AbbVie 2014 Annual Report Download - page 79

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Alvine Pharmaceuticals, Inc.
In May 2013, AbbVie entered into a global collaboration with Alvine Pharmaceuticals, Inc. to develop
ALV003, a novel oral treatment for patients with celiac disease. As part of the agreement, AbbVie made an
initial upfront payment of $70 million, which was expensed to IPR&D in the second quarter of 2013.
AbbVie could make additional payments totaling up to $275 million pursuant to this arrangement.
Action Pharma A/S
In May 2012, AbbVie recorded a charge to IPR&D of $110 million as a result of the acquisition of
ABT-719 (previously referred to as AP214), a drug under development for the prevention of acute kidney
injury associated with major cardiac surgery in patients at increased risk.
Note 7 Goodwill and Intangible Assets
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Goodwill
The carrying amount of goodwill was $5.9 billion and $6.3 billion at December 31, 2014 and 2013,
respectively. Changes in the goodwill balance in 2014 were primarily due to foreign currency translation.
Changes in the goodwill balance in 2013 were attributable to foreign currency translation and goodwill
additions of $25 million related to product rights acquired during the second quarter. As of December 31,
2014, there were no accumulated goodwill impairment losses. Future impairment tests for goodwill will be
performed annually in the third quarter, or earlier if indicators of impairment exist.
Intangible Assets, Net
The following table summarizes AbbVie’s intangible assets:
December 31, 2014 December 31, 2013
Gross Net Gross Net
carrying Accumulated carrying carrying Accumulated carrying
(in millions) amount amortization amount amount amortization amount
Definite-lived intangible assets
Developed product rights $4,546 $(3,706) $ 840 $4,744 $(3,503) $1,241
License agreements 1,097 (869) 228 994 (792) 202
Total definite-lived intangible assets 5,643 (4,575) 1,068 5,738 (4,295) 1,443
Indefinite-lived research and development 445 — 445 447 — 447
Total intangible assets $6,088 $(4,575) $1,513 $6,185 $(4,295) $1,890
Intangible assets with finite useful lives are amortized over their estimated useful lives, which range
between 3 to 16 years with an average of 13 years and 10 years for developed product rights and license
agreements, respectively. Additions in 2014 are primarily related to the acquisition of $80 million of
amortizable intangible assets under license agreements for on-market product rights in the United States
with an average amortization period of 10 years.
Amortization expense for 2014, 2013 and 2012 was $403 million, $509 million and $625 million,
respectively, and is included in cost of products sold in the consolidated statements of earnings. At
December 31, 2014, the anticipated annual amortization expense for intangible assets recorded as of
December 31, 2014 was $247 million in 2015, $164 million in 2016, $152 million in 2017, $145 million in
2018 and $107 million in 2019. In the third quarter of 2014, an impairment charge of $37 million was
recorded related to certain on-market product rights in Japan due to increased generic competition. The
charge was based on a discounted cash flow analysis and is included in cost of products sold.
The indefinite-lived intangible assets as of December 31, 2013 relate to IPR&D acquired in a business
combination. In 2012, AbbVie recorded an impairment charge of $13 million for certain projects under
development. The charge was based on a discounted cash flow analysis and was included in R&D expense.
In 2014, no material impairment charges were recorded related to indefinite-lived intangible assets.
2014 Form 10-K 73