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Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets 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 rights, trademarks and other such costs, which are capitalized and amortized on a straight-line basis over their useful lives, normally ranging from one to thirty years.  Accumulated amortization of intangible assets was $203.1 million and $217.6 million at December 31, 2019 and 2018, respectively.  Amortization expense was $39.8 million, $53.5 million and $61.4 million for the years ended December 31, 2019, 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.

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 year for each project or product (including net revenue, cost of sales, 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 fully impaired.

During 2019, four product licensing rights were impaired due to a change in forecasts as a result of competition, resulting in impairment expenses of $29.3 million, compared to impairments expenses of $91.6 million on twenty-five product licensing rights in 2018, and $103.5 million on ten product licensing rights in 2017. Additionally, during 2019, one IPR&D project was
impaired, while in 2018 and 2017, eighteen and three IPR&D projects were impaired primarily due to anticipated market conditions upon launch, resulting in impairment expenses of $0.2 million, $139.5 million and $24.6 million, respectively.

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.

As of December 31, 2019 and 2018, the Prescription Pharmaceuticals reporting unit had $251.2 million and $267.2 million of goodwill, respectively and the Consumer Health reporting unit had $16.7 million of goodwill. Goodwill is tested for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest that impairment may exist. In its annual goodwill impairment analysis, the Company uses widely accepted valuation techniques to determine the fair value of its reporting units. 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. Where available and as appropriate, comparative market multiples are used in conjunction with the results of the discounted cash flows. The Company engages third-party valuation consultants to assist in evaluating the Company's estimated fair value calculations. The carrying value of each reporting unit is based on the assets and liabilities associated with the operations of the reporting unit, including allocation of shared or corporate balances among reporting units. Allocations are generally based on sales and gross profit of each reporting unit as a percent of the total company results. During the first quarter of 2019, as a result of the Company's decision to explore strategic alternatives to exit the India manufacturing facility, the Company performed impairment testing and recorded a full goodwill impairment of $16.0 million of its India reporting unit. The Company performed its annual impairment test on October 1, 2019 and assessed qualitative factors, and substantiated with certain quantitative measures, to determine whether it was more-likely- than-not that the fair values of the reporting units were less than their carrying values (“Step 0”). The Company determined it was “more-likely-than-not” that the carrying values of its Prescription Pharmaceutical and Consumer Health reporting units were less than their fair values and, accordingly, the Company did not perform a quantitative analysis.

As a result of a significant deterioration in the price of common stock following the Company’s announcement of its exploration of strategic alternatives that included seeking to restructure its indebtedness and/or implement a strategic transaction, including a sale of its assets, with or without the protections of a filing under Chapter 11 of the U.S. Bankruptcy code, the Company performed an additional quantitative impairment test as of December 31, 2019. Due to the uncertainty of the outcome of these scenarios, the Company performed a probability-based approach when determining the weighted average fair value of the reporting units to incorporate into the Company’s estimate of all currently known potential outcomes and determined that the fair value of the Prescription Pharmaceutical reporting unit exceeded the carrying value by approximately 7.9% and the Consumer Health reporting unit fair value exceeded the carrying value by approximately 25.5% and, therefore, no goodwill impairment charge was necessary. As of December 31, 2019, the Company's estimated fair value, as determined by the sum of our reporting units' fair value, reconciled within a reasonable range of our market capitalization, which included an assumed control premium of approximately 20.9%. Given the continued downward trend in our share price in recent reporting periods, it is reasonably possible that changes in judgments, assumptions and estimates we made in assessing the fair value of goodwill could cause us to consider some portion or all of the remaining $267.9 million in goodwill of the Company’s reporting units to become impaired. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2020 or prior to that, if any such change constitutes an interim triggering event. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material. In addition, a continued decline in market conditions and/or changes in our market share could negatively impact the estimated future cash flows and discount rates used in the income approach to determine the fair value of our reporting units and could result in an impairment charge in the foreseeable future.

