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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-11083
BOSTON SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware04-2695240
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
    300 Boston Scientific Way, Marlborough, Massachusetts                    01752-1234
        (Address of Principal Executive Offices)                         (Zip Code)
508 683-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueBSXNew York Stock Exchange
0.625% Senior Notes due 2027BSX27New York Stock Exchange
5.50% Mandatory Convertible Preferred Stock, Series A, par value $0.01 per shareBSX PR ANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares outstanding of Common Stock, $0.01 par value per share, as of October 30, 2020 was 1,431,921,459.

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PART I
FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions, except per share data)2020201920202019
Net sales$2,659 $2,707 $7,204 $7,831 
Cost of products sold869 777 2,465 2,265 
Gross profit1,790 1,930 4,740 5,566 
Operating expenses:
Selling, general and administrative expenses984 1,012 2,760 2,849 
Research and development expenses315 306 857 866 
Royalty expense12 15 32 48 
Amortization expense197 178 595 498 
Intangible asset impairment charges219 — 452 105 
Contingent consideration expense (benefit)6 8 (102)(9)
Restructuring charges (credits)3 3 16 10 
Litigation-related net charges (credits)260 25 260 (108)
 1,995 1,547 4,870 4,258 
Operating income (loss)(205)383 (130)1,308 
Other income (expense):
Interest expense(86)(95)(265)(294)
Other, net64 (197)9 (322)
Income (loss) before income taxes(227)91 (386)693 
Income tax expense (benefit)(72)(35)(94)(11)
Net income (loss)(155)126 (292)704 
Preferred stock dividends(14)— (19)— 
Net income (loss) available to common stockholders$(169)$126 $(311)$704 
Net income (loss) per common share — basic$(0.12)$0.09 $(0.22)$0.51 
Net income (loss) per common share — assuming dilution
$(0.12)$0.09 $(0.22)$0.50 
Weighted-average shares outstanding
Basic1,430.9 1,393.1 1,413.0 1,390.6 
Assuming dilution1,430.9 1,412.2 1,413.0 1,409.7 







See notes to the unaudited condensed consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Three Months Ended
September 30,		Nine Months Ended
September 30,
(in millions)2020201920202019
Net income (loss)$(155)$126 $(292)$704 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment84 (2)(104)4 
Net change in derivative financial instruments(64)62 (15)102 
Net change in defined benefit pensions and other items— — — (1)
Total other comprehensive income (loss)20 60 (119)105 
Total comprehensive income (loss)$(135)$186 $(411)$809 









































See notes to the unaudited condensed consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 As of
(in millions, except share and per share data)September 30, 2020December 31, 2019
 (unaudited) 
ASSETS  
Current assets:  
Cash and cash equivalents$2,022 $217 
Trade accounts receivable, net1,598 1,828 
Inventories1,472 1,579 
Prepaid income taxes174 195 
Other current assets894 880 
Total current assets6,160 4,699 
Property, plant and equipment, net2,064 2,079 
Goodwill10,137 10,176 
Other intangible assets, net6,797 7,886 
Deferred tax assets4,172 4,196 
Other long-term assets1,516 1,529 
TOTAL ASSETS$30,845 $30,565 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current debt obligations$11 $1,416 
Accounts payable452 542 
Accrued expenses2,195 2,109 
Other current liabilities644 800 
Total current liabilities3,302 4,866 
Long-term debt9,325 8,592 
Deferred income taxes522 595 
Other long-term liabilities2,132 2,635 
Commitments and contingencies
Stockholders’ equity  
Preferred stock, $0.01 par value - authorized 50,000,000 shares - issued 10,062,500 shares as of September 30, 2020 and none as of December 31, 2019
— — 
Common stock, $0.01 par value - authorized 2,000,000,000 shares - issued 1,679,428,209 shares as of September 30, 2020 and 1,642,488,911 shares as of December 31, 2019
17 16 
Treasury stock, at cost - 247,566,270 shares as of September 30, 2020 and December 31, 2019
(1,717)(1,717)
Additional paid-in capital19,687 17,561 
Accumulated deficit(2,574)(2,253)
Accumulated other comprehensive income (loss), net of tax151 270 
Total stockholders’ equity15,564 13,877 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$30,845 $30,565 

