

12.	Goodwill and Intangible Assets

The changes in the carrying amount of goodwill by segment were as follows:



	December 29, 2017					December 30, 2016
	Gross Carrying amount		Accumulated Impairment			Gross Carrying amount		Accumulated Impairment
Specialty Brands	$	3,482.7	$	0.0		$	3,498.1	$	0.0
Specialty Generics	207.0		(207.0		)	207.0		(207.0		)
Total	$	3,689.7	$	(207.0	)	$	3,705.1	$	(207.0	)

During the fiscal year ended December 29, 2017, the gross carrying value of goodwill in the Specialty Brands segment decreased by $15.4 million. The decrease was primarily attributable to the sale of the Intrathecal Therapy business to Piramal for which $49.8 million of goodwill was ascribed and was factored into the gain on sale of the business. The decrease was partially offset by $25.1 million from the Ocera Acquisition and $11.4 million from the InfaCare Acquisition. The remaining change in goodwill was related to a purchase accounting adjustment for the Stratatech Acquisition primarily attributable to changes in deferred tax balances.

Goodwill Impairment Analysis

Fiscal Year ended December 29, 2017

The Company performed its annual goodwill impairment analysis for the Specialty Brands reporting unit as of the first day of the fourth quarter. For purposes of assessing impairment of goodwill for the Specialty Brands reporting unit, the Company made various assumptions regarding estimated future cash flows, discount rate and other factors in determining the respective fair value of the reporting unit using the income approach.

These assumptions resulted in a fair value of the Specialty Brands reporting unit in excess of its net book value. The fair value of the Specialty Brands reporting unit was assessed for reasonableness by aggregating the fair values of the Company’s businesses and comparing this to its market capitalization with a control premium. Based upon the Company’s annual assessment, no goodwill impairment was identified.

During the three months ended December 29, 2017, the Company experienced a substantial decline in its market capitalization, providing an indication that goodwill may be impaired at December 29, 2017. The decline in the Company’s market capitalization was driven by a decrease in its share price. The Company believes that its share price has been adversely affected most notably by patient withdrawal issues impacting net sales of H.P. Acthar Gel, ongoing Inomax patent litigation, uncertainty regarding the perceived value of its various pipeline products and an incomplete understanding of its complex income tax structure.

In response to the decline in the Company's market capitalization, the annual valuation was updated and the Company determined that there was no goodwill impairment at December 29, 2017.

The projections used in both the annual and the year ended December 29, 2017 valuations for the Specialty Brands reporting unit include management’s best estimate of long-term revenue and operating income. The Company's projections of future cash flows were discounted based on a weighted average cost of capital of 12.5%, for both valuations, that was determined from relevant market comparisons, adjusted upward for specific reporting unit risks. A terminal value growth rate was applied to the terminal year cash flows, representing the Company's estimate of stable, sustainable growth. The fair value of the Specialty Brands reporting unit represents the sum of the discounted cash flows from the discrete period and the terminal year cash flows. These assumptions resulted in a fair value of the Specialty Brands reporting unit in excess of its net book value by a mid-single digits in both valuations. The fair value of the Specialty Brands reporting unit was assessed for reasonableness by aggregating the fair value of the Company’s businesses and comparing this to its market capitalization with a control premium and consideration of the aforementioned adverse effects the Company believes have impacted its share price.

Should the Specialty Brands reporting unit fail to experience growth, revise its long-term projections for its products downward or market conditions dictate utilization of a higher discount rate, the Specialty Brands reporting unit could be subject to impairment in future periods. In addition, the Company will continue to assess the impact of its market capitalization. It is possible that if the Company's market capitalization decline is sustained, such decline could result in an impairment of goodwill and other long-lived assets associated with its reporting units.

The Three Months Ended December 30, 2016

The Specialty Generics reporting unit has experienced customer consolidation and increased competition that have and are expected to result in further downward pressure to net sales and operating income in this reporting unit. During the three months ended December 30, 2016, the FDA approved new products that are expected to compete with the Company's methylphenidate HCI extended-release tablets USP (CII) ("Methylphenidate ER") products and that one competitor launched their Methylphenidate ER products. Additional products expected to compete with the Company's Methylphenidate ER products were launched during fiscal 2017. All of these products have a class AB rating compared with the class BX rating on the Company's Methylphenidate ER products. It is uncertain how these product approvals may impact the FDA's withdrawal proceedings associated with the Company's Methylphenidate ER products. The Company determined that these events represented a triggering event and the Company performed an assessment of the goodwill associated with the Specialty Generics reporting unit as of December 30, 2016.

The Company's projections in the Specialty Generics reporting unit included long-term net sales and operating income at lower than historical levels primarily attributable to customer consolidation and increased competition, including the competition effects on Methylphenidate ER. The Company utilized a weighted average cost of capital of 9.5% which reflects the Company's risk premium associated with the projected cash flows. These assumptions resulted in a fair value of the Specialty Generics reporting unit that was less than its net book value. As this impairment analysis was performed prior to the Company's adoption of ASU 2017-04 in fiscal 2017, the Company performed step two of the goodwill impairment test and recognized a $207.0 million goodwill impairment in the Specialty Generics segment.

Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets at the end of each period were as follows:



	December 29, 2017				December 30, 2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortizable:
Completed technology	$	9,882.8	$	2,260.8	$	10,028.7	$	1,617.1
License agreements	177.1		121.1		177.1		112.7
Trademarks	82.1		14.5		82.1		10.9
Customer relationships	29.5		12.2		27.6		8.4
Other	8.6		8.6		6.7		6.7
Total	$	10,180.1	$	2,417.2	$	10,322.2	$	1,755.8
Non-Amortizable:
Trademarks	$	35.0			$	35.0
In-process research and development	577.1				399.1
Total	$	612.1			$	434.1

The Company recorded impairment charges totaling $63.7 million in fiscal 2017 related to the Raplixa intangible asset and $16.9 million in fiscal 2016 related to certain Specialty Brands in-process research and development intangible assets acquired as part of the CNS Therapeutics acquisition in fiscal 2013. In both fiscal 2017 and 2016, the valuation method used to approximate fair value was based on the estimated discounted cash flows for the respective asset. The Raplixa impairment charge resulted from the lower than previously anticipated commercial opportunities for the product, while the CNS Therapeutics IPR&D impairment charge resulted from delays in anticipated FDA approval, higher than expected development costs and lower than previously anticipated commercial opportunities.

Finite-lived intangible asset amortization expense within continuing operations is as follows:



	Fiscal Year Ended						Three Months Ended
	December 29, 2017		September 30, 2016		September 25, 2015		December 30, 2016
Amortization expense	$	694.5	$	700.1	$	550.3	$	175.7

The estimated aggregate amortization expense on intangible assets owned by the Company is expected to be as follows:



Fiscal 2018	$	681.8
Fiscal 2019	681.4
Fiscal 2020	681.1
Fiscal 2021	680.9
Fiscal 2022	553.9