Warner Chilcott 10Q 2017 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number	Exact name of registrant as specified in its charter, principal office and address and telephone number	State of incorporation or organization	I.R.S. Employer Identification No.
001-36867	Allergan plc Clonshaugh Business and Technology Park Coolock, Dublin, D17 E400, Ireland (862) 261-7000	Ireland	98-1114402

001-36887	Warner Chilcott Limited Cannon’s Court 22	Bermuda	98-0496358
	Victoria Street
	Hamilton HM 12
	Bermuda
	(441) 295-2244

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Allergan plc		YES ☒		NO ☐
Warner Chilcott Limited		YES ☒		NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Allergan plc		YES ☒		NO ☐
Warner Chilcott Limited		YES ☒		NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Allergan plc	Large accelerated filer	☒	Accelerated filer	☐
	Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company	☐
	Emerging growth company	☐

Warner Chilcott Limited	Large accelerated filer	☐	Accelerated filer	☐
	Non-accelerated filer (Do not check if a smaller reporting company)	☒	Smaller reporting company	☐
	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Allergan plc		YES ☐		NO ☒
Warner Chilcott Limited		YES ☐		NO ☒

Number of shares of Allergan plc’s Ordinary Shares outstanding on October 27, 2017: 332,583,097. There is no trading market for securities of Warner Chilcott Limited, all of which are indirectly wholly owned by Allergan plc.

This Quarterly Report on Form 10-Q is a combined report being filed separately by two different registrants: Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc. The information in this Quarterly Report on Form 10-Q is equally applicable to Allergan plc and Warner Chilcott Limited, except where otherwise indicated. Warner Chilcott Limited meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and, to the extent applicable, is therefore filing this form with a reduced disclosure format.

TABLE OF CONTENTS

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017

		PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited)	3
	Consolidated Balance Sheets of Allergan plc as of September 30, 2017 and December 31, 2016	3
	Consolidated Statements of Operations of Allergan plc for the three and nine months ended September 30, 2017 and September 30, 2016	4
	Consolidated Statements of Comprehensive (Loss) / Income of Allergan plc for the three and nine months ended September 30, 2017 and September 30, 2016	5
	Consolidated Statements of Cash Flows of Allergan plc for the nine months ended September 30, 2017 and 2016	6
	Consolidated Balance Sheets of Warner Chilcott Limited as of September 30, 2017 and December 31, 2016	7
	Consolidated Statements of Operations of Warner Chilcott Limited for the three and nine months ended September 30, 2017 and September 30, 2016	8
	Consolidated Statements of Comprehensive (Loss) / Income of Warner Chilcott Limited for the three and nine months ended September 30, 2017 and September 30, 2016	9
	Consolidated Statements of Cash Flows of Warner Chilcott Limited for the nine months ended September 30, 2017 and 2016	10
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	80
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	119
Item 4.	Controls and Procedures	121
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	122
Item 1A.	Risk Factors	122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	122
Item 6.	Exhibits	122
	Signatures	124

PART I. FINANCIAL INFORMATION

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS

ALLERGAN PLC

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except par value)

	September 30,		December 31,
	2017		2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,612.7	$	1,724.0
Marketable securities		3,829.1		11,501.5
Accounts receivable, net		2,808.6		2,531.0
Inventories		899.8		718.0
Prepaid expenses and other current assets		962.6		1,383.4
Total current assets		10,112.8		17,857.9
Property, plant and equipment, net		1,802.2		1,611.3
Investments and other assets		269.9		282.1
Non current assets held for sale		11.1		27.0
Deferred tax assets		327.0		233.3
Product rights and other intangibles		56,698.9		62,618.6
Goodwill		49,770.9		46,356.1
Total assets	$	118,992.8	$	128,986.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	4,541.7	$	5,019.0
Income taxes payable		221.1		57.8
Current portion of long-term debt and capital leases		3,797.0		2,797.9
Total current liabilities		8,559.8		7,874.7
Long-term debt and capital leases		26,539.1		29,970.8
Other long-term liabilities		1,007.0		1,085.0
Other taxes payable		911.4		886.2
Deferred tax liabilities		10,802.0		12,969.1
Total liabilities		47,819.3		52,785.8
Commitments and contingencies (Refer to Note 20)
Equity:
Preferred shares, $0.0001 par value per share, 5.1 million shares authorized, 5.1 million and 5.1 million shares issued and outstanding, respectively	$	4,929.7	$	4,929.7
Ordinary shares; $0.0001 par value per share; 1,000.0 million shares authorized, 332.6 million and 334.9 million shares issued and outstanding, respectively		-	-
Additional paid-in capital		54,381.3		53,958.9
Retained earnings		10,137.2		18,342.5
Accumulated other comprehensive income / (loss)		1,711.2		(1,038.4	)
Total shareholders’ equity		71,159.4		76,192.7
Noncontrolling interest		14.1		7.8
Total equity		71,173.5		76,200.5
Total liabilities and equity	$	118,992.8	$	128,986.3

See accompanying Notes to Consolidated Financial Statements.

ALLERGAN PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues	$	4,034.3		$	3,622.2		$	11,614.6		$	10,706.3
Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		586.5			462.2			1,587.1			1,381.1
Research and development		442.6			622.8			1,691.9			1,662.4
Selling and marketing		832.8			796.0			2,637.1			2,429.6
General and administrative		336.9			361.2			1,112.8			1,033.9
Amortization		1,781.0			1,609.1			5,274.9			4,831.9
In-process research and development impairments		202.0			42.0			1,245.3			316.9
Asset sales and impairments, net		3,874.8			(4.7	)		3,896.2			(24.0	)
Total operating expenses		8,056.6			3,888.6			17,445.3			11,631.8
Operating (loss)		(4,022.3	)		(266.4	)		(5,830.7	)		(925.5	)

Interest income		11.1			18.1			53.0			23.5
Interest (expense)		(265.2	)		(324.3	)		(832.3	)		(1,002.9	)
Other (expense) income, net		(1,310.3	)		33.6			(3,366.6	)		184.2
Total other (expense), net		(1,564.4	)		(272.6	)		(4,145.9	)		(795.2	)
(Loss) before income taxes and noncontrolling interest		(5,586.7	)		(539.0	)		(9,976.6	)		(1,720.7	)
(Benefit) for income taxes		(1,638.8	)		(158.9	)		(2,752.1	)		(825.8	)
Net (loss) from continuing operations, net of tax		(3,947.9	)		(380.1	)		(7,224.5	)		(894.9	)
(Loss) / income from discontinued operations, net of tax		(6.1	)		15,601.9			(17.6	)		15,873.2
Net (loss) / income		(3,954.0	)		15,221.8			(7,242.1	)		14,978.3
(Income) attributable to noncontrolling interest		(1.7	)		(1.8	)		(4.7	)		(4.3	)
Net (loss) / income attributable to shareholders		(3,955.7	)		15,220.0			(7,246.8	)		14,974.0
Dividends on preferred shares		69.6			69.6			208.8			208.8
Net (loss) /income attributable to ordinary shareholders	$	(4,025.3	)	$	15,150.4		$	(7,455.6	)	$	14,765.2

(Loss) / income per share attributable to ordinary shareholders - basic:
Continuing operations	$	(12.05	)	$	(1.15	)	$	(22.23	)	$	(2.81	)
Discontinued operations		(0.02	)		39.73			(0.05	)		40.25
Net (loss) / income per share - basic	$	(12.07	)	$	38.58		$	(22.28	)	$	37.44
(Loss) / income per share attributable to ordinary shareholders - diluted:
Continuing operations	$	(12.05	)	$	(1.15	)	$	(22.23	)	$	(2.81	)
Discontinued operations		(0.02	)		39.73			(0.05	)		40.25
Net (loss) /income per share - diluted	$	(12.07	)	$	38.58		$	(22.28	)	$	37.44

Dividends per ordinary share	$	0.70		$	-		$	2.10		$	-

Weighted average shares outstanding:
Basic		333.5			392.7			334.6			394.4
Diluted		333.5			392.7			334.6			394.4

See accompanying Notes to Consolidated Financial Statements.

ALLERGAN PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME

(Unaudited; in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) / income	$	(3,954.0	)	$	15,221.8		$	(7,242.1	)	$	14,978.3
Other comprehensive income
Foreign currency translation gains / (losses)		280.8			(19.1	)		1,141.2			173.8
Net impact of other-than-temporary loss on investment in Teva securities		(207.7	)		-			1,599.4			-
Impact of Teva Transaction		-			1,544.8			-			1,544.8
Unrealized gains / (losses), net of tax		13.1			(609.3	)		9.0			(625.2	)
Total other comprehensive income, net of tax		86.2			916.4			2,749.6			1,093.4
Comprehensive (loss) / income		(3,867.8	)		16,138.2			(4,492.5	)		16,071.7
Comprehensive (income) attributable to noncontrolling interest		(1.7	)		(1.8	)		(4.7	)		(4.3	)
Comprehensive (loss) / income attributable to ordinary shareholders	$	(3,869.5	)	$	16,136.4		$	(4,497.2	)	$	16,067.4

See accompanying Notes to Consolidated Financial Statements.

ALLERGAN PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

	Nine Months Ended September 30,
	2017			2016
Cash Flows From Operating Activities:
Net (loss) / income	$	(7,242.1	)	$	14,978.3
Reconciliation to net cash provided by operating activities:
Depreciation		123.2			117.6
Amortization		5,274.9			4,836.7
Provision for inventory reserve		77.3			162.7
Share-based compensation		220.8			269.9
Deferred income tax benefit		(3,205.3	)		(517.1	)
Pre-tax gain on sale of generics business		-			(24,203.1	)
Non-cash tax effect of gain on sale of generics business		-			5,749.9
In-process research and development impairments		1,245.3			316.9
Loss / (gain) on asset sales and impairments, net		3,896.2			(24.0	)
Net income impact of other-than-temporary loss on investment in Teva securities		3,273.5			-
Amortization of inventory step-up		126.2			42.4
Non-cash extinguishment of debt		(8.2	)		-
Amortization of deferred financing costs		19.6			44.6
Contingent consideration adjustments, including accretion		(51.6	)		76.7
Other, net		(18.2	)		(16.0	)
Changes in assets and liabilities (net of effects of acquisitions):
Decrease / (increase) in accounts receivable, net		(138.5	)		(40.4	)
Decrease / (increase) in inventories		(107.7	)		(221.6	)
Decrease / (increase) in prepaid expenses and other current assets		45.8			158.9
Increase / (decrease) in accounts payable and accrued expenses		(356.3	)		331.9
Increase / (decrease) in income and other taxes payable		646.1			(131.6	)
Increase / (decrease) in other assets and liabilities		4.0			(397.5	)
Net cash provided by operating activities		3,825.0			1,535.2
Cash Flows From Investing Activities:
Additions to property, plant and equipment		(234.0	)		(250.5	)
Additions to product rights and other intangibles		(604.3	)		-
Sale of generics business		-			33,304.5
Additions to investments		(8,433.8	)		(15,445.5	)
Proceeds from sale of investments and other assets		14,474.4			40.0
Proceeds from sales of property, plant and equipment		5.8			33.3
Acquisitions of businesses, net of cash acquired		(5,290.4	)		(74.5	)
Net cash (used in) / provided by investing activities		(82.3	)		17,607.3
Cash Flows From Financing Activities:
Proceeds from borrowings of long-term indebtedness, including credit facility		3,025.0			1,050.0
Debt issuance and other financing costs		(17.5	)		-
Payments on debt, including capital lease obligations and credit facility		(5,579.2	)		(10,831.0	)
Proceeds from stock plans		167.2			138.0
Payments of contingent consideration and other financing		(515.2	)		(77.7	)
Repurchase of ordinary shares		(36.4	)		(2,758.6	)
Dividends paid		(917.0	)		(208.8	)
Net cash (used in) financing activities		(3,873.1	)		(12,688.1	)
Effect of currency exchange rate changes on cash and cash equivalents		19.1			4.3
Net (decrease) / increase in cash and cash equivalents		(111.3	)		6,458.7
Cash and cash equivalents at beginning of period		1,724.0			1,096.0
Cash and cash equivalents at end of period	$	1,612.7		$	7,554.7
Supplemental Disclosures of Cash Flow Information
Taxes paid in connection with the sale of the generics business	$	-		$	2,571.7
Other income taxes paid, net of refunds	$	(173.6	)	$	339.0
Cash payments of interest	$	988.8		$	1,144.5
Schedule of Non-Cash Investing and Financing Activities:
Non-cash equity issuance for the acquisition of Zeltiq net assets	$	8.5		$	-
Deferred consideration for the acquisition of Zeltiq	$	13.5		$	-
Receipt of Teva Pharmaceuticals Industries Ltd. ordinary shares in connection with the sale of the generics business	$	-		$	5,038.6
Dividends accrued	$	24.6		$	24.2

See accompanying Notes to Consolidated Financial Statements.

WARNER CHILCOTT LIMITED

CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions)

	September 30,		December 31,
	2017		2016
ASSETS
Current assets:
Cash and cash equivalents	$	1,608.5	$	1,713.2
Marketable securities		3,829.1		11,501.5
Accounts receivable, net		2,808.6		2,531.0
Receivables from Parents		5,308.9		9,289.2
Inventories		899.8		718.0
Prepaid expenses and other current assets		961.0		1,382.1
Total current assets		15,415.9		27,135.0
Property, plant and equipment, net		1,802.2		1,611.3
Investments and other assets		269.9		282.1
Non current receivables from Parents		3,964.0		3,964.0
Non current assets held for sale		11.1		27.0
Deferred tax assets		326.9		233.3
Product rights and other intangibles		56,698.9		62,618.6
Goodwill		49,770.9		46,356.1
Total assets	$	128,259.8	$	142,227.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	4,516.1	$	4,993.3
Payables to Parents		1,816.5		1,372.8
Income taxes payable		221.1		57.8
Current portion of long-term debt and capital leases		3,797.0		2,797.9
Total current liabilities		10,350.7		9,221.8
Long-term debt and capital leases		26,539.1		29,970.8
Other long-term liabilities		1,007.0		1,086.0
Other taxes payable		911.4		886.2
Deferred tax liabilities		10,802.0		12,969.1
Total liabilities		49,610.2		54,133.9
Commitments and contingencies
Equity:
Members' capital		72,935.1		72,935.1
Retained earnings		3,989.2		16,189.0
Accumulated other comprehensive income / (loss)		1,711.2		(1,038.4	)
Total members’ equity		78,635.5		88,085.7
Noncontrolling interest		14.1		7.8
Total equity		78,649.6		88,093.5
Total liabilities and equity	$	128,259.8	$	142,227.4

See accompanying Notes to Consolidated Financial Statements.

WARNER CHILCOTT LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net revenues	$	4,034.3		$	3,622.2		$	11,614.6		$	10,706.3
Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		586.5			462.2			1,587.1			1,381.1
Research and development		442.6			622.8			1,691.9			1,662.4
Selling and marketing		832.8			796.0			2,637.1			2,429.6
General and administrative		277.2			312.2			1,039.2			966.2
Amortization		1,781.0			1,609.1			5,274.9			4,831.9
In-process research and development impairments		202.0			42.0			1,245.3			316.9
Asset sales and impairments, net		3,874.8			(4.7	)		3,896.2			(24.0	)
Total operating expenses		7,996.9			3,839.6			17,371.7			11,564.1
Operating (loss)		(3,962.6	)		(217.4	)		(5,757.1	)		(857.8	)
Non-operating income (expense):
Interest income		37.9			18.1			126.5			23.5
Interest (expense)		(265.2	)		(324.3	)		(832.3	)		(1,002.9	)
Other (expense) / income, net		(1,310.3	)		33.6			(3,366.6	)		34.2
Total other (expense), net		(1,537.6	)		(272.6	)		(4,072.4	)		(945.2	)
(Loss) before income taxes and noncontrolling interest		(5,500.2	)		(490.0	)		(9,829.5	)		(1,803.0	)
(Benefit) for income taxes		(1,638.8	)		(158.9	)		(2,752.1	)		(825.8	)
Net (loss) from continuing operations, net of tax		(3,861.4	)		(331.1	)		(7,077.4	)		(977.2	)
(Loss) / income from discontinued operations, net of tax		(6.1	)		15,601.9			(17.6	)		15,873.2
Net (loss) / income		(3,867.5	)		15,270.8			(7,095.0	)		14,896.0
(Income) attributable to noncontrolling interest		(1.7	)		(1.8	)		(4.7	)		(4.3	)
Net (loss) / income attributable to members	$	(3,869.2	)	$	15,269.0		$	(7,099.7	)	$	14,891.7

See accompanying Notes to Consolidated Financial Statements.

WARNER CHILCOTT LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME

(Unaudited; in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) / income	$	(3,867.5	)	$	15,270.8		$	(7,095.0	)	$	14,896.0
Other comprehensive income
Foreign currency translation gains / (losses)		280.8			(19.1	)		1,141.2			173.8
Net impact of other-than-temporary loss on investment in Teva securities		(207.7	)		-			1,599.4			-
Impact of Teva Transaction		-			1,544.8			-			1,544.8
Unrealized gains / (losses), net of tax		13.1			(609.3	)		9.0			(625.2	)
Total other comprehensive income, net of tax		86.2			916.4			2,749.6			1,093.4
Comprehensive (loss) / income		(3,781.3	)		16,187.2			(4,345.4	)		15,989.4
Comprehensive (income) attributable to noncontrolling interest		(1.7	)		(1.8	)		(4.7	)		(4.3	)
Comprehensive (loss) / income attributable to ordinary shareholders	$	(3,783.0	)	$	16,185.4		$	(4,350.1	)	$	15,985.1

See accompanying Notes to Consolidated Financial Statements.

WARNER CHILCOTT LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)

	Nine Months Ended September 30,
	2017			2016
Cash Flows From Operating Activities:
Net (loss) / income	$	(7,095.0	)	$	14,896.0
Reconciliation to net cash provided by operating activities:
Depreciation		123.2			117.6
Amortization		5,274.9			4,836.7
Provision for inventory reserve		77.3			162.7
Share-based compensation		220.8			269.9
Deferred income tax benefit		(3,205.3	)		(517.1	)
Pre-tax gain on sale of generics business		-			(24,203.1	)
Non-cash tax effect of gain on sale of generics business		-			5,749.9
In-process research and development impairments		1,245.3			316.9
Loss / (gain) on asset sales and impairments, net		3,896.2			(24.0	)
Net income impact of other-than-temporary loss on investment in Teva securities		3,273.5			-
Amortization of inventory step up		126.2			42.4
Non-cash extinguishment of debt		(8.2	)		-
Amortization of deferred financing costs		19.6			44.6
Contingent consideration adjustments, including accretion		(51.6	)		76.7
Other, net		(18.2	)		(16.0	)
Changes in assets and liabilities (net of effects of acquisitions):
Decrease / (increase) in accounts receivable, net		(138.5	)		(40.4	)
Decrease / (increase) in inventories		(107.7	)		(221.6	)
Decrease / (increase) in prepaid expenses and other current assets		47.4			156.8
Increase / (decrease) in accounts payable and accrued expenses		(330.7	)		361.5
Increase / (decrease) in income and other taxes payable		646.1			(131.6	)
Increase / (decrease) in other assets and liabilities, including receivable / payable with Parents		(32.9	)		(1,899.4	)
Net cash provided by / (used in) operating activities		3,962.4			(21.5	)
Cash Flows From Investing Activities:
Additions to property, plant and equipment		(234.0	)		(250.5	)
Additions to product rights and other intangibles		(604.3	)		-
Sale of generics business		-			33,304.5
Additions to investments		(8,433.8	)		(15,445.5	)
Proceeds from the sale of investments and other assets		14,474.4			40.0
Proceeds from sales of property, plant and equipment		5.8			33.3
Acquisitions of businesses, net of cash acquired		(5,290.4	)		(74.5	)
Net cash (used in) / provided by investing activities		(82.3	)		17,607.3
Cash Flows From Financing Activities:
Proceeds from borrowings of long-term indebtedness, including credit facility		3,025.0			1,050.0
Debt issuance and other financing costs		(17.5	)		-
Payments on debt, including capital lease obligations and credit facility		(5,579.2	)		(10,831.0	)
Payments of contingent consideration and other financing		(515.2	)		(77.7	)
Dividend to Parent		(917.0	)		(1,244.8	)
Net cash (used in) financing activities		(4,003.9	)		(11,103.5	)
Effect of currency exchange rate changes on cash and cash equivalents		19.1			4.3
Net (decrease) / increase in cash and cash equivalents		(104.7	)		6,486.6
Cash and cash equivalents at beginning of period		1,713.2			1,036.2
Cash and cash equivalents at end of period	$	1,608.5		$	7,522.8
Schedule of Non-Cash Investing and Financing Activities:
Non-cash dividends to Parent	$	4,203.9		$	-

See accompanying Notes to Consolidated Financial Statements

ALLERGAN PLC AND WARNER CHILCOTT LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — General

Allergan plc is a global pharmaceutical company and a leader in a new industry model – Growth Pharma. Allergan is focused on developing, manufacturing and commercializing branded pharmaceutical (“brand,” “branded” or “specialty brand”), device, biologic, surgical and regenerative medicine products for patients around the world. The Company has operations in more than 100 countries. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc and has the same principal business activities.

On August 2, 2016 we completed the divestiture of our global generics business and certain other assets to Teva Pharmaceutical Industries Ltd. (“Teva”) (the “Teva Transaction”) in exchange for which we received $33.3 billion in cash, net of cash acquired by Teva, which includes estimated working capital and other contractual adjustments, and 100.3 million unregistered Teva ordinary shares (or American Depository Shares with respect thereto), which at the time of the closing approximated $5.0 billion in value using the closing date Teva opening stock price discounted at a rate of 5.9 percent due to the lack of marketability (“Teva Shares”).

As part of the Teva Transaction, Teva acquired our global generics business, including the United States (“U.S.”) and international generic commercial units, our third-party supplier Medis, our global generic manufacturing operations, our global generic research and development (“R&D”) unit, our international over-the-counter (“OTC”) commercial unit (excluding OTC eye care products) and certain established international brands.

On October 3, 2016, the Company completed the divestiture of the Anda Distribution business to Teva for $500.0 million. The Anda Distribution business distributed generic, branded, specialty and OTC pharmaceutical products from more than 300 manufacturers to retail independent and chain pharmacies, nursing homes, mail order pharmacies, hospitals, clinics and physician offices across the U.S.

The Company recognized a combined gain on the sale of the Anda Distribution business and the Teva Transaction of $15,932.2 million in the year ended December 31, 2016, as well as deferred liabilities relating to other elements of our arrangements with Teva of $299.2 million. In the three and nine months ended September 30, 2016, the Company recognized a gain on the sale of the generics business of $15,881.5 million.

As a result of the Teva Transaction and the divestiture of the Company’s Anda Distribution business, and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) number 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” the financial results of the businesses held for sale have been reclassified to discontinued operations for all periods presented in our consolidated financial statements. The results of our discontinued operations include the results of our generic product development, manufacturing and distribution of off-patent pharmaceutical products, certain established international brands marketed similarly to generic products and out-licensed generic pharmaceutical products primarily in Europe through our Medis third-party business through August 2, 2016, as well as our Anda Distribution business through October 3, 2016.

The accompanying consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2016 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying consolidated financial statements. The accompanying year end consolidated balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s consolidated financial position, results of operations, comprehensive (loss) / income and cash flows for the periods presented. Unless otherwise noted, all such adjustments are of a normal, recurring nature. All intercompany transactions and balances have been eliminated in consolidation. The Company’s results of operations, comprehensive (loss) / income and cash flows for the interim periods are not necessarily indicative of the results of operations, comprehensive (loss) / income and cash flows that it may achieve in future periods.

NOTE 2 – Reconciliation of Warner Chilcott Limited results to Allergan plc results

Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc, the ultimate parent of the group, (together with other Warner Chilcott Limited parents, the “Parents”). The results of Warner Chilcott Limited are consolidated into the results of Allergan plc. Due to the deminimis activity between Warner Chilcott Limited and the Parents (including Allergan plc), content throughout this filing relates to both Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited representations relate only to itself and not to any other company. Except where otherwise indicated, and excluding certain insignificant cash and non-cash transactions at the Allergan plc level, these notes relate to the consolidated financial statements for both separate registrants, Allergan plc and Warner Chilcott Limited. In addition to certain inter-company payable and receivable amounts between the entities, the following is a reconciliation of the financial position and results of operations of Warner Chilcott Limited to Allergan plc ($ in millions):

	As of September 30, 2017						As of December 31, 2016
	Allergan plc		Warner Chilcott Limited		Difference		Allergan plc		Warner Chilcott Limited		Difference
Cash and cash equivalents	$	1,612.7	$	1,608.5	$	4.2	$	1,724.0	$	1,713.2	$	10.8
Prepaid expenses and other current assets		962.6		961.0		1.6		1,383.4		1,382.1		1.3
Accounts payable and accrued liabilities		4,541.7		4,516.1		25.6		5,019.0		4,993.3		25.7
Other long-term liabilities		1,007.0		1,007.0		-		1,085.0		1,086.0		(1.0	)

	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017
	Allergan plc			Warner Chilcott Limited			Difference			Allergan plc			Warner Chilcott Limited			Difference
General and administrative expenses	$	336.9		$	277.2		$	59.7		$	1,112.8		$	1,039.2		$	73.6
Operating (loss)		(4,022.3	)		(3,962.6	)		(59.7	)		(5,830.7	)		(5,757.1	)		(73.6	)
Total other (expense), net		(1,564.4	)		(1,537.6	)		(26.8	)		(4,145.9	)		(4,072.4	)		(73.5	)
(Loss) before income taxes and noncontrolling interest		(5,586.7	)		(5,500.2	)		(86.5	)		(9,976.6	)		(9,829.5	)		(147.1	)
Net (loss) from continuing operations, net of tax		(3,947.9	)		(3,861.4	)		(86.5	)		(7,224.5	)		(7,077.4	)		(147.1	)
Net (loss)		(3,954.0	)		(3,867.5	)		(86.5	)		(7,242.1	)		(7,095.0	)		(147.1	)
Dividends on preferred shares		69.6			-			69.6			208.8			-			208.8
Net (loss) attributable to ordinary shareholders/members		(4,025.3	)		(3,869.2	)		(156.1	)		(7,455.6	)		(7,099.7	)		(355.9	)

	Three Months Ended September 30, 2016									Nine Months Ended September 30, 2016
	Allergan plc			Warner Chilcott Limited			Difference			Allergan plc			Warner Chilcott Limited			Difference
General and administrative expenses	$	361.2		$	312.2		$	49.0		$	1,033.9		$	966.2		$	67.7
Operating (loss)		(266.4	)		(217.4	)		(49.0	)		(925.5	)		(857.8	)		(67.7	)
Total other (expense), net		(272.6	)		(272.6	)		-			(795.2	)		(945.2	)		150.0
(Loss) before income taxes and noncontrolling interest		(539.0	)		(490.0	)		(49.0	)		(1,720.7	)		(1,803.0	)		82.3
Net (loss) from continuing operations, net of tax		(380.1	)		(331.1	)		(49.0	)		(894.9	)		(977.2	)		82.3
Net income		15,221.8			15,270.8			(49.0	)		14,978.3			14,896.0			82.3
Dividends on preferred shares		69.6			-			69.6			208.8			-			208.8
Net income attributable to ordinary shareholders/members		15,150.4			15,269.0			(118.6	)		14,765.2			14,891.7			(126.5	)

The difference between general and administrative expenses in the three and nine months ended September 30, 2017 and 2016 were due to corporate related expenses incurred at Allergan plc as well as transaction costs. The difference in other (expense), net in the nine months ended September 30, 2016 related to the payment received by Allergan plc relating to the reimbursement of expenses associated with the termination of the merger agreement with Pfizer, Inc. Movements in equity are due to historical differences in the results of operations of the companies and differences in equity awards.

As of September 30, 2017 and December 31, 2016, Warner Chilcott Limited had $5.3 billion and $9.3 billion in Receivables from Parents, respectively. As of September 30, 2017 and December 31, 2016, Warner Chilcott Limited had $4.0 billion and $4.0 billion in Non-current Receivables from the Parents, respectively. These receivables related to intercompany loans between Allergan plc and each of Allergan Capital S.à.r.l. (formerly known as Actavis Capital S.à.r.l.) and Forest Finance B.V., subsidiaries of Warner Chilcott Limited. These loans are interest-bearing loans with varying term dates. Total interest income recognized during the three and nine months ended September 30, 2017 was $26.8 million and $73.5 million, respectively.

NOTE 3 — Summary of Significant Accounting Policies

The following are interim updates to certain of the policies described in “Note 4” of the notes to the Company’s audited consolidated financial statements for the year ended December 31, 2016 included in the Annual Report.

Reclassifications

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. As a result of implementation of this guidance, effective January 1, 2017, the Company reduced previously reported Retained Earnings by $62.4 million and increased previously reported Additional-Paid-In-Capital by $62.4 million. In addition, the Company decreased its net Deferred Tax Liabilities and increased Retained Earnings by $20.8 million for the tax impact of this change. The Company also revised its presentation of previously reported cash flows by eliminating the presentation of “Excess tax benefit from stock-based compensation” which raised operating cash flows and reduced financing cash flows for the nine months ended September 30, 2016 by $26.6 million.

Revenue Recognition

General

Revenue from product sales is recognized when title and risk of loss to the product transfers to the customer, which is based on the transaction shipping terms. Recognition of revenue also requires persuasive evidence of an arrangement, reasonable assurance of collection of sales proceeds, and the seller’s price to the buyer to be fixed or determinable. The Company warrants products against defects and for specific quality standards, permitting the return of products under certain circumstances. Product sales are recorded net of all sales-related deductions including, but not limited to: chargebacks, trade discounts, sales returns and allowances, commercial and government rebates, customer loyalty programs and fee-for-service arrangements with certain distributors, which we refer to in the aggregate as sales returns and allowances (“SRAs”).

Royalty and commission revenue is recognized as a component of net revenues in accordance with the terms of the applicable contractual agreements when collectability is reasonably assured and when revenue can be reasonably measured.

Provisions for SRAs

As is customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. When the Company recognizes gross revenue from the sale of products, an estimate of SRA is recorded, which reduces the product revenues. Accounts receivable and/or accrued liabilities are also reduced and/or increased by the SRA amount depending on whether we have the right of offset with the customer. These provisions are estimated based on historical payment experience, historical relationship of the deductions to gross product revenues, government regulations, estimated utilization or redemption rates, estimated customer inventory levels and current contract sales terms. The estimation process used to determine our SRA provision has been applied on a consistent basis and no material revenue adjustments have been necessary to increase or decrease our reserves for SRA as a result of a significant change in underlying estimates. The Company uses a variety of methods to assess the adequacy of the SRA reserves to ensure that our financial statements are fairly stated.

Accounts receivable balances in the Company’s consolidated financial statements are presented net of SRA estimates. SRA balances in accounts receivable were $204.9 million and $287.4 million at September 30, 2017 and December 31, 2016, respectively. SRA balances within accounts payable and accrued expenses were $1,985.4 million and $1,891.4 million at September 30, 2017 and December 31, 2016, respectively. The movements in the SRA reserve balances in the nine months ended September 30, 2017 are as follows ($ in millions):

Balance as of December 31, 2016	$	2,178.8
Provision to reduce gross product sales to net product sales		5,914.5
Acquired balances in the LifeCell and Zeltiq acquisitions		41.3
Payments and other		(5,944.3	)
Balance as of September 30, 2017	$	2,190.3

The SRA provisions recorded to reduce gross product sales to net product sales, excluding discontinued operations, were as follows ($ in millions):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Gross product sales	$	5,994.9		$	5,332.9		$	17,265.7		$	15,727.7
Provisions to reduce gross product sales to net product sales		(2,044.6	)		(1,757.3	)		(5,914.5	)		(5,153.0	)
Net product sales	$	3,950.3		$	3,575.6		$	11,351.2		$	10,574.7
Percentage of SRA provisions to gross sales		34.1	%		33.0	%		34.3	%		32.8	%

The increase in SRA provisions to reduce gross product sales to net product sales was attributable primarily to the US business with higher rebates to maintain broad coverage for key brands, an increase in coupon/co-pay program participation and an annual price increase which drove increases in statutory Medicaid and chargeback related discounts.

Goodwill and Intangible Assets with Indefinite-Lives

General

The Company tests goodwill and intangible assets with indefinite-lives for impairment annually in the second quarter. Additionally, the Company may perform interim tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit below its carrying amount. The carrying value of each reporting unit is determined by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units.

Goodwill is considered impaired if the carrying amount of the net assets exceeds the fair value of the reporting unit. Impairment, if any, would be recorded in operating income and this could result in a material impact to net income / (loss) and income / (loss) per share.

Acquired in-process research and development (“IPR&D”) intangible assets represent the value assigned to acquired research and development projects that, as of the date acquired, represent the right to develop, use, sell and/or offer for sale a product or other intellectual property that the Company has acquired with respect to products and/or processes that have not been completed or approved. The IPR&D intangible assets are subject to impairment testing until completion or abandonment of each project. Upon abandonment, the assets are impaired, if there is no future alternative use or ability to sell the asset. Impairment testing requires the development of significant estimates and assumptions involving the determination of estimated net cash flows for each year for each project or product (including net revenues, cost of sales, research and development (“R&D”) costs, selling and marketing costs and other costs which may be allocated), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, and competitive trends impacting the asset and each cash flow stream as well as other factors. The major risks and uncertainties associated with the timely and successful completion of the IPR&D projects include legal risk, market risk and regulatory risk. Changes in these assumptions could result in future impairment charges. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change or the timely completion of each project and commercial success will occur. For these and other reasons, actual results may vary significantly from estimated results.

Upon successful completion of each project and approval of the product, we will make a separate determination of the useful life of the intangible, transfer the amount to currently marketed products (“CMP”) and amortization expense will be recorded over the estimated useful life.

Annual Testing

The Company evaluated goodwill for five reporting units during the second quarter of 2017. The Company performed its annual impairment test utilizing long-term growth rates for its reporting units ranging from 0.0% to 2.0% in its estimation of fair value and discount rates ranging from 7.5% to 8.5%. The factors used in evaluating goodwill for impairment are subject to change and are tracked against historical results by management. Changes in the key assumptions by management can change the results of testing. The Company determined there was no impairment associated with goodwill.

As part of the annual IPR&D impairment test performed by the Company during 2017, the following impairments were recorded:

•

The Company impaired a CNS IPR&D project obtained as part of the Allergan acquisition by $486.0 million related to an anticipated approval delay due to certain product specifications;

•

The Company impaired a women’s healthcare IPR&D project by $91.3 million based on the Company’s intention to divest the non-strategic asset;

•

The Company impaired an IPR&D eye care project obtained as part of the Allergan acquisition by $44.0 million as a result of a decrease in projected cash flows due to a decline in market demand assumptions;

•

The Company impaired an IPR&D asset acquired as part of the Warner Chilcott acquisition by $57.0 million ($278.0 million in the nine months ended September 30, 2017) due to a delay in anticipated launch of a women’s healthcare project coupled with an anticipated decrease in product demand; and

•

The Company impaired an IPR&D eye care project obtained as part of the Allergan acquisition by $20.0 million.

In addition to the Company’s annual IPR&D impairment test, the Company noted the following IPR&D impairments based on triggering events during the nine months ended September 30, 2017:

•

The Company recorded IPR&D impairments of $164.0 million related to other Dry Eye IPR&D assets obtained in the Allergan acquisition as a result of the dry eye market going generic;

•

The Company impaired an IPR&D medical aesthetics project obtained as part of the Allergan acquisition by $17.0 million; and

•

The Company terminated its License, Transfer and Development Agreement for SER-120 (nocturia) with Serenity Pharmaceuticals, LLC. As a result of this termination, the Company recorded an impairment of $140.0 million on the IPR&D intangible asset obtained as part of the Allergan acquisition during the first quarter of 2017.

During the nine months ending September 30, 2016, the Company impaired an international eye care pipeline project of $35.0 million based on a decrease in projected cash flows due to market conditions as well as an impairment of $20.0 million for a specified indication of a Botox therapeutic product based on a decrease in projected cash flows due to a decline in market demand assumptions, a women’s healthcare project for $24.0 million and osteoarthritis for approximately $190.0 million based on clinical results and during the three and nine months ended September 30, 2016, the Company impaired a gastroenterology project for $42.0 million based on the lack of future availability of active pharmaceutical ingredients.

Litigation and Contingencies

The Company is involved in various legal proceedings in the normal course of its business, including product liability litigation, intellectual property litigation, employment litigation and other litigation. Additionally, the Company, in consultation with its counsel, assesses the need to record a liability for contingencies on a case-by-case basis in accordance with FASB Accounting Standards Codification (“ASC”) Topic 450 “Contingencies” (“ASC 450”). For more information on litigation and contingencies, refer to “NOTE 20 — Commitments and Contingencies” in this Quarterly Report.

Earnings Per Share (“EPS”)

The Company computes EPS in accordance with ASC Topic 260, “Earnings Per Share” (“ASC 260”) and related guidance, which requires two calculations of EPS to be disclosed: basic and diluted. Basic EPS is computed by dividing net (loss) / income by the weighted average ordinary shares outstanding during a period. Diluted EPS is based on the treasury stock method and includes the effect from potential issuance of ordinary shares, such as shares issuable pursuant to the exercise of stock options and restricted stock units. Diluted EPS also includes the impact of ordinary share equivalents to be issued upon the mandatory conversion of the Company’s preferred shares. Ordinary share equivalents have been excluded where their inclusion would be anti-dilutive.

A reconciliation of the numerators and denominators of basic and diluted EPS consisted of the following ($ in millions, except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Net (loss) / income:
Net (loss) attributable to ordinary shareholders excluding income from discontinued operations, net of tax	$	(4,019.2	)	$	(451.5	)	$	(7,438.0	)	$	(1,108.0	)
(Loss) / income from discontinued operations, net of tax		(6.1	)		15,601.9			(17.6	)		15,873.2
Net (loss) / income attributable to ordinary shareholders	$	(4,025.3	)	$	15,150.4		$	(7,455.6	)	$	14,765.2

Basic weighted average ordinary shares outstanding		333.5			392.7			334.6			394.4

Basic EPS:
Continuing operations	$	(12.05	)	$	(1.15	)	$	(22.23	)	$	(2.81	)
Discontinued operations	$	(0.02	)	$	39.73		$	(0.05	)	$	40.25
Net (loss) / income per share	$	(12.07	)	$	38.58		$	(22.28	)	$	37.44

Dividends per ordinary share	$	0.70		$	-		$	2.10		$	-

Diluted weighted average ordinary shares outstanding		333.5			392.7			334.6			394.4

Diluted EPS:
Continuing operations	$	(12.05	)	$	(1.15	)	$	(22.23	)	$	(2.81	)
Discontinued operations	$	(0.02	)	$	39.73		$	(0.05	)	$	40.25
Net (loss) / income per share	$	(12.07	)	$	38.58		$	(22.28	)	$	37.44

Stock awards to purchase 3.7 and 4.2 million ordinary shares for the three and nine months ended September 30, 2017, respectively, were outstanding, but not included in the computation of diluted EPS, because the awards were anti-dilutive. The weighted average impact of ordinary share equivalents of 17.7 million for the three and nine months ended September 30, 2017, which are anticipated to result from the mandatory conversion of the Company’s preferred shares were not included in the calculation of diluted EPS as their impact would be anti-dilutive. The impact of the share repurchase on basic EPS was 3.0 million weighted average shares and 1.3 million weighted average shares for the three and nine months ended September 30, 2017, respectively. Refer to “NOTE 16 –Shareholder’s Equity” for further discussion on the Company’s Share Repurchase Program.

