 13E-3 in connection with the proposed merger and is incorporated by reference herein in its entirety. The summary of Lazard’s analyses and reviews provided below is qualified in its entirety by reference to the full text of the written presentation, and you are encouraged to read the written presentation carefully and in its entirety. For more information, please see the section entitled “Where You Can Find Additional Information” beginning on page 132.

The summary of Lazard’s analyses and reviews provided below is not a complete description of the analyses and reviews underlying Lazard’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description.

In arriving at its opinion, Lazard did not draw in isolation conclusions from or with regard to any factor or analysis considered by it. Rather, Lazard made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. Considering selected portions of its analyses and reviews in the summary set forth below or in Lazard’s written presentation, without considering its analyses and reviews as a whole, could create an incomplete or misleading view of the analyses and reviews underlying Lazard’s opinion.

For purposes of its analyses and reviews, Lazard considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Urovant. No company, business or transaction considered in Lazard’s analyses and reviews is identical to Urovant or the merger, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses or transactions considered in Lazard’s analyses and reviews. The estimates contained in Lazard’s analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Lazard’s analyses and reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Lazard’s analyses and reviews are inherently subject to substantial uncertainty.

The summary of the analyses and reviews provided below includes information presented in tabular format. In order to fully understand Lazard’s analyses and reviews, the tables must be read together with the full text of each summary. The tables alone do not constitute a complete description of Lazard’s analyses and reviews. Considering the data in the tables below without considering the full description of its analyses and reviews, including the methodologies and assumptions underlying its analyses and reviews, could create a misleading or incomplete view of Lazard’s analyses and reviews.

Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 12, 2020, unless otherwise indicated, and is not

 

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necessarily indicative of current market conditions. Lazard, based on its professional judgment and experience, rounded all per share prices presented to the special committee to the nearest 5 cents. All per share prices presented below are also rounded to the nearest 5 cents.

Financial Analyses

Discounted Cash Flow Analysis

Using the projections contained in the Revised Special Committee Case, which are provided in the section entitled “Special Factors—Projected Financial Information” beginning on page 64, Lazard performed a discounted cash flow analysis of Urovant. Lazard used the projections contained in the Revised Special Committee Case as the underlying data for Lazard’s discounted cash flow analysis in accordance with the instructions of the special committee. The chart titled “Revised Special Committee Case” contained within the section entitled “Special Factors—Projected Financial Information” beginning on page 64 is incorporated by reference herein.

A discounted cash flow analysis is a valuation methodology used to derive a valuation of a company by calculating the present value of the company’s estimated future cash flows. A company’s “estimated future cash flows” are its projected unlevered free cash flows, and “present value” refers to the value today or as of an assumed date of the future cash flows or amounts and is obtained by discounting the estimated future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, capital structure, income taxes, expected returns and other appropriate factors.

For purposes of this analysis, Lazard calculated a range of enterprise values for Urovant by discounting to present value, utilizing discount rates ranging from 8.5% to 11.5%, chosen by Lazard using its professional judgment and experience based upon its analysis of a weighted average cost of capital of Urovant ranging from 8.5% to 11.5% and using the mid-year convention, (i) the estimated probability-adjusted, after-tax unlevered free cash flows to be generated by Urovant from December 31, 2020 through March 31, 2039 as set forth in the Revised Special Committee Case; and (ii) a range of terminal values for Urovant of ($12 million) to ($3 million).

The terminal values were derived by applying a negative terminal growth rate range of (30%) – (10%) to the estimated unlevered free cash flow for the terminal year to be generated by Urovant. The negative terminal growth rates used by Lazard were estimated by Lazard based on its professional judgment and experience, taking into account the Revised Special Committee Case. In particular, the decision to use a negative terminal growth rate range in connection with the discounted cash flow analysis was based, in part, on the projected losses of exclusivity Urovant would experience with respect to vibegron in fiscal year 2034 and URO-902 in 2038, and the projected declines in revenue and unlevered free cash flow that would occur beginning in 2034 as shown in the Revised Special Committee Case.

Lazard then added to the range of enterprise values the estimated net cash of Urovant at December 31, 2020 to derive a range of total equity values for Urovant. Lazard then calculated a range of implied equity values per Urovant common share by dividing such total equity values of Urovant by the number of fully diluted shares outstanding of Urovant after giving effect to the Assumed Equity Raise, which was a low value of 92.129 million shares and a high value of 92.791 million shares, respectively. The results of this analysis implied an equity value per share range of $13.30 to $17.35.

At the direction of the special committee, all discounted cash flow analyses included an assumed future equity raise by Urovant, specifically, $350 million net of 6% underwriter’s fee in equity financing raised at a 17.5% discount to the 15-day volume weighted average price of a Urovant common share, which we refer to as the “Assumed Equity Raise.”

For informational purposes only, Lazard performed the foregoing discounted cash flow analysis using the projections derived from the Revised Management Case. From this analysis, Lazard estimated an implied price

 

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per share range for Urovant common shares of $19.45 to $25.00. In addition, for information purposes only, Lazard also performed the foregoing discounted cash flow analysis using projections from published, publicly available Wall Street equity research reports. From this analysis, Lazard estimated an implied price per share range for Urovant common shares of $8.20 to $13.45. As noted above, the foregoing analyses did not provide the basis for, and was not material to, the rendering of Lazard’s opinion.

Selected Public Companies Analysis

Using public filings and data sources, Lazard reviewed and analyzed certain financial information, valuation multiples and market trading data related to selected comparable publicly traded biotechnology companies, the operations of which Lazard believed, based on its experience with companies in the biotechnology industry and its professional judgment, to be generally relevant in analyzing Urovant’s operations for purposes of this analysis. Lazard compared such information for the selected comparable companies to the corresponding information for Urovant.

The companies in the biotechnology industry selected by Lazard for this analysis were as follows:

 

   

Aurinia Pharmaceuticals Inc.

 

   

Zogenix, Inc.

 

   

Rhythm Pharmaceuticals, Inc.

 

   

Esperion Therapeutics, Inc.

 

   

BioCryst Pharmaceuticals, Inc.

 

   

Kadmon Holdings, Inc.

 

   

Ardelyx, Inc.

 

   

Eiger Biopharmaceuticals, Inc.

Lazard selected the companies above because, among other things, the selected companies operate businesses similar in certain respects to the business of Urovant. However, none of the selected companies is identical to Urovant and certain of these companies may have characteristics that are materially different from those of Urovant. Based on its professional judgment and experience, Lazard believes that purely quantitative analyses are not, in isolation, determinative in the context of the merger and that qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Urovant and the selected companies that could affect the public trading values of each company are also relevant.

For each of the selected companies above, Lazard calculated the enterprise value of the selected company (calculated as the market capitalization, taking into account in-the-money options and other equity awards and convertible securities, plus the book value of debt and preferred equity, less cash and cash equivalents, short term investments, and long term investments, plus book value of minority interests) as of November 11, 2020, as a multiple of revenue estimates for the fifth year following the commercial launch of their lead product in its lead

 

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indication from FactSet Research Systems, Evaluate Pharma, Equity Research Estimates and other sources, referred to in this section as “EV/ L+5 Revenue”. The results of this analysis are as follows:

 

     Market Value
($ in millions)
     Enterprise Value
($ in millions)
     L+5 Revenue (1)
($ in millions)
     Enterprise Value
/ L+5 Revenue
 

Aurinia Pharmaceuticals Inc.

     1,742        1,304        1,047        1.2x  

Zogenix, Inc.

     1,166        836        749        1.1x  

Rhythm Pharmaceuticals, Inc.

     1,053        852        812        1.0x  

BioCryst Pharmaceuticals, Inc.

     817        766        465        1.6x  

Esperion Therapeutics, Inc.

     782        567        621        0.9x  

Kadmon Holdings, Inc.

     621        506        617        0.8x  

Ardelyx, Inc.

     522        387        617        0.6x  

Eiger Biopharmaceuticals, Inc.

     340        239        358        0.7x  

75th Percentile

     1,081        840        765        1.1x  

Median

     800        666        619        1.0x  

Mean

     880        682        661        1.0x  

25th Percentile

     596        476        579        0.8x  

Source: FactSet, Evaluate Pharma, company filings, websites and corporate presentations.

Note: Market data as of November 11, 2020. For companies with products launching prior to 6/30, the launch year is defined as L+1. For launches after 6/30 the year in which the product launches is defined as L+0. Launch assumed shortly after approval date / expected approval.

 

(1)

Revenue estimates represent broker median estimates for L+5.

Using its professional judgment and experience, Lazard then applied a range of multiples of estimated EV/L+5 Revenues, based on the 25th percentile and 75th percentile of the estimated EV/L+5 Revenue for the selected companies of 0.8x and 1.1x, respectively, to $627 million (the Revised Special Committee Case’s unadjusted estimated revenues of Urovant for the fifth year following the commercial launch of Urovant’s lead product in its lead indication, after giving effect to the Assumed Equity Raise). The results of this analysis implied an equity value per Urovant common share range of $7.50 to $9.60. To calculate these values, Lazard multiplied Urovant’s L+5 value of $627 million by the unrounded 25th percentile and 75th percentile EV/L+5 multiples to derive an implied range of enterprise values for Urovant of $490 million to $720 million. Lazard then converted these enterprise values into equity values by adding net cash of $189 million pro forma for the Assumed Equity Raise, resulting in an equity value range of $679 million to $909 million. Lastly, Lazard divided the low and high equity value range figures by the number of fully diluted shares outstanding of Urovant after giving effect to the Assumed Equity Raise, which was a low value of 90.412 million shares and a high value of 94.549 million shares, respectively. This calculation resulted in the final implied equity value per Urovant common share range of $7.50 to $9.60.

Selected Precedent Transactions Analysis

Using public filings and other publicly available information, Lazard reviewed and analyzed selected precedent transactions involving biotechnology companies that Lazard viewed as generally relevant in evaluating the proposed merger. In performing these analyses, Lazard analyzed certain financial information and transaction multiples relating to companies in the selected transactions and compared such information to the corresponding information for the proposed merger.

Specifically, Lazard reviewed seven merger and acquisition transactions in the biotechnology industry announced since January 1, 2016, that Lazard deemed relevant to consider in relation to Urovant and the merger. These transactions are listed below. Although none of the selected precedent transactions or the target companies in such transactions is directly comparable to the merger or to Urovant, all of the transactions were chosen because they involve transactions that, for the purposes of this analysis, may be considered similar to the merger and/or involve targets that, for the purposes of analysis, may be considered similar to Urovant.

 

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Announcement Date

  

Acquiror

  

Target

10/05/20    BridgeBio Pharma, Inc.    Eidos Therapeutics, Inc.
08/31/20    Nestle S.A.    Aimmune Therapeutics, Inc.
09/30/19    Swedish Orphan Biovitrum AB    Dova Pharmaceuticals, Inc.
09/16/19    H. Lundbeck A/S    Alder BioPharmaceuticals, Inc.
02/25/19    Ipsen    Clementia Pharmaceuticals Inc.
01/05/18    Takeda Pharmaceutical Company Limited    TiGenix
07/21/16    Galenica Group    Relypsa, Inc.

Using data regarding the precedent transactions and the target companies available from public filings and other publicly available information, Lazard examined the selected transactions with respect to the upfront consideration, as a multiple of the target company’s revenues for the fifth year following the commercial launch of their lead product in its lead indication, referred to in this section as “Upfront/L+5 Revenue”, as reflected in publicly available consensus estimates at the time of the transaction announcement. The results of this analysis are as follows:

 

Acquiror

  

Target

  Upfront
Consideration
($ in millions)
    Total
Consideration(1)
($ in millions)
    L+5 Revenue
($ in millions)
    Upfront /
L+5
Revenue
 

BridgeBio Pharma, Inc.

   Eidos Therapeutics, Inc.     2,753       2,753       3,658       0.8x  

Nestle S.A.

   Aimmune Therapeutics, Inc.     2,411       2,411       958       2.5x  

Swedish Orphan Biovitrum AB

   Dova Pharmaceuticals, Inc.     800       846       631       1.3x  

H. Lundbeck A/S

   Alder BioPharmaceuticals, Inc.     1,577       1,798       623       2.5x  

Ipsen

   Clementia Pharmaceuticals Inc.     857       1,103       678       1.3x  

Takeda Pharmaceutical Company Limited

   TiGenix     579       579       240       2.4x  

Galenica Group

   Relypsa, Inc.     1,432       1,432       532       2.7x  
   75th Percentile     1,994       2,105       818       2.5x  
   Median     1,432       1,432       631       2.4x  
   Mean     1,487       1,561       1,046       1.9x  
   25th Percentile     828       975       577       1.3x  

Source: Company filings, press releases, and equity research.

Note: For companies with products launching prior to 6/30, the Launch year is defined as L+1. For launches after 6/30, the year in which the product launches is defined as L+0. Launch assumed shortly after approval date/expected approval. Eidos expected launch in H2 2022 based on broker consensus.

 

(1)

Transaction totals include contingent consideration.

