Acquisition of Molecular Profiles Limited

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Acquisition of Molecular Profiles Limited

3.     Acquisition of Molecular Profiles Limited

On September 12, 2013, Columbia acquired all of the outstanding capital stock of Molecular Profiles, a U.K.-based pharmaceutical development services company. The main service lines that have been added to the Company’s portfolio as a result of the acquisition include:

• Pharmaceutical Development Services – Preformulation and Chemistry Manufacturing and Controls (“CMC”), solid state form optimization and formulation development.

• Clinical Trial Manufacturing Services – Manufacturing of tablets, capsules, topicals, dry powder inhaled products (“DPI’s”) and liquids.

• Advanced Analytical and Consulting Services – Detailed analytical characterization to support pharmaceutical development, troubleshooting process issues, materials characterization, and testing and consultancy relating to intellectual property.

The acquisition expands Columbia’s service offerings and customer base while diversifying the Company’s revenue streams. With the addition of Molecular Profiles, the Company now supplies analytical and consultancy services for drug development, preformulation and formulation development, clinical trial drug manufacturing services to a broad range of pharmaceutical customers and commercial drug manufacturing and supply to Merck Serono. As a result of the transaction, former Molecular Profiles stockholders, in the aggregate received for their shares of Molecular Profiles common stock $16.7 million in cash and 1,051,323 unregistered shares of Columbia common stock. The total consideration is valued at $24.0 million, based upon the closing price of Columbia’s common stock adjusted for a discount for lack of marketability on September 12, 2013. The goodwill recognized is attributable to expected synergies as the formulation, clinical trial manufacturing and consulting business lines are integrated into Columbia’s business model. Columbia accounted for this transaction using the acquisition method under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

Columbia has allocated the purchase price to the net tangible assets and intangible assets based upon their fair values at September 12, 2013. The difference between the aggregate purchase price and the fair value of assets acquired and liabilities assumed is allocated to goodwill, none of which is deductible for tax purposes. Columbia acquired $25.7 million of net assets, including $2.9 million of identifiable intangible assets and goodwill of $10.7 million. The identifiable assets include $0.3 million of trade names, $1.4 million of developed technology and $1.2 million of customer relationships.

The following table summarizes the purchase consideration paid for Molecular Profiles and the fair values of the assets acquired and liabilities assumed at the date of acquisition:

Purchase consideration:
Cash and stock paid	$	24,041,941
Cash acquired		(2,230,514	)
Debt assumed		3,889,486
Fair value of consideration transferred	$	25,700,913
Recognized amounts of identifiable assets acquired and liabilities assumed:
Accounts receivable	$	3,522,281
Prepaid expenses and other current assets		970,376
Property and equipment		11,967,176
Deferred tax assets		605,009
Identifiable intangible assets		2,910,000
Goodwill		10,660,296
Accounts payable		(999,539	)
Accrued expenses		(1,045,309	)
Deferred revenue		(2,889,377	)
Total	$	25,700,913

The above fair values of the assets acquired and liabilities assumed are based on information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. As of December 31, 2013, the Company’s measurement period adjustments are complete.

Revenue related to Molecular Profiles operations was $3.6 million following the September 12, 2013 acquisition date, and is included in Columbia’s consolidated statements of operations for the year ended December 31, 2013 as service revenues. As a result of the integration of the operations of Molecular Profiles into Columbia’s operations, disclosure of earnings included in the accompanying consolidated statements of operations since the acquisition date is not practicable.

The following unaudited pro forma condensed consolidated operating results for the years ended December 31, 2013 and 2012 summarize the combined results of operations for Columbia and Molecular Profiles. The unaudited pro forma consolidated operating results include the business combination accounting effects as if the acquisition had been completed as of January 1, 2012 (for both the 2013 and 2012 period results). These pro forma amounts are for informational purposes only and are not indicative of the operating results that would have occurred if the transaction had occurred on such date. No effect has been given for synergies, if any, that may be realized through the acquisition.

	Year Ended December 31,
	2013		2012
Revenues	$	36,074,941	$	30,965,698
Pre-tax income	$	6,251,894	$	7,600,216
Basic net income per share	$	0.52	$	0.63
Diluted net income per share	$	0.45	$	0.05

For the year ended December 31, 2013, Columbia recorded $1.1 million in costs associated with the acquisition of Molecular Profiles. These amounts and $0.5 million in costs associated with a failed transaction are recorded as acquisition related expenses within operating expenses on the consolidated statements of operations. These costs consist of legal, accounting and other professional service fees.