Acquisitions

12 Months Ended

Dec. 31, 2019

Acquisition of Docetaxel-Injection, Non-Alcohol Formula

On October 13, 2015, the Company entered into the Teikoku Agreement with Teikoku to market, sell and distribute Non-Alcohol Docetaxel Injection, an investigational product intended for the treatment of breast cancer, non-small cell lung cancer, prostate cancer, gastric adenocarcinoma, and head and neck cancer. The NDA for Non-Alcohol Docetaxel Injection for these indications was approved by the FDA on December 22, 2015. Under the terms of the agreement, the Company paid $4,850 upon FDA approval and NDA transfer to the Company, which occurred on January 12, 2016. The Company also paid 25% royalties on gross profits to Teikoku. The Company accounted for the transaction as a purchase of a business in 2016, in accordance with ASC 805 Business Combinations.

The Company has measured the fair value of the future royalty payment using its own assumptions of future profitability of Non-Alcohol Docetaxel Injection. Acquisition contingent consideration is measured at fair value on a recurring basis using unobservable inputs; which accordingly represents a Level 3 measurement within the fair value hierarchy. Any change in fair value of the contingent consideration subsequent to the acquisition date is recognized in operating income within the statement of operations.

During the year ended December 31, 2017, the Company recorded a change in the fair value of contingent consideration of $6.2 million. This was primarily driven by adjustments to the fair values of the liabilities associated with Non-Alcohol Docetaxel Injection, which was remeasured due to the loss of a customer and other market conditions identified during the third quarter of 2017 for the product and partially offset by accretion for the time value of money.

During the year ended December 31, 2018, the Company recorded an adjustment to the remaining contingent consideration to reflect the Company's decision to discontinue sales of Non-Alcohol Docetaxel Injection.

The following table represents a reconciliation of the change in the fair value measurement of the contingent consideration liability, which was recorded in the Company's consolidated statements of income:



Closing Balance December 31, 2016		Changes in fair value			Payment of contingent consideration		Closing Balance December 31, 2017		Changes in fair value			Payment of contingent consideration			Closing Balance December 31, 2018
$	6,940	$	(6,176	)	$	—	$	764	$	(763	)	$	(1	)	$	—

Total consideration of $11,220, which is comprised of the $4,850 cash paid on FDA approval and NDA transfer to the Company and the fair value of contingent consideration has been attributed to the intangible asset for Non-Alcohol Docetaxel Injection product rights.

Eagle Biologics Acquisition

On November 16, 2016, the Company entered into a stock purchase agreement (“Arsia SPA”) to acquire Arsia Therapeutics (“Arsia” “Seller”), an early-stage biotechnology firm with proprietary viscosity-reducing technology and formulation know-how and subsequently renamed the subsidiary Eagle Biologics, Inc. ("Eagle Biologics"). Under the terms of the stock purchase agreement, we paid approximately $27.2 million in cash and 40,200 shares of Eagle common stock worth $3.0 million at closing. We also agreed to pay up to $48 million in additional payments upon the completion of certain milestones, for aggregate potential payments of $78 million.

On February 8, 2018, the Company entered into an amendment (the “Arsia Amendment”) to the Arsia SPA. Pursuant to the Arsia Amendment, the Company's obligation to make four separate milestone payments pursuant to the Arsia SPA, which could have aggregated to a total of $48 million, were terminated in exchange for a single payment of $15 million to the Seller.

The acquisition was accounted for as a business combination in accordance with ASC 805, which requires the assets acquired and liabilities assumed from Eagle Biologics to be recorded on the acquisition date at their respective fair values. Eagle Biologics’ results of operations are included in the financial statements from the date of acquisition.

The following table summarizes the consideration transferred to acquire Eagle Biologics at the date of acquisition:



The aggregate consideration consisted of:	Final fair value
Cash consideration paid	$	27,209
Common stock issued (i)	3,046
Fair value of contingent consideration payable to seller (long term) (ii)	15,000
Total consideration	$	45,255

(i) Under the stock purchase agreement, the number of common shares to be issued to the seller is equal to $2.7 million divided by the average of the closing day price per share for the 30 trading days prior to the Closing Date. The average price of the common stock of 30 days prior to closing was $68.18. Accordingly, the number of common stock to be issued

to the seller was determined at 40,200 shares ($2.7 million divided by $68.18 per share). The fair value of the common stock issued was determined based on the closing price of Eagle’s common stock on November 16, 2016.

(ii) Under the Arsia SPA, the contingent consideration includes four separate milestone payments which could aggregate to a total of $48 million payable to the Seller upon achievement of certain clinical, regulatory and development milestones. In accordance with the provisions of ASC 805-30-25-5, each unit of contingent consideration is recognized at the acquisition date fair value. The acquisition date fair value of the contingent consideration was $16.1 million. Such fair values are determined based on a probabilistic model with weights assigned on the likelihood of the Company achieving the clinical, regulatory and development milestones as well as an acceleration event in the future. Each unit of contingent consideration is classified as a liability in the balance sheet and would be subsequently measured at fair value on each reporting date. Any future change in fair value would be recognized in the statement of operations. As described above, on February 8, 2018, the Company entered into the Arsia Amendment, pursuant to which the Company’s obligations to make four separate milestone payments under the Arsia SPA were terminated in exchange for a single payment of $15 million to the Seller.

During the year ended December 31, 2017, the Company recorded a change in the fair value of contingent consideration of $1.2 million related to the Arsia Amendment.



Closing Balance December 31, 2016		Changes in fair value			Payment of contingent consideration		Closing Balance December 31, 2017		Changes in fair value		Payment of contingent consideration			Closing Balance December 31, 2018
$	16,201	$	(1,201	)	$	—	$	15,000	$	—	$	(15,000	)	$	—