Stock awards to purchase 4.4 million and 4.7 million ordinary shares for the three and nine months ended September 30, 2016, respectively, were outstanding, but not included in the computation of diluted EPS, because the awards were anti-dilutive for continuing operations and as such the treatment for discontinued operations is also anti-dilutive. The weighted average impact of ordinary share equivalents of 17.6 million for the three and nine months ended September 30, 2016, which are anticipated to result from the mandatory conversion of the Company’s preferred shares, were not included in the calculation of diluted EPS as their impact would be anti-dilutive.

Restructuring Costs

The Company records liabilities for costs associated with exit or disposal activities in the period in which the liability is incurred. In accordance with existing benefit arrangements, employee severance costs are accrued when the restructuring actions are probable and estimable. Costs for one-time termination benefits in which the employee is required to render service until termination in order to receive the benefits are recognized ratably over the future service period. The Company also incurs costs with contract terminations and costs of transferring products as part of restructuring activities. Refer to “NOTE 19 — Business Restructuring Charges” for more information.

Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), with an effective date for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The effective date for ASU 2014-09 was deferred by one year through the issuance of ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Subsequent to the issuance of ASU 2014-09, the FASB issued multiple updates which are intended to improve the operability and understandability of the implementation guidance, and to provide clarifying guidance in certain narrow areas and add some practical expedients, which include guidance on principal versus agent considerations; identifying performance obligations; licensing implementation guidance; assessing the specific collectability criterion and accounting for certain contracts; presentation of sales taxes and other similar taxes collected from customers; noncash consideration; contract modifications at transition; and completed contracts at transition. The adoption of this guidance is not anticipated to have a material impact on the Company’s financial position or results of operations as the Company's sales primarily relate to standard bill and ship terms of pharmaceutical products to customers. The Company will adopt this standard in 2018 using the modified retrospective approach.

In February 2016, the FASB issued ASU 2016-02, which states that a lessee should recognize the assets and liabilities that arise from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is evaluating the impact that this pronouncement will have on our financial position and results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is evaluating the impact, if any, that this pronouncement will have on our financial position and results of operations.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. The amendments to the guidance require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments eliminate the exception for an intra-entity transfer of an asset other than inventory. Two common examples of assets included in the scope of the amendments are intellectual property and property, plant, and equipment. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. While the Company has not completed its assessment, the adoption of the guidance may have a material impact on the Company’s financial position.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The amendments to the guidance are intended to help companies evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. When substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. This amendment introduces an initial required screening that, if met, eliminates the need for further assessment. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. To be a business without outputs, there will need to be an organized workforce. The ASU also narrows the definition of the term “outputs” to be consistent with how it is described in Topic 606, Revenue from Contracts with Customers. These amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The changes to the definition of a business may result in more acquisitions being accounted for as asset acquisitions.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments to the guidance eliminate Step 2 from the goodwill impairment test. The goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. These amendments also

eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. These amendments should be applied on a prospective basis. The nature of and reason for the change in accounting principle should be disclosed upon transition. These amendments are effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of these amendments are not anticipated to have a material impact on the Company’s financial position or results of operations.

In March 2017, the FASB issued ASU No. 2017-07, Compensation — Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments to the guidance require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. In addition, the amendments also allow only the service cost component to be eligible for capitalization when applicable. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company does not anticipate the standard having an impact on our financial position and results of operations.

In March 2017, The FASB issued Accounting Standards Update (ASU) 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for certain callable debt securities held at a premium and requires the premium to be amortized to the earliest call date, but does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments are effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Entities are required to apply the amendments on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The entity is required to provide disclosures about a change in accounting principle in the period of adoption. The Company is evaluating the impact these amendments will have on our financial position and results of operations.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718) — Scope of Modification Accounting. ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award. The amendments to the guidance in ASU 2017-09 include guidance on determining changes to the terms and conditions of share-based payment awards and require an entity to apply modification accounting under Topic 718 unless all of the following conditions are met: (1) the fair value of the modified award is the same as the fair value of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017 and should be applied prospectively to an award modified on or after the adoption date. The adoption of these amendments are not anticipated to have a material impact on the Company’s financial position or results of operations.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815) — Targeted Improvements to Accounting for Hedging Activities. The amendments to the guidance will better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments also make certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted in any interim period or fiscal years before the effective date of the amendments. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments. The amended presentation and disclosure guidance is required only prospectively. The Company is evaluating the impact the amendments will have on our financial positions and results of operations.

NOTE 4 — Acquisitions and Other Agreements

2017 Transactions

The following are the significant transactions that were completed in the nine months ended September 30, 2017.

Acquisitions

Keller Medical, Inc.

On June 23, 2017 the Company acquired Keller Medical, Inc. (“Keller”), a privately held medical device company and developer of the Keller Funnel^® (the “Keller Acquisition”). The acquisition combines the Keller Funnel^®, a surgical device used in conjunction with breast implants, with the Company’s leading breast implants business.

ZELTIQ^® Aesthetics, Inc.

On April 28, 2017 the Company acquired Zeltiq^® Aesthetics, Inc. (“Zeltiq”) for an acquisition accounting purchase price of $2,405.4 million (the “Zeltiq Acquisition”). Zeltiq was focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform. The acquisition combined Zeltiq’s body contouring business with the Company’s leading portfolio of medical aesthetics.

Assets Acquired and Liabilities Assumed at Fair Value

The Zeltiq Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. As of September 30, 2017, certain amounts relating to the valuation of tax related matters and intangible assets have not been finalized. The finalization of these matters may result in changes to goodwill.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date and reflects purchase accounting adjustments subsequent to the acquisition date ($ in millions):

	Preliminary Valuation as of June 30, 2017			Measurement Period Adjustments			Preliminary Valuation as of September 30, 2017
Cash and cash equivalents	$	36.7		$	-		$	36.7
Accounts receivable		47.0			-			47.0
Inventories		59.3			-			59.3
Property, plant and equipment		12.4			-			12.4
Intangible assets		1,185.0			-			1,185.0
Goodwill		1,204.6			(0.3	)		1,204.3
Other assets		17.1			-			17.1
Accounts payable and accrued expenses		(93.6	)		-			(93.6	)
Deferred revenue		(10.6	)		-			(10.6	)
Deferred taxes, net		(51.2	)		0.3			(50.9	)
Other liabilities		(1.3	)		-			(1.3	)
Net assets acquired	$	2,405.4		$	-		$	2,405.4

IPR&D and Intangible Assets

The estimated fair value of the intangible assets, including customer relationships, was determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, R&D costs, selling and marketing costs, other allocated costs, and working capital/contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream. This technique is referred to herein as the “IPR&D and Intangible Asset Valuation Technique.”

The fair value of the intangible assets acquired in the Zeltiq Acquisition was determined using the IPR&D and Intangible Asset Valuation Technique. The discount rate used to arrive at the present value for these acquired intangible assets ranged from 10.0% to 11.0% to reflect the internal rate of return and incremental commercial uncertainty in the cash flow projections. The discount rate of the Zeltiq Acquisition was driven by the life-cycle stage of the products and the therapeutic indication. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results.

The following table identifies the summarized amounts recognized and the weighted average useful lives using the economic benefit of intangible assets ($ in millions):

	Amount recognized as of the acquisition date		Weighted average useful lives (years)
Definite-lived assets
Consumables	$	985.0		6.7
System		43.0		3.7
Total CMP		1,028.0
Customer Relationships		157.0		6.6
Total definite-lived assets		1,185.0

Goodwill

Among the reasons the Company acquired Zeltiq and the factors that contributed to the preliminary recognition of goodwill was the expansion of the Company’s leading medical aesthetics portfolio. Goodwill from the Zeltiq Acquisition of $958.4 million was assigned to the US Specialized Therapeutic segment; and goodwill of $245.9 million was assigned to the International segment and is non-deductible for tax purposes.

Inventories

The fair value of inventories acquired included an acquisition accounting fair market value step-up of $22.9 million. In the three and nine months ended September 30, 2017, the Company recognized $11.0 million and $22.9 million, respectively, as a component of cost of sales as the inventory acquired was sold to the Company’s customers.

Long-Term Deferred Tax Liabilities and Other Tax Liabilities

Long-term deferred tax liabilities and other tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over the tax basis which is multiplied by the statutory tax rate for the jurisdiction in which the deferred taxes exist.

LifeCell Corporation

On February 1, 2017, the Company acquired LifeCell Corporation (“LifeCell”), a regenerative medicine company, for an acquisition accounting price of $2,883.1 million (the “LifeCell Acquisition”). The LifeCell Acquisition combines LifeCell's novel, regenerative medicines business, including its high-quality and durable portfolio of dermal matrix products, with Allergan's leading portfolio of medical aesthetic products, breast implants and tissue expanders. The acquisition of LifeCell expanded the Company’s medical aesthetics portfolio by adding Alloderm^® and Strattice^®.

Assets Acquired and Liabilities Assumed at Fair Value

The LifeCell Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. As of September 30, 2017, certain amounts relating to the valuation of tax related matters and intangible assets have not been finalized. The finalization of these matters may result in changes to goodwill.

	Preliminary Valuation as of March 31, 2017			Measurement Period Adjustments			Preliminary Valuation as of September 30, 2017
Cash and cash equivalents	$	8.7		$	-		$	8.7
Accounts receivable		50.8			-			50.8
Inventories		175.4			-			175.4
Property, plant and equipment, net		53.7			-			53.7
Currently marketed products ("CMP") intangible assets		2,010.0			-			2,010.0
In-process research and development ("IPR&D") intangible assets		10.0			-			10.0
Goodwill		1,469.8			(20.7	)		1,449.1
Accounts payable and accrued expenses		(149.6	)		-			(149.6	)
Deferred tax liabilities, net		(766.9	)		20.7			(746.2	)
Other		21.2			-			21.2
Net assets acquired	$	2,883.1		$	-		$	2,883.1

IPR&D and Intangible Assets

The fair value of the acquired intangible assets was determined using the IPR&D and Intangible Asset Valuation Technique. The discount rate used to arrive at the present value for these acquired intangible assets was 7.5% to reflect the internal rate of return and incremental commercial uncertainty in the cash flow projections in the LifeCell Acquisition. The discount rate of the LifeCell Acquisition was driven by the life-cycle stage of the products, the advanced nature of IPR&D projects, and IPR&D assets acquired and the therapeutic indication. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results.

The following table identifies the summarized amounts recognized and the weighted average useful lives using the economic benefit of intangible assets ($ in millions):

	Amount recognized as of the acquisition date		Weighted average useful lives (years)
Definite-lived assets
Alloderm^®	$	1,385.0		6.9
Revolve^®		80.0		7.1
Strattice^®		320.0		5.1
Artia^®		115.0		8.8
Other		10.0		2.8
Total CMP		1,910.0
Customer Relationships		100.0		6.3
Total definite-lived assets		2,010.0
In-process research and development
Other		10.0
Total IPR&D		10.0
Total intangible assets	$	2,020.0

Goodwill

Among the reasons the Company acquired LifeCell and the factors that contributed to the preliminary recognition of goodwill was the expansion of the Company’s leading product portfolio. Goodwill from the LifeCell Acquisition of $1,449.1 million was assigned to the US Specialized Therapeutic segment and is non-deductible for tax purposes.

Inventories

The fair value of inventories acquired included an acquisition accounting fair market value step-up of $108.4 million. In the three and nine months ended September 30, 2017, the Company recognized $27.4 million and $103.3 million, respectively, as a component of cost of sales as the inventory acquired was sold to the Company’s customers.

Long-Term Deferred Tax Liabilities and Other Tax Liabilities

Licenses and Other Transactions Accounted for as Asset Acquisitions

Lyndra, Inc.

On July 31, 2017, the Company entered into a collaboration, option and license agreement with Lyndra, Inc. (“Lyndra”) to develop orally administered ultra-long-acting (once-weekly) products for the treatment of Alzheimer’s disease and an additional, unspecified indication. The total upfront payment of $15.0 million was expensed as a component of R&D expense in the three and nine months ended September 30, 2017. The future option exercise payments, if any, and any future success based milestones relating to the licensed products of up to $85.0 million will be recorded if the corresponding events become probable.

Editas Medicine, Inc.

On March 14, 2017, the Company entered into a strategic alliance and option agreement with Editas Medicine, Inc. (“Editas”) for access to early stage, first-in-class eye care programs. Pursuant to the agreement, Allergan made an upfront payment of $90.0 million for the right to license up to five of Editas’ gene-editing programs in eye care, including its lead program for Leber Congenital Amaurosis (“LCA”), which is currently in pre-clinical development. Under the terms of the agreement, if an option is exercised, Editas is eligible to receive contingent research and development and commercial milestones plus royalties based on net sales. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing, as well as the lack of certain other inputs and processes, that the transaction did not qualify as a business. The total upfront payment of $90.0 million was expensed as a component of R&D expense in the nine months ended September 30, 2017. The future option exercise payments, if any, and any future success based milestones relating to the licensed products will be recorded if the corresponding events become probable.

Assembly Biosciences, Inc.

On January 9, 2017, the Company entered into a licensing agreement with Assembly Biosciences, Inc. (“Assembly”) for the worldwide rights to Assembly’s microbiome gastrointestinal development programs. Under the terms of the agreement, the Company made an upfront payment to Assembly of $50.0 million for the exclusive, worldwide rights to develop and commercialize certain development compounds. Additionally, Assembly will be eligible to receive success-based development and commercial milestone payments plus royalties based on net sales. The Company and Assembly will generally share development costs through proof-of-concept (“POC”) studies, and Allergan will assume all post-POC development costs. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing as well as the lack of certain other inputs and processes that the transaction did not qualify as a business. The total upfront payment of $50.0 million was expensed as a component of R&D expense in the nine months ended September 30, 2017 and the future success based milestone payments of up to $2,771.0 million will be recorded if the corresponding events become probable.

Lysosomal Therapeutics, Inc.

On January 9, 2017, the Company entered into a definitive agreement for the option to acquire Lysosomal Therapeutics, Inc. (“LTI”). LTI is focused on innovative small-molecule research and development in the field of neurodegeneration, yielding new treatment options for patients with severe neurological diseases. Pursuant to the agreement, Allergan acquired an option right directly from LTI shareholders to acquire LTI for $150.0 million plus future milestone payments following completion of a Phase 1b trial for LTI-291 as well as an upfront research and development payment. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing, as well as the lack of certain other inputs and processes, that the transaction did not qualify as a business. The aggregate upfront payment of $145.0 million was recorded as a component of R&D expense in the nine months ended September 30, 2017.

Other Transactions

Saint Regis Mohawk Tribe

On September 8, 2017, the Company entered into an agreement with the Saint Regis Mohawk Tribe, under which the Saint Regis Mohawk Tribe obtained the rights to Orange Book-listed patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05%, and the Company was granted exclusive licenses under the patents related to the product. Pursuant to the agreement, the Company paid the Saint Regis Mohawk Tribe an upfront payment of $13.8 million, which was recorded as a component of cost of sales in the three and nine months ended September 30, 2017. Additionally, the Saint Regis Mohawk Tribe will be eligible to receive $15.0 million in annual royalties during the period that certain patent claims remain in effect.

2016 Transactions

The following are the significant transactions that were completed in the year ended December 31, 2016.

Acquisitions

Tobira Therapeutics, Inc.

On November 1, 2016, the Company acquired Tobira Therapeutics, Inc. (“Tobira”), a clinical-stage biopharmaceutical company focused on developing and commercializing therapies for non-alcoholic steatohepatitis (“NASH”) and other liver diseases for an acquisition accounting purchase price of $570.1 million, plus contingent consideration of up to $49.84 per share in contingent value rights (“CVR”), or up to $1,101.3 million, that may be payable based on the successful completion of certain development, regulatory and commercial milestones (the “Tobira Acquisition”), of which $303.1 million was paid in the nine months ended September 30, 2017. The CVR had an acquisition date fair value of $479.0 million. The acquisition added Cenicriviroc and Evogliptin, two differentiated, complementary development programs for the treatment of the multi-factorial elements of NASH, including inflammation, metabolic syndromes and fibrosis, to Allergan's global gastroenterology R&D pipeline.

Assets Acquired and Liabilities Assumed at Fair Value

The Tobira Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

The following table summarizes the final fair values of the assets acquired and liabilities assumed at the acquisition date and reflects purchase accounting adjustments subsequent to the acquisition date ($ in millions):

	Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Cash and cash equivalents	$	21.3		$	-		$	21.3
IPR&D intangible asset		1,357.0			-			1,357.0
Goodwill		112.7			(14.1	)		98.6
Indebtedness		(15.9	)		-			(15.9	)
Contingent consideration		(479.0	)		-			(479.0	)
Deferred tax liabilities, net		(395.9	)		14.1			(381.8	)
Other assets and liabilities		(30.1	)		-			(30.1	)
Net assets acquired	$	570.1		$	-		$	570.1

Contingent Consideration

As part of the Tobira Acquisition, the Company was required to pay the former shareholders of Tobira up to $1,101.3 million based on the timing of certain development, regulatory and commercial milestones, if any. The Company estimated the fair value of the contingent consideration to be $479.0 million using a probability weighted average approach that considered the possible outcomes of scenarios related to the specified product.

Vitae Pharmaceuticals, Inc.

On October 25, 2016, the Company acquired Vitae Pharmaceuticals, Inc. (“Vitae”), a clinical-stage biotechnology company for an acquisition accounting purchase price of $621.4 million (the “Vitae Acquisition”). The Vitae Acquisition strengthens Allergan’s dermatology product pipeline, with the addition of a Phase II, orally active RORyt (retinoic acid receptor-related orphan receptor gamma) inhibitor for the potential treatment of psoriasis and other autoimmune disorders. In addition, the Company expanded its pipeline with the acquisition of a Phase II atopic dermatitis drug candidate.

Assets Acquired and Liabilities Assumed at Fair Value

The transaction has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

	Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Cash and cash equivalents	$	44.7		$	-		$	44.7
Marketable securities		20.2			-			20.2
Property, plant and equipment, net		5.0			-			5.0
IPR&D assets		686.0			-			686.0
Assets held for sale		22.5			-			22.5
Goodwill		34.4			(3.8	)		30.6
Other liabilities		(20.7	)		-			(20.7	)
Deferred tax liabilities, net		(170.7	)		3.8			(166.9	)
Net assets acquired	$	621.4		$	-		$	621.4

Assets held for sale

The Company held for sale certain intangible assets acquired as part of the Vitae Acquisition for an acquisition accounting value of $22.5 million. In the nine months ended September 30, 2017, the Company sold these assets for $22.5 million.

ForSight VISION 5

On September 23, 2016, the Company acquired ForSight VISION5, Inc. (“ForSight”), a privately held, clinical-stage biotechnology company focused on eye care, in an all cash transaction of approximately $95.0 million with an acquisition accounting purchase price of $74.5 million plus the payment of outstanding indebtedness of $14.8 million and other miscellaneous charges(the “ForSight Acquisition”). ForSight shareholders are eligible to receive contingent consideration of up to $125.0 million, which had an initial estimated fair value of $79.8 million, relating to commercialization milestones. The Company acquired ForSight for its lead development program, a peri-ocular ring designed for extended drug delivery and reducing elevated intraocular pressure (“IOP”) in glaucoma patients.

Assets Acquired and Liabilities Assumed at Fair Value

The ForSight Acquisition has been accounted for using the acquisition method of accounting. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.

	Preliminary Valuation			Measurement Period Adjustments			Final Valuation
Cash and cash equivalents	$	1.0		$	-		$	1.0
IPR&D intangible asset		158.0			-			158.0
Goodwill		51.6			(1.1	)		50.5
Current liabilities		(14.8	)		-			(14.8	)
Contingent consideration		(79.8	)		-			(79.8	)
Deferred tax liabilities, net		(38.3	)		1.1			(37.2	)
Other		(3.2	)		-			(3.2	)
Net assets acquired	$	74.5		$	-		$	74.5

Licenses and Other Transactions Accounted for as Asset Acquisitions

In the year ended December 31, 2016, none of the following completed transactions qualified as a business. The conclusion for each transaction was determined based on the stage of development of the specific assets acquired, the lack of acquired employees in the individual transactions and the lack of acquired manufacturing processes, as well as the lack of certain other inputs and processes. As a result, the initial consideration in these transactions was included as a component of R&D expenses in the year ended December 31, 2016 as follows ($ in millions):

	Initial Consideration
AstraZeneca plc agreement in the three months ended December 31, 2016	$	250.0
Motus Therapeutics, Inc. acquisition in the three months ended December 31, 2016		199.5
Chase Pharmaceuticals Corporation acquisition in the three months ended December 31, 2016		122.9
RetroSense Therapeutics, LLC license agreement in the three months ended September 30, 2016		59.7
Akarna Therapeutics, Ltd acquisition in the three months ended September 30, 2016		48.2
Topokine Therapeutics, Inc. acquisition in the three months ended June 30, 2016		85.8
Heptares Therapeutics Ltd. license agreement in the three months ended June 30, 2016		125.0
Anterios, Inc. acquisition in the three months ended March 31, 2016		89.2

2015 Transactions

The following are the significant transactions that were completed in the year ended December 31, 2015.

Acquisitions

Allergan, Inc.

On March 17, 2015, the Company completed the acquisition of Allergan, Inc. (“Legacy Allergan”). The addition of Legacy Allergan’s therapeutic franchises in ophthalmology, neurosciences and medical aesthetics/dermatology/plastic surgery complemented the Company’s existing central nervous system, gastroenterology, women’s health and urology franchises. The combined company benefited from Legacy Allergan’s global brand equity and consumer awareness of key products. The transaction also expanded our presence and market and product reach across many international markets, with strengthened commercial positions across Canada, Europe, Southeast Asia and other high-value growth markets, including China, India, the Middle East and Latin America.

Inventories

The fair value of inventories acquired included an acquisition accounting fair market value step-up of $923.9 million. In the nine months ended September 30, 2016, the Company recognized $21.6 million as a component of cost of sales as the inventory acquired was sold to the Company’s customers.

Acquisition-Related Expenses

As a result of the Allergan acquisition, the Company incurred the following transaction and integration costs in the three months ended September 30, 2017 and 2016, respectively ($ in millions):

	Three Months Ended September 30, 2017		Three Months Ended September 30, 2016
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	1.1	$	2.2
Acquisition, integration and restructuring related charges		-		6.6
Research and development
Stock-based compensation acquired for Legacy Allergan employees		5.8		9.3
Acquisition, integration and restructuring related charges		-		6.8
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		7.5		15.8
Acquisition, integration and restructuring related charges		-		(1.2	)
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		2.9		9.9
Acquisition, integration and restructuring related charges		-		50.4
Total transaction and integration costs	$	17.3	$	99.8

As a result of the Allergan acquisition, the Company incurred the following transaction and integration costs in the nine months ended September 30, 2017 and 2016, respectively ($ in millions):

	Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	3.8	$	7.4
Acquisition, integration and restructuring related charges		0.9		12.4
Research and development
Stock-based compensation acquired for Legacy Allergan employees		19.7		32.6
Acquisition, integration and restructuring related charges		0.5		10.6
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		21.4		53.0
Acquisition, integration and restructuring related charges		-		11.7
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		10.3		28.2
Acquisition, integration and restructuring related charges		9.2		144.0
Total transaction and integration costs	$	65.8	$	299.9

NOTE 5 — Discontinued Operations

Global Generics Business

On July 27, 2015, the Company announced that it entered into the Teva Transaction, which closed on August 2, 2016. As a result of the Teva Transaction, the Company holds equity in Teva and purchases product manufactured by Teva for sale in our US General Medicine segment as part of ongoing transitional service and contract manufacturing agreements.

The Company notes the following reconciliation of the proceeds received in the Teva Transaction to the gain recognized in income from discontinued operations for the nine months ended September 30, 2016 ($ in millions):

Net cash proceeds received	$	33,304.5
August 2, 2016 fair value of Teva shares		5,038.6
Total Proceeds	$	38,343.1
Net assets sold to Teva, excluding cash		(12,076.7	)
Other comprehensive income disposed		(1,544.8	)
Deferral of proceeds relating to additional elements of agreements with Teva		(518.9	)
Pre-tax gain on sale of generics business	$	24,202.7
Income taxes		(8,321.2	)
Net gain on sale of generics business	$	15,881.5

In October 2016, pursuant to our agreement with Teva, Teva provided the Company with its proposed estimated adjustment to the closing date working capital balance. The Company disagrees with Teva’s proposed adjustment, and, pursuant to our agreement with Teva, each of the Company’s and Teva’s proposed adjustments have been submitted to arbitration (“Working Capital Arbitration”) to determine the working capital amount in accordance with GAAP as applied by the Company consistent with past practice. Teva initially proposed an adjustment of approximately $1.4 billion and subsequently submitted a revised adjustment of approximately $1.5 billion to the arbitrator, and the final amount of any contractual adjustment as determined in accordance with the Working Capital Arbitration could vary materially from the adjustment calculated by the Company and would be reflected in our financial statements for discontinued operations. In addition, on October 30, 2017, Teva submitted a Notice of Direct and Third Party Claims seeking indemnification for virtually all of the same items for which Teva is seeking a proposed adjustment in the Working Capital Arbitration as well as several new items as to which no quantity of damages has been asserted, and which the Company is currently evaluating, and the Company has not determined that a loss is probable or estimable as to those additional items. Teva is not entitled to a “double recovery” for the same damages in the Working Capital Arbitration and under an indemnification theory and is subject to further limitations on recovery as set forth in the Master Purchase Agreement under which the global generics business was sold. Any adjustment to the Company’s proceeds from the Teva Transaction as a result of the Working Capital Arbitration or the indemnification claims could have a material adverse effect on the Company’s results of operations and cash flows, including the Company’s fiscal year 2017 results of operations and fiscal year 2018 cash flows. In the event the Working Capital Arbitration goes forward as scheduled, the Company anticipates a decision from the Working Capital Arbitration in the first quarter of 2018 in accordance with the current timeline agreed by the parties and arbitrator. Any potential resolution of the claims for indemnity will be subject to additional assertions of claims by Teva at a later date. Disputes related to matters asserted for indemnification would be subject to judicial resolution in accordance with the Master Purchase Agreement.

The fair value of Teva Shares owned are recorded within “Marketable securities” on the Company’s Consolidated Balance Sheet. The closing Teva Transaction date opening stock price discounted at a rate of 5.9 percent due to the lack of marketability was used to initially value the shares. At March 31, 2017, the Company determined that the decline in value since August 2, 2016 was other-than-temporary. As a result, the Company impaired the value of its investment by $1,978.0 million at March 31, 2017 as a component of other (expense) income.

As of September 30, 2017, the value of the Teva Shares was $1,765.1 million, which included no discount rate due to the lack of marketability as the restrictions have been lifted. At September 30, 2017, the Company determined that the decline in value since March 31, 2017 was other-than-temporary. As a result, the Company impaired the value of its investment by $1,295.5 million at September 30, 2017 as a component of other (expense) income (other-than-temporary impairment for the nine months ended September 30, 2017 totaled $3,273.5 million). The determination was made based on the amount of time that the stock price had been below the carrying value, intentions regarding the potential holding period of the shares, and the materiality of the decline in share price. The Company will continue to monitor the share price and additional impairments to the investment may occur.

On October 3, 2016, the Company completed the divestiture of the Anda Distribution business for $500.0 million.

Financial results of the global generics business and the Anda Distribution business are presented as "(Loss) / Income from discontinued operations, net of tax” on the Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016. The loss from discontinued operations, net of tax of $6.1 million and $17.6 million, respectively, in the three and nine months ended September 30, 2017, primarily related to ongoing matters with respect to the Teva Transaction.

The following table presents key financial results of the businesses included in "(Loss) / Income from discontinued operations" for the three and nine months ended September 30, 2016 ($ in millions):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2016		2016
Net revenues	$	756.5	$	4,504.3
Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		531.0		2,798.3
Research and development		37.3		269.6
Selling and marketing		69.1		352.6
General and administrative		90.3		399.4
Amortization		-		4.8
Total operating expenses		727.7		3,824.7
Operating income		28.8		679.6
Other (expense) income, net		15,881.5		15,881.1
Provision for income taxes		308.4		687.5
Net income from discontinued operations	$	15,601.9	$	15,873.2

For the year ended December 31, 2015, the Company recorded a deferred tax benefit of $5,738.8 million related to investments in certain subsidiaries. For the nine months ended September 30, 2016, the Company recorded a deferred tax expense of $474.7 million to adjust its deferred tax asset related to investments in certain subsidiaries. The recognition of this expense has been reflected in “Income from discontinued operations, net of tax.” Upon the closing of the Teva Transaction, the Company recorded the reversal of the corresponding deferred tax asset of $5,273.9 million against the current income taxes payable in continuing operations.

Depreciation and amortization were ceased upon the determination that the held for sale criteria were met, which were the announcement dates of the Teva Transaction and the divestiture of the Anda Distribution business. The depreciation, amortization and significant operating and investing non-cash items of the discontinued operations were as follows ($ in millions):

	Nine Months Ended September 30,
	2016
Depreciation from discontinued operations	$	2.1
Amortization from discontinued operations		4.8
Capital expenditures		85.3
Deferred income tax expense		5,893.4

NOTE 6 – Other (Expense) Income

Other (expense) income consisted of the following ($ in millions):

	Three Months Ended September 30,
	2017			2016
Net income impact of other-than-temporary loss on investment in Teva securities	$	(1,295.5	)	$	-
Dividend income		8.5			34.1
Other (expense) income, net		(23.3	)		(0.5	)
Other (expense) income, net	$	(1,310.3	)	$	33.6

	Nine Months Ended September 30,
	2017			2016
Net income impact of other-than-temporary loss on investment in Teva securities	$	(3,273.5	)	$	-
Debt extinguishment costs as part of the debt tender offer		(161.5	)		-
Dividend income		76.7			34.1
Naurex recovery		20.0			-
Pfizer termination fee (Allergan plc only)		-			150.0
Other (expense) income, net		(28.3	)		0.1
Other (expense) income, net	$	(3,366.6	)	$	184.2

Teva Securities

As described in Note 5, the Company recognized an other-than-temporary impairment on its investment in Teva securities of $1,295.5 million and $3,273.5 million in the three and nine months ended September 30, 2017, respectively.

Debt Extinguishment

As described in Note 13, the Company repaid $2,843.3 million of senior notes. In the nine months ended September 30, 2017, as a result of the extinguishment, the Company recognized a loss of $161.5 million, within “Other income/ (expense)” for the early tender payment and non-cash write-off of premiums and debt fees related to the repurchased notes, including $170.5 million of a make-whole premium.

Dividend income

As a result of the Teva Transaction, the Company acquired 100.3 million Teva ordinary shares. During the three and nine months ended September 30, 2017, the Company received dividend income of $8.5 million and $76.7 million, respectively. The Company received $34.1 million during the three and nine months ended September 30, 2016.

Other-than-temporary impairments

The Company recorded other-than-temporary impairment charges on other equity investments and cost method investments of $22.6 million and $26.1 million in the three and nine months ended September 30, 2017, respectively.

Naurex Recovery

On August 28, 2015, the Company acquired certain products in early stage development of Naurex, Inc. (“Naurex”) in an all-cash transaction, which was accounted for as an asset acquisition (the “Naurex Transaction”). The Company received a purchase price reduction of $20.0 million in the nine months ended September 30, 2017 based on the settlement of an open contract negotiation.

Pfizer termination fee

In the nine months ended September 30, 2016, the Company received a payment of $150.0 million from Pfizer Inc. (“Pfizer”) for reimbursement of expenses associated with the termination of a merger agreement between the Company and Pfizer which is reported as other income.

NOTE 7 — Share-Based Compensation

The Company recognizes compensation expense for all share-based compensation awards made to employees and directors based on the fair value of the awards on the date of grant. A summary of the Company’s share-based compensation plans is presented below.

Equity Award Plans

The Company has adopted several equity award plans which authorize the granting of options, restricted shares, restricted stock units and other forms of equity awards of the Company’s ordinary shares, subject to certain conditions.

The Company grants awards with the following features:

•

Time-based vesting restricted stock and restricted stock units awards;

•

Performance-based restricted stock unit awards measured to performance-based targets defined by the Company, including, but not limited to, total shareholder return metrics, R&D milestones and EBITDA, as defined by the Company;

•

Non-qualified options to purchase outstanding shares; and

•

Cash-settled awards recorded as a liability. These cash settled awards are based on pre-established total shareholder returns metrics.

Option award plans require options to be granted at the fair market value of the shares underlying the options at the date of the grant and generally become exercisable over periods ranging from three to five years. Each option granted expires ten years from the date of the grant. Restricted stock awards are grants that entitle the holder to ordinary shares, subject to certain terms. Restricted stock unit awards are grants that entitle the holder the right to receive an ordinary share, subject to certain terms. Restricted stock and restricted stock unit awards (both time-based vesting and performance-based vesting) generally have restrictions that lapse over a one to four year vesting period. Restrictions generally lapse for non-employee directors after one year. Certain restricted stock units are performance-based awards issued at a target number with the actual number of ordinary shares issued ranging based on achievement of the performance criteria. All restricted stock and restricted stock units which remain active under the Company’s equity award plans are eligible to receive cash dividend equivalent payments upon vesting.

Fair Value Assumptions

All restricted stock and restricted stock units (whether time-based vesting or performance-based vesting) are granted and expensed using the fair value per share on the applicable grant date, over the applicable vesting period. Non-qualified options to purchase ordinary shares are granted to employees at exercise prices per share equal to the closing market price per share on the date of grant. The fair value of non-qualified options is determined on the applicable grant dates using the Black-Scholes method of valuation and that amount is recognized as an expense over the vesting period. Using the Black-Scholes valuation model, the fair value of options is based on the following assumptions:

	2017 Grants	2016 Grants
Dividend yield	1.2%	0%
Expected volatility	27.0%	27.0%
Risk-free interest rate	2.0 - 2.3%	1.3 - 2.4%
Expected term (years)	7.0	7.0 - 7.5

Share-Based Compensation Expense

Share-based compensation expense recognized in the Company’s results of operations for the three months ended September 30, 2017 and 2016 was as follows ($ in millions):

	Three Months Ended September 30,
	2017			2016
Equity based compensation awards	$	72.3		$	81.1
Cash-settled awards in connection with the Forsight Acquisition		-			3.1
Non-equity settled awards other		(32.6	)		7.4
Total share-based compensation expense	$	39.7		$	91.6

The income in non-equity settled awards other was due to an actuarial reversal based on the total shareholder return metrics declining in the three months ended September 30, 2017 of $32.6 million. These awards are cash-settled awards which are fair valued based on a pre-determined total shareholder return metric. Included in the table above is share-based compensation relating to discontinued operations of $3.2 million for the three months ended September 30, 2016.

Share-based compensation expense recognized in the Company’s results of operations for the nine months ended September 30, 2017 and 2016 were as follows ($ in millions):

	Nine Months Ended September 30,
	2017			2016
Equity-based compensation awards	$	220.8		$	269.9
Cash-settled awards in connection with the Zeltiq Acquisition		31.5			-
Cash-settled awards in connection with the Forsight Acquisition		-			3.1
Non-equity settled awards other		(19.5	)		14.0
Total share-based compensation expense	$	232.8		$	287.0

Included in the table above is share-based compensation relating to discontinued operations of $16.0 million for the nine months ended September 30, 2016.

Included in the equity-based compensation awards for the three and nine months ended September 30, 2017 and 2016 is the impact of accelerations and step-ups relating to the acquisition accounting treatment of outstanding awards acquired in the Allergan, Forest Laboratories, Inc. (“Forest”), and Zeltiq acquisitions as follows ($ in millions):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Zeltiq Acquisition	$	5.8	$	-	$	43.5	$	-
Allergan Acquisition		9.7		26.8		37.5		86.8
Forest Acquisition		1.5		10.3		9.0		37.5
Total	$	17.0	$	37.1	$	90.0	$	124.3

Unrecognized future share-based compensation expense was $487.4 million as of September 30, 2017, including $46.0 million from the Allergan acquisition, $31.8 million from the Zeltiq Acquisition, and $5.2 million from the Forest Acquisition. This amount will be recognized as an expense over a remaining weighted average period of 1.9 years. Share-based compensation is being amortized and charged to operations over the same period as the restrictions are eliminated for the participants, which is generally on a straight-line basis.

Share Activity

The following is a summary of equity award activity for unvested restricted stock and stock units in the period from December 31, 2016 through September 30, 2017:

(in millions, except per share data)	Shares			Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)		Aggregate Grant Date Fair Value
Restricted shares / units outstanding at December 31, 2016		1.5		$	251.88		1.6	$	388.0
Granted		1.1			235.14				258.7
Assumed as part of the Zeltiq Acquisition *		0.2			213.15				41.8
Vested		(0.3	)		230.89				(89.2	)
Forfeited		(0.1	)		256.09				(28.8	)
Restricted shares / units outstanding at September 30, 2017		2.4		$	244.12		1.9	$	570.5

*	Awards assumed as part of the Zeltiq Acquisition represent the pro rata portion of future compensation as of April 28, 2017.

The following is a summary of equity award activity for non-qualified options to purchase ordinary shares in the period from December 31, 2016 through September 30, 2017:

(in millions, except per share data)	Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2016		9.0		$	113.77			5.9	$	861.7
Granted		0.3			239.33
Exercised		(1.6	)		(92.61	)
Cancelled		(0.2	)		(121.60	)
Outstanding, vested and expected to vest at September 30, 2017		7.5		$	119.78			4.6	$	634.5

NOTE 8 — Reportable Segments

The Company’s businesses are organized into the following segments: US Specialized Therapeutics, US General Medicine and International. In addition, certain revenues and shared costs, and the results of corporate initiatives, are managed outside of the three segments.

The operating segments are organized as follows:

•

The US Specialized Therapeutics segment includes sales and expenses relating to certain branded products within the U.S., including Medical Aesthetics, Medical Dermatology, Eye Care, Neurosciences and Urology therapeutic products.

•

The US General Medicine segment includes sales and expenses relating to branded products within the U.S. that do not fall into the US Specialized Therapeutics business units, including Central Nervous System, Gastrointestinal, Women’s Health, Anti-Infectives and Diversified Brands.

•

The International segment includes sales and expenses relating to products sold outside the U.S.

The Company evaluates segment performance based on segment contribution. Segment contribution for our segments represents net revenues less cost of sales (defined below), selling and marketing expenses, and select general and administrative expenses. Included in segment revenues are product sales that were sold through our former Anda Distribution business once the Anda Distribution business had sold the product to a third party customer. These sales are included in segment results and are reclassified into revenues from discontinued operations through a reduction of Corporate revenues which eliminates the sales made by our former Anda Distribution business from results of continuing operations prior to October 3, 2016. Cost of sales for these products in discontinued operations is equal to our average third party cost of sales for third party branded products distributed by our former Anda Distribution. The Company does not evaluate the following items at the segment level:

•

Revenues and operating expenses within cost of sales, selling and marketing expenses, and general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.

•

General and administrative expenses that result from shared infrastructure, including certain expenses located within the United States.

•

Total assets including capital expenditures.

•

Other select revenues and operating expenses including R&D expenses, amortization, IPR&D impairments and asset sales and impairments, net, as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

The Company defines segment net revenues as product sales and other revenue derived from branded products or licensing agreements.

Cost of sales within segment contribution includes standard production and packaging costs for the products we manufacture, third party acquisition costs for products manufactured by others, profit-sharing or royalty payments for products sold pursuant to licensing agreements and finished goods inventory reserve charges. Cost of sales included within segment contribution does not include non-standard production costs, such as non-finished goods inventory obsolescence charges, manufacturing variances and excess capacity utilization charges, where applicable. Cost of sales does not include amortization or impairment costs for acquired product rights or other acquired intangibles.

Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs.

General and administrative expenses consist mainly of personnel-related costs, facilities costs, transaction costs, insurance, depreciation, litigation costs and professional services costs which are general in nature and attributable to the segment.

