IMPAIRMENT CHARGES

6 Months Ended

Jun. 30, 2011

IMPAIRMENT CHARGES

IMPAIRMENT CHARGES

11.  IMPAIRMENT CHARGES

In May 2011, the United States District Court for the District of Delaware issued a decision for the patent litigation pertaining to AMRIX (Cyclobenzaprine Hydrochloride Extended-Release Capsules).  The Court ruled in the Defendants’ favor in the case, finding the two U.S. patents at issue invalid.  As a result, we recognized an impairment charge of $41.9 million in the second quarter of 2011 to reduce the value of the AMRIX intangible asset.  We also recognized an impairment charge of $1.4 million to reduce the value of equipment used in the production of AMRIX, and we recognized a credit of $27.8 million to cost of goods sold to reverse a previously accrued liability for sales-based milestones that is no longer expected to be met.  The reduction of the carrying value of the AMRIX intangible asset to its revised fair value is based on our estimate of the future cash flows from the sale of branded and generic AMRIX.  The net carrying value of our AMRIX intangible asset was $27.6 million at June 30, 2011.

In the second quarter of 2011, we performed our annual test of impairment of the in-process R&D assets acquired as part of the acquisition of Mepha GmbH in April 2010.  As a result, we recognized an impairment charge of $5.2 million based on the write-off of amounts related to products no longer expected to be launched and the write-down of amounts for products with lower expected future cash flows.

In the second quarter of 2011, we revised our estimate of future cash flows for the sale and clinical development of our TRISENOX product and as a result no longer expect to incur any of the future milestone payments related to this product.  We reduced our contingent liabilities and recognized a reduction in the carrying value of the TRISENOX intangible assets in the amount of $44.3 million in the second quarter of 2011, which did not impact net income. The net carrying value of our TRISENOX intangible asset was $15.7 million at June 30, 2011.