On June 9, 2020 (the Closing Date), the Company completed its acquisition of all of the outstanding equity of USWM Enterprises, LLC (USWM Enterprises), a privately-held biopharmaceutical company, pursuant to the Sale and Purchase Agreement with US WorldMeds Partners, LLC (Seller), dated April 28, 2020 (the Agreement). Under the terms of the Agreement, the Company acquired the right to further develop and commercialize APOKYN, XADAGO, and the Apomorphine Infusion Pump (SPN-830) in the U.S., and MYOBLOC worldwide (the Products) for an upfront cash payment of $297.2 million, subject to working capital adjustments, and the potential for additional contingent consideration payments of up to $230 million.

The potential $230 million in contingent consideration payments includes up to $130 million for the achievement of certain SPN-830 regulatory and commercial activities (regulatory and developmental contingent consideration payments) and up to $100 million related to future sales performance of the Products (sales-based contingent consideration payments). The regulatory and developmental contingent consideration payments include a $25 million milestone due upon the U.S. Food and Drug Administration's (FDA) acceptance of the SPN-830 New Drug Application (NDA) for review. The remaining $105 million of the $130 million contingent consideration payments include payments upon the FDA's regulatory approval and commercial launch of SPN-830. One of the regulatory milestones has a time-based mechanism for full or partial achievement. The $100 million sales-based contingent consideration payments include a $35 million milestone due upon achievement of certain U.S. net product sales of APOKYN during 2021. The remaining $65 million of the $100 million sales-based contingent consideration payments relate to the achievement of certain net product sales of the Products in 2022 and 2023.

The acquisition is being accounted for as a business combination under the acquisition method of accounting, in accordance with ASC 805, Business Combinations. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The estimated fair values of the assets acquired and liabilities assumed, including goodwill, have been included in the Company's consolidated financial statements since the acquisition's Closing Date.

The Company's accounting for this acquisition is preliminary and fair value estimates for the assets acquired and liabilities assumed and the Company's estimates and assumptions are subject to change as the Company obtains additional information for its estimates during the measurement period. During the measurement period, if the Company obtains new information regarding facts and circumstances that existed as of the Closing Date that, if known, would have resulted in revised estimated values of those assets or liabilities, the Company will accordingly revise its estimates of fair values and purchase price allocation. The effect of measurement period adjustments on the estimated fair value elements will be reflected as if the adjustments had been made as of the Closing Date. The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

The Company expects to finalize its purchase price allocation within one year of the Closing Date. The Company continues to analyze and assess relevant information necessary to determine, recognize and record at fair value the assets acquired and liabilities assumed. Examples of areas that rely on preliminary estimates subject to measurement period adjustments include intangibles, lease asset and liability and deferred income tax assets and liabilities. The Company is in the process of obtaining additional market research that may inform the fair value of the acquired intangible assets and additional analysis that may be informative in the determination of the fair value of lease asset and other information. Accordingly, the preliminary recognition and measurement of assets acquired and liabilities assumed as of Closing Date are subject to change.


	As Initially Reported		Measurement Period Adjustments		As Adjusted
Cash consideration	$	304,194	$	1,341	$	305,535
Estimated fair value of contingent consideration	115,700		(40,900)		74,800
Estimated total purchase consideration	$	419,894	$	(39,559)	$	380,335

Cash consideration to Seller - net of cash acquired (1)	$	297,200	$	1,341	$	298,541

The Company paid the Seller $297.2 million in cash at the Closing Date. As of December 31, 2020, the Company paid the Seller an additional $1.3 million for working capital adjustment on the purchase price consistent with the Agreement resulting in an increase to the original cash consideration paid to the Seller.

In addition to the cash paid to the Seller, contingent payments of up to $230 million are also due to the Seller upon the achievement of certain milestones related to the development of SPN-830, the IPR&D asset, and sale of the Products. The possible outcomes for the contingent consideration range from $0, if no milestone is achieved, to $230.0 million, if all milestones are achieved on an undiscounted basis.

The estimated fair value of the $130 million regulatory and developmental contingent consideration payments was estimated using the probability weighted cash flow income approach. Under this method, fair value is estimated by applying a probability assumption to each milestone payment, and then consolidating the probability payments to be discounted under a discounted cash flow method as of the date each payment is expected to be made. In addition to the discount rate, the more significant inputs and assumptions considered include estimated probability and timing of milestone achievement, such as the probability and timing of obtaining regulatory approval. The resulting probability weighted cash flows were discounted at a rate commensurate with the level of risk associated with the projected cash flows.

The estimated fair value of the $100 million sales-based contingent consideration payments was estimated using a Monte Carlo simulation. In addition to the discount rate and the estimated revenue volatility, the more significant inputs and assumptions considered include the estimated amount and timing of projected revenues from the Products. The projected revenues were discounted at a rate commensurate with the level of risk associated with the projected cash flows.

The Company initially recorded a contingent consideration liability of $115.7 million as of the Closing Date to reflect the estimated fair value of the contingent consideration based on information available at that time. Subsequent to the Closing Date, the Company adjusted the contingent consideration fair value based on new information related to the facts and circumstances that existed as of the acquisition date related to the timing of meeting the conditions of the milestone payments that are contingent upon regulatory approval and commercial launch of the acquired IPR&D asset as well as the estimated timing of projected revenues from the Products. This resulted in a measurement period adjustment of $40.9 million, and decreased the estimated fair value of the contingent consideration liability as of Closing Date to $74.8 million.