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30, 2017
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	1,724.8		$	1,497.4		$	807.8		$	4,030.0

Operating expenses:
Cost of sales⁽¹⁾		131.4			225.5			116.3			473.2
Selling and marketing		353.5			247.7			224.8			826.0
General and administrative		54.8			47.7			28.3			130.8
Segment Contribution	$	1,185.1		$	976.5		$	438.4		$	2,600.0
Contribution margin		68.7	%		65.2	%		54.3	%		64.5	%
Corporate											321.9
Research and development											442.6
Amortization											1,781.0
In-process research and development impairments											202.0
Asset sales and impairments, net											3,874.8
Operating (loss)										$	(4,022.3	)
Operating margin											(99.8	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

	Three Months Ended September 30, 2016
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	1,453.2		$	1,488.1		$	697.8		$	3,639.1

Operating expenses:
Cost of sales⁽¹⁾		69.2			215.1			95.1			379.4
Selling and marketing		292.4			292.8			188.2			773.4
General and administrative		41.2			42.3			28.0			111.5
Segment Contribution	$	1,050.4		$	937.9		$	386.5		$	2,374.8
Contribution margin		72.3	%		63.0	%		55.4	%		65.3	%
Corporate											372.0
Research and development											622.8
Amortization											1,609.1
In-process research and development impairments											42.0
Asset sales and impairments, net											(4.7	)
Operating (loss)										$	(266.4	)
Operating margin											(7.3	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,
	2017		2016
Segment net revenues	$	4,030.0	$	3,639.1
Corporate revenues		4.3		(16.9	)
Net revenues	$	4,034.3	$	3,622.2

No country outside of the United States represents ten percent or more of net revenues. The US Specialized Therapeutics and US General Medicine segments are comprised solely of sales within the United States.

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30, 2017
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	4,921.8		$	4,270.9		$	2,403.6		$	11,596.3

Operating expenses:
Cost of sales⁽¹⁾		349.4			623.2			341.6			1,314.2
Selling and marketing		1,040.7			838.3			673.2			2,552.2
General and administrative		149.4			129.7			86.5			365.6
Segment Contribution	$	3,382.3		$	2,679.7		$	1,302.3		$	7,364.3
Contribution margin		68.7	%		62.7	%		54.2	%		63.5	%
Corporate											1,086.7
Research and development											1,691.9
Amortization											5,274.9
In-process research and development impairments											1,245.3
Asset sales and impairments, net											3,896.2
Operating (loss)											(5,830.7	)
Operating margin											(50.3	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

	Nine Months Ended September 30, 2016
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	4,240.8		$	4,390.9		$	2,128.1		$	10,759.8

Operating expenses:
Cost of sales⁽¹⁾		215.0			649.6			309.3			1,173.9
Selling and marketing		844.8			902.8			582.7			2,330.3
General and administrative		126.4			128.2			86.5			341.1
Segment Contribution	$	3,054.6		$	2,710.3		$	1,149.6		$	6,914.5
Contribution margin		72.0	%		61.7	%		54.0	%		64.3	%
Corporate											1,052.8
Research and Development											1,662.4
Amortization											4,831.9
In-process research and development impairments											316.9
Asset sales and impairments, net											(24.0	)
Operating (loss)											(925.5	)
Operating margin											(8.6	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,
	2017		2016
Segment net revenues	$	11,596.3	$	10,759.8
Corporate revenues		18.3		(53.5	)
Net revenues	$	11,614.6	$	10,706.3

The following tables present global net revenues for the top products of the Company for the three and nine months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30, 2017
	US Specialized Therapeutics		US General Medicine		International		Corporate		Total
Botox®	$	558.6	$	-	$	215.9	$	-	$	774.5
Restasis®		366.8		-		15.5		-		382.3
Juvederm Collection**		115.6		-		126.5		-		242.1
Linzess®/Constella®		-		190.9		5.7		-		196.6
Lumigan®/Ganfort®		83.3		-		91.5		-		174.8
Bystolic® /Byvalson®		-		164.2		0.5		-		164.7
Alphagan®/Combigan®		92.7		-		43.4		-		136.1
Eye Drops		53.7		-		71.2		-		124.9
Lo Loestrin®		-		120.0		-		-		120.0
Namenda XR®		-		114.3		-		-		114.3
Estrace® Cream		-		101.6		-		-		101.6
Breast Implants		58.0		-		38.1		-		96.1
Viibryd®/Fetzima®		-		86.5		1.0		-		87.5
Alloderm®		84.6		-		1.5		-		86.1
Vraylar™		-		80.2		-		-		80.2
Ozurdex ®		24.6		-		50.2		-		74.8
Coolsculpting Consumables		50.3		-		13.8		-		64.1
Asacol®/Delzicol®		-		49.5		11.9		-		61.4
Carafate ® /Sulcrate ®		-		58.7		0.7		-		59.4
Zenpep®		-		56.8		-		-		56.8
Aczone®		46.7		-		0.2		-		46.9
Canasa®/Salofalk®		-		39.0		4.6		-		43.6
Coolsculpting Systems & Add On Applicators		33.1		-		10.2		-		43.3
Viberzi®		-		40.9		0.2		-		41.1
Armour Thyroid		-		38.5		-		-		38.5
Saphris®		-		37.2		-		-		37.2
Namzaric®		-		37.0		-		-		37.0
Rapaflo®		28.3		-		1.8		-		30.1
Teflaro®		-		29.1		-		-		29.1
Savella®		-		24.0		-		-		24.0
SkinMedica®		18.7		-		1.4		-		20.1
Avycaz®		-		16.9		-		-		16.9
Dalvance®		-		16.1		-		-		16.1
Latisse®		13.6		-		1.9		-		15.5
Tazorac®		15.1		-		0.1		-		15.2
Lexapro®		-		12.9		-		-		12.9
Kybella® /Belkyra®		9.6		-		1.6		-		11.2
Liletta®		-		9.3		-		-		9.3
Minastrin® 24		-		3.6		-		-		3.6
Enablex®		-		0.9		-		-		0.9
Namenda® IR		-		-		-		-		-
Other Products Revenues		71.5		169.3		98.4		4.3		343.5
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			-		-
Total Net Revenues	$	1,724.8	$	1,497.4	$	807.8	$	4.3	$	4,034.3

	Three Months Ended September 30, 2016
	US Specialized Therapeutics		US General Medicine		International		Corporate			Total
Botox®	$	496.3	$	-	$	193.4	$	-		$	689.7
Restasis®		356.4		-		15.4		-			371.8
Juvederm Collection**		105.0		-		96.8		-			201.8
Linzess®/Constella®		-		164.4		4.3		-			168.7
Lumigan®/Ganfort®		78.3		-		86.6		-			164.9
Bystolic® /Byvalson®		-		165.1		0.5		-			165.6
Alphagan®/Combigan®		93.4		-		41.3		-			134.7
Eye Drops		50.2		-		67.7		-			117.9
Lo Loestrin®		-		105.7		-		-			105.7
Namenda XR®		-		146.9		-		-			146.9
Estrace® Cream		-		98.6		-		-			98.6
Breast Implants		51.1		-		35.6		-			86.7
Viibryd®/Fetzima®		-		87.6		-		-			87.6
Alloderm®		-		-		-		-			-
Vraylar™		-		32.4		-		-			32.4
Ozurdex ®		20.9		-		43.4		-			64.3
Coolsculpting Consumables		-		-		-		-			-
Asacol®/Delzicol®		-		72.2		14.2		-			86.4
Carafate ® /Sulcrate ®		-		56.4		0.6		-			57.0
Zenpep®		-		52.5		-		-			52.5
Aczone®		69.0		-		-		-			69.0
Canasa®/Salofalk®		-		47.2		4.4		-			51.6
Coolsculpting Systems & Add On Applicators		-		-		-		-			-
Viberzi®		-		30.9		-		-			30.9
Armour Thyroid		-		39.1		-		-			39.1
Saphris®		-		40.8		-		-			40.8
Namzaric®		-		14.9		-		-			14.9
Rapaflo®		25.2		-		1.5		-			26.7
Teflaro®		-		33.3		-		-			33.3
Savella®		-		28.1		-		-			28.1
SkinMedica®		25.8		-		-		-			25.8
Avycaz®		-		4.8		-		-			4.8
Dalvance®		-		10.3		-		-			10.3
Latisse®		17.2		-		1.9		-			19.1
Tazorac®		27.5		-		0.2		-			27.7
Lexapro®		-		15.6		-		-			15.6
Kybella® /Belkyra®		14.2		-		0.5		-			14.7
Liletta®		-		4.4		-		-			4.4
Minastrin® 24		-		84.9		-		-			84.9
Enablex®		-		1.9		-		-			1.9
Namenda® IR		-		2.9		-		-			2.9
Other Products Revenues		22.7		147.2		89.5		6.8			266.2
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			(23.7	)		(23.7	)
Total Net Revenues	$	1,453.2	$	1,488.1	$	697.8	$	(16.9	)	$	3,622.2

	Nine Months Ended September 30, 2017
	US Specialized Therapeutics		US General Medicine		International		Corporate		Total
Botox®	$	1,642.0	$	-	$	662.6	$	-	$	2,304.6
Restasis®		1,012.0		-		46.7		-		1,058.7
Juvederm Collection**		361.6		-		386.0		-		747.6
Linzess®/Constella®		-		506.3		16.1		-		522.4
Lumigan®/Ganfort®		236.6		-		271.8		-		508.4
Bystolic® /Byvalson®		-		454.7		1.6		-		456.3
Alphagan®/Combigan®		275.5		-		128.4		-		403.9
Eye Drops		152.2		-		207.2		-		359.4
Namenda XR®		-		355.0		-		-		355.0
Lo Loestrin®		-		332.8		-		-		332.8
Breast Implants		173.6		-		116.8		-		290.4
Estrace® Cream		-		265.1		-		-		265.1
Viibryd®/Fetzima®		-		244.2		2.1		-		246.3
Alloderm®		223.3		-		5.0		-		228.3
Ozurdex ®		72.0		-		152.5		-		224.5
Vraylar™		-		200.1		-		-		200.1
Asacol®/Delzicol®		-		152.7		36.8		-		189.5
Carafate ® /Sulcrate ®		-		176.6		2.1		-		178.7
Zenpep®		-		153.8		-		-		153.8
Canasa®/Salofalk®		-		115.7		13.3		-		129.0
Aczone®		128.3		-		0.3		-		128.6
Coolsculpting Consumables		98.2		-		26.3		-		124.5
Armour Thyroid		-		117.8		-		-		117.8
Saphris®		-		117.5		-		-		117.5
Viberzi®		-		113.7		0.3		-		114.0
Namzaric®		-		94.0		-		-		94.0
Teflaro®		-		92.7		-		-		92.7
Rapaflo®		79.9		-		5.5		-		85.4
Coolsculpting Systems & Add On Applicators		64.1		-		20.4		-		84.5
Savella®		-		74.3		-		-		74.3
SkinMedica®		72.1		-		1.4		-		73.5
Minastrin® 24		-		56.1		-		-		56.1
Tazorac®		51.3		-		0.5		-		51.8
Latisse®		40.5		-		6.2		-		46.7
Avycaz®		-		42.7		-		-		42.7
Kybella® /Belkyra®		37.4		-		5.1		-		42.5
Dalvance®		-		40.9		1.2		-		42.1
Lexapro®		-		39.4		-		-		39.4
Liletta®		-		23.1		-		-		23.1
Enablex®		-		2.8		-		-		2.8
Namenda® IR		-		0.1		-		-		0.1
Other		201.2		498.8		287.4	��	18.3		1,005.7
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			-		-
Total Net Revenues	$	4,921.8	$	4,270.9	$	2,403.6	$	18.3	$	11,614.6

	Nine Months Ended September 30, 2016
	US Specialized Therapeutics		US General Medicine		International		Corporate			Total
Botox®	$	1,454.0	$	-	$	592.9	$	-		$	2,046.9
Restasis®		1,026.4		-		49.7		-			1,076.1
Juvederm Collection**		325.3		-		304.2		-			629.5
Linzess®/Constella®		-		452.0		12.7		-			464.7
Lumigan®/Ganfort®		240.4		-		269.2		-			509.6
Bystolic® /Byvalson®		-		479.0		1.3		-			480.3
Alphagan®/Combigan®		274.3		-		127.3		-			401.6
Eye Drops		140.1		-		206.9		-			347.0
Namenda XR®		-		486.5		-		-			486.5
Lo Loestrin®		-		296.0		-		-			296.0
Breast Implants		149.2		-		112.5		-			261.7
Estrace® Cream		-		276.4		-		-			276.4
Viibryd®/Fetzima®		-		252.6		0.1		-			252.7
Alloderm®		-		-		-		-			-
Ozurdex ®		61.8		-		130.2		-			192.0
Vraylar™		-		51.1		-		-			51.1
Asacol®/Delzicol®		-		297.9		40.5		-			338.4
Carafate ® /Sulcrate ®		-		167.7		1.7		-			169.4
Zenpep®		-		145.1		-		-			145.1
Canasa®/Salofalk®		-		135.0		13.0		-			148.0
Aczone®		156.1		-		-		-			156.1
Coolsculpting Consumables		-		-		-		-			-
Armour Thyroid		-		121.8		-		-			121.8
Saphris®		-		123.6		-		-			123.6
Viberzi®		-		55.3		-		-			55.3
Namzaric®		-		38.0		-		-			38.0
Teflaro®		-		101.9		-		-			101.9
Rapaflo®		87.6		-		4.2		-			91.8
Coolsculpting Systems & Add On Applicators		-		-		-		-			-
Savella®		-		74.1		-		-			74.1
SkinMedica®		81.5		-		-		-			81.5
Minastrin® 24		-		247.5		1.4		-			248.9
Tazorac®		68.0		-		0.6		-			68.6
Latisse®		54.7		-		6.2		-			60.9
Avycaz®		-		26.9		-		-			26.9
Kybella® /Belkyra®		38.2		-		1.6		-			39.8
Dalvance®		-		26.7		-		-			26.7
Lexapro®		-		50.8		-		-			50.8
Liletta®		-		15.0		-		-			15.0
Enablex®		-		14.7		-		-			14.7
Namenda® IR		-		12.8		-		-			12.8
Other		83.2		442.5		251.9		26.5			804.1
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			(80.0	)		(80.0	)
Total Net Revenues	$	4,240.8	$	4,390.9	$	2,128.1	$	(53.5	)	$	10,706.3

**	Sales of fillers including Juvederm, Voluma and other fillers are referred to herein as the “Juvederm Collection.”

Unless included above, no product represents ten percent or more of total net revenues.

NOTE 9 — Inventories

Inventories consist of finished goods held for sale and distribution, raw materials and work-in-process. Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value). The Company writes down inventories to net realizable value based on forecasted demand, market conditions or other factors, which may differ from actual results.

Inventories consisted of the following ($ in millions):

	September 30,		December 31,
	2017		2016
Raw materials	$	316.0	$	297.1
Work-in-process		134.5		145.4
Finished goods		544.8		357.7
		995.3		800.2
Less: inventory reserves		95.5		82.2
Total Inventories	$	899.8	$	718.0

As of September 30, 2017, finished goods included $5.1 million related to the fair-value step-up of acquired inventory as a result of the LifeCell Acquisition.

NOTE 10 — Investments and Other Assets

Investments in marketable securities, other investments and other assets consisted of the following ($ in millions):

	September 30, 2017		December 31, 2016
Marketable securities:
Short-term investments	$	2,064.0	$	8,062.3
Teva Shares		1,765.1		3,439.2
Total marketable securities	$	3,829.1	$	11,501.5
Investments and other assets:
Legacy Allergan deferred executive compensation investments	$	112.4	$	111.7
Equity method investments		11.8		12.8
Cost method investments		-		15.0
Other long-term investments		64.9		67.2
Taxes receivable		32.0		36.0
Other assets		48.8		39.4
Total investments and other assets	$	269.9	$	282.1

Investments in securities, including those classified in cash and cash equivalents due to the maturity term of the instrument, as of September 30, 2017 and December 31, 2016 included the following ($ in millions):

	Investments in Securities as of September 30, 2017:
Level 1	Carrying amount		Unrecognized gain		Unrecognized loss			Estimated fair value		Cash & cash equivalents		Marketable securities
Money market funds	$	939.4	$	-	$	-		$	939.4	$	939.4	$	-
Investment in Teva ordinary shares		1,765.1		-		-			1,765.1		-		1,765.1
Total	$	2,704.5	$	-	$	-		$	2,704.5	$	939.4	$	1,765.1

Level 2	Carrying amount		Unrecognized gain		Unrecognized loss			Estimated fair value		Cash & cash equivalents		Marketable securities
Commercial paper and other	$	769.1	$	-	$	-		$	769.1	$	-	$	769.1
Certificates of deposit		1,295.6		-		(0.7	)		1,294.9		-		1,294.9
Total	$	2,064.7	$	-	$	(0.7	)	$	2,064.0	$	-	$	2,064.0

	Investments in Securities as of December 31, 2016:
Level 1	Carrying amount		Unrecognized gain		Unrecognized loss			Estimated fair value		Cash & cash equivalents		Marketable securities
Money market funds	$	1,238.9	$	-	$	-		$	1,238.9	$	1,238.9	$	-
Total	$	1,238.9	$	-	$	-		$	1,238.9	$	1,238.9	$	-

Level 2	Carrying amount		Unrecognized gain		Unrecognized loss			Estimated fair value		Cash & cash equivalents		Marketable securities
Commercial paper and other	$	3,909.7	$	0.2	$	-		$	3,909.9	$	-	$	3,909.9
Investment in Teva ordinary shares		5,038.6		-		(1,599.4	)		3,439.2		-		3,439.2
Certificates of deposit		4,152.4		-		-			4,152.4		-		4,152.4
Total	$	13,100.7	$	0.2	$	(1,599.4	)	$	11,501.5	$	-	$	11,501.5

Companies are required to use a fair value hierarchy as defined in ASC Topic 820 “Fair Value Measurement,” (“ASC 820”) which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value (“Fair Value Leveling”). There are three levels of inputs used to measure fair value with Level 1 having the highest priority and Level 3 having the lowest:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity. The Level 3 assets are those whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques with significant unobservable inputs, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants. Fair values are determined based on Fair Value Leveling.

Marketable securities and investments consist of available-for-sale investments in money market securities, U.S. treasury and agency securities, and equity securities of publicly traded companies for which market prices are readily available. Unrealized gains or losses on marketable securities and investments are recorded in accumulated other comprehensive (loss) / income. Realized gains or losses on marketable securities and investments are recorded in interest income. The Company’s marketable securities and other long-term investments are classified as available-for-sale and are recorded at fair value based on quoted market prices using the specific identification method. These investments are classified as either current or non-current, as appropriate, in the Company’s consolidated balance sheets. The Company may sell certain of its marketable securities prior to their stated maturities for strategic reasons including, but not limited to, anticipation of credit deterioration and maturity management.

Excluding the Company’s investment in Teva securities, the Company primarily considers the declines in market value of its marketable securities investment portfolio to be temporary in nature. See Note 5 for further discussion of the Company’s investment in Teva Shares. The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The Company’s policy requires investments to be investment grade with the primary objective of minimizing the potential risk of principal loss. Fair values were determined for each individual security in the investment portfolio.

NOTE 11 — Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following ($ in millions):

	September 30, 2017		December 31, 2016
Accrued expenses:
Accrued third-party rebates	$	1,645.9	$	1,595.5
Accrued payroll and related benefits		550.0		581.1
Accrued returns		339.5		295.9
Contractual commitments		254.2		264.9
Royalties payable		181.6		146.6
Accrued pharmaceutical fees		144.5		221.3
Interest payable		144.0		294.2
Accrued R&D expenditures		139.0		154.0
Litigation-related reserves and legal fees		129.4		101.1
Accrued severance, retention and other shutdown costs		75.3		86.2
Accrued non-provision taxes		70.6		55.0
Accrued selling and marketing expenditures		56.6		95.9
Current portion of contingent consideration obligations		31.2		511.0
Dividends payable		24.6		23.2
Other accrued expenses		470.5		368.2
Total accrued expenses	$	4,256.9	$	4,794.1
Accounts payable		284.8		224.9
Total Accounts Payable and Accrued Expenses	$	4,541.7	$	5,019.0

NOTE 12 — Goodwill, Product Rights and Other Intangible Assets

The Company’s goodwill by segment consisted of the following ($ in millions):

	US Specialized Therapeutics			US General Medicine			International		Total
Balance as of December 31, 2016	$	18,433.2		$	21,426.6		$	6,496.3	$	46,356.1
Additions through acquisitions		2,454.8			-			245.9		2,700.7
Measurement period adjustments		(25.9	)		(14.1	)		-		(40.0	)
Foreign exchange and other adjustments		-			-			754.1		754.1
Balance as of September 30, 2017	$	20,862.1		$	21,412.5		$	7,496.3	$	49,770.9

As of September 30, 2017 and December 31, 2016, the gross balance of goodwill, pre-impairments, was $49,788.2 million and $46,373.4 million, respectively.

The following items had a significant impact on goodwill in the nine months ended September 30, 2017:

•

An increase in goodwill of $1,449.1 million resulting from the LifeCell Acquisition; and

•

An increase in goodwill of $1,204.3 million resulting from the Zeltiq Acquisition.

Product rights and other intangible assets consisted of the following ($ in millions):

Cost Basis	Balance as of December 31, 2016		Acquisitions		Impairments			IPR&D to CMP Transfers			Held for sale			Foreign Currency Translation		Balance as of September 30, 2017
Intangibles with definite lives:
Product rights and other related intangibles	$	67,801.4	$	3,866.9	$	-		$	1,119.1		$	-		$	705.2	$	73,492.6
Trade name		690.0		-		-			-			-			-		690.0
Total definite-lived intangible assets	$	68,491.4	$	3,866.9	$	-		$	1,119.1		$	-		$	705.2	$	74,182.6
Intangibles with indefinite lives:
IPR&D	$	8,758.3	$	10.0	$	(1,245.3	)	$	(1,119.1	)	$	(6.8	)	$	8.6	$	6,405.7
Total indefinite-lived intangible assets	$	8,758.3	$	10.0	$	(1,245.3	)	$	(1,119.1	)	$	(6.8	)	$	8.6	$	6,405.7
Total product rights and related intangibles	$	77,249.7	$	3,876.9	$	(1,245.3	)	$	-		$	(6.8	)	$	713.8	$	80,588.3

Accumulated Amortization	Balance as of December 31, 2016			Amortization			Impairments			Foreign Currency Translation			Balance as of September 30, 2017
Intangibles with definite lives:
Product rights and other related intangibles	$	(14,493.9	)	$	(5,216.9	)	$	(3,876.0	)	$	(107.3	)	$	(23,694.1	)
Trade name		(137.2	)		(58.1	)		-			-			(195.3	)
Total definite-lived intangible assets	$	(14,631.1	)	$	(5,274.9	)	$	(3,876.0	)	$	(107.3	)	$	(23,889.4	)
Total product rights and related intangibles	$	(14,631.1	)	$	(5,274.9	)	$	(3,876.0	)	$	(107.3	)	$	(23,889.4	)
Net Product Rights and Other Intangibles	$	62,618.6											$	56,698.9

The following items had a significant impact on net product rights and other intangibles in the nine months ended September 30, 2017:

•

The Company acquired $2,020.0 million of intangible assets in connection with the LifeCell Acquisition in the nine months ended September 30, 2017;

•

The Company acquired $1,185.0 million of intangible assets in connection with the Zeltiq Acquisition in the nine months ended September 30, 2017;

•

The Company reacquired rights on select licensed products promoted in the Company’s US General Medicine segment in an aggregate value of $574.0 million in the nine months ended September 30, 2017. As part of the rights reacquired, the Company is no longer obligated to pay royalties on the specific products, which increases the Company’s segment gross margin percentage;

•

The Company evaluated all of its dry eye related assets for impairment as a result of the U.S. District Court for the Eastern District of Texas issuing an adverse trial decision finding that the four asserted patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05% are invalid. As a result of our review of all potential scenarios relating to these assets and a decrease in our assessment of the likelihood of revenue extending through the full patent term of 2024, the Company recognized an impairment of $3,230.0 million related to Restasis^® as well as $164.0 million related to other Dry Eye IPR&D assets obtained in the Allergan acquisition in the three and nine months ended September 30, 2017;

•

The Company impaired the intangible asset related to Aczone^® by $646.0 million as a result of recent market dynamics, including erosion in the brand acne market, an anticipated decline in the market outlook, and recent generic entrants in the three and nine months ended September 30, 2017;

•

The Company impaired a CNS IPR&D project obtained as part of the Allergan acquisition by $486.0 million related to an anticipated approval delay due to certain product specifications in the nine months ended September 30, 2017;

•

The Company impaired an IPR&D asset acquired as part of the Warner Chilcott acquisition by $21.0 million and $278.0 million in the three and nine months ended September 30, 2017, respectively, due to a delay in anticipated launch of a women’s healthcare project coupled with an anticipated decrease in product demand;

•

The Company impaired a women’s healthcare IPR&D project by $91.3 million based on the Company’s intention to divest the non-strategic asset in the nine months ended September 30, 2017;

•

The Company impaired an IPR&D eye care project obtained as part of the Allergan acquisition by $44.0 million as a result of decrease in projected cash flows due to a decline in market demand assumptions in the nine months ended September 30, 2017;

•

The Company impaired an IPR&D eye care project obtained as part of the Allergan acquisition by $20.0 million in the nine months ended September 30, 2017;

•

The Company impaired an IPR&D medical aesthetics project obtained as part of the Allergan acquisition by $17.0 million in the three and nine months ended September 30, 2017; and

•

The Company reclassified certain intangible assets from IPR&D to CMP primarily related to Juvederm^®, Rhofade^® and TrueTear™ upon approval of the products.

Assuming no additions, disposals or adjustments are made to the carrying values and/or useful lives of the intangible assets, annual amortization expense on product rights and other related intangibles as of September 30, 2017 over the remainder of 2017 and each of the next five years is estimated to be as follows ($ in millions):

	Amortization Expense
2017 remaining	$	1,913.4
2018	$	6,420.4
2019	$	6,014.0
2020	$	5,692.8
2021	$	4,753.4
2022	$	4,387.1

The above amortization expense is an estimate. Actual amounts may change from such estimated amounts due to fluctuations in foreign currency exchange rates, additional intangible asset acquisitions, finalization of preliminary fair value estimates, potential impairments, accelerated amortization or other events. In addition, the Company has certain currently marketed products for which operating contribution performance has been below that which was originally assumed in the products’ initial valuations. The Company, on a quarterly basis, monitors the related intangible assets for these products for potential impairments. It is reasonably possible that impairments may occur in future periods, which may have a material adverse effect on the Company’s results of operations and financial position.

NOTE 13 — Long-Term Debt and Capital Leases

Total debt and capital leases consisted of the following ($ in millions):

	Balance As of						Fair Market Value As of
	September 30, 2017			December 31, 2016			September 30, 2017		December 31, 2016
Senior Notes:
Floating Rate Notes
$500.0 million floating rate notes due March 12, 2018 *	$	500.0		$	500.0		$	501.8	$	502.5
$500.0 million floating rate notes due March 12, 2020 **		500.0			500.0			509.0		509.4
		1,000.0			1,000.0			1,010.8		1,011.9
Fixed Rate Notes
$1,000.0 million 1.850% notes due March 1, 2017		-			1,000.0			-		1,001.1
$500.0 million 1.300% notes due June 15, 2017		-			500.0			-		499.7
$1,200.0 million 1.875% notes due October 1, 2017		-			1,200.0			-		1,202.5
$3,000.0 million 2.350% notes due March 12, 2018		3,000.0			3,000.0			3,008.9		3,018.0
$250.0 million 1.350% notes due March 15, 2018		250.0			250.0			249.4		248.4
$1,050.0 million 4.375% notes due February 1, 2019		350.0			1,050.0			361.0		1,090.0
$500.0 million 2.450% notes due June 15, 2019		500.0			500.0			503.5		501.2
$400.0 million 6.125% notes due August 14, 2019		400.0			400.0			430.0		437.7
$3,500.0 million 3.000% notes due March 12, 2020		3,500.0			3,500.0			3,562.8		3,541.8
$650.0 million 3.375% notes due September 15, 2020		650.0			650.0			668.5		663.6
$750.0 million 4.875% notes due February 15, 2021		450.0			750.0			485.1		803.3
$1,200.0 million 5.000% notes due December 15, 2021		1,200.0			1,200.0			1,317.3		1,297.7
$3,000.0 million 3.450% notes due March 15, 2022		3,000.0			3,000.0			3,102.0		3,030.7
$1,700.0 million 3.250% notes due October 1, 2022		1,700.0			1,700.0			1,740.5		1,693.1
$350.0 million 2.800% notes due March 15, 2023		350.0			350.0			348.5		335.6
$1,200.0 million 3.850% notes due June 15, 2024		1,200.0			1,200.0			1,255.3		1,211.7
$4,000.0 million 3.800% notes due March 15, 2025		4,000.0			4,000.0			4,146.3		3,995.6
$2,500.0 million 4.550% notes due March 15, 2035		2,500.0			2,500.0			2,658.6		2,458.5
$1,000.0 million 4.625% notes due October 1, 2042		456.7			1,000.0			479.3		967.6
$1,500.0 million 4.850% notes due June 15, 2044		1,500.0			1,500.0			1,637.7		1,496.4
$2,500.0 million 4.750% notes due March 15, 2045		1,200.0			2,500.0			1,300.8		2,466.9
		26,206.7			31,750.0			27,255.5		31,961.1

Euro Denominated Notes
€750.0 million 0.500% notes due June 1, 2021		884.0			-			887.4		-
€700.0 million 1.250% notes due June 1, 2024		825.0			-			832.0		-
€550.0 million 2.125% notes due June 1, 2029		648.2			-			662.2		-
€700.0 million floating rate notes due June 1, 2019 ***		825.0			-			825.6		-
		3,182.2			-			3,207.2		-
Total Senior Notes Gross		30,388.9			32,750.0			31,473.5		32,973.0
Unamortized premium		104.1			171.2			-	-
Unamortized discount		(84.8	)		(95.8	)		-	-
Total Senior Notes Net		30,408.2			32,825.4			31,473.5		32,973.0
Other Indebtedness
Debt Issuance Costs		(126.6	)		(144.6	)
Other		51.8			85.5
Total Other Borrowings		(74.8	)		(59.1	)
Capital Leases		2.7			2.4
Total Indebtedness	$	30,336.1		$	32,768.7

*	Interest on the 2018 floating rate note is three month USD LIBOR plus 1.080% per annum

**	Interest on the 2020 floating rate note is three month USD LIBOR plus 1.255% per annum

***	Interest on the €700.0 million floating rate notes is the three month EURIBOR plus 0.350% per annum

Fair market value in the table above is determined in accordance with Fair Value Leveling under Level 2 based upon quoted prices for similar items in active markets.

The Company has issued fixed rate notes over multiple issuances for various business needs. Interest on the various U.S. dollar denominated fixed rate and floating notes is generally payable semi-annually and quarterly, respectively with various payment dates. Interest on the various Euro denominated fixed rate and floating rate notes is generally payable annually and quarterly, respectively, with various payment dates.

Senior Notes

Borrowings

Euro Denominated Notes

On May 26, 2017, Allergan Funding SCS (formerly known as Actavis Funding SCS), a limited partnership (société en commandite simple) organized under the laws of the Grand Duchy of Luxembourg and an indirect wholly-owned subsidiary of Allergan plc, issued €700.0 million floating rate notes due 2019 (the “2019 Floating Rate Notes”), €750.0 million 0.500% notes due 2021 (the “0.500% 2021 Notes”), €750.0 million 1.250% notes due 2024 (the “1.250% 2024 Notes”), and €550.0 million 2.125% notes due 2029 (the “2.125% 2029 Notes”), collectively the “Euro Denominated Notes”. The notes are fully and unconditionally guaranteed by Allergan Funding SCS’s indirect parents, Warner Chilcott Limited and Allergan Capital S.a.r.l. (“Allergan Capital”, formerly known as Actavis Capital S.a.r.l.), and by Allergan Finance, LLC, a subsidiary of Allergan Capital, on an unsecured and unsubordinated basis.

Interest on the 2019 Floating Rate Notes is payable quarterly on March 1, June 1, September 1 and December 1 of each year, and began on September 1, 2017. Interest on the 0.500% 2021 Notes, the 1.250% 2024 Notes, and the 2.125% 2029 Notes is payable annually on June 1 of each year and will begin on June 1, 2018.

These notes were issued to fund, in part, the payment of the tender offers described below.

Repayments

Tender Offer

On May 30, 2017, the Company’s wholly owned subsidiaries Allergan Funding SCS, Allergan Finance LLC, Forest Laboratories, LLC and Allergan, Inc., each as co-offeror with Warner Chilcott Limited, completed the repurchase of certain debt securities issued by the entities for cash under a previously announced tender offer. As a result of the offering, the Company repurchased $300.0 million of the $750.0 million 4.875% notes due February 15, 2021, $543.3 million of the $1,000.0 million 4.625% notes due October 1, 2042, $700.0 million of the $1,050.0 million 4.375% notes due February 1, 2019, and $1,300.0 million of the $2,500.0 million 4.750% notes due March 15, 2045. The Company paid a total of $3,013.8 million, which included an early tender payment, to repurchase the notes of $170.5 million in cash. The Company recognized a net expense of $161.5 million within “Other income/ (expense)” for the early tender payment and non-cash write-off of premiums and debt fees related to the repurchased notes.

Other Activity

The $800.0 million 5.750% fixed rate notes due April 1, 2016 were paid in full at maturity.

The $500.0 million floating rate notes due September 1, 2016 were paid in full at maturity and bore interest at the three-month LIBOR plus 0.875%.

The $1,000.0 million 1.850% senior notes due March 1, 2017 were paid in full at maturity.

The $500.0 million 1.300% senior notes due June 15, 2017 were redeemed and paid in full on April 21, 2017.

The $1,200.0 million 1.875% senior notes due October 1, 2017 were redeemed and paid in full on June 29, 2017.

Credit Facility Indebtedness

On August 2, 2016, the Company repaid the remaining balances of all outstanding term-loan indebtedness and terminated its then-existing revolving credit facility with proceeds from the Teva Transaction. The interest expense on the then-outstanding indebtedness in the nine months ended September 30, 2016 was $116.2 million.

Revolving Credit Facility

On June 14, 2017, Allergan plc and certain of its subsidiaries entered into a revolving credit and guaranty agreement (the “Revolver Agreement”) among Allergan Capital, as borrower, Allergan plc, as Ultimate Parent; Warner Chilcott Limited, as Intermediate Parent and Subsidiary Guarantor; Allergan Finance LLC., Allergan Funding SCS, as Subsidiary Guarantors; the lenders from time to time party thereto (the “Revolving Lenders”); J.P. Morgan Chase Bank as Administrative Agent; J.P. Morgan Europe Limited, as London Agent; and the other financial institutions party thereto. Under the Revolver Agreement, the Revolving Lenders have committed to provide an unsecured five-year revolving credit facility in an aggregate principal amount of up to $1.5 billion, with the ability to increase the revolving credit facility by $500.0 million to an aggregate principal amount of up to $2.0 billion.

The Revolver Agreement provides that loans thereunder would bear interest, at our choice, of a per annum rate equal to either (a) a base rate, plus an applicable margin per annum varying from 0.00% per annum to 1.00% per annum depending on the Debt Rating or (b) a Eurodollar rate, plus an applicable margin varying from 0.875% per annum to 2.00% per annum depending on the Debt Rating. Additionally, to maintain availability of funds, the Company pays an unused commitment fee, which according to the pricing grid is set at 0.070% to 0.250% per annum, depending on the Debt Rating, of the unused portion of the revolver.

The obligations under the Revolver Agreement were guaranteed by Warner Chilcott Limited, Allergan Finance LLC and Allergan Funding SCS.

The Revolver Agreement contains customary affirmative covenants for facilities of this type, including, among others, covenants pertaining to the delivery of financial statements, notices of default, maintenance of corporate existence and rights and compliance with laws, as well as customary negative covenants for facilities of this type, including, among others, limitations secured indebtedness, non-guarantor subsidiary indebtedness, mergers and certain other fundamental changes and passive holding company status. The Revolver Agreement also contains a financial covenant requiring maintenance of a maximum consolidated leverage ratio.

In addition, the Revolver Agreement also contains customary events of default (with customary grace periods and materiality thresholds) and if and for so long as an event of default has occurred and is continuing, any amounts outstanding under the Revolver Agreement will accrue interest at an increased rate, the Revolving Lenders can terminate their commitments thereunder and payments of any outstanding amounts could be accelerated by the Revolving Lenders.

The Company was subject to, and as of September 30, 2017 was in compliance with all, financial and operational covenants under the terms of the Revolver Agreement. At September 30, 2017, there were no outstanding borrowings or letters of credit outstanding under the Revolver Agreement.

Annual Debt Maturities

As of September 30, 2017, annual debt maturities were as follows ($ in millions):

	Total Payments
2017 remaining	$	-
2018		3,750.0
2019		2,075.0
2020		4,650.0
2021		2,534.0
2022		4,700.0
2023 and after		12,679.9
	$	30,388.9
Capital leases		2.7
Debt issuance costs		(126.6	)
Other short-term borrowings		51.8
Unamortized premium		104.1
Unamortized discount		(84.8	)
Total Indebtedness	$	30,336.1

Amounts represent total anticipated cash payments assuming scheduled repayments.

NOTE 14 — Other Long-Term Liabilities

Other long-term liabilities consisted of the following ($ in millions):

	September 30,		December 31,
	2017		2016
Acquisition related contingent consideration liabilities	$	528.6	$	661.1
Long-term pension and post retirement liability		204.2		201.6
Legacy Allergan deferred executive compensation		114.0		111.7
Long-term severance and restructuring liabilities		49.9		22.0
Deferred revenue		38.7		15.7
Product warranties		27.4		28.1
Long-term contractual obligations		23.1		25.3
Other long-term liabilities		21.1		19.5
Total other long-term liabilities	$	1,007.0	$	1,085.0

NOTE 15 — Income Taxes

The Company’s effective tax rate for the nine months ended September 30, 2017 was 27.6% compared to 48.0% for the nine months ended September 30, 2016. The effective tax rate for the nine months ended September 30, 2017 was favorably impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses, including the impairment of intangible assets, tax benefited at rates greater than the Irish statutory rate. The tax benefits related to the impairment of intangible assets recorded during the nine months ended September 30, 2017 were $1,805.9 million. The effective tax rate was unfavorably impacted by pre-tax charges for the impairment of the Company’s investment in Teva Shares of $3,273.5 million and the tax impact of amortization of intangible assets, both at rates less than the Irish statutory rate. During the nine months ended September 30, 2017, the Company determined that a temporary difference related to excess tax over book basis in a U.S. subsidiary will reverse in the foreseeable future and recorded a corresponding tax benefit of $175.0 million.

The effective tax rate for the nine months ended September 30, 2016 was favorably impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the nine months ended September 30, 2016 included, the following items: an expense of $179.5 million primarily related to a change in a valuation allowance on a portion of U.S. capital loss carryforwards resulting from restructuring associated with the sale of the global generics business, a benefit of $48.2 million related to the change in tax rates applicable to certain temporary differences, a benefit of $40.3 million for the recognition of previously unrecognized tax benefits and a benefit of $37.9 million for the New Jersey Grow income tax credit.

The effective tax rate for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 was impacted by impairment charges tax benefited at a less favorable rate.

The Company conducts business globally and, as a result, it files U.S. federal and state and foreign tax returns. The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for amounts it believes are in accordance with the accounting standard, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations with tax authorities, identification of new issues and issuance of new legislation, regulations or case law.

