imvt-20200930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 30, 2020


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

Commission File Number 001-38906

IMMUNOVANT, INC.

(Exact name of Registrant as specified in its Charter)


Delaware		83-2771572
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

320 West 37th Street		10018
New York,	NY
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (917) 580-3099

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

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.0001 par value per share

IMVT

The Nasdaq Stock Market LLC

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 and post such files). Yes ☒ No ☐

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

As of November 12, 2020, there were 97,890,705 shares of the Registrant’s common stock, $0.0001 par value per share, outstanding.

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		Page
Summary Risk Factors		2
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2020 and March 31, 2020	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended September 30, 2020 and 2019	6
	Condensed Consolidated Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	77
Item 4.	Mine Safety Disclosures	77
Item 5.	Other Information	77
Item 6.	Exhibits	77
SIGNATURES		78

Where You Can Find More Information

Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (www.immunovant.com), filings we make with the Securities and Exchange Commission, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with our stockholders and the public about our company, our product candidates, and other matters. It is possible that the information that we make available may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website.

The information contained on the website referenced in this Quarterly Report on Form 10-Q is not incorporated by reference into this filing, and the website address is provided only as an inactive textual reference.

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SUMMARY RISK FACTORS

You should consider carefully the risks described under “Risk Factors” in Part II, Item 1.A of this Quarterly Report on Form 10-Q. References to “we,” “us,” and “our” in this section titled “Summary Risk Factors” refer to Immunovant, Inc. and its wholly owned subsidiaries. A summary of the risks that could materially and adversely affect our business, financial condition, operating results and prospects include the following:

•Our business, operations and clinical development plans and timelines and supply chain could be adversely affected by the effects of health epidemics, including the ongoing COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, contract research organizations, or CROs, shippers and others.

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

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

•Our business is heavily dependent on the successful development, regulatory approval and commercialization of our sole product candidate, IMVT-1401.

•We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of IMVT-1401.

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

•We rely on the license agreement with HanAll Biopharma Co., Ltd., or the HanAll Agreement, to provide rights to the core intellectual property relating to IMVT-1401. Any termination or loss of significant rights under the HanAll Agreement would adversely affect our development or commercialization of IMVT-1401.

•The HanAll Agreement obligates us to make certain milestone payments, some of which may be triggered prior to our potential commercialization of IMVT-1401.

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

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

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

IMMUNOVANT, INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share data)


	September 30, 2020		March 31, 2020
Assets
Current assets:
Cash	$	444,372	$	100,571
Prepaid expenses	5,854		5,460
Income tax receivable	40		36
Value-added tax receivable	—		3,009
Total current assets	450,266		109,076
Operating lease right-of-use assets	3,493		—
Property and equipment, net	136		65
Deferred offering costs	—		246
Total assets	$	453,895	$	109,387
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,787	$	1,190
Accrued expenses	5,787		10,938
Current portion of operating lease liabilities	1,102		—
Due to Roivant Sciences Ltd.	134		3,190
Total current liabilities	12,810		15,318
Operating lease liabilities, net of current portion	2,679		—
Total liabilities	15,489		15,318
Commitments and contingencies (Note 11)
Stockholders’ equity:(1)
Series A preferred stock, par value $0.0001 per share, 10,000 shares authorized, issued and outstanding at September 30, 2020 and March 31, 2020	—		—
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized, no shares issued and outstanding at September 30, 2020 and March 31, 2020	—		—
Common stock, par value $0.0001 per share, 500,000,000 shares authorized, 97,890,705 shares issued and outstanding at September 30, 2020 and 500,000,000 shares authorized, 56,455,376 shares issued and 54,655,376 shares outstanding at March 31, 2020	10		5
Additional paid-in capital	577,341		185,306
Accumulated other comprehensive loss	(222)		(16)
Accumulated deficit	(138,723)		(91,226)
Total stockholders’ equity	438,406		94,069
Total liabilities and stockholders’ equity	$	453,895	$	109,387

(1) Retroactively restated for the reverse recapitalization as described in Note 1.

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

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IMMUNOVANT, INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share data)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Operating expenses:
Research and development (includes $999 and $1,476 of stock-based compensation expense for the three and six months ended September 30, 2020, respectively, and $2,307 and $2,372 of stock-based compensation expense for the three and six months ended September 30, 2019, respectively)(1)	$	11,976	$	10,331	$	28,898	$	28,807
General and administrative (includes $2,362 and $5,866 of stock-based compensation expense for the three and six months ended September 30, 2020, respectively, and $830 and $1,337 of stock-based compensation expense for the three and six months ended September 30, 2019, respectively)(2)	8,998		4,163		18,662		5,748
Total operating expenses	20,974		14,494		47,560		34,555
Interest expense	—		249		—		249
Other income, net	(225)		(294)		(151)		(319)
Loss before provision for income taxes	(20,749)		(14,449)		(47,409)		(34,485)
Provision for income taxes	40		33		88		56
Net loss	$	(20,789)	$	(14,482)	$	(47,497)	$	(34,541)
Net loss per common share – basic and diluted(3)	$	(0.25)	$	(0.38)	$	(0.61)	$	(0.90)
Weighted-average common shares outstanding – basic and diluted(3)	84,353,438		38,590,381		77,623,132		38,590,381

(1)Includes $68 and $176 of costs allocated from Roivant Sciences Ltd. for the three and six months ended September 30, 2020, respectively, and $1 and $152 of costs allocated from Roivant Sciences Ltd. for the three and six months ended September 30, 2019, respectively.

(2)Includes $173 and $337 of costs allocated from Roivant Sciences Ltd. for the three and six months ended September 30, 2020, respectively, and $270 and $514 of costs allocated from Roivant Sciences Ltd. for the three and six months ended September 30, 2019, respectively.

(3)Retroactively restated for the reverse recapitalization as described in Note 1.

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

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IMMUNOVANT, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Net loss	$	(20,789)	$	(14,482)	$	(47,497)	$	(34,541)
Other comprehensive loss:
Foreign currency translation adjustments	(232)		(53)		(206)		(344)
Total other comprehensive loss	(232)		(53)		(206)		(344)
Comprehensive loss	$	(21,021)	$	(14,535)	$	(47,703)	$	(34,885)

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

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IMMUNOVANT, INC.

Condensed Consolidated Statements of Stockholders’ Equity(1)

(Unaudited, in thousands except share data)


	Series A preferred stock			Common stock			Common stock subscribed		Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2020	10,000	$	—	54,655,376	$	5	$	—	$	185,306	$	(16)	$	(91,226)	$	94,069
Issuance of common stock upon underwritten public offering	—	—		9,613,365	1		—		130,427		—		—		130,428
Issuance of common stock upon achievement of earnout shares milestone	—	—		10,000,000	1		—		(1)		—		—		—
Vesting of sponsor restricted shares	—	—		900,000	—		—		—		—		—		—
Issuance of common stock upon warrant redemption	—	—		5,719,145	1		—		65,751		—		—		65,752
Stock options exercised	—	—		23,841	—		—		63		—		—		63
Capital contribution – stock-based compensation	—	—		—	—		—		63		—		—		63
Capital contribution – expenses allocated from Roivant Sciences Ltd.	—	—		—	—		—		164		—		—		164
Stock-based compensation	—	—		—	—		—		3,918		—		—		3,918
Foreign currency translation adjustments	—	—		—	—		—		—		26		—		26
Net loss	—	—		—	—		—		—		—		(26,708)		(26,708)
Balance at June 30, 2020	10,000	$	—	80,911,727	$	8	$	—	$	385,691	$	10	$	(117,934)	$	267,775
Issuance of common stock upon underwritten public offering	—	—		6,060,606	1		—		188,118		—		—		188,119
Issuance of common stock upon achievement of earnout shares milestone	—	—		10,000,000	1		—		(1)		—		—		—
Vesting of sponsor restricted shares	—	—		900,000	—		—		—		—		—		—
Stock options exercised	—	—		18,372	—		—		119		—		—		119
Capital contribution – stock-based compensation	—	—		—	—		—		54		—		—		54
Capital contribution – expenses allocated from Roivant Sciences Ltd.	—	—		—	—		—		53		—		—		53
Stock-based compensation	—	—		—	—		—		3,307		—		—		3,307
Foreign currency translation adjustments	—	—		—	—		—		—		(232)		—		(232)
Net loss	—	—		—	—		—		—		—		(20,789)		(20,789)
Balance at September 30, 2020	10,000	$	—	97,890,705	$	10	$	—	$	577,341	$	(222)	$	(138,723)	$	438,406


