UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~December 3031, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38667

Urovant Sciences Ltd.

(Exact Name of Registrant as Specified in its Charter)

Bermuda	98-1463899
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Suite 1, 3rd Floor 11-12 St. James’s Square London SW1Y 4LB, United Kingdom	Not Applicable
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: +44 (0)207 400-3347

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)
Common Shares, $0.000037453 par value	UROV	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark ~~whether~~whetfher the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~November~~February 211, ~~2020~~2021, the registrant had 3132,~~659~~743,~~870~~396 common shares, $0.000037453 par value per share, outstanding.

~~Table~~CAUTIONARY ~~of Contents~~STATEMENT

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Shareholders’ (Deficit) Equity for the Three and Six Months Ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2020 and 2019	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
Signatures		87

REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are often identified by the use of words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “to be,” “will,” “would,” or the negative or plural of these words, or similar expressions or variations, although not all forward-looking statements contain these words. Examples of forward-looking statements included in this Quarterly Report on Form 10-Q include statements concerning future matters such as our expected liquidity, the commercialization of our lead product GEMTESA (vibegron), the development of our product candidate, URO-902, our expense levels, expectations regarding the outcome of legal proceedings and other statements regarding matters that are not historical are forward-looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results could differ materially from those expressed or implied by these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those listed below in the section entitled “Summary Risk Factors,” and those discussed in the section titled “Risk Factors” set forth in Part II. Item 1A. of this Quarterly Report on Form 10-Q, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission (the “SEC”). These risks are not exhaustive. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

SUMMARY RISK FACTORS

Our business, financial condition and results of operations may be affected by a number of risks and uncertainties. The following is a summary of the principal risks and uncertainties that may impact us, all of which are more fully described in the section entitled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q. The summary below should not be relied upon as an exhaustive summary of the material risks facing our business, and should be read in conjunction with the “Risk Factors” section in Part II, Item 1A of this Quarterly Report on Form 10-Q. In addition, other risks not presently known to us or that we currently deem immaterial may also impact our business.

•

The conditions to the Merger (as such term is defined below) may not be satisfied or waived in a timely manner or at all, and the Merger Agreement (as such term is defined below) may be terminated in accordance with its terms, which could negatively impact our business, financial condition, results of operations, and the price of our common shares.

•

The announcement of the Merger could negatively impact our business, financial condition, or results of operations.

•

Attending to matters related to the Merger could divert our management’s focus from our ongoing business operations.

•

Business interruptions resulting from effects of pandemics or epidemics such as the novel strain of the coronavirus known as COVID-19, may materially and adversely affect our business and financial condition.

•

We believe our current cash and current borrowing capacity under the Sumitomo Loan Agreement (as such term is defined below) will not be sufficient for us to fund our anticipated level of operations until we become cash flow positive. If we fail to obtain additional capital, we will not be able to commercialize GEMTESA or complete the development of, seek regulatory approval for, and commercialize GEMTESA for OAB in men with BPH or our gene therapy product candidate, URO-902.

•

The Sumitomo Loan Agreement (as such term is defined below) contains certain covenants that could adversely affect our operations and, if an event of default were to occur, we could be forced to repay our outstanding indebtedness sooner than planned, including at a time when we do not have sufficient capital to satisfy such obligation. In addition, servicing our existing debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt. The occurrence of any of these events could cause a significant adverse impact on our business, prospects and share price.

•

We expect to incur significant operating losses and negative operating cash flows for the foreseeable future, and we may never achieve or maintain profitability.

•

The success of our business depends significantly on the commercial success of GEMTESA., and it may fail to achieve market acceptance by physicians, patients, third-party payors and others in the medical community, which is necessary for GEMTESA’ commercial success. If GEMTESA is not successfully commercialized, our business will be harmed.

•

We do not have our own manufacturing capabilities and rely on third parties to produce clinical and commercial supplies of our lead product and our drug candidate. If these third parties experience economic or production issues, do not maintain their regulatory approvals, or otherwise fail to provide us with the supplies we expect, it may delay our ability to develop and commercialize our lead product, GEMTESA, or our gene therapy product candidate, URO-902.

•

We currently rely on a single supplier for the enzyme used to manufacture GEMTESA, and if such supplier fails to provide us with sufficient supplies of enzyme to manufacture the quantity of GEMTESA we will need for commercialization, it may slow or halt our commercialization efforts for GEMTESA and harm our business.

•

We currently rely on Sunovion Pharmaceuticals, Inc. (“Sunovion”), an affiliate of Sumitovant Biopharma Ltd. (“Sumitovant”), the holder of a majority of our common shares to provide us certain market access and co-promotion services. If we are unable to establish sales, market access, marketing, and distribution capabilities, either on our own or with third-party collaboration partners, we may not be successful in commercializing GEMTESA.

•

If Sunovion does not provide us the services and the commercial and operational support contemplated in the terms of the Market Access Services Agreement and Co-Promotion Agreement (as each item is defined below), our business could be adversely impacted.

•

Coverage and reimbursement may not be available for GEMTESA, which could make it difficult for us to sell it profitably.

•

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

•

Clinical studies are very expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes. Clinical study failures can occur at any stage of clinical studies, and we could encounter problems that cause us to suspend, abandon or repeat clinical studies. We cannot predict with any certainty the timing for commencement or completion of current or future clinical studies.

•

The results of our clinical studies may not support our proposed claims for our future product candidates. The results of previous clinical studies may not be predictive of future results, and interim or top-line data may be subject to change or qualification based on the complete analysis of data.

•

Our gene therapy product candidate, URO-902, is based on a novel technology, and the regulatory landscape that governs gene therapy products is uncertain and may change, which makes it difficult to predict the amount of time, money and other resources the Company will need to expend to develop URO-902 and obtain regulatory approval.

•

Our product and/or our gene therapy product candidate may cause adverse effects or have other properties that could limit their market acceptance and could delay or prevent the regulatory approval of or limit the scope of any approved label for, our gene therapy product candidate.

•

Regulatory requirements may make it difficult for us to obtain the materials and supplies necessary to conduct clinical studies regarding or to manufacture and sell GEMTESA or our gene therapy product candidate, if approved.

•

We are reliant on third parties to conduct, manage, and monitor our clinical studies, and if those third parties perform in an unsatisfactory manner, it may harm our business.

•

If we are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

•

If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our product and/or gene therapy product candidate.

•

We have agreements with Sumitovant, our majority shareholder, and with Sumitomo Dainippon Pharma Co., Ltd., the parent company of Sumitovant (“Sumitomo Dainippon Pharma”), that may be perceived to create conflicts of interest. To the extent other investors perceive that Sumitovant or Sumitomo Dainippon Pharma will not act in the best interests of all of our shareholders, such perception may negatively affect the price of our common shares.

•

We are a “controlled company” within the meaning of the applicable Nasdaq listing rules and, as a result, qualify for exemptions from certain corporate governance requirements. If we rely on these exemptions, our shareholders will not have the same protections afforded to shareholders of companies that are subject to such requirements.

•

We are a Bermuda company, and it may be difficult for shareholders to enforce judgments against us or our directors and executive officers. Bermuda law differs from the laws in effect in the United States and may afford less protection to our shareholders.

•

U.S. holders of our common shares may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Urovant,” the “Company,” “we,” “us,” and “our” refer to Urovant Sciences Ltd. and its wholly-owned subsidiaries, and references to “USL” refer to Urovant Sciences Ltd. on an unconsolidated basis and excluding its subsidiaries.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of December 31, 2020 and March 31, 2020	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2020 and 2019	5
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended December 31, 2020 and 2019	6
	Condensed Consolidated Statements of Shareholders’ (Deficit) Equity for the Three and Nine Months Ended December 31, 2020 and 2019	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2020 and 2019	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	91
Signatures		92

iii

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

UROVANT SCIENCES LTD.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	September 30, 2020			March 31, 2020
	December 31, 2020			March 31, 2020
Assets				(Note 2)
Current assets:
Cash	$	7471,~~401~~295		$	51,414
Restricted cash		250			243
Prepaid expenses and other current assets		914,~~195~~509			6,489
Due from Sumitovant Biopharma Ltd.		—			172
Total current assets		8386,~~846~~054			58,318
Property and equipment, net		12,~~492~~020			1,210
Operating lease right-of-use assets		3,~~823~~705			3,135
Intangible asset, net		14,000			—
Restricted cash, net of current portion		2,198			623
Other assets		98910			9
Total assets	$	91108,~~457~~887		$	63,295
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable	$	~~493~~3,509		$	1,589
Accrued expenses		2335,~~747~~113			21,756
Due to Roivant Sciences Ltd.		—			31
Due to Sunovion Pharmaceuticals, Inc.		~~173~~182			—
Current portion of share-based compensation liabilities		31,~~934~~112			7,204
Current portion of operating lease liabilities		~~497~~520			351
Total current liabilities		2840,~~844~~436			30,931
Share-based compensation liabilities, net of current portion		~~658~~1,195			32
Related-party long-term debt		~~171~~209,~~278~~285			87,252
Operating lease liabilities, net of current portion		3,~~727~~588			3,086
Total liabilities		~~204~~254,~~507~~504			121,301
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 11)
Shareholders' deficit
Common shares, par value $0.000037453 per share, 267,001,308 shares authorized, 31,576,916 and 30,635,258 issued and outstanding at September 30, 2020 and March 31, 2020, respectively		1			1
Common shares, par value $0.000037453 per share, 267,001,308 shares authorized, 32,533,959 and 30,635,258 issued and outstanding at December 31, 2020 and March 31, 2020, respectively		1			1
Common shares subscribed		(1	)		(1	)
Accumulated other comprehensive income		553			452
Accumulated other comprehensive (loss) income		(24	)		452
Additional paid-in capital		~~274~~289,~~323~~130			263,818
Accumulated deficit		(~~387~~434,~~926~~723	)		(322,276	)
Total shareholders' deficit		(~~113~~145,~~050~~617	)		(58,006	)
Total liabilities and shareholders' deficit	$	91108,~~457~~887		$	63,295

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

	Three Months Ended September 30,						Six Months Ended September 30,
	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
Operating expenses:
Research and development	$	1415,~~536~~616		$	1723,~~796~~099		$	3046,~~890~~506		$	3962,~~810~~909
General and administrative(1)		1829,~~933~~965			716,~~435~~687			3161,~~422~~387			1229,~~900~~587
Total operating expenses		3345,~~469~~581			2539,~~231~~786			62107,~~312~~893			5292,~~710~~496
Other (expense) income:
Interest expense, net(2)		(1,~~464~~615	)		(~~581~~1,401	)		(24,~~907~~522	)		(12,~~094~~495	)
Loss on disposal of property and equipment		—			—			—			(236	)
Other (expense) income, net		(308	)		79			(426	)		(111	)
Other income (expense), net		271			(34	)		(155	)		(145	)
Loss before (benefit from) provision for income taxes		(3546,~~241~~925	)		(2541,~~733~~221	)		(65112,~~645~~570	)		(5495,~~151~~372	)
(Benefit from) provision for income taxes		(85128	)		838			5(123	)		75113
Net loss	$	(3546,~~156~~797	)	$	(2541,~~741~~259	)	$	(65112,~~650~~447	)	$	(5495,~~226~~485	)
Net loss per common share—basic and diluted	$	(1.1246	)	$	(01.8536	)	$	(23.1259	)	$	(13.7914	)
Weighted average common shares outstanding—basic and diluted		3132,~~251~~101,~~351~~832			30,~~355~~413,~~874~~946			3031,~~979~~355,~~833~~190			30,~~340~~365,~~603~~142

(1) Includes $~~587~~556 and $1,143 of costs from Sunovion Pharmaceuticals, Inc. during the three and ~~six~~nine months ended ~~September~~December 3031, 2020, respectively (see Note 56[DF]). Also, includes $7280 and $~~132~~213 of costs allocated from Roivant Sciences Ltd. during the three and ~~six~~nine months ended ~~September~~December 3031, 2019, respectively.

(2) Includes $1,~~479~~627 and $24,~~935~~562 of interest expense from related-party long-term debt with Sumitomo Dainippon Pharma Co., Ltd. during the three and ~~six~~nine months ended ~~September~~December 3031, 2020, respectively (see Note 45).

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

	Three Months Ended September 30,						Six Months Ended September 30,
	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019			2020			2019
Net loss	$	(3546,~~156~~797	)	$	(2541,~~741~~259	)	$	(65112,~~650~~447	)	$	(5495,~~226~~485	)
Other comprehensive income (loss):
Other comprehensive (loss) income:
Foreign currency translation adjustment		58(577	)		~~(92~~29	)		~~101~~(476	)		96125
Total other comprehensive income (loss)		58			(92	)		101			96
Total other comprehensive (loss) income		(577	)		29			(476	)		125
Comprehensive loss	$	(3547,~~098~~374	)	$	(2541,~~833~~230	)	$	(65112,~~549~~923	)	$	(5495,~~130~~360	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity

(in thousands, except share data)

	Common Shares				Common Shares			Additional			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Subscribed			Paid-in Capital			Deficit			(Loss) Income			Deficit
Balance at March 31, 2020		30,635,258	$	1	$	(1	)	$	263,818		$	(322,276	)	$	452		$	(58,006	)
Share-based compensation expense		—		—		—			1,032			—			—			1,032
Exercise of stock options		231,799		—		—			1,205			—			—			1,205
Share-based compensation liabilities reclassified to equity upon exercise of stock options		—		—		—			988			—			—			988
Change in fair value of share-based compensation liabilities recorded to liabilities		—		—		—			(35	)		—			—			(35	)
Issuance of common shares pursuant to 2019 ESPP		39,541		—		—			331			—			—			331
Foreign currency translation adjustment		—		—		—			—			—			43			43
Net loss		—		—		—			—			(30,494	)		—			(30,494	)
Balance at June 30, 2020		30,906,598		1		(1	)		267,339			(352,770	)		495			(84,936	)
Share-based compensation expense		—		—		—			1,824			—			—			1,824
Exercise of stock options		670,318		—		—			2,921			—			—			2,921
Share-based compensation liabilities reclassified to equity upon exercise of stock options		—		—		—			2,045			—			—			2,045
Change in fair value of share-based compensation liabilities recorded to additional paid-in capital		—		—		—			194			—			—			194
Foreign currency translation adjustment		—		—		—			—			—			58			58
Net loss		—		—		—			—			(35,156	)		—			(35,156	)
Balance at September 30, 2020		31,576,916	$	1	$	(1	)	$	274,323		$	(387,926	)	$	553		$	(113,050	)
	Common Shares				Common Shares			Additional			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
Share-based compensation expense		—		—		—			1,895			—			—			1,895
	Shares		Amount		Subscribed			Paid-in Capital			Deficit			Income			Equity
Exercise of stock options		908,221		—		—			6,375			—			—			6,375
Balance at March 31, 2019		30,322,911	$	1	$	(1	)	$	250,032		$	(175,531	)	$	269		$	74,770
Share-based compensation liabilities reclassified to equity upon exercise of stock options		—		—		—			6,310			—			—			6,310
Capital contributions from RSI and RSG		—		—		—			130			—			—			130
Vesting of restricted stock units, net of tax withholding		21,145		—		—			(20	)		—			—			(20	)
Share-based compensation expense		—		—		—			1,047			—			—			1,047
Issuance of common shares pursuant to 2019 ESPP		27,677		—		—			247			—			—			247
Exercise of stock options		17,521		—		—			70			—			—			70
Foreign currency translation adjustment		—		—		—			—			—			(577	)		(577	)
Foreign currency translation adjustment		—		—		—			—			—			188			188
Net loss		—		—		—			—			(46,797	)		—			(46,797	)
Net loss		—		—		—			—			(28,485	)		—			(28,485	)
Balance at December 31, 2020		32,533,959	$	1	$	(1	)	$	289,130		$	(434,723	)	$	(24	)	$	(145,617	)
Balance at June 30, 2019		30,340,432		1		(1	)		251,279			(204,016	)		457			47,720
Capital contributions from RSI and RSG		—		—		—			60			—			—			60
Share-based compensation expense		—		—		—			1,221			—			—			1,221
Exercise of stock options		41,001		—		—			150			—			—			150
Warrants issued with long-term debt		—		—		—			438			—			—			438
Foreign currency translation adjustment		—		—		—			—			—			(92	)		(92	)
Net loss		—		—		—			—			(25,741	)		—			(25,741	)
Balance at September 30, 2019		30,381,433	$	1	$	(1	)	$	253,148		$	(229,757	)	$	365		$	23,756

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Condensed Consolidated Statements of Shareholders’ (Deficit) Equity — Continued

(in thousands, except share data)

	Common Shares				Common Shares			Additional			Accumulated			Accumulated Other Comprehensive			Total Shareholders'
	Shares		Amount		Subscribed			Paid-in Capital			Deficit			Income			(Deficit) Equity
Balance at March 31, 2019		30,322,911	$	1	$	(1	)	$	250,032		$	(175,531	)	$	269		$	74,770
Capital contributions from RSI and RSG		—		—		—			130			—			—			130
Share-based compensation expense		—		—		—			1,047			—			—			1,047
Exercise of stock options		17,521		—		—			70			—			—			70
Foreign currency translation adjustment		—		—		—			—			—			188			188
Net loss		—		—		—			—			(28,485	)		—			(28,485	)
Balance at June 30, 2019		30,340,432		1		(1	)		251,279			(204,016	)		457			47,720
Capital contributions from RSI and RSG		—		—		—			60			—			—			60
Share-based compensation expense		—		—		—			1,221			—			—			1,221
Exercise of stock options		41,001		—		—			150			—			—			150
Warrants issued with long-term debt		—		—		—			438			—			—			438
Foreign currency translation adjustment		—		—		—			—			—			(92	)		(92	)
Net loss		—		—		—			—			(25,741	)		—			(25,741	)
Balance at September 30, 2019		30,381,433		1		(1	)		253,148			(229,757	)		365			23,756
Capital contributions from RSI and RSG		—		—		—			61			—			—			61
Share-based compensation expense		—		—		—			12,529			—			—			12,529
Exercise of stock options		128,434		—		—			498			—			—			498
Vesting of restricted stock units, net of tax withholding		9,821		—		—			(63	)		—			—			(63	)
Foreign currency translation adjustment		—		—		—			—			—			29			29
Net loss		—		—		—			—			(41,259	)		—			(41,259	)
Balance at December 31, 2019		30,519,688	$	1	$	(1	)	$	266,173		$	(271,016	)	$	394		$	(4,449	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended September 30,
	Nine Months Ended December 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(65112,~~650~~447	)	$	(5495,~~226~~485	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		~~166~~272			~~113~~178
Share-based compensation expense		39,~~404~~324			214,~~268~~797
Amortization of debt discount and issuance costs		2633			~~352~~664
Non-cash operating lease cost		~~476~~722			~~256~~448
Loss on disposal of property and equipment		—			236
Unrealized foreign currency translation adjustment		~~101~~(476	)		96125
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(28,~~706~~020	)		42,~~091~~897
Other assets		(89576	)		7277
Due from Sumitovant Biopharma Ltd.		172			—(111	)
Due to Roivant Sciences Ltd.		(31	)		55(8	)
Due to Sunovion Pharmaceuticals, Inc.		~~173~~182			—
Accounts payable		(1,~~096~~920	)		~~(358~~463	)
Accrued expenses		~~1,991~~(723	)		~~100~~4,998
Operating lease liabilities		(~~377~~621	)		(23153	)
Net cash used in operating activities		(63,440	)		(46,968	)
Interest payable		—			343
Net cash used in operating activities		(110,269	)		(70,531	)
Cash flows from investing activities:
Purchases of property and equipment		(~~448~~1,082	)		(~~589~~732	)
Cash used in investing activities		(448	)		(589	)
Capitalized website development costs		(245	)		—
Cash used in investing activities		(1,327	)		(732	)
Cash flows from financing activities:
Proceeds from capital contributions from Roivant Sciences Ltd.		—			~~190~~251
Proceeds from exercise of stock options		410,~~126~~501			~~220~~718
Debt financing costs paid		—			(387	)
Deferred offering costs paid		—			(165	)
Cash proceeds from debt financing		—			30,000
Cash proceeds from related-party debt financing		84122,000			—87,500
Proceeds from issuance of common shares pursuant to 2019 ESPP		331			—
Payment of restricted stock units tax withholding on net settlement		(20	)		(63	)
Net cash provided by financing activities		88,457			30,023
Proceeds from issuance of common shares pursuant to 2019 ESPP		578			—
Net change in cash and restricted cash		24,569			(17,534	)
Net cash provided by financing activities		133,059			117,854
Net change in cash and restricted cash		21,463			46,591
Cash and restricted cash—beginning of period		52,280			86,196
Cash and restricted cash—end of period	$	7673,~~849~~743		$	68132,~~662~~787
Non-cash investing and financing activities:
Warrants issued with long-term debt	$	—		$	438
Property and equipment included in due to Roivant Sciences Ltd.	$	—		$	63
Debt financing costs included in accrued expenses	$	—		$	213
Reclassification of share-based compensation liabilities to additional paid-in capital upon exercise of stock options	$	39,~~033~~343		$	—
Change in fair value of share-based compensation liabilities recorded to additional paid-in capital	$	159		$	—
Capitalized regulatory milestone payment in accrued expenses	$	14,000		$	—
Capitalized website development costs in accrued expenses	$	80		$	—
Supplemental disclosure of cash paid:
Income taxes	$	80110		$	5061
Interest	$	24,~~904~~519		$	~~867~~1,641

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

UROVANT SCIENCES LTD.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1—Description of business and liquidity

[A] Description of business:

Urovant Sciences Ltd. and its subsidiaries (collectively, the “Company” and, on an unconsolidated basis and excluding its subsidiaries, “USL”) is a ~~clinical-stage~~ biopharmaceutical company focused on developing and commercializing innovative therapies for urologic conditions. The Company’s lead product ~~candidate~~, GEMTESA (vibegron), is an oral, once-daily, (75 mg) small molecule beta-3 agonist. ~~The~~approved ~~Company~~by isthe U.S. Food ~~currently~~and ~~developing~~Drug ~~vibegron~~Administration (“FDA”) in December 2020 for the treatment of adult patients with overactive bladder (“OAB”) with symptoms of urge urinary incontinence, urgency and urinary frequency. The Company is also ~~developing~~evaluating ~~vibegron~~GEMTESA for the treatment of ~~two additional potential indications:~~ OAB in men with benign prostatic hyperplasia ~~and abdominal pain due to irritable bowel syndrome~~(“BPH”). The Company’s ~~second~~ product candidate, URO-902, is a gene therapy that the Company is developing for patients with OAB who have failed oral pharmacological therapy. There are no currently available ~~U.S. Food and Drug Administration (“~~FDA”) -approved gene therapy treatments for OAB. The Company was founded on January 27, 2016 as a Bermuda Exempted Limited Company and a wholly owned subsidiary of Roivant Sciences Ltd. (“RSL”). As of September 30, 2020, the Company has the following wholly owned subsidiaries (1) Urovant Holdings Ltd. (“UHL”), a private limited company incorporated under the laws of England and Wales, (2) Urovant Sciences GmbH (“USG”), a company with limited liability formed under the laws of Switzerland, (3) Urovant Sciences, Inc. (“USI”), a Delaware corporation based in the United States of America, (4) Urovant Treasury Holdings, Inc. (“UTH”), a Delaware corporation based in the United States of America, and (5) Urovant Sciences Treasury, Inc. (“UST”), a Delaware corporation based in the United States of America.

OnThe ~~December~~Company was founded on January 27, ~~2019,~~2016 ~~Sumitomo~~as ~~Dainippon~~a ~~Pharma~~Bermuda ~~Co.,~~Exempted Limited Company and a wholly-owned subsidiary of Roivant Sciences Ltd. (“~~Sumitomo Dainippon Pharma~~RSL”). ~~and~~As ~~RSL~~of ~~announced~~December 31, 2020, the ~~closing~~Company ofhas the ~~transactions~~following ~~between~~wholly-owned ~~Sumitomo~~subsidiaries: ~~Dainippon~~(i) Urovant ~~Pharma~~Holdings ~~and~~Ltd. ~~RSL~~(“UHL”), ~~and~~a ~~certain~~private oflimited ~~its~~company ~~affiliates~~incorporated ~~contemplated~~under by the ~~definitive~~laws ~~transaction~~of ~~agreement~~England ~~entered~~and ~~into~~Wales; on(ii) Urovant ~~October~~Sciences ~~31,~~GmbH ~~2019~~ (~~the~~ “~~Sumitomo Transaction~~USG”), ~~pursuant~~a tocompany ~~which~~with ~~all~~limited ofliability formed under the ~~Company’s~~laws ~~common~~of ~~shares~~Switzerland; ~~held~~(iii) Urovant bySciences, ~~RSL~~Inc. ~~were~~(“USI”), ~~contributed~~a toDelaware ~~Sumitovant~~corporation ~~Biopharma~~based ~~Ltd.,~~in athe ~~wholly-owned~~United ~~subsidiary~~States of ~~RSL~~America; at(iv) ~~the~~Urovant ~~time~~Treasury ofHoldings, ~~such~~Inc. ~~contribution~~ (“~~Sumitovant~~UTH”), a Delaware corporation based in the United States of America; and ~~subsequent~~(v) toUrovant ~~such~~Sciences ~~contribution~~Treasury, ~~Sumitomo~~Inc. ~~Dainippon~~(“UST”), ~~Pharma~~a ~~acquired~~Delaware ~~all~~corporation ~~issued~~based ~~and~~in ~~outstanding~~the ~~equity~~United ~~securities~~States of ~~Sumitovant~~America.

~~Since~~On ~~its~~December 27, ~~inception~~2019, ~~the~~Sumitomo ~~Company~~Dainippon ~~has~~Pharma ~~devoted~~Co., ~~substantially~~Ltd. ~~all~~(“Sumitomo ofDainippon ~~its~~Pharma”) ~~efforts~~and toRSL ~~organizing~~announced ~~and~~the ~~staffing~~closing of the ~~Company,~~transactions ~~acquiring~~between ~~its~~Sumitomo ~~product~~Dainippon ~~candidates,~~Pharma ~~vibegron~~ and ~~URO-902,~~RSL ~~advancing~~and ~~vibegron~~certain ~~into~~of ~~clinical~~its ~~development,~~affiliates ~~and~~contemplated ~~preparing~~by ~~for~~the ~~commercialization.~~definitive ~~Vibegron~~transaction ~~was~~agreement ~~licensed~~entered ~~from~~into ~~Merck~~on ~~Sharp &~~October ~~Dohme~~31, ~~Corp.~~2019 (the “~~Merck~~Sumitomo Transaction”),. aPursuant ~~subsidiary~~to ofthe ~~Merck &~~Sumitomo ~~Co.,~~Transaction inall ~~February~~of ~~2017.~~the ~~URO-902~~Company’s ~~was~~common ~~licensed~~shares ~~from~~held ~~Ion~~by ~~Channel~~RSL ~~Innovations,~~were ~~LLC~~contributed ~~(“ICI”)~~to inSumitovant ~~August~~Biopharma ~~2018~~Ltd., ~~The~~a ~~Company~~wholly-owned ~~has~~subsidiary ~~determined~~of ~~that~~RSL itat ~~has~~the ~~one~~time ~~operating~~of such contribution (“Sumitovant”), and ~~reporting~~subsequent ~~segment~~to assuch itcontribution, ~~allocates~~Sumitomo ~~resources~~Dainippon ~~and~~Pharma ~~assesses~~acquired ~~financial~~all ~~performance~~issued onand aoutstanding ~~consolidated~~equity ~~basis.~~securities of Sumitovant.

On November 12, 2020, Sumitovant, Titan Ltd., a wholly-owned subsidiary of Sumitovant (“Merger Sub”), USL, and Sumitomo Dainippon Pharma, entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, and subject to the term and conditions set forth therein, Merger Sub will merge with and into USL (the “Merger”), with USL continuing as the surviving company in the Merger and a wholly-owned subsidiary of Sumitovant (the “Surviving Company”). Subject to the terms and conditions set forth in Merger Agreement, in the event the Merger is consummated, holders of the Company’s common shares (other than Excluded Shares, Parent Owned Shares and Dissenting Shares (as each such term is defined below) will be entitled to receive $16.25 per share, without interest and less any applicable withholding taxes (the “Per Share Merger Consideration”). The consummation of the Merger is not subject to any financing condition. See Note 6[A]) for more details on the Merger Agreement.

Since its inception, the Company has devoted substantially all of its efforts to organizing and staffing the Company, acquiring its product, GEMTESA, and its gene therapy product candidate, URO-902, advancing GEMTESA through its clinical development and approval by the FDA for the treatment of OAB, and preparing for the commercialization of GEMTESA. GEMTESA was licensed from Merck Sharp & Dohme Corp. (“Merck”), a subsidiary of Merck & Co., in February 2017. URO-902 was licensed from Ion Channel Innovations, LLC (“ICI”) in August 2018. The Company has determined that it has one operating and reporting segment as it allocates resources and assesses financial performance on a consolidated basis.

[B] Liquidity:

The Company has historically been capitalized with funding from its initial public offering, which was completed in October 2018, debt financings, and, prior to its initial public offering, capital contributions from its former parent company, RSL.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Since inception, the Company has incurred and expects to continue to incur significant and increasing operating losses and negative cash flows for at least the next several years. To date, the Company has not generated any revenues ~~and does not anticipate generating any revenues unless and until it successfully completes development of, obtains regulatory approval for, and commercializes one of its product candidates~~. At ~~September~~December 3031, 2020, the Company reported cash of $7471.43 million and a shareholders’ deficit of $~~113~~145.16 million. The Company currently believes its existing cash, together with the draw down under the Sumitomo Loan Agreement (as defined below) of $3858.0 million in ~~November~~January ~~2020~~2021 and the remaining financing commitment from Sumitomo Dainippon Pharma of $90157.5 million, which is available to the Company based on funding requests made in accordance with the operating budget approved by the Company’s Board of Directors (the “Board”) (see Notes 45 and 1213), will be sufficient to fund its committed operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of these condensed consolidated financial statements. This estimate is based on the Company’s current assumptions, including assumptions relating to the ~~timing~~commercial launch of ~~regulatory~~GEMTESA ~~approval~~for ~~and~~ the ~~subsequent~~treatment ~~launch~~ of ~~vibegron~~adult ~~for~~patients with OAB, and the Company’s ability to manage the amount and timing of its spend. The Company’s available capital may also be consumed faster than anticipated due to other events, including the length and severity of the global novel coronavirus (“COVID-19”) pandemic and measures taken to control the spread of COVID-19, as well as changes in and progress of its development activities and the impact of commercialization efforts due to the COVID-19 pandemic. The Company will seek to obtain additional capital as needed through equity financings, debt or other financing arrangements, such as potential collaboration, license or development agreements. However, given the impact of COVID-19 on the U.S. and global financial markets and any limitations on future financing arrangements pursuant to the terms of the Sumitomo Loan Agreement, as well as Sumitomo Dainippon Pharma’s ability to exert substantial influence and control over the Company due to Sumitomo Dainippon Pharma’s majority ownership of the Company’s outstanding common shares, the Company may be unable to access further financing when needed. As such, there can be no assurance that the Company will be able to raise additional capital when needed or under acceptable terms, if at all. The sale of any additional equity or convertible debt securities may dilute existing shareholders and the terms of these securities may include liquidation or other preferences that adversely affect the rights of the Company’s existing common shareholders.

710

spend. The Company’s ~~agreement with Sumitomo Dainippon Pharma involves, and any agreements for future debt or preferred equity financings, if~~ available, ~~may involve, covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, incurring~~ capital ~~expenditures~~may oralso ~~declaring~~be ~~dividends. If~~consumed ~~the~~faster ~~Company~~than isanticipated ~~unable~~due to ~~obtain~~other ~~such additional financing~~events, asincluding ~~needed, in sufficient amounts or on terms acceptable to~~ the ~~Company, or~~continued iflength ~~the~~and ~~remaining~~severity ~~financing commitment~~ of ~~$90.5 million under~~ the ~~Sumitomo Loan Agreement~~ isglobal nonovel ~~longer~~coronavirus ~~available to the Company despite future funding~~(“COVID-19”) ~~requests made in accordance with its Board approved operating budget~~pandemic, ~~the~~measures ~~Company~~taken ~~may have~~ to ~~significantly~~control ~~delay or scale back its operations to reduce working capital requirements beginning in~~ the ~~second~~spread ~~calendar quarter~~ of ~~2021 and substantial uncertainty would exist with respect to the Company’s ability to continue as a going concern. In addition~~COVID-19, ~~the Company will prioritize necessary~~ and ~~appropriate~~changes ~~steps~~in ~~to enable~~ the ~~continued~~progress ~~operations~~ of the ~~business and preservation of the value of its assets beyond the next twelve months, including but not limited to, actions such as reduced personnel-related costs, curtailment of the~~ Company’s ~~commercial launch efforts for vibegron, if approved,~~ development activities and ~~other discretionary expenditures that are within~~ the ~~Company’s control.~~ ~~These reductions in expenditures, if required, may have an adverse~~ impact onof ~~the~~its ~~Company’s~~commercialization ~~ability~~efforts due to ~~achieve certain of~~ the ~~Company’s~~COVID-19 ~~planned objectives in fiscal years 2020 and 2021~~pandemic.

~~The~~If the Merger is not approved by the Company’s ~~future~~shareholders ~~operations~~as ~~are~~required ~~highly~~by ~~dependent~~the onMerger aAgreement, ~~combination~~any of ~~factors,~~the ~~including~~other ~~(1)~~ conditions to the ~~success~~consummation of ~~its~~the ~~research~~Merger ~~and~~is ~~development~~not ~~programs;~~satisfied or waived, or the parties to the Merger Agreement fail to consummate the Merger for any other reason (2see Note 6[A]) ~~regulatory~~, ~~approval~~the ~~and~~Company ~~market~~will ~~acceptance~~seek ofto ~~vibegron~~obtain additional capital as needed through equity financings, ~~URO-902~~debt or ~~any~~other ~~future~~financing ~~product~~arrangements, ~~candidate;~~such ~~(3)~~as potential collaboration, license or development agreements. However, given the ~~development~~impact of ~~competitive~~the ~~therapies~~COVID-19 bypandemic ~~other~~on ~~biotechnology~~the U.S. and ~~pharmaceutical~~global ~~companies;~~financial ~~(4)~~ markets, the ~~Company~~limitations on future financing arrangements pursuant to the terms of the Sumitomo Loan Agreement, and Sumitomo Dainippon Pharma’s ability to ~~manage~~exert substantial ~~growth~~influence ofand control over the ~~organization;~~Company ~~(5)~~ due to Sumitomo Dainippon Pharma’s majority ownership of the Company’s ~~ability~~outstanding common shares, the Company may be unable to ~~protect~~access ~~its~~further ~~technology~~financing ~~and~~when ~~products;~~needed. As ~~and~~such, ~~ultimately~~there ~~(6)~~ can be no assurance that the ~~timely~~Company ~~and~~will ~~successful~~be ~~completion~~able to raise additional capital when needed or under acceptable terms, if at all. The sale of any additional ~~financing~~equity or convertible debt securities may dilute existing shareholders, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of the Company’s existing shareholders.

The Sumitomo Loan Agreement involves, and any agreements for future debt or preferred equity financings, if available, may involve, covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, incurring capital expenditures or declaring dividends. If the Company is unable to obtain such additional financing, as needed, in sufficient amounts or on terms acceptable to the Company, or if the remaining financing commitment of $157.5 million under the Sumitomo Loan Agreement is no longer available to the Company despite future funding requests made in accordance with its Board-approved operating budget, the Company may have to significantly delay or scale back its operations to reduce working capital requirements beginning in the second calendar quarter of 2021, and substantial uncertainty would exist with respect to the Company’s ability to continue as a going concern. In addition, the Company would prioritize necessary and appropriate steps to enable the continued operations of the business and preservation of the value of its assets beyond the next twelve months, including but not limited to, actions such as reducing personnel-related costs and delaying or curtailing of the Company’s commercial launch efforts for GEMTESA, development activities and other discretionary expenditures that are within the Company’s control. These reductions in expenditures, if required, may have an adverse impact on the Company’s ability to achieve certain of the Company’s planned objectives in fiscal year 2021.

The Company’s future operations are highly dependent on a combination of factors, including (i) the successful commercial launch and market acceptance of GEMTESA; (ii) the success of its other research and development programs; (iii) regulatory approval, successful commercial launch and market acceptance of URO-902 or any future product candidate; (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies; (v) the Company’s ability to manage growth of the organization; (vi) the Company’s ability to protect its technology and products; and, ultimately (vii) the timely and successful completion of any additional financing.

Note 2—Summary of significant accounting policies

[A] Basis of presentation:

The Company’s fiscal year ends on March 31. The accompanying interim condensed consolidated balance sheet as of ~~September~~December 3031, 2020, the condensed consolidated statements of operations and comprehensive loss for the three and ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, the condensed consolidated statements of cash flows for the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, and the condensed consolidated statements of shareholders’ (deficit) equity for the three and ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019 are unaudited. The accompanying interim unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements, as certain footnotes or other financial information that are required by U.S. GAAP can be condensed or omitted. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2020 included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on June 19, 2020.

The condensed consolidated balance sheet as of March 31, 2020 has been derived from the audited consolidated financial statements at that date. In the opinion of management, the interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position and its results of operations and cash flows for the interim periods presented. The results for the three and ~~six~~nine months ended ~~September~~December 3031, 2020 are not necessarily indicative of the results to be expected for the year ending March 31, 2021 or for any future period.

Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of USL and UHL, USG, USI, UTH and UST, USL’s wholly -owned subsidiaries. USL has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

There have been no significant changes in the Company's accounting policies from those disclosed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the SEC on June 19, 2020.

[B] Use of estimates:

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs, and expenses, including the evaluation of the Company’s ability to continue as a going concern, impairment of long-lived assets (including intangible asset), as well as share-based compensation expenses, research and development expenses and accruals, estimated useful lives of depreciable and amortizable assets, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and such differences may be material.