See notes to the unaudited condensed consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
 Preferred StockCommon StockTreasury StockAdditional Paid-In CapitalAccumulated DeficitAccumulated Other Comprehensive Income (Loss), Net of Tax
(in millions, except share data)Shares IssuedPar ValueShares IssuedPar Value
As of December 31, 2018— $— 1,632,148,030 $16 $(1,717)$17,346 $(6,953)$33 
Net income (loss)   424  
Total other comprehensive income (loss)   54 
Stock-based compensation6,001,343 28 
As of March 31, 2019— $— 1,638,149,373 $16 $(1,717)$17,374 $(6,528)$87 
Net income (loss)154 
Total other comprehensive income (loss)(9)
Stock-based compensation949,557 48 
As of June 30, 2019— $— 1,639,098,930 $16 $(1,717)$17,422 $(6,375)$78 
Net income (loss)126 
Total other comprehensive income (loss)60 
Stock-based compensation2,243,579 89 
As of September 30, 2019— $— 1,641,342,509 $16 $(1,717)$17,510 $(6,249)$138 
Net income (loss)3,996 
Total other comprehensive income (loss)132 
Stock-based compensation1,146,402 50 
As of December 31, 2019— $— 1,642,488,911 $16 $(1,717)$17,561 $(2,253)$270 
Net income (loss)11 
Cumulative effect adjustment for adoption of ASU 2016-13(10)
Total other comprehensive income (loss)(101)
Stock-based compensation4,388,331 28 
As of March 31, 2020— $— 1,646,877,242 $16 $(1,717)$17,589 $(2,252)$168 
Net income (loss)(147)
Total other comprehensive income (loss)(37)
Preferred stock issuance10,062,500 — 975 
Common stock issuance29,382,500 — 975 
Preferred stock dividends(5)
Stock-based compensation493,824 50 
As of June 30, 202010,062,500 $— 1,676,753,566 $17 $(1,717)$19,590 $(2,405)$131 
Net income (loss)(155)
Total other comprehensive income (loss)20 
Preferred stock dividends(14)
Stock-based compensation2,674,643 97 
As of September 30, 202010,062,500 $— 1,679,428,209 $17 $(1,717)$19,687 $(2,574)$151 



See notes to the unaudited condensed consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
(in millions)20202019
Cash provided by (used for) operating activities$835 $1,144 
Investing activities:  
Purchases of property, plant and equipment(217)(275)
Proceeds from sale of property, plant and equipment6 5 
Payments for acquisitions of businesses, net of cash acquired(3)(4,382)
Proceeds from royalty rights66 — 
Payments for investments and acquisitions of certain technologies(130)(137)
Proceeds from divestiture15 90 
Payments for settlements of hedge contracts— (294)
Cash provided by (used for) investing activities(264)(4,992)
Financing activities:  
Payment of contingent consideration and royalty rights established in purchase accounting(132)(135)
Payments on short-term borrowings(2,950)(1,000)
Proceeds from short-term borrowings, net of debt issuance costs2,245 — 
Net increase (decrease) in commercial paper(714)13 
Payments on borrowings from credit facilities(1,919)— 
Proceeds from borrowings on credit facilities1,916 — 
Payments on long-term borrowings and debt extinguishment costs(1,000)(1,472)
Proceeds from long-term borrowings, net of debt issuance costs1,683 6,243 
Cash dividends paid on preferred stock(14)— 
Net proceeds from issuance of preferred stock in connection with public offering975 — 
Net proceeds from issuance of common stock in connection with public offering975 — 
Cash used to net share settle employee equity awards(59)(64)
Proceeds from issuances of common stock pursuant to employee stock compensation and purchase plans107 113 
Cash provided by (used for) financing activities1,112 3,697 
Effect of foreign exchange rates on cash(8)(2)
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents1,675 (153)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period607 829 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period$2,282 $676 
Supplemental Information  
Stock-based compensation expense$128 $116 
Fair value of contingent consideration recorded in purchase accounting— 127 
Non-cash impact of transferred royalty rights(66)— 
As of September 30,
Reconciliation to amounts in the unaudited condensed consolidated balance sheets:20202019
Cash and cash equivalents$2,022 $277 
Restricted cash and restricted cash equivalents included in Other current assets
214 357 
Restricted cash equivalents included in Other long-term assets
46 43 
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period$2,282 $676 
See notes to the unaudited condensed consolidated financial statements. Amounts may not foot due to rounding.
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. When used in this report, the terms, "we," "us," "our," and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in Item 8 of our most recent Annual Report on Form 10-K.

