| GOODWILL AND OTHER INTANGIBLES | NOTE 10. GOODWILL AND OTHER INTANGIBLES Goodwill Changes in the carrying amount of our goodwill for the year s ended December 31, 2016 and 2015 were as follows (in thousands): Carrying Amount U.S. Generic Pharmaceuticals U.S. Branded Pharmaceuticals International Pharmaceuticals Total Goodwill as of December 31, 2014 $ 1,071,637 $ 1,131,932 $ 694,206 $ 2,897,775 Goodwill acquired during the period 4,718,297 544,344 7,660 5,270,301 Effect of currency translation — — (109,442 ) (109,442 ) Goodwill impairment charges $ — $ (673,500 ) $ (85,780 ) $ (759,280 ) Goodwill as of December 31, 2015 $ 5,789,934 $ 1,002,776 $ 506,644 $ 7,299,354 Measurement period adjustments 83,916 8,352 1,366 93,634 Effect of currency translation on gross balance — — 3,336 3,336 Effect of currency translation on accumulated impairment — — 9,421 9,421 Goodwill impairment charges (1) (2,342,549 ) (1,880 ) (331,921 ) (2,676,350 ) Goodwill as of December 31, 2016 $ 3,531,301 $ 1,009,248 $ 188,846 $ 4,729,395 __________ (1) U.S. Branded Pharmaceuticals segment impairment charge is related to goodwill attributed to BELBUCA™. The carrying amount of goodwill at December 31, 2016 and 2015 is net of the following accumulated impairments: Accumulated Impairment U.S. Generic Pharmaceuticals U.S. Branded Pharmaceuticals International Pharmaceuticals Total Accumulated impairment losses as of December 31, 2015 $ — $ 673,500 $ 85,780 $ 759,280 Accumulated impairment losses as of December 31, 2016 $ 2,342,549 $ 675,380 $ 408,280 $ 3,426,209 Other Intangible Assets The following is a summary of other intangible assets held by the Company at December 31, 2016 and 2015 (in thousands): Cost basis: Balance as of December 31, 2015 Acquisitions Impairments Other Effect of Currency Translation Balance as of December 31, 2016 Indefinite-lived intangibles: In-process research and development $ 1,742,880 $ (114,200 ) $ (183,375 ) $ (323,156 ) $ 1,432 $ 1,123,581 Total indefinite-lived intangibles $ 1,742,880 $ (114,200 ) $ (183,375 ) $ (323,156 ) $ 1,432 $ 1,123,581 Definite-lived intangibles: Licenses (weighted average life of 12 years) $ 676,867 $ — $ — $ (211,147 ) $ — $ 465,720 Customer relationships (weighted average life of 15 years) 11,318 — (3,460 ) (7,858 ) — — Tradenames (weighted average life of 12 years) 7,537 — — — (192 ) 7,345 Developed technology (weighted average life of 11 years) 6,731,573 152,591 (918,356 ) 250,037 7,159 6,223,004 Total definite-lived intangibles (weighted average life of 11 years) $ 7,427,295 $ 152,591 $ (921,816 ) $ 31,032 $ 6,967 $ 6,696,069 Total other intangibles $ 9,170,175 $ 38,391 $ (1,105,191 ) $ (292,124 ) $ 8,399 $ 7,819,650 Accumulated amortization: Balance as of December 31, 2015 Amortization Impairments Other Effect of Currency Translation Balance as of December 31, 2016 Definite-lived intangibles: Licenses $ (508,225 ) $ (44,522 ) $ — $ 211,147 $ — $ (341,600 ) Customer relationships (7,858 ) — — 7,858 — — Tradenames (6,544 ) (87 ) — — 32 (6,599 ) Developed technology (818,606 ) (831,842 ) — 36,911 1,383 (1,612,154 ) Total definite-lived intangibles $ (1,341,233 ) $ (876,451 ) $ — $ 255,916 $ 1,415 $ (1,960,353 ) Total other intangibles $ (1,341,233 ) $ (876,451 ) $ — $ 255,916 $ 1,415 $ (1,960,353 ) Net other intangibles $ 7,828,942 $ 5,859,297 __________ (1) Includes intangible assets acquired through the acquisition of Voltaren ® Gel and other business combinations in addition to the capitalization of payments relating to XIAFLEX ® , offset by measurement period adjustments relating to the Par acquisition. (2) Includes the impairment of certain intangible assets of our U.S. Generic Pharmaceuticals segment of $676.8 million , our U.S. Branded Pharmaceuticals segment of $110.4 million , our International Pharmaceuticals segment of $301.7 million and the impairment of certain intangible assets in connection with the wind-down of our Astora business, with a net impairment of approximately $16.3 million , which is reported as Discontinued operations, net of tax in the Consolidated Statements of Operations for the year ended December 31, 2016 . See Note 3. Discontinued Operations and Held for Sale for further information relating to the Astora wind-down. (3) Includes the removal of approximately $221.9 million of fully amortized intangible assets relating to expired or terminated licensing agreements in our U.S. Branded Pharmaceuticals segment, including the 2008 Voltaren ® Gel agreement, described in Note 11. License and Collaboration Agreements , Natesto TM , described in Note 5. Acquisitions and STENDRA ® , described below. In addition, $10.0 million of fully amortized assets were removed in connection with the wind-down of our Astora business described above. Additionally, certain IPR&D assets of $323.2 million