[C] Risks and uncertainties:

The Company is subject to risks common to early stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, including the need to successfully commercialize and gain market acceptance of its lead product, ~~candidates~~risks of failure or unsatisfactory results of nonclinical studies and clinical trials, the need to obtain ~~marketing~~additional ~~approval~~financing ~~for~~to fund the future development and commercialization of its lead product ~~candidates~~and gene therapy product candidate, ~~risks~~ ofdependence ~~failure~~on orkey ~~unsatisfactory~~products, ~~results~~third-party service providers, such as contract research organizations, and contract manufacturing organizations, protection of ~~nonclinical~~intellectual ~~studies~~property rights, compliance with government regulations, and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

~~clinical~~In ~~trials~~March 2020, the ~~need~~World toHealth ~~obtain~~Organization ~~additional~~declared ~~financing~~the COVID-19 outbreak a pandemic. Due to ~~fund~~the COVID-19 pandemic, there has been uncertainty and disruption in the ~~future~~global ~~development~~economy and ~~commercialization~~financial ofmarkets. ~~its~~Through ~~product~~February ~~candidates~~12, ~~dependence~~2021, the date of issuance of this Quarterly Report on ~~key~~Form ~~products~~10-Q, ~~third-party~~the ~~service~~Company’s ~~providers~~results ~~such~~of asoperations ~~contract~~and ~~research~~cash ~~organizations~~flows ~~and~~have ~~contract~~not ~~manufacturing~~been ~~organizations,~~significantly ~~protection~~impacted by the COVID-19 outbreak. The Company is not aware of ~~intellectual~~any ~~property~~specific ~~rights, compliance~~event ~~with~~or ~~government~~circumstance ~~regulations, and~~that ~~the~~would ~~ability~~require an update to ~~make~~its ~~milestone~~estimates, ~~royalty~~judgments and assumptions or ~~other~~a ~~payments~~revision ~~due~~of ~~under~~the ~~any~~carrying ~~license,~~value ~~collaboration~~of the Company’s assets or ~~supply~~liabilities ~~agreements~~as of February 12, 2021.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Through November 2, 2020, the date of issuance of this Quarterly Report on Form 10-Q, the Company’s results of operations and cash flows have not been significantly impacted by the COVID-19 outbreak. The Company is not aware of any specific event or circumstance that would require an update to its estimates, judgments and assumptions or a revision of the carrying value of the Company’s assets or liabilities as of November 2, 2020.

[D] Cash, cash equivalents, and restricted cash:

Cash includes cash deposits in banks. The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains cash deposits in federally-insured financial institutions in excess of federally insured limits. The Company has established guidelines relative to diversification and maturities to maintain liquidity and preservation of capital. The Company has not experienced any credit losses related to these financial instruments and does not believe that it is exposed to any significant credit risk related to these instruments.

Restricted cash consists of legally restricted non-interest-bearing deposit accounts held as compensating balances against the Company’s corporate credit card program and irrevocable standby letters of credit connected to its office leases (see Note 1112) and its fleet rental program. Restricted cash classified as a current asset consists of the restricted deposit account relating to the Company’s corporate credit card agreement. Restricted cash classified as a long-term asset consists of the restricted deposit account related to the irrevocable standby letters of credit.

Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash and restricted cash as presented on the condensed consolidated balance sheets. Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands):

	September 30, 2020		March 31, 2020
	December 31, 2020		March 31, 2020
Cash	$	7471,~~401~~295	$	51,414
Restricted cash		2,448		866
Cash and restricted cash	$	7673,~~849~~743	$	52,280

[E] Financial instruments:

The Company applies a fair value framework in order to measure and disclose its financial assets and liabilities. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates and yield curves.

•

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent the valuation is based on models or inputs that are less observable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

9The Company’s financial instruments consist of cash, restricted cash, accounts payable, accrued expenses, amounts due to and from RSL, Sumitovant and Sunovion Pharmaceuticals, Inc., a wholly-owned subsidiary of Sumitomo Dainippon Pharma (“Sunovion”), share-based compensation liabilities, and debt obligations. The carrying value of the Company’s debt obligations approximates fair value based on current interest rates for similar types of borrowings and is included in Level 2 of the fair value hierarchy. The share-based compensation liabilities are remeasured at fair value on a recurring basis and are included in Level 3 of the fair value hierarchy. The remaining financial instruments are stated at their respective historical carrying amounts, which approximates fair value due to their short-term nature.

The Company’s ~~financial~~measured ~~instruments~~the consist of cash, restricted cash, accounts payable, accrued expenses, amounts due to and from RSL, Sumitovant and Sunovion Pharmaceuticals, Inc., a wholly owned subsidiary of Sumitomo Dainippon Pharma (“Sunovion”), share-based compensation liabilities, ~~and~~at ~~debt~~fair ~~obligations. The carrying~~ value ofbased ~~the~~on ~~Company’s~~significant ~~debt~~inputs ~~obligations~~not ~~approximates~~observable ~~fair~~in ~~value based~~the onmarket, ~~current~~which ~~interest~~caused ~~rates~~them ~~for~~to ~~similar~~be ~~types~~classified ofas ~~borrowings~~a ~~and is included in~~ Level 23 ofmeasurement within the fair value hierarchy (see Note 10). The valuation of the share-based compensation liabilities ~~are~~used ~~remeasured~~assumptions ~~at fair value on a recurring basis~~ and ~~are~~estimates ~~included in Level 3 of~~ the ~~fair~~Company ~~value~~believed ~~hierarchy.~~would ~~The~~be ~~remaining~~made ~~financial~~by ~~instruments~~a ~~are~~market ~~stated~~participant atin ~~their~~making ~~respective~~the ~~historical~~same ~~carrying amounts, which approximates fair value due to their short-term nature~~valuation.

The Company measured the share-based compensation liabilities at fair value based on significant inputs not observable in the market, which caused them to be classified as a Level 3 measurement within the fair value hierarchy (see Note 9). The valuation of the share-based compensation liabilities used assumptions and estimates the Company believed would be made by a market participant in making the same valuation.

The stock options liability is marked-to-market each reporting period with the change in fair value recorded as share-based compensation expense on the Company’s condensed consolidated statements of operations until the stock options are exercised and are sold to Sumitovant or to the market, or until the former Principal Executive Officer has held the exercised and unsold shares for a period of at least six months. The fair value of the stock options liability is determined at each reporting period by utilizing the Black-Scholes option-pricing model.

The stock appreciation rights (“SARs”) liability is marked-to-market each reporting period with the change in fair value recorded as share-based compensation expense on the Company’s condensed consolidated statements of operations over the vesting term and until the SARs are exercised. The fair value of the SARs liability is determined at each reporting period by utilizing a binominal lattice model.

[F] ~~Net~~Intangible ~~loss per common share~~assets:

When the Company determines net assets acquired or products in-licensed do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets, and therefore, no goodwill is recorded and contingent consideration such as payments upon achievement of various developmental, regulatory and commercial milestones generally is not recognized at the acquisition date. In an asset acquisition, up-front payments allocated to in-process research and development (“IPR&D”) projects at the acquisition date and subsequent milestone payments are charged to expense in the Company’s condensed consolidated statements of operations unless there is an alternative future use.

Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development. When development is successfully completed, which generally occurs when regulatory approval is obtained, the milestone payments made in connection with regulatory approvals are capitalized and deemed finite-lived intangible assets which are amortized, primarily on a straight-line basis if the pattern of cash flows cannot be reliably estimated, to cost of product sales over their respective estimated useful lives beginning at that point in time. Any future regulatory or sales-based milestone payments associated with the finite-lived intangible assets are also capitalized.

[G] Impairment of long-lived assets:

Long-lived assets, including property, equipment, and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. Should there be an indicator of impairment, the Company tests for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

[H] Net loss per common share:

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing the net loss applicable to common shareholders by the diluted weighted-average number of common shares outstanding during the period calculated in accordance with the treasury stock method. In periods in which the Company reports a net loss, all common share equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equivalent. Potentially dilutive common shares have been excluded from the diluted net loss per common share computations in all periods presented because such securities have an anti-dilutive effect on net loss per common share due to the Company’s net loss. There are no reconciling items used to calculate the weighted-average number of total common shares outstanding for basic and diluted net loss per common share data.

At ~~September~~December 3031, 2020 and 2019, potentially dilutive securities were as follows:

	September 30,
	December 31,
	2020		2019
Options		32,~~841~~906,~~933~~012		4,~~169~~358,~~654~~720
Restricted stock units (unvested)		1,~~870~~909,~~228~~930		1589,~~000~~650
Stock appreciation rights		845,732		—
Employee stock purchase plan		20,396		—
Warrants		99,777		99,777
Total		65,~~678~~761,~~066~~451		4,~~284~~548,~~431~~147

[GI] Recently issued accounting pronouncements:

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (“ASU No. 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU No. 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses on available-for-sale debt securities to be recorded through an allowance for credit losses instead of as a reduction in the amortized cost basis of the securities. ASU No. 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates, which deferred the effective date of ASU No. 2016-13 for public business entities that meet the definition of a smaller reporting company, as defined by the SEC, as of November 15, 2019. As the Company met the definition of a smaller reporting company as of November 15, 2019, ASU No. 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2022. Early adoption is permitted, including adoption in any interim period. The Company does not expect the adoption to have a material impact on the Company’s condensed consolidated financial position, results of operations, and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments of this update simplify the accounting for income taxes by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact the adoption of this standard will have on its consolidated financial position, results of operations, and related disclosures.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, that provides temporary optional guidance to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The new guidance provides expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London Inter-bank Offered Rate (“LIBOR”) or another reference rate that is expected to be discontinued due to reference rate reform. This new guidance is effective prospectively beginning on March 12, 2020 through December 31, 2022. As of ~~September~~December 3031, 2020, the Company has not modified its contract that will be impacted by reference rate reform. The Company will continue to assess the impact the adoption of this standard will have on its consolidated financial position, results of operations, and related disclosures when its contract impacted by reference rate reform is modified.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future consolidated financial position, results of operations or cash flows.

~~Note 3—Accrued expenses~~14

~~Accrued~~Note ~~expenses~~3—Intangible ~~at September 30, 2020 and March 31, 2020 consist of the following (in thousands):~~asset

	September 30, 2020		March 31, 2020
Research and development expenses	$	14,451	$	13,728
Compensation-related expenses		5,650		6,296
Professional services expenses		207		433
Other general and administrative expenses		3,439		1,299
Total accrued expenses	$	23,747	$	21,756

A summary of the Company’s finite-lived intangible asset as of December 31, 2020 is as follows (in thousands, except for years):

Note 4—Related-party long-term debt

	December 31, 2020
	Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived asset:
Intangible asset - vibegron	10	$	14,000	$	—	$	14,000

OnDuring ~~December 27, 2019,~~ the ~~Company~~three ~~entered~~and ~~into~~nine a $300 million unsecured revolving debt facility with Sumitomo Dainippon Pharma (the “Sumitomo Loan Agreement”). Sumitomo Dainippon Pharma funded an initial amount of $87.5 million on December 30, 2019 under the terms of the Sumitomo Loan Agreement. During the six months ended ~~September~~December 3031, 2020, ~~Sumitomo~~there ~~Dainippon~~was ~~Pharma~~no ~~funded~~amortization anexpense ~~amount~~recognized offor ~~$84.0~~our ~~million.~~finite-lived Inintangible ~~addition, in November 2020, Sumitomo Dainippon Pharma funded an additional amount of $38~~asset.0 ~~million~~The ~~(see~~following ~~Note~~table ~~12[A]).~~summarizes ~~Additional~~the ~~funds~~estimated ~~may~~future beamortization ~~drawn~~expense ~~down~~associated bywith ~~the~~our ~~Company,~~finite-lived ~~upon~~intangible ~~request,~~asset noat ~~more~~December ~~than once in any calendar quarter~~31, ~~subject~~2020 ~~to funding requests by the Company that are made are~~ (in ~~accordance with the Company’s Board approved operating budget.~~thousands):

Loans under the Sumitomo Loan Agreement (“Loans”) bear a variable interest rate per annum equal to LIBOR plus a margin of 3% payable on the last day of each calendar quarter. LIBOR is currently expected to be phased out by the end of 2021, and if it becomes unavailable, the Company and Sumitomo Dainippon Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, a margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. The interest rate on the Loans was 3.31% at September 30, 2020. The Loans mature and are payable in full on the five-year anniversary of the closing date of the Sumitomo Loan Agreement or December 27, 2024.

Years Ending March 31,	Amount
Remainder of 2021	$	353
2022		1,412
2023		1,412
2024		1,412
2025		1,412
Thereafter		7,999
Total	$	14,000

Note 4—Accrued expenses

Accrued expenses at December 31, 2020 and March 31, 2020 consist of the following (in thousands):

	December 31, 2020		March 31, 2020
Research and development expenses	$	25,651	$	13,728
Compensation-related expenses		5,437		6,296
Professional services expenses		482		433
Other general and administrative expenses		3,543		1,299
Total accrued expenses	$	35,113	$	21,756

Note 5—Related-party long-term debt

On December 27, 2019, the Company entered into a $300.0 million unsecured revolving debt facility with Sumitomo Dainippon Pharma (the “Sumitomo Loan Agreement”), and in February 2021, the Company and Sumitomo Dainippon Pharma amended the Sumitomo Loan Agreement to increase the Company’s borrowing capacity pursuant to the Sumitomo Loan Agreement to $425.0 million (see Note 13[A]).

Sumitomo Dainippon Pharma funded an initial amount of $87.5 million on December 30, 2019 under the terms of the Sumitomo Loan Agreement. During the nine months ended December 31, 2020, Sumitomo Dainippon Pharma funded an amount of $122.0 million. In addition, in January 2021, Sumitomo Dainippon Pharma funded an additional amount of $58.0 million (see Note 13[A]). Additional funds may be drawn down by the Company, upon request, no more than once in any calendar quarter, pursuant to funding requests by the Company that are made are in accordance with the Company’s Board-approved operating budget.

Loans under the Sumitomo Loan Agreement (“Loans”) bear a variable interest rate per annum equal to LIBOR plus a margin of 3% payable on the last day of each calendar quarter. LIBOR is currently expected to be phased out by the end of 2021, and if it becomes unavailable, the Company and Sumitomo Dainippon Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, a margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. The interest rate on the Loans was 3.22% at December 31, 2020. The Loans mature and are payable in full on the five-year anniversary of the closing date of the Sumitomo Loan Agreement or December 27, 2024.

The Company’s obligations under the Sumitomo Loan Agreement are fully and unconditionally guaranteed by each of the Company’s direct and indirect subsidiaries. The Sumitomo Loan Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings.

The Sumitomo Loan Agreement also contains customary events of default (subject, in certain instances, to specified grace periods). If any event of default occurs, the principal, premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Loans may become due and payable immediately. Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding principal balance, and Sumitomo Dainippon Pharma may declare all outstanding obligations immediately due and payable (subject, in certain instances, to specified grace periods) and take such other actions as set forth in the Sumitomo Loan Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations under the Sumitomo Loan Agreement would automatically become due and payable. The Company is in compliance with the covenants pursuant to the Sumitomo Loan Agreement as of September 30, 2020.

1115

Agreement. Upon the occurrence of certain bankruptcy and insolvency events, the obligations under the Sumitomo Loan Agreement would automatically become due and payable. The Company is in compliance with the covenants pursuant to the Sumitomo Loan Agreement as of December 31, 2020.

The Company incurred financing costs of $0.3 million relating to the Sumitomo Loan Agreement which are recorded as an offset to related-party long-term debt on the Company’s condensed consolidated balance sheets. The deferred financing costs are being amortized over the term of the debt using the effective interest method, and are included in interest expense in the Company’s condensed consolidated statements of operations.

Outstanding debt obligations to Sumitomo Dainippon Pharma are as follows (in thousands):

	September 30, 2020			March 31, 2020
	December 31, 2020			March 31, 2020
Principal amount	$	~~171~~209,500		$	87,500
Less: unamortized debt issuance costs		(~~222~~215	)		(248	)
Loan payable less unamortized debt issuance costs		~~171~~209,~~278~~285			87,252
Less: current maturities		—			—
Long-term debt, net of unamortized debt issuance costs	$	~~171~~209,~~278~~285		$	87,252

Note 56—Related party transactions

[A] Merger agreement – Sumitomo ~~loan~~Dainippon ~~agreement:~~Pharma and Sumitovant

~~See~~On ~~Note~~November 12, 42020, ~~for~~Sumitovant, ~~information~~Merger ~~regarding~~Sub, ~~the~~USL, and Sumitomo ~~Loan~~Dainippon Pharma, entered into the Merger Agreement. Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Merger Sub would be merged with and into USL (the “Merger”), with USL continuing as the surviving company in the Merger.

~~[B]~~The ~~Investor~~respective ~~rights~~obligations ~~agreement~~of –USL, ~~Sumitomo~~Sumitovant ~~Dainippon~~and ~~Pharma~~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 requirements that a proposal to approve and adopt the Merger Agreement and certain related agreements and transactions (such proposal, the “Merger Proposal”) is approved at a meeting of the Company’s shareholders by (i) holders of at least 66 2/3% of the issued and outstanding common shares of USL entitled to vote on the Merger Proposal and voting at such meeting (the “General Shareholder Approval”), and (ii) holders of at least a majority of the outstanding common shares of USL held by shareholders of the Company other than Sumitovant: and its affiliates (the “Public Shareholder Approval”). However, the consummation of the Merger is not subject to any financing condition.

OnSubject ~~December 27,~~to ~~2019,~~ the ~~Company~~terms ~~entered~~and ~~into~~conditions anset ~~investor~~forth ~~rights~~in ~~agreement~~the ~~with~~Merger ~~Sumitomo~~Agreement, ~~Dainippon~~at ~~Pharma~~the ~~and~~effective ~~Sumitovant~~time of the Merger (the “~~Investor~~Effective ~~Rights Agreement~~Time”)., ~~Pursuant~~(i) toeach ~~the~~share ~~Investor~~of ~~Rights~~USL’s ~~Agreement~~common stock, ~~among~~par ~~other~~value ~~things~~$0.000037453 per share, ~~the~~issued ~~Company~~and ~~agreed~~outstanding immediately prior to ~~comply~~the ~~with~~Effective ~~any~~Time ~~demands~~(other bythan ~~Sumitovant~~Excluded toShares, ~~register~~Parent Owned Shares and shares for ~~sale,~~which shareholders have sought appraisal rights under the ~~Securities~~applicable ~~Act~~laws of ~~1933,~~Bermuda (as ~~amended,~~each ~~any~~term ~~common~~is ~~shares~~defined ofbelow)) ~~the~~will ~~Company~~automatically ~~beneficially~~cease ~~owned~~to byexist, ~~Sumitovant~~and ~~that~~each ~~have~~holder anof ~~anticipated~~a ~~aggregate~~common ~~net~~share ~~offering~~will ~~price~~cease ofto athave ~~least~~any ~~$5 million,~~rights ~~subject~~with torespect ~~certain~~thereto, ~~customary~~except ~~exceptions~~for ~~and~~ the right ofto receive the ~~Company~~Per toShare ~~refuse~~Merger Consideration; (ii) any ~~demand~~common ~~for~~share ~~registration~~owned ifby ~~the~~USL ~~Company~~as ~~already~~a ~~effected~~treasury ~~two~~share ~~registrations~~and ~~for~~any ~~Sumitovant~~common inshare ~~the~~owned ~~year~~directly ~~preceding~~by ~~such~~any ~~demand.~~direct Inor ~~addition~~indirect wholly-owned subsidiary of USL (each, ~~the~~an ~~Company~~“Excluded ~~agreed~~Share”), toin ~~periodically~~each ~~provide~~case ~~Sumitovant~~as ~~with~~of ~~(i) certain~~immediately ~~financial~~prior ~~statements~~to the Effective Time, ~~projections~~will be canceled, ~~capitalization~~be ~~summaries~~no ~~and~~longer ~~other~~outstanding, ~~information~~and ~~customarily~~will ~~provided~~automatically cease to ~~significant~~exist, ~~investors~~and no consideration will be delivered in ~~publicly-traded~~exchange ~~companies~~therefor; and (iiiii) ~~access~~each common share that is owned directly by Sumitovant as of immediately prior to the ~~Company’s~~Effective ~~books,~~Time ~~records~~(each, ~~facilities~~a ~~and~~“Parent ~~employees~~Owned ~~during~~Share”) ~~the~~will ~~Company’s~~remain ~~normal~~outstanding ~~business~~and ~~hours~~will asconstitute ~~Sumitovant~~a ~~may~~common ~~reasonably~~share ~~request~~of the Surviving Company.

~~Moreover~~In addition, ~~the~~immediately ~~Investor~~prior ~~Rights~~to ~~Agreement~~the ~~also~~Effective ~~contains~~Time, ~~certain~~(i) each ~~protections~~option ~~for~~to ~~the~~purchase ~~Company’s~~common ~~minority~~shares ~~shareholders~~that ~~for~~is sooutstanding ~~long~~and asunexercised, ~~Sumitomo~~whether ~~Dainippon~~vested ~~Pharma~~ or ~~certain~~unvested, ofthat ~~its~~has ~~affiliates~~an ~~beneficially~~exercise ~~own~~price ~~between~~per ~~50%~~common ~~and~~share ~~90%~~that ofis ~~the~~less ~~total~~than ~~number~~the ofPer ~~votes~~Share ~~entitled~~Merger toConsideration will be ~~cast~~canceled atand ~~elections~~converted ofinto the ~~Company’s~~right ~~directors~~to (receive the ~~“Total~~Per ~~Voting~~Share ~~Power”).~~Merger ~~These~~Consideration, ~~protections~~net ~~include,~~of ~~among~~the ~~other~~applicable ~~things:~~exercise price, (iii) aeach ~~requirement~~option ~~for~~to apurchase ~~minimum~~common ofshares ~~three~~that ~~independent~~is ~~directors~~outstanding onand ~~the~~unexercised, ~~Company’s~~whether ~~Board~~vested ~~(each~~or ofunvested, ~~whom~~that ~~cannot~~has bean ~~removed~~exercise byprice ~~Sumitomo~~per ~~Dainippon~~common ~~Pharma~~share orthat ~~certain~~is ofequal ~~its~~to ~~affiliates~~or ~~without~~greater than the ~~approval~~Per ofShare aMerger ~~majority~~Consideration ofwill ~~the~~be ~~minority~~canceled ~~shareholders);~~without payment, (iiiii) each aSAR ~~requirement~~that is outstanding and unexercised, whether vested or unvested, that ~~the~~has ~~audit~~a ~~committee~~strike ofprice ~~the~~per ~~Board~~common (share that is less than the ~~“Audit~~Per ~~Committee”)~~Share Merger Consideration will be ~~comprised~~canceled ~~solely~~and ofconverted ~~independent~~into ~~directors;~~the ~~(iii)~~ right to receive the ~~appointment~~Per ofShare ~~Mr. Pierre~~Merger ~~Legault~~Consideration, asnet of the ~~Company’s~~applicable ~~lead~~strike ~~independent~~price, ~~director;~~ (iv) aeach ~~requirement~~SAR that ~~any~~is ~~transaction~~outstanding ~~proposed~~and byunexercised, ~~Sumitomo~~whether ~~Dainippon~~vested ~~Pharma~~ or ~~certain~~unvested, ofthat ~~its~~has ~~affiliates~~an ~~that~~exercise ~~would~~price ~~increase~~per ~~Sumitomo~~common ~~Dainippon~~share ~~Pharma’s~~that ~~beneficial~~is ~~ownership~~equal to ~~over~~or ~~76%~~greater ofthan the ~~Total~~Per ~~Voting~~Share ~~Power~~Merger beConsideration ~~approved~~will bybe ~~the~~canceled ~~Audit~~without ~~Committee~~payment, and (ifv) each ~~occurring~~then-outstanding ~~prior~~time-based torestricted ~~December 27,~~share ~~2021)~~unit ~~and,~~of ifUSL ~~such~~and ~~transaction~~each ~~would~~common ~~increase~~share ~~Sumitomo~~granted ~~Dainippon~~by ~~Pharma’s~~USL ~~beneficial~~that ~~ownership~~is subject to ~~over~~a ~~80%~~restriction ofon ~~the~~transfer ~~Total~~that ~~Voting~~lapses ~~Power,~~at athe ~~majority~~end of ~~the~~a ~~Company’s~~specified ~~minority~~period ~~shareholders~~or ~~must~~periods ~~vote~~(whether onvested ~~such~~or ~~matter;~~unvested) ~~and~~that ~~(v) a~~has ~~requirement~~not ~~that~~been ~~any~~settled ~~related~~in ~~person~~common ~~transactions~~shares ~~between~~of ~~Sumitomo~~USL ~~Dainippon~~prior ~~Pharma~~to orthe ~~certain~~Effective ofTime ~~its~~will ~~affiliates~~be canceled and the ~~Company~~holder bethereof ~~approved~~will byhave the ~~Audit~~right ~~Committee~~to receive a single lump sum cash payment, ~~consistent~~without ~~with~~interest, equal to the ~~Company’s~~Per ~~existing~~Share ~~Related~~Merger ~~Person~~Consideration, ~~Transactions~~less ~~Policy~~any applicable withholding for taxes.

~~Pursuant~~The torespective ~~the~~obligations ~~Investor~~of ~~Rights Agreement~~USL, ~~the~~Sumitovant ~~Company~~and ~~also~~Merger ~~agreed~~Sub ~~that~~to soeffect ~~long~~the asMerger ~~Sumitomo~~are ~~Dainippon~~subject ~~Pharma~~to orthe ~~certain~~satisfaction, ofor ~~its~~to ~~affiliates~~the ~~beneficially~~extent ~~own~~permitted ~~between~~by ~~50%~~applicable ~~and~~law, ~~90%~~waiver of ~~the~~several ~~Total~~customary ~~Voting Power~~conditions, including: (i) the ~~Company~~receipt ~~will~~of ~~inform~~the ~~Sumitovant~~General ~~before~~Shareholder ~~issuing~~Approval ~~any new common shares~~ and ~~allow~~the ~~Sumitovant~~Public toShareholder Approval, (iii) ~~participate~~ inthe ~~such~~absence ~~issuance~~of upany tolaw, ~~its~~injunction, ~~pro~~judgment ~~rata~~or ~~share~~other ~~(unless~~legal ~~such~~restraint ~~issuance~~that isprohibits ~~in connection with~~ the ~~acquisition~~consummation of athe ~~business~~Merger, ~~or its assets) or~~ (iiiii) ~~make~~the ~~sufficient~~accuracy ~~open market purchases~~ of ~~the~~each ~~Company~~party’s ~~securities~~representations and warranties (subject to ~~ensure~~certain ~~that~~qualifications), ~~Sumitomo~~(iv) ~~Dainippon~~each ~~Pharma~~party’s ~~beneficial~~compliance ~~ownership~~in ~~percentage~~all ~~does~~material ~~not~~respects ~~decline~~with asits aobligations ~~result~~contained ofin ~~such issuance. No amounts have been paid or received under~~ the ~~Investor~~Merger ~~Rights~~ Agreement; ~~however,~~and (v) the ~~Company~~absence ~~believes~~of ~~the~~a ~~Investor Rights Agreement is~~ material toadverse ~~its~~effect ~~business~~on ~~and operations~~USL.

~~[C] Information sharing agreement – Sumitovant:~~16

Sumitovant and USL have made customary representations, warranties and covenants in the Merger Agreement, including covenants, in the case of USL, to cause a meeting of its shareholders to be duly called and held as soon as reasonably practicable following the clearance of a proxy statement and the Schedule 13E-3 in connection with the Merger by the SEC for the purpose of voting on the adoption of the Merger Agreement. USL has also agreed to conduct its business in the ordinary course consistent with past practice, including not taking certain specified actions, prior to the consummation of the Merger or the termination of the Merger Agreement pursuant to its terms.

The Merger Agreement also contains certain termination rights for each of Sumitovant and USL and further provides that, upon termination of the Merger Agreement, under specified circumstances, USL may be required to pay Sumitovant a termination fee of $13.62 million. No amounts have been paid to or received from Sumitovant under the Merger Agreement; however, the Company believes the Merger Agreement is material to its business and operations.

[B] Voting agreement – Sumitovant

On November 12, 2020, Sumitovant and USL entered into a Voting and Support Agreement (the “Voting Agreement”) whereby Sumitovant has agreed, among other things, that at any meeting of the shareholders of USL or in connection with any written consent of the shareholders of USL, Sumitovant will appear at such meeting or cause its common shares to be counted as present at such meeting for purposes of establishing a quorum and, so long as Sumitovant is not prohibited from doing so by applicable law or a contractual obligation with USL, vote or consent in favor of the Merger and the adoption of the Merger Agreement.

No amounts have been paid to or received from Sumitovant under the Voting Agreement; however, the Company believes the Voting Agreement is material to its business and operations.

[C] Sumitomo loan agreement – Sumitomo Dainippon Pharma:

See Note 5 for information regarding the Sumitomo Loan Agreement.

[D] Investor rights agreement – Sumitomo Dainippon Pharma and Sumitovant:

On December 27, 2019, the Company entered into an investor rights agreement with Sumitomo Dainippon Pharma and Sumitovant (the “Investor Rights Agreement”). Pursuant to the Investor Rights Agreement, among other things, the Company agreed to comply with any demands by Sumitovant to register for sale, under the Securities Act any common shares of the Company beneficially owned by Sumitovant that have an anticipated aggregate net offering price of at least $5 million, subject to certain customary exceptions and the right of the Company to refuse any demand for registration if the Company already effected two registrations for Sumitovant in the year preceding such demand. In addition, the Company agreed to periodically provide Sumitovant with (i) certain financial statements, projections, capitalization summaries and other information customarily provided to significant investors in publicly-traded companies and (ii) access to the Company’s books, records, facilities and employees during the Company’s normal business hours as Sumitovant may reasonably request.

Moreover, the Investor Rights Agreement also contains certain protections for the Company’s minority shareholders for so long as Sumitomo Dainippon Pharma or certain of its affiliates beneficially own between 50% and 90% of the total number of votes entitled to be cast at elections of the Company’s directors (the “Total Voting Power”). These protections include, among other things: (i) a requirement for a minimum of three independent directors on the Board (each of whom cannot be removed by Sumitomo Dainippon Pharma or certain of its affiliates without the approval of a majority of the minority shareholders); (ii) a requirement that the audit committee of the Board (the “Audit Committee”) be comprised solely of independent directors; (iii) the appointment of Mr. Pierre Legault as the Company’s lead independent director; (iv) a requirement that any transaction proposed by Sumitomo Dainippon Pharma or certain of its affiliates that would increase Sumitomo Dainippon Pharma’s beneficial ownership to over 76% of the Total Voting Power be approved by the Audit Committee (if occurring prior to December 27, 2021) and, if such transaction would increase Sumitomo Dainippon Pharma’s beneficial ownership to over 80% of the Total Voting Power, a majority of the Company’s minority shareholders must vote on such matter; and (v) a requirement that any related person transactions between Sumitomo Dainippon Pharma or certain of its affiliates and the Company be approved by the Audit Committee, consistent with the Company’s existing Related Person Transactions Policy.

Pursuant to the Investor Rights Agreement, the Company also agreed that so long as Sumitomo Dainippon Pharma or certain of its affiliates beneficially own between 50% and 90% of the Total Voting Power, the Company will inform Sumitovant before issuing any new common shares and allow Sumitovant to (i) participate in such issuance up to its pro rata share (unless such issuance is in connection with the acquisition of a business or its assets) or (ii) make sufficient open market purchases of the Company’s securities to ensure that Sumitomo Dainippon Pharma’s beneficial ownership percentage does not decline as a result of such issuance. No amounts have been paid to or received from Sumitomo Dainippon Pharma and Sumitovant under the Investor Rights Agreement; however, the Company believes the Investor Rights Agreement is material to its business and operations.

[E] Information sharing agreement – Sumitovant:

On May 21, 2020, the Company entered into an information sharing and cooperation agreement (the “Sumitovant Information Sharing Agreement”) with Sumitovant. The Sumitovant Information Sharing Agreement, among other things, obligates the Company to deliver to Sumitovant drafts of (i) the Company’s quarterly and annual financial statements and (ii) the discussion and analysis by the Company’s management of its financial condition and the results of its operations for such fiscal periods, prior to the applicable deadlines for filing such information with the SEC. The Company also agreed to coordinate with Sumitovant before releasing earnings results or any interim financial guidance and to notify Sumitovant before issuing any other material press releases.

In addition, the Sumitovant Information Sharing Agreement requires the Company to give Sumitovant’s auditors access to the Company’s auditors and its books and records to facilitate the completion of Sumitovant’s own internal audit and their review of the Company’s financial statements and internal accounting controls and operations. The Company also agreed to provide Sumitovant any documents or materials relating to its business and access to its senior management to discuss any matters, in each case, as Sumitovant may reasonably request. To the extent the Company provides Sumitovant any information in response to such a request, Sumitovant may not (i) disclose such information to certain of its affiliates or (ii) use such information in a manner it deems, in good faith, to be detrimental to the Company or its shareholders. In addition, both parties agreed to hold any information they receive from the other party in the strictest confidence, subject to customary exceptions for information that becomes public, that has been independently developed, or that is otherwise received on a non-confidential basis from a third party.

Moreover, the Sumitovant Information Sharing Agreement provides that the Company must adopt and maintain policies to address its obligations with respect to financial reporting, audits, internal controls, record keeping, taxes, and other applicable laws. In addition, the Board must have a compliance oversight committee (the “Compliance Committee”) that oversees a compliance program designed to ensure the Company complies with its obligations under applicable laws (the “Compliance Program”). The Compliance Committee, in turn, is required to (i) appoint a member of the Company’s senior management to administer the Compliance Program and (ii) cause the implementation of internal reporting procedures and training to support the Compliance Program. The Sumitovant Information Sharing Agreement also requires the Company to comply in all material respects with applicable laws.

No amounts have been paid to or received from Sumitovant under the Sumitovant Information Sharing Agreement; however, the Company believes the Sumitovant Information Sharing Agreement is material to its business and operations.

[DF] Market access services agreement – Sunovion:

On June 17, 2020, USG entered into a market access services agreement (as amended, the “Market Access Services Agreement”) with Sunovion. USG and Sunovion subsequently amended the Market Access Services Agreement on December 21, 2020 and January 8, 2021 to clarify and add certain terms to the Market Access Services Agreement. Pursuant to the Market Access Services Agreement, among other things, USG appointed Sunovion as the exclusive distributor of ~~vibegron~~GEMTESA in the United States, including all of its territories and possessions (the “Territory”).

Sunovion, in turn, has agreed to provide certain market access services with respect to the distribution and sale of ~~vibegron~~GEMTESA, including, among other things: (i) adding ~~vibegron~~GEMTESA to Sunovion’s agreements with its third party logistics providers; (ii) adding ~~vibegron~~GEMTESA to certain of Sunovion’s contracts with wholesalers, group purchasing organizations and integrated delivery networks; (iii) facilitating USG’s entry into new contracts with certain health organizations regarding ~~vibegron~~GEMTESA; (iv) managing the validation, processing and payment of rebates, chargebacks, and certain administrative, distribution and service fees related to ~~vibegron~~GEMTESA; (v) providing USG with price reporting metrics and other information required for it to comply with applicable government price reporting requirements; (vi) coordinating with USG and any applicable wholesalers to address any recalls, investigations, or product holds; and (vii) providing certain other ancillary support services to facilitate the foregoing.

In order to facilitate Sunovion’s provision of these services, USG agreed, among other things, to: (i) grant Sunovion a non-exclusive license under all intellectual property owned or controlled by USG, solely to enable Sunovion to perform the contemplated services; (ii) provide Sunovion periodic reports of sales projections and volume requirements, as well as such other information as Sunovion reasonably requests or may need to perform the services; (iii) comply with the provisions of any agreements between Sunovion and third parties pursuant to which ~~vibegron~~GEMTESA will be distributed or sold; (iv) cooperate with certain investigations related to orders and audits of USG’s quality systems; and (v) promptly notify Sunovion in the event ~~vibegron~~GEMTESA is recalled.

As consideration for the services, USG will pay Sunovion an agreed-upon monthly service charge for each of the first two years of the agreement term. After the second year of the agreement term, the monthly service charges will be subject to good faith negotiations between the parties. In addition, USG also agreed to (i) reimburse Sunovion for any pass-through expenses it incurs while providing the services and (ii) establish an escrow fund for use by Sunovion when managing any rebates, chargebacks and similar fees.

The Market Access Services Agreement also contains customary representations and warranties by the parties and customary provisions related to confidentiality, indemnification and insurance. The initial term of the Market Access Services Agreement is three years. Thereafter, the term will be automatically extended for one-year periods, unless either party provides notice of its intent to terminate the agreement at least nine (9) months prior to the expiration of the applicable term. Either party may also terminate the agreement prior to the end of its term in the event of an uncured material breach by the other party or if such other party becomes insolvent or undergoes a change of control. Finally, USG may also terminate the Market Access Services Agreement if Sunovion fails to satisfy certain market access milestones or upon payment of a break-up fee.

During the three and ~~six~~nine months ended ~~September~~December 3031, 2020, the Company incurred expenses of $0.6 million and $1.1 million, respectively, pursuant to the Market Access Services Agreement, which is included in general and administrative expenses in the accompanying condensed consolidated statements of operations. As of ~~September~~December 3031, 2020, the Company’s outstanding obligation pursuant to the Market Access Services Agreement is $0.2 million.

[EG] Co-promotion agreement – Sunovion:

~~See~~On ~~Note~~October ~~12[B]~~6, ~~for~~2020, ~~information~~USG ~~regarding~~entered into a Co-Promotion Agreement (the co“Co-~~promotion~~Promotion ~~agreement~~Agreement”) ~~entered~~with ~~into~~Sunovion. ~~between~~Pursuant to the ~~Company~~Co-Promotion ~~and~~Agreement, among other things, USG appointed Sunovion as its co-promoter of GEMTESA to primary care physicians in ~~October~~the ~~2020~~Territory, for the period commencing upon the regulatory approval of GEMTESA and ending on March 31, 2026 (the “Co‑Promotion Period”).

