Johnson and Johnson 2013 Annual Report Download - page 64

The excess of purchase price over the estimated fair value of tangible assets acquired amounted to $2,657 million and has
been assigned to identifiable intangible assets, with any residual recorded to goodwill. Of this amount, approximately $982
million has been identified as the value of IPR&D associated with the acquisition of Crucell N.V.
The IPR&D related to the acquisition of Crucell N.V. of $982 million is associated with vaccines and antibodies that
prevent and/or treat infectious diseases. 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 14% – 81% were used to reflect inherent
clinical and regulatory risk. The discount rate applied was 16%. During 2012, the Company recorded a charge of $0.5
billion for the intangible asset write-down and $0.4 billion for the impairment of the in-process research and development
related to the Crucell business. During 2013, the Company recorded a charge of $0.4 billion for the impairment of the in-
process research and development related to the Crucell business.
With the exception of the Synthes, Inc. acquisition, supplemental pro forma information for 2013, 2012 and 2011 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 2013, the Company divestitures included: women’s sanitary protection products in the U.S., Canada and the
Caribbean to Energizer Holdings, Inc.; Rolaids®to Chattem, Inc.; DORIBAX®rights to Shionogi; and the sale of certain
consumer brands and certain pharmaceutical products. In 2013, the gains on the divestitures of businesses were $0.1
billion. 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.
In January 2014, the Company received a binding offer from The Carlyle Group to acquire the Ortho-Clinical Diagnostics
business for $4.15 billion. The purchase price will be reduced at closing by approximately $0.2 billion, primarily for certain
retained working capital, and will be subject to other customary adjustments. The Company expects this transaction to
close sometime during the middle of 2014, pending fulfillment of certain conditions, including, but not limited to, the
receipt of applicable anti-trust clearances and other customary closing requirements.
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 29, 2013, 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 as might be warranted based on
new information and further developments in accordance with ASC 450-20-25. For these and other litigation and
regulatory matters discussed below 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.
PRODUCT LIABILITY
Certain subsidiaries of Johnson & Johnson are involved in numerous product liability claims and lawsuits involving multiple
products. Claimants in these cases seek substantial compensatory and, where available, punitive damages. While these
54 •Johnson & Johnson 2013 Annual Report