INTANGIBLE ASSETS AND GOODWILL

3 Months Ended

Mar. 31, 2013


9.	INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The major components of intangible assets as of March 31, 2013 and December 31, 2012 were as follows:



	As of March 31, 2013							As of December 31, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
Product brands	$	8,106,401	$	(1,525,134	)	$	6,581,267	$	7,968,318	$	(1,345,367	)	$	6,622,951
Corporate brands	293,681		(27,702		)	265,979		284,287		(25,336		)	258,951
Product rights	2,148,178		(599,639		)	1,548,539		2,110,350		(525,186		)	1,585,164
Partner relationships	182,249		(52,184		)	130,065		187,012		(44,230		)	142,782
Out-licensed technology and other	206,076		(59,991		)	146,085		209,452		(57,507		)	151,945
Total finite-lived intangible assets⁽¹⁾	10,936,585		(2,264,650		)	8,671,935		10,759,419		(1,997,626		)	8,761,793
Indefinite-lived intangible assets:
Acquired IPR&D	555,386		—			555,386		546,876		—			546,876
	$	11,491,971	$	(2,264,650	)	$	9,227,321	$	11,306,295	$	(1,997,626	)	$	9,308,669

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(1)

In the first quarter of 2013, the Company recognized a write-off of $22.2 million related to Opana®, a pain relief medication approved in Canada, due to production issues arising in the first quarter of 2013. These production issues resulted in higher spending projections and delayed commercialization timelines which, in turn, triggered the Company’s decision to suspend its launch plans. The Company does not believe this program has value to a market participant. This write-off was recognized in Amortization of intangible assets in the consolidated statements of loss.

For further information regarding asset impairment charges, see note 6 titled “FAIR VALUE MEASUREMENTS”.

The decrease in intangible assets, net primarily reflects the acquisition of the Natur Produkt and Eisai identifiable intangible assets (as described in note 3), which was more than offset by amortization, the negative impact of foreign currency exchange, and the intangible write-off described above.

For the three-month periods ended March 31, 2013 and 2012, amortization expense related to intangible assets was recorded as follows:



	Three Months Ended March 31,
	2013		2012
Cost of goods sold	$	—	$	2,026
Amortization expense	326,175		200,643
	$	326,175	$	202,669

Amortization expense in the three-month period ended March 31, 2013 includes the $26.1 million impairment charge related to suncare and skincare brands sold primarily in Australia (see note 6 titled “FAIR VALUE MEASUREMENTS” for additional information) and the $22.2 million Opana® write-off described above.

Estimated aggregate amortization expense for each of the five succeeding years ending December 31 is as follows:



	2013		2014		2015		2016		2017
Amortization expense	$	1,156,545	$	1,088,490	$	1,058,227	$	1,005,899	$	976,289

Goodwill

The changes in the carrying amount of goodwill in the three-month period ended March 31, 2013 were as follows:



	Developed Markets			Emerging Markets			Total
Balance, January 1, 2013^(a)	$	3,988,795		$	1,152,571		$	5,141,366
Additions^(b)	256			35,395			35,651
Adjustments^(c)	22,562			(316		)	22,246
Foreign exchange and other	(6,820		)	(27,196		)	(34,016		)
Balance, March 31, 2013	$	4,004,793		$	1,160,454		$	5,165,247

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(a)	Effective in the first quarter of 2013, the Company has two reportable segments: Developed Markets and Emerging Markets. Accordingly, the Company has restated prior period segment information to conform to the current period presentation. For further details, see note 18 titled “SEGMENT INFORMATION”.


(b)	Primarily relates to the Natur Produkt acquisition (as described in note 3).


(c)	Primarily reflects the impact of measurement period adjustments related to the Medicis acquisition (as described in note 3).

As described in note 3, the allocation of the goodwill balance associated with the Eisai, Natur Produkt and Medicis acquisitions is provisional and subject to the completion of the valuation of the assets acquired and liabilities assumed.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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