INTANGIBLE ASSETS AND GOODWILL

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

The major components of intangible assets as of September 30, 2013 and December 31, 2012 were as follows:



	As of September 30, 2013							As of December 31, 2012
	Gross Carrying Amount		Accumulated Amortization, Including Impairments			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization, Including Impairments			Net Carrying Amount
Finite-lived intangible assets:
Product brands	$	10,199,918	$	(2,470,281	)	$	7,729,637	$	7,968,318	$	(1,345,367	)	$	6,622,951
Corporate brands	363,482		(38,413		)	325,069		284,287		(25,336		)	258,951
Product rights	3,013,321		(811,998		)	2,201,323		2,110,350		(525,186		)	1,585,164
Partner relationships	190,489		(73,043		)	117,446		187,012		(44,230		)	142,782
Out-licensed technology and other	255,052		(76,114		)	178,938		209,452		(57,507		)	151,945
Total finite-lived intangible assets⁽¹⁾	14,022,262		(3,469,849		)	10,552,413		10,759,419		(1,997,626		)	8,761,793
Indefinite-lived intangible assets:
Acquired IPR&D⁽²⁾	847,375		—			847,375		546,876		—			546,876
Corporate brand⁽³⁾	1,690,551		—			1,690,551		—		—			—
	$	16,560,188	$	(3,469,849	)	$	13,090,339	$	11,306,295	$	(1,997,626	)	$	9,308,669

____________________________________


(1)	In the third quarter of 2013, the Company recognized an impairment charge of $551.6 million related to ezogabine/retigabine (immediate-release formulation) which is co-developed and marketed under a collaboration agreement with GSK. For further information regarding this asset impairment charge, see note 7 titled “FAIR VALUE MEASUREMENTS”.

In addition, in the third quarter of 2013, the Company recognized a write-off of $10.0 million related to certain OTC skincare products in the U.S. (included in the Company’s Developed Markets segment) due to the discontinuation of the products. The Company does not believe these programs have value to a market participant.

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 (included in the Company's Developed Markets segment), 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.

These impairment charges were recognized in Amortization and impairments of finite-lived intangible assets in the consolidated statements of (loss) income.


(2)	In the third quarter of 2013, the Company wrote off an IPR&D asset of $93.8 million relating to a modified-release formulation of ezogabine/retigabine. For further information regarding this write-off, see note 7 titled “FAIR VALUE MEASUREMENTS”.

In addition, in the third quarter of 2013, the Company wrote-off IPR&D assets of $27.3 million, in the aggregate, due to the write-off of IPR&D assets acquired by Valeant as part of Aton acquisition in May 2010, mainly related to the termination of the A007 (Lacrisert®) development program in the third quarter of 2013. The Company does not believe these programs have value to a market participant.

In the third quarter of 2012, the Company recorded charges of (i) $133.4 million related to the write-off of an acquired IPR&D asset related to the IDP-107 dermatology program, which was acquired in September 2010 as part of merger between the Company (then named Biovail Corporation (“Biovail”)) and Valeant, and (ii) $12.0 million related to a payment to terminate a research and development commitment with a third party. Through discussion with various internal and external Key Opinion Leaders, the Company completed its analysis of the Phase 2 study results for IDP-107 during the third quarter of 2012. This led to the Company’s decision in the third quarter of 2012 to terminate the program and fully impair the asset. As attempts to identify a partner for the program were not successful, the Company does not believe the program has value to a market participant.

The write-offs of the IPR&D assets were recorded in In-process research and development impairments and other charges in the consolidated statements of (loss) income.

For further information regarding asset impairment charges, see note 7 titled “FAIR VALUE MEASUREMENTS”.


(3)	Represents the B&L corporate trademark, which has an indefinite useful life and is not amortizable. See note 3 “BUSINESS COMBINATIONS” for further information.

The increase in intangible assets, net primarily reflects the acquisition of the B&L, Obagi, Eisai and Natur Produkt identifiable intangible assets (as described in note 3) partially offset by amortization, the negative impact of foreign currency exchange, and the intangible impairments described above.

Amortization and impairments of finite-lived intangible assets were recorded as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Cost of goods sold	$	—	$	—	$	—	$	2,557
Amortization and impairments of finite-lived intangible assets	910,248		218,187		1,540,021		629,400
	$	910,248	$	218,187	$	1,540,021	$	631,957

Amortization and impairments of finite-lived intangible assets in the nine-month period ended September 30, 2013 includes the $551.6 million impairment charge related to ezogabine/retigabine (described above), the $31.5 million of impairment charges related to suncare and skincare brands sold primarily in Australia (see note 7 titled “FAIR VALUE MEASUREMENTS” for additional information), the $22.2 million Opana® write-off (described above), $22.3 million of write-offs, in the aggregate, related to the discontinuation of certain products in the Brazilian, Canadian, and Polish markets, and the $10.0 million write-off related to certain OTC skincare products in the U.S. (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⁾	$	1,243,488	$	1,365,817	$	1,317,121	$	1,230,973	$	1,177,238

____________________________________


(1)	Amortization expense shown in the table above does not include impairments of finite-lived intangible assets.

Goodwill

The changes in the carrying amount of goodwill in the nine-month period ended September 30, 2013 were as follows:



	Developed Markets		Emerging Markets			Total
Balance, January 1, 2013^(a)	$	3,992,988	$	1,148,378		$	5,141,366
Additions^(b)	3,440,237		1,170,563			4,610,800
Adjustments^(c)	20,168		(316		)	19,852
Foreign exchange and other	2,193		(32,208		)	(30,015		)
Balance, September 30, 2013	$	7,455,586	$	2,286,417		$	9,742,003

____________________________________


(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 20 titled “SEGMENT INFORMATION”.


(b)	Primarily relates to the B&L, Obagi and Natur Produkt acquisitions (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 B&L and Natur Produkt 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.

+ References+ Details