Note 2. Acquisition:

On April 30, 2013, we entered into a Share Purchase Agreement with Chengdu Kanghong Pharmaceuticals (Group) Co. Ltd. (“CKT”) to acquire CKT’s 50% equity interest in KSCP for $25,000, payable in installments through September 2015. The acquisition closed on June 4, 2013, following approval by the Chengdu Hi-Tech Industrial Development Zone Bureau of Investment Services. Concurrent with the closing of the acquisition, we paid $10,000 of the aggregate purchase consideration, and recorded a liability of $13,836 representing the fair value of our future payments as of the acquisition date to CKT under the terms of the Share Purchase Agreement. Concurrent with the execution of the Share Purchase Agreement, we entered into a Share Pledge Agreement with CKT pursuant to which we pledged a portion of the shares to be acquired as collateral securing our future installment payment obligations. Future installment payments are payable as follows:


	(in thousands)
2013	$	2,500
2014		3,500
2015		9,000

The acquisition was financed with cash and short term investments. The acquisition of KSCP provided us with full control of the KSCP manufacturing facility and will better serve our long term strategic goals, including a strategy of additional investment in product development and capacity expansion.

Upon obtaining the controlling interest, we remeasured the previously held equity interest in KSCP to fair value, resulting in a gain of $2,936 reported as gain on previously held equity interest in the condensed consolidated statements of operations. The gain includes $2,782 reclassified from accumulated other comprehensive income (loss), and previously recorded as currency translation adjustments. Both the gain on previously held equity interest and the fair value of the non-controlling interest in KSCP that we acquired were based on an asset approach valuation method. Acquisition related costs of $479 were included with product development expenses.

The acquisition date fair value transferred for the purchase of KSCP is as follows:


	(in thousands)
Cash	$	10,000
Present value of remaining purchase consideration		13,836
Previously held equity interest		15,949
Gain on remeasurement of previously held equity interest in KSCP		154

Total purchase consideration	$	39,939

The estimated fair value of identifiable assets acquired and liabilities assumed for the KSCP acquisition is shown in the table below:


	(in thousands)
Goodwill	$	6,038
Acquired tangible assets, net of assumed liabilities		33,901

Total allocation of fair value	$	39,939

The net tangible assets acquired consist primarily of cash of $2,704, inventory of $2,396, prepaid assets of $196, and property, plant and equipment of $56,654, net of assumed liabilities, primarily long term bank loans of $19,095 and accrued compensation and other liabilities of $8,954. We recorded goodwill of $6,038 due to KSCP’s workforce and the synergies anticipated by having control over the products and manufacturing at the KSCP facility. Goodwill will not be deductible for statutory tax purposes. We expect the determination of fair value to be finalized in 2013.

The following unaudited pro forma financial information reflects the consolidated results of operations of Sagent as if the acquisition of KSCP had taken place on January 1, 2012 and January 1, 2013. The pro forma information includes acquisition and integration expenses. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date.


	Three months ended June 30,					Six months ended June 30,
	2013		2012			2013		2012
Net revenues	$	59,591	$	42,680		$	119,802	$	80,960
Net income (loss)		11,529		(6,945	)		19,559		(16,863	)
Diluted income (loss) per common share		0.40		(0.25	)		0.68		(0.60	)