XML 92 R22.htm IDEA: XBRL DOCUMENT
v3.21.2

Fair Value Measurements | 3 Months Ended | 12 Months Ended
--- | --- | ---
Jun. 30, 2021 | Mar. 31, 2021
Fair Value Measurements | Note 11—Fair Value Measurements Recurring Fair Value Measurements The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and March 31, 2021, by level, within the fair value hierarchy (in thousands):
|  | As of June 30, 2021 |  |  | As of March 31, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Balance as of June 30, 2021 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Balance as of March 31, 2021 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 1,340,662 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,340,662 |  |  | $ | 1,420,597 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,420,597 |
Investment in Sio common shares |  |  | 50,716 |  |  |  | — |  |  |  | — |  |  |  | 50,716 |  |  |  | 48,487 |  |  |  | — |  |  |  | — |  |  |  | 48,487 |
Investment in Arbutus common shares |  |  | 48,521 |  |  |  | — |  |  |  | — |  |  |  | 48,521 |  |  |  | 53,325 |  |  |  | — |  |  |  | — |  |  |  | 53,325 |
Investment in Arbutus convertible preferred shares |  |  | — |  |  |  | 69,187 |  |  |  | — |  |  |  | 69,187 |  |  |  | — |  |  |  | 76,037 |  |  |  | — |  |  |  | 76,037 |
Other investment |  |  | 11,935 |  |  |  | — |  |  |  | — |  |  |  | 11,935 |  |  |  | 11,129 |  |  |  | — |  |  |  | — |  |  |  | 11,129 |
Total assets at fair value |  | $ | 1,451,834 |  |  | $ | 69,187 |  |  | $ | — |  |  | $ | 1,521,021 |  |  | $ | 1,533,538 |  |  | $ | 76,037 |  |  | $ | — |  |  | $ | 1,609,575 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt issued by Dermavant to NovaQuest |  | $ | — |  |  | $ | — |  |  | $ | 155,200 |  |  | $ | 155,200 |  |  | $ | — |  |  | $ | — |  |  | $ | 150,100 |  |  | $ | 150,100 |
Liability instruments measured at fair value |  |  | — |  |  |  | — |  |  |  | 5,906 |  |  |  | 5,906 |  |  |  | — |  |  |  | — |  |  |  | 67,893 |  |  |  | 67,893 |
Total liabilities at fair value |  | $ | — |  |  | $ | — |  |  | $ | 161,106 |  |  | $ | 161,106 |  |  | $ | — |  |  | $ | — |  |  | $ | 217,993 |  |  | $ | 217,993 |
There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy that occurred during the three months ended June 30, 2021. Level 3 Disclosures The Company measures its Level 3 liabilities at fair value based on significant inputs not observable in the market, which causes them to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an ongoing basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value related to updated assumptions and estimates are recorded within the statements of operations at the end of each reporting period. The fair value of Level 3 liabilities may change significantly as additional data are obtained, impacting the Company’s assumptions regarding probabilities of potential scenarios used to estimate fair value. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods. The changes in fair value of the Level 3 liabilities during the three months ended June 30, 2021 and 2020 were as follows (in thousands):
Balance at March 31, 2020 |  | $ | 191,473 |
Changes in fair value of debt and liability instruments, included in net loss |  |  | 17,125 |
Liability instruments disposed due to deconsolidation of subsidiary |  |  | (3,325 | )
Balance at June 30, 2020 |  | $ | 205,273 |
Balance at March 31, 2021 |  | $ | 217,993 |
Changes in fair value of debt and liability instruments, included in net loss |  |  | 4,585 |
Termination of DSP Options |  |  | (61,472 | )
Balance at June 30, 2021 |  | $ | 161,106 |
Debt issued by Dermavant to NovaQuest The fair value of the debt instrument as of June 30, 2021 and March 31, 2021 represents the fair value of amounts payable to NovaQuest using a Monte Carlo simulation model under the income approach determined by using probability assessments of the expected future payments through 2032 and applying discount rates ranging from 11% to 12%. The future payments are based on significant inputs that are not observable in the market which are subject to remeasurement at each reporting date. The estimates of fair value may not be indicative of the amounts that could ultimately be paid by Dermavant to NovaQuest. Sumitomo Options In June 2021, the Company completed a transaction with Sumitomo pursuant to which the Sumitomo Options were terminated, resulting in the extinguishment of the related liability. As of the termination date, the fair value of the Sumitomo Options was $61.5 million, and as of March 31, 2021, the fair value was $62.4 million. See Note 4, “Sumitomo Transaction Agreement” for additional information. | Note 15—Fair Value Measurements Recurring Fair Value Measurements The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2021 and 2020, by level, within the fair value hierarchy (in thousands):
