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Intangible Asset | 3 Months Ended
--- | ---
Mar. 31, 2021
Intangible Asset |
Intangible Asset | 8. Intangible Asset ​ As of March 31, 2021 and December 31, 2020, the Company’s only intangible asset (the “Nucynta Intangible Asset”) is related to the Nucynta Acquisition and Nucynta Commercialization Agreement. The gross carrying amount and accumulated amortization of the Nucynta Intangible Asset were as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ | As of March 31, | ​ | As of December 31,
​ | 2021 | ​ | 2020
Gross carrying amount | $ | 521,170 | ​ | $ | 521,170
Accumulated amortization | ​ | (202,061) | ​ |  | (185,266)
Intangible asset, net | $ | 319,109 | ​ | $ | 335,904
​ Nucynta Acquisition ​ In February 2020, the Company entered into the Nucynta Purchase Agreement with Assertio, pursuant to which the Company acquired certain intellectual property and manufacturing rights related to the Nucynta Products, including U.S. commercialization rights, U.S. manufacturing rights, and inventory, for an aggregate purchase price of $375,000, subject to certain closing and post-closing adjustments. The Company also agreed to assume certain regulatory and supply chain contracts, and obligations related to Nucynta Products (see Note 4). In February 2020, the Company entered into a loan agreement (see Note 10) and issued convertible senior notes (see Note 11) to finance a portion of the purchase price paid pursuant to the Nucynta Purchase Agreement. ​ The consideration transferred in the asset acquisition was measured at cost, including transaction costs, assets transferred by the Company, and royalty obligations discharged by the seller. The table below represents the costs accumulated to acquire the commercial rights for the Nucynta Products based on the terms of the Nucynta Purchase Agreement, as amended: ​
​ | ​ | ​
Acquisition consideration: | ​ | ​
Base purchase price | $ | 375,000
Cash paid for inventory | ​ | 6,030
Transaction costs | ​ | 6,297
Reduction for 2020 cash transferred to Assertio under the prior Nucynta Commercialization Agreement(1) | ​ | (13,071)
Reduction for accrued royalty obligation discharged upon closing(1) | ​ | (1,145)
Total acquisition consideration: | $ | 373,111
​
| (1) | Represents $14,216 total reduction to the base purchase price comprising of $13,071 of cash payments transferred to Assertio under the prior Nucynta Commercialization Agreement as well as a reduction for discharged pre-acquisition accrued royalties based on sales from January 1, 2020 through closing.
​ The Company then allocated the consideration transferred to the individual assets acquired on a relative fair value basis as summarized in the table below: ​
​ | ​ | ​
Assets acquired: | ​ | ​
Nucynta Intangible Asset | $ | 367,081
Inventory | ​ | 6,030
Total consideration allocated to assets acquired: | $ | 373,111
​ The Company concluded that the consideration allocable to the Nucynta Intangible Asset for the additional intellectual property and manufacturing rights it acquired as part of the Nucynta Acquisition were incremental costs associated with the pre-existing intangible asset from the former Nucynta Commercialization Agreement, as such costs result in probable future economic benefits. Specifically, the additional intellectual property rights acquired in the Nucynta Acquisition enable the Company to eliminate royalty obligations otherwise payable to Assertio under the former Nucynta Commercialization Agreement. ​ Effective February 13, 2020, upon the closing of the Nucynta Acquisition, the Nucynta Commercialization Agreement was effectively terminated and the Company’s royalty payment obligations to Assertio thereunder ceased. Following the closing, the Company no longer pay royalties to Assertio and the Company’s only remaining royalty obligation is to pay 14% of net sales of the Nucynta Products directly to Grünenthal. ​ A summary of the gross carrying amount, accumulated amortization, and net book value of the Nucynta Intangible Asset is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Gross Carrying Value | ​ | ​ | Accumulated Amortization | ​ | ​ | Net Book Value
Balance as of December 31, 2019 | $ | 154,089 | ​ | $ | (124,586) | ​ | $ | 29,503
Amortization expense through Nucynta Acquisition | ​ | — | ​ | ​ | (1,754) | ​ | ​ | (1,754)
Additional cost incurred from Nucynta Acquisition | ​ | 367,081 | ​ | ​ | — | ​ | ​ | 367,081
Amortization expense from Nucynta Acquisition through period end | ​ | — | ​ | ​ | (58,926) | ​ | ​ | (58,926)
Balance as of December 31, 2020 | $ | 521,170 | ​ | $ | (185,266) | ​ | $ | 335,904
Amortization expense | ​ | — | ​ | ​ | (16,795) | ​ | ​ | (16,795)
Balance as of March 31, 2021 | $ | 521,170 | ​ | $ | (202,061) | ​ | $ | 319,109
​ Amortization ​ The Company has been amortizing the Nucynta Intangible Asset over its useful life, which is the period over which the asset is expected to contribute directly or indirectly to the future cash flows of the Company. The Company had initially determined that the useful life for the intangible asset was approximately 4.0 years from the closing date of the Nucynta Commercialization Agreement, January 9, 2018 on the basis of the majority of the cash flows expected to be realized for future product sales under the Nucynta Commercialization Agreement. The Nucynta Acquisition significantly impacted the timing and amount of future cash inflows from the sales of the Nucynta Products, and, therefore, the Company considered it to be a triggering event to remeasure the expected useful life of the Nucynta Intangible Asset. The Company determined that the useful life for the Nucynta Intangible Asset was approximately 5.9 years from the Closing Date of the Nucynta Acquisition and accordingly, the intangible asset is amortized prospectively over its revised useful life. The Company recognizes amortization expense as a component of cost of product revenues in the Condensed Consolidated Statement of Operations on a straight-line basis over its useful life as it approximates the period of economic benefits expected to be realized from future cash inflows from sales of the Nucynta Products. ​ The following table presents amortization expense recognized for the three months ended March 31, 2021 and 2020: ​
​ | ​ | ​ | ​ | ​ | ​
​ | Three months ended March 31,
​ | ​ | 2021 |  | ​ | 2020
Nucynta amortization expense included in cost of product revenues | $ | 16,795 | ​ | $ | 10,295
​ As of March 31, 2021, the remaining amortization period is approximately 4.8 years and is expected to be recognized in the following periods: ​
​ | ​ | ​
Years ended December 31, | Amortization Expense
2021 | $ | 50,386
2022 | ​ | 67,181
2023 | ​ | 67,181
2024 | ​ | 67,181
2025 | ​ | 67,180
Remaining amortization expense: | $ | 319,109
​

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