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These excerpts taken from the LLY 10-K filed Oct 21, 2008. ICOS
Corporation Acquisition
On January 29, 2007, we acquired all of the outstanding
common stock of ICOS Corporation (ICOS), our partner in the
Lilly ICOS LLC joint venture for the manufacture and sales of
Cialis for the treatment of erectile dysfunction. The
acquisition brings the full value of Cialis to us and enables us
to realize operational
Table of Contents
efficiencies in the further development, marketing, and selling
of this product. Under the terms of the agreement, each
outstanding share of ICOS common stock was redeemed for $34 in
cash for an aggregate purchase price of approximately
$2.3 billion, which was financed through borrowings.
The acquisition has been accounted for as a business combination
under the purchase method of accounting. Under the purchase
method of accounting, the assets acquired and liabilities
assumed from ICOS are recorded at their respective fair values
as of the acquisition date in our consolidated financial
statements. The excess of the purchase price over the fair value
of the acquired net assets has been recorded as goodwill in the
amount of $646.7 million. No portion of this goodwill is
expected to be deductible for tax purposes. ICOS’s results
of operations are included in our consolidated financial
statements from the date of acquisition.
We have determined the following estimated fair values for the
assets purchased and liabilities assumed as of the date of
acquisition. The determination of estimated fair value requires
management to make significant estimates and assumptions.
The acquired in-process research and development (IPR&D)
represents compounds currently under development that have not
yet achieved regulatory approval for marketing. New indications
for and formulations of the Cialis compound in clinical testing
at the time of the acquisition represented approximately
48 percent of the estimated fair value of the IPR&D.
The remaining value of IPR&D represents several other
products in development, with no one asset comprising a
significant portion of this value. In accordance with
FIN 4, Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method,
these IPR&D intangible assets totaling $303.5 million
have been written off by a charge to income immediately
subsequent to the acquisition because the compounds do not have
any alternative future use. This charge is not deductible for
tax purposes. The ongoing activity with respect to each of these
compounds under development is not material to our research and
development expenses.
There are several methods that can be used to determine the
estimated fair value of the acquired IPR&D. We utilized the
“income method,” which applies a probability weighting
to the estimated future net cash flows that are derived from
projected sales revenues and estimated costs. These projections
are based on factors such as relevant market size, patent
protection, historical pricing of similar products, and expected
industry trends. The estimated future net cash flows are then
discounted to the present value using an appropriate discount
rate. This analysis is performed for each project independently.
The discount rate we used in valuing the acquired IPR&D
projects was 20 percent.
ICOS Corporation Acquisition On January 29, 2007, we acquired all of the outstanding common stock of ICOS Corporation (ICOS), our partner in the Lilly ICOS LLC joint venture for the manufacture and sales of Cialis for the treatment of erectile dysfunction. The acquisition brings the full value of Cialis to us and enables us to realize operational
Table of Contentsefficiencies in the further development, marketing, and selling of this product. Under the terms of the agreement, each outstanding share of ICOS common stock was redeemed for $34 in cash for an aggregate purchase price of approximately $2.3 billion, which was financed through borrowings. The acquisition has been accounted for as a business combination under the purchase method of accounting. Under the purchase method of accounting, the assets acquired and liabilities assumed from ICOS are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the purchase price over the fair value of the acquired net assets has been recorded as goodwill in the amount of $646.7 million. No portion of this goodwill is expected to be deductible for tax purposes. ICOS’s results of operations are included in our consolidated financial statements from the date of acquisition. We have determined the following estimated fair values for the assets purchased and liabilities assumed as of the date of acquisition. The determination of estimated fair value requires management to make significant estimates and assumptions.
The acquired in-process research and development (IPR&D) represents compounds currently under development that have not yet achieved regulatory approval for marketing. New indications for and formulations of the Cialis compound in clinical testing at the time of the acquisition represented approximately 48 percent of the estimated fair value of the IPR&D. The remaining value of IPR&D represents several other products in development, with no one asset comprising a significant portion of this value. In accordance with FIN 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, these IPR&D intangible assets totaling $303.5 million have been written off by a charge to income immediately subsequent to the acquisition because the compounds do not have any alternative future use. This charge is not deductible for tax purposes. The ongoing activity with respect to each of these compounds under development is not material to our research and development expenses. There are several methods that can be used to determine the estimated fair value of the acquired IPR&D. We utilized the “income method,” which applies a probability weighting to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products, and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each project independently. The discount rate we used in valuing the acquired IPR&D projects was 20 percent. These excerpts taken from the LLY 10-K filed Feb 29, 2008. ICOS
Corporation Acquisition
On January 29, 2007, we acquired all of the outstanding
common stock of ICOS Corporation (ICOS), our partner in the
Lilly ICOS LLC joint venture for the manufacture and sales of
Cialis for the treatment of erectile dysfunction. The
acquisition brings the full value of Cialis to us and enables us
to realize operational efficiencies in the further development,
marketing, and selling of this product. Under the terms of the
agreement, each outstanding share of ICOS common stock was
redeemed for $34 in cash for an aggregate purchase price of
approximately $2.3 billion, which was financed through
borrowings.
