INTANGIBLE ASSETS AND GOODWILL

4 Months Ended

Dec. 31, 2012

INTANGIBLE ASSETS AND GOODWILL [Abstract]

(3)	INTANGIBLE ASSETS AND GOODWILL

On December 14, 2007, the Company acquired the intellectual property and other rights to develop RP103 to treat various clinical indications from the University of California at San Diego ("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 fair value of the intangible assets acquired at the time of acquisition was approximately $2.6 million.

As a result of the merger with Encode, the Company received the exclusive worldwide license to RP103 (as the same has been amended, the "License Agreement"), developed by clinical scientists at the UCSD, School of Medicine. RP103 is a proprietary enterically coated formulation of cysteamine bitartrate, a cystine depleting agent currently approved by the U.S. Food and Drug Administration ("FDA"). Cysteamine bitartrate is prescribed for the management of the genetic disorder known as nephropathic cystinosis ("cystinosis"), a lysosomal storage disease. The active ingredient in RP103 has also demonstrated potential in studies as a treatment for other metabolic and neurodegenerative diseases, such as Huntington's disease and NASH.

Pursuant to the license agreement with UCSD, the Company is obligated to pay an annual maintenance fee until the commencement of commercial sales of any licensed products developed. The Company is also obligated to pay milestone payments upon the occurrence of certain events, royalties on net sales from products developed pursuant to the license agreement and a percentage of sublicense fees or royalties, if any. The Company is obligated to fulfill predetermined milestones within a specified number of years from the effective date of the license agreement, depending on the indication. To the extent that the Company fails to perform any of the obligations, UCSD may terminate the license or otherwise cause the license to become non-exclusive.

Intangible assets recorded as a result of the 2009 Merger were approximately $0.2 million (net of $0.9 million in-process research and development asset written off during the year ended August 31, 2012 because the related research project was abandoned and the asset was therefore impaired).

A summary of intangibles acquired is as follows (dollars in thousands):

	Useful Life	December 31,			August 31,
	(years)	2012			2012			2011
Intangible asset (IP license for RP103) related to the Encode merger	20	$	2,620		$	2,620		$	2,620
Intangible assets (out-license) related to the 2009 Merger	16		240			240			240
In-process research and development	N/A		0			0			900
Total intangible assets			2,860			2,860			3,760
Less accumulated amortization			(704	)		(655	)		(509	)
Intangible assets, net		$	2,156		$	2,205		$	3,251

The intangible assets related to 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 will be amortized using the straight-line method over the estimated useful life of 16 years, which is the life of the intellectual property patents.

During the four months ended December 31, 2012, the years ended August 31, 2012, 2011 and 2010 and the cumulative period from September 8, 2005 (inception) to December 31, 2012, the Company amortized $49, $146, $153, $152 and $746, respectively, of intangible assets to research and development expense.

Amortization expense for intangible assets for each of the next five years is as follows:

Year ending December 31,	Amortization expense
2013		146
2014		146
2015		146
2016		146
2017		146

The Company tested the carrying value of goodwill for impairment as of December 31, 2012 and determined that there was no impairment.

- 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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