ACQUISITIONS AND OTHER ARRANGEMENTS

9 Months Ended

Sep. 30, 2019

In the first nine months of 2019, we acquired the rights to multiple products for an aggregate purchase price of $166 million. The purchase prices were capitalized primarily as developed-technology intangible assets and we are amortizing the assets over their estimated weighted-average useful lives of 11 years. Net sales related to these products in the first nine months of 2019 were not material.

Cheetah Medical, Inc.

On October 25, 2019, we acquired 100% of Cheetah Medical, Inc. (Cheetah) for total upfront cash consideration of $195 million, net of cash acquired, with the potential for additional cash consideration, up to $40 million, based on clinical and commercial milestones for which the acquisition date fair value was $18 million. Cheetah is a leading provider of hemodynamic monitoring technologies. As the acquisition was completed after September 30, 2019, our condensed consolidated financial statements do not include the financial condition or operating results of Cheetah in any of the periods presented herein. The fair value of the potential contingent consideration payments was estimated by applying a probability-weighted expected payment model for the clinical milestone and a Monte Carlo simulation model for the commercial milestone, which were then discounted to present value. The fair value measurements were based on Level 3 inputs. Refer to Note 17 for additional information regarding fair value measurements.

The following table summarizes the fair value of consideration transferred:


(in millions)
Cash consideration transferred	$	197
Contingent consideration	18
Total consideration	$	215

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date:


(in millions)
Assets acquired and liabilities assumed
Cash	$	2
Accounts receivable, net	3
Inventories	1
Prepaid expenses and other current assets	1
Property, plant and equipment	1
Goodwill	111
Other intangible assets	131
Operating lease right-of-use assets	1
Accounts payable and other accrued liabilities	(4)
Other non-current liabilities	(32)
Total assets acquired and liabilities assumed	$	215

We allocated $123 million of the total consideration to the developed product rights with a weighted-average useful life of 15 years and $8 million to customer relationships with a useful life of 13 years. The fair values of the intangible assets were determined using the income approach. The discount rates used to measure the intangible assets were 11.0% for developed product rights and 10.0% for customer relationships. We consider the fair value of the intangible assets to be Level 3 measurements due to the significant estimates and assumptions used by management in establishing the estimated fair values.

The goodwill, which is not deductible for tax purposes, includes the value of potential future technologies as well as the overall strategic benefits provided to our product portfolio and is included primarily in the Americas segment.

Seprafilm Adhesion Barrier

In December 2019, we entered into a definitive agreement to acquire Seprafilm Adhesion Barrier (Seprafilm) from Sanofi. The transaction closed in February 2020 and we paid approximately $345 million for the acquired assets, subject to a post-close adjustment. Seprafilm is indicated for use in patients undergoing abdominal or pelvic laparotomy as an adjunct intended to reduce the incidence, extent and severity of postoperative adhesions between the abdominal wall and the underlying viscera such as omentum, small bowel, bladder, and stomach, and between the uterus and surrounding structures such as tubes and ovaries, large bowel, and bladder. As the acquisition was completed after September 30, 2019, our condensed consolidated financial statements do not include the financial condition or results of operations of Seprafilm in any of the periods presented herein. We expect that most of the purchase price will be allocated to intangible assets and we are evaluating whether this transaction will be accounted for as an asset acquisition or a business combination.

Other

In January 2020, we acquired the U.S. rights to an additional product for $60 million. The purchase price will be capitalized as a developed-technology intangible asset in the quarter ending March 31, 2020 and will be amortized over its estimated useful life of 11 years.