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Asset Sales
6 Months Ended
Mar. 31, 2014
Deferred Revenue Disclosure [Abstract]  
Asset Sales
Asset Sales
On March 28, 2012, the Company entered into an Asset Purchase Agreement with Hikma Pharmaceutical Co. LTD, or Hikma. Under the terms of the agreement, Hikma acquired exclusive U.S. rights to market Diclofenac/Misoprostal following regulatory approval. The Company received $3,500,000 upon signing the Asset Purchase Agreement. This amount is included in deferred revenue until approval, since it is refundable otherwise. In addition, the Company is entitled to receive another $1,000,000 upon regulatory approval, validation batch manufacturing with inventory released for launch, and sufficient launch inventory. Before approval, this milestone will be reduced for each generic competitor that receives regulatory approval (excluding an "authorized generic" version of the Brand Product); however, the milestone shall not be reduced to an amount less than $500,000. The Company will receive a royalty on Net Profits of the product for a period of ten years from the date of the first commercial sale of the product, with the royalty percentage varying depending upon certain events and competition.
On June 24, 2013, Hikma filed a lawsuit against the Company in the United States District Court for the Southern District of New York alleging that the Company (a) breached the Hikma, Asset Purchase Agreement (the "APA") by failing to refund the purchase price following Hikma's purported termination of the Hikma APA as a result of the Company failing to receive timely ANDA approval, and (b) intentionally failed to disclose alleged manufacturing product defects to Hikma. The Company believes that it did not fail to receive timely ANDA approval and therefore that Hikma was not entitled to (a) terminate the Hikma APA and (b) receive a refund of the purchase price. The Company also believes that it did not intentionally fail to disclose alleged manufacturing product defects to Hikma. Should Hikma prevail on its claims, the Company could be required to return the $3,500,000 purchase price plus interest, as well as other damages. The Company cannot estimate the possible loss or range of loss related to the Hikma litigation beyond the $3,500,000 purchase price.
On March 14, 2014, the Company received ANDA approval. The Company plans to submit additional data to the FDA before launch. As of March 31, 2014, the $3,500,000 purchase price is accrued as part of deferred revenue.
During fiscal year 2010 and 2011, the Company divested another non-core product and received proceeds of $6,500,000, comprised of $5,500,000 as a signing milestone which is recorded in deferred revenues and $500,000 for the initiation of Tech Transfer of which $250,000 remains in deferred revenues and a second payment of $500,000 for the completion of the Tech Transfer of which $250,000 remains in deferred revenues. Under the terms of this agreement, the licensor must obtain all of the following milestones in order for the Company to earn the revenues. These milestones are a) the receipt of an approvable letter from the FDA, b) acknowledgment from the FDA that no further clinical studies will be needed and c) an approval letter from the FDA. If these milestones are not met, then the $6,000,000 in total included in deferred revenue on the balance sheet at March 31, 2014 and September 30, 2013 must be refunded and the product rights are returned to the Company. In addition, the Company may receive additional milestones of up to $3,000,000 in the future, dependent on the licensor's actively selling the product in an exclusive market position.
See Note 4 for a summary of Deferred Revenue related to the Asset Sales.