Note 5 — Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill by reportable segment during six months ended June 30, 2011 were as follows (in thousands):


	Cell Therapy — United States			Pharmaceutical Manufacturing — China		Total
Balance as of December 31, 2010
Goodwill	$	558.2		$	27,002.0	$	27,560.2
Accumulated impairment losses		(558.2	)		—		(558.2	)
		—			27,002.0		27,002.0
Acquisitions*		9,680.0			—		9,680.0
Foreign currency exchange rate changes		—			534.0		534.0
Balance as of June 30, 2011
Goodwill	$	9,680.0		$	27,536.0	$	37,216.0

Goodwill associated with the PCT Merger

As of June 30, 2011 and December 31, 2010, the Company’s intangible assets and related accumulated amortization consisted of the following (in thousands):



	Useful Life		June 30, 2011							December 31, 2010
	Useful Life		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Customer list		10 Years	$	19,490.8	$	(3,077.8	)	$	16,413.0	$	17,740.0	$	(2,069.7	)	$	15,670.3
Manufacturing technology		10 Years		10,204.7		(983.9	)		9,220.8		4,220.6		(492.4	)		3,728.2
Tradename		10 Years		2,303.4		(225.4	)		2,078.0		983.9		(114.7	)		869.2
In process R&D		Indefinite		1,762.8		—			1,762.8		2,219.6		—			2,219.6
Standard operating procedures		10 Years		1,087.9		(181.3	)		906.6		1,066.8		(124.5	)		942.3
Lease rights		2 Years		833.4		(694.5	)		138.9		817.2		(476.7	)		340.5
VSEL patent rights		19 Years		669.0		(123.2	)		545.8		669.0		(105.6	)		563.4
Patents		8 Years		167.7		(41.9	)		125.8		164.3		(31.2	)		133.1
Total Intangible Assets			$	36,519.7	$	(5,328.0	)	$	31,191.7	$	27,881.4	$	(3,414.8	)	$	24,466.6

In 2011, Erye commenced sales of two products that were previously accounted for as In Process R&D which has resulted in a reclassification of approximately $500,600 from In Process R&D to Manufacturing Technology. Certain of the Company’s intangible assets are recorded on the books of wholly owned or partially owned subsidiaries and affiliates in China, and denominated in RMB. As a result, the balance reported fluctuates based upon the changes in exchange rates.

In connection with the acquisition of PCT, the following intangible assets were acquired (in thousands):


Customer list	$	1,400.0
Manufacturing technology		5,400.0
Tradename		1,300.0
	$	8,100.0

Total intangible amortization expense was classified in the operating expense categories for the periods included below as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cost of revenue	$	397.3	$	226.7	$	738.3	$	328.3
Research and development		13.8		13.6		27.5		27.1
Selling, general and administrative		541.8		452.8		1,063.4		836.1
Total	$	952.9	$	693.1	$	1,829.2	$	1,191.5

Estimated intangible amortization expense on an annual basis for the succeeding five years is as follows (in thousands):


2011	$	1,820.9
2012		3,364.0
2013		3,364.0
2014		3,364.0
2015		3,364.0
Thereafter		15,914.8
	$	31,191.7

Note 5 — Goodwill and Other Intangible Assets

As part of the Company’s annual impairment review as of December 31, 2010, a $558,200 goodwill impairment charge was recorded within the Company’s Cell Therapy — United States reportable segment due to lower than expected revenue and operating income growth of its Adult Stem Cell Banking — United States reporting unit since its acquisition. The Company estimated the fair value utilizing a discounted cash flow model.

The changes in the carrying amount of goodwill, by reportable segment during 2010 and 2009 were as follows (in thousands):


	Cell Therapy — United States			Regenerative Medicine — China		Pharmaceutical Manufacturing — China
Balance as of December 31, 2008
Goodwill	$	558.2		$	—	$	—
Accumulated impairment losses		—			—		—
		558.2			—		—
Acquisitions		—			—		26,070.4
Foreign currency exchange rate changes		—			—		6.0
Balance as of December 31, 2009
Goodwill		558.2			—		26,076.4
Accumulated impairment losses		—			—		—
		558.2			—		26,076.4
Impairment		(558.2	)		—		—
Foreign currency exchange rate changes		—			—		925.6
Balance as of December 31, 2010
Goodwill		558.2			—		27,002.0
Accumulated impairment losses		(558.2	)		—		—
	$	—		$	—	$	27,002.0

As of December 31, 2010 and 2009, the Company’s intangible assets and related accumulated amortization consisted of the following (in thousands):



	Useful Life		December 31,
			2010							2009
			Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Amortized intangible assets:
Customer list		10	$	17,740.0	$	(2,069.7	)	$	15,670.3	$	17,131.9	$	(285.5	)	$	16,846.4
Manufacturing technology		10		4,220.6		(492.4	)		3,728.2		4,075.9		(67.9	)		4,008.0
In process R&D		Indefinite		2,219.6		—			2,219.6		2,143.5		—			2,143.5
Standard operating procedures		10		1,066.8		(124.5	)		942.3		1,030.2		(17.1	)		1,013.1
Tradename		10		983.9		(114.7	)		869.2		950.2		(15.8	)		934.4
Lease rights		2		817.2		(476.7	)		340.5		789.2		(65.8	)		723.4
VSEL patent rights		19		669.0		(105.6	)		563.4		669.0		(70.4	)		598.6
Patents		8		164.3		(31.2	)		133.1		158.7		(11.1	)		147.6
Intangible assets, net			$	27,881.4	$	(3,414.8	)	$	24,466.6	$	26,948.6	$	(533.6	)	$	26,415.0

Total intangible amortization expense was classified in the operating expense categories for the periods included below as follows (in thousands):


	Years Ended December 31,
	2010		2009		2008
Cost of revenues	$	912.5	$	150.9	$	—
Selling, general, and administrative		1,842.0		312.5		—
Research and development		35.2		35.2		35.2
Total	$	2,789.7	$	498.6	$	35.2

Estimated intangible amortization expense on an annual basis for the succeeding five years is as follows (in thousands):


Years Ending December 31,	Amount
2011	$	2,796.6
2012		2,456.1
2013		2,456.1
2014		2,456.1
2015		2,456.1
Thereafter		9,626.0
Total	$	22,247.0

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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