Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 are as follows:



(In millions)	Generics Segment			Specialty Segment			Total
Balance at December 31, 2013:
Goodwill	$	3,991.4		$	734.1		$	4,725.5
Accumulated impairment losses	—			(385.0		)	(385.0		)
	3,991.4			349.1			4,340.5
Acquisitions	13.3			—			13.3
Divestment	(10.5		)	—			(10.5		)
Foreign currency translation	(294.0		)	—			(294.0		)
	3,700.2			349.1			4,049.3
Balance at December 31, 2014:
Goodwill	3,700.2			734.1			4,434.3
Accumulated impairment losses	—			(385.0		)	(385.0		)
	3,700.2			349.1			4,049.3
Acquisitions	1,658.2			—			1,658.2
Foreign currency translation	(327.4		)	—			(327.4		)
	5,031.0			349.1			5,380.1
Balance at December 31, 2015:
Goodwill	5,031.0			734.1			5,765.1
Accumulated impairment losses	—			(385.0		)	(385.0		)
	$	5,031.0		$	349.1		$	5,380.1

Intangible assets consist of the following components at December 31, 2015 and 2014:



(In millions)	Weighted Average Life (Years)	Original Cost		Accumulated Amortization		Net Book Value
December 31, 2015
Amortized intangible assets:
Patents and technologies	20	$	116.6	$	103.8	$	12.8
Product rights and licenses	11	8,848.6		2,652.7		6,195.9
Other⁽¹⁾	6	465.3		189.8		275.5
		9,430.5		2,946.3		6,484.2
In-process research and development		737.7		—		737.7
		$	10,168.2	$	2,946.3	$	7,221.9
December 31, 2014
Amortized intangible assets:
Patents and technologies	20	$	116.6	$	99.2	$	17.4
Product rights and licenses	10	3,617.0		2,127.8		1,489.2
Other⁽¹⁾	8	162.2		70.6		91.6
		3,895.8		2,297.6		1,598.2
In-process research and development		748.9		—		748.9
		$	4,644.7	$	2,297.6	$	2,347.1

____________


⁽¹⁾	Other intangibles consist principally of customer lists, contractual rights and other contracts.

Product rights and licenses are primarily comprised of the products marketed at the time of acquisition. These product rights and licenses relate to numerous individual products, the net book value of which, by therapeutic category, is as follows:



(In millions)	December 31, 2015		December 31, 2014
Allergy	$	71.2	$	82.5
Anti-infectives	368.7		152.8
Antineoplastic	169.3		123.7
Cardiovascular	1,105.5		175.0
Central Nervous System	949.8		199.5
Dermatological	52.9		65.9
Endocrine and Metabolic	1,152.5		54.8
Gastrointestinal	1,289.9		67.6
Hematological Agents	370.1		294.5
Immunological Agents	322.7		20.8
Respiratory System	137.9		78.3
Other⁽¹⁾	205.4		173.8
	$	6,195.9	$	1,489.2

____________


⁽¹⁾	Other consists of numerous therapeutic classes, none of which individually exceeds 5% of total product rights and licenses.

Amortization expense, which is classified primarily within cost of sales in the Consolidated Statements of Operations, for the years ended December 31, 2015, 2014 and 2013 was approximately $846.0 million, $393.8 million and $363.7 million, respectively. Amortization expense for the years ended December 31, 2015, 2014 and 2013 includes intangible asset impairment charges of $31.3 million, $27.7 million and $18.0 million, respectively. Amortization expense, inclusive of the intangible assets acquired as a result of the acquisition of the EPD Business and the acquisition of Jai Pharma Limited during 2015, is expected to be approximately $933 million, $795 million, $742 million, $661 million and $568 million for the years ended December 31, 2016 through 2020, respectively.

Indefinite-lived intangibles, such as the Company’s IPR&D assets, are tested at least annually for impairment, but they may be tested whenever certain impairment indicators are present. Impairment is determined to exist when the fair value is less than the carrying value of the assets being tested.

The Company performed its annual impairment review of certain IPR&D assets during the third and fourth quarters of 2015. This review of IPR&D assets principally relates to assets acquired as part of the Agila acquisition in December 2013, the respiratory delivery platform acquisition in December 2011 and the Bioniche Pharma acquisition in September 2010. For the years ended December 31, 2015 and 2014, the Company recorded $31.3 million and $17.7 million, respectively, of impairment charges related to the Agila IPR&D assets, which was recorded as a component of amortization expense. For the year ended December 31, 2013, the Company recorded $18.0 million of impairment charges primarily related to the Bioniche Pharma IPR&D assets, which was recorded as a component of amortization expense. These impairment charges resulted from the Company’s estimate of the fair value of these assets, which was based upon updated forecasts and commercial development plans, compared with the assigned fair values at the acquisition date. The fair value was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 7 Financial Instruments and Risk Management. The fair value of IPR&D was calculated as the present value of the estimated future net cash flows using a market rate of return. The assumptions inherent in the estimated future cash flows include, among other things, the impact of changes to the development programs, the projected development and regulatory time frames and the current competitive environment. Discount rates ranging between 9.8% and 11.8% were utilized in the valuations performed during the third and fourth quarters of 2015. Discount rates ranging between 10% and 12% were utilized in valuation during the third quarter of 2014. Changes to any of the Company’s assumptions may result in a further reduction to the estimated fair value of the IPR&D asset. During the years ended December 31, 2015 and 2014, approximately $59.4 million and $60.3 million, respectively, was reclassified from acquired IPR&D to product rights and licenses.

In addition, the Company monitors long-lived intangible assets for potential triggering events or changes in circumstances that would indicate that the carrying amount of the asset may not be recoverable. During the year ended December 31, 2015, the Company revised its estimated useful lives on certain intangible assets. During the year ended December 31, 2014, the Company recorded impairment charges of approximately $10.0 million related to product rights and licenses, which was recorded as a component of amortization expense.

During the year ended December 31, 2015, the Company made cash payments of approximately $425 million for products rights and licenses related to certain marketed pharmaceutical products with multiple counterparties, as further described in Note 3 Acquisitions and Other Transactions. During the year ended December 31, 2014, the Company made cash payments of approximately $383 million for product rights and licenses, of which approximately $120 million related to the Company’s purchase of certain commercialization rights in the U.S. and other countries related to the Agila acquisition and approximately $263 million related to the Company’s purchase of the U.S. commercialization, marketing and intellectual property rights of Arixtra and the authorized generic rights of Arixtra.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details