Using its professional judgment and experience, Lazard then applied a range of Upfront/L+5 Revenue multiples for the selected precedent transactions based on the 25th percentile and 75th percentile of Upfront/L+5 Revenue multiples, which ranged from 1.3x to 2.5x, to $627 million (the Revised Special Committee Case’s unadjusted estimated revenues of Urovant for five years following the commercial launch of Urovant’s lead product in its lead indication, after giving effect to the Assumed Equity Raise). The results of this analysis implied an equity value per Urovant common share range of $10.75 to $19.05. To calculate these values, Lazard multiplied Urovant’s L+5 value of $627 million by the unrounded 25th percentile and 75th percentile Upfront/L+5 multiples to derive an implied range of enterprise values for Urovant of $793 million to $1,582 million. Lazard then converted these enterprise values into equity values by adding net cash of $189 million pro forma for the Assumed Equity Raise, resulting in an equity value range of $982 million to $1,771 million. Lastly, Lazard divided the low and high equity value range figures by the number of fully diluted shares outstanding of Urovant after giving effect to the Assumed Equity Raise, which was a low value of 91.459 million shares and a high value of 92.987 million shares, respectively. This calculation resulted in the final implied equity value per Urovant common share range of $10.75 to $19.05.

 

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Other Analyses

The analyses and data described below were presented to the special committee for informational purposes only and did not provide the basis for, and were not otherwise material to, the rendering of Lazard’s opinion.

Premia Paid Analysis

Using information from public filings and other publicly available information, Lazard analyzed the premia paid for acquisitions of publicly-traded companies in the biotechnology industry with a pre-commercial stage product by strategic buyers with transaction equity values implied for the target company in the transaction based on the consideration payable at the closing of the selected transaction (including any contingent consideration) ranging between $500 million and $10 billion that have been announced since January 1, 2018. For each of the precedent transactions, Lazard calculated the implied premia as a percentage based on the amount by which the per-share consideration in each transaction exceeded the target company’s closing share price on the last trading day upon which shares of the target company traded on an unaffected basis (determined as of the last trading day prior to the first public report of a possible transaction) (the (“Unaffected Premia”) and also calculated the implied premia as a percentage based on the amount by which the per-share consideration in each transaction exceeded the target company’s high trading price in the last 52 weeks upon which shares of the target company traded on an unaffected basis (the “52-Week Premia”).

The selected acquisitions of publicly-traded companies in the biotechnology industry with a pre-commercial stage product by strategic buyers and their respective Unaffected Premia and 52-Week Premia are as follows:

 

Acquiror

  

Target

   Unaffected
Premia(1)(2)
    52-Week
Premia(1)
 

BridgeBio Pharma, Inc.

   Eidos Therapeutics, Inc.      41     12

Johnson & Johnson

   Momenta Pharmaceuticals, Inc.      70     34

Sanofi SA

   Principia Biopharma Inc.(3)      35     35

Gilead Sciences, Inc.

   Forty Seven, Inc.(4)      96     92

Sanofi SA

   Synthorx, Inc.      172     172

Merck & Co., Inc.

   ArQule, Inc.      107     68

Astellas Pharma Inc.

   Audentes Therapeutics, Inc.      110     46

Novartis AG

   The Medicines Company(5)      45     45

Alexion Pharmaceuticals, Inc.

   Achillion Pharmaceuticals, Inc.      73     31

UCB S.A.

   Ra Pharmaceuticals, Inc.      112     33

H. Lundbeck A/S

   Alder BioPharmaceuticals, Inc.      79     (1 %) 

Biogen Inc.

   Nightstar Therapeutics plc      68     (8 %) 

Ipsen

   Clementia Pharmaceuticals Inc.      67     28

Roche Holding Ltd

   Spark Therapeutics, Inc.      122     24

Novartis AG

   Endocyte, Inc.      54     20

Eli Lilly and Company

   ARMO BioSciences, Inc.      68     (8 %) 

Alexion Pharmaceuticals, Inc.

   Wilson Therapeutics      70     54

Novartis AG

   AveXis, Inc.      88     59

Seattle Genetics, Inc.

   Cascadian Therapeutics, Inc.      69     69

Sanofi SA

   Ablynx NV(6)      112     112

Celgene Corporation

   Juno Therapeutics, Inc(7)      91     38

Takeda Pharmaceutical Company Limited

   TiGenix      81     69
  

75th Percentile

     104     66
  

Mean

     83     47
  

Median

     76     37
  

25th Percentile

     68     25

Source: Company filings, EvaluatePharma and FactSet

Notes: Based on pre-commercial public biopharma transactions over $500m in transaction value.

 

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(1)

Based on total transaction value. Premia calculations exclude CVRs which are present in Alexion/Achillion, Lundbeck/Alder, and Ipsen/Clementia.

(2)

Premium to 1-day unaffected price.

(3)

Sanofi/Principia statistics based on unaffected date of July 15, 2019 based on release of rumors first reported on July 16, 2019.

(4)

Gilead/FortySeven statistics based on unaffected date of February 27, 2020 based on release of rumors first reported on February 28, 2020.

(5)

Novartis/Medicines Company statistics based on unaffected date of November 18, 2019 based on release of rumors first reported on November 19, 2019.

(6)

Sanofi/Ablynx statistics based on unaffected date of January 5, 2018 based on news that Ablynx rejected a bid from Novo Nordisk released on January 8, 2018.

(7)

Celgene/Juno statistics based on unaffected date of January 16, 2018 based on release of rumors first reported on January 17, 2018.

Based on its professional judgment and experience, Lazard then applied the 25th percentile and 75th percentile Unaffected Premia for the selected pre-commercial companies of 68% and 104%, respectively, to the closing price of Urovant on November 11, 2020 to calculate an implied equity value per Urovant common share range of $13.25 to $16.15. This was calculated by multiplying 68% and 104% respectively by $7.91, the closing price of Urovant on November 11, 2020, to calculate the premia and adding the resulting premia to $7.91. Based on its professional judgment and experience, Lazard applied the 25th percentile and 75th percentile 52-Week Premia for the selected pre-commercial companies of 25% and 66% respectively, to $15.75, the 52-week high trading price of Urovant to calculate an implied equity value per Urovant common share range of $19.70 to $26.15. This was calculated by multiplying 25% and 66% respectively by $15.75, to calculate the premia and adding the resulting premia to $15.75.

Lazard also analyzed the premia paid for acquisitions of publicly-traded companies in the biotechnology industry with a commercial stage product by strategic buyers with transaction equity values implied for the target company in the transaction based on the consideration payable at the closing of the selected transaction (including any contingent consideration) ranging between $500 million and $10 billion that have been announced since January 1, 2018. For each of these precedent transactions, Lazard also calculated the Unaffected Premia and the 52-Week Premia.

The selected acquisitions of publicly-traded companies in the biotechnology industry with a commercial stage product by strategic buyers and their respective Unaffected Premia and 52-Week Premia are as follows:

 

Acquiror

  

Target

   Unaffected
Premia(1)(2)
    52-Week
Premia(1)
 

Endo International plc

   BioSpecifics Technologies Corp.      45     30

Covis Group S.à r.l.

   AMAG Pharmaceuticals, Inc.      46     3

Gilead Sciences, Inc.

   Immunomedics, Inc.      108     97

Nestle S.A.

   Aimmune Therapeutics, Inc.      174     (6 %) 

Ionis Pharmaceuticals, Inc.

   Akcea Therapeutics, Inc.      59     (19 %) 

Alexion Pharmaceuticals, Inc.

   Portola Pharmaceuticals, Inc.      132     (51 %) 

Menarini Group

   Stemline Therapeutics, Inc.      142     (35 %) 

Eli Lilly and Company

   Dermira, Inc.(3)      138     27

Swedish Orphan Biovitrum AB

   Dova Pharmaceuticals, Inc.      36     30

Pfizer Inc.

   Array BioPharma Inc.      62     62

Eli Lilly and Company

   Loxo Oncology, Inc.      68     24

Bausch Health Companies Inc.

   Synergy Pharmaceuticals Inc.      138     (69 %) 

GlaxoSmithKline plc

   TESARO, Inc.(4)      182     (15 %) 

Sanofi SA

   Bioverativ Inc.      64     64

75th Percentile

     138     30

 

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Acquiror

  

Target

   Unaffected
Premia(1)(2)
    52-Week
Premia(1)
 

Mean

     100     10

Median

     88     13

25th Percentile

     60     (18 %) 

Source: Company filings, EvaluatePharma and FactSet

Notes: Based on commercial public biopharma transactions over $500m in transaction value.

 

(1)

Based on total transaction value. Premia calculations exclude CVRs which are present in Menarini/Stemline and SOBI/Dova.

(2)

Premium to 1-day unaffected price.

(3)

Lilly/Dermira statistics based on unaffected date of December 6, 2019, due to significant price appreciation without notable news or catalysts.

(4)

GSK/Tesaro statistics based on unaffected date of November 15, 2018, based on release of rumors first reported on November 16, 2018.

Based on its professional judgment and experience, Lazard then applied the 25th percentile and 75th percentile Unaffected Premia for the selected commercial companies of 60% and 138%, respectively, to the closing price of Urovant on November 11, 2020 to calculate an implied equity value per Urovant common share range of $12.65 to $18.80. This was calculated by multiplying 60% and 138% respectively by $7.91, the closing price of Urovant on November 11, 2020, to calculate the premia and adding the resulting premia to $7.91. Based on its professional judgment and experience, Lazard applied the 25th percentile and 75th percentile 52-Week Premia for the selected commercial companies of (18%) and 30%, respectively, to the 52-week high trading price of Urovant to calculate an implied equity value per Urovant common share range of $12.90 to $20.50. This was calculated by multiplying (18%) and 30% respectively by $15.75 to calculate the premia and adding the resulting premia to $15.75.

52-Week High/Low Trading Prices

Lazard reviewed the range of trading prices of Urovant common shares for the 52 weeks ended on November 11, 2020. Lazard observed that, during such period, the closing share price of the Urovant common shares ranged from $7.15 per share to $15.75 per share, as compared to the per share merger consideration of $16.25 per share.

Research Analyst Price Targets

Lazard reviewed selected equity research analyst price targets based on published, publicly available Wall Street equity research reports. Lazard observed that such price targets ranged from $18.00 per share to $28.00 per Urovant common share, with a median of $23.00 per Urovant common share, as compared to the per share merger consideration of $16.25 per Urovant common share.

The selected equity research analyst price targets are as follows:

 

Analyst

   Date      Price Target  

Jefferies

     11/2/2020      $ 18.00  

J.P. Morgan

     11/2/2020      $ 23.00  

H.C. Wainwright & Co.

     8/19/2020      $ 28.00  

Miscellaneous

Urovant has agreed to pay Lazard a transaction fee of $2,750,000, payable upon the consummation of the merger, of which $1,125,000 became payable upon delivery of the fairness opinion. In addition, Urovant has

 

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agreed to reimburse Lazard for its reasonable out-of-pocket expenses incurred in connection with its engagement, including reasonable fees of counsel, and will indemnify Lazard and certain related persons against certain liabilities arising out of Lazard’s engagement. In the two years prior to this engagement, Lazard did not provide any investment banking services to Urovant or its subsidiaries. Lazard has in the two years prior to the delivery of its opinion on November 12, 2020 provided certain investment banking services to Sumitomo Dainippon, including, during the past two years, having advised in connection with a potential transaction unrelated to Urovant that was not consummated. Lazard received no fee from Sumitomo Dainippon in connection with this advice, but Sumitomo Dainippon did reimburse Lazard for certain expenses incurred by Lazard during the course of such engagement. Lazard, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, leveraged buyouts, and valuations for estate, corporate and other purposes. In addition, in the ordinary course, Lazard and its affiliates and employees may trade securities of Urovant, Sumitomo Dainippon, and certain of their respective affiliates for their own accounts and for the accounts of their customers, may at any time hold a long or short position in such securities, and may also trade and hold securities on behalf of Urovant, Sumitomo Dainippon and certain of their respective affiliates. The issuance of Lazard’s opinion was approved by the opinion committee of Lazard.

Lazard is an internationally recognized investment banking firm providing a full range of financial advisory and other services. Lazard was selected to act as investment banker to Urovant because of its qualifications, expertise and reputation in investment banking and mergers and acquisitions generally and in particular, as an advisor to companies in the healthcare sector, as well as its familiarity with the business of Urovant.

Lazard prepared these analyses solely for purposes of, and the analyses were delivered to the special committee in connection with, the provision of its opinion to the special committee as to the fairness, from a financial point of view, to the holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act or (ii) Sumitovant). Lazard did not recommend any specific consideration to the special committee or that any given consideration constituted the only appropriate consideration for the merger. Lazard’s opinion was one of many factors considered by the special committee, as discussed further in the section entitled “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” beginning on page 35.

Other Presentations by Lazard

In addition to the presentation made to the special committee on November 12, 2020, which has been filed with the SEC as exhibit (c)(9) to the Schedule 13E-3 and as described in “Special Factors—Opinion of the Financial Advisor to the Special Committee,” “Special Factors—Summary of Lazard’s Financial Analyses,” “Special Factors—Financial Analyses,” and “Special Factors—Other Analyses,” copies of preliminary illustrative presentations delivered by Lazard to the special committee on October 9, 2020 and November 10, 2020 containing preliminary illustrative financial analyses also are attached as exhibits to the Schedule 13E-3. A summary of these preliminary illustrative presentations is provided below. The following summary, however, does not purport to be a complete description of these preliminary illustrative presentations or of the preliminary financial analyses performed by Lazard.

