Other Acquisitions and Dispositions | 9 Months Ended |
Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
OTHER ACQUISITIONS AND DISPOSITIONS | ' |
OTHER AQUISITIONS AND DISPOSITIONS |
Apricus Pharmaceuticals |
TopoTarget |
In April 2013, the Company delivered 148,441 shares of common stock representing $0.3 million of holdback consideration owed to TopoTarget A/S. In addition, approximately $0.1 million was recorded as other expense as a result of a change in stock price between the agreement date and the date the shares were issued. |
Following the sale of the Totect® assets, the liabilities related to Totect® were reclassified to continuing operations. In September 2013, the Company and TopoTarget A/S negotiated a settlement agreement which resulted in the extinguishment of the contingent consideration associated with milestone stock payments and all other obligations set forth in the purchase agreement, in exchange for 540,276 shares of Apricus common stock, valued at approximately $1.2 million at the date of issuance. The shares are subject to sale by Topotarget A/S in accordance with a stock selling plan. To the extent that the shares, when sold by TopoTarget A/S, have an aggregate value of less than $1.1 million, the Company would be required to provide additional consideration to TopoTarget A/S in the form of additional shares in an amount equal to the shortfall. The liability associated with the potential additional shares was valued using a Monte Carlo valuation model as of the date of the settlement agreement, with the following inputs: stock price on the date of issuance ($2.02), 63% volatility, a term of 0.41 years and a risk-free interest rate of 0.04%. These unobservable inputs represent a Level 3 measurement within the fair value hierarchy. |
During the three month period ended September 30, 2013, the Company recorded a non-cash gain of $0.5 million in its continuing operations for the difference between the contingent consideration of $1.7 million relieved from liabilities and the $1.2 million of common stock provided in accordance with the settlement agreement. In addition, the Company recorded a non-cash charge for the fair value of the potential additional shares of approximately $0.2 million, which has been recorded as a short-term derivative liability on the Company's consolidated balance sheet and as other expense in the Company's statement of operations for the three and nine months ended September 30, 2013. |
Sale of Totect® Assets |
On March 26, 2013, the Company entered into and closed the Biocodex Agreement whereby the Company agreed to sell to Biocodex all of the Company’s rights and certain information, property and inventory related to Totect® (the “Assets”) in exchange for $1.5 million in cash at the closing date plus the right to receive double-digit, tiered, decreasing royalties based on Biocodex’s net sales over the next three years (the “Transaction”). |
The royalty payments are based on a percentage of net sales beginning on March 26, 2013. The Company evaluated the potential and estimated future earn-out payments prescribed by the future royalty arrangement and performed certain due diligence on Biocodex’s operations, concluding that it was unable to determine the amount, timing or certainty of its ability to receive future royalty payments from Biocodex associated with the future sales of Totect® and accordingly, has not recorded an earn-out receivable associated with the Biocodex Agreement. |
A summary of the assets sold in conjunction with the sale of the Assets as of March 26, 2013 is as follows (in thousands): |
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Current assets, including inventory, prepaid expenses | $ | 960 | | | | | | | | | | | | | |
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Fixed assets, net of depreciation | 63 | | | | | | | | | | | | | |
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Technology license, net of accumulated amortization | 1,467 | | | | | | | | | | | | | |
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Trade name license, net of accumulated amortization | 411 | | | | | | | | | | | | | |
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| $ | 2,901 | | | | | | | | | | | | | |
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The Company retained all liabilities arising in connection with the manufacture or commercialization of Totect® by the Company prior to the closing date of the Transaction. |
The Company recorded a loss of $1.4 million in the first quarter of 2013 related to the sale of the Assets which represented the difference between the book value of the assets sold and the $1.5 million in cash consideration received. The Company will recognize any future earnings related to the receipt of royalties from Biocodex in the reporting period when earned as a recovery of the loss within discontinued operations. This loss and any future earnings will be presented in discontinued operations. |
Granisol® |
In February 2012, the Company entered into the following agreements with PediatRx Inc. (“PediatRx”): (1) a Co-Promotion Agreement in the U.S. for Granisol®, an oral liquid granisetron based anti-emetic product (the “Co-Promotion Agreement”), (2) an assignment of PediatRx’s rights under its Co-Promotion Agreement with Bi-Coastal Pharmaceuticals, Inc. for Aquoral®, for dry mouth or Xerostomia in the U.S. and (3) an Asset Purchase Agreement for Granisol® outside of the U.S. (the “Sale Agreement”). As consideration for entering into the agreements, the Company paid PediatRx $0.3 million up-front and agreed to pay PediatRx a percentage royalty on the Company’s net operating income related to sales of Granisol® in the U.S. The majority of the $0.3 million was related to the Co-Promotion Agreement and therefore recorded as an intangible asset in the Pharmaceuticals segment with an estimated useful life of ten years, equal to the life of the agreement. The remaining portion, which was recorded as research and development expense, related to intellectual property for a particular research and development project that did not reach technological feasibility in the territories covered by the license and that has no alternative future use. |
