Johnson and Johnson 2015 Annual Report Download - page 75

The 2015 acquisitions primarily included: XO1 Limited, a privately-held biopharmaceutical company developing an anti-
thrombin antibody and Novira Therapeutics, Inc., a privately held clinical-stage biopharmaceutical company developing
innovative therapies for curative treatment of chronic hepatitis B virus infection.
The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $1,173 million and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill. Of this amount, approximately $839
million has been identified as the value of IPR&D primarily associated with the acquisitions of XO1 Limited and Novira
Therapeutics, Inc. The value of the IPR&D was calculated using cash flow projections discounted for the inherent risk in
the projects.
The IPR&D related to the acquisition of XO1 Limited of $360 million is associated with a recombinant human antibody
developed to mimic the activity of a human antibody which appears to produce an anticoagulated state without
predisposition to bleeding. A probability of success factor of 36.0% was used to reflect inherent clinical and regulatory
risk. The discount rate applied was 11.75%.
The IPR&D related to the acquisition of Novira Therapeutics, Inc. of $396 million is associated with its lead candidate NVR
3-778 which is an investigational small molecule, direct-acting antiviral, for oral administration in patients with HBV that
inhibits the HBV core or capsid protein. A probability of success factor of 51.0% was used to reflect inherent clinical and
regulatory risk. The discount rate applied was 16.0%.
Certain businesses were acquired for $2,129 million in cash and $38 million of liabilities assumed during 2014. These
acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included
in the financial statements from their respective dates of acquisition.
The 2014 acquisitions included: Covagen AG, a privately-held, biopharmaceutical company specializing in the
development of multispecific protein therapeutics through the FynomAb®technology platform; Alios BioPharma, Inc., a
privately-held, clinical stage biopharmaceutical company focused on developing therapies for viral diseases; and the
ORSL™ electrolyte ready-to-drink brand from Jagdale Industries Ltd. The excess of purchase price over the estimated fair
value of tangible assets acquired amounted to $2,069 million and has been assigned to identifiable intangible assets, with
any residual recorded to goodwill. Of this amount, approximately $1,913 million has been identified as the value of IPR&D
associated with the acquisitions of Covagen AG and Alios BioPharma, Inc. The value of the IPR&D was calculated using
cash flow projections discounted for the inherent risk in the projects.
The IPR&D related to the acquisition of Alios BioPharma, Inc. (Alios) of $1,688 million is associated with Alios’ lead
compound AL-8176, an orally administered antiviral therapy for treatment of infants with respiratory syncytial virus (RSV).
A probability of success factor of 60.0% was used to reflect inherent clinical and regulatory risk. The discount rate applied
was 11.4%. The IPR&D related to the acquisition of Covagen AG of $225 million is associated with Covagen’s lead
compound COVA-322, currently in Phase 1b study for psoriasis and holding potential as a treatment for a broad range of
inflammatory diseases including rheumatoid arthritis. A probability of success factor of 26.0% was used to reflect inherent
clinical and regulatory risk. The discount rate applied was 12.5% . During 2015, the Company recorded a charge for the
impairment of the IPR&D related to the acquisition of Covagen AG.
Certain businesses were acquired for $835 million in cash and $193 million of liabilities assumed during 2013. These
acquisitions were accounted for using the acquisition method and, accordingly, results of operations have been included
in the financial statements from their respective dates of acquisition.
The assumed liabilities primarily represent the fair value of the contingent consideration which may be payable related to
the acquisition of Aragon Pharmaceuticals, Inc., a privately-held, pharmaceutical discovery and development company
focused on drugs to treat hormonally-driven cancers. As per terms of the agreement, additional payments of up to $350
million may be paid in the future based on reaching predetermined milestones.
The 2013 acquisitions included: Flexible Stenting Solutions, Inc., a leading developer of innovative flexible peripheral
arterial, venous and biliary stents; Shanghai Elsker Mother & Baby Co., Ltd, a baby care company in China and Aragon
Pharmaceuticals, Inc.
The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $941 million and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill. Of this amount, approximately $831
million has been identified as the value of IPR&D primarily associated with the acquisitions of Aragon Pharmaceuticals, Inc.
The IPR&D related to the acquisition of Aragon Pharmaceuticals, Inc. of $810 million is associated with Aragon’s
androgen receptor antagonist program for treatment of hormonally-driven cancers. The value of the IPR&D was calculated
using cash flow projections discounted for the inherent risk in such projects. Probability of success factors ranging from
37%-52.0% were used to reflect inherent clinical and regulatory risk. The discount rate applied was 15.5% .
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