Acquisitions and License Agreements (Tables)

12 Months Ended

Sep. 30, 2016

Schedule of Fair Value of Identifiable Assets Acquired and Liabilities Assumed

The following amounts represent the preliminary allocation of the fair value of the identifiable assets acquired and liabilities assumed for the Stratatech Acquisition and Hemostasis Acquisition, and final allocation of the fair value of the identifiable assets acquired and liabilities assumed for the Therakos Acquisition, Ikaria Acquisition, Questcor Acquisition and Cadence Acquisition:



	Stratatech		Hemostasis		Therakos		Ikaria		Questcor		Cadence
Cash	$	0.2	$	3.3	$	41.3	$	77.3	$	445.1	$	43.2
Inventory	—		94.6		23.5		26.3		67.9		21.0
Intangible assets	99.8		132.7		1,170.0		1,971.0		5,601.1		1,300.0
Goodwill (non-tax deductible)	57.3		3.3		429.9		795.0		1,789.4		318.1
Other assets, current and non-current⁽¹⁾	3.2		7.9		40.2		174.3		274.3		18.0
Total assets acquired	160.5		241.8		1,704.9		3,043.9		8,177.8		1,700.3
Current liabilities	4.3		3.6		24.7		33.0		168.9		48.8
Unpaid purchase consideration (current)	—		—		—		—		128.8		—
Other liabilities (non-current)	—		10.6		0.6		15.8		186.8		—
Deferred tax liabilities, net (non-current)	24.3		2.1		315.7		620.5		1,906.8		292.3
Contingent consideration (non-current)	54.9		52.0		—		—		—		—
Total debt	1.0		—		344.8		1,121.0		—		30.0
Total liabilities assumed	84.5		68.3		685.8		1,790.3		2,391.3		371.1
Net assets acquired	$	76.0	$	173.5	$	1,019.1	$	1,253.6	$	5,786.5	$	1,329.2


(1)	This amount includes $1.3 million, zero, $22.0 million, $73.8 million, $87.3 million, and $14.7 million of accounts receivable for the Stratatech Acquisition, Hemostasis Acquisition, Therakos Acquisition, Ikaria Acquisition, Questcor Acquisition and Cadence Acquisition, respectively, which is also the gross contractual value.

Schedule of Reconciliation of Total Consideration

The following reconciles the total consideration to net assets acquired:



	Stratatech			Hemostasis			Therakos		Ikaria		Questcor			Cadence
Total consideration, net of cash	$	130.7		$	222.2		$	977.8	$	1,176.3	$	5,470.2		$	1,286.0
Plus: cash assumed in acquisition	0.2			3.3			41.3		77.3		445.1			43.2
Total consideration	130.9			225.5			1,019.1		1,253.6		5,915.3			1,329.2
Less: unpaid purchase consideration	—			—			—		—		(128.8		)	—
Less: non-cash contingent consideration	(54.9		)	(52.0		)	—		—		—			—
Net assets acquired	$	76.0		$	173.5		$	1,019.1	$	1,253.6	$	5,786.5		$	1,329.2

Schedule of Earnings by Acquiree

Financial Results - The amount of net sales and earnings included in the Company's results for the periods presented were as follows:



Net sales	2016			2015			2014
Therakos	$	207.6		$	—		$	—
Ikaria	491.5			191.9			—
Questcor	1,218.4			1,125.9			129.2
Cadence	284.3			263.0			124.4
	$	2,201.8		$	1,580.8		$	253.6
Operating income (loss)
Therakos	$	12.5		$	—		$	—
Ikaria	201.1			47.1			—
Questcor	371.5			223.3			17.4
Cadence	(84.5		)	(97.3		)	(66.9		)
	$	500.6		$	173.1		$	(49.5	)

Schedule of Acquisition Cost

Acquisition-Related Costs - Acquisition-related costs incurred in fiscal 2016, 2015 and 2014 for each of the acquisitions discussed above were as follows:



Acquisition-related costs	2016		2015		2014
Stratatech	$	3.7	$	—	$	—
Hemostasis Products	2.7		—		—
Therakos	0.3		22.5		—
Ikaria	0.2		30.9		—
Questcor	—		—		47.5
Cadence	—		—		17.6
	$	6.9	$	53.4	$	65.1

Business Combination Intangible Asset Amortization By Acquiree [Table Text Block]

The amount of amortization on acquired intangible assets included within operating income (loss) for the periods presented was as follows:



Intangible asset amortization	2016		2015		2014
Therakos	$	78.0	$	—	$	—
Ikaria	124.5		57.1		—
Questcor	300.7		301.4		34.9
Cadence	162.5		162.5		85.9
	$	665.7	$	521.0	$	120.8

During fiscal 2016, 2015 and 2014, the Company recognized $24.3 million, $44.1 million and $25.7 million, respectively, of expense associated with fair value adjustments of acquired inventory. This expense was included within cost of sales.

