Other Intangible Assets, Net

6 Months Ended

Jun. 30, 2015

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Other Intangible Assets Disclosure

10.       Other intangible assets, net

		June 30,	December 31,
		2015	2014
		$’M	$’M
		________________	________________
Amortized intangible assets
	Intellectual property rights acquired for currently marketed products	9,416.1	4,816.9
	Other intangible assets1	375.0	30.0
		________________	________________
		9,791.1	4,846.9
Unamortized intangible assets
	Intellectual property rights acquired for IPR&D	1,182.2	1,550.0
		________________	________________
		10,973.3	6,396.9
Less: Accumulated amortization		(1,662.9)	(1,462.5)
		________________	________________
		9,310.4	4,934.4
		________________	________________

• Other intangible assets primarily comprises of royalty right assets acquired with NPS Pharma.

The change in the net book value of other intangible assets for the six monthsto June 30, 2015and 2014is shown in the table below:

	Other intangible assets
	2015	2014
	$’M	$’M
	________________	________________
As at January 1,	4,934.4	2,312.6
Acquisitions	5,167.8	3,321.4
Amortization charged	(219.6)	(119.0)
Impairment charges	(523.3)	(188.0)
Foreign currency translation	(48.9)	(1.5)
	________________	________________
As at June 30,	9,310.4	5,325.5
	________________	________________

In the six months to June 30, 2015 the Company acquired intangible assets totaling $5,168 million, relating to the fair value of intangible assets for currently marketed products and royalty right assets acquired with NPS Pharma of $4,993 million and IPR&D assets of $175 million acquired with Meritage (see Note 2 for further details).

The Company reviews its intangible assets for impairment whenever events or circumstances suggest that their carrying value may not be recoverable. In the six months to June 30, 2015 the Company identified indicators of impairment in respect of its SHP625 (for the treatment of cholestatic liver disease), and SHP608 (for the treatment of DEB) IPR&D assets.

The indicators of impairment related to SHP625 in the second quarter of 2015 included the results of two Phase 2 studies, comprising a 13-week study of 20 paediatric patients with Alagille syndrome (“ALGS”), a 13 week, double blind, placebo-controlled trial in combination with ursodeoxycholic acid (“UDCA”) for patients with Primary Biliary Cirrhosis (“PBC”), and preliminary results froma 72 week open label Phase 2 study in Progressive Familial Intrahepatic Cholestasis (“PFIC”). Although both the ALGS and PBC trials indicated a reduction in bile serum acids in the SHP625 treated group, neither of these trials met their primary or secondary endpoints. The interim analysis in the PFIC trial was based on the first 12 subjects who completed 13 weeks of treatment per protocol. There was no statistically significant reduction in mean serum bile acid levels from baseline. A change from baseline analysis was planned as there is no placebo treatment arm in this study. However, changes from baseline for pruritus did reach statistical significance.

Following these trial results, the Company reviewed the recoverability of its SHP625 IPR&D asset in the second quarter of 2015 and recorded an impairment charge of $346.6 million (within R&D expenses in the consolidated statement of income) to record the SHP625 IPR&D asset to its revised fair value of $120.4 million. This fair value was based on the revised discounted cash flow forecasts associated with SHP625, which included a reduced probability of achieving regulatory approval.

For SHP608, preclinical toxicity findings in the second quarter of 2015 have led to a significant reduction in the probability of achieving regulatory approval of this asset. As a result, the Company recorded an impairment charge of $176.7 million within R&D expenses in the consolidated statement of income to fully write off the SHP608 IPR&D asset.

The fair values of the related contingent consideration liabilities arising from the Lumena and Lotus Tissue Repair acquisitions (through which Shire acquired SHP625 and SHP608 respectively) have also been reduced, resulting in a credit of $280.0 million being recorded in Integration and acquisition costs.

In the six months to June 30, 2014 the Company identified indicators of impairment in respect of its SHP602 (iron chelating agent for the treatment of iron overload secondary to chronic transfusion) and SHP613 (for the treatment of improvement in patency of arteriovenous access in hemodialysis patients) IPR&D assets. The Company therefore reviewed the recoverability of its SHP602 and SHP613 IPR&D assets and recorded an impairment charge of $166.0 million and $22.0 million, respectively, within R&D expenses in the consolidated statement of income to record the IPR&D assets to their revised fair value.

Management estimates that the annual amortization charge in respect of intangible assets held at June 30, 2015will be approximately $476 million for each of the five years to June 30, 2020.Estimated amortization expense can be affected by various factors including future acquisitions, disposals of product rights, regulatory approval and subsequent amortization of acquired IPR&D projects, foreign exchange movements and the technological advancement and regulatory approval of competitor products.