9. Intangibles

On December 18, 2020, Journey entered an Asset Purchase Agreement with a third party (the “Anti-itch Product Agreement”) for a topical product that is indicated to treat scabies and skin itch conditions (“Anti-itch Product”). Pursuant to the terms and conditions of the Anti-itch Product Agreement, Journey agreed to pay $4.0 million, comprised of a non-refundable deposit of $0.2 million upon the execution of the term sheet, a cash upfront payment of $1.8 million on January 1, 2021 and additional future payments of $0.5 million on April 1, 2021, $0.5 million on July 1, 2021, and $1.0 million on January 1, 2022. There are no subsequent milestone payments or royalties beyond the aforementioned payments.  Commercial launch of this product is expected in the third quarter of 2021.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determined the purchase of the Anti-itch Product did not constitute the purchase of a business, and therefore recorded the purchase price of the Anti-itch Product as an asset, to be amortized over the life of the product, which is deemed to be three years.

On July 29, 2020, Journey entered into a License and Supply Agreement with a third party to acquire intellectual property rights to an oral acne product that is indicated for the treatment of severe acne (the “Isotretinoin Agreement”). Pursuant to the terms and conditions of the Isotretinoin Agreement, Journey agreed to pay  $5.0 million, comprised of an upfront payment of $1.0 million paid upon execution with remaining payments due as follows: $0.5 million upon achievement of a regulatory approval milestone and $0.5 million upon the delivery of the first order and $3.0 million due in $1.0 million installments, on the 18-month anniversary, the 24-month anniversary and the 36-month anniversary of execution of the Isotretinoin Agreement. Three additional milestone payments totaling $17.0 million are contingent upon the achievement of certain net sales milestones. Royalties in the low-double digits based on net sales, subject to specified reductions are also due.  Commercial launch of this product is expected in the second quarter of 2021.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determined the purchase of the Isotretinoin Agreement did not constitute the purchase of a business, and therefore recorded the purchase price of the Isotretinoin Agreement as an asset, to be amortized over the life of the product, which is deemed to be five years.

On July 22, 2019 Journey purchased Ximino®, a minocycline hydrochloride used to treat acne from a third party. Pursuant to the terms and conditions of the Asset Purchase Agreement (“APA”), total consideration for the APA is $9.4 million, comprised of an upfront payment of $2.4 million payable within 60 days after execution on September 22, 2019. The remaining four payments totaling $7.0 million are due in consecutive years commencing on the second anniversary of execution of the APA. In addition, Journey is obligated to pay royalties in the mid-single digits based on net sales of Ximino, subject to specified reductions.

The Company, in accordance with ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determined the purchase of Ximino did not constitute the purchase of a business, and therefore recorded the purchase price of Ximino as an asset, to be amortized over the life of the product, which is deemed to be seven years. In addition, the Company determined pursuant to ASC 450, Contingencies, that royalty payments in connection with the APA will be recorded when they become payable with a corresponding charge to cost of goods sold.

In accordance with the terms of the APA Journey will incur interest expense in the event of payment default. As such per ASC 835-30 Interest-Imputed Interest, Journey recorded an initial discount for imputed interest of $2.3 million. As of December 31, 2019, Journey recorded an intangible asset related to this transaction of $7.1 million which was recorded on the Consolidated Balance Sheet of Fortress.

On August 31, 2018, JMC entered into an agreement with a third party to acquire the exclusive rights to Exelderm®, a topical antifungal available in a cream and solution. This acquisition was recorded as an intangible asset and expense will be recognized over the expected life of Exelderm® of 3 years. JMC commenced the sale of Exelderm® in September 2018 and accordingly commenced the amortization of this cost.

In January 2016, JMC entered into a licensing agreement with a third party to distribute its prescription wound cream Luxamend ® and paid an upfront fee of $50,000. Additionally, in January 2016, JMC entered into a licensing agreement with a third party to distribute its prescription emollient Ceracade ® for the treatment of various types of dermatitis and paid an upfront fee of $0.3 million. JMC commenced the sale of both of these products during the year ended December 31, 2016 and accordingly commenced the amortization of these costs over their respective three year estimated useful life.

In March 2015, JMC entered into a license and supply agreement to acquire the rights to distribute Targadox® a dermatological product for the treatment of acne. JMC made an upfront payment of $1.3 million. Further payments will be made based on a revenue sharing arrangement. JMC received FDA approval for the manufacturing of this product in July 2016 and commenced sales of this product in October 2016.

The table below provides a summary of intangible assets as of December 31, 2020 and 2019, respectively:

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The table below provides a summary for the years ended December 31, 2020 and 2019, of recognized expense related to  product licenses, which was recorded in costs of goods sold on the Consolidated Statement of Operations (see Note 19):

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Note 1: Includes an upfront payment of $2.4 million and four payments totaling $7.0 million due in consecutive years commencing on the second anniversary of the execution of the APA. Such payments were discounted by $2.3 million as a result of the long-term nature of such payments.

Note 2: Includes an upfront payment of $1.0 million and a milestone payment of $0.5 million in 2020 and three payments totaling $3.5 million due at various points between 2021 through 2023. Such payments were discounted by $0.3 million as a result of the long-term nature of such payments. As of December 31, 2020, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2020.  Journey expects the asset to be placed in service in the first half of 2021. Once the asset is placed in service Journey will amortize the asset over five years, which represents its expected useful life.

Note 3: Includes an upfront payment of $0.2 million and three payments totaling $2.8 million in 2021 and $1.0 million in 2022. Such payments were discounted by $0.1 million as a result of the long-term nature of such payments. As of December 31, 2020, this asset has not yet been placed in service, therefore no amortization expense was recognized on this asset for the year ended December 31, 2020. The Company expects to launch  this asset in Q3 2021. Once the asset is placed in service Journey will amortize the asset over three years, which represents its expected useful life.

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The future amortization of these intangible assets is as follows:

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