Business Combination (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of assets acquired and liabilities assumed

The Acquisition has been accounted for as a business combination under the acquisition method of accounting. The following table summarizes the final fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands).


	Acquisition
	Fair Values
Current assets	$	21,363
Property and equipment		850
Restricted cash		432
Intangible assets(a)		283,000
Total identifiable assets		305,645
Current liabilities		(15,538)
Other long term liabilities		(5,226)
Total liabilities assumed		(20,764)
Goodwill(b)		155,593
Total fair value of consideration transferred	$	440,474

(a)As of the effective date of the Acquisition, identifiable intangible assets are required to be measured at fair value. The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. We used an income approach to estimate the fair value of the intangibles which includes licensed intellectual property and IPR&D. The assumptions used to estimate the cash flows of the licensed intellectual property included a discount rate of 15%, estimated gross margins of 98%, income tax rates ranging from 7.8% in periods in which we have established tax holidays to 13.8% thereafter, and operating expenses consisting of direct costs based on the anticipated level of revenues as well as the $7.0 million of research and development cost sharing payments we owe in 2016 and 2017. The assumptions used to estimate the cash flows of the IPR&D (which related to the potential approval of ICLUSIG as a second line treatment and, as described in Note 8 below, has subsequently been written off) included a PTS of 25%, discount rate of 16%, estimated gross margins of 98%, income tax rates ranging from 7.8% in periods in which we have established tax holidays to 13.8% thereafter, and operating expenses consisting of direct costs based on the anticipated level of revenues as well as probability weighted milestone payments estimated for 2020 related to the clinical results and potential approval of ICLUSIG as a second line treatment. The licensed intellectual property has a weighted-average useful life of approximately 12.5 years and will be amortized using the straight-line method. Amortization expense of the licensed intellectual property is recorded in cost of product revenues on the consolidated statement of operations. The IPR&D was considered an indefinite-lived intangible until the completion or abandonment of the related research and development activities.

(b)Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed. The Goodwill is related to the existing platform, infrastructure, and workforce which is expected to generate synergies and further our strategic plan in Europe. Goodwill is not amortized and none of the goodwill is expected to be deductible for tax purposes.

Schedule of unaudited pro forma information

The following unaudited pro forma information presents condensed consolidated results of operations for the years ended December 31, 2016 and 2015, as if the Acquisition had occurred as of January 1, 2015 (in thousands).


	For the Years Ended
	December 31,
	2016		2015
Pro forma revenues	$	1,148,006	$	780,758
Pro forma net income (loss)	$	102,619	$	(69,892)