Schedule of Intangible Assets Acquired

Intangible assets acquired consist of the following:



Stratatech	Amount		Amortization Period
In-process research and development - StrataGraft	$	99.8	Non-Amortizable

The IPR&D intangible asset relates to StrataGraft. The fair value of the IPR&D was determined using the income approach, which is a valuation technique that provides an estimate of fair value of the assets based on the market participant expectations of cash flows the asset would generate. The cash flows were discounted at a rate of 16.5%. The IPR&D discount rate for StrataGraft was developed after assigning a probability of success to achieving the projected cash flows based on the current stage of development, inherent uncertainty in the FDA approval process and risks associated with commercialization of a new product. Based on the Company's preliminary estimate, the excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents future product development, the assembled workforce, and the tax status of the transaction. The goodwill is not deductible for U.S. income tax purposes. All assets acquired are included within the Company's Specialty Brands segment.



Hemostasis Products	Amount		Amortization Period
Raplixa - Completed technology	$	73.0	15 years
Recothrom - Completed technology	42.7		13 years
PreveLeak - Completed technology	17.0		13 years
	$	132.7

The completed technology intangible assets relate to each of the acquired drugs. The fair value of the intangible assets were determined using the income approach. The cash flows were discounted commensurate with the level of risk associated with each asset or its projected cash flows. The completed technology intangible assets utilized a discount rate of 17.0%, 16.0% and 17.0% for Raplixa, Recothrom and PreveLeak, respectively. All assets acquired are included within the Company's Specialty Brands segment.



Therakos	Amount		Amortization Period
Completed technology	$	1,170.0	15 years

The completed technology intangible asset relates to extracorporeal photopheresis treatment therapies. The fair value of the intangible asset was determined using the income approach. The completed technology intangible asset utilized a discount rate of 17.0%. The excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents the assembled workforce, future product and device development, anticipated synergies and the tax status of the transaction. The goodwill is not deductible for U.S. income tax purposes. All assets acquired are included within the Company's Specialty Brands segment.



Ikaria	Amount		Amortization Period
Completed technology	$	1,820.0	15 years
Trademark	70.0		22 years
In-process research and development - terlipressin	81.0		Non-Amortizable
	$	1,971.0

The completed technology and trademark intangible assets relate to Inomax. The fair value of the intangible assets were determined using the income approach. Completed technology, trademark and IPR&D terlipressin intangibles utilized discount rates of 14.5%, 14.5%, and 17.0%, respectively. The IPR&D discount rate for terlipressin was developed after assigning a probability of success to achieving the projected cash flows based on the current stage of development, inherent uncertainty in the FDA approval process and risks associated with commercialization of a new product. The excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents the assembled workforce, future product and device development, anticipated synergies and the tax status of the transaction. The goodwill is not deductible for U.S. income tax purposes. All assets acquired are included within the Company's Specialty Brands segment.



Questcor	Amount		Weighted-Average Amortization Period
Completed technology	$	5,343.3	18 years
Trademark	5.2		13 years
Customer relationships	34.3		12 years
In-process research and development - Synacthen	218.3		Non-Amortizable
	$	5,601.1

The completed technology intangible asset relates to Acthar. The trademark and customer relationship intangible assets relate to BioVectra, Inc. The IPR&D relates to the U.S. development of Synacthen, a synthetic pharmaceutical product. The fair value of the intangible assets were determined using the income approach. Completed technology, customer relationships, trademark and in-process research and development intangibles utilized discount rates of 14.5%, 10.0%, 10.0% and 16.0%, respectively. The in-process research and development discount rate was developed after assigning a probability of success to achieving the projected cash flows based on the current stage of development, inherent uncertainty in the FDA approval process and risks associated with commercialization of a new product. 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 status of the transaction. The goodwill is not deductible for U.S. income tax purposes. The majority of assets acquired are included within the Company's Specialty Brands segment. Assets related to BioVectra, Inc. are included within the Company's Specialty Generics segment.



Cadence	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. The cash flows were discounted at a 13.0% rate. For more information on the BMS license agreement, refer to "License Agreement" below. 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 status of the transaction. The goodwill is not deductible for U.S. income tax purposes. All assets acquired are included within the Company's Specialty Brands segment.

Schedule of Pro Forma Information

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 acquisitions occurred on the assumed dates, 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 acquisitions or revenue growth that may be anticipated.



	2016		2015
Net sales	$	3,380.8	$	3,332.0
Income from continuing operations	499.4		288.9
Basic earnings per share from continuing operations	$	4.52	$	2.49
Diluted earnings from per share continuing operations	4.48		2.47