Goodwill and Other Intangible Assets, Net

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, ranging from one to thirty years.

During the nine month periods ended September 30, 2018 and 2017, accumulated amortization of intangible assets was $257.2 million and $235.0 million, respectively. The Company recorded amortization expense of $13.6 million and $15.3 million during the three month periods ended September 30, 2018 and 2017, respectively, and $40.0 million and $46.3 million during the nine month periods ended September 30, 2018 and 2017, respectively.

The Company regularly assesses its amortizable intangible assets for impairment based on several factors, including estimated fair value and anticipated cash flows, and records any impairment expenses in the Consolidated Statements of Comprehensive (Loss) Income. 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 also models the fair value of the reporting unit based on projected earnings and cash flows of the reporting unit. The Company performed a qualitative assessment of goodwill and did not identify any indicators of impairment during the quarter. On October 1, 2018, the Delaware Chancery Court issued an opinion denying Akorn’s claims for relief and concluding that Fresenius Kabi AG had validly terminated the Merger Agreement. Upon the issuance of the Opinion, the Company's common stock price closed at $5.36 per share, compared to $12.98 per share from the previous market close. As a result, the Company is planning to perform a quantitative assessment to evaluate goodwill for impairment in the quarter ending December 31, 2018.

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 yet 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 quarter for each project or product (including net revenue, 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. If applicable, upon abandonment of the IPR&D product, the assets are impaired.

During the three month period ended September 30, 2018, eight IPR&D projects were impaired primarily due to the anticipated market conditions and competition upon launch, resulting in impairment expenses of $20.6 million, while during the three month period ended September 30, 2017, the Company had no impairment expense. Additionally, during the three month period ended September 30, 2018, six product licensing rights were impaired due to market conditions, resulting in impairment expenses of $9.0 million; of which, $2.3 million was recorded to R&D expenses, compared to impairments of $7.6 million on one product licensing rights during the comparative prior year period.

During the nine month period ended September 30, 2018, sixteen IPR&D projects were impaired primarily due to anticipated market conditions and competition upon launch, resulting in impairment expenses of $100.1 million, while in the comparative prior year period, the Company recognized impairment expenses of $3.4 million for one asset primarily due to market conditions upon launch. Additionally, during the nine month period ended September 30, 2018, ten product licensing rights were impaired due to market conditions resulting in impairment expenses of $12.9 million; of which, $4.1 million was recorded to R&D expenses, compared to impairments of $12.3 million on three product licensing rights during the comparative prior year period of which $1.6 million was recognized in R&D expenses.

The following table provides a summary of the activity in goodwill by segment for the nine month period ended September 30, 2018 (in thousands):



	Consumer Health		Prescription Pharmaceuticals			Total
Balances at December 31, 2017	$	16,717	$	268,593		$	285,310
Currency translation adjustments	—		(2,093		)	(2,093		)
Acquisitions	—		—			—
Impairments	—		—			—
Dispositions	—		—			—
Balances at September 30, 2018	$	16,717	$	266,500		$	283,217

The following table sets forth the major categories of the Company’s intangible assets and their weighted average remaining amortization periods as of September 30, 2018 and December 31, 2017 (dollar amounts in thousands):



	Gross Amount		Accumulated Amortization			Reclass-ifications			Gross Impairment			Net Balance		Wtd Avg Remaining Amortization Period (years)
September 30, 2018
Product licensing rights	$	607,939	$	(241,555	)	$	5,300		$	(14,725	)	$	356,959	8.8
IPR&D	149,161		—			(5,300		)	(100,073		)	43,788		N/A - Indefinite lived
Trademarks	16,000		(6,071		)	—			—			9,929		17.5
Customer relationships	4,225		(2,253		)	—			—			1,972		7.6
Other intangibles	11,235		(7,331		)	—			—			3,904		5.8
	$	788,560	$	(257,210	)	$	—		$	(114,798	)	$	416,552
December 31, 2017
Product licensing rights	$	747,106	$	(205,549	)	$	—		$	(139,217	)	$	402,340	9.8
IPR&D	173,757		—			—			(24,596		)	149,161		N/A - Indefinite lived
Trademarks	16,000		(5,376		)	—			—			10,624		17.8
Customer relationships	4,225		(2,058		)	—			—			2,167		8.3
Other intangibles	11,235		(6,043		)	—			—			5,192		5.7
	$	952,323	$	(219,026	)	$	—		$	(163,813	)	$	569,484