Note 5. ASSETS HELD-FOR-SALE
In February 2014, BMS sold to AstraZeneca the diabetes business of BMS which comprised our global alliance with them, including all rights and ownership to Onglyza, Forxiga, Bydureon*, Byetta*, Symlin* and metreleptin. The transaction included the shares of Amylin (previously acquired by BMS in August 2012), and the resulting transfer of its manufacturing facility in West Chester, Ohio; the intellectual property related to Onglyza and Forxiga; and the future purchase of BMS’s manufacturing facility located in Mount Vernon, Indiana no earlier than 18 months following the closing of the transaction. Substantially all employees dedicated to the diabetes business were transferred to AstraZeneca upon the closing of the transaction.
As consideration for the transaction, AstraZeneca paid $2.7 billion to BMS at closing, a $600 million milestone in February 2014 for the approval of Farxiga in the U.S., and will make contingent regulatory and sales-based milestone payments of up to $800 million and royalty payments based on net sales through 2025. In addition, AstraZeneca will make payments of up to $225 million if and when certain assets are transferred including the Mount Vernon manufacturing site and the diabetes business in China.
The business was treated as a single disposal group held for sale as of December 31, 2013. No write-down was required as the fair value of the business less costs to sell exceeded the related carrying value. The following assets and liabilities of the diabetes business held-for-sale is presented separately from BMS’s other accounts as of December 31, 2013.
|
| | | | |
Dollars in Millions | | December 31, 2013 |
Assets | | |
Receivables | | $ | 83 |
|
Inventories | | 163 |
|
Deferred income taxes - current | | 125 |
|
Prepaid expenses and other | | 20 |
|
Property, plant and equipment | | 678 |
|
Goodwill(a) | | 550 |
|
Other intangible assets | | 5,682 |
|
Other assets | | 119 |
|
Total assets held-for-sale | | 7,420 |
|
| | |
Liabilities | | |
Short-term borrowings and current portion of long-term debt | | 27 |
|
Accounts payable | | 30 |
|
Accrued expenses | | 148 |
|
Deferred income - current | | 352 |
|
Accrued rebates and returns | | 81 |
|
Deferred income - noncurrent | | 3,319 |
|
Deferred income taxes - noncurrent | | 946 |
|
Other liabilities | | 28 |
|
Total liabilities related to assets held-for-sale | | 4,931 |
|
(a) The allocation of goodwill was based on the relative fair value of the diabetes business (as of December 31, 2013) being divested to the Company's reporting unit.
The stock and asset purchase agreement contains multiple elements that will be delivered subsequent to the closing of the transaction. Each element of the transaction was determined to have standalone value and as a result, a portion of the consideration received at closing will be allocated to the undelivered elements using the relative selling price method including the China diabetes business, the Mount Vernon manufacturing facility, the development agreement and the incremental discount attributed to the supply agreement. The remaining amount of consideration received at closing will be included in the calculation of the estimated net gain on disposal.
All contingent consideration, including royalties and milestone payments, if and when received, will also be allocated to the underlying elements of the transaction on a relative selling price basis. Amounts allocated to the sale of the business will be immediately recognized. Amounts allocated to the other elements will either be recognized immediately or deferred, in whole or in part, to the extent each element has been delivered.
