NOTE 4 — Acquisitions and Other Agreements

During the six months ended June 30, 2015, the Company acquired material assets and businesses. The pro forma results of the businesses acquired that materially impacted the reported results of the Company are as follows (unaudited; $ in millions except per share information):

	Six Months Ended June 30, 2015
	As reported			Allergan Acquisition		Pro Forma
Net Revenue	$	5,611.7		$	1,523.0	$	7,134.7
Net (loss) / income attributable to ordinary shareholders	$	(847.9	)	$	377.7	$	(470.2	)
Net (loss) per share
Basic	$	(2.48	)			$	(1.19	)
Diluted	$	(2.48	)			$	(1.19	)

2016 Transactions

The following are the material transactions that were completed in the six months ended June 30, 2016.

Licenses and Asset Acquisitions

Topokine

On April 21, 2016, the Company acquired Topokine Therapeutics (“Topokine”), a privately held, clinical-stage biotechnology company focused on development stage topical medicines for fat reduction. Under the terms of the agreement, the Company acquired Topokine for an upfront payment of $85.0 million and success-based development and sales milestones of up to $260.0 million for XAF5, a first-in-class topical agent in development for the treatment of steatoblepharon, also known as undereye bags. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront net payment of approximately $85.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the event becomes probable.

Heptares License

On April 6, 2016, the Company entered into an agreement with Heptares Therapeutics (“Heptares”), under which the Company licensed exclusive global rights to a portfolio of novel subtype-selective muscarinic receptor agonists in development for the treatment of major neurological disorders, including Alzheimer's disease. Under the terms of the agreement, Heptares received an upfront payment of $125.0 million and is eligible to receive contingent milestone payments of up to approximately $665.0 million associated with the successful Phase 1, 2 and 3 clinical development and launch of the first three licensed compounds for multiple indications and up to approximately $2.575 billion associated with achieving certain annual sales thresholds during the several years following launch (the “Heptares Transaction”). In addition, Heptares is eligible to receive up to double-digit tiered royalties on net sales of all products resulting from the partnership. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront payment of approximately $125.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the event becomes probable.

Anterios

On January 6, 2016, the Company acquired Anterios, Inc. (“Anterios”), a clinical stage biopharmaceutical company developing a next generation delivery system and botulinum toxin-based prescription products. Under the terms of the agreement, the Company acquired Anterios for an upfront net payment of approximately $90.0 million and potential development and commercialization milestone payments related to an investigational topical formulation of botulinum toxin type A in development for the potential treatment of hyperhidrosis, acne, and crow’s feet lines and the related NDS™, Anterios' proprietary platform delivery technology that enables local, targeted delivery of neurotoxins through the skin without the need for injections (“the Anterios Transaction”). Total future milestone payments could amount to $387.5 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees as well as certain other inputs and processes that the transaction did not qualify as a business. The total upfront net payment of approximately $90.0 million was expensed as a component of R&D expense and the future milestones will be recorded when the event becomes probable.

2015 Transactions

The following are the material transactions that were completed in the year ended December 31, 2015.

Acquisitions

AqueSys

On October 16, 2015, the Company acquired AqueSys, Inc. (“AqueSys”), a private, clinical-stage medical device company focused on developing ocular implants that reduce intraocular pressure (“IOP”) associated with glaucoma, in an all-cash transaction. Under the terms of the agreement, the Company acquired AqueSys for an acquisition accounting purchase price of $298.9 million, including $193.5 million for the estimated fair value of contingent consideration relating to the regulatory approval and commercialization milestone payments. The Company acquired AqueSys for its development program, including XEN45, a soft shunt that is implanted in the sub conjunctival space in the eye through a minimally invasive procedure with a single use, pre-loaded proprietary injector (the “AqueSys Acquisition”).

Assets Acquired and Liabilities Assumed at Fair Value

The AqueSys Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):

	Amount
Cash and cash equivalents	$	6.2
Current assets		1.2
IPR&D intangible assets		302.0
Intangible assets		221.0
Goodwill		138.5
Current liabilities		(6.9	)
Contingent consideration		(193.5	)
Deferred tax liabilities, net		(169.6	)
Net assets acquired	$	298.9

Kythera

On October 1, 2015, the Company acquired Kythera Biopharmaceuticals (“Kythera”) for $75 per share, or an acquisition accounting purchase price of $2,089.5 million (the “Kythera Acquisition”). Kythera was focused on the discovery, development and commercialization of novel prescription aesthetic products. Kythera’s lead product, Kybella^® injection, is the first and only Food and Drug Administration (“FDA”) approved, non-surgical treatment for moderate to severe submental fullness, commonly referred to as double chin.

Assets Acquired and Liabilities Assumed at Fair Value

The Kythera Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date ($ in millions):

	Amount
Cash and cash equivalents	$	78.1
Marketable securities		79.9
Inventory		18.2
Other current assets		14.5
IPR&D intangible assets		320.0
Intangible assets		2,120.0
Goodwill		328.7
Other current liabilities		(48.6	)
Deferred tax, net		(766.7	)
Outstanding indebtedness		(54.6	)
Net assets acquired	$	2,089.5

Auden Mckenzie

On May 29, 2015 the Company acquired Auden Mckenzie Holdings Limited (“Auden”), a company specializing in the development, licensing and marketing of niche generic medicines and proprietary brands in the United Kingdom (“UK”) and across Europe for approximately 323.7 million British Pounds, or $495.9 million (the “Auden Acquisition”). The assets and liabilities acquired, as well as the results of operations for the acquired Auden business are part of the assets divested in the Teva Transaction. Results of Auden are included as a component of income from discontinued operations and the acquired financial position is included in assets and liabilities held for sale.

Recognition and Measurement of Assets Acquired and Liabilities Assumed at Fair Value

The Auden Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the final fair values of the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date ($ in millions):

	Amount
Cash and cash equivalents	$	32.2
Inventory		49.1
IPR&D intangible assets		38.6
Intangible assets		342.4
Goodwill		123.3
Other assets and liabilities		7.2
Contingent consideration		(17.3	)
Deferred tax liabilities, net		(79.6	)
Net assets acquired	$	495.9

Allergan

On March 17, 2015, the Company acquired Legacy Allergan for approximately $77.0 billion including outstanding indebtedness assumed of $2.2 billion, cash consideration of $40.1 billion and equity consideration of $34.7 billion, which includes outstanding equity awards (the “Allergan Acquisition”). Under the terms of the agreement, Legacy Allergan shareholders received 111.2 million of the Company’s ordinary shares, 7.0 million of the Company’s non-qualified stock options and 0.5 million of the Company’s share units. The addition of Legacy Allergan’s therapeutic franchises in ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery complements the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company also benefited significantly from Legacy Allergan’s global brand equity and consumer awareness of key products, including Botox^® and Restasis^®. The transaction expanded our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.

Inventories

The fair value of inventories acquired included an acquisition accounting fair market value step-up of $923.9 million. In the six months ended June 30, 2016, the Company recognized $21.6 million as a component of cost of sales as the inventory acquired was sold to the Company’s customers.

In the three and six months ended June 30, 2015, the Company recognized $433.4 million and $504.4 million, respectively, as a component of cost of sales as the inventory acquired was sold to the Company’s customers.

Acquisition-Related Expenses

As a result of the Allergan Acquisition, the Company incurred the following transaction and integration costs in the three months ended June 30, 2016 and 2015, respectively ($ in millions):

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	2.1	$	7.4
Acquisition, integration and restructuring related charges		1.9		1.2
Research and development
Stock-based compensation acquired for Legacy Allergan employees		9.4		36.1
Acquisition, integration and restructuring related charges		1.0		6.3
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		16.7		39.7
Acquisition, integration and restructuring related charges		7.9		10.5
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		8.4		43.2
Acquisition, integration and restructuring related charges		53.8		62.0
Other (expense) income
Bridge loan facilities expense		-		(1.9	)
Interest rate lock		-		-
Total transaction and integration costs	$	101.2	$	208.3

As a result of the acquisition, the Company incurred the following transaction and integration costs in the six months ended June 30, 2016 and 2015, respectively ($ in millions):

	Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	5.2	$	14.3
Acquisition, integration and restructuring related charges		5.8		12.1
Research and development
Stock-based compensation acquired for Legacy Allergan employees		23.3		91.6
Acquisition, integration and restructuring related charges		3.8		66.2
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		37.2		62.9
Acquisition, integration and restructuring related charges		12.9		60.5
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		18.3		226.2
Acquisition-related expenditures		-		65.5
Acquisition, integration and restructuring related charges		93.6		165.7
Other (expense) income
Bridge loan facilities expense		-		(264.9	)
Interest rate lock		-		31.0
Total transaction and integration costs	$	200.1	$	998.9

Licenses and Asset Acquisitions

Migraine License

On August 17, 2015, the Company entered into an agreement with Merck & Co. (“Merck”) under which the Company acquired the exclusive worldwide rights to Merck’s early development stage investigational small molecule oral calcitonin gene-related peptide receptor antagonists, which are being developed for the treatment and prevention of migraines (the “Merck Transaction”). The Merck Transaction is being accounted for as an asset acquisition. The Company acquired these rights for an upfront charge of $250.0 million. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing as well as certain other inputs and processes that the transaction did not qualify as a business. The Company paid $125.0 million in the year ended December 31, 2015 and the remaining $125.0 million was paid in April 2016. Additionally, Merck is owed contingent payments based on commercial and development milestones of up to $965.0 million as well as royalties.

Divestitures

Respiratory Business

As part of the Forest Acquisition (defined below), we acquired certain assets that comprised Legacy Forest’s branded respiratory business in the U.S. and Canada (the “Respiratory Business”). During the year ended December 31, 2014, we held for sale respiratory assets of $734.0 million, including allocated goodwill to this unit of $309.1 million. On March 2, 2015, the Company sold the Respiratory Business to AstraZeneca plc (“AstraZeneca”) for consideration of $600.0 million upon closing, additional funds to be received for the sale of certain of our inventory to AstraZeneca and low single-digit royalties above a certain revenue threshold. AstraZeneca also paid Allergan an additional $100.0 million and Allergan has agreed to a number of contractual consents and approvals, including certain amendments to the ongoing collaboration agreements between AstraZeneca and Allergan (the “Respiratory Sale”). As a result of the final terms of the agreement, in the six months ended June 30, 2015, the Company recognized an incremental charge in cost of sales (including the acquisition accounting fair value mark-up of inventory) relating to inventory that will not be sold to AstraZeneca of $35.3 million. In the quarter ended June 30, 2015, the Company recorded an out-of-period pre-tax expense of $38.8 million related to the write off of royalty rights that expired in April 2015 in connection with the first quarter 2015 transaction. The impact of the out-of-period adjustment is not material to either the three months ended March 31, 2015 or the three months ended June 30, 2015. The Company recognized a loss in other (expense) income for the sale of the business of $38.8 million and $5.3 million, in the three and six months ended June 30, 2015, respectively.

2014 Transactions

The following are the material transactions that were completed in the year ended December 31, 2014 impacted our results of operations in the current period.

Durata Therapeutics

On November 17, 2014, the Company completed its tender offer to purchase all of the outstanding shares of Durata Therapeutics, Inc. (“Durata”), an innovative pharmaceutical company focused on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses (the “Durata Acquisition”). The Company purchased all outstanding shares of Durata, which were valued at approximately $724.5 million, including the assumption of debt. Additionally, there is one contingent value right (“CVR”) per share, entitling the holder to receive additional cash payments of up to $5.00 per CVR if certain regulatory or commercial milestones related to Durata’s lead product Dalvance^® are achieved. The CVR had an acquisition date fair value of $49.0 million.

Contingent Consideration

At the time of the Durata Acquisition, additional consideration was conditionally due to the seller based upon the approval of Dalvance^® in Europe, the approval of a single dose indication and the product reaching certain sales milestones. The Company estimated the acquisition accounting fair value of the contingent consideration to be $49.0 million using a probability weighted approach that considered the possible outcomes based on assumptions related to the timing and probability of the product launch date, discount rates matched to the timing of the payment, and probability of success rates and discount adjustments on the related cash flows. On March 2, 2015, the Company announced that the European Commission had granted Allergan’s subsidiary Durata Therapeutics International B.V., marketing authorization for Xydalba™ (dalbavancin) for the treatment of acute bacterial skin and skin structure infections (ABSSSI) in adults. The approval triggered the first CVR payment in the quarter ended March 31, 2015 of $30.9 million. In January 2016, the Company received approval from the FDA for an expanded label that will include a single dose of Dalvance^®, which triggered a second CVR payment of $30.9 million in the quarter ended March 31, 2016. The difference between the probability weighted fair value and the final payments are recorded as a component of cost of sales.

Forest Laboratories

On July 1, 2014, the Company acquired Forest Laboratories, Inc. (“Legacy Forest”) for $30.9 billion including outstanding indebtedness assumed of $3.3 billion, equity consideration of $20.6 billion, which includes outstanding equity awards, and cash consideration of $7.1 billion (the “Forest Acquisition”). Under the terms of the transaction, Legacy Forest shareholders received 89.8 million Allergan plc ordinary shares, 6.1 million Allergan plc non-qualified stock options and 1.1 million Allergan plc share units. Legacy Forest was a leading, fully integrated, specialty pharmaceutical company largely focused on the United States market. Legacy Forest marketed a portfolio of branded drug products and developed new medicines to treat patients suffering from diseases principally in the following therapeutic areas: central nervous system, cardiovascular, gastrointestinal, respiratory, anti-infective, and cystic fibrosis. A portion of the assets acquired were divested as part of the Teva Transaction.

Inventories

The fair value of inventories acquired included an acquisition accounting fair market value step-up of $1,036.3 million. In the six months ended June 30, 2016, the Company recognized $20.1 million as a component of cost of sales as the inventory acquired on July 1, 2014 was sold to the Company’s customers.

In the three and six months ended June 30, 2015, the Company recognized $49.8 million and $186.6 million, respectively, as a component of cost of sales as the inventory acquired on July 1, 2014 was sold to the Company’s customers in addition to a write-off associated with the Respiratory Sale. A portion of these amounts are included in discontinued operations in the six months ended June 30, 2015.

As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the three months ended June 30, 2016 and 2015, respectively ($ in millions):

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2015
Cost of sales
Stock-based compensation acquired for Forest employees	$	0.7	$	1.5
Acquisition, integration and restructuring related charges		-		0.1
Research and development
Stock-based compensation acquired for Forest employees		4.8		8.5
Acquisition, integration and restructuring related charges		0.2		-
Selling and marketing
Stock-based compensation acquired for Forest employees		7.4		8.8
Acquisition, integration and restructuring related charges		-		0.1
General and administrative
Stock-based compensation acquired for Forest employees		10.6		11.1
Acquisition, integration and restructuring related charges		-		34.2
Total transaction and integration costs	$	23.7	$	64.3

As a result of the Forest Acquisition, the Company incurred the following transaction and integration costs in the and six months ended June 30, 2016 and 2015, respectively ($ in millions):

	Six Months Ended June 30, 2016		Six Months Ended June 30, 2015
Cost of sales
Stock-based compensation acquired for Forest employees	$	1.2	$	2.7
Acquisition, integration and restructuring related charges		-		1.1
Research and development
Stock-based compensation acquired for Forest employees		8.9		24.5
Acquisition, integration and restructuring related charges		0.3		8.8
Selling and marketing
Stock-based compensation acquired for Forest employees		14.8		28.4
Acquisition, integration and restructuring related charges		-		16.9
General and administrative
Stock-based compensation acquired for Forest employees		18.7		32.2
Acquisition, integration and restructuring related charges		1.2		47.2
Total transaction and integration costs	$	45.1	$	161.8