13Sunovion has agreed, among other things, to use its commercially reasonable efforts to co-promote GEMTESA to primary care physicians in the Territory during the Co-Promotion Period. Sunovion has also agreed that during the term of the Co-Promotion Agreement it will not directly or indirectly promote, co-promote, detail, market or commercialize any other products with an indication for OAB, and will cause its affiliates to refrain from the same.

~~[F]~~In ~~Operating~~addition, ~~lease~~the –Company ~~Roivant~~has agreed, among other things to: (i) use its commercially reasonable efforts to co-promote, manufacture, and otherwise commercialize GEMTESA in the Territory; (ii) prepare all materials that will be used to promote and market GEMTESA, subject to review and approval of the parties; (iii) develop and provide to Sunovion all materials necessary to train Sunovion’s sales representatives and managers; and (iv) remain responsible for all regulatory obligations related to GEMTESA.

InDuring ~~June~~the ~~2019~~Co-Promotion Period, USG and Sunovion will incur expenses related to the ~~Company~~co-promotion ~~entered~~of ~~into~~GEMTESA ato ~~sublease~~primary ~~agreement~~care physicians in accordance with a ~~related~~budget ~~party,~~that ~~RSI~~the parties will develop, review and approve annually. Sunovion has agreed that for ~~2,784~~the ~~square~~period ~~feet~~commencing upon the regulatory approval of ~~office~~GEMTESA ~~space~~and ~~located~~ending inon ~~Durham~~March 31, ~~North~~2023 ~~Carolina~~(the “Initial ~~that~~Co‑Promotion Period”), ~~expires~~it inwill ~~July~~incur ~~2025.~~at ~~The~~least ~~sublease~~$60 ~~has~~million ~~scheduled~~of ~~rent~~co-promotion ~~increases~~expenses ~~each~~specific ~~year~~to ~~and~~ the ~~total~~promotion ~~sublease~~of ~~payment~~GEMTESA, ~~obligations~~which ~~under~~amount ~~the~~may be increased upon agreement ~~are~~of ~~$0.6~~the ~~million~~parties (the “Initial Threshold”). ~~See~~After ~~Note~~Sunovion 11reaches ~~for~~the ~~more~~Initial ~~details~~Threshold onin expenses for the ~~sublease~~Initial Co-Promotion Period, USG shall be responsible for all co-promotion expenses incurred thereafter.

~~Note~~As ~~6—Income~~consideration ~~taxes~~for the co-promotion activities, starting on April 1, 2023, USG will pay Sunovion certain percentages of the net sales of GEMTESA in the Territory on a quarterly basis until the amounts paid reach a contractually agreed payment threshold that will be calculated based on the amount expended by Sunovion under the Initial Threshold (the “Payout Threshold”). USG will pay Sunovion the percentages of the net sales of GEMTESA until Sunovion has received fees totaling $108 million, plus any expenses that Sunovion incurs in excess of $60 million through the Co-Promotion Period.

In addition to the foregoing, the Co-Promotion Agreement also contains customary representations and warranties by the parties and customary provisions related to dispute resolution, confidentiality, indemnification and insurance. The term of the Co-Promotion Agreement will expire upon the later of (i) the end of the Co-Promotion Period or (ii) when the payments received by Sunovion reach the Payout Threshold. However, either party may also terminate the agreement prior to the end of its term in the event of an uncured material breach by the other party or if such other party becomes insolvent or undergoes a change of control. USG may also terminate the Co-Promotion Agreement for any reason or no reason at all upon six months prior notice to Sunovion.

No amounts were incurred pursuant to the Co-Promotion Agreement during the three and nine months ended December 31, 2020.

[H] Operating lease – Roivant:

In June 2019, the Company entered into a sublease agreement with a related party, RSI, for 2,784 square feet of office space located in Durham, North Carolina that expires in July 2025. The sublease has scheduled rent increases each year and the total sublease payment obligations under the agreement are $0.6 million. See Note 12 for more details on the sublease.

Note 7—Income taxes

The Company is not subject to taxation under the laws of Bermuda since it was organized as a Bermuda Exempted Limited Company, for which there is no current tax regime. The Company’s provision for income taxes is primarily based on income taxes in the U.S. for federal and state taxes.

The Company’s effective tax rate for the three months ended ~~September~~December 3031, 2020 and 2019 was 0.2427% and (0.0309)%, respectively. The Company’s effective tax rate for the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019 was (0.~~01)~~11% and (0.1412)%, respectively. The effective tax rate is driven by the Company’s jurisdictional earnings by location and a valuation allowance that eliminates the Company’s global net deferred tax assets.

The Company assesses the realizability of its deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the amount which is more likely than not to be realized and records a valuation allowance as necessary.

Note 78—Shareholders’ deficit

At-the-market equity offering program:

In November 2019, the Company entered into a sales agreement with Jefferies LLC (“Jefferies”) to sell its common shares having an aggregate offering price of up to $50 million from time to time through an “at-the-market” equity offering program under which Jefferies acts as the Company’s agent. As of ~~September~~December 3031, 2020, the Company has not sold any common shares under its “at-the-market” equity offering program.

Note 89—Share-based compensation

Equity incentive plan:

On June 1, 2017, the Company adopted its 2017 Equity Incentive Plan (the “2017 Plan”), under which 2,002,509 common shares were initially reserved for grant. On June 15, 2018, the Board approved an increase in the number of common shares reserved for grant under the 2017 Plan of 1,068,006 common shares. The 2017 Plan was approved by the Company’s shareholders in September 2018. In connection with the Company’s initial public offering, the 2017 Plan was amended effective upon the execution of the underwriting agreement related to the offering. All references herein to the Company’s 2017 Plan will be deemed to refer to the 2017 Plan, as amended and restated, unless context otherwise requires.

In September 2019, the shareholders of the Company approved an amendment to the 2017 Plan to increase the number of common shares reserved for issuance under the 2017 Plan by 3,000,000 common shares.

Pursuant to the “evergreen” provision contained in the 2017 Plan, the number of common shares reserved for issuance under the 2017 Plan automatically increases on November 1 of each year, commencing on November 1, 2018 and ending on November 1, 2028, in an amount equal to 4% of the total number of the Company’s common shares outstanding on the last day of the preceding month, or by a lesser number of common shares as may be determined by the ~~Company’s~~ Board prior to any such increase date. On November 1, 2020, the number of common shares authorized for issuance increased automatically by 1,266,394 shares in accordance with the evergreen provision of the 2017 Plan. Previous increases in the number of common shares authorized for issuance in accordance with the evergreen provision of the 2017 Plan totaled 2,428,173 shares.

At ~~September~~December 3031, 2020, a total of 12,~~572~~805,~~063~~310 common shares were available for future issuance under the 2017 Plan.

Inducement incentive plan:

On October 15, 2020, the compensation committee of the Board adopted the Inducement Incentive Plan (the “Inducement Plan”) pursuant to which the Company may grant nonstatutory options to purchase common shares, restricted share awards, restricted share unit awards, share appreciation rights, performance share awards, cash awards, and other forms of share compensation as an inducement to individuals to join the Company. The Inducement Plan, as adopted, allows the Company to deliver up to 600,000 shares (the “Share Limit”) of its common stock to eligible persons, as defined in the Inducement Plan. As of December 31, 2020, no awards have been granted pursuant to the Inducement Plan.

2019 Employee Stock Purchase Plan:

In July 2019, the ~~Company’s~~ Board adopted the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). In September 2019, the Company’s shareholders approved the 2019 ESPP. A total of 450,000 common shares are authorized for issuance under the 2019 ESPP. Pursuant to the “evergreen” provision contained in the 2019 ESPP, the number of common shares reserved for issuance under the 2019 ESPP automatically increases on November 1 of each year, commencing on November 1, 2020 and ending on November 1, 2028, in an amount equal to the lesser of (i) 1% of the total number of the Company’s common shares outstanding on March 31st of the preceding calendar year, and (ii) 600,000 common shares.; ~~The~~provided that the Company’s Board may approve an increase of a lesser number of common shares prior to any such increase date. On November 1, 2020, the number of common shares authorized for issuance increased automatically by 306,352 shares in accordance with the evergreen provision of the 2019 ESPP.

1420

The 2019 ESPP permits eligible employees to purchase common shares at a discount through payroll deductions during defined six-month consecutive offering periods beginning on January 1st. The price at which the shares are purchased is equal to the lower of (i) 85% of the fair market value of the common shares on the first day of the offering or (ii) 85% of the fair market value of the common shares on the purchase date. A participant may purchase a maximum of 60,000 common shares during each offering period, not to exceed $25,000 worth of common shares on the offering date during each calendar year, and the maximum number of common shares that can be purchased by all participants during each offering period is 150,000 shares. The Company uses the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of the 2019 ESPP share-based compensation expense to be recognized during each offering period. The weighted-average grant date fair value per share for the offering period during the three and ~~six~~nine months ended ~~September~~December 3031, 2020 using the Black-Scholes option-pricing model was $3.91 and $4.53, respectively.

During the ~~six~~three and nine months ended ~~September~~December 3031, 2020, 3927,~~541~~677 and 67,218 common shares, respectively, were issued pursuant to the 2019 ESPP for total proceeds of $0.32 million and $0.6 million, respectively, and, as of ~~September~~December 3031, 2020, ~~410~~382,~~459~~782 shares remain available for future issuance under the 2019 ESPP. ~~There were no common shares issued pursuant to the 2019 ESPP during the three months ended September 30, 2020.~~ At ~~September~~December 3031, 2020 and March 31, 2020, the Company had an outstanding liability of $0.04 million and $0.2 million, respectively, which is included in accrued expenses in the condensed consolidated balance sheets.

Stock options:

The Company estimated the fair value of each stock option on the date of grant using the Black-Scholes option pricing model applying the range of assumptions in the following table:

	Three Months Ended September 30,			Six Months Ended September 30,
	Three Months Ended December 31,				Nine Months Ended December 31,
	2020	~~2019~~	2019	~~2020~~	2020	~~2019~~	2019
Risk-free interest rate	0.2843% ~~- 0.39%~~	~~1.39% - 1.92%~~	1.55% - 1.72%	~~0.28% - 0.56%~~	0.28% - 0.56%	~~1.39% - 2.33%~~	1.39% - 2.33%
Expected term, in years	~~5.50 -~~ 6.11	~~5.50 - 6.11~~	6.11	~~5.50 - 6.11~~	5.50 - 6.11	~~5.50 - 6.11~~	5.50 - 6.11
Expected volatility	76.59% ~~- 77.1%~~	~~62.7% - 63.7%~~	68.9% - 70.0%	~~76.5% - 78.4%~~	76.5% - 78.4%	~~62.7% - 65.1%~~	62.7% - 70.0%
Expected dividend yield	—%	—%	—%	—%	—%	—%	—%

The following table presents a summary of stock option activity and data under the Company’s 2017 Plan through ~~September~~December 3031, 2020 (in thousands, except share and per share data):

	Number of Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Options outstanding at March 31, 2020		4,134,100		$	6.85	$	4.24		8.38
Granted		~~614~~621,~~700~~400		$	9.72	$	6.44
Forfeited		(439,~~750~~150	)	$	1312.6531	$	87.6195
Exercised		(~~902~~1,~~117~~810,338	)	$	45.5780	$	23.8964
Options outstanding at September 30, 2020		3,841,933		$	7.83	$	5.01		8.29	$	7,593
Options outstanding at December 31, 2020		2,906,012		$	8.04	$	5.16		8.20	$	23,506
Options exercisable at September 30, 2020		2,968,433		$	7.18	$	4.62		7.92	$	7,447
Options exercisable at December 31, 2020		2,113,487		$	7.33	$	4.66		7.77	$	18,608

The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the quoted market price of our common shares at ~~September~~December 3031, 2020. At ~~September~~December 3031, 2020, there were 2,~~968~~113,~~433~~487 vested or exercisable options outstanding. During the three and ~~six~~nine months ended ~~September~~December 3031, 2020, the Company granted options to purchase ~~248~~6,~~706~~700 and ~~614~~621,~~700~~400 common shares, respectively, to certain employees and directors of the Company with a weighted-average exercise price and grant date fair value per share of $9.2254 and $6.0432 and $9.72 and $6.44, respectively, under the 2017 Plan. The aggregate intrinsic value of options exercised to purchase ~~670~~908,~~318~~221 and ~~902~~1,~~117~~810,338 common shares, respectively, during the three and ~~six~~nine months ended ~~September~~December 3031, 2020 was $37.23 million and $411.47 million, respectively.

During the year ended March 31, 2020, in connection with the resignation of the Company’s former Principal Executive Officer, fully-vested stock options to purchase 1,416,166 common shares with a weighted-average exercise price of $5.59 per share held by the former Principal Executive Officer were reclassified from equity to liabilities following the modification of the stock options to include a share repurchase feature (see Note 910). The share repurchase feature is in the form of a right of first refusal for Sumitovant to purchase up to 1,416,666 shares underlying the stock options upon exercise by the former Principal Executive Officer. The stock options remain exercisable through October 1, 2021. No shares issued upon exercise of stock options by the former Principal Executive Officer during the three and ~~six~~nine months ended ~~September~~December 3031, 2020 were purchased by Sumitovant.

Stock appreciation rights (“SARs”):

SARs entitle the holder to receive, upon exercise, an amount of the Company’s common shares or cash (or a combination thereof) determined by reference to appreciation, from and after the date of grant, in the fair market value of the Company’s common shares over the strike price on the exercise date. The SARs are subject to vesting terms similar to the Company’s stock options and restricted stock units.

1521

In March 2020, a total of 845,732 SARs were granted under the 2017 Plan to the Company’s Principal Executive Officer pursuant to his employment agreement. The SARs vest as to 25% on the one-year anniversary of the grant date with the remaining SARs vesting in 12 equal quarterly installments thereafter, subject to the Principal Executive Officer providing continuous service to the Company through each such vesting date. The SARs can be settled in shares or cash upon exercise, at the sole discretion of the ~~Company’s~~ Board. Due to the current presumption that the SARs will be settled in cash upon exercise, the SARs have been classified as a liability instrument requiring the Company to remeasure the SARs at each reporting period until exercise (see Note 910). The estimated fair value of the SARs granted was $56.02 million and $5.2 million, respectively, at ~~September~~December 3031, 2020 and March 31, 2020.

Restricted stock unit (“RSUs”):

A summary of restricted stock unit activity under the Company’s 2017 Plan through ~~September~~December 3031, 2020 is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested balance at March 31, 2020		751,927		$	13.84
Granted		1,~~332~~424,~~061~~361		$	9.0823
Forfeited		(~~213~~243,~~760~~946	)	$	1413.1461
Unvested balance at September 30, 2020		1,870,228		$	10.42
Vested		(22,412	)	$	10.06
Unvested balance at December 31, 2020		1,909,930		$	10.48

The fair value of the RSUs is estimated at the grant date using the Company’s common share price. During the three and ~~six~~nine months ended ~~September~~December 3031, 2020, the Company granted RSUs totaling ~~374~~92,~~146~~300 and 1,~~332~~424,~~061~~361, respectively, to certain employees and directors of the Company. The weighted average grant-date fair value of RSUs granted during the three and ~~six~~nine months ended ~~September~~December 3031, 2020 was $811.9837 and $9.0823 per unit, respectively.

Share-based compensation expense:

Share-based compensation expense was as follows (in thousands):

Three Months Ended September 30,

Six Months Ended September 30,

Three Months Ended December 31,

Nine Months Ended December 31,

2020

2019

2020

2019

Share-based compensation recognized as:

Research and development

~~419~~404

~~257~~2,844

~~788~~1,192

~~522~~3,366

General and administrative

~~947~~5,516

~~964~~9,685

28,~~616~~132

111,~~746~~431

15,~~366~~920

112,~~221~~529

39,~~404~~324

214,~~268~~797

Share-based compensation expense is included in research and development and general and administrative expenses in the accompanying condensed consolidated statements of operations consistent with the grantee’s salary classification. Share-based compensation expense presented in the table above includes share-based compensation expense from those share-based awards classified as liability instruments mentioned above.

Total unrecognized share-based compensation expense was approximately $2625.14 million at ~~September~~December 3031, 2020 and is expected to be recognized over a weighted-average period of 3.4122 years.

Note 910—Fair value measurements

As of ~~September~~December 3031, 2020 and March 31, 2020, the liabilities measured at fair value on a recurring basis consisted of certain liability classified stock options and SARs (see Note 89), which are included in share-based compensation liabilities in the accompanying condensed consolidated balance sheets. There were no assets measured at fair value on a recurring basis as of ~~September~~December 3031, 2020 and March 31, 2020. The following represents the fair value using the hierarchy described in Note 2[E] for the Company’s financial liabilities that are required to be measured at fair value on a recurring basis as of ~~September~~December 3031, 2020 and March 31, 2020 (in thousands):

As of September 30, 2020

As of December 31, 2020

Level 1

Level 2

Level 3

Total Fair Value

Liabilities:

Share-based compensation liability - stock options

—

31,~~934~~112

Share-based compensation liability - SARs

—

~~658~~1,195

Total liabilities

—

42,~~592~~307

1622

	As of March 31, 2020
	Level 1		Level 2		Level 3		Total Fair Value
Liabilities:
Share-based compensation liability - stock options	$	—	$	—	$	7,204	$	7,204
Share-based compensation liability - SARs		—		—		32		32
Total liabilities	$	—	$	—	$	7,236	$	7,236

The fair value of the stock options liability as of ~~September~~December 3031, 2020 was calculated using the following significant unobservable inputs:

Input		~~September~~December 3031, 2020
Risk-free interest rate		0.1210%
Expected dividend yield		—%
Expected term, in years		10.0075
Expected volatility		7997.27%
Exercise price (per share)		$3.86 - $144.0001
Share price (per share)		$916.3413
Number of stock options valued		~~882~~90,~~521~~000

The fair value of the SARs liability as of ~~September~~December 3031, 2020 was calculated using the following significant unobservable inputs:

Input		~~September~~December 3031, 2020
Risk-free interest rate		0.6586%
Expected dividend yield		—%
Expected term, in years		9.4823
Expected volatility		7681.53%
Post-vesting cancellation rate		45.86%
Exercise ratio		2.8
Exercise price (per share)		$9.16
Share price (per share)		$916.3413
Probability input for completion of Merger		95.0%
Number of SARs granted		845,732

The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the share-based compensation liabilities for the ~~six~~nine months ended ~~September~~December 3031, 2020 (in thousands):

	Stock Options			SARs
Balance at March 31, 2020	$	7,204		$	32
Additions		—			—
Change in fair value		~~(237~~3,251	)		~~626~~1,163
Settlements		(39,~~033~~343	)		—
Balance at September 30, 2020	$	3,934		$	658
Balance at December 31, 2020	$	1,112		$	1,195

Note 1011—Commitments and contingencies

The Company entered into certain commitments under the Merck license agreement, the ICI license agreement, the enzyme supply agreement with Codexis, Inc., ~~and~~ the information sharing collaboration agreement with Kyorin Pharmaceutical Co., Ltd~~. In~~ ~~October~~and ~~2020,~~ the ~~Company entered into a co~~Co-~~promotion~~Promotion ~~agreement~~Agreement ~~with Sunovion~~ (see Note 126[BG] ~~for more details on the commitments required by the co-promotion agreement~~).

In ~~addition~~December 2020, the Company ~~has~~achieved ~~entered~~a ~~into~~certain ~~services~~regulatory ~~agreements~~milestone ~~with~~pursuant ~~third~~to ~~parties~~the ~~for~~Merck ~~pharmaceutical~~license ~~research~~agreement and ~~development and manufacturing activities. Expenditures to contract research organizations~~, oras ~~CROs,~~a ~~and contract manufacturing organizations~~result, orrecorded ~~CMOs,~~a ~~represent~~milestone ~~significant~~payment ~~costs in the Company’s clinical development~~ of ~~its product candidates and its manufacturing of future commercial supply for vibegron~~$14.0 ~~Subject to required notice periods~~million, awhich ~~nominal~~is ~~early~~included ~~termination fee,~~ in ~~certain~~intangible ~~cases,~~asset and ~~the~~accrued ~~Company’s~~expenses ~~remaining~~as ~~obligations~~of ~~under~~December ~~binding purchase orders~~31, ~~the~~2020 ~~Company~~in ~~can elect to discontinue~~ the ~~work~~accompanying ~~under~~condensed ~~these~~consolidated ~~agreements~~balance atsheet ~~any~~(see ~~time.~~Note ~~The Company expects to enter into additional commitments as the business further develops~~3).

17The Company also achieved a certain regulatory milestone pursuant to the enzyme supply agreement and, as a result, recorded a milestone payment of $0.5 million, which is included in research and development expenses for the three and nine months ended December 31, 2020 in the accompanying condensed consolidated statement of operations.

~~The~~In addition, the Company ~~may~~has ~~be,~~entered ~~from~~into ~~time~~services toagreements ~~time,~~with athird ~~party~~parties tofor ~~various~~pharmaceutical ~~disputes~~research and ~~claims~~development ~~arising~~and ~~from~~manufacturing ~~normal business~~ activities. ~~The~~Expenditures ~~Company~~to ~~accrues~~contract ~~for~~research ~~loss~~organizations, ~~contingencies~~or ~~when~~CROs, ~~available~~and ~~information~~contract ~~indicates~~manufacturing ~~that~~organizations, itor isCMOs, ~~probable~~represent ~~that~~significant acosts ~~liability~~in ~~has~~the ~~been~~Company’s ~~incurred~~clinical ~~and~~development ~~the~~of ~~amount~~its ofproduct ~~such~~candidates ~~liability~~and ~~can~~its bemanufacturing ~~reasonably~~of ~~estimated.~~future Incommercial ~~the~~supply ~~cases~~for ~~where~~GEMTESA. ~~the~~Subject ~~Company~~to ~~believes~~required ~~that~~notice periods, a ~~reasonably~~nominal ~~possible~~early ~~loss~~termination ~~exists~~fee, ~~the~~in ~~Company~~certain ~~discloses~~cases, ~~the facts~~ and ~~circumstances of~~ the ~~loss~~Company’s ~~contingency,~~remaining ~~including~~obligations anunder ~~estimable~~binding ~~range,~~purchase ~~if possible~~orders, ~~unless~~ the Company ~~has~~can ~~determined~~elect ~~that~~to ~~any~~discontinue ~~such~~the ~~reasonably~~work ~~possible~~under ~~losses~~these ~~will~~agreements ~~not~~at ~~have~~any atime. ~~material~~The ~~impact~~Company onexpects ~~the~~to ~~Company’s~~enter ~~results~~into ofadditional ~~operations,~~commitments ~~financial~~as ~~condition~~the orbusiness ~~cash~~further ~~flows~~develops.

During the three and six months ended September 30, 2020, there were no material changes outside the ordinary course of business to the specified contractual obligations set forth in the commitments and contingencies footnote disclosure in the Company’s audited consolidated financial statements for the year ended March 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on June 19, 2020.23

~~Note~~During ~~11—Leases~~the three and nine months ended December 31, 2020, there were no material changes outside the ordinary course of business to the specified contractual obligations set forth in the commitments and contingencies footnote disclosure in the Company’s audited consolidated financial statements for the year ended March 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the SEC on June 19, 2020.

InShareholder November 2018, the Company entered into an operating lease for office space in Irvine, California for approximately 21,489 square feet. The lease term for the operating lease is seven years with options to terminate after five years and to extend the lease term for an additional five years which are both not reasonably certain of exercise. Subject to rent abatement for the first through fifth months of the lease, the Company will be required to pay $54,367 per month for rent for the first twelve months of the lease term which will increase at a fixed rate of approximately 3% per year. The lease further provides that the Company is obligated to pay certain variable costs, including common area maintenance expenses. The lease commenced in June 2019 and the Company recognized an operating lease right-of-use asset of $3.0 million and an operating lease liability of $3.0 million. In connection with the lease, the Company maintains a standby letter of credit for the benefit of the landlord in the amount of $0.6 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as noncurrent restricted cash as of September 30, 2020 and March 31, 2020. The remaining lease term is 5.7 years at September 30, 2020 and the estimated incremental borrowing rate applied is 12.4%.Litigation

InSince ~~April~~the announcement of the Merger Agreement on November 12, 2020, three single-plaintiff lawsuits have been filed against USL and each of the ~~Company~~directors ~~entered~~serving ~~into~~on anthe ~~amendment~~Board toconcerning ~~its~~the ~~Irvine~~Merger. The ~~facility~~first ~~operating~~lawsuit ~~lease~~was tofiled ~~add~~by ~~approximately~~Claudia 6Cisneros on January 27,~~865~~ ~~square~~2021 ~~feet~~in ofthe ~~office~~United ~~space~~States District Court for athe ~~total~~Southern District of ~~approximately~~New 28York,~~354~~ ~~square~~Case ~~feet~~No. 1:21-CV-00735. The ~~lease~~second ~~term~~lawsuit ~~and~~was ~~option~~filed toon ~~extend~~January 28, 2021 by Michelle Sovereign in the ~~lease~~United ~~term~~States District Court for the ~~additional~~District ~~office~~of ~~space~~Delaware, isCase ~~concurrent~~No. ~~with~~1:21-CV-00112. ~~the~~The ~~existing~~third ~~operating~~lawsuit ~~lease~~was ~~and~~filed ~~expires~~on inFebruary ~~May~~1, ~~2026.~~2021 ~~Subject~~by toMatthew ~~rent~~Ho ~~abatement~~in ~~for~~ the ~~first~~United ~~through~~States ~~fifth~~District ~~months~~Court offor the ~~additional~~Eastern ~~leased~~District ~~office~~of ~~space~~New York, ~~the~~Case ~~Company~~No. ~~will~~1:21-CV-00542. All bethree ~~required~~lawsuits toassert ~~pay~~purported ~~$17,918~~violations ~~per~~of ~~month~~Sections ~~for~~14(a) ~~rent~~and ~~for~~20(a) of the ~~first~~Securities ~~twelve~~Exchange ~~months~~Act of ~~the~~1934, ~~lease~~as ~~term~~amended ~~which~~(the ~~will~~“Exchange ~~increase~~Act”) atbased aon ~~fixed~~allegations ~~rate~~that ofthe ~~approximately~~Company’s 3%preliminary ~~per~~proxy ~~year.~~statement ~~The~~filed ~~lease~~on ~~further~~December ~~provides~~29, ~~that~~2020 with the ~~Company~~SEC isomits ~~obligated~~information toabout ~~pay~~the ~~certain~~background ~~variable~~of ~~costs~~the Merger, ~~including~~the ~~common~~Company’s ~~area~~financial ~~maintenance~~projections ~~expenses.~~set Inforth ~~accordance~~in ~~with~~the ~~ASC~~preliminary ~~842,~~proxy ~~Leases~~statement, and the ~~Company~~financial ~~determined~~analyses of the ~~operating~~financial ~~lease~~advisor ~~for~~retained by the ~~additional~~special ~~office~~committee ~~space~~of the Board to beevaluate the fairness of the Merger from a ~~separate~~financial ~~lease~~standpoint. ~~and~~All ~~not~~three lawsuits seek, among other things, an ~~amendment~~injunction preventing the consummation of the ~~original~~Merger, ~~lease~~or ~~terms~~if the Merger is consummated, rescission of the ~~Irvine~~Merger ~~facility.~~or ~~The~~an ~~lease~~award ~~commenced~~of inrescissory ~~May~~damages, ~~2020~~a ~~and~~declaration that the Company ~~recognized~~and anits ~~operating~~directors ~~lease~~violated ~~right-of-use~~Sections ~~asset~~14(a) and 20(a) of ~~$0.9~~the ~~million~~Exchange Act, and anthe ~~operating~~award ~~lease~~to ~~liability~~the plaintiff of ~~$0.9~~the ~~million.~~costs ~~The~~of ~~remaining~~the ~~lease~~action, ~~term~~including ~~was~~reasonable ~~5.7~~allowance ~~years~~for atplaintiffs’ ~~September~~attorneys’ ~~30,~~and ~~2020~~experts’ ~~and~~fees. The Company believes the ~~estimated~~suits ~~incremental~~are ~~borrowing~~without ~~rate~~merit ~~applied~~and ~~was~~intends 11to defend vigorously against them.~~6%.~~

InThe ~~June 2019, the~~ Company ~~entered~~may ~~into~~be, afrom ~~sublease~~time ~~agreement~~to ~~with~~time, a ~~related~~ party, ~~RSI,~~to ~~for~~various ~~office~~disputes ~~space~~and inclaims ~~Durham,~~arising ~~North~~from ~~Carolina~~normal ~~for~~business ~~approximately 2,784 square feet~~activities. The ~~lease~~Company ~~term~~accrues for ~~the~~loss ~~operating~~contingencies ~~lease~~when isavailable ~~six~~information ~~years~~indicates ~~and~~that ~~two~~it ~~months with no option to extend the lease term. The Company~~ is ~~required~~probable tothat ~~pay $7,192 per month through July 2020 which will increase at~~ a ~~fixed~~liability ~~rate~~has ofbeen 3%incurred ~~per year. The lease commenced in June 2019~~ and the ~~Company~~amount ~~recognized~~of ansuch ~~operating~~liability ~~lease~~can ~~right-of-use~~be ~~asset~~reasonably ~~of $0~~estimated.4 ~~million~~In ~~and~~the ancases ~~operating~~where ~~lease~~the ~~liability~~Company ofbelieves ~~$0.4~~that ~~million.~~a Inreasonably ~~connection~~possible ~~with~~loss ~~the lease~~exists, the Company ~~maintains~~discloses athe ~~standby~~facts ~~letter~~and circumstances of ~~credit for~~ the ~~benefit~~loss ofcontingency, ~~RSI~~including inan ~~the~~estimable ~~amount~~range, ofif ~~$0.02~~possible, ~~million.~~unless ~~The~~the Company ~~secured~~has ~~the~~determined ~~letter~~that ofany ~~credit~~such ~~for~~reasonably ~~the~~possible ~~full~~losses ~~amount~~will ofnot ~~the~~have ~~letter~~a ~~with~~material ~~cash~~impact on ~~deposit,~~the Company’s ~~which~~results isof ~~reported~~operations, asfinancial ~~noncurrent~~condition ~~restricted~~or cash asflows. ofThe ~~September~~Company ~~30,~~believes ~~2020~~the ~~and~~outcome ~~March~~of ~~31,~~currently ~~2020.~~pending ~~The~~claims ~~remaining~~or ~~lease~~lawsuits ~~term~~will isnot ~~4.8~~likely ~~years~~have ata ~~September~~material ~~30,~~effect ~~2020~~on ~~and~~its ~~the~~consolidated ~~estimated~~operations ~~incremental~~or ~~borrowing~~financial ~~rate applied is 12~~position.~~4%.~~

Note 12—Leases

In November 2018, the Company entered into an operating lease for office space in Irvine, California for approximately 21,489 square feet. The lease term for the operating lease is seven years with options to terminate after five years and to extend the lease term for an additional five years which are both not reasonably certain of exercise. Subject to rent abatement for the first through fifth months of the lease, the Company will be required to pay $54,367 per month for rent for the first twelve months of the lease term which will increase at a fixed rate of approximately 3% per year. The lease further provides that the Company is obligated to pay certain variable costs, including common area maintenance expenses. The lease commenced in June 2019, and the Company recognized an operating lease right-of-use asset of $3.0 million and an operating lease liability of $3.0 million. In connection with the lease, the Company maintains a standby letter of credit for the benefit of the landlord in the amount of $0.6 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as noncurrent restricted cash as of December 31, 2020 and March 31, 2020. The remaining lease term is 5.4 years at December 31, 2020, and the estimated incremental borrowing rate applied is 12.4%.

In April 2020, the Company entered into an amendment to its Irvine facility operating lease to add approximately 6,865 square feet of office space for a total of approximately 28,354 square feet. The lease term and option to extend the lease term for the additional office space is concurrent with the existing operating lease and expires in May 2026. Subject to rent abatement for the first through fifth months of the additional leased office space, the Company will be required to pay $17,918 per month for rent for the first twelve months of the lease term which will increase at a fixed rate of approximately 3% per year. The lease further provides that the Company is obligated to pay certain variable costs, including common area maintenance expenses. In accordance with ASC 842, Leases, the Company determined the operating lease for the additional office space to be a separate lease and not an amendment of the original lease terms of the Irvine facility. The lease commenced in May 2020, and the Company recognized an operating lease right-of-use asset of $0.9 million and an operating lease liability of $0.9 million. The remaining lease term was 5.4 years at December 31, 2020, and the estimated incremental borrowing rate applied was 11.6%.

In June 2019, the Company entered into a sublease agreement with a related party, RSI, for office space in Durham, North Carolina for approximately 2,784 square feet. The lease term for the operating lease is six years and two months with no option to extend the lease term. The Company is required to pay $7,192 per month through July 2020 which will increase at a fixed rate of 3% per year. The lease commenced in June 2019, and the Company recognized an operating lease right-of-use asset of $0.4 million and an operating lease liability of $0.4 million. In connection with the lease, the Company maintains a standby letter of credit for the benefit of RSI in the amount of $0.02 million. The Company secured the letter of credit for the full amount of the letter with cash on deposit, which is reported as noncurrent restricted cash as of December 31, 2020 and March 31, 2020. The remaining lease term is 4.6 years at December 31, 2020, and the estimated incremental borrowing rate applied is 12.4%.

Supplemental balance sheet information related to operating leases was as follows (in thousands, except lease term and discount rate):

	September 30, 2020		March 31, 2020
	December 31, 2020		March 31, 2020
Operating lease right-of-use assets	$	3,~~823~~705	$	3,135
Operating lease liabilities, current portion	$	~~497~~520	$	351
Operating lease liabilities, long-term portion		3,~~727~~588		3,086
Total lease liabilities	$	4,~~224~~108	$	3,437
Weighted average remaining lease term (years)	5.64 years		6.1 years
Weighted average discount rate	12.2%		12.4%

18Supplemental cash flow information for the nine months ended December 31, 2020 and 2019 related to operating leases as follows (in thousands):

Supplemental cash flow information for the six months ended September 30, 2020 and 2019 related to operating leases as follows (in thousands):

	December 31,
	2020		2019
Cash paid within cash flows used in operations	$	621	$	153
Operating lease right-of-use asset obtained in exchange for operating lease liabilities	$	910	$	3,414
Amortization of operating lease right-of-use assets	$	340	$	195

	September 30,
	2020		2019
Cash paid within cash flows used in operations	$	377	$	23
Operating lease right-of-use asset obtained in exchange for operating lease liabilities	$	910	$	3,414
Amortization of operating lease right-of-use assets	$	222	$	113

The undiscounted future lease payments under the lease liabilities as of December 31, 2020 were as follows (in thousands):

The undiscounted future lease payments under the lease liabilities as of September 30, 2020 were as follows (in thousands):

Years Ending March 31,	Lease Payments
Remainder of 2021	$	244
2022		1,001
2023		1,031
2024		1,061
2025		1,094
Thereafter		1,233
Total lease payments		5,664
Less: imputed interest		(1,556	)
Total lease liabilities	$	4,108

Years Ending March 31,	Lease Payments
Remainder of 2021	$	488
2022		1,001
2023		1,031
2024		1,061
2025		1,094
Thereafter		1,233
Total lease payments		5,908
Less: imputed interest		(1,684	)
Total lease liabilities	$	4,224

Operating lease costs for the three and nine months ended December 31, 2020 and 2019 were $0.2 million and $0.7 million and $0.2 million $0.5 million, respectively. Short-term and variable lease costs were not material for the three and nine months ended December 31, 2020 and 2019.

~~Operating~~Note ~~lease~~13—Subsequent costs for the three and six months ended September 30, 2020 and 2019 were $0.3 million and $0.5 million and $0.2 million $0.3 million, respectively. Short-term and variable lease costs were not material for the three and six months ended September 30, 2020 and 2019.events

~~Note~~[A] ~~12—Subsequent~~Sumitomo ~~events~~loan agreement amendment and funding

~~[A]~~On February 5, 2021, the Company and Sumitomo ~~loan~~Dainippon ~~agreement~~Pharma ~~funding~~entered into an amendment to the Sumitomo Loan Agreement in which the maximum principal amount available to the Company to borrow pursuant to the terms of the Sumitomo Loan Agreement was increased by $125.0 million to a total of $425.0 million (see Note 5).

In ~~November~~January ~~2020~~2021, the Company received gross proceeds of $3858.0 million pursuant to a draw under the Sumitomo Loan Agreement (see Note 45). Subsequent to this draw, $~~209~~267.5 million was outstanding under the Sumitomo Loan Agreement and $90157.5 million of borrowing capacity, which includes the increase from the Sumitomo Loan Agreement amendment, remained available to the Company, which amount may be drawn down by the Company, upon request, no more than once in any calendar quarter, ~~subject~~pursuant to funding requests by the Company that are made in accordance with the Company’s Board -approved operating budget.

~~[B] Sunovion co-promotion agreement~~25

On October 6, 2020, USG entered into a Co-Promotion Agreement (the “Co-Promotion Agreement”) with Sunovion. Pursuant to the Co-Promotion Agreement, among other things, USG appointed Sunovion as its co-promoter of vibegron to primary care physicians in the United States, including all of its territories and possessions (the “Territory”), for the period commencing upon the regulatory approval of vibegron and ending on March 31, 2026 (the “Co‑Promotion Period”).

Sunovion has agreed, among other things, to use its commercially reasonable efforts to co-promote vibegron to primary care physicians in the Territory during the Co-Promotion Period. Sunovion has also agreed that during the term of the Co-Promotion Agreement it will not directly or indirectly promote, co-promote, detail, market or commercialize any other products with an indication for overactive bladder, and will cause its affiliates to refrain from the same.

In addition, the Company has agreed, among other things to: (i) use its commercially reasonable efforts to co-promote, manufacture, and otherwise commercialize vibegron in the Territory; (ii) prepare all materials that will be used to promote and market vibegron, subject to review and approval of the parties; (iii) develop and provide to Sunovion all materials necessary to train Sunovion’s sales representatives and managers; and (iv) remain responsible for all regulatory obligations related to vibegron.