were placed in service and transferred into developed technology, while certain other developed technology assets were removed due to their sale or disposal during the period presented. Additionally, approximately $34.6 million of intangible assets, net, were transferred to Assets held for sale relating to our Litha business and our BELBUCA™ intangible asset. See Note 3. Discontinued Operations and Held for Sale for further information relating to our Assets held for sale. Amortization expense for the years ended December 31, 2016 , 2015 and 2014 totaled $876.5 million , $561.3 million and $218.7 million , respectively. Estimated amortization of intangibles for the five fiscal years subsequent to December 31, 2016 is as follows (in thousands): 2017 $ 777,893 2018 $ 560,762 2019 $ 500,605 2020 $ 473,910 2021 $ 462,153 Changes in the gross carrying amount of our other intangibles for the year ended December 31, 2016 were as follows (in thousands): Gross Carrying Amount December 31, 2015 $ 9,170,175 Capitalization of payments relating to XIAFLEX ® 12,008 Voltaren ® Gel acquisition 162,700 Other acquisitions 18,183 Sale of certain International Pharmaceuticals intangible assets (1,959 ) Impairment of certain U.S. Branded Pharmaceuticals intangible assets (110,430 ) Impairment of certain U.S. Generic Pharmaceuticals intangible assets (676,776 ) Impairment of certain International Pharmaceuticals intangible assets (301,698 ) Impairment of certain Astora intangible assets (26,318 ) Measurement period adjustments relating to acquisitions closed during 2015 (NOTE 5) (154,500 ) Removal of fully amortized intangible assets relating to expired or terminated licensing agreements (221,853 ) Transfer of intangible assets to Assets held for sale (NOTE 3) (58,281 ) Effect of currency translation 8,399 December 31, 2016 $ 7,819,650 Endo tests goodwill and indefinite-lived intangible assets for impairment annually, or more frequently whenever events or changes in circumstances indicate that the asset might be impaired. Our annual assessment is performed as of October 1st. As part of the annual and interim goodwill and intangible asset impairment assessments, the Company estimates the fair values of its reporting units using an income approach that utilizes a discounted cash flow model, or, where appropriate, a market approach, or a combination thereof. The discounted cash flow models are dependent upon the Company’s estimates of future cash flows and other factors. These estimates of future cash flows involve assumptions concerning (i) future operating performance, including future sales, long-term growth rates, operating margins, variations in the amount and timing of cash flows and the probability of achieving the estimated cash flows and (ii) future economic conditions. These assumptions are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. The discount rates applied to the estimated cash flows for the Company’s October 1, 2016 , 2015 and 2014 annual goodwill and indefinite-lived intangible assets impairment test ranged from 8.5% to 11.0% , from 9.0% to 16.0% and from 8.5% to 15.5% , respectively, depending on the overall risk associated with the particular assets and other market factors. The Company believes the discount rates and other inputs and assumptions are consistent with those that a market participant would use. Any impairment charges resulting from the annual and interim goodwill and intangible asset impairment assessments are recorded to Asset impairments charges on the Company’s Consolidated Statements of Operations . Goodwill Results of 2016 Goodwill Impairment Testing As part of its annual goodwill impairment test, the Company concluded that the carrying value of its U.S. Generics, Paladin, Somar and Litha reporting units exceeded their respective estimated fair values and recorded goodwill impairment charges of $2,342.5 million , $272.6 million , $33.0 million and $26.3 million , respectively. The impairments were a result of a combination of factors, including increased buying power from the continued consolidation of the Company’s generic business customer base, a significant change in the value derived from the level and frequency of anticipated pricing opportunities in the future and increased levels of competition, particularly in the Company’s U.S. Generics reporting unit, due to the entry of new low cost competitors and accelerated FDA ANDA approvals. Consequently, the Company lowered its projected revenue growth rates and profitability levels as part of its fourth quarter company-wide strategic forecasting process. These external dynamics were exacerbated by an increase in the risk factor included in the discount rate used to calculate the U.S. Generics discounted cash flows from the date of the Company’s last interim test. The