The Company has several concurrent audits open and pending with the Internal Revenue Service (“IRS”) as set forth below:

IRS Audits		Tax Years
Allergan W.C. Holding Inc. (formerly known as Actavis W.C. Holding Inc.)		2013 and 2014
Warner Chilcott Corporation		2010, 2011, 2012 and 2013
Forest Laboratories, Inc.		2010, 2011, 2012, 2013 and 2014
Allergan, Inc.		2009, 2010, 2011, 2012 and 2013
LifeCell Corporation		2014

NOTE 16 — Shareholders’ Equity

A summary of the changes in shareholders’ equity for the nine months ended September 30, 2017 consisted of the following ($ in millions):

	Allergan plc
Shareholders’ equity as of December 31, 2016	$	76,192.7
Increase in additional paid in capital for share-based compensation plans		220.8
Tax impact of change in accounting for share-based compensation plans		20.8
Net (loss) attributable to shareholders		(7,246.8	)
Proceeds from stock plans		167.2
Dividends on ordinary shares		(708.2	)
Dividends on preferred shares		(208.8	)
Repurchase of ordinary shares		(36.4	)
Non-cash issuance of shares		8.5
Net impact of other-than-temporary loss on investment in Teva securities		1,599.4
Other comprehensive income		1,150.2
Shareholders’ equity as of September 30, 2017	$	71,159.4

	Warner Chilcott Limited
Members' equity as of December 31, 2016	$	88,085.7
Tax impact of change in accounting for share-based compensation plans		20.8
Net (loss) attributable to members		(7,099.7	)
Dividend to Parent		(5,120.9	)
Net impact of other-than-temporary loss on investment in Teva securities		1,599.4
Other comprehensive income		1,150.2
Members' equity as of September 30, 2017	$	78,635.5

Share Repurchase Program

During the year ended December 31, 2016, the Company’s Board of Directors approved a $5.0 billion share repurchase program which was completed in October 2016. Additionally, the Company’s Board of Directors approved a $10.0 billion accelerated share repurchase program, which was initiated in November 2016. Under the accelerated share repurchase program, the Company received $8.0 billion of repurchased shares during the year ended December 31, 2016. During the year ended December 31, 2016, the Company repurchased a total of 61.6 million ordinary shares under these share repurchase programs.

During the nine months ended September 30, 2017, the Company settled the accelerated share repurchase program, which resulted in the Company repurchasing an additional 4.2 million ordinary shares.

On September 25, 2017, the Company’s Board of Directors approved a $2.0 billion share repurchase program. As of September 30, 2017, the Company has not repurchased any shares under the program.

Quarterly Dividend

During the third quarter of 2017, the Company authorized a quarterly dividend of $0.70 per ordinary share, or $235.5 million in the aggregate, which was paid on September 15, 2017 to shareholders of record at the close of business on August 18, 2017. For the nine months ended September 30, 2017, the Company has paid $708.2 million of dividends on ordinary shares. On October 27, 2017, the Company authorized a quarterly dividend of $0.70 per ordinary share for the fourth quarter of 2017. The Company also announced that its Board of Directors has approved an increase to its quarterly cash dividend for 2018 to $0.72 per ordinary share.

Preferred Shares

In both the nine months ended September 30, 2017 and 2016, the Company paid $208.8 million of dividends on preferred shares. Each preferred share will automatically convert to ordinary shares on March 1, 2018.

Accumulated Other Comprehensive Income / (Loss)

For most of the Company’s international operations, the local currency has been determined to be the functional currency. The results of its non-U.S. dollar based operations are translated to U.S. dollars at the average exchange rates during the period. Assets and liabilities are translated at the rate of exchange prevailing on the balance sheet date. Equity is translated at the prevailing rate of exchange at the date of the equity transaction. Translation adjustments are reflected in shareholders’ equity and are included as a component of other comprehensive income / (loss). The effects of converting non-functional currency assets and liabilities into the functional currency are recorded as transaction gains/losses in general and administrative expenses in the consolidated statements of operations.

The movements in accumulated other comprehensive income for the three and nine months ended September 30, 2017 were as follows ($ in millions):

	Foreign Currency Translation Items		Unrealized (losses) / gains net of tax			Total Accumulated Other Comprehensive Income / (Loss)
Balance as of December 31, 2016	$	534.7	$	(1,573.1	)	$	(1,038.4	)
Other comprehensive gain / (loss) before reclassifications into general and administrative		860.4		203.6			1,064.0
Net impact of other-than-temporary loss on investment in Teva securities		-		1,599.4			1,599.4
Total other comprehensive income		860.4		1,803.0			2,663.4
Balance as of June 30, 2017	$	1,395.1	$	229.9		$	1,625.0

Net impact of other-than-temporary loss on investment in Teva securities		-		(207.7	)		(207.7	)
Other comprehensive gain / (loss) before reclassifications into general and administrative		280.8		13.1			293.9
Total other comprehensive income		280.8		(194.6	)		86.2
Balance as of September 30, 2017	$	1,675.9	$	35.3		$	1,711.2

The movements in accumulated other comprehensive (loss) / income for the three and nine months ended September 30, 2016 were as follows ($ in millions):

	Foreign Currency Translation Items			Unrealized gains net of tax			Total Accumulated Other Comprehensive (Loss) / Income
Balance as of December 31, 2015	$	(564.3	)	$	70.2		$	(494.1	)
Other comprehensive gain / (loss) before reclassifications into general and administrative		192.9			(15.9	)		177.0
Total other comprehensive income / (loss)		192.9			(15.9	)		177.0
Balance as of June 30, 2016	$	(371.4	)	$	54.3		$	(317.1	)

Other comprehensive gain / (loss) before reclassifications into general and administrative		(19.1	)		54.9			35.8
Impact of Teva Transaction		1,540.6			4.2			1,544.8
Net impact of other-than-temporary loss on investment in Teva securities		-			(664.2	)		(664.2	)
Total other comprehensive (loss) / income		1,521.5			(605.1	)		916.4
Balance as of September 30, 2016	$	1,150.1		$	(550.8	)	$	599.3

NOTE 17 — Hedging Activities

The Company’s revenue, earnings, cash flows and fair value of its assets and liabilities can be impacted by fluctuations in foreign exchange risks and interest rates, as applicable. The Company manages the impact of foreign exchange risk and interest rate movements through operational means and through the use of various financial instruments, including derivative instruments such as foreign currency derivatives. As of September 30, 2017 and December 31, 2016, there were no outstanding foreign currency instruments.

Overall, the Company is a net recipient of currencies other than the U.S. dollar and, as such, benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect the Company’s consolidated revenues and favorably impact operating expenses in U.S. dollars.

Net Investment Hedge

In the normal course of business, we manage certain foreign exchange risks through a variety of strategies, including hedging. Our hedging strategies include the use of derivatives, including net investment hedges.

For net investment hedges, the effective portion of the gains and losses on the instruments arising from the effects of foreign exchange are recorded in the currency translation adjustment component of accumulated other comprehensive income / (loss), consistent with the underlying hedged item. Hedging transactions are limited to an underlying exposure. As a result, any change in the value of our hedging instruments would be substantially offset by an opposite change in the value of the underlying hedged items. We do not use derivative instruments for trading or speculative purposes.

The Company is exposed to foreign exchange risk in its international operations from foreign currency purchases, net investments in foreign subsidiaries, and foreign currency assets and liabilities created in the normal course of business, including the Euro Denominated Notes. In the nine months ended September 30, 2017, we used effective net investment hedges to partially offset the effects of foreign currency on our investments in certain of our foreign subsidiaries. The total notional amount of our instruments designated as net investment hedges was $3.5 billion as of September 30, 2017. During the three and nine months ended September 30, 2017, the impact of the net investment hedges on other comprehensive income was a loss of $94.1 million and $151.3 million, respectively.

NOTE 18 — Fair Value Measurement

Assets and liabilities are measured at fair value using Fair Value Leveling or disclosed at fair value on a recurring basis and as of September 30, 2017 and December 31, 2016 consisted of the following ($ in millions):

	Fair Value Measurements as of September 30, 2017 Using:
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents ^*	$	939.4	$	939.4	$	-	$	-
Short-term investments		2,064.0	-			2,064.0		-
Deferred executive compensation investments		112.4		92.0		20.4		-
Foreign currency derivatives		-	-			-		-
Investment in Teva ordinary shares		1,765.1		1,765.1		-		-
Investments and other		76.7		76.7		-		-
Total assets	$	4,957.6	$	2,873.2	$	2,084.4	$	-
Liabilities:
Deferred executive compensation liabilities	$	114.0	$	93.6	$	20.4	$	-
Contingent consideration obligations		559.8		-		-		559.8
Total liabilities	$	673.8	$	93.6	$	20.4	$	559.8

	Fair Value Measurements as of December 31, 2016 Using:
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents^*	$	1,238.9	$	1,238.9	$	-	$	-
Short-term investments		8,062.3	-			8,062.3
Deferred executive compensation investments		111.7	90.5		21.2
Foreign currency derivatives		0.1	-		0.1			-
Investment in Teva ordinary shares		3,439.2	-			3,439.2		-
Investments and other		95.0		95.0	-			-
Total assets	$	12,947.2	$	1,424.4	$	11,522.8	$	-
Liabilities:
Deferred executive compensation liabilities	$	111.7	$	90.5	$	21.2	$	-
Contingent consideration obligations		1,172.1		-		-		1,172.1
Total liabilities	$	1,283.8	$	90.5	$	21.2	$	1,172.1

*	Marketable securities with less than 90 days remaining until maturity at the time of acquisition are classified as cash equivalents.

Marketable securities and investments consist of available-for-sale investments in money market securities and equity securities for which market prices are readily available. Unrealized gains or losses on marketable securities and investments are recorded in accumulated other comprehensive (loss) / income. Realized gains or losses on marketable securities and investments are recorded in interest income.

Contingent Consideration Obligations

The fair value measurement of the contingent consideration obligations is determined using Level 3 inputs and is based on a probability-weighted income approach. The measurement is based upon unobservable inputs supported by little or no market activity based on our own assumptions. Changes in the fair value of the contingent consideration obligations, including accretion, are recorded in our consolidated statements of operations as follows ($ in millions):

	Three Months Ended
Expense / (income)	September 30, 2017			September 30, 2016
Cost of sales	$	(67.0	)	$	10.4
Research and development		0.2			5.5
General and administrative		-			-
Total	$	(66.8	)	$	15.9

	Nine Months Ended
Expense / (income)	September 30, 2017			September 30, 2016
Cost of sales	$	(127.3	)	$	13.4
Research and development		75.7			65.8
General and administrative		-			0.1
Total	$	(51.6	)	$	79.3

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2017 and 2016 ($ in millions):

Balance as of

December 31, 2016

Net transfers

in to (out of)

Level 3

Purchases, settlements,

and other net

Net accretion

and fair value

adjustments

Balance as of

September 30, 2017

Liabilities:

Contingent consideration

obligations

1,172.1

(560.7

)

(51.6

)

559.8

Balance as of

December 31, 2015

Net transfers

in to (out of)

Level 3

Purchases, settlements,

and other net

Net accretion

and fair value

adjustments

Balance as of

September 30, 2016

Liabilities:

Contingent consideration

obligations

868.0

3.8

79.3

951.1

During the nine months ended September 30, 2017, the following activity in contingent consideration obligations from the following business acquisitions was incurred ($ in millions):

Business Acquisition	Balance as of December 31, 2016		Fair Value Adjustments and Accretion			Payments and Other			Balance as of September 30, 2017
Tobira Acquisition	$	514.4	$	19.5		$	(301.6	)	$	232.3
Allergan Acquisition		199.6		(6.8	)		(110.0	)		82.8
Medicines 360 acquisition		127.5		(69.6	)		(15.5	)		42.4
AqueSys Acquisition		103.9		(35.5	)		(25.0	)		43.4
Oculeve Acquisition		99.5		54.3			(100.0	)		53.8
ForSight Acquisition		65.4		2.0			-			67.4
Metrogel acquisition		15.0		0.1			(7.6	)		7.5
Forest Acquisition		11.0		3.2			(1.5	)		12.7
Uteron acquisition		8.2		(8.2	)		-			-
Other		27.6		(10.6	)		0.5			17.5
Total	$	1,172.1	$	(51.6	)	$	(560.7	)	$	559.8

The Company has made contingent consideration milestone payments of $549.1 million in the nine months ended September 30, 2017, respectively, including $41.2 million within operating cash flows in the nine months ended September 30, 2017.

NOTE 19 — Business Restructuring Charges

During 2017, activity related to our business restructuring and facility rationalization activities primarily related to the cost optimization initiatives in conjunction with the LifeCell and Zeltiq acquisitions, international restructurings and non-acquisition related restructurings. Restructuring activities for the nine months ended September 30, 2017 were as follows ($ in millions):

	Severance and Retention			Share-Based Compensation			Other			Total
Reserve balance at December 31, 2016	$	68.5		$	-		$	39.7		$	108.2
Charged to expense
Cost of sales		40.4			-			-			40.4
Research and development		17.8			-			-			17.8
Selling and marketing		46.6			-			-			46.6
General and administrative		20.5			34.4			13.0			67.9
Total expense		125.3			34.4			13.0			172.7
Cash payments		(77.9	)		(31.5	)		(35.8	)		(145.2	)
Other reserve impact		(7.6	)		(2.9	)		-			(10.5	)
Reserve balance at September 30, 2017	$	108.3		$	-		$	16.9		$	125.2

As part of the Company’s internal optimization restructuring programs, the Company incurred severance and other restructuring costs relating to the commercial organization of $20.0 million as the Company intends to eliminate approximately 400 commercial organization positions. In addition, restructuring charges in the nine months ended September 30, 2017 includes $13.7 million of severance and restructuring costs related to a planned internal reduction of approximately 100 employees within the Company’s R&D organization and $39.7 million of severance and restructuring costs relating to the global manufacturing operations initiating plans to close certain facilities. In the three months ended September 30, 2017, the Company reversed certain charges related to a portion of anticipated internal restructurings which are no longer occurring based on revised portfolio prioritizations and the timing of select R&D projects.

During the three months ended September 30, 2017 and 2016, the Company recognized restructuring charges of $31.8 million and $37.7 million, respectively. During the nine months ended September 30, 2017 and 2016, the Company recognized restructuring charges of $172.7 million and $72.0 million, respectively.

NOTE 20 — Commitments & Contingencies

The Company and its affiliates are involved in various disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings, and litigation matters that arise from time to time in the ordinary course of business. The process of resolving matters through litigation or other means is inherently uncertain and it is possible that an unfavorable resolution of these matters will adversely affect the Company, its results of operations, financial condition and cash flows. The Company’s general practice is to expense legal fees as services are rendered in connection with legal matters, and to accrue for liabilities when losses are probable and reasonably estimable.

The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of the liability that is accrued. As of September 30, 2017, the Company’s consolidated balance sheet includes accrued loss contingencies of approximately $75.0 million.

The Company’s legal proceedings range from cases brought by a single plaintiff to mass tort actions and class actions with thousands of putative class members. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims (including, but not limited to, qui tam actions, antitrust, product liability, breach of contract, securities, patent infringement and trade practices), some of which present novel factual allegations and/or unique legal theories. In addition, a number of the matters pending against us are at very early stages of the legal process (which in complex proceedings of the sort faced by us often extend for several years). As a result, some matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to estimate a range of possible loss. In those proceedings in which plaintiffs do request publicly quantified amounts of relief, the Company does not believe that the quantified amounts are meaningful because they are merely stated jurisdictional limits, exaggerated and/or unsupported by the evidence or applicable burdens of proof.

In matters involving the assertion or defense of the Company’s intellectual property, the Company believes it has meritorious claims and intends to vigorously assert or defend the patents or other intellectual property at issue in such litigation. Similarly, in matters where the Company is a defendant, the Company believes it has meritorious defenses and intends to defend itself vigorously. However, the Company can offer no assurances that it will be successful in a litigation or, in the case of patent enforcement matters, that a generic version of the product at issue will not be launched or enjoined. Failing to prevail in a litigation could adversely affect the Company and could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

Antitrust Litigation

Asacol^® Litigation. Two class action complaints were filed on June 22, 2015, and three more on September 21, 2015, in federal court in Massachusetts on behalf of a putative class of indirect purchasers. In each complaint plaintiffs allege that they paid higher prices for Warner Chilcott’s Asacol^® HD and Delzicol^® products as a result of Warner Chilcott’s alleged actions preventing or delaying generic competition in the market for Warner Chilcott’s older Asacol^® product in violation of U.S. federal antitrust laws and/or state laws. Plaintiffs seek unspecified injunctive relief, treble damages and/or attorneys’ fees. Defendants moved to dismiss the indirect purchasers’ complaint. A hearing was held on the motion to dismiss on May 11, 2016. On July 20, 2016, the court issued a decision granting the motion in part, dismissing the indirect purchaser plaintiffs’ claims based on purported reverse payments and dismissing several of indirect purchaser plaintiffs’ claims based on state laws. On August 15, 2016, the indirect purchaser plaintiffs filed a second amended complaint. The Company filed an answer to the second amended complaint on October 4, 2016. Complaints were also filed on behalf of a putative class of direct purchasers of Asacol^® in federal court in New York on April 26, 2016, and on June 29, 2016, in each case making similar allegations to the complaints filed by the indirect purchaser plaintiffs. Those matters have been consolidated with the indirect purchaser cases in the federal court in Massachusetts. On October 11, 2016, the Company filed a motion to dismiss the direct purchasers’ consolidated complaint and oral argument on the motion was held on December 16, 2016. On February 10, 2017, the court issued an order granting in part and denying in part the Company’s motion to dismiss. The Company has reached a tentative agreement with the direct purchaser plaintiffs to settle their claims. The Company has filed a motion for summary judgment seeking dismissal of the indirect purchaser plaintiffs’ claims.

Botox^® Litigation. A class action complaint was filed in federal court in California on February 24, 2015, and amended May 29, 2015, alleging unlawful market allocation in violation of Section 1 of the Sherman Act, 15 U.S.C. §1, agreement in restraint of trade in violation of 15 U.S.C. §1 of the Sherman Act, unlawful maintenance of monopoly market power in violation of Section 2 of the Sherman Act, 15 U.S.C. §2 of the Sherman Act, violations of California’s Cartwright Act, Section 16700 et seq. of Calif. Bus. and

Prof. Code, and violations of California’s unfair competition law, Section 17200 et seq. of Calif. Bus. and Prof. Code. In the complaint, plaintiffs seek an unspecified amount of treble damages. On July 19, 2016, plaintiffs filed a motion for class certification. On October 14, 2016, the Company filed an opposition to plaintiffs’ motion for class certification. Oral argument on the class certification motion was heard on January 13, 2017. On June 13, 2017, the court granted plaintiff’s motion for class certification. In September 2017, the parties filed cross motions for summary judgement, which were heard by the court on October 27, 2017.

Loestrin^® 24 Litigation. On April 5, 2013, two putative class actions were filed in the federal district court against Warner Chilcott and certain affiliates alleging that Warner Chilcott’s 2009 patent lawsuit settlements with Watson Laboratories and Lupin related to Loestrin^® 24 Fe were unlawful. The complaints, both asserted on behalf of putative classes of end-payors, generally allege that Watson and Lupin improperly delayed launching generic versions of Loestrin^® 24 in exchange for substantial payments from Warner Chilcott in violation of federal and state antitrust and consumer protection laws. The complaints each seek declaratory and injunctive relief and damages. Additional complaints have been filed by different plaintiffs seeking to represent the same putative class of end-payors. In addition to the end-payor suits, two lawsuits have been filed on behalf of a class of direct payors and by direct purchasers in their individual capacities. After a hearing on September 26, 2013, the JPML issued an order transferring all related Loestrin^® 24 cases to the federal court for the District of Rhode Island. On September 4, 2014, the court granted the defendants’ motion to dismiss the complaint. The plaintiffs appealed the district court’s decision to the First Circuit Court of Appeals and oral argument was held on December 7, 2015. On February 22, 2016, the First Circuit issued its decision vacating the decision of, and remanding the matter to, the district court. On June 11, 2016, defendants filed an omnibus motion to dismiss the claims of the direct purchaser class plaintiffs, end-payor class plaintiffs and individual direct purchaser plaintiffs. Oral argument on the motion to dismiss was held on January 13, 2017. On July 24, 2017, the court issued its decision denying the motion to dismiss.

Namenda^® Litigation. On September 15, 2014, the State of New York, through the Office of the Attorney General of the State of New York, filed a lawsuit in the United States District Court for the Southern District of New York alleging that Forest was acting to prevent or delay generic competition to Forest’s immediate-release product Namenda^® in violation of federal and New York antitrust laws and committed other fraudulent acts in connection with its commercial plans for Namenda^® XR. On December 11, 2014, the district court issued a ruling granting the state’s preliminary injunction motion and issued an injunction on December 15, 2014 which the Court of Appeals for the Second Circuit affirmed on May 22, 2015. Forest and the New York Attorney General reached a settlement on November 24, 2015. On May 29, 2015, a putative class action was filed on behalf of a class of direct purchasers and on June 8, 2015 a similar putative class action was filed on behalf of a class of indirect purchasers. Since that time, additional complaints have been filed on behalf of putative classes of direct and indirect purchasers. The class action complaints make claims similar to those asserted by the New York Attorney General and also include claims that Namenda^® patent litigation settlements between Forest and generic companies also violated the antitrust laws. On December 22, 2015, Forest and its co-defendants filed motions to dismiss the pending complaints. On September 13, 2016, the court issued a decision denying the Company’s motion to dismiss. On September 27, 2016, the Company filed an answer to the amended complaint. On February 16, 2017 and February 23, 2017, plaintiffs filed motions for summary judgment on two of the counts of their complaint. On March 16, 2017, the Company filed oppositions to the plaintiffs’ summary judgment motions and a cross motion for summary judgment on one count. The motions were argued before the court on May 5, 2017. On May 23, 2017, the Court issued its decision on the parties’ summary judgment motions. The Court granted plaintiffs’ motion in part as to the collateral estoppel effect of a prior finding of anti-competitive conduct, and denied the cross-motions on whether the Company’s obtaining pediatric exclusivity was anti-competitive conduct.

Zymar^®/Zymaxid^® Litigation. On February 16, 2012, Apotex Inc. and Apotex Corp. filed a complaint in the federal district court in Delaware against Senju Pharmaceuticals Co., Ltd. (“Senju”), Kyorin Pharmaceutical Co., Ltd. (“Kyorin”), and Allergan, Inc. alleging monopolization in violation of Section 2 of the Sherman Act, conspiracy to monopolize, and unreasonable restraint of trade in the market for gatifloxacin ophthalmic formulations, which includes Allergan Inc.’s ZYMAR^® gatifloxacin ophthalmic solution 0.3% and ZYMAXID^® gatifloxacin ophthalmic solution 0.5% products. In the complaint, Plaintiffs seek an unspecified amount of treble damages and disgorgement of profits. Following the court’s denial of Allergan Inc.’s motions to dismiss, Allergan Inc. filed an answer to Apotex’s complaint on June 1, 2015. On March 27, 2017, the Company and Apotex settled this matter. On April 26, 2017, this matter was dismissed.

On June 6, 2014, a separate antitrust class action complaint was filed in the federal district court in Delaware against the same defendants as in the Apotex case. The complaint alleges that defendants unlawfully excluded or delayed generic competition in the gatifloxacin ophthalmic formulations market (generic versions of ZYMAR^® and ZYMAXID^®). On September 18, 2014, Allergan Inc. filed a motion to dismiss for lack of subject matter jurisdiction and joined in co-defendants’ motion to dismiss for failure to state a claim. On August 19, 2015, the court granted Allergan Inc.’s motion to dismiss. On September 18, 2015, plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit. The Third Circuit oral argument was held on June 13, 2016. On September 7, 2016, the U.S. Court of Appeals for the Third Circuit vacated the District Court’s granting of Allergan Inc.’s motion to dismiss and remanded to the District Court for further proceedings. The Third Circuit denied the Company’s petition for a rehearing on October 4, 2016. On October 18, 2017, the parties reached a tentative settlement.

Commercial Litigation

Celexa^®/Lexapro^® Class Actions. Forest and certain of its affiliates have been named as defendants in multiple federal court actions relating to the promotion of Celexa^® and/or Lexapro^® all of which have been consolidated in the Celexa^®/Lexapro^® MDL proceeding in the federal district court in Massachusetts. On November 13, 2013, an action was filed in federal court in Minnesota which sought to certify a nationwide class of third-party payor entities that purchased Celexa^® and Lexapro^® for pediatric use. The complaint asserts claims under the federal Racketeer Influenced and Corrupt Organizations (“RICO”) Act, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa^® and Lexapro^®. Forest moved to dismiss the complaint on December 12, 2014, and the court thereafter issued a ruling dismissing plaintiff’s claims under Minnesota’s Deceptive Trade Practices Act, but denying the remaining portions of the motion. A motion for class certification was filed in February, 2016, and denied on June 2, 2016. Thereafter, plaintiffs filed a 23(f) petition requesting leave to appeal the denial of class certification which the First Circuit denied on December 7, 2016. On January 19, 2017, plaintiff filed a motion for summary judgment on the Company’s statute of limitation affirmative defense and the Company filed a cross motion for summary judgment on February 23, 2017. In addition, plaintiff in the action filed a second motion for class certification on February 28, 2017. Forest has filed a motion for summary judgment on all counts of the complaint.

On August 28, 2014, an action was filed in the federal district court in Washington seeking to certify a nationwide class of consumers and subclasses of Washington and Massachusetts consumers that purchased Celexa^® and Lexapro^® for pediatric use. The complaint asserts claims under the federal RICO statute, alleging that Forest engaged in an off-label marketing scheme and paid illegal kickbacks to physicians to induce prescriptions of Celexa^® and Lexapro^®. Forest moved to dismiss the complaint on December 19, 2014. On June 16, 2015, the court issued a ruling on the motion to dismiss, granting it in part and denying it in part. Plaintiffs thereafter filed an amended complaint. Forest moved to dismiss the amended complaint. On June 9, 2016, the court denied Forest’s motion. On March 3, 2017, plaintiffs in this action filed a motion for class certification, which motion was denied by the court. On September 15, 2017, Forest filed a motion for summary judgment on all counts of the complaint.

Telephone Consumer Protection Act Litigation. In October 2012, Forest and certain of its affiliates were named as defendants in a putative class action in federal court in Missouri. This suit alleges that Forest and another defendant violated the Telephone Consumer Protection Act (the “TCPA”) and was filed on behalf of a proposed class that includes all persons who, from four years prior to the filing of the action, were sent telephone facsimile messages of material advertising the commercial availability of any property, goods, or services by or on behalf of defendants, which did not display an opt-out notice compliant with a certain regulation promulgated by the FCC. On July 17, 2013, the district court granted Forest’s motion to stay the action pending the administrative proceeding initiated by the pending FCC Petition and a separate petition Forest filed. On October 31, 2015, another class action complaint was filed in Missouri state court against Allergan USA, Inc., Warner Chilcott Corporation and Actavis, Inc., now known as Allergan Finance LLC, alleging violations of the Telephone Consumer Protection Act, the Missouri Consumer Fraud and Protection Act and conversion on behalf of a putative nationwide class of plaintiffs to who defendant Warner Chilcott Corporation sent unsolicited facsimile advertisements. Defendants removed this action to the federal district court for the Western District of Missouri on December 10, 2015 and responded to the complaint on February 8, 2016. On February 17, 2016, plaintiffs voluntarily dismissed defendants Allergan USA, Inc. and Actavis, Inc. from the litigation. In the wake of the Court of Appeals decision on the Petition discussed below, the parties reached an agreement to settle the action against Warner Chilcott.

In a related matter, on June 27, 2013, Forest filed a Petition for Declaratory Ruling with the FCC requesting that the FCC find that (1) the faxes at issue in the action complied, or substantially complied with the FCC regulation, and thus did not violate it, or (2) the FCC regulation was not properly promulgated under the TCPA. Warner Chilcott filed a similar petition with the FCC. On January 31, 2014, the FCC issued a Public Notice seeking comment on Forest’s and several other similar petitions. On October 30, 2014, the FCC issued a final order on the FCC Petition granting Forest and several other petitioners a retroactive waiver of the opt-out notice requirement for all faxes sent with express consent. The litigation plaintiffs, who had filed comments on the January 2014 Public Notice, have appealed the final order to the Court of Appeals for the District of Columbia. Forest and other petitioners intervened in the appeal seeking review of that portion of the FCC final order addressing the statutory basis for the opt out/express consent portion of the regulation. Oral argument before the appellate court took place on November 8, 2016. On March 31, 2017, the Court of Appeals issued a decision which held that the FCC regulation at issue was not properly promulgated under the TCPA.

Prescription Opioid Drug Abuse Litigation. The Company has been named as a defendant in approximately 82 matters relating to the promotion and sale of prescription opioid pain relievers and additional suits may be filed.

On May 21, 2014, the California counties Santa Clara and Orange filed a lawsuit in California state court on behalf of the State of California against several pharmaceutical manufacturers. Plaintiffs named Actavis plc in the suit. The California plaintiffs filed an amended complaint on June 9, 2014. The California complaint alleges that the manufacturer defendants engaged in a deceptive campaign to promote their products in violation of state laws. The complaint seeks an unspecified amount of monetary damages, penalties and injunctive relief. On August 27, 2015, the court stayed the action based on primary jurisdiction arguments raised in the

motions to dismiss. On June 3, 2016, the California plaintiffs filed a motion to lift the stay and a motion for leave to file a third amended complaint. On July 1, 2016, the Company and co-defendants filed joint oppositions to the California plaintiffs’ motion to lift the stay and motion for leave to file a third amended complaint. On July 27, 2016, the court ordered the California plaintiffs to file another motion for leave to file an amended complaint along with a proposed amended complaint. On October 19, 2016, the court in the California litigation lifted the stay in part permitting defendants to challenge the third amended complaint and for the parties to discuss settlement and maintaining the stay in all other respects. On July 6, 2017, Santa Clara and Orange Counties filed a fourth amended complaint.

On June 2, 2014, the City of Chicago also filed a complaint in Illinois state court against the same set of defendants, including Actavis plc, that were sued in the California Action. Co-defendants in the action removed the matter to the federal court in Illinois. The Chicago complaint contains similar allegations as the California complaint and also seeks unspecified monetary damages, penalties and injunctive relief. Defendants have moved to dismiss the complaints in each action. On May 8, 2015, the court granted the Company’s motion to dismiss the complaint. On August 26, 2015, the City of Chicago filed a second amended complaint. On September 29, 2016, the court in the Chicago litigation granted in part and denied in part defendants’ motion to dismiss the second amended complaint. On October 25, 2016, Chicago filed a third amended complaint. On December 15, 2016, the Company moved to dismiss the third amended complaint and filed an answer to the complaint.

On December 15, 2015, the State of Mississippi filed a lawsuit in Mississippi state court against several pharmaceutical manufacturers. The Mississippi action parallels the allegations in the California and Chicago matters and seeks monetary and equitable relief. In March and April 2016, the defendants filed motions to dismiss, stay, and transfer venue in the Mississippi action. On February 13, 2017, the defendants’ motion to transfer venue was denied. On March 6, 2017, the defendants filed a petition for permission to appeal interlocutory order denying defendants’ motion to transfer venue with the Mississippi Supreme Court.

On May 31, 2017, the State of Ohio filed a lawsuit in Ohio state court against several pharmaceutical manufacturers. The Ohio action parallels the allegations in the Chicago matter and seeks monetary and equitable relief. Since the filing of the complaint by the State of Ohio, additional cases have been filed, including cases filed by the States of Oklahoma and New Mexico, but mainly by political subdivisions of states (ie., counties and municipalities) in state and federal courts across the country. In addition, a putative class action was filed in the United States District Court for the Western District of Arkansas on behalf of Arkansas residents who were prescribed an opioid product or were prescribed an opioid product and were treated for an overdose or addiction against several pharmaceutical manufacturers. The claims in the additional cases largely parallel the claims in the California, Chicago, Mississippi and Ohio matters. The Company is aware that other states and political subdivisions are considering filing comparable actions against, among others, manufacturers and parties that promoted prescription opioid pain relievers.

Testosterone Replacement Therapy Class Action. On November 24, 2014, the Company was served with a putative class action complaint filed on behalf a class of third party payers in federal court in Illinois. The suit alleges that the Company and other named pharmaceutical defendants violated various laws including the federal RICO statute and state consumer protection laws in connection with the sale and marketing of certain testosterone replacement therapy pharmaceutical products (“TRT Products”), including the Company’s Androderm^® product. This matter was filed in the TRT Products Liability MDL, described in more detail below, notwithstanding that it is not a product liability matter. Plaintiff alleges that it reimbursed third parties for dispensing TRT Products to beneficiaries of its insurance policies. Plaintiff seeks to obtain certain equitable relief, including injunctive relief and an order requiring restitution and/or disgorgement, and to recover damages and multiple damages in an unspecified amount. Defendants filed a joint motion to dismiss the complaint, after which plaintiff amended its complaint. Defendants jointly filed a motion to dismiss the amended complaint, which was granted in part and denied in part on February 3, 2016. The Court dismissed plaintiff’s substantive RICO claims against the Company for mail and wire fraud for failure to plead with particularity under Rule 9(b) but granted plaintiffs leave to replead. The court also dismissed plaintiff’s state law statutory claims and common law claims for fraud and unjust enrichment. The Court declined to dismiss plaintiff’s conspiracy claims pursuant to 18 U.S.C. § 1962(d) and its claims for negligent misrepresentation. Plaintiff filed a third amended complaint on April 7, 2016. Defendants jointly filed a motion to dismiss the third amended complaint on May 5, 2016. On August 2, 2016, the court dismissed all claims in the Third Amended Complaint against the Company except plaintiff’s RICO conspiracy claim. On August 29, 2016, the Company filed a Motion for Reconsideration or, in the alternative, Motion to Certify for Interlocutory Appeal, which the court denied on September 8, 2016. Discovery is in the early stages.

TNS Products Litigation. On March 19, 2014, a class action complaint was filed in the federal district court in California on behalf of a putative class of consumers. The complaint alleges violations of the California Unfair Competition Law, the Consumers Legal Remedies Act, and the False Advertising Law, and deceit. On June 2, 2014, plaintiff filed a first amended complaint. On June 23, 2014, Allergan filed a motion to dismiss the first amended complaint. On September 5, 2014, the court granted-in-part and denied-in-part Allergan’s motion to dismiss. On September 8, 2014, the court set trial for September 1, 2015. On November 4, 2014, Allergan and SkinMedica filed a motion to dismiss. On January 7, 2015, Allergan and SkinMedica’s motion to dismiss was denied. On February 19, 2015 plaintiff filed a third amended complaint. On May 27, 2015, the case was stayed pending the decision of the Ninth Circuit Court of Appeals in another matter involving similar legal issues.

Xaleron Dispute. On February 5, 2016, Xaleron Pharmaceuticals, Inc. filed a lawsuit against Allergan, Inc. and Actavis, Inc., now known as Allergan Finance, LLC, in state court in New York. The complaint, filed on February 26, 2016, alleges the defendants misappropriated Xaleron’s confidential business information and asserts claims for unfair competition, tortious interference with prospective economic advantage and unjust enrichment. The Company filed a motion to dismiss the complaint on April 15, 2016. On September 13, 2016, the court issued a decision denying the Company’s motion. Defendants filed an answer to the complaint and the parties are now engaged in discovery.

Zeltiq Shareholder Litigation. On March 14, 2017, a putative shareholder class action lawsuit was filed against Zeltiq Aesthetics, Inc. and various directors as well as Allergan entities in Delaware federal court. Plaintiffs allege that Zeltiq’s proxy statement misrepresents material information that is preventing Zeltiq’s shareholders from making a fully informed decision on the proposed sale to Allergan, including failure to disclose GAAP reconciliation of Zeltiq’s non-GAAP projections. The Allergan entities were named under a supervisory role theory. On March 29, 2017, a similar putative shareholder class action lawsuit was filed in California federal court against Zeltiq Aesthetics, Inc. and various directors seeking a preliminary injunction. Allergan was not named as a defendant. Zeltiq filed an amendment to its Definitive Proxy Statement on April 11, 2017, which includes supplemental disclosures that address plaintiffs’ claims. On the same date, plaintiffs in the California action withdrew their motion for a preliminary injunction. On May 23, 2017, plaintiffs in the California action voluntarily dismissed their complaint, with prejudice as to the named plaintiff and without prejudice as to the class members. The parties have reached an agreement in principle to settle this dispute pursuant to which plaintiffs will voluntarily dismiss this action.

Zeltiq Advertising Litigation. On April 26, 2017, a putative class action lawsuit was filed against Zeltiq Aesthetics, Inc. in state court in California alleging that Zeltiq misled customers regarding the promotion of its CoolSculpting product and the product’s premarket notification clearance status. On May 30, 2017, the case was removed to the United States District Court for the Central District of California. On July 20, 2017, Plaintiffs filed an amended complaint. In August 2017, Zeltiq filed a motion to dismiss the amended complaint.

Employment Litigation

In July 2012, Forest was named as defendants in an action brought by certain former Company sales representatives and specialty sales representatives in the federal district court in New York. The action is a putative class and collective action, and alleges class claims under Title VII for gender discrimination with respect to pay and promotions, as well as discrimination on the basis of pregnancy, and a collective action claim under the Equal Pay Act. The proposed Title VII gender class includes all current and former female sales representatives employed by the Company throughout the U.S. from 2008 to the date of judgment, and the proposed Title VII pregnancy sub-class includes all current and former female sales representatives who have been, are, or will become pregnant while employed by the Company throughout the U.S. from 2008 to the date of judgment. The proposed Equal Pay Act collective action class includes current, former, and future female sales representatives who were not compensated equally to similarly-situated male employees during the applicable liability period. The second amended complaint also includes non-class claims on behalf of certain of the named Plaintiffs for sexual harassment and retaliation under Title VII, and for violations of the Family and Medical Leave Act. On August 14, 2014, the court issued a decision on the Company’s motion to dismiss, granting it in part and denying it in part, striking the plaintiffs’ proposed class definition and instead limiting the proposed class to a smaller set of potential class members and dismissing certain of the individual plaintiffs’ claims. Plaintiffs filed a motion for conditional certification of an Equal Pay Act collective action on May 22, 2015 which the Company has opposed. On September 2, 2015, the court granted plaintiffs motion to conditionally certify a collective action. On April 3, 2017, the parties agreed to settle this matter.

Patent Litigation

Patent Enforcement Matters

Aczone ® Gel, 7.5%. In June and July 2017, Allergan, Inc. brought actions for infringement of U.S. Patent No. 9,517,219 (the “‘219 patent”) in the U.S. District Court for the District of Delaware against Taro Pharmaceutical Industries Ltd. and Taro Pharmaceuticals, Inc. (collectively, “Taro”). Taro had notified Allergan in April and July 2017, that it filed an ANDA with the FDA seeking to obtain approval to market a generic version of Aczone® Gel, 7.5% before the ‘219 patent expires in November 2033. These lawsuits triggered automatic stays of approval of Taro’s ANDA that expire no earlier than October 2019 and January 2020, respectively (unless there is a final court decision adverse to Plaintiff sooner). Trial has been scheduled for February 4, 2019, assuming the parties consent to Magistrate Judge Fallon conducting all proceedings in the case. Otherwise, when the case is ready for trial the court will assign a district judge and the pre-trial and trial dates will be set depending on the district judge’s schedule.

Amrix^®. In August 2014, Aptalis Pharmatech, Inc. (“Aptalis”) and Ivax International GmbH (“Ivax”), Aptalis’s licensee for Amrix, brought an action for infringement of U.S. Patent No. 7,790,199 (the “’199 patent”), and 7,829,121 (the “’121 patent”) in the U.S. District Court for the District of Delaware against Apotex Inc. and Apotex Corp. (collectively “Apotex”). Apotex has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market a generic version of Amrix before these patents expire. (The ’199 and ’121 patents expire in November 2023.) This lawsuit triggered an automatic stay of approval of Apotex’s ANDA until no earlier than December 27, 2016 (unless there is a final court decision adverse to Plaintiffs sooner, and subject to any other exclusivities, such as a first filer 180 day market exclusivity). A bench trial concluded on November 17, 2015. Post-trial briefing concluded on April 8, 2016. On December 8, 2016, the court entered an order, opinion and judgment in favor of Plaintiffs and against Apotex, that Apotex infringes the asserted claims of the ‘199 and ‘121 patents. On December 8, 2016, Apotex filed a notice of appeal. Apotex filed its opening brief on February 15, 2017. Aptalis and Ivax’s responsive brief was filed on May 11, 2017. Apotex’s reply brief was filed on May 25, 2017. Oral argument is scheduled for December 5, 2017. On September 29, 2016, Adare Pharmaceuticals, Inc., and Ivax filed suit in U.S. District Court for the District of Delaware against Apotex asserting that Apotex’s generic product will infringe U.S. Patent No. 9,399,025 (the “’025 patent”). (The ‘025 patent expires in November 2023.). On March 17, 2017, the district court granted the parties’ joint stipulation to stay the action concerning the ‘025 patent.

