Equity Method Investment

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

The Company has a variable interest in Kleo through its equity investment. Kleo is a variable interest entity due to the equity investment at risk being insufficient to finance its activities. An assessment of whether or not the Company has the power to direct activities that most significantly impact Kleo’s economic performance and to identify the party that obtains the majority of the benefits of the investment was performed as of March 31, 2020 and December 31, 2019, and will be performed as of each subsequent reporting date. After each of these assessments, the Company concluded that the activities that most significantly impact Kleo’s economic performance are the ability to direct the research activities, the ability to select vendors to perform the research, the ability to maintain research staff and the ability to raise additional funds, each of which are directed by Kleo. Based on the outcome of these assessments, the Company concluded that the investment should be accounted for under the equity method.

The Company has recorded its investments in Kleo to date based on the costs of those investments, as adjusted for the Company’s proportional share of Kleo’s net income or loss in each period. The Company's ownership interest in outstanding stock of Kleo for the three months ended March 31, 2020 and 2019 was 41.9%. The Company records future adjustments to the carrying value of its investment at each reporting date equal to its proportionate share of Kleo’s net loss for the corresponding period. The Company recorded other expense and a corresponding reduction in the carrying value of its investment in Kleo as follows:


	Three Months Ended March 31,
	2020		2019
Proportionate share of Kleo's net loss	$	1,380	$	900

The carrying value of the Company’s investment in Kleo was $3,958 and $5,338 as of March 31, 2020 and December 31, 2019, respectively, and is reported as equity method investment on the condensed consolidated balance sheet. The carrying value of the investment represents the Company’s maximum loss exposure as of the balance sheet date. The following table provides a roll-forward of the carrying value of the Company’s equity method investment:


	Carrying Value
Balance at December 31, 2019	$	5,338

Loss recognized in connection with equity method investment	(1,380)
Balance at March 31, 2020	$	3,958

Balance at December 31, 2018	$	11,414

Loss recognized in connection with equity method investment	(900)
Balance at March 31, 2019	$	10,514