Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

The following table sets forth the carrying amounts and accumulated amortization of the Company’s intangible assets:



	As of September 30, 2017							As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(in thousands)
Amortizable intangible assets:
Product licenses⁽¹⁾	$	—	$	—		$	—	$	30,000	$	(3,013	)	$	26,987
Developed product rights⁽²⁾	309,180		(23,215		)	285,965		370,560		(35,946		)	334,614
Total amortizable intangible assets	309,180		(23,215		)	285,965		400,560		(38,959		)	361,601

Intangible assets not subject to amortization:
In-process research and development	$	—	$	—		$	—	$	253,620	$	—		$	253,620
Total intangible assets not subject to amortization	—		—			—		253,620		—			253,620
Total intangible assets	$	309,180	$	(23,215	)	$	285,965	$	654,180	$	(38,959	)	$	615,221

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(1)	The Company amortizes intangible assets related to the product licenses over their expected useful lives.


(2)	The Company amortizes intangible assets related to developed product rights over the remaining life of the patents.

In the third quarter of 2017, the Company reclassified $188.6 million of IPR&D assets to developed product rights due to the approval of Vabomere in the United States and commenced amortization over its estimated useful life.

The Company recognized amortization expense of approximately $3.1 million and $6.5 million for the three months ended September 30, 2017 and 2016, respectively, and approximately $11.6 million and $19.3 million during the nine months ended September 30, 2017 and 2016, respectively, related to its intangible assets. The Company expects amortization expense related to its intangible assets to be approximately $5.4 million for the last three months of 2017. The Company expects annual amortization expense related to its intangible assets to be approximately $21.4 million, $21.4 million, $21.4 million, $21.4 million and $21.4 million for the years ending December 31, 2018, 2019, 2020, 2021 and 2022, respectively, with the balance of $173.6 million being amortized thereafter. The Company records amortization expense in cost of revenue in the accompanying condensed consolidated statements of operations.

In the second quarter of 2017 the Company recorded impairment charges of $226.5 million and $26.2 million to reduce the unamortized carrying amounts of the developed product rights and product licenses, respectively, associated with Ionsys to their estimated fair values of zero which is a Level 3 fair value measurement, as a result of the discontinuation and market withdrawal of Ionsys which became effective on June 19, 2017. In the second quarter of 2017, the Company recorded impairment charges of $65.0 million to reduce the carrying amount of the in-process research and development associated with MDCO-700 to an estimated fair value of zero, which is a Level 3 fair value measurement, in connection with management’s decision to discontinue the MDCO-700 trials. These impairment charges were recorded in asset impairment charges in the accompanying condensed consolidated statements of operations. See Note 1, “Nature of Business,” for further details and Note 7, “Fair Value Measurements,” for definitions of hierarchy levels.

There were no changes in the carrying amount of goodwill for the nine months ended September 30, 2017.

- 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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