Income Taxes

9 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is not subject to taxation under the laws of Bermuda since it was organized as a Bermuda Exempted Limited Company, for which there is no current tax regime. The Company’s income tax expense is primarily based on income taxes in the U.S. for federal, state and local taxes. The Company’s effective tax rate for the three months ended December 31, 2019 and 2018 was (0.22)% and 0.00%, respectively. The Company’s effective tax rate for the nine months ended December 31, 2019 and 2018 was (0.31)% and (0.12)%, respectively. The Company’s effective tax rate is driven by the Company’s jurisdictional earnings by location and a valuation allowance that eliminates the Company’s global net deferred tax assets.

The Company assesses the realizability of the 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.

Section 382 of the U.S. Internal Revenue Code imposes an annual limitation on the amount of existing tax attributes that might be used to offset income tax when a corporation has undergone a significant change in stock ownership. On December 27, 2019, Sumitovant became the Company’s majority shareholder after acquiring approximately 50.2% of the Company’s outstanding common shares which triggered an ownership change under Section 382.  The Company is evaluating the impact of the annual limitation. The Company does not believe that annual limitation had a significant impact on the Company’s income tax provision during the three and nine months ended December 31, 2019.