v2.4.0.6
Business Combination
 12 Months Ended
Dec. 31, 2011
Business Combination [Abstract]  
Business Combination
3.             Business Combination
 
We entered into an Agreement and Plan of Merger with Transave, Inc. on December 1, 2010.  The Merger has been accounted for using the acquisition method of accounting and, accordingly, the tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the date of the acquisition.  Transaction costs related to the Merger were $6.0 million of which $4.8 million is expensed in 2010 and $1.2 million is expensed in 2009 and is included in general and administrative expenses in the statement of operations.  Our evaluation of the estimate of the fair value of the assets acquired and the liabilities assumed from Transave and the related allocations of purchase price are shown in the tables below (on a pre-reverse stock-split basis).  Both of these evaluations are “Level 3” as defined in Note 9.
 
The following table summarizes the purchase price allocation for the Merger, based on the Company's fair market evaluation of assets acquired and liabilities assumed.
 
Computation of Purchase Price:
   
Cash consideration paid
 $8,544 
Fair value of common stock consideration (2,593,892 shares issued)
  18,416 
Fair value of preferred series B stock consideration (9,174,589 shares issued)
  56,020 
Purchase price of acquired assets
  82,980 
      
Fair value of liabilities assumed
    
Accounts payable
  - 
Accrued expenses
  - 
Current liablities
  4,515 
Long-term liabilities
  87 
Total fair value of liabilities assumed
  4,602 
      
Total purchase price to be allocated to assets acquired
 $87,582 
      
Allocation of Purchase Price:
    
Fair value of net assets acquired
    
Current assets
 $2,170 
Fixed assets
  1,131 
Other assets
  91 
In-process research and development
  77,900 
Goodwill
  6,290 
Total fair value of assets acquired
 $87,582 
 
Goodwill typically results through expected synergies from combining operations of an acquiree and an acquirer as well as from intangible assets that do not qualify for separate recognition. The goodwill recognized as a result of this Merger results from the synergies expected to result from the combination of Insmed and Transave. No portion of this goodwill will be deductible for tax purposes.

The fair value of the common stock (on a pre-reverse stock-split basis) was the Company's closing stock price on December 1, 2010, which was $0.71 per share.  Based on a review of its features, the conditional convertible series B preferred stock was considered economically equivalent to the common stock. Accordingly, the fair value was estimated using the common stock price reduced for a lack of marketability between the acquisition date (or issuance date) and the anticipated date of conversion. This discount for lack of marketability via a protective put analysis and the fair value of the series B preferred stock was estimated at $0.61 per share at December 1, 2010.

The following unaudited pro forma financial information combines the consolidated results of operations as if the Merger had occurred as of the beginning of the periods presented.
 
INSMED INCORPORATED
Proforma Statement of Operations (Unaudited)
(in thousands)
 
   
2010
 
Revenues
  7,654 
Operating loss
  (20,266)
Net income (loss) after income taxes
  (25,873)