 

   

The preliminary illustrative presentation delivered by Lazard to the special committee on October 9, 2020, filed as exhibit (c)(7) to the Schedule 13E-3, contains, among other information, (i) an overview of the process that had been completed with regard to the potential transaction as of October 9, 2020; (ii) illustrative methodologies that Lazard proposed to use in connection with evaluating the potential transaction; (iii) illustrative approaches to buy-side financial forecasts; (iv) an overview of the potential assets to be valued; (v) information regarding analyst benchmarking, pre-commercial biopharma premia and commercial biopharma premia; (vi) illustrative analysis at various potential offer prices; (vii) an illustrative transaction process timeline; (viii) suggested negotiation considerations; and (ix) an overview of Urovant’s shareholder base.

 

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The preliminary illustrative presentation delivered by Lazard to the special committee on November 10, 2020, filed as exhibit (c)(8) to the Schedule 13E-3, contains, among other information, (i) a summary of the then current transaction terms and transaction consideration; (ii) an overview of the process that had been completed with regard to the potential transaction as of November 10, 2020; (iii) an overview of the potential assets to be valued; (iv) information regarding Urovant’s historic stock performance, illustrative stock trading trends and price targets and analyst benchmarking; (v) an overview of the financial analysis assumptions; (vi) the Original Special Committee Case; (vii) preliminary illustrative valuations based on the Original Special Committee case, including a preliminary illustrative discounted cash flow valuation and analysis; (viii) information regarding selected comparable companies; (ix) an overview of Urovant’s shareholder base and trading activity; (x) information regarding analyst benchmarking, pre-commercial biopharma premia and commercial biopharma premia; and (xi) illustrative analysis at various potential offer prices.

In addition to the presentations delivered by Lazard to the special committee on October 9, 2020 and November 10, 2020, Lazard and the special committee discussed the potential transaction and Lazard’s progress and approach regarding Lazard’s financial analysis on a number of occasions. No other presentations were delivered by Lazard to the special committee. The descriptions of the special committee meetings on October 9, 2020, October 13, 2020, October 16, 2020, October 23, 2020, October 30, 2020, November 6, 2020, November 7, 2020, November 8, 2020, November 9, 2020, November 10, 2020 and November 11, 2020 as set forth in the section entitled “Special Factors—Background of the Merger” are each incorporated herein by reference.

None of these other preliminary illustrative presentations by Lazard, or the other conversations between Lazard and the special committee, alone or together, constitute, or form the basis of, an opinion of Lazard with respect to the consideration payable under the merger agreement, and the preliminary illustrative financial analyses therein were based on economic, monetary, market and other conditions as in effect on, and the information made available to Lazard as of, the dates of the respective presentations and conversations.

Summary of Presentations Provided by Citi

Sumitovant retained Citigroup Global Markets Inc., or Citi, as its financial advisor in connection with the proposed merger. Sumitovant selected Citi because it is an internationally recognized investment bank with substantial merger and acquisition advisory experience, including in the biopharmaceutical industry, and had advised Sumitomo Dainippon on its purchase of its existing ownership stake in Urovant through its strategic alliance with Roivant Sciences in December 2019. Sumitovant and its affiliates have paid Citi $25 million in fees since 2019. Sumitovant’s engagement letter with Citi contemplates that Sumitovant will pay Citi a fee of $4 million upon completion of the merger. In addition, Sumitovant has agreed to reimburse Citi for its expenses, including attorneys’ fees and disbursements, and to indemnify Citi and related persons against various liabilities, including certain liabilities under the federal securities laws.

For purposes of Sumitovant’s consideration of a potential merger, Sumitovant discussed with Citi Urovant’s performance metrics – including Urovant’s stock price performance and financial results – as well as valuation information. In connection with these discussions, Citi provided materials to Sumitovant on July 22, 2020, September 7, 2020, September 9, 2020, September 10, 2020 and November 5, 2020, as described below. None of these discussion materials addressed the fairness of the consideration provided for in the merger agreement and the statutory merger agreement to the Public Shareholders. Sumitovant provided neither instructions regarding, nor limitations on, Citi’s preparation of these discussion materials. Citi based these discussion materials on its review of, among other things, the Sumitovant management projections (as defined below), publicly available historical business and financial information about Urovant and publicly available information about select prior going-private merger transactions. Citi, without independent verification, relied upon the accuracy and completeness of the historical information and assumed the Sumitovant management projections were prepared on a reasonable basis and reflected the best currently available estimates and judgments of Sumitovant. Citi prepared the discussion materials to assist Sumitovant with its consideration of the merger. Citi was not

 

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requested to provide, and did not provide, any opinion as to the fairness of the merger, any valuation for the purpose of assessing fairness of the consideration, any appraisal of assets or liabilities or any recommendation as to how a shareholder should vote. Citi also was not requested to, and did not, evaluate the solvency or fair value of any person under any laws, nor did Citi advise on other legal, tax or accounting matters. The terms of the merger agreement and the per share merger consideration were determined through arm’s-length negotiations between Sumitovant and the special committee. Citi provided advice to Sumitovant during these negotiations. Citi, however, did not recommend any specific amount of consideration. The Citi discussion materials were among many factors taken into consideration by the board of directors of Sumitovant, which we refer to herein as the “Sumitovant Board,” in making its determination to approve the merger.

Copies of the Citi discussion materials summarized below have been filed as exhibits to the Schedule 13E-3, are incorporated herein by reference and will be made available for inspection and copying at Sumitovant’s principal executive offices during its regular business hours by any holder of Urovant common shares or its representative who has been so designated in writing. The foregoing summaries do not purport to be complete descriptions of the analyses performed by Citi in connection with the discussion materials and are qualified in their entirety by reference to the Citi discussion materials filed as exhibits to the Schedule 13E-3.

Information in the Citi discussion materials is subject to the assumptions, limitations, qualifications and other conditions contained therein and is necessarily based on economic, monetary, market and other conditions as of, and the information made available to Citi in advance of, the date of each such materials. Citi assumes no responsibility for updating, revising or reaffirming the analyses in any of the discussion materials based on circumstances, developments or events occurring after the date of such materials. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by the analyses. Because the analyses in the discussion materials are inherently subject to uncertainty, neither Citi nor any other person assumes responsibility if future results are different from those indicated in the Citi discussion materials. No transaction used in the discussion materials is identical to the merger; Citi selected the comparable transactions based on Citi’s professional judgment and experience, but those transactions differ in important ways from the proposed merger.

The following summarizes the material financial analyses contained in the Citi discussion materials. This summary, however, does not purport to be a complete description of the financial analyses performed by Citi, nor does the order of the analyses described represent relative importance or weight given to those analyses by Citi.

On July 22, 2020, and in response to a request from Sumitovant, representatives of Citi provided Sumitovant with discussion materials relating to Urovant, which we refer to as the “July 22 materials.” Sumitovant requested that Citi provide the July 22 materials in order to assess the effect of Urovant completing equity or debt financing transactions in varying amounts. This analysis estimated the total incremental cost for Sumitovant to purchase Urovant equity not already owned by Sumitovant, assuming a Urovant financing transaction in either March 2021 or March 2022. The July 22 materials assessed the cost at illustrative per share prices ranging from $10.00 to $20.00. The July 22 materials assumed Urovant would raise $200 million in debt or equity financing prior to a March 2021 transaction and $350 million in debt or equity financing prior to a March 2022 transaction. Citi derived implied ranges of the fully diluted value of Urovant equity not owned by Sumitovant at hypothetical prices that Sumitovant could potentially offer in connection with a going private transaction. Citi used figures disclosed in Urovant and Sumitovant filings with the SEC for the number of Urovant shares outstanding and the number of Urovant shares owned by Sumitovant. To calculate total incremental cost under each debt financing scenario, Citi added to the fully diluted value of Urovant equity not owned by Sumitovant the estimated amount of assumed net debt at the time of the transaction. To calculate the total incremental cost under each equity financing scenario, Citi assumed that Sumitovant would purchase 75% of any equity financing (i.e., that Sumitovant would participate in any offering to approximately maintain its percentage ownership of Urovant).

On September 7, 2020, and at Sumitovant’s request, representatives of Citi provided Sumitovant with discussion materials, which we refer to as the “September 7 materials,” describing directional theoretical returns

 

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to Sumitovant from a merger. The September 7 materials provided illustrative cash flows over a seven year period for (1) Urovant as a standalone entity, (2) Sumitovant assuming no merger (the “status-quo scenario”) and (3) Sumitovant assuming a merger, which we refer to as the “acquisition scenario,” and indicated that a return analysis would assess the difference between cash flows in the acquisition and status-quo scenarios.

On September 9, 2020, and at Sumitovant’s request, representatives of Citi provided Sumitovant with discussion materials, which we refer to as the “September 9 materials,” containing illustrative discounted cash flow analyses based upon updates to the Sumitovant management projections. Citi also calculated ranges of implied value illustrative per Urovant common share based on estimates of free cash flows from the year ending March 31, 2021 through the year ending March 31, 2038 using the Sumitovant management projections. Citi derived ranges of illustrative enterprise values and subtracted estimated net debt to derive illustrative equity values. Citi then divided the illustrative equity values by estimated fully diluted shares outstanding, using the treasury stock method, to derive illustrative per Urovant common share values. Citi calculated present values illustrative per Urovant common share as of September 2020, March 2021 and March 2022, based on assumed changes in probabilities of success of Urovant programs and applied discount rate ranges of (1) 13.7% to 16.2% (which included a small-capitalization risk premium) and (2) 10.9% to 12.9% (which excluded a small-capitalization risk premium). Citi generated the discount rates based on an assessment of Urovant’s weighted average cost of capital. The analysis in the September 10 materials generated estimated values ranging from $9.95 at September 2020 using a 16.2% discount rate to $32.74 at March 2022 using a 10.9% discount rate. Citi, using similar methodology but employing only the discount rate range that excluded a small-capitalization risk premium, also calculated estimated illustrative per Urovant common share values as of September 30, 2020 and as of March 31 for each year from 2021 to 2027. These calculated estimated present values illustrative per Urovant common share ranged from $16.63 as of September 30, 2020 using a discount rate of 12.9% to $61.45 as of March 31, 2027 using a discount rate of 10.9%.

On September 10, 2020, and at Sumitovant’s request, representatives of Citi provided Sumitovant with discussion materials, which we refer to as the “September 10 materials,” containing updated illustrative discounted cash flow analyses based upon the Sumitovant management projections. Citi also calculated ranges of implied value illustrative per Urovant common share based on updated estimates of free cash flow from the year ending March 31, 2021 through the year ending March 31, 2038 using the Sumitovant management projections. Citi derived ranges of illustrative enterprise values and subtracted estimated net debt to derive illustrative equity values. Citi then divided the illustrative equity values by estimated fully diluted shares outstanding, using the treasury stock method, to derive illustrative per Urovant common share values. Citi calculated present values illustrative per Urovant common share as of September 2020, March 2021 and March 2022, based on assumed changes in probabilities of success of Urovant programs and applied discount rate ranges of (1) 13.9% to 16.5% (which included a small-capitalization risk premium) and (2) 11.1% to 13.2% (which excluded a small-capitalization risk premium). Citi generated the discount rates based on an updated assessment of Urovant’s weighted average cost of capital. The analysis in the September 10 materials generated estimated values ranging from $8.35 at September 2020 using a 16.5% discount rate to $29.56 at March 2022 using an 11.1% discount rate. Citi, using similar methodology but employing only the discount rate range that excluded a small-capitalization risk premium, also calculated estimated illustrative per Urovant common share values as of September 30, 2020 and as of March 31 for each year from 2021 to 2027. These calculated estimated present values illustrative per Urovant common share ranged from $14.47 as of September 30, 2020 using a discount rate of 13.2% to $56.67 as of March 31, 2027 using a discount rate of 11.1%.

On November 5, 2020, at Sumitovant’s request, representatives of Citi provided Sumitovant with discussion materials, which we refer to as the “November 5 materials,” containing a summary of recent Urovant stock price performance, as well as preliminary financial analyses of the range of illustrative per Urovant common share values implied by Urovant’s 52-week intraday high and low, certain precedent minority squeeze-out premiums and a discounted cash follow analysis. The 52-week trading price had ranged from $6.55 (3/19/2020) to $15.98

 

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(01/02/2020). The November 5 materials included a summary of the premiums paid in 12 U.S. all-cash minority squeeze-out transactions announced between January 2010 and October 2020. The transactions analyzed were:

 

Date   

Target

  

Acquiror

8/31/20    Akcea Therapeutics, Inc.    Ionis Pharmaceuticals, Inc.
8/19/20    Hudson Ltd.    Dufry AG
11/27/19    AVX Corporation    Kyocera Corporation
11/16/18    EMC Insurance Group Inc.    Employers Mutual Casualty Company
06/19/18    Foundation Medicine, Inc.    Roche Holdings, Inc.
03/09/16    Crown Media Holdings Inc.    Hallmark Cards Incorporated
03/07/16    National Interstate Corporation    American Financial Group, Inc.
02/29/16    Federal-Mogul Holdings Corporation    Icahn Enterprises L.P.
03/01/13    Sauer-Danfoss Inc.    Danfoss A/S
02/19/13    Cornerstone Therapeutics Inc.    Chiesi Farmaceutici S.p.A.
11/01/11    CNA Surety Corporation    CNA Financial Corporation
03/21/10    CNX Gas Corporation    CONSOL Energy Inc.

