| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies (A) Basis of Presentation: The Company’s fiscal year ends on March 31, and its fiscal quarters end on June 30, September 30 and December 31. The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, issued by the Financial Accounting Standards Board, or FASB. The 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. (B) Use of Estimates: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions in certain circumstances that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company regularly evaluates estimates and assumptions related to assets, liabilities, costs, and expenses, including compensation and other expenses allocated to the Company under its services agreements with Roivant Sciences, Inc., or RSI, and Roivant Sciences GmbH, or RSG, each a wholly owned subsidiary of the Company’s parent company, Roivant Sciences Ltd., or RSL, as well as share-based compensation expenses, research and development, or R&D, expenses, 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 at the date of the consolidated financial statements and the reported amounts of expenses incurred during the reporting period, that are not readily apparent from other sources. Actual results could differ from those estimates. (C) Risks and Uncertainties: The Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to commercialization of products, regulatory approvals, dependence on key products, third-party service providers such as contract research organizations, or CROs, and contract manufacturing organizations, or CMOs, and protection of intellectual property rights. (D) Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk include cash. At March 31, 2018 , substantially all of the Company’s cash balances are deposited in three banking institutions and are all in excess of insured levels. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash. (E) Property and Equipment: Property and equipment, consisting of computers, equipment, furniture and fixtures, leasehold improvements, and software, is recorded at cost, less accumulated depreciation. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, retirement or sale, the related cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is recorded for property and equipment using the straight-line method over the estimated useful lives of the assets, which range from three to seven years once the asset is installed and placed into service. Leasehold improvements are amortized using the straight-line method over their estimated useful life or the remaining lease term, whichever is shorter. The Company reviews the recoverability of its long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable, based on undiscounted cash flows. If such assets are considered to be impaired, an impairment loss is recognized and is measured as the amount by which the carrying amount of the assets exceed their estimated fair value, which is measured based on the projected discounted future net cash flows arising from the assets. (F) Operating Leases: At the inception of a lease, the Company evaluates the lease agreement to determine whether the lease is an operating or capital lease. For operating leases, the Company recognizes rent expense on a straight-line basis over the lease term and records the difference between cash rent payments and the recognition of rent expense as a deferred liability. Where lease agreements contain rent escalation clauses, rent abatements and/or concessions, such as rent holidays and tenant improvement allowances, the Company applies them in the determination of straight-line rent expense over the lease term. Certain lease agreements also require the Company to make additional payments for taxes, insurance, and other operating expenses incurred during the lease period, which are expensed as incurred. (G) Debt Issuance Costs and Debt Discount: Debt issuance costs include the costs of debt financings undertaken by the Company, including legal fees, accounting fees, and other direct costs of the financing. Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts, and are amortized to interest expense over the term of the related debt using the effective interest method. Further, debt discounts created as a result of the allocation of proceeds received from a debt issuance to warrants issued in conjunction with the debt issuance are amortized to interest expense under the effective interest method over the life of the recognized debt liability. (H) Contingencies: The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company continually assesses litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. In accordance with the guidance of the FASB on accounting for contingencies, the Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum amount in the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the contingency, including an estimable range, if possible. (I) Deferred Offering Costs: Deferred offering costs consist of qualified legal, accounting, and other direct costs related to the Company’s efforts to raise capital through a public or private sale of the Company’s capital stock. These costs are deferred until the completion of the applicable offering, at which time such costs are reclassified to additional paid-in-capital as a reduction of the proceeds. (J) Research and Development Expenses: R&D costs are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based on an ongoing review of the level of effort and costs actually 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 R&D. Milestone payments made in connection with regulatory approvals are capitalized and amortized to cost of revenue over the remaining useful life of the asset. R&D expenses primarily consist of employee-related expenses, such as salaries, share-based compensation, benefits and travel expenses for R&D personnel, the intellectual property and R&D materials acquired from Takeda, certain costs billed by RSI and RSG under their services agreements with the Company, as well as allocated share-based compensation expense from RSL, and expenses from third parties who conduct R&D activities on behalf of the Company. The Company expenses in-process R&D projects acquired as asset acquisitions which have not reached technological feasibility and which have no alternative future use. (K) Takeda Warrant Liability: The Company recorded the Takeda warrant liability at its estimated fair value in the consolidated balance sheets. The Company remeasured the estimated fair value of the Takeda warrant liability each reporting period in which it was outstanding and recorded the change in the fair value in the consolidated statements of operations as other expense (income). The Takeda warrant liability expired on April 30, 2017. (L) Income Taxes: Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when, after consideration of all positive and negative evidence, it is not more likely than not that the Company’s deferred tax assets will be realizable. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. Interest and/or penalties related to income tax matters are recognized as a component of income tax expense as incurred. (M) Share-Based Compensation: The Company recognizes share-based compensation expense related to stock options granted to employees and members of its board of directors based on the estimated fair value of the awards on the date of grant. The Company estimates the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the share-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. The Company recognizes share-based compensation expense related to stock options granted to non-employees issued in exchange for services based on the estimated fair value of the awards on the date of grant. The Company estimates the grant date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model; however, the fair value of the stock options granted to non-employees is remeasured each reporting period until the service is complete, and the resulting increase or decrease in fair value, if any, is recognized as expense or income, respectively, during the period the related services are rendered. The Black-Scholes option-pricing model requires the use of highly subjective assumptions, which are used to determine the fair value of share-based awards. These assumptions include: Expected Term. The expected term represents the period that the Company’s share-based awards are expected to be outstanding and is determined using the simplified method noted under the provisions of Staff Accounting Bulletin, or SAB No. 107, with the continued use of this method extended under the provisions of SAB No. 110 (based on the mid-point between the vesting date and the end of the contractual term). Expected Volatility. Because the Company did not have an extended trading history for its common shares, the expected volatility was estimated using weighted average measures of implied volatility and the historical volatility of a peer group of companies for a period equal to the expected life of the stock options. The Company’s peer group of publicly traded biopharmaceutical companies was chosen based on their similar size, stage in the life cycle or area of specialty. Risk-Free Interest Rate. The risk-free interest rate is based on the interest rates paid on securities issued by the U.S. Treasury with a term approximating the expected life of the stock options. Expected Dividend. The Company has never paid, and does not anticipate paying, cash dividends on its common shares. Therefore, the expected dividend yield was assumed to be zero . RSL common share awards and RSL options granted by RSL to RSL, RSI and RSG employees are valued by RSL at fair value on the date of grant and that fair value is recognized as share-based compensation expense over the requisite service period. As RSL is a non-public entity, the RSL common share awards and RSL options are classified as Level 3 by RSL due to their unobservable nature. Significant judgment and estimates were used by RSL to estimate the fair value of these awards and options, as they are not publicly traded. RSL common share awards and RSL options are subject to specified vesting schedules and requirements (a mix of time-based and performance-based events). The fair value is based on various corporate event-based considerations, including targets for RSL’s post-IPO market capitalization and future financing events. The fair value of each RSL option is estimated on the date of grant using the Black-Scholes closed-form option-pricing model. Share-based compensation expense has been and will continue to be allocated to the Company over the requisite service period over which these RSL common share awards and RSL options are expected to vest and based on the relative percentage of time utilized by RSL, RSI and RSG employees on the Company’s matters. RSL restricted stock units granted to the Company’s Principal Executive Officer vest upon the achievement of both a performance and market condition, if both are achieved by the contractual expiration date and the Principal Executive Officer has remained in continuous service with RSL or any of its subsidiaries. The Company will recognize share-based compensation expense related to this award upon the achievement of the performance and market conditions throughout the requisite service period. Share-based compensation expense associated with time-vesting restricted share awards and restricted stock units is based on the fair value of the Company’s common shares on the grant date, which equals the closing market price of the Company’s common shares on the grant date. The Company recognizes the share-based compensation expense related to these awards on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards. Share-based compensation expense associated with restricted share awards subject to market conditions is estimated on the grant date using a Monte Carlo valuation model. The resulting fair value is recognized as share-based compensation expense ratably over the derived service period regardless of whether the market conditions are satisfied. Prior to the Company’s IPO, it was required to periodically estimate the fair value of its common shares when issuing share awards and options and in computing its estimated share-based compensation expense. In order to determine the fair value of the equity awards, the Company’s board of directors considered, among other things, timely valuations of the common shares prepared by an unrelated third-party valuation firm in accordance with guidance provided by the American Institute of Certified Public Accountants Practice Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation. In connection with the Company’s IPO and after discussions with the underwriters, it reassessed the fair value of these awards. Subsequent to the Company’s IPO, the estimated fair value of share-based payment awards has been determine as indicated in the preceding paragraphs. Prior to April 1, 2017, the Company estimated pre-vesting award forfeitures based on the Company’s expectations of future employee turnover and adjusted its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differed, or were expected to differ, from such estimates. Any changes in estimated forfeitures were recognized through a cumulative catch-up adjustment in the period of change which also impacted the amount of compensation expense to be recognized in future periods. On April 1, 2017, The Company adopted ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” or ASU