During the Co-Promotion Period, the Company and Sunovion will incur expenses related to the co-promotion of vibegron to primary care physicians in accordance with a budget that the parties will develop, review and approve annually. Sunovion has agreed that for the period commencing upon the regulatory approval of vibegron and ending on March 31, 2023 (the “Initial Co‑Promotion Period”), it will incur at least $60 million of co-promotion expenses, which amount may be increased upon agreement of the parties (the “Initial Threshold”). After Sunovion reaches the Initial Threshold in expenses for the Initial Co-Promotion Period, the Company shall be responsible for all co-promotion expenses incurred thereafter.

As consideration for the co-promotion activities, starting on April 1, 2023, USG will pay Sunovion certain percentages of the net sales of vibegron in the Territory on a quarterly basis until the amounts paid reach a certain payment threshold that will be calculated based on the amount expended by Sunovion under the Initial Threshold (the “Payout Threshold”). USG will pay Sunovion these certain percentages of the net sales of vibegron until Sunovion has received fees totaling $108 million, plus any expenses that Sunovion incurs in excess of $60 million through the Co-Promotion Period.

[C] Inducement incentive plan

On October 15, 2020, the independent directors of the Compensation Committee of the Company’s Board of Directors adopted the Inducement Incentive Plan (“Inducement Plan”) pursuant to which the Company may grant nonstatutory options to purchase common shares, restricted share awards, restricted share unit awards, share appreciation rights, performance share awards, cash awards, and other forms of share compensation as an inducement to individuals to join the Company. The Inducement Plan, as adopted, allows the Company to deliver up to 600,000 shares (the “Share Limit”) of its common stock to eligible persons, as defined in the Inducement Plan. As of November 2, 2020, no awards have been granted pursuant to the Inducement Plan.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended March 31, 2020 included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the United States Securities and Exchange Commission, or the SEC, on June 19, 2020. ~~Unless~~Please see the ~~context~~section ~~requires~~entitled ~~otherwise,~~“Cautionary ~~references~~Statement inRegarding Forward-Looking Statements” preceding Item 1 of this Quarterly Report on Form 10-Q tofor ~~“Urovant,”~~information ~~the~~regarding ~~“Company,”~~forward-looking ~~“we,” “us,” and “our” refer to Urovant Sciences Ltd~~statements. ~~and its wholly owned subsidiaries.~~

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “to be,” “will,” “would,” or the negative or plural of these words, or similar expressions or variations, although not all forward-looking statements contain these words. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those expressed or implied by these forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors” set forth in Part II. Item 1A. of this Quarterly Report on Form 10-Q, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC. These risks are not exhaustive. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Business Overview

We are a ~~clinical-stage~~ biopharmaceutical company focused on developing and commercializing innovative therapies for urologic conditions. Our goal is to be a leading urology company by developing, commercializing and acquiring innovative therapies. Our lead product ~~candidate~~, GEMTESA (vibegron), is an oral, once-daily, (75 mg) small molecule that was observed to be a highly selective agonist of the human beta-3 adrenergic receptor in in vitro assays. ~~Vibegron~~GEMTESA iswas ~~currently~~approved ~~being~~by ~~developed~~the U.S. Food and Drug Administration, or FDA, in December 2020 for ~~three~~the ~~potential~~treatment ~~indications:~~of adult patients with overactive bladder, or OAB, ~~the~~with ~~treatment~~symptoms of ~~OAB~~urge urinary incontinence, or UUI, urgency and urinary frequency. We expect to commercially launch GEMTESA in ~~men~~the ~~with~~United ~~benign~~States ~~prostatic~~in ~~hyperplasia,~~late orcalendar ~~BPH,~~Q1 ~~and~~2021. GEMTESA is also currently being developed for an additional indication for the treatment of ~~abdominal~~OAB ~~pain~~in ~~due~~men towith ~~irritable~~benign ~~bowel~~prostatic ~~syndrome~~hyperplasia, or ~~IBS~~BPH. Our second product candidate, URO-902, is a novel gene therapy that we are developing for patients with OAB who have failed oral pharmacological therapy. ~~Vibegron~~GEMTESA was licensed to us in February 2017 by Merck Sharp & Dohme Corp., or Merck, and URO-902 was licensed to us in August 2018 by Ion Channel Innovations, LLC, or ICI.

We were incorporated in January 2016, and our operations to date have consisted of organizing and staffing our company, identifying and in-licensing ~~our~~ product candidates, including acquiring the rights to ~~vibegron~~GEMTESA and URO-902, preparing for and advancing the clinical development of our lead product ~~candidates~~and gene therapy product candidate and preparing for the ~~potential~~ commercialization of ~~vibegron~~GEMTESA.

Our development programs and expected upcoming milestones are summarized in the following figure:

21Merger Agreement

~~Our~~On ~~Product~~November 12, ~~Candidates~~2020, Sumitovant Biopharma Ltd., or Sumitovant, Titan Ltd., a wholly owned subsidiary of Sumitovant, or Merger Sub, Urovant Sciences Ltd., or USL, and, solely with respect to Section 9.13 of the Merger Agreement, Sumitomo Dainippon Pharma Co., Ltd., or Sumitomo Dainippon Pharma, entered into a definitive Agreement and Plan of Merger, or the Merger Agreement, providing for the merger of Merger Sub with and into USL, or the Merger, with USL continuing as the surviving company in the Merger and a wholly-owned subsidiary of Sumitovant, or the Surviving Company. In connection with the Merger, and subject to the description below, holders of USL’s common shares will be entitled to receive $16.25 per share, without interest. The Merger is not subject to any financing condition. Please see Note 6[A] to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding the Merger and the Merger Agreement.

~~VIBEGRON~~GEMTESA (vibgeron)

GEMTESA was approved by the FDA in December 2020 for the treatment of adult patients with OAB with symptoms of UUI, urgency and urinary frequency. We are also currently developing ~~vibegron~~GEMTESA in ~~three~~an additional target ~~indications:~~indication ~~OAB;~~of OAB in men with BPH~~; and abdominal pain due to IBS~~. ~~Vibegron~~GEMTESA is an oral, once-daily, small molecule that was observed to be a highly selective agonist of the human beta-3 adrenergic receptor in in vitro assays. We believe vibegron, if approved by the U.S. Food and Drug Administration, or FDA, may offer a differentiated profile compared to current OAB therapies, including the potential for broader efficacy claims if the FDA approves the inclusion of urgency data, rapid onset of action data, and a single convenient once-daily dose in the label. Vibegron has been well tolerated in all clinical trials to date, has not been associated with clinically relevant drug-drug interactions, such as the inhibition of CYP2D6, and has not demonstrated a QTc signal at any of the human doses tested.

Urovant Sciences GmbH, or USG, our wholly -owned subsidiary, holds global commercial rights to ~~vibegron~~GEMTESA, excluding China, Japan and certain other Asian countries. In September 2017, Kyorin Pharmaceutical Co., Ltd., or Kyorin, submitted a marketing application for vibegron to the Japan Pharmaceuticals and Medical Devices Agency, and in September 2018, received marketing approval from Japan’s Ministry of Health, Labour and Welfare for vibegron for the treatment of adults with OAB ~~in September 2018~~.

Treatment of OAB

We believe GEMTESA offers a differentiated profile compared to current OAB therapies. We believe GEMTESA has the potential to address the limitations of both anticholinergics and mirabegron and become a differentiated beta-3 agonist based on the following advantages:

•

Met both co-primary endpoints (statistically significant reduction in daily micturitions and daily UUI episodes) and all seven key secondary endpoints in our international pivotal Phase 3 EMPOWUR trial. In this pivotal Phase 3 clinical trial, GEMTESA 75 mg met both co-primary efficacy endpoints and all seven key secondary endpoints, including a clinically meaningful reduction in daily urgency episodes. In the primary efficacy analysis, once-daily GEMTESA met the co-primary endpoints at week 12, achieving statistical significance over placebo on both reduction in daily UUI episodes (p<0.0001) and reduction in daily micturitions (p<0.001). The difference from placebo was statistically significant as early as week 2, which was the first timepoint measured, for both episodes and micturitions (p<0.0001 and p<0.001, respectively), and statistically significant efficacy was maintained at all timepoints measured through the end of the study for both endpoints. Additionally, at all measured timepoints, GEMTESA achieved numerically better efficacy than tolterodine, the active control in this study, which is a currently available OAB treatment. All seven pre-specified key secondary endpoints were met, including a statistically significant reduction in daily urgency episodes compared to placebo (p=0.002).

•

Statistically significant reduction in daily UUI and total incontinence episodes from baseline to week 52 between GEMTESA and tolterodine. A post-hoc analysis was performed on the results from the double-blind extension of our pivotal Phase 3 EMPOWUR trial to compare the change from baseline to week 52 results between GEMTESA and the active control, tolterodine. In the post-hoc analysis, GEMTESA showed a statistically significant reduction in daily UUI and total incontinence episodes from baseline to 52 weeks compared to tolterodine.

•

Broader efficacy claims in our approved label including urgency data. Currently, no other approved OAB therapies in the United States can promote efficacy data for the reduction of urgency episodes related to OAB symptoms. The approved label for GEMTESA includes urgency data as the most important secondary endpoint.

•

Rapid onset of action. In clinical trials, GEMTESA has demonstrated an onset of action in as early as two weeks. In our international pivotal Phase 3 EMPOWUR trial, GEMTESA achieved rapid onset by two weeks in both co-primary endpoints and reduction in daily urgency episodes, making GEMTESA the only beta-3 agonist to demonstrate an onset of action by two weeks.

•

No QTc signal. In a QTc study designed to assess the potential for increased risk of ventricular arrhythmia and torsades de pointes, GEMTESA showed no QTc prolongation at therapeutic or supratherapeutic doses. GEMTESA is the only beta-3 agonist without demonstrated QTc prolongation in the product label.

•

No known dementia risk. There is a growing body of evidence that “anticholinergic load” may lead to an increased risk of dementia. Existing data also suggest that use of anticholinergic agents may have an impact on cognition, especially in the elderly. This increased risk of dementia combined with the poor side effect profile of the anticholinergic class, such as dry mouth, constipation and blurred vision, has led to significant U.S. oral OAB prescription share gains of the beta-3 agonist class. There is no evidence to date linking the use of beta-3 agonists with increased risk of dementia.

•

No CYP2D6 drug-drug interactions. CYP2D6 is one of the most important and common enzymes involved in the metabolism of drugs. GEMTESA is not an inhibitor of CYP2D6 and therefore has a reduced risk for potentially harmful drug-drug interactions.

•

Single, convenient dose. GEMTESA is the only beta-3 agonist available that does not require dose titration.

•

Crushable dose formulation. The approved label for GEMTESA provides for the administration of GEMTESA with or without food and as a crushed tablet in applesauce. GEMTESA is the only beta-3 agonist that can be crushed and delivered in food, an important option for elderly and other select patients.

To support the anticipated commercial launch of GEMTESA for OAB in the United States in late calendar Q1 2021, we have hired an initial sales force of approximately 155 persons in the United States, targeting urologists and other specialists that treat a high number of patients with urologic conditions and prescribers in long-term care facilities. We intend to scale the commercial presence to reach additional health care professionals as GEMTESA sales grow.

We have also entered into a co-promotion agreement, or the Co-Promotion Agreement, with Sunovion, in which Sunovion will be our co-promoter of GEMTESA to primary care physicians in the United States. Please see Note 6[G] to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the Co-Promotion Agreement. In addition, we have entered into a market access services agreement, or the Market Access Services Agreement, with Sunovion in which Sunovion has agreed to provide certain market access and administrative services with respect to the distribution and sale of GEMTESA in the United States. Please see Note 6[F] to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the Market Access Services Agreement.

We believe that our commercial leadership team, with experience launching prescription products in the OAB market, and our collaboration with Sunovion, positions us well to efficiently pursue the significant market opportunity for GEMTESA in the United States. We may opportunistically seek strategic collaborations to maximize the commercial opportunities for GEMTESA outside the United States.

Our Phase 3 Program for the Treatment of OAB

In March 2018, we enrolled the first patients in our international pivotal Phase 3 EMPOWUR trial of ~~vibegron~~GEMTESA in adults with OAB. The EMPOWUR trial was a randomized, double-blind, placebo- and active comparator-controlled clinical trial in men and women with OAB having or not having ~~urge urinary incontinence, or~~ UUI, episodes. The trial had a design in line with the Phase 2b clinical trial conducted by Merck and the Japanese Phase 3 clinical trial conducted by Kyorin. Enrollment of more than 1,500 patients into the EMPOWUR trial was completed in October 2018. In March 2019, we reported positive top-line results from our international pivotal Phase 3 EMPOWUR trial of GEMTESA in adults with OAB.

InThe ~~March 2019, we reported positive top-line~~ results ~~from our international pivotal Phase 3 EMPOWUR trial~~ of ~~vibegron~~the ~~in adults with OAB. In this pivotal Phase 3 clinical trial with over 1,500 patients, vibegron 75 mg met both~~ co-primary ~~efficacy endpoints demonstrating a highly significant reduction in daily UUI episodes~~ and ~~micturitions.~~key Insecondary ~~the primary efficacy analysis, once-daily vibegron met the co-primary~~ endpoints atused ~~week 12, achieving statistical significance over placebo on both reduction~~ in ~~daily~~our ~~UUI~~Phase ~~episodes~~3 ~~(p<0.0001)~~EMPOWUR ~~and~~trial reduction in daily micturitions (p<0.001). The difference from placebo was statistically significant as early as week 2, which was the first timepoint measured, for both UUI episodes and micturitions (p<0.0001 and p<0.001, respectively), and statistically significant efficacy was maintained at ~~all timepoints measured through~~ the end of the study ~~for~~are ~~both~~depicted ~~endpoints~~below. ~~Additionally, at all measured timepoints, vibegron achieved numerically better efficacy than tolterodine, the active control in this study, which is a currently available OAB treatment.~~

Vibegron met all seven pre-specified key secondary endpoints, including a statistically significant reduction in daily urgency episodes compared to placebo (p=0.002). Secondary endpoints included, among others, changes in the frequency of urgency episodes and total incontinence episodes (which includes all incontinence episodes, whether UUI or stress-related), as well as self-reported quality of life scores.

P-value is a conventional statistical method for measuring the statistical significance of clinical results. A p-value of 0.05 or less represents statistical significance, meaning there is a less than 1-in-20 likelihood that the observed results occurred by chance. The FDA utilizes statistical significance, as measured by p-value, as an evidentiary standard of efficacy and typically requires a p-value of 0.05 or less to demonstrate statistical significance. The results of the co-primary and key secondary endpoints used in our Phase 3 EMPOWUR trial at the end of the study are depicted below.

The EMPOWUR Phase 3 clinical trial data showing reductions in daily UUI episodes over time are shown in the graphs below.

The EMPOWUR Phase 3 clinical trial data showing reductions in daily UUI episodes at the end of the study for patients in the vibegron treatment group, compared to the tolterodine treatment group and placebo treatment group, are shown in the graphs below.28

~~Vibegron~~The ~~was~~EMPOWUR ~~well~~Phase 3 ~~tolerated~~clinical ~~and~~trial ~~the~~data ~~most~~showing ~~common~~reductions ~~adverse events reported versus placebo (>2%~~ in ~~vibegron~~daily ~~and~~UUI ~~greater~~episodes ~~than~~at ~~placebo)~~the ~~were~~end ~~headache~~of ~~(4.0%~~the vsstudy ~~2.4%),~~for ~~nasopharyngitis~~patients ~~(commonly~~in ~~known~~the asGEMTESA atreatment ~~cold) (2.8% vs 1.7%)~~group, ~~diarrhea~~compared ~~(2.2%~~to vsthe ~~1.1%),~~tolterodine ~~and nausea (2.2% vs 1.1%). The frequency of serious adverse events was similar across~~ treatment ~~arms~~group ~~(1.1%~~and in placebo, ~~1.5%~~treatment ~~in vibegron~~group, ~~and~~are ~~2.3%~~shown in ~~tolterodine). The incidence of~~ the ~~reported~~graphs ~~adverse event of hypertension was equal to placebo (1~~below.~~7% in vibegron, 1.7% in placebo, and 2.6% in tolterodine).~~

InGEMTESA ~~the~~was ~~Phase~~well 3tolerated ~~EMPOWUR~~and ~~trial~~the ~~there~~most ~~were~~common ~~two serious~~ adverse events, orreported ~~SAEs,~~versus ~~reported~~placebo (>2% in ~~two~~GEMTESA ~~patients~~and ingreater ~~the~~than ~~vibegron~~placebo) ~~treatment~~were ~~group~~headache ~~considered~~(4.0% tovs be2.4%), ~~treatment~~nasopharyngitis ~~related~~(commonly byknown ~~the~~as ~~investigator:~~a cold) (2.8% vs 1.7%), ~~non-cardiac~~diarrhea ~~chest~~(2.2% ~~pain~~vs in1.1%), ~~one~~and ~~patient~~nausea (~~with~~2.2% novs ~~evidence~~1.1%). The frequency of anserious ~~acute~~adverse ~~cardiac~~events ~~event)~~was ~~and~~similar across treatment arms (2)1.1% ~~pneumonia~~in placebo, 1.5% in ~~one~~GEMTESA), ~~patient~~and 2.3% ~~Our~~in ~~independent~~tolterodine). ~~assessment~~The ~~did~~incidence ~~not~~of ~~consider~~the ~~these~~reported ~~SAEs~~adverse event of hypertension was equal to beplacebo ~~treatment~~(1.7% ~~related~~in GEMTESA), 1.7% in placebo, and 2.6% in tolterodine).

In ~~August~~the ~~2019,~~Phase we3 ~~completed~~EMPOWUR ~~the~~trial ~~ambulatory~~there ~~blood~~were ~~pressure~~two ~~study~~serious ~~for~~adverse ~~vibegron.~~events, ~~The~~or ~~purpose~~SAEs, ofreported ~~the~~in ~~study~~two ~~was~~patients toin ~~rule~~the ~~out~~GEMTESA antreatment ~~effect~~group ofconsidered ~~vibegron relative~~ to ~~placebo~~be ontreatment ~~daytime~~related ~~systolic~~by ~~blood pressure. The primary endpoint variable was~~ the ~~change~~investigator: ~~from~~(1) ~~baseline~~non-cardiac tochest ~~day~~pain 28 in ~~mean~~one ~~daytime~~patient ~~ambulatory~~(with ~~systolic~~no ~~blood~~evidence ~~pressure.~~of ~~Secondary~~an ~~endpoints~~acute ~~included:~~cardiac 1event) ~~change from baseline in mean daytime diastolic blood pressure~~ and ~~heart rate,~~ (2) ~~full~~pneumonia ~~24 hour mean change~~ in ~~systolic~~one ~~and~~patient. ~~diastolic~~Our ~~blood~~independent ~~pressure~~assessment ~~and~~did ~~heart~~not ~~rates~~consider asthese ~~well~~SAEs ~~as 3) maximum changes 30 minutes~~ to ~~6.5~~be ~~hours~~treatment ~~post dosing~~related.

23In September 2019, we reported positive long-term data from the double-blind extension of our pivotal Phase 3 EMPOWUR trial of GEMTESA in adults with OAB. In this double-blind extension of the Phase 3 EMPOWUR trial with over 500 patients, GEMTESA 75 mg further improved the treatment benefit on key OAB symptoms such as micturitions, UUI, urgency and total incontinence over the 40-week extension period. Among the 52-week EMPOWUR GEMTESA treatment group, the reduction in micturitions at week 52 was 2.4 episodes per day from a baseline of 11.32 episodes and the reduction in urgency episodes was 3.4 episodes per day from a baseline of 8.0 episodes. GEMTESA demonstrated sustained efficacy for UUI as the reduction in UUI was 2.2 episodes at week 52 from a baseline of 3.18 per day. In addition, a total of 61% of patients on GEMTESA achieved at least a 75% reduction in their daily UUI episodes from baseline at week 52 and 41% of patients on GEMTESA became “dry” which is defined as having no UUI episodes at week 52. In the 40-week extension of our Phase 3 EMPOWUR trial, there was one death in the GEMTESA treatment group, a 63-year old patient due to arteriosclerotic disease, assessed by the investigator and the sponsor to not be treatment related. The overall adverse event profile of GEMTESA from the 40-week extension study was consistent with the 12-week EMPOWUR Phase 3 study. GEMTESA was well tolerated and the most common adverse events reported versus tolterodine were hypertension (8.8% vs. 8.6%), urinary tract infections (6.6% vs. 7.3%), and headache (5.5% vs. 3.9%). All other common adverse events such as upper respiratory tract infection and diarrhea were below 5% for both GEMTESA and tolterodine. Overall, GEMTESA 75 mg demonstrated a continued improvement in symptoms with sustained efficacy and a favorable long-term safety and tolerability profile.

Vibegron achieved its primary endpoint demonstrating that vibegron does not have an effect on daytime systolic ambulatory blood pressure compared to placebo (where no effect was defined as a change from baseline of less than 3.5mm Hg compared to placebo within a 90% confidence interval). For mean ambulatory daytime systolic blood pressure, there was no statistically significant or clinically relevant difference for vibegron compared to placebo. The treatment differences from baseline to day 28 for vibegron in mean ambulatory systolic blood pressure over placebo were +0.81 mm Hg, for mean diastolic blood pressure -0.04 mm Hg and for mean daytime heart rate +0.88 beats/minute. Regarding the categorical changes from baseline in systolic blood pressure for the in clinic visit vital signs, there were small, not clinically relevant, increases in the percentage of patients having a 10 mm Hg or 15mmg Hg increase in systolic blood pressure for vibegron compared to placebo. The adverse event profile was consistent with the EMPOWUR phase 3 study with the most common adverse events being headache, diarrhea, upper respiratory tract infection and urinary tract infection at rates below 5%.29

WeFor ~~also~~the ~~completed~~double-blind ~~the~~extension ~~pharmacokinetic~~of ~~study~~our onpivotal ~~food~~Phase ~~effect~~3 ~~and~~EMPOWUR ~~the~~trial, ~~crushed~~a ~~tablet~~post-hoc ofanalysis ~~vibegron~~was 75performed ~~mg.~~to ~~The~~compare ~~study~~the change from baseline to week 52 results ~~support~~between GEMTESA and tolterodine. In the ~~proposed~~post-hoc ~~labeling~~analysis, ~~for~~GEMTESA ~~administration~~showed ofa ~~vibegron~~statistically ~~with~~significant orreduction ~~without~~in ~~food~~daily UUI and astotal aincontinence ~~crushed~~episodes ~~tablet~~from baseline to 52 weeks compared to the active control, tolterodine. The trial data analysis showing reductions in ~~soft~~daily ~~food~~UUI episodes between GEMTESA and tolterodine over time is in the graph below.

In September 2019, we reported positive long-term data from the double-blind extension of our pivotal Phase 3 EMPOWUR trial of vibegron in adults with OAB. In this double-blind extension of the Phase 3 EMPOWUR trial with over 500 patients, vibegron 75 mg further improved the treatment benefit on key OAB symptoms such as micturitions, UUI, urgency and total incontinence over the 40-week extension period. Among the 52-week EMPOWUR vibegron treatment group, the reduction in micturitions at week 52 was 2.4 episodes per day from a baseline of 11.32 episodes and the reduction in urgency episodes was 3.4 episodes per day from a baseline of 8.0 episodes. Vibegron demonstrated sustained efficacy for urge urinary incontinence as the reduction in urge urinary incontinence was 2.2 episodes at week 52 from a baseline of 3.18 per day. In addition, a total of 61% of patients on vibegron achieved at least a 75% reduction in their daily urge urinary incontinence episodes from baseline at week 52 and 41% of patients on vibegron became “dry” which is defined as having no urge urinary incontinence episodes at week 52. In the 40-week extension of our Phase 3 EMPOWUR trial, there was one death in the vibegron treatment group, a 63-year old patient due to arteriosclerotic disease, assessed by the investigator and the sponsor to not be treatment related. The overall adverse event profile of vibegron from the 40-week extension study was consistent with the 12-week EMPOWUR Phase 3 study. Vibegron was well tolerated and the most common adverse events reported versus tolterodine were hypertension (8.8% vs. 8.6%), urinary tract infections (6.6% vs. 7.3%), and headache (5.5% vs. 3.9%). All other common adverse events such as upper respiratory tract infection and diarrhea were below 5% for both vibegron and tolterodine. Overall, vibegron 75 mg demonstrated a continued improvement in symptoms with sustained efficacy and a favorable long-term safety and tolerability profile.

For the double-blind extension of our pivotal Phase 3 EMPOWUR trial, a post-hoc analysis was performed to compare the change from baseline to week 52 results between vibegron and tolterodine. In the post-hoc analysis, vibegron showed a statistically significant reduction in daily UUI and total incontinence episodes from baseline to 52 weeks compared to the active control, tolterodine. The trial data analysis showing reductions in daily UUI episodes between vibegron and tolterodine over time is in the graph below.

In December 2019, we submitted a new drug application, or NDA, to the FDA seeking approval of once-daily 75mg vibegron for the treatment of patients with OAB with symptoms of urge urinary incontinence, urgency, and urinary frequency. The FDA accepted our NDA in March 2020. Our NDA has been assigned a Prescription Drug User Fee Act, or PDUFA, goal date of December 26, 2020.

Our Phase 3 Program for the Treatment of OAB in Men with BPH

In March 2019, we initiated the Phase 3 COURAGE randomized, double blind, placebo-controlled trial for OAB in men with BPH who are also taking BPH medications but continue experiencing OAB symptoms. inThe study is expected to enroll approximately 1,000 patients. ~~The~~and ~~study~~ is being conducted in two phases. In part one, we assessed the initial safety in 82 patients via an independent Data Safety Monitoring Board. Part one of the study was completed and after reviewing the safety data, the independent Data Safety Monitoring Board agreed that we could begin part two of the study, which we initiated in October 2019. Part two is assessing efficacy and safety in all patients, and testing 75 mg of ~~vibegron~~GEMTESA versus placebo, the same dose studied in our Phase 3 EMPOWUR trial. The primary efficacy consists of the co-primary efficacy endpoints, change from baseline in the average number of micturitions per 24 hours and change from baseline in the average number of urgency episodes per 24 hours. The primary efficacy timepoint is Week 12 after treatment. Secondary endpoints include change from baseline in the average number of nocturia episodes per night, which is awakening at night to use the bathroom to urinate, UUI episodes per day, the average volume voided per micturition, prostate symptom scores and safety. The duration for the double-blind study is 24 weeks. In addition, a 28-week open-label extension study will evaluate the long-term safety and efficacy of ~~vibegron~~GEMTESA in men with OAB symptoms and on another therapy for BPH. WeAs a result of the impact of COVID-19 on the Phase 3 COURAGE trial enrollment, we now expect to receive top-line data from the Phase 3 COURAGE trial in the ~~second~~first half of ~~2021~~2022. See the section titled “Impact of COVID-19” below for more details.

Our Phase 2a Program for the Treatment of Abdominal Pain Due to IBS

In December 2018, we enrolled our first patient in this trial. The Phase 2a trial iswas a double-blind, placebo-controlled study in women with abdominal pain due to IBS with predominant diarrhea, or IBS-D, or mixed episodes of diarrhea and constipation, or IBS-M. The trial enrolled over 200 patients in the United States, randomized to receive either 75 mg of ~~vibegron~~GEMTESA or placebo, administered orally once daily for a 12-week period. The primary endpoint iswas a 30% reduction in abdominal pain intensity, while secondary endpoints ~~include~~included Global Improvement Scale ratings, stool symptoms and safety. WeIn ~~have~~November ~~completed~~2020, ~~enrollment~~we ~~and~~reported ~~expect~~topline todata ~~receive~~which ~~top~~demonstrated that the study did not meet the primary endpoint with 40.9% of GEMTESA IBS-~~line~~D ~~data~~patients ~~from~~achieving at least a 30% improvement in average worst abdominal pain over the ~~Phase~~week 2a12 ~~clinical~~period, ~~trial~~compared to 42.9% in the ~~fourth~~placebo ~~calendar~~group. ~~quarter~~The most important secondary endpoint demonstrated 42.4% of ~~2020~~Global Improvement Scale responders at Week 12 for IBS-D patients in the GEMTESA group, compared with 33.3% for placebo but this was not statistically significant for the IBS-D, IBS-M or the overall IBS population. We will continue to analyze the full data set of this study.

GEMTESA was very well tolerated in the study and did not lead to any worsening of IBS symptoms. Discontinuation rates due to adverse events were 0% in the GEMTESA group and 2.7% in placebo. The frequency of serious adverse events was similar across treatment arms with one serious adverse event in the placebo group and two in the GEMTESA treatment group which were not considered treatment related by the investigator. The adverse events reported for GEMTESA were in the placebo range (33.3% in both groups). In particular, the adverse events of worsening of IBS were 2.7% for both GEMTESA and placebo and the adverse event of diarrhea was 0% for GEMTESA 75 mg and 1.8% for placebo, respectively.

URO-902

In December 2019, we enrolled our first patient in the placebo-controlled, randomized, multicenter proof-of-concept Phase 2a clinical trial to evaluate the safety and efficacy of URO-902 for the treatment of OAB in 78 female patients who have not responded to oral pharmacological therapies. The Phase 2a trial is expected to enroll patients in two cohorts: the first cohort will receive either a single administration of 24 mg of URO-902 (24,000 µg) or matching placebo, and the second cohort will receive 48 mg of URO-902 (48,000 µg) or matching placebo into the bladder wall. An unblinded review of safety data via an independent Data Safety Monitoring Board will be performed after all patients in the first cohort reach week 6. Study treatment for the second cohort will begin only after the Data Safety Monitoring Board has agreed that we can proceed with the second cohort. Patients will be followed for up to 48 weeks after initial administration. The key efficacy endpoints for this Phase 2a clinical trial include reductions per day in micturitions, urgency episodes and UUI episodes. In addition, our design of the Phase 2a clinical trial considers the safety data and preliminary efficacy data available from the two Phase 1b clinical trials in OAB conducted by ICI. We expect to receive the week 12 primary efficacy and safety top-line data from both cohorts in the Phase 2a clinical trial in the second half of 2021 and full trial data after the completion of the 48-week post-treatment period in 2022.

Phase 2a clinical trial include reductions per day in micturitions, urgency episodes and UUI episodes. In addition, our design of the Phase 2a clinical trial considers the safety data and preliminary efficacy data available from the two Phase 1b clinical trials in OAB conducted by ICI.

All patients in the first cohort have reached week 6, and, in February 2021, after reviewing the safety data, the independent Data Safety Monitoring Board agreed that we can proceed with the second cohort of the study. As a result of the impact of COVID-19 on the Phase 2a clinical trial enrollment, we now expect to receive the week 12 primary efficacy and safety top-line data from both cohorts in the Phase 2a clinical trial in the first half of 2022 and full trial data after the completion of the 48-week post-treatment period in the second half of 2022. See the section titled “Impact of COVID-19” below for more details.

Recent Key Agreements

Information Sharing and Cooperation Agreement

On May 21, 2020, we entered into an information sharing and cooperation agreement, or the Sumitovant Information Sharing Agreement, with Sumitovant ~~Biopharma Ltd~~., ~~or Sumitovant.~~ The Sumitovant Information Sharing Agreement, among other things, obligates us to deliver to Sumitovant drafts of (i) our quarterly and annual financial statements and (ii) the discussion and analysis by our management of the Company’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. We also agreed to coordinate with Sumitovant before releasing earnings results or any interim financial guidance and to notify Sumitovant before issuing any other material press releases.

In addition, the Sumitovant Information Sharing Agreement requires us to 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 our financial statements and internal accounting controls and operations. We also agreed to 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. To the extent we provide Sumitovant any information in response to such a request, Sumitovant may not (i) disclose such information to certain of its affiliates or (ii) use such information in a manner it deems, in good faith, to be detrimental to the Company or our shareholders. In addition, both parties agreed to hold any information they receive from the other party in the strictest confidence, subject to customary exceptions for information that becomes public, that has been independently developed, or that is otherwise received on a non-confidential basis from a third party.

Moreover, the Sumitovant Information Sharing Agreement provides that we must adopt and maintain policies to address our obligations with respect to financial reporting, audits, internal controls, record keeping, taxes, and other applicable laws. In addition, the Board must have a compliance oversight committee, or the Compliance Committee, that oversees a compliance program designed to ensure we comply with our obligations under applicable laws, or the Compliance Program. The Compliance Committee, in turn, is required to (i) appoint a member of our senior management to administer the Compliance Program and (ii) cause the implementation of internal reporting procedures and training to support the Compliance Program. The Sumitovant Information Sharing Agreement also requires us to comply in all material respects with applicable laws.

Market Access Services Agreement

On June 17, 2020, USG entered into ~~a market access services agreement, or~~ the Market Access Services Agreement, with Sunovion ~~Pharmaceuticals, Inc~~., ~~or Sunovion, a wholly-owned subsidiary of Sumitomo Dainippon Pharma Co., Ltd., or Sumitomo Dainippon Pharma.~~ Pursuant to the Market Access Services Agreement, among other things, USG appointed Sunovion as the exclusive distributor of ~~vibegron~~GEMTESA in the United States, including all of its territories and possessions. The Market Access Services Agreement was amended on December 21, 2020 and January 8, 2021 to clarify and add certain terms to the Market Access Services Agreement.

Sunovion, in turn, has agreed to provide certain market access services with respect to the distribution and sale of ~~vibegron,~~GEMTESA including, among other things: (i) adding ~~vibegron~~GEMTESA to Sunovion’s agreements with its third party logistics providers; (ii) adding ~~vibegron~~GEMTESA to certain of Sunovion’s contracts with wholesalers, group purchasing organizations and integrated delivery networks; (iii) facilitating USG’s entry into new contracts with certain health organizations regarding ~~vibegron~~GEMTESA; (iv) managing the validation, processing and payment of rebates, chargebacks, and certain administrative, distribution and service fees related to ~~vibegron~~GEMTESA; (v) providing USG with price reporting metrics and other information required for it to comply with applicable government price reporting requirements; (vi) coordinating with USG and any applicable wholesalers to address any recalls, investigations, or product holds; and (vii) providing certain other ancillary support services to facilitate the foregoing.

As consideration for the services, USG will pay Sunovion an agreed-upon monthly service charge for each of the first two years of the agreement term. After the second year of the agreement term, the monthly service charges will be subject to good faith negotiations between the parties. In addition, USG also agreed to (x) reimburse Sunovion for any pass-through expenses it incurs while providing the services and (y) establish an escrow fund for use by Sunovion when managing any rebates, chargebacks and similar fees.

Co-Promotion Agreement

On October 6, 2020, USG entered ~~into a Co-Promotion Agreement, or~~ the Co-Promotion Agreement, with Sunovion. Pursuant to the Co-Promotion Agreement, among other things, USG appointed Sunovion as its co-promoter of ~~vibegron~~GEMTESA to primary care physicians in the United States, including all of its territories and possessions, or the Territory, for the period commencing upon the regulatory approval of ~~vibegron~~GEMTESA and ending on March 31, 2026, or the Co‑Promotion Period.

Sunovion has agreed, among other things, to use its commercially reasonable efforts to co-promote ~~vibegron~~GEMTESA to primary care physicians in the Territory during the Co-Promotion Period. Sunovion has also agreed that during the term of the Co-Promotion Agreement it will not directly or indirectly promote, co-promote, detail, market or commercialize any other products with an indication for ~~overactive bladder~~OAB, and will cause its affiliates to refrain from the same.

In addition, we have agreed, among other things to: (i) use our commercially reasonable efforts to co-promote, manufacture, and otherwise commercialize ~~vibegron~~GEMTESA in the Territory; (ii) prepare all materials that will be used to promote and market ~~vibegron~~GEMTESA, subject to review and approval of the parties; (iii) develop and provide to Sunovion all materials necessary to train Sunovion’s sales representatives and managers; and (iv) remain responsible for all regulatory obligations related to ~~vibegron~~GEMTESA.

26During the Co-Promotion Period, we and Sunovion will incur expenses related to co-promotion of GEMTESA to primary care physicians in accordance with a budget that the parties will develop, review and approve annually. Sunovion has agreed that for the period commencing upon the regulatory approval of GEMTESA and ending on March 31, 2023, or the Initial Co‑Promotion Period, it will incur at least $60 million of co-promotion expenses specific to the promotion of GEMTESA, which amount may be increased upon agreement of the parties, or the Initial Threshold. After Sunovion reaches the Initial Threshold in expenses for the Initial Co-Promotion Period, we shall be responsible for all co-promotion expenses incurred thereafter.

~~During~~As consideration for the Coco-~~Promotion~~promotion ~~Period~~activities, westarting ~~and~~on ~~Sunovion~~April ~~will~~1, ~~incur~~2023, ~~expenses~~USG ~~related~~will topay ~~co-promotion~~Sunovion certain percentages of ~~vibegron~~the tonet ~~primary~~sales ~~care~~of ~~physicians~~GEMTESA in ~~accordance~~the ~~with~~Territory on a ~~budget~~quarterly ~~that~~basis until the ~~parties~~amounts ~~will~~paid ~~develop,~~reach ~~review~~a ~~and~~contractually ~~approve~~agreed ~~annually. Sunovion~~payment ~~has~~threshold ~~agreed~~ that ~~for~~will ~~the~~be ~~period~~calculated ~~commencing~~based ~~upon~~on the ~~regulatory~~amount ~~approval~~expended ofby ~~vibegron~~Sunovion ~~and~~under ~~ending~~the onInitial ~~March 31~~Threshold, ~~2023,~~ or the ~~Initial~~ ~~Co‑Promotion Period,~~Payout itThreshold. USG will ~~incur~~pay atSunovion ~~least~~the ~~$60~~percentages ~~million~~ of ~~co-promotion~~the ~~expenses,~~net ~~which~~sales ~~amount~~of ~~may~~GEMTESA beuntil ~~increased~~Sunovion ~~upon~~has ~~agreement~~received offees ~~the~~totaling ~~parties~~$108 million, orplus ~~the~~any ~~Initial~~expenses ~~Threshold. After~~that Sunovion ~~reaches~~incurs ~~the~~in ~~Initial~~excess ~~Threshold~~of in$60 ~~expenses~~million ~~for~~through the ~~Initial~~ Co-Promotion Period~~, we shall be responsible for all co-promotion expenses incurred thereafter~~.

