Business Acquisition

6 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

On June 9, 2022, we completed our 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 our common stock. 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 our current portfolio of FDA approved hospital products with the addition of Barhemsys and Byfavo.

We evaluated the Business Acquisition under ASC 805, Business Combinations and ASU 2017-01, Business Combinations: Clarifying the Definition of a Business. We 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 we 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 $100.4 million, summarized as follows (in thousands):


	Fair Value of Consideration
Cash consideration	$	76,708
Fair value of Eagle common stock issued	23,645

	$	100,353

The purchase price allocation resulted in the amounts being allocated to the assets acquired and liabilities assumed at the acquisition date based upon their respective fair values summarized below. The determination of fair value was finalized in the fourth quarter of 2022. During the year ended December 31, 2022, we recorded certain measurement period adjustments, which are summarized below. The impact of these measurement period adjustments was recorded as an increase to goodwill, increasing the goodwill balance to $5.3 million.

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


	Purchase Price Allocation
Cash	$	2,556
Net working capital, excluding cash	(2,158)
Inventory	17,548
Intangible assets	108,000
Debt	(26,659)

Deferred tax liability, net	(4,225)
Fair value of net assets acquired	95,062
Goodwill	5,291
	$	100,353

The estimated fair value of acquired intangible assets was determined using the "income approach," which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. 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 assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management's best estimates as of the close date of the acquisition on June 9, 2022.

Some of the more significant assumptions inherent in the development of the intangible asset valuations included the estimated net cash flow for each year for each asset (including relevant market size and market share), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, as well as other factors.

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 the six-month periods ended June 30, 2022 as if the acquisition of Acacia had occurred as of January 1, 2022:


	Three Months Ended June 30,		Six Months Ended June 30,
	2022		2022
Total revenue	$	74,546	$	191,038

Net income	$	2,875	$	36,124

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 did 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 date indicated, nor are the pro forma results indicative of results which may occur in the future.