Acquisitions

CTRM Business acquisition

On May 30, 2014, Vericel completed its acquisition of certain assets of Sanofi, including all of the outstanding equity interests of Genzyme Denmark, a wholly-owned subsidiary of Sanofi, and over 250 patents and patent applications and assumed certain liabilities for purposes of acquiring portions of the CTRM Business. Vericel is a leader in developing patient-specific expanded cellular therapies for use in the treatment of patients with severe diseases and conditions and the CTRM Business expands the Company’s portfolio of cellular therapies to include products which treat severe burns and as well as cartilage defects. Pursuant to the terms of the asset purchase agreement, the Company paid a total purchase price of $6.5 million, including $4.0 million in cash and a $2.5 million promissory note which was repaid on July 30, 2014.

The total purchase price consideration was as follows:



Acquisition consideration (In thousands):	Fair Value
Cash payment	$	4,000
Promissory note	2,500
Total acquisition consideration	$	6,500

The Company recognized tangible and intangible assets and liabilities acquired based upon their respective estimated fair values as of the acquisition date. The table below shows the fair values assigned to the assets acquired and liabilities assumed. Based on this analysis, the transaction resulted in a bargain purchase gain.

The final purchase price allocation was as follows:



Purchase price allocation (In thousands):	Fair Value
Cash	$	5,050
Accounts receivable	53
Inventory	2,039
Other current assets	192
Accounts payable and accrued expenses	(939		)
Asset retirement obligation	(1,600		)
Property and equipment	1,818
Intangible assets	3,360
Bargain purchase gain	(3,473		)
Total consideration	$	6,500

As part of the acquisition, $5.0 million in cash was received from Sanofi in order to fund the restructuring of the Denmark operations and close the facility. In 2014, the Company implemented its restructuring plans for the Danish subsidiary after the consummation of the acquisition of the CTRM Business and recorded restructuring charges in the U.S. and Denmark of $3.0 million. See Note 5 “Restructuring” below for additional information.

The intangible assets acquired represent commercial use rights for certain products acquired in the transaction. The fair value of $3.4 million was determined using the income approach based on projected cash flows attributed to the commercial rights. In 2016, the Company recorded an impairment related to write-off of the commercial use rights. Upon the approval of MACI in December 2016 and the expected replacement of Carticel with MACI, it was determined the fair value of the Carticel related intangible asset was fully impaired as of December 31, 2016.

Pro forma Financial Information

The following pro forma condensed combined information for the year ended December 31, 2014 is presented as if the acquisition of the CTRM Business had occurred on January 1, 2013.

In management’s opinion, all adjustments necessary to reflect the significant effects of this transaction have been made. These statements are based on assumptions and estimates considered appropriate by management; however, they are not necessarily, and should not be assumed to be, an indication of Vericel’s financial position or results of operations that would have been achieved had the acquisitions been completed as of the dates indicated or that may be achieved in the future.



	Year Ended December 31,
(in thousands)	2014
Pro forma revenue	$	44,906
Pro forma net loss	(30,115		)
Pro forma net loss per share - basic and diluted	(3.10		)