
5.	RESTRUCTURING, INTEGRATION AND OTHER COSTS

Medicis Acquisition-Related Cost-Rationalization and Integration Initiatives

In connection with the Medicis acquisition, the Company has implemented cost-rationalization and integration initiatives to capture operating synergies and generate cost savings across the Company. These measures included:


•	workforce reductions across the Company and other organizational changes;


•	closing of duplicative facilities and other site rationalization actions company-wide, including research and development facilities, sales offices and corporate facilities;


•	leveraging research and development spend; and


•	procurement savings.

The Company estimates that it will incur total costs significantly less than the estimated annual synergies of $300 million in connection with these cost-rationalization and integration initiatives, which are expected to be substantially completed by the end of 2013. Since the acquisition date, total costs of $143.3 million (including (i) $101.4 million of restructuring expenses, (ii) $32.2 million of acquisition-related costs, which excludes $24.2 million of acquisition-related costs recognized in the fourth quarter of 2012 related to royalties to be paid to Galderma S.A. on sales of Sculptra®, and (iii) $9.7 million of integration expenses) have been incurred through March 31, 2013. These costs primarily include: employee termination costs payable to approximately 750 employees of the Company and Medicis who have been or will be terminated as a result of the Medicis acquisition; IPR&D termination costs related to the transfer to other parties of product-development programs that did not align with our research and development model; costs to consolidate or close facilities and relocate employees; and contract termination and lease cancellation costs. These estimates do not include a charge of $77.3 million recognized and paid in the fourth quarter of 2012 related to the acceleration of unvested stock options, restricted stock awards, and share appreciation rights for Medicis employees that was triggered by the change in control.

The following table summarizes the major components of restructuring costs incurred in connection with Medicis acquisition-related initiatives through March 31, 2013:



	Employee Termination Costs						IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs
	Severance and Related Benefits			Share-Based Compensation⁽¹⁾			IPR&D Termination Costs		Contract Termination, Facility Closure and Other Costs			Total
Balance, January 1, 2012	$	—		$	—		$	—	$	—		$	—
Costs incurred and charged to expense	85,253			77,329			—		370			162,952
Cash payments	(77,975		)	(77,329		)	—		(5		)	(155,309		)
Non-cash adjustments	4,073			—			—		(162		)	3,911
Balance, December 31, 2012	11,351			—			—		203			11,554
Costs incurred and charged to expense	12,902			—			—		2,870			15,772
Cash payments	(21,573		)	—			—		(2,758		)	(24,331		)
Non-cash adjustments	151			—			—		(177		)	(26		)
Balance, March 31, 2013	$	2,831		$	—		$	—	$	138		$	2,969

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(1)	Relates to the acceleration of unvested stock options, restricted stock awards, and share appreciation rights for Medicis employees that was triggered by the change in control.

In addition to restructuring costs associated with the Company’s Medicis acquisition-related initiatives shown in the table above, the Company incurred an additional $33.2 million of other restructuring, integration-related and other costs in the three-month period ended March 31, 2013, including (i) $24.3 million of integration consulting, duplicate labor, transition service, and other costs, (ii) $4.3 million of facility closure costs, (iii) $2.9 million of severance costs and (iv) $1.7 million of other costs, including non-personnel manufacturing integration costs. These costs primarily related to (i) Medicis integration costs, as well as integration and restructuring costs for other acquisitions, (ii) intellectual property migration and the global consolidation of the Company’s manufacturing facilities, and (iii) systems integration initiatives. The Company made payments of $34.8 million during the three-month period ended March 31, 2013 (in addition to the $24.3 million of payments related to Medicis restructuring shown in the table above).

In the three-month period ended March 31, 2012, the Company incurred $62.3 million of restructuring, integration-related and other costs, in the aggregate, including costs of $13.9 million related to the September 28, 2010 merger between the Company (then named as Biovail Corporation (“Biovail”)) and Valeant, as well as $18.2 million of other severance-related costs. The Company made payments of $67.3 million, in the aggregate, during the three-month period ended March 31, 2012.