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NOTE 7 – INTANGIBLE ASSETS | 9 Months Ended
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Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract] |
NOTE 7 – INTANGIBLE ASSETS | NOTE 7 – INTANGIBLE ASSETS The following table sets forth the gross carrying amount, accumulated amortization and net carrying amount of our intangible assets as of September 30, 2019 and December 31, 2018:
|  | September 30, 2019 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Amount |  |  | Weighted-Average Remaining Amortization Period (yrs.) |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Approved hormone therapy drug candidate patents |  |  | 3,138,308 |  |  |  | (421,694 | ) |  |  | 2,716,614 |  |  |  | 13.25 years |
Hormone therapy drug candidate patent (pending) |  |  | 1,937,691 |  |  |  | — |  |  |  | 1,937,691 |  |  |  | n/a |
Non-amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multiple trademarks |  |  | 287,846 |  |  |  | — |  |  |  | 287,846 |  |  |  | indefinite |
TOTAL |  | $ | 5,363,845 |  |  | $ | (421,694 | ) |  | $ | 4,942,151 |  |  |  |  |
|  | December 31, 2018 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Net Amount |  |  | Weighted-Average Remaining Amortization Period (yrs.) |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
OPERA® software patent |  | $ | 31,951 |  |  | $ | (10,484 | ) |  | $ | 21,467 |  |  |  | 10.75 years |
Development costs of corporate website |  |  | 91,743 |  |  |  | (91,743 | ) |  |  | — |  |  |  | n/a |
Approved hormone therapy drug candidate patents |  |  | 2,234,129 |  |  |  | (282,485 | ) |  |  | 1,951,644 |  |  |  | 14 years |
Hormone therapy drug candidate patents (pending) |  |  | 1,855,279 |  |  |  | — |  |  |  | 1,855,279 |  |  |  | n/a |
Non-amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multiple trademarks |  |  | 264,289 |  |  |  | — |  |  |  | 264,289 |  |  |  | indefinite |
TOTAL |  | $ | 4,477,391 |  |  | $ | (384,712 | ) |  | $ | 4,092,679 |  |  |  |  |
We capitalize external costs, consisting primarily of legal costs, related to securing our patents and trademarks. Once a patent is granted, we amortize the approved hormone therapy drug candidate patents using the straight-line method over the estimated useful life of approximately 20 years, which is the life of intellectual property patents. If the patent is not granted, we write-off any capitalized patent costs at that time. Trademarks are perpetual and are not amortized. During the nine months ended September 30, 2019, we wrote off $78,864 in costs related to trademarks and patents, including the net carrying amount of the OPERA patent. As of September 30, 2019, we had 26 issued domestic, or U.S., patents and 28 issued foreign patents, including: ● 12 domestic patents and six foreign patents that relate to BIJUVA as well as three domestic patents that relate to estradiol and progesterone product candidates. These patents establish an important intellectual property foundation for BIJUVA and are owned by us. The domestic patents will expire in 2032. The foreign patents will expire no earlier than 2032. In addition, we have pending patent applications relating to BIJUVA in the U.S., Argentina, Australia, Brazil, Canada, China, Europe, Israel, Japan, Mexico, New Zealand, Russia, South Africa, and South Korea; ● Five domestic patents (four utility and one design) and 13 foreign patents (three utility and ten design) that relate to IMVEXXY. These patents establish an important intellectual property foundation for IMVEXXY and are owned by us. The domestic patents will expire in 2032 or 2033. The foreign utility patents will expire no earlier than 2033. The foreign design patents provide protection expiring no earlier than 2025. In certain jurisdictions, the foreign design patents provide protection through at least 2037. In addition, we have pending patent applications related to IMVEXXY in the U.S., Argentina, Australia, Brazil, Canada, Europe, Israel, Japan, Mexico, New Zealand, Russia, South Africa, and South Korea; ● One domestic utility patent that relates to our topical-cream candidates, which is owned by us. The domestic patent will expire in 2035. We have pending patent applications with respect to our topical-cream candidates in the U.S., Argentina, Australia, Brazil, Canada, Europe, Israel, Japan, Mexico, Russia, South Africa, and South Korea; ● One domestic utility patent and five foreign patents that relate to our transdermal-patch candidates, which are owned by us. The domestic utility patent will expire in 2032. The foreign patents will expire no earlier than 2033. We have pending patent applications with respect to our transdermal-patch candidates in the U.S., Brazil, Canada, Europe, Mexico, and South Africa; ● One domestic utility patent that relates to our OPERA