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Notes Payable
6 Months Ended
Jun. 30, 2011
Notes Payable [Abstract]  
Debt Disclosure [Text Block]
NOTES PAYABLE:
On December 22, 2006, the Company raised approximately $40 million in gross proceeds to the Company from the offering and sale of convertible subordinated notes (the "Notes") to a group of institutional investors.  The Notes accrued interest at a rate of 8% per annum and were subordinated to the Company's obligations under the STRIANT Financing Agreement (see Note 8) and had a stated maturity date of December 31, 2011.  They were convertible into a total of approximately 7.6 million shares of Common Stock at a conversion price of $5.25.  Investors also received warrants to purchase 2,285,714 shares of Common Stock at an exercise price of $5.50 per share.  The warrants have a stated expiration date of December 22, 2011, unless earlier exercised or terminated.  The Company used the proceeds of this offering to acquire from Merck Serono the U.S. marketing rights to CRINONE for $33.0 million and Merck Serono’s existing inventory of that product.  The balance of the proceeds was used to pay other costs related to the transaction and for general corporate purposes.
The Company recorded original issue discounts of $6.3 million to the Notes based upon the fair value of warrants granted.  In addition, beneficial conversion features totaling $8.5 million have been recorded as a discount to the Notes.  These discounts were amortized at an imputed rate over the five-year term of the related Notes.  For the six month period ended June 30, 2010, $0.8 million of amortization related to these discounts were classified as interest expense in the consolidated statements of operations; there was no amortization taken in the period ended June 30, 2011 because the discounts were fully written off as a result of the closing of the Watson Transactions and the Note Purchase Agreements (described below).
On March 3, 2010, the Company entered into Note Purchase and Amendment Agreements (the “Note Purchase Agreements”) with all of the holders (the “Holders”) of the Notes.  Under the Note Purchase Agreements, the Company agreed to purchase, subject to the satisfaction of certain conditions, the approximately $40 million in aggregate principal amount of Notes held by the Holders.  The aggregate purchase price for the Notes was $26 million in cash (plus accrued and unpaid interest through but excluding the date of the closing of the Note purchases), warrants to purchase 7,750,000 shares of Common Stock at an exercise price of $1.35 per share (the “Warrants”) and 7,407,407 shares of Common Stock.  The closings of the transactions contemplated by the Note Purchase Agreements were subject to various conditions, including the consummation of the Watson Transactions.  Pursuant to the Note Purchase Agreements, the Holders consented, effective on March 3, 2010, to an amendment to the Notes (the “Amendment”) that eliminated the right of any holder of the Notes to cause the Company to redeem the Notes by virtue of the Watson Transactions.  The Amendment would have terminated if the note purchase closings did not occur on or prior to August 31, 2010, and, in certain other circumstances.  On July 2, 2010, the closings under the Note Purchase Agreements occurred and the Notes were canceled.
The Notes contained an embedded derivative that allowed the Holders to redeem the Notes at face value in the event of the sale of substantially all of the assets of the Company.  Prior to the signing of the Watson Transactions (See Note 2) on March 3, 2010, this feature was assigned a nominal value as the Company assessed the potential for such sale to be remote.  The Watson Transactions resulted in the sale of substantially all of the assets of the Company and, therefore, the associated value of the embedded derivative was increased to the difference between the fair value of the consideration, as determined on March 31, 2010, to be paid at the closing of the Watson Transactions and the carrying value of the Notes.  Accordingly, the Company recorded a non-cash charge of $5,848,150 on March 31, 2010.
The value of the embedded derivative fluctuated as long as the Notes remained outstanding, based on changes in the fair value of the consideration and the carrying value of the Notes.  On June 30, 2010, the non-cash charge for the embedded derivative was $4,829,036.  With the closing of the Watson Transactions on July 2, 2010, the value of the embedded derivative was reversed.  The embedded derivative was classified as a Level 2 valuation as described in Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 820-10, “Fair Value Measurements and Disclosures.”
The Warrants issued under the Note Purchase Agreements on July 2, 2011 are exercisable, subject to the limitations set forth therein, during the period commencing 180 days after, and ending on the fifth anniversary of their issuance, unless earlier exercised or terminated as provided in such Warrants.  The Warrants contained a feature requiring the Company to purchase the Warrants issued under the Note Purchase Agreements if the Company had issued shares of Common Stock (or equivalents) for a price less than $2.00 per share until 45 days after the Company's public announcement of the results of the PREGNANT Study.  This resulted in the Warrants being recorded as a liability; the Company determined the fair value using the Black-Scholes model.  The Company recorded a liability at the closing of the Watson Transactions in the amount of $5,509,893 as of the close of business on July 1, 2010. It was adjusted, as of December 31, 2010, to $13,471,832. The results of the PREGNANT Study were announced in December 2010 and on January 20, 2011, when the contingent purchase rights on the Warrants expired, the value of the Warrants was determined under the Black-Scholes model to be $16,193,037 and reclassified to Capital in Excess of Par Value. These Warrants are no longer marked to market.