Abbott Laboratories 2014 Annual Report Download - page 68

FINANCIAL REVIEW
ABBOTT 2014 ANNUAL REPORT
66
In December 2014, Abbott completed the acquisition of Topera,
Inc. for approximately $250million in cash, plus additional pay-
ments up to $300million to be made upon completion of certain
regulatory and sales milestones. The acquisition of Topera pro-
vides Abbott a foundational entry in the electrophysiology market.
The preliminary allocation of the fair value of the acquisition
resulted in non-deductible acquired in-process research and
development of approximately $20million, which is accounted for
as an indefinite-lived intangible asset until regulatory approval or
discontinuation, non-deductible definite-lived intangibles assets
of approximately $325million, non-deductible goodwill of
approximately $190million, net deferred tax liabilities of approxi-
mately $120million, and contingent consideration of
approximately $165million. The preliminary fair value of the
contingent consideration was determined based on an indepen-
dent appraisal. Acquired intangible assets consist of developed
technology and trademarks, and are being amortized over 16 years.
The preliminary allocations of the fair value of these acquisitions
will be finalized when valuations are completed. Had the aggre-
gate of the above acquisitions taken place on January1, 2013,
consolidated net sales and income would not have been signifi-
cantly dierent from reported amounts.
In August 2013, Abbott acquired 100 percent of IDEV Technologies,
net of debt, for $310million, in cash. The acquisition of IDEV
Technologies expands Abbott’s endovascular portfolio. The final
allocation of the fair value of the acquisition resulted in non-
deductible acquired in-process research and development of
approximately $170million which is accounted for as an indefinite-
lived intangible asset until regulatory approval or discontinuation,
non-deductible definite-lived intangible assets of approximately
$66million, non-deductible goodwill of approximately $112million
and net deferred tax liabilities of $47million. Acquired intangible
assets consist of developed technology and are being amortized
over 11 years.
In August 2013, Abbott acquired 100 percent of OptiMedica for
$260million, in cash, plus additional payments up to $150million
to be made upon completion of certain development, regulatory
and sales milestones. The acquisition of OptiMedica provides
Abbott with an immediate entry point into the laser assisted cata-
ract surgery market. The final allocation of the fair value of the
acquisition resulted in non-deductible definite-lived intangible
assets of approximately $160million, non-deductible acquired
in-process research and development of approximately $60mil-
lion which is accounted for as an indefinite-lived intangible asset
until regulatory approval or discontinuation, non-deductible
goodwill of approximately $130million, net deferred tax liabilities
of $49million and contingent consideration of approximately
$70million. The fair value of the contingent consideration was
determined based on an independent appraisal. Acquired intangi-
ble assets consist primarily of developed technology that is being
amortized over 18 years.
RESTRUCTURINGS
In 2014, Abbott management approved plans to streamline
operations in order to reduce costs and improve eciencies in
various Abbott businesses including nutritional and established
pharmaceuticals businesses. Abbott recorded employee related
severance and other charges of approximately $164million in 2014.
expands its presence in emerging markets. CFR’s financial results
are included in Abbott’s financial statements beginning on
September 26, 2014, the date that Abbott acquired control of this
business. Abbott owns 99.9% of the outstanding ordinary shares
of CFR. The fair value of the non-controlling interest at the acqui-
sition date was approximately $3million. The acquisition was
funded with cash and cash equivalents and short-term investments.
The preliminary allocation of the fair value of the acquisition is
shown in the table below. The allocation of the fair value of the
acquisition will be finalized when the valuation is completed.
(inbillions)
Acquired intangible assets, non-deductible $«1.80
Goodwill, non-deductible 1.59
Acquired net tangible assets 0.07
Deferred income taxes recorded at acquisition (0.54)
Total preliminary allocation of fair value $«2.92
Acquired intangible assets consist primarily of product rights for
currently marketed products and are amortized over 12 to 16years
(average of 15 years). The goodwill is primarily attributable to intan-
gible assets that do not qualify for separate recognition. The goodwill
is identifiable to the Established Pharmaceutical Products segment.
The acquired tangible assets consist primarily of cash and cash
equivalents of approximately $94million, trade accounts receivable
of approximately $179million, inventory of approximately $177mil-
lion, other current assets of approximately $51million, property
and equipment of approximately $214million, and other long-term
assets of approximately $138million. Assumed liabilities consist of
borrowings of approximately $570million, trade accounts payable
and other current liabilities of approximately $192million and
other noncurrent liabilities of approximately $15million.
Annualized net sales for CFR Pharmaceuticals are expected to
total approximately $800million. Had the acquisition of CFR
Pharmaceuticals taken place on January1, 2013, the consolidated
net sales and earnings of Abbott would not have been significantly
dierent from the reported amounts.
In December 2014, Abbott acquired control of Veropharm, a leading
Russian pharmaceutical company for approximately $315million
excluding assumed debt. Through this acquisition, Abbott estab-
lishes a manufacturing footprint in Russia and obtains a portfolio of
medicines that is well aligned with Abbott’s current pharmaceutical
therapeutic areas of focus. Abbott acquired control of Veropharm
through its purchase of Limited Liability Company Garden Hills, the
holding company that owns approximately 98percent of Veropharm.
Including the assumption of approximately $90million of debt and a
minority interest with a fair value of $5million, the total value of the
acquired business was approximately $410million. The preliminary
allocation of the fair value of the acquisition resulted in definite
lived intangible assets of approximately $120million, goodwill of
approximately $60million, and net deferred tax liabilities of approx-
imately $35million. The goodwill is identifiable to the Established
Pharmaceutical Products segment. Additionally, Abbott acquired
property, plant, and equipment of approximately $185million,
accounts receivable of approximately $45million, inventory of
approximately $25million, and other assets of approximately
$10million. Acquired intangible assets consist of developed tech-
nology and are being amortized over 16 years.