Investments

12 Months Ended

Dec. 31, 2018

Investments Debt And Equity Securities [Abstract]

Investments

8. Investments

Debt security

On March 4, 2015, the Company entered into an Option Agreement (the “Option Agreement”) with eNeura, Inc. (“eNeura”), a privately held medical technology company that is developing devices for the treatment of migraines. The Option Agreement provided the Company with an exclusive option to acquire eNeura (the “Option”) during the 18-month period following the grant of the Option, which expired in September 2016 without the Company exercising the option. In consideration for the Option, (i) the Company paid a non-refundable $0.3 million fee to eNeura, and (ii) the Company loaned eNeura $15.0 million pursuant to a Convertible Promissory Note (the “eNeura Note”) that was issued to the Company. The principal amount of the eNeura Note is $15.0 million and interest accrues at 8.0%. The eNeura Note will mature on March 4, 2019 and interest is due when the eNeura Note matures, provided that if a change in control of eNeura (generally defined as a third party acquisition of fifty percent or more of eNeura’s voting equity or all or substantially all of eNeura’s assets) occurs prior to the maturity date, the eNeura Note will automatically convert into preferred stock of eNeura at a fixed price equal to $7.30 per share. The investment is recorded in other long-term assets as an available for sale debt security at fair value and interest is recorded in interest income; however, the Company discontinued recognition of interest income on the eNeura Note in the first quarter of 2017. The eNeura Note is collateralized by eNeura’s intellectual property in the event of default or nonpayment. In the event the Company were to obtain eNeura’s intellectual property, the Company believes the value of such intellectual property equals or exceeds the value of the eNeura Note. Refer to Note 11 for additional discussion regarding the valuation of this debt security.

Currently, the Company does not expect to collect the complete principal and interest on March 4, 2019 and is in negotiations with eNeura to possibly extend and/or modify other terms of the eNeura Note. Any significant changes to the term of the eNeura Note, including extending the due date, could have a material impact on the fair value of the security.

Equity investment and warrants

As of December 31, 2018, the Company holds common stock of Bone Biologics and warrants to purchase approximately 13 thousand shares at a weighted average exercise price of $14.32 per share (after adjusting the shares and exercise price for a reverse stock split executed by Bone Biologics in 2018). Under the terms of the warrant purchase agreements, the warrants to purchase common stock in Bone Biologics are exercisable over a seven year period, which expires in 2020, and are transferable by the holder to other parties. These instruments are recorded within other long-term assets.

Prior to 2018, these instruments were accounted for at cost as the fair value of these instruments was not readily determinable. Effective January 1, 2018, the Company is required to measure these equity investments at fair value and recognize any changes in fair value in net income as a result of adopting ASU 2016-01 (see Note 2). Under this guidance, the Company has elected to account for these investments using a new measurement alternative, which values the investments at cost, less any impairments, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. During the first quarter of 2018, the Company purchased an additional 25,000 shares of Bone Biologics common stock, after

giving effect to a reverse stock split by Bone Biolgics subsequent to the purchase, for $0.5 million. During the three months ended September 30, 2018, Bone Biologics executed a series of equity financing activities which significantly diluted the Company’s ownership interest in the outstanding stock. After considering the new observable prices in these equity financing activities, and after giving consideration to other matters disclosed by Bone Biologics, the Company determined this investment was impaired and recorded an impairment charge of $4.4 million relating to its investments in Bone Biologics. These changes are included in other  expense, net. Refer to Note 11 for additional discussion regarding the valuation of this investment.