Byvalson^®. On September 18, 2017, Forest Laboratories, LLC and Forest Laboratories Holdings, Ltd. (collectively, “Forest”) brought an action for infringement of U.S. Patent Nos. 7,803,838 (the “‘838 patent”) and 7,838,552 (the “‘552 patent”) in the U.S. District Court for the District of New Jersey against Prinston Pharmaceutical Inc., Zhejiang Huahai Pharmaceutical Co., Ltd., Huahai US Inc. and Solco Healthcare US, LLC (collectively, “Prinston”). Prinston notified Forest that it filed an ANDA with the FDA seeking to obtain approval to market a generic version of Byvalson^® before the ‘838 and ‘552 patents expire. The ‘838 patent expires in August 2026, and the ‘552 patent expires in October 2027. Prinston claims in its notice letter that the ‘838 patent and the ‘552 patent are invalid, unenforceable and/or would not be infringed. This lawsuit triggered an automatic stay of approval of the Prinston ANDA until February 2020 (unless a court issues a decision adverse to Forest sooner). No schedule has been set.

Canasa^®. In July 2013, Aptalis Pharma US, Inc. and Aptalis Pharma Canada Inc. brought actions for infringement of U.S. Patent Nos. 8,217,083 (the “’083 patent”) and 8,436,051 (the “’051 patent”) in the U.S. District Court for the District of New Jersey against Mylan and Sandoz. These companies have notified Aptalis that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Canasa^® before these patents expire. Amended complaints were filed against these companies in November 2013 adding claims for infringement of U.S. Patent No. 7,854,384 (the “’384 patent”). The ’083, ’051, and ’384 patents expire in June 2028. On November 11, 2015, Aptalis entered into a settlement agreement with Mylan. Under the terms of the settlement agreement, Mylan may launch its generic version of Canasa^® on December 15, 2018, or earlier under certain circumstances. On March 22, 2016, Aptalis entered into a settlement agreement with Sandoz.

On December 14, 2015, Aptalis brought an action for infringement of the ’083, ’051, and ’384 patents in the U.S. District Court for the District of New Jersey against Pharmaceutical Sourcing Partners, Inc. (“PSP”). PSP had notified Aptalis that it had filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa^® before certain of these patents expire. This lawsuit triggered an automatic stay of approval of PSP’s ANDA that expires no earlier than May 2018 (unless a court issues a decision adverse to Aptalis sooner). On December 23 and 27, 2015, Aptalis brought actions for infringement of the ’083, ’051, and ’384 patents in the U.S. District Courts for the District of New Jersey and the District of Delaware, respectively, against Delcor Asset Corp., Renaissance Pharma, Inc. and Renaissance Acquisition Holdings, LLC (collectively, “Delcor”). Delcor has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa before certain of these patents expire. These lawsuits triggered an automatic stay of approval of Delcor’s ANDA that expires no earlier than May 2018 (unless there is a final court decision adverse to Aptalis sooner). On March 14, 2016, Aptalis filed a motion to dismiss PSP’s Seventh and Eighth counterclaims alleging unfair competition and tortious interference under state law, or in the alternative, to bifurcate the trial and stay discovery relating to PSP’s Seventh and Eighth counterclaims. Trial is scheduled for November 2017 in the PSP action. On April 8, 2016, Aptalis entered into a settlement agreement with Delcor. On May 27, 2016, the court denied Aptalis’ motion to the extent that it concerns dismissal of PSP’s Seventh and Eighth counterclaims, denied without prejudice to the extent that the motion concerns bifurcation and a stay and granted leave to Aptalis to move again concerning bifurcation and a stay. On June 24, 2016, Aptalis filed an answer to PSP’s counterclaims. On October 13, 2016, Aptalis entered into a settlement agreement with PSP, and the case was dismissed on October 20, 2016.

On January 30, 2017, Aptalis brought an action for infringement of the ’083, ’051, and ’384 patents in the U.S. District Court for the District of New Jersey against Zydus Pharmaceuticals (USA) Inc., Zydus Healthcare USA LLC and Cadila Healthcare Limited (collectively “Zydus”). Zydus has notified Aptalis that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa^® before certain of these patents expire. This lawsuit triggered an automatic stay of approval of Zydus’s ANDA that expires no earlier than June 2019 (unless a court issues a decision adverse to Aptalis sooner). No trial schedule has been set.

On August 11, 2017, Aptalis brought actions for infringement of the ’083, ’051, and ’384 patents in the U.S. District Courts for the District of New Jersey and the District of Delaware against Amneal Pharmaceuticals LLC and Amneal Pharmaceuticals of New York, LLC (collectively “Amneal”). Amneal notified Aptalis that it filed an ANDA with the FDA seeking to obtain approval to market generic versions of Canasa before certain of these patents expire. These lawsuits triggered an automatic stay of approval of Amneal’s ANDA that expires no earlier than December 29, 2019 (unless there is a final court decision adverse to Aptalis sooner). On August 23, 2017, Aptalis entered into a settlement agreement with Amneal and the case was dismissed.

Combigan^® II-III. In 2012, Allergan filed a complaint against Sandoz, Alcon, Apotex and Watson in the U.S. District Court for the Eastern District of Texas, Marshall Division, alleging that their proposed products infringe U.S. Patent Number 8,133,890 (the “890 Patent”), and subsequently amended their complaint to assert infringement of U.S. Patent Number 8,354,409. In March 2013, Allergan received a Paragraph IV invalidity and non-infringement certification from Sandoz, contending that the ‘890 Patent is invalid and not infringed by the proposed generic product. In October 2013, Allergan filed a motion to stay and administratively close the Combigan II matter, which was granted. In April 2015, Allergan filed a stipulation of dismissal and the U.S. District Court granted the Order with respect to the Watson defendants. In October 2015, the U.S. District Court entered an order consolidating the Combigan^® III matter C.A. 2:15-cv-00347-JRG into this matter C.A. 2:12-cv-00207-JRG, as lead case. A Markman Hearing was held on March 2, 2016.

On May 19, 2016, Sandoz filed an opposed motion for leave to amend its answer and counterclaim seeking to add a count for declaratory judgment of invalidity of the ‘149 Patent. On July 20, 2016, Alcon and Sandoz filed motions for summary judgment of invalidity and non-infringement of claim 4 of the ‘149 Patent, and Allergan filed a motion for summary judgment of infringement of claim 4 of the ‘149 Patent and to preclude Sandoz from re-challenging the validity of that claim. On September 30, 2016, the court denied the parties’ motions for summary judgment. A bench trial concluded on October 27, 2016. On December 30, 2016, the court entered an opinion and final judgment in favor of Allergan and against Sandoz, that the asserted claims of the ‘149 Patent, and U.S. Patent Numbers 7,320,976 (“‘976 Patent”) and 8,748,425 (the “‘425 Patent”), were not invalid, and that Sandoz infringes the asserted claims of the ‘425 Patent. The court also held in favor of Sandoz and against Allergan, that Sandoz does not infringe the asserted claims of the ‘149 and ‘976 Patents. Sandoz filed a notice of appeal to U.S. Court of Appeals for the Federal Circuit on January 17, 2017, and Allergan filed a notice of cross appeal on January 27, 2017. On March 1, 2017, Sandoz filed its opening brief, on April 10, 2017, Allergan filed its responsive brief, and on May 15, 2017, Sandoz filed its reply brief. Oral argument was held on October 2, 2017.

Delzicol^®. On August 28, 2015, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of U.S. Patent No. 6,649,180 (the “‘180 patent”) in the United States District Court for the Eastern District of Texas against Teva Pharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (collectively, “Teva”). Teva notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol^® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Teva’s ANDA that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). Trial is scheduled for October 2017. On November 9, 2015, Plaintiffs also brought an action for infringement of ‘180 patent in the United States District Court for the Eastern District of Texas against Mylan Pharmaceuticals, Inc., Mylan Laboratories Limited and Mylan, Inc. (collectively, “Mylan”). Mylan notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol^® before the ‘180 patent expires in April 2020. This lawsuit triggered an automatic stay of approval of Mylan’s ANDA that expires no earlier than March 2018 (unless a court issues a decision adverse to Plaintiffs sooner). On December 16, 2015, Mylan filed a motion to dismiss for failure to state a claim, lack of personal jurisdiction, and improper venue. Trial is scheduled for October 2017. In March 2016, the court entered an order consolidating the Mylan litigation (C.A. 2:15-cv-01740) with the Teva litigation (C.A. 2:15-cv-01471) matter as the lead case.

On April 1, 2016, Warner Chilcott Company, LLC, Warner Chilcott (US), LLC, Allergan Pharmaceuticals International Ltd., Allergan USA, LLC and Qualicaps Co., Ltd. (collectively, “Plaintiffs”) brought an action for infringement of the ‘180 patent in the United States District Court for the Eastern District of Texas against Zydus International Pvt. Ltd., Zydus Pharmaceuticals (USA) Inc. and Cadila Healthcare Ltd. (collectively, “Zydus”). Zydus notified the Company that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Delzicol^® before the ‘180 patent expires. In May 2016, Plaintiffs filed a first amended complaint against Mylan and a first amended and second amended complaint against Teva. In June 2016, Plaintiffs filed a second amended complaint against Mylan and a third amended complaint against Teva. On June 27, 2016, Teva filed an answer and counterclaims and Mylan filed a motion to dismiss the second amended complaint for failure to state a claim, lack of personal jurisdiction, and improper venue. On June 9, 2016, Zydus filed an answer and counterclaims.

On July 21, 2016, the Plaintiffs filed an answer to Teva’s counterclaim and to Zydus’s counterclaim. On November 28, 2016, Plaintiffs entered into a settlement agreement with Zydus. Under the terms of the settlement agreement, Zydus may launch its generic version of Delzicol^® on March 1, 2020, or earlier under certain circumstances. On January 19, 2017, the Magistrate Judge issued a Report and Recommendation denying Mylan’s motion to dismiss, which was adopted by the district court on February 14, 2017. On

March 31, 2017, Plaintiffs filed a motion to stay the litigation against Teva, and, on April 11, 2017, Plaintiffs filed a motion to dismiss the originally-filed action against Teva for lack of subject matter jurisdiction. On April 21, 2017, Plaintiffs brought an action for infringement of the ‘180 patent in the United States District Court for the Eastern District of Texas against Teva Pharmaceuticals USA, Inc., which had notified Plaintiffs that, on or before March 9, 2017, it had amended its ANDA seeking to obtain approval to market generic versions of Delzicol^®. Teva also notified Plaintiffs that it had submitted to FDA a new paragraph IV certification for the ‘180 patent in connection with its ANDA. On July 25, 2017, the Magistrate Judge denied Plaintiffs’ motion to stay the originally-filed action against Teva and also issued a Report and Recommendation denying Plaintiffs’ motion to dismiss the same action. On August 7, 2017, Teva and Mylan filed motions for summary judgment of non-infringement, and Teva filed a motion for summary judgment for alleged improper Orange Book listing. On September 28, 2017, the Magistrate Judge issued a Report and Recommendation granting Teva’s and Mylan’s motions for summary on non-infringement and denying, as moot, Teva’s summary judgment motion concerning Orange Book listing. On October 13, 2017, Plaintiffs and Defendants filed objections to the Magistrate Judge’s Report and Recommendation on non-infringement.

Delzicol^® IPR. On November 4, 2016, Mylan Pharmaceuticals Inc. (“Mylan”) filed a petition for Inter Partes Review (“IPR”) with the USPTO regarding U.S. Patent No. 6,649,180 (the “‘180 patent”). Qualicaps Co., Ltd.’s filed a patent owner preliminary response on February 17, 2017. On May 17, 2017, the USPTO granted Mylan’s petition to institute an IPR on certain grounds with respect to claims 1 and 4 of the ‘180 patent. On July 21, 2017, Qualicaps filed a patent owner response. September 15, 2017, Mylan filed a reply. A hearing is scheduled for January 25, 2018.

Fetzima^®. In September and October 2017, certain Allergan subsidiaries and Pierre Fabre Medicament received Paragraph IV certification notice letters from Amneal Pharmaceuticals LLC, Aurobindo Pharma USA, Inc., MSN Laboratories Private Limited, Prinston Pharmaceutical Inc., Torrent Pharmaceuticals Limited, West-Ward Pharmaceuticals International Limited, and Zydus Pharmaceuticals (USA) Inc. indicating that they had submitted to FDA ANDAs seeking approval to manufacture and sell generic versions of FETZIMA^® 20 mg, 40 mg, 80 mg, and 120 mg extended release capsules (“FETZIMA”) before the expiration of the three patents listed in the Orange Book, including U.S. Patent Nos. RE43,879 (the “‘879 Patent”); 8,481,598 (the “‘598 Patent”); and 8,865,937 (the “‘937 Patent”). The ‘879 Patent expires in June 2023 (not including a pending application for patent term extension (“PTE”)), the ‘598 patent expires in March 2031, and the ‘937 Patent expires in May 2032. These generic ANDA filers claim in their respective notice letters that the ‘879 Patent, the ‘598 Patent and the ‘937 Patent are invalid and/or would not be infringed. The Company is evaluating patent infringement actions in response to these ANDA filings.

Juvéderm^® XC IPRs. On August 2, 2017, Teoxane S.A. (“Teoxane”) filed a petition for Inter Partes Review (Trial number IPR2017-01906) with the USPTO regarding U.S. Patent No. 8,357,795, which was accorded a filing date of September 13, 2017. And on August 24, 2017, Teoxane filed a petition for Inter Partes Review (Trial Number IPR2017-02002) with the USPTO regarding U.S. Patent Number 8,450,475, which was accorded a filing date of September 13, 2017.

Lastacaft^®. In July 2017, the Company and Vistakon Pharmaceuticals, LLC received a Paragraph IV certification notice letter from Aurobindo Pharma USA Inc. (“Aurobindo”) indicating that it had submitted to FDA an ANDA seeking approval to manufacture and sell a generic version of LASTACAFT® (“LASTACAFT”) before the expiration of U.S. Patent No. 8,664,215 (the “‘215 Patent) listed in the Orange Book. The ‘215 Patent expires December 2027. Aurobindo claims that the patent listed in its notice letter is invalid, unenforceable and/or would not be infringed. On September 8, 2017, Allergan, Inc. and Vistakon Pharmaceuticals, LLC (collectively, “Plaintiffs”), brought an action for infringement of the ‘215 Patent in the U.S. District Court for the District of Delaware against Aurobindo Pharma Ltd., Aurobindo Pharma USA, Inc. and Auromedics Pharma LLC (collectively, “Defendants”). This lawsuit triggered an automatic stay of approval of the applicable ANDA that expires no earlier than January 2020 (unless there is a final court decision adverse to Plaintiffs sooner). No trial schedule has been set.

Latisse^® IV. In July 2017, Plaintiffs Allergan and Duke University (collectively, “Plaintiffs”) filed a complaint for infringement of U.S. Patent Number 9,579,270 (“‘270 Patent”) against Defendants Sandoz Inc. (“Sandoz”) and Alcon Laboratories, Inc. (“Alcon”) in the U.S. District Court for the Eastern District of Texas. (The ‘270 patent expires in January 2021.) In December 2016, Sandoz announced the U.S. market launch of Defendants’ generic copy of LATISSE^®. In their complaint, Plaintiffs seek, among other things, a judgment that Defendants have infringed the ‘270 patent by making, selling, and offering to sell, and/or importing, their generic copy of LATISSE^® within the United States. Plaintiffs seek injunctive relief and damages for Defendants’ infringement. On September 14, 2017, Alcon filed its answer, Sandoz filed its answer and counterclaims, and Defendants filed a joint motion to transfer venue to the Middle District of North Carolina (“MDNC”). Defendants filed a complaint in the MDNC for declaratory judgment seeking, among other things, a declaration of invalidity, unenforceability and non-infringement of the ‘270 patent, a declaration precluding Allergan and Duke University from asserting the ‘270 based on collateral estoppel and a declaratory judgment that assertion of the ‘270 patent constitutes patent misuse, sham litigation and a violation of the Sherman Act. In the MDNC complaint Sandoz and Alcon seek an unspecified amount of treble damages. On September 14, 2017, Sandoz and Alcon filed a joint motion for summary judgment based on collateral estoppel.

In addition, in August 2017, the Company and Duke University received a Paragraph IV certification notice letter from Alembic Pharmaceuticals, Ltd. (“Alembic”) indicating that it had submitted to FDA an ANDA seeking approval to manufacture and sell a generic version of LATISSE® (“LATISSE”) before the expiration of U.S. Patent Nos. 8,038,988 (the “‘988 Patent”), 8,101,161 (the “‘161 Patent”), 8,263,054 (the “‘054 Patent”), 8,541,466 (the “‘466 Patent”), 8,632,760 (the “‘760 Patent”), 8,758,733 (the “‘733 Patent”), 8,906,962 (the “‘962 Patent”), 8,986,715 (the “‘715 Patent”), 9,216,183 (the “‘183” Patent), 9,226,931 (the “‘931 Patent) and 9,579,270 (the “‘270 Patent”). (The ‘466, ‘962 and ‘270 Patents expire in January 2021; the ‘054, ‘760, ‘733, ‘715, ‘183, and ‘931 Patents expire in January 2023; the ‘988 Patent expires in August 2023; and the ‘161 Patent expires in May 2024). Alembic claims that the patents listed in its notice letter are invalid, unenforceable and/or would not be infringed. On September 25, 2017, Allergan, Inc., Allergan Sales, LLC and Duke University (collectively, “Plaintiffs”), brought an action for infringement of the ‘270 Patent in the U.S. District Court for the District of New Jersey against Alembic Pharmaceuticals, Ltd., Alembic Global Holding SA, and Alembic Pharmaceuticals, Inc. This lawsuit triggered an automatic stay of approval of the applicable ANDA that expires no earlier than February 2020 (unless there is a final court decision adverse to Plaintiffs sooner). No trial schedule has been set.

Linzess^®. In October and November 2016, the Company and Ironwood received Paragraph IV certification notice letters from Teva Pharmaceuticals USA, Inc. (“Teva”) , Aurobindo Pharma Ltd., Mylan Pharmaceuticals Inc. (“Mylan”), and Sandoz Inc. (“Sandoz”) indicating that they had submitted to FDA ANDAs seeking approval to manufacture and sell generics version of LINZESS® 145 mcg and 290 mcg capsules (“LINZESS”) before the expiration of some or all of the nine patents then listed in the Orange Book, including U.S. Patent Nos. 7,304,036 (the “‘036 Patent”); 7,371,727 (the “‘727 Patent”); 7,704,947 (the “‘947 Patent”); 7,745,409 (the “‘409 Patent”); 8,080,526 (the “‘526 Patent”); 8,110,553 (the “‘553 Patent”); 8,748,573 (the “‘573 Patent”); 8,802,628 (the “‘628 Patent”); and 8,933,030 (the “‘030 Patent”). (The ‘727, ‘947, ‘409, ‘526 and ‘553 Patents expire in January 2024; the ‘036 Patent expires in August 2026; and the ‘573, ‘628 and ‘030 Patents expire in 2031.) Teva, Aurobindo Pharma Ltd., Mylan and Sandoz claim that the patents discussed in their respective notice letters are invalid, unenforceable and/or would not be infringed. On November 30, 2016, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd., Allergan USA, Inc. and Ironwood Pharmaceuticals, Inc. (collectively, “Plaintiffs”), brought an action for infringement of some or all of the ‘036, ‘727, ‘947, ‘409, ‘526, ‘553, ‘573, ‘628 and ‘030 Patents in the U.S. District Court for the District of Delaware against Aurobindo Pharma Ltd., Aurobindo Pharma USA, Inc. (collectively, “Aurobindo”), Teva, Mylan and Sandoz. This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than February 2020 (unless there is a final court decision adverse to Plaintiffs sooner). Mylan filed its answer on December 22, 2016. Teva and Sandoz filed their respective answers and counterclaims on January 20 and January 30, 2017. Aurobindo filed its answer and counterclaims on April 6, 2017. On May 19, 2017, the district court entered a scheduling order. Trial is scheduled for June 2019. On July 13, 2017, Mylan filed a motion to dismiss for improper venue.

In May 2017, the Company and Ironwood also received a Paragraph IV certification notice letter from Sun Pharma Global FZE indicating that it had submitted to FDA an ANDA seeking approval to manufacture and sell a generic version of LINZESS before the expiration of the ‘573, ‘628 and ‘030 Patents. Sun Pharma Global FZE claims that the patents are invalid and/or would not be infringed. On June 30, 2017, Plaintiffs brought an action for infringement of the ‘573, ‘628 and ‘030 Patents in the U.S. District Court for the District of Delaware against Sun Pharma Global FZE and Sun Pharmaceutical Industries Inc. (collectively, “Sun”). This lawsuit triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than February 2020 (unless there is a final court decision adverse to Plaintiffs sooner). No schedule has been set.

In July 2017, the Company and Ironwood received a second Notice Letter relating to the ANDA submitted to the FDA by Aurobindo. Aurobindo claims that the ‘036, ‘727, ‘947, ‘409, ‘526, ‘553 Patents, as well as the ‘573, ‘628 and ‘030 Patents, are invalid and/or would not be infringed. On August 25, 2017, Plaintiffs brought an action for infringement of these patents in the U.S. District Court for the District of Delaware against Aurobindo. On September 28, 2017, this action was consolidated with the first action filed against Aurobindo.

In September 2017, the Company and Ironwood received a second Notice Letter relating to the ANDA submitted to the FDA by Teva. Teva claims that U.S. Patent No. 9,708,371 (the “‘371 Patent”) is invalid and/or would not be infringed. (The ‘371 Patent expires in 2033.) On October 20, 2017, Plaintiffs brought an action for infringement of the ‘371 patent in the U.S. District Court for the District of Delaware against Teva. No schedule has been set.

Namenda XR^®. Between January and October 2014, Forest Laboratories, Inc., Forest Laboratories Holdings, Ltd. (collectively, “Forest”) and Merz Pharma and Adamas Pharmaceuticals, Forest’s licensors for Namenda XR^® (all collectively, “Plaintiffs”), brought actions for infringement of some or all of U.S. Patent Nos. 5,061,703 (the “‘703 patent”), 8,039,009 (the “‘009 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,329,752 (the “‘752 patent”), 8,362,085 (the “‘085 patent”), and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Wockhardt, Teva, Sun, Apotex, Anchen, Zydus, Watson, Par, Mylan, Amneal, Ranbaxy, and Amerigen, and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namenda XR^® before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘703 patent expires in October 2015, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085,

and ‘233 patents expire in May 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than June 2016 (unless there is a final court decision adverse to Plaintiffs sooner). On June 11, 2014, Mylan filed a motion to dismiss for lack of personal jurisdiction, which the district court denied on March 30, 2015. On December 18, 2014, Ranbaxy filed an IPR before the Patent Trial and Appeal Board, U.S. Patent and Trademark Office, with respect to the ‘085 patent. Adamas filed a preliminary response on April 14, 2015. On May 1, 2015, Forest entered into a settlement agreement with Ranbaxy. On May 15, 2015, the Patent Trial and Appeal Board granted Adamas and Ranbaxy’s joint motion to terminate the case. On October 17, 2014, Forest and Actavis Laboratories FL, Inc. (f/k/a Watson Laboratories, Inc. - Florida) filed a stipulation dismissing their respective claims without prejudice. On November 3, 2014, Plaintiffs entered into a settlement agreement with Wockhardt. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Wockhardt that will permit it to launch its generic version of Namenda XR^® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘703 patent, the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, including any extensions and/or pediatric exclusivities; or (b) the date that Wockhardt obtains final FDA approval of its ANDA, or earlier in certain circumstances.

On January 13, 2015, Plaintiffs entered into settlement agreements with Anchen and Par. Under the terms of the settlement agreements, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide licenses to Anchen and Par that will permit them to launch their generic versions of Namenda XR^® as of the date that is the later of (a) two (2) calendar months prior to the expiration date of the last to expire of the ‘209 patent, the ‘708 patent, the ‘379 patent, the ‘752 patent, the ‘085 patent, and the ‘233 patent, as well as the ‘009 patent for Par only, including any extensions and/or pediatric exclusivities; or (b) the dates that Anchen and Par obtain final FDA approval of their respective ANDAs, or earlier in certain circumstances. On May 11, 2015, Forest entered into a settlement agreement with Sun. On August 18, 2015, Forest entered into a settlement agreement with Zydus. On September 9, 2015, Forest entered into a settlement agreement with Amneal. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Amneal that will permit it to launch its generic version of Namenda XR^® beginning January 31, 2020, following receipt by Amneal of final approval from the FDA on its ANDA for generic Namenda XR^®; or (b) under certain circumstances, Amneal has an option to launch an authorized generic version of Namenda XR^® beginning on January 31, 2021. The Company entered into a settlement agreement with Amerigen on October 20, 2015. The Company entered into a settlement agreement with Mylan on November 16, 2015. The Company entered into a settlement agreement with Lupin on December 22, 2015. On January 5, 2016, the district court issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in the asserted patents. On February 11, 2016, the Company settled with Apotex. Trial began on February 16, 2016 with the remaining defendant Teva with respect to the ‘009 patent. Post-trial briefing concluded on April 29, 2016. The Parties have reached agreement on settlement with Teva subject to Court approval.

In June 2016, after reaching an agreement to settle, the parties filed and the court entered a judgment of infringement in favor of Plaintiffs and against Teva regarding the ‘009 patent. On July 26, 2016, the court entered a final judgment of invalidity of claim 1 of the ‘209 patent, claims 1, 6, 10 and 15 of the ‘708 patent, claim 1 of the ‘379 patent, claims 1 and 9 of the ‘752 patent, claims 1 and 7 of the ‘085 patent and claim 1 of the ‘233 patent in favor of Teva. On August 23, 2016, the Company filed a Notice of Appeal to the U.S. Court of Appeals for the Federal Circuit in the actions involving Teva with respect to the district court’s January 5, 2016 claim construction opinion and order, and the July 26, 2016 final judgment of invalidity. On August 24, 2016, the U.S. Court of Appeals for the Federal Circuit docketed the appeal filed by the Company. The Company filed its opening brief on December 8, 2016. Teva filed its responsive brief on February 1, 2017. The Company filed its reply brief on March 17, 2017. Oral argument is scheduled for November 9, 2017. The Company believes that its arguments on appeal are substantial and meritorious. On September 29, 2016, the Company issued a press release following announcement of ANDA approvals, including FDA final approval by Lupin. If the district court ruling is upheld on appeal to the U.S. Court of Appeals for the Federal Circuit, there is a possibility that generic entry for Namenda XR could occur following an adverse decision.

On October 9, 2015, the Company also brought an action for infringement of the ‘009, ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Accord Healthcare, Inc. and Intas Pharmaceuticals Limited (collectively, “Accord”). The Accord defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR^® before these patents expire. On January 14, 2016, Forest entered into a settlement agreement with Accord. On December 8, 2015, the Company also brought an action for infringement of the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents in the U.S. District Court for the District of Delaware against Panacea Biotec, Ltd. (“Panacea”). Panacea has notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namenda XR^® before these patents expire. On May 17, 2016, the Company entered into a settlement agreement with Panacea.

In April 2017, Forest Laboratories, LLC received a Paragraph IV certification notice letter from Macleods Pharmaceuticals, Ltd. indicating that it had submitted to FDA an ANDA seeking approval to manufacture and sell a generic version of Namenda XR^® before the expiration of the ‘009, ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents. Macleods Pharmaceuticals, Ltd. claims that these patents are invalid, unenforceable and/or would not be infringed. The Company is evaluating a patent infringement action in response to this ANDA filing. On June 2, 2017, the Company and Adamas Pharma, LLC brought an action for infringement of the ‘009, ‘209, ‘708 and ‘379 patents in the U.S. District Court for the District of Delaware against Macleods Pharmaceuticals, Ltd. and Macleods Pharma USA, Inc. (collectively, “Macleods”). This lawsuit triggered an automatic stay of approval of the Macleods ANDA that expires no earlier than October 2019 (unless there is a final court decision adverse to Plaintiffs sooner). No trial schedule has been set.

Namzaric^®. On August 27, 2015, Forest Laboratories, LLC, Forest Laboratories Holdings, Ltd. and Adamas Pharmaceuticals, Inc. (all collectively, “Plaintiffs”), brought an action for infringement of some or all of U.S. Patent Nos. 8,039,009 (the “’009 patent”), 8,058,291 (the “‘291 patent”), 8,168,209 (the “‘209 patent”), 8,173,708 (the “‘708 patent”), 8,283,379 (the “‘379 patent”), 8,293,794 (the “‘794 patent”), 8,329,752 (the “‘752 patent”), 8,338,485 (the “‘485 patent”), 8,338,486 (the “‘486 patent”), 8,362,085 (the “‘085 patent”), 8,580,858 (the “‘858 patent”) and 8,598,233 (the “‘233 patent”) in the U.S. District Court for the District of Delaware against Amneal Pharmaceuticals LLC and Par Pharmaceutical, Inc., and related subsidiaries and affiliates thereof. These companies have notified Plaintiffs that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Namzaric^® before these certain patents expire. Including a 6-month pediatric extension of regulatory exclusivity, the ‘009 patent expires in September 2029, and the ‘209, ‘708, ‘379, ‘752, ‘085, and ‘233 patents expire in May 2026. The ‘291 patent expires in December 2029, and the ‘794, ‘485, ‘486, and ‘858 patents expire in November 2025. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than January 2018 (unless there is a final court decision adverse to Plaintiffs sooner). On October 23, 2015, the Company also brought an action for infringement of the ‘009, ‘291, ‘209, ‘708, ‘379, ‘794, ‘752, ‘485, ‘486, ‘085, ‘858 and ‘233 patents in the U.S. District Court for the District of Delaware against Amerigen Pharmaceuticals, Inc. and Amerigen Pharmaceuticals Ltd. (collectively, “Amerigen”). The Amerigen defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namzaric^® before these certain patents expire. On January 5, 2016, the district court in the Namenda XR^® patent litigations issued a claim construction ruling that included findings of indefiniteness as to certain claim terms in certain of the patents also asserted in the pending Namzaric^® patent litigations. The Company entered into a settlement agreement with Par on April 29, 2016. Under the terms of the settlement agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Par that will permit it to launch its generic version of Namzaric^® as of June 5, 2029, or earlier in certain circumstances. Trial is scheduled for October 2017. In June 2016, Forest filed a motion for leave to file an amended complaint to add the ‘009 patent against Amneal, which the District Court granted on July 19, 2016. On May 20, 2016, the Company also brought an action for infringement of the ‘009, ‘291, ‘209, ‘708, ‘379, ‘794, ‘752, ‘485, ‘486, ‘085, ‘858 and ‘233 patents in the U.S. District Court for the District of Delaware against Accord Healthcare Inc. USA and Intas Pharmaceuticals Limited (collectively, “Accord”). The Accord defendants have notified Plaintiffs that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namzaric^® before these certain patents expire. The Company entered into a settlement agreement with Accord on July 20, 2016. On August 30, 2016, Plaintiffs entered into a settlement agreement with Amneal, who is believed to be a first applicant with respect to certain dosage strengths (memantine hydrochloride extended-release and donepezil hydrochloride, 14 mg/10 mg and 28 mg/10 mg) of Namzaric^®. Under the terms of the agreement, and subject to review of the settlement terms by the U.S. Federal Trade Commission, Plaintiffs will provide a license to Amneal that will permit it to launch its generic version of Namzaric^® as of January 1, 2025, or earlier in certain circumstances. Alternatively, under certain circumstances, Amneal has an option to launch an authorized generic version of Namzaric beginning on January 1, 2026. On October 21, 2016, Plaintiffs entered into a settlement agreement with Amerigen, and the case was dismissed.

On November 10, 2016, the Company also brought an action for infringement of the ‘009, ‘291, ‘485, ‘486, and ‘858 patents in the U.S. District Court for the District of Delaware against Apotex Corp and Apotex Inc. (“Apotex”). Apotex has notified Plaintiffs that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Namzaric^® before these patents expire. This lawsuit triggered an automatic stay of approval of Apotex’s ANDA that expires no earlier than March 2019 (unless there is a final court decision adverse to Plaintiffs sooner). On April 10, 2017, Plaintiffs entered into a settlement agreement with Apotex, and the case was dismissed.

In April 2017, Forest Laboratories, LLC received a Paragraph IV certification notice letter from Macleods Pharmaceuticals, Ltd. (“Macleods”) indicating that it had submitted to FDA an ANDA seeking approval to manufacture and sell generic versions of Namzaric^® donepezil and memantine hydrochloride extended release capsules (10 mg/14 mg and 10 mg/28 mg) before the expiration of the ‘009, ‘291, ‘209, ‘708, ‘379, ‘794, ‘752, ‘485, ‘486, ‘085, ‘858 and ‘233 patents. Macleods claims that these patents are invalid, unenforceable and/or would not be infringed. The Company is evaluating a patent infringement action in response to this ANDA filing. On June 2, 2017, the Company and Adamas Pharma, LLC brought an action for infringement of the ‘009, ‘291, ‘485, ‘486, and ‘858 patents in the U.S. District Court for the District of Delaware against Macleods Pharmaceuticals, Ltd. and Macleods Pharma USA, Inc. (collectively, “Macleods”). This lawsuit triggered an automatic stay of approval of the Macleods ANDA that expires no earlier than October 2019 (unless there is a final court decision adverse to Plaintiffs sooner). No trial schedule has been set.

Rapaflo^®. On June 17, 2013, Actavis, Inc, now known as Allergan Finance, LLC., Watson Laboratories, Inc., (collectively, “Actavis”) and Kissei Pharmaceutical Co., Ltd. (“Kissei”) sued Hetero USA Inc., Hetero Labs Limited, and Hetero Labs Limited, Unit 3 (collectively, “Hetero”) in the United States District Court for the District of Delaware, alleging that sales of silodosin tablets, a generic version of Actavis’ Rapaflo^® tablets, would infringe U.S. Patent No. 5,387,603 (the “‘603 patent”). On June 17, 2013 Actavis and Kissei sued Sandoz Inc. (“Sandoz”) in the United States District Court for the District of Delaware, alleging that sales of Sandoz’s generic version of Rapaflo^®would infringe the ‘603 patent. The complaint seeks injunctive relief. On December 22, 2014, the Parties completed a settlement agreement with Hetero. Actavis and Kissei’s lawsuit against Sandoz have been consolidated. Pursuant to the provisions of the Hatch-Waxman Act, the FDA is precluded from granting final approval to the generic applicants prior to April 8, 2016. On April 13, 2017, the Sandoz action was dismissed pursuant to a settlement agreement.

In July 2017, the Company and Kissei received a notice letter from Aurobindo indicating that it had filed a Paragraph IV certification and had submitted to FDA an ANDA seeking approval to manufacture and sell a generic version of RAPAFLO^® (“RAPAFLO”) before the expiration of U.S. Patent No. 5,387,603 (the “‘603 Patent”) listed in the Orange Book. (The ‘603 Patent expires in December 2018). Alembic claims that the patent listed in its notice letter is invalid, unenforceable and/or would not be infringed. On August 18, 2017, Allergan, Finance, LLC, Allergan Sales, LLC and Kissei Pharmaceutical Co., Ltd. (collectively, “Plaintiffs”), brought an action for infringement of the ‘603 Patent in the U.S. District Court for the District of Delaware against Aurobindo Pharma Ltd., Aurobindo Pharma U.S.A., Inc., and Aurobindo Pharma USA LLC (collectively, “Aurobindo”). This lawsuit triggered an automatic stay of approval of the applicable ANDA through to patent expiration (unless there is a final court decision adverse to Plaintiffs sooner). On September 13, 2017, Aurobindo filed an answer, affirmative defenses and counterclaims. On October 4, 2017 Plaintiffs filed an answer to Aurobindo’s counterclaims. No trial schedule has been set.

Restasis^®. Between August and September 2015, Allergan brought actions for infringement of U.S. Patent Nos. 8,629,111 (the “‘111 patent”), 8,633,162 (the “‘162 patent”), 8,642,556 (the “‘556 patent”), 8,648,048 (the “‘048 patent”), and 8,685,930 (the “‘930 patent”) in the U.S. District Court for the Eastern District of Texas against Akorn, Inc., Apotex, Inc., Mylan Pharmaceuticals, Inc., Teva Pharmaceuticals USA, Inc., InnoPharma, Inc., and Pfizer, Inc., and related subsidiaries and affiliates thereof. On September 14, 2015, Allergan brought an action for infringement of these patents in the U.S. District Court for the District of Delaware against InnoPharma, Inc. and Pfizer, Inc. These companies have notified Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis^® before these patents expire in August 2024. In the Texas actions the District Court granted joint motions to dismiss without prejudice Teva Pharmaceutical Industries Ltd. and Pfizer, Inc., on October 12 and October 22, 2015, respectively. Teva Pharmaceuticals USA, Inc. (“Teva”) and InnoPharma, Inc. (“InnoPharma”) remain defendants in the respective actions. In October 2015, Mylan Pharmaceuticals, Inc. and Mylan, Inc. (“Mylan”) filed a motion to dismiss for lack of personal jurisdiction and improper venue, and for failure to state a claim as to Mylan, Inc.; Teva filed a motion to dismiss for lack of personal jurisdiction and improper venue; Apotex, Inc. and Apotex Corp. (“Apotex”) filed an answer, affirmative defenses and counterclaim; Akorn, Inc. (“Akorn”) filed an answer and counterclaim; and Teva filed an answer, counterclaim and motion to dismiss. Allergan entered into a settlement agreement with Apotex on December 15, 2015. In December 2015, Allergan and Apotex filed a joint stipulation of dismissal and the U.S. District Court granted the Order with respect to the Apotex defendants. In January 2016, the court scheduled a bench trial for August 28, 2017.

In February 2016, Allergan filed an amended complaint to include U.S. Patent Number 9,248,191 (the “’191 patent”). In February and March 2016, Allergan received Paragraph IV letters from Apotex, Mylan and Teva notifying Allergan that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Restasis^® before the patents expire in August 2024, contending that the ‘191 patent is invalid and not infringed by their respective proposed generic products.

On March 1, 2016, Allergan received a Paragraph IV letter from Famy Care Limited (“Famy Care”) notifying Allergan that they have filed an ANDA with the FDA seeking to obtain approval to market generic versions of Restasis^® before the patents expire in August 2024, contending that the ‘111 patent, the ʼ162 patent, the ‘556 patent, the ‘048 patent, the ‘930 patent, and the ‘191 patent are invalid and not infringed by their respective proposed generic products. In March 2016, the court entered an order requesting supplemental briefs on the effect of the Federal Circuit’s Acorda decision (No. 2014-1456) on Teva’s and Mylan’s pending motions to dismiss. In their supplemental briefs, Teva acknowledged that, under the Acorda decision, it is subject to specific personal jurisdiction in the Eastern District of Texas and that venue is proper, and Mylan requested that the District Court refrain from taking action on its pending motion until after Mylan has sought panel and en banc rehearing in the Acorda action. In April 2016, the court issued a memorandum and opinion denying Mylan’s and Teva’s motions to dismiss. On April 12, 2016, Allergan filed a complaint for infringement of the ʼ111 patent, ʼ162 patent, ʼ556 patent, ʼ048 patent, ʼ930 patent, and the ʼ191 patent in the U.S. District Court for the Eastern District of Texas against Famy Care. In March and April 2016, Allergan filed answers to Teva, Akorn and InnoPharma’s counterclaims. On June 6, 2016, Famy Care filed an answer, affirmative defenses and counterclaims. In June 2016, Allergan filed a motion for consolidation and the court entered an order consolidating the Famy Care matter, C.A. 2:16-cv-00401-WCB, into C.A. 2:15-cv-01455-WCB, (the “Lead” case).

