Goodwill and other intangible assets

9 Months Ended

Sep. 30, 2022

Goodwill and other intangible assets

Goodwill and other intangible assets

7. Goodwill and other intangible assets

In-process R&D of $5.9 million was recorded in connection with the acquisition of Pelican, as described in Note 2. During the fourth quarter of 2021, due to a sustained decline in the quoted market price of its common stock, the Company performed an interim impairment analysis using the income approach and in-process R&D with a total carrying value of $5.9 million was written down to its estimated fair value of $3.5 million and an impairment charge of $2.4 million during the fourth quarter of 2021 was recorded. As of September 30, 2022, the Company has elected to terminate any further development of PTX-35. As a result of the termination, the in-process R&D affiliated with PTX-35 has been fully impaired.

Goodwill and an intangible asset were recorded in connection with the acquisition of Elusys Therapeutics, as described in Note 2. The intangible asset consists of the fair value of the ANTHIM® formulation and will be amortized over its estimated useful life of 80 months. The change in the carrying amount of goodwill and intangible assets during the nine months ended September 30, 2022 is as follows:

					Intangible
	Goodwill		IPR&D		Assets
Balance at December 31, 2021	$	—	$	3,500,000	$	—
Impairment of intangible asset		—		(3,500,000)		—
Acquisition of Elusys Therapeutics		5,067,748		—		11,200,000
Acquisition fair value adjustment		(1,600,000)		—		(1,500,000)
Amortization of intangible assets		—		—		(666,875)
Balance at September 30, 2022	$	3,467,748	$	—	$	9,033,125

During the three months ended September 30, 2022, the Company received an updated valuation report from a third-party valuation firm. After considering the results of the valuation report, the Company has estimated that the fair value of the contract deferred consideration to be $4.9 million and the intangible asset to be $9.7 million. As a result, the fair value of the contract deferred consideration was decreased by $1.6 million with a corresponding decrease to goodwill and the intangible asset was decreased by $1.5 million with a corresponding decrease to the earn out contingent consideration.

Significant factors in the consideration of goodwill and intangible assets for impairment include expectations of future cash flows, market capitalization relative to book value, and expected growth rates. As a result of the decrease in share price, we performed an analysis to determine if a triggering event occurred that indicated it was more likely than not that the fair value of one or more of our reporting units was less than its carrying value. The analysis resulted in the determination that no triggering event occurred as of September 30, 2022. Management considered the structural and timing factors, comparatively low stock trading volume, and limited historical operating results that include only one full quarter of results.  We believe the downward pressure on the stock price of our publicly traded shares is unrelated to the ongoing operations of the Company. However, with the macroeconomic uncertainty and decline in the Company’s stock price, there could be a non-cash charge for impairment in a future period should the decline in stock price subsequent to September 30, 2022 be sustained. As additional facts and circumstances evolve, the Company will continue to observe and assess whether an impairment trigger has occurred. To the extent it becomes more likely than not that the fair value of the Company is less than its carrying amount, the Company will be required to perform a quantitative impairment test, which may result in a non-cash impairment charge in future periods.

The Company performs an annual impairment test at the reporting unit level as of April 1st of each fiscal year. A full impairment of the Pelican IPR&D asset was recorded during the quarter ended September 30, 2022. No impairment was recorded for the quarter ended September 30, 2021.