

4.	Acquisitions

Business Acquisitions

Questcor Pharmaceuticals

On April 5, 2014, the Company entered into an Agreement and Plan of Merger ("the Merger Agreement") with Questcor Pharmaceuticals, Inc. ("Questcor"), a high-growth biopharmaceutical company, pursuant to which the Company has agreed to acquire Questcor for approximately $6.0 billion (based on the closing price of the Company's ordinary shares on August 1, 2014) ("the Questcor Merger"). Questcor shareholders will receive $30.00 per share in cash and 0.897 ordinary shares of the Company for each share of Questcor common stock owned. The Company has entered into debt financing commitments that, together with cash on hand, are expected to be sufficient to provide the funds necessary to consummate the transaction, as discussed further in Note 21. Questcor is focused on the treatment of patients with serious, difficult-to-treat autoimmune and rare diseases. Questcor's primary product, H.P. Acthar® Gel (repository corticotropin injection), is an injectable drug that is approved by the U.S. Food and Drug Administration ("FDA") for the treatment of 19 indications, including nephrotic syndrome, rheumatology related conditions, multiple sclerosis and infantile spasms. Questcor also supplies specialty contract manufacturing services to the global pharmaceutical and biotechnology industry through its wholly-owned subsidiary, BioVectra Inc. The acquisition is expected to provide a strong and sustainable platform for future revenue and earnings growth within the Company's Specialty Pharmaceuticals segment. Subject to customary closing conditions, the transaction is currently expected to be completed shortly after the shareholder meetings of the Company and Questcor, which are both scheduled for August 14, 2014. Acquisition costs included in the consolidated condensed statements of income for the three and nine months ended June 27, 2014 were $16.6 million and $17.5 million, respectively, and were included within selling, general and administrative expenses. The Company anticipates incurring additional acquisition costs throughout the remainder of fiscal 2014. For further information on the acquisition of Questcor, refer to the Company's Form S-4 filed with the SEC on July 11, 2014.

Cadence Pharmaceuticals

On March 19, 2014, the Company acquired all of the outstanding common stock of Cadence Pharmaceuticals, Inc. ("Cadence"), a biopharmaceutical company focused on commercializing products principally for use in the hospital setting, for total consideration of $14.00 per share in cash, or approximately $1.3 billion. The acquisition was primarily funded through a $1.3 billion senior secured term loan credit facility, as further discussed in Note 11. Cadence's sole product, OFIRMEV® (acetaminophen) injection ("Ofirmev"), is a proprietary intravenous formulation of acetaminophen for the management of mild to moderate pain, the management of moderate to severe pain with adjunctive opioid analgesics and the reduction of fever. The acquisition of Cadence ("the Cadence Acquisition") adds a growth product to the Specialty Pharmaceuticals product portfolio and provides the Company an opportunity to expand its reach into the adjacent hospital market, in which Cadence had established a presence.

The following amounts represent the preliminary allocation of the fair value of the identifiable assets acquired and liabilities assumed, including preliminary goodwill and intangible assets, and the related deferred tax balances. The Company expects to complete its valuation analysis and finalize deferred tax balances as of the acquisition date no later than the fourth fiscal quarter of 2014. The changes in the purchase price allocation and preliminary goodwill based on the final valuation may include, but are not limited to, changes in deferred income taxes, intangible assets and inventory.



Cash and cash equivalents	$	43.2
Inventory	21.0
Intangible assets	1,300.0
Goodwill	322.2
Other assets, current and non-current ⁽¹⁾	18.0
Deferred tax liabilities, net	(296.4		)
Other liabilities, current and non-current ⁽²⁾	(78.8		)
Net assets acquired	$	1,329.2


(1)	This amount includes $14.7 million of accounts receivable, which is also the gross contractual value.


(2)	This amount includes $30.0 million of pre-existing Cadence debt, which the Company repaid upon completion of the acquisition.

Intangible assets acquired consist of the following:



	Amount		Amortization Period
Completed technology	$	1,300.0	8 years

The completed technology intangible asset relates to Ofirmev, the rights to which have been in-licensed from Bristol-Myers Squibb Company ("BMS"). The fair value of the intangible asset was determined using the income approach, which is a valuation technique that provides an estimate of the fair value of the asset based on market participant expectations of the cash flows an asset would generate. The cash flows were discounted at a 13.0% rate. For more information on the BMS license agreement, refer to "License Agreement" below. Based on the Company's preliminary estimate, the excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents the assembled workforce, anticipated synergies and the tax-free nature of the transaction. The goodwill is not deductible for U.S. income tax purposes. All assets acquired are included within the Company's Specialty Pharmaceuticals segment.