	Series A preferred stock			Common stock			Common stock subscribed		Additional paid-in capital		Accumulated other comprehensive income (loss)		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2019	—	$	—	38,590,381	$	4	$	(3)	$	31,830	$	346	$	(24,838)	$	7,339
Capital contribution – stock-based compensation	—	—		—	—		—		35		—		—		35
Capital contribution – expenses allocated from Roivant Sciences Ltd.	—	—		—	—		—		331		—		—		331
Stock-based compensation	—	—		—	—		—		537		—		—		537
Foreign currency translation adjustments	—	—		—	—		—		—		(291)		—		(291)
Net loss	—	—		—	—		—		—		—		(20,059)		(20,059)
Balance at June 30, 2019	—	$	—	38,590,381	$	4	$	(3)	$	32,733	$	55	$	(44,897)	$	(12,108)
Settlement of common share subscription	—	—		—	—		3		—		—		—		3
Capital contribution – stock-based compensation	—	—		—	—		—		18		—		—		18
Capital contribution – expenses allocated from Roivant Sciences Ltd.	—	—		—	—		—		220		—		—		220
Stock-based compensation	—	—		—	—		—		3,119		—		—		3,119
Foreign currency translation adjustments	—	—		—	—		—		—		(53)		—		(53)
Net loss	—	—		—	—		—		—		—		(14,482)		(14,482)
Balance at September 30, 2019	—	$	—	38,590,381	$	4	$	—	$	36,090	$	2	$	(59,379)	$	(23,283)

(1) Retroactively restated for reverse recapitalization as described in Note 1.

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

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IMMUNOVANT, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Six Months Ended September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(47,497)	$	(34,541)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	7,342		3,709
Depreciation on property and equipment	24		10
Foreign currency translation adjustments	(206)		(344)
Loss on disposal of property and equipment	—		14
Noncash lease expense	431		—
Write-off of deferred offering costs	—		1,398
Other	—		(40)
Changes in operating assets and liabilities:
Prepaid expenses	(394)		2,120
Income tax receivable	(4)		44
Value-added tax receivable	3,009		(8)
Accounts payable	4,737		963
Accrued expenses	(5,166)		664
Due to Roivant Sciences Ltd.	(149)		111
Income tax payable	—		11
Operating lease liabilities	(143)		—
Net cash used in operating activities	(38,016)		(25,889)
Cash flows from investing activities
Purchase of property and equipment	(86)		(8)
Net cash used in investing activities	(86)		(8)
Cash flows from financing activities
Capital contributions	217		551
Proceeds from issuance of common stock upon underwritten public offering	319,783		—
Proceeds from issuance of common stock upon warrant redemption	65,752		—
Proceeds from stock options exercised	182		—
Payment of deferred offering costs	(975)		(554)
Proceeds from convertible promissory notes payable	—		35,000
Repayment of convertible promissory notes payable	—		(2,500)
Proceeds from note payable to Roivant Sciences Ltd.	—		7,907
Repayment of note payable to Roivant Sciences Ltd.	(3,056)		(2,500)
Net cash provided by financing activities	381,903		37,904
Net change in cash	343,801		12,007
Cash – beginning of period	100,571		6,985
Cash – end of period	$	444,372	$	18,992
Non-cash operating activity
Operating lease right-of-use assets obtained and exchanged for operating lease liabilities	$	3,924	$	—
Non-cash investing activity
Purchase of property and equipment in accounts payable	$	—	$	6
Non-cash financing activity
Deferred offering costs in accrued expenses	$	261	$	1,178
Supplemental disclosure of cash paid:
Income taxes	$	92	$	—

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

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IMMUNOVANT, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 — Description of Business and Liquidity

[A] Description of Business

Immunovant, Inc. together with its wholly owned subsidiaries (the “Company” or “Immunovant”) (formerly known as Health Sciences Acquisitions Corporation) is a clinical-stage biopharmaceutical company focused on enabling normal lives for patients with autoimmune diseases. The Company is developing a novel, fully human monoclonal antibody, IMVT-1401 (formerly referred to as “RVT-1401”), that selectively binds to and inhibits the neonatal fragment crystallizable receptor. The Company intends to develop IMVT-1401 for indications in which there is robust evidence that pathogenic immunoglobulin G antibodies drive disease manifestation and for which reduction of these antibodies should lead to clinical benefit for patients with autoimmune diseases.

The Company has determined that it has one operating and reporting segment.

Reverse Recapitalization

On December 18, 2019, Health Sciences Acquisitions Corporation (“HSAC”) completed the acquisition of Immunovant Sciences Ltd. (“ISL”) pursuant to the share exchange agreement dated as of September 29, 2019 (the “Share Exchange Agreement”), by and among HSAC, ISL, the stockholders of ISL (the “Sellers”), and Roivant Sciences Ltd. (“RSL”), as representative of the Sellers (the “Business Combination”). As of immediately prior to the closing of the Business Combination, the Sellers owned 100% of the issued and outstanding common shares of ISL (“ISL Shares”). At the closing of the Business Combination, HSAC acquired 100% of the issued and outstanding ISL Shares, in exchange for 42,080,376 shares of HSAC’s common stock issued to the Sellers and 10,000 shares of HSAC Series A preferred stock issued to RSL. Upon the closing of the Business Combination, ISL became a wholly owned subsidiary of HSAC and HSAC was renamed “Immunovant, Inc.”.

The Business Combination was accounted for as a reverse recapitalization and HSAC was treated as the “acquired” company for accounting purposes. The Business Combination was accounted as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a recapitalization. Accordingly, all historical financial information presented in these unaudited condensed consolidated financial statements represents the accounts of ISL and its wholly owned subsidiaries “as if” ISL is the predecessor to the Company. The shares and net loss per common share, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination (0.48906624 Immunovant, Inc. shares for 1 ISL Share).

One of the primary purposes of the Business Combination was to provide a platform for ISL to gain access to the U.S. capital markets. See Note 3 – Business Combination and Recapitalization for additional details.

[B] Liquidity

The Company has incurred significant losses and negative cash flows from operations since its inception. As of September 30, 2020, the Company’s cash totaled $444.4 million and its accumulated deficit was $138.7 million.

The Company has not generated any revenues to date and does not anticipate generating any revenues unless and until it successfully completes development and obtains regulatory approval for IMVT-1401 or any future product candidate. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and recognizes the need to raise additional capital to fully implement its business plan.

The Company intends to raise such additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidates. Based on anticipated spend and timing of expenditure assumptions, the Company currently expects that its existing cash as of September 30, 2020, will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of calendar year 2023 from the date the unaudited condensed consolidated financial statements are issued.