As consideration for the co-promotion activities, starting on April 1, 2023, USG will pay Sunovion certain percentages of the net sales of vibegron in the Territory on a quarterly basis until the amounts paid reach a certain payment threshold that will be calculated based on the amount expended by Sunovion under the Initial Threshold, or the Payout Threshold. USG will pay Sunovion these certain percentages of the net sales of vibegron until Sunovion has received fees totaling $108 million, plus any expenses that Sunovion incurs in excess of $60 million through the Co-Promotion Period.

No amounts were incurred pursuant to the Co-Promotion Agreement during the three and nine months ended December 31, 2020.

Merger Agreement

On November 12, 2020, we, Sumitovant, Merger Sub, and Sumitomo Dainippon Pharma, entered into the Merger Agreement with respect to the Merger. Please see Note 6[A] to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the Merger Agreement.

Voting and Support Agreement

On November 12, 2020, Sumitovant and USL entered into a Voting and Support Agreement, or the Voting Agreement, whereby Sumitovant has agreed, among other things, that at any meeting of the shareholders of USL or in connection with any written consent of the shareholders of USL, Sumitovant will appear at such meeting or cause its common shares to be counted as present at such meeting for purposes of establishing a quorum and, so long as Sumitovant is not prohibited from doing so by applicable law or a contractual obligation with USL, vote or consent in favor of the Merger and the adoption of the Merger Agreement.

Amendment to Sumitomo Loan Agreement

On February 5, 2021, the Company and Sumitomo Dainippon Pharma entered into an amendment to the $300 million unsecured revolving debt facility with Sumitomo Dainippon Pharma, or the Sumitomo Loan Agreement, in which the maximum principal amount available to us to borrow pursuant to the terms of the Sumitomo Loan Agreement was increased by $125.0 million to a total of $425.0 million.

Impact of COVID-19

In December 2019, an outbreak of a novel strain of coronavirus, or COVID-19, was identified. Due to the rapid and global spread of the virus, in March 2020, the World Health Organization categorized the novel COVID-19 as a pandemic, and it has spread throughout the United States and other countries across the world. To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines and causing some businesses to suspend operations. Although many stay-at-home orders have been lifted, the impact of this pandemic has been and will likely continue to be extensive in many aspects of society, and has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. To date, our operations have not been significantly impacted by the COVID-19 pandemic other than, for ~~vibegron~~GEMTESA, from March 19, 2020 to April 27, 2020, we temporarily halted the screening of new patients into our Phase 3 COURAGE trial and Phase 2a trial for abdominal pain due to IBS. For URO-902, from March 19, 2020 to May 4, 2020, we temporarily halted the screening of new patients in our Phase 2a trial due to the COVID-19 pandemic. Patients that were in the run-in phase or already enrolled in our ongoing studies continued with treatment pursuant to the clinical trial protocol and treatments were not halted or delayed. Since the end of the temporary halt in screening of new patients for both ~~vibegron~~GEMTESA and URO-902, we ~~are~~ re-~~opening~~opened the clinical trial sites in a stepwise manner to allow for screening of new patients., ~~The~~and ~~stepwise~~all ~~manner~~of inour ~~which~~sites wehave ~~are~~been re-~~opening~~opened ~~our~~as ~~sites~~of isDecember ~~continuing~~31, ~~and~~2020. However, as the ~~majority~~COVID-19 pandemic and spread of the virus has continued, the enrollment rates in our ~~sites~~Phase ~~have~~3 ~~been~~COURAGE ~~re-opened.~~trial Toand ~~date,~~our ~~these~~Phase ~~events~~2a trial for URO-902 have not ~~had~~met our initial projections and, as a ~~material~~result, ~~adverse~~we ~~impact~~have onshifted our clinical trial ~~plans~~timelines ~~and~~for ~~timelines.~~the ~~However,~~availability weof ~~continue~~top-line todata ~~evaluate~~for each study from the ~~impact~~second ~~COVID-19~~half ~~may~~of ~~have~~2021 onto the ~~full~~first ~~re-opening~~half of ~~our~~2022. ~~sites,~~We ascontinue ~~well~~to asevaluate the impact COVID-19 may have on our clinical trial plans and timelines.

Our priorities during the COVID-19 pandemic are protecting the health and safety of our employees while continuing our mission to develop and commercialize innovative therapies for urological conditions. Beginning the week of March 16, 2020, substantially all of our workforce began working from home and we curtailed employee travel. We continue to require employees to work from home to protect their health and safety. The effects of any future stay-at-home orders or the continuation of our work from home measures for a significant period of time may negatively impact productivity, disrupt our business and delay our development programs, regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. To date, we have not experienced these potential negative effects due to the continuation of our work from home measures. We continue to follow and monitor recommended actions of government and health authorities to protect our employees and will gradually resume normal operations once it is prudent to do so, and in compliance with all Federal, State, and local laws.

Further, the COVID-19 pandemic may negatively affect our supply chain, ~~our ability to obtain approval of vibegron from the FDA~~ and our ~~pre-launch~~ commercial ~~readiness~~launch activities. We rely exclusively on third-party manufacturers to manufacture ~~vibegron~~GEMTESA and URO-902 and our key third-party suppliers and manufacturers have been able to broadly maintain operations. To date, we have not experienced any significant disruption in our current supply chain for our clinical trials and asinitial weproduct ~~prepare~~ for ~~the~~ commercial launch of ~~vibegron,~~GEMTESA ~~if approved,~~ or any negative impact or delay in our ~~pre-launch~~ commercial ~~readiness~~launch activities or timelines as a result of COVID-19. While we currently do not anticipate any interruptions in our manufacturing process or ~~our~~commercial ~~pre-~~launch ~~commercial readiness~~ activities, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our third-party suppliers and contract manufacturing partners’ ability to supply and/or manufacture our products and our ability to conduct our ~~pre-launch~~ commercial ~~readiness~~launch activities.

27Our clinical trials may also continue to be affected in the future by the COVID-19 pandemic. Site initiation may be delayed due to prioritization of healthcare resources toward the COVID-19 pandemic. The COVID-19 pandemic may cause enrollment rates in our clinical trials to not meet expectations as some patients may not be willing to enroll into clinical studies due to the ongoing pandemic or may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. We had a temporary halt in screening of new patients and the ongoing effects of the COVID-19 pandemic on our clinical trials has resulted in a shift in our clinical trial timeline as described above. We are working diligently with our clinical research organizations, or CROs, to implement strategies to increase our enrollment rates and achieve our clinical development timelines. We are continuing to evaluate any additional impact the COVID-19 pandemic may have on our clinical development timelines and the future enrollment of patients in our Phase 3 COURAGE trial for GEMTESA and Phase 2a clinical trial for URO-902.

~~Our~~The ~~clinical~~ultimate ~~trials~~impact ~~may~~of ~~also be affected in~~ the ~~future by the~~ COVID-19 pandemic. ~~Site~~is ~~initiation~~highly uncertain, and ~~patient~~we ~~enrollment~~do ~~may~~not beyet ~~delayed~~know ~~due~~the tofull ~~prioritization~~extent of ~~healthcare~~potential ~~resources~~delays ~~toward~~or ~~the~~impacts ~~COVID-19~~on ~~pandemic.~~our ~~The~~business, ~~COVID-19~~our ~~pandemic~~financial ~~may~~results, ~~delay enrollment in~~ our clinical trials, ~~and~~our ~~some~~supply ~~patients~~chains, ~~may~~our ~~not~~commercial belaunch ~~able~~activities, toend ~~comply~~user ~~with~~demand ~~clinical~~for ~~trial~~GEMTESA, ~~protocols~~healthcare ifsystems ~~quarantines~~or ~~impede~~the ~~patient~~global ~~movement~~economy oras ~~interrupt~~a ~~healthcare services~~whole. The Weextent ~~had~~to awhich ~~temporary~~COVID-19 ~~halt~~impacts inus ~~screening~~will ofdepend ~~new~~on ~~patients~~future asdevelopments, ~~described~~which ~~above~~are highly uncertain and wecannot ~~are~~be ~~monitoring~~predicted, including the ~~effects~~duration and spread of the COVID-19 pandemic, onnew ~~our~~information ~~clinical~~which ~~trials.~~may Inemerge ~~addition,~~concerning wethe ~~are~~severity ~~continuing~~of toCOVID-19 ~~evaluate~~(including new strains of the ~~impact~~coronavirus) and the actions to contain COVID-19 ~~pandemic~~or ~~may~~treat ~~have~~its onimpact, ~~our~~including ~~clinical~~the ~~development~~timing, ~~timelines~~distribution and efficacy of vaccines and other treatments, among others. As such, the ~~future~~full ~~enrollment~~magnitude ofthat ~~patients~~the inpandemic ~~our~~will ~~Phase~~have 3on ~~COURAGE~~our ~~trial~~financial ~~for~~condition, ~~vibegron~~liquidity, and ~~Phase~~future 2aresults ~~clinical~~of ~~trial~~operations ~~for~~is ~~URO-902~~uncertain and cannot be predicted.

The ultimate impact of the COVID-19 pandemic is highly uncertain and we do not yet know the full extent of potential delays or impacts on our business, our financial results, our clinical trials, our supply chains, our pre-launch commercial readiness activities, end user demand for our products, if approved, healthcare systems or the global economy as a whole. The extent to which COVID-19 impacts us will depend on future developments, which are highly uncertain and cannot be predicted, including the duration of the COVID-19 pandemic, new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. As such, the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations is uncertain and cannot be predicted.33

Financial History

We have incurred, and expect to continue to incur, significant operating losses and negative cash flows as we continue to ~~develop~~prepare ~~our~~for ~~product~~the ~~candidates~~commercialization of GEMTESA and continue to ~~prepare~~develop GEMTESA for ~~potential~~other ~~future~~indications ~~regulatory~~and ~~approvals~~our ~~and~~gene ~~commercialization~~therapy ofproduct ~~vibegron~~candidate. To date, we have not generated any revenue~~, and we do not expect to generate revenue unless and until we successfully complete development of, obtain regulatory approval for, and commercialize at least one of our product candidates~~.

We have historically funded our operations primarily from the issuance and sale of our common shares, from the ~~$300 million unsecured revolving debt facility with~~ Sumitomo ~~Dainippon Pharma, or the Sumitomo~~ Loan Agreement, and from the term loans we had pursuant to the loan agreement with Hercules Capital, Inc., or Hercules. These term loans with Hercules were repaid in January 2020. Additional information about our sources of funding is included under “—Liquidity and Capital Resources—Sources of Liquidity” below.

Financial Operations Overview

Revenue

WeWith ~~currently~~the ~~do not have any products approved for sale and have not generated any revenue since inception. If we are able to successfully develop, receive regulatory~~ approval ~~for~~of ~~and~~our ~~commercialize~~New ~~vibegron,~~Drug ~~URO-902 or any future product candidate alone or in collaboration with third parties~~Application, ~~we may generate revenue from vibegron, URO-902~~ or ~~any such future product candidate. In particular~~NDA, ~~if our NDA~~ for ~~vibegron~~GEMTESA for the treatment of OAB ~~is approved~~ by the FDA onin ~~or around our PDUFA goal date of~~ December ~~26,~~ 2020, we expect to begin to recognize product revenues after our initial product launch in April 2021.

Research and Development Expenses

Our research and development expenses to date have been primarily attributed to the license of rights to ~~vibegron~~GEMTESA and URO-902, the initiation and ongoing activities related to our clinical programs and the increase in our personnel. Research and development expenses include program-specific costs, as well as costs that are not allocated to a specific program.

Program-specific costs include:

• direct third-party costs such as expenses incurred under agreements with clinical research organizations, or CROs, and contract manufacturing organizations, or CMOs, the cost of consultants who assist with the development of ~~vibegron~~GEMTESA on a program-specific basis, investigator grants, sponsored research, manufacturing costs in connection with producing materials for use in conducting nonclinical studies and clinical trials, and other third-party expenses directly attributable to the development of our product candidates.

Unallocated costs primarily include:

•

employee-related expenses, such as salaries, share-based compensation, benefits and travel expense for our research and development personnel; and

•

other expenses, which include the costs of consultants who assist with research and development activities not specific to a program.

Research and development expenses also include in-process research and development expense related to our acquisition of the rights to our product ~~candidates~~and gene therapy product candidate, ~~vibegron~~GEMTESA and URO-902, from Merck and ICI, respectively.

28Research and development activities will continue to be central to our business model. Product candidates in later stages of clinical development, such as GEMTESA, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. It is difficult to determine with certainty the duration and completion costs of any clinical trial we may conduct. We expect our overall research and development expenses to continue to be a significant area of spend over the next several years as we advance the clinical development of GEMTESA for the treatment of OAB in men with BPH and URO-902. With the approval of GEMTESA for the treatment of patients with OAB, development costs for GEMTESA for OAB will decrease but are expected to be partially offset by increases in development costs of GEMTESA for other indications and URO-902, particularly if the programs are successful, as well as increases in other areas, such as regulatory, pharmacovigilance, and medical affairs.

~~Research~~The ~~and~~duration, ~~development~~costs ~~activities~~and ~~will~~timing ~~continue~~of toclinical betrials ~~central~~of to our ~~business~~current ~~model.~~and ~~Product~~future product candidates inwill ~~later~~depend ~~stages~~on a variety of ~~clinical~~factors ~~development~~that include, ~~such~~but asare ~~vibegron,~~not ~~generally~~limited ~~have~~to: ~~higher~~the ~~development~~number of trials required for approval; the per patient trial costs; ~~than~~the ~~those~~number of patients that participate in ~~earlier~~the ~~stages~~trials; the number of ~~clinical~~sites ~~development,~~included ~~primarily~~in ~~due~~the totrials; the ~~increased~~countries ~~size~~in ~~and~~which ~~duration~~the oftrial ~~later-stage~~is ~~clinical~~conducted; ~~trials.~~the Itlength isof ~~difficult~~time required to ~~determine~~enroll ~~with~~eligible ~~certainty~~patients; the ~~duration~~number ~~and~~of ~~completion~~doses ~~costs~~that ofpatients ~~any~~receive; ~~clinical~~the ~~trial~~drop-out weor ~~may~~discontinuation ~~conduct.~~rates Weof ~~expect~~patients; ~~our~~the ~~overall~~potential ~~research~~additional ~~and~~safety ~~development~~monitoring ~~expenses~~or toother ~~continue~~studies torequested beby aregulatory ~~significant~~agencies; ~~area~~the duration of ~~spend~~patient ~~over~~follow-up; the ~~next~~timing ~~several~~and ~~years~~receipt asof weregulatory ~~advance~~approvals; the costs of clinical ~~development~~trial ofmaterial; ~~vibegron~~the efficacy and ~~URO-902.~~safety ~~With~~profile of the ~~completion~~product ofcandidates; ~~the Phase~~and 3any ~~EMPOWUR~~impact ~~study~~as ~~and~~a ~~submission~~result of ~~our~~the ~~NDA~~COVID-19 ~~seeking~~pandemic. ~~approval~~For ofexample, ~~vibegron~~beginning ~~for~~in mid-March 2020, we temporarily halted the ~~treatment~~screening of new patients ~~with~~for ~~OAB~~six weeks in all our ongoing clinical trials due to the COVID-19 pandemic, ~~development~~and ~~costs~~enrollment rates for ~~vibegron~~our ~~for~~ongoing ~~OAB~~studies ~~will~~have ~~decrease~~not ~~but~~met ~~are~~our expected totimeline befor ~~partially~~enrollment. ~~offset~~The bytemporary ~~increases~~halt in ~~development~~screening ~~costs~~and oflower ~~vibegron~~than ~~for~~expected ~~other~~enrollment ~~indications~~rates resulted in lower clinical trial expenses than forecasted during the nine months ended December 31, ~~particularly~~2020. ifHowever, we currently expect our clinical trial expenses during the ~~programs~~fiscal ~~are~~year ~~successful~~ending March 31, as2022 ~~well~~to increase for our Phase 3 COURAGE trial and Phase 2a trial for URO-902 as ~~increases~~screening resumed for both studies in ~~other~~May ~~areas,~~2020 ~~such~~and asenrollment ~~regulatory,~~strategies ~~pharmacovigilance,~~are being identified and ~~medical~~implemented ~~affairs~~in collaboration with our CROs.

~~The~~In ~~duration~~addition, ~~costs~~the ~~and~~probability ~~timing~~ of ~~clinical~~success ~~trials~~for ofURO-902 ~~our current~~ and ~~future~~any other product candidates will depend on anumerous ~~variety of~~ factors, ~~that~~including ~~include~~competition, ~~but~~manufacturing ~~are~~capability ~~not~~and ~~limited~~commercial ~~to:~~viability. ~~the~~As ~~number~~a ofresult, ~~trials~~we ~~required~~are ~~for~~unable approval; the per patient trial costs; the number of patients that participate in the trials; the number of sites included in the trials; the countries in which the trial is conducted; the length of time required to ~~enroll~~determine ~~eligible patients;~~ the ~~number~~duration ofand ~~doses~~completion ~~that~~costs ~~patients receive; the drop-out or discontinuation rates~~ of ~~patients;~~our ~~the~~programs ~~potential additional safety monitoring~~ or ~~other~~when ~~studies requested by regulatory agencies; the duration of patient follow-up; the timing~~ and ~~receipt~~to ofwhat ~~regulatory~~extent ~~approvals;~~we ~~the~~will ~~costs~~generate ofrevenue ~~clinical~~from ~~trial~~commercialization ~~material; the efficacy~~ and ~~safety~~sale ~~profile~~ of ~~the product candidate; and~~ any ~~impact as a result~~ of ~~the~~our ~~COVID-19~~product ~~pandemic~~candidates. ~~For~~Our ~~example,~~research ~~beginning~~and indevelopment ~~mid-March~~activities ~~2020,~~may webe ~~temporarily~~subject ~~halted~~to ~~the~~change ~~screening~~from oftime ~~new patients for six weeks in all our ongoing clinical trials due~~ to ~~the~~time ~~COVID-19~~as ~~pandemic. The temporary halt in screening resulted in lower clinical trial expenses than expected during the six months ended September 30, 2020. However,~~ we ~~currently~~evaluate ~~expect~~ our ~~clinical~~priorities ~~trial expenses during the remainder of the fiscal year ending March 31, 2021 to increase for our Phase 3 COURAGE trial~~ and ~~Phase~~available ~~2a trial for URO-902 as screening resumed for both studies in May 2020~~resources.

In addition, the probability of success for vibegron, URO-902 and any other product candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our programs or when and to what extent we will generate revenue from commercialization and sale of any of our product candidates. Our research and development activities may be subject to change from time to time as we evaluate our priorities and available resources.34

General and Administrative Expense

General and administrative expenses consist primarily of employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for general and administrative personnel, professional fees for legal, consulting, accounting, auditing and tax services, commercial readiness costs, insurance, facilities and information technology costs, and general overhead.

Our general and administrative expenses to date have increased primarily to support our organizational growth, commercial readiness costs which includes establishing certain sales, marketing, and commercialization functions in advance of ~~potential~~the ~~future~~approval ~~regulatory~~of ~~approvals~~GEMTESA, and costs of continuing to operate as a public company. We anticipate our general and administrative expenses to continue to increase in the future as we prepare for the ~~potential~~ commercial launch of ~~our product candidates, if approved by the FDA or other regulatory agencies~~GEMTESA.

IfWith ~~any~~the approval of ~~our~~GEMTESA ~~current~~by orthe ~~future~~FDA ~~product~~in ~~candidates~~December ~~obtains U.S. regulatory approval~~2020, we expect that we ~~would~~will incur significantly increased expenses associated with building aour salesforce function, funding commercial activities, and the potential future payment obligations pursuant to the Co-Promotion Agreement, which are expected to begin in April 2023. These increases will likely include increased costs related to the hiring of additional personnel, sales and marketing costs, and general overhead. Additionally, these anticipated expenditures include costs associated with being a public company, such as services associated with maintaining compliance with the requirements of The Nasdaq Global Select Market, or Nasdaq, and the SEC, insurance costs, and investor relations costs.

Results of Operations

Comparison of the Three Months Ended ~~September~~December 3031, 2020 and 2019

The following table sets forth our results of operations for the three months ended ~~September~~December 3031, 2020 and 2019 (in thousands):

	Three Months Ended September 30,
	Three Months Ended December 31,
	2020			2019
Operating expenses:
Research and development	$	1415,~~536~~616		$	1723,~~796~~099
General and administrative		1829,~~933~~965			716,~~435~~687
Total operating expenses		3345,~~469~~581			2539,~~231~~786
Other (expense) income:
Other income (expense):
Interest expense, net		(1,~~464~~615	)		(~~581~~1,401	)
Other (expense) income, net		(308	)		79
Other income (expense), net		271			(34	)
Loss before (benefit from) provision for income taxes		(3546,~~241~~925	)		(2541,~~733~~221	)
(Benefit from) provision for income taxes		(85128	)		838
Net loss	$	(3546,~~156~~797	)	$	(2541,~~741~~259	)

Research and Development Expenses

For the three months ended ~~September~~December 3031, 2020 and 2019, our research and development expenses consisted of the following (in thousands):

	Three Months Ended September 30,
	Three Months Ended December 31,
	2020		2019
Program-specific costs:
Vibegron	$	8,984	$	14,824
GEMTESA (vibegron)	$	9,152	$	17,053
URO-902		1,~~928~~816		~~649~~1,110
Unallocated costs:
Share-based compensation		~~419~~404		~~257~~2,844
Personnel expenses		2,~~885~~929		1,~~475~~583
Other expense		~~320~~1,315		~~591~~509
Total research and development expenses	$	1415,~~536~~616	$	1723,~~796~~099

Research and development expenses decreased by $37.35 million, to $1415.56 million, for the three months ended ~~September~~December 3031, 2020 compared to $1723.81 million for the three months ended ~~September~~December 3031, 2019. The decrease in research and development expenses was primarily attributed to the following:

• a decrease of $65.84 million in ~~CRO~~fees ~~costs~~paid ~~primarily~~pursuant ~~due~~ to the ~~completion~~Prescription ofDrug ~~the~~User ~~double-blind~~Fee ~~extension~~Act, ofor ~~our~~PDUFA, ~~Phase~~in 3connection ~~EMPOWUR~~with ~~study~~the insubmission ~~the~~of ~~prior~~our ~~fiscal~~NDA ~~year~~for GEMTESA and the ~~completion~~milestone ofpayment ~~enrollment~~pursuant into ~~our~~the ~~Phase~~collaboration 2aagreement ~~trial~~with ~~for~~Kyorin, ~~vibegron~~each ~~for~~of ~~the~~which ~~treatment~~was ofpaid ~~abdominal~~in ~~pain~~December ~~due~~2019 toand ~~IBS~~did not re-occur in ~~June~~the three months ended December 31, 2020; ~~and~~

• a decrease of $02.34 million in ~~other~~share-based ~~unallocated~~compensation ~~research~~due to the acceleration of vesting of certain stock options and ~~development~~restricted ~~costs~~stock units as a result of the sale of Roivant Sciences Ltd.’s, or RSL, interest in the Company to Sumitomo Dainippon Pharma in December 2019;

•

a decrease of $1.9 million in other program-specific third-party research and development costs; and

•

a decrease of $1.5 million in chemistry, manufacturing and controls costs as a result of the increased manufacturing of drug substance for validation batches of GEMTESA in the prior year compared to the current year.

These decreased expenses were partially offset by increases primarily attributed to the following:

• an increase of $21.06 million in ~~chemistry,~~CRO ~~manufacturing~~costs ~~and~~primarily ~~controls~~due ~~costs~~to asthe acompletion ~~result~~ of ~~sourcing~~our ~~materials~~Phase ~~and~~2a ~~the~~clinical ~~manufacturing~~trial offor ~~validation~~GEMTESA ~~batches~~for the treatment of ~~vibegron,~~abdominal aspain ~~well~~due asto IBS and the ~~manufacturing~~continuation of ~~drug~~our ~~substance~~other ~~for~~ongoing ~~future~~ clinical ~~supply of URO-902~~trials;

• an increase of $1.63 million in personnel-related costs, ~~including share-based compensation,~~ due to increased headcount; and

• an increase of $0.28 million in other ~~program-specific~~unallocated ~~third-party~~ research and development costs ~~to support the continuation of our clinical programs~~.

General and Administrative Expenses

General and administrative expenses increased by $1113.53 million, to $1830.90 million, for the three months ended ~~September~~December 3031, 2020 compared to $716.47 million for the three months ended ~~September~~December 3031, 2019. The increase in general and administrative expenses was primarily attributed to the following:

• an increase of $57.49 million in commercial readiness costs;

• an increase of $4.98 million in personnel-related costs due to increased headcount to support our organizational growth as we continue to prepare for our commercial launch of ~~vibegron, if approved~~GEMTESA;

• an increase of $03.7 million in legal and other professional and consulting fees primarily due to transaction related legal and finance costs in connection with the Merger Agreement and increase service provider costs to support our operational growth; and

• an increase of $01.51 million in general overhead and corporate expenses due to increased costs associated with operating as a public company, such as director and officer insurance premiums and larger office facilities to accommodate our increased headcount.

These increased costs were partially offset by a decrease of $4.2 million in share-based compensation expense for stock options and restricted stock units granted to employees and board members due to the acceleration of vesting of certain stock options and restricted stock units as a result of the sale of RSL’s interest in the Company to Sumitomo Dainippon Pharma in December 2019.

Interest Expense, Net

Interest expense, net for the three months ended ~~September~~December 3031, 2020 consists of interest expense related to the Sumitomo Loan Agreement, as well as the associated non-cash amortization of debt issuance costs, partially offset by interest income earned on interest bearing cash deposit accounts. Interest expense, net for the three months ended ~~September~~December 3031, 2019 includes the interest expense related to our prior loan agreement with Hercules, which was terminated in January 2020. Interest expense, net, increased by $0.92 million, to $1.56 million, for the three months ended ~~September~~December 3031, 2020 compared to $01.64 million for the three months ended ~~September~~December 3031, 2019 primarily due to the Company entering into the Sumitomo Loan Agreement in December 2019.

30Comparison of the Nine Months Ended December 31, 2020 and 2019

~~Comparison~~The following table sets forth our results of operations for the ~~Six~~nine ~~Months~~months ~~Ended~~ended ~~September~~December 3031, 2020 and 2019 (in thousands):

The following table sets forth our results of operations for the six months ended September 30, 2020 and 2019 (in thousands):

	Nine Months Ended December 31,
	2020			2019
Operating expenses:
Research and development	$	46,506		$	62,909
General and administrative		61,387			29,587
Total operating expenses		107,893			92,496
Other expense:
Interest expense, net		(4,522	)		(2,495	)
Loss on disposal of property and equipment		—			(236	)
Other expense, net		(155	)		(145	)
Loss before (benefit from) provision for income taxes		(112,570	)		(95,372	)
(Benefit from) provision for income taxes		(123	)		113
Net loss	$	(112,447	)	$	(95,485	)

	Six Months Ended September 30,
	2020			2019
Operating expenses:
Research and development	$	30,890		$	39,810
General and administrative		31,422			12,900
Total operating expenses		62,312			52,710
Other expense:
Interest expense, net		(2,907	)		(1,094	)
Loss on disposal of property and equipment		—			(236	)
Other expense		(426	)		(111	)
Loss before provision for income taxes		(65,645	)		(54,151	)
Provision for income taxes		5			75
Net loss	$	(65,650	)	$	(54,226	)

Research and Development Expenses

For the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, our research and development expenses consisted of the following (in thousands):

	Six Months Ended September 30,
	Nine Months Ended December 31,
	2020		2019
Program-specific costs:
Vibegron	$	20,292	$	34,126
GEMTESA (vibegron)	$	29,444	$	51,179
URO-902		34,~~182~~998		~~819~~1,929
Unallocated costs:
Share-based compensation		~~788~~1,192		~~522~~3,366
Personnel expenses		58,~~385~~314		34,~~206~~789
Other expense		12,~~243~~558		1,~~137~~646
Total research and development expenses	$	3046,~~890~~506	$	3962,~~810~~909

Research and development expenses decreased by $816.94 million, to $3046.95 million, for the ~~six~~nine months ended ~~September~~December 3031, 2020 compared to $3962.89 million for the ~~six~~nine months ended ~~September~~December 3031, 2019. The decrease in research and development expenses was primarily attributed to the following:

• a decrease of $1715.03 million in CRO costs primarily due to the completion of the Phase 3 EMPOWUR study and the ambulatory blood pressure study for ~~vibegron~~GEMTESA in the prior fiscal year; ~~and~~

• a decrease of $05.64 million in ~~other~~fees ~~program-specific~~paid ~~third-party~~pursuant ~~research~~to ~~and~~the ~~development~~Prescription ~~costs~~Drug toUser ~~support~~Fee Act, or PDUFA, in connection with the ~~continuation~~submission of our ~~clinical~~NDA ~~programs.~~for GEMTESA and the milestone payment pursuant to the collaboration agreement with Kyorin, each of which was paid in December 2019 and did not re-occur in the nine months ended December 31, 2020;

•

a decrease of $2.6 million in other program-specific third-party research and development costs; and

•

a decrease of $2.2 million in share-based compensation due to the acceleration of vesting of certain stock options and restricted stock units as a result of the sale of RSL’s interest in the Company to Sumitomo Dainippon Pharma in December 2019.

These decreased expenses were partially offset by increases primarily attributed to the following:

• an increase of $64.17 million in chemistry, manufacturing and controls costs as a result of sourcing materials and the manufacturing of validation batches of ~~vibegron~~GEMTESA, as well as the manufacturing of drug substance for future clinical supply of URO-902;

• an increase of $23.5 million in personnel-related costs, ~~including share-based compensation,~~ due to increased headcount; and

• an increase of $0.19 million in other unallocated research and development costs.

General and Administrative Expenses

General and administrative expenses increased by $1831.58 million, to $3161.4 million, for the ~~six~~nine months ended ~~September~~December 3031, 2020 compared to $1229.96 million for the ~~six~~nine months ended ~~September~~December 3031, 2019. The increase in general and administrative expenses was primarily attributed to the following:

• an increase of $816.53 million in commercial readiness costs;

31• an increase of $11.9 million in personnel-related costs due to increased headcount to support our organizational growth as we continue to prepare for our commercial launch of GEMTESA;

• an increase of $75.10 million in ~~personnel-related~~legal ~~costs~~and other professional and consulting fees primarily due to ~~increased~~transaction ~~headcount~~related tolegal ~~support~~and ~~our~~finance ~~organizational~~costs ~~growth~~in asconnection wewith ~~continue~~the toMerger ~~prepare~~Agreement ~~for~~and ~~our~~increased ~~commercial~~service ~~launch~~provider ofcosts ~~vibegron,~~to ifsupport ~~approved~~our operational growth; and

• an increase of $1.39 million in ~~legal~~general overhead and ~~other~~corporate ~~professional~~expenses due to increased costs associated with operating as a public company, such as director and ~~consulting~~officer ~~fees;~~insurance premiums and larger office facilities to accommodate our increased headcount.

•These anincreased ~~increase~~costs were partially offset by a decrease of $03.93 million in share-based compensation expense for stock options, and restricted stock units ~~and stock appreciation rights~~ granted to employees and ~~Board~~board members ~~primarily~~due ~~from~~to ~~our~~the ~~increased~~acceleration ~~headcount;~~of vesting of certain stock options and restricted stock units as a result of the sale of RSL’s interest in the Company to Sumitomo Dainippon Pharma in December 2019.

• an increase of $0.7 million in general overhead and corporate expenses due to increased costs associated with operating as a public company, such as director and officer insurance premiums and larger office facilities to accommodate our increased headcount.37

Interest Expense, Net

Interest expense, net for the ~~six~~nine months ended ~~September~~December 3031, 2020 consists of interest expense related to the Sumitomo Loan Agreement as well as the associated non-cash amortization of debt issuance costs, partially offset by interest income earned on interest bearing cash deposit accounts. Interest expense, net for the ~~six~~nine months ended ~~September~~December 3031, 2019 includes the interest expense related to our prior loan agreement with Hercules, which was terminated in January 2020. Interest expense, net, increased by $12.80 million, to $24.95 million, for the ~~six~~nine months ended ~~September~~December 3031, 2020 compared to $12.15 million for the ~~six~~nine months ended ~~September~~December 3031, 2019 primarily due to the Company entering into the Sumitomo Loan Agreement in December 2019.

Liquidity and Capital Resources

Sources of Liquidity

In October 2018, we completed our IPO, in which we sold 10,297,813 common shares, including 297,813 common shares pursuant to the partial exercise of the underwriters’ over-allotment option to purchase additional shares, at a public offering price of $14.00 per common share. The net proceeds to us were approximately $132.9 million, after deducting $10.1 million in underwriting discounts and commissions and $1.2 million in offering expenses.

In February 2019, we entered into a loan agreement with Hercules in the amount of $100.0 million. A first tranche of $15.0 million was funded in February 2019, and a second tranche of $30.0 million was funded in September 2019. In January 2020, we terminated the loan agreement with Hercules in connection with, and as a requirement under, the Sumitomo Loan Agreement and repaid in full our remaining obligations under the loan agreement as of the date of termination totaling $48.2 million.

In November 2019, we filed a registration statement on Form S-3 under the Securities Act to register the offer and sale of up to an aggregate of $200.0 million of our securities, which includes our $50.0 million “at-the market” equity offering program. As of ~~November~~February 212, ~~2020~~2021, we have not sold any common shares under our “at-the-market” equity offering program.

In December 2019, we entered into the Sumitomo Loan Agreement in the amount of $300.0 million. In February 2021, the Sumitomo Loan Agreement was amended to increase the amount available to us pursuant to the Sumitomo Loan Agreement to $425.0 million. Sumitomo Dainippon Pharma funded an initial amount of $87.5 million in December 2019, an amount of $84122.0 million during the ~~six~~nine months ended ~~September~~December 3031, 2020 and an additional amount of $3858.0 million in ~~November~~January ~~2020~~2021. As of ~~November~~February 212, ~~2020~~2021, $~~209~~267.5 million was outstanding under the Sumitomo Loan Agreement and $90157.5 million remained available to us, which amount may be drawn down by us, upon request, no more than once in any calendar quarter, ~~subject~~pursuant to funding requests by us that are made in accordance with our Board -approved operating budget.

As of ~~September~~December 3031, 2020, we had an accumulated deficit of $~~387~~434.97 million and a cash balance of $7471.43 million, as compared to $322.3 million and $51.4 million, respectively, as of March 31, 2020. Prior to our IPO, the loan agreement with Hercules and the Sumitomo Loan Agreement, all operations had been financed through capital contributions or short-term advances from ~~Roivant Sciences Ltd., or~~ RSL, or its affiliates.

Capital Requirements

For the three months ended ~~September~~December 3031, 2020 and 2019, we had a net loss of $3546.28 million and $2541.73 million, respectively, and for the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, we had a net loss of $65112.74 million and $5495.25 million, respectively. We have never generated any revenue.

We expect to continue to incur significant operating losses and negative cash flows at least for the next several years. We do not expect to generate product revenue until we successfully complete development of, obtain regulatory approval for, and commercialize at least one of our current or future product candidates, which may never occur. Our net losses and negative cash flows may fluctuate significantly from quarter-to-quarter and year-to-year, depending on our ability to generate product revenues, the timing of our planned clinical trials, our expenditures on other research and development activities and our ~~pre-~~commercialization ~~and commercialization~~ efforts. We anticipate that our capital requirements will increase substantially as we:

• increase our efforts to establish a sales, marketing and distribution infrastructure in anticipation of our commercial launch of GEMTESA in the United States, including the potential future payment obligations pursuant to the Co-Promotion Agreement, which are expected to begin in April 2023;

• advance our Phase 3 COURAGE trial of ~~vibegron~~GEMTESA for the treatment of OAB in men with BPH;

• advance the clinical development of vibegron for the treatment of abdominal pain due to IBS beyond our ongoing Phase 2a trial;

•

advance the clinical development of URO-902 for the treatment of OAB in patients who have not responded to oral pharmacological therapies beyond our ongoing Phase 2a trial;

• expand our chemistry, manufacturing, and control and other manufacturing related activities, including increasing the scale of our external manufacturing capabilities to commercialize GEMTESA and any future drug candidates for which we may obtain regulatory approval;

•

identify, acquire, develop and commercialize additional product candidates;

•

integrate acquired technologies into a comprehensive regulatory and product development strategy;

•

maintain, expand and protect our intellectual property portfolio;

•

hire scientific, clinical, regulatory, quality control, and administrative personnel;

•

add operational, financial and management information systems and personnel, including personnel to support our drug development efforts;

•

seek regulatory approvals for any product candidates that successfully complete clinical trials;

•

service debt obligations and payment of interest associated with the Sumitomo Loan Agreement; and

•

continue to operate as a public company.

