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INTANGIBLE ASSETS AND GOODWILL

12 Months Ended

Dec. 31, 2011

12. INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The major components of intangible assets as of December 31, 2011 and 2010 were as follows:

			Weighted- Average Useful Lives (Years)		2011							2010

			Weighted- Average Useful Lives (Years)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Finite-lived intangible assets:
	Product brands			13	$	6,442,371	$	(737,876	)	$	5,704,495	$	4,227,465	$	(404,951	)	$	3,822,514
	Corporate brands			19		181,349		(10,630	)		170,719		169,675		(2,191	)		167,484
	Product rights			8		1,302,748		(306,936	)		995,812		1,074,611		(279,275	)		795,336
	Partner relationships			7		135,095		(15,633	)		119,462		—		—			—
	Out-licensed technology and other			8		174,873		(38,915	)		135,958		205,332		(17,842	)		187,490

		Total finite-lived intangible assets⁽¹⁾		13		8,236,436		(1,109,990	)		7,126,446		5,677,083		(704,259	)		4,972,824
Indefinite-lived intangible assets:
	Acquired IPR&D⁽²⁾			NA		531,352		—			531,352		1,399,956		—			1,399,956

					$	8,767,788	$	(1,109,990	)	$	7,657,798	$	7,077,039	$	(704,259	)	$	6,372,780

(1)

As described in note 4, in connection with the divestitures of IDP-111 and 5-FU, the Company reclassified from intangible assets $54.4 million and $14.8 million of carrying value related to these products, respectively, to assets held for sale in the consolidated balance sheet as of December 31, 2011. In addition, the Company recognized $7.9 million and $19.8 million of impairment charges related to IDP-111 and 5-FU, respectively, in Amortization of intangible assets in the consolidated statements of income (loss) for the year ended December 31, 2011.

(2)

As described in note 5, in December 2011, ezogabine/retigabine received scheduling as a controlled substance, which triggered the reclassification of $797.7 million of IPR&D to a finite-lived product brand intangible asset, to be amortized over an estimated useful life of seven years. Also, the Company recognized impairment charges on IPR&D assets of $105.2 million in the fourth quarter of 2011, relating to the A002, A004, and A006 programs (U.S. Neurology and Other segment) acquired as part of the Aton acquisition in 2010 described above under note 3, as well as the IDP-109 and IDP-115 programs (U.S. Dermatology segment). The impairment charges were triggered in the fourth quarter of 2011 due to unfavorable study results, feedback received from the FDA which would result in the incurrence of higher costs to perform additional studies, reassessment of risk and the probability of success, and/or pipeline prioritization decisions resulting in the re-allocation of Company resources to other research and development programs. The impairment charges on IPR&D assets were recorded in Acquired in-process research and development expense in the consolidated statements of income (loss) for the year ended December 31, 2011.

The increase in intangible assets primarily reflects the acquisition of the PharmaSwiss, Sanitas, Elidel® and Xerese®, Dermik, Ortho Dermatologics, Afexa and iNova identifiable intangible assets (as described in note 3) and the rights to Zovirax® (as described in note 4), partially offset by the impact of the measurement period adjustments in connection with the Merger (as described in note 3), the impact of foreign currency exchange, the write-off of IPR&D assets described above, the carrying amount of the Cloderm® intangible assets expensed on the out-license of the product rights and the reclassification from intangible assets of the carrying values of IDP-111 and 5-FU to assets held for sale as described above.

For the years ended December 31, 2011, 2010 and 2009, amortization expense related to intangible assets was recorded as follows:

	2011		2010		2009

Alliance and royalty revenue	$	1,072	$	1,072	$	1,072
Cost of goods sold		8,103		8,103		8,103
Amortization expense		557,814		219,758		104,730

	$	566,989	$	228,933	$	113,905

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

			2012			2013			2014			2015			2016

	Amortization expense		$	799,318		$	801,101		$	791,634		$	772,828		$	772,595

Goodwill

As of the Merger Date, the Company reassigned its existing goodwill to affected reporting units using a relative fair value approach. The changes in the carrying amount of goodwill from the Merger Date through December 31, 2011 were as follows:

	U.S. Neurology and Other			U.S. Dermatology			Canada and Australia			Branded Generics — Europe			Branded Generics — Latin America			Total

Balance, September 28, 2010	$	68,029		$	18,495		$	9,655		$	4,115		$	—		$	100,294
Acquisition of Valeant		1,311,487			480,043			369,493			350,876			366,957			2,878,856
Foreign exchange and other^(a)		(24,561	)		(17,097	)		19,667			(2,847	)		47,064			22,226

Balance, December 31, 2010		1,354,955			481,441			398,815			352,144			414,021			3,001,376

Additions^(b)		—			11,648			220,228			364,451			—			596,327
Adjustments^(c)		187,248			(338	)		(32,963	)		(24,623	)		(12,858	)		116,466
Foreign exchange and other		—			(1,100	)		(5,806	)		(66,498	)		(41,979	)		(115,383	)

Balance, December 31, 2011	$	1,542,203		$	491,651		$	580,274		$	625,474		$	359,184		$	3,598,786

(a)

Foreign exchange and other in 2010 contains reclassifications between segments to conform to the current year management structure.

(b)

Relates to the acquisitions of PharmaSwiss, Sanitas, Dermik, Ortho Dermatologics, Afexa, iNova and Ganehill (as described in note 3).

(c)

Reflects the impact of measurement period adjustments related to the Merger (as described in note 3).

As described in note 3, the allocation of the goodwill balance associated with the acquisition of PharmaSwiss, Sanitas, Dermik, Ortho Dermatologics, Afexa and iNova 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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