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Note 2 — Summary of Significant Accounting Policies

[A] Basis of Presentation

The Company’s fiscal year ends on March 31 and its first three fiscal quarters end on June 30, September 30, and December 31. The accompanying condensed consolidated financial statements are unaudited. The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim financial reporting. 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 normally required by U.S. GAAP can be condensed or omitted. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited combined and consolidated financial statements. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company has no unconsolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. 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”).

In the opinion of management, the unaudited condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair statement of results for the interim periods. The results for the three and six months ended September 30, 2020 are not necessarily indicative of those expected for the year ending March 31, 2021 or for any future period. The condensed consolidated balance sheet as of March 31, 2020 included herein was derived from the audited combined and consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited combined and consolidated financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on June 29, 2020.

All share and per-share data reported in the unaudited condensed consolidated financial statements herein have been retroactively restated to reflect the effect of the Business Combination (as discussed in Note 3).

[B] Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, stock-based compensation, operating leases, research and development costs and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

Additionally, the Company assessed the impact that the COVID-19 pandemic has had on its operations and financial results as of September 30, 2020 and through the issuance of this report. The Company’s analysis was informed by the facts and circumstances as they were known to the Company. This assessment considered the impact COVID-19 may have on financial estimates and assumptions that affect the reported amounts of assets and liabilities and expenses.

[C] Risks and Uncertainties

The Company is subject to risks common to early stage companies in the biopharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key products, key personnel, third-party service providers such as contract research organizations, protection of intellectual property rights and the ability to make milestone, royalty or other payments due under any license, collaboration or supply agreements.

[D] Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk include cash. As of September 30, 2020, the cash balance is kept in one banking institution that the Company believes is of high credit quality and is in excess of federally insured levels. The Company maintains its cash with an accredited financial institution and accordingly, such funds are subject to minimal credit risk. The Company has not experienced any losses on its cash.

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[E] Research and Development Expense

Research and development costs with no alternative future use are expensed as incurred. Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development. Milestone payments made in connection with regulatory approvals are capitalized and amortized to cost of product sales over the remaining useful life of the asset. Research and development expenses primarily consist of employee-related costs and expenses from third parties who conduct research and development activities on behalf of the Company. The estimated costs of research and development activities conducted by third-party service providers, which primarily include the conduct of clinical trials and contract manufacturing activities, are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. The estimate of the work completed is developed through discussions with internal personnel and external services providers as to the progress toward completion of the services and the agreed-upon fee to be paid for such services. As actual costs become known, the accrued estimates are adjusted. Such estimates are not expected to be materially different from amounts actually incurred, however the Company’s understanding of the status and timing of services performed, the number of subjects enrolled, and the rate of subject enrollment may vary from estimates and could result in reporting amounts that are higher or lower than incurred in any particular period. The estimate of accrued research and development expense is dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers.

[F] Leases

The Company's operating leases primarily relate to its three subleased premises, two in New York and one in North Carolina. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and lease liabilities are initially recognized based on the present value of the future fixed lease payments over the expected lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. Operating lease ROU assets also include any lease payments made at or before lease commencement, adjusted by any initial direct costs and exclude any lease incentives received. The Company determines the lease term as the non-cancelable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the unaudited condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease costs such as common area costs and other operating costs are expensed as incurred.

The Company accounts for lease and non-lease components as a single lease component for all its facilities leases.

[G] Fair Value of Financial Instruments

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

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

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

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

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

The Company’s financial instruments consist of cash, accounts payable, accrued expenses and amounts due to RSL. These financial instruments are stated at their respective historical carrying amounts, which approximates fair value due to their short-term nature. There were no Level 2 or Level 3 financial instruments as of September 30, 2020 or March 31, 2020.

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[H] Net Loss per Common Share

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

The following potentially dilutive securities have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:


	Six Months Ended September 30,
	2020	2019
Preferred stock as converted	10,000	—
Options	5,834,682	3,130,588
Restricted stock units (unvested)	127,200	—
Total	5,971,882	3,130,588

In addition, the convertible promissory notes issued in the six months ended September 30, 2019 were not included in the calculation of diluted weighted-average number of common shares outstanding because they were anti-dilutive given the net loss of the Company.

[I] Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removes, modifies, and adds certain recurring and nonrecurring fair value measurement disclosures, including removing disclosures around the amount(s) of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for Level 3 fair value measurements, among other things. ASU 2018-13 adds disclosure requirements around changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and a narrative description of measurement uncertainty. The amendments in ASU 2018-13 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company has adopted this ASU as of April 1, 2020, with no impact to the Company’s unaudited condensed consolidated financial statements from the adoption of this new standard.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 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 2016-13 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period. The Company has adopted this ASU as of April 1, 2020, with no impact to the Company’s unaudited condensed consolidated financial statements from the adoption of this new standard.

Recent authoritative guidance issued by the FASB (including technical corrections to the Accounting Standards Codification), the American Institute of Certified Public Accountants, and the SEC did not, or are not expected to, have a material impact on the Company’s consolidated financial statements and related disclosures.

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Note 3 — Business Combination and Recapitalization

As discussed in Note 1, on December 18, 2019, HSAC completed the acquisition of ISL and acquired 100% of the ISL Shares for total consideration of $420.9 million, consisting of 42,080,376 shares of HSAC’s common stock and 10,000 shares of HSAC’s Series A preferred stock, in each case, valued at $10.00 per share (the deemed value of the shares issued pursuant to the Share Exchange Agreement). The Business Combination was accounted for as a reverse recapitalization whereby HSAC was treated as the “acquired” company for accounting purposes. This determination was primarily based on the fact that subsequent to the Business Combination, the Sellers have a majority of the voting power of the combined company, ISL will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the combined company, and ISL’s senior management will comprise all of the senior management of the combined company. The Business Combination was accounted as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a recapitalization. The net assets of HSAC were stated at historical cost with no goodwill or other intangible assets recorded. Reported amounts from operations included herein prior to the Business Combination are those of ISL. The shares, options and net loss per share available to holders of the Company’s common stock, prior to the Business Combination, have been retroactively restated as shares reflecting the exchange ratio established in the Business Combination (0.48906624 Immunovant, Inc. shares for 1 ISL Share).

In connection with the Business Combination, the Company incurred direct and incremental costs of $2.8 million, consisting of legal, accounting, financial advisory and other professional fees, which are included in additional paid-in capital in the consolidated balance sheets as of September 30, 2020. The Company incurred additional financial advisory fees related to the Business Combination of $2.3 million, which are included in accumulated deficit within the consolidated balance sheets as of September 30, 2020.

Earnout Shares

Pursuant to the Share Exchange Agreement, the Sellers were entitled to receive up to an aggregate of 20,000,000 additional shares of the Company’s common stock (the “Earnout Shares”) if the volume-weighted average price of the Company’s shares equals or exceeds the following prices for any 20 trading days within any 30-trading-day period (the “Trading Period”) following December 18, 2019, the date of the closing of the Business Combination:

(i)during any Trading Period prior to March 31, 2023, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of at least $17.50 per share (the “First Earnout Milestone”); and

(ii)during any Trading Period prior to March 31, 2025, 10,000,000 Earnout Shares upon the achievement of a volume-weighted average price of at least $31.50 per share (the “Second Earnout Milestone”).

On May 12 and September 17, 2020, the Company achieved the First Earnout Milestone and the Second Earnout Milestone, respectively. Accordingly, the Company issued all of the 20,000,000 Earnout Shares to the Sellers (including 17,547,938 Earnout Shares issued to RSL) in the six months ended September 30, 2020.

See Note 8 – Stockholders’ Equity for additional details.