Amounts reported in millions within this quarterly report are computed based on the amounts in thousands. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.

Subsequent Events

We evaluate events occurring after the date of our most recent accompanying unaudited condensed consolidated balance sheet for potential recognition or disclosure in our financial statements. Those items requiring recognition in the financial statements have been recorded and disclosed accordingly. Those items requiring disclosure (non-recognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note H – Commitments and Contingencies and Note I – Stockholders' Equity for more information.

Accounting Standards Implemented Since December 31, 2019

ASC Update No. 2016-13

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments - Credit Losses (FASB ASC Topic 326, Financial Instruments - Credit Losses). We adopted the standard as of January 1, 2020 using the modified retrospective method. Under this method, we applied the new credit loss measurement guidance to financial assets measured at amortized cost on the date of adoption and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2020 are presented in accordance with FASB ASC Topic 326. Prior period amounts have not been restated and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 310, Receivables.

Upon the adoption of FASB ASC Topic 326, credit loss reserves are recorded when financial assets are established if credit losses are expected over the asset’s contractual life. These losses were previously expensed when it became probable that a loss would be incurred. As a result of the adoption of FASB ASC Topic 326, we recorded a net reduction to opening retained earnings on January 1, 2020 related to the establishment of credit loss reserves on Trade accounts receivable and recorded a corresponding increase in the Allowance for credit losses, a contra Trade accounts receivable account. The adoption had an immaterial impact on our financial position and results of operations.

ASC Update No. 2018-15

In August 2018, the FASB issued ASC Update No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The purpose of Update No. 2018-15 is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Update No. 2018-15 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted, including adoption in any interim period. We adopted Update No. 2018-15 in the first quarter of 2020. The adoption had an immaterial impact on our financial position and results of operations.

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ASC Update No. 2018-18

In November 2018, the FASB issued ASC Update No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606. The purpose of Update No. 2018-18 is to clarify the interaction between FASB ASC Topic 808 and FASB ASC Topic 606, Revenue from Contracts with Customers (FASB ASC Topic 606) as FASB ASC Topic 808 did not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements was often based on an analogy to other accounting literature or an accounting policy election. Update No. 2018-18 is effective for annual periods beginning after December 15, 2019. We adopted Update No. 2018-18 in the first quarter of 2020. The adoption had an immaterial impact on our financial position and results of operations.

NOTE B – ACQUISITIONS AND STRATEGIC INVESTMENTS

Our unaudited condensed consolidated financial statements include the operating results for acquired entities from the respective date of acquisition. We did not complete any material acquisitions or divestitures during the first nine months of 2020. We have not presented supplemental pro forma financial information for prior acquisitions given their results are not material to our unaudited condensed consolidated financial statements. We recorded immaterial purchase price adjustments during the measurement period for the preliminary purchase price allocations of acquisitions in the first nine months of 2020. Transaction costs for these acquisitions were immaterial to our unaudited condensed consolidated financial statements and were expensed as incurred.

Q3 2019 YTD Acquisitions

BTG plc

On August 19, 2019, we announced the closing of our acquisition of BTG, a public company organized under the laws of England and Wales. BTG had three key portfolios, the largest of which is its interventional medicine portfolio (Interventional Medicine) that encompasses interventional oncology therapeutic technologies for patients with liver and kidney cancers, as well as a vascular portfolio for treatment of deep vein thrombosis, pulmonary embolism, deep venous obstruction and superficial venous disease. Following the closing of the acquisition, we began to integrate BTG's Interventional Medicine business into our Peripheral Interventions division.

In addition to the Interventional Medicine product lines, the BTG portfolio also included a specialty pharmaceutical business (Specialty Pharmaceuticals) comprised of acute care antidotes to treat overexposure to certain medications and toxins and a licensing portfolio (Licensing arrangements) that generated net royalties related to BTG intellectual property and product license agreements. Refer to Note D – Hedging Activities and Fair Value Measurements for additional information.

The transaction price consisted of upfront cash in the aggregate amount of £3.312 billion (or $4.023 billion based on the exchange rate at closing on August 19, 2019) for the entire issued ordinary share capital of BTG, whereby BTG stockholders received 840 pence (or $10.20 based on the exchange rate at closing) in cash for each BTG share. The transaction price included $404 million of cash and cash equivalents acquired. We implemented our acquisition of BTG by way of a court-sanctioned scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006, as amended.