On June 27, 2012, the Company entered into a termination agreement with PediatRx, Inc., ending discussions regarding the potential merger transaction whereby the Company would have acquired PediatRx (the “Merger”). In January 2012, the Company had entered into a term sheet for the acquisition of PediatRx, which included an additional payment by the Company to PediatRx of $1.0 million payable in Company common stock if the Company elected not to pursue the Merger, subject to certain conditions. On June 27, 2012, triggered by the termination agreement and in settlement of the $1.0 million payable, the Company issued and delivered to PediatRx 373,134 shares of common stock, which were valued at a price of $2.68 per share. The $1.0 million dollar payment was considered part of the cost of the Co-Promotion Agreement and was recorded as an intangible asset in the Pharmaceuticals segment, with an estimated useful life of ten years, equal to the life of the agreement. While the Merger itself was terminated, the Company retained the ex-U.S. worldwide rights to Granisol® under the Sale Agreement and the U.S. co-promotion rights to Granisol® under the Co-Promotion Agreement. |
In June 2013, after seeking strategic alternatives for its U.S. oncology supportive care business, the Company determined that it would no longer pursue a buyer for its sales promotional interest in the Granisol® product and provided a notice of termination to PediatRx under the Co-Promotion Agreement, which was finalized in August 2013. There is no remaining inventory or distribution activity related to Granisol® at this time. |
The liabilities related to Apricus Pharmaceuticals, which have been reclassified to continuing operations as of the date of the sale, were $0.5 million as of September 30, 2013. |
BQ Kits |
The Company had a small segment of research-use-only Elisa Kits and Rapid Tests across a range of targets. The business was not core to the Company’s current strategy focused on the development and commercialization of products associated with male and female sexual health and in June 2013, management determined that the segment would be offered for sale to qualified buyers and initiated a sale process. Accordingly, the operating results of the BQ Kits, Inc. ("BQ Kits") business were included in discontinued operations for the three and nine months ended September 30, 2013 and 2012. |
In July 2013, the Company sold BQ Kits to an unrelated third-party for a total gain on sale of approximately $0.2 million, which was reflected in discontinued operations in the third quarter financial results of the Company. |
Discontinued Operations |
The Company had no assets or liabilities within discontinued operations (Apricus Pharmaceuticals and BQ Kits) as of September 30, 2013. The carrying amounts of its assets and liabilities of its discontinued operations as of December 31, 2012 are as follows (in thousands): |
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Inventories | $ | 292 | | | | | | | | | | | | | |
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Prepaid expenses and other current assets | 533 | | | | | | | | | | | | | |
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Current assets of discontinued operations | 825 | | | | | | | | | | | | | |
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Fixed assets, net | 40 | | | | | | | | | | | | | |
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Intangible assets, net | 1,877 | | | | | | | | | | | | | |
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Other long-term assets | 23 | | | | | | | | | | | | | |
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Noncurrent assets of discontinued operations | 1,940 | | | | | | | | | | | | | |
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Total assets of discontinued operations | $ | 2,765 | | | | | | | | | | | | | |
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Trade accounts payable | $ | 708 | | | | | | | | | | | | | |
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Accrued expenses | 1,087 | | | | | | | | | | | | | |
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Deferred revenue | 243 | | | | | | | | | | | | | |
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Contingent consideration | 1,328 | | | | | | | | | | | | | |
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Provision for replacement inventory | 170 | | | | | | | | | | | | | |
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Current liabilities of discontinued operations | 3,536 | | | | | | | | | | | | | |
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Contingent consideration | 420 | | | | | | | | | | | | | |
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Provision for replacement inventory | 27 | | | | | | | | | | | | | |
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Noncurrent liabilities of discontinued operations | 447 | | | | | | | | | | | | | |
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Total liabilities of discontinued operations | $ | 3,983 | | | | | | | | | | | | | |
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The operating results of the Company’s discontinued operations are as follows (in thousands): |
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Product sales | $ | 58 | | | $ | 257 | | | $ | 432 | | | $ | 484 | |
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Cost of goods sold | 23 | | | (114 | ) | | (177 | ) | | (274 | ) |
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Operating expenses | (65 | ) | | (913 | ) | | (382 | ) | | (2,407 | ) |
Other income | — | | | 197 | | | — | | | 4 | |
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Gain (loss) on sale of assets | 198 | | | — | | | (1,231 | ) | | — | |
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Income (loss) from discontinued operations | $ | 214 | | | $ | (573 | ) | | $ | (1,358 | ) | | $ | (2,193 | ) |
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