As a result of the Avedro Merger previously discussed in Note 1, Organization and Basis of Presentation, effective November 21, 2019, Avedro is a wholly-owned subsidiary of the Company and the Avedro Merger is intended to expand the Company’s portfolio of pipeline products beyond the treatment of glaucoma to include pharmaceutical therapies for the treatment of corneal disorders as part of the Company’s strategic objective to build a portfolio of micro-scale surgical and pharmaceutical therapies in corneal health and retinal disease.

The fair value of consideration transferred at closing was $437.8 million (the Merger Consideration), that consisted of Glaukos shares worth $406.8 million issued to replace Avedro common stock, Glaukos shares worth $0.2 million to replace certain vested Avedro warrants, and $30.8 million of value attributable to the pre-combination services associated with replacement of all Avedro outstanding and unexercised stock option awards and all outstanding restricted stock units (Replacement Awards). See Note 9, Stock-based Compensation for further details regarding the Replacement Awards. The following table summarizes the components of the Merger Consideration as of November 21, 2019 (in thousands, except shares and stock closing price):



Avedro shares of common stock outstanding at closing		17,670,003
Exchange Ratio		0.365
Right to receive shares of Glaukos		6,449,551
Glaukos closing stock price on November 21, 2019	$	63.07

Fair value of Glaukos common stock issued in the Avedro Merger, plus an immaterial amount of cash paid for fractional shares	$	406,776
Fair value of Glaukos common stock issued to replace certain vested Avedro warrants	$	189
Fair value of Replacement Awards attributable to pre-combination services	$	30,786
Total Merger Consideration	$	437,751

The Company performed a valuation analysis of the fair market value of Avedro’s assets and liabilities as of closing. The following table sets forth a preliminary allocation of the Merger Consideration to the identifiable tangible and intangible assets acquired and liabilities assumed, with the excess recorded to goodwill. This allocation of the Merger Consideration as of November 21, 2019 may be subject to revision if new facts and circumstances arise over the measurement period, which may extend up to one year from closing (in thousands):



Assets Acquired:
Cash	$	49,101
Accounts receivable		13,113
Inventory		33,339
Prepaid expenses and other current assets		2,522
Restricted cash		551
Property and equipment		1,489
Intangible assets		385,200
Goodwill		66,134
Liabilities Assumed:
Accounts payable		7,056
Accrued liabilities		6,776
Deferred revenue		1,389
Debt		22,496
Deferred revenue, non-current		43
Deferred tax liability		75,938
Fair value of net assets acquired	$	437,751

Goodwill represents the excess of the Merger Consideration over the preliminary fair value of the underlying assets acquired and liabilities assumed. Goodwill is attributable to the assembled workforce of experienced personnel at Avedro and expected synergies, and is not deductible for tax purposes.

Additionally, the fair market value inventory adjustment totaled approximately $29.0 million and is being amortized to cost of sales over the inventory’s expected turnover period.

The fair value and estimated useful lives of the Avedro intangible assets are as follows (in thousands, except where noted):


			Estimated
	Fair		Useful Life
	Value		(in years)
Intangible assets subject to amortization:
Developed technology	$	252,200	11.4
Customer relationships		14,100	5
Total	$	266,300
Intangible assets not subject to amortization:
In-process research and development (IPR&D)	$	118,900	Indefinite
Total intangible assets	$	385,200