increase in the discount rate was due to the implied control premium resulting from recent trading values of the Company’s stock. On a combined basis, these factors reduced the resulting estimated fair value of the Company’s reporting units. As of December 31, 2016 , the remaining balance of goodwill for the Company’s U.S. Generics, U.S. Branded, Paladin, Somar and Litha reporting units was $3,531.3 million , $1,009.2 million , $166.4 million , $22.5 million and zero , respectively. Results of 2015 Goodwill Impairment Testing Given the results of our intangible asset assessment during the third quarter of 2015 for STENDRA ® and certain testosterone replacement therapy (TRT) products, the Company initiated an interim goodwill impairment analysis of our Urology, Endocrinology and Oncology (UEO) reporting unit as of September 30, 2015. As a result of this interim analysis, the Company determined that the net book value of our UEO reporting unit exceeded its estimated fair value. The Company prepared this analysis on a preliminary basis to estimate the amount of a provisional impairment charge as of September 30, 2015, and determined that an impairment was probable and reasonably estimable. The preliminary fair value assessments were performed by the Company taking into consideration a number of factors, based upon the latest available information, including the preliminary results of a hypothetical purchase price allocation. As a result of the preliminary analysis, during the three months ended September 30, 2015, the Company recorded a provisional pre-tax, non-cash impairment charge of $680.0 million in the Consolidated Statements of Operations , representing the difference between the estimated implied fair value of the UEO reporting unit’s goodwill and its respective net book value. The Company completed its UEO goodwill impairment analysis during the fourth quarter of 2015 and reduced the provisional pre-tax, non-cash impairment charge by $6.5 million , for a net, pre-tax, non-cash impairment charge during the year ended December 31, 2015 of $673.5 million . During the fourth quarter of 2015, the Company combined certain resources within the Branded business and management realigned how they review the segment’s performance. As a result, we determined that our Pain and UEO reporting units should be combined into one Branded reporting unit for purposes of testing goodwill as of October 1, 2015. In addition to testing the Pain and UEO reporting units separately for goodwill impairment as of October 1, 2015, the Company also tested the combined Branded reporting unit for impairment. The impairment tests did not result in any additional charge for the quarter ended December 31, 2015 . As of December 31, 2015 , the remaining balance of goodwill for the Branded reporting unit was approximately $1,002.8 million . As part of the annual goodwill impairment test, the Company recorded a pre-tax, non-cash impairment charge of $85.8 million in the Consolidated Statements of Operations during the fourth quarter of 2015, representing the difference between the estimated implied fair value of the Paladin reporting unit’s goodwill and its respective net book value, primarily due to the loss of exclusivity on certain products sold in Canada. As of December 31, 2015 , the remaining balance of goodwill for the Paladin reporting unit was approximately $420.4 million . Intangible Assets A summary of significant other intangible asset impairment charges by reportable segment for the three years ended December 31, 2016 is included below. U.S. Generic Pharmaceuticals Segment During the three months ended March 31, 2016 and June 30, 2016, the Company identified certain market and regulatory conditions impacting the commercial potential of certain indefinite and definite-lived intangible assets in our U.S. Generic Pharmaceuticals segment. Accordingly, we tested these assets for impairment and determined that the carrying value of certain of these assets was no longer fully recoverable, resulting in pre-tax, non-cash asset impairment charges of $29.3 million and $40.0 million during the first and second quarters of 2016, respectively. In addition, during the first quarter of 2016, the Company recognized pre-tax, non-cash asset impairment charges of $100.3 million related to the 2016 U.S. Generic Pharmaceuticals restructuring initiative, which resulted from the discontinuation of certain commercial products and the abandonment of certain IPR&D projects. See Note 4. Restructuring for discussion of our material restructuring initiatives. During the fourth quarter of 2016, the Company recognized pre-tax, non-cash intangible asset impairment charges of $507.2 million in our U.S. Generic Pharmaceuticals resulting from certain market conditions, including price erosion and