|  | As of March 31, 2021 |  |  | As of March 31, 2020 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Balance as of March 31, 2021 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Balance as of March 31, 2020 |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  | $ | 1,420,597 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,420,597 |  |  | $ | 1,874,662 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,874,662 |
Investment in Sio common shares |  |  | 48,487 |  |  |  | — |  |  |  | — |  |  |  | 48,487 |  |  |  | 45,329 |  |  |  | — |  |  |  | — |  |  |  | 45,329 |
Investment in Arbutus common shares |  |  | 53,325 |  |  |  | — |  |  |  | — |  |  |  | 53,325 |  |  |  | 16,174 |  |  |  | — |  |  |  | — |  |  |  | 16,174 |
Investment in Arbutus convertible preferred shares |  |  | — |  |  |  | 76,037 |  |  |  | — |  |  |  | 76,037 |  |  |  | — |  |  |  | 23,062 |  |  |  | — |  |  |  | 23,062 |
Other investments |  |  | 11,129 |  |  |  | — |  |  |  | — |  |  |  | 11,129 |  |  |  | 8,880 |  |  |  | — |  |  |  | — |  |  |  | 8,880 |
Total assets at fair value |  | $ | 1,533,538 |  |  | $ | 76,037 |  |  | $ | — |  |  | $ | 1,609,575 |  |  | $ | 1,945,045 |  |  | $ | 23,062 |  |  | $ | — |  |  | $ | 1,968,107 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt held by Dermavant with NovaQuest |  | $ | — |  |  | $ | — |  |  | $ | 150,100 |  |  | $ | 150,100 |  |  | $ | — |  |  | $ | — |  |  | $ | 89,100 |  |  | $ | 89,100 |
Liability instruments measured at fair value |  |  | — |  |  |  | — |  |  |  | 67,893 |  |  |  | 67,893 |  |  |  | — |  |  |  | — |  |  |  | 102,373 |  |  |  | 102,373 |
Total liabilities at fair value |  | $ | — |  |  | $ | — |  |  | $ | 217,993 |  |  | $ | 217,993 |  |  | $ | — |  |  | $ | — |  |  | $ | 191,473 |  |  | $ | 191,473 |
There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy that occurred during the years ended March 31, 2021 and 2020. Level 3 Disclosures The Company measures its Level 3 liabilities, including debt issued by Dermavant to NovaQuest and the Sumitomo Options, at fair value based on significant inputs not observable in the market, which causes them to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the Level 3 liabilities uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an ongoing basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value related to updated assumptions and estimates are recorded within the statements of operations at the end of each reporting period. The fair value of Level 3 liabilities may change significantly as additional data are obtained, impacting the Company’s assumptions regarding probabilities of potential scenarios used to estimate fair value. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods. The changes in fair value of the Level 3 liabilities during the years ended March 31, 2021 and 2020 were as follows (in thousands):
Balance at March 31, 2019 |  | $ | 103,628 |
Issuance of liability instruments measured at fair value |  |  | 101,567 |
Changes in fair value of debt and liability instruments, included in net loss |  |  | (13,722 | )
Balance at March 31, 2020 |  |  | 191,473 |
Changes in fair value of debt and liability instruments, included in net loss |  |  | 29,845 |
Liability instruments disposed due to deconsolidation of subsidiary |  |  | (3,325 | )
Balance at March 31, 2021 |  | $ | 217,993 |
Debt issued by Dermavant to NovaQuest The fair value of the debt instrument as of March 31, 2021 and 2020 represents the fair value of amounts payable to NovaQuest using a Monte Carlo simulation model under the income approach determined by using probability assessments of the expected future payments through 2032 and applying discount rates ranging from 6% to 17%. The future payments are based on significant inputs that are not observable in the market which are subject to remeasurement at each reporting date. The estimates of fair value may not be indicative of the amounts that could ultimately be paid by Dermavant to NovaQuest. Sumitomo Options The fair value of the options to acquire the Company’s interest in Dermavant, Genevant, Lysovant, Metavant, Cytovant Parent, and Sinovant (collectively, the “Option Vants”) granted to Sumitomo under the Sumitomo Transaction Agreement as of March 31, 2021 and 2020 was calculated using significant unobservable inputs including the following:
|  | Range or Point Estimate Used
Input |  | As of March 31, 2021 |  | As of March 31, 2020
Time to expiration (in years) |  | 3.59 |  | 0.49 - 4.59
Risk-free rate |  | 0.52% |  | 0.15% - 0.35%
Volatility |  | 89.0% - 95.0% |  | 91.0% - 110.0%
As of March 31, 2021 and 2020, the fair value of the Sumitomo Options was $62.4 million and $95.9 million, respectively. Sumitomo Options are included in “Liability instruments measured at fair value” in the accompanying consolidated balance sheets. In June 2021, the Company completed a transaction with Sumitomo pursuant to which Sumitomo terminated all of its existing options to acquire the Company’s equity interests in certain subsidiaries. See Note 19, “Subsequent Events” for additional information.

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration