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BUSINESS COMBINATIONS (Tables)
 9 Months Ended
Sep. 30, 2015
Business Acquisition [Line Items]  
Schedule of pro forma impact of merger and acquisition
The following table presents unaudited pro forma consolidated results of operations for the three-month and nine-month periods ended September 30, 2015 and 2014, as if 2015 acquisitions had occurred as of January 1, 2014 and 2014 acquisitions had occurred as of January 1, 2013.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$
2,786.8

 
$
2,538.4

 
$
7,737.7

 
$
7,593.5

Net income (loss) attributable to Valeant Pharmaceuticals International, Inc.
57.8

 
14.1

 
(258.2
)
 
(338.7
)
 
 
 
 
 
 
 
 
Income (loss) per share attributable to Valeant Pharmaceuticals International, Inc.:
 
 
 
 
 
 
 
Basic
$
0.17

 
$
0.04

 
$
(0.75
)
 
$
(0.99
)
Diluted
$
0.16

 
$
0.04

 
$
(0.75
)
 
$
(0.99
)
Salix  
Business Acquisition [Line Items]  
Fair value of consideration transferred
The following table indicates the consideration transferred to effect the Salix Acquisition:
(In millions except per share data)
 
Conversion
Calculation
 
Fair
Value
Number of shares of Salix common stock outstanding as of acquisition date
 
64.3

 
 

Multiplied by Per Share Merger Consideration
 
$
173.00

 
$
11,123.9

Number of outstanding stock options of Salix cancelled and exchanged for cash(a)
 
0.1

 
10.1

Number of outstanding restricted stock of Salix cancelled and exchanged for cash(a)
 
1.1

 
195.0

 
 
 
 
11,329.0

Less: Cash consideration paid for Salix’s restricted stock that was accelerated at the closing of the Salix Acquisition(a)
 
 
 
(164.5
)
Add: Payment of Salix’s Term Loan B Credit Facility(b)
 
 
 
1,125.2

Add: Payment of Salix’s 6.00% Senior Notes due 2021(b)
 
 
 
842.3

Total fair value of consideration transferred
 
 

 
$
13,132.0

___________________________________
(a)
The purchase consideration paid to holders of Salix stock options and restricted stock attributable to pre-combination services was included as a component of purchase price. Purchase consideration of $165 million paid for outstanding restricted stock that was accelerated by the Company in connection with the Salix Acquisition was excluded from purchase price and accounted for as post-combination expense within Other expense (income) in the second quarter of 2015.
(b)
The repayment of Salix’s Term Loan B Credit Facility has been reflected as part of the purchase consideration as the debt was repaid concurrently with the consummation of the Salix Acquisition and was not assumed by the Company as part of the acquisition. Similarly, the redemption of Salix’s 6.00% Senior Notes due 2021 has been reflected as part of the purchase consideration as the indenture governing the 6.00% Senior Notes due 2021 was satisfied and discharged concurrently with the consummation of the Salix Acquisition and was not assumed by the Company as part of the acquisition.
Schedule of fair value of long-term debt assumed
The following table summarizes the fair value of long-term debt assumed as of the acquisition date:
 
 
Amounts
Recognized as of
Acquisition Date
1.5% Convertible Senior Notes due 2019(1)
 
$
1,837.1

2.75% Convertible Senior Notes due 2015(1)
 
1,286.0

Total long-term debt assumed
 
$
3,123.1

____________________________________
(1)
The Company subsequently redeemed these amounts in full in the second quarter of 2015, except for a nominal amount of the 1.5% Convertible Senior Notes due 2019
Schedule of estimated fair value of assets acquired and liabilities assumed
The transaction has been accounted for as a business combination under the acquisition method of accounting. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date. The following recognized amounts are provisional and subject to change:
•
amounts for intangible assets, property and equipment, certain liabilities, and other working capital balances pending finalization of the valuation;
•
amounts for income tax assets and liabilities, pending finalization of estimates and assumptions in respect of certain tax aspects of the transaction; and
•
amount of goodwill pending the completion of the valuation of the assets acquired and liabilities assumed.
The Company will finalize these amounts as it obtains the information necessary to complete the measurement process. Any changes resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recognized at the acquisition date. These changes could be significant. The Company will finalize these amounts no later than one year from the acquisition date.
 
