XML 86 R10.htm IDEA: XBRL DOCUMENT v2.4.0.8
Business Combinations
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Business Combinations
Business Combinations
In January 2011, the Company acquired CyDex, a specialty pharmaceutical company developing products and licensing its Captisol technology. Captisol is currently incorporated in six FDA-approved medications and marketed by four of CyDex’s licensees: Onyx (a subsidiary of Amgen, Inc.), Pfizer, Bristol-Myers Squibb and Baxter (formerly Prism Pharmaceuticals).
Under the terms of the agreement, the Company paid $31.6 million to the CyDex shareholders and issued a series of CVRs. Additionally, the Company assumed certain contractual obligations for potential milestone payments to license holders. In addition, the Company agreed to pay CyDex shareholders, for each respective year from 2011 through 2016, (i) 20% of all CyDex-related revenue, but only to the extent that and beginning only when CyDex-related revenue for such year exceeds $15 million, plus (ii) an additional 10% of all CyDex-related revenue recognized during such year, but only to the extent that and beginning only when aggregate CyDex-related revenue for such year exceeds $35 million. The initial fair value of the liability was determined using an income approach, incorporating the estimated future cash flows from potential milestones and revenue sharing. These cash flows were then discounted to present value using a discount rate of 21.5%. For the year ended December 31, 2013, the fair value of the acquisition related contingent liabilities was determined using the income approach. The liability is evaluated each reporting period based on events and circumstances related to the underlying milestones, and the change in fair value is recorded in the Company's Consolidated Statements of Operations. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different than the carrying amount of the liability.
The Company is required by the CyDex CVR Agreement to dedicate at least five experienced full-time employee equivalents per year to the acquired business and to invest at least $1.5 million per year, inclusive of such employee expenses, in the acquired business, through 2015.
The components of the purchase price allocation for CyDex are as follows (in thousands):
 
Purchase Consideration (in thousands):
 
Cash paid to CyDex shareholders
$
31,572

Estimated fair value of contingent consideration
17,585

Total purchase consideration
$
49,157

Allocation of Purchase Price (in thousands):
 
Cash
$
85

Accounts receivable
1,202

Inventory
2,414

In-process research and development
3,200

Intangible assets with definite lives
47,469

Goodwill
11,538

Other assets
1,311

Liabilities assumed
(18,062
)
 
$
49,157


The acquired identified intangible assets with definite lives from the acquisition with CyDex are as follows:
 
Acquired Intangible Assets (in thousands)
 
Complete technology
$
15,227

Trademark and trade name
2,642

Customer relationships
29,600

 
$
47,469


The weighted-average amortization period for the identified intangible assets with definite lives is 20 years.
The Company has allocated $3.2 million of the purchase price of CyDex to IPR&D. This amount represents the estimated fair value of CyDex’s two main proprietary products that have not yet reached technological feasibility and do not have future alternative use as of the date of the merger. The valuation was based on a probability-weighted present value of the expected upfront and milestone payments. The probability of success takes into account the stages of completion and the risks surrounding successful development and commercialization of the underlying product candidates. These cash flows were then discounted to present value using a discount rate of 21.5%. For the year ended December 31, 2013, the Company recorded a non-cash impairment charge of $0.5 million for the write-off of IPR&D for Captisol-enabled intravenous Clopidogrel. The asset was impaired upon notification from MedCo that they intended to terminate the license agreement and return the rights of the compound to the Company.
The valuation of the Captisol technology was based on a derivative of the discounted cash flow method that estimated the present value of a hypothetical royalty stream derived via the licensing of similar technology. These projected cash flows were then discounted to present value using a discount rate of 20.5%. The valuation of the trademark and trade name was based on the Relief from Royalty method using royalty rates paid in third-party licensing agreements involving similar trade names. These projected cash flows were then discounted to present value using a discount rate of 20.5%. The valuation of the customer relationships was based on a discounted cash flow analysis incorporating the estimated future cash flows from these relationships during their assumed life of 20 years. These cash flows were then discounted to present value using a discount rate of 21.5%.