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Goodwill and Other Intangible Assets

9 Months Ended

Mar. 31, 2022

Goodwill and Other Intangible Assets

8. Goodwill and Other Intangible Assets

During fiscal 2022, the Company’s market capitalization has significantly declined. During the three months ended September 30, 2021, the decline was considered a qualitative factor that led management to assess whether an impairment had occurred. Management’s evaluation indicated that the goodwill related to one of its reporting units within the BioPharma segment was potentially impaired. The Company then performed a quantitative impairment test by calculating the fair value of the reporting unit and compared that amount 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. The decline in market capitalization was an indicator of increased risk thereby increasing the discount rates in the valuation models. The Company determined the fair value of the reporting unit utilizing the discounted cash flow model. As of September 30, 2021, utilizing the risk adjusted weighted-average discount rate, the fair value of the reporting unit was less than its carrying value. The Company recognized an impairment loss of $19.5 million in the BioPharma segment related to the goodwill associated with the Cerecor Inc. acquisition. As of September 30, 2021, a quantitative test indicated there was no impairment to the Consumer Health reporting unit as it resulted in an implied fair value of $5.9 million compared with the $0.5 million carrying value.

During the three months ended March 31, 2022, the continued decline of the Company’s market capitalization was considered a qualitative factor that led management to reassess whether an impairment had occurred. Management’s evaluation indicated that the goodwill related to one of its reporting units within the BioPharma segment was potentially impaired. The Company then performed a quantitative impairment test by calculating the fair value of the reporting unit and compared that amount 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. The decline in market capitalization was an indicator of increased risk thereby increasing the discount rates in the valuation models. The Company determined the fair value of the reporting unit utilizing the discounted cash flow model. As of March 31, 2022, utilizing the risk adjusted weighted-average discount rate, the fair value of the reporting unit was less than its carrying value. The Company recognized an impairment loss of $37.7 million in the BioPharma segment related to the goodwill associated with the Neos Acquisition.

The Consumer Health segment, which has $8.6 million goodwill from the February 2020 acquisition of Innovus Pharmaceuticals, Inc. (the “Innovus Acquisition”), reported $2.2 million negative carrying value as of March 31, 2022, and as such there was no goodwill impairment during the three months ended March 31, 2022.

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


	BioPharma		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 September 30, 2021		37,712		8,637		46,349
Goodwill impairment		—		—		—
Balance as of December 31, 2021		37,712		8,637		46,349
Goodwill impairment		(37,712)		—		(37,712)
Balance as of March 31, 2022	$	—	$	8,637	$	8,637

The Company currently holds the following intangible asset portfolios as of March 31, 2022: (i) 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 Acquisition in March 2021; (ii) Proprietary modified-release drug delivery technology right as a result of the Neos Acquisition; (iii) Acquired product distribution rights and commercial technology consisting of RxConnect and trade names as a result of the Neos Acquisition, and patents, trade names and the acquired customer lists from the Innovus Acquisition; (iv) Acquired in-process R&D from the Neos Acquisition 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 March 31, 2022 and June 30, 2021, respectively.


	March 31, 2022
									Weighted-
	Gross						Net		Average
	Carrying		Accumulated				Carrying		Remaining
	Amount		Amortization		Impairment		Amount		Life (in years)

	(In thousands)
Licensed assets	$	3,246	$	(1,778)	$	(1,468)	$	—	—
Acquired product technology right		45,400		(6,864)		(3,224)		35,312	12.21
Acquired technology right		30,200		(1,834)		—		28,366	16.00
Acquired product distribution rights		11,354		(3,204)		—		8,150	7.85
Acquired in-process R&D		2,600		—		—		2,600	Indefinite-lived
Acquired commercial technology		630		(630)		—		—	—
Acquired trade name		400		(206)		(194)		—	—
Acquired customer lists		390		(390)		—		—	—
Total	$	94,220	$	(14,906)	$	(4,886)	$	74,428	13.21


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


	March 31,
	(In thousands)
2022 (remaining 3 months)	$	1,624
2023		6,490
2024		6,477
2025		6,282
2026		5,938
2027		5,908
Thereafter		39,109
Total future amortization expense	$	71,828

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 $1.7 million for the three months ended March 31, 2022 and 2021, respectively, and $6.1 million and $4.9 million for the nine months ended March 31, 2022 and 2021, respectively.

During the three and nine months ended March 31, 2022, in connection with the decision to discontinue commercializing or divesting certain products within the BioPharma segment that have minimal revenue and gross margin contribution, the Company recorded $4.9 million impairment expense for the write-down of intangible assets consisting of (i) $2.6 million for AcipHex, (ii) $1.4 million for ZolpiMist, (iii) $0.5 million for Tussionex, (iv) $0.2 million for Cefaclor and (v) $0.2 million for the Neos tradename.

During the three and nine months ended March 31, 2021, in connection with the divestiture of Natesto, the Company recorded $4.3 million impairment expense as a result of the impairment of the associated licensed intangible asset.