INTANGIBLE ASSETS AND GOODWILL

6 Months Ended

Jun. 30, 2013

INTANGIBLE ASSETS AND GOODWILL [Abstract]

2. INTANGIBLE ASSETS AND GOODWILL

On December 14, 2007, the Company acquired the intellectual property and other rights to develop PROCYSBI/RP103 to treat various clinical indications from UCSD by way of a merger with Encode Pharmaceuticals, Inc., a privately held development stage company ("Encode"), which held the intellectual property license with UCSD. The intangible assets acquired in the merger with Encode were recorded at approximately $2.6 million, primarily based on the value of the Company's common stock and warrants issued to the Encode stockholders. Based upon FDA approval of PROCYSBI, the Company paid and capitalized $750,000 earned by UCSD as a licensing milestone payment which is being amortized through 2027, the life of the licensed patents.

Intangible assets originally recorded as a result of the 2009 Merger were approximately $1.1 million of which $0.9 million was written off as of August 31, 2012 as discussed below.

Summary of intangible assets acquired as discussed above:

(In thousands)	June 30, 2013			December 31, 2012

Intangible asset (IP license for PROCYSBI /RP103) related to the Encode merger	$	2,620		$	2,620
Intangible assets (out-license) related to the 2009 Merger		240			240
Intangible assets (UCSD license FDA approval milestone)		750			0

Total intangible assets		3,610			2,860
Less accumulated amortization		(790	)		(704	)

Intangible assets, net	$	2,820		$	2,156

The intangible assets related to PROCYSBI/RP103 are being amortized monthly over 20 years, which are the lives of the intellectual property patents and the estimated useful life. The 20 year estimated useful life is also based upon the typical development, approval, marketing and life cycle management timelines of pharmaceutical drug products. The intangible assets related to the out-license are amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents. At August 31, 2012, the Company determined that the capitalized acquired in-process research and development cost of $0.9 million, representing the tezampanel and NGX 426 program acquired in the 2009 Merger, was impaired due to the Company's decision to discontinue development of this product candidate for thrombosis due to regulatory hurdles that would require significant expenditures which the Company chose not to prioritize for funding. The Company performed an impairment analysis and determined that the fair value of this intangible asset was zero. As such, the Company expensed $0.9 million as in-process research and development as part of research and development expense on the Company's consolidated statements of comprehensive loss for the fiscal year ended August 31, 2012. During the three and six months ended June 30, 2013, the Company did not identify any impairment losses.

The Company amortized approximately $50,000 and $37,000 of intangible assets to research and development expense during the three months ended June 30, 2013 and May 31, 2012, respectively, and $86,000 and $73,000 during the six months ended June 30, 2013 and May 31, 2012, respectively. These amounts relate to the amortization of the intangible assets listed above.

The following table summarizes the actual and estimated amortization expense for intangible assets for the periods indicated:

Amortization period (In thousands)	Amortization expense
Year ending December 31, 2013 – estimate	$	187
Year ending December 31, 2014 – estimate		201
Year ending December 31, 2015 – estimate		201
Year ending December 31, 2016 – estimate		201
Year ending December 31, 2017 – estimate		201

Goodwill of approximately $3.3 million represents the excess of total consideration recorded for the 2009 Merger over the value of the assets assumed. The Company tested the carrying value of goodwill for impairment as of the end of its transition period for the four month period ended December 31, 2012 and determined that there was no impairment. Intangible assets are tested for impairment whenever events indicate that their carrying values may not be recoverable. During the fiscal year ended August 31, 2012, the tezampanel/NGX426 asset was written off with a carrying value of approximately $0.9 million and during the fiscal year ended August 31, 2011, the NeuroTrans™ asset was written off with a carrying value of approximately $0.1 million due to the termination of a collaboration agreement.

- 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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