The condensed consolidated statements of income for both the three and nine months ended June 27, 2014 included net sales of $53.2 million and $58.5 million, respectively, and $57.6 million and $66.6 million losses from continuing operations before income taxes, respectively. These amounts reflect the operating results and amortization expenses of Cadence since the date of acquisition. Acquisition costs included within the condensed consolidated statements of income for the nine months ended June 27, 2014 were $17.6 million, respectively, and were included within selling, general and administrative expenses.

The following unaudited pro forma information presents a summary of the combined results of operations of the Company and of Cadence for the three and nine months ended June 27, 2014 and June 28, 2013 as if the acquisition had occurred on October 1, 2012, along with certain pro forma adjustments. These pro forma adjustments consist primarily of:


•	non-recurring costs related to the step-up in fair value of acquired inventory and transaction costs related to the acquisition of Cadence;


•	increased amortization expense related to the completed technology intangible asset acquired in the acquisition of Cadence;


•	increased interest expense to reflect the variable rate term loan and revolving credit facility entered into in connection with the acquisition of Cadence (utilizing the interest rate in effect at March 28, 2014 of 3.50%), including interest and amortization of deferred financing costs and original issue discount; and


•	the related income tax effects.

The following unaudited pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the acquisition occurred on the assumed date, nor is it necessarily an indication of future operating results. In addition, the unaudited pro forma information does not reflect the cost of any integration activities, benefits from any synergies that may be derived from the acquisition or revenue growth that may be anticipated.



	Three Months Ended						Nine Months Ended
	June 27, 2014			June 28, 2013			June 27, 2014			June 28, 2013
Net sales	$	653.1		$	594.7		$	1,816.8		$	1,724.8
Net (loss)	(18.2		)	(61.9		)	(20.8		)	(97.7		)

Basic (loss) per share	$	(0.31	)	$	(1.07	)	$	(0.36	)	$	(1.69	)
Diluted (loss) per share	(0.31		)	(1.07		)	(0.36		)	(1.69		)

CNS Therapeutics

On October 1, 2012, the Company acquired all the outstanding equity of CNS Therapeutics, Inc. ("CNS Therapeutics"), a specialty pharmaceuticals company focused on developing and commercializing intrathecal products for site-specific administration to the central nervous system to treat neurological disorders and intractable chronic pain, for total consideration of $95.0 million. The total consideration was comprised of an upfront cash payment of $88.1 million (net of cash acquired of $3.6 million) and the fair value of contingent consideration of $6.9 million. This contingent consideration, which could potentially total a maximum of $9.0 million, is discussed further in Note 18. All assets acquired are included within the Company's Specialty Pharmaceuticals segment. The acquisition of CNS Therapeutics expanded the Company's branded pharmaceuticals portfolio and supports the Company's strategy of leveraging its therapeutic expertise and core capabilities in manufacturing, regulatory and commercialization to serve patients. With the acquisition, the Company now offers products for use in the management of severe spasticity of cerebal or spinal origin with a research and development pipeline of an additional presentation and concentration of GABLOFEN® (baclofen injection) ("Gablofen"), as well as other investigational pain products for intrathecal administration.

The condensed consolidated statements of income for the three and nine months ended June 27, 2014 contained $8.7 million and $24.1 million, respectively, of net sales of intrathecal products. The condensed combined statements of income for the three and nine months ended June 28, 2013 contained $7.5 million and $20.8 million, respectively, of net sales of intrathecal products. Acquisition and integration costs included in the periods presented were not material.

License Agreement

Bristol-Myers Squibb

As part of the Cadence Acquisition, the Company acquired the exclusive development and commercialization rights to Ofirmev in the U.S. and Canada, as well as the rights to the patents and technology, which were originally in-licensed by Cadence from BMS in March 2006. BMS sublicensed these rights to Cadence under a license agreement with SCR Pharmatop S.A. ("Pharmatop"), and the Company has the right to grant sublicenses to third parties. Under this license agreement, the Company may be obligated to make future milestone payments of up to $25.0 million upon the achievement of certain levels of net sales. In addition, the Company is obligated to pay royalties on sales of the product.