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Contingent Consideration
 9 Months Ended
Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
Contingent Consideration Disclosure Contingent Consideration
The Company's contingent consideration liabilities are related to the USWM Acquisition (as defined below) and the Adamas Acquisition. The contingent consideration liabilities are measured at fair value on a recurring basis using either a Monte Carlo simulation or the income approach. The Company classifies its contingent consideration liabilities as Level 3 fair value measurements based on the significant unobservable inputs used to estimate fair value. These reflect the inputs and assumptions the Company believes would be made by market participants. Changes in any of those inputs together or in isolation may result in significantly lower or higher fair value measurement.
USWM Contingent Consideration
On June 9, 2020 (the USWM Closing Date), the Company completed its acquisition of all the outstanding equity of USWM Enterprises, LLC (USWM Enterprises) (USWM Acquisition). The USWM Acquisition included potential additional contingent consideration payments of up to $230 million comprised of the following:
•Regulatory and developmental milestones - gross contingent consideration of up to $130 million contingent upon achievement of regulatory and developmental milestones.
This includes a $25 million milestone due upon the FDA acceptance of the SPN-830 NDA for review, which was paid in the first quarter of 2022. This milestone payment is reported under both financing and operating activities in the condensed consolidated statements of cash flows. Of the $25 million payment, $22.9 million represents the acquisition date fair value of the contingent consideration liability and was reported under cash flows from financing activities. The remaining $2.1 million represents the excess of the acquisition date fair value and was reported under cash flows from operating activities.
The remaining $105 million is comprised of amounts due upon achievement of certain FDA's regulatory approval and commercial launch of SPN-830. This includes a $50 million milestone which has a time-based mechanism for full or partial payment. As of September 30, 2022, the achievement of this milestone is remote. The remaining $55 million, which does not have a time-based mechanism for payment, relates to the FDA's approval of the SPN-830 NDA and the subsequent commercial product launch. Refer to Note 1, Business Organization and Note 17, Subsequent Events.
•Sales-based milestones consist of gross contingent consideration payments of up to $100 million related to future sales performance of the acquired USWM products. Of the $100 million sales-based contingent consideration, a $35 million milestone due upon the achievement of certain U.S. net product sales of APOKYN in 2021 was not achieved. The remaining $65 million relates to the achievement of certain net product sales of the acquired USWM products in 2022 and 2023. As of September 30, 2022, the Company assessed that the remaining sales-based milestones will not be achieved based on net sales projections.
The change in fair value is reported on the condensed consolidated statement of earnings in Contingent consideration expense (gain). The key assumptions considered in estimating the fair value include the estimated probability and timing of milestone achievement, such as the probability and timing of obtaining regulatory approval, discount rate, the estimated revenue volatility and the estimated amount and timing of projected revenues from the acquired USWM products.
The Company recorded a $0.4 million expense and a $2.4 million expense due to the change in fair value of the contingent consideration liabilities for the USWM milestones for the three and nine months ended September 30, 2022, respectively. The change in the fair value of contingent consideration for USWM milestones was primarily driven by the increase in estimated fair value of regulatory and developmental milestones due to passage of time and the accretion to the payout amount related to the milestone achieved in the first quarter of 2022.
The Company recorded a $0.1 million expense and a $7.7 million gain due to the change in fair value of the contingent consideration liabilities for the USWM milestones for the three and nine months ended September 30, 2021, respectively. In the second quarter of 2021, the Company recorded a change in fair value of $7.7 million, which was primarily due to the write-down of the sales-based contingent consideration. The Company assessed that the sales-based milestones will not be achieved based on the revised net sales projections.
Adamas Contingent Consideration
As discussed in Note 3, Acquisition, the Adamas Acquisition included payment of two non-tradable contingent value rights (CVRs) each of which represents the contractual right to receive a contingent payment upon the achievement of the applicable aggregate worldwide net product sales of GOCOVRI.
During the measurement period, changes in the fair value of contingent consideration related to the Adamas Acquisition are recorded against goodwill if such changes are related to facts and circumstances that existed at the acquisition date. In each reporting period after the acquisition, the Company remeasures the fair value of contingent consideration liabilities and records in its consolidated statements of earnings the increases or decreases in the fair value of the liabilities. The Company recorded a $0.1 million expense and a $0.5 million gain due to the change in fair value of the contingent consideration liabilities for the three and nine months ended September 30, 2022, respectively. The change in fair value was reported on the condensed consolidated statement of earnings in Contingent consideration expense (gain).
The change in estimated fair value of contingent consideration for the sales-based Adamas milestones was primarily due to changes in market data and the passage of time. The key assumptions considered in estimating the fair value of the Adamas sales-based milestones include the estimated amount and timing of projected revenues, volatility, estimated discount rates and risk-free interest rate. Refer to Note 3, Acquisition, for further discussion of significant inputs and assumptions used in the valuation of the contingent consideration for the Adamas Acquisition.
The following table provides a reconciliation of the beginning and ending balances related to the contingent consideration liabilities for the USWM Acquisition and Adamas Acquisition (dollars in thousands):
USWM AcquisitionAdamas AcquisitionTotal
Balance at December 31, 2021$70,170 $10,307 $80,477 
Milestone payments(25,000)— (25,000)
Change in fair value recognized in earnings2,420 (526)1,894 
Balance at September 30, 2022 (unaudited)$47,590 $9,781 $57,371 
Regulatory and developmental contingent consideration liabilities$47,590 $— $47,590 
Sales-based contingent consideration liabilities— 9,781 9,781 
Balance at September 30, 2022 (unaudited)$47,590 $9,781 $57,371 
The following table provides the current and long-term portions related to the contingent consideration for the USWM Acquisition and Adamas Acquisition (dollars in thousands):
September 30,
2022		December 31,
2021
Reported under the following captions in the condensed consolidated balance sheets:(unaudited)
Contingent consideration, current portion$47,590 $44,840 
Contingent consideration, long-term9,781 35,637 
Total$57,371 $80,477