Identifiable Intangible Assets and Goodwill

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Identifiable Intangible Assets and Goodwill

Identifiable Intangible Assets and Goodwill

A. Identifiable Intangible Assets

The following summarizes the components of Identifiable intangible assets:
	As of December 31, 2020						As of December 31, 2019
(MILLIONS OF DOLLARS)	Gross Carrying Amount		Accumulated Amortization		Identifiable Intangible Assets, less Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Identifiable Intangible Assets, less Accumulated Amortization
Finite-lived intangible assets
Developed technology rights(a)	$	73,545	$	(50,902)	$	22,643	$	72,449	$	(47,092)	$	25,357
Brands	922		(774)		148		922		(741)		181
Licensing agreements and other(b)	2,292		(1,186)		1,106		1,687		(1,108)		579
	76,759		(52,862)		23,896		75,058		(48,941)		26,117
Indefinite-lived intangible assets
Brands	827				827		827				827
IPR&D(c)	3,175				3,175		5,919				5,919
Licensing agreements and other(b)	573				573		1,073				1,073
	4,575				4,575		7,819				7,819
Identifiable intangible assets(d)	$	81,334	$	(52,862)	$	28,471	$	82,877	$	(48,941)	$	33,936

(a)The increase in the gross carrying amount primarily reflects the transfer of $600 million from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy, as well as a $499 million capitalized portion of an upfront payment to Myovant (see Note 2E) and an increase from a $200 million measurement period adjustment related to the acquisition of Array (see Note 2A), partially offset by a $528 million impairment of Eucrisa (see Note 4) and a $263 million impairment of certain generic sterile injectables acquired in connection with our acquisition of Hospira (see Note 4).

(b)The changes in the gross carrying amounts primarily reflect the transfer of $600 million from indefinite-lived Licensing agreements and other to finite-lived Licensing agreements and other to reflect the approval in the U.S. of several products subject to out-licensing arrangements acquired from Array, as well as measurement period adjustments related to the acquisition of Array.

(c)The decrease in the gross carrying amount primarily reflects a decrease from a $1.2 billion measurement period adjustment related to the acquisition of Array, a $900 million impairment of IPR&D (see Note 4), and the transfer of $600 million from IPR&D to Developed technology rights to reflect the approval of Braftovi in combination with Erbitux® (cetuximab), for the treatment of BRAFV600E-mutant mCRC after prior therapy.

(d)The decrease is primarily due to amortization, impairments, and measurement period adjustments related to the acquisition of Array, partially offset by the capitalization of an upfront payment to Myovant (see Note 2E).

Nearly all of our identifiable intangible assets are managed by our commercial organization, with only 9% of total cost of IPR&D managed by our R&D organization.

Developed Technology Rights

Developed technology rights represent the cost for developed technology acquired from third parties and can include the right to develop, use, market, sell and/or offer for sale the product, compounds and intellectual property that we have acquired with respect to products, compounds and/or processes that have been completed. We possess a well-diversified portfolio of hundreds of developed technology rights across therapeutic categories, representing our commercialized products. The significant components of developed technology rights are the following: Xtandi, Prevnar 13/Prevenar 13 Infant, Braftovi/Mektovi, Premarin, Prevnar 13/Prevenar 13 Adult, Eucrisa, Orgovyx, and, to a lesser extent Zavicefta, Tygacil, Merrem/Meronem, Refacto AF/Xyntha, Pristiq and Bosulif. Also included in this category are the post-approval milestone payments made under our alliance agreements for certain biopharmaceutical products.

Brands

Brands represent the cost for tradenames and know-how, as the products themselves do not receive patent protection. Indefinite-lived brands include Medrol and Depo-Medrol, while finite-lived brands include Depo-Provera and Zavedos.

IPR&D

IPR&D assets represent R&D assets that have not yet received regulatory approval in a major market. The significant components of IPR&D are the following: the program for the oral poly ADP ribose polymerase inhibitor for the treatment of patients with germline BRCA-mutated advanced breast cancer acquired as part of the Medivation acquisition and assets acquired in connection with the Array acquisition. IPR&D assets are required to be classified as indefinite-lived assets until the successful completion or the abandonment of the associated R&D effort. Accordingly, during the development period after the date of acquisition, these assets are not amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. At that time, we will determine the useful life of the asset, reclassify it out of IPR&D and begin amortization. If the associated R&D effort is abandoned, the related IPR&D assets will likely be written-off, and we will record an impairment charge.

IPR&D assets are high-risk assets, given the uncertain nature of R&D. Accordingly, we expect that many of these IPR&D assets will become impaired and be written-off at some time in the future.

Licensing Agreements

Licensing agreements for developed technology and for technology in development primarily relate to out-licensing arrangements acquired from third parties, including the Array acquisition. These assets represent the cost for the license, where we acquired the right to future royalties and/or milestones upon development or commercialization by the licensing partner. A significant component of the licensing arrangements are for out-licensing arrangements with a number of partners for oncology technology in varying stages of development that have not yet received regulatory approval in a major market. Accordingly, during the development period after the date of acquisition, each of these assets is classified as indefinite-lived intangible assets and will not be amortized until approval is obtained in a major market. At that time we will determine the useful life of the asset, reclassify the respective licensing arrangement asset to finite-lived intangible asset and begin amortization. If the development effort is abandoned, the related licensing asset will likely be written-off, and we will record an impairment charge.

Amortization

The weighted-average life for each of our total finite-lived intangible assets and the largest component, developed technology rights, is approximately 9 years. Total amortization expense for finite-lived intangible assets was $3.5 billion in 2020, $4.5 billion in 2019 and $4.8 billion in 2018.

The following provides the expected annual amortization expense:
(MILLIONS OF DOLLARS)	2021		2022		2023		2024		2025
Amortization expense	$	3,372	$	3,249	$	2,921	$	2,642	$	2,492

B. Goodwill

At the beginning of 2019, we reorganized our commercial operations and began to manage our businesses through three different operating segments––Biopharma, Upjohn and Consumer Healthcare. As a result of the reorganization of our commercial operations, our remaining goodwill was required to be reallocated amongst the then new Biopharma and Upjohn operating segments by determining the fair value of each reporting unit under our old and new management structure and the portions being transferred. We completed this re-allocation based on relative fair value in the second quarter of 2019 and retrospectively presented goodwill according to the operating structure.

Our Consumer Healthcare business was classified as held for sale as of December 31, 2018 and, upon closing of the transaction with GSK during the third quarter of 2019, we deconsolidated our Consumer Healthcare business and derecognized Consumer Healthcare goodwill. For additional information, see Note 2C. On November 16, 2020, we completed the spin-off and the combination of our Upjohn Business with Mylan. Upon closing, we deconsolidated the Upjohn business and derecognized $10.6 billion in Upjohn goodwill. In addition, at December 31, 2019, the goodwill associated with the Upjohn Business was classified as Noncurrent assets of discontinued operations. For additional information, see Note 2B.

The following summarizes the components and changes in the carrying amount of Goodwill:
(MILLIONS OF DOLLARS)	Total
Balance, January 1, 2019	$	42,927
Additions(a)	5,411
Other(b)	(136)
Balance, December 31, 2019	48,202
Additions(c)	727
Other(b)	648
Balance, December 31, 2020	$	49,577

(a)Additions relate to our acquisition of Array (see Note 2A).

(b)Other represents the impact of foreign exchange.

(c)Additions primarily represent the impact of measurement period adjustments related to our Array acquisition (see Note 2A).