Purchase Price Allocation

We accounted for the acquisition of BTG as a business combination, and in accordance with FASB ASC Topic 805, Business Combinations (FASB ASC Topic 805), we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The final purchase price was comprised of the following components:
(in millions)
Payment for acquisition, net of cash acquired$3,619 
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The final purchase price allocation was comprised of the following components:
(in millions)
Goodwill$1,644 
Trade accounts receivable, net108 
Inventories232 
Other current assets252 
Other intangible assets, net1,785 
Other long-term assets537 
Accrued expenses and other current liabilities(308)
Other long-term liabilities(274)
Deferred tax liability(358)
$3,619 

We allocated a portion of the purchase price to the specific intangible asset categories as follows:
Amount Assigned
(in millions)
Amortization Period
(in years)
Risk-Adjusted Discount
Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related$1,709 10-1811 %-12%
Other intangible assets75 2-1111%
$1,785 

As a result of our acquisition of BTG, we recognized goodwill of $1.644 billion, which is attributable to the synergies expected to arise from the acquisition and revenue and cash flow projections associated with future technologies. The goodwill is not deductible for tax purposes. We allocated $1.406 billion to our Peripheral Interventions reporting unit and $238 million to the Specialty Pharmaceuticals reporting unit.

Vertiflex, Inc.

On June 11, 2019, we announced the closing of our acquisition of Vertiflex, Inc. (Vertiflex), a privately-held company which developed and commercialized the Superion™ Indirect Decompression System, a minimally-invasive device used to improve physical function and reduce pain in patients with lumbar spinal stenosis (LSS). The transaction price consisted of an upfront cash payment of $465 million and contingent payments that are based on a percentage of Vertiflex sales growth in the first three years following the acquisition close. At the time of acquisition, we estimated the sales-based contingent payments to be in a range of zero to $100 million; however, the payments are uncapped over the three year earn-out period. Following the closing of the acquisition, we integrated the Vertiflex business into our Neuromodulation division.

Millipede, Inc.

On January 29, 2019, we announced the closing of our acquisition of Millipede, Inc. (Millipede), a privately-held company that has developed the IRIS Transcatheter Annuloplasty Ring System for the treatment of severe mitral regurgitation. We were an investor in Millipede since the first quarter of 2018 as part of an investment and acquisition option agreement, whereby we purchased a portion of the outstanding shares of Millipede, along with newly issued shares of the company, for an upfront cash payment of $90 million. In the fourth quarter of 2018, upon the successful completion of a first-in-human clinical study, we exercised our option to acquire the remaining shares of Millipede. We held an interest of approximately 20 percent immediately prior to the acquisition date. We remeasured the fair value of our previously-held investment based on the implied enterprise value and allocation of purchase price consideration according to priority of equity interests. The transaction price for the remaining stake consisted of an upfront cash payment of $325 million and up to an additional $125 million payment upon achievement of a commercial milestone. Following the closing of the acquisition, we integrated the Millipede business into our Interventional Cardiology division.

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Purchase Price Allocation

We accounted for the acquisitions of Vertiflex and Millipede as business combinations, and in accordance with FASB ASC Topic 805, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition dates. The final purchase prices were comprised of the following components:
(in millions)
Payments for acquisitions, net of cash acquired$763 
Fair value of contingent consideration127 
Fair value of prior interests102 
$992 

The final combined purchase price allocation was comprised of the following components:
(in millions)
Goodwill$577 
Amortizable intangible assets220 
Indefinite-lived intangible assets240 
Other assets acquired24 
Liabilities assumed(12)
Net deferred tax liabilities(58)
$992 

We allocated a portion of the combined purchase price to the specific intangible asset categories as follows:
Amount Assigned
(in millions)
Amortization Period
(in years)
Risk-Adjusted Discount
Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related$210 1215%
Other intangible assets10 1215%
Indefinite-lived intangible assets:
In-process research and development (IPR&D)240 N/A19%
$461 
Goodwill was primarily established due to synergies expected to be gained from leveraging our existing operations, as well as revenue and cash flow projections associated with future technologies, and has been allocated to our reportable segments based on the relative expected benefit. The goodwill recorded relating to our 2019 acquisitions is not deductible for tax purposes.