On May 30, 2017, Defendants filed motions for summary judgment for noninfringement, lack of enablement, and for lack of standing, or in the alternative for invalidity under 35 U.S.C. § 102(f). Allergan opposed these summary judgment motions, and briefing was completed on June 27, 2017.

On August 1, 2017, the Court conducted a pre-trial conference and motion hearing. During the conference, (i) Mylan waived its venue objection; and (ii) the court issued oral rulings denying each of Defendants’ three motions for summary judgment and stated that written opinions on those motions would follow. Trial began on August 28, 2017, in Marshall, Texas and concluded on September 1, 2017.

On July 20, 2016, Allergan filed a complaint for infringement of the ʼ111 patent, ʼ162 patent, ʼ556 patent, ʼ048 patent, ʼ930 patent, and the ʼ191 patent in the U.S. District Court for the District of Delaware and, on July 21, 2016, a complaint in the U.S. District Court for the Eastern District of Texas against TWi Pharmaceuticals, Inc. and TWi Pharmaceuticals USA, Inc. (“TWi”). TWi notified Allergan that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Restasis^® before these certain patents expire. Allergan entered into a settlement agreement with TWi on January 11, 2017. Allergan entered into a settlement agreement with Famy Care on August 28, 2017. Under the terms of the settlement, Allergan will provide a license to Famy Care that will permit it to launch its generic version of Restasis beginning on February 27, 2024, or earlier in certain circumstances. Allergan entered into a settlement agreement with Innopharma on October 12, 2017. Under the terms of the settlement, Allergan will provide a license to Innopharma that will permit it to launch its generic version of Restasis^® beginning on February 27, 2024, or earlier in certain circumstances. Additionally, under certain circumstances, Allergan will supply and authorize InnoPharma to launch an authorized generic version of Restasis^® on August 28, 2024.

On September 8, 2017, Allergan assigned all Orange Book-listed patents for Restasis^®to the Saint Regis Mohawk Tribe (“the Tribe”), a recognized sovereign tribal government, and concurrently was granted an exclusive field-of-use license to practice the patents in the United States for all FDA-approved uses of the products under the Restasis^® NDAs. On October 13, 2017, Allergan filed an opposed motion to join the Tribe as a co-plaintiff in the pending action against Teva, Mylan and Akorn. On October 16, 2017, the District Court issued a decision and final judgment finding that the asserted claims of the ‘111 patent, the ‘048 patent, the ‘930 patent and the ‘191 patent were infringed, but invalid on the ground of obviousness. The District Court also held that the asserted claims were not invalid as anticipated, for lack of enablement, or for improper inventorship, and denied Akorn’s counterclaims for attorney fees on the grounds that this was not an exceptional case. In a separate Order, the District Court joined the Tribe as a co-plaintiff under Federal Rule of Civil Procedure 25(c) and declined to rule on the validity of the patent assignment to the Tribe.

On December 22, 2016, Allergan filed a complaint for infringement of the ʼ111 patent, ʼ162 patent, ʼ556 patent, ʼ048 patent, ʼ930 patent, and the ʼ191 patent in the U.S. District Court for the Eastern District of Texas against Deva Holding A.S. (“Deva”). Deva notified Allergan that it has filed an ANDA with the FDA seeking to obtain approval to market generic versions of Restasis^® before these certain patents expire. On February 20, 2017, Deva filed an answer, affirmative defenses and counterclaims. On March 28, 2017, Deva filed a motion to stay pending either the USPTO’s final written decision in the pending IPR proceedings, or the district court’s issuance of a trial opinion in the consolidated actions originally brought in 2015. On July 28, 2017, Deva’s stay motion was denied without prejudice. Trial in the Deva matter is scheduled in October 2018.

Restasis^® IPR. On June 6, 2016, Allergan, Inc. received notification letters that Inter Partes Review of the USPTO (“IPR”) petitions were filed by Mylan Pharmaceuticals Inc. (“Mylan”) regarding U.S. Patent Nos. 8,629,111 (the “‘111 patent”), 8,633,162 (the “‘162 patent”), 8,642,556 (the “‘556 patent”), 8,648,048 (the “‘048 patent”), 8,685,930 (the “‘930 patent”), and 9,248,191 (the “‘191 patent”), which patents expire on August 27, 2024. Mylan filed the IPR petition on June 3, 2016. On June 23, 2016, Allergan received a notification letter that a IPR petition and motion for joinder was filed by Argentum Pharmaceuticals LLC (“Argentum”) regarding the ’111 patent. On December 7, 2016, Allergan entered into a settlement agreement with Argentum and Argentum’s petition was withdrawn. On December 8, 2016, the USPTO granted Mylan’s petitions to institute IPRs with respect to these patents. On January 6, 2017, each of Akorn, Famy Care and Teva filed, and on January 9, 2017 the USPTO received, IPR petitions with respect to these patents and motions for joinder with the Mylan IPR. On February 6, 2017, Allergan opposed joinder. On March 20, 2017, Allergan filed patent owner responses. The USPTO granted Teva’s and Akorn’s joinder motions on March 31, 2017. On April 27, 2017, the USPTO decided not to join Famy Care as a petitioner to the earlier-filed IPR petitions. On July 10, 2017, the USPTO denied Famy Care’s motion for joinder with the IPRs instituted in December 2016, and on July 10 and 12, 2017, granted Famy Care’s petitions to institute IPRs with respect to these same patents. On May 31, 2017, the USPTO granted-in part a motion by Mylan for additional discovery. On July 14, 2017, Allergan filed a patent owner sur-reply. On July 20, Allergan and Mylan filed requests for oral argument. On July 28, 2017, the USPTO rescheduled the hearing for September 13, 2017. On September 8, 2017,Allergan assigned all Orange Book-listed patents for Restasis^®to the Saint Regis Mohawk Tribe (“the Tribe”), a recognized sovereign tribal government, and concurrently was granted an exclusive field-of-use license to practice the patents in the United States for all FDA-approved uses of the products under the Restasis^® NDAs. That same day, the Tribe filed an updated Mandatory Notice with the USPTO to reflect that the Tribe is the patent owner, and sought permission to file a motion to dismiss based on tribal sovereign immunity. During a September 11, 2017 teleconference, the USPTO postponed the September 13, 2017 hearing and set a

briefing schedule on the Tribe’s motion to dismiss. The Tribe filed its opening brief on September 22, 2017, Petitioners filed their opposition brief on October 13, 2017, and the Tribe filed its reply brief on October 20, 2017. On October 4, 2017, the USPTO denied Mylan’s request for authorization to file a motion for additional discovery, and denied without prejudice Allergan’s counsel’s request to withdraw from the IPR proceedings. A rescheduled hearing date has not been set.

Saphris^®. Between September 2014 and May 2015, Forest Laboratories, LLC, and Forest Laboratories Holdings Ltd. (collectively, “Forest”) brought actions for infringement of some or all of U.S. Patent Nos. 5,763,476 (the “‘476 patent”), 7,741,358 (the “‘358 patent”) and 8,022,228 (the “‘228 patent”) in the U.S. District Court for the District of Delaware against Sigmapharm Laboratories, LLC, Hikma Pharmaceuticals, LLC, Breckenridge Pharmaceutical, Inc., Alembic Pharmaceuticals, Ltd. and Amneal Pharmaceuticals, LLC, and related subsidiaries and affiliates thereof. Including a 6-month pediatric extension of regulatory exclusivity, the ‘476 patent expires in December 2020, and the ‘358 and ‘228 patents expire in October 2026. These lawsuits triggered an automatic stay of approval of the applicable ANDAs that expires no earlier than August 13, 2017 (unless a court issues a decision adverse to Forest sooner). On February 3, 2015, the District Court consolidated the then-pending actions for all purposes. On September 30, 2015, the District Court consolidated all pending actions. On March 28, 2016, the court entered Forest and Hikma’s proposed joint stipulation and order of adverse judgment and dismissal of claims related to the ‘358 and ‘228 patents. In April 2016, the court granted the proposed consent judgment of non-infringement and order of dismissal of counterclaims related to the ‘358 and ‘228 patents, as well as a stipulation and order with respect to infringement of Claims 1, 2, and 6 of the ʼ476 patent, between Plaintiffs and Breckenridge. The Court also granted the proposed stipulation of entry and proposed order of adverse judgment and dismissal of counterclaims related to the ʼ358 and ʼ228 patents between Plaintiffs and Sigmapharm. Trial is scheduled to begin in October 2016 with respect to the ‘476 patent, the only remaining patent-in-suit. In April, May and July 2016, the court granted the proposed stipulations and orders of infringement of certain claims of the ‘476 patent as to Hikma, Breckenridge and Alembic. On October 13, 2016, the court stayed trial as to Sigmapharm and extended the 30-month stay as to Sigmapharm. Trial concluded on November 3, 2016. The parties filed their opening post-trial briefs on January 23, 2017 and their responsive briefs on March 17, 2017. On June 30, 2017, the district court issued an opinion and order finding all asserted claims of the ‘476 patent valid, and that claims 4, 9 and 10 were not infringed by Alembic and Breckenridge. On July 11, 2017, the district court entered a final judgment that ordered, among other things, that Alembic’s, Amneal’s, Breckenridge’s and Hikma’s respective ANDAs not be granted final approval by FDA earlier than the date of expiration of the ‘476 patent inclusive of any applicable adjustments, extensions or exclusivities. On July 28, 2017, Alembic, Amneal, Breckenridge and Hikma filed notices of appeal. The issue of infringement as to Sigmapharm remains stayed. On July 25, 2017, the District Court actions were reassigned to Judge Mitchel S. Goldberg of the U.S. District Court for the Eastern District of Pennsylvania. On September 15, 2017, Sigmapharm filed a motion to lift the stay and proceed to trial on the issue of infringement. Plaintiffs filed an opposition on September 29, 2017, and Simapharm filed a reply on October 6, 2017. A hearing on Sigmapharm’s motion is scheduled for November 7, 2017.

Savella^®. On October 5 and 6, 2017, Forest Laboratories Holdings, Ltd., Allergan Sales, LLC and Allergan USA, Inc. (collectively, “Allergan and Forest”) brought actions for infringement of U.S. Patent Nos. 6,602,911 (the “‘911 patent”), 7,888,342 (the “‘342 patent”), and 7,994,220 (the “‘220 patent”) in the U.S. District Court for the District of Delaware and the District of New Jersey, respectively, against Strides Pharma Global Pte Limited and Strides Pharma Inc. (collectively, Strides”). Strides notified Forest that it filed an ANDA with the FDA seeking to obtain approval to market a generic version of Savella^® before the ‘911, ‘342 and ‘220 patents expire. (The ‘342 patent expires in November 2021, the ‘911 patent expires in January 2023, and the ‘220 patent expires in September 2029.) Strides claims in its notice letter that the ‘911 Patent, the ‘342 Patent, and the ‘220 Patent are invalid and/or would not be infringed. These lawsuits triggered an automatic stay of approval of the Strides ANDA until February 2020 (unless a court issues a decision adverse to Forest sooner). No schedule has been set.

Previously, the Company, along with Royalty Pharma Collection Trust (“Royalty Pharma”), asserted these patents in actions against Amneal, Apotex, First Time US Generics, Glenmark, Hetero, Lupin, Par, and Ranbaxy, and related subsidiaries and affiliates thereof, and reached settlements terminating those actions. The Company and Royalty Pharma voluntarily dismissed, without prejudice, its claims against Sandoz. The Company and Royalty Pharma also asserted these patents against Mylan and, on July 11, 2016, the U.S. District Court for the District of Delaware entered an order, opinion and judgment in favor of plaintiffs and against Mylan, that Mylan infringes the asserted claims of the ‘911, ‘342 and ‘220 patents, and that the asserted claims of the ‘911, ‘342 and ‘220 patents are valid. On September 30, 2016, Forest and Royalty entered into a settlement agreement with Mylan. Pursuant to the settlement agreement, Mylan may enter the market as of March 19, 2026, or earlier under certain circumstances.

Viibryd^®. In March 2015, Forest Laboratories, LLC, Forest Laboratories Holdings Ltd., (collectively, “Forest”) and Merck KGaA and Merck Patent Gesellschaft Mit Beschränkter Haftung (collectively, “Merck”), Forest’s licensor for Viibryd, brought actions for infringement of U.S. Patent Nos. 7,834,020 (the “‘020 patent”), 8,193,195 (the “‘195 patent”), 8,236,804 (the “‘804 patent”) and 8,673,921 (the “‘921 patent”) in the U.S. District Court for the District of Delaware against Accord Healthcare Inc. (“Accord”), Alembic Pharmaceuticals, Ltd. (“Alembic”), Apotex, Inc. (“Apotex”), InvaGen Pharmaceuticals, Inc. (“InvaGen”), and Teva Pharmaceuticals USA, Inc. (“Teva”), and related subsidiaries and affiliates thereof. These companies have notified Forest and/or Merck that they have filed ANDAs with the FDA seeking to obtain approval to market generic versions of Viibryd before the ‘020,

‘195, ‘804 and ‘921 patents expire in June 2022. These lawsuits triggered an automatic stay of approval of the applicable ANDAs until July 21, 2018 (unless a court issues a decision adverse to Forest and Merck sooner). On August 24, 2015, the District Court consolidated the actions for all purposes and issued a scheduling order setting a trial date in January 2018. On November 23, 2015, Forest and Merck brought an action for infringement of the ‘020, ‘195, ‘804 and ‘921 patents in the U.S. District Court for the District of Delaware against InvaGen, which matter was consolidated with the earlier-filed action against InvaGen. On March 29, 2017, the District Court granted plaintiffs and Teva’s joint stipulation to stay the action as to Teva until May 11, 2017, due to the parties’ settlement discussions. On April 20, 2017, plaintiffs entered into a settlement agreement with Alembic, and the case was dismissed. On May 15, 2017, plaintiffs entered into a settlement agreement with Accord, and the case was dismissed. On June 29, 2017, plaintiffs entered into a settlement agreement with Teva, and the case was dismissed. On July 28, 2017, plaintiffs entered into a settlement agreement with Apotex, and the case was dismissed. Under the terms of the settlement with Apotex, Allergan will provide a license to Apotex that will permit it to launch its generic version of Viibryd beginning six months and one day prior to the expiration of the last to expire of the ‘020, ‘195, ‘804 and ‘921 patents, including any extensions or pediatric exclusivities, or earlier in certain circumstances. On October 23, 2017, plaintiffs entered into a settlement agreement with InvaGen, and the parties filed a joint stipulation of dismissal.

Trademark Enforcement Matters

Juvéderm®. On April 5, 2017, Allergan, Inc. (“Allergan”) brought an action for unfair competition, false advertising, dilution, conspiracy and infringement of Allergan’s JUVÉDERM trademarks in the U.S. District Court for the Central District of California against Dermavita Limited Partnership (“Dermavita”), Dima Corp. S.A. (“Dima Corp.”) and KBC Media Relations LLC (“KBC”). Dima Corp. had previously announced its acquisition of a license from Dermavita to develop and market in the U.S. cosmetic products under the Juvederm trademark. During June 2017, Allergan entered into a settlement agreement with KBC. During July 2017, the Court preliminarily enjoined Dima Corp. from, inter alia, promoting or selling within the United States any product bearing the trademark JUVEDERM or any other trademark confusingly similar to it. Also during July 2017, the Court denied Dermavita’s motion to dismiss Allergan’s complaint based on alleged improper service and purported lack of personal jurisdiction.

Allergan Holdings France SAS and Allergan France SAS requested a preliminary injunction against Dermavita, Dima Corp, Aesthetic Services, Jacqueline Sillam and Dimitri Sillam in the High Court of Paris, France. During June 2017, the Paris Court preliminarily enjoined the defendants from, inter alia, promoting or selling in France its Juvederm products, requiring the transfer of various domain names and payment of provisional damages to Allergan, on the basis that such use would infringe Allergan’s EU and French JUVÉDERM trademarks and would amount to unfair competition. This injunction has been appealed. Allergan France has also filed against Dermavita, Dima Corp. and others a full action of trademark infringement in the Paris court. The first case management hearing is scheduled for November 7, 2017. Dermavita has filed an action against Allergan in the Nanterre, France court alleging that Allergan has not used its JUVÉDERM trademark and requesting the court to revoke Allergan’s trademark. Allergan’s response papers are due December 4, 2017.

Furthermore, more than 50 trademark opposition and cancellation actions between Allergan and Dermavita remain pending in front of various national and regional trademark offices around the world.

Product Liability Litigation

Actonel^® Litigation. Warner Chilcott is a defendant in approximately 168 cases and a potential defendant with respect to approximately 369 unfiled claims involving a total of approximately 539 claimants relating to Warner Chilcott’s bisphosphonate prescription drug Actonel^®. The claimants allege, among other things, that Actonel^® caused them to suffer osteonecrosis of the jaw (“ONJ”), a rare but serious condition that involves severe loss or destruction of the jawbone, and/or atypical fractures of the femur. Warner Chilcott is in the initial stages of discovery in these litigations. All of the filed cases are in either federal or state courts in the United States, with the exception of one purported product liability class action involving a total of two plaintiffs that was brought against Warner Chilcott in a provincial court in Canada. The Canadian action alleges, among other things, that Actonel^® caused the plaintiffs and the proposed class members who ingested Actonel^® to suffer ONJ or other side effects. It is expected that these plaintiffs will seek class certification. Plaintiffs have typically asked for unspecified monetary and injunctive relief, as well as attorneys’ fees. Warner Chilcott is indemnified by Sanofi for certain Actonel claims pursuant to a collaboration agreement relating to the two parties’ co-promotion of the product in the United States and other countries. In addition, Warner Chilcott is also partially indemnified by the Procter & Gamble Company (“P&G”) for ONJ claims that were pending at the time Warner Chilcott acquired P&G’s global pharmaceutical business in October 2009. In May and September 2013, Warner Chilcott entered into two settlement agreements that resolved a majority of the then-existing ONJ-related claims.

AlloDerm Litigation. LifeCell Corporation is named as a defendant in approximately 335 lawsuits alleging that its biologic mesh product AlloDerm did not perform as intended and caused various injuries. Plaintiffs allege the product was defectively designed or manufactured and/or did not have proper warnings. These cases are consolidated in Superior Court of New Jersey, Middlesex County. Prior to the close of its sale to Allergan, LifeCell mediated the New Jersey cases in December 2016 and negotiated a settlement of its pending New Jersey cases, which was paid by LifeCell on April 19, 2017. Approximately 332 of the cases have been dismissed, with the balance anticipated to be dismissed pending estate filings. LifeCell’s insurers participated in the settlement. One other case is pending in Oklahoma but the Company has not yet been served.

Benicar^® Litigation. Forest is named in approximately 1,759 actions involving allegations that Benicar^®, a treatment for hypertension that Forest co-promoted with Daiichi Sankyo between 2002 and 2008, caused certain gastrointestinal injuries. Under Forest’s Co-Promotion Agreement, Daiichi Sankyo is defending Forest in these lawsuits. On August 1, 2017, Daiichi announced that it has agreed to enter into a program to settle, on behalf of all defendants, this pending product liability litigation against various Daiichi Sankyo and Forest entities.

Celexa^®/Lexapro^® Litigation. Certain Forest entities are defendants in approximately 166 actions alleging that Celexa^® or Lexapro^® caused various birth defects. Several of the cases involve multiple minor-plaintiffs. The majority of these actions have been consolidated in state court in Missouri. The Company has reached an agreement with plaintiffs to settle five of the pending cases. There are birth defect cases pending in other jurisdictions, none of which are set for trial.

RepliForm Litigation. LifeCell Corporation is named as a defendant in approximately 250 cases alleging that its biologic mesh product RepliForm did not perform as intended and caused various injuries. Plaintiffs allege the product was defectively designed or manufactured and/or did not have proper warnings. In all of those cases Boston Scientific Corporation, LifeCell’s distributor, has been named as a co-defendant. In addition, a significant portion of those cases also name another manufacturer as a defendant whose product was implanted at the same time. All but a few of the cases have been consolidated for centralized management in the Superior Court of Massachusetts, Middlesex County. The other cases are venued in federal court in West Virginia, and state courts in Delaware and Minnesota. The cases are still in the early stages of pleadings and discovery has not yet begun.

Testosterone Litigation. Beginning in 2014, a number of product liability suits were filed against Actavis, Inc., now known as Allergan Finance, LLC, and one or more of its former subsidiaries as well as other manufacturers and distributors of testosterone products, for personal injuries including but not limited to cardiovascular events allegedly arising out of the use of Androderm.^® There are approximately 565 currently pending actions which have been consolidated in an MDL in federal court in Illinois. The defendants have responded to the plaintiffs’ master complaint in the MDL and discovery is ongoing. The Company anticipates that additional suits will be filed.

Government Investigations, Government Litigation and Qui Tam Litigation

Forest. Forest received a subpoena, dated April 29, 2015, from the U.S. Department of Health and Human Services, Office of Inspector General (“OIG”). The subpoena requests documents relating to Average Manufacturer (“AMP”) and Best Price calculations for several of its products. Subsequently, Forest received a Civil Investigative Demand (“CID”) from the OIG, dated August 16, 2016 primarily related to the calculation of Best Price. The Company is cooperating fully with the OIG’s requests.

In April 2014, the federal district court in Massachusetts unsealed a qui tam complaint which asserts claims under the False Claims Act and contains allegations regarding off-label promotion of Namenda^®. The Company filed a motion to dismiss the relator’s Second Amended Complaint and the court granted in part and denied in part Forest’s motion, dismissing the False Claims Act conspiracy claim only. On October 7, 2016, the Company filed a second motion to dismiss the relator’s second amended complaint based on newly discovered evidence. On April 28, 2017, the court issued a decision in which it granted the Company’s motion. Plaintiff has agreed to withdraw his appeal of the district court’s decision. The U.S. Attorney’s Office declined to intervene in this action but has reserved the right to do so at a later date.

Forest and certain of its affiliates are defendants in three state court actions pending in Illinois, Utah and Wisconsin involving qui tam actions alleging generally that the plaintiffs (all government agencies) were overcharged for their share of Medicaid drug reimbursement costs. Forest and the other defendants filed a motion to dismiss Utah’s amended complaint. This motion to dismiss was denied in part. On October 30, 2017, the Company reached an agreement to settle the Utah action. On February 17, 2014, the Wisconsin state court granted defendants’ motion to dismiss plaintiff’s second amended complaint. However, the relator filed a separate action making the same basic allegations as in its amended complaint in the original action. On May 17, 2017, the Wisconsin state court granted defendants’ motion to dismiss the amended complaint.

On December 28, 2015, a putative class action complaint was filed in state court in Pennsylvania on behalf of a putative class of private payers. Defendants removed the complaint to the federal court in Pennsylvania. The complaint alleges that manufacturers of generic drugs, including a subsidiary of Forest Laboratories, Inc. that in the past had marketed generic products, caused plaintiffs to overpay for prescription drug products through the use of inflated AWPs. The complaint alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, negligent misrepresentation/fraud, unjust enrichment, civil conspiracy and aiding and abetting. Plaintiffs filed an amended complaint on March 29, 2016. On May 3, 2016, the court issued an order staying this action. On June 26, 2017, the Company filed a motion to dismiss the complaint which the court granted on September 25, 2016. An additional complaint was filed in state court in Pennsylvania on behalf an individual indirect purchaser containing similar allegations to the class complaint. On January 18, 2017, defendants filed a motion to dismiss the complaint. On July 24, 2017, the state court issued a decision on the Company’s individual motion to dismiss, granting it in part and denying it in part.

Allergan. On April 18, 2017, the Company received a CID, dated April 12, 2017, from the Department of Justice. The CID seeks information relating to the Company’s sales and marketing practices of Botox to urology practices. The Company is cooperating fully with DOJ requests.

On October 3, 2017, the Company received a letter from the House of Representatives Committee on Oversight and Government Reform. The letter seeks information relating to the Saint Regis Mohawk Tribe’s acquisition of six Restasis® patents and the granting of exclusive licenses to the Restasis® product to the Company. The Company has received other information requests from regulatory agencies concerning the transaction and is cooperating fully with these requests.

Actavis/Watson. On October 16, 2017, the Company received a CID from the State of North Carolina Department of Justice. The CID seeks information relating to the legacy Watson company’s reporting of AMP calculations. The Company is cooperating fully with the state’s requests.

The Company has received subpoenas from multiple states relating to the legacy Actavis and Watson companies’ promotional efforts relating to opioid products, none of which are currently promoted and many of which the Company no longer sells. The Company is cooperating fully with the states’ requests.

The Company and its affiliates are involved in various other disputes, governmental and/or regulatory inspections, inquires, investigations and proceedings that could result in litigation, and other litigation matters that arise from time to time.

Matters Relating to the Company’s Divested Generics Business

The following matters relate to the former generics business of the Company or the transaction pursuant to which that business was sold to Teva, effective August 2, 2016. The Company believes that with respect to claims by Teva against the Company, it has substantial meritorious defenses. Furthermore, the Master Purchase Agreement under which the global generics business was sold provides for assumption by Teva of liabilities and claims relating to the generics business and indemnification by Teva for losses imposed on, sustained, incurred or suffered by or asserted against the Company for third party claims relating to the generics business. With respect to third party claims, it has substantial and meritorious claims for indemnification by Teva for these matters and failing same, substantial and meritorious defenses with respect to the underlying claims against the Company and/or its current subsidiaries; and in each case the Company intends to assert and/or defends claims vigorously. However, it is impossible to predict with certainty the outcome of any litigation or indemnity claims.

Lidoderm^® Litigation. On March 30, 2016, the U.S. Federal Trade Commission filed a lawsuit in federal district court in the Eastern District of Pennsylvania against the Company and one of its global generics business subsidiaries, Watson Laboratories, Inc., Endo Pharmaceuticals Inc. and others arising out of patent settlements relating to Lidoderm and Opana ER. The Lidoderm settlement was reached by Endo Pharmaceuticals Inc. and Watson Laboratories, Inc. in May 2012, prior to it’s being affiliated with the Company, and all allegations against the Company and Watson Laboratories, Inc. related to the Lidoderm settlement only. On October 25, 2016, the FTC voluntarily withdrew its complaint in federal court in Pennsylvania. Similar lawsuits filed by private plaintiffs were already pending in the federal district court in California. On January 23, 2017, both the FTC and State of California filed complaints against the Watson Laboratories, Endo Pharmaceuticals as well as the Company and its subsidiary Allergan Finance LLC in the same federal court in California alleging violations of federal and state antitrust laws. The FTC and California complaints contain allegations relating to the Lidoderm settlement only and seek injunctive relief, restitution or disgorgement of profits and, in the California action, statutory penalties. On January 27, 2017, Allergan Finance LLC filed a declaratory judgment action against the FTC in the same federal district court in the Eastern District of Pennsylvania where the FTC’s original action had been pending. The court consolidated Allergan Finance’s action with declaratory judgment actions that had already been filed by other parties that were named as defendants in the original FTC action in Pennsylvania and the plaintiffs filed a consolidated, amended complaint on February 14, 2017. On March 2, 2017, the FTC filed a motion to dismiss the amended complaint. In April 2017, the FTC and State of California’s actions were stayed pending the declaratory judgment action in the Eastern District of Pennsylvania. On May 9, 2017, plaintiffs filed a motion for summary judgment in the Eastern District of Pennsylvania.

Generic Drug Pricing Securities and ERISA Litigation. On November 4, 2016, a class action was filed by a putative class of Allergan shareholders in federal court in California against the Company and certain of its current and former officers alleging that the Company and certain of its current and former officers made materially false and misleading statements. The complaint alleges generally that between February 2014 and November 2016, Allergan and certain of its officers made materially false and misleading statements regarding the Company’s internal controls over its financial reporting and failed to disclose that its Actavis generics unit had engaged in illegal, anticompetitive price-fixing with its generic industry peers. The complaint seeks unspecified monetary damages. Additional complaints have been filed in other federal district courts. On February 2, 2017, the actions were consolidated in the federal district court in New Jersey. Plaintiffs filed a consolidated amended complaint on May 1, 2017. The Company filed a motion to dismiss plaintiffs’ consolidated amended complaint on July 17, 2107. Plaintiffs filed their opposition on September 15 and the Company filed its reply on October 6, 2017. On February 14, 2017, a separate complaint was filed in the federal district court in California that is premised on the same alleged underlying conduct that is at issue in the securities litigation but that asserts claims under the Employee Retirement Income Security Act of 1974 (“ERISA). A similar lawsuit was filed in the federal district court in New Jersey on March 7, 2017. The ERISA complaints assert claims on behalf of a putative class of individuals who participated in the Company’s retirement plans and seek an unspecified amount of damages and other injunctive relief. On June 26, 2017, the Company filed a motion to stay or transfer venue in the California ERISA matter to the District of New Jersey, after which time plaintiffs agreed to stipulate to the transfer. The Company’s motion to consolidate the matters was granted on August 21, 2017, and a consent discovery order entered. Plaintiffs have until October 18 to file an amended consolidated complaint.

Hydrocortisone Investigation. On November 10, 2016, the Company received notice from the UK Competition and Markets Authority (“CMA”) that it would be included within the scope of the CMA’s formal investigation under Section 25 of the Competition Act of 1998 (“CA98”) into suspected abuse of dominance by a former generics business subsidiary of the Company in relation to the supply of 10mg and 20mg hydrocortisone tablets. The CMA is investigating alleged excessive and unfair prices with respect to hydrocortisone tablets and whether the former generics business subsidiary entered into anti-competitive agreements with a potential competitor relating to the hydrocortisone product. The CMA is investigating whether the conduct infringes the Chapter II prohibition of the CA98 and/or Article 102 of the Treaty on the Functioning of the European Union. The CMA issued a statement of objection with respect to the alleged excessive and unfair pricing in December 2016 and a separate statement of objection with respect to the alleged anti-competitive agreements in March 2017. The Company intends to cooperate fully with the investigation.

Teva Shareholder Derivative Litigation. On or about February 26, 2017, Allergan plc was named as defendant in a proposed Teva shareholder derivative litigation filed in the Economic Division of the Tel Aviv District Court in Israel. In order to proceed with the lawsuit, plaintiffs have to secure court approval and have filed a motion seeking such approval. The lawsuit contains allegations directed at Teva’s board of directors and the approval process needed by Teva to approve the Master Purchase Agreement and also includes claims regarding the amount and form of consideration Teva paid in connection with the Master Purchase Agreement. The Israeli court recently granted a procedural motion to consolidate a separate action that was filed against Teva only with the action that was filed on February 26^t^h. Pursuant to the court’s order, plaintiffs have filed a consolidated motion seeking approval from the court to commence the shareholder derivative suit.

Teva Working Capital Dispute. In October 2016, pursuant to our agreement with Teva, Teva provided the Company with its proposed estimated adjustment to the closing date working capital balance. The Company disagrees with Teva’s proposed adjustment, and, pursuant to our agreement with Teva, each of the Company’s and Teva’s proposed adjustments have been submitted to arbitration to determine the working capital amount in accordance with GAAP as applied by the Company consistent with past practice. Teva initially proposed an adjustment of approximately $1.4 billion and subsequently submitted a revised adjustment of approximately $1.5 billion to the arbitrator, and the final amount of any contractual adjustment as determined in accordance with the Working Capital Arbitration could vary materially from the adjustment calculated by the Company and would be reflected in our financial statements for discontinued operations. In addition, on October 30, 2017, Teva submitted a Notice of Direct and Third Party Claims seeking indemnification for virtually all of the same items for which Teva is seeking a proposed adjustment in the Working Capital Arbitration as well as several new items as to which no quantity of damages has been asserted, and which the Company is currently evaluating, and the Company has not determined that a loss is probable or estimable as to those additional items. Teva is not entitled to a “double recovery” for the same damages in the Working Capital Arbitration and under an indemnification theory and is subject to further limitations on recovery as set forth in the Master Purchase Agreement under which the global generics business was sold. Any adjustment to the Company’s proceeds from the Teva Transaction as a result of the Working Capital Arbitration or the indemnification claims could have a material adverse effect on the Company’s results of operations and cash flows, including the Company’s fiscal year 2017 results of operations and fiscal year 2018 cash flows. In the event the Working Capital Arbitration goes forward as scheduled, the Company anticipates a decision from the Working Capital Arbitration in the first quarter of 2018 in accordance with the current timeline agreed by the parties and arbitrator. Any potential resolution of the claims for indemnity will be subject to additional assertions of claims by Teva at a later date. Disputes related to matters asserted for indemnification would be subject to judicial resolution in accordance with the Master Purchase Agreement.

NOTE 21 — Warner Chilcott Limited (“WCL”) Guarantor and Non-Guarantor Condensed Consolidating Financial Information

The following financial information is presented to segregate the financial results of WCL, Allergan Funding SCS, and Allergan Finance, LLC (the issuers of the long-term notes), the guarantor subsidiaries for the long-term notes and the non-guarantor subsidiaries. The guarantors jointly and severally, and fully and unconditionally, guarantee the Company’s obligation under the long-term notes.

The information includes elimination entries necessary to consolidate the guarantor and the non-guarantor subsidiaries. Investments in subsidiaries are accounted for using the equity method of accounting. The principal elimination entries eliminate investments in subsidiaries, equity and intercompany balances and transactions.

WCL, Allergan Capital S.à.r.l. and Allergan Finance, LLC are guarantors of the long-term notes. The Company anticipates future legal entity structure changes which may impact the presentation of this footnote in the near future.

WCL has revised its consolidating balance sheets as previously presented in Footnote 25 of the December 31, 2016 Annual Report on Form 10-K and its consolidating financial statements as previously presented in Footnote 21 of the September 30, 2016 Quarterly Report on Form 10-Q due to a change in the Company’s legal structure and other reclassifications that occurred during the nine months ended September 30, 2017. As a result, prior period information has been recast to conform to the current period presentation.

The following financial information presents the consolidating balance sheets as of September 30, 2017 and December 31, 2016, the related statement of operations for the three and nine months ended September 30, 2017 and 2016 and the statement of cash flows for the nine months ended September 30, 2017 and 2016.

