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This excerpt taken from the ELN 6-K filed Mar 30, 2009. Goodwill,
Other Intangible Assets, Property, Plant and Equipment and
Impairment
Goodwill, other intangible assets with an indefinite useful life
and intangible assets not yet available for use are not subject
to amortisation and are tested for impairment at least annually.
Additionally, these assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. The recoverable amount is the
higher of an asset’s fair value less costs to sell and
value in use. Value in use is calculated by discounting the
expected future cash flows obtainable as a result of the
asset’s continued use. For the purposes of impairment
testing, assets are grouped at the lowest level for which there
are separately identifiable cash flows (cash-generating units).
When reviewing carrying values, we assess R&D risk,
commercial risk, revenue and cost projections, our expected
sales and marketing support, our allocation of resources, the
impact of competition, including generic competition, the impact
of any reorganisation or change of business focus, the level of
third-party interest in our intangible assets and market
conditions.
Where the carrying value of an asset or its cash-generating unit
exceeded its recoverable amount, the carrying values of those
assets have been written down to their recoverable amounts.
Total goodwill and other intangible assets amounted to
$386.1 million at 31 December 2008 (2007:
$294.4 million). The results of certain impairment tests on
intangible assets with estimable useful lives are discussed
below. As the impairment analysis is principally based on
discounted estimated cash flows, actual outcomes could vary
significantly from such estimates. If we were to use different
estimates, particularly with respect to the likelihood of
R&D success, the likelihood and date of commencement of
generic
Table of Contents
Financial Review
competition or the impact of any reorganisation or change of
business focus, then an additional material impairment charge
could arise. We believe that we have used reasonable estimates
in assessing the carrying values of our intangible assets.
In June 2007, we recorded an impairment charge of
$76.2 million relating to the Maxipime and
Azactam intangible and other assets. This other charge
related primarily to patents and licences, and was included
within cost of sales ($2.8 million) and selling, general
and administrative (SG&A) expenses ($73.4 million) in
the Consolidated Income Statement. As a direct result of the
approval of a first generic formulation of cefepime
hydrochloride in June 2007 and the anticipated approval for a
generic form of Azactam, we revised the projected future
cumulative discounted cash flows. The revised projected future
cumulative discounted cash flows were lower than the carrying
value of the intangible and other assets, thus indicating the
combined carrying value was not recoverable. Consequently, the
impairment charge was calculated as the excess of the carrying
value over the discounted net present value. In conjunction with
the impairment charge, we revised the estimated useful lives of
the intangibles by nine months from September 2008 to December
2007. Accordingly, the remaining net carrying value of the
intangible assets was amortised, on a straight-line basis,
through 31 December 2007.
In December 2007, we recorded an impairment charge of
$197.5 million relating to the Prialt intangible
assets. This other charge related to acquired in-process
research and development (IPR&D) costs of
$194.0 million and patents and licences of
$3.5 million, and was included within SG&A expenses in
the Consolidated Income Statement. We launched Prialt in
the United States in January 2005 and revenue from sales of
Prialt totalled $16.5 million in 2008 (2007:
$12.3 million). These revenues were lower than our initial
forecast. In light of additional data becoming available in
2007, we adjusted our sales forecast for Prialt, which
caused projected cumulative discounted cash flows to be lower
than the carrying value of the intangible assets, thus
indicating that the carrying value was not recoverable.
Consequently, the impairment charge was calculated as the excess
of the carrying value over the discounted net present value. The
remaining net carrying value of the Prialt intangible
assets was $51.4 million at 31 December 2008. We
believe that we have used reasonable estimates in assessing the
carrying value of this intangible asset. Nevertheless, should
our future revenues from this product fail to meet our
expectations, the carrying value of this asset may become
further impaired.
We have invested significant resources in our manufacturing
facilities in Ireland to provide us with the capability to
manufacture products from our product development pipeline and
for our clients. To the extent that we are not successful in
developing these pipeline products or do not acquire products to
be manufactured at our facilities, the carrying value of these
facilities may become impaired. At 31 December 2008, our
best estimates of the likely success of development and
commercialisation of our pipeline products support the carrying
value of our manufacturing facilities.