information-technology platform, which is owned by us and will expire in 2031; ● One domestic utility patent that relates to a product candidate containing d-limonene, which is owned by us and will expire in 2036; and ● Two domestic utility patents that relate to TX-009HR, a progesterone and estradiol product candidate, which are owned by us and will expire in 2037. We have pending patent applications with respect to TX-009HR in the U.S., Argentina, Australia, Brazil, Canada, Europe, Israel, Japan, Mexico, New Zealand, Russia, South Africa, and South Korea. Amortization expense was $51,259 and $31,100 for the three months ended September 30, 2019 and 2018, respectively, and $140,206 and $77,123 for the nine months ended September 30, 2019 and 2018, respectively. Estimated amortization expense for the next five years for the patent costs currently being amortized is as follows:
Year Ending December 31, |  |  | Estimated Amortization |
| 2019 (3 months) |  |  | $ | 51,259 |
| 2020 |  |  | $ | 205,035 |
| 2021 |  |  | $ | 205,035 |
| 2022 |  |  | $ | 205,035 |
| 2023 |  |  | $ | 205,035 |
License Agreement with the Population Council On July 30, 2018, we entered into the Council License Agreement to commercialize ANNOVERA in the U.S. ANNOVERA became commercially available in the third quarter of 2019 and we expect the full commercial launch in the first quarter of 2020. Under the terms of the Council License Agreement, we paid the Population Council a milestone payment of $20,000,000 within 30 days following approval by the FDA of the new drug application, or NDA, for ANNOVERA. The first commercial batch of ANNOVERA was released during the third quarter of 2019 and we are required to pay the Population Council $20,000,000 as a result of the commercial batch release. Both milestone payments of $20,000,000 were recorded as finite-lived intangible asset in the consolidated balance sheet as of September 30, 2019. We started amortizing the intangible asset in the third quarter of 2019 once ANNOVERA became commercially available for use. The cost is amortized over the remaining useful life over which an intangible asset will contribute directly or indirectly to our cash flows. During both the three and nine months ended September 30, 2019, we recorded $15,998 in amortization expense related to the license fee which was recorded as a component of cost of sales. The Population Council is also eligible to receive milestone payments and royalties from commercial sales of ANNOVERA. We will assume responsibility for marketing expenses related to the commercialization of ANNOVERA. In addition, we are required to pay the Population Council, on a quarterly basis, step-based royalty payments based on annual net sales of ANNOVERA in the U.S. by the Company and its affiliates and permitted licensees as follows: (i) if annual net sales are less than or equal to $50,000,000, a royalty of 5% of net sales; (ii) for annual net sales greater than $50,000,000 and less than or equal to $150,000,000, a royalty of 10% of such net sales; and (iii) for net sales greater than $150,000,000, a royalty of 15% of such net sales. The annual royalty rate will be reduced to 50% of the initial rate during the six-month period beginning on the date of the first arms-length commercial sale of a generic equivalent of the one-year vaginal contraceptive system that is launched by a third party in the U.S., and thereafter will be reduced to 20% of the initial rate. The Population Council has agreed to perform and pay the costs and expenses associated with four post-approval studies required by the FDA for ANNOVERA and we have agreed to perform and pay the costs and expenses associated with a post approval study required by the FDA to measure risk for venous thromboembolism, provided that if the costs and expenses associated with such post-approval study exceed $20,000,000, half of such excess will be offset against royalties or other payments owed by us to the Population Council under the Council License Agreement. We and the Population Council have agreed to form a joint product committee responsible for overseeing activities under the Council License Agreement. We will be responsible for all aspects of promotion, product positioning, pricing, education programs, publications, sales messages and any additional desired clinical studies for the one-year vaginal contraceptive system, subject to oversight and decisions made by the joint product committee. The Council License Agreement includes exclusive rights for us to negotiate co-development of two other investigational vaginal contraceptive systems in development by the Population Council. We assess our intangible assets for impairment if indicators are present or changes in circumstance suggest that impairment may exist. If impairment indicators are present or changes in