MYLAN INC. | 2013 | FY | 3


Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2012 are as follows:
 
(In thousands)
Generics Segment
 
Specialty Segment
 
Total
Balance at December 31, 2011:
 
 
 
 
 
Goodwill
$
3,196,428

 
$
706,507

 
$
3,902,935

Accumulated impairment losses

 
(385,000
)
 
(385,000
)
 
3,196,428

 
321,507

 
3,517,935

Foreign currency translation
(2,280
)
 

 
(2,280
)
 
3,194,148

 
321,507

 
3,515,655

Balance at December 31, 2012:
 
 
 
 
 
Goodwill
3,194,148

 
706,507

 
3,900,655

Accumulated impairment losses

 
(385,000
)
 
(385,000
)
 
3,194,148

 
321,507

 
3,515,655

Goodwill acquired (1)
903,998

 

 
903,998

Transfers (2)
(27,602
)
 
27,602

 

Foreign currency translation
(131,529
)
 

 
(131,529
)
 
3,939,015

 
349,109

 
4,288,124

Balance at December 31, 2013:
 
 
 
 
 
Goodwill
3,939,015

 
734,109

 
4,673,124

Accumulated impairment losses

 
(385,000
)
 
(385,000
)
 
$
3,939,015

 
$
349,109

 
$
4,288,124

____________
(1) 
See Note 3.
(2) 
As a result of the January 1, 2013 reorganization of certain components between the Generics and Specialty segments, the Company was required to reassign a portion of the carrying amount of goodwill to the Specialty segment.



Intangible assets consist of the following components at December 31, 2013 and 2012:
 
(In thousands)
Weighted
Average Life
(Years)
 
Original
Cost
 
Accumulated
Amortization
 
Net Book
Value
December 31, 2013
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Patents and technologies
20
 
$
116,631

 
$
93,761

 
$
22,870

Product rights and licenses
10
 
3,559,505

 
2,018,111

 
1,541,394

Other (1)
8
 
173,974

 
59,395

 
114,579

 
 
 
3,850,110

 
2,171,267

 
1,678,843

In-process research and development
 
 
839,045

 

 
839,045

 
 
 
$
4,689,155

 
$
2,171,267

 
$
2,517,888

December 31, 2012
 
 
 
 
 
 
 
Amortized intangible assets:
 
 
 
 
 
 
 
Patents and technologies
20
 
$
116,631

 
$
88,288

 
$
28,343

Product rights and licenses
10
 
3,459,980

 
1,749,424

 
1,710,556

Other (1)
8
 
111,033

 
51,384

 
59,649

 
 
 
3,687,644

 
1,889,096

 
1,798,548

In-process research and development
 
 
425,909

 

 
425,909

 
 
 
$
4,113,553

 
$
1,889,096

 
$
2,224,457

____________
(1) 
Other intangibles consist principally of customer lists and contracts.

Product rights and licenses are primarily comprised of the products marketed at the time of acquisition. These product rights and licenses relate to numerous individual products, the net book value of which, by therapeutic category, is as follows:
 
(In thousands)
December 31, 2013
 
December 31, 2012
Allergy
$
95,911

 
$
111,386

Anti-infectives
194,220

 
145,109

Antineoplastic
147,414

 
51,251

Cardiovascular
235,777

 
309,062

Central Nervous System
211,205

 
273,102

Dermatological
79,576

 
93,644

Endocrine and Metabolic
72,400

 
80,702

Gastrointestinal
95,184

 
121,823

Respiratory System
147,448

 
218,658

Other (1) 
262,259

 
305,819

 
$
1,541,394

 
$
1,710,556

____________
(1) 
Other consists of numerous therapeutic classes, none of which individually exceeds 5% of total product rights and licenses.

Amortization expense, which is classified primarily within cost of sales in the Consolidated Statements of Operations, for the years ended December 31, 2013, 2012 and 2011 was $363.7 million, $386.4 million and $357.8 million, respectively. Amortization expense is expected to be approximately $386 million, $360 million, $276 million, $231 million and $182 million for the years ended December 31, 2014 through 2018, respectively.

Indefinite-lived intangibles, such as the Company’s IPR&D assets, are tested at least annually for impairment, but they may be tested whenever certain impairment indicators are present. Impairment is determined to exist when the fair value is less than the carrying value of the assets being tested.

The Company performs its annual impairment review of certain IPR&D assets at September 30th. This review of IPR&D assets principally relates to assets acquired as part of the Bioniche Pharma acquisition in September 2010. For the years ended December 31, 2013 and 2012, the Company recorded impairment charges related to the Bioniche Pharma IPR&D assets in the amounts of $18.0 million and $41.6 million, respectively, which were recorded as a component of amortization expense. These impairment charges resulted from the Company’s estimate of the fair value of these assets, which was based upon updated forecasts and commercial development plans, compared with the assigned fair values at the acquisition date. The fair value was determined based upon detailed valuations employing the income approach which utilized Level 3 inputs, as defined in Note 6. The fair value of IPR&D was calculated as the present value of the estimated future net cash flows using a market rate of return. The assumptions inherent in the estimated future cash flows include, among other things, the impact of changes to the development programs, the projected development and regulatory time frames and the current competitive environment. A discount rate of approximately 10% was utilized in each valuation at September 30, 2013 and 2012. Changes to any of the Company’s assumptions may result in a further reduction to the estimated fair value of the IPR&D asset.

During the years ended December 31, 2013 and 2012, approximately $6.5 million and $33.0 million, respectively, was reclassified from acquired IPR&D to product rights and licenses. Also during the year ended December 31, 2012, the Company paid approximately $70.0 million to acquire products rights and licenses, the majority of which relates to two dermatological products acquired from Valeant Pharmaceuticals.

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