The median and average premium paid relative to the unaffected price one day prior to announcement in these transactions were 47.2% and 49.0%, respectively. Applying premiums of 25% and 65%, representing a 20% band around the median premium rounded to the nearest five percent, against the then current market price of $8.14, implied a premiums paid range of $10.20 to $13.45 (rounded to the nearest $0.05). The November 5 materials also showed that, in the precedent minority squeeze-out transactions, an acquiror increased its final offer an average of 15.2% above its initial offer. The discounted cash flow analysis prepared based on the Sumitovant management projections indicated a range illustrative per Urovant common share of $13.35 (using a 15.7% discount rate) to $20.50 (using a 12.4% discount rate) (rounded to the nearest $0.05). This range reflects revisions to the Sumitovant management projections underlying the September 9 and September 10 materials. The November 5 materials also included a summary of Urovant’s pro forma capitalization at illustrative per Urovant common share offer prices ranging from $10.00 to $20.00, as well as at an illustrative initial proposal of $12.50 illustrative per Urovant common share. The analysis indicated the premiums implied by such illustrative offer prices to Urovant’s then-current per Urovant common share price of $8.14, to Urovant’s 52-week intraday high and low, to Urovant’s volume weighted average price over the trailing 30, 60 and 90 trading days and to Urovant’s undisturbed share price prior to the definitive agreement announcement of the Strategic Alliance with Roivant Sciences of $9.68. The table below has a summary of this analysis:

 

     Price per
share
     Range of Premiums/
(Discounts) relative to
$10.00 to $20.00
 

Closing price on November 4, 2020

   $ 8.14        22.9% – 145.7%  

30-day VWAP

   $ 8.63        15.8% – 131.6%  

60-day VWAP

   $ 8.67        15.4% – 130.7%  

90-day VWAP

   $ 8.79        13.7% – 127.4%  

52-Week Intraday High

   $ 15.98        (37.4%) – 25.2%  

52-Week Intraday Low

   $ 6.55        52.7% – 205.3%  

Closing price on October 30, 2019 (last close prior to the definitive agreement announcement of the Strategic Alliance with Roivant Sciences)

   $ 9.68        3.3% – 106.6%  

During the past two years, Citi has not received fees from Urovant for investment banking services, such as merger and acquisition advisory or debt or equity underwriting, or business non-investment banking services, such as foreign exchange, cash management or other treasury services. In the ordinary course of its business, Citi and its affiliates may actively trade or hold the securities of Urovant, Sumitovant and entities affiliated with either for its own account or for the account of its customers and, accordingly, may at any time hold a long or

 

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short position in such securities. There have been no other material relationships between Citi, on the one hand, or Urovant, Sumitovant, or Sumitomo Dainippon, on the other hand, other than as disclosed herein.

Sumitovant Financial Information and Projections

Sumitovant does not, as a matter of course, publicly disclose forecasts or internal projections as to future performance due to, among other things, the inherent difficulty of predicting financial performance for future periods and the likelihood that the underlying assumptions and estimates may not be realized. However, Sumitovant provided certain non-public financial projections to Citi in its capacity as Sumitovant’s financial advisor as part of the due diligence process.

Sumitovant’s management teams developed long-range financial projections for vibegron, relating to projected revenue, cost of goods sold, selling, general- & administrative expenses, research & development values, depreciation and amortization, and net working capital values as adjusted by the probability of success through March 31, 2038, which we refer to as the Sumitovant management projections, such adjustments assuming 100% probability of success for vibegron in OAB by 2021 and 100% probability of success for vibegron in OAB-BPH by 2023. The Sumitovant management projections were prepared based on budgets and information provided by Urovant in the ordinary course of business and not for purposes of a potential merger. Sumitovant made its own assessments and adjustments to develop the Sumitovant management projections. The Sumitovant management projections incorporated the latest assumptions relating to vibegron’s development plans, cost and timing, as well as a current analysis of the competitive environment in the commercial forecasts of vibegron. The Sumitovant management projections were also adjusted for the probability of success of, among other things, obtaining regulatory approvals and meeting the anticipated launch date for vibegron, and earning the target pricing of sales of approved products.

The Sumitovant management projections, while presented with numerical specificity, necessarily were based on numerous variables and assumptions that are inherently uncertain and many of which will be beyond Urovant’s (and following the completion of the merger, Sumitovant’s) control. Because the Sumitovant management projections cover multiple years, by its nature, this information becomes subject to greater uncertainty with each successive year. The assumptions upon which the Sumitovant management projections were based necessarily involve judgments with respect to, among other things, development timelines, likelihood of clinical success, product pricing, market uptake, reimbursement and potential competition, all of which are difficult or impossible to predict accurately and many of which are beyond Urovant’s control. The Sumitovant management projections also reflect assumptions as to certain business decisions and transactions that are subject to change and may not occur, at all or on the terms assumed. Important factors that may affect actual results and result in the Sumitovant management projections not being achieved include, but are not limited to: (1) the availability and level of third-party reimbursement for Urovant’s products and services; (2) market acceptance of such products and services; (3) the introduction of new products and services; (4) access to sufficient capital; (5) the impact of competition; (6) the effect of regulatory actions; (7) the effect of global economic conditions; (8) changes in applicable laws, rules and regulations; and (9) other risk factors described in Urovant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as the section entitled “Forward-Looking Statements” in this proxy statement. In addition, the Sumitovant management projections may be affected by Urovant’s ability to achieve strategic goals, objectives and targets over the applicable period.

The Sumitovant management projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comport with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation or presentation of prospective financial information or generally accepted accounting principles. The summary of the Sumitovant management projections is not being included in this proxy statement to influence a shareholder’s decision regarding whether to vote in favor of the Merger Proposal but rather because the Sumitovant management projections represent an assessment by Sumitovant’s management of future performance and cash flows that was used in the financial analyses of Citi described above.

 

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The Sumitovant management projections set forth below do not take into account any circumstances or events occurring after the date they were prepared, including the announcement of the merger and transaction-related expenses. The Sumitovant management projections also do not take into account the effect of any failure of the merger to close and should not be viewed as accurate or continuing in that context.

The inclusion of the Sumitovant management projections in this proxy statement should not be regarded as an indication that Sumitovant or Urovant or any of their respective affiliates, advisors or representatives considered or consider the Sumitovant management projections to be predictive of actual future events, and the Sumitovant management projections should not be relied on as such. Neither Sumitovant, Urovant, nor any of their respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from these Sumitovant management projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Sumitovant management projections to reflect circumstances existing after the date such Sumitovant management projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Sumitovant management projections are shown to be in error or no longer appropriate. Neither Sumitovant nor Urovant intends to make publicly available any update or other revision to the Sumitovant management projections except as required by law. Neither Sumitovant nor Urovant nor any of their respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any shareholder or other investor regarding the ultimate performance of Urovant compared to the information contained in the Sumitovant management projections or that projected results will be achieved.

Urovant’s shareholders are cautioned not to place undue, if any, reliance on the Sumitovant management projections included in this proxy statement.

The Sumitovant management projections incorporate certain financial measures, including earnings before interest and taxes, or EBIT, net operating profit after tax, or NOPAT, and free cash flow to the firm, or FCFF, which are not measures under generally accepted accounting principles. Such financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with generally accepted accounting principles. Sumitovant’s or Citi’s calculations of these financial measures may differ from others in its industry and are not necessarily comparable with information presented under similar captions used by other companies.

Subject to the foregoing qualifications, the following is a summary of the September 9 Sumitovant management projections:

 

    Year Ending March 31,  
    2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

Total Revenue

    0       29       137       293       445       548       716       771       800       830       861       894       928       963       750       150       75       38  

Cost of Goods Sold

    (0     (3     (17     (30     (36     (44     (58     (62     (65     (67     (70     (72     (75     (78     (61     (12     (6     (3

Gross Profit

    0       25       120       262       409       504       658       708       735       763       791       821       853       885       689       138       69       34  

EBIT

    (192     (188     (116     (16     98       180       301       327       401       424       449       480       507       535       414       74       45       11  

NOPAT

    (192     (188     (116     (16     98       180       301       307       339       359       380       406       429       453       350       63       38       9  

FCFF

    (192     (192     (132     (39     75       165       276       298       335       354       375       401       424       448       382       153       50       20  

 

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The primary difference between the September 9 and September 10 Sumitovant management projections is an increase in the assumed effective tax rate in the year ending March 31, 2028 from 6% to 9% and from the year ending March 31, 2029 onwards from 15% to 21%, which had the effect of reducing NOPAT and FCFF. Subject to the foregoing qualifications, the following is a summary of the updated September 10th Sumitovant management projections:

 

    Year Ending March 31,  
    2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

Total Revenue

    0       29       137       293       445       548       716       771       800       830       861       894       928       963       750       150       75       38  

Cost of Goods Sold

    (0     (3     (17     (30     (36     (44     (58     (62     (65     (67     (70     (72     (75     (78     (61     (12     (6     (3

Gross Profit

    0       25       120       262       409       504       658       708       735       763       791       821       853       885       689       138       69       34  

EBIT

    (192     (188     (116     (16     98       180       301       327       401       424       449       480       507       535       414       74       45       11  

NOPAT

    (192     (188     (116     (16     98       180       301       299       315       334       353       377       398       421       325       58       36       9  

FCFF

    (192     (192     (132     (39     75       165       276       291       311       329       348       372       393       415       357       148       47       20  

The primary difference between the September 10 and November 5 Sumitovant management projections is revised R&D and SG&A expenses from the year ending March 31, 2021 to the year ending March 31, 2031. Furthermore, Sumitovant management revised the assumption of the market exclusivity period, resulting in a change in the forecasting revenue from the year ending March 31, 2035 onwards. Subject to the foregoing qualifications, the following is a summary of the updated November 5 Sumitovant management projections:

 

    Year Ending March 31,  
    2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

Total Revenue

    0       29       137       293       445       548       716       771       800       830       861       894       928       963       1,000       450       225       113  

Cost of Goods Sold

    (0     (3     (17     (30     (36     (44     (58     (62     (65     (67     (70     (72     (75     (78     (81     (36     (18     (9

Gross Profit

    0       25       120       262       409       504       658       708       735       763       791       821       853       885       919       414       207       103  

EBIT

    (172     (168     (105     (18     92       176       284       344       401       424       423       480       507       535       573       296       183       80  

NOPAT

    (172     (168     (105     (18     92       176       284       307       315       334       333       377       398       421       451       233       144       63  

FCFF

    (172     (172     (121     (42     69       161       259       299       311       329       328       372       393       415       445       316       178       97  

Controlling Purchaser’s Purposes and Reasons for the Merger

Under the SEC rules governing “going-private” transactions, including Rule 13e-3 under the Exchange Act, each of Sumitomo Dainippon, Sumitovant and merger sub, which we refer to collectively as the “Controlling Purchaser,” is an “affiliate” of Urovant and engaged in a “going-private” transaction, and therefore, is required to disclose its purposes and reasons for the merger to Urovant’s “unaffiliated security holders” as defined under Rule 13e-3 of the Exchange Act. Each member of the Controlling Purchaser is making the statements included in this section of the proxy statement solely for the purpose of complying with the requirements of Rule 13e-3 and other rules under the Exchange Act. However, no member of the Controlling Purchaser is making any recommendation to any Public Shareholder as to how that shareholder should vote on any proposal, and the views of each member of the Controlling Purchaser should not be construed as a recommendation to any Public Shareholder as to how such shareholder should vote. Each member of the Controlling Purchaser has interests in the merger that are different from, and in addition to, those of the Public Shareholders.

If the merger is completed, Urovant will become a wholly owned subsidiary of Sumitovant. As a result, the Urovant common shares will cease to be listed on Nasdaq or publicly traded and will be deregistered under the Exchange Act. Upon completion of the merger, the board of directors of merger sub immediately prior to the effective time of the merger, together with any directors of Urovant that Sumitovant determines to appoint at the effective time (subject to such person’s agreement to serve as a director of the surviving company) will become the board of directors of Urovant as the surviving company in the merger. The officers of Urovant immediately

 

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prior to the completion of the merger will remain in place as the officers of Urovant following completion of the merger. For the Controlling Purchaser, the purpose of the merger is to enable (i) Sumitovant to acquire 100% ownership and control of Urovant in a transaction in which holders of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) will receive $16.25 per Urovant common share, and (ii) the Controlling Purchaser to own 100% of the equity interests in Urovant after the merger. In this regard, the Controlling Purchaser will bear the risks and rewards of such ownership in Urovant after the merger, including any future earnings and growth of Urovant as a result of improvements to Urovant’s operations, synergies that may accrue from the merger, acquisitions of other businesses, and the benefits of operating Urovant.

