Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

The following table summarizes the carrying amount of our intangible assets and goodwill, net of accumulated amortization and impairment charges:


		June 30, 2020											December 31, 2019
	Estimated Life (years)	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization		Net
Licensing rights	3-8	$	57.0	$	(36.5)		$	20.5	$	57.0	$	(34.7)	$	22.3
Patents	7	10.5		(10.5)			—		10.5		(10.5)		—
Purchased technology	6-16	4,710.5		(3,578.4)		(a)	1,132.1		4,710.5		(1,388.7)		3,321.8
Other intangibles	5	0.4		(0.3)			0.1		0.4		(0.2)		0.2
Acquired IPR&D	Indefinite	907.0		—			907.0		—		—		—
Total		$	5,685.4	$	(3,625.7)		$	2,059.7	$	4,778.4	$	(1,434.1)	$	3,344.3
Goodwill	Indefinite	$	5,078.1	$	(2.9)		$	5,075.2	$	5,040.3	$	(2.9)	$	5,037.4
(a) Includes an impairment charge of $2,042.3 recognized during the second quarter 2020 related to the KANUMA intangible asset

In connection with our acquisition of Achillion during the first quarter of 2020, we acquired IPR&D programs with a fair value of $918.0 and recorded goodwill of $37.8. For additional information on our acquisition of Achillion, please see Note 3, Acquisitions. In the second quarter 2020, we recognized an impairment charge of $11.0 to write off the cost basis of our ACHN-4471 (ALXN2040) acquired in-process research and development asset due to clinical results received during the quarter.

Amortization expense for the three months ended June 30, 2020 and 2019 was $74.6 and $81.2, respectively. Amortization expense for the six months ended June 30, 2020 and 2019 was $149.3 and $161.7, respectively. As of June 30, 2020, assuming no changes in the gross cost basis of intangible assets, the total estimated amortization expense for finite-lived intangible assets is $56.5 for the six months ending December 31, 2020, and approximately $113.0 for each of the years ending December 31, 2021 through December 31, 2025.

During the quarter ended June 30, 2020, based on continued challenges expanding patient growth and new alternative commercial opportunities, the Company revised its strategic view of KANUMA and determined that we have exhausted commercially viable initiatives related to KANUMA and will have difficulty expanding patient growth over the long term as we focus on promoting other commercial programs and growing our pipeline. As a result, we no longer expect to increase the number of KANUMA patients in the long term at the rate previously assumed. This determination resulted in reduced cash flow projections for KANUMA, which indicated that the related intangible asset value was not fully recoverable on an undiscounted cash flows basis. On June 30, 2020, the Company utilized market participant assumptions to determine its best estimate of the fair value of the intangible asset related to KANUMA that, when compared with its related carrying value, resulted in an impairment charge of $2,042.3.

The estimated fair value of the KANUMA asset as of June 30, 2020 was determined using the excess earnings method, a variation of the income approach. The excess earnings method estimates the value of an intangible asset equal to the present value of the incremental after-tax cash flows attributable to that intangible asset over its remaining economic life. Long term cash flow projections for the asset require the use of significant estimates and judgements, including discount rates and revenue growth rates, and were based on the Company’s most recent

strategic plan. The fair value of the asset was determined using an estimated weighted average cost of capital of 10.0%, which reflects the risks inherent in future cash flow projections and represents a rate of return that a market participant would expect for this asset. The estimated revenue growth rates fluctuate over the life of the asset, with a weighted average growth rate in the low single digits. The Company believes its assumptions are consistent with the plans and estimates that a market participant would use to manage the business. The estimated fair value of the KANUMA intangible asset as of June 30, 2020 was $820.0 and will continue to be amortized over its remaining estimated useful life. This fair value measurement was based on significant inputs not observable in the market and thus represents a Level 3 fair value measurement.

The following summarizes the changes in the carrying amount of goodwill:


	June 30, 2020
Balance at December 31, 2019	$	5,037.4
Goodwill resulting from the acquisition of Achillion	37.8
Balance at June 30, 2020	$	5,075.2