| Business combinations |
Business combinations Onyx Pharmaceuticals On October 1, 2013, we acquired all of the outstanding stock of Onyx Pharmaceuticals, Inc. (Onyx), a global biopharmaceutical company engaged in the development and commercialization of innovative therapies for improving the lives of people afflicted with cancer. Onyx has a multiple myeloma franchise, with Kyprolis® (carfilzomib) for Injection already approved in the United States, and with oprozomib being evaluated in clinical trials for patients with hematologic malignancies. In addition, Onyx has three partnered oncology assets: Nexavar® (sorafenib) tablets (an Onyx and Bayer compound), Stivarga® (regorafenib) tablets (a Bayer compound), and palbociclib (a Pfizer, Inc. compound). This transaction, which was accounted for as a business combination, provides us with an opportunity to expand our oncology franchise. Onyx’s operations have been included in our condensed consolidated financial statements commencing on the acquisition date. The aggregate consideration to acquire Onyx was paid in cash and consisted of (in millions): | | | | | Total consideration transferred | $ | 9,517 |
| Compensation expense | 197 |
| Total cash paid | $ | 9,714 |
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The $9,517 million cash payment consisted of a $9,186 million cash payment to the outstanding common stockholders and a $331 million cash payment to the Onyx equity award holders for services rendered prior to October 1, 2013 under the Onyx equity award plans. The remaining $197 million of cash, which related to the accelerated vesting of the remaining Onyx equity awards, was recognized as compensation expense during the three months ended December 31, 2013. This amount was included primarily in SG&A expense in the Consolidated Statement of Income. The consideration to acquire Onyx was allocated to the acquisition date fair values of assets acquired and liabilities assumed as follows (in millions): | | | | | Cash and cash equivalents | $ | 319 |
| Marketable securities | 337 |
| Inventories | 170 |
| Indefinite-lived intangible assets - In-process research and development (IPR&D) | 1,180 |
| Finite-lived intangible assets - Developed product technology rights | 6,190 |
| Finite-lived intangible assets - Licensing rights | 2,792 |
| Goodwill | 2,402 |
| Convertible debt | (742 | ) | Assumed contingent consideration | (261 | ) | Deferred income taxes, net | (3,011 | ) | Other assets (liabilities), net | 141 |
| Total consideration | $ | 9,517 |
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Onyx’s preliminary goodwill at December 31, 2013 has been revised. Goodwill was reduced by $124 million due primarily to revisions which increased the acquisition date fair values of developed product technology rights by $280 million and deferred income taxes by $93 million, and decreased inventory by $80 million. The adjustments did not have a material effect on our current or prior period financial statements. The developed product technology rights acquired relate to Kyprolis® which is approved in the United States. This product technology is being amortized on a straight-line basis over the estimated useful life of 12 years. Licensing rights acquired represent the aggregate estimated fair values of receiving future milestone, royalty and/or profit sharing payments associated with various contract agreements that were entered into by Onyx prior to the acquisition. The weighted-average useful life of these finite-lived intangible assets is ten years, and they are being amortized on a straight-line basis. Filgrastim and pegfilgrastim rights acquisition In October 2013, we entered into an agreement to acquire the licenses to filgrastim and pegfilgrastim effective January 1, 2014 (acquisition date), that were held by F. Hoffmann-La Roche Ltd. (Roche) in approximately 100 markets in Eastern Europe, Latin America, Asia, the Middle East and Africa (Product Rights), and to settle our preexisting relationship related to the Product Rights for total consideration of $497 million. The acquisition of the Product Rights was accounted for as a business combination as the acquired rights and processes are capable of producing an immediate return to us, and the settlement of the preexisting relationship was accounted for separately from the business combination. This transaction provides us with an opportunity to expand our geographic presence and reach more patients in more countries that could benefit from our therapies. The operations of the acquired set of activities have been included in our financial statements commencing on the acquisition date. Pro forma results of operations for this acquisition have not been presented because this acquisition is not material to our consolidated results of operations. The aggregate consideration transferred consisted of (in millions): | | | | | Total consideration transferred or to be transferred | $ | 497 |
| Settlement of preexisting relationship at fair value | (99 | ) | Total consideration transferred to acquire the Product Rights | $ | 398 |
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The settlement of the preexisting relationship relates to a supply contract between Amgen and Roche that was terminated as a result of the acquisition of the Product Rights. The fair value of the contract of $99 million was recognized in Cost of sales in the Condensed Consolidated Statement of Income for the nine months ended September 30, 2014. The consideration to acquire the Product Rights was allocated to the acquisition date fair values of assets acquired as follows (in millions): | | | | | Finite-lived intangible assets - Marketing-related rights | $ | 363 |
| Finite-lived intangible assets - Developed product technology rights | 11 |
| Goodwill | 3 |
| Other assets | 21 |
| Total consideration | $ | 398 |
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The marketing-related and developed product technology rights acquired relate to the Product Rights and are being amortized on a straight-line basis over their estimated useful lives of five years and three and one-half years, respectively. |
