Business Combinations Business Combinations

6 Months Ended

Jun. 29, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

BUSINESS COMBINATIONS

Spinal Modulation, Inc.: On June 7, 2013, the Company made an equity investment of $40 million in Spinal Modulation, a privately-held company that is focused on the development of an intraspinal neuromodulation therapy that delivers spinal cord stimulation targeting the dorsal root ganglion (DRG) to manage chronic pain. The investment agreement resulted in a 19% voting equity interest and provided the Company with the exclusive right, but not the obligation, to acquire Spinal Modulation for payments of up to $300 million during the period that extends through the completion of certain regulatory milestones. If the Company acquires Spinal Modulation, the contingent acquisition agreement also provides for additional consideration payments contingent upon the achievement of certain revenue-based milestones. Accordingly, upon the Company's acquisition of the noncontrolling interest of Spinal Modulation, the contingent payments would be recognized at the then-current fair value as an equity transaction. Additionally, in connection with the investment and contingent acquisition agreement, the Company also entered into an exclusive international distribution agreement, and obtained significant decision-making rights over Spinal Modulation's operations and economic performance. The Company also committed to providing additional debt financing to Spinal Modulation up to $15 million, Accordingly, effective June 7, 2013, the Company determined that Spinal Modulation was a VIE for which St. Jude Medical is the primary beneficiary. Therefore, as of June 7, 2013, the financial condition and results of operations of Spinal Modulation were included in St. Jude Medical's consolidated financial statements. The Company has a 19% voting equity interest in Spinal Modulation and allocates the losses attributable to Spinal Modulation's noncontrolling shareholders to noncontrolling interest in the Condensed Consolidated Statements of Earnings and Condensed Consolidated Balance Sheets. The creditors of Spinal Modulation do not have any recourse to the general credit of St. Jude Medical.

CardioMEMS, Inc.: During 2010, the Company made an equity investment of $60 million in CardioMEMS, a privately-held company that is focused on the development of a wireless monitoring technology that can be placed directly into the pulmonary artery to assess cardiac performance via measurement of pulmonary artery pressure. The investment agreement resulted in a 19% voting equity interest and provided the Company with the exclusive right, but not the obligation, to acquire CardioMEMS for an additional payment of $375 million less any net debt payable to St. Jude Medical, Inc. during the period that extends through the completion of certain regulatory milestones.

In the first quarter of 2013, the Company obtained significant decision-making rights over CardioMEMS' operations and provided debt financing of $28 million to CardioMEMS which was collateralized by substantially all the assets of CardioMEMS including its intellectual property. In July 2013, the Company provided $9 million of additional debt financing to CardioMEMS.

In accordance with Generally Accepted Accounting Principles in the United States (U.S. GAAP) accounting guidance,the Company reconsidered and determined that effective February 27, 2013 CardioMEMS was a VIE for which St. Jude Medical is the primary beneficiary. As a result, as of February 27, 2013, the financial condition and results of operations of CardioMEMS were included in St. Jude Medical's consolidated financial statements. The Company recognized a $29 million charge to other expense (see Note 10) to adjust the carrying value of the pre-existing equity investment and fixed price purchase option to fair value. The Company continues to have a 19% voting equity interest in CardioMEMS and allocates the losses attributable to CardioMEMS' noncontrolling shareholders to noncontrolling interest in the Condensed Consolidated Statements of Earnings and Condensed Consolidated Balance Sheets. The creditors of CardioMEMS do not have any recourse to the general credit of St. Jude Medical.

The following table summarizes the estimated fair values of Spinal Modulation's and CardioMEMS' assets and liabilities included in St. Jude Medical's Condensed Consolidated Balance Sheets as of June 7, 2013 and February 27, 2013, respectively (in millions):

	Spinal Modulation		CardioMEMS
Current assets	$	10	$	8
Goodwill	117		84
Acquired in-process research and development (IPR&D)	50		69
Other intangible assets	10		—
Other long-term assets	1		2
Total assets	188		163
Current liabilities	6		13
Deferred income taxes, net	22		26
Other long-term liabilities	—		4
Total liabilities	$	28	$	43
Non-controlling interest	$	160	$	89

The goodwill recognized in connection with both the Spinal Modulation and CardioMEMS transactions were not deductible for income tax purposes and were allocated to the Company's IESD segment. The goodwill represents the strategic benefits of growing the Company's neuromodulation chronic pain portfolio and the Company's cardiac rhythm management and heart failure therapy product portfolio as well as the expected revenue growth from increased market penetration. The Company recognized $50 million and $69 million of indefinite-lived IPR&D intangible assets related to Spinal Modulation and CardioMEMS, respectively. Upon completion of the related development projects (generally when regulatory approval to market the product is obtained), the IPR&D will be amortized over its estimated useful life. The Company also recognized $10 million of purchased technology intangible assets with an estimated useful life of 12 years associated with the consolidation of Spinal Modulation.

The pro forma impact of the CardioMEMS and Spinal Modulation business combinations have not been presented since the impact to the Company's results of operations was not material.