Recent Transactions

9 Months Ended

Dec. 31, 2023

Note 5—Recent Transactions

(A) Telavant Disposition

On December 14, 2023 (the “Transaction Date”), the Company completed the sale of its entire equity interest in its majority-owned subsidiary, Telavant Holdings, Inc. (“Telavant”), to Roche Holdings, Inc. (“Roche”) (the “Roche Transaction”). The Roche Transaction was made pursuant to a Stock Purchase Agreement dated October 22, 2023 among the Company, Telavant, Pfizer Inc. (“Pfizer”), and Roche (the “Stock Purchase Agreement”). Telavant was jointly formed by the Company and Pfizer in November 2022 to develop and commercialize RVT-3101, an anti-TL1A antibody in development for ulcerative colitis (“UC”) and Crohn’s disease, in the United States and Japan. Prior to the Roche Transaction, the Company held 75% of the issued and outstanding shares of common stock and preferred stock of Telavant, and Pfizer owned the remaining 25%, in each case on an as-converted basis.

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

At the closing of the Roche Transaction, Roche acquired the full rights to further develop and manufacture RVT-3101 and commercialize it in the United States and Japan pending clinical and regulatory success. Outside of the United States and Japan, Pfizer holds commercialization rights. In addition, following the closing of the Roche Transaction, Roche acquired Telavant’s option to enter into a global collaboration with Pfizer on a next generation p40/TL1A directed bispecific antibody, currently in Phase 1.

The Telavant entity that was sold did not meet the definition of a business, and therefore the Company concluded that the Roche Transaction was a sale of non-financial assets, with control transferred at closing. The sale of Telavant did not meet the criteria for reporting discontinued operations as the sale does not represent a strategic shift in the Company’s business. The Company recognized a gain on sale of Telavant net assets of approximately $5.3 billion during the three and nine months ended December 31, 2023 in the accompanying condensed consolidated statements of operations. The gain does not include the Company’s portion of the one-time milestone payment, which will be recognized in the period it is achieved. The gain on sale of Telavant net assets qualifies under the substantial shareholding exemption and consequently is not subject to the corporation income tax. The table below summarizes the calculation of the gain.

	(in thousands)
Consideration:
Upfront cash payment	$	5,234,373
Carrying amount of noncontrolling interest derecognized		87,500
Total consideration		5,321,873

Assets sold		3,253
Liabilities transferred		29,790
Net liabilities sold		(26,537	)

Gain on sale of Telavant net assets	$	5,348,410

The pretax loss generated by Telavant was $27.3 million for the period from October 1, 2023 to the Transaction Date and $71.1 million for the period from April 1, 2023 to the Transaction Date. The pretax loss generated by Telavant for the period from inception on November 14, 2022 to December 31, 2022 was $89.4 million. The entirety of the Telavant pretax losses was attributable to the Company.

(B) Asset Acquisition

In July 2023, a newly-formed subsidiary in-licensed certain intellectual property rights in exchange for a $14.0 million upfront cash payment. The transaction was accounted for as an asset acquisition as the acquired assets did not meet the definition of a business. The acquired rights represent in-process research and development assets, which were determined to have no alternative future use. Accordingly, the Company recorded $14.0 million as acquired in-process research and development expense in the accompanying condensed consolidated statements of operations for the nine months ended December 31, 2023.

Additionally, the newly-formed subsidiary agreed to pay up to $280 million of future development, regulatory, and commercial milestone payments and tiered high-single digit sales-based royalties.

In July 2023, VantAI Holdings, Inc. (“VantAI”), a wholly-owned subsidiary of the Company, completed a transaction pursuant to which SK, Inc. (“SK”) contributed $6.0 million to VantAI in exchange for preferred shares in VantAI (the “VantAI Preferred Financing”). In August 2023, the Company and SK Biopharmaceuticals Co., Ltd. (“SK Bio”), a subsidiary of SK, completed a transaction pursuant to which SK Bio purchased all of the Company’s shares in Proteovant Sciences, Inc. (“Proteovant”) in exchange for $47.5 million (the “Proteovant Sale”).

As a result of changes in governance and voting rights, the Company determined that it no longer held a controlling financial interest in VantAI. Accordingly, the Company deconsolidated VantAI as of July 2023. The Company recorded a $17.4 million gain on deconsolidation of Proteovant and VantAI in the accompanying condensed consolidated statements of operations for the nine months ended December 31, 2023.

Upon deconsolidation, the Company recorded its $9.0 million retained investment in VantAI based upon the fair value of the preferred shares held by the Company. Due to the Company’s significant influence over the operating and financial policies of VantAI, the Company will account for its retained interest under the equity method of accounting.