XML 30 R14.htm IDEA: XBRL DOCUMENT

Goodwill and Other Intangible Assets

6 Months Ended

Dec. 31, 2021

Goodwill and Other Intangible Assets

8. Goodwill and Other Intangible Assets

Since the June 30, 2021 annual goodwill impairment assessment, the Company’s stock price has continued to decline. During the three months ended September 30, 2021, the continued decline was considered a qualitative factor that led Management to reassess as to whether it is more likely than not that the fair value of one or more of the Company’s reporting units is greater than its carrying value. Management’s evaluation of the first step indicated that its Aytu BioPharma segment’s goodwill was potentially impaired. The Company then performed a quantitative impairment test by calculating the fair value of the segment and comparing it to its carrying value. Significant assumptions inherent in the valuation methodologies include, but were not limited to prospective financial information, growth rates, terminal value, discount rates and comparable multiples from publicly traded companies in our industry. Due to the decline in stock price this was an indicator of increased risk primarily increasing the discount rates in the valuation models. The Company determined the fair value of the reporting segment utilizing the discounted cash flow model. As a result of the continued decline in its stock price, the Company risk adjusted its cost of equity, which increased the over-all discount rate. As of September 30, 2021, utilizing the risk adjusted weighted-average discount rate, the fair value of Aytu BioPharma segment was less than its carrying value. As a result, the Company recognized an impairment loss of $19.5 million related to the Aytu BioPharma segment. The quantitative test indicated there was no impairment to the Aytu Consumer Health segment as it resulted in an implied fair value of $5.9 million compared with the $0.5 million carrying value. There was no such impairment during the three months ended December 31, 2021.

The Aytu Consumer Health segment, which has $8.6 million goodwill from the March 2020 Innovus merger, reported $1.5 million negative carrying value as of December 31, 2021.

The change in carrying amount of goodwill by reportable segment is as follows:


	Aytu BioPharma		Aytu Consumer Health		Consolidated

	(In thousands)
Balance as of June 30, 2021	$	57,165	$	8,637	$	65,802
Goodwill impairment		(19,453)		—		(19,453)
Balance as of December 31, 2021	$	37,712	$	8,637	$	46,349

The Company currently holds the following intangible asset portfolios as of December 31, 2021: (i) Licensed asset, which consists of pharmaceutical product assets that were acquired prior to July 1, 2020; (ii) Product technology rights, acquired from the November 1, 2019 acquisition of a line of prescription pediatric products (“Pediatric Portfolio”) from Cerecor, Inc. and the Neos Merger on March 19, 2021; (iii) Proprietary modified-release drug delivery technology right as a result of the Neos Merger; (iv) Acquired product distribution rights and commercial technology consisting of RxConnect and trade names as a result of the Neos Merger, and patents, trade names and the acquired customer lists from the acquisition of Innovus Pharmaceuticals, Inc. (“Innovus Merger”); (v) Acquired in-process R&D from the Neos Merger related to the NT0502 product candidate for the treatment of sialorrhea.

The following table provides the summary of the Company’s intangible assets as of December 31, 2021 and June 30, 2021, respectively.


	December 31, 2021
							Weighted-
							Average
	Gross				Net		Remaining
	Carrying		Accumulated		Carrying		Life (in
	Amount		Amortization		Amount		years)

	(In thousands)
Licensed assets	$	3,246	$	(1,662)	$	1,584	3.42
Acquired product technology right		45,400		(5,963)		39,437	12.44
Acquired technology right		30,200		(1,390)		28,810	16.25
Acquired product distribution rights		11,354		(2,827)		8,527	8.09
Acquired in-process R&D		2,600		—		2,600	Indefinite-lived
Acquired commercial technology		630		(493)		137	0.25
Acquired trade name		400		(156)		244	1.25
Acquired customer lists		390		(390)		—	—
Total	$	94,220	$	(12,881)	$	81,339	13.13


	June 30, 2021
							Weighted-
							Average
	Gross						Remaining
	Carrying		Accumulated			Net Carrying	Life (in
	Amount		Amortization		Amount		years)

	(In thousands)
Licensed assets	$	3,246	$	(1,430)	$	1,816	3.92
Acquired product technology right		45,400		(4,160)		41,240	12.88
Acquired technology right		30,200		(501)		29,699	16.75
Acquired product distribution rights		11,354		(2,073)		9,281	8.57
Acquired in-process R&D		2,600		—		2,600	Indefinite-lived
Acquired commercial technology		630		(178)		452	0.75
Acquired trade name		400		(56)		344	1.75
Acquired customer lists		390		(358)		32	0.01
Total	$	94,220	$	(8,756)	$	85,464	13.47

The following table summarizes the estimated future amortization expense to be recognized over the next five years and periods thereafter:


	December 31,
	(In thousands)
2022 (remaining 6 months)	$	3,914
2023		7,489
2024		7,333
2025		7,099
2026		6,331
2027		6,301
Thereafter		40,272
Total future amortization expense	$	78,739

Certain of the Company’s amortizable intangible assets include renewal options, extending the expected life of the asset. The renewal periods range between approximately 1 to 20 years depending on the license, patent or other agreement. Renewals are accounted for when they are reasonably assured. Intangible assets are amortized using the straight-line method over the estimated useful lives. Amortization expense of intangible assets was $2.0 million and

$1.6 million for the three months ended December 31, 2021 and 2020, respectively, and $4.1 million and $3.2 million for the six months ended December 31, 2021 and 2020, respectively.