Our primary use of cash is to fund the ~~development~~commercialization of ~~vibegron~~GEMTESA for the treatment of OAB, advance our Phase 3 COURAGE trial for ~~vibegron~~GEMTESA for the treatment of OAB in men with BPH, advance our Phase 2a clinical trial for ~~vibegron in patients with abdominal pain due to IBS, advance our Phase 2a clinical trial for~~ URO-902 for the treatment of OAB in patients who have not responded to oral pharmacological therapies, and to fund our ~~commercial readiness and~~ general and administrative costs. We expect our operating expenses to continue to increase in the future as we expand our operations tofor ~~continue~~the tocommercialization ~~develop~~of ~~our~~GEMTESA ~~product candidates~~ and continue to ~~prepare~~develop GEMTESA for ~~the~~other ~~potential~~indications ~~future~~and ~~regulatory~~our ~~approvals~~gene ~~and~~therapy ~~commercialization~~product ~~of vibegron~~candidate. Based on our anticipated spend and the timing of expenditure assumptions, we currently believe that our existing cash, together with the draw down under the Sumitomo Loan Agreement of $3858.0 million in ~~November~~January ~~2020~~2021 and the remaining financing commitment from Sumitomo Dainippon Pharma of $90157.5 million, which is available to us if our future funding requests are in accordance with our Board -approved operating budget, will be sufficient to fund our committed operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q. This estimate is based on our current assumptions, including assumptions relating to the ~~timing~~commercial launch of ~~regulatory~~GEMTESA ~~approval~~for ~~and~~the ~~subsequent~~treatment ~~launch~~ of ~~vibegron for~~ OAB and our ability to manage the amount and timing of our spend. Our current assumptions may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Changes may occur that would consume our available capital faster than anticipated, including the length and severity of the COVID-19 pandemic and measures taken to control the spread of COVID-19, as well as changes in and progress of our development activities and the impact on commercialization efforts due to the COVID-19 pandemic. We will need additional funding tofor our long-term commercial efforts for GEMTESA for the treatment of OAB, complete the clinical development of, and seek regulatory approval for, ~~vibegron~~GEMTESA for the treatment of OAB in men with BPH and ~~abdominal pain due to IBS,~~ URO-902, and commercially launch ~~vibegron or~~ URO-902, if approved.

In November 2020, we entered into the Merger Agreement. If the Merger is not approved by our shareholders as required by the Merger Agreement, any of the other conditions to the consummation of the Merger is not satisfied or waived, or the parties to the Merger Agreement fail to consummate the Merger for any other reason (see Note 6[A] to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information), we will seek to obtain additional capital as needed through equity financings, debt or other financing arrangements, such as potential collaboration, license or development agreements. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic, or otherwise, as well as may be limited pursuant to the terms of the Sumitomo Loan Agreement and Sumitomo Dainippon Pharma’s ability to exert substantial influence and control over us due to Sumitomo Dainippon Pharma’s majority ownership of our outstanding common shares. As such, adequate additional funding may not be available to us on acceptable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations, and financial condition.

Until such time, ~~if ever,~~ as we can generate substantial product revenue from sales of ~~vibegron,~~GEMTESA ~~URO-902~~ or any future product ~~candidate~~candidates, if approved, we expect to finance our cash needs through a combination of the remaining financing commitment available to us from the Sumitomo Loan Agreement, equity offerings, debt financings and potential collaboration, license or development agreements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common shareholder. ~~Our~~The ~~agreement with~~ Sumitomo ~~Dainippon~~Loan ~~Pharma~~Agreement involves, and any agreements for future debt or preferred equity financings, if available, may involve covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

33In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise capital, when needed, in sufficient amounts or on terms acceptable to us, or if the current financing commitment of $157.5 million under the Sumitomo Loan Agreement is no longer available to us despite our future funding requests being in accordance with our Board-approved operating budget, we may have to significantly delay or scale back our operations to reduce working capital requirements beginning in the second calendar quarter of 2021 and substantial uncertainty would exist with respect to our ability to continue as a going concern. In addition, we will prioritize necessary and appropriate steps to enable the continued operations of the business and preservation of the value of our assets beyond the next twelve months, including but not limited to, actions such as reduced personnel-related costs, delay or curtailment of our commercial launch efforts for GEMTESA, development activities and other discretionary expenditures that are within our control. These reductions in expenditures, if required, may have an adverse impact on our ability to achieve certain of our planned objectives in fiscal year 2021 and any of these actions could materially harm our business, results of operations and future prospects.

In addition, if we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise capital, when needed, in sufficient amounts or on terms acceptable to us, or if the current financing commitment of $90.5 million under the Sumitomo Loan Agreement is no longer available to us despite our future funding requests being in accordance with our Board approved operating budget, we may have to significantly delay or scale back our operations to reduce working capital requirements beginning in the second calendar quarter of 2021 and substantial uncertainty would exist with respect to our ability to continue as a going concern. We will prioritize, as necessary and appropriate, steps to enable the continued operations of our business and the preservation of the value of our assets beyond the next twelve months, including, but not limited to, actions such as reducing personnel-related costs, curtailment of our commercial launch efforts for vibegron, if approved, development activities and other discretionary expenditures that are within our control. These reductions in expenditures, if required, may have an adverse impact on our ability to achieve certain of our planned objectives in fiscal years 2020 and 2021. Additionally, we may have to discontinue the development or commercialization of vibegron or URO-902, grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves or potentially discontinue operations and substantial uncertainty would exist with respect to our ability to continue as a going concern. Any of these actions could materially harm our business, results of operations and future prospects. 39

Cash Flows

The following table sets forth a summary of our cash flows for the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019 (in thousands):

	Six Months Ended September 30,
	Nine Months Ended December 31,
	2020			2019
Net cash used in operating activities	$	(63110,~~440~~269	)	$	(4670,~~968~~531	)
Cash used in investing activities		(~~448~~1,327	)		(~~589~~732	)
Net cash provided by financing activities		88133,~~457~~059			30117,~~023~~854

Operating Activities

For the ~~six~~nine months ended ~~September~~December 3031, 2020, $63110.43 million of cash was used in operating activities. This was primarily attributable to a net loss of $65112.74 million and an increase in prepaid expenses and other current assets of $28.70 million primarily for prepayments made to our CRO in advance of services completed for our Phase 3 COURAGE study and prepaid deposits to our CMO for future manufacturing of drug substance for GEMTESA. This amount was partially offset by $39.43 million in share-based compensation expense from stock options, restricted stock units and stock appreciation rights granted to employees and Board members, as well as the increased fair value of certain stock options classified as liability instruments, an increase of $01.92 million in accounts payable and accrued expenses, and $0.57 million in non-cash operating lease costs.

For the ~~six~~nine months ended ~~September~~December 3031, 2019, $4770.05 million of cash was used in operating activities. This was primarily attributable to a net loss of $5495.25 million. This amount was partially offset by $14.8 million in share-based compensation expense from stock options and restricted stock units granted to employees and board members as a ~~decrease~~result of the acceleration of vesting of certain stock options and restricted stock units due to the sale of RSL’s interest in the Company to Sumitomo Dainippon Pharma in December 2019, an increase of $05.35 million in accounts payable and accrued expenses. ~~These~~primarily ~~amounts~~due ~~were~~to ~~partially~~the ~~offset~~milestone bypayment due under the Kyorin collaboration agreement, a decrease of $42.19 million in prepaid expenses and other current assets primarily due to the expense of amounts paid in advance of services performed by our CRO for our Phase 3 EMPOWUR study, $~~2.3 million in share-based compensation expense from stock options and restricted stock units granted to employees and Board members, $~~0.35 million in non-cash operating lease costs, $0.2 million from the loss on disposal of furniture and equipment upon our move to ~~the~~a ~~new~~larger office space in Irvine, California ~~office space~~, and $0.47 million for the amortization of the debt discount and issuance costs from the prior loan agreement with Hercules.

Investing Activities

For the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, $01.43 million and $0.67 million of cash was used in investing activities, respectively, ~~all~~primarily for the purchase of property and equipment.

Financing Activities

For the ~~six~~nine months ended ~~September~~December 3031, 2020, cash provided by financing activities of $88133.51 million was primarily attributable to proceeds of $84122.0 million from the loans under the Sumitomo Loan Agreement, proceeds of $410.15 million from the exercise of stock options, and proceeds from the issuance of common shares pursuant to the 2019 Employee Stock Purchase Plan of $0.36 million.

For the ~~six~~nine months ended ~~September~~December 3031, 2019, cash provided by financing activities of $30117.09 million was primarily attributable to proceeds of $87.5 million from the Sumitomo Loan Agreement, proceeds of $30.0 million from the ~~debt~~prior ~~financing~~loan agreement with Hercules, proceeds of $0.28 million from the exercise of stock options, and capital contributions from RSL of $0.23 million, offset by the payment of debt financing costs in connection with the ~~Hercules~~prior ~~Loan~~loan ~~Agreement~~agreement with Hercules of $0.4 million and deferred offering costs in connection with our “at-the-market” equity offering program of $0.2 million.

Contractual Obligations and Commitments

During the ~~six~~nine months ended ~~September~~December 3031, 2020, there were no material changes outside of the ordinary course of business to our commitments and the specified contractual obligations set forth in the contractual obligations table included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 filed with the SEC on June 19, 2020, except as described below.

34During the nine months ended December 31, 2020, we received loans in the amount of $122.0 million pursuant to the Sumitomo Loan Agreement. See Note 5, “Related-party long-term debt” to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of this loan agreement. In addition, subsequent to December 31, 2020, in January 2021, we drew an additional $58.0 million under the Sumitomo Loan Agreement and, in February 2021, amended the Sumitomo Loan Agreement to increase the maximum principal amount available to be borrowed by the Company to $425.0 million. Subsequent to this draw, $267.5 million was outstanding under the Sumitomo Loan Agreement.

~~During~~In October 2020, USG entered into the ~~six~~Co-Promotion ~~months~~Agreement ~~ended~~with ~~September~~Sunovion. 30Pursuant to the Co-Promotion Agreement, ~~2020~~among other things, weUSG ~~received~~appointed ~~loans~~Sunovion as its co-promoter of GEMTESA to primary care physicians in the ~~amount~~Territory offor ~~$84.0~~the ~~million~~period ~~pursuant~~commencing toupon the ~~Sumitomo~~regulatory ~~Loan~~approval ~~Agreement~~of GEMTESA and ending on March 31, 2026. See Note 46[G], “~~Long~~Related party transactions—Co-~~term~~promotion ~~debt~~agreement - Sunovion” to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of ~~this loan agreement. In addition, subsequent to September 30, 2020, in November 2020, we drew an additional $38.0 million under~~ the ~~Sumitomo~~Co-Promotion ~~Loan~~ Agreement. ~~Subsequent to this draw, $209.5 million was outstanding under the Sumitomo Loan Agreement.~~

In October 2020, USG entered into the Co-Promotion Agreement with Sunovion. Pursuant to the Co-Promotion Agreement, among other things, USG appointed Sunovion as its co-promoter of vibegron to primary care physicians in the Territory for the period commencing upon the regulatory approval of vibegron and ending on March 31, 2026. See Note 12[B], “Subsequent events—Sunovion co-promotion agreement” to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a further discussion of the Co-Promotion Agreement.40

Off-Balance Sheet Arrangements

During the periods presented, we did not have nor do we currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the consolidated balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis. Significant estimates include assumptions used to determine which costs are charged to research and development and general and administrative expense, as well as assumptions used to estimate the fair value of common share and option awards and any potential impairments of long-lived assets (including intangible assets).

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

During the ~~six~~nine months ended ~~September~~December 3031, 2020, there were no material changes to our critical accounting policies and use of estimates from those disclosed under the heading “Management’s discussion and analysis of financial condition and results of operations—Critical accounting policies and significant judgments and estimates” and in the footnotes to our audited consolidated financial statements for the year ended March 31, 2020 included in our Annual Report on Form 10-K filed with the SEC on June 19, 2020 other than the following.

Intangible Asset

Intangible assets are reviewed for impairment on an annual basis as well as between annual tests if we become aware of any events or changes that would indicate that it is more likely than not that the fair values of the intangible assets are below their respective carrying amounts. When performing quantitative impairment assessments, we calculate the fair value using discounted cash flow models that require significant estimates and assumptions including but not limited to:

•

estimates of revenues and operating profits related to the product;

•

the life of the potential commercialized product and associated risks; and

•

risks related to the viability of and potential alternative treatments in any target markets.

If the carrying value of an intangible asset exceeds its fair value, then the intangible asset is written-down to its fair value.

Recent Accounting Pronouncements

For information regarding recently issued accounting pronouncements and the expected impact on our consolidated financial statements, see Note 2, “Summary of significant accounting policies,” to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

Under SEC rules and regulations, because we are considered to be a “smaller reporting company,” we are not required to provide the information required by this item in this report.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be

disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures as of ~~September~~December 3031, 2020, the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~September~~December 3031, 2020 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended ~~September~~December 3031, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls, will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

3642

PART II—OTHER INFORMATION

Item 1.Legal Proceedings.

~~From~~For ~~time~~a todescription ~~time,~~of weour ~~may become involved in~~ legal proceedings, ~~related~~see to“Shareholder ~~claims~~Litigation” ~~arising~~in ~~from~~Note ~~the~~11, ~~ordinary~~Commitments ~~course~~and ofContingencies, ~~business.~~to Weour ~~are~~unaudited ~~not~~condensed ~~currently~~consolidated afinancial ~~party~~statements tocontained ~~any~~in ~~material~~Part ~~legal proceedings~~I, ~~and~~Item we1 ~~are not aware~~ of ~~any~~this ~~pending~~Quarterly orReport ~~threatened legal proceedings against us that we believe could have a material adverse effect~~ on ~~our~~Form ~~business, operating results, or financial condition~~10-Q.

Item 1A.Risk Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed and the trading price of our common shares could decline. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.

The risks and uncertainties discussed below update and supersede the risks and uncertainties previously disclosed in Part I, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2020, which was filed with the SEC on ~~August~~November 132, 2020. ~~There~~Other than the additional risk factors related to the Merger Agreement and the Merger and the potential change to the competitive landscape for GEMTESA due to the Myrbetriq patent extension, there have been no material changes to the risks and uncertainties previously disclosed in such Quarterly Report on Form 10-Q.

Risks Related to the Proposed Merger

The conditions to the Merger set forth in the Merger Agreement may not be satisfied or waived in a timely manner or at all, and the Merger Agreement may be terminated in accordance with its terms, which could negatively impact our business, financial condition, results of operations, and the price of our common shares.

On November 12, 2020, we entered into the Merger Agreement. Completion of the Merger is subject to the satisfaction or waiver of several customary conditions, including: (i) receipt of each of the General Shareholder Approval and the Public Shareholder Approval (each as defined in Note 6[A] to the unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q) , (ii) the absence of any law, injunction, judgment or other legal restraint that prohibits the consummation of the Merger, (iii) the accuracy of each party’s representations and warranties (subject to certain qualifications), (iv) each party’s performance in all material respects of its obligations contained in the Merger Agreement and (v) the absence of a material adverse effect on USL.

If the Merger is not consummated on or before May 12, 2021, because any of the conditions set forth above have not been satisfied or waived or due any other impediment, then either USL or Sumitovant will be able to terminate the Merger Agreement (to the extent the terminating party’s breach of any provision of the Merger Agreement did not directly or indirectly cause the failure to consummate the Merger). Similarly, if we do not obtain the Public Shareholder Approval at a special meeting of USL shareholders at which a vote on the Merger was taken, then either USL or Sumitovant will be able to terminate the Merger Agreement. In addition, both USL and Sumitovant have the right to terminate the Merger Agreement if because of any breach of the Merger Agreement by the other party, the closing conditions regarding the accuracy of such party’s representations and warranties or the performance of such party’s obligations could not be satisfied as of the anticipated closing date. These terms and conditions, and other circumstances under which the Merger Agreement may be terminated in accordance with its terms, are described in more detail in the Merger Agreement, which we filed as an exhibit to the Current Report on Form 8-K with the SEC on November 13, 2020.

We intend to pursue the satisfaction or waiver, as applicable, of each condition to the completion of the Merger, including the receipt of the General Shareholder Approval and the Public Shareholder Approval. However, no assurance can be given that the required approvals will be obtained and, even if all such approvals are obtained, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the Merger Agreement.

If the Merger is not completed, the share price of our common shares may change to the extent that the current market price of our common shares reflects an assumption that the Merger will be completed. The failure of the parties to consummate the Merger could also result in negative publicity for the Company or negative impressions of us in the investment community or business community generally. In addition, certain costs related to the Merger, including the fees and/or expenses of our legal and financial advisors, may be required to be paid even if the Merger is not completed.

The announcement of the Merger could negatively impact our business, financial condition, or results of operations.

Our announcement of having entered into the Merger Agreement could cause a material disruption to our business and there can be no assurance that the conditions to the completion of the Merger will be satisfied. We are subject to several risks as a result of the announcement of the Merger Agreement, including, but not limited to, the following:

•

Pursuant to the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to the completion of the Merger, which restrictions could adversely affect our ability to realize certain of our business strategies or take advantage of certain business opportunities;

•

We may be unable to retain certain key employees who may seek and obtain different employment in anticipation of the completion of the Merger; and

•

Third parties may determine to delay or defer purchase decisions or contractual arrangements or terminate and/or attempt to renegotiate their relationships with us as a result of the Merger, whether pursuant to the terms of their existing agreements with us or otherwise.

In addition to these risks, the announcement of our entry into the Merger Agreement could attract frivolous lawsuits from litigious parties that frequently target mergers of publicly-traded companies. Indeed, since the announcement of the Merger Agreement on November 12, 2020 and the filing of the Company’s preliminary proxy statement with the SEC on December 29, 2020, three single-plaintiff lawsuits have been filed against USL and each of the directors serving on the Board concerning the Merger. See Part II, Item 1. “Legal Proceedings” for more information regarding such lawsuits. Responding to these lawsuits, and any other litigation targeting the Merger, will require the Company to incur legal costs and expenses and may divert the time and attention of our management away from our business operations.

The Merger Agreement contains provisions that could make it difficult for a third party to acquire us prior to the completion of the Merger.

The Merger Agreement contains restrictions on our ability to seek or accept a third-party proposal for an acquisition of the Company. These provisions include our agreement not to solicit or initiate any additional discussions with third parties regarding other proposals for our acquisition, as well as restrictions on our ability to respond to such proposals. Under certain circumstances set forth in the Merger Agreement, the Company is permitted to terminate the Merger Agreement to accept a superior proposal from a third party to acquire the Company; however, the Company would be required to pay Sumitovant a termination fee equal to $13,620,000 in connection with such termination.

These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer a greater value to our shareholders than the $16.25 per share merger consideration. Furthermore, even if a third party elects to propose an acquisition, the requirement that the Company must pay a termination fee to accept any such proposal may cause that third party to offer of a lower price to our shareholders than such third party might otherwise have offered.

Attending to matters related to the Merger could divert our management’s focus from our ongoing business operations.

Our management will need to take several actions in connection with the proposed Merger, including, among other things, holding a special meeting of our shareholders for the purposes of considering and voting on the adoption and approval of the Merger Agreement, filing a proxy statement, in preliminary and definitive form, in connection with its solicitation of proxies from our shareholders for the special meeting, responding to questions from our shareholders, employees, suppliers, counterparties and other interested stakeholders regarding the proposed Merger, addressing litigation brought against the Company and its directors in connection with the proposed Merger, ensuring that the Company complies with the various restrictions on the conduct of our business set forth in the Merger Agreement, and working with Sumitovant to ensure the various conditions to closing the Merger are satisfied or waived.

These tasks could divert our management’s focus away from our ongoing business operations or reduce the time or resources management could otherwise direct towards the commercial launch our lead product, GEMTESA, or the development, regulatory approval, and commercialization of GEMTESA for OAB in men with BPH or our gene therapy product candidate, URO-902. If management is not able to devote sufficient time to these significant development and commercialization efforts, our business and the results of our operations could be materially impaired.

Risks Related to Our Business, Financial Position and Capital Requirements

We have a limited operating history and have never generated any product revenue.

We are a clinical-stage biopharmaceutical company with a limited operating history. We were incorporated in January 2016, and our operations to date have primarily been developing ~~vibegron~~and obtaining regulatory approval for GEMTESA for the treatment of OAB, organizing and staffing our company, and acquiring rights to ~~vibegron~~GEMTESA and URO-902. We have not yet demonstrated an ability to ~~successfully obtain marketing approval,~~ manufacture a commercial scale product, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, we have no meaningful operations upon which to evaluate our business and predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

Our ability to generate product revenue and become profitable depends upon our ability to successfully complete the development of, and obtain the necessary regulatory approvals for, vibegron for the treatment of OAB or our other targeted indications, OAB in men with BPH and abdominal pain due to IBS, as well as URO-902 for the treatment of OAB. We have never been profitable, have no products approved for commercial sale, and have not generated any product revenue.44

~~Even~~Our ifability weto ~~receive~~generate ~~regulatory~~product ~~approval~~revenue ~~for~~and ~~one~~become ofprofitable depends upon our ~~product~~ability ~~candidates,~~to wesuccessfully docommercialize ~~not~~GEMTESA ~~know~~for ~~when~~the ortreatment ifof itOAB ~~will~~and ~~generate~~develop ~~product~~and ~~revenue.~~obtain ~~Our~~regulatory ~~ability~~approval tofor ~~generate~~our ~~product~~other ~~revenue~~targeted ~~depends~~indication, onOAB ain ~~number~~men ofwith ~~factors~~BPH, ~~including,~~as ~~but~~well as URO-902 for the treatment of OAB. We have never been profitable and have not ~~limited~~generated ~~to,~~any ~~our~~product ~~ability~~revenue to: date.

•Our ~~successfully~~ability ~~complete~~to ~~clinical~~generate ~~trials~~product ~~and~~revenue ~~obtain~~depends ~~regulatory~~on ~~approval~~a ~~for~~number ~~the~~of ~~marketing~~factors, ofincluding, but not limited to, our ~~product~~ability ~~candidates;~~to:

• add operational, financial and management information systems personnel, including personnel to support our clinical, manufacturing and planned ~~future~~ commercialization efforts;

• initiate and continue relationships with third-party manufacturers and have commercial quantities of our product ~~candidates~~ manufactured at acceptable cost and quality levels and in compliance with FDA and other regulatory requirements;

•

attract and retain experienced management and advisory teams;

•

raise additional funds when needed and on terms acceptable to us;

• ~~commercial~~commercially launch of our ~~products~~product, whether alone or in collaboration with others, including establishing sales, marketing and distribution systems for our product ~~candidates~~;

• set an acceptable price for our product ~~candidates~~ and obtain coverage and adequate reimbursement from third-party payors;

• achieve broad market acceptance of our ~~products~~product in the medical community and with third-party payors and consumers; and

•

maintain, expand and protect our intellectual property portfolio.

37Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses, or when or if, we will be able to achieve or maintain profitability. Our expenses could increase beyond expectations if we are required by the FDA or comparable non-U.S. regulatory authorities to perform studies or clinical trials in addition to those that we currently anticipate. Even with the approval of GEMTESA for commercial sale, we anticipate incurring significant costs associated with its commercial launch. If we cannot successfully execute any one of the foregoing, our business may not succeed.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses, or when or if, we will be able to achieve or maintain profitability. Our expenses could increase beyond expectations if we are required by the FDA or comparable non-U.S. regulatory authorities to perform studies or clinical trials in addition to those that we currently anticipate. Even if one of our product candidates is approved for commercial sale, we anticipate incurring significant costs associated with its commercial launch. If we cannot successfully execute any one of the foregoing, our business may not succeed.

We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that a product candidate will fail to gain regulatory approval or fail to become commercially viable. We have never generated any product revenue, and we cannot estimate with precision the extent of our future losses. WeWhile dowe ~~not currently~~ have ~~any~~a ~~products~~product that ~~are~~is available for commercial sale, ~~and~~ we may never ~~generate product revenue or~~ achieve profitability. Our net loss was $3546.28 million and $2541.73 million for the three months ended ~~September~~December 3031, 2020 and 2019, respectively, and $65112.74 million and $5495.25 million for the ~~six~~nine months ended ~~September~~December 3031, 2020 and 2019, respectively. As of ~~September~~December 3031, 2020, we had an accumulated deficit of $~~387~~434.97 million.

We expect to continue to incur substantial and increasing losses through the commercialization of our product ~~candidates,~~GEMTESA ifand ~~approved.~~our ~~Our~~gene therapy product ~~candidates have not been approved for marketing anywhere in the world~~candidate, ~~and~~if ~~they may never receive such approval~~approved. AsWe ~~a result, we~~ are uncertain when or if we will achieve profitability and, if so, whether we will be able to sustain it. Our ability to generate product revenue and achieve profitability is dependent on our ability to manufacture and successfully market GEMTESA alone or in collaboration with others and to complete the development of, obtain necessary regulatory approvals for, and ~~manufacture~~commercialize ~~and~~our ~~successfully~~gene ~~market~~therapy ~~our~~ product ~~candidates alone or in collaboration with others~~candidate. We cannot assure you that we will be profitable even if we successfully commercialize our product ~~candidates~~. IfOur ~~we do successfully obtain regulatory approval to market our product candidates, our~~ revenue will be dependent upon, in part and among other things, the size of the markets in the territories for which we gain regulatory approval, the number of competitors in such markets, the accepted price for our product ~~candidates~~ and whether we own the commercial rights for those territories. If the indication approved by regulatory authorities is narrower than we expect, or the treatment population is narrowed by competition, physician choice or treatment guidelines, we may not generate significant revenue from sales of our product ~~candidates, even if approved~~. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our common shares and our ability to raise capital and continue operations.

We expect our research and development expenses in connection with our development programs for ~~our~~GEMTESA ~~product~~for ~~candidates~~the totreatment ~~continue~~of toOAB bein ~~significant.~~men Inwith ~~addition,~~BPH asand weour ~~prepare~~gene ~~for~~therapy ~~and~~product ifcandidate weto ~~obtain~~continue ~~regulatory~~to ~~approval~~be ~~for~~significant. ~~our~~In ~~product candidates~~addition, we expect to incur increased sales, marketing and manufacturing expenses with the approval of GEMTESA. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. These losses had, and will continue to have, an adverse effect on our results of operations, financial position and working capital.

We are heavily dependent on the success of our lead product ~~candidate~~, ~~vibegron~~GEMTESA, and if ~~vibegron~~GEMTESA ~~does not successfully complete clinical development or receive regulatory approval, or~~ is not successfully commercialized, our business may be harmed.

We currently have noone ~~products~~product that ~~are~~is approved for commercial sale, and we may never be able to develop another marketable ~~products~~product. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the ~~advancement of vibegron, through clinical trials and the regulatory approval process, as well as the~~ commercialization of ~~vibegron following regulatory approval, if received~~GEMTESA. Accordingly, our business currently depends heavily on the successful ~~development, regulatory approval, and~~ commercialization of ~~vibegron~~GEMTESA.

Even though we have ~~submitted~~received ~~our~~regulatory ~~NDA~~approval for ~~vibegron~~GEMTESA, we cannot be certain that ~~vibegron~~GEMTESA will ~~receive regulatory approval, or~~ be successfully commercialized ~~even if we receive regulatory approval~~. The ~~research,~~ testing, manufacturing, labeling, approval, sale, marketing and distribution of products are, and will remain, subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each have differing regulations. We are not permitted to market vibegron in the United States until we receive approval of our NDA, or in any foreign country until we receive the requisite approvals from the appropriate authorities in such countries for marketing authorization.

The top-line results from our Phase 3 EMPOWUR trial demonstrated a statistically significant difference for the active vibegron 75 mg dose compared to placebo for the co-primary endpoints, which are reductions in daily UUI episodes and reduction in daily micturitions, in the primary efficacy analysis. In addition, we reported a statistically significant reduction in daily urgency episodes compared to placebo (p=0.002), which is the first of the seven pre-specified key secondary endpoints. All seven pre-specified secondary endpoints achieved statistical significance over placebo for vibegron. As such, even if we were able to obtain approval for vibegron, these secondary endpoints may not be mentioned in the U.S. label, which could potentially adversely affect product differentiation.45

Weby ~~submitted~~FDA ~~our~~and ~~NDA~~other ~~for~~regulatory ~~vibegron~~authorities in ~~December~~the ~~2019~~United ~~but~~States ~~have~~and ~~not~~other ~~yet~~countries ~~submitted~~that aeach ~~Biologics~~have ~~License~~differing ~~Application, or BLA, for URO-902~~regulations. ~~Obtaining~~We ~~approval~~are ofnot anpermitted ~~NDA,~~to ~~BLA~~market orGEMTESA ~~similar~~in ~~regulatory~~any ~~approval~~foreign iscountry anuntil ~~extensive,~~we ~~lengthy,~~receive ~~expensive~~the ~~and~~requisite ~~inherently~~approvals ~~uncertain~~from ~~process, and~~ the ~~FDA~~appropriate ~~or other foreign regulatory~~ authorities ~~may~~in ~~delay,~~such ~~limit~~countries ~~or deny approval of any of our current or future product candidates, including through amendments to the NDA or BLA,~~ for ~~many~~marketing ~~reasons, including:~~ authorization.

• we may not be able to demonstrate that our product candidates are effective as treatments for any of our targeted indications to the satisfaction of the FDA or other relevant regulatory authorities;

• the FDA or other relevant regulatory authorities may identify unexpected efficacy or safety concerns while reviewing an NDA or similar application;

• the FDA or other relevant regulatory authorities may require additional pre-approval studies or clinical trials, which would increase our costs and prolong our development timelines;

• the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or other relevant regulatory authorities for marketing approval;

• the FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials;

• the FDA or other relevant regulatory authorities may disagree with our proposed analysis plans for any clinical trials of our product candidates;

• the CROs that we retain to conduct clinical trials may take actions outside of our control, or otherwise commit errors or breaches of protocols, that materially adversely impact our clinical trials and ability to obtain market approvals;

• the FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient to demonstrate that the clinical and other benefits of these products outweigh their safety risks;

• the FDA or other relevant regulatory authorities may disagree with our interpretation of data or significance of results from the nonclinical studies and clinical trials of our product candidates, or may require that we conduct additional studies;

• the FDA or other relevant regulatory authorities may not accept data generated from our clinical trial sites;

• if our NDA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory authority, as the case may be, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA or other relevant regulatory authority, as the case may be, require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

• the FDA or other relevant regulatory authorities may require development of a risk evaluation and mitigation strategy, or REMS, or its equivalent, as a condition of approval;

• the FDA or other relevant regulatory authorities may require additional post-marketing studies, which would be costly;

• the FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to support the approval and quality of our product candidates;

• the FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturers and third-party manufacturers may not pass the pre-approval inspections by regulatory authorities;

• the FDA or other relevant regulatory authorities may have slower response times or be under-resourced due to the global novel coronavirus disease, or COVID-19, pandemic and, as a result, review, inspection and other timelines may be materially delayed; or

• the FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.

Our business, financial condition, results of operations and ongoing clinical trials could be harmed by the effects of the COVID-19 pandemic.

We are subject to various risks related to the global pandemic associated with COVID-19. For example, many geographic regions imposed, or in the future may impose, “shelter-in-place” orders, quarantines or similar orders or restrictions to control the spread of COVID-19. These types of restrictions have resulted in most of our employees working from home, and could result in the employees of our key third-party vendors and manufacturers working from home. Although certain shelter-in-place orders have been lifted, we, or our suppliers or manufacturers, may continue to require employees to work from home to protect the health and safety of employees. We rely exclusively on third-party manufacturers to manufacture vibegron and URO-902. Neither we, nor our suppliers or manufacturers have significant experience operating with the majority of our respective work forces working from home, and this may disrupt standard operations for us or them, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our respective abilities to conduct business in the ordinary course. In addition, this may increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors.

39We rely exclusively on third-party manufacturers to manufacture GEMTESA and URO-902. Neither we, nor our suppliers or manufacturers have significant experience operating with the majority of our respective work forces working from home, and this may disrupt standard operations for us or them, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our respective abilities to conduct business in the ordinary course. In addition, this may increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors.

As our starting materials for ~~vibegron~~GEMTESA are purchased outside of the U.S., a disruption in our ability to procure such materials may occur if exportation out of the countries where our third-party manufacturers are located is halted or delayed for a significant period of time due to COVID-19. Such a disruption could have a material adverse impact on our ability to timely manufacture sufficient product quantities for our expected future customer demand~~, if vibegron is approved~~. Additionally, timely enrollment in our clinical trials is dependent upon global clinical trial sites, which may be adversely affected by the COVID-19 pandemic.

We are currently conducting clinical trials for ~~our~~GEMTESA ~~product~~for ~~candidates~~the treatment of OAB in men with BPH in many countries. Many of these regions are currently being affected or may in the future be affected by the COVID-19 pandemic. For ~~vibegron~~GEMTESA, from March 19, 2020 to April 27, 2020, we temporarily halted the screening of new patients into our Phase 3 COURAGE trial and Phase 2a trial for abdominal pain due to IBS and, for URO-902, from March 19, 2020 to May 4, 2020, we temporarily halted the screening of new patients in our Phase 2a trial due to the COVID-19 pandemic. Patients that were in the run-in phase or already enrolled in our ongoing studies continued with treatment pursuant to the clinical trial protocol and treatments were not halted or delayed. Since the end of the temporary halt in screening of new patients, we ~~have been~~ re-~~opening~~opened the clinical trial sites in a stepwise manner to allow for screening of new patients, and ~~the~~all ~~majority~~ of our study sites have be re-opened as of December 31, 2020. However, as the COVID-19 pandemic and spread of the virus has continued, the enrollment rates in our Phase 3 COURAGE trial and our Phase 2a trial for URO-902 have not met our initial projections. As a result, we have shifted our clinical trial timelines for the availability of top-line data for each study from the second half of 2021 to the first half of 2022. We continue to evaluate the impact the COVID-19 pandemic may have on our clinical development timelines and the future enrollment of patients in our Phase 3 COURAGE trial for ~~vibegron~~GEMTESA and Phase 2a clinical trial for URO-902. If the COVID-19 pandemic continues to spread in the geographies in which we are conducting clinical trials, we may experience further disruptions in those clinical trials, which could have a material adverse impact on our clinical trial plans and timelines, including:

•

delays in receiving authorizations from local regulatory authorities and ethics committees to initiate planned clinical trials;

•

delays or difficulties in enrolling patients in our clinical trials;

•

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

•

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruptions in global shipping that may affect the transport of clinical trial materials;

•

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

•

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial patient visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;

•

risk that participants enrolled in our clinical trials may acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial due to missed study visits and/or data, as well as adverse events due to the COVID-19 infection;

•

delays in necessary interactions with local regulators, ethics committees and other third parties and contractors due to limitations in employee resources or forced furlough of government employees;

•

limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and

•

refusal of the FDA to accept data from clinical trials in affected geographies.

Health regulatory agencies globally may also experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor our clinical trials and, as a result, review, inspection and other timelines may be materially delayed. For example, in March 2020, the FDA announced its intention to temporarily postpone certain inspections of both foreign and domestic manufacturing facilities. In July 2020, the FDA announced that it began working towards resuming prioritized domestic inspections by either continuing, on a case-by-case basis, to conduct only mission critical inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include pre-approval and surveillance inspections. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. It is unknown how long such delays or disruptions could last. Any elongation or de-prioritization of our clinical trials or delay in regulatory ~~review~~reviews resulting from such disruptions, ~~in particular any delays to our PDUFA date of December 26, 2020 for vibegron,~~ could materially affect the development and study of our product candidates ~~and commercialization efforts~~.

The COVID-19 pandemic could have an adverse impact on our commercial launch plans for ~~vibegron,~~GEMTESA ~~if approved,~~ due to the continuation or re-imposition of government-imposed quarantines, stay at home orders, travel restrictions, mandated business closures and other public health safety measures which may result in limiting our ability to ~~hire a sales force prior to launch,~~ conduct necessary trainings of such sales force and attending and presenting at various conferences or other programs. IfThe ~~vibegron is approved, the~~ continuation or re-imposition of these government-imposed orders, as applicable, may also result in patients not visiting their healthcare providers or their pharmacies to get their prescriptions filled, in-person interactions by sales and medical representatives in healthcare settings such as urologists’ offices and long-term care facilities may be suspended, and any remote interactions may be less effective than in-person interactions. In addition, due to the prioritization of healthcare resources toward pandemic efforts, even remote interactions may not be possible. These factors could have an adverse impact on our business and our ability to effectively launch ~~vibegron, if approved~~GEMTESA.

The continued spread of COVID-19 has also led to extreme disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty. The trading prices for our common shares and other biopharmaceutical companies have been highly volatile as a result of COVID-19. Given the rapid and evolving nature of the virus and the uncertainty about its impact on society and the global economy, we cannot predict the extent to which it will affect our operations or the value of our common shares, particularly if these impacts persist or worsen over an extended period of time. To the extent the COVID-19 pandemic adversely affects our business, financial results, and value of our common shares, it may also affect our ability to raise capital when needed and to comply with certain covenants in our loan agreement or other agreements that are material to our business.

We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to successfully commercialize GEMTESA or complete the development of, seek regulatory approval for and ~~commercialization~~commercialize, GEMTESA for the treatment of ~~vibegron~~OAB in men with BPH and our gene therapy product candidate.

We expect to spend substantial capital to commercialize GEMTESA and complete the development of, seek regulatory approvals for, and commercialize GEMTESA for the treatment of OAB in men with BPH and our gene therapy product ~~candidates~~candidate. These expenditures will include costs associated with our license agreements with Merck and ICI pursuant to which we are obligated to cover the development and commercialization costs of ~~vibegron~~GEMTESA and URO-902, respectively, make payments in connection with the achievement of certain regulatory milestones prior to generating any product sales, make further payments upon the achievement of certain sales milestones and make tiered royalty payments in connection with the sale of approved products~~, if any~~.

We will require additional capital to successfully commercialize GEMTESA and to complete the development and potential commercialization of our gene therapy product ~~candidates~~candidate. Because the length of time and activities associated with successful development of GEMTESA for the treatment of OAB in men with BPH and our gene therapy product ~~candidates~~candidate ~~are~~is highly uncertain, we are unable to estimate with certainty the actual funds we will require for development and any approved marketing and commercialization activities. Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

• the disruption to our supply chains, business operations, commercialization efforts, ~~if approved,~~ or clinical trials or to the resulting from the COVID-19 pandemic~~, including any delay in the FDA’s approval of our NDA~~;

• the disruption to the business or operations of our ~~contract manufacturers,~~ CROs or other third parties with whom we conduct business resulting from the COVID-19 pandemic;

•

future global financial crises and economic downturns, including those cause by widespread public health crises such as the COVID-19 pandemic;

• the timing, costs and results of our Phase 3 COURAGE clinical trial of ~~vibegron~~GEMTESA for the treatment of OAB in men with BPH ~~and our Phase 2a clinical trial of vibegron for the treatment of abdominal pain due to IBS~~;

•

the timing, costs and results of our Phase 2a clinical trial for URO-902 for the treatment of OAB in patients who have not responded to oral pharmacological therapies;

•

the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;

•

the cost and timing of completion of commercial-scale manufacturing activities;

•

the cost of establishing sales, marketing and distribution capabilities for our products in regions where we choose to commercialize our products on our own;

• the initiation, progress, timing and results of our commercialization of GEMTESA and our gene therapy product ~~candidates~~candidate, if approved, for commercial sale;

•

the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

• the cost of defending potential intellectual property disputes, including patent infringement actions brought by third parties against us or any of our current or future products and product candidates; and

•

the effect of competing technological and market developments.

