Medtronic 2010 Annual Report Download - page 70

66 Medtronic, Inc.
Notes to Consolidated Financial Statements
(continued)
In connection with the acquisition of CryoCath, the Company
acquired $57 million of technology-based intangible assets with
an estimated useful life of 11 years. Also as part of the acquisition,
the Company recognized $72 million and $184 million for IPR&D
and goodwill, respectively. The IPR&D was expensed on the date
of acquisition and primarily relates to the future launch of Arctic
Front into the U.S. market. For purposes of valuing the acquired
IPR&D, the Company estimated total costs to complete of
approximately $3 million. The establishment of goodwill was
primarily due to the expected revenue growth that is attributable
to increased market penetration from future products and
customers. The goodwill is not deductible for tax purposes.
Restore Medical, Inc. In July 2008, the Company acquired Restore
Medical, Inc. (Restore). Restore’s Pillar Palatal Implant System
provides the Company with a minimally invasive, implantable
medical device used to treat the soft palate component of sleep
breathing disorders, including mild to moderate obstructive sleep
apnea and snoring. The Company accounted for the acquisition as
a business combination. Restore shareholders received $1.60 per
share in cash for each share of Restore common stock they owned.
Total consideration for the transaction, net of cash acquired, was
approximately $29 million. In connection with the acquisition of
Restore, the Company acquired $17 million of technology-based
intangible assets with an estimated useful life of 10 years, $8
million of net tangible assets and $5 million of goodwill. The
goodwill is not deductible for tax purposes.
The pro forma impact of the above acquisitions was not
significant, individually or in the aggregate, to the results of the
Company for the fiscal years ended April 24, 2009 and April 25,
2008. The results of operations related to each company have
been included in the Company’s consolidated statements of
earnings since the date each company was acquired.
Other Acquisitions and IPR&D Charges In February 2009, the
Company recorded an IPR&D charge of $307 million related to the
asset acquisition of privately held Ventor Technologies Ltd.
(Ventor), a development stage company focused on transcatheter
heart valve technologies for the treatment of aortic valve
disease. This acquisition adds two technologies to the Company’s
transcatheter valve portfolio: a minimally invasive, surgical
transapical technology and a next generation percutaneous,
transfemoral technology. Total consideration for the transaction,
net of cash acquired, was approximately $308 million. Of the $308
million, $307 million 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 and $1 million
related to other net assets acquired.
During the second and fourth quarters of fiscal year 2009, the
Company recorded IPR&D charges of $22 million related to the
purchase of certain intellectual property for use in the Spinal
and Diabetes businesses. These payments were expensed as
IPR&D since technological feasibility of the underlying products
had not yet been reached and such technology has no future
alternative use.
Fiscal Year 2008
Kyphon Inc. In November 2007, the Company acquired Kyphon Inc.
(Kyphon) and it became a wholly owned subsidiary of the
Company. Kyphon develops and markets medical devices
designed to restore and preserve spinal function using minimally
invasive technology. Kyphon’s primary products are used in
balloon kyphoplasty for the treatment of spinal compression
fractures caused by osteoporosis or cancer, and in the interspinous
process decompression procedure for treating the symptoms of
lumbar spinal stenosis. It is expected that the acquisition of
Kyphon will add to the growth of the Company’s existing Spinal
business by extending its product offerings and enabling the
Company to provide physicians with a broader range of therapies
for use at all stages of the care continuum.
Under the terms of the agreement announced in July 2007,
Kyphon shareholders received $71 per share in cash for each
share of Kyphon common stock they owned. Total consideration
for the transaction was approximately $4.203 billion, which
includes payments to Kyphon shareholders for the cancellation of
outstanding shares, the assumption and settlement of existing
Kyphon debt and payment of direct acquisition costs. Total debt
assumed relates to Kyphon’s obligations under existing credit and
term loan facilities and outstanding senior convertible notes. In
addition, the total consideration includes the proceeds of
unwinding the related convertible note hedges and cancellation
and payment of the warrants to the hedge participants that were
originally issued by Kyphon in February 2007. The transaction was
financed through a combination of approximately $3.303 billion
cash on hand, the issuance of $600 million short-term commercial
paper and borrowing $300 million through a new long-term
unsecured revolving credit facility.
The Company has accounted for the acquisition of Kyphon as a
business combination. Under business combination accounting,
the assets and liabilities of Kyphon were recorded as of the
acquisition date, at their respective fair values, and consolidated