Business combination (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of assets acquired and liabilities assumed


	Amounts		Measurement		Amounts
	Recognized as of		Period		Recognized as of
(estimated in thousands)	Acquisition Date(a)		Adjustments(b)		September 30, 2016
Current assets	$	21,413	$	(159)	$	21,254
Property and equipment		850		—		850
Restricted cash		432		—		432
Intangible assets(c)		283,000		—		283,000
Total identifiable assets		305,695		(159)		305,536
Current liabilities		(15,720)		182		(15,538)
Other long term liabilities		(5,226)		—		(5,226)
Total liabilities assumed		(20,946)		182		(20,764)
Goodwill(d)		155,725		(23)		155,702
Total fair value of consideration transferred	$	440,474	$	—	$	440,474

(a)As previously reported in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

(b)The measurement period adjustments primarily reflect a change in working capital.

(c)As of the effective date of the Acquisition, identifiable intangible assets are required to be measured at fair value. The fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 measurement. We used an income statement approach to estimate the preliminary fair value of the intangibles which includes licensed intellectual property and IPR&D. The assumptions used to estimate the cash flows of the licensed intellectual property included a discount rate of 15%, estimated gross margins of 98%, income tax rates ranging from 7.8% in periods in which we have established tax holidays to 13.8% thereafter, and operating expenses consisting of direct costs based on the anticipated level of revenues as well as the $7.0 million of research and development cost sharing payments we will owe in 2016 and 2017. The assumptions used to estimate the cash flows of the IPR&D (which relates to the potential approval of ICLUSIG as a second line treatment) included a PTS of 25%, discount rate of 16%, estimated gross margins of 98%, income tax rates ranging from 7.8% in periods in which we have established tax holidays to 13.8% thereafter, and operating expenses consisting of direct costs based on the anticipated level of revenues as well as probability weighted milestone payments estimated for 2020 related to the clinical results and potential approval of ICLUSIG as a second line treatment. The licensed intellectual property has a weighted-average useful life of approximately 12.5 years and will be amortized using the straight-line method and the IPR&D is an indefinite-lived intangible and will not be amortized until the completion or abandonment of the related research and development activities.

(d)Goodwill is calculated as the difference between the estimated acquisition date fair value of the consideration transferred and the estimated fair values of the assets acquired and liabilities assumed. The Goodwill is related to the existing platform, infrastructure, and workforce which is expected to generate synergies and further our strategic plan in Europe. Goodwill is not amortized and none of the goodwill is expected to be deductible for tax purposes.

Schedule of unaudited pro forma information

The following unaudited pro forma information presents condensed consolidated results of operations for the three and nine months ended September 30, 2016 and 2015, as if the Acquisition had occurred as of January 1, 2015 (in thousands).


	For the Three Months Ended,				For the Nine Months Ended,
	September 30,				September 30,
	2016		2015		2016		2015
Pro forma revenues	$	269,469	$	194,866	$	821,743	$	528,711
Pro forma net income (loss)	$	36,877	$	(48,613)	$	91,248	$	(96,015)