We currently believe that our existing cash, together with the proceeds of $3858.0 million received in ~~November~~January ~~2020~~2021 pursuant to the Sumitomo Loan Agreement and the current remaining financing commitment available to us of $90157.5 million ~~from~~pursuant to the Sumitomo ~~Dainippon~~Loan ~~Pharma~~Agreement, will be sufficient to fund our committed operating expenses and capital expenditure requirements for at least the next 12 months from the filing date of this Quarterly Report on Form 10-Q. This estimate is based on assumptions that may prove to be wrong and changes may occur that would consume our available capital faster than anticipated, including the length and severity of the COVID-19 pandemic and the impact of measures taken to control the spread of COVID-19, as well as changes in and progress of our development activities and the impact of commercialization efforts due to the COVID-19 pandemic. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. We cannot be certain that additional capital when needed will be available on acceptable terms, or at all.

41If we are unable to raise additional capital, as needed, in sufficient amounts or on terms acceptable to us, or if the current remaining financing commitment of $157.5 million available to us under the Sumitomo Loan Agreement is no longer available to us despite our future funding requests being in accordance with our Board-approved operating budget, we may have to significantly delay or scale back our operations to reduce working capital requirements beginning in the second calendar quarter of 2021. We will prioritize, as necessary and appropriate, steps to enable the continued operations of our business and the preservation of the value of our assets beyond the next twelve months, including, but not limited to, actions such as reducing personnel-related costs, curtailment of our commercial launch efforts for GEMTESA, development activities and other discretionary expenditures that are within our control.

IfAdditionally, we ~~are~~may ~~unable~~have to ~~raise~~discontinue ~~additional~~the ~~capital,~~development asor ~~needed,~~commercialization inof ~~sufficient~~our ~~amounts~~current orand onany ~~terms~~future ~~acceptable~~products toand usproduct candidates, or ifpotentially ~~the~~discontinue ~~current~~operations ~~remaining financing commitment of $90~~altogether.5 ~~million~~Attempting ~~available~~ to ussecure ~~under~~additional ~~the~~capital, ~~Sumitomo~~as ~~Loan~~needed, ~~Agreement~~may isdivert nothe ~~longer~~time ~~available~~and toattention usof ~~despite~~ our ~~future~~management ~~funding~~from ~~requests~~day-to-day ~~being~~activities inand ~~accordance~~harm ~~with~~ our ~~Board~~product ~~approved~~commercialization ~~operating~~efforts ~~budget,~~and ~~we may have to significantly delay or scale back~~ our ~~operations~~gene totherapy ~~reduce~~product ~~working~~candidate ~~capital~~development ~~requirements~~efforts. ~~beginning~~Because inof the ~~second~~numerous ~~calendar~~risks ~~quarter of 2021. We will prioritize, as necessary~~ and ~~appropriate,~~uncertainties ~~steps~~associated towith ~~enable~~ the ~~continued~~development ~~operations~~and commercialization of our ~~business~~product and ~~the~~gene ~~preservation~~therapy ofproduct ~~the~~candidate, ~~value~~if ofapproved, ~~our~~we ~~assets~~are ~~beyond~~unable ~~the~~to ~~next~~estimate ~~twelve~~the ~~months,~~amounts ~~including,~~of ~~but~~increased ~~not~~capital ~~limited to~~outlays, ~~actions~~operating ~~such~~expenditures asand ~~reducing~~capital ~~personnel-related~~requirements ~~costs,~~associated ~~curtailment~~with of our ~~commercial~~commercialization ~~launch~~ efforts ~~for~~and ~~vibegron,~~current ifproduct ~~approved,~~ development ~~activities and other discretionary expenditures that are within our control~~programs.

~~Additionally,~~The weSumitomo ~~may~~Loan ~~have~~Agreement tocontains ~~discontinue~~certain ~~the~~covenants ~~development~~that orcould ~~commercialization~~adversely ofaffect our ~~current~~operations, and ~~any~~if ~~future~~an ~~product~~event ~~candidates,~~of ordefault ~~potentially~~were ~~discontinue operations altogether. Attempting~~ to ~~secure~~occur, ~~additional~~we ~~capital,~~could asbe ~~needed,~~forced ~~may~~to ~~divert~~repay the ~~time~~outstanding ~~and~~indebtedness ~~attention~~sooner ofthan ~~our~~planned ~~management from day-to-day activities~~ and ~~harm~~possibly ~~our~~at ~~product~~a ~~candidate~~time ~~development~~when ~~efforts.~~we ~~Because~~do ofnot ~~the~~have ~~numerous~~sufficient ~~risks~~capital ~~and~~to ~~uncertainties~~meet ~~associated~~this ~~with~~obligation. ~~the~~The ~~development~~occurrence ~~and~~of ~~potential~~any ~~commercialization~~ of ~~our~~these ~~product~~events ~~candidates,~~could wecause ~~are~~a ~~unable~~significant toadverse ~~estimate~~impact ~~the~~on ~~amounts~~our ~~of increased capital outlays~~business, ~~operating~~prospects ~~expenditures~~ and ~~capital~~share ~~requirements associated with our current product development programs~~price.

Our Loan Agreement with Sumitomo Dainippon Pharma contains certain covenants that could adversely affect our operations and, if an event of default were to occur, we could be forced to repay the outstanding indebtedness sooner than planned and possibly at a time when we do not have sufficient capital to meet this obligation. The occurrence of any of these events could cause a significant adverse impact on our business, prospects and share price.

Pursuant to the Sumitomo Loan Agreement, we have agreed that we may not sell or assign rights to our patents and other intellectual property without the prior consent of Sumitomo Dainippon Pharma. The Sumitomo Loan Agreement contains affirmative and negative covenants that, among other things, restrict our ability to:

•

incur additional indebtedness;

•

incur liens;

•

make investments;

•

dispose of any property;

•

make distributions, including dividends;

•

enter into certain transactions with affiliates of Sumitomo Dainippon Pharma;

•

consolidate or merge; and

•

alter the business of the Company.

These terms of the Sumitomo Loan Agreement could prevent us from taking certain actions without the consent of our lender, who is also currently our majority shareholder, which may limit our flexibility in operating our business and our ability to take actions that might be advantageous to us and our minority shareholders, placing us at a competitive disadvantage compared to our competitors who have less leverage and who therefore may be able to take advantage of opportunities that our leverage prevents us from exploiting.

The Sumitomo Loan Agreement also includes events of default, including, among other things, payment defaults; breaches of certain covenants or agreements; certain bankruptcy or insolvency events; the occurrence of certain events that could reasonably be expected to have a “material adverse effect”; and defaults in respect of certain other indebtedness.

Upon the occurrence of an event of default and following any cure periods (if applicable), a default interest rate of an additional 5.0% per annum may be applied to the outstanding principal balance, and Sumitomo Dainippon Pharma may declare all outstanding obligations immediately due and payable (subject, in certain instances, to specified grace periods) and take such other actions as set forth in the Sumitomo Loan Agreement.

If an event of default under the Sumitomo Loan Agreement were to occur and Sumitomo Dainippon Pharma declared all outstanding obligations immediately due and payable, we would be required to immediately repay the outstanding indebtedness. If we are unable to repay this debt, Sumitomo Dainippon Pharma would be able to take remedies permitted under the Sumitomo Loan Agreement. Even if we are able to repay the indebtedness on an event of default, the repayment of these sums may significantly reduce our working capital and impair our ability to operate as planned. The occurrence of any of these events could cause a significant adverse impact on our business, prospects and share price.

The LIBOR calculation method may change, and LIBOR is expected to be phased out after 2021.

Loans under the Sumitomo Loan Agreement bear interest at a rate per annum equal to LIBOR plus a margin of 3.0% payable on the last day of each calendar quarter. On July 27, 2017, the U.K. Financial Conduct Authority announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. On November 30, 2020, ICE Benchmark Administration, or IBA, the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors. While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

42At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a newly created index, calculated with a broad set of short-term repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United States or elsewhere. Pursuant to the Sumitomo Loan Agreement, if LIBOR becomes unavailable in the future, we and Sumitomo Dainippon Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. To the extent our interest rates increase as a result, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate, or SOFR, a newly created index, calculated with a broad set of short-term repurchase agreements backed by treasury securities. It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United States or elsewhere. Pursuant to the Sumitomo Loan Agreement, if LIBOR becomes unavailable in the future, we and Sumitomo Dainippon Pharma will negotiate in good faith to select an alternative interest rate and, if applicable as a result of such alternative interest rate, margin adjustment that is consistent with industry accepted successor rates for determining a LIBOR replacement. To the extent our interest rates increase as a result, our interest expense will increase, in which event we may have difficulties making interest payments and funding our other fixed costs, and our available cash flow for general corporate requirements may be adversely affected.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

Our ability to make the payment of the principal of, to pay interest on or to refinance the Sumitomo Loan Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control, including global macroeconomic effects of global pandemics such as the COVID-19 pandemic. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligation.

Raising additional funds by issuing securities may cause dilution to existing shareholders, raising additional funds through debt financings may involve restrictive covenants, and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.

We expect that significant additional capital will be needed in the future to continue our planned operations. Until such time, ~~if ever,~~ that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, the Sumitomo Loan Agreement, additional debt financings, strategic alliances and license and development agreements or other collaborations. To the extent that we raise additional capital by issuing equity securities, our existing shareholders’ ownership may experience substantial dilution, and the terms of these securities may include liquidation or other preferences that could adversely affect the rights of a common shareholder. Additionally, any agreements for future debt or preferred equity financings, if available, may involve additional covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.

We rely on our license agreements with Merck and ICI to provide rights to the core intellectual property relating to ~~vibegron~~GEMTESA and URO-902, respectively. Any termination or loss of significant rights under either agreement, would adversely affect our ~~development or~~ commercialization of ~~these~~GEMTESA ~~product~~and ~~candidates~~our development of URO-902.

We have licensed our core intellectual property relating to ~~vibegron~~GEMTESA and URO-902 from Merck and ICI, respectively. If, for any reason, our license agreement with Merck or ICI is terminated or we otherwise lose those rights, it would adversely affect our business. Our license agreements impose on us obligations relating to exclusivity, territorial rights, development, commercialization, funding, payment, diligence, sublicensing, insurance, intellectual property protection and other matters. If we breach any material obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages to Merck or ICI, and Merck or ICI may have the right to terminate our license, which would result in us being unable to develop, manufacture and sell our product ~~candidates~~and gene therapy product candidate.

Pursuant to our license agreement with Merck, Merck agreed to provide a supply of the vibegron compound to support the development of vibegron. Under this agreement, we may only use such material in preclinical and clinical work. The agreement also provides for Merck to reasonably assist us during a specified period of time with a technical transfer of the manufacturing process from Merck to us or our designee for production of vibegron. Although Merck has already transferred the manufacturing process for vibegron to us, we may still need additional assistance if we experience any setbacks with the manufacturing at a larger scale. If Merck fails to fulfill its continuing obligations under this agreement, if needed, or if we require additional assistance after their obligation to assist us expires, our development of vibegron could be significantly delayed or otherwise adversely affected.

Under our license agreement with ICI, ICI has transferred the manufacturing process to us or our designee for production of URO-902. If we require additional assistance from ICI after their obligation to assist us expires, our manufacture and development of URO-902 could be significantly delayed or otherwise adversely affected.

43We may be required to make significant payments to third parties under our licensing and collaboration agreements for our current product and gene therapy product candidate.

WeUnder ~~may~~our agreements with Merck, Kyorin and ICI, we are subject to significant obligations, including payment obligations upon the achievement of specified milestones and payments based on product sales, as well as other material obligations. Certain of the milestone payments payable by us under these agreements are due upon events that have or will occur prior to our planned commercialization of our product and gene therapy product candidate. Accordingly, we have and will be required to make ~~significant~~such payments prior to ~~third~~the ~~parties~~time ~~under~~at which we are able to generate revenue from sales of our ~~licensing~~product and ~~collaboration~~gene ~~agreements~~therapy ~~for~~product candidate, if approved. There can be no assurance that we will have the funds necessary to make such payments, or be able to raise such funds when needed, on terms acceptable to us, or at all. Furthermore, if we are forced to raise additional funds, we may be required to delay, limit, reduce or terminate our ~~current~~product development or future commercialization efforts, or grant rights to develop and market a product ~~candidates~~or product candidate that we would otherwise develop and market ourselves.

Under our agreements with Merck, Kyorin and ICI, we are subject to significant obligations, including payment obligations upon the achievement of specified milestones and payments based on product sales, as well as other material obligations. Certain of the milestone payments payable by us under these agreements are due upon events that will occur prior to our planned commercialization of our product candidates. Accordingly, we will be required to make such payments prior to the time at which we are able to generate revenue, if any, from sales of our product candidates. There can be no assurance that we will have the funds necessary to make such payments, or be able to raise such funds when needed, on terms acceptable to us, or at all. Furthermore, if we are forced to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise develop and market ourselves.

We may not be able to manage our business effectively if we are unable to attract and retain key personnel.

We may not be able to attract or retain qualified management and commercial, scientific and clinical personnel due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. If we are not able to attract and retain necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development objectives, our ability to raise additional capital and our ability to implement our business strategies.

We are highly dependent on the skills and leadership of our senior management team and key employees. Our senior management and key employees may terminate their positions with us at any time. If we lose one or more members of our senior management team or key employees, our ability to successfully implement our business strategies could be adversely affected. Replacing these individuals may be difficult, cause disruption and may take an extended period of time due to the limited number of individuals in our industry with the breadth of skills and experience required to develop, gain regulatory approval of and commercialize products successfully. Competition to hire from this limited pool is intense, with many of our competitors seeking to hire and retain the same qualified personnel. We may, from time-to-time, hire personnel who work for our competitors or others in the industry, and our competitors may hire personnel who work for us, which could result in a material disruption to our business or even litigation. In the event we lose key personnel, we may be unable to hire, train, retain or motivate new key personnel to replace those we lose. We do not maintain “key person” insurance for any members of our senior management team or other employees.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

We expect to hire, either directly, or through any current or future subsidiaries of ours, additional employees throughout the organization. We may have difficulties identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations across our entities, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the ~~development~~commercialization of ~~vibegron,~~GEMTESA or the development of URO-902 and any future product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate or grow revenue could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our current or future product and product candidates and compete effectively will partly depend on our ability to effectively manage any future growth.

Many of the other pharmaceutical companies we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer operating history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these opportunities may be more appealing to high-quality candidates and consultants than what we have to offer. If we are unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which we can develop product candidates and our business will be harmed.

If we are unable to obtain the contemplated services and commercial and operational support from Sunovion pursuant to the terms of the Market Access Services Agreement and Co-Promotion Agreement, our business could be adversely impacted.

In June 2020, we entered into the Market Access Services Agreement with Sunovion, a wholly-owned subsidiary of Sumitomo Dainippon Pharma. Sunovion has agreed to provide certain market access services with respect to the distribution and sale of ~~vibegron~~GEMTESA. In October 2020, we entered into the Co-Promotion Agreement in which Sunovion agreed, among other things, to use its commercially reasonable efforts to co-promote ~~vibegron~~GEMTESA to primary care physicians in the United States. Sunovion, because of its own business considerations, may be unable or unwilling to support our commercialization and operations pursuant to the Market Access Services Agreement and/or Co-Promotion Agreement, and we may not be able to realize the benefits of Sunovion’s broader commercial network, including its primary care physician salesforce.

44If we are unable to access Sunovion’s commercial infrastructure, partner with its primary care physician salesforce in the United States, and obtain services that support our operations and the co-promotion of GEMTESA to primary care physicians pursuant to the Market Access Services Agreement and/or Co-Promotion Agreement, we will have to find alternative means to support our operations and the commercialization of our product, including establishing our own primary care physician salesforce. Building the commercial infrastructure that we have access to pursuant to the Market Access Services Agreement and establishing the primary care physician salesforce that will co-promote GEMTESA pursuant to the Co-Promotion Agreement in the United States may be prohibitively expensive and time consuming. Accessing the distribution or support network of another third party or finding a new partner to co-promote GEMTESA to primary care physicians could be costly or require us to agree to exclusivity or otherwise give up valuable rights. In addition, it may be difficult to find alternative service providers or a co-promotion partner on terms acceptable to us. Any of these events could result in delays in the commercialization of our product and may affect our ability to successfully market our product, which would adversely impact our business, results of operations and financial condition.

IfFinally, weattempting ~~are unable~~ to ~~access~~secure ~~Sunovion’s~~an ~~commercial~~alternative ~~infrastructure,~~co-promotion partner, ~~with~~service ~~its primary care physician salesforce in the United States~~provider, ~~and~~or ~~obtain~~access ~~services~~to ~~that~~commercial ~~support~~infrastructure ~~our~~if ~~operations~~we ~~and~~or ~~the~~Sunovion ~~co-promotion~~is ofunable ~~vibegron~~ to ~~primary~~perform ~~care~~under ~~physicians pursuant to~~ the Market Access Services Agreement and/or Co-Promotion Agreement, wefor ~~will~~any ~~have~~reason tomay ~~find~~divert ~~alternative~~the ~~means~~time ~~to support our operations~~ and ~~the~~attention ~~commercialization~~ of our ~~product~~management ~~candidates,~~from ~~including establishing~~ our own primary care physician salesforce. Building the commercial infrastructure that we have access to pursuant to the Market Access Services Agreement and establishing the primary care physician salesforce that will coday-~~promote vibegron pursuant~~ to ~~the Co~~-~~Promotion~~day ~~Agreement~~operations ~~in the United States may be prohibitively expensive~~ and ~~time~~impair ~~consuming. Accessing~~ the ~~distribution~~development orand support network of another third party or finding a new partner to co-promote vibegron to primary care physicians could be costly or require us to agree to exclusivity or otherwise give up valuable rights. In addition, it may be difficult to find alternative service providers or a co-promotion partner on terms acceptable to us. Any of these events could result in delays in the commercialization of our product ~~candidates and may affect our ability to successfully market our product candidates, which would adversely impact our business, results of operations and financial condition~~.

Finally, attempting to secure an alternative co-promotion partner, service provider, or access to commercial infrastructure if we or Sunovion is unable to perform under the Market Access Services Agreement and/or Co-Promotion Agreement for any reason may divert the time and attention of our management from our day-to-day operations and impair the development and commercialization of our product candidates.

Our or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have an adverse effect on our results of operations.

We are exposed to the risk that our or our affiliates’ employees and contractors, including principal investigators, CROs, consultants, commercial collaborators, service providers and other vendors may engage in misconduct or other illegal activity. Misconduct by these parties could include intentional, reckless or negligent conduct or other unauthorized activities that violate the laws and regulations of the FDA or other similar regulatory bodies, including those laws that require the reporting of true, complete and accurate information to such regulatory bodies; manufacturing and the FDA’s Good Clinical Practice, or GCP, or current Good Manufacturing Practice, or cGMP, standards; federal, state and foreign healthcare fraud and abuse laws and data privacy; or laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and other business arrangements in the healthcare industry are subject to extensive laws intended to prevent fraud, kickbacks, self-dealing, bribery, corruption, antitrust violations and other abusive practices. These laws may restrict or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person, including any person who may have engaged in any fraud or misconduct, or government agency could allege such fraud or other misconduct, even if none occurred. Furthermore, we rely on our CROs and clinical trial sites to adequately report data from our ongoing clinical trials. For example, any failure by such parties to adequately report safety signals to us in a timely manner from any such trials may also affect the approvability of our product candidates or cause delays and disruptions for the approval of our product candidates, if any. If our or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors are alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, suspension or delay in our clinical trials, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings, and additional reporting requirements and oversight, any of which could adversely affect our ability to operate our business and our results of operations. As a result of the consummation of the Sumitomo Transaction, we are affiliated with different entities, and any misconduct or improper activities by the employees of these new affiliates could have an adverse effect on our results of operations.

We may not be successful in our efforts to identify and acquire or in-license additional product candidates, or to enter into collaborations or strategic alliances for the development and commercialization of any such future product candidates.

Part of our strategy involves identifying and acquiring or in-licensing novel product candidates. The process by which we identify product candidates may fail to yield product candidates for clinical development for a number of reasons, including those discussed in these risk factors and also:

•

the process by which we identify and decide to acquire product candidates may not be successful;

•

potential product candidates may, upon further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance;

•

potential product candidates may not be effective in treating their targeted diseases; or

•

the acquisition or in-licensing transactions can entail numerous operational and functional risks, including exposure to unknown liabilities, disruption of our business, or incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected acquisition or integration costs.

We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful. We also cannot be certain that, following an acquisition or in-licensing transaction, we will achieve the revenue or specific net income that justifies such transaction. Further, time and resources spent identifying, acquiring and developing potential product candidates may distract management’s attention from our primary business or other development programs. If we are unable to identify and acquire suitable product candidates for clinical development, this would adversely impact our business strategy, our financial position and share price.

In the future, we may also decide to collaborate with other pharmaceutical companies for the development and potential commercialization of our gene therapy product ~~candidates~~candidate in the United States or other countries or territories of the world. We will face significant competition in seeking appropriate collaborators. We may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our gene therapy product ~~candidates~~candidate because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our gene therapy product ~~candidates~~candidate as having the requisite potential to demonstrate safety and efficacy. If and when we collaborate with a third party for development and commercialization of a product candidate, we can expect to relinquish some or all of the control over the future success of that product candidate to the third party. Our ability to reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

International expansion of our business exposes us to business, legal, regulatory, political, operational, financial and economic risks associated with conducting business outside of the United States.

Part of our business strategy involves international expansion, including establishing and maintaining operations outside of the United States and establishing and maintaining relationships with health care providers, payors, government officials, distributors and manufacturers globally. Conducting business internationally involves a number of risks, including:

•

multiple conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses;

• failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our product ~~candidates~~and gene therapy product candidate, if approved, in various countries;

•

difficulties in managing foreign operations;

•

complexities associated with managing multiple payor-reimbursement regimes or self-pay systems;

•

financial risks, such as longer payment cycles, difficulty enforcing contracts and collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;

•

reduced protection for intellectual property rights;

•

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

•

failure to comply with the United States Foreign Corrupt Practices Act, or FCPA, including its books and records provisions and its anti-bribery provisions, the United Kingdom Bribery Act 2010, or UK Bribery Act, and similar antibribery and anticorruption laws in other jurisdictions, for example by failing to maintain accurate information and control over sales or distributors’ activities.

Any of these risks, if encountered, could significantly harm our future international expansion and operations and, consequently, negatively impact our financial condition, results of operations and cash flows.

Legal, political, and economic uncertainty surrounding the planned exit of the United Kingdom from the European Union are a source of instability and uncertainty.

The United Kingdom held a referendum on June 23, 2016 to determine whether the United Kingdom should leave the European Union, or remain as a member state, the outcome of which was in favor of leaving the European Union, which is commonly referred to as Brexit. ~~Under~~On ~~Article~~March 5029, of2017, the ~~2009~~United ~~Lisbon~~Kingdom ~~Treaty,~~formally notified the ~~United~~European ~~Kingdom~~Council ~~will~~of ~~cease~~its intention to beleave athe ~~member~~European ~~state~~Union. ~~when~~In aJanuary ~~withdrawal~~2020, ~~agreement~~the isEuropean ~~entered~~Council ~~into~~and ~~(such~~the ~~agreement~~United ~~will~~Kingdom ~~also~~entered ~~require~~into ~~parliamentary~~a ~~approval)~~withdrawal oragreement, ~~failing~~which ~~that,~~sets ~~two~~the ~~years~~terms ~~following~~of the ~~notification~~withdrawal of anthe ~~intention~~United toKingdom ~~leave~~from ~~under Article 50, unless~~ the European ~~Council~~Union ~~(together~~and ~~with~~provided ~~the~~for ~~United~~a ~~Kingdom)~~transition ~~unanimously~~period ~~decides~~that toended ~~extend~~on ~~this~~December ~~period~~31, 2020. In OnDecember ~~March 29~~2020, ~~2017,~~ the United Kingdom ~~formally~~and ~~notified~~ the European ~~Council~~Union ofagreed ~~its~~on ~~intention~~a totrade ~~leave~~and ~~the~~cooperation ~~European~~agreement ~~Union.~~that Inwill ~~January~~apply ~~2020,~~provisionally after the ~~European~~end ~~Council~~of ~~and~~ the ~~United~~transition ~~Kingdom~~period ~~entered~~until ~~into~~it ais ~~withdrawal~~ratified ~~agreement,~~by ~~which sets~~ the ~~terms~~parties ofto the ~~withdrawal~~agreement. ofOn ~~the~~December ~~United~~31, ~~Kingdom~~2020, ~~from~~ the ~~European Union. The~~ United Kingdom ~~and~~passed ~~the~~legislation ~~European~~giving ~~Union~~effect ~~entered~~to ~~into~~the atrade ~~transition~~and ~~period~~cooperation ofagreement, ~~11 months~~ and, inthe ~~June~~European ~~2020,~~Union ~~agreed~~is anticipated to ~~not~~formally ~~extend~~adopt the ~~transition~~agreement ~~period~~in ~~beyond~~early ~~December~~2021. ~~31,~~The ~~2020. During~~trade ~~this~~and ~~transition~~cooperation ~~period,~~agreement ~~Brexit~~covers ~~has~~the ~~involved~~general aobjectives ~~process~~and framework of ~~lengthy~~the ~~negotiations~~relationship between the United Kingdom and EUthe ~~member~~European ~~states~~Union, including as it relates to ~~determine~~trade, ~~the~~transport, ~~future~~visas, ~~terms~~judicial, oflaw ~~the~~enforcement ~~United~~and ~~Kingdom’s~~security ~~relationship~~matters. ~~with~~Notably, under the ~~European~~trade ~~Union. The~~and ~~transition~~cooperation agreement, ~~between~~UK ~~the~~goods ~~two~~no ~~parties~~longer ~~means~~benefit ~~that~~from the ~~United~~free ~~Kingdom~~movement ~~will~~of ~~abide~~goods, byand ~~current~~there ~~regulatory~~is ~~and~~no ~~trading~~longer ~~frameworks~~the ~~until~~free ~~December~~movement ~~31,~~of ~~2020~~people ~~pending~~between the ~~agreement~~United ofKingdom ~~their~~and ~~future~~the ~~relationship~~European Union.

Lack of clarity about future U.K. laws and regulations as the United Kingdom determines which EU rules and regulations to replace or replicate in the event of a withdrawal, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs, depress economic activity and restrict access to capital. In addition, if the United Kingdom and the European Union are unable to negotiate acceptable withdrawal terms or if other EU Member States pursue withdrawal, barrier-free access between the United Kingdom and other EU Member States or among the European Economic Area overall could be diminished or eliminated. The long-term effects of Brexit will depend on any agreements (or lack thereof) between the United Kingdom and the European Union and, in particular, any arrangements for the United Kingdom to retain access to European Union markets either during a transitional period or more permanently.52

Such a withdrawal from the European Union is unprecedented, and it is unclear how the changes to United Kingdom’s access to the European single market for goods, capital, services and labor within the European Union, or the European single market, and the wider commercial, legal and regulatory environment, will impact our U.K. operations. We may also face new regulatory costs and challenges that could have an adverse effect on our operations and development programs. For example, because the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical studies, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from EU directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may force us to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product ~~candidates~~or gene therapy product candidate, which could significantly harm our business.

Even prior to any change to the United Kingdom’s relationship with the European Union, the announcement of Brexit created economic uncertainty surrounding the terms of Brexit, and its consequences could negatively impact our financial condition, results of operations and cash flows. Further, the United Kingdom’s vote to exit the European Union could also result in similar referendums or votes in other European countries in which we conduct business. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications the withdrawal of the United Kingdom from the European Union will have and how such withdrawal may affect us.

Cyber security risks and the failure to maintain the confidentiality, integrity, and availability of our computer hardware, software, and Internet applications and related tools and functions could result in harm to our business and/or subject us to costs, fines or lawsuits.

Our computer systems, as well as those of various third parties on which we rely, or may rely on in the future, including Sunovion, Sumitovant, and its affiliates, our CROs and other contractors, consultants and law and accounting firms, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. We rely on sophisticated information technology systems and network infrastructure to operate and manage our business and rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our business therefore depends on the continuous, effective, reliable, and secure operation of our computer hardware, software, networks, Internet servers, and related infrastructure. To the extent that our hardware or software malfunctions or access to our data by internal personnel or suppliers through the Internet is interrupted or compromised, it could result in a material disruption of our drug development programs and our business could suffer.

Although our computer and communications hardware is protected through physical and software safeguards, it is still vulnerable to system malfunction, computer viruses, malware and ransomware, and other cybersecurity threats such as phishing and social engineering attacks. These events could lead to the unauthorized access of our information technology systems and result in financial loss and the misappropriation or unauthorized disclosure of confidential information belonging to us, our employees, partners, or our suppliers. For example, the loss of nonclinical or clinical trial data from completed, ongoing or planned trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world. As a result, we may not be able to address these techniques proactively or implement adequate preventative measures. If our information technology systems are compromised, further development of our current or future product candidates could be delayed and we could be subject to fines, damages, litigation and enforcement actions, incur financial losses, suffer reputational damage, lose trade secrets or other confidential information, each of which could significantly harm our business.

If we fail to comply with applicable U.S. and foreign privacy and data protection laws and regulations, we may be subject to liabilities that adversely affect our business, operations and financial performance.

We are subject to federal and state laws and regulations requiring that we take measures to protect the privacy and security of certain information we gather and use in our business. For example, federal and state security breach notification laws, state health information privacy laws and federal and state consumer protection laws impose requirements regarding the collection, use, disclosure and storage of personal information. In addition, in June 2018, California enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. Although the CCPA includes exemptions for certain clinical trials data, and HIPAA protected health information, the law may increase our compliance costs and potential liability with respect to other personal information we collect about California residents. The CCPA has prompted a number of proposals for new federal and state privacy legislation that, if passed, could increase our potential liability, increase our compliance costs and adversely affect our business.

We may also be subject to or affected by foreign laws and regulations, including regulatory guidance, governing the collection, use, disclosure, security, transfer and storage of personal data, such as information that we collect about patients and healthcare providers in connection with clinical trials and our other operations in the U.S. and abroad. The global legislative and regulatory landscape for privacy and data protection continues to evolve, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. This evolution may create uncertainty in our business, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. For example, the EU has adopted the General Data Protection Regulation, or GDPR, which introduces strict requirements for processing personal data. The GDPR increases our compliance burden with respect to data protection, including by mandating potentially burdensome documentation requirements and granting certain rights to individuals to control how we collect, use, disclose, retain and leverage information about them. The processing of sensitive personal data, such as information about health conditions, entails heightened compliance burdens under the GDPR and is a topic of active interest among foreign regulators. In addition, the GDPR provides for breach reporting requirements, more robust regulatory enforcement and fines of up to the greater of 20 million euros or 4% of annual global revenue. While companies are afforded some flexibility in determining how to comply with the GDPR’s various requirements, significant effort and expense are required to ensure continuing compliance with the GDPR. Moreover, the requirements under the GDPR and guidance issued by different EU member states may change periodically or may be modified, and such changes or modifications could have an adverse effect on our business operations if compliance becomes substantially costlier than under current requirements. It is also possible that each of these privacy laws may be interpreted and applied in a manner that is inconsistent with our practices. Further, Brexit has created uncertainty with regard to data protection regulation in the UK. In particular, it is unclear whether, post Brexit, the UK will enact data protection legislation equivalent to the GDPR and how data transfers to and from the United Kingdom will be regulated. Any failure or perceived failure by us to comply with federal, state, or foreign laws or self-regulatory standards could result in negative publicity, diversion of management time and effort and proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Changes in funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, the effects of the COVID-19 pandemic on its operations and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies, including those disruptions that may be caused by the COVID-19 pandemic, may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, in March 2020, the FDA announced its intention to temporarily postpone certain inspections of both foreign and domestic manufacturing facilities. In July 2020, the FDA announced that it began working towards resuming prioritized domestic inspections by either continuing, on a case-by-case basis, to conduct only mission critical inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include pre-approval and surveillance inspections. In addition, between December 22, 2018 and ending on January 25, 2019, the U.S. government shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If temporary reductions in operations due to the COVID-19 pandemic or repeated or prolonged government shutdowns occur, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Fluctuations in insurance cost and availability could adversely affect our results of operations or our risk management profile.

We hold a number of insurance policies, including product liability insurance, directors’ and officers’ liability insurance, general liability insurance, property insurance and workers’ compensation insurance and such policies contain customary conditions and exclusions. If the costs of maintaining adequate insurance coverage increase significantly in the future, our operating results could be materially adversely affected. Likewise, if any of our current insurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity from commercial insurance providers. Additionally, even if we maintain insurance coverage for a type of liability, a particular claim may not be covered if it is subject to a coverage exclusion or we do not otherwise meet the conditions for coverage. If we operate our business without insurance, or with inadequate insurance, we could be responsible for paying claims or judgments against us, which could adversely affect our results of operations or financial condition.

Potential product liability lawsuits against us could cause us to incur substantial liabilities and limit commercialization of any products that we may develop.

The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk of product liability claims. Product liability claims might be brought against us by consumers, health care providers, other pharmaceutical companies or others taking or otherwise coming into contact with our products. On occasion, large monetary judgments have been awarded in class action lawsuits where drugs have had unanticipated adverse effects. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claims may result in:

•

impairment of our business reputation and significant negative media attention;

•

withdrawal of participants from our clinical trials;

•

significant costs to defend related litigation;

•

distraction of management’s attention from our primary business;

•

substantial monetary awards to patients or other claimants;

• inability to commercialize GEMTESA or our current or future product candidates, if approved;

•

product recalls, withdrawals or labeling, marketing or promotional restrictions;

• decreased demand for GEMTESA or our current or future product candidates, if approved; and

•

loss of revenue.

The product liability insurance we currently carry, and any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. IfWe ~~we obtain marketing approval for our product candidates, we~~ intend to acquire insurance coverage to include the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business, including preventing or limiting the commercialization of GEMTESA or our current or future product candidates, if approved.

49Risks Related to Our Industry

or prohibit a wide range of business activities, including research, manufacturing, distribution, pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our nonclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee or third-party misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. Additionally, we are subject to the risk that a person, including any person who may have engaged in any fraud or misconduct, or government agency could allege such fraud or other misconduct, even if none occurred. Furthermore, we rely on our CROs and clinical trial sites to adequately report data from our ongoing clinical trials. For example, any failure by such parties to adequately report safety signals to us in a timely manner from any such trials may also affect the approvability of our gene therapy product candidate or cause delays and disruptions for the approval of our gene therapy product candidate, if any. If our or our affiliates’ employees, independent contractors, principal investigators, consultants, commercial collaborators, service providers or other vendors are alleged or found to be in violation of any such regulatory standards or requirements, or become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws and curtailment of our operations, it could have a significant impact on our business and financial results, including the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, suspension or delay in our clinical trials, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, FDA debarment, contractual damages, reputational harm, diminished profits and future earnings, and additional reporting requirements and oversight, any of which could adversely affect our ability to operate our business and our results of operations. As a result of the consummation of the Sumitomo Transaction, we are affiliated with different entities, and any misconduct or improper activities by the employees of these new affiliates could have an adverse effect on our results of operations.

Risks Related to Development, Regulatory Approval and Commercialization

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal functions on which the operation of our business may rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept payment of user fees, the effects of the COVID-19 pandemic on its operations and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

Disruptions at the FDA and other agencies, including those disruptions that may be caused by the COVID-19 pandemic, may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, in March 2020, the FDA announced its intention to temporarily postpone certain inspections of both foreign and domestic manufacturing facilities. In July 2020, the FDA announced that it began working towards resuming prioritized domestic inspections by either continuing, on a case-by-case basis, to conduct only mission critical inspections, or, where possible to do so safely, resuming prioritized domestic inspections, which generally include pre-approval and surveillance inspections. In addition, between December 22, 2018 and ending on January 25, 2019, the U.S. government shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. If temporary reductions in operations due to the COVID-19 pandemic or repeated or prolonged government shutdowns occur, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Clinical trials are very expensive, time-consuming, difficult to design and implement, and involve uncertain outcomes.

~~Our~~Product ~~product~~ candidates ~~are still in development and will~~ require extensive clinical testing before we are prepared to submit ana New Drug Application, or NDA, or a Biologics License Application, or BLA, or other similar application for regulatory approval. While we ~~submitted~~received ~~our~~ NDA approval for ~~vibegron~~GEMTESA in December ~~2019~~2020, weit ~~cannot~~is ~~provide~~uncertain ~~you~~whether ~~any assurance that~~ we will submit an NDA for regulatory approval of GEMTESA for any ~~of our~~ other product ~~candidates~~indication ~~within our projected timeframes~~ or ~~that~~a ~~our~~BLA ~~NDA~~ for ~~vibegron~~our orgene ~~any~~therapy ~~other~~product ~~such~~candidate, ~~applications will be approved by the relevant regulatory authorities~~URO-902. Clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. For ~~instance~~example, the FDA or other regulatory authorities may not agree with our proposed analysis plans for any clinical trials of our product candidates, and during any such review, may identify unexpected efficacy or safety concerns, which may delay the approval of an NDA or similar application. The FDA may also find that the benefits of our product candidates do not outweigh their risks in a manner sufficient to grant regulatory approval. The clinical trial process is also time-consuming and costly and relies on the collaboration with many CROs and clinical trial sites.