The Controlling Purchaser determined that the structuring the transaction as a merger in which the Public Shareholders (other than dissenting holders) receive $16.25 in cash for each Urovant common share is preferable to other transaction structures as it enables the holders of Urovant common shares (other than (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) to immediately realize the value of their investment in Urovant through their receipt of the per share merger consideration, which represents a premium of approximately 96% on the closing price of a Urovant common share on November 12, 2020 and a premium of 92% on the 30-day volume weighted average share price of a Urovant common share on November 12, 2020, in each case on Nasdaq. Conversely, as a result of the merger, the Public Shareholders will no longer have an opportunity to participate in any future benefits associated with the ownership of the Urovant common shares, including the receipt of any dividends paid by Urovant and participation in any potential appreciation in the trading price of the Urovant common shares beyond the per share merger consideration. The Public Shareholders’ receipt of cash in exchange for their Urovant common shares pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes to the Public Shareholders who are U.S. Holders.

In addition, the Controlling Purchaser believes that structuring the transaction in such a manner is preferable to other alternative transaction structures because it (i) will enable the Controlling Purchaser to directly acquire all of the outstanding shares of Urovant at the same time, (ii) will allow Urovant to cease to be a public reporting company, reducing management time and attention spent on those activities, as well as operating costs, (iii) will allow the Controlling Purchaser to determine investment strategies and position Urovant for commercial success as it prepares to launch its first potential therapy, vibegron, for patients with overactive bladder, and (iv) is consistent with recent precedent transactions involving publicly-listed companies organized under Bermuda law. Because the transaction structure is consistent with the objectives of the Controlling Purchaser and with market practice, the Controlling Purchaser did not pursue or propose an alternative transaction structure. As an alternative to the merger, members of the Controlling Purchaser had discussions with Urovant regarding the Controlling Purchaser providing funds to Urovant by increasing its existing credit facility, the purchase of convertible bonds or providing financing to Urovant. The Controlling Purchaser and Urovant were not able to reach agreement on the appropriate structure for these financing arrangements and no such agreements were implemented.

In deciding to pursue the merger, the Controlling Purchaser considered and took into account various risks and other factors that potentially could adversely affect them. These included the possibility that the merger could result in the loss of key employees of Urovant or otherwise disrupt Urovant’s business operations. The Controlling Purchaser also considered that its directors, officers and other employees would expend considerable time and effort in negotiating, implementing and completing the merger, and in doing so their time would be diverted from other important business opportunities and operational matters. The Controlling Purchaser recognized that it will incur significant transaction costs and expenses in connection with the merger, regardless of whether the merger is completed. There is a risk that the merger may not be completed despite the Controlling Purchaser’s efforts, including in the event that the requisite shareholder approvals are not obtained.

 

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The Controlling Purchaser believes that entering into the merger agreement prior to the approval of vibegron is appropriate because (i) Urovant’s operational cash needs, particularly in connection with the commercial launch of vibegron, require an agreement on the funding strategy for Urovant’s business and Urovant and controlling purchaser had not been able to determine an appropriate and mutually agreeable structure for these arrangements, (ii) synergies that may be enabled through transactions between Urovant and the Controlling Purchaser or its affiliates could be viewed by the Public Shareholders as detrimental to the interests of the Public Shareholders if they continued as holders of Urovant common shares, (iii) the current share price of a Urovant common share appropriately reflects the approval and marketing risk of vibegron, and (iv) completion of the merger shortly after the launch of vibegron will allow Urovant’s management and employees to focus on the successful launch of vibegron, rather than diverting resources to the negotiation and approval of the merger.

The Controlling Purchaser believes that after the merger is consummated, Urovant should have greater operating flexibility and more efficient access to capital, including due to the reduction in expenses resulting from Urovant ceasing to be a public company and the ability of the Controlling Purchaser to efficiently provide certain administrative functions to Urovant, which should allow Urovant to adequately build its sales force in the near-term and support Urovant’s long-term growth and profitability. If that happens, the Controlling Purchaser (and not the Public Shareholders) will benefit from any resulting increase in the value of Urovant.

Accordingly, the Controlling Purchaser has decided to undertake to pursue the merger at this time for the reasons described above.

If the merger is not completed for any reason, Sumitomo Dainippon, Sumitovant and their affiliates reserve the right, subject to the investor rights agreement, to acquire additional Urovant common shares through private purchases, market transactions, tender or exchange offers or otherwise on terms and at prices that may be more or less favorable than those provided in the merger agreement, or, subject to any applicable legal restrictions, to dispose of any or all Urovant common shares acquired by them. In the event that the merger is not completed, then the investor rights agreement will remain in place in accordance with its terms.

Position of the Controlling Purchaser as to Fairness of the Merger

Under the SEC rules governing “going-private” transactions, including Rule 13e-3 under the Exchange Act, each member of the Controlling Purchaser is an “affiliate” of Urovant and engaged in a “going-private” transaction and, therefore is required to disclose its beliefs as to the fairness of the merger to Urovant’s “unaffiliated security holders” as defined under Rule 13e-3 of the Exchange Act. Each member of the Controlling Purchaser is making the statements included in this section of the proxy statement solely for the purpose of complying with the requirements of Rule 13e-3 and related rules under the Exchange Act. However, no member of the Controlling Purchaser is making any recommendation to any Public Shareholder as to how that shareholder should vote on any proposal, and the views of each member of the Controlling Purchaser should not be construed as a recommendation to any Public Shareholder as to how such shareholder should vote. Each member of the Controlling Purchaser has interests in the merger that are different from, and in addition to, those of the Public Shareholders.

The Public Shareholders were represented by the special committee, which negotiated the terms and conditions of the merger agreement on the Public Shareholders’ behalf, with the assistance of the special committee’s independent financial and legal advisors. While the members of the Controlling Purchaser are represented by Ms. Potter and Dr. Nishinaka on the Urovant board, the merger was negotiated and approved by the special committee. Ms. Potter and Dr. Nishinaka were not members of the special committee and did not participate in the deliberations of the special committee regarding, or receive advice from the special committee’s legal or financial advisors as to, the substantive and procedural fairness of the merger to the Public Shareholders. The Controlling Purchaser did not undertake any independent evaluation of the fairness of the merger or the per share merger consideration to the Public Shareholders, nor did it request or obtain any opinion or analysis with respect to the fairness of the merger or the per share merger consideration to the Public Shareholders.

 

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The Controlling Purchaser believes, based on, among other things, the factors considered by, and the analysis and resulting conclusions of, the special committee described in the section entitled “—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” (which analysis and resulting conclusions the Controlling Purchaser adopts), that the merger is substantively and procedurally fair to the Public Shareholders.

In particular, the Controlling Purchaser considered the following substantive factors, which are not presented in any relative order of importance:

 

   

the $16.25 per-share merger consideration represents (i) a premium of approximately 96% to the closing price of a Urovant common share on November 12, 2020 and (ii) a premium of 92% to the 30-day volume weighted average share price of a Urovant common share on November 12, 2020;

 

   

the per share merger consideration is all cash, which provides immediate certainty of value and liquidity to the Public Shareholders, since such shareholders are able to realize the $16.25 per-share merger consideration for each of their Urovant common shares;

 

   

the merger will eliminate the Public Shareholders’ exposure to the various risks and uncertainties related to continued ownership of Urovant common shares, which include among others:

 

   

exposure to risks and uncertainties relating to FDA approval, the commercial launch, and the competitive position, of vibegron;

 

   

exposure to market, economic and other risks that arise from owning shares in a public company;

 

   

any potential decline in the market prices of the Urovant common shares that may result from a general economic slowdown;

 

   

other fluctuations in the value of the Urovant common shares based on general economic, business and industry conditions throughout the world;

 

   

potential volatility in the price of the Urovant common shares as a result of future developments beyond Urovant’s control, including government or regulatory action, and changes in tax laws, interest rates and general market conditions;

 

   

potential impacts on the price and trading volumes of the Urovant common shares caused by analyst recommendations and expectations and market sentiment; and

 

   

the other risk factors disclosed in Urovant’s most recent SEC filings;

 

   

Sumitovant’s and merger sub’s obligations to complete the merger and pay the per share merger consideration pursuant to the merger agreement are not conditioned on their obtaining financing; and

 

   

Sumitomo Dainippon has agreed to irrevocably guarantee to Urovant the due and punctual payment of all amounts payable by Sumitovant or merger sub under the merger agreement, including Sumitovant’s and merger sub’s obligation to fund the per share merger consideration that is payable to the Public Shareholders.

In addition, the Controlling Purchaser considered the following procedural factors, which are not presented in any relative order of importance:

 

   

under the investor rights agreement, the Controlling Purchaser is subject to various restrictions on its ability to influence or control the Urovant board, including a contractual restriction requiring the Controlling Purchaser to obtain the approval of Urovant’s independent directors comprising its audit committee before making or publicly announcing a proposal for a merger, which gave the independent directors of the Urovant board the authority to pursue, or decline to pursue, negotiations with the Controlling Purchaser relating to a sale of Urovant, including the merger;

 

   

the Urovant board established the special committee comprised of independent and disinterested directors who are not affiliated with the Controlling Purchaser to consider the Controlling Purchaser’s proposal and to negotiate with the Controlling Purchaser;

 

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the special committee was advised by experienced and qualified advisors, consisting of O’Melveny, as legal counsel, and Lazard, as financial advisor;

 

   

the authorization of the special committee to (i) review and evaluate the terms and conditions of the merger on behalf of Urovant and the Public Shareholders, (ii) negotiate the terms and conditions of the merger, and (iii) determine whether or not to approve the merger and the merger agreement;

 

   

the Sumitovant Board and the Controlling Purchaser were advised by experienced and qualified advisors, consisting of Jones Day, as legal counsel, and Citi, as financial advisor;

 

   

the merger is conditioned on the approval by the holders of at least a majority of the outstanding Urovant common shares held by the Public Shareholders, in addition to the approval of the holders of at least 66 23% of the outstanding Urovant common shares entitled to vote and voting at the special general meeting;

 

   

the merger agreement allows the special committee, subject to specific limitations and requirements set forth in the merger agreement, to withdraw its recommendation in favor of the Merger Proposal in response to a superior proposal or intervening event, subject to Urovant paying the Controlling Purchaser the Termination Fee of $13,620,000;

 

   

the special committee was deliberative in its process to determine whether the merger was fair to, and in the best interests of, Urovant and its shareholders (including unaffiliated security holders, as defined in Rule 13e-3 of the Exchange Act) and to analyze, evaluate and negotiate the terms of the merger;

 

   

neither the Controlling Purchaser, nor their affiliates, participated in or had any influence on the deliberative process of, or the conclusions reached by, the special committee or the negotiating positions of the special committee;

 

   

the merger is not conditioned on any financing being obtained by the Controlling Purchaser, which increases the likelihood that the merger will be consummated and that the Public Shareholders will receive the per share merger consideration of $16.25;

 

   

at the request of Urovant, Sumitovant entered into the Sumitovant voting agreement pursuant to which it is required to vote all Urovant common shares that it owns in favor of the merger, with such obligation being applicable even if the Controlling Purchaser no longer wishes to consummate the merger, which increases the likelihood that the merger will be consummated and that the Public Shareholders will receive the per share merger consideration of $16.25;

 

   

the per share merger consideration resulted from active negotiations between the special committee and the Controlling Purchaser and their respective advisors;

 

   

the special committee unanimously determined that the merger agreement, the statutory merger agreement, and the transactions contemplated thereby, including the merger, were in the best interests of Urovant and its shareholders (including unaffiliated security holders, as defined in Rule 13e-3 of the Exchange Act); and

 

   

the Public Shareholders who do not vote for the merger and who comply with certain procedural requirements will be entitled, after completion of the merger, to exercise statutory appraisal rights under Bermuda law.

