Fair Value Measurements

12 Months Ended

Mar. 31, 2018

The following table sets forth the Company’s liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and 2017, by level, within the fair value hierarchy (in thousands):



	As of March 31, 2018								As of March 31, 2017

	Level 1		Level 2		Level 3		Balance as of March 31, 2018		Level 1		Level 2		Level 3		Balance as of March 31, 2017
Liabilities:
Takeda warrant liability	$	—	$	—	$	—	$	—	$	—	$	—	$	52	$	52
Total liabilities at fair value	$	—	$	—	$	—	$	—	$	—	$	—	$	52	$	52

There were no transfers of assets between Level 1 and Level 2 of the fair value hierarchy that occurred during the year ended March 31, 2018.

Level 3 Disclosures

Before expiration on April 30, 2017, the Company measured the warrant liability associated with the license agreement with Takeda at fair value based on significant inputs not observable in the market, which caused it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the warrant liability used assumptions and estimates the Company believed would be made by a market participant in making the same valuation. The Company assessed these assumptions and estimates on an ongoing basis through the expiration of the Takeda warrant as additional data impacting the assumptions and estimates was obtained. Changes in the fair value of the warrant liability related to updated assumptions and estimates were recognized as other (expense) income in the accompanying consolidated statements of operations.

The fair value of the Takeda warrant liability as of March 31, 2017 was calculated using the following significant unobservable inputs:



Input	Range or Point Estimate Used
Projected time frame to an equity financing	April 2017
Probability of a successful equity financing	2.0	%
Annualized equity volatility	73.4	%
Risk-free interest rate	0.74	%

The changes in fair value of the Takeda warrant liability during the years ended March 31, 2018 and 2017 were as follows (in thousands):



Balance at March 31, 2016	$	—
Fair value of the Takeda warrant liability issued	5,377
Changes in the fair value of the Takeda warrant liability, included in net loss	27,518
Settlements	(32,843		)
Balance at March 31, 2017	52
Fair value of the warrant liability issued	—
Changes in the fair value of the warrant liability, included in net loss	—
Settlements	(52		)
Balance at March 31, 2018	$	—

For the year ended March 31, 2018, changes in the carrying value of the Takeda warrant liability resulted from settlements related to the fair value of the Takeda warrant automatically exercised.

For the year ended March 31, 2017, changes in the carrying value of the Takeda warrant liability resulted from settlements related to the fair value of the Takeda warrant exercised, partially offset by changes in the fair value of the Takeda warrant liability primarily due to the changes in the estimated probabilities of future financing events, change in the enterprise value of the Company, automatic exercise of the Takeda warrant and the passage of time.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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