 
Amounts
Recognized as of
Acquisition Date
(as previously
reported)(a)
 
Measurement
Period
Adjustments(b)
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Cash and cash equivalents
 
$
113.7

 
$
—

 
$
113.7

Inventories(c)
 
233.2

 
—

 
233.2

Other assets(d)
 
1,400.3

 
14.3

 
1,414.6

Property, plant and equipment, net
 
24.3

 
—

 
24.3

Identifiable intangible assets, excluding acquired IPR&D(e)
 
6,756.3

 
—

 
6,756.3

Acquired IPR&D(f)
 
5,366.8

 
(90.1
)
 
5,276.7

Current liabilities(g)
 
(1,764.2
)
 
(140.8
)
 
(1,905.0
)
Contingent consideration, including current and long-term portion(h)
 
(327.9
)
 
(45.3
)
 
(373.2
)
Long-term debt, including current portion(i)
 
(3,123.1
)
 
—

 
(3,123.1
)
Deferred income taxes, net(j)
 
(3,512.0
)
 
92.5

 
(3,419.5
)
Other non-current liabilities
 
(7.3
)
 
(9.0
)
 
(16.3
)
Total identifiable net assets
 
5,160.1

 
(178.4
)
 
4,981.7

Goodwill(k)
 
7,971.9

 
178.4

 
8,150.3

Total fair value of consideration transferred
 
$
13,132.0

 
$
—

 
$
13,132.0

________________________
(a)
As previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015.
(b)
The measurement period adjustments primarily reflect: (i) a reduction in acquired in-process research and development ("IPR&D") assets, specifically for the Oral Relistor® program based mainly on revised cost projections (see further discussion of IPR&D programs in (f) below), (ii) an increase in assumed contingent consideration resulting from further assessment of assumptions related to the probability-weighted cash flows and (iii) the tax impact of pre-tax measurement period adjustments as well as reclassifications of certain tax balances. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
(c)
Includes an estimated fair value step-up adjustment to inventory of $108 million.
(d)
Primarily includes an estimated fair value of $1.27 billion to record the capped call transactions and convertible bond hedge transactions that were entered into by Salix prior to the Salix Acquisition in connection with its 1.5% Convertible Senior Notes due 2019 and 2.75% Convertible Senior Notes due 2015. These instruments were settled on the date of the Salix Acquisition and, as such, the fair value was based on the settlement amounts. Other assets also includes an estimated insurance recovery of $80 million, based on estimated fair value, related to the legal matters discussed in (g) below.
(e)
The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Date
Product brands
 
