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 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 the acquisition was approximately $2.6 million. 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.

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 originally recorded as a result of a 2009 merger were approximately $1.1 million of which $0.9 million was written off to research and development expense during the year ended August 31, 2012, as discussed below.

A summary of intangible assets acquired is as follows:

(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

At August 31, 2012, the Company determined that the capitalized acquired in-process research and development asset carried at $0.9 million, representing the tezampanel and NGX 426 program acquired in a 2009 merger, was fully impaired due to the Company's decision to discontinue development of this product candidate. 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.

Amortization expense for intangible assets for the periods indicated is expected to be as follows:

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

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.

- 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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