No. 2016-09, in which it elected to change its accounting policy from estimating forfeitures to recognizing such forfeitures when they occur (see Note 2 (Q), “Recently Issued Accounting Pronouncements,” for further details.) (N) Net Loss per Common Share: Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted-average number of common shares outstanding during the period, reduced, where applicable, for outstanding yet unvested shares of restricted common stock. The computation of diluted net loss per common share is based on the weighted-average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, restricted share units, restricted share awards, and warrants. In periods in which the Company reports a net loss, all common share equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equal. The following potentially dilutive securities have been excluded from the diluted net loss per common share calculations for the years ended March 31, 2018 and 2017 , and for the period from February 2, 2016 (Date of Inception) to March 31, 2016 : Years Ended March 31, Period from February 2, 2016 (Date of Inception) to March 31, 2018 2017 2016 Options 3,549,405 1,525,857 — Restricted share awards 1,198,735 1,128,222 — Restricted stock units 15,000 — — Warrants 73,710 — — Total 4,836,850 2,654,079 — (O) Fair Value Measurements: The Company utilizes fair value measurement guidance prescribed by accounting standards to value its financial instruments. The guidance establishes a fair value hierarchy for financial instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. Fair value is defined as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a three-tier fair value hierarchy that distinguishes among the following: • Level 1-Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. • Level 2-Valuations are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. • Level 3-Valuations are based on inputs that are unobservable (supported by little or no market activity) and significant to the overall fair value measurement. 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 include cash, accounts payable and long-term debt. Cash and accounts payable are stated at their respective historical carrying amounts, which approximate fair value due to their short-term nature. The carrying value of the Company’s long-term debt approximates fair value based on current interest rates for similar types of borrowings and is included in Level 2 of the fair value hierarchy. (P) Foreign Currency: The results of the Company’s non-U.S. dollar based functional currency operations are translated to U.S. dollars at the average exchange rates during the period. The Company’s assets and liabilities are translated using the current exchange rate as of the balance sheet date and shareholders’ equity (deficit) is translated using historical rates. Adjustments resulting from the translation of the financial statements of the Company’s foreign functional currency subsidiaries into U.S. dollars are excluded from the determination of net loss and are accumulated in a separate component of shareholders’ equity (deficit). Foreign currency exchange transaction gains and losses are included in other income (expense) in the Company’s consolidated statements of operations. (Q) Recently Issued Accounting Pronouncements: In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842),” or ASU No. 2016-02, which is a comprehensive new lease standard that amends various aspects of existing accounting guidance for leases. The core principle of ASU No. 2016-02 will require lessees to present the assets and liabilities that arise from leases on their balance sheets. ASU No. 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the new standard and its impact on the Company’s consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, “ Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, ” or ASU No. 2016-09. ASU No. 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation, and the financial statement presentation of excess tax benefits or deficiencies. ASU No. 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this guidance as of April 1, 2017 using a modified retrospective transition method. As a result of the adoption of this standard, the Company elected to change its accounting policy from estimating forfeitures to recognizing forfeitures when they occur and, as a result, recorded an adjustment of $0.1 million to increase accumulated deficit with a corresponding offset to additional paid-in-capital as of April 1, 2017. The other requirements of ASU No. 2016-09 did not have a material impact on the Company’s consolidated financial statements and related disclosures. In October 2016, the FASB issued ASU No. 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory ,” or ASU No. 2016-16. ASU No. 2016-16 requires the income tax consequences of intra-entity transfers of assets other than inventory to be recognized as current period income tax expense or benefit and removes the requirement to defer and amortize the consolidated tax consequences of intra-entity transfers. The new standard will be effective for the Company on April 1, 2018 and will be adopted using a modified retrospective approach which requires a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company is currently evaluating the new standard and its impact on the Company’s consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02, “ Income Statement-Reporting Comprehensive Income (Topic 220) : Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ,” or ASU No. 2018-02. ASU No. 2018-02 allows companies to reclassify stranded tax effects resulting from the newly enacted federal corporate income tax rate under the Tax Cuts and Jobs Act, from accumulated other comprehensive (loss) income to retained earnings. ASU No. 2018-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the new standard and its impact on the Company’s consolidated financial statements and related disclosures. In March 2018, the FASB issued ASU No. 2018-05, “ Income Taxes (Topic 740) : Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ,” or ASU No. 2018-05. ASU No. 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act. ASU No. 2018-05 is effective immediately. The Company evaluated the impact of the Act as well as the guidance of Staff Accounting Bulletin No. 118 and incorporated the changes into the determination of a reasonable estimate of its deferred taxes and appropriate disclosures in the notes to the Company’s consolidated financial statements. The Company considers its accounting for the impact of the new law to be provisional and will continue to evaluate the impact this recent tax reform legislation may have on its results of operations, financial position, cash flows and related disclosures. |