Warner Chilcott Limited

Consolidating Balance Sheets

As of September 30, 2017

(Unaudited; in millions)

Current assets:	Warner Chilcott Limited (Parent Guarantor)		Allergan Capital S.a.r.l. (Guarantor)		Allergan Funding SCS (Issuer)		Allergan Finance, LLC (Issuer and Guarantor)		Non- guarantors		Eliminations			Consolidated Warner Chilcott Limited
Cash and cash equivalents	$	0.1	$	29.7	$	-	$	-	$	1,578.7	$	-		$	1,608.5
Marketable securities		-		-		-		-		3,829.1		-			3,829.1
Accounts receivable, net		-		-		-		-		2,808.6		-			2,808.6
Receivable from Parents		-		4,824.2		-		-		484.7		-			5,308.9
Inventories, net		-		-		-		-		899.8		-			899.8
Intercompany receivables		-		9,481.2		5,308.4		75.9		30,134.2		(44,999.7	)		-
Prepaid expenses and other current assets		-		5.0		-		89.7		866.3		-			961.0
Total current assets		0.1		14,340.1		5,308.4		165.6		40,601.4		(44,999.7	)		15,415.9
Property, plant and equipment, net		-		-		-		-		1,802.2		-			1,802.2
Investments and other assets		-		-		-		-		269.9		-			269.9
Investment in subsidiaries		78,649.5		84,325.9		-		70,820.7		-		(233,796.1	)		-
Non current intercompany receivables		-		31,706.5		20,938.0		-		30,867.5		(83,512.0	)		-
Non current receivables from Parents		-		-		-		-		3,964.0		-			3,964.0
Non current assets held for sale		-		-		-		-		11.1		-			11.1
Deferred tax assets		-		-		-		-		326.9		-			326.9
Product rights and other intangibles		-		-		-		-		56,698.9		-			56,698.9
Goodwill		-		-		-		-		49,770.9		-			49,770.9
Total assets	$	78,649.6	$	130,372.5	$	26,246.4	$	70,986.3	$	184,312.8	$	(362,307.8	)	$	128,259.8

Current liabilities:
Accounts payable and accrued expenses		-		-		77.9		-		4,438.2		-			4,516.1
Intercompany payables		-		17,174.7		1,756.9		11,202.6		14,865.5		(44,999.7	)		-
Payable to Parents		-		-		-		-		1,816.5		-			1,816.5
Income taxes payable		-		-		-		-		221.1		-			221.1
Current portion of long-term debt and capital leases		-		-		3,472.6		-		324.4		-			3,797.0
Total current liabilities		-		17,174.7		5,307.4		11,202.6		21,665.7		(44,999.7	)		10,350.7
Long-term debt and capital leases		-		-		20,938.0		2,530.3		3,070.8		-			26,539.1
Other long-term liabilities		-		-		-		-		1,007.0		-			1,007.0
Long-term intercompany payables		-		30,718.5		-		149.0		52,644.5		(83,512.0	)		-
Other taxes payable		-		-		-		-		911.4		-			911.4
Deferred tax liabilities		-		-		-		-		10,802.0		-			10,802.0
Total liabilities		-		47,893.2		26,245.4		13,881.9		90,101.4		(128,511.7	)		49,610.2
Total equity / (deficit)		78,649.6		82,479.3		1.0		57,104.4		94,211.4		(233,796.1	)		78,649.6
Total liabilities and equity	$	78,649.6	$	130,372.5	$	26,246.4	$	70,986.3	$	184,312.8	$	(362,307.8	)	$	128,259.8

Warner Chilcott Limited

Consolidating Balance Sheets

As of December 31, 2016

($ in millions)

Current assets:	Warner Chilcott Limited (Parent Guarantor)		Allergan Capital S.a.r.l. (Guarantor)		Allergan Funding SCS (Issuer)		Allergan Finance, LLC (Issuer and Guarantor)		Non- guarantors		Eliminations			Consolidated Warner Chilcott Limited
Cash and cash equivalents	$	0.1	$	513.9	$	-	$	-	$	1,199.2	$	-		$	1,713.2
Marketable securities	-			6,351.8		-		-		5,149.7		-			11,501.5
Accounts receivable, net	-		-			-		-		2,531.0		-			2,531.0
Receivable from Parents	-			4,196.9		-		-		5,092.3		-			9,289.2
Inventories	-		-			-		-		718.0		-			718.0
Intercompany receivables	-			24,348.6		3,343.5		81.6		66,840.8		(94,614.5	)		-
Prepaid expenses and other current assets	-			14.2		-		42.7		1,325.2		-			1,382.1
Total current assets		0.1		35,425.4		3,343.5		124.3		82,856.2		(94,614.5	)		27,135.0
Property, plant and equipment, net		-		-		-		-		1,611.3		-			1,611.3
Investments and other assets		-		-		-		15.8		266.3		-			282.1
Investment in subsidiaries		88,093.4		89,276.0		-		73,757.8	-			(251,127.2	)		-
Non current intercompany receivables		-		27,706.6		22,540.1		-		9,686.6		(59,933.3	)		-
Non current receivables from Parents		-		-		-		-		3,964.0		-			3,964.0
Non current assets held for sale		-		-		-		-		27.0		-			27.0
Deferred tax assets		-		-		-		-		233.3		-			233.3
Product rights and other intangibles		-		-		-		-		62,618.6		-			62,618.6
Goodwill		-		-		-		-		46,356.1		-			46,356.1
Total assets	$	88,093.5	$	152,408.0	$	25,883.6	$	73,897.9	$	207,619.4	$	(405,675.0	)	$	142,227.4
Current liabilities:
Accounts payable and accrued expenses		-		-		208.9		-		4,784.4		-			4,993.3
Intercompany payables		-		55,828.8		1,652.9		9,359.1		27,773.7		(94,614.5	)		-
Payable to Parents		-		334.1	-		-			1,038.7		-			1,372.8
Income taxes payable		-		-	-		-			57.8		-			57.8
Current portion of long-term debt and capital leases		-		-		1,478.1		1,197.4		122.4		-			2,797.9
Total current liabilities		-		56,162.9		3,339.9		10,556.5		33,777.0		(94,614.5	)		9,221.8
Long-term debt and capital leases		-		-		22,540.1		3,079.0		4,351.7		-			29,970.8
Other long-term liabilities		-		-		-		-		1,086.0		-			1,086.0
Long-term intercompany payables		-		9,537.6		-		149.0		50,246.7		(59,933.3	)		-
Other taxes payable		-		-		-		-		886.2		-			886.2
Deferred tax liabilities		-		-		-		-		12,969.1		-			12,969.1
Total liabilities		-		65,700.5		25,880.0		13,784.5		103,316.7		(154,547.8	)		54,133.9
Total equity / (deficit)		88,093.5		86,707.5		3.6		60,113.4		104,302.7		(251,127.2	)		88,093.5
Total liabilities and equity	$	88,093.5	$	152,408.0	$	25,883.6	$	73,897.9	$	207,619.4	$	(405,675.0	)	$	142,227.4

Warner Chilcott Limited

Consolidating Statements of Operations

For the Three Months Ended September 30, 2017

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)			Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Net revenues	$	-		$	-		$	-		$	-		$	4,034.3		$	-		$	4,034.3

Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		-			-			-			-			586.5			-			586.5
Research and development		-			-			-			-			442.6			-			442.6
Selling and marketing		-			-			-			-			832.8			-			832.8
General and administrative		-			-			(0.9	)		-			278.1			-			277.2
Amortization		-			-			-			-			1,781.0			-			1,781.0
In-process research and development impairments		-			-			-			-			202.0			-			202.0
Asset sales and impairments, net		-			-			-			-			3,874.8			-			3,874.8
Total operating expenses		-			-			(0.9	)		-			7,997.8			-			7,996.9
Operating (loss)		-			-			0.9			-			(3,963.5	)		-			(3,962.6	)

Non-operating income (expense):
Interest income / (expense), net		-			193.6			52.5			(26.3	)		(447.1	)		-			(227.3	)
Other (expense), net		-			-			-			-			(1,310.3	)		-			(1,310.3	)
Total other income (expense), net		-			193.6			52.5			(26.3	)		(1,757.4	)		-			(1,537.6	)
Income / (loss) before income taxes and noncontrolling interest		-			193.6			53.4			(26.3	)		(5,720.9	)		-			(5,500.2	)
(Benefit) / provision for income taxes		-			-			0.3			(14.4	)		(1,624.7	)		-			(1,638.8	)
Losses / (earnings) of equity interest subsidiaries		3,869.2			4,077.9			-			2,564.2			-			(10,511.3	)		-
Net (loss) / income from continuing operations, net of tax	$	(3,869.2	)	$	(3,884.3	)	$	53.1		$	(2,576.1	)	$	(4,096.2	)	$	10,511.3		$	(3,861.4	)
(Loss) from discontinued operations		-			-			-			-			(6.1	)		-			(6.1	)
Net (loss) / income	$	(3,869.2	)	$	(3,884.3	)	$	53.1		$	(2,576.1	)	$	(4,102.3	)	$	10,511.3		$	(3,867.5	)
(Income) attributable to noncontrolling interest		-			-			-			-			(1.7	)		-			(1.7	)
Net (loss) / income attributable to ordinary shareholders	$	(3,869.2	)	$	(3,884.3	)	$	53.1		$	(2,576.1	)	$	(4,104.0	)	$	10,511.3		$	(3,869.2	)
Other comprehensive income / (loss)		86.2			176.0			-			(50.2	)		86.2			(212.0	)		86.2
Comprehensive income / (loss)	$	(3,783.0	)	$	(3,708.3	)	$	53.1		$	(2,626.3	)	$	(4,017.8	)	$	10,299.3		$	(3,783.0	)

Warner Chilcott Limited

Consolidating Statements of Operations

For the Nine Months Ended September 30, 2017

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)			Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Net revenues		-			-			-			-			11,614.6			-			11,614.6

Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		-			-			-			-			1,587.1			-			1,587.1
Research and development		-			-			-			-			1,691.9			-			1,691.9
Selling and marketing		-			-			-			-			2,637.1			-			2,637.1
General and administrative		-			-			9.2			1.1			1,028.9			-			1,039.2
Amortization		-			-			-			-			5,274.9			-			5,274.9
In process research and development impairments		-			-			-			-			1,245.3			-			1,245.3
Asset sales and impairments, net		-			-			-			-			3,896.2			-			3,896.2
Total operating expenses		-			-			9.2			1.1			17,361.4			-			17,371.7
Operating (loss)		-			-			(9.2	)		(1.1	)		(5,746.8	)		-			(5,757.1	)

Non-operating income (expense):
Interest income / (expense), net		-			721.7			117.3			(104.3	)		(1,440.5	)		-			(705.8	)
Other income (expense), net		-			-			(110.4	)		(39.9	)		(3,216.3	)		-			(3,366.6	)
Total other income (expense), net		-			721.7			6.9			(144.2	)		(4,656.8	)		-			(4,072.4	)
Income / (loss) before income taxes and noncontrolling interest		-			721.7			(2.3	)		(145.3	)		(10,403.6	)		-			(9,829.5	)
(Benefit) / provision for income taxes		-			(0.2	)		0.3			(73.4	)		(2,678.8	)		-			(2,752.1	)
Losses / (earnings) of equity interest subsidiaries		7,099.7			7,901.8			-			2,579.5			-			(17,581.0	)		-
Net (loss) / income from continuing operations, net of tax	$	(7,099.7	)	$	(7,179.9	)	$	(2.6	)	$	(2,651.4	)	$	(7,724.8	)	$	17,581.0		$	(7,077.4	)
(Loss) from discontinued operations		-			-			-			-			(17.6	)		-			(17.6	)
Net (loss) / income	$	(7,099.7	)	$	(7,179.9	)	$	(2.6	)	$	(2,651.4	)	$	(7,742.4	)	$	17,581.0		$	(7,095.0	)
(Income) attributable to noncontrolling interest		-			-			-			-			(4.7	)		-			(4.7	)
Net (loss) / income attributable to ordinary shareholders	$	(7,099.7	)	$	(7,179.9	)	$	(2.6	)	$	(2,651.4	)	$	(7,747.1	)	$	17,581.0		$	(7,099.7	)
Other comprehensive income / (loss)		2,749.6			2,894.5			-			(357.7	)		2,749.6			(5,286.4	)		2,749.6
Comprehensive (loss) / income	$	(4,350.1	)	$	(4,285.4	)	$	(2.6	)	$	(3,009.1	)	$	(4,997.5	)	$	12,294.6		$	(4,350.1	)

Warner Chilcott Limited

Consolidating Statements of Operations

For the Three Months Ended September 30, 2016

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)			Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Net revenues	$	-		$	-		$	-		$	-		$	3,622.2		$	-		$	3,622.2

Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		-			-			-			-			462.2			-			462.2
Research and development		-			-			-			-			622.8			-			622.8
Selling and marketing		-			-			-			-			796.0			-			796.0
General and administrative		-			4.1			-			-			308.1			-			312.2
Amortization		-			-			-			-			1,609.1			-			1,609.1
In process research and development impairments		-			-			-			-			42.0			-			42.0
Asset sales and impairments, net		-			-			-			-			(4.7	)		-			(4.7	)
Total operating expenses		-			4.1			-			-			3,835.5			-			3,839.6
Operating (loss)		-			(4.1	)		-			-			(213.3	)		-			(217.4	)

Non-operating income (expense):
Interest income / (expense), net		-			911.6			(216.6	)		(40.3	)		(960.9	)		-			(306.2	)
Other income, net		-			-			-			-			33.6			-			33.6
Total other income (expense), net		-			911.6			(216.6	)		(40.3	)		(927.3	)		-			(272.6	)
(Loss) / income before income taxes and noncontrolling interest		-			907.5			(216.6	)		(40.3	)		(1,140.6	)		-			(490.0	)
Provision / (benefit) for income taxes		-			-			-			(22.6	)		(136.3	)		-			(158.9	)
Losses / (earnings) of equity interest subsidiaries		(15,269.0	)		(11,485.0	)		-			747.6			-			26,006.4			-
Net (loss) / income from continuing operations, net of tax	$	15,269.0		$	12,392.5		$	(216.6	)	$	(765.3	)	$	(1,004.3	)	$	(26,006.4	)	$	(331.1	)
(Loss) from discontinued operations		-			-			-			-			15,601.9			-			15,601.9
Net (loss) / income	$	15,269.0		$	12,392.5		$	(216.6	)	$	(765.3	)	$	14,597.6		$	(26,006.4	)	$	15,270.8
(Income) attributable to noncontrolling interest		-			-			-			-			(1.8	)		-			(1.8	)
Net (loss) / income attributable to ordinary shareholders	$	15,269.0		$	12,392.5		$	(216.6	)	$	(765.3	)	$	14,595.8		$	(26,006.4	)	$	15,269.0
Other comprehensive (loss) / income		916.4			958.4		-				900.2			916.4			(2,775.0	)		916.4
Comprehensive income / (loss)	$	16,185.4		$	13,350.9		$	(216.6	)	$	134.9		$	15,512.2		$	(28,781.4	)	$	16,185.4

Consolidating Statements of Operations

For the Nine Months Ended September 30, 2016

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)		Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Net revenues	$	-		$	-		$	-	$	-		$	10,706.3		$	-		$	10,706.3

Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		-			-			-		-			1,381.1			-			1,381.1
Research and development		-			-			-		-			1,662.4			-			1,662.4
Selling and marketing		-			-			-		-			2,429.6			-			2,429.6
General and administrative		-			4.6			-		19.8			941.8			-			966.2
Amortization		-			-			-		-			4,831.9			-			4,831.9
In process research and development impairments		-			-			-		-			316.9			-			316.9
Asset sales and impairments, net		-			-			-		-			(24.0	)		-			(24.0	)
Total operating expenses		-			4.6			-		19.8			11,539.7			-			11,564.1
Operating (loss)		-			(4.6	)		-		(19.8	)		(833.4	)		-			(857.8	)

Non-operating income (expense):
Interest income / (expense), net		-			1,349.2			2.2		(117.2	)		(2,213.6	)		-			(979.4	)
Other income (expense), net		-			-			-		-			34.2			-			34.2
Total other income (expense), net		-			1,349.2			2.2		(117.2	)		(2,179.4	)		-			(945.2	)
Income / (loss) before income taxes and noncontrolling interest		-			1,344.6			2.2		(137.0	)		(3,012.8	)		-			(1,803.0	)
Provision / (benefit) for income taxes		-			-			-		(51.4	)		(774.4	)		-			(825.8	)
Losses / (earnings) of equity interest subsidiaries		(14,891.7	)		(10,701.3	)		-		198.6			-			25,394.4			-
Net (loss) / income from continuing operations, net of tax	$	14,891.7		$	12,045.9		$	2.2	$	(284.2	)	$	(2,238.4	)	$	(25,394.4	)	$	(977.2	)
Income from discontinued operations		-			-			-		-			15,873.2			-			15,873.2
Net (loss) / income	$	14,891.7		$	12,045.9		$	2.2	$	(284.2	)	$	13,634.8		$	(25,394.4	)	$	14,896.0
(Income) attributable to noncontrolling interest		-			-			-		-			(4.3	)		-			(4.3	)
Net (loss) / income income attributable to ordinary shareholders	$	14,891.7		$	12,045.9		$	2.2	$	(284.2	)	$	13,630.5		$	(25,394.4	)	$	14,891.7
Other comprehensive income / (loss)		1,093.4			1,213.8			-		871.1			1,093.4			(3,178.3	)		1,093.4
Comprehensive (loss) / income	$	15,985.1		$	13,259.7		$	2.2	$	586.9		$	14,723.9		$	(28,572.7	)	$	15,985.1

Warner Chilcott Limited

Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2017

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)			Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Cash Flows From Operating Activities:
Net (loss) / income	$	(7,099.7	)	$	(7,179.9	)	$	(2.6	)	$	(2,651.4	)	$	(7,742.4	)	$	17,581.0		$	(7,095.0	)
Reconciliation to net cash provided by operating activities:
Losses / (earnings) of equity interest subsidiaries		7,099.7			7,901.8			-			2,579.5			-			(17,581.0	)		-
Depreciation		-			-			-			-			123.2			-			123.2
Amortization		-			-			-			-			5,274.9			-			5,274.9
Provision for inventory reserve		-			-			-			-			77.3			-			77.3
Share-based compensation		-			-			-			-			220.8			-			220.8
Deferred income tax benefit		-			-			-			-			(3,205.3	)		-			(3,205.3	)
In-process research and development impairments		-			-			-			-			1,245.3			-			1,245.3
Loss on asset sales and impairments, net		-			-			-			-			3,896.2			-			3,896.2
Net income impact of other-than-temporary loss on investment in Teva securities		-			-			-			-			3,273.5			-			3,273.5
Amortization of inventory step up		-			-			-			-			126.2			-			126.2
Non-cash debt extinguishment		-			-			17.6			12.2			(38.0	)		-			(8.2	)
Amortization of deferred financing costs		-			-			17.0			2.6			-			-			19.6
Contingent consideration adjustments, including accretion		-			-			-			-			(51.6	)		-			(51.6	)
Dividends from subsidiaries		917.0			-			-			-			-			(917.0	)		-
Other, net		-			(10.0	)		-			-			(8.2	)		-			(18.2	)
Changes in assets and liabilities (net of effects of acquisitions)		-			(5,072.9	)		(235.4	)		1,800.4			3,591.6			-			83.7
Net cash provided by / (used in) operating activities		917.0			(4,361.0	)		(203.4	)		1,743.3			6,783.5			(917.0	)		3,962.4
Cash Flows From Investing Activities:
Additions to property plant and equipment		-			-			-			-			(234.0	)		-			(234.0	)
Additions to product rights and other intangibles		-			-			-			-			(604.3	)		-			(604.3	)
Additions to investments		-			(3,989.6	)		-			-			(4,444.2	)		-			(8,433.8	)
Proceeds from sale of investments and other assets		-			7,866.4			-			-			6,608.0			-			14,474.4
Proceeds from sales of property, plant and equipment		-			-			-			-			5.8			-			5.8
Acquisitions of business, net of cash acquired		-			-			-			-			(5,290.4	)		-			(5,290.4	)
Net cash provided by / (used in) investing activities		-			3,876.8			-			-			(3,959.1	)		-			(82.3	)
Cash Flows From Financing Activities:
Proceeds from borrowings of long-term indebtedness		-			-			3,020.9			-			4.1			-			3,025.0
Debt issuance costs		-			-			(17.5	)		-			-			-			(17.5	)
Payments on debt, including capital lease obligations		-			-			(2,800.0	)		(1,743.3	)		(1,035.9	)		-			(5,579.2	)
Payments of contingent consideration and other financing		-			-			-			-			(515.2	)		-			(515.2	)
Dividends to Parent		(917.0	)		-			-			-			(917.0	)		917.0			(917.0	)
Net cash (used in) / provided by financing activities		(917.0	)		-			203.4			(1,743.3	)		(2,464.0	)		917.0			(4,003.9	)
Effect of currency exchange rate changes on cash and cash equivalents		-			-			-			-			19.1			-			19.1
Net (decrease) in cash and cash equivalents		-			(484.2	)		-			-			379.5			-			(104.7	)
Cash and cash equivalents at beginning of period		0.1			513.9			-			-			1,199.2			-			1,713.2
Cash and cash equivalents at end of period	$	0.1		$	29.7		$	-		$	-		$	1,578.7		$	-		$	1,608.5

Warner Chilcott Limited

Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2016

(Unaudited; in millions)

	Warner Chilcott Limited (Parent Guarantor)			Allergan Capital S.a.r.l. (Guarantor)			Allergan Funding SCS (Issuer)			Allergan Finance, LLC (Issuer and Guarantor)			Non- guarantors			Eliminations			Consolidated Warner Chilcott Limited
Cash Flows From Operating Activities:
Net (loss) / income	$	14,891.7		$	12,045.9		$	2.2		$	(284.2	)	$	13,634.8		$	(25,394.4	)	$	14,896.0
Reconciliation to net cash provided by operating activities:
(Earnings) / losses of equity interest subsidiaries		(14,891.7	)		(10,701.3	)		-			198.6			-			25,394.4			-
Depreciation		-			-			-			-			117.6			-			117.6
Amortization		-			-			-			-			4,836.7			-			4,836.7
Provision for inventory reserve		-			-			-			-			162.7			-			162.7
Share-based compensation		-			-			-			-			269.9			-			269.9
Deferred income tax benefit		-			-			-			-			(517.1	)		-			(517.1	)
Pre-tax gain on sale of generics business		-			-			-			-			(24,203.1	)		-			(24,203.1	)
Non-cash tax effect of gain on sale of generics business		-			-			-			-			5,749.9			-			5,749.9
In-process research and development impairments		-			-			-			-			316.9			-			316.9
(Gain) on asset sales and impairments, net					-			-			-			(24.0	)					(24.0	)
Amortization of inventory step-up		-			-			-			-			42.4			-			42.4
Amortization of deferred financing costs		-			21.7			18.3			3.2			1.4			-			44.6
Contingent consideration adjustments, including accretion		-			-			-			-			76.7			-			76.7
Dividends from subsidiaries		1,244.8			1,244.8			-			-			-			(2,489.6	)		-
Other, net		-			-			-			-			(16.0	)		-			(16.0	)
Changes in assets and liabilities (net of effects of acquisitions)		0.1			8,487.2			479.5			80.4			(10,821.9	)		-			(1,774.7	)
Net cash provided by / (used in) operating activities		1,244.9			11,098.3			500.0			(2.0	)		(10,373.1	)		(2,489.6	)		(21.5	)
Cash Flows From Investing Activities:
Additions to property, plant and equipment		-			-			-			-			(250.5	)		-			(250.5	)
Additions to product rights and other intangibles		-			-			-			-			-			-			-
Sale of generics business		-			-			-			-			33,304.5			-			33,304.5
Additions to investments		-			-			-			-			(15,445.5	)		-			(15,445.5	)
Proceeds from the sale of investments and other assets		-			-			-			-			40.0			-			40.0
Proceeds from sales of property, plant and equipment		-			-			-			-			33.3			-			33.3
Acquisitions of businesses, net of cash acquired		-			-			-			-			(74.5	)		-			(74.5	)
Net cash (used in) investing activities		-			-			-			-			17,607.3			-			17,607.3
Cash Flows From Financing Activities:
Proceeds from borrowings on credit facility		-			1,050.0			-			-			-			-			1,050.0
Payments on debt, including capital lease obligations		-			(8,815.9	)		(500.0	)		-			(1,515.1	)		-			(10,831.0	)
Payments of contingent consideration		-			-			-			-			(77.7	)		-			(77.7	)
Dividends to Parent		(1,244.8	)		(1,244.8	)		-			-			(1,244.8	)		2,489.6			(1,244.8	)
Net cash (used in) / provided by financing activities		(1,244.8	)		(9,010.7	)		(500.0	)		-			(2,837.6	)		2,489.6			(11,103.5	)
Effect of currency exchange rate changes on cash and cash equivalents		-			-			-			-			4.3			-			4.3
Net increase / (decrease) in cash and cash equivalents		0.1			2,087.6			-			(2.0	)		4,400.9			-			6,486.6
Cash and cash equivalents at beginning of period		-			13.5			-			2.0			1,020.7			-			1,036.2
Cash and cash equivalents at end of period	$	0.1		$	2,101.1		$	-		$	-		$	5,421.6		$	-		$	7,522.8

NOTE 22 – Subsequent Events

Tax Structure

As a result of changes to the internal structure of the Company that occurred in October 2017, we estimate that a net tax benefit of approximately $795.0 million will be accounted for as a discrete item in our Q4 2017 tax provision. This is due to certain temporary differences expected to reverse at tax rates different than what was originally recorded.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and the results of operations should be read in conjunction with the “Consolidated Financial Statements” and notes thereto included elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”) and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 (the “Annual Report”). This discussion contains forward-looking statements that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, those identified under “Risk Factors” in our Annual Report, and elsewhere in this Quarterly Report.

References throughout to “we,” “our,” “us,” the “Company” or “Allergan” refer to financial information and transactions of Allergan plc. References to “Warner Chilcott Limited” refer to Warner Chilcott Limited, the Company’s indirect wholly-owned subsidiary, and, unless the context otherwise requires, its subsidiaries. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc, the ultimate parent of the group. The results of Warner Chilcott Limited are consolidated into the results of Allergan plc. Due to the deminimis activity between Allergan plc and Warner Chilcott Limited, references throughout this filing relate to both Allergan plc and Warner Chilcott Limited. Warner Chilcott Limited representations relate only to itself and not to any other company.

Overview

Allergan plc is a global pharmaceutical company and a leader in a new industry model – Growth Pharma. Allergan is focused on developing, manufacturing and commercializing branded pharmaceutical (“brand”, “branded” or “specialty brand”), device, biologic, surgical and regenerative medicine products for patients around the world. The Company has operations in more than 100 countries. Warner Chilcott Limited is an indirect wholly-owned subsidiary of Allergan plc and has the same principal business activities.

On August 2, 2016 we completed the divestiture of our global generics business and certain other assets to Teva Pharmaceutical Industries Ltd. (“Teva”) (the “Teva Transaction”) in exchange for which we received $33.3 billion in cash, net of cash acquired by Teva, which includes estimated working capital and other contractual adjustments, and 100.3 million unregistered Teva ordinary shares (or American Depository Shares with respect thereto), which approximated $5.0 billion in value using the closing date Teva opening stock price discounted at a rate of 5.9 percent due to the lack of marketability.

As a result of the Teva Transaction and the divestiture of the Company’s Anda Distribution business, and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) number 2014-08 “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, the financial results of the businesses held for sale have been reclassified to discontinued operations for all periods presented in our consolidated financial statements. The results of our discontinued operations include the results of our generic product development, manufacturing and distribution of off-patent pharmaceutical products, certain established international brands marketed similarly to generic products and out-licensed generic pharmaceutical products primarily in Europe through our Medis third-party business through August 2, 2016, as well as our Anda Distribution business through October 3, 2016.

2017 Transactions

The following are the material transactions that were completed in the nine months ended September 30, 2017.

Acquisitions

Keller Medical, Inc.

On June 23, 2017 the Company acquired Keller Medical, Inc. (“Keller”), a privately held medical device company and developer of the Keller Funnel^® (the “Keller Acquisition”). The acquisition combines the Keller Funnel^® with the Company’s leading breast implants business.

Zeltiq^® Aesthetics, Inc.

On April 28, 2017 the Company acquired ZELTIQ^® Aesthetics, Inc. (“Zeltiq”) for an acquisition accounting purchase price of $2,405.4 million (the “Zeltiq Acquisition”). Zeltiq was focused on developing and commercializing products utilizing its proprietary controlled-cooling technology platform. The acquisition combined Zeltiq’s body contouring business with the Company’s leading portfolio of medical aesthetics.

As a result of the Zeltiq Acquisition, the Company incurred the following transaction and integration costs in the three and nine months ended September 30, 2017 ($ in millions):

	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Cost of sales
Stock-based compensation acquired for legacy Zeltiq employees	$	0.8	$	1.3
Research and development
Stock-based compensation acquired for legacy Zeltiq employees		1.3		2.1
Acquisition, integration and restructuring related charges		0.7		1.0
Selling and marketing
Stock-based compensation acquired for legacy Zeltiq employees		4.3		7.9
Acquisition, integration and restructuring related charges		2.1		12.4
General and administrative
Stock-based compensation acquired for legacy Zeltiq employees		1.9		36.1
Acquisition, integration and restructuring related charges		8.2		37.9
Total Integration Costs	$	19.3	$	98.7

LifeCell Corporation

On February 1, 2017, the Company acquired the LifeCell Corporation (“LifeCell”), a regenerative medicine company, for an acquisition accounting price of $2,883.1 million (the “LifeCell Acquisition”). The acquisition combined LifeCell's novel, regenerative medicines business, including its high-quality and durable portfolio of dermal matrix products with the Company’s leading portfolio of medical aesthetics, breast implants and tissue expanders. The acquisition of LifeCell expanded the Company’s marketed product portfolio by adding Alloderm^® and Strattice^®.

As a result of the LifeCell Acquisition, the Company incurred the following transaction and integration costs in the three and nine months ended September 30, 2017 ($ in millions):

	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Cost of sales
Acquisition, integration and restructuring related charges	$	-	$	0.2
Research and development
Acquisition, integration and restructuring related charges		-		0.6
Selling and marketing
Acquisition, integration and restructuring related charges		-		2.9
General and administrative
Acquisition, integration and restructuring related charges		7.8		37.3
Total Integration Costs	$	7.8	$	41.0

Licenses and Other Transactions Accounted for as Asset Acquisitions

Lyndra, Inc.

On July 28, 2017, the Company entered into a collaboration, option and license agreement with Lyndra, Inc. (“Lyndra”) to develop orally administered ultra-long-acting (once-weekly) products for the treatment of Alzheimer’s disease and an additional, unspecified indication. The total upfront payment of $15.0 million was expensed as a component of R&D expense in the three and nine months ended September 30, 2017. The future option exercise payments, if any, and any future success based milestones relating to the licensed products of up to $85.0 million will be recorded if the corresponding events become probable.

Editas Medicine, Inc.

Assembly Biosciences, Inc.

On January 9, 2017 the Company entered into a licensing agreement with Assembly Biosciences, Inc. (“Assembly”) for the worldwide rights to Assembly’s microbiome gastrointestinal development programs. Pursuant to the agreement, Allergan made an upfront payment to Assembly of $50.0 million for the exclusive, worldwide rights to develop and commercialize certain development compounds. Additionally, Assembly will be eligible to receive success-based development and commercial milestone payments plus royalties based on net sales. Allergan and Assembly will generally share development costs through proof-of-concept (“POC”) studies, and Allergan will assume all post-POC development costs. The Company concluded based on the stage of development of the assets, the lack of acquired employees and manufacturing, as well as the lack of certain other inputs and processes, that the transaction did not qualify as a business. The total upfront payment of $50.0 million was expensed as a component of R&D expense in the nine months ended September 30, 2017 and the future success based milestone payments of up to $2,771.0 million will be recorded if the corresponding events become probable.

Lysosomal Therapeutics, Inc.

On January 9, 2017 the Company entered into a definitive agreement for the option to acquire Lysosomal Therapeutics, Inc. (“LTI”). LTI is focused on innovative small-molecule research and development in the field of neurodegeneration, yielding new treatment options for patients with severe neurological diseases. Under the agreement, Allergan acquired an option right directly from LTI shareholders to acquire LTI for $150.0 million plus future milestone payments following completion of a Phase 1b trial for LTI-291 as well as an upfront research and development payment. The Company concluded based on the stage of development of the

assets, the lack of acquired employees and manufacturing, as well as the lack of certain other inputs and processes, that the transaction did not qualify as a business. The aggregate upfront payment of $145.0 million was recorded as a component of R&D expense in the nine months ended September 30, 2017.

Other Transactions

Saint Regis Mohawk Tribe

On September 8, 2017, the Company entered into an agreement with the Saint Regis Mohawk Tribe, under which the Saint Regis Mohawk Tribe obtained the rights to Orange Book-listed patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05%, and the Company was granted exclusive licenses under the patents related to the product. Pursuant to the agreement, the Company paid the Saint Regis Mohawk Tribe an upfront payment of $13.8 million, which was recorded as a component of cost of sales in the three and nine months ended September 30, 2017. Additionally, the Saint Regis Mohawk Tribe will be eligible to receive $15.0 million in annual royalties, during the period that certain patent claims remain in effect.

2016 Transactions

The following are the material transactions that were completed in the year ended December 31, 2016.

Acquisitions

Tobira Therapeutics, Inc.

On November 1, 2016, the Company acquired Tobira Therapeutics, Inc. (“Tobira”), a clinical-stage biopharmaceutical company focused on developing and commercializing therapies for non-alcoholic steatohepatitis (“NASH”) and other liver diseases, for an acquisition accounting purchase price of $570.1 million, plus contingent consideration of up to $49.84 per share in contingent value rights (“CVR”), or up to $1,101.3 million, that may be payable based on the successful completion of certain development, regulatory and commercial milestones (the “Tobira Acquisition”), of which $303.1 million was paid during the second quarter of 2017. The CVR had an aggregate acquisition date fair value of $479.0 million. The Tobira Acquisition added to the Company’s pipeline Cenicriviroc and Evogliptin, two differentiated, complementary development programs for the treatment of the multi-factorial elements of NASH, including inflammation, metabolic syndromes and fibrosis.

Vitae Pharmaceuticals, Inc.

On October 25, 2016, the Company acquired Vitae Pharmaceuticals, Inc. (“Vitae”), a clinical-stage biotechnology company, for an acquisition accounting purchase price of $621.4 million (the “Vitae Acquisition”). The Vitae Acquisition strengthens Allergan’s dermatology product pipeline with the addition of a Phase II orally active RORyt (retinoic acid receptor-related orphan receptor gamma) inhibitor for the potential treatment of psoriasis and other autoimmune disorders. In addition, as a result of the Vitae Acquisition, the Company expanded its pipeline with the acquisition of a Phase II atopic dermatitis drug candidate.

ForSight VISION5, Inc.

On September 23, 2016, the Company acquired ForSight VISION5, Inc. (“ForSight’), a privately held, clinical-stage biotechnology company focused on eye care, in an all cash transaction of approximately $95.0 million (the “ForSight Acquisition”). Under the terms of the ForSight Acquisition, the Company acquired ForSight for an acquisition accounting purchase price of $74.5 million plus the payment of outstanding indebtedness of $14.8 million and other miscellaneous charges. ForSight shareholders are eligible to receive contingent consideration of up to $125.0 million, which has an initial estimated fair value of $79.8 million, relating to commercialization milestones. The Company acquired ForSight for its lead development program, a peri-ocular ring designed for extended drug delivery and reducing elevated intraocular pressure (“IOP”) in glaucoma patients.

Licenses and Asset Acquisitions

	Initial Consideration
AstraZeneca plc agreement in the three months ended December 31, 2016	$	250.0
Motus Therapeutics, Inc. acquisition in the three months ended December 31, 2016		199.5
Chase Pharmaceuticals Corporation acquisition in the three months ended December 31, 2016		122.9
RetroSense Therapeutics, LLC license agreement in the three months ended September 30, 2016		59.7
Akarna Therapeutics, Ltd acquisition in the three months ended September 30, 2016		48.2
Topokine Therapeutics, Inc. acquisition in the three months ended June 30, 2016		85.8
Heptares Therapeutics Ltd. license agreement in the three months ended June 30, 2016		125.0
Anterios, Inc. acquisition in the three months ended March 31, 2016		89.2

2015 Transactions

The following are the material transactions that were completed in the year ended December 31, 2015.

Allergan, Inc.

Acquisition-Related Expenses

As a result of the Allergan acquisition, the Company incurred the following transaction and integration costs in the three months ended September 30, 2017 and 2016, respectively ($ in millions):

	Three Months Ended September 30, 2017		Three Months Ended September 30, 2016
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	1.1	$	2.2
Acquisition, integration and restructuring related charges		-		6.6
Research and development
Stock-based compensation acquired for Legacy Allergan employees		5.8		9.3
Acquisition, integration and restructuring related charges		-		6.8
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		7.5		15.8
Acquisition, integration and restructuring related charges		-		(1.2	)
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		2.9		9.9
Acquisition, integration and restructuring related charges		-		50.4
Total transaction and integration costs	$	17.3	$	99.8

As a result of the Allergan acquisition, the Company incurred the following transaction and integration costs in the nine months ended September 30, 2017 and 2016, respectively ($ in millions):

	Nine Months Ended September 30, 2017		Nine Months Ended September 30, 2016
Cost of sales
Stock-based compensation acquired for Legacy Allergan employees	$	3.8	$	7.4
Acquisition, integration and restructuring related charges		0.9		12.4
Research and development
Stock-based compensation acquired for Legacy Allergan employees		19.7		32.6
Acquisition, integration and restructuring related charges		0.5		10.6
Selling and marketing
Stock-based compensation acquired for Legacy Allergan employees		21.4		53.0
Acquisition, integration and restructuring related charges		-		11.7
General and administrative
Stock-based compensation acquired for Legacy Allergan employees		10.3		28.2
Acquisition, integration and restructuring related charges		9.2		144.0
Total transaction and integration costs	$	65.8	$	299.9

Operating results

Segments

The operating segments are organized as follows:

•

The International segment includes sales and expenses relating to products sold outside the U.S.

•

General and administrative expenses that result from shared infrastructure, including certain expenses located within the United States.

•

Total assets including capital expenditures.

•

Other select revenues and operating expenses including R&D expenses, amortization, IPR&D impairments and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

The Company defines segment net revenues as product sales and other revenue derived from branded products or licensing agreements.

Selling and marketing expenses consist mainly of personnel-related costs, product promotion costs, distribution costs, professional service costs, insurance, depreciation and travel costs.

Three Months Ended September 30, 2017 and 2016

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30, 2017
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	1,724.8		$	1,497.4		$	807.8		$	4,030.0

Operating expenses:
Cost of sales⁽¹⁾		131.4			225.5			116.3			473.2
Selling and marketing		353.5			247.7			224.8			826.0
General and administrative		54.8			47.7			28.3			130.8
Segment Contribution	$	1,185.1		$	976.5		$	438.4		$	2,600.0
Contribution margin		68.7	%		65.2	%		54.3	%		64.5	%
Corporate											321.9
Research and development											442.6
Amortization											1,781.0
In-process research and development impairments											202.0
Asset sales and impairments, net											3,874.8
Operating (loss)										$	(4,022.3	)
Operating margin											(99.8	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

	Three Months Ended September 30, 2016
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	1,453.2		$	1,488.1		$	697.8		$	3,639.1

Operating expenses:
Cost of sales⁽¹⁾		69.2			215.1			95.1			379.4
Selling and marketing		292.4			292.8			188.2			773.4
General and administrative		41.2			42.3			28.0			111.5
Segment Contribution	$	1,050.4		$	937.9		$	386.5		$	2,374.8
Contribution margin		72.3	%		63.0	%		55.4	%		65.3	%
Corporate											372.0
Research and development											622.8
Amortization											1,609.1
In-process research and development impairments											42.0
Asset sales and impairments, net											(4.7	)
Operating (loss)										$	(266.4	)
Operating margin											(7.3	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,					Change
	2017		2016			Dollars		%
Segment net revenues	$	4,030.0	$	3,639.1		$	390.9		10.7	%
Corporate revenues		4.3		(16.9	)		21.2		125.4	%
Net revenues	$	4,034.3	$	3,622.2		$	412.1		11.4	%

The following table represents global net revenues for the top products for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30, 2017										Three Months Ended September 30, 2016												Total Change
	US Specialized Therapeutics		US General Medicine		International		Corporate		Total		US Specialized Therapeutics		US General Medicine		International		Corporate			Total			Dollars			Percentage
Botox®	$	558.6	$	-	$	215.9	$	-	$	774.5	$	496.3	$	-	$	193.4	$	-		$	689.7		$	84.8			12.3	%
Restasis®		366.8		-		15.5		-		382.3		356.4		-		15.4		-			371.8			10.5			2.8	%
Juvederm Collection**		115.6		-		126.5		-		242.1		105.0		-		96.8		-			201.8			40.3			20.0	%
Linzess®/Constella®		-		190.9		5.7		-		196.6		-		164.4		4.3		-			168.7			27.9			16.5	%
Lumigan®/Ganfort®		83.3		-		91.5		-		174.8		78.3		-		86.6		-			164.9			9.9			6.0	%
Bystolic® /Byvalson®		-		164.2		0.5		-		164.7		-		165.1		0.5		-			165.6			(0.9	)		(0.5	)%
Alphagan®/Combigan®		92.7		-		43.4		-		136.1		93.4		-		41.3		-			134.7			1.4			1.0	%
Eye Drops		53.7		-		71.2		-		124.9		50.2		-		67.7		-			117.9			7.0			5.9	%
Lo Loestrin®		-		120.0		-		-		120.0		-		105.7		-		-			105.7			14.3			13.5	%
Namenda XR®		-		114.3		-		-		114.3		-		146.9		-		-			146.9			(32.6	)		(22.2	)%
Estrace® Cream		-		101.6		-		-		101.6		-		98.6		-		-			98.6			3.0			3.0	%
Breast Implants		58.0		-		38.1		-		96.1		51.1		-		35.6		-			86.7			9.4			10.8	%
Viibryd®/Fetzima®		-		86.5		1.0		-		87.5		-		87.6		-		-			87.6			(0.1	)		(0.1	)%
Alloderm®		84.6		-		1.5		-		86.1		-		-		-		-			-			86.1		n.a.
Vraylar™		-		80.2		-		-		80.2		-		32.4		-		-			32.4			47.8			147.5	%
Ozurdex ®		24.6		-		50.2		-		74.8		20.9		-		43.4		-			64.3			10.5			16.3	%
Coolsculpting Consumables		50.3		-		13.8		-		64.1		-		-		-		-			-			64.1		n.a.
Asacol®/Delzicol®		-		49.5		11.9		-		61.4		-		72.2		14.2		-			86.4			(25.0	)		(28.9	)%
Carafate ® /Sulcrate ®		-		58.7		0.7		-		59.4		-		56.4		0.6		-			57.0			2.4			4.2	%
Zenpep®		-		56.8		-		-		56.8		-		52.5		-		-			52.5			4.3			8.2	%
Aczone®		46.7		-		0.2		-		46.9		69.0		-		-		-			69.0			(22.1	)		(32.0	)%
Canasa®/Salofalk®		-		39.0		4.6		-		43.6		-		47.2		4.4		-			51.6			(8.0	)		(15.5	)%
Coolsculpting Systems & Add On Applicators		33.1		-		10.2		-		43.3		-		-		-		-			-			43.3		n.a.
Viberzi®		-		40.9		0.2		-		41.1		-		30.9		-		-			30.9			10.2			33.0	%
Armour Thyroid		-		38.5		-		-		38.5		-		39.1		-		-			39.1			(0.6	)		(1.5	)%
Saphris®		-		37.2		-		-		37.2		-		40.8		-		-			40.8			(3.6	)		(8.8	)%
Namzaric®		-		37.0		-		-		37.0		-		14.9		-		-			14.9			22.1			148.3	%
Rapaflo®		28.3		-		1.8		-		30.1		25.2		-		1.5		-			26.7			3.4			12.7	%
Teflaro®		-		29.1		-		-		29.1		-		33.3		-		-			33.3			(4.2	)		(12.6	)%
Savella®		-		24.0		-		-		24.0		-		28.1		-		-			28.1			(4.1	)		(14.6	)%
SkinMedica®		18.7		-		1.4		-		20.1		25.8		-		-		-			25.8			(5.7	)		(22.1	)%
Avycaz®		-		16.9		-		-		16.9		-		4.8		-		-			4.8			12.1		n.m.
Dalvance®		-		16.1		-		-		16.1		-		10.3		-		-			10.3			5.8			56.3	%
Latisse®		13.6		-		1.9		-		15.5		17.2		-		1.9		-			19.1			(3.6	)		(18.8	)%
Tazorac®		15.1		-		0.1		-		15.2		27.5		-		0.2		-			27.7			(12.5	)		(45.1	)%
Lexapro®		-		12.9		-		-		12.9		-		15.6		-		-			15.6			(2.7	)		(17.3	)%
Kybella® /Belkyra®		9.6		-		1.6		-		11.2		14.2		-		0.5		-			14.7			(3.5	)		(23.8	)%
Liletta®		-		9.3		-		-		9.3		-		4.4		-		-			4.4			4.9			111.4	%
Minastrin® 24		-		3.6		-		-		3.6		-		84.9		-		-			84.9			(81.3	)		(95.8	)%
Enablex®		-		0.9		-		-		0.9		-		1.9		-		-			1.9			(1.0	)		(52.6	)%
Namenda® IR		-		-		-		-		0.0		-		2.9		-		-			2.9			(2.9	)		(100.0	)%
Other Products Revenues		71.5		169.3		98.4		4.3		343.5		22.7		147.2		89.5		6.8			266.2			77.3			29.0	%
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			-		-	n.a.		n.a.		n.a.			(23.7	)		(23.7	)		23.7		n.a.
Total Net Revenues	$	1,724.8	$	1,497.4	$	807.8	$	4.3	$	4,034.3	$	1,453.2	$	1,488.1	$	697.8	$	(16.9	)	$	3,622.2		$	412.1			11.4	%

**	Sales of fillers including Juvederm, Voluma and other fillers are referred to herein as the “Juvederm Collection.”

US Specialized Therapeutics Segment

The following table presents top product sales and net contribution for the US Specialized Therapeutics segment for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,						Change
	2017			2016 ⁽¹⁾			Dollars			%
Total Eye Care	$	635.3		$	608.5		$	26.8			4.4	%
Restasis^®		366.8			356.4			10.4			2.9	%
Alphagan^®/Combigan^®		92.7			93.4			(0.7	)		(0.7	)%
Lumigan^®/Ganfort^®		83.3			78.3			5.0			6.4	%
Ozurdex^®		24.6			20.9			3.7			17.7	%
Eye Drops		53.7			50.2			3.5			7.0	%
Other Eye Care		14.2			9.3			4.9			52.7	%
Total Medical Aesthetics		602.3			388.9			213.4			54.9	%
Facial Aesthetics		314.9			293.7			21.2			7.2	%
Botox^® Cosmetics		189.7			174.5			15.2			8.7	%
Juvederm Collection		115.6			105.0			10.6			10.1	%
Kybella^®		9.6			14.2			(4.6	)		(32.4	)%
Plastic Surgery		58.0			52.2			5.8			11.1	%
Breast Implants		58.0			51.1			6.9			13.5	%
Other Plastic Surgery		-			1.1			(1.1	)		(100.0	)%
Regenerative Medicine		113.7			-			113.7		n.a.
Alloderm^®		84.6			-			84.6		n.a.
Other Regenerative Medicine		29.1			-			29.1		n.a.
Body Contouring		83.4			-			83.4		n.a.
Coolsculpting® Systems & Add On Applicators		33.1			-			33.1		n.a.
Coolsculpting® Consumables		50.3			-			50.3		n.a.
Skin Care		32.3			43.0			(10.7	)		(24.9	)%
SkinMedica^®		18.7			25.8			(7.1	)		(27.5	)%
Latisse^®		13.6			17.2			(3.6	)		(20.9	)%
Total Medical Dermatology		86.9			116.1			(29.2	)		(25.2	)%
Aczone^®		46.7			69.0			(22.3	)		(32.3	)%
Tazorac^®		15.1			27.5			(12.4	)		(45.1	)%
Botox^® Hyperhidrosis		16.8			16.3			0.5			3.1	%
Other Medical Dermatology		8.3			3.3			5.0			151.5	%
Total Neuroscience and Urology		380.4			330.7			49.7			15.0	%
Botox^® Therapeutics		352.1			305.5			46.6			15.3	%
Rapaflo^®		28.3			25.2			3.1			12.3	%
Other Neuroscience and Urology		-			-			-		n.a.
Other Revenues		19.9			9.0			10.9			121.1	%
Net revenues	$	1,724.8		$	1,453.2		$	271.6			18.7	%
Operating expenses:
Cost of sales⁽²⁾		131.4			69.2			62.2			89.9	%
Selling and marketing		353.5			292.4			61.1			20.9	%
General and administrative		54.8			41.2			13.6			33.0	%
Segment contribution	$	1,185.1		$	1,050.4		$	134.7			12.8	%
Segment margin		68.7	%		72.3	%					(3.6	)%
Segment gross margin⁽³⁾		92.4	%		95.2	%					(2.8	)%

⁽¹⁾	Includes revenues earned that were distributed through our former Anda Distribution business to third party customers.

