Quarterly report pursuant to Section 13 or 15(d)

ASSET ACQUISITION

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ASSET ACQUISITION
3 Months Ended
Mar. 31, 2023
ASSET ACQUISITION  
ASSET ACQUISITION

NOTE 5. ASSET ACQUISITION

In January 2022, the Company entered into an agreement with VYNE Therapeutics, Inc. (“VYNE”) to acquire two United States Food and Drug Administration (“FDA”) Approved Topical Minocycline Products, Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, and a Molecule Stabilizing Technology™ proprietary platform from VYNE for an upfront payment of $20.0 million and an additional $5.0 million payment on the one (1)-year anniversary of the closing (the “VYNE Product Acquisition Agreement”). This expanded the Company’s product portfolio to eight marketed branded dermatology products. The Company also acquired certain associated inventory.

The VYNE Product Acquisition Agreement also provides for contingent net sales milestone payments. In the first calendar year in which annual sales reach each of $100 million, $200 million, $300 million, $400 million and $500 million, a one-time payment of $10 million, $20 million, $30 million, $40 million and $50 million, respectively, will be paid in that year only, per product, totaling up to $450 million. In addition, the Company will pay VYNE 10% of any upfront payment received by the Company from a licensee or sublicensee of the products in any territory outside of the United States, subject to exceptions for certain jurisdictions as detailed in the VYNE Product Acquisition Agreement.

The following table summarizes the aggregate consideration transferred for the assets acquired by the Company in connection with the VYNE Product Acquisition:

    

Aggregate

Consideration

($’s in thousands)

    

Transferred

Consideration transferred to VYNE at closing

$

20,000

Fair Value of deferred cash payment due January 2023

 

4,740

Transaction costs

 

223

Total consideration transferred at closing

$

24,963

The fair value of the deferred cash payment was accreted to the $5.0 million January 2023 cash payment over a one-year period through interest expense. The Company made the $5 million deferred cash payment in January 2023.

The following table summarizes the assets acquired in the VYNE Product Acquisition:

    

Assets

($’s in thousands)

Recognized

Inventory

6,041

Identifiable Intangibles:

 

  

AMZEEQ Intangible

 

15,162

ZILXI Intangible

 

3,760

Fair value of net identifiable assets acquired

$

24,963

The intangible assets were valued using an income approach, while the inventory was valued using a final sales value less cost to dispose approach.