Sponsor Restricted Stock Agreement

In accordance with that certain restricted stock agreement, dated September 29, 2019, by and between HSAC and Health Sciences Holdings, LLC (the “Sponsor”), the Sponsor subjected 1,800,000 shares of its common stock (“Sponsor Restricted Shares”) to potential forfeiture, with 900,000 shares to vest and be released from potential forfeiture upon achievement of each of the First Earnout Milestone and the Second Earnout Milestone (as defined above), respectively. On May 12 and September 17, 2020, the Company achieved the First Earnout Milestone and the Second Earnout Milestone, respectively, and, as a result, all of the 1,800,000 Sponsor Restricted Shares vested and are no longer subject to forfeiture.

Note 4 — Material Agreements

License Agreement

On December 19, 2017, Roivant Sciences GmbH (“RSG”), a wholly owned subsidiary of RSL, entered into a license agreement (the “HanAll Agreement”) with HanAll Biopharma Co., Ltd. (“HanAll”). Under the HanAll Agreement, RSG received (1) the non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import, use and commercialize the antibody referred to as IMVT-1401 and certain back-up and next-generation antibodies, and products containing such antibodies, in the United States, Canada, Mexico, the European Union, the United Kingdom, Switzerland, the Middle East, North Africa and Latin America (the “Licensed Territory”).

In exchange for this license, RSG provided or agreed to provide the following consideration:

•Upfront, non-refundable payment of $30.0 million;

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•Up to $20.0 million in shared (50/50)% research, development, and out-of-pocket costs incurred by HanAll;

•Up to an aggregate of $452.5 million upon the achievement of certain development, regulatory and sales milestones; and

•Tiered royalties ranging from the mid-single digits to mid-teens on net product sales subject to reduction on a product-by-product and country-by-country basis, until the later of (1) expiration of patent and regulatory exclusivity or (2) the 11th anniversary of the first commercial sale of such product in such country.

Since the acquisition of IMVT-1401, RSL and the Company have performed all the development associated with IMVT-1401 and no amounts were incurred by HanAll and reported to the Company, to research or develop the technology for the three and six months ended September 30, 2020 and September 30, 2019, respectively.

On August 18, 2018, RSG entered into a sublicense agreement (the “Sublicense Agreement”) with Immunovant Sciences GmbH (“ISG”), a wholly-owned subsidiary of the Company, to sublicense this technology, as well as RSG’s knowhow and patents necessary for the development, manufacture or commercialization of any compound or product that pertain to immunology. On December 7, 2018, RSG issued a notice to terminate the Sublicense Agreement with ISG and entered into an assignment and assumption agreement to assign to ISG all the rights, title, interest, and future obligations under the HanAll Agreement from RSG, including all rights to IMVT-1401 from RSG in the Licensed Territory, for an aggregate purchase price of $37.8 million. As a result of the assignment of IMVT-1401 by RSG to ISG, the Company recorded a Swiss value-added tax receivable of $3.0 million which was reflected as a capital contribution from RSL as of March 31, 2020. In April 2020, the Company received the payment related to this receivable.

In May 2019, the Company achieved its first development and regulatory milestone under the HanAll Agreement which resulted in a $10.0 million milestone payment that the Company subsequently paid in August 2019. The milestone payment was recorded as a research and development expense in the period incurred.

Note 5 — Accrued Expenses

Accrued expenses consist of the following (in thousands):


	September 30, 2020		March 31, 2020
Research and development expenses	$	3,423	$	8,332
Accrued bonuses	1,339		859
Legal and other professional fees	772		1,231
Other expenses	253		516
Total accrued expenses	$	5,787	$	10,938

Note 6 — Related Party Transactions

Roivant Sciences Inc. (“RSI”) and RSG Services Agreements

In addition to the agreements discussed in Note 4, in August 2018, the Company entered into services agreements (the “Services Agreements”) with RSI and RSG, under which RSI and RSG agreed to provide services related to development, administrative and financial activities to the Company during its formative period. Under each Services Agreement, the Company will pay or reimburse RSI or RSG, as applicable, for any expenses it, or third parties acting on its behalf, incurs for the Company. For any general and administrative and research and development activities performed by RSI or RSG employees, RSI or RSG, as applicable, will charge back the employee compensation expense plus a pre-determined mark-up. RSI and RSG also provided such services prior to the formalization of the Services Agreements, and such costs have been recognized by the Company in the period in which the services were rendered. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative percentage of time utilized on Company matters. All other costs will be billed back at cost. The term of the Services Agreements will continue until terminated by the Company, RSI or RSG, as applicable, upon 90 days’ written notice.

For the three and six months ended September 30, 2020, the Company was charged $0.2 million and $0.5 million, respectively, by RSI, RSG and RSL, of which $0.1 million and $0.3 million, respectively, were treated as capital contributions and $0.1 million and $0.2 million, respectively, were treated as amounts due to RSL in the accompanying unaudited condensed consolidated financial statements.

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For the three and six months ended September 30, 2019, the Company was charged $0.3 million and $0.7 million, respectively, by RSI, RSG, and RSL, of which $0.3 million and $0.6 million, respectively, were treated as capital contributions. The remaining amount of $0.1 million for the six months ended September 30, 2019 was treated as an amount due to RSL in the accompanying unaudited condensed consolidated financial statements.

RSL Promissory Note

In June 2019, the Company entered into an interest-free promissory note payable to RSL in the amount of $5.0 million (the “June Promissory Note”). The June Promissory Note was due and payable at the earlier of December 12, 2019 or upon demand by RSL. Subsequently, in August 2019, the Company cancelled the June Promissory Note and entered into a convertible promissory note with RSL in the amount of $5.0 million (the “RSL Convertible Promissory Note”) under the same terms as other convertible promissory notes entered into with RTW Master Fund, Ltd. and RTW Innovation Master Fund, Ltd. (the “RTW Entities”). In September 2019, the Company repaid $2.5 million aggregate principal amount of the RSL Convertible Promissory Note, and accrued interest on such amount was forgiven. The remaining aggregate principal balance of the RSL Convertible Note of $2.5 million automatically converted immediately prior to the closing of the Business Combination into shares of ISL exchangeable for an aggregate of 250,000 shares of the Company’s common stock upon the closing of the Business Combination. All interest under the RSL Convertible Promissory Note was waived and cancelled immediately prior to the closing of the Business Combination.

In July 2019, the Company entered into an interest-free promissory note payable to RSL in the amount of $2.9 million (the “July Promissory Note”). The July Promissory Note had a 180-day term and was payable on demand upon the expiration of the term. In May 2020, the Company paid and settled the July Promissory Note.

RSL Information Sharing and Cooperation Agreement

In December 2018, the Company entered into an amended and restated information sharing and cooperation agreement (the “Cooperation Agreement”) with RSL. The Cooperation Agreement, among other things: (1) obligates the Company to deliver to RSL periodic financial statements and other information upon reasonable request and to comply with other specified financial reporting requirements; (2) requires the Company to supply certain material information to RSL to assist it in preparing any future SEC filings; and (3) requires the Company to implement and observe certain policies and procedures related to applicable laws and regulations. The Company has agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in connection with RSL’s status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their respective officers, employees or directors to the Company or any of its subsidiaries, subject to certain limitations set forth in the Cooperation Agreement. No amounts have been paid or received under this agreement; however, the Company believes this agreement is material to its business and operations.

Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of when RSL no longer (a) is required by U.S. GAAP to consolidate the Company’s results of operations and financial position, account for its investment in the Company under the equity method of accounting or, by any rule of the SEC, include the Company’s separate financial statements in any filings it may make with the SEC and (b) has the right to elect directors constituting a majority of the Company’s board of directors.

RSI Subleases

See Note 10 for a discussion of the subleases the Company has entered into with RSI.

