12. Business Combinations:

On April 13, 2011, the Company completed its acquisition of Clinical Data, Inc. (Clinical Data), a specialty pharmaceutical company focused on the development of first-in-class and best-in-category therapeutics, for $30 per share, plus contingent consideration, per a Contingent Value Rights agreement (CVR), of up to $6 per share, if certain milestones connected to sales of Viibryd™, one of the acquired products, are achieved. The acquisition was consummated by a wholly-owned subsidiary of the Company through a tender offer and merger, pursuant to which we acquired all of the outstanding shares of common stock of Clinical Data, all of the outstanding warrants to purchase shares that had exercise prices of $36.00 per share or less, and all of the outstanding convertible promissory notes.

The Company expects to fully integrate the operations of Clinical Data into its existing structure. The aggregate consideration paid was approximately $1.3 billion, which the Company financed with existing cash.

The CVR may require consideration to be paid by the Company in the form of milestone payments connected to sales of Viibryd as follows:

·	$1 per share if U.S. net sales of Viibryd, over four consecutive fiscal quarters within the first 5 years from the date of the close, reach or exceed $800 million,

·	$2 per share if U.S. net sales of Viibryd, over four consecutive fiscal quarters within the first 6 years from the date of the close, reach or exceed $1.1 billion and;

·	$3 per share if U.S. net sales of Viibryd, over four consecutive fiscal quarters within the first 7 years from the date of the close, reach or exceed $1.5 billion.

The approximate range of undiscounted amounts we may be required to pay under the CVR is between zero and $275 million. The fair value of the contingent consideration recognized at the acquisition date was approximately $25 million. The Company determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including:

• estimated net sales projections

• the probability of success for sales milestones of Viibryd; and

• the risk adjusted discount rate for fair value measurement

The fair value will be evaluated quarterly or more frequently if circumstances dictate. Changes in the fair value of contingent consideration will be recorded in earnings.

With this acquisition, the Company gained access to Viibryd (vilazodone HCl), an antidepressant developed by Clinical Data for the treatment of adults with major depressive disorder (MDD). Viibryd was approved by the FDA in January 2011. The efficacy of Viibryd was established in two 8-week, multi-center, randomized, double-blind, placebo-controlled studies in adult (18-80 years of age) outpatients who met the Diagnostic and Statistical Manual of Mental Disorders (DSM-IV-TR) criteria for MDD.

In addition to Viibryd, the Company also obtained Clinical Data's development pipeline including Phase III candidate apadenoson, which the Company expects to launch by 2014. Apadenoson is in development as a pharmacologic stress agent for radionuclide myocardial perfusion imaging.

The following table summarizes the Company's purchase price allocation which includes the estimated fair values of the assets acquired, including goodwill and intangible assets, and liabilities assumed as of the acquisition date. These amounts are provisional and subject to change:

(In thousands)

Asset acquired/ liability assumed	Fair value at acquisition date
Cash	$	14,214
Inventory		8,919
Prepaid and other current assets		1,208
Property, plant and equipment		906
Other assets		8,650
Short term debt		( 725	)
Accounts payable		( 11,391	)
Accrued expenses		( 25,059	)
Deferred tax liabilities		( 371,764	)
Acquired contingent acquisition liabilities		( 11,000	)
Intangible assets		990,000
Goodwill		698,126
Total Net Assets Acquired		1,302,084

Cash paid		1,276,865
Fair value of contingent consideration		25,219
Total Purchase Price	$	1,302,084

Acquired goodwill includes the combined synergies of the purchased business, the assembled workforce and the Company's access to Viibryd, a drug indicated for depression; a therapeutic area in which the Company has extensive experience. In Viibryd, the Company obtained a newly approved product that will join the Company's portfolio of products, and will contribute to offsetting the expiration of the patent for Lexapro, which accounted for approximately 55% of the Company's sales in fiscal 2011. Lexapro faces patent expiration in March 2012. In addition, the Company has gained access to Clinical Data's earlier stage development projects in various therapeutic areas. The intangible asset recorded at acquisition relates to Viibryd, which will be amortized over 12 years; the life of the Viibryd patent, which expires in 2023. The acquired contingent liabilities relate to a previous acquisition and represent a Level 3 measurement within the fair value hierarchy. The Company has begun the integration of Clinical Data, which will be absorbed into the Company's current segment, and is expected to be fully integrated within the calendar year with minimal carryover. None of the goodwill is deductible for tax purposes. The carrying amount of the goodwill at the end of the period was $698.1 million.

Viibryd sales were the only revenue generated from the acquisition for the quarter ended June 30, 2011, and totaled $7.3 million. The Company does not track research and development expense by project and with the integration of Clinical Data, the expenses and net income attributed to the acquisition cannot be determined independently.

Additional Pro Forma Information

The acquisition occurred during the first month of the current fiscal year, and assuming the acquisition occurred at the beginning of the year, the combined pro forma operating results would not be significantly different from the actual results presented in the Condensed Consolidated Statement of Income for the three months ended June 30, 2011.

In the prior year quarter, Viibryd was not an approved product, thus no significant additional revenue would have been generated, and the combined pro forma revenue for the quarter ended June 30, 2010 would be the same as presented in the Condensed Consolidated Statement of Income for the three months ended June 30, 2010. Assuming the acquisition occurred at the beginning of the prior fiscal year, the combined pro-forma net income would be $107.7 million, due to an operating loss by Clinical Data, primarily driven by research and development expense.