Intangible Assets and Goodwill

6 Months Ended

Jul. 03, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

INTANGIBLE ASSETS AND GOODWILL

Intangible assets that have finite useful lives are amortized over their estimated useful lives. The latest annual impairment assessment of goodwill and indefinite lived intangible assets was completed in the fiscal fourth quarter of 2021. Future impairment tests for goodwill and indefinite lived intangible assets will be performed annually in the fiscal fourth quarter, or sooner, if warranted.

(Dollars in Millions)	July 3, 2022		January 2, 2022
Intangible assets with definite lives:
Patents and trademarks — gross	$	36,885	38,572
Less accumulated amortization	(20,336)		(20,088)
Patents and trademarks — net	16,549		18,484
Customer relationships and other intangibles — gross	22,558		23,011
Less accumulated amortization	(12,269)		(11,925)
Customer relationships and other intangibles — net(1)	10,289		11,086
Intangible assets with indefinite lives:
Trademarks	6,794		6,985
Purchased in-process research and development(2)	8,776		9,837
Total intangible assets with indefinite lives	15,570		16,822
Total intangible assets — net	$	42,408	46,392

(1)The majority is comprised of customer relationships

(2)In the fiscal first quarter of 2022, the Company recorded an intangible asset impairment charge of approximately $0.6 billion related to an in-process research and development asset, bermekimab (JnJ-77474462), an investigational drug for the treatment of Atopic Dermatitis (AD) and Hidradenitis Suppurativa (HS). Additional information regarding efficacy of the AD indication became available which led the Company to the decision to terminate the development of bermekimab for AD. The Company acquired all rights to bermekimab from XBiotech, Inc.in the fiscal year 2020. The remaining reduction was driven by assets that reached commercialization and are now classified as having definite lives.

Goodwill as of July 3, 2022 was allocated by segment of business as follows:

(Dollars in Millions)	Consumer Health		Pharmaceutical	MedTech	Total
Goodwill at January 2, 2022	$	9,810	10,580	14,856	35,246
Goodwill, related to acquisitions	—		—	195	195
Currency translation/Other	(665)		(545)	(65)	(1,275)
Goodwill at July 3, 2022	$	9,145	10,035	14,986	34,166

The weighted average amortization period for patents and trademarks is 12 years. The weighted average amortization period for customer relationships and other intangible assets is 21 years. The amortization expense of amortizable intangible assets included in cost of products sold was $1.1 billion and $1.2 billion for the fiscal second quarters ended July 3, 2022 and July 4, 2021, respectively. The amortization expense of amortizable intangible assets included in cost of products sold was $2.2 billion and $2.4 billion for the fiscal six months ended July 3, 2022 and July 4, 2021, respectively. Intangible asset write-downs are included in Other (income) expense, net.

The estimated amortization expense for approved products, before tax, for the five succeeding years is approximately:

(Dollars in Millions)
2022	2023	2024	2025	2026
$4,400	4,400	4,200	3,400	2,800

See Note 10 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.