Note 7 — Income Taxes

The Company’s effective tax rates were (0.19)% and (0.18)% for the three and six months ended September 30, 2020, respectively and (0.23)% and (0.16)% for the three and six months ended September 30, 2019, respectively. The Company's effective rate is primarily driven by its 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.

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Note 8 — Stockholders’ Equity

Series A Preferred Stock

In connection with the closing of the Business Combination, the Company designated and issued 10,000 shares of Series A preferred stock, par value $0.0001 per share, to RSL, all of which shares are outstanding as of September 30, 2020.

Each share of Series A preferred stock will automatically convert into one share of common stock at such time as the holder(s) of Series A preferred stock hold less than 25% of the total voting power of the Company’s outstanding shares. In the event of the Company’s liquidation, dissolution, or winding up, the holder(s) of the Series A preferred stock will receive first an amount per share equal to $0.01 and then will be entitled to share ratably in the assets legally available for distribution to all stockholders.

Preferred Stock

In connection with the closing of the Business Combination, the Company authorized 10,010,000 shares of preferred stock par value $0.0001 per share. Other than the 10,000 shares of preferred stock designated as Series A preferred stock, there were no issued and outstanding shares of preferred stock as of September 30, 2020.

Common Stock

In connection with the closing of the Business Combination, the Company authorized 500,000,000 shares of common stock, par value $0.0001 per share. Immediately after giving effect to the Business Combination, there were 56,455,376 shares of common stock issued and 54,655,376 shares of common stock outstanding.

In April 2020, the Company completed an underwritten public offering of 9,613,365 shares of its common stock (including 1,034,483 shares of common stock purchased by RSL and the full exercise of the underwriters’ option to purchase 1,253,917 additional shares of common stock) at a price to the public of $14.50 per share, for net proceeds to the Company of approximately $131.0 million, after deducting underwriting discounts and commissions and offering expenses.

On May 12 and September 17, 2020, the Company achieved the First Earnout Milestone and the Second Earnout Milestone, respectively, under the Share Exchange Agreement (See Note 3). As a result, the Company issued all of the 20,000,000 Earnout Shares to the Sellers, (including 17,547,938 Earnout Shares issued to RSL) in the six months ended September 30, 2020. In addition, upon the achievement of the First Earnout Milestone and the Second Earnout Milestone and pursuant to the Sponsor Restricted Stock Agreement, all of the 1,800,000 Sponsor Restricted Shares vested and are no longer subject to forfeiture.

In September 2020, the Company completed an underwritten public offering of 6,060,606 shares of its common stock (including 380,000 shares of common stock purchased by RSL and the full exercise of the underwriters’ option to purchase 790,513 additional shares of common stock) at a price to the public of $33.00 per share, for net proceeds to the Company of approximately $188.1 million after deducting underwriting discounts and commissions and offering expenses.

The Company has reserved the following shares of common stock for issuance:


	September 30, 2020	March 31, 2020
Conversion of Series A preferred stock	10,000	10,000
Options outstanding	5,834,682	3,873,888
Restricted stock units outstanding	127,200	—
Options available for future option grants	5,101,557	5,283,520
Common stock warrants	—	5,750,000
Earnout shares	—	20,000,000
Total	11,073,439	34,917,408

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Common Stock Warrants

In connection with HSAC’s initial public offering in May 2019, HSAC issued 11,500,000 warrants for the purchase of one-half of one share of common stock (an aggregate of 5,750,000 shares) at a price of $11.50 per whole share, subject to adjustment. The warrants were classified as equity. All of the warrants remained outstanding as of and were exercisable commencing on May 14, 2020. The warrants were set to expire in December 2024 or earlier upon redemption or liquidation. The warrants were redeemable, at the Company’s option, in whole and not in part, at a price of $0.01 per warrant, upon a minimum of 30 days’ prior written notice of redemption, and if, and only if, the last sale price of the Company’s common stock equaled or exceeded $16.50 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends a notice of redemption to the warrant holders. In May 2020, the Company delivered a notice of the redemption to the warrant holders, and an aggregate of 11,438,290 outstanding warrants were subsequently exercised for an aggregate of 5,719,145 shares of the Company’s common stock at a price of $11.50 per share, for net proceeds of approximately $65.8 million. The remaining 61,710 warrants were cancelled, and the holders thereof paid $0.01 per cancelled warrant. No warrants remain outstanding as of September 30, 2020.

Note 9 — Stock-Based Compensation

2019 Equity Incentive Plan

In December 2019, in connection with the Business Combination, the Company’s stockholders approved the 2019 Equity Incentive Plan (the “2019 Plan”) and reserved 5,500,000 shares of common stock for issuance thereunder. The 2019 Plan became effective immediately upon the closing of the Business Combination. The maximum number of shares of common stock that may be issued pursuant to the exercise of incentive options under the 2019 Plan is 16,500,000. On April 1, 2020, the number of common shares reserved for issuance increased automatically by 4.0% of the total number of shares of common stock outstanding on the last day of the preceding month (i.e. 2,186,215 shares of common stock) in accordance with the evergreen provision of the 2019 incentive plan. As of September 30, 2020, options to purchase 2,457,458 shares of common stock and 127,200 restricted stock units (“RSUs”) have been granted under the 2019 Plan and 5,101,557 shares remained available for future grant.

2018 Equity Incentive Plan

Pursuant to the Share Exchange Agreement, upon the closing of the Business Combination, all vested or unvested outstanding options to purchase common shares of ISL under its 2018 Equity Incentive Plan (the “2018 Plan”) were automatically assumed by the Company and converted into options to purchase 4,408,287 shares of the Company’s common stock with no changes to the terms of the awards. As of the effective date of the 2019 Plan, no further stock awards have been or will be made under 2018 Plan. As of September 30, 2020, 3,377,224 stock options were outstanding under the 2018 Plan.

Stock Option Activity

A summary of the stock option activity under the Company’s equity incentive plans is as follows:


	Options Outstanding
	Number of options	Weighted- Average Exercise Price		Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Balance - March 31, 2020	3,873,888	$	8.33	9.37	$	28,029
Granted	2,290,978	23.51
Exercised	(42,213)	4.31
Forfeited	(61,738)	14.86
Canceled	(226,233)	7.86
Balance - September 30, 2020	5,834,682	$	14.27	9.21	$	122,505
Exercisable - September 30, 2020	945,851	$	8.08	8.74	$	25,646

The aggregate intrinsic value is calculated as the difference between the exercise price of all outstanding and exercisable stock options and the fair value of the Company’s common stock as of September 30, 2020. The options granted during the three and six months ended September 30, 2020 had a weighted-average fair value of $23.26 and $16.05 per share, respectively, at the grant date. The options granted during the three and six months ended September 30, 2019 had a weighted-average fair value of $5.63 and $5.26 per share, respectively, at the grant date.

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


	Three Months Ended September 30,		Six Months Ended September 30,
	2020	2019	2020	2019
Risk-free interest rate	0.30% - 0.40%	1.88% - 1.88%	0.30% - 0.44%	1.78% - 2.25%
Expected term, in years	5.81 - 6.11	6.05 - 6.11	5.56 - 6.11	5.75 - 6.11
Expected volatility	83.31% - 84.05%	75.67% - 75.73%	78.16% - 84.05%	74.69% - 75.73%
Expected dividend yield	—%	—%	—%	—%

Restricted Stock Unit Awards

A summary of RSUs activity under the Company’s equity incentive plans is as follows:


	Number of RSUs	Weighted- Average Grant Date Fair Value
Unvested as of March 31, 2020	—	$	—
Issued	127,200	19.01
Unvested as of September 30, 2020	127,200	$	19.01

Stock-based Compensation Expense

For the three and six months ended September 30, 2020 and 2019, stock-based compensation expense under the Company’s equity incentive plans was as follows (in thousands):


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Research and development expenses	$	951	$	2,306	$	1,370	$	2,369
General and administrative expenses	2,356		813		5,855		1,287
Total stock-based compensation	$	3,307	$	3,119	$	7,225	$	3,656

As of September 30, 2020, total unrecognized compensation expense related to non-vested stock options and RSUs was $47.1 million and $2.0 million, respectively, which is expected to be recognized over the remaining weighted-average service period of 2.9 years and 1.6 years, respectively.

