Acquisition of Healthcare Protective Products Division
 12 Months Ended
Dec. 31, 2013
Acquisition of Healthcare Protective Products Division [Abstract]  
Acquisition of Healthcare Protective Products Division
3. Acquisition of Healthcare Protective Products Division

On August 1, 2013, the Company acquired substantially all of the assets of the HPPD, a division of Bracco, for approximately $25.9 million in cash along with contingent purchase consideration obligations to Bracco. The assets acquired in this acquisition include HPPD's product, RSDL, and a majority of the customer and distributor agreements associated with RSDL along with approximately $1.5 million of manufacturing equipment. The acquisition diversifies the Biodefense segment by adding product sales from RSDL.

The contingent purchase consideration obligation is based on a percentage of RSDL net sales, ranging from 0-10%, for the period August 1, 2013 through July 31, 2028. At August 1, 2013, the contingent purchase consideration obligation was recorded at a fair value of $16.2 million. The Level 3 fair value of this obligation is based on management's assessment of the potential future realization of the contingent purchase consideration payments. This assessment is based on inputs that have no observable market. The obligation is measured using the income approach (a discounted cash flow model).

The total purchase price is summarized below:

(in thousands)
 
 
Amount of cash paid to Bracco Diagnostics Inc.
 
$
25,873
 
Fair value of contigent purchase consideration
  
16,232
 
Total purchase price
 
$
42,105
 


The table below summarizes the allocation of the purchase price based upon fair values of assets acquired and liabilities assumed at August 1, 2013. 

(in thousands)
 
 
Acquired intangible assets
  
32,099
 
Goodwill
  
8,452
 
Acquired equipment
  
1,543
 
Other
  
11
 
Total purchase price
 
$
42,105
 


A substantial portion of the assets acquired from Bracco consisted of intangible assets associated with the RSDL product.  As of the date of acquisition, the Company has recorded intangible assets of approximately $28.6 million related to RSDL, which is being amortized over 8 years, and $3.5 million related to a manufacturing agreement with Bracco, which is being amortized over 3 years. For the year ended December 31, 2013, the Company recorded $2.0 million in amortization for intangible assets, which have been recorded in cost of product sales within the Company's Biodefense segment. The weighted average amortization period for the intangible assets is 89 months.

Intangible assets consist of the following:

(in thousands)
 
RSDL
  
Manufacturing
Agreement
  
Total
 
Cost Basis
 
  
  
 
Balance at December 31, 2012
 
$
–
  
$
–
  
$
–
 
Additions
  
28,621
   
3,478
   
32,099
 
Balance at December 31, 2013
 
$
28,621
  
$
3,478
  
$
32,099
 
 
            
Accumulated Amortization
            
Balance at December 31, 2012
 
$
–
  
$
–
  
$
–
 
Amortization
  
(1,468
)
  
(483
)
  
(1,951
)
Balance at December 31, 2013
 
$
(1,468
)
 
$
(483
)
 
$
(1,951
)
 
            
Net book value at December 31, 2013
 
$
27,153
  
$
2,995
  
$
30,148
 


Future amortization expense as of December 31, 2013 is as follows:

(in thousands)
 
 
2014
 
$
4,737
 
2015
  
4,737
 
2016
  
4,255
 
2017
  
3,587
 
2018 and beyond
  
12,832
 
Total remaining amortization
 
$
30,148
 


The Company recorded approximately $8.5 million in goodwill related to the HPPD acquisition representing the purchase price paid in the acquisition in excess of the fair value of the tangible and intangible assets acquired. This goodwill is included in the Company's biodefense segment. None of the goodwill generated from the HPPD acquisition is expected to be deductible for tax purposes.

For the year ended December 31, 2013, $11.2 million of revenue and $1.9 million of revenue and net income, respectively, has been included in the Company's statements of operations.

The Company incurred transaction costs related to the HPPD acquisition of approximately $600,000 for the year ended December 31, 2013, which have been recorded in selling, general and administrative expenses within the Company's Biodefense segment.

The Company has determined the historical results of HPPD were not significant to the Company's results of operations, and as such no proforma disclosures have been presented.