In the course of reaching their determination as to the fairness of the merger to the Public Shareholders, the Controlling Purchaser also considered a variety of risks and other countervailing factors related to the merger agreement and the merger, including the following:

 

   

the fact that the Public Shareholders will have no ongoing equity participation in Urovant following the merger and that those Public Shareholders (i) will cease to participate in Urovant’s future earnings or growth, if any, (ii) will not benefit from increases, if any, in the value of the Urovant common shares and (iii) will not benefit from any potential sale to a third party in the future, including any of the foregoing that may result from a successful launch and commercialization of vibegron;

 

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the risk that the merger might not be completed in a timely manner or that the merger might not be consummated at all as a result of a failure to satisfy the conditions contained in the merger agreement, and the fact that a failure to complete the merger could negatively affect the trading price of Urovant or could result in significant costs and disruptions to Urovant’s normal business;

 

   

the restrictions on the conduct of Urovant’s business prior to the completion of the proposed Merger, which may delay or prevent Urovant from undertaking business opportunities that may arise and certain other actions it might otherwise take with respect to the operations of Urovant pending completion of the merger;

 

   

the fact that the merger is conditioned upon the approval of at least a majority of the outstanding Urovant common shares held by the Public Shareholders, which reduces the certainty that the merger will be completed;

 

   

the fact that litigation may occur in connection with the merger and any such litigation may result in significant costs and a diversion of management focus;

 

   

the risk, if the merger is not consummated, that the pendency of the merger could affect adversely the relationship of Urovant and its subsidiaries with their respective employees, suppliers, agents and others with whom they have business dealings;

 

   

the fact that Sumitovant, in making its proposal to engage in the merger, indicated that it is not interested in considering or participating in any transaction involving a sale of its Urovant common shares and that Sumitovant’s current ownership of approximately 70.6% of the outstanding Urovant common shares would likely preclude competing offers from third parties;

 

   

the fact that the merger agreement provides that, during the period from the date of the merger agreement until the effective time of the merger, Urovant is subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide non-public information to third parties and to engage in negotiations with third parties regarding alternative acquisition proposals, subject to customary exceptions;

 

   

the fact that Urovant has incurred and will continue to incur significant transaction costs and expenses in connection with the potential transaction, regardless of whether the merger is consummated;

 

   

the risk related to amounts that may be payable by Urovant upon the termination of the merger agreement, including the Termination Fee of $13,620,000, and the process required to terminate the merger; and

 

   

the fact that the receipt of per share merger consideration in exchange for each Urovant common share pursuant to the merger generally will be taxable to U.S. Holders (as defined below in “—Material U.S. Federal Income Tax Consequences of the Merger”) of Urovant common shares.

The Controlling Purchaser did not conduct a going-concern valuation of the Urovant common shares for the purposes of determining the fairness of the per share merger consideration to the Public Shareholders because, following the merger, Urovant will have a significantly different capital structure and because the Controlling Purchaser believes that the trading price of Urovant common shares at any given time represents the best available indicator of Urovant’s going-concern value at that time, so long as the trading price at that time is not impacted by speculation regarding the likelihood of a potential transaction.

In addition, the Controlling Purchaser did not consider net book value, which is an accounting concept, for purposes of determining the fairness of the per share merger consideration to the Public Shareholders because, in the Controlling Purchaser’s view, net book value is neither indicative of Urovant’s market value nor its value as a going concern, but rather an indicator of historical costs.

Moreover, the Controlling Purchaser did not consider liquidation value in determining the fairness of the merger consideration to the Public Shareholders because (i) of their belief that liquidation sales generally result

 

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in proceeds substantially less than the sales of a going concern, (ii) of the impracticability of determining a liquidation value given the significant execution risk involved in any breakup, (iii) they considered Urovant to be a viable going concern and (iv) Urovant’s business is expected to continue to be operated following the merger and will be integrated into the Controlling Purchaser’s business.

As more fully described in “—Opinion of Financial Advisor to the Special Committee,” Lazard provided financial advice to the special committee in connection with the merger, and on November 12, 2020, rendered a written opinion to the special committee that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the review undertaken in preparing such opinion as set forth therein, the per share merger consideration of $16.25 per share to be received by the holders of Urovant common shares (other than Sumitovant and holders who have elected to dissent from the merger and seek appraisal rights) in the merger pursuant to the merger agreement is fair, from a financial point of view, to such holders. The Controlling Group did not consider Lazard’s fairness opinion in making its determination as to the fairness of the merger consideration to the Public Shareholders.

In making their determination as to the substantive fairness of the merger to the Public Shareholders, the Controlling Purchaser was not aware of any offers by any person for (i) the merger consolidation of Urovant with another company, (ii) the sale or transfer of all or any substantial part of Urovant’s assets, or (iii) a purchaser of Urovant’s securities that would enable the holder to exercise control of Urovant.

The foregoing discussion of the information and factors considered and given weight by the Controlling Purchaser in connection with the fairness of the merger is not intended to be exhaustive but includes all factors considered by the Controlling Purchaser that they believe to be material. The Controlling Purchaser did not find it practicable to, and did not, quantify or otherwise assign relative weights to the individual factors considered in reaching their conclusions as to the fairness of the merger. Rather, the fairness determinations were made after consideration of all of the foregoing factors as a whole.

Sources and Amounts of Funds or other Consideration; Expenses

Completion of the merger is not conditioned upon Sumitovant’s ability to finance the payment of the aggregate amount of per share merger consideration payable in connection with the merger. Sumitovant estimates that the total amount of funds required to complete the merger (including payments for options, warrants, SARs, RSUs and restricted shares) and other payments referred to in the merger agreement) pursuant to the merger agreement will be approximately $216.7 million at or prior to the completion of the merger. The funds to pay for the Urovant common shares in connection with the merger are expected to come from Sumitomo Dainippon’s working capital, which will be contributed by Sumitomo Dainippon to Sumitovant and by Sumitovant to merger sub for deposit with the paying agent.

The Controlling Purchaser does not believe its financial condition is relevant to Urovant’s shareholders’ decision whether to approve the Merger Proposal because (i) the aggregate per share merger consideration is being paid solely in cash, (ii) the completion of the merger is not subject to any financing condition, and (iii) the Controlling Purchaser has, and will arrange for merger sub to have, sufficient funds to pay for all of the Urovant common shares outstanding and held by the Public Shareholders on the terms set forth in the merger agreement.

Plans for Urovant After the Merger

Following the completion of the merger, the Controlling Purchaser will own 100% of the equity interests of Urovant. The Controlling Purchaser anticipates that Urovant’s operations will continue to be conducted substantially as they currently are being conducted.

Following the completion of the merger and the delisting of Urovant common shares, Urovant will no longer be subject to the Exchange Act and the Nasdaq listing rules and the related direct and indirect costs and expenses, and may experience positive effects on profitability as a result of the elimination of such costs and expenses.

 

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At the effective time of the merger, the directors of merger sub immediately prior to the effective time, together with any directors of Urovant that Sumitovant determines to appoint at the effective time (subject to the agreement of such persons to serve as directors), will be the directors of the surviving company. At the effective time of the merger, the officers of Urovant immediately prior to the effective time will be the officers of the surviving company.

As of the date of this proxy statement, other than the merger, the Controlling Purchaser has no current plans, proposals or negotiations that relate to or would result in an extraordinary transaction involving Urovant’s business or management, such as a merger, reorganization, liquidation, relocation of any operations, or sale or transfer of a material amount of assets, or the incurrence by Urovant of any indebtedness. Following the merger, the Controlling Purchaser plans to evaluate and review Urovant’s business and operations and initiate a review of new plans and proposals which they consider to be in the best interests of Urovant, including engaging in acquisitions of new businesses or assets, dispositions of existing businesses or assets, the movement of businesses or assets within Sumitomo Dainippon’s organizational structure, the alteration of the mix of assets held by Urovant or any of the types of extraordinary transactions described above.

Certain Effects of the Merger

If the Merger Proposal receives the required approvals of Urovant’s shareholders described elsewhere in this proxy statement and the other conditions to the completion of the merger are either satisfied or waived, merger sub will be merged with and into Urovant upon the terms set forth in the merger agreement. As the surviving company in the merger, Urovant will continue to exist following the merger as a wholly owned subsidiary of Sumitovant.

At the effective time of the merger, by virtue of the merger and without any further action, the memorandum of association and the bye-laws of merger sub, each as in effect immediately prior to the effective time, will become the memorandum of association and bye-laws of the surviving company.

Following completion of the merger, all of the equity interests in Urovant, as the surviving company, will be beneficially owned by the Controlling Purchaser and none of the Public Shareholders will, by virtue of the merger, have any direct ownership in, or be a shareholder of, Urovant, the surviving company or the Controlling Purchaser. As a result, the Public Shareholders will no longer benefit from any increase in the value, nor will they bear the risk of any decrease in the value, of Urovant common shares. Following the merger, the Controlling Purchaser will benefit from any increase in Urovant’s value and will also bear the risk of any decrease in Urovant’s value.

Upon completion of the merger, each holder of Urovant common shares (other than Urovant common shares held by (i) holders who are entitled to and properly demand an appraisal of their Urovant common shares pursuant to the Bermuda Companies Act, (ii) Sumitovant or (iii) Urovant (or its wholly owned subsidiaries)) will be entitled to receive the per share merger consideration for each share held and all such Urovant common shares will, at the effective time, be cancelled. Please see the section of this proxy statement entitled “The Merger Agreement—Effect of the Merger on the Urovant Common Shares and Merger Sub.”

For information regarding the effects of the merger on Urovant’s outstanding equity awards and the employee stock purchase plan, please see the sections entitled “The Merger Agreement—Treatment of Urovant Equity Awards” and “Special Factors—Interests of Urovant’s Directors and Executive Officers in the Merger.”

The Urovant common shares are currently registered under the Exchange Act and trade on the Nasdaq under the symbol “UROV.” Following the completion of the merger, Urovant common shares will no longer be traded on the Nasdaq or any other public market. In addition, the registration of the Urovant common shares under the Exchange Act will be terminated, and Urovant will no longer be required to file periodic and other reports with the SEC with respect to the Urovant common shares or otherwise. Termination of registration of the Urovant

 

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common shares under the Exchange Act will reduce the information required to be furnished by Urovant to Urovant’s shareholders and the SEC, and would make provisions of the Exchange Act, such as the requirement to file annual and quarterly reports pursuant to Section 13(a) or 15(d) of the Exchange Act, the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement to furnish a proxy statement in connection with stockholders’ meetings pursuant to Section 14(a) of the Exchange Act, no longer applicable to Urovant. Urovant will become the beneficiary of the cost savings achieved by Urovant no longer remaining a company subject to the reporting requirements under the federal securities laws.

Alternatives to the Merger

As noted above, in response to the proposed offer from Sumitovant, the special committee evaluated potential strategic alternatives, including continuing as an independent public company and seeking equity financing, with the assistance of Urovant’s senior management and advisors. The special committee considered the risks and potential likelihood of achieving greater value for the Public Shareholders by pursuing strategic alternatives to the merger, including continuing as an independent public company, seeking equity financing, including through a fully-marketed equity offering, and pursuing Urovant’s management plan, relative to the benefits of the merger. In this regard, the special committee took into account that Sumitovant, as the holder of a majority of Urovant common shares, has an effective veto over any alternative extraordinary transaction, and that Sumitovant stated in its proposal letter delivered on September 28, 2020 that it had no interest in selling Urovant common shares or approving any alternative sale, merger or other extraordinary corporate transaction involving Urovant. In addition, special committee also noted the potential dilutive effect of a fully-marketed equity offering. For more information on the process behind the special committee’s determination, please see the sections entitled “Special Factors—Background of the Merger” beginning on page 17 and “Special Factors—Reasons for the Merger; Recommendation of the Special Committee; Fairness of the Merger” beginning on page 35. Sumitovant has made the only firm offer to acquire Urovant that Urovant received during the past two years.

Projected Financial Information

Other than its ordinary course guidance to investors in respect of the current fiscal year, Urovant does not, as a matter of course, make public financial projections as to future revenues, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, as further described in the section entitled “Special Factors—Background of the Merger” beginning on page 17, financial projections prepared by management of Urovant in the ordinary course of business in October 2020, which we refer to as the Management Case, were made available to the special committee and the special committee’s advisors in connection with the evaluation of Sumitovant’s potential proposal. Projections of net sales through Urovant’s 2030 fiscal year, which were ultimately included as part of the Management Case (with such changes as set forth in footnote 7 to the Management Case Forecast on page 67) were also shared with Sumitovant under the terms of the Sumitovant information sharing agreement. However, the special committee ultimately adjusted the Management Case to reflect the special committee’s assessment of the appropriate assumptions regarding pricing and market share for vibegron, which we refer to as the Original Special Committee Case. The special committee initially authorized Lazard to use the financial projections resulting from such adjustment that were included in the Original Special Committee Case, before Urovant received the draft label for its drug candidate vibegron from the FDA. After receipt of such draft label, at the direction of the special committee, Urovant’s management updated the Management Case (as set forth in the Revised Management Case) and the Original Special Committee Case (as set forth in the Revised Special Committee Case), in each case to reflect the impact of such label. The special committee subsequently authorized Lazard to use the updated financial projections included in the Revised Special Committee Case. The special committee was provided with the Revised Management Case for reference purposes only in connection with evaluating the proposed transaction and did not provide the Revised Management Case to Sumitovant. The financial projections contained in the Management Case, the Original Special Committee Case and the Revised Special Committee Case are being included in this proxy statement to give shareholders access to this information, but not to influence their decision whether to vote for or against the approval of the merger

 

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agreement or any other proposal at the special general meeting. By including the projections in this proxy statement, neither Urovant nor any other person (or their respective representatives) has made or is making any representation to any person regarding the information included in the projections or the ultimate performance of Urovant compared to the information contained in the projections. Similarly, Urovant has not made any representation to Sumitovant or merger sub, in the merger agreement or otherwise, concerning the projections.

