Medtronic 2009 Annual Report Download - page 72

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68 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
consolidated financial information is presented for informational
purposes only.
Fiscal Year
(in millions, except per share data) 2008 2007
Net sale s $ 13,804 $ 12,744
Net earnings $ 2,093 $ 2,321
Earnings per share:
Basic $ 1.85 $ 2.02
Diluted $ 1.83 $ 2.00
The unaudited pro forma financial information for fiscal years
2008 and 2007 include a $290 million IPR&D charge and a $34
million increase in cost of products sold related to the step-up to
fair value of inventory acquired, both of which are non-recurring.
Other Acquisitions and IPR&D Charges In April 2008, the Company
recorded an IPR&D charge of $42 million related to the acquisition
of NDI Medical (NDI), a development stage company focused
on commercially developing technology to stimulate the dorsal
genital nerve as a means to treat urinary incontinence. Total
consideration for NDI was approximately $42 million which
included $39 million in cash and the forgiveness of $3 million of
pre-existing loans provided to NDI. The acquisition will provide
the Company with exclusive rights to develop and use NDI’s
technology in the treatment of urinary urge incontinence. This
payment was expensed as IPR&D since technological feasibility of
the underlying projects had not yet been reached and such
technology has no future alternative use.
In November 2007, the Company recorded an IPR&D charge of
$20 million related to the acquisition of Setagon, Inc. (Setagon),
a development stage company focused on commercially
developing metallic nanoporous surface modification technology.
The acquisition will provide the Company with exclusive rights to
use and develop Setagon’s Controllable Elution Systems
technology in the treatment of cardiovascular disease. Total
consideration for Setagon was approximately $20 million in cash,
subject to purchase price increases, which would be triggered
by the achievement of certain milestones. This payment was
expensed as IPR&D since technological feasibility of the underlying
project had not yet been reached and such technology has no
future alternative use.
In June 2007, the Company exercised a purchase option and
acquired substantially all of the O-Arm Imaging System (O-Arm)
assets of Breakaway Imaging, LLC (Breakaway), a privately
held company. Prior to the acquisition, the Company had the
exclusive rights to distribute and market the O-Arm. The O-Arm
provides multi-dimensional surgical imaging for use in spinal and
orthopedic surgical procedures. The acquisition is expected to
bring the O-Arm into a broad portfolio of image guided surgical
solutions. Total consideration for Breakaway was approximately
$26 million in cash, subject to purchase price increases, which
would be triggered by the achievement of certain milestones.
In connection with the acquisition of Breakaway, the Company
acquired $22 million of technology-based intangible assets that
had an estimated useful life of 15 years at the time of acquisition,
$1 million of tangible assets and $3 million of goodwill. The
goodwill is deductible for tax purposes. The pro forma impact of
the acquisition of Breakaway was not significant to the results of
the Company for the fiscal years 2008 and 2007.
Additionally, during fiscal year 2008, the Company recorded
IPR&D charges of $25 million related to a milestone payment
under the existing terms of a royalty bearing, non-exclusive patent
cross-licensing agreement with NeuroPace, Inc. and $13 million
for unrelated purchases of certain intellectual property. These
payments were expensed as IPR&D since technological feasibility
of the underlying projects had not yet been reached and such
technology has no future alternative use.
Fiscal Year 2007
In March 2007, the Company acquired manufacturing assets,
know-how, and an exclusive license to intellectual property
related to the manufacture and distribution of EndoSheath
products from Vision–Sciences, Inc. (VSI), which was accounted for
as a purchase of assets. The license acquired from VSI expanded
the Company’s existing U.S. distribution rights of EndoSheath
products to worldwide distribution rights. The EndoSheath is a
sterile disposable sheath that fits over a fiberoptic endoscope
preventing contamination of the scope during procedures and
allowing reuse of the scope without further sterilization. The
consideration paid was $27 million in cash which was primarily
allocated to technology-based intangible assets with an estimated
useful life of 10 years at the time of acquisition. The purchase
price is subject to increases triggered by the achievement of
certain milestones.
In September 2006, the Company acquired and/or licensed
selected patents and patent applications owned by Dr. Eckhard
Alt (Dr. Alt), or certain of his controlled companies in a series of