10
 
$
6,088.3

Corporate brand
 
20
 
668.0

Total identifiable intangible assets acquired
 
11
 
$
6,756.3


(f)
A multi-period excess earnings methodology (income approach) was used to determine the estimated fair values of the acquired in-process research and development (“IPR&D”) assets from a market participant perspective. The projected cash flows from these assets were adjusted for the probabilities of successful development and commercialization of each project, and the Company used risk-adjusted discount rates of 10%-11% to present value the projected cash flows.
The IPR&D assets primarily relate to Xifaxan® 550 mg for the treatment of irritable bowel syndrome with diarrhea (new indication) in adults ("Xifaxan IBS-D"). In determining the fair value of Xifaxan IBS-D ($4.79 billion as of the acquisition date), the Company assumed material cash inflows would commence in 2015. In May 2015, Xifaxan IBS-D received approval from the U.S. Food and Drug Administration (the "FDA"), and, accordingly, such asset has been reclassified to an amortizable intangible asset as of the approval date and is being amortized over a period of 10 years.
Other IPR&D assets include, among others, Oral Relistor® for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain and Rifaximin soluble solid dispersion ("SSD") for the treatment of early decompensated liver cirrhosis. In September 2015, the Company announced that the FDA accepted for review the Company's New Drug Application for Oral Relistor®, and the FDA assigned a Prescription Drug User Fee Act (PDUFA) action date of April 16, 2016. In the third quarter of 2015, the Company terminated the Rifaximin SSD IPR&D program and recognized an impairment charge as described in Note 8.
(g)
Primarily includes an estimated fair value of $1.08 billion to record the warrant transactions that were entered into by Salix prior to the Salix Acquisition in connection with its 1.5% Convertible Senior Notes due 2019 (these instruments were settled on the date of the Salix Acquisition and, as such, the fair value was based on the settlement amounts), as well as accruals for (i) the estimated fair value of $336 million (exclusive of the related insurance recovery described in (d) above) for potential losses and related costs associated with legal matters relating to the legacy Salix business (See Note 16 for additional information regarding these legal matters) and (ii) product returns and rebates of $374 million.
(h)
The contingent consideration consists of potential payments to third parties including developmental milestone payments due upon specified regulatory achievements, commercialization milestones contingent upon achieving specified targets for net sales, and royalty-based payments. The range of potential milestone payments (excluding royalty-based payments) is from nil if none of the milestones are achieved to a maximum of up to approximately $650 million (the majority of which relates to sales-based milestones) over time if all milestones are achieved, in the aggregate, to third parties, including up to $250 million in developmental and sales-based milestones to Progenics Pharmaceuticals, Inc. related to Relistor® (including Oral Relistor®), and various other developmental and sales-based milestones. The total fair value of the contingent consideration of $373 million (including current portion of $11 million) as of the acquisition date was determined using probability-weighted discounted cash flows. Refer to Note 6 for additional information regarding contingent consideration.
(i)
The following table summarizes the fair value of long-term debt assumed as of the acquisition date:
 
 
Amounts
Recognized as of
Acquisition Date
1.5% Convertible Senior Notes due 2019(1)
 
$
1,837.1

2.75% Convertible Senior Notes due 2015(1)
 
1,286.0

Total long-term debt assumed
 
$
3,123.1

____________________________________
(1)
The Company subsequently redeemed these amounts in full in the second quarter of 2015, except for a nominal amount of the 1.5% Convertible Senior Notes due 2019.
(j)
Comprises deferred tax assets ($288 million) and deferred tax liabilities ($3.71 billion).
(k)
Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. None of the goodwill is expected to be deductible for tax purposes. The goodwill recorded represents the following:
•
the Company’s expectation to develop and market new product brands, product lines and technology;
•
cost savings and operating synergies expected to result from combining the operations of Salix with those of the Company;
•
the value of the continuing operations of Salix’s existing business (that is, the higher rate of return on the assembled net assets versus if the Company had acquired all of the net assets separately); and
•
intangible assets that do not qualify for separate recognition (for instance, Salix’s assembled workforce).
The provisional amount of goodwill has been allocated to the Company’s Developed Markets segment.
Summary of amounts and useful lives assigned to identifiable intangible assets
The following table summarizes the amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Date
Product brands
 
10
 
$
6,088.3

Corporate brand
 
20
 
668.0

Total identifiable intangible assets acquired
 
11
 
$
6,756.3
Other 2015 Acquisitions  
Business Acquisition [Line Items]  
Schedule of estimated fair value of assets acquired and liabilities assumed
 
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Cash
 
$
81.6

 
$
—

 
$
81.6

Accounts receivable(b)
 
38.3

 
—

 
38.3

Inventories
 
118.9

 
(0.3
)
 
118.6

Other current assets
 
18.2

 
—

 
18.2

Property, plant and equipment
 
85.6

 
(14.3
)
 
71.3

Identifiable intangible assets, excluding acquired IPR&D(c)
 
999.3

 
7.4

 
1,006.7

Acquired IPR&D
 
57.4

 
(1.5
)
 
55.9

Other non-current assets
 
2.8

 
—

 
2.8

Current liabilities(d)
 
(117.0
)
 
—

 
(117.0
)
Long-term debt
 
(6.1
)
 
—

 
(6.1
)
Deferred tax liability, net
 
(14.9
)
 
3.2

 
(11.7
)
Non-current liabilities(d)
 
(117.4
)
 