In performing our impairment testing, we noted that the combined
fair value of our cash-generating units based on the income
approach exceeded our market capitalisation at 31 December
2008. In turn, given our shareholders’ deficit position,
both the fair value of our cash-generating units and our market
capitalisation exceeded the combined carrying values of the
cash-generating units by a substantial margin at
31 December 2008.
This excerpt taken from the ELN 6-K filed Mar 31, 2008. Goodwill,
Other Intangible Assets, Property, Plant and Equipment and
Impairment
Goodwill, other intangible assets with an indefinite useful life
and intangible assets not yet available for use are not subject
to amortisation and are tested for impairment at least annually.
Additionally, these assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. The recoverable amount is the
higher of an asset’s fair value less costs to sell and
value in use. Value in use is calculated by discounting the
expected future cash flows obtainable as a result of the
asset’s continued use. For the purposes of impairment
testing, assets are grouped at the lowest level for which there
are separately identifiable cash flows (cash-generating units).
When reviewing carrying values, we
32 Elan
Corporation, plc 2007 Annual Report
Table of Contents
Financial Review
assess R&D risk, commercial risk, revenue and cost
projections, our expected sales and marketing support, our
allocation of resources, the impact of competition, including
generic competition, the impact of any reorganisation or change
of business focus, the level of third-party interest in our
intangible assets and market conditions.
Where the carrying value of an asset or its cash-generating unit
exceeded its recoverable amount, the carrying values of those
assets have been written down to their recoverable amounts.
Total goodwill and other intangible assets amounted to
$294.4 million at 31 December 2007 (2006:
$681.7 million). The results of certain impairment tests on
intangible assets with estimable useful lives are discussed
below. As the impairment analysis is principally based on
estimated cash flows, actual outcomes could vary significantly
from such estimates. If we were to use different estimates,
particularly with respect to the likelihood of R&D success,
the likelihood and date of commencement of generic competition
or the impact of any reorganisation or change of business focus,
then an additional material impairment charge could arise. We
believe that we have used reasonable estimates in assessing the
carrying values of our intangible assets.
In June 2007, we recorded an impairment charge of
$76.2 million relating to the Maxipime and
Azactam intangible and other assets. This other charge
related primarily to patents and licences, and was included
within cost of sales ($2.8 million) and selling, general
and administrative (SG&A) expenses ($73.4 million) in
the Consolidated Income Statement. As a direct result of the
approval of a first generic formulation of cefepime
hydrochloride in June 2007 and the anticipated approval for a
generic form of Azactam, we revised the projected future
cumulative discounted cash flows. The revised projected future
cumulative discounted cash flows were lower than the carrying
value of the intangible and other assets, thus indicating the
combined carrying value was not recoverable. Consequently, the
impairment charge was calculated as the excess of the carrying
value over the discounted net present value. In conjunction with
the impairment charge, we revised the estimated useful lives of
the intangibles by nine months from September 2008 to December
2007. Accordingly, the remaining net carrying value of the
intangible assets was amortised, on a straight-line basis,
through 31 December 2007.
In December 2007, we recorded an impairment charge of
$197.5 million relating to the Prialt intangible
assets. This other charge related to acquired in-process
research and development (IPR&D) costs of
$194.0 million and patents and licences of
$3.5 million, and was included within SG&A expenses in
the Consolidated Income Statement. We launched Prialt in
the United States in January 2005 and revenue from sales of
Prialt totalled $12.3 million in 2007 (2006:
$12.1 million). These revenues were lower than our initial
forecast. In light of additional data becoming available in
2007, we adjusted our sales forecast for Prialt, which
caused projected cumulative discounted cash flows to be lower
than the carrying value of the intangible assets, thus
indicating that the carrying value was not recoverable.