Contingent Consideration

Changes in the fair value of our contingent consideration liability were as follows:

(in millions)
Balance as of December 31, 2019$354 
Contingent consideration net expense (benefit)(102)
Contingent consideration payments(40)
Balance as of September 30, 2020$214 

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As of September 30, 2020, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay associated with our prior acquisitions was $627 million. Refer to Note B – Acquisitions and Strategic Investments to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K for additional information.

The $102 million benefit recorded in the first nine months of 2020 related to a reduction in the contingent consideration liability for certain prior acquisitions for which we reduced the probability of achievement of associated revenue and/or regulatory milestones upon which payment is conditioned, or in the case of nVision Medical Corporation (nVision) for milestones that would not be achieved due to management's discontinuation of the R&D program.

The recurring Level 3 fair value measurements of our contingent consideration liability that we expect to be required to settle include the following significant unobservable inputs:
Contingent Consideration LiabilityFair Value as of September 30, 2020Valuation TechniqueUnobservable InputRangeWeighted Average (1)
R&D, Regulatory and Commercialization-based Milestones$100 millionDiscounted Cash FlowDiscount Rate2 %-2%2%
Probability of Payment90 %-90%90%
Projected Year of Payment2027-20272027
Revenue-based Payments$114 millionDiscounted Cash FlowDiscount Rate11 %-14%13%
Probability of Payment53 %-100%87%
Projected Year of Payment2020-20242022
(1)    Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected year of payment, the amount represents the median of the inputs and is not a weighted average.

Projected contingent payment amounts related to some of our research and development (R&D), commercialization-based and revenue-based milestones are discounted back to the current period using a discounted cash flow model. Significant increases or decreases in projected revenues, probabilities of payment, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement as of September 30, 2020.

Strategic Investments

The aggregate carrying amount of our strategic investments was comprised of the following:

As of
(in millions)September 30, 2020December 31, 2019
Equity method investments$366 $264 
Measurement alternative investments (1)196 171 
Publicly-held equity securities (2)— 1 
Notes receivable4 23 
$567 $458 
(1)    Measurement alternative investments are privately-held equity securities without readily determinable fair values that are measured at cost minus impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
(2)    Publicly-held equity securities are measured at fair value with changes in fair value recognized currently in Other, net within our accompanying unaudited condensed consolidated statements of operations.

These investments are classified as Other long-term assets within our accompanying unaudited condensed consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies.

As of September 30, 2020, the cost of our aggregated equity method investments exceeded our share of the underlying equity in net assets by $343 million, which represents amortizable intangible assets, IPR&D, goodwill and deferred tax liabilities. In the third quarter of 2020, we recorded a $65 million non-cash gain presented in Other, net within our unaudited condensed consolidated statements of operations to state at fair value one of our portfolio investments treated under the measurement alternative method of accounting.
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NOTE C – GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill are as follows:
As of September 30, 2020As of December 31, 2019
(in millions)Gross Carrying AmountAccumulated Amortization/ Write-offsGross Carrying AmountAccumulated Amortization/ Write-offs
Technology-related$11,834 $(6,102)$12,020 $(5,706)
Patents514 (407)525 (408)
Other intangible assets1,758 (1,183)1,754 (1,081)
Amortizable intangible assets$14,106 $(7,692)$14,299 $(7,195)
    
Goodwill$20,037 $(9,900)$20,076 $(9,900)
IPR&D$263 $662 
Technology-related120 120 
Indefinite-lived intangible assets$383 $782 

Our technology-related intangible assets consist of technical processes, intellectual property and institutional understanding with respect to products and processes that we intend to leverage in future products or processes and will carry forward from one product generation to the next. We used the multi-period excess earnings method, a form of the income approach, to derive the fair value of the technology-related intangible assets and are amortizing them on a straight-line basis over their assigned estimated useful lives. Our IPR&D represents intangible assets that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility or completion of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. In the first quarter of 2020, following receipt of CE Mark for certain products, we reclassified certain of our IPR&D intangible assets to amortizable technology-related assets and began amortization to reflect their use over their remaining lives.

