Johnson and Johnson 2009 Annual Report Download - page 58

56 J O H N S O N & J O H N S O N 2 0 0 9 A N N U A L R E P O R T
20. Business Combinations and Divestitures
Certain businesses were acquired for $2,470 million in cash and
$875 million of liabilities assumed and non-controlling interests
during 2009. These acquisitions were accounted for by the pur-
chase method and, accordingly, results of operations have been
included in the financial statements from their respective dates
of acquisition.
The 2009 acquisitions included: Mentor Corporation, a leading
supplier of medical products for the global aesthetics market;
Cougar Biotechnology, Inc., a development stage biopharmaceutical
company with a specific focus on oncology; Finsbury Orthopaedics
Limited, a privately held UK-based manufacturer and global distrib-
utor of orthopaedic implants; Gloster Europe, a privately held devel-
oper of innovative disinfection processes and technologies to
prevent healthcare-acquired infections and substantially all of the
assets and rights of Elan’s Alzheimer’s Immunotherapy Program
through a newly formed company, of which the Company owns
50.1% and Elan owns 49.9%.
The excess of purchase price over the estimated fair value of
tangible assets acquired amounted to $2,940 million and has been
assigned to identifiable intangible assets, with any residual recorded
to goodwill. Of this amount, approximately $1,737 million has been
identified as the value of IPR&D primarily associated with the acqui-
sitions of Cougar Biotechnology, Inc. and substantially all of the
assets and rights of Elan’s Alzheimer’s Immunotherapy Program.
Additionally, approximately $1,107 million has been identified as the
value of other intangible assets, including patents & technology and
customer relationships primarily associated with the acquisition of
Mentor Corporation.
The IPR&D related to the acquisition of Cougar Biotechnology,
Inc. was $971 million and is associated with abiraterone acetate, a
late stage, first-in-class compound for the treatment of prostate can-
cer. The value of the IPR&D was calculated using cash flow projec-
tions discounted for the risk inherent in such projects. Probability of
success factors ranging from 60–85% were used to reflect inherent
clinical and regulatory risk. The discount rate applied was 23.5%.
Refer to Note 6 for information related to the Elan transaction.
Certain businesses were acquired for $1,214 million in cash and
$114 million of liabilities assumed during 2008. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial statements
from their respective dates of acquisition.
The 2008 acquisitions included: Amic AB, a privately held
Swedish developer of in vitro diagnostic technologies for use in
point-of-care and near-patient settings; Beijing Dabao Cosmetics
Co., Ltd., a company that sells personal care brands in China;
SurgRx, Inc., a privately held developer of the advanced bipolar
tissue sealing system used in the ENSEAL® family of devices;
HealthMedia, Inc., a privately held company that creates web-based
behavior change interventions; LGE Performance Systems, Inc., a
privately held company known as Human Performance Institute™,
which develops science-based training programs to improve
employee engagement and productivity and Omrix Biopharmaceu-
ticals, Inc., a fully integrated biopharmaceutical company that
develops and markets biosurgical and immunotherapy products.
The excess of purchase price over the estimated fair value of
tangible assets acquired amounted to $891 million and has been
assigned to identifiable intangible assets, with any residual recorded
to goodwill. Approximately $181 million has been identified as the
value of IPR&D associated with the acquisitions of Omrix Biophar-
maceuticals, Inc., Amic AB, SurgRx, Inc. and HealthMedia, Inc.
The IPR&D charge related to the acquisition of Omrix Biophar-
maceuticals, Inc. was $127 million and is associated with stand-
alone and combination biosurgical technologies used to achieve
hemostasis. The value of the IPR&D was calculated using cash
flow projections discounted for the risk inherent in such projects.
Probability of success factors ranging from 60–90% were used
to reflect inherent clinical and regulatory risk. The discount rate
applied was 14%. As of the end of the 2008 fiscal year, 97.8% of the
outstanding shares of Common Stock of Omrix Biopharmaceuticals,
19. Selected Quarterly Financial Data (unaudited)
Selected unaudited quarterly financial data for the years 2009 and 2008 are summarized below:
2009 2008
_________________________________________________ ________________________________________________
First Second Third Fourth First Second Third Fourth
(Dollars in Millions Except Per Share Data) Quarter Quarter Quarter Quarter(1) Quarter Quarter(2) Quarter Quarter(3)
Segment sales to customers
Consumer $ 3,711 3,854 3,989 4,249 4,064 4,036 4,099 3,855
Pharmaceutical 5,780 5,498 5,249 5,993 6,429 6,340 6,113 5,685
Med Devices & Diagnostics 5,535 5,887 5,843 6,309 5,701 6,074 5,709 5,642
Total sales $15,026 15,239 15,081 16,551 16,194 16,450 15,921 15,182
Gross profit 10,775 10,789 10,647 11,239 11,580 11,699 11,147 10,810
Earnings before provision for taxes on income 4,643 4,263 4,245 2,604 4,747 4,375 4,290 3,517
Net earnings 3,507 3,208 3,345 2,206 3,598 3,327 3,310 2,714
Basic net earnings per share $ 1.27 1.16 1.21 0.80 1.27 1.18 1.19 0.98
Diluted net earnings per share $ 1.26 1.15 1.20 0.79 1.26 1.17 1.17 0.97
(1) The fourth quarter of 2009 includes an after-tax charge of $852 million for restructuring and $212 million after-tax of income from net litigation.
(2) The second quarter of 2008 includes an after-tax charge of $40 million for IPR&D.
(3) The fourth quarter of 2008 includes an after-tax charge of $141 million for IPR&D, $229 million after-tax of income from net litigation and $331 million after-tax gain on the divestiture of
the Professional Wound Care business of Ethicon, Inc. The gain from the divestiture of the Professional Wound Care business of Ethicon, Inc. was reinvested in the business.