Note

Recent Acquisition,

Goodwill, In-Process Research and Development and Other Intangible Assets

Recent

Acquisition

February 2019,

we acquired the AZEDRA manufacturing assets for

$8.0

million cash consideration and entered into a sublease agreement for the radiopharmaceutical manufacturing facility located in Somerset, New Jersey. The Somerset site serves as the launch facility for AZEDRA and will also provide manufacturing support for the Company’s development stage radiopharmaceuticals, including

1095.

The production of AZEDRA uses a proprietary Ultratrace® process which concentrates the MIBG targeted radiolytic activity by eliminating non-therapeutic “cold” MIBG molecules, giving AZEDRA a uniquely high specific activity.

Purchase Price Allocation

: We accounted for this acquisition as a business combination by preliminarily allocating the consideration we paid to the fair values of the assets acquired at the effective date of the acquisition, as summarized below. The difference between the fair value of the acquisition consideration and the estimated fair value of the identifiable assets represents potential future economic benefits arising from the acquisition, and has been recorded as goodwill. This preliminary allocation

may

change if, as and when additional information, becomes available. Under applicable accounting requirements, we must make the final determination within

one

year of the acquisition date.

The following table summarizes the preliminary allocation of the consideration paid to the estimated fair values of the assets acquired as of the acquisition date (in thousands):

	Amount
Cash consideration	$	8,000

Tangible assets acquired:
Machinery and equipment		682
Leasehold improvements		1,300
Total tangible assets acquired		1,982
Intangible assets - Somerset		1,245
Total tangible and intangible assets acquired		3,227

Goodwill	$	4,773

The replacement cost method, a variation of the cost approach, was applied to assess the value of the assets acquired by Progenics. The principle behind this method is that the value represents the current cost of a similar new asset having the nearest equivalent utility as the asset being valued. It generally represents the maximum amount that a prudent investor will pay for a comparable asset. The cost approach provides a systematic framework for estimating the value of tangible or intangible assets based on the economic principle of substitution, and that

prudent investor will purchase an existing asset for more than it will cost to create a comparable asset. Under this approach, value is estimated by developing the cost to either replace or reproduce (replicate) the asset of similar utility.

The acquired Somerset intangible assets represent manufacturing know-how asset, which is comprised of documented technical date and information, formulae, standards, specifications, processes, methods, code books, as well as all information, knowledge, trade practices and secrets utilized by the Somerset facility in manufacturing of the AZEDRA. We estimate the remaining useful life of the Somerset intangible to be approximately

years.

Goodwill, In-Process Research and Development and Other Intangible Assets

The fair values of in-process research and development (“IPR&D”) and other identified intangible assets acquired in business combinations are capitalized. We utilize the “income method,” which applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected sales revenues and estimated costs or “replacement costs”, whichever is greater. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each IPR&D project and other identified intangible assets, independently. IPR&D assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Other identified intangible assets, which include the technology asset acquired as part of the EXINI business combination, AZEDRA product rights intangible and Somerset intangible, are amortized over the relevant estimated useful lives. The IPR&D assets are tested for impairment at least annually or when a triggering event occurs that could indicate a potential impairment and any impairment loss is recognized in our condensed consolidated statements of operations.

Goodwill represents excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is

not

amortized but is subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. We determine whether goodwill

may

be impaired by comparing the fair value of the reporting unit (we have determined that we have only

one

reporting unit for this purpose), calculated as the product of shares outstanding and the share price as of the end of a period, to its carrying value (for this purpose, our total stockholders’ equity).

goodwill impairment has been recognized as of

March 31, 2019

2018.

The following tables summarize the activity related to our goodwill and intangible assets (in thousands):

					Other
					Intangible
	Goodwill		IPR&D		Assets
Balance at January 1, 2019	$	13,074	$	600	$	6,066
Increase related to Somerset acquisition	$	4,773	$	-	$	1,245
Amortization expense		-		-		(260	)
Balance at March 31, 2019	$	17,847	$	600	$	7,051

					Other
					Intangible
	Goodwill		IPR&D		Assets
Balance at January 1, 2018	$	13,074	$	28,700	$	1,669
Amortization expense		-		-		(53	)
Balance at March 31, 2018	$	13,074	$	28,700	$	1,616

The following table reflects the components of the finite-lived intangible assets as of

March 31, 2019 (

in thousands):

	Gross Amount		Accumulated Amortization		Net Carrying Value
Intangible assets - AZEDRA product rights	$	4,900	$	467	$	4,433
Intangible assets - Somerset	$	1,245	$	32		1,213
Intangible assets - EXINI technology		2,120		715		1,405
Total	$	8,265	$	1,214	$	7,051