—

 
(117.4
)
Total identifiable net assets
 
1,146.7

 
(5.5
)
 
1,141.2

Goodwill(e)
 
86.7

 
(0.9
)
 
85.8

Total fair value of consideration transferred
 
$
1,233.4

 
$
(6.4
)
 
$
1,227.0

________________________
(a)
The measurement period adjustments primarily relate to the Dendreon acquisition and reflect: (i) a reduction in the estimated fair value of property, plant and equipment driven by further assessment of the fair value of a manufacturing facility, (ii) refinements of the estimated fair value of intangible assets, and (iii) the tax impact of pre-tax measurement period adjustments. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
(b)
The fair value of trade accounts receivable acquired was $38 million, with the gross contractual amount being $39 million, of which the Company expects that $1 million will be uncollectible.
(c)
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Product brands
 
7
 
$
713.4

 
$
0.5

 
$
713.9

Product rights
 
3
 
42.7

 
0.4

 
43.1

Corporate brands
 
9
 
0.7

 
—

 
0.7

Partner relationships
 
8
 
7.8

 
—

 
7.8

Technology/know-how
 
10
 
232.7

 
6.5

 
239.2

Other
 
6
 
2.0

 
—

 
2.0

Total identifiable intangible assets acquired
 
8
 
$
999.3

 
$
7.4

 
$
1,006.7


(d)
As part of the Marathon acquisition, the Company assumed a contingent consideration liability related to potential payments, in the aggregate, of up to approximately $200 million, for Isuprel® and Nitropress®, the amounts of which are dependent on the timing of generic entrants for these products. The fair value of the liability as of the acquisition date was determined using probability-weighted projected cash flows, with $41 million classified in Current liabilities and $46 million classified in Non-current liabilities in the table above. As of September 30, 2015, the assumptions used for determining the fair value of the contingent consideration liability have not changed significantly from those used as of the acquisition date. Through September 30, 2015, the Company has made contingent consideration payments of $22 million related to the Marathon acquisition.
(e)
The goodwill relates primarily to the Marathon and other smaller acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Substantially all of the goodwill is expected to be deductible for tax purposes. The goodwill represents primarily the cost savings, operating synergies and other benefits expected to result from combining the operations with those of the Company.
The provisional amount of goodwill has been allocated primarily to the Company’s Developed Markets segment.
Summary of amounts and useful lives assigned to identifiable intangible assets
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Product brands
 
7
 
$
713.4

 
$
0.5

 
$
713.9

Product rights
 
3
 
42.7

 
0.4

 
43.1

Corporate brands
 
9
 
0.7

 
—

 
0.7

Partner relationships
 
8
 
7.8

 
—

 
7.8

Technology/know-how
 
10
 
232.7

 
6.5

 
239.2

Other
 
6
 
2.0

 
—

 
2.0

Total identifiable intangible assets acquired
 
8
 
$
999.3

 
$
7.4

 
$
1,006.7
2014 Acquisitions  
Business Acquisition [Line Items]  
Schedule of estimated fair value of assets acquired and liabilities assumed
 
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments(a)
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Cash and cash equivalents
 
$
33.6

 
$
1.1

 
$
34.7

Accounts receivable(b)
 
87.7

 
(5.9
)
 
81.8

Assets held for sale(c)
 
125.7

 
(0.8
)
 
124.9

Inventories
 
170.4

 
(15.9
)
 
154.5

Other current assets
 
19.1

 
(4.9
)
 
14.2

Property, plant and equipment, net
 
58.5

 
(0.6
)
 
57.9

Identifiable intangible assets, excluding acquired IPR&D(d)
 
697.2

 
26.2

 
723.4

Acquired IPR&D(e)
 
65.8

 
(2.8
)
 
63.0

Other non-current assets
 
4.0

 
(2.1
)
 
1.9

Current liabilities
 
(152.0
)
 
(16.9
)
 
(168.9
)
Long-term debt, including current portion
 
(11.2
)
 
0.3

 
(10.9
)
Deferred income taxes, net
 
(116.0
)
 
40.5

 
(75.5
)
Other non-current liabilities
 
(13.4
)
 
(0.1
)
 
