Amgen 2002 Annual Report Download - page 56

Page 54
AMGEN 2002 ANNUAL REPORT
price allocation is expected to be completed as soon as
practicable after the consummation of the acquisition.
In the fourth quarter of 2002, goodwill increased by
$53.9 million principally due to the impact of adjusting
amounts previously accrued under the Company’s various
restructuring plans (see “— Restructuring plans” below)
and obtaining final third-party valuations of identifiable
intangible assets.
In-process research and development
Approximately $2,991.8 million of the purchase price rep-
resents the estimated fair value of projects that, as of the
acquisition date, had not reached technological feasibility
and had no alternative future use. Accordingly, this amount
was immediately expensed in the consolidated statement of
operations in the third quarter of 2002. The estimated fair
values assigned to IPR&D is comprised of the following
projects by therapeutic area (in millions):
Value of IPR&D
acquired
Inflammation $2,160.1
Oncology 726.3
Other 105.4
Total $2,991.8
The estimated fair value of these projects was determined
based on the use of a discounted cash flow model. For each
project, the estimated after-tax cash flows were probabil-
ity weighted to take into account the stage of completion
and the risks surrounding the successful development and
commercialization. These cash flows were then discounted
to a present value using discount rates ranging from 12%
to 14%. In addition, solely for the purposes of estimating
the fair values of these IPR&D projects as of July 15, 2002,
the following assumptions were made:
•Future R&D costs of $500 million to $600 million
(unaudited) per therapeutic area would be incurred to
complete the inflammation and the oncology research
projects, and future costs of $200 million to $250
million (unaudited) would be incurred to complete all
other research projects. These estimates are net of any
R&D costs that will be shared under collaborations with
corporate partners.
•The research projects, which were in various stages of
development from pre-clinical through phase 3 clinical
trials, are expected to reach completion at various dates
ranging from 2003 through 2009.
The major risks and uncertainties associated with the
timely and successful completion of these projects consist
of the ability to confirm the safety and efficacy of the tech-
nology based on the data from clinical trials and obtaining
necessary regulatory approvals. In addition, no assurance can
be given that the underlying assumptions used to forecast
the cash flows or the timely and successful completion of
such projects will materialize, as estimated. For these rea-
sons, among others, actual results may vary significantly from
the estimated results.
Identifiable intangible assets
Acquired identifiable intangible assets primarily relate to
ENBREL
®
and include product rights for approved indica-
tions of currently marketed products and core technology.
The amounts assigned to each intangible asset class as of the
acquisition date and the weighted-average amortization
periods are as follows (amounts in millions):
Weighted
Value of average
intangibles amortization
acquired period
Developed product technology $3,264.5 14.5 years
Core technology 1,348.3 15 years
Tradename 190.4 15 years
Total $4,803.2
Leukine
®
and Novantrone
®
In May 2002, Immunex entered into an agreement to sell
certain assets used in connection with its Leukine
®
business
to Schering AG Germany (“Schering”) for approximately
$389.9 million in cash plus the payment of additional cash
consideration upon achievement of certain milestones. The
sale of the Leukine
®
business was pursued in connection with
Amgen’s acquisition of Immunex and was completed on
July 17, 2002.
In December 2002, the Company licensed the com-
mercialization rights for Novantrone
®
in the United States
to Serono S.A. in exchange for royalties based on future
product sales.