The acquisition has been accounted for as a business combination
under the purchase method of accounting. Under the purchase
method of accounting, the assets acquired and liabilities
assumed from ICOS are recorded at their respective fair values
as of the acquisition date in our consolidated financial
statements. The excess of the purchase price over the fair value
of the acquired net assets has been recorded as goodwill in the
amount of $646.7 million. No portion of this goodwill is
expected to be deductible for tax purposes. ICOS’s results
of operations are included in our consolidated financial
statements from the date of acquisition.
We have determined the following estimated fair values for the
assets purchased and liabilities assumed as of the date of
acquisition. The determination of estimated fair value requires
management to make significant estimates and assumptions.
The acquired in-process research and development (IPR&D)
represents compounds currently under development that have not
yet achieved regulatory approval for marketing. New indications
for and formulations of the Cialis compound in clinical testing
at the time of the acquisition represented approximately
48 percent of the estimated fair value of the IPR&D.
The remaining value of IPR&D represents several other
products in development, with no one asset comprising a
significant portion of this value. In accordance with
FIN 4, Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method,
these IPR&D intangible assets totaling $303.5 million
have been written off by a charge to income immediately
subsequent to the acquisition because the compounds do not have
any alternative future use. This charge is not deductible for
tax purposes. The ongoing activity with respect to each of these
compounds under development is not material to our research and
development expenses.
There are several methods that can be used to determine the
estimated fair value of the acquired IPR&D. We utilized the
“income method,” which applies a probability weighting
to the estimated future net cash flows that are derived from
projected sales revenues and estimated costs. These projections
are based on factors such as relevant market size, patent
protection, historical pricing of similar products, and expected
industry trends. The estimated future net cash flows are then
discounted to the present value using an appropriate discount
rate. This analysis is performed for each project independently.
The discount rate we used in valuing the acquired IPR&D
projects was 20 percent.
ICOS Corporation Acquisition On January 29, 2007, we acquired all of the outstanding common stock of ICOS Corporation (ICOS), our partner in the Lilly ICOS LLC joint venture for the manufacture and sales of Cialis for the treatment of erectile dysfunction. The acquisition brings the full value of Cialis to us and enables us to realize operational efficiencies in the further development, marketing, and selling of this product. Under the terms of the agreement, each outstanding share of ICOS common stock was redeemed for $34 in cash for an aggregate purchase price of approximately $2.3 billion, which was financed through borrowings. The acquisition has been accounted for as a business combination under the purchase method of accounting. Under the purchase method of accounting, the assets acquired and liabilities assumed from ICOS are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the purchase price over the fair value of the acquired net assets has been recorded as goodwill in the amount of $646.7 million. No portion of this goodwill is expected to be deductible for tax purposes. ICOS’s results of operations are included in our consolidated financial statements from the date of acquisition.
We have determined the following estimated fair values for the assets purchased and liabilities assumed as of the date of acquisition. The determination of estimated fair value requires management to make significant estimates and assumptions.
The acquired in-process research and development (IPR&D) represents compounds currently under development that have not yet achieved regulatory approval for marketing. New indications for and formulations of the Cialis compound in clinical testing at the time of the acquisition represented approximately 48 percent of the estimated fair value of the IPR&D. The remaining value of IPR&D represents several other products in development, with no one asset comprising a significant portion of this value. In accordance with FIN 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, these IPR&D intangible assets totaling $303.5 million have been written off by a charge to income immediately subsequent to the acquisition because the compounds do not have any alternative future use. This charge is not deductible for tax purposes. The ongoing activity with respect to each of these compounds under development is not material to our research and development expenses. There are several methods that can be used to determine the estimated fair value of the acquired IPR&D. We utilized the “income method,” which applies a probability weighting to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products, and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each project independently. The discount rate we used in valuing the acquired IPR&D projects was 20 percent. This excerpt taken from the LLY 10-K filed Feb 28, 2007. ICOS Corporation
Acquisition
On January 29, 2007, we acquired all of the outstanding
common stock of ICOS Corporation (ICOS), our partner in the
Lilly ICOS LLC joint venture that manufactures, markets and
sells Cialis for the treatment of erectile dysfunction. The
acquisition brings the full value of Cialis to us and will
enable us to realize operational efficiencies in the further
development, marketing and selling of this product.
Under the terms of the agreement, each outstanding share of ICOS
common stock was redeemed for $34 in cash for an aggregate
purchase price of approximately $2.3 billion, which was
financed through borrowings. While the allocation of the
purchase price has not been finalized, we anticipate that
approximately $1.7 billion of the purchase price will be
allocated to the acquired intangible asset related to Cialis and
approximately $300 million to acquired in-process research
and development (IPR&D). The intangible asset will be
amortized over Cialis’ remaining expected patent lives in
each country, which range from 2015 to 2017. A deferred tax
liability of approximately $700 million will be established
related to the intangible asset. Approximately $800 million
will be recorded as goodwill and is not expected to be
deductible for tax purposes. We will include the IPR&D as an
expense in the first quarter of 2007 and will include ICOS’
results of operations subsequent to the acquisition in our 2007
consolidated financial statements. The IPR&D charge is not
deductible for tax purposes.
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