Business Acquisition

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

On June 9, 2022, we completed our previously announced acquisition of the entire issued share capital of Acacia for cash consideration and common stock totaling 94.7 million euros, the equivalent of 0.90 euros per share, and an aggregate of 516,024 shares of our common stock. Each shareholder of Acacia received 0.68 euros in cash and 0.0049 shares of common stock of Eagle. Acacia is a hospital pharmaceutical company focused on the development and commercialization of new products aimed at improving the care of patients undergoing significant treatments such as surgery and other invasive procedures. The transaction was entered to expand Eagle’s current portfolio of FDA approved hospital products with the addition of Barhemsys and Byfavo.

The Company evaluated the Business Acquisition under ASC 805, Business Combinations and ASU 2017-01, Business Combinations: Clarifying the Definition of a Business. The Company concluded that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group of similar identifiable assets. The transaction does not pass the screen test and thus management performed an assessment to determine if the acquired entities met the definition of a business. For the assessment, management considered whether it has acquired (i) inputs, (ii) processes, and (iii) outputs. Under ASC 805, to be considered a business, a set of activities and assets is required to have only the first two of the three elements, which together are or will be used in the future to create outputs. Management determined that the acquired entities met the definition of a business since the Company acquired inputs, processes capable of producing outputs and outputs.

Therefore, the acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on the fair values as of the date of the acquisition.

The fair value of the consideration totaled $101.6 million, summarized as follows (in thousands):


	Fair Value of Consideration
Cash consideration	$	77,971
Fair value of Eagle common stock issued	23,645

	$	101,616

The Company recorded the assets acquired and liabilities assumed as of the date of the acquisition based on the information available as of that date. As the Company finalize the fair values of the assets acquired and liabilities assumed, purchase price adjustments may be recorded during the measurement period and such adjustments could be material. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments are recognized.

The following table presents the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands):


	Preliminary Purchase Price Allocation
Cash	$	2,556
Net working capital, excluding cash	(2,158)
Inventory	26,942
Intangible assets	104,000
Debt	(28,503)

Deferred tax liability, net	(4,536)
Fair value of net assets acquired	98,301
Goodwill	3,315
	$	101,616

The fair value of acquired intangible assets was based on the present value of expected future after tax cash flows attributable to the commercialization of Barhemsys and Byfavo, using the net present value approach. The inventory acquired was valued at expected profit margins for the acquired products. The fair value of working capital acquired approximates its book value. The fair value of debt acquired was based on the present value of future cash outflows using the net present value approach and applying an interest rate that is considered to be a market participant equivalent rate.

The Company incurred approximately $9.8 million and $11.3 million in acquisition-related expenses, which were included in selling, general and administrative expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2022. These expenses primarily consist of legal fees and success fees paid to third party advisors. The results of Acacia operations have been included in the condensed consolidated statements of operations beginning on the acquisition date. The acquired business contributed revenues of $0.2 million and net loss of $3.4 million to the Company for the period from June 9, 2022 to June 30, 2022.

The goodwill recorded related to the acquisition is the excess of the fair value of the consideration transferred by the acquirer over the fair value of the net identifiable assets acquired and liabilities assumed at the date of acquisition. The goodwill recorded is not deductible for tax purposes.

Pro Forma Financial Information:

The following table provides unaudited pro forma financial information for the three-month and six-month periods ended June 30, 2022 and 2021 as if the acquisition of Acacia had occurred as of January 1, 2021.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Total revenue	$	74,546	$	48,417	$	191,038	$	89,814

Net income (loss)	$	2,875	$	(10,156)	$	36,124	$	(51,304)

These amounts have been calculated after applying our accounting policies.

The pro forma results above include the impact of the following adjustments, as necessary: additional amortization expense relating to assets acquired; interest and other financing costs relating to the acquisition transaction; and the elimination of one-time or nonrecurring items. The one-time or nonrecurring items eliminated were primarily comprised of inventory fair value step-up adjustments; transaction costs, as well as certain Acacia-related share based payment charges and employee compensation expenses.

The pro forma results do not include any anticipated cost savings or other effects of the planned integration of Acacia. Accordingly, the pro forma results above are not necessarily indicative of the results that would have been if the acquisition had occurred on the dates indicated, nor are the pro forma results indicative of results which may occur in the future.