Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The following information details the carrying amounts and accumulated amortization of the Company's intangible assets subject to amortization:



	As of September 30, 2015								As of December 31, 2014
	Weighted Average Useful Life	Gross Carrying Amount		Accumulated Amortization and Other Charges			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization and Other Charges			Net Carrying Amount
		(in thousands)
Identifiable intangible assets
Selling rights agreements	0.0 years	$	9,126	$	(9,126	)	$	—	$	9,125	$	(8,961	)	$	164
Product licenses	15.5 years	95,500		(71,336		)	24,164		71,000		(65,602		)	5,398
Developed product rights	15.4 years	793,107		(50,458		)	742,649		180,930		(6,513		)	174,417
Total	15.4 years	$	897,733	$	(130,920	)	$	766,813	$	261,055	$	(81,076	)	$	179,979

In the nine months ended September 30, 2015, the Company reclassified $250.0 million, $36.1 million and $176.0 million of IPR&D assets to developed product rights due to the approval of Ionsys in the United States, and Raplixa in the United States and Europe, respectively. In February 2015, the Company completed the acquisition of the remaining assets held by Bristol-Myers Squibb Company (BMS) which were exclusively related to Recothrom. The Company paid BMS approximately $132.4 million in the aggregate, including approximately $44.0 million for inventory. In the nine months ended September 30, 2015, the Company reclassified the value of the purchase option related to Recothrom and additional amounts paid to BMS to developed product rights and commenced amortization.

During the three months ended September 30, 2015, the Company recorded a charge of $25.8 million to reduce the carrying value of the product rights associated with PreveLeak to their estimated fair value as a result of a reduction in expected future cash flows.

The Company recognized an amortization expense and impairment charges of $33.7 million and $49.8 million related to its intangible assets in the three and nine months ended September 30, 2015, respectively. Fair value was based on expected future cash flows using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by the market participants, discounted using a risk adjusted rate.

The Company expects amortization expense related to its intangible assets to be $12.9 million for the fourth quarter of 2015. The Company expects annual amortization expense related to its intangible assets to be $51.8 million, $51.9 million, $51.5 million, $51.2 million and $51.1 million for the years ending December 31, 2016, 2017, 2018, 2019 and 2020, respectively, with the balance of $496.4 million being amortized thereafter. The Company records amortization of selling rights agreements in selling, general and administrative expense in the accompanying consolidated statements of operations. The Company records amortization and any impairments of product licenses and developed product rights in cost of revenue in the accompanying consolidated statements of operations.

The following information details the carrying amounts of the Company's intangible assets not subject to amortization:



	As of September 30, 2015					As of December 31, 2014
	Gross Carrying Amount		Adjustments	Net Carrying Amount		Gross Carrying Amount		Adjustments	Net Carrying Amount
	(in thousands)
Intangible assets not subject to amortization:
In-process research and development	$	253,620	—	$	253,620	$	650,680	—	$	650,680
Recothrom option	—		—	—		62,000		—	62,000
Total	$	253,620	—	$	253,620	$	712,680	—	$	712,680

On February 2, 2015, the Company completed the acquisition of Annovation, and Annovation became the Company's wholly owned subsidiary. As a result of the acquisition of Annovation, the Company recorded $65.0 million of in-process research and development for the acquisition of ABP-700, a novel intravenous anesthetic. See Note 12 "Acquisitions" for further information regarding the Company's acquisition of Annovation.

The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 are as follows:



	September 30, 2015
	(in thousands)
Balance as of December 31, 2014	$	286,532
Goodwill resulting from the acquisition of Annovation	24,530
Translation adjustments	2,103
Balance as of September 30, 2015	$	313,165

- 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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