4. Acquisitions

Acquisition of ACAM2000 business

On October 6, 2017, the Company completed the acquisition of the ACAM2000® (Smallpox (Vaccinia) Vaccine, Live) business of Sanofi Pasteur Biologics, LLC ("Sanofi"). This acquisition includes ACAM2000, the only smallpox vaccine licensed by the FDA, a current good manufacturing practices ("cGMP") live viral manufacturing facility and office and warehouse space, both in Canton, Massachusetts, and a cGMP viral fill/finish facility in Rockville, Maryland. With this acquisition, the Company also acquired an existing 10-year contract with the Centers for Disease Control and Prevention ("CDC"), which will expire and be up for renewal or extension in March 2018. This contract had a stated value up to $425 million, with a remaining contract value of up to approximately $160 million as of the acquisition date, for the delivery of ACAM2000 to the SNS and establishing U.S.-based manufacturing of ACAM2000. This acquisition added to the Company's product portfolio and expanded the Company's manufacturing capabilities.

At the closing, the Company paid $97.5 million in an upfront payment and $20 million in milestone payments earned as of the closing date tied to the achievement of certain regulatory and manufacturing-related milestones, for a total payment in cash of $117.5 million. The agreement includes an additional milestone payment of up to $7.5 million upon achievement of a regulatory milestone, which was achieved in November 2017. The $7.5 million milestone payment was made during the fourth quarter of 2017. This transaction will be accounted for by the Company under the acquisition method of accounting, with the Company as the acquirer. Under the acquisition method of accounting, the assets and liabilities of the ACAM2000 business will be recorded as of October 6, 2017, the acquisition date, at their respective fair values, and combined with those of the Company.

The contingent purchase consideration obligation is based on a regulatory milestone. At October 6, 2017, the contingent purchase consideration obligation related to the regulatory milestone was recorded at a fair value of $2.2 million. The Level 3 fair value of this obligation is based on a present value model of management's assessment of the probability of achievement of the regulatory milestone as of the acquisition date. This assessment is based on inputs that have no observable market.

The total purchase price is summarized below:

(in thousands)
Amount of cash paid to Sanofi	$	117,500
Fair value of contingent purchase consideration		2,200
Total purchase price	$	119,700

The table below summarizes the preliminary allocation of the purchase price based upon estimated fair values of assets acquired and liabilities assumed at October 6, 2017. The allocation is preliminary based upon the finalization of valuation reports.

(in thousands)
Fair value of tangible assets acquired and liabilities assumed:
Inventory	$	74,876
Property, plant and equipment		19,995
Total fair value of tangible assets acquired and liabilities assumed		94,871

Acquired intangible asset		16,700
Goodwill		8,129
Total purchase price	$	119,700

The Company determined the fair value of the intangible asset using the income approach, which is based on the present value of future cash flows. The fair value measurements are based on significant unobservable inputs that are developed by the Company using estimates and assumptions of the respective market and market penetration of the Company's products. The Company determined the fair value of the ACAM2000 intangible asset using the income approach with a present value discount rate of 15.5%, based on the estimated weighted-average cost of capital for substantially similar companies. This is comparable to the estimated internal rate of return for the acquisition and represents the rate that market participants would use to value these intangible assets. The projected cash flows from ACAM2000 intangible asset were based on key assumptions, including: estimates of revenues and operating profits, the life of the potential commercialized product and associated risks, and risks related to the viability of and potential alternative treatments in any future target markets. The Company has determined the ACAM2000 intangible asset will be amortized over 10 years.

The Company determined the fair value of the inventory using the probability adjusted comparative sales method, which estimates the expected sales price reduced for all costs expected to be incurred to complete/dispose of the inventory with a profit on those costs.

The Company determined the fair value of the property, plant and equipment utilizing either the cost approach or the sales comparison approach. The cost approach is determined by determining replacement cost of the asset and then subtracting any value that has been lost due to economic obsolescence, functional obsolescence, or physical deterioration. The sales comparison approach determines an asset is equal to the market price of an asset of comparable features such as design, location, size, construction, materials, use, capacity, specification, operational characteristics and other features or descriptions.

The Company recorded approximately $8.1 million in goodwill related to the ACAM2000 acquisition, representing the purchase price paid in the acquisition that was in excess of the fair value of the tangible and intangible assets acquired. There is no goodwill for tax purposes.

The Company has incurred transaction costs related to the ACAM2000 acquisition of approximately $2.5 million for the year ended December 31, 2017, which has been recorded in selling, general and administrative expenses.

The Company has determined the historical results for ACAM2000 were not significant to the Company's results of operations, and as such no proforma disclosures have been presented.

Acquisition of Raxibacumab asset

On October 2, 2017, the Company completed the acquisition of Raxibacumab, a fully human monoclonal antibody therapeutic product approved by the U.S. Food and Drug Administration ("FDA") for the treatment and prophylaxis of inhalational anthrax, from Human Genome Sciences, Inc. and GlaxoSmithKline LLC (collectively referred to as "GSK"). The all-cash transaction consists of a $76 million upfront payment and up to $20 million in product sale and manufacturing-related milestone payments. None of the milestones have been achieved as of December 31, 2017.

The Company has determined that substantially all of the value of Raxibacumab is attributed to the Raxibacumab asset and therefore the Raxibacumab acquisition is considered an asset acquisition. In addition, the Company has capitalized $1.6 million of transaction costs associated with the acquisition. The Company has determined the Raxibacumab asset will be amortized over 10 years.