Consequently, the impairment charge was calculated as the excess
of the carrying value over the discounted net present value. The
remaining net carrying value of the Prialt intangible
assets was $57.8 million at 31 December 2007. We
believe that we have used reasonable estimates in assessing the
carrying value of this intangible asset. Nevertheless, should
our future revenues from this product fail to meet our
expectations, the carrying value of this asset may become
further impaired.
We have invested significant resources in our manufacturing
facilities in Ireland to provide us with the capability to
manufacture products from our product development pipeline. To
the extent that we are not successful in developing these
pipeline products or do not acquire products to be manufactured
at our facilities, the carrying value of these facilities may
become impaired. At 31 December 2007, our best estimates of
the likely success of development and commercialisation of our
pipeline products support the carrying value of our
manufacturing facilities.
This excerpt taken from the ELN 6-K filed Mar 30, 2007. Goodwill,
Other Intangible Assets, Property, Plant and Equipment and
Impairment
Goodwill, other intangible assets with an indefinite useful life
and intangible assets not yet available for use are not subject
to amortisation and are tested for impairment at least annually.
Additionally, these assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable. The recoverable amount is the
higher of an asset’s fair value less costs to sell and
value in use. Value in use is calculated by discounting the
expected future cash flows obtainable as a result of the
asset’s continued use. For the purposes of impairment
testing, assets are grouped at the lowest level for which there
are separately identifiable cash flows (cash-generating units).
When reviewing carrying values, we assess R&D risk,
commercial risk, revenue and cost projections, our expected
sales and marketing support, our allocation of resources, the
impact of competition, including generic competition, the impact
of any reorganisation or change of business focus, the level of
third-party interest in our intangible assets and market
conditions.
Where the carrying value of an asset or its cash-generating unit
exceeded its recoverable amount, the carrying values of those
assets have been written down to their recoverable amounts.
Total goodwill and other intangible assets amounted to
$681.7 million at 31 December 2006 (2005:
$815.2 million). There were no material impairment charges
relating to goodwill and other intangible assets in 2006 or
2005. As the impairment analysis is principally based on
estimated cashflows, actual outcomes could vary significantly
from such estimates. If we were to use different estimates,
particularly with respect to the likelihood of R&D success,
the likelihood and date of commencement of generic competition
or the impact of any reorganisation or change of business focus,
then an additional material impairment charge could arise. We
believe that we have used reasonable estimates in assessing the
carrying values of our intangible assets.
In January 2005, we launched Prialt in the United States.
Revenue from sales of Prialt totalled $12.1 million
in 2006 (2005: $6.3 million). The total revenue was lower
than our initial forecast. Our estimates of the fair value of
this product, based on future net cash flows, are in excess of
the asset’s carrying value of $283.7 million at
31 December 2006. We believe that we have used reasonable
estimates in assessing the carrying value of this intangible.
Nevertheless, should our future revenues from this product fail
to meet our expectations, the carrying value of this asset may
become impaired.
Bristol-Myers recently received correspondence from lawyers for
Apotex stating that Apotex intends to enter the US market with
Apotex’s cefepime hydrochloride upon receiving approval
from the FDA. Bristol-Myers has requested additional information
from Apotex to determine if Apotex’s form of cefepime
hydrochloride, if approved by the FDA, infringes Bristol-Myers
patents. If Apotex or others are able to introduce generic
competitors to Maxipime our revenues from, and gross
margin for, Maxipime will be materially and adversely
affected. Our estimates of the fair value of Maxipime and
Azactam, based on future net cash flows which assume that
both products will face generic competition in the future, are
in excess of the carrying value of these intangibles of
$135.7 million at 31 December 2006. If Apotex or
others are able to introduce generic competitors to
Maxipime earlier than we anticipate, then the carrying
value of this asset may become impaired.
We have invested significant resources in our manufacturing
facilities in Ireland to provide us with the capability to
manufacture products from our product development pipeline. To
the extent that we are not successful in developing these
pipeline products or do not acquire products to be manufactured
at our facilities, the carrying value of these facilities may
become impaired. At 31 December 2006, our best estimates of
the likely success of development and commercialisation of our
pipeline products support the carrying value of our
manufacturing facilities.
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