Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

Goodwill totaled $81.4 million as of June 30, 2022. Goodwill for the Sorrento Therapeutics segment and Scilex segment was $74.7 million and $6.7 million, respectively, as of June 30, 2022. As of June 30, 2022, intangible assets with indefinite useful lives totaling $127.7 million are included in acquired in-process research and development (“IPR&D”) in the table below.

Goodwill and intangible assets are assessed annually for impairment on October 1 and more frequently whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that the full carrying amount of an asset is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset exceeds its fair value. In June 2022, the Company decided to put on hold for future evaluation the development of Abivertinib, which was acquired from ACEA in 2021 (see Note 6 for details), for the treatment of hospitalized COVID-19 patients. This event led to an assessment to determine if an impairment occurred for the associated IPR&D assets in the second quarter of 2022. Based on a quantitative analysis for impairment, which is considered a Level 3 non-recurring fair value measurement and is based on the discounted cash flow method that estimates the present value of risk adjusted projected cash flow derived from the IPR&D assets using a discount rate of 16%, the Company determined that approximately $90.8 million associated with the IPR&D assets, which are in the Sorrento Therapeutics segment, had been impaired and recorded within the loss on impairment of intangible assets in the consolidated statement of operations for each of the three and six months ended June 30, 2022. The Company also determined that the fair value of the contingent consideration decreased by $64.3 million and $66.4 million for the three and six months ended June 30, 2022, respectively (See Note 3 for details). The Company performed an evaluation, including a qualitative analysis and an assessment of the overall market capitalization in comparison to the carrying value of the reporting units for goodwill, and it determined that it was not more likely than not that an impairment of goodwill existed at the reporting unit at June 30, 2022.

A summary of the Company’s identifiable intangible assets as of June 30, 2022 and December 31, 2021 is as follows (in thousands, except for years):

			June 30, 2022						December 31, 2021
June 30, 2022	Weighted Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Intangibles, Net		Gross Carrying Amount		Accumulated Amortization		Intangibles, Net
Customer relationships		2	$	1,585	$	1,466	$	119	$	1,585	$	1,453	$	132
Acquired technology		19		3,410		1,500		1,910		3,410		1,412		1,998
Acquired in-process research and development		—		127,650		—		127,650		218,430		—		218,430
Technology placed in service		15		21,940		5,485		16,455		21,940		4,754		17,186
Patent rights		15		32,720		12,373		20,347		32,720		11,283		21,437
Assembled workforce		5		605		404		201		605		343		262
Internally developed software		2		520		347		173		520		260		260
Acquired licenses		15		5,711		—		5,711		—		—		—
Total intangible assets			$	194,141	$	21,575	$	172,566	$	279,210	$	19,505	$	259,705

Aggregate amortization expense was $1.0 million and $1.1 million for the three months ended June 30, 2022 and 2021, respectively. Aggregate amortization expense was $2.1 million for each of the six months ended June 30, 2022 and 2021. Estimated future amortization expense related to intangible assets, excluding indefinite-lived intangible assets, at June 30, 2022 is as follows (in thousands):

Years Ending December 31,	Amount
2022 (Remaining six months)	$	2,253
2023		4,416
2024		4,239
2025		4,214
2026		4,214
Thereafter		25,580
Total expected future amortization	$	44,916