Investments in Preferred Stock

Investment in ZIOPHARM Preferred Stock

In June 2016, the Company received 100,000 shares of Series 1 Preferred Stock (the "Preferred Shares") of ZIOPHARM with a per share stated value of $1,200, as consideration for amending their two previously existing ECC agreements (Note 5). The Company received a monthly dividend, paid in additional Preferred Shares, equal to $12.00 per Preferred Share held per month divided by the stated value of the Preferred Shares. In conjunction with the ZIOPHARM License Agreement in October 2018 (Note 5), the Company returned to ZIOPHARM all of the Preferred Shares owned or accrued by the Company as of the effective date of the agreement.

The investment in ZIOPHARM preferred stock was categorized as Level 3 as there were significant unobservable inputs and the Preferred Shares were not traded on a public exchange. The fair value of the investment in ZIOPHARM preferred stock was estimated using a probability-weighted expected return ("PWERM") model. The key inputs used in the PWERM model were (i) estimating the future returns for conversion of the Preferred Shares for both product approval and a change in control of ZIOPHARM (the "conversion events") using market data of the change in value for guideline companies as a result of these conversion events; (ii) estimating the expected date and likelihood of each conversion event; and (iii) discounting these estimated future returns using a discount rate for the Preferred Shares considering industry debt issuances originated by public funds and venture capital rates of return. The fair value of the Company's investment in ZIOPHARM preferred stock, including additional Preferred Shares received as dividends, was $160,832 as of December 31, 2017. During the years ended December 31, 2018, 2017 and 2016, the Company received and accrued an additional 11,415, 13,460, and 6,184 Preferred Shares, respectively, and recognized $14,793, $16,717, and $7,421 of dividend income in the accompanying consolidated statements of operations, respectively.

Investment in Fibrocell Preferred Stock

In March 2017, Fibrocell sold Series A Convertible Preferred Stock (the "Convertible Preferred Shares") convertible into shares of Fibrocell common stock and warrants to purchase shares of Fibrocell common stock to certain institutional and accredited investors, including the Company and affiliates of Third Security. The Company paid $1,161 in exchange for 1,161 Convertible Preferred Shares and warrants to acquire 99,769 shares of Fibrocell common stock, reflective of the 1-for-5 reverse stock split of Fibrocell's common stock effective May 25, 2018. The Convertible Preferred Shares are convertible at any time at the election of the Company and accrue dividends at 4% per annum, compounded quarterly, increasing the stated value of the shares. The investment in Fibrocell preferred stock is categorized as Level 3 as there are significant unobservable inputs and the Convertible Preferred Shares are not traded on a public exchange. The fair value of the investment in Fibrocell preferred stock is estimated using a conversion plus dividend approach utilizing the trading value of the underlying common stock and an estimated premium for the preferred stock dividend and other preferences. Market price volatility of Fibrocell's common stock and a significant change in the estimated preferred stock premium could result in a significant impact to the fair value of the investment in Fibrocell preferred stock. As of December 31, 2018 and 2017, the fair value of the Company's investment in Fibrocell preferred stock totaled $191 and $393, respectively. See Note 17 for additional discussion of the warrants.

Investment in Oragenics Preferred Stock

In November 2017, concurrent with Oragenics closing a preferred stock private placement, the Company exchanged a promissory note, including accrued interest, purchased from Oragenics in May 2017 and receivables due from Oragenics totaling $3,385 for Oragenics Series C preferred stock ("Series C Preferred Stock"). The Series C Preferred Stock is non-voting and non-convertible and is redeemable in whole or part at any time by Oragenics in cash. The Series C Preferred Stock accrues an annual 12% dividend payable in additional Series C Preferred Stock through May 10, 2019, and after such date, the annual dividend increases to 20%. Additionally, the Company and Oragenics amended certain future payment terms under its ECCs (Note 5). As of December 31, 2018 and 2017, based on the most recent financial information available on Oragenics, the Company concluded that there was no value to its investment in Oragenics preferred stock.

Changes in the Fair Value of Investments in Preferred Stock

The following table summarizes the changes in the Level 3 investments in preferred stock during the years ended December 31, 2018 and 2017.



	2018			2017
Beginning balance	$	161,225		$	129,545
Purchase of preferred stock	—			766
Conversion of receivables to preferred stock	—			3,385
Dividend income from investments in preferred stock	14,841			16,756
Net unrealized appreciation (depreciation) in the fair value of the investments in preferred stock	(17,499		)	10,773
Return of preferred stock	(158,376		)	—
Ending balance	$	191		$	161,225