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Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2021

Note 6.

Intangible Assets and Goodwill

Intangible assets

As part of the Avedro Merger on November 21, 2019, the Company acquired identifiable intangible assets for (i) developed technology related to Photrexa, a bio-activated pharmaceutical therapy for the corneal cross-linking treatment of keratoconus, which is being amortized to cost of sales over a weighted-average estimated useful life of approximately 11 years, and (ii) customer relationships, which will be amortized to selling, general and administrative expense over an estimated useful life of five years. The Company also acquired in-process research and development (IPR&D) related to other applications of Avedro’s corneal remodeling platform, which will not be amortized until technological feasibility is met, but will be assessed for impairment annually, or more frequently if indicators of impairment become present.

For the years ended December 31, 2021 and December 31, 2020, amortization expense related to the above finite-lived intangible assets was approximately $22.1 million and $2.8 million, recorded in cost of sales and selling, general and administrative expenses, respectively, in the consolidated statement of operations. For the year ended December 31, 2019, amortization expense related to the above finite-lived intangible assets was approximately $2.3 million and $0.3 million, recorded in cost of sales and selling, general and administrative expenses, respectively in the consolidated statement of operations.

The Company evaluated its indefinite-lived intangible assets for impairment, including any considerations specific to the COVID-19 pandemic, utilizing the methodology pursuant to the adoption of ASU 2017-04 and concluded these intangible assets were not impaired as of December 31, 2021.

Goodwill

The assessment of goodwill by reporting unit is performed annually, in the fourth quarter, or more frequently if events or circumstances indicate the carrying value may no longer be recoverable and that an impairment loss may have occurred. The Company concluded there was no goodwill impairment as of December 31, 2021, and during this annual assessment the Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and its impact on the Company’s reporting unit.

The following table presents the composition of intangible assets and goodwill (in thousands):


	Estimated	As of December 31, 2021						As of December 31, 2020
	Useful	Gross						Gross
	Life	Carrying		Accumulated		Net		Carrying		Accumulated		Net
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Developed technology	11.4	$	252,200	$	(46,485)	$	205,715	$	252,200	$	(24,393)	$	227,807
Customer relationships	5.0		14,100		(5,934)		8,166		14,100		(3,114)		10,986
Intangible assets subject to amortization			266,300		(52,419)		213,881		266,300		(27,507)		238,793

In-process research and development	Indefinite	$	118,900		—		118,900		118,900		—		118,900

Total		$	385,200	$	(52,419)	$	332,781	$	385,200	$	(27,507)	$	357,693

Goodwill	Indefinite	$	66,134		—		66,134		66,134		—		66,134

As of December 31, 2021, expected amortization expense for unamortized finite-lived intangible assets for the next five years and thereafter is as follows (in thousands):


	Amortization Expense
2022	$	24,912
2023		24,912
2024		24,619
2025		22,092
2026		22,092
Thereafter		95,254
Total amortization	$	213,881

Actual amortization expense to be reported in future periods could differ from these estimates as a result of asset impairments, acquisitions, or other facts and circumstances.