Annual report pursuant to Section 13 and 15(d)

6. Goodwill and Indefinite-Lived Intangible Assets

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6. Goodwill and Indefinite-Lived Intangible Assets
12 Months Ended
Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Indefinite-Lived Intangible Assets

Goodwill

 

A reconciliation of the change in the carrying value of goodwill is as follows:  

       
    Balance as of January 1, 2013   $ 3,592,073  
    Foreign currency translation     73,126  
    Balance as of December 31, 2013     3,665,199  
    Acquired from acquisitions     4,129,248  
    Disposed with Hive Out Agreement     (4,129,248 )
    Foreign currency translation     (200,042 )
    Balance as of December 31, 2014   $ 3,465,157  

 

The goodwill acquired from the Acquisition was disposed in connection with the Hive Out Agreement. See Footnote 3, Acquisitions, for further discussion on the Acquisition and the Hive Out Agreement. As of October 1, 2014 and 2013, the dates of the Company’s annual impairment review, the fair value of the Company’s goodwill balance significantly exceeded its carrying value.

 

Indefinite-Lived Intangible Assets

 

The Company’s acquired indefinite-lived intangible asset, OncoHist™, is IPR&D relating to the Company’s business combination with SymbioTec. As of October 1, 2014 and 2013, the dates of the Company’s annual impairment review, the fair value of the Company’s indefinite-lived intangible asset balance was $14.61 million and $10.40 million, respectively, which exceeded its carrying value by approximately 44% and 1%, respectively. The carrying value of OncoHist™ was $9.75 million and $10.32 million as of December 31, 2014 and 2013, respectively. No impairment was recorded during the years ended December 31, 2014 and 2013. The changes in the carrying value reflected herein are solely comprised of the effects of changes in foreign currency.

 

The Company, with the assistance of an independent third party, calculated the fair value of OncoHist™ by using the Multi-Period Excess Earnings Method (“MPEEM”), which is a form of the income approach, using Level 3 inputs under the fair value hierarchy. Under the MPEEM, the fair value of an intangible asset is equal to the present value of the asset’s incremental after-tax cash flows (excess earnings) remaining after deducting the market rates of return on the estimated value of contributory assets (contributory charge) over its remaining useful life. This method requires the Company to make long-term projections of the amount and timing of income and expenses related to development and commercialization of the acquired intangible asset and assumptions regarding the rate of return on contributory assets, the weighted average cost of capital and the discount rate for estimated future after-tax cash flows. Specifically, this method took into account the Company’s estimates of future incremental milestone payments that may be achieved upon completion of certain clinical trial stages, regulatory approval and sales goals upon commercialization, as well as the Company’s expected royalty income based on sales upon commercialization. Projected expenses are based on the Company’s forecasted budget required to complete the development of the IPR&D and are estimates subject to change based on several factors including the results of clinical trials and delays in regulatory approval. The discount rate used is commensurate with the uncertainties associated with the economic estimates described above and reflects the stage of development, the time and resources needed to complete the development of the product and the risks of advancement through regulatory approval processes.

 

OncoHist™ is not yet commercialized and has not yet begun to be amortized as of December 31, 2014.