Stock-based Compensation Allocated to the Company by RSL

In relation to the RSL common share awards and options issued by RSL to employees of RSL, RSI, RSG and the Company, stock-based compensation expense of $0.1 million was recorded for the three and six months ended September 30, 2020, respectively, and $0.1 million for the three and six months ended September 30, 2019, respectively in the accompanying unaudited condensed consolidated statements of operations.

Note 10 — Leases

In June 2020, the Company entered into two sublease agreements with RSI, for two floors of the building the Company currently occupies as its headquarters in New York. The subleases will expire on February 27, 2024 and April 29, 2024, respectively, and have scheduled rent increases each year. In April 2020, the Company entered into a sublease agreement with an unrelated party for one floor of a building in North Carolina. The sublease will expire on February 28, 2022 and has no scheduled rent increases. These leases are classified as operating leases. Operating lease ROU assets of $4.2 million and lease liabilities of $4.2 million, were recognized based on the present value of remaining fixed lease payments over the expected lease term using an incremental borrowing rate of 3.9%. As the Company’s operating leases do not provide an implicit rate, estimated incremental borrowing rates were used based on the information available at the time of execution of sublease agreement in determining the present value of lease payments. The aggregate weighted-average remaining lease term were 3.4 years as of September 30, 2020. Variable lease costs such as common area costs and other operating costs are expensed as incurred and were minimal for the three and six months ended September 30, 2020.

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During the three and six months ended September 30, 2020, the Company incurred $0.3 million and $0.5 million, respectively, in rent expense and paid $0.1 million and $0.2 million, respectively, in cash related to contractual rent obligations under the operating leases. The following table provides a reconciliation of the Company’s remaining undiscounted contractual rent obligations due within each respective fiscal year ending March 31 to the operating lease liabilities recognized as of September 30, 2020 (in thousands):


Years Ending March 31,	Operating Leases
2021	$	587
2022	1,198
2023	1,152
2024	1,132
2025	47
Thereafter	—
Total undiscounted payments	4,116
Less: present value adjustment	(335)
Present value of future payments	3,781
Less: current portion of operating lease liabilities	(1,102)
Operating lease liabilities, net of current portion	$	2,679

Note 11 — Commitments and Contingencies

The ongoing COVID-19 pandemic has resulted in transitions to remote workforces, business closures and disruptions and a slowdown of economic activity across the globe. The COVID-19 pandemic had a variable impact on the Company’s clinical trials from March through September 2020. Some sites closed enrollment for new patients in early March, whereas other sites remained partially open for new patient enrollment. At this time, many sites globally have re-opened for new enrollment, though disruptions remain in some locations due to local restrictions. Given the uncertain course of the pandemic, it is impossible to predict with certainty which sites will remain open. To date, the Company has not experienced significant impacts on its business and operations as a result of the COVID-19 pandemic. However, the extent of the impact of COVID-19 on the Company’s future operational and financial performance will depend on certain developments, including the ultimate duration and spread of the outbreak, the continuing impact of the pandemic on financial markets and the global economy, and the impact of the outbreak on the Company’s employees and vendors, all of which are uncertain and cannot be predicted.

As of September 30, 2020, other than contingent payments pursuant to the HanAll Agreement discussed in Note 4 and the subleases discussed in Note 10, the Company did not have any ongoing material financial commitments. The Company expects to enter into other commitments as the business further develops. In the normal course of business, the Company enters into agreements with contract service providers to assist in the performance of its research and development activities. Subject to required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time. The Company expects to enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of capital resources.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our (1) unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) audited combined and consolidated financial statements and the related 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, filed with the Securities and Exchange Commission, or the SEC, on June 29, 2020. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “Immunovant,” the “Company,” “we,” “us,” and “our” refer to Immunovant, Inc. and its wholly owned subsidiaries.

Prior to December 18, 2019, we were known as Health Sciences Acquisitions Corporation, or HSAC. On December 18, 2019, we completed the Business Combination (as defined below) with Immunovant Sciences Ltd., or ISL, a private company. For accounting purposes, HSAC was deemed to be the acquired entity.

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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, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 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.

Overview

We are a clinical-stage biopharmaceutical company focused on enabling normal lives for patients with autoimmune diseases. We are developing a novel, fully human monoclonal antibody, IMVT-1401 (formerly referred to as RVT-1401), that selectively binds to and inhibits the neonatal fragment crystallizable receptor, or FcRn. IMVT-1401 is the product of a multi-step, multi-year research program conducted by HanAll Biopharma Co., Ltd., or HanAll, to design a highly potent anti-FcRn antibody optimized for subcutaneous delivery. These efforts have resulted in a product candidate that has been dosed in small volumes (e.g. 2 mL) and with a 27-gauge needle, while still generating therapeutically relevant pharmacodynamic activity, important attributes that we believe will drive patient preference and market adoption. In nonclinical studies and in clinical trials conducted to date, IMVT-1401 has been observed to reduce immunoglobulin G, or IgG antibody levels. High levels of pathogenic IgG antibodies drive a variety of autoimmune diseases and, as a result, we believe IMVT-1401 has the potential for broad application in these disease areas. We intend to develop IMVT-1401 in autoimmune diseases for which there is robust evidence that pathogenic IgG antibodies drive disease manifestation and for which reduction of IgG antibodies should lead to clinical benefit.

We are developing IMVT-1401 as a fixed-dose, self-administered subcutaneous injection on a convenient weekly, or less frequent, dosing schedule. As a result of our rational design, we believe that IMVT-1401, if developed and approved for commercial sale, would be differentiated from currently available, more invasive treatments for advanced IgG-mediated autoimmune diseases, (e.g., myasthenia gravis, or MG, thyroid eye disease, or TED (formerly referred to as Graves’ ophthalmopathy, or GO), Warm Autoimmune Hemolytic Anemia, or WAIHA, idiopathic thrombocytopenic purpura, pemphigus vulgaris, chronic inflammatory demyelinating polyneuropathy, bullous pemphigoid, neuromyelitis optica, pemphigus foliaceus, Guillain-Barré syndrome and PLA2R+ membranous nephropathy). In 2019, these diseases had an aggregate prevalence of approximately 243,000 patients in the United States and 388,000 patients in Europe. To the extent we choose to develop IMVT-1401 for certain of these rare diseases, we plan to seek orphan drug designation in the United States and Europe. Such designations would primarily provide financial and exclusivity incentives intended to make the development of orphan drugs financially viable. However, we have not yet sought such designation for any of our three target indications, and there is no certainty that it would obtain such designation, or maintain the benefits associated with such designation, if or when we do.

In August 2019, we initiated dosing in our ASCEND MG trial, a multi-center, randomized, placebo-controlled Phase 2a clinical trial designed to evaluate the safety, tolerability, pharmacodynamics and efficacy of IMVT-1401 in patients with moderate-to-severe MG. As previously disclosed in August 2020, we reported results from this trial for fifteen patients completing the six week blinded, placebo-controlled period of the trial where IMVT-1401 was observed to be well-tolerated with no serious adverse events reported, no withdrawals due to adverse events, and no imbalance in headaches. In addition, we observed mean reductions in total serum IgG from baseline to Day 42 for the 340 mg and 680 mg cohorts of 59% and 76%, respectively. We anticipate initiating our Phase 3 clinical trial of IMVT-1401 in patients with MG in the first half of calendar year 2021.