The financial projections are subjective in many respects. Although presented with numerical specificity, the financial projections reflect and are based on numerous varying assumptions and estimates with respect to industry performance, general business, economic, political, market and financial conditions, competitive uncertainties, and other matters, all of which are difficult to predict and beyond Urovant’s control. The financial projections are forward-looking statements that should be read with caution, and there can be no assurance that the projected results will be realized or that actual results will not be higher or lower than projected. In addition, since the financial projections cover multiple years, such information by its nature becomes less reliable with each successive year, including the years 2026-2038, at which time Urovant’s market access services and co-promotion agreements with Sunovion will have expired and new agreements are assumed to have been negotiated. The financial projections also reflect assumptions as to certain business matters that are subject to change and/or beyond Urovant’s control. See the section entitled “Cautionary Statement Concerning Forward-Looking Information,” beginning on page 80, as well as the section entitled “Risk Factors” in Urovant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated by reference into this proxy statement.

The financial projections were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. Urovant’s independent registered public accounting firm has not examined or compiled any of the financial projections, expressed any conclusion or provided any form of assurance with respect to the financial projections and, accordingly, assumes no responsibility for them. The financial projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Urovant contained in Urovant’s public filings with the SEC.

The financial projections do not take into account any circumstances or events occurring after the date they were prepared, and, except as may be required in order to comply with applicable securities laws, Urovant does not intend to update or otherwise revise the financial projections, or the specific portions presented, to reflect circumstances existing after the date when they were made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections are an accurate prediction of future events, and they should not be relied on as such.

Set forth below are summaries of the financial projections contained in (i) the Management Case, which was provided to the special committee and Lazard, and portions of which were provided to Sumitovant (with such differences in the projections provided to Sumitovant as set forth in footnote 4 thereto), (ii) the Original Special Committee Case, which the special committee initially authorized Lazard to use for its financial analysis prior to Urovant’s receipt of the draft label for its drug candidate vibegron, and (iii) the Revised Special Committee Case, which the special committee ultimately authorized Lazard to use for its financial analysis (in lieu of the Original Special Committee Case), following Urovant’s receipt of the draft label for vibegron.

 

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Management Case(1)

($ in millions)(2)

 

    2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

OAB (3)

  $ 1     $ 56     $ 158     $ 361     $ 559     $ 701     $ 824     $ 933     $ 1,021     $ 1,099     $ 1,153     $ 1,187     $ 1,211     $ 1,223     $ 183     $ 64     $ 29     $ 16     $ 9  

BPH (4)

  $ 0     $ 0     $ 0     $ 4     $ 13     $ 23     $ 34     $ 44     $ 50     $ 53     $ 56     $ 60     $ 64     $ 68     $ 10     $ 4     $ 2     $ 1     $ 0  

IBS (5)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 4     $ 21     $ 40     $ 60     $ 84     $ 109     $ 132     $ 140     $ 21     $ 7     $ 3     $ 2     $ 1  

URO-902 (6)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 8     $ 18     $ 22     $ 24     $ 26     $ 28     $ 29     $ 29     $ 30     $ 31     $ 32     $ 26  

Net Revenue (7)

  $ 1     $ 56     $ 158     $ 365     $ 572     $ 724     $ 861     $ 1,006     $ 1,128     $ 1,235     $ 1,317     $ 1,383     $ 1,435     $ 1,460     $ 244     $ 105     $ 65     $ 51     $ 36  

% Growth

        183     131     57     27     19     17     12     9     7     5     4     2     (83 )%      (57 )%      (38 )%      (22 )%      (29 )% 

Less COGS

  $ 0     $ 6     $ 21     $ 26     $ 41     $ 52     $ 61     $ 71     $ 79     $ 86     $ 92     $ 96     $ 99     $ 101     $ 16     $ 6     $ 4     $ 3     $ 2  

% Margin

      10     13     7     7     7     7     7     7     7     7     7     7     7     7     6     6     5     5

Less Merck Royalty

  $ 0     $ 6     $ 16     $ 38     $ 61     $ 79     $ 95     $ 112     $ 126     $ 138     $ 148     $ 156     $ 162     $ 165     $ 22     $ 7     $ 3     $ 2     $ 1  

Less ICI Royalty

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 1     $ 1     $ 2     $ 2     $ 3     $ 3     $ 4     $ 4     $ 4     $ 4     $ 4     $ 3  

Gross Profit (8)

  $ 1     $ 45     $ 121     $ 302     $ 470     $ 593     $ 705     $ 823     $ 923     $ 1,009     $ 1,075     $ 1,129     $ 1,171     $ 1,190     $ 202     $ 87     $ 54     $ 42     $ 30  

% Margin

      80     77     83     82     82     82     82     82     82     82     82     82     82     83     83     83     83     83

Less R&D

  $ 81     $ 73     $ 71     $ 77     $ 62     $ 41     $ 26     $ 18     $ 17     $ 17     $ 17     $ 15     $ 14     $ 13     $ 12     $ 10     $ 9     $ 8     $ 6  

% Margin

      130     45     21     11     6     3     2     1     1     1     1     1     1     5     10     14     15     18

Less S&M

  $ 62     $ 127     $ 162     $ 187     $ 195     $ 221     $ 237     $ 252     $ 238     $ 213     $ 213     $ 217     $ 219     $ 219     $ 34     $ 13     $ 6     $ 4     $ 2  

% Margin

      227     103     51     34     31     28     25     21     17     16     16     15     15     14     12     10     8     6

Less U.S. G&A

  $ 28     $ 39     $ 40     $ 42     $ 44     $ 45     $ 46     $ 47     $ 48     $ 49     $ 50     $ 51     $ 52     $ 28     $ 28     $ 28     $ 28     $ 28     $ 28  

% Margin

      69     25     11     8     6     5     5     4     4     4     4     4     2     11     27     43     55     78

Less Switzerland G&A

  $ 0     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 3     $ 3     $ 3     $ 3     $ 3     $ 3  

% Margin

    0     4     1     1     0     0     0     0     0     0     0     0     0     0     1     3     4     5     8

Less Sunovion Co-Promote

  $ 0     $ 0     $ 0     $ 16     $ 31     $ 39     $ 48     $ 22     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

% Margin

    0     0     0     4     5     5     6     2     0     0     0     0     0     0     0     0     0     0     0

Operating Income (EBIT) (9)

  $ (170   $ (195   $ (154   $ (22   $ 136     $ 245     $ 346     $ 480     $ 618     $ 728     $ 793     $ 843     $ 883     $ 927     $ 126     $ 34     $ 8     $ (0   $ (10

% Margin

            24     34     40     48     55     59     60     61     62     64     52     32     12    

Less Switzerland Taxes (10))

  $ 0     $ 0     $ 0     $ 0     $ (5   $ (9   $ (13   $ (18   $ (24   $ (28   $ (31   $ (33   $ (34   $ (36   $ (5   $ (1   $ 0     $ 0     $ 0  

% Statutory Tax Rate

    13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13

Less U.S. Taxes (10)

  $ 0     $ 0     $ 0     $ 0     $ (19   $ (36   $ (49   $ (67   $ (90   $ (106   $ (116   $ (123   $ (129   $ (135   $ (18   $ (5   $ (1   $ 0     $ 0  

% Statutory Tax Rate

    21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21

Plus Depreciation

  $ 0     $ 0     $ 1     $ 3     $ 5     $ 6     $ 7     $ 8     $ 9     $ 10     $ 11     $ 11     $ 11     $ 12     $ 2     $ 1     $ 1     $ 0     $ 0  

% Margin

    52     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1

Less CapEx (11)

  $ (1   $ (0   $ (1   $ (3   $ (5   $ (6   $ (7   $ (8   $ (9   $ (10   $ (11   $ (11   $ (11   $ (12   $ (2   $ (1   $ (1   $ (0   $ (0

% Margin

    (149 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )% 

Less Change in NWC (11)

  $ (0   $ (3   $ (5   $ (10   $ (10   $ (8   $ (7   $ (7   $ (6   $ (5   $ (4   $ (3   $ (3   $ (1   $ 61     $ 7     $ 2     $ 1     $ 1  

% of Change in Sales

    5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5

Plus Merck Reg. Milestone Amortization (12)

  $ 0     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 0     $ 0     $ 0     $ 0     $ 0  

Plus ICI Reg. Milestone Amortization (12)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Plus Merck Sales Milestone Amortization (12)

  $ 0     $ 0     $ 1     $ 3     $ 6     $ 2     $ 11     $ 19     $ 6     $ 6     $ 6     $ 6     $ 6     $ 6     $ 0     $ 0     $ 0     $ 0     $ 0  

Less ICI Sales Milestone Payment (13)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Less ICI Reg. Milestone Payment (13)

  $ 0     $ 0     $ 0     $ (1   $ 0     $ 0     $ (2   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Unlevered FCF (14)

  $ (170   $ (197   $ (158   $ (30   $ 109     $ 196     $ 288     $ 408     $ 506     $ 596     $ 650     $ 692     $ 725     $ 762     $ 164     $ 35     $ 8     $ 0     $ (9

% Margin

            19     27     33     41     45     48     49     50     51     52     67     33     13     1  

EBITDA (15)

  $ (170   $ (195   $ (153   $ (19   $ 141     $ 251     $ 353     $ 488     $ 627     $ 738     $ 804     $ 855     $ 895     $ 939     $ 128     $ 34     $ 8     $ 0     $ (9

% Margin

            25     35     41     49     56     60     61     62     62     64     52     33     13     0  

 

(1)

As noted, the Management Case was revised following receipt by Urovant of the draft label to produce the Revised Management Case. The revisions made to the Management Case correspond to the revisions made to the Original Special Committee Case that ultimately resulted in the Revised Special Committee Case.

 

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(2)

All figures provided in this table have been rounded to the nearest million.

(3)

Reflects total projected net revenues from sales of vibegron for treatment of overactive bladder, or OAB.

(4)

Reflects total projected net revenues from sales of vibegron for treatment of OAB in men with benign prostatic hyperplasia, or BPH.

(5)

Reflects total projected net revenues from sales of vibegron for treatment of irritable bowel syndrome, or IBS.

(6)

Reflects total projected net revenues from sales of URO-902 for treatment of patients with OAB who have failed oral pharmacological therapy.

(7)

On October 21, 2020, Urovant’s management provided net sales projections for the fiscal years 2020 through 2030 for sales of vibegron for the treatment of OAB and OAB in men with BPH to Sumitovant. These projections provided to Sumitovant contained different projections for certain fiscal years compared to the Management Case set forth above as follows: (i) for 2023, $366 million; (ii) for 2024, $575 million; (iii) for 2025, $729 million; (iv) for 2026, $866 million; (v) for 2027, $988 million; (vi) for 2028, $1,083 million; (vii) for 2029, $1,165 million; and (viii) for 2030, $1,222 million. The projections provided to Sumitovant on October 21, 2020 are different from the Management Case due to: (x) with respect to years from 2023 through 2025, the application of probability of success adjustments to revenues from OAB in men with BPH; and (y) with respect to years from 2026 through 2030, the application of probability of success adjustments to revenues from OAB in men with BPH, and the inclusion of revenues from sales of vibegron for treatment of IBS and from sales of URO-902 for treatment of patients with OAB who have failed oral pharmacological therapy.

(8)

Gross Profit is calculated by starting with Net Revenue and deducting (i) the cost of goods sold (“COGS”) and (ii) the royalty payments payable to (A) Merck Sharpe & Dohme Corp. (“Merck”) pursuant to the License Agreement, dated February 3, 2017 by and between Urovant Sciences GmbH and Merck, as amended (the “Merck License”), and (B) Ion Channel Innovations, LLC (“ICI”) pursuant to the License Agreement, dated August 24, 2018, between Urovant Sciences GmbH and ICI (the “ICI License”).

(9)

Operating Income (EBIT), also known as Earnings Before Interest and Taxes, is a non-GAAP financial measure calculated by starting with Gross Profit and deducting costs and expenses for research and development (“R&D”), sales and marketing (“S&M”), Urovant’s co-promotion arrangement with Sunovion Pharmaceuticals (“Sunovion Co-Promote”), and general administrative expenses related to Urovant’s operations in the United States (“U.S. G&A”) and Switzerland (“Switzerland G&A”), without duplication.

(10)

Reflects projected taxes payable by Urovant in the United States (based on a 21% statutory tax rate) and Switzerland (based on a 13% statutory tax rate).

(11)

Projected capital expenditures and changes to net working capital are based on the expected capital requirements for implementing the 2020 Business Plan (as defined below).

(12)

Projected amortization includes the amortization of regulatory and sales milestone payments payable to Merck pursuant to the Merck License and regulatory milestone payments payable to ICI pursuant to the ICI License.

(13)

Projected milestone payments include the sales and regulatory milestone payments payable to ICI pursuant to the ICI License.

(14)

Unlevered FCF (unlevered free cash flow), is a non-GAAP financial measure calculated by starting with Operating Income (EBIT), adding in depreciation and amortization, and then deducting taxes, capital expenditures, changes in net working capital, and milestone payments.

(15)

EBITDA, also known as Earnings Before Interest, Taxes, Depreciation, and Amortization is a non-GAAP financial measure calculated by starting with Operating Income (EBIT) and adding in depreciation and amortization (excluding any duplicative amounts, such as amortization of acquired intangibles).