The fair value measurement of the contingent consideration liability was determined based on significant unobservable inputs and thus represents a Level 3 fair value measurement. These significant unobservable inputs include: the discount rates; the estimated probability and timing of milestone achievement including regulatory milestones related to the IPR&D asset; the estimated amount and timing of projected revenues from the Products; and the estimated revenue volatilities. Significant judgment is employed in determining the appropriateness of these inputs. Changes to the inputs described above could have a material impact on the Company's financial position and results of operations in any given period. The Company believes the assumptions are representative of those a market participant would use in estimating the fair value of the contingent considerations.

The following table presents the Company’s preliminary estimates of the fair value of the assets acquired and liabilities assumed as of the Closing Date and subsequent measurement period adjustments recorded during the year ended December 31, 2020 (dollars in thousands):


	As Initially Reported		Measurement Period Adjustments		As Adjusted
Cash and cash equivalents	$	6,994	$	—	$	6,994
Accounts receivable	18,474		—		18,474
Inventories (1)	10,400		(700)		9,700
Prepaid expenses and other current assets	3,564		—		3,564
Property and equipment	454		—		454
Finance lease asset (2)	22,747		—		22,747
Intangible assets (1)	387,000		(32,000)		355,000
Other assets	340		—		340
Total of assets acquired	449,973		(32,700)		417,273
Accounts payable	(2,573)		—		(2,573)
Accrued expenses and other current liabilities	(23,339)		—		(23,339)
Finance lease liability (2)	(22,747)		—		(22,747)
Deferred income tax liabilities, net (3)	(69,515)		3,325		(66,190)
Total liabilities assumed	(118,174)		3,325		(114,849)
Total identifiable net assets	$	331,799	$	(29,375)	$	302,424
Goodwill	88,095		(10,184)		77,911
Total purchase price (4)	$	419,894	$	(39,559)	$	380,335

The estimated fair value of the inventory was determined using the comparative sales method, which estimated the expected sales price of the product, reduced by all costs expected to be incurred to complete or to dispose of the inventory, as well as a profit on the sale. The Company recorded a measurement period adjustment of $0.7 million. The Company made refinements to the inputs and assumptions pertaining to the estimate of acquired inventories' obsolescence based on review of product dating information.

The acquired intangible assets include the acquired IPR&D asset related to the apomorphine infusion pump product candidate and the acquired developed technology, and product rights. The Company determined the estimated fair value of the acquired intangible assets as of the Closing Date using the income approach. This is a valuation technique based on the market participant's expectations of the cash flows that the intangible assets are forecasted to generate. The cash flows were discounted at

The fair value measurements of the acquired intangible assets were determined based on significant unobservable inputs and thus represents a Level 3 fair value measurement. Some of the more significant inputs and assumptions used in the intangible assets valuation includes: the timing and probability of success of clinical and regulatory approvals for the IPR&D asset, the estimated future cash flows from product sales, the timing and projection of costs and expenses, discount rates and tax rates.

The Company initially recorded a fair value of intangible assets of $387 million, which consisted of $150 million related to the acquired IPR&D and $237 million related to acquired developed technology and product rights. The initial estimate of the fair value of intangible assets recorded as of the Closing Date is based on information available at that time. During the year ended December 31, 2020, the Company recorded measurement period adjustments of $32 million, which adjusted the initial estimated fair value of the intangible assets to $355 million as of the Closing Date. The Company updated assumptions with respect to the timing of regulatory approval and the commercialization of the acquired IPR&D asset. In addition, the Company also made refinements on the estimates of projected cash flows based on review of terms of the contractual arrangements associated with the Products acquired. The revisions were based on updated assumptions and information related to the facts and circumstances that existed as of the acquisition date.

Acquired intangible assets, excluding the acquired IPR&D, will be amortized over their estimated useful lives on a straight-line basis. IPR&D assets are considered indefinite-lived, until the successful completion or abandonment of the associated research and development efforts.

Goodwill was calculated as the excess of the consideration paid consequent to completing the acquisition, compared to the net assets recognized. Goodwill represents the future economic benefits arising from the acquired assets, and which could not be individually identified and separately valued. Goodwill is primarily attributable to the additional acquired growth platforms and an expanded revenue base. Goodwill is not expected to be deductible for tax purposes.

Acquisition-related transaction costs, which primarily consisted of regulatory, financial advisory, and legal fees, totaled $8.4 million and $1.7 million for the year ended December 31, 2020, and December 31, 2019, respectively, were included in Selling, general and administrative expense, in the consolidated statements of earnings.

The operations of MDD US Enterprises, LLC (formerly USWM Enterprises, LLC) and its subsidiaries have been included in the Company's consolidated statements of earnings for the period after the Closing Date through December 31, 2020. Total revenues of $91.0 million and net earnings of $9.9 million were recorded for the year ended December 31, 2020.

The unaudited pro forma combined financial information is based on historical financial information and the Company's preliminary allocation of the purchase price; therefore, it is subject to subsequent adjustment upon finalizing the purchase price allocation. In order to reflect the occurrence of the acquisition as if it occurred on January 1, 2019, the unaudited pro forma combined financial information reflects the adoption of ASC 842, Leases; the recognition of additional amortization expense on intangible assets, the removal of historical amortization charges and the elimination of non-recurring acquisition-related cumulative transaction costs of $10.1 million.