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In May 2019, we initiated dosing in our ASCEND GO-1 trial, a Phase 2a clinical trial in Canada in patients with TED. We announced initial results from this trial in March 2020. Enrollment is ongoing in our ASCEND GO-2 trial, a Phase 2b clinical trial for TED in the United States, Canada and Europe. We plan to report initial results from our ASCEND GO-2 trial in the first half of calendar year 2021.

In November 2019, we submitted an Investigational New Drug, or IND, application to the U.S. Food and Drug Administration, or FDA, for WAIHA and, in December 2019, our IND was cleared for Phase 2 trial initiation. We plan to report initial results from the high-dose cohort of this Phase 2a trial of IMVT-1401 in patients with WAIHA in the first quarter of calendar year 2021.

We also intend to announce three new indications for IMVT-1401 by August 2021.

ISL was incorporated in July 2018 and its operations prior to the closing of the Business Combination were limited to organizing and staffing ISL, acquiring the rights to IMVT-1401, and preparing for and conducting clinical trials. To date, we have not generated any revenue and have generated significant operating losses since our inception. As of September 30, 2020, we had an accumulated deficit of $138.7 million. For the three and six months ended September 30, 2020, we recorded net losses of $20.8 million and $47.5 million, respectively. For the three and six months ended September 30, 2019, we recorded net losses of $14.5 million and $34.5 million, respectively.

COVID-19 Business Update

We have been actively monitoring the impact of the global Novel Coronavirus Disease 2019, or COVID-19 pandemic on our employees and our business. Based on guidance issued by federal, state and local authorities, we transitioned to a remote work model for our employees, effective mid-March 2020. Our operations continue as we seek to comply with guidance from governmental authorities and adjust our activities as appropriate.

The COVID-19 pandemic has had a variable impact on our clinical trials since March 2020. Some sites closed enrollment for new patients in early March, whereas other sites remained partially open for new patient enrollment. At this time, many sites globally have re-opened for new enrollment, though disruptions remain in some locations due to local restrictions. Given the uncertain course of the pandemic, it is impossible to predict with certainty which sites will remain open.

In the conduct of our business activities, we are also taking actions designed to protect the safety and well-being of our patients and employees. For patients already enrolled in our clinical trials, we are working closely with clinical trial investigators and site staff to continue treatment in compliance with trial protocols and observe government and institutional guidelines designed to safeguard the health and safety of patients, clinical trial investigators and site staff. Our very experienced clinical development team has successfully maintained robust communication with our sites. We have also been working with our partners to ensure that backup services are in place, which has enabled some virtual visits to replace in-person visits. These internal and external efforts have allowed us to continue progress across our clinical development programs.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate duration and spread of the outbreak, the continuing impact of the pandemic on financial markets and the global economy, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

For additional information about risks and uncertainties related to the COVID-19 pandemic that may impact our business, financial condition and results of operations, see the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q.

Business Combination and Recapitalization

On December 18, 2019, HSAC completed its acquisition of ISL pursuant to that certain share exchange agreement dated as of September 29, 2019, or the Share Exchange Agreement, by and among HSAC, ISL, the stockholders of ISL, or the Sellers, and Roivant Sciences Ltd., or RSL, as representative of the Sellers. At the closing, HSAC acquired 100% of the issued and outstanding common shares of ISL. We refer to this transaction as the Business Combination. The aggregate value of the consideration paid by HSAC in the Business Combination was $420.9 million, consisting of 42,080,376 shares of HSAC’s common stock and 10,000 shares of HSAC’s Series A preferred stock, in each case, valued at $10.00 per share (the deemed value of the shares issued pursuant to the Share Exchange Agreement). Upon the closing of the Business Combination, ISL became a wholly owned subsidiary of HSAC and HSAC was renamed “Immunovant, Inc.”

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ISL was founded on July 6, 2018 as a Bermuda exempted limited company and a wholly owned subsidiary of RSL. HSAC was incorporated in Delaware on December 6, 2018 and was formed as a blank check company for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar business combination with one or more businesses.

The Business Combination was accounted for as a reverse recapitalization and HSAC was treated as the “acquired” company for accounting purposes. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of ISL issuing stock for the net assets of HSAC, accompanied by a recapitalization. Reported amounts from operations included herein prior to the Business Combination are those of ISL.

Our Key Agreements

License Agreement with HanAll Biopharma Co., Ltd.

In December 2017, Roivant Sciences GmbH, or RSG, a wholly-owned subsidiary of RSL, entered into a license agreement with HanAll, or the HanAll Agreement. Under the HanAll Agreement, RSG, received (1) the non-exclusive right to manufacture and (2) the exclusive, royalty-bearing right to develop, import and use the antibody referred to as IMVT-1401 and certain back-up and next-generation antibodies, and products containing such antibodies, and to commercialize such products, in the United States, Canada, Mexico, the European Union, or the E.U., the United Kingdom, or the U.K., Switzerland, the Middle East, North Africa and Latin America, or the Licensed Territory, for all human and animal uses, during the term of the agreement.

In December 2018, we obtained and assumed all rights, title, interest and obligations under the HanAll Agreement from RSG, including all rights to IMVT-1401 from RSG in the Licensed Territory, pursuant to an assignment and assumption agreement between RSG and its wholly owned subsidiary, Immunovant Sciences GmbH, or ISG, for an aggregate purchase price of $37.8 million plus Swiss value-added tax of $2.9 million.

Under the HanAll Agreement, the parties may choose to collaborate on a research program directed to the research and development of next generation FcRn inhibitors in accordance with an agreed plan and budget. We are obligated to reimburse HanAll for half of such research and development expenses incurred by HanAll, up to an aggregate reimbursement amount of $20.0 million. Intellectual property created by HanAll pursuant to this research program will be included in our license; intellectual property created by us pursuant to this research program will be included in HanAll’s license. Since the acquisition of IMVT-1401, we, along with RSL, have performed all the development associated with IMVT-1401 and no amounts were due to HanAll for further research or development of the technology for the three and six months ended September 30, 2020 and 2019.

Pursuant to the HanAll Agreement, RSG made an upfront payment of $30.0 million to HanAll. In May 2019, we achieved our first development and regulatory milestone which resulted in a $10.0 million milestone payment that we subsequently paid in August 2019. We will be responsible for future contingent payments and royalties, including up to an aggregate of $442.5 million upon the achievement of certain development, regulatory and sales milestone events. We are also obligated to pay HanAll tiered royalties ranging from the mid-single digits to mid-teens on net sales of licensed products, subject to standard offsets and reductions as set forth in the HanAll Agreement. These royalty obligations apply on a product-by-product and country-by-country basis and end upon the latest of: (A) the date on which the last valid claim of the licensed patents expire, (B) the date on which the data or market exclusivity expires or (C) 11 years after the first commercial sale of the licensed product, in each case, with respect to a given product in a given country.

Services Agreements with RSI and RSG

In August 2018, we entered into services agreements with Roivant Sciences Inc., or RSI, and RSG, collectively the Services Agreements, under which RSI and RSG agreed to provide services related to development, administrative and financial activities to us during our formative period. Under each Services Agreement, we will pay or reimburse RSI or RSG, as applicable, for any expenses they, or third parties acting on our behalf, incur. For any general and administrative and research and development activities performed by RSI or RSG employees, RSI or RSG, as applicable, will charge back the employee compensation expense plus a pre-determined markup. RSI and RSG also provided such services prior to the formalization of the Services Agreements, and such costs have been recognized by us in the period in which the services were rendered. Employee compensation expense, inclusive of base salary and fringe benefits, is determined based upon the relative percentage of time utilized on our matters. All other costs will be billed back at cost. The term of the Services Agreements will continue until terminated by us, RSI or RSG, as applicable, upon 90 days’ written notice.