 

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Original Special Committee Case

($ in millions)(1)

 

    2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

OAB (2)

  $ 1     $ 56     $ 158     $ 361     $ 459     $ 598     $ 695     $ 773     $ 825     $ 866     $ 883     $ 909     $ 927     $ 936     $ 140     $ 49     $ 22     $ 12     $ 7  

BPH (3)

  $ 0     $ 0     $ 0     $ 4     $ 13     $ 23     $ 34     $ 44     $ 50     $ 53     $ 56     $ 60     $ 64     $ 68     $ 10     $ 4     $ 2     $ 1     $ 0  

IBS (4)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 4     $ 21     $ 40     $ 60     $ 84     $ 109     $ 132     $ 140     $ 21     $ 7     $ 3     $ 2     $ 1  

URO-902 (5)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 8     $ 18     $ 22     $ 24     $ 26     $ 28     $ 29     $ 29     $ 30     $ 31     $ 32     $ 26  

Net Revenue

  $ 1     $ 56     $ 158     $ 365     $ 472     $ 621     $ 732     $ 845     $ 933     $ 1,001     $ 1,047     $ 1,105     $ 1,151     $ 1,173     $ 201     $ 90     $ 58     $ 47     $ 34  

% Growth

        183     131     29     32     18     15     10     7     5     6     4     2     (83 )%      (55 )%      (36 )%      (19 )%      (28 )% 

Less COGS

  $ 0     $ 6     $ 21     $ 26     $ 34     $ 44     $ 52     $ 60     $ 65     $ 70     $ 72     $ 76     $ 79     $ 80     $ 13     $ 5     $ 3     $ 2     $ 2  

% Margin

      10     13     7     7     7     7     7     7     7     7     7     7     7     6     6     5     5     5

Less Merck Royalty

  $ 0     $ 6     $ 16     $ 38     $ 49     $ 67     $ 80     $ 93     $ 102     $ 110     $ 116     $ 123     $ 128     $ 131     $ 17     $ 6     $ 3     $ 1     $ 1  

Less ICI Royalty

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 1     $ 1     $ 2     $ 2     $ 3     $ 3     $ 4     $ 4     $ 4     $ 4     $ 4     $ 3  

Gross Profit (6)

  $ 1     $ 45     $ 121     $ 301     $ 389     $ 510     $ 600     $ 692     $ 764     $ 820     $ 856     $ 904     $ 941     $ 958     $ 167     $ 75     $ 48     $ 39     $ 28  

% Margin

      80     77     83     82     82     82     82     82     82     82     82     82     82     83     83     83     83     83

Less R&D

  $ 81     $ 72     $ 71     $ 77     $ 62     $ 41     $ 26     $ 18     $ 17     $ 17     $ 17     $ 15     $ 14     $ 13     $ 11     $ 10     $ 9     $ 8     $ 6  

% Margin

      130     45     21     13     7     4     2     2     2     2     1     1     1     6     11     15     16     19

Less S&M

  $ 62     $ 127     $ 162     $ 186     $ 195     $ 231     $ 247     $ 261     $ 244     $ 218     $ 173     $ 175     $ 177     $ 176     $ 28     $ 11     $ 5     $ 4     $ 2  

% Margin

      227     103     51     41     37     34     31     26     22     16     16     15     15     14     12     9     7     6

Less U.S. G&A

  $ 28     $ 39     $ 40     $ 42     $ 44     $ 45     $ 46     $ 47     $ 48     $ 49     $ 50     $ 51     $ 52     $ 28     $ 28     $ 28     $ 28     $ 28     $ 28  

% Margin

      69     25     11     9     7     6     6     5     5     5     5     4     2     14     31     48     59     83

Less Switzerland G&A

  $ 0     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 2     $ 3     $ 3     $ 3     $ 3     $ 3     $ 3  

% Margin

    0     4     1     1     0     0     0     0     0     0     0     0     0     0     1     3     5     6     8

Less Sunovion Co-Promote

  $ 0     $ 0     $ 0     $ 16     $ 26     $ 34     $ 41     $ 40     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

% Margin

    0     0     0     4     5     5     6     5     0     0     0     0     0     0     0     0     0     0     0

Operating Income (EBIT) (7)

  $ (170   $ (195   $ (154   $ (21   $ 61     $ 158     $ 239     $ 324     $ 454     $ 535     $ 615     $ 660     $ 696     $ 738     $ 97     $ 23     $ 3     $ (3   $ (11

% Margin

            13     25     33     38     49     53     59     60     60     63     48     26     5    

Less Switzerland Taxes (8)

  $ 0     $ 0     $ 0     $ 0     $ (2   $ (6   $ (9   $ (13   $ (18   $ (21   $ (24   $ (26   $ (27   $ (29   $ (4   $ (1   $ (0   $ 0     $ 0  

% Statutory Tax Rate

    13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13     13

Less U.S. Taxes (8)

  $ 0     $ 0     $ 0     $ 0     $ (9   $ (23   $ (33   $ (47   $ (66   $ (78   $ (90   $ (96   $ (102   $ (108   $ (14   $ (3   $ (0   $ 0     $ 0  

% Statutory Tax Rate

    21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21     21

Plus Depreciation

  $ 0     $ 0     $ 1     $ 3     $ 4     $ 5     $ 6     $ 7     $ 7     $ 8     $ 8     $ 9     $ 9     $ 9     $ 2     $ 1     $ 0     $ 0     $ 0  

% Margin

    52     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1

Less CapEx (9)

  $ (1   $ (0   $ (1   $ (3   $ (4   $ (5   $ (6   $ (7   $ (7   $ (8   $ (8   $ (9   $ (9   $ (9   $ (2   $ (1   $ (0   $ (0   $ (0

% Margin

    (149 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )%      (1 )% 

Less Change in NWC (9)

  $ (0   $ (3   $ (5   $ (10   $ (5   $ (7   $ (6   $ (6   $ (4   $ (3   $ (2   $ (3   $ (2   $ (1   $ 49     $ 6     $ 2     $ 1     $ 1  

% of Change in Sales

    5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5     5

Plus Merck Reg. Milestone Amortization (10)

  $ 0     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 1     $ 0     $ 0     $ 0     $ 0     $ 0  

Plus ICI Reg. Milestone Amortization (10)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Plus Merck Sales Milestone Amortization (10)

  $ 0     $ 0     $ 1     $ 3     $ 1     $ 1     $ 10     $ 3     $ 3     $ 3     $ 3     $ 3     $ 3     $ 3     $ 0     $ 0     $ 0     $ 0     $ 0  

Less ICI Sales Milestone Payment (11)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Less ICI Reg. Milestone Payment (11)

  $ 0     $ 0     $ 0     $ (1   $ 0     $ 0     $ (2   $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

Unlevered FCF (12)

  $ (170   $ (197   $ (157   $ (29   $ 47     $ 124     $ 201     $ 263     $ 370     $ 436     $ 503     $ 539     $ 569     $ 604     $ 128     $ 25     $ 4     $ (2   $ (10

% Margin

            10     20     27     31     40     44     48     49     49     52     64     27     7    

EBITDA (13)

  $ (170   $ (195   $ (153   $ (18   $ 65     $ 163     $ 245     $ 331     $ 461     $ 543     $ 624     $ 669     $ 705     $ 748     $ 99     $ 24     $ 4     $ (2   $ (11

% Margin

            14     26     33     39     49     54     60     61     61     64     49     27     6    

Tax-Effected NOL Benefit (14)

  $ 0     $ 0     $ 0     $ 0     $ 2     $ 6     $ 9     $ 13     $ 18     $ 3     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0  

% Margin

    0     0     0     0     1     1     1     2     2     0     0     0     0     0     0     0     0     0     0

 

(1)

All figures provided in this table have been rounded to the nearest million.

(2)

Reflects total projected net revenues from sales of vibegron for treatment of overactive bladder, or OAB.

 

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(3)

Reflects total projected net revenues from sales of vibegron for treatment of OAB in men with benign prostatic hyperplasia, or BPH.

(4)

Reflects total projected net revenues from sales of vibegron for treatment of irritable bowel syndrome, or IBS.

(5)

Reflects total projected net revenues from sales of URO-902 for treatment of patients with OAB who have failed oral pharmacological therapy.

(6)

Gross Profit is calculated by starting with Net Revenue and deducting (i) the cost of goods sold (“COGS”) and (ii) the royalty payments payable to (A) Merck Sharpe & Dohme Corp. (“Merck”) pursuant to the License Agreement, dated February 3, 2017 by and between Urovant Sciences GmbH and Merck, as amended (the “Merck License”), and (B) Ion Channel Innovations, LLC (“ICI”) pursuant to the License Agreement, dated August 24, 2018, between Urovant Sciences GmbH and ICI (the “ICI License”).

(7)

Operating Income (EBIT), also known as Earnings Before Interest and Taxes, is a non-GAAP financial measure calculated by starting with Gross Profit and deducting costs and expenses for research and development (“R&D”), sales and marketing (“S&M”), Urovant’s co-promotion arrangement with Sunovion Pharmaceuticals (“Sunovion Co-Promote”), and general administrative expenses related to Urovant’s operations in the United States (“U.S. G&A”) and Switzerland (“Switzerland G&A”), without duplication.

(8)

Reflects projected taxes payable by Urovant in the United States (based on a 21% statutory tax rate) and Switzerland (based on a 13% statutory tax rate).

(9)

Projected capital expenditures and changes to net working capital are based on the expected capital requirements for implementing the 2020 Business Plan (as defined below).

(10)

Projected amortization includes the amortization of regulatory and sales milestone payments payable to Merck pursuant to the Merck License and regulatory milestone payments payable to ICI pursuant to the ICI License.

(11)

Projected milestone payments include the sales and regulatory milestone payments payable to ICI pursuant to the ICI License.

(12)

Unlevered FCF (unlevered free cash flow), is a non-GAAP financial measure calculated by starting with Operating Income (EBIT), adding in depreciation and amortization, and then deducting taxes, capital expenditures, changes in net working capital, and milestone payments.

(13)

EBITDA, also known as Earnings Before Interest, Taxes, Depreciation, and Amortization is a non-GAAP financial measure calculated by starting with Operating Income (EBIT) and adding in depreciation and amortization (excluding any duplicative amounts, such as amortization of acquired intangibles).

(14)

Tax-Effected NOL Benefit is a projection of the tax benefits that would accrue to Urovant in connection with net operating losses.

 

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Revised Special Committee Case

($ in millions)(1)

 

    2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030     2031     2032     2033     2034     2035     2036     2037     2038  

OAB (2)

  $ 1     $ 56     $ 193     $ 402     $ 457     $ 598     $ 695     $ 773     $ 825     $ 866     $ 883     $ 909     $ 927     $ 936     $ 140     $ 49     $ 22     $ 12     $ 7  

BPH (3)

  $ 0     $ 0     $ 0     $ 4     $ 13     $ 23     $ 34     $ 44     $ 50     $ 53     $ 56     $ 60     $ 64     $ 68     $ 10     $ 4     $ 2     $ 1     $ 0  

IBS (4)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 4     $ 21     $ 40     $ 60     $ 84     $ 109     $ 132     $ 140     $ 21     $ 7     $ 3     $ 2     $ 1  

URO-902 (5)

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 8     $ 18     $ 22     $ 24     $ 26     $ 28     $ 29     $ 29     $ 30     $ 31     $ 32     $ 26  

Net Revenue

  $ 1     $ 56     $ 193     $ 405     $ 470     $ 621     $ 732     $ 845     $ 933     $ 1,001     $ 1,047     $ 1,105     $ 1,151     $ 1,173     $ 201     $ 90     $ 58     $ 47     $ 34  

% Growth

        247     109     16     32     18     15     10     7     5     6     4     2     (83 )%      (55 )%      (36 )%      (19 )%      (28 )% 

Less COGS

  $ 0     $ 6     $ 25     $ 29     $ 33     $ 44     $ 52     $ 60     $ 65     $ 70     $ 72     $ 76     $ 79     $ 80     $ 13     $ 5     $ 3     $ 2     $ 2  

% Margin

      10     13     7     7     7     7     7     7     7     7     7     7     7     6     6     5     5     5

Less Merck Royalty

  $ 0     $ 6     $ 19     $ 42     $ 49     $ 67     $ 80     $ 93     $ 102     $ 110     $ 116     $ 123     $ 128     $ 131     $ 17     $ 6     $ 3     $ 1     $ 1  

Less ICI Royalty

  $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 0     $ 1     $ 1     $ 2     $ 2     $ 3     $ 3     $ 4     $ 4     $ 4     $ 4     $ 4     $ 3  

Gross Profit (6)

  $ 1     $ 45     $ 149     $ 334     $ 388     $ 510     $ 600     $ 692     $ 764     $ 820     $ 856     $ 904     $ 941     $ 958     $ 167     $ 75     $ 48     $ 39     $ 28  

% Margin

      80     77     83     82     82     82     82     82     82     82     82     82     82     83     83     83     83     83

Less R&D

  $ 81     $ 72     $ 71     $ 77     $ 62     $ 41     $ 26     $ 18     $ 17     $ 17     $ 17     $ 15     $ 14     $ 13     $ 11     $ 10     $ 9     $ 8     $ 6  

% Margin

      130     37     19     13     7     4 <