XML 26 R15.htm IDEA: XBRL DOCUMENT v3.5.0.2
INTANGIBLE ASSETS AND GOODWILL
 6 Months Ended
Jun. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The major components of intangible assets as of June 30, 2016 and December 31, 2015 were as follows:
 
 
As of June 30, 2016
 
As of December 31, 2015
 
 
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
 
$
21,774.0

 
$
(6,291.5
)
 
$
15,482.5

 
$
22,082.8

 
$
(5,236.4
)
 
$
16,846.4

Corporate brands
 
1,041.9

 
(128.6
)
 
913.3

 
1,066.1

 
(107.1
)
 
959.0

Product rights/patents
 
4,305.9

 
(1,954.8
)
 
2,351.1

 
4,339.9

 
(1,711.7
)
 
2,628.2

Partner relationships
 
167.5

 
(131.6
)
 
35.9

 
217.6

 
(170.3
)
 
47.3

Technology and other
 
442.3

 
(174.1
)
 
268.2

 
480.3

 
(186.1
)
 
294.2

Total finite-lived intangible assets(1)
 
27,731.6

 
(8,680.6
)
 
19,051.0

 
28,186.7

 
(7,411.6
)
 
20,775.1

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
Acquired IPR&D(2)
 
587.3

 
—

 
587.3

 
610.4

 
—

 
610.4

Corporate brand(3)
 
1,697.5

 
—

 
1,697.5

 
1,697.5

 
—

 
1,697.5

 
 
$
30,016.4

 
$
(8,680.6
)
 
$
21,335.8

 
$
30,494.6

 
$
(7,411.6
)
 
$
23,083.0

____________________________________
(1)
The Company continues to monitor the recoverability of its finite-lived intangible assets and tests the intangible assets for impairment if indicators of impairment are present.
In the second quarter of 2016, the Company recognized impairment charges of $215 million, primarily due to $199 million recognized as a result of the intangible assets related to Ruconest®, inclusive of goodwill of $37 million, being classified as assets held for sale as of June 30, 2016. Refer to Note 19 for further details.
In the first quarter of 2016, the Company recognized impairment charges of $16 million for a number of individually immaterial intangible assets.
In the fourth quarter of 2015, the Company recognized impairment charges of $79 million related to the write-off of intangible assets and $23 million related to the write-off of property, plant and equipment, in connection with the termination (announced in October 2015) of the arrangements with and relating to Philidor (Developed Markets segment). In addition, in the fourth quarter of 2015, the Company recognized an impairment charge of $27 million related to the write-off of ezogabine/retigabine (immediate-release formulation) (Developed Markets segment) resulting from further analysis of commercialization strategy and projections. GlaxoSmithKline plc (‘‘GSK’’) controls all sales force promotion for ezogabine/retigabine.
In the third quarter of 2015, the Company recognized an impairment charge of $26 million related to Zelapar® (Developed Markets segment), resulting from declining sales trends.
These impairment charges were recognized in Amortization and impairments of finite-lived intangible assets in the Consolidated statements of (loss) income for the respective periods.
(2)
The Company acquired certain IPR&D assets as part of the Salix Acquisition, as described further in Note 4.
In the second quarter of 2016, the Company wrote off an IPR&D asset of $14 million related to the termination of the development program for Cirle 3-dimensional surgical navigation technology, resulting from a feasibility analysis.
In the fourth quarter of 2015, the Company wrote off an IPR&D asset of $28 million related to the Emerade® development program in the U.S. (Developed Markets segment) based on analysis of feedback received from the FDA, and such program was terminated in the U.S.
In the third quarter of 2015, the Company wrote off an IPR&D asset of $90 million related to the Rifaximin SSD development program (Developed Markets segment) based on analysis of Phase 2 study data, and the program was subsequently terminated.
In the second quarter of 2015, the Company wrote off an IPR&D asset of $12 million related to the Arestin® Peri-Implantitis development program (Developed Markets segment), resulting from analysis of Phase 3 study data.
The write-offs of the IPR&D assets were recognized in In-process research and development impairments and other charges in the Consolidated statements of (loss) income for the respective periods.
(3)
Represents the corporate trademark, related to the acquisition of Bausch & Lomb Holdings Incorporated (‘‘B&L’’) in August 2013, which has an indefinite useful life and is therefore not amortized.
Estimated aggregate amortization expense, as of June 30, 2016, for each of the five succeeding years ending December 31 is as follows:
 
