Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 6 — Goodwill and Other Intangible Assets

Intangible assets consist primarily of goodwill, which is carried at its initial value, subject to evaluation for impairment, In-Process Research and Development (“IPR&D”), which is accounted for as an indefinite-lived intangible asset, subject to impairment testing until completion or abandonment of the project, and product licensing costs, trademarks and other such costs, which are capitalized and amortized on a straight-line basis over their useful lives, normally ranging from one year to thirty years. Accumulated amortization of intangible assets was $144.1 million and $81.7 million at December 31, 2015 and 2014, respectively. Amortization expense was $66.3 million, $43.5 million and $7.4 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company regularly assesses its amortizable intangible assets for impairment based on several factors, including estimated fair value and anticipated cash flows, and through this analysis incurred impairment expense for intangible assets during the year ended December 31, 2015 of $30.4 million. If the Company incurs additional costs to renew or extend the life of an intangible asset, such costs are added to the remaining unamortized cost of the asset, if any, and the sum is amortized over the extended remaining life of the asset.

Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist. The Company uses widely accepted valuation techniques to determine the fair value of its reporting units used in its annual goodwill impairment analysis. The Company’s valuation is primarily based on qualitative and quantitative assessments regarding the fair value of the reporting unit relative to its carrying value. The Company modeled the fair value of the reporting unit based on projected earnings and cash flows of the reporting unit. The Company performed its annual impairment test on October 1, 2015 and 2014 and determined that the fair value of its reporting units are substantially in excess of its carrying value and, therefore, no impairment charge was necessary.

IPR&D intangible assets represent the value assigned to acquired R&D projects that principally represent rights to develop and sell a product that the Company has acquired which have not been completed or approved. These assets are subject to impairment testing until completion or abandonment of each project. Impairment testing requires the development of significant estimates and assumptions involving the determination of estimated net cash flows for each year for each project or product (including net revenues, cost of sales, R&D costs, selling and marketing costs and other costs which may be allocated), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, and competitive trends impacting the asset and each cash flow stream as well as other factors. The major risks and uncertainties associated with the timely and successful completion of the IPR&D projects include legal risk, market risk and regulatory risk. Alternatively, upon abandonment of the IPR&D product, the assets are impaired. In the year ended December 31, 2015, the Company made the decision to abandon two IPR&D projects which were acquired through the VersaPharm acquisition based on the Company’s analysis of launch expectations and technical feasibility, resulting in an impairment of the full asset values of each product which aggregated to $2.6 million which has been recorded in R&D expenses in the consolidated financial statements as of the year ended December 31, 2015.

Changes in goodwill during the two years ended December 31, 2015 were as follows (in thousands):

	Goodwill
December 31, 2013	$	29,831
Acquisitions and other adjustments	271,249
Impairments	—
Dispositions	(15,284		)
Foreign currency translation	(513		)

December 31, 2014	$	285,283
Acquisitions and other adjustments	—
Impairments	—
Dispositions	—
Foreign currency translation	(573		)

December 31, 2015	$	284,710

The following table sets forth the major categories of the Company’s intangible assets and the weighted-average remaining amortization period as of December 31, 2015 for those assets that are not already fully amortized (dollar amounts in thousands):

	Gross Carrying Amount		Accumulated Amortization			Reclassifications (1)			Impairment (2)			Net Carrying Amount		Weighted Average Remaining Amortization Period (years)
Product licensing rights	$	782,269	$	(132,642	)	$	38,000		$	(34,000	)	$	653,627	13.2
IPR&D	227,559		—			(38,000		)	(2,627		)	186,932		N/A – Indefinite lived
Trademarks	16,000		(2,982		)	—			—			13,018		21.8
Customer relationships	6,493		(3,716		)	—			—			2,777		11.7
Other intangibles	11,235		(2,600		)	—			—			8,635		7.9
Non-compete agreements	2,167		(2,167		)	—			—			—		0.0

	$	1,045,723	$	(144,107	)	$	—		$	(36,627	)	$	864,989

(1)

This amount reclassifies the acquisition date value of one previously IPR&D asset due to launch in the year ended December 31, 2015.

(2)

Impairment of product licensing rights is stated at gross carrying cost of $34.0 million less accumulated amortization of $3.6 million as of the impairment date. Accordingly, the net impairment expense recognized in product licensing rights was $30.4 million as of and for the year ended December 31, 2015.

Changes in intangible assets during the two years ended December 31, 2015 were as follows (in thousands):

	Product licensing rights			IPR&D			Trademarks			Customer relationships			Other intangibles			Non-compete agreements
December 31, 2013	$	115,900		$	—		$	8,656		$	4,638		$	—		$	1,311
Acquisitions	664,627			227,259			6,500			300			11,234			—
Amortization	(39,188		)	—			(877		)	(1,934		)	(879		)	(615		)
Dispositions	(36,548		)	—			—			—			—			—
Foreign currency translation	—			—			—			31			—			(12		)

December 31, 2014	$	704,791		$	227,259		$	14,279		$	3,035		$	10,356		$	683
Acquisitions	3,535			300			—			—			—			—
Amortization	(62,323		)	—			(1,261		)	(381		)	(1,721		)	(586		)
Impairments	(30,376		)	(2,627		)	—			—			—			—
Dispositions	—			—			—			—			—			—
Foreign currency translation	—			—			—			123			—			(97		)
Reclassifications	38,000			(38,000		)	—			—			—			—

December 31, 2015	$	653,627		$	186,932		$	13,018		$	2,777		$	8,635		$	—

In the year ended December 31, 2015, the Company incurred impairment expense of $30.4 million associated with one currently marketed product acquired in the Hi-Tech acquisition and $2.6 million of abandonment of IPR&D (which has been recognized in R&D expenses as of the year ended December 31, 2015) associated with two IPR&D projects acquired in the VersaPharm acquisition.

The amortization expense of acquired intangible assets for each of the following five years will be as follows (in thousands):

Year ending December 31,	Amortization Expense
2016	$	65,717
2017	65,591
2018	65,386
2019	62,559
2020	54,778

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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