The following represents our goodwill balance by global reportable segment and our separately presented Specialty Pharmaceuticals operating segment:
(in millions)MedSurgRhythm and NeuroCardiovascularSpecialty PharmaceuticalsTotal
As of December 31, 2019$2,061 $2,192 $5,676 $247 $10,176 
Impact of foreign currency fluctuations and other changes in carrying amount(6)2 (29)(7)(39)
As of September 30, 2020$2,056 $2,194 $5,646 $241 $10,137 

Goodwill and Indefinite-Lived Intangible Asset Impairment Testing

We did not record any goodwill impairment charges in the third quarter and first nine months of 2020 or 2019. We test our goodwill balances in the second quarter of each year as of April 1 for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist. In the second quarter of 2020, we performed our annual goodwill impairment test for all of our reporting units and concluded that the fair value of each reporting unit exceeded its carrying value.

We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We identified the following reporting units in our 2020 annual goodwill impairment test: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health, Neuromodulation and Specialty Pharmaceuticals. We aggregated the Cardiac Rhythm Management and Electrophysiology reporting units, components of the Rhythm Management operating segment, based on the criteria prescribed in FASB ASC Topic 350, Intangibles - Goodwill and Other.

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In 2020, we utilized the qualitative assessment approach to test all of our reporting units. We assessed recent events, including the COVID-19 pandemic, as well as changes in macroeconomic factors, industry and market conditions, overall financial performance and other entity-specific factors since the most recently performed quantitative test. After assessing the totality of events, we determined that it is more likely than not that the fair value of each of our reporting units has sufficient excess over its carrying value, and concluded that goodwill was not impaired or at risk of impairment in the second quarter of 2020. There were no impairment indicators in the third quarter of 2020 that necessitated an interim impairment test.

We recorded Intangible asset impairment charges of $219 million in the third quarter of 2020, none in the third quarter of 2019, $452 million in the first nine months of 2020 and $105 million in the first nine months of 2019. The impairment charges recorded in the third quarter of 2020 were primarily associated with IPR&D acquired with Apama Medical Inc. following management’s decision to cancel the program. Intangible asset impairment charges in the first nine months of 2020 also included charges related to nVision and certain other intangible assets initially established following acquisition. In general, these charges were recorded as a result of management’s decision to change commercial launch plans or discontinue certain R&D programs based on cost to complete, time to market, overall economic viability or, specific to nVision, our understanding of the clinical evidence necessary to commercialize the technology.

We test our indefinite-lived intangible assets at least annually during the third quarter for impairment and reassess their classification as indefinite-lived assets. In addition, we review our indefinite-lived intangible assets for classification and impairment more frequently if impairment indicators exist. We assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that our indefinite-lived intangible assets are impaired. If we conclude that it is more likely than not that the asset is impaired, we then determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with FASB ASC Topic 350. If the carrying value exceeds the fair value of the indefinite-lived intangible asset, we write the carrying value down to the fair value. In the third quarter of 2020, we performed our annual IPR&D impairment test and evaluated our indefinite-lived core technology assets using the optional qualitative assessment approach and concluded a quantitative test was required for certain IPR&D assets, resulting in the ultimate impairment of the Apama assets discussed above. We also verified that the classification of IPR&D projects and our indefinite-lived core technology assets recognized within our unaudited condensed consolidated balance sheets continues to be appropriate.

We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. If we determine it is more likely than not that the asset is impaired based on our qualitative assessment of impairment indicators, we test the intangible asset for recoverability. If the carrying value of the intangible asset or asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset or asset group, we will write the carrying value down to fair value in the period impairment is identified. In the third quarter of 2020, we determined a recoverability test was required for certain amortizable intangible assets based on our qualitative assessment of impairment indicators, and recorded intangible asset impairment charges as appropriate.

Refer to Critical Accounting Policies and Estimates within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our most recent Annual Report on Form 10-K for further discussion of our annual goodwill and intangible asset impairment testing.

NOTE D – HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

We address market risk from changes in foreign currency exchange rates and interest rates through risk management programs which include the use of derivative and nonderivative financial instruments. We operate these programs pursuant to documented corporate risk management policies and do not enter into derivative transactions for speculative purposes. Our derivative instruments do not subject our earnings to material risk, as the gains or losses on these derivatives generally offset losses or gains recognized on the hedged item.

We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to individual counterparties and by actively monitoring counterparty credit ratings and the amount of individual credit exposure. We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. Further, none of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.
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Currency Hedging Instruments

Risk Management Strategy

Our risk from changes in currency exchange rates consists primarily of monetary assets and liabilities; forecasted intercompany and third-party transactions; net investments in certain subsidiaries; and, during 2019 prior