circumstance suggest that impairment may exist, we perform a recoverability test by comparing the sum of the estimated undiscounted cash flows of each intangible asset to its carrying value on the consolidated balance sheet. If the undiscounted cash flows used in the recoverability test are less than the carrying value, we would determine the fair value of the intangible asset and recognize an impairment loss if the carrying value of the intangible asset exceeds its fair value. We also evaluate the remaining useful life of intangible assets subject to amortization on a periodic basis to determine whether events and circumstances would indicate impairment or warrant a revision to the remaining useful life. If the estimate of an intangible asset’s remaining useful life is changed, we will amortize the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. License Agreement with Knight Therapeutics Inc. On July 30, 2018, we entered into a license and supply agreement, or the Knight License Agreement, with Knight pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel. Pursuant to the terms of the Knight License Agreement, Knight will pay us a milestone fee upon first regulatory approval in Canada of each of IMVEXXY and BIJUVA, sales milestone fees based upon certain aggregate annual sales in Canada and Israel of each of IMVEXXY and BIJUVA and royalties based on aggregate annual sales of each of IMVEXXY and BIJUVA in Canada and Israel. Knight will be responsible for all regulatory and commercial activities in Canada and Israel related to IMVEXXY and BIJUVA. We may terminate the Knight License Agreement if Knight does not submit all regulatory applications, submissions and/or registrations required for regulatory approval to use and commercialize IMVEXXY and BIJUVA in Canada and Israel within certain specified time periods. We also may terminate the Knight License Agreement if Knight challenges our patents. Either party may terminate the Knight License Agreement for any material breach by the other party that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters. In connection with the Knight License Agreement, Knight entered into a subscription agreement with us, pursuant to which Knight purchased 3,921,568 shares of our Common Stock concurrent with the closing of the underwritten public offering of Common Stock at a price of $5.10, for proceeds of $20,000,000, on August 6, 2018. License Agreement with Theramex On June 6, 2019, we entered into an exclusive license and supply agreement, or the License Agreement, with Theramex, a leading, global specialty pharmaceutical company dedicated to women’s health, to commercialize BIJUVA and IMVEXXY outside of the U.S., excluding Canada and Israel, or the Territory. Under the terms of the License Agreement, Theramex paid us EUR 14 million in cash as an upfront fee on August 5, 2019. Within thirty days of signing the License Agreement, we provided Theramex the regulatory materials and clinical data that were necessary for Theramex to obtain marketing authorizations and other applicable regulatory approvals for commercializing BIJUVA and IMVEXXY. We recognized the revenue related to the upfront fee, which was a non-refundable payment, during the third quarter of 2019, at a point in time when Theramex was able to use and benefit from the license which was when the knowledge transfer of regulatory documents occurred. We are eligible to receive additional milestone payments comprised of (i) up to an aggregate of EUR 2 million in regulatory milestone payments based on regulatory approvals for BIJUVA and IMVEXXY in certain specified markets and (ii) up to an aggregate of EUR 27.5 million in sales milestone payments to be paid in escalating tranches based on Theramex first attaining certain aggregate annual net sales milestones of BIJUVA and IMVEXXY in the Territory ranging from EUR 25 million to EUR 100 million. We are also entitled to receive quarterly royalty payments on net sales of BIJUVA and IMVEXXY in the Territory. Theramex will be responsible for all regulatory and commercial activities for BIJUVA and IMVEXXY in the Territory. Theramex may sublicense its rights to commercialize BIJUVA and IMVEXXY in the Territory, except for certain specified markets. We may terminate the License Agreement if Theramex does not submit all regulatory applications, submissions and/or registrations required for regulatory approval to use and commercialize BIJUVA and IMVEXXY within certain specified time periods. We also may terminate the License Agreement if Theramex challenges our patents. Either party may terminate the License Agreement for any material breach by the other party that is not cured within certain specified time periods or if the other party files for bankruptcy or other related matters.

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