(13.5
)
Total identifiable net assets
 
969.4

 
18.1

 
987.5

Noncontrolling interest
 
(15.0
)
 
(4.9
)
 
(19.9
)
Goodwill(f)
 
410.4

 
49.0

 
459.4

Total fair value of consideration transferred
 
$
1,364.8

 
$
62.2

 
$
1,427.0

________________________
(a)
The measurement period adjustments primarily reflect: (i) a net increase in the fair value of contingent consideration related to smaller acquisitions based on assessment of probability and timing assumptions for potential milestone payments, related to factors that existed as of the respective acquisition dates, (ii) a decrease in the net deferred tax liability primarily related to the PreCision and Solta Medical acquisitions, (iii) adjustments to the estimated fair value of intangible assets related to smaller acquisitions, (iv) an increase in current liabilities primarily related to the PreCision acquisition and other smaller acquisitions, and (v) a decrease in inventory primarily related to the Solta Medical acquisition and other smaller acquisitions. The measurement period adjustments were made to reflect facts and circumstances existing as of the acquisition date, and did not result from intervening events subsequent to the acquisition date. These adjustments did not have a significant impact on the Company’s previously reported consolidated financial statements and, therefore, the Company has not retrospectively adjusted those financial statements.
(b)
The fair value of trade accounts receivable acquired was $82 million, with the gross contractual amount being $88 million, of which the Company expects that $6 million will be uncollectible.
(c)
Assets held for sale relate to the Tretin-X® product rights and the product rights for the generic tretinoin gel and cream products acquired in the PreCision acquisition, which were subsequently divested in the third quarter of 2014.
(d)
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Product brands
 
10
 
$
506.0

 
$
5.7

 
$
511.7

Product rights
 
8
 
95.2

 
(3.3
)
 
91.9

Corporate brand
 
15
 
28.9

 
4.0

 
32.9

In-licensed products
 
9
 
1.5

 
(0.3
)
 
1.2

Partner relationships
 
9
 
37.5

 
13.6

 
51.1

Other
 
9
 
28.1

 
6.5

 
34.6

Total identifiable intangible assets acquired
 
10
 
$
697.2

 
$
26.2

 
$
723.4


(e)
The acquired IPR&D assets primarily relate to programs from smaller acquisitions. In addition, the Solta Medical acquisition includes a program for the development of a next generation Thermage® product.
(f)
The goodwill relates primarily to the PreCision and Solta Medical acquisitions. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Substantially all of the goodwill is not expected to be deductible for tax purposes. The goodwill recorded from the PreCision and Solta Medical acquisitions represents the following:
•
cost savings, operating synergies and other benefits expected to result from combining the operations of PreCision and Solta Medical with those of the Company;
•
the Company’s expectation to develop and market new products and technology; and
•
intangible assets that do not qualify for separate recognition (for instance, PreCision’s and Solta Medical’s assembled workforces).
The provisional amount of goodwill from the PreCision acquisition has been allocated to the Company’s Developed Markets segment ($194 million). The amount of goodwill from the Solta Medical acquisition has been allocated to both the Company’s Developed Markets segment ($56 million) and Emerging Markets segment ($38 million).
Summary of amounts and useful lives assigned to identifiable intangible assets
The following table summarizes the provisional amounts and useful lives assigned to identifiable intangible assets:
 
 
Weighted-
 Average
Useful Lives
(Years)
 
Amounts
Recognized as of
Acquisition Dates
 
Measurement
Period
Adjustments
 
Amounts
Recognized as of
September 30, 2015
(as adjusted)
Product brands
 
10
 
$
506.0

 
$
5.7

 
$
511.7

Product rights
 
8
 
95.2

 
(3.3
)
 
91.9

Corporate brand
 
15
 
28.9

 
4.0

 
32.9

In-licensed products
 
9
 
1.5

 
(0.3
)
 
1.2

Partner relationships
 
9
 
37.5

 
13.6

 
51.1

Other
 
9
 
28.1

 
6.5

 
34.6

Total identifiable intangible assets acquired
 
10
 
$
697.2

 
$
26.2

 
$
723.4