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RSL Information Sharing and Cooperation Agreement

In December 2018, we entered into an amended and restated information sharing and cooperation agreement, or the Cooperation Agreement, with RSL, which, among other things: (1) obligates us to deliver to RSL periodic financial statements and other information upon reasonable request and to comply with other specified financial reporting requirements; (2) requires us to supply certain material information to RSL to assist it in preparing any future SEC filings; and (3) requires us to implement and observe certain policies and procedures related to applicable laws and regulations. We have agreed to indemnify RSL and its affiliates and their respective officers, employees and directors against all losses arising out of, due to or in connection with RSL’s status as a stockholder under the Cooperation Agreement and the operations of or services provided by RSL or its affiliates or their respective officers, employees or directors to us or any of our subsidiaries, subject to certain limitations set forth in the Cooperation Agreement. No amounts have been paid or received under this agreement; however, we believe this agreement is material to our business and operations.

Subject to specified exceptions, the Cooperation Agreement will terminate upon the earlier of (1) the mutual written consent of the parties or (2) the later of when RSL no longer (a) is required by generally accepted accounting principles in the United States, or U.S. GAAP, to consolidate our results of operations and financial position, account for its investment in us under the equity method of accounting or, by any rule of the SEC, include our separate financial statements in any filings it may make with the SEC and (b) has the right to elect directors constituting a majority of our board of directors.

Financial Operations Overview

Revenue

We have not generated any revenue and have incurred significant operating losses since inception, and we do not expect to generate any revenue from the sale of any products unless or until we obtain regulatory approval of and commercialize IMVT-1401 or any future product candidates. Our ability to generate revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of IMVT-1401 and any future product candidates.

Research and Development Expenses

Since our incorporation, our operations have primarily been limited to organizing and staffing our company, acquiring rights to our product candidate, IMVT-1401, and preparing for and conducting clinical trials. Research and development expenses primarily consist of salaries, benefits, and other staff-related costs, including associated stock-based compensation, laboratory supplies, clinical studies and trials and related clinical manufacturing costs. Costs related to manufacturing preparation, fees paid to other entities that conduct certain research and development activities on our behalf, and facilities and allocated overhead and facility costs are also included within research and development. We expect to significantly increase our research and development efforts as we initiate and conduct our Phase 2 and Phase 3 clinical trials for IMVT-1401. Research and development expenses will include:

•employee-related expenses, such as salaries, stock-based compensation, benefits and travel expense for the research and development personnel that we plan to hire;

•expenses incurred under agreements with contract research organizations, or CROs, as well as consultants that conduct nonclinical studies designed to assist with the lead optimization of our product candidate;

•manufacturing costs in connection with conducting nonclinical studies and clinical trials;

•milestone payments and other costs associated with the HanAll Agreement;

•costs for sponsored research;

•cost incurred under patent, technology, and know-how sublicense agreements;

•upfront payments for the purchase of in-process research and development; and

•costs allocated to us under our Services Agreements with RSI and RSG.

Research and development activities will continue to be central to our business model. We expect our research and development expenses to be significant over the next several years as we increase personnel and compensation costs and commence additional expected clinical trials for IMVT-1401 and prepare to seek regulatory approval for our product candidate. It is difficult to determine with certainty the duration and completion costs of any clinical trial we may conduct.

The duration, costs and timing of clinical trials of IMVT-1401 and any future product candidates will depend on a variety of factors that include, but are not limited to:

•the number of trials required for approval;

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•the per patient trial costs;

•the number of patients that participate in the trials;

•the number of sites included in the trials;

•the countries in which the trial is conducted;

•the length of time required to enroll eligible patients;

•the number of doses that patients receive;

•the drop-out or discontinuation rates of patients;

•the potential additional safety monitoring or other studies requested by regulatory agencies;

•the duration of patient follow-up;

•the timing and receipt of regulatory approvals;

•the potential impact of the recent COVID-19 pandemic;

•the efficacy and safety profile of the product candidate; and

•the cost of manufacturing.

In addition, the probability of success for IMVT-1401 and any other product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability.

General and Administrative Expenses

General and administrative expenses consist primarily of employee salaries and related benefits, costs allocated under the Services Agreements and stock-based compensation for general and administrative personnel services and legal and accounting fees and consulting services relating to our formation and corporate matters.

We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities and increased costs of operating as a public company. These increases will likely include patent costs for our product candidates and increased costs related to the hiring of additional personnel and fees to outside consultants for professional services. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with Nasdaq rules and SEC requirements, insurance and investor relations costs. In addition, whenever IMVT-1401 obtains regulatory approval, we expect that we would incur expenses associated with building a sales and marketing team.

Results of Operations

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


	Three Months Ended September 30,
	2020		2019		Change
Operating expenses:
Research and development	$	11,976	$	10,331	$	1,645
General and administrative	8,998		4,163		4,835
Total operating expenses	20,974		14,494		6,480
Interest expense	—		249		(249)
Other income, net	(225)		(294)		69
Loss before provision for income taxes	(20,749)		(14,449)		(6,300)
Provision for income taxes	40		33		7
Net loss	$	(20,789)	$	(14,482)	$	(6,307)

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Research and Development Expenses

Research and development expenses increased by $1.7 million, from $10.3 million for the three months ended September 30, 2019 to $12.0 million for the three months ended September 30, 2020. This increase was primarily due to a $1.0 million increase in cost related to our non-clinical and clinical studies due to expansion of ongoing clinical trials and initiation of non-clinical study. In addition, there were a $0.6 million increase in professional services cost due to increased operating activity.

General and Administrative Expenses

General and administrative expenses increased by $4.8 million, from $4.2 million for the three months ended September 30, 2019 to $9.0 million for the three months ended September 30, 2020. This increase was primarily due to higher personnel-related costs of $2.3 million and stock-based compensation expense of $1.5 million, both of which were due to higher headcount. Other increases include recruiting fees for $0.6 million, commercial spend for $0.6 million, and $0.3 million for rent, offset by lower legal and professional fees.

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


	Six Months Ended September 30,
	2020		2019		Change
Operating expenses:
Research and development	$	28,898	$	28,807	$	91
General and administrative	18,662		5,748		12,914
Total operating expenses	47,560		34,555		13,005
Interest expense	—		249		(249)
Other income, net	(151)		(319)		168
Loss before provision for income taxes	(47,409)		(34,485)		(12,924)
Provision for income taxes	88		56		32
Net loss	$	(47,497)	$	(34,541)	$	(12,956)

Research and Development Expenses

Research and development expenses increased by $0.1 million, from $28.8 million for the six months ended September 30, 2019 to $28.9 million for the six months ended September 30, 2020. Research and development expense for the six months ended September 30, 2019 included $10.0 million related to the achievement of the first development and regulatory milestone under HanAll Agreement in May 2019. Excluding the effects of this one-time milestone, research and development expenses increased by $10.1 million for the six months ended September 30, 2020 compared to the six months ended September 30, 2019. This increase was primarily due to increases in contract manufacturing costs of $6.6 million and non-clinical and clinical studies of $0.9 million, driven by the expansion of our clinical trial program for the treatment of autoimmune diseases. Other increases include higher personnel-related expenses (including stock-based compensation expense) of $1.6 million due to higher headcount to support our clinical operations and $1.0 million in professional services cost due to increased operating activity.

General and Administrative Expenses