Failures can occur at any stage of clinical trials, and we could encounter problems that cause us to abandon or repeat clinical trials. In addition, results from clinical trials may require further evaluation, delaying the next stage of clinical development or submission of an NDA. Further, product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical studies and initial clinical trials, and such product candidates may exhibit safety signals in later stage clinical trials that they did not exhibit in preclinical or earlier-stage clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in or the discontinuation of advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Likewise, the results of nonclinical testing or early clinical trials may not be predictive of the results of our planned development programs, and there can be no assurance that the results of studies conducted by collaborators or other third parties will be viewed favorably or are indicative of our own future trial results. In particular, our gene therapy product candidate, URO-902, is in early stages of development. The outcome of nonclinical testing and early clinical trials may not be predictive of the success of later stage clinical trials. The Phase 1b clinical trial conducted by ICI for URO-902 for the treatment of OAB and detrusor overactivity in women studied a small patient population, which makes it difficult to predict whether the favorable results observed in such clinical trial will be repeated in larger and more advanced clinical trials.

in or the discontinuation of advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Likewise, the results of nonclinical testing or early clinical trials may not be predictive of the results of our planned development programs, and there can be no assurance that the results of studies conducted by collaborators or other third parties will be viewed favorably or are indicative of our own future trial results. In particular, our gene therapy product candidate, URO-902, is in early stages of development. The outcome of nonclinical testing and early clinical trials may not be predictive of the success of later stage clinical trials. The Phase 1b clinical trial conducted by ICI for URO-902 for the treatment of OAB and detrusor overactivity in women studied a small patient population, which makes it difficult to predict whether the favorable results observed in such clinical trial will be repeated in larger and more advanced clinical trials.

The commencement and completion of clinical trials may be delayed by several factors, including:

• impacts of the COVID-19 pandemic such as disruptions or delays to standard study monitoring practices, study drug shipments, biological pharmacokinetics sample shipments, patient enrollment, data analysis and reporting of results due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials;

•

failure to obtain regulatory approval to commence a trial;

•

unforeseen safety issues;

•

occurrence of serious adverse events in trials of the same class of agents conducted by other sponsors;

•

lack of effectiveness during clinical trials;

•

determination of dosing issues;

•

inability to reach agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•

slower than expected rates of patient recruitment or failure to recruit suitable patients to participate in a trial;

•

failure to add a sufficient number of clinical trial sites;

•

unanticipated impact from changes in or modifications to protocols or clinical trial design;

•

inability of trial participants to visit the study sites and continue with the studies and inability of the clinical investigators to see trial participants in a timely manner due to potential site closures;

•

an institutional review board, or IRB, refusing to approve, suspending, or terminating the trial at an investigational site, precluding enrollment of additional patients, or withdrawing their approval of the trial;

•

premature discontinuation of trial participants from clinical trials or missing data;

•

failure to manufacture or release sufficient quantities of a product candidate or placebo, or failure to obtain sufficient quantities of active comparator medications for our clinical trials, if applicable, that in each case meet our quality standards, for use in clinical trials;

•

inability to monitor patients adequately during or after treatment; or

•

inappropriate unblinding of trial results.

Further, we, the FDA or other regulatory authority may suspend our clinical trials in an entire country at any time, or an IRB may suspend its clinical trial sites within any country, if it appears that we or our collaborators are failing to conduct a trial in accordance with regulatory requirements, including cGMP regulations, that we are exposing participants to unacceptable health risks, or if the FDA or other regulatory authority, as the case may be, finds deficiencies in our Investigational New Drug, or IND, or equivalent applications for other countries or the manner in which the clinical trials are conducted. Therefore, we cannot predict with any certainty the schedule for commencement and completion of future clinical trials. If we experience delays in the commencement or completion of our clinical trials, or if we terminate a clinical trial prior to completion, the commercial prospects of our product candidates could be harmed, and our ability to generate product revenue may be delayed. In addition, any delays in our clinical trials could increase our costs, cause a decline in our share price, slow down the approval process, and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and results of operations. In addition, many of the factors that cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authorities. The FDA or other regulatory authorities may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected the integrity of the study. The FDA or other regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or other regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

In addition, prior to our acquisition of the rights to vibegron and URO-902, we had no involvement with or control over the nonclinical or clinical development of these product candidates. Additionally, pursuant to our collaboration agreement with Kyorin, who retains exclusive rights from Merck to develop and commercialize vibegron in Japan and certain other Asian territories, we may use supportive data generated by Kyorin in connection with seeking regulatory approval of vibegron in the territories in which we have rights to develop and commercialize vibegron. We are dependent on Merck, Kyorin and ICI having conducted such research and development in accordance with the applicable protocols and legal, regulatory and scientific standards, having accurately reported the results of all clinical trials and other research they conducted prior to our acquisition of the rights to our current product candidates, having correctly collected and interpreted the data from these trials and other research, and having supplied us with complete information, data sets and reports required to adequately demonstrate the results reported through the date of our acquisition of these assets. Problems related to predecessors could result in increased costs and delays in the development of our product candidates, which could adversely affect our ability to generate any future revenue from sales of our product candidates, if approved.55

~~Our~~principal ~~gene~~investigator ~~therapy~~has ~~product~~created ~~candidate,~~a ~~URO-902,~~conflict isof ~~based~~interest onor aotherwise ~~novel~~affected ~~technology~~the ~~and~~integrity of the study. The FDA or other regulatory ~~landscape~~authority ~~that~~may ~~governs~~therefore ~~gene~~question ~~therapy~~the ~~products~~integrity isof ~~uncertain~~the data generated at the applicable clinical trial site and the utility of the clinical trial itself may ~~change~~be jeopardized. This could result in a delay in approval, ~~which~~or ~~makes~~rejection, itof ~~difficult~~our tomarketing ~~predict~~applications by the ~~time~~FDA or other regulatory authority, as the case may be, and ~~cost~~may ultimately lead to the denial of ~~development~~marketing ~~and~~approval of ~~subsequently~~one ~~obtaining~~or ~~regulatory~~more ~~approval~~of our product candidates.

~~The~~In ~~use~~addition, ofprior ~~gene~~to ~~therapy~~our inacquisition of the ~~treatment~~rights ofto ~~OAB~~GEMTESA isand ~~novel.~~URO-902, ~~There~~we ~~can~~had be no ~~assurance~~involvement ~~that~~with weor ~~will~~control ~~not~~over ~~experience~~the ~~problems~~nonclinical or ~~delays~~clinical ~~with~~development ~~the assessment~~ of the ~~current~~product ~~drug~~and ~~supply~~gene ~~and~~therapy inproduct ~~the~~candidate. ~~future~~Additionally, ~~with~~pursuant ~~developing~~to our ~~product~~collaboration ~~candidate~~agreement ~~and~~with ~~that~~Kyorin, ~~such~~who ~~problems~~retains orexclusive ~~delays~~rights ~~will~~from ~~not~~Merck ~~cause~~to ~~unanticipated~~develop ~~costs,~~and orcommercialize ~~that~~vibegron ~~any~~in ~~such~~Japan ~~development~~and ~~problems~~certain ~~can~~other beAsian ~~solved.~~territories, Wewe may ~~also~~use ~~experience~~supportive ~~delays~~data generated by Kyorin in ~~developing~~connection awith ~~sustainable,~~seeking ~~reproducible~~regulatory ~~and~~approval ~~scalable~~of ~~manufacturing~~GEMTESA ~~process,~~in the territories in which ~~may~~we ~~prevent~~have usrights ~~from~~to ~~completing~~develop ~~our~~and ~~clinical~~commercialize ~~studies~~GEMTESA. orWe ~~commercializing~~are ~~URO-902~~dependent on aMerck, ~~timely~~Kyorin orand ~~profitable~~ICI ~~basis~~having conducted such research and development in accordance with the applicable protocols and legal, ifregulatory atand ~~all.~~scientific Westandards, ~~expect~~having ~~that~~accurately reported the ~~supply~~results of ~~URO-902~~all ~~that~~clinical ~~was~~trials ~~transferred~~and other research they conducted prior to usour ~~under~~acquisition of the ~~ICI~~rights ~~license~~to ~~agreement~~our ~~will~~current ~~only~~product beand ~~sufficient~~gene ~~for~~therapy product candidate, having correctly collected and interpreted the data from these trials and other research, and having supplied us towith complete information, data sets and reports required to adequately demonstrate the results reported through the date of our ~~Phase~~acquisition 2aof ~~study~~these assets. ~~Any~~Problems ~~issues~~related weto ~~experience~~predecessors could result in ~~the~~increased ~~future~~costs ~~with~~and ~~respect~~delays toin the ~~manufacturing~~development orof ~~availability~~our ofgene ~~URO-902~~therapy product candidate, which could ~~significantly~~adversely ~~delay~~affect our ~~URO-902~~ability ~~development~~to ~~program~~generate ~~and~~future ~~harm~~revenue from sales of our ~~business~~gene ~~prospects~~therapy product candidate, if approved.

Our gene therapy product candidate, URO-902, is based on a novel technology, and the regulatory landscape that governs gene therapy products is uncertain and may change, which makes it difficult to predict the time and cost of development and of subsequently obtaining regulatory approval.

The use of gene therapy in the treatment of OAB is novel. There can be no assurance that we will not experience problems or delays with the assessment of the current drug supply and in the future with developing our gene therapy product candidate and that such problems or delays will not cause unanticipated costs, or that any such development problems can be solved. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process, which may prevent us from completing our clinical studies or commercializing URO-902 on a timely or profitable basis, if at all. We expect that the supply of URO-902 that was transferred to us under the ICI license agreement will only be sufficient for us to complete our Phase 2a study. Any issues we experience in the future with respect to the manufacturing or availability of URO-902 could significantly delay our URO-902 development program and harm our business prospects.

In addition, the clinical trial requirements and the criteria used by the FDA and other foreign regulatory authorities to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of such product candidate. The regulatory approval process for novel product candidates such as URO-902 can be more expensive and take longer than for other, better known or more extensively studied product candidates. To date, only a limited number of gene therapies have received marketing authorization from the FDA or foreign regulatory authorities. Until August 2017, the FDA had never approved a gene therapy product. Since that time, the FDA has only approved a small number of gene therapy product candidates, including Kymriah by Novartis International AG, for pediatric and young adult patients with a form of acute lymphoblastic leukemia, Yescarta by Kite Pharma, Inc., for adult patients with certain forms of non-Hodgkin lymphoma, Luxturna by Spark Therapeutics, Inc. for patients with an inherited form of vision loss, and Zolgensma by AveXis, Inc. for pediatric patients with a form of spinal muscular atrophy. It is difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for URO-902 in either the United States, or other major markets or how long it will take to commercialize URO-902, if approved. Approvals by foreign regulatory authorities may not be indicative of what the FDA may require for approval, and vice versa.

The FDA recently released a series of draft guidance documents regarding certain gene therapy product candidates, including gene therapies for rare diseases, and other clinical and manufacturing issues related to gene therapy product candidates. We cannot be certain when additional guidance will be released that could be relevant to, or have an impact on, our gene therapy product candidate or the duration or expense of any applicable regulatory review processes.

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. The FDA has established the Office of Tissues and Advanced Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise the CBER in its review. In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human clinical trials for cell therapy products and gene therapy had historically been subject to review by the Recombinant DNA Advisory Committee, or the RAC, of the National Institutes of Health, or NIH, Office of Biotechnology Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH Guidelines. On August 17, 2018, the NIH issued a notice in the Federal Register and issued a public statement proposing changes to the oversight framework for gene therapy trials, including changes to the applicable NIH Guidelines to modify the roles and responsibilities of the RAC with respect to human clinical trials of gene therapy products, and requesting public comment on its proposed modifications. During the public comment period, which closed October 16, 2018, the NIH has announced that it will no longer accept new human gene transfer protocols for review as a part of the protocol registration process or convene the RAC to review individual clinical protocols. These trials will remain subject to the FDA’s oversight and other clinical trial regulations, and oversight at the local level will continue as set forth in the NIH Guidelines. Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and assessment by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Even though we may not be required to submit a protocol for our gene therapy product candidates through the NIH for RAC review, we will still be subject to significant regulatory oversight by the FDA, and in addition to the government regulators, the applicable IBC and institutional review board, or IRB, of each institution at which we or our collaborators conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review and approve the proposed clinical trial. Similarly, foreign regulatory authorities may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines.

The IBC assesses the safety of the research and identifies any potential risk to public health or the environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Even though we may not be required to submit a protocol for our gene therapy product candidates through the NIH for RAC review, we will still be subject to significant regulatory oversight by the FDA, and in addition to the government regulators, the applicable IBC and institutional review board, or IRB, of each institution at which we or our collaborators conduct clinical trials of our product candidates, or a central IRB if appropriate, would need to review and approve the proposed clinical trial. Similarly, foreign regulatory authorities may issue new guidelines concerning the development and marketing authorization for gene therapy products and require that we comply with these new guidelines.

The FDA, NIH and the European Medicines Agency, or EMA, have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing. For example, the EMA advocates a risk-based approach to the development of a gene therapy product candidate. Agencies at both the federal and state level in the United States, as well as the U.S. congressional committees and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such actions may delay or prevent development and, if approved, commercialization of URO-902.

These regulatory review committees and advisory groups and any new guidelines they promulgate may lengthen the regulatory review process, require us to perform additional testing, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of URO-902 or lead to significant post-approval limitations or restrictions. As we advance our gene therapy product candidate, we will be required to consult with these regulatory and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of URO-902. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient product revenue, and our business, financial condition, results of operations and prospects would be adversely affected.

Negative public opinion of gene therapy and increased regulatory scrutiny of gene therapy and genetic research may adversely impact public perception of our current and future product candidates.

Our gene therapy product candidate, URO-902, involves introducing genetic material into patients’ cells. The clinical and commercial success of URO-902 and any future gene therapy product candidates will depend in part on public acceptance of the use of gene therapy and gene regulation for the prevention or treatment of human diseases. Public attitudes may be influenced by claims that gene therapy and gene regulation are unsafe, unethical or immoral and, consequently, any gene therapy product candidates that we may develop may not gain the acceptance of the public or the medical community. Adverse public attitudes may adversely impact our ability to enroll patients in our clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments that involve the use of gene therapy product candidates that we may develop in lieu of, or in addition to, existing treatments with which they are already familiar and for which greater clinical data may be available.

52More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of URO-902. For example, in 2003, clinical trials using early versions of murine gamma-retroviral vectors, which integrate with, and thereby alter, the host cell’s DNA, have led to several well publicized adverse events, including reported cases of leukemia. Adverse events in our clinical trials, even if not ultimately attributable to our gene therapy product candidate, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of URO-902 or any future gene therapy product candidates, stricter labeling requirements for such product candidates if approved and a decrease in demand for any such product candidates. The risk of cancer remains a concern for gene therapy, and we cannot be sure that it will not occur in any of our planned or future clinical trials. In addition, there is the potential risk of delayed adverse events following exposure to gene therapy due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. If any such adverse events occur, our clinical trials and, if approved, commercialization of URO-902 or any future product candidates could be halted or delayed, which would have a negative impact on our business and operations.

~~More~~Reported ~~restrictive~~data ~~government regulations~~ or ~~negative~~other ~~public~~clinical ~~opinion~~development ~~would~~announcements ~~have~~by aKyorin ~~negative effect on our business~~ or ~~financial~~other ~~condition~~third ~~and~~parties may ~~delay~~adversely oraffect ~~impair~~our ~~the development and~~ commercialization of ~~URO-902.~~GEMTESA ~~For example,~~ in ~~2003, clinical trials using early versions of murine gamma-retroviral vectors, which integrate with, and thereby alter,~~ the ~~host~~United ~~cell’s DNA, have led to several well publicized adverse events, including reported cases of leukemia~~States. Adverse events in our clinical trials, even if not ultimately attributable to our gene therapy product candidate, and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of URO-902 or any future gene therapy product candidates, stricter labeling requirements for such product candidates if approved and a decrease in demand for any such product candidates. The risk of cancer remains a concern for gene therapy and we cannot assure that it will not occur in any of our planned or future clinical trials. In addition, there is the potential risk of delayed adverse events following exposure to gene therapy due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. If any such adverse events occur, our clinical trials and, if approved, commercialization of URO-902 or any future product candidates could be halted or delayed, which would have a negative impact on our business and operations.

~~Reported~~Kyorin developed vibegron for the treatment of OAB in Japan and in September 2018, received marketing approval from Japan’s Ministry of Health, Labour and Welfare for vibegron for the treatment of adults with OAB. In November 2018, Kyorin launched vibegron for the treatment of OAB in Japan. Previously, Kyorin reported positive results from its Phase 3 clinical trial in Japan for the treatment of OAB. If subsequent announcements by Kyorin regarding vibegron are unfavorable, or post-marketing data or ~~other~~Phase 4 clinical ~~development~~trials ~~announcements~~conducted by Kyorin are unfavorable or ~~other~~result ~~third~~in ~~parties~~new safety signals in Japan during any such post-marketing or Phase 4 clinical trial, it could negatively impact our commercialization efforts for GEMTESA in the United States. Any unexpected measure by the Japanese regulatory agencies following approval of vibegron in Japan, including any measures due to unexpected post-marketing safety signals, may ~~adversely~~also affect our ~~clinical~~regulatory ~~development~~approval ~~plan~~for GEMTESA in the United States. In addition, we face similar risks to the extent that third parties develop vibegron in other Asian territories.

Kyorin developed vibegron for the treatment of OAB in Japan and in September 2018, received marketing approval from Japan’s Ministry of Health, Labour and Welfare for vibegron for the treatment of adults with OAB. In November 2018, Kyorin launched vibegron for the treatment of OAB in Japan. Previously, Kyorin reported positive results from its Phase 3 clinical trial in Japan for the treatment of OAB. If subsequent announcements by Kyorin regarding vibegron are unfavorable, or post-marketing data or Phase 4 clinical trials conducted by Kyorin are unfavorable or result in new safety signals in Japan during any such post-marketing or Phase 4 clinical trial, it could negatively impact our clinical development plans and potential approval for vibegron in the United States. Any unexpected measure by the Japanese regulatory agencies following approval of vibegron in Japan, including any measures due to unexpected post-marketing safety signals, will also affect the potential approval for vibegron in the United States. In addition, we face similar risks to the extent that third parties develop vibegron in other Asian territories.57

The results of our clinical trials may not support our proposed claims for our current or future product candidates, or regulatory approval at all.

Success in nonclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior nonclinical testing and clinical trials. Likewise, promising results in interim analyses or other preliminary analyses do not ensure that the clinical trial as a whole will be successful. A number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in clinical trials, even after promising results in earlier nonclinical studies or clinical trials. These setbacks have been caused by, among other things, nonclinical findings made while clinical trials were underway and safety or efficacy observations made in clinical trials, including previously unreported adverse events. The results of nonclinical studies and early clinical trials of our current or future product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through nonclinical and initial clinical trials. For example, we may not succeed in demonstrating that vibegron offers a differentiated profile compared to current OAB therapies, including the potential for broader efficacy claims if the FDA does not approve the inclusion of urgency data, rapid onset of action data, and a single, convenient once-daily and crushable dose in the label. A future failure of a clinical trial to meet its pre-specified endpoints would likely cause us to abandon a product candidate and may delay development of any other product candidates.

~~Although~~Any ~~we submitted our NDA for vibegron in December 2019, any~~ delay in, or termination of, our clinical trials will delay the submission of an NDA in the United States or other similar applications with other relevant foreign regulatory authorities and, ultimately, our ability to commercialize ~~vibegron~~our ~~and generate~~ product ~~revenue~~candidates. Even if our clinical trials are completed as planned for our product candidates, we cannot be certain that their results will support ~~these~~any potential claims for differentiation or the effectiveness or safety of ~~vibegron~~those product candidates. The FDA has substantial discretion in the review and approval process and may disagree that our studies support the differentiated claims we may propose. We cannot guarantee that we will obtain approval for the differentiated claims we propose, if at all. Any failure to support our claims for differentiation or obtain approval from the FDA for the differentiated claims we propose could adversely impact our ability to compete with other available therapies.

Interim, “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or “top-line” data from our clinical trials, which is based on a preliminary analysis of then-available top-line data, and the results and related findings and conclusions are subject to change following a full analyses of all data related to the particular trial. For example, the top-line data analysis from our Phase 3 EMPOWUR study did not include full vital sign data, including blood pressure. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, top-line data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our business in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, product candidate or our business. If the top-line data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates, our business, operating results, prospects or financial condition may be harmed.

Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.

We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials on our current timelines, or at all, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Enrollment in our clinical trials may be slower than we anticipate, leading to delays in our development timelines. For example, we may face difficulty enrolling or maintaining a sufficient number of patients in our clinical trials due to the effects of the COVID-19 pandemic or due to existing alternative treatments approved for the treatment of OAB as patients may decline to enroll or decide to withdraw from our clinical trials due to the risk of receiving placebo or the perceived risks of gene therapy as compared to more traditional treatment options. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, the willingness of and ability for patients to visit clinical sites as a result of the COVID-19 pandemic, the eligibility criteria for the trial and the proportion of patients screened that meets those criteria, our ability to obtain and maintain patient consents, and the risk that patients enrolled in clinical trials will drop out of the trials before completion.

Furthermore, any negative results or new safety signals we or third parties may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain patients in our clinical trials. Similarly, negative results reported by our competitors about their drug candidates may negatively affect patient recruitment in our clinical trials. Also, marketing authorization of competitors in this same class of drugs may impair our ability to enroll patients into our clinical trials, delaying or potentially preventing us from completing recruitment of one or more of our trials. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates, or could render further development impossible. In addition, we expect to rely on CROs and clinical trial sites to ensure proper and timely conduct of our future clinical trials, and, while we intend to enter into agreements governing their services, we will be limited in our ability to compel their actual performance, including their abilities to perform during the COVID-19 pandemic.

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

Drug development is highly competitive and subject to rapid and significant technological advancements. For example, there are several large and small pharmaceutical companies focused on delivering therapeutics for OAB. Further, it is likely that additional drugs will become available in the future for the treatment of OAB and our other target indications.

We are aware of several companies that are working to develop drugs that would compete against ~~vibegron~~GEMTESA and URO-902 for the treatment of OAB. For example, Velicept Therapeutics, Inc. is advancing solabegron, a beta-3 agonist initially developed by GlaxoSmithKline plc, as a twice-daily and once-daily formulation into Phase 2b clinical trials. In addition to solabegron, there are several other product candidates under development for the treatment of OAB. Taiho Pharmaceutical Co., Ltd., is developing TAC-302, a novel neurite outgrowth enhancer, currently in Phase 2 clinical trials in Japan. Dong-A ST Co., Ltd., is developing DA-8010, a novel anticholinergic, currently in a Phase 2 clinical trial in South Korea. Taris Biomedical LLC is developing TAR-302, an intravesicular drug-delivery system for trospium, an anticholinergic drug, currently in Phase 1b clinical trials. In addition, a number of companies are developing injectable neurotoxins (biosimilar onabotulinumtoxinA, abobotulinumtoxinA, and nivobotulinumtoxinA) for OAB, and Allergan has advanced a BOTOX-based sustained release gel (RTGel) for the treatment of OAB into Phase 2 clinical development.

We also face competition from other drugs and therapies currently approved for the treatment of OAB. Anticholinergic drugs have been the standard of pharmacologic care for OAB since the approval of flavoxate in 1970 and oxybutynin in 1975. Anticholinergics continue to account for the largest share of prescriptions written for the treatment of OAB in the United States. There are a number of widely prescribed anticholinergics approved for sale in the United States, including solifenacin, tolterodine and oxybutynin. Duchesnay USA has also signed an agreement with Apogepha to market Mictoryl® (propiverine hydrochloride) an anticholinergic and calcium antagonist in the United States once all FDA regulatory reviews have been completed. Propiverine hydrochloride was first approved in Germany in 1992 and is widely marketed outside of the United States. In addition, we will face competition from mirabegron (Myrbetriq, marketed by Astellas) and Allergan’s BOTOX, each of which are FDA-approved therapies used for the treatment of OAB. Recently, Myrbetriq was granted a new patent that extends its exclusivity to 2030 and as a result we will face continued competitive pressures in the market. Furthermore, we expect to face additional competition from generic products as the patent protection for competitor’s products expire.

For example, we expect to face competition from a generic version of mirabegron following Myrbetriq’s loss of marketing exclusivity, which we expect to occur in early 2024. Any such competition from generics could adversely affect the market size and opportunity for vibegron, and there can be no assurance that generic competition will not reach the market even sooner than we expect.

Many of our existing or potential competitors have substantially greater financial, technical and human resources than we do and significantly greater experience in the discovery and development of product candidates, as well as in obtaining regulatory approvals of those product candidates in the United States and in foreign countries. Many of our current and potential future competitors also have significantly more experience commercializing drugs that have been approved for marketing. Mergers and acquisitions in the pharmaceutical and biotechnology industries could result in even more resources being concentrated among a smaller number of our competitors. Competition may reduce the number and types of patients available to us to participate in clinical trials, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, drugs that are more effective or less costly than any product candidate that we may develop.

Our ability to compete successfully will depend largely on our ability to:

•

develop and commercialize therapies that are superior to other products in the market;

• demonstrate through our clinical trials that our product ~~candidates~~is ~~are~~ differentiated from existing and future therapies;

•

attract and retain qualified scientific, product development and commercial personnel;

•

obtain patent or other proprietary protection for our technologies and product;

• obtain required regulatory approvals, including approvals to market our product ~~candidates~~ in ways that are differentiated from existing and future therapies;

• successfully manufacture and commercialize GEMTESA and our gene therapy product ~~candidates~~candidate, if approved;

•

obtain coverage and adequate reimbursement from, and negotiate competitive pricing with, third-party payors; and

•

successfully collaborate with pharmaceutical companies in the discovery, development and commercialization of new therapies.

The availability of our competitors’ products could limit the demand and the price we are able to charge for any product candidate we develop. The inability to compete with existing or subsequently introduced drugs would have an adverse impact on our business, financial condition and prospects.

Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product and gene therapy product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving FDA or other regulatory authority approval for or commercializing medicines before we do, which would have an adverse impact on our business and results of operations.

If we are not able to obtain required regulatory approvals for our gene therapy product candidate, URO-902, or for other product candidates we may have in the future, we will not be able to commercialize ~~our~~such product candidates, and our ability to generate product revenue will be materially impaired.

Activities associated with the development and commercialization of our gene therapy product candidate, URO-902, and any other product candidates we may have in the future, including the design, research, testing, manufacture, safety, efficacy, recordkeeping, labeling, packaging, storage, approval, advertising, promotion, sale and distribution of ~~our~~such product candidates are subject to comprehensive regulation by the FDA and other regulatory agencies in the United States and by similar regulatory authorities outside the United States. Failure to obtain marketing approval for, and thus commercialize ~~our~~such ~~product~~ candidates, could negatively impact our ability to generate ~~any~~ revenue from product sales.

WeThe ~~have~~time ~~not~~required ~~received~~to obtain approval ~~from~~of ~~regulatory~~a ~~authorities~~BLA toor ~~market~~NDA ~~any~~by ~~product~~the ~~candidate~~FDA inor ~~any~~similar ~~jurisdiction,~~regulatory ~~and~~authorities itoutside ~~is possible that none~~ of ~~our~~the ~~product~~United ~~candidates~~States ~~will~~is ~~ever~~unpredictable ~~obtain~~but ~~the~~typically ~~appropriate~~takes ~~regulatory~~many ~~approvals~~years ~~necessary~~following ~~for~~the uscommencement toof ~~commence~~clinical ~~product~~trials ~~sales.~~and ~~Neither~~depends weupon ~~nor~~numerous ~~any~~factors, ~~current~~including orthe ~~future~~substantial ~~collaborator,~~discretion isof ~~permitted~~the toregulatory ~~market~~authority. ~~any~~In ofaddition, ~~our~~approval ~~product~~policies, ~~candidates~~regulations, inor the ~~United~~type ~~States~~and oramount ~~any~~of ~~other~~clinical ~~jurisdiction~~data ~~until~~necessary weto ~~receive~~gain ~~regulatory~~ approval ofmay anchange ~~NDA~~during ~~from~~ the ~~FDA~~course orof ~~similar~~a ~~regulatory~~product ~~authorities~~candidate’s ~~outside~~clinical ofdevelopment ~~the~~and ~~United~~may ~~States~~vary among jurisdictions.

~~The~~We ~~time~~have ~~required~~not toyet ~~obtain~~submitted a BLA for URO-902. Obtaining approval of an NDA, byBLA ~~the FDA~~ or similar regulatory ~~authorities~~approval ~~outside of the United States~~ is ~~unpredictable~~an ~~but~~extensive, ~~typically~~lengthy, ~~takes~~expensive ~~many years following the commencement of clinical trials~~ and ~~depends~~inherently ~~upon~~uncertain ~~numerous factors~~process, ~~including~~and the ~~substantial~~FDA ~~discretion~~or ofother ~~the~~foreign regulatory ~~authority.~~authorities Inmay ~~addition~~delay, ~~approval~~limit ~~policies, regulations,~~ or ~~the~~deny ~~type~~approval ~~and~~of ~~amount~~any of ~~clinical~~our ~~data~~current ~~necessary~~or tofuture ~~gain~~product ~~approval~~candidates, ~~may~~including ~~change~~through ~~during~~amendments to the ~~course~~NDA ofor aBLA, ~~product~~for ~~candidate’s~~many ~~clinical~~reasons, ~~development~~including: ~~and may vary among jurisdictions.~~

55• we may not be able to demonstrate that our product candidates are effective as treatments for any of our targeted indications to the satisfaction of the FDA or other relevant regulatory authorities;

•

the FDA or other relevant regulatory authorities may identify unexpected efficacy or safety concerns while reviewing an NDA or similar application;

•

the FDA or other relevant regulatory authorities may require additional pre-approval studies or clinical trials, which would increase our costs and prolong our development timelines;

•

the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or other relevant regulatory authorities for marketing approval;

•

the FDA or other relevant regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials;

•

the FDA or other relevant regulatory authorities may disagree with our proposed analysis plans for any clinical trials of our product candidates;

•

the CROs that we retain to conduct clinical trials may take actions outside of our control, or otherwise commit errors or breaches of protocols, that materially adversely impact our clinical trials and ability to obtain market approvals;

•

the FDA or other relevant regulatory authorities may not find the data from nonclinical studies or clinical trials sufficient to demonstrate that the clinical and other benefits of these products outweigh their safety risks;

•

the FDA or other relevant regulatory authorities may disagree with our interpretation of data or significance of results from the nonclinical studies and clinical trials of our product candidates, or may require that we conduct additional studies;

•

the FDA or other relevant regulatory authorities may not accept data generated from our clinical trial sites;

•

if our NDA or other foreign application is reviewed by an advisory committee, the FDA or other relevant regulatory authority, as the case may be, may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA or other relevant regulatory authority, as the case may be, require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

•

the FDA or other relevant regulatory authorities may require development of a risk evaluation and mitigation strategy, or REMS, or its equivalent, as a condition of approval;

•

the FDA or other relevant regulatory authorities may require additional post-marketing studies, which would be costly;

•

the FDA or other relevant regulatory authorities may find the chemistry, manufacturing and controls data insufficient to support the approval and quality of our product candidates;

•

the FDA or other relevant regulatory authorities may identify deficiencies in the manufacturing processes or facilities of our third-party manufacturers and third-party manufacturers may not pass the pre-approval inspections by regulatory authorities;

•

the FDA or other relevant regulatory authorities may have slower response times or be under-resourced due to the global novel coronavirus disease, or COVID-19, pandemic and, as a result, review, inspection and other timelines may be materially delayed; or

•

the FDA or other relevant regulatory authorities may change their approval policies or adopt new regulations.

Securing marketing approvals requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the safety and efficacy of the product candidate for that indication. We expect to rely on third-party CROs and consultants to assist us in filing and supporting the applications necessary to gain marketing approvals. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Delays or errors in the submission of applications for marketing approval or issues, including those related to gathering the appropriate data and the inspection process, may ultimately delay or affect our ability to obtain regulatory approval, commercialize our product candidates and generate product revenue.

~~Our~~GEMTESA and our gene therapy product ~~candidates~~candidate may cause adverse effects or have other properties that could limit their market acceptance and could delay or prevent ~~their~~the regulatory approval or limit the scope of any approved label orfor ~~market~~our ~~acceptance~~gene therapy product candidate.

Adverse events caused by our gene therapy product ~~candidates~~candidate or that of adjuncts, could cause us, other reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials, and could result in the denial of regulatory approval. If an unacceptable frequency or severity of adverse events or new safety signals are reported in our clinical trials for our current or future product candidates, our ability to obtain regulatory approval for such product candidates may be negatively impacted. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. Any of these occurrences may harm our business, financial condition and prospects.

In particular, there have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia in trials using earlier generation viral vectors. While URO-902 uses a plasmid vector, gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. There is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biologic activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that may occur with treatment with gene therapy products include an immunologic reaction early after administration that could substantially limit the effectiveness of the treatment or represent safety risks for patients. Many times, side effects are only detectable after investigational products are tested in larger scale, pivotal clinical trials or, in some cases, after they are made available to patients on a commercial scale after approval. If ~~any~~GEMTESA, ofor our ~~current~~gene ortherapy ~~future~~ product ~~candidates~~candidate, ~~are~~if approved, ~~and then~~ cause serious or unexpected side effects, a number of potentially significant negative consequences could result, including:

•

regulatory authorities may withdraw their approval of the product or require a REMS (or equivalent outside the United States) to impose restrictions on its distribution or other risk management measures;

•

we may be required to recall a product;

•

additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

•

regulatory authorities may require the addition of labeling statements, such as warnings or contraindications, or require other labeling changes;

•

we may be required to change the way the product is administered or to conduct additional clinical trials;

•

we may be required to repeat a preclinical study or clinical trial or terminate a program, even if other studies or trials related to the program are ongoing or have been successfully completed;

•

we could be sued and held liable for harm caused to patients;

•

we could elect to discontinue the sale of our product;

•

the product may become less competitive; and

•

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance ~~of the affected product candidate~~ and could substantially increase the costs of commercializing ~~our~~GEMTESA ~~current~~ or ~~future~~our gene therapy product ~~candidates~~candidate, if approved.

The FDA may impose restrictions that limit the scope of any approved label and affect our market acceptance.

The FDA has substantial discretion in the product label review and approval process and may disagree that our studies support the differentiated claims we propose. Even if we are successful in demonstrating that our product offers a differentiated profile compared to current therapies, the FDA may restrict us from mentioning such claims in the U.S. label, which could potentially adversely affect product differentiation.

Further, the FDA could institute a “class” label for all products in the same market, which could require us to include warnings or other information on the label of our product that may not be specifically applicable to our product. For example, while the results of the ambulatory blood pressure study of vibegron demonstrated that vibegron does not have an effect on daytime systolic ambulatory blood pressure compared to placebo, the FDA may nevertheless require a safety warning for blood pressure for all drugs in this class. If the FDA were to institute such a “class” label requiring a blood pressure warning, it would adversely impact our ability to differentiate vibegron from mirabegron, which did not achieve the same positive blood pressure results as vibegron. If we are unable to differentiate our products and compete effectively, our ability to successfully commercialize vibegron and our other product candidates, our business, operating results, prospects or financial condition may be harmed.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and even if we obtain approval for a product candidate in one country or jurisdiction, we may never obtain approval for or commercialize it in any other jurisdiction, which would limit our ability to realize our full market potential.

Prior to obtaining approval to commercialize a product candidate in any jurisdiction, we or our collaborators must demonstrate with substantial evidence from well controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory agencies, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for a product candidate are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. In order to market any products in any particular jurisdiction, we must establish and comply with numerous and varying regulatory requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA does not ensure approval by regulatory authorities in any other country or jurisdiction outside the United States. In addition, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval in any other country. Approval processes vary among countries and can involve additional product testing and validation, as well as additional administrative review periods. Prior to obtaining approval to commercialize a product candidate, we must demonstrate acceptable stability under various conducts and for commercially viable lengths of time. Given the timing for completion of validation, it is possible that we could experience delays in FDA approval and/or delays in the commercial launch of ~~vibegron~~our product candidates solely as a result of the time it takes to demonstrate acceptable stability. Seeking regulatory approval could result in difficulties and costs for us and require additional nonclinical studies or clinical trials, which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our products in those countries. ~~We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and we do not have experience in obtaining regulatory approval.~~ If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be reduced and our ability to realize the full market potential of any product we develop will be unrealized.

Even if we obtain regulatory approval for any of our current or future product candidates, we will still face extensive regulatory requirements, and our product may face future development and regulatory difficulties.

Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment of registration and drug listing requirements, continued compliance with cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of drug product samples to physicians, recordkeeping and GCP requirements for any clinical trials that we conduct post-approval. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the conditions of approval or the FDA or other regulatory authorities may require that contraindications, warnings or precautions-including in some cases, a boxed warning be included in the product labeling, which could limit sales of the product.

Regulatory authorities closely regulate the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. Regulatory authorities impose stringent restrictions on manufacturers’ communications regarding off-label use, and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal Food, Drug, and Cosmetic Act in the United States and other comparable regulations in foreign jurisdictions relating to the promotion of prescription drugs may lead to enforcement actions and investigations by the FDA, Department of Justice, State Attorneys General and other foreign regulatory agencies alleging violations of United States federal and state health care fraud and abuse laws, as well as state consumer protection laws and comparable laws in foreign jurisdictions.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements may yield various results, including:

•

restrictions on the manufacture of such products;

•

restrictions on the labeling or marketing of such products;

5762

•

restrictions on product distribution or use;

•

requirements to conduct post-marketing studies or clinical trials, or any regulatory holds on our clinical trials;

•

requirement of a REMS (or equivalent outside the United States);

•

Warning or Untitled Letters;

•

withdrawal of the products from the market;

•

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Filing Compare · Urovant Sciences Ltd.