Investment in Evofem Biosciences, Inc.

9 Months Ended

Sep. 30, 2020

Investments, Equity Securities [Abstract]

Investment in Evofem Biosciences, Inc.

4. Investment in Evofem Biosciences, Inc.

On April 10, 2019, the Company entered into a securities purchase agreement with Evofem and two other purchasers pursuant to which the Company purchased $60.0 million of Evofem securities in a private placement. The transaction was structured in two tranches.

The first tranche closed on April 11, 2019, pursuant to which the Company invested $30.0 million to purchase 6,666,667 shares of Evofem common stock at $4.50 per share and was also issued warrants to purchase up to 1,666,667 shares of Evofem common stock. The warrants are exercisable beginning six months after the issuance date for a period of seven years from the issuance date at an exercise price of $6.38 per share.

The second tranche closed on June 10, 2019, pursuant to which the Company invested an additional $30.0 million to purchase 6,666,667 additional shares of Evofem common stock at $4.50 per share and was also issued warrants to purchase up to an additional 1,666,667 shares of Evofem common stock with the same terms as the warrants issued in the first tranche.

On May 21, 2020, the Company announced that it had completed the distribution of all of the Company’s 13,333,334 shares of common stock of Evofem to the Company’s stockholders, which represented approximately 26.7% of the outstanding shares of Evofem common stock as of the close of business on May 15, 2020. The distribution was recorded as a noncash distribution of $64.4 million, reducing retained earnings.

Following the distribution, the Company continues to hold warrants to purchase up to 3,333,334 shares of Evofem common stock. As of September 30, 2020, the Evofem warrants were valued under the Liquidation Basis at $2.5 million and are classified as “Other assets” on the Company’s Condensed Consolidated Statement of Net Assets. The Evofem common stock

and the Evofem warrants are included in “Long-term assets held for sale” on the Company’s December 31, 2019 Condensed Consolidated Balance Sheet. See Note 3, Discontinued Operations Classified as Assets Held for Sale under Going Concern Basis, for additional information.

For the eight months ended August 31, 2020, the Company recorded a loss of $17.9 million in Income (loss) from discontinued operations before income taxes on the Company’s Condensed, Consolidated Statement of Operations for the change in fair value of the Evofem common stock.

For the two and eight months ended August 31, 2020, the Company recorded an unrealized gain of $1.3 million and an unrealized loss of $7.5 million, respectively, for the change in fair value of the Evofem warrants. These amounts are included in Income (loss) from discontinued operations before income taxes on the Company’s Condensed, Consolidated Statements of Operations.