Johnson and Johnson 2012 Annual Report Download - page 62

The IPR&D related to the acquisition of Acclarent, Inc. was $75 million and is associated with novel, endoscopic, catheter-
based devices to meet the needs of ENT patients. 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 50 – 53% were used to
reflect inherent clinical and regulatory risk. The discount rate applied was 16%.
The IPR&D related to the acquisition of RespiVert Ltd. was $100 million and is associated with narrow spectrum kinase
inhibitors with a unique profile of anti-inflammatory activities as treatments for moderate to severe asthma, Chronic
Obstructive Pulmonary Disease (COPD) and Cystic Fibrosis (CF). 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 10 – 12% were
used to reflect inherent clinical and regulatory risk. The discount rate applied was 17%.
The IPR&D related to the acquisition of Micrus Endovascular LLC was $38 million and is associated with ischemic and
flow diverter technologies. 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 50 – 75% were used to reflect inherent clinical and
regulatory risk. The discount rate applied was 14%.
With the exception of the Synthes, Inc. acquisition, supplemental pro forma information for 2012, 2011 and 2010 in
accordance with U.S. GAAP standards related to business combinations, and goodwill and other intangible assets, is not
provided, as the impact of the aforementioned acquisitions did not have a material effect on the Company’s results of
operations, cash flows or financial position.
During 2012, the Company divestitures included: BYSTOLIC®(nebivolol) IP rights to Forest Laboratories, Inc.; the trauma
business of DePuy Orthopaedics, Inc. to Biomet, Inc.; the Therakos business to an affiliate of Gores Capital Partners III,
L.P.; the sale of certain consumer brands and the RhoGAM®business. In 2012, the gains on the divestitures of
businesses were $0.9 billion. During 2011, the Company divestitures included, the Animal Health Business to Elanco, a
Division of Eli Lilly, MONISTAT®in Canada, the U.S. and its territories (including Puerto Rico), assets of the Ortho
Dermatologics division in the U.S. to subsidiaries of Valeant Pharmaceuticals International, Inc. and the Surgical
Instruments Business of Codman & Shurtleff, Inc. In 2011, the gains on the divestitures of businesses were $1.0 billion.
During 2010, the Company divestitures included the Breast Care Business of Ethicon Endo-Surgery, Inc. The gains on
these divestitures were recognized in Other (income)/expense, net.
21. Legal Proceedings
Johnson & Johnson and certain of its subsidiaries are involved in various lawsuits and claims regarding product liability,
intellectual property, commercial and other matters; governmental investigations; and other legal proceedings that arise
from time to time in the ordinary course of their business.
The Company records accruals for such contingencies when it is probable that a liability will be incurred and the amount
of the loss can be reasonably estimated. As of December 30, 2012, the Company has determined that the liabilities
associated with certain litigation matters are probable and can be reasonably estimated. The Company has accrued for
these matters and will continue to monitor each related legal issue and adjust accruals for new information and further
developments in accordance with ASC 450-20-25. For these and other litigation and regulatory matters currently
disclosed for which a loss is probable or reasonably possible, the Company is unable to determine an estimate of the
possible loss or range of loss beyond the amounts already accrued. These matters can be affected by various factors,
including whether damages sought in the proceedings are unsubstantiated or indeterminate; scientific and legal discovery
has not commenced or is not complete; proceedings are in early stages; matters present legal uncertainties; there are
significant facts in dispute; or there are numerous parties involved.
In the Company’s opinion, based on its examination of these matters, its experience to date and discussions with counsel,
the ultimate outcome of legal proceedings, net of liabilities accrued in the Company’s balance sheet, is not expected to
have a material adverse effect on the Company’s financial position. However, the resolution in any reporting period of one
or more of these matters, either alone or in the aggregate, may have a material adverse effect on the Company’s results of
operations and cash flows for that period.
54 •Johnson & Johnson 2012 Annual Report