Fair Value Measurements

12 Months Ended

Mar. 31, 2021

Financial Instruments Measured at Fair Value on a Recurring Basis

The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires that certain assets and liabilities be reflected at their fair value. The fair value of these financial instruments is based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by U.S. GAAP (see Note 2). The following table summarizes the Company’s assets and liabilities that require fair value remeasurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):


	Fair Value Measurement Using:
	Level 1		Level 2		Level 3		Total
As of March 31, 2021
Assets:
Money market funds (1)	$	36,903	$	—	$	—	$	36,903
Commercial paper (2)	—		21,689		—		21,689
U.S. agency securities (1)	—		10,000		—		10,000
Municipal bonds (3)	—		1,417		—		1,417

Total assets	$	36,903	$	33,106	$	—	$	70,009
Liabilities:
Share-based compensation liabilities - stock options (5)	$	—	$	12,113	$	—	$	12,113
Share-based compensation liabilities - common shares (6)	9,523		—		—		9,523
Total liabilities	$	9,523	$	12,113	$	—	$	21,636


	Fair Value Measurement Using:
	Level 1		Level 2		Level 3		Total
As of March 31, 2020
Assets:
Money market funds (1)	$	11,348	$	—	$	—	$	11,348
Commercial paper (4)	—		7,042		—		7,042
Total assets	$	11,348	$	7,042	$	—	$	18,390

(1) Included in cash and cash equivalents.

(2) Includes $12.7 million in cash and cash equivalents and $9.0 million in marketable securities.

(3) Included in marketable securities.

(4) Includes $4.0 million in cash and cash equivalents and $3.0 million in marketable securities.

(5) Includes 1,281,803 outstanding stock options remeasured using the Black-Scholes option-pricing model (see Note 13(H)).

(6) Includes 462,705 common shares remeasured using the Company’s March 31, 2021 closing market price of $20.58 per common share (see Note 13(H)).

During the year ended March 31, 2021, the Company’s former Principal Executive Officer’s outstanding fully-vested share-based compensation awards were reclassified from equity to liabilities following the modification of the awards to include a share repurchase feature (see Note 10(H)). The share-based compensation liabilities are remeasured each reporting period with the change in fair value recorded as share-based compensation expense in the Company’s consolidated statements of operations until the equity awards are exercised and sold to Sumitovant or to the market or the former Principal Executive Officer has held the common shares for a period of at least six months. The Company remeasures the share-based compensation liabilities related to outstanding stock options at fair value using the Black-Scholes option pricing model for which all significant inputs are observable, either directly or indirectly, which caused them to be classified as a Level 2 measurement within the fair value hierarchy. The Company remeasures the share-based compensation liabilities related to common shares held for less than six months based on the closing market price of the Company’s common shares at each reporting period-end, which caused them to be classified as a Level 1 measurement within the fair value hierarchy.

The following table includes information regarding the Company’s share-based compensation liabilities (a current liability) for the year ended March 31, 2021 (in thousands):


March 31, 2020	$	—
Reclassification from additional paid-in capital	17,473
Change in fair value	10,609
Settlements	(6,446)
March 31, 2021	$	21,636

The fair value of the share-based compensation liabilities related to outstanding stock options was estimated as of March 31, 2021 using the Black-Scholes option-pricing model and the following assumptions:



Expected common share price volatility	72.9	%
Expected risk free interest rate	0.06	%
Expected term, in years	0.78
Expected dividend yield	—	%

Financial Instruments Not Measured at Fair Value on a Recurring Basis

The Company recorded the cost share advance from collaboration partner, which is included in Level 2 of the fair value hierarchy, at its estimated fair value of $146.4 million as of the transaction date. As discussed in Note 13(B), on the transaction date, the cost share advance from collaboration partner was discounted to fair value using the Company’s estimated incremental borrowing rate over the period in which the cost share advance is expected to be utilized. The recorded amount has been and will continue to be reduced each reporting period by the amount of Allowable Expenses applied to the cost share advance. There were no nonrecurring fair value assets as of March 31, 2021 and 2020 and no nonrecurring fair value liabilities as of March 31, 2020.

- 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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