Other Assets

3 Months Ended

Sep. 30, 2012

Other Assets

Other Assets

Note 8.  Other Assets

As of July 24, 2010, Lannett stopped manufacturing and distributing Morphine Sulfate Oral Solution (“MS”).  Lannett filed a 505(b)(2) New Drug Application (“MS NDA”) in February 2010 and received FDA approval on the submission in June 2011.  The filing fee related to this application totaled $1,406 and was initially recorded within other current assets on the consolidated balance sheets because part of or the entire fee was thought to be refundable.  Lannett met with the FDA in January 2011 to review the status of the application.  At that time, the FDA stated that it will need to finalize its Establishment Inspection Report for the February 2011 inspection of Lannett’s facilities before it could give final approval on the MS NDA.  Additionally, the Company corresponded with the FDA in March 2011 regarding whether any of the fee is refundable.  The FDA’s response was that the entire filing fee was not refundable.  In September 2012, the Company had further communications with the FDA regarding the refundable portion of the filing fee.  Based on these communications, the Company continues to believe that a portion of the filing fee is refundable.  As of September 30, 2012, the Company has not been refunded any portion of the filing fee, nor has the Company received final determination on whether any of the fee is refundable.

The Company’s position is that the value related to the part of the fee that is not refunded is the cost of getting regulatory approval for its MS product and that this value should be properly recorded as an intangible asset based upon approval and amortized over the product’s estimated useful life upon shipment of the product.  The revenues and gross profit margins attained by the Company from sales of its MS product currently substantiate its value as an intangible asset.  As a result of the FDA approval of the MS NDA, an estimate of the nonrefundable amount totaling $398 determined, based upon input from a third party analysis, was reclassified to intangible assets upon shipment of the product which commenced in August 2011.  Amortization will be adjusted prospectively once the nonrefundable portion of the fee is finalized with the FDA.