2.2.0.7 false Acquisition of Gloucester Pharmaceuticals, Inc 0203 - Disclosure - Acquisition of Gloucester Pharmaceuticals, Inc true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 Pure Standard http://www.xbrl.org/2003/instance pure xbrli 0 $ 2 Acquisition of Gloucester Pharmaceuticals, Inc [Abstract] 0 celg_AcquisitionOfBusinessAbstract celg false na duration Acquisition Of Business. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Acquisition Of Business. false 3 Acquisition of Gloucester Pharmaceuticals, Inc 1 us-gaap_BusinessCombinationDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>3. Acquisition of Gloucester Pharmaceuticals, Inc.</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">On January 15, 2010, the Company acquired all of the outstanding common stock and stock options of Gloucester in a transaction accounted for under the acquisition method of accounting for business combinations, ASC No. 805, “Business Combinations,” or ASC 805. Under the acquisition method of accounting, the assets acquired and liabilities assumed of Gloucester were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The reported consolidated financial condition and results of operations of the Company after completion of the acquisition reflect these fair values. Gloucester’s results of operations are included in the Company’s consolidated financial statements from the date of acquisition. Gloucester’s results of operations prior to the acquisition were determined to be immaterial to the Company; therefore, proforma financial statements are not required to be presented. </div> \   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company paid $338.9 million in cash before milestone payments and may make additional future payments of $300.0 million in contingent regulatory milestone payments. Prior to the acquisition, Gloucester was a privately held biopharmaceutical company that acquired clinical-stage oncology drug candidates with the goal of advancing them through regulatory approval and commercialization. The Company acquired Gloucester to enhance its portfolio of therapies for patients with life-threatening illnesses worldwide. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the acquisition date based upon their respective fair values summarized below: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="86%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="9%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 10pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">January 15, 2010</td> <td> </td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Current assets </div></td> <td> </td> <td align="left">$</td> <td align="right">3,132</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Developed product rights </div></td> <td> </td> <td> </td> <td align="right">197,000</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">IPR&D product rights </div></td> <td> </td> <td> </td> <td align="right">349,000</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other noncurrent assets </div></td> <td> </td> <td> </td> <td align="right">54</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Assets acquired </div></td> <td> </td> <td> </td> <td align="right">549,186</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Contingent consideration </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(230,201</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net deferred taxes </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(145,635</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other liabilities assumed </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(21,347</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net assets acquired </div></td> <td> </td> <td> </td> <td align="right">152,003</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Goodwill </div></td> <td> </td> <td> </td> <td align="right">186,907</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash paid </div></td> <td> </td> <td align="left">$</td> <td align="right">338,910</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Asset categories acquired in the Gloucester acquisition included working capital, inventory, fixed assets, developed product right assets and in-process research and development, or IPR&D, product right assets. Fair values of working capital and fixed assets were determined to approximate book values while the fair value of inventory was determined to be greater than book value. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of developed product right assets was based on expected cash flows from developed product right sales of ISTODAX<sup style="font-size: 85%; vertical-align: text-top">®</sup> (romidepsin), a novel histone deacetylase (HDAC) inhibitor, which was approved for marketing in the United States in November 2009 by the FDA for the treatment of cutaneous T-cell lymphoma, or CTCL, in patients who have received at least one prior systemic therapy. Prior to the acquisition, Gloucester was also conducting a registration trial in peripheral T-cell lymphoma, or PTCL, in the United States with an anticipated supplemental New Drug Application filing in 2010 for this indication. Fair values were derived using probability-weighted cash flows. The U.S. CTCL developed product right asset is being amortized over its economic useful life of ten years. The compassionate use right asset is being amortized evenly over the asset’s economic useful life of 1.5 years. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair value of IPR&D product right assets was based on expected cash flows from sales of ISTODAX<sup style="font-size: 85%; vertical-align: text-top">®</sup> (romidepsin) for the treatment of PTCL, which had not yet achieved regulatory approval for marketing and has no future alternative use. The $349.0 million estimated fair value of IPR&D product rights was derived using probability-weighted cash flows. The fair value was based on expected cash flows from the treatment of PTCL in the United States and PTCL in the European Union, or E.U., based on key assumptions such as estimates of sales and operating profits related to the programs considering their stages of development; the time and resources needed to complete the regulatory approval process for the products and the life of the potential commercialized products and associated risks, including the inherent difficulties and uncertainties in obtaining regulatory approvals. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The U.S. PTCL IPR&D product right asset was assigned a value of $287.0 million based on related future net cash flows estimated using a risk-adjusted discount rate of 14.5% and an anticipated regulatory approval date in mid-2011 with market exclusivity rights expected to continue through 2017. The E.U. PTCL IPR&D product right asset was assigned a value of $62.0 million based on future net cash flows using a risk-adjusted discount rate of 14.5% and an anticipated regulatory approval date in mid-2015 with market exclusivity rights expected to continue through 2021. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition. The Company does not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the Company’s acquisition of Gloucester has been recorded as a noncurrent asset in its Consolidated Balance Sheets and is not amortized, but is subject to review for impairment in accordance with ASC 350, “Goodwill and Other Intangible Assets.” </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The Company accounts for contingent consideration in accordance with applicable guidance provided within the business combination rules of ASC 805. As part of the Company’s consideration for the Gloucester acquisition, it is contractually obligated to pay certain consideration resulting from the outcome of future events. The Company updates its assumptions each reporting period based on new developments and records such amounts at fair value until such consideration is satisfied. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The Gloucester acquisition included two contingent considerations which would obligate the Company to make a $180.0 million cash milestone payment to the former Gloucester shareholders upon the marketing approval for the U.S. PTCL IPR&D product right asset and a $120.0 million cash milestone payment upon the marketing approval for the E.U. PTCL IPR&D product right asset. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">The initial fair value of contingent considerations was $230.2 million, consisting of $156.7 million based on the $180.0 million milestone payment upon U.S. PTCL approval and $73.5 million based on the $120.0 million milestone payment upon E.U. PTCL approval. The Company determined the fair value of these obligations to pay additional milestone payments upon approvals based on a probability-weighted income approach. This fair value measurement is based on significant input not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The resulting probability-weighted cash flows were discounted using a Baa rated debt yield of 6.15 percent, which the Company believes is appropriate and representative of a market participant assumption. The range of estimated milestone payments is from no payment if both product indications fail to gain market approval to $300.0 million if both product indications gain market approval. The Company classified the contingent considerations as liabilities, which were measured at fair value as of the acquisition date. Fair value is based on the future milestone payments adjusted for the probability of each payment and the time until each payment is expected to be made. </div> <div align="justify" style="font-size: 10pt; margin-top: 10pt">Subsequent to the acquisition date, the Company has measured the contingent consideration arrangement at fair value each period with changes in fair value recognized in operating earnings. Changes pertaining to facts and circumstances that existed as of the acquisition date will be recognized as adjustments to goodwill. Changes in fair values reflect new information about the IPR&D assets and the passage of time. In the absence of new information, changes in fair value will only reflect the passage of time as development work towards the achievement of the milestones progresses and will be accrued based on an accretion schedule. At September 30, 2010, the balance of the contingent consideration was $246.9 million, of which $167.8 million is included in other current liabilities and $79.1 million included in other non-current liabilities. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock Description of a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. This element may be used as a single block of text to encapsulate the entire disclosure (including data and tables) regarding business combinations, including leverage buyout transactions (as applicable). 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