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EXCEL - IDEA: XBRL DOCUMENT - HI TECH PHARMACAL CO INCFinancial_Report.xls
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v2.4.0.6
Intangible Assets
6 Months Ended
Oct. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS

8. INTANGIBLE ASSETS:

The components of net intangible assets are as follows:

 

                                         
    October 31, 2012     April 30, 2012        
    Gross Carrying
Amount
    Accumulated
Amortization
    Gross Carrying
Amount
    Accumulated
Amortization
    Amortization Period  

Tussicaps® intangible assets

  $ 22,126,000     $ (3,486,000   $ 22,126,000     $ (1,992,000     5-10 years  

ECR intangible assets

    7,334,000       (2,191,000     7,334,000       (1,828,000     10 years  

Mag-Ox® intangible assets

    4,100,000       (1,093,000     4,100,000       (888,000     10 years  

Clobetasol intangible asset

    4,000,000       (1,000,000     4,000,000       (800,000     10 years  

Orbivan® and Zolvit® intangible assets

    3,577,000       (750,000     3,477,000       (463,000     3-10 years  

Sinus Buster® intangible assets

    2,513,000       (130,000     2,513,000       —         10 years  

Zolpimist® intangible assets

    3,000,000       (656,000     3,000,000       (469,000     7-10 years  

Zostrix® intangible assets

    5,354,000       (3,552,000     5,354,000       (3,179,000     3-11.5 years  

KVK License intangible assets

    1,500,000       —         1,500,000       —         10 years  

Midlothian intangible assets

    1,011,000       (401,000     1,011,000       (342,000     3-10 years  

Vosol® and Vosol® HC intangible assets

    700,000       (333,000     700,000       (298,000     10 years  

Partnered ANDA intangible assets

    375,000       —         375,000       —         10 years  

Other intangible assets

    1,705,000       (1,063,000     1,705,000       (878,000     0.5-10 years  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 57,295,000     $ (14,655,000   $ 57,195,000     $ (11,137,000        
   

 

 

   

 

 

   

 

 

   

 

 

         

Intangible assets are stated at cost, net of amortization using the straight line method over the expected useful lives of the product rights, once the related products begin to sell. Amortization expense of the intangible assets for the six months ended October 31, 2012 and 2011 was $3,518,000 and $2,175,000, respectively. Amortization expense for the three months ended October 31, 2012 and 2011 was $1,761,000 and $1,400,000, respectively. The Company tests for impairment of intangible assets annually and when events or circumstances indicate that the carrying value of the assets may not be recoverable.

On June 28, 2011, the Company acquired marketing and distribution rights to several unique branded products for the treatment of pain from Atley Pharmaceuticals. Some products were approved at the time of acquisition and others were subsequently approved by the Food and Drug Administration (“FDA”). The Company paid $3,220,000 in cash for rights to the products and inventory. Inventory acquired was valued at $298,000. The Company also paid an additional $200,000 for Orbivan® CF during the 2012 fiscal year and $100,000 for Orbivan® with Codeine during the six months ended October 31, 2012. The Company agreed to pay an additional $355,000 within 180 days, less any amount which has been offset by certain claims. The Company will pay royalties for certain of these products under a license agreement it has assumed. In July 2011, the Company exercised its option to buy out one of the royalty streams related to one of the products for the amount of $500,000, which was paid in August 2011. Such amount has been included in prepaid royalties. At October 31, 2012, $200,000 remained as prepaid royalties included in other current assets.

On July 29, 2011, the Company acquired marketing and distribution rights to an Abbreviated New Drug Application (“ANDA”) filing from KVK-Tech, Inc. for dexbrompheniramine maleate 6 mg/pseudoephedrine sulfate 120 mg extended release tablets for $2,000,000. Upon approval from the FDA, the product will be marketed by ECR Pharmaceuticals, the Company’s branded sales and marketing subsidiary, under the Lodrane® brand name. The agreement provided for certain amounts to be refunded to Hi-Tech if the product had not been approved by the FDA by certain dates. As of October 31, 2012, the Company had received refunds of $500,000; therefore, the intangible asset is presented at a $1,500,000 value. The product has not been approved, and the Company may receive further refunds of up to $500,000.

On August 19, 2011, the Company acquired Tussicaps® extended-release capsules and some inventory from Mallinckrodt LLC (“Mallinckrodt”). The Company paid $11,600,000 in cash at the time of acquisition, has made through October 31, 2012 aggregate quarterly payments of $2,875,000 and may make additional payments of up to $9,625,000 over the next three years depending on the competitive landscape and sales performance. On the acquisition date, the Company had recorded a preliminary contingent liability of $11,993,000, which was adjusted to $11,189,000 during the third quarter of fiscal 2012, with the reduction of the contingent liability being offset by a reduction of the related intangible. The fair value of the contingent payment was estimated using the present value of management’s projection of the expected payments pursuant to the term of the agreement. As of October 31, 2012, the contingent payment liability amounted to $8,927,000, of which $2,875,000 is classified as a current liability. The decrease in the carrying amount was the result of payments made, offset by the accrual of interest on the outstanding balance. Tussicaps® is covered by a patent which will expire in September 2024. The Company and Mallinckrodt entered into a manufacturing agreement pursuant to which Mallinckrodt will manufacture and supply the Tussicaps ® products to the Company for at least seven years.

 

On November 28, 2011, the Company entered into an asset purchase agreement to acquire an ANDA for a product and all product intellectual property. The purchase price of the ANDA and interest in the intellectual property is up to $3,000,000 under certain conditions and is payable in installments over 24 months. In connection with this asset purchase, the Company has entered into a collaboration agreement and profit sharing agreement with another party. The Company and the other party will each own 50% of the product and will each pay equal amounts in satisfaction of the purchase price obligation. The other party will also pay 50% of the development costs and share in 50% of the net profits. The Company made an initial payment of $375,000 on November 29, 2011. The Company has the right to terminate this agreement at any time and not pay subsequent installments. Upon termination by the Company, all interests in the assets acquired will be transferred back to the seller.

On March 7, 2012, the Company acquired several homeopathic branded nasal spray products including Sinus Buster ® and Allergy Buster ® from Dynova Laboratories, Inc. for $1,344,000 in cash and an additional $1,250,000 deposited in an escrow account to pay for potential expenses. Hi-Tech will also pay a 12% royalty on net sales for 3 1/2 years, or $1,750,000, whichever is reached first. The brands are being sold through the Company’s Health Care Products OTC division.