GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2015

GOODWILL AND INTANGIBLE ASSETS

Goodwill

As a result of our 2013 merger with BioSante Pharmaceuticals, Inc. (“BioSante”), we recorded goodwill of $1.8 million in our one reporting unit. We assess the recoverability of the carrying value of goodwill as of October 31 of each year, and whenever events occur or circumstances change that would, more likely than not, reduce the fair value of our reporting unit below its carrying value. There have been no events or changes in circumstances that would have reduced the fair value of our reporting unit below its carrying value from the most recent assessment on October 31, 2014, through September 30, 2015. No impairment losses were recognized during the three or nine months ended September 30, 2015 or 2014.

Acquisition of Abbreviated New Drug Applications

In March 2015 we purchased from Teva Pharmaceuticals (“Teva”) the Abbreviated New Drug Application (“ANDA”) for a generic product, Flecainide Acetate tablets, for $4.5 million in cash and a percentage of future gross profits from product sales. We accounted for this transaction as an asset purchase. The ANDA is being amortized in full over its useful life of 10 years.

In July 2015, we purchased from Teva the ANDAs for 22 previously marketed generic drug products for $25.0 million in cash and a percentage of future gross profits from product sales. We accounted for this transaction as an asset purchase. The ANDAs are being amortized in full over their useful life of 10 years.

Testosterone Gel NDA

As part of our 2013 merger with BioSante, we acquired a testosterone gel product that was licensed to Teva (the “Teva license”). In May 2015, we acquired from Teva the approved New Drug Application (“NDA”) for the previously-licensed product. Pursuant to the terms of the purchase agreement, upon commercialization, we will pay Teva a royalty of up to $5 million, at a rate of 5% of the consideration we receive as a result of commercial sale of the product. We have assessed the value of the Teva license under the new structure and determined that the asset was not impaired as of the May 2015 acquisition date. We will continue to assess the asset for potential impairment on an on-going basis.

Marketing and Distribution Rights

In August 2015, we entered into a distribution agreement with IDT Australia Limited (“IDT”) to market several products in the U.S. (the “IDT Agreement”). The products have associated ANDAs that require various FDA approvals prior to commercialization. In general, IDT will be responsible for regulatory submissions of the products and the manufacturing of certain products. We made an upfront payment to IDT of $1.0 million and will make additional milestone payments upon FDA approval for commercialization of certain products. Upon approval, IDT will manufacture some of the products and we will manufacture the other products. We will be responsible for marketing and distributing all the products under our label, in the United States, providing a percentage of profits from sales of the drugs to IDT. The $1.0 million upfront payment was recorded as a marketing and distribution rights intangible asset and will be amortized in full over its seven-year useful life.

Definite-Lived Intangible Assets

The components of our definite-lived intangible assets are as follows:

(in thousands)	September 30, 2015				December 31, 2014				Weighted Average
	Gross Carrying		Accumulated		Gross Carrying		Accumulated		Amortization
	Amount		Amortization		Amount		Amortization		Period
Acquired ANDA intangible assets	$	42,077	$	(3,138)	$	12,577	$	(1,312)	10 years
Product rights		22,522		(2,816)		22,522		(1,133)	10 years
Testosterone gel NDA		10,900		(2,230)		10,900		(1,487)	10 years
Marketing and distribution rights		1,000		(24)		-		-	7 years
	$	76,499	$	(8,208)	$	45,999	$	(3,932)

Our acquired ANDA intangible assets consist of the exclusive rights, including all of the applicable technical data and other relevant information, to produce certain pharmaceutical products that we acquired from various companies, including the group of ANDAs acquired from Teva in the first quarter of 2014 and the additional ANDAs acquired in 2015. The product rights assets consist of the exclusive rights, including all of the applicable technical data and other relevant information, to produce certain branded pharmaceutical products that we acquired from various companies, including the Lithobid and Vancocin products acquired in the third quarter of 2014. The testosterone gel NDA was acquired in May 2015. Definite-lived intangible assets are stated at cost, net of amortization using the straight line method over the expected useful lives of the intangible assets. Amortization expense was $1.9 million and $1.0 million for the three months ended September 30, 2015 and 2014, respectively. Amortization expense was $4.3 million and $2.2 million for the nine months ended September 30, 2015 and 2014, respectively.

We test for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. No such triggering events were identified during the three and nine months ended September 30, 2015 and 2014 and therefore no impairment loss was recognized in the three and nine months ended September 30, 2015 or 2014.

Expected future amortization expense is as follows:

(in thousands)
2015 (remainder of the year)	$	1,894
2016		7,578
2017		7,578
2018		7,578
2019		7,578
2020 and thereafter		36,085
Total	$	68,291

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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