 
2016
 
2017
 
2018
 
2019
 
2020
Amortization expense(1)
 
$
2,666.4

 
$
2,583.9

 
$
2,454.5

 
$
2,327.6

 
$
2,120.4

____________________________________
(1)
Estimated amortization expense shown in the table above does not include potential future impairments of finite-lived intangible assets, if any.
Goodwill
The changes in the carrying amount of goodwill in the six-month period ended June 30, 2016 were as follows:
 
 
Developed
Markets
 
Emerging
Markets
 
Total
Balance, January 1, 2016
 
$
16,141.3

 
$
2,411.5

 
$
18,552.8

Additions
 
0.7

 
—

 
0.7

Divestiture(1)
 
(36.2
)
 
—

 
(36.2
)
Allocations to assets held for sale(2)
 
(37.1
)
 
—

 
(37.1
)
Foreign exchange and other
 
45.0

 
(13.4
)
 
31.6

Balance, June 30, 2016
 
$
16,113.7

 
$
2,398.1

 
$
18,511.8


____________________________________
(1)
See Note 5 for additional information regarding the divestiture of a portfolio of neurology medical device products to Stryker Corporation.
(2)
Relates to the reclassification of goodwill to assets held for sale in the second quarter of 2016 related to the divestiture of Ruconest®, refer to Note 19 for further details.
As described in Note 4, the allocations of the goodwill balance associated with certain acquisitions are provisional and subject to the completion of the valuation of the assets acquired and liabilities assumed.
Goodwill is not amortized but is tested for impairment at least annually at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. The Company operates in two operating and reportable segments: Developed Markets and Emerging Markets. The Developed Markets segment consists of four reporting units based on geography, namely (i) U.S., (ii) Canada and Australia, (iii) Western Europe, and (iv) Japan. The Emerging Markets segment consists of three reporting units based on geography, namely (i) Central and Eastern Europe, Middle East and Africa, (ii) Latin America, and (iii) Asia. The Company conducted its annual goodwill impairment test in the fourth quarter of 2015 which resulted in no goodwill impairment. Given the challenges facing the Company in certain businesses, primarily in dermatology and GI, management, under the direction of the Company's new Chief Executive Officer, performed a review of the Company's current forecast for fiscal year 2016 (the “2016 forecast”) in connection with the preparation of the Company's Consolidated financial statements as of and for the three months ended March 31, 2016, which resulted in a reduction in the 2016 forecast. The Company considered this reduction in its 2016 forecast to constitute a triggering event requiring the performance of an updated goodwill impairment analysis as of March 31, 2016. The Company estimated the fair values of its reporting units using a discounted cash flow analysis approach. These calculations contain uncertainties as they require management to make assumptions about future cash flows and the appropriate discount rate to reflect the risk inherent in the future cash flows. A change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on the Company's results of operations. As a result of this goodwill impairment analysis, despite a decline in the estimated fair value of the U.S. reporting unit, the Company determined that none of the goodwill associated with its reporting units was impaired as of March 31, 2016. The estimated fair values of each reporting unit exceeded their carrying values at the date of testing. The Company applied a hypothetical 15% decrease to the fair values of each reporting unit, which at such date, would not have triggered additional impairment testing and analysis.
The Company continues to evaluate the performance of its reporting units and other factors that may affect the fair value estimates of its reporting units. Based on its most recent evaluation, no triggering event requiring the performance of a goodwill impairment analysis has been identified, including consideration of the hypothetical 15% decrease to the fair values of each reporting unit.