increased competition, impacting the commercial potential of definite and indefinite-lived intangible assets, including higher than expected erosion rates in the U.S. Generic Pharmaceuticals base business. During the year ended December 31, 2015, the Company identified certain market and regulatory conditions impacting the commercial potential of certain indefinite and definite-lived intangible assets in our U.S. Generic Pharmaceuticals segment. Accordingly, we tested these assets for impairment and determined that the carrying value of certain of these assets was no longer fully recoverable, resulting in pre-tax, non-cash asset impairment charges of $70.2 million , $72.4 million and $38.4 million , respectively, during the second, third and fourth quarters of 2015. U.S. Branded Pharmaceuticals Segment As a result of unfavorable formulary changes and generic competition for sumatriptan, the Company has experienced a downturn in the performance of its Sumavel ® DosePro ® (Sumavel ® ) product, a needle-free delivery system for sumatriptan acquired from Zogenix, Inc. in 2014. As a result of this underperformance, the Company concluded during the third quarter of 2016 that an impairment assessment was required to evaluate the recoverability of Sumavel ® . After performing this assessment, we recorded a pre-tax, non-cash impairment charge of $72.8 million during the three months ended September 30, 2016, representing a full impairment of the intangible asset. During the fourth quarter of 2016, the Company recognized pre-tax, non-cash intangible asset impairment charges of $37.6 million in our U.S. Branded Pharmaceuticals segment resulting primarily from the termination of our BELBUCA TM product and the return of this product to BDSI. During the year ended December 31, 2015, a sustained downturn in the short-acting TRT market caused underperformance across several of our TRT products, including Testim ® and Natesto™. In addition, we also experienced underperformance with respect to STENDRA ® . As a result of this underperformance and a re-alignment of investment priorities towards higher growth and higher value assets such as XIAFLEX ® , the Company concluded during the third quarter of 2015 that an impairment assessment was required to evaluate the recoverability of certain definite-lived intangible assets associated with these products. After performing this assessment, we recorded a pre-tax, non-cash impairment charge of approximately $152.0 million during the third quarter of 2015, representing a full impairment of our Natesto™ intangible asset and a partial impairment of our Testim ® and STENDRA ® intangible assets. As a result of the Company providing written notice to VIVUS Inc. on December 30, 2015 that we were terminating the STENDRA ® License Agreement effective June 30, 2016, we recorded an additional pre-tax, non-cash impairment charge of approximately $9.5 million , representing the remaining carrying amount of our STENDRA ® intangible asset. Additionally, during the fourth quarter of 2015, we determined that the fair value of certain U.S. Branded Pharmaceuticals IPR&D assets were less than their respective carrying amounts, and we recorded a pre-tax, non-cash impairment charge of $5.5 million representing the full carrying amount of the assets. As part of the 2014 year-end financial close and reporting process, the Company concluded that an impairment assessment was required to evaluate the recoverability of a definite-lived license intangible asset related to OPANA ® ER. After performing these assessments, we recorded a pre-tax, non-cash impairment charge of $12.3 million , representing the remaining carrying amount of this asset. International Pharmaceuticals Segment During the three months ended September 30, 2016, the Company determined that it would not pursue commercialization of a product in certain international markets. Accordingly, we tested the definite-lived intangible asset associated with this product for impairment and determined that the carrying value was no longer fully recoverable, resulting in pre-tax, non-cash asset impairment charge of $16.2 million during the third quarter of 2016. During the fourth quarter of 2016, the Company recognized pre-tax, non-cash intangible asset impairment charges of $285.5 million in our International Pharmaceuticals segment resulting from certain market conditions impacting the commercial potential of definite and indefinite-lived intangible assets. As part of our definite-lived intangible asset impairment review processes for 2015, the Company recorded pre-tax, non-cash impairment charges of approximately $14.6 million in our International Pharmaceuticals segment, representing the difference between the carrying amount of certain intangible assets and their estimated fair value. |