There are a number of uncertain factors or events that exist which may result in a future triggering event and require an interim impairment analysis with respect to the carrying value of goodwill for the Company-owned reporting unit prior to our annual assessment. These internal and external factors include but are not limited to the following:

•
Inability to refinance our debt obligations;
•
Impacts on future cash flow estimates from a potential sale process on either an out-of-court or in-court basis potentially including through the filing of Chapter 11 under the U.S. Bankruptcy Code in order to effectuate a sale process;
•
Future market earnings multiples deterioration;
•
Our financial performance falls short of our projections due to internal operating factors;
•
Increased competition;
•
Deterioration of industry trends;
•
Economic recession; and
•
Other factors causing our cash flow to deteriorate.

If the triggering event analysis indicates the fair value of one of the Company’s reporting units has potentially deteriorated further, we may be required to perform an updated impairment assessment which may result in a non-cash impairment charge to reduce the carrying value of goodwill. Assessing goodwill for impairment requires management to make assumptions and to apply judgment, including forecasting future sales and expenses, and selecting appropriate discount rates, which can be affected by economic conditions and other factors that can be difficult to predict. Given the continued substantial decline in the Company’s share price and the fact that the aforementioned uncertainties may not be resolved satisfactorily in the near-term, there can be no assurance that our estimates and assumptions used in the evaluation of goodwill and identified intangible assets for impairment, as of December 31, 2019, will prove to be accurate predictions of the future.

Changes in goodwill during the two years ended December 31, 2019 and 2018, were as follows (in thousands): 
 
Goodwill
December 31, 2017
$
285,310

Foreign currency translation
(1,431
)
December 31, 2018
$
283,879

Impairments
(15,955
)
Foreign currency translation
(1
)
December 31, 2019
$
267,923



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, 2019, for those assets that are not already fully amortized (in thousands): 
 
Gross Carrying Amount (2)
 
Accumulated
Amortization
 
Reclassifications
 
Impairment (1)
 
Net
Carrying
Amount
 
Weighted Average
Remaining Amortization
Period (years)
Product licensing rights
$
472,041

 
$
(187,306
)
 
$
—

 
$
(83,550
)
 
$
201,185

 
9.5
IPR&D
4,400

 
—

 
—

 
(200
)
 
4,200

 
N/A - Indefinite lived
Trademarks
16,000

 
(7,231
)
 
—

 
—

 
8,769

 
17.2
Customer relationships
4,225

 
(2,578
)
 
—

 
—

 
1,647

 
6.3
Other intangibles
6,000

 
(6,000
)
 
—

 
—

 
—

 
—
 
$
502,666

 
$
(203,115
)
 
$
—

 
$
(83,750
)
 
$
215,801

 
 

(1) Impairment of product licensing rights and IPR&D is stated at gross carrying cost of $83.6 million and $0.2 million less accumulated amortization of $54.3 million for product licensing rights as of the impairment dates. IPR&D is not subject to amortization. Accordingly, the total net impairment expense was $29.5 million, of which $29.3 million and $0.2 million, were recognized in product licensing rights and IPR&D respectively, for the year ended December 31, 2019.

(2) Differences in the Gross Amounts between periods are due to the additions during the year.

Changes in intangible assets during the two years ended December 31, 2019 and 2018, were as follows (in thousands):
 
Product
licensing
rights
 
IPR&D
 
Trademarks
 
Customer
relationships
 
Other
intangibles
December 31, 2017
$
402,340

 
$
149,161

 
$
10,624

 
$
2,167

 
$
5,192

Acquisitions
50

 
—

 
—

 
—

 
—

Amortization
(50,567
)
 
—

 
(928
)
 
(260
)
 
(1,717
)
Impairments
(88,492
)
 
(139,461
)
 
—

 
—

 
(3,133
)
Reclassifications
5,300

 
(5,300
)
 
—

 
—

 
—

December 31, 2018
$
268,631

 
$
4,400

 
$
9,696

 
$
1,907

 
$
342

Acquisitions
87

 
—

 
—

 
—

 
—

Amortization
(38,236
)
 
—

 
(927
)
 
(260
)
 
(342
)
Impairments
(29,297
)
 
(200
)
 
—

 
—

 


December 31, 2019
$
201,185

 
$
4,200

 
$
8,769

 
$
1,647

 
$
—


The amortization expense of acquired intangible assets for each of the following periods are expected to be as follows (in thousands):
Year ending December 31,
 
Amortization Expense
2020
 
$
24,568

2021
 
24,568

2022
 
24,568

2023
 
24,137

2024
 
22,149

2025 and thereafter
 
91,611

Total
 
$
211,601