8.	Business combination and BELBUCA^® acquisition:

On December 7, 2016, the Company and Endo entered into the Termination Agreement to terminate Endo’s licensing rights for BELBUCA^®. The transaction closed on January 6, 2017. At the closing date, the Company purchased from Endo the following net assets (the “net assets”): (i) current BELBUCA^® product inventory and work-in-progress, (ii) material manufacturing contracts related to BELBUCA^®^, (iii) BELBUCA^®-related domain names and trademarks (including the BELBUCA^® trademark), (iv) BELBUCA^® -related manufacturing equipment, and (v) all pre-approval regulatory submissions, including any Investigational New Drug Applications and New Drug Applications, regulatory approvals and post-approval regulatory submissions concerning BELBUCA^®. The purchase price for the net assets (the “Asset Purchase Price”) was equal to the sum of: (i) the aggregate book value of the portion of the transferred product inventory forecasted to be used or sold by the Company, (ii) the aggregate book value of work-in-progress inventory, and (iii) the assumption of any assumed liabilities. Together with the Asset Purchase Price, pursuant to the terms of the Termination Agreement, the Company paid to Endo a fee in the amount of $5 million in consideration for (i) Endo’s agreement not to compete for a period of two years from the closing date of the termination agreement and (ii) Endo’s waiver of its right to sell product for twelve months following the closing of the termination agreement.

The BELBUCA^® acquisition was accounted for as a business combination in accordance with ASC No. 805, Business Combinations which, among other things, requires assets acquired and liabilities assumed to be measured at their acquisition date fair values. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses and cash flows, weighted average cost of capital, discount rates, and estimates of terminal values. The Company believes the estimates used were reasonable and the significant effects of the BELBUCA^® acquisition were properly reflected.

The following table summarizes the consideration paid to acquire BELBUCA^® and the estimated values of assets acquired and liabilities assumed in the accompanying consolidated balance sheet based on their fair values on January 6, 2017 (the date of the Endo Closing):


*Asset purchase price:*
Deferred cash consideration to Endo	$	7,536

Total asset purchase price	$	7,536

*Estimated fair value of assets acquired:*
Current BELBUCA^® product inventory and work-in process	$	5,412
BELBUCA^®-related manufacturing equipment		432
License and distribution rights intangible assets		45,000
Deferred tax liability		(15,972	)

Amount attributable to assets acquired	$	34,872

Bargain purchase gain	$	(27,336	)

As a result of the business combination, the Company recognized a deferred tax liability of $16.0 million. This deferred tax liability was netted against its deferred tax assets as of March 31, 2017. Because a full valuation allowance has been provided against the Company’s deferred tax assets as it is considered more likely than not that they will not be utilized, the Company released a corresponding amount of its valuation allowance during the three months ended March 31, 2017 and recognized a $16.0 million tax benefit in the accompanying condensed consolidated statement of operations.

During the three months ended March 31, 2017, the Company recorded the asset acquisition as a bargain purchase gain of $27.3 million in the accompanying condensed consolidated statement of operations.