AbbVie 2012 Annual Report Download - page 79

The allocation of the fair value of the arrangement as of the acquisition date is shown in the table
below.
(in billions)
Acquired intangible assets, non-deductible $ 1.8
IPR&D, non-deductible 0.5
Goodwill, non-deductible 0.4
Deferred income taxes (0.5)
Total consideration $ 2.2
The excess of the purchase price over the fair value of the assets acquired and liabilities assumed of
approximately $400 million was recorded as goodwill. Goodwill is attributable to expected synergies and
other benefits AbbVie believed would result from the acquisition. Acquired intangible assets consist
primarily of product rights for currently marketed products and are amortized over 2 to 13 years
(average of 8 years). Acquired IPR&D projects are accounted for as indefinite-lived intangible assets
until regulatory approval or discontinuation.
Facet Biotech Corporation
In April 2010, AbbVie acquired the outstanding shares of Facet Biotech Corporation (Facet) for
approximately $430 million, in cash, net of cash held by Facet. The acquisition enhances AbbVie’s
early-and mid-stage pharmaceutical pipeline, including daclizumab, a biologic for multiple sclerosis, and
an oncology compound. A substantial portion of the fair value of the acquisition, including $381 million
for daclizumab, has been allocated to acquired IPR&D projects that are accounted for as indefinite-
lived intangible assets until regulatory approval or discontinuation. Had the Facet acquisition taken
place on January 1, 2010, combined net sales and net earnings would not have been significantly
different from reported amounts.
Collaborations and Other Arrangements
The company enters into collaborative agreements with third parties to develop and commercialize
drug candidates. Collaborative activities may include joint research and development and
commercialization of new products. AbbVie generally receives certain licensing rights under these
arrangements. These collaborations often require upfront payments and may include additional
milestone, research and development cost sharing, royalty or profit share payments, contingent upon
the occurrence of certain future events linked to the success of the asset in development and
commercialization. Upfront payments associated with collaborative arrangements during the
development stage are expensed to IPR&D. Subsequent payments made to the partner for the
achievement of milestones during the development stage are expensed to R&D when the milestone is
achieved. Milestone payments made to the partner subsequent to regulatory approval are capitalized as
intangible assets and amortized to cost of products sold over the estimated useful life of the related
asset. Royalty and sales-based milestones are expensed as cost of products sold when incurred.
Reata Pharmaceuticals, Inc.
During 2010 and 2011, AbbVie entered into a series of transactions with Reata Pharmaceuticals, Inc.
(Reata). AbbVie acquired equity interests in Reata of $62 million each in 2011 and 2010. In 2010,
AbbVie entered into an agreement to acquire licensing rights outside the United States, excluding
certain Asian markets, to bardoxolone methyl, a product in development for the treatment of chronic
kidney disease, resulting in a charge to IPR&D of $238 million. The achievement of certain
development milestones under the license agreement resulted in charges of $50 million in 2012 to
R&D and $188 million in 2011 to IPR&D. Additional payments of up to $150 million could be
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