⁽²⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽³⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

As a result of the Zeltiq and LifeCell acquisitions, the Company received the following segment contribution in the three months ended September 30, 2017 ($ in millions):

	LifeCell		Zeltiq		Combined Contribution
Net revenues	$	114.4	$	83.4	$	197.8
Operating expenses:
Cost of sales		28.6		23.8		52.4
Selling and marketing		24.9		35.3		60.2
General and administrative		3.6		2.6		6.2

Net Revenues

The increase in segment net revenues for the three months ended September 30, 2017 over the prior year period was primarily driven by growth in Botox^® Therapeutics, Facial Aesthetics and the LifeCell and Zeltiq acquisitions, offset, in part, by decreases in Medical Dermatology.

Botox^® Therapeutics increased $46.6 million, or 15.3%, versus the prior year period driven by demand growth.

The increase in Facial Aesthetics revenues was driven in part by Botox^® Cosmetics which increased $15.2 million, or 8.7%, versus the prior year period primarily due to demand growth. Also contributing was an increase in Juvederm Collection revenues of $10.6 million, or 10.1% versus the prior year period driven by strong demand offset, in part, by an increase in discounts due to competitive entries.

The decline in Aczone^® revenues of $22.3 million, or 32.3%, was primarily due to generic pressure on the branded acne category and higher discounts for formulary coverage.

Cost of Sales

Excluding the LifeCell and Zeltiq acquisitions, segment gross margin decreased to 94.8% in the three months ended September 30, 2017 versus 95.2% in the prior year period due to product mix.

Selling and Marketing Expenses

The increase in selling and marketing expenses primarily relates to the increased costs from the LifeCell and Zeltiq acquisitions of $60.2 million.

General and Administrative Expenses

The increase in general and administrative costs is due in part to the acquisitions of LifeCell and Zeltiq.

US General Medicine Segment

The following table presents top product sales and net contribution for the US General Medicine segment for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,						Change
	2017			2016 ⁽¹⁾			Dollars			%
Total Central Nervous System (CNS)	$	355.2		$	325.5		$	29.7			9.1	%
Namenda XR^®		114.3			146.9			(32.6	)		(22.2	)%
Viibryd^®/Fetzima^®		86.5			87.6			(1.1	)		(1.3	)%
Saphris^®		37.2			40.8			(3.6	)		(8.8	)%
Vraylar™		80.2			32.4			47.8			147.5	%
Namzaric^®		37.0			14.9			22.1			148.3	%
Namenda^® IR		-			2.9			(2.9	)		(100.0	)%
Total Gastrointestinal (GI)		443.5			431.4			12.1			2.8	%
Linzess^®		190.9			164.4			26.5			16.1	%
Asacol^®/Delzicol^®		49.5			72.2			(22.7	)		(31.4	)%
Carafate^®/Sulcrate^®		58.7			56.4			2.3			4.1	%
Zenpep^®		56.8			52.5			4.3			8.2	%
Canasa^®/Salofalk^®		39.0			47.2			(8.2	)		(17.4	)%
Viberzi^®		40.9			30.9			10.0			32.4	%
Other GI		7.7			7.8			(0.1	)		(1.3	)%
Total Women's Health		265.7			305.3			(39.6	)		(13.0	)%
Lo Loestrin^®		120.0			105.7			14.3			13.5	%
Estrace^® Cream		101.6			98.6			3.0			3.0	%
Minastrin^® 24		3.6			84.9			(81.3	)		(95.8	)%
Liletta^®		9.3			4.4			4.9			111.4	%
Other Women's Health		31.2			11.7			19.5			166.7	%
Total Anti-Infectives		67.2			52.5			14.7			28.0	%
Teflaro^®		29.1			33.3			(4.2	)		(12.6	)%
Dalvance^®		16.1			10.3			5.8			56.3	%
Avycaz^®		16.9			4.8			12.1		n.m.
Other Anti-Infectives		5.1			4.1			1.0			24.4	%
Diversified Brands		318.7			319.3			(0.6	)		(0.2	)%
Bystolic^®/ Byvalson^®		164.2			165.1			(0.9	)		(0.5	)%
Armour Thyroid		38.5			39.1			(0.6	)		(1.5	)%
Savella^®		24.0			28.1			(4.1	)		(14.6	)%
Lexapro^®		12.9			15.6			(2.7	)		(17.3	)%
Enablex^®		0.9			1.9			(1.0	)		(52.6	)%
PacPharma		3.0			6.2			(3.2	)		(51.6	)%
Other Diversified Brands		75.2			63.3			11.9			18.8	%
Other Revenues		47.1			54.1			(7.0	)		(12.9	)%
Net revenues	$	1,497.4		$	1,488.1		$	9.3			0.6	%
Operating expenses:
Cost of sales⁽²⁾		225.5			215.1			10.4			4.8	%
Selling and marketing		247.7			292.8			(45.1	)		(15.4	)%
General and administrative		47.7			42.3			5.4			12.8	%
Segment contribution	$	976.5		$	937.9		$	38.6			4.1	%
Segment margin		65.2	%		63.0	%					2.2	%
Segment gross margin⁽³⁾		84.9	%		85.5	%					(0.6	)%

⁽¹⁾	Includes revenues earned that were distributed through our former Anda Distribution business to third party customers.

⁽²⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽³⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

Net Revenues

The increase in segment net revenues for the three months ended September 30, 2017 over the prior year is due primarily to increases in Central Nervous System, Anti-Infectives, and Gastrointestinal revenues, offset, in part, by a decline in Women’s Health revenues.

The increase in Central Nervous System revenues of $29.7 million, or 9.1%, was driven by the launch of Vraylar™ and Namzaric^® offset, in part, by the continued decline in Namenda XR^® due to decreased demand and conversion to Namzaric^®.

Growth within our Gastrointestinal franchise of $12.1 million, or 2.8%, was primarily driven by growth in Linzess^® and newly launched Viberzi^®. Linzess^® revenues increased $26.5 million, or 16.1%, versus the prior year period primarily due to strong demand growth, and positive year over year trade buying patterns. Offsetting these increases, in part, was a reduction in demand for Asacol^® HD following the launch of an authorized generic in August 2016. Offsetting this decline, in part, was royalty revenue of $20.2 million relating to our authorized generic version of Asacol^® HD, which is included within “Other Revenues”.

Women’s Health revenues declined $39.6 million, or 13.0%, primarily due to a decline of $81.3 million resulting from the loss of exclusivity on Minastrin^® 24, offset, in part, by revenues on our new product, Taytulla^® of $21.0 million and increased sales of Lo Loestrin^® of 13.5% due primarily to strong demand growth.

Cost of Sales

The increase in cost of sales was the result of higher product revenues and unfavorable product mix, offset in part, by the impact of the Company reacquiring rights on select licensed products during the nine months ended September 30, 2017. As part of the rights reacquired, the Company is no longer obligated to pay royalties on the specific products, which increases the Company’s segment gross margin percentage. In the three months ended September 30, 2016, royalties incurred relating to the reacquired product rights were $14.9 million.

Selling and Marketing Expenses

The decrease in selling and marketing expenses relates to lower promotional spending in the current year primarily related to Linzess^®, Viberzi^® and Vralyar™ and lower selling expenses due to headcount reductions and lower launch costs.

General and Administrative Expenses

General and administrative expenses are in line period-over-period.

International Segment

The following table presents top product sales and net contribution for the International segment for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,						Change
	2017			2016			$ Overall Change			$ Currency Change			$ Operational Change			% Overall Change			% Currency Change			% Operational Change
Total Eye Care	$	317.9		$	294.2		$	23.7		$	7.9		$	15.8			8.1	%		2.7	%		5.4	%
Lumigan^®/Ganfort^®		91.5			86.6			4.9			3.3			1.6			5.7	%		3.8	%		1.9	%
Alphagan^®/Combigan^®		43.4			41.3			2.1			0.6			1.5			5.1	%		1.5	%		3.6	%
Ozurdex^®		50.2			43.4			6.8			1.6			5.2			15.7	%		3.7	%		12.0	%
Optive^®		28.4			25.6			2.8			1.0			1.8			10.9	%		3.9	%		7.0	%
Other Eye Drops		42.8			42.1			0.7			0.7			0.0			1.7	%		1.7	%		0.0	%
Restasis^®		15.5			15.4			0.1			(0.1	)		0.2			0.6	%		(0.6	)%		1.2	%
Other Eye Care		46.1			39.8			6.3			0.8			5.5			15.8	%		2.0	%		13.8	%
Total Medical Aesthetics		331.1			251.0			80.1			2.0			78.1			31.9	%		0.8	%		31.1	%
Facial Aesthetics		259.6			212.6			47.0			1.5			45.5			22.1	%		0.7	%		21.4	%
Botox^® Cosmetics		131.5			115.3			16.2			(1.4	)		17.6			14.1	%		(1.2	)%		15.3	%
Juvederm Collection		126.5			96.8			29.7			2.8			26.9			30.7	%		2.9	%		27.8	%
Belkyra^® (Kybella^®)		1.6			0.5			1.1			0.1			1.0		n.m.				20.0	%	n.m.
Plastic Surgery		38.5			35.8			2.7			-			2.7			7.5	%		0.0	%		7.5	%
Breast Implants		38.1			35.6			2.5			-			2.5			7.0	%		0.0	%		7.0	%
Earfold^™		0.4			0.2			0.2			-			0.2			100.0	%		0.0	%		100.0	%
Regenerative Medicine		5.1			-			5.1			0.2			4.9		n.a.			n.a.			n.a.
Alloderm^®		1.5			-			1.5			-			1.5		n.a.			n.a.			n.a.
Other Regenerative Medicine		3.6			-			3.6			0.2			3.4		n.a.			n.a.			n.a.
Body Contouring		24.0			-			24.0			0.2			23.8		n.a.			n.a.			n.a.
Coolsculpting® Systems & Add On Applicators		10.2			-			10.2			0.1			10.1		n.a.			n.a.			n.a.
Coolsculpting® Consumables		13.8			-			13.8			0.1			13.7		n.a.			n.a.			n.a.
Skin Care		3.9			2.6			1.3			0.1			1.2			50.0	%		3.8	%		46.2	%
Botox^® Therapeutics and Other		141.8			134.6			7.2			4.4			2.8			5.3	%		3.3	%		2.0	%
Botox^® Therapeutics		84.4			78.1			6.3			2.5			3.8			8.1	%		3.2	%		4.9	%
Asacol^®/Delzicol^®		11.9			14.2			(2.3	)		0.2			(2.5	)		(16.2	)%		1.4	%		(17.6	)%
Constella^®		5.7			4.3			1.4			0.2			1.2			32.6	%		4.7	%		27.9	%
Other Products		39.8			38.0			1.8			1.5			0.3			4.7	%		3.9	%		0.8	%
Other Revenues		17.0			18.0			(1.0	)		-			(1.0	)		(5.6	)%		0.0	%		(5.6	)%
Net revenues	$	807.8		$	697.8		$	110.0		$	14.3		$	95.7			15.8	%		2.0	%		13.8	%
Operating expenses:
Cost of sales⁽¹⁾		116.3			95.1			21.2			2.6			18.6			22.3	%		2.7	%		19.6	%
Selling and marketing		224.8			188.2			36.6			5.3			31.3			19.4	%		2.8	%		16.6	%
General and administrative		28.3			28.0			0.3			0.6			(0.3	)		1.1	%		2.1	%		(1.0	)%
Segment contribution	$	438.4		$	386.5		$	51.9		$	5.8		$	46.1			13.4	%		1.5	%		11.9	%
Segment margin		54.3	%		55.4	%											(1.1	)%
Segment gross margin⁽²⁾		85.6	%		86.4	%											(0.8	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽²⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

Net Revenues

The increase in segment net revenues in the three months ended September 30, 2017 over the prior period is primarily due to the operational growth of total Facial Aesthetics and EyeCare, as well as the acquisition of Zeltiq, which contributed $24.0 million in net revenues during the three months ended September 30, 2017.

Within total Eye Care, Ozurdex^® increased $6.8 million, or 15.7% versus the prior year period, primarily driven by demand growth. Within Facial Aesthetics, Juvederm Collection revenues increased $29.7 million, or 30.7% versus the prior year period, primarily resulting from demand growth. Botox^® Cosmetic sales grew 14.1% driven by demand growth. Botox^® Therapeutics sales also grew 8.1% driven by demand growth.

In the first quarter of 2017, the Company announced a realignment of its International Commercial organization. As a result of this realignment, future promotional priorities among the International portfolio may shift and, as such, revenues by product may be impacted.

Cost of Sales

The increase in cost of sales was primarily due to the increase in net revenues, and an increase in manufacturing costs. Segment gross margins declined to 85.6% for the three months ended September 30, 2017 compared to 86.4% for the three months ended September 30, 2016.

Selling and Marketing Expenses

The increase in selling and marketing expenses relates to promotional spending associated with Ozurdex^®, Botox^® Cosmetic and the Juvederm Collection, as well as $13.3 million relating to the Zeltiq Acquisition.

General and Administrative Expenses

General and administrative expenses are in line period-over-period.

Corporate

Corporate represents the results of corporate initiatives as well as the impact of select revenues and shared costs. The following represents the corporate amounts for the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30, 2017
	Integration and Restructuring			Fair Value Adjustments			Effect of Purchase Accounting			Other			Revenues and Shared Costs			Total

Net Sales	$	-		$	-		$	-		$	-		$	4.3		$	4.3
Operating expenses:
Cost of sales⁽¹⁾		41.3			(67.0	)		39.6			13.8			85.6			113.3
Selling and marketing		(3.1	)		-			8.1			1.3			0.5			6.8
General and administrative		29.8			-			3.4			30.6			142.3			206.1
Contribution	$	(68.0	)	$	67.0		$	(51.1	)	$	(45.7	)	$	(224.1	)	$	(321.9	)

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights.

	Three Months Ended September 30, 2016
	Integration and Restructuring			Fair Value Adjustments			Effect of Purchase Accounting			Reclassification of Sales Distributed Through Anda to Discontinued Operations			Other			Revenues and Shared Costs			Total
Net Sales	$	-		$	-		$	-		$	(23.7	)	$	-		$	6.8		$	(16.9	)
Operating expenses:
Cost of sales⁽¹⁾		8.0			10.4			1.7			(23.0	)		(0.1	)		85.8			82.8
Selling and marketing		4.1			-			16.3			-			-			2.2			22.6
General and administrative		60.2			-			12.0			-			57.7			119.8			249.7
Contribution	$	(72.3	)	$	(10.4	)	$	(30.0	)	$	(0.7	)	$	(57.6	)	$	(201.0	)	$	(372.0	)

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights.

In the three months ended September 30, 2017, integration and restructuring charges included costs related to the integration of LifeCell and Zeltiq as well as the Company’s internal restructuring programs. As part of the Company’s internal restructuring programs, the Company incurred severance and other restructuring costs relating to the global manufacturing operations of $39.7 million as the Company intends to close certain facilities. In the three months ended September 30, 2017 the Company incurred purchase accounting effects of $38.4 million in cost of sales related to the fair value inventory step-up from the LifeCell and Zeltiq acquisitions as products were sold to the Company’s third party customers. The Company also incurred charges related to the purchase accounting impact on stock-based compensation related to the Allergan, Forest Laboratories, Inc. (“Forest”) and Zeltiq acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses. In the three months ended September 30, 2017, general and administrative costs included legal settlement charges of $32.9 million.

In the three months ended September 30, 2016, integration and restructuring charges were primarily related to the integration of the Legacy Allergan business as well as charges incurred with the terminated merger with Pfizer, Inc. of $15.8 million. The Company incurred charges related to the purchase accounting impact on stock-based compensation related to the Allergan and Forest acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses. Included in other in the three months ended September 30, 2016 are mark-to-market unrealized losses for foreign currency option contracts that were entered into in order to offset future exposure to movements in currencies of $18.2 million as well as legal settlement charges of $40.8 million.

Shared costs primarily include above site and unallocated costs associated with running our global manufacturing facilities and corporate General & Administrative expenses. In the three months ended September 30, 2017, the Company incurred transactional foreign exchange losses of $24.5 million versus transactional foreign exchange gains of $41.5 million, which excludes mark-to-market unrealized losses on foreign currency option contracts, in the three months ended September 30, 2016.

Research and Development Expenses

R&D expenses consist predominantly of personnel-related costs, investigator costs for clinical trials, active pharmaceutical ingredient costs, contract research, license and milestone fees, biostudy and facility costs associated with product development.

R&D expenses consisted of the following components in the three months ended September 30, 2017 and 2016 ($ in millions):

	Three Months Ended September 30,					Change
	2017			2016		Dollars			%
Ongoing operating expenses	$	405.3		$	386.4	$	18.9			4.9	%
Brand related milestone payments and upfront license payments		42.6			207.9		(165.3	)		(79.5	)%
Acquisition accounting fair market value adjustment to stock-based compensation		4.3			8.0		(3.7	)		(46.3	)%
Acquisition, integration, and restructuring charges		(9.8	)		15.0		(24.8	)		(165.3	)%
Contingent consideration adjustments, net		0.2			5.5		(5.3	)		(96.4	)%
Total expenditures	$	442.6		$	622.8	$	(180.2	)		(28.9	)%

The increase in ongoing operating expenses in the three months ended September 30, 2017 versus the prior year period is primarily due to increased product development spending primarily driven by late stage development campaigns within the Central Nervous System and Gastrointestinal therapeutic areas. In the three months ended September 30, 2017, the Company reversed certain charges related to a portion of anticipated internal restructurings which are no longer occurring based on revised portfolio prioritizations and the timing of select R&D projects.

The following represents brand related milestone payments and upfront license payments in the three months ended September 30, 2017 and 2016, respectively ($ in millions):

	Three Months Ended September 30,
($ in millions)	2017		2016
Heptares Therapeutics Ltd.	$	15.0	$	-
Lyndra, Inc.		15.0		-
Akarna Therapeutics, Ltd.		-		48.2
RetroSense Therapeutics, LLC		-		59.7
Merck & Co.		-		100.0
Other		12.6		-
	$	42.6	$	207.9

Amortization

Amortization in the three months ended September 30, 2017 and 2016 was as follows:

	Three Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars		%
Amortization	$	1,781.0	$	1,609.1	$	171.9		10.7	%

Amortization for the three months ended September 30, 2017 increased as compared to the prior period primarily as a result of amortization related to the acquired LifeCell and Zeltiq products of $50.0 million as well as amortization from approved products during the year ended December 31, 2016 and the nine months ended September 30, 2017.

IPR&D Impairments and Asset Sales and Impairments, Net

IPR&D impairments and Asset sales and impairments, net consisted of the following components in the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,					Change
($ in millions)	2017		2016			Dollars		%
IPR&D impairments	$	202.0	$	42.0		$	160.0	n.m.
Asset sales and impairments, net		3,874.8		(4.7	)		3,879.5	n.m.

In the three months ended September 30, 2017, the Company evaluated all of its dry eye related assets for impairment as a result of the U.S. District Court for the Eastern District of Texas issuing an adverse trial decision finding that the four asserted patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05% are invalid. As a result of our review of all potential scenarios relating to these assets and a decrease in our assessment of the likelihood of revenue extending through the full patent term of 2024, the Company recognized an impairment of $3,230.0 million related to Restasis^® as well as $164.0 million related to other Dry Eye IPR&D assets obtained in the Allergan acquisition.

In the three months ended September 30, 2017, the Company impaired the intangible asset related to Aczone^® by $646.0 million s a result of recent market dynamics, including erosion in the brand acne market, an anticipated decline in the market outlook, and recent generic entrants. In the three months ended September 30, 2017, the Company recorded IPR&D an impairments of $17.0 million of a medical aesthetics project obtained as part of the Allergan acquisition and a $21.0 million impairment due to a delay in anticipated launch of a women’s healthcare project coupled with an anticipated decrease in product demand.

In the three months ended September 30, 2016, the Company recorded $42.0 million in IPR&D impairments on a gastroenterology project as a result of the lack of future availability of active pharmaceutical ingredients.

Interest Income

Interest income in the three months ended September 30, 2017 and 2016 was as follows:

	Three Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars			%
Interest income	$	11.1	$	18.1	$	(7.0	)		(38.7	)%

Interest income in the three months ended September 30, 2017 decreased versus the three months ended September 30, 2016 resulting from the use of cash and marketable securities primarily for share buybacks during the fourth quarter of 2016.

Interest Expense

Interest expense consisted of the following components in the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars			%
Fixed Rate Notes	$	241.6	284.7			(43.1	)		(15.1	)%
Floating Rate Notes		6.6	5.8			0.8			13.8	%
Euro Denominated Notes		8.3		-		8.3		n.a.
Term loan indebtedness		-		28.1		(28.1	)		(100.0	)%
Revolving Credit Facility		-		-		-		n.a.
Other		8.7	5.7			3.0			52.6	%
Interest expense	$	265.2	$	324.3	$	(59.1	)		(18.2	)%

Interest expense in the three months ended September 30, 2017 decreased versus the three months ended September 30, 2016 due to the pay down of term loan indebtedness with use of proceeds received in the Teva Transaction as well as scheduled maturities and early debt extinguishment of senior secured notes and the reduction of interest related to the repayment of $2,843.3 million existing senior secured notes which were refinanced into lower coupon euro denominated notes.

Other (expense) income, net

Other (expense) income, net consisted of the following components in the three months ended September 30, 2017 and 2016:

	Three Months Ended September 30,						Change
($ in millions)	2017			2016			Dollars			%
Net income impact of other-than-temporary loss on investment in Teva securities	$	(1,295.5	)	$	-		$	(1,295.5	)	n.a.
Dividend income		8.5			34.1			(25.6	)		(75.1	)%
Other (expense) income, net		(23.3	)		(0.5	)		(22.8	)	n.m.
Other (expense) income, net	$	(1,310.3	)	$	33.6		$	(1,343.9	)	n.a.

Teva Securities

At September 30, 2017, the Company determined that the decline in value of its investment in Teva securities since March 31, 2017 was other-than-temporary. As a result, the Company impaired the value of its investment by $1,295.5 million at September 30, 2017 as a component of other (expense) income. The determination was made based on the amount of time that the stock price had been below the carrying value, intentions regarding the potential holding period of the shares, and the materiality of the decline in share price.

Dividend income

As a result of the Teva Transaction, the Company acquired 100.3 million Teva ordinary shares. During three months ended September 30, 2017 and 2016, the Company received dividend income of $8.5 million and $34.1 million, respectively.

Other-than-temporary impairments

The Company recorded other-than-temporary impairment charges on other equity investments and cost method investments of $22.6 million in the three months ended September 30, 2017.

(Benefit) for Income Taxes

	Three Months Ended September 30,						Change
($ in millions)	2017			2016			Dollars			%
(Benefit) for income taxes	$	(1,638.8	)	$	(158.9	)	$	(1,479.9	)		931.3	%
Effective tax rate		29.3	%		29.5	%

The Company’s effective tax rate for the three months ended September 30, 2017 was 29.3% compared to 29.5% for the three months ended September 30, 2016. The effective tax rate for the three months ended September 30, 2017 was favorably impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses, including the impairment of intangible assets, tax benefited at rates greater than the Irish statutory rate. The tax benefits related to the impairment of intangible assets recorded during the three months ended September 30, 2017 were $1,517.7 million. The effective tax rate was unfavorably impacted by a pre-tax charge for the impairment of the Company’s investment in Teva Shares of $1,295.5 million for which no tax benefit was recorded.

The effective tax rate for the three months ended September 30, 2016 was impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the three months ended September 30, 2016 included the following items: a benefit of $48.2 million related to the change in tax rates applicable to certain temporary differences, a benefit of $37.9 million for the New Jersey Grow income tax credit and a benefit of $15.7 million primarily related to a valuation allowance release in Ireland.

Nine Months Ended September 30, 2017 and 2016

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30, 2017
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	4,921.8		$	4,270.9		$	2,403.6		$	11,596.3

Operating expenses:
Cost of sales⁽¹⁾		349.4			623.2			341.6			1,314.2
Selling and marketing		1,040.7			838.3			673.2			2,552.2
General and administrative		149.4			129.7			86.5			365.6
Segment Contribution	$	3,382.3		$	2,679.7		$	1,302.3		$	7,364.3
Contribution margin		68.7	%		62.7	%		54.2	%		63.5	%
Corporate											1,086.7
Research and development											1,691.9
Amortization											5,274.9
In-process research and development impairments											1,245.3
Asset sales and impairments, net											3,896.2
Operating (loss)											(5,830.7	)
Operating margin											(50.3	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

	Nine Months Ended September 30, 2016
	US Specialized			US General
	Therapeutics			Medicine			International			Total
Net revenues	$	4,240.8		$	4,390.9		$	2,128.1		$	10,759.8

Operating expenses:
Cost of sales⁽¹⁾		215.0			649.6			309.3			1,173.9
Selling and marketing		844.8			902.8			582.7			2,330.3
General and administrative		126.4			128.2			86.5			341.1
Segment Contribution	$	3,054.6		$	2,710.3		$	1,149.6		$	6,914.5
Contribution margin		72.0	%		61.7	%		54.0	%		64.3	%
Corporate											1,052.8
Research and Development											1,662.4
Amortization											4,831.9
In-process research and development impairments											316.9
Asset sales and impairments, net											(24.0	)
Operating (loss)											(925.5	)
Operating margin											(8.6	)%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

The following is a reconciliation of net revenues for the operating segments to the Company’s net revenues for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,					Change
	2017		2016			Dollars		%
Segment net revenues	$	11,596.3	$	10,759.8		$	836.5		7.8	%
Corporate revenues		18.3		(53.5	)		71.8		134.2	%
Net revenues	$	11,614.6	$	10,706.3		$	908.3		8.5	%

100

The following tables represent global net revenues for the top products for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30, 2017										Nine Months Ended September 30, 2016												Total Change
	US Specialized Therapeutics		US General Medicine		International		Corporate		Total		US Specialized Therapeutics		US General Medicine		International		Corporate			Total			Dollars			Percentage
Botox®	$	1,642.0	$	-	$	662.6	$	-	$	2,304.6	$	1,454.0	$	-	$	592.9	$	-		$	2,046.9		$	257.7			12.6	%
Restasis®		1,012.0		-		46.7		-		1,058.7		1,026.4		-		49.7		-			1,076.1			(17.4	)		(1.6	)%
Juvederm Collection**		361.6		-		386.0		-		747.6		325.3		-		304.2		-			629.5			118.1			18.8	%
Linzess®/Constella®		-		506.3		16.1		-		522.4		-		452.0		12.7		-			464.7			57.7			12.4	%
Lumigan®/Ganfort®		236.6		-		271.8		-		508.4		240.4		-		269.2		-			509.6			(1.2	)		(0.2	)%
Bystolic® /Byvalson®		-		454.7		1.6		-		456.3		-		479.0		1.3		-			480.3			(24.0	)		(5.0	)%
Alphagan®/Combigan®		275.5		-		128.4		-		403.9		274.3		-		127.3		-			401.6			2.3			0.6	%
Eye Drops		152.2		-		207.2		-		359.4		140.1		-		206.9		-			347.0			12.4			3.6	%
Namenda XR®		-		355.0		-		-		355.0		-		486.5		-		-			486.5			(131.5	)		(27.0	)%
Lo Loestrin®		-		332.8		-		-		332.8		-		296.0		-		-			296.0			36.8			12.4	%
Breast Implants		173.6		-		116.8		-		290.4		149.2		-		112.5		-			261.7			28.7			11.0	%
Estrace® Cream		-		265.1		-		-		265.1		-		276.4		-		-			276.4			(11.3	)		(4.1	)%
Viibryd®/Fetzima®		-		244.2		2.1		-		246.3		-		252.6		0.1		-			252.7			(6.4	)		(2.5	)%
Alloderm®		223.3		-		5.0		-		228.3		-		-		-		-			-			228.3		n.a.
Ozurdex ®		72.0		-		152.5		-		224.5		61.8		-		130.2		-			192.0			32.5			16.9	%
Vraylar™		-		200.1		-		-		200.1		-		51.1		-		-			51.1			149.0		n.m.
Asacol®/Delzicol®		-		152.7		36.8		-		189.5		-		297.9		40.5		-			338.4			(148.9	)		(44.0	)%
Carafate ® /Sulcrate ®		-		176.6		2.1		-		178.7		-		167.7		1.7		-			169.4			9.3			5.5	%
Zenpep®		-		153.8		-		-		153.8		-		145.1		-		-			145.1			8.7			6.0	%
Canasa®/Salofalk®		-		115.7		13.3		-		129.0		-		135.0		13.0		-			148.0			(19.0	)		(12.8	)%
Aczone®		128.3		-		0.3		-		128.6		156.1		-		-		-			156.1			(27.5	)		(17.6	)%
Coolsculpting Consumables		98.2		-		26.3		-		124.5		-		-		-		-			-			124.5		n.a.
Armour Thyroid		-		117.8		-		-		117.8		-		121.8		-		-			121.8			(4.0	)		(3.3	)%
Saphris®		-		117.5		-		-		117.5		-		123.6		-		-			123.6			(6.1	)		(4.9	)%
Viberzi®		-		113.7		0.3		-		114.0		-		55.3		-		-			55.3			58.7			106.1	%
Namzaric®		-		94.0		-		-		94.0		-		38.0		-		-			38.0			56.0			147.4	%
Teflaro®		-		92.7		-		-		92.7		-		101.9		-		-			101.9			(9.2	)		(9.0	)%
Rapaflo®		79.9		-		5.5		-		85.4		87.6		-		4.2		-			91.8			(6.4	)		(7.0	)%
Coolsculpting Systems & Add On Applicators		64.1		-		20.4		-		84.5		-		-		-		-			-			84.5		n.a.
Savella®		-		74.3		-		-		74.3		-		74.1		-		-			74.1			0.2			0.3	%
SkinMedica®		72.1		-		1.4		-		73.5		81.5		-		-		-			81.5			(8.0	)		(9.8	)%
Minastrin® 24		-		56.1		-		-		56.1		-		247.5		1.4		-			248.9			(192.8	)		(77.5	)%
Tazorac®		51.3		-		0.5		-		51.8		68.0		-		0.6		-			68.6			(16.8	)		(24.5	)%
Latisse®		40.5		-		6.2		-		46.7		54.7		-		6.2		-			60.9			(14.2	)		(23.3	)%
Avycaz®		-		42.7		-		-		42.7		-		26.9		-		-			26.9			15.8			58.7	%
Kybella® /Belkyra®		37.4		-		5.1		-		42.5		38.2		-		1.6		-			39.8			2.7			6.8	%
Dalvance®		-		40.9		1.2		-		42.1		-		26.7		-		-			26.7			15.4			57.7	%
Lexapro®		-		39.4		-		-		39.4		-		50.8		-		-			50.8			(11.4	)		(22.4	)%
Liletta®		-		23.1		-		-		23.1		-		15.0		-		-			15.0			8.1			54.0	%
Enablex®		-		2.8		-		-		2.8		-		14.7		-		-			14.7			(11.9	)		(81.0	)%
Namenda® IR		-		0.1		-		-		0.1		-		12.8		-		-			12.8			(12.7	)		(99.2	)%
Other		201.2		498.8		287.4		18.3		1,005.7		83.2		442.5		251.9		26.5			804.1			201.6			25.1	%
Less product sold through our former Anda Distribution business	n.a.		n.a.		n.a.			-		-	n.a.		n.a.		n.a.			(80.0	)		(80.0	)		80.0			(100.0	)%
Total Net Revenues	$	4,921.8	$	4,270.9	$	2,403.6	$	18.3	$	11,614.6	$	4,240.8	$	4,390.9	$	2,128.1	$	(53.5	)	$	10,706.3		$	908.3			8.5	%

**	Sales of fillers including Juvederm, Voluma and other fillers are referred to herein as the “Juvederm Collection.”

101

US Specialized Therapeutics Segment

The following table presents top product sales and net contribution for the US Specialized Therapeutics segment for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,						Change
	2017			2016¹⁾			Dollars			%
Total Eye Care	$	1,788.5		$	1,777.6		$	10.9			0.6	%
Restasis^®		1,012.0			1,026.4			(14.4	)		(1.4	)%
Alphagan^®/Combigan^®		275.5			274.3			1.2			0.4	%
Lumigan^®/Ganfort^®		236.6			240.4			(3.8	)		(1.6	)%
Ozurdex^®		72.0			61.8			10.2			16.5	%
Eye Drops		152.2			140.1			12.1			8.6	%
Other Eye Care		40.2			34.6			5.6			16.2	%
Total Medical Aesthetics		1,736.3			1,182.6			553.7			46.8	%
Facial Aesthetics		982.8			893.3			89.5			10.0	%
Botox^® Cosmetics		583.8			529.8			54.0			10.2	%
Juvederm Collection		361.6			325.3			36.3			11.2	%
Kybella^®		37.4			38.2			(0.8	)		(2.1	)%
Plastic Surgery		173.6			153.1			20.5			13.4	%
Breast Implants		173.6			149.2			24.4			16.4	%
Other Plastic Surgery		-			3.9			(3.9	)		(100.0	)%
Regenerative Medicine		305.0			-			305.0		n.a.
Alloderm^®		223.3			-			223.3		n.a.
Other Regenerative Medicine		81.7			-			81.7		n.a.
Body Contouring		162.3			-			162.3		n.a.
Coolsculpting® Systems & Add On Applicators		64.1			-			64.1		n.a.
Coolsculpting® Consumables		98.2			-			98.2		n.a.
Skin Care		112.6			136.2			(23.6	)		(17.3	)%
SkinMedica^®		72.1			81.5			(9.4	)		(11.5	)%
Latisse^®		40.5			54.7			(14.2	)		(26.0	)%
Total Medical Dermatology		255.3			282.2			(26.9	)		(9.5	)%
Aczone^®		128.3			156.1			(27.8	)		(17.8	)%
Tazorac^®		51.3			68.0			(16.7	)		(24.6	)%
Botox^® Hyperhidrosis		50.4			48.9			1.5			3.1	%
Other Medical Dermatology		25.3			9.2			16.1			175.0	%
Total Neuroscience and Urology		1,087.7			963.8			123.9			12.9	%
Botox^® Therapeutics		1,007.8			875.3			132.5			15.1	%
Rapaflo^®		79.9			87.6			(7.7	)		(8.8	)%
Other Neuroscience and Urology		-			0.9			(0.9	)		(100.0	)%
Other Revenues		54.0			34.6			19.4			56.1	%
Net revenues	$	4,921.8		$	4,240.8		$	681.0			16.1	%
Operating expenses:
Cost of sales⁽²⁾		349.4			215.0			134.4			62.5	%
Selling and marketing		1,040.7			844.8			195.9			23.2	%
General and administrative		149.4			126.4			23.0			18.2	%
Segment contribution	$	3,382.3		$	3,054.6		$	327.7			10.7	%
Segment margin		68.7	%		72.0	%					(3.3	)%
Segment gross margin⁽³⁾		92.9	%		94.9	%					(2.0	)%

⁽¹⁾	Includes revenues earned that were distributed through our former Anda Distribution business to third party customers.

⁽²⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽³⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

102

As a result of the Zeltiq and LifeCell acquisitions, the Company received the following segment contribution in the nine months ended September 30, 2017 ($ in millions):

	LifeCell		Zeltiq		Combined Contribution
Net revenues	$	306.6	$	162.3	$	468.9
Operating expenses:
Cost of sales		74.6		46.0		120.6
Selling and marketing		69.2		61.4		130.6
General and administrative		9.3		4.9		14.2

Net Revenues

The increase in segment net revenues in the nine months ended September 30, 2017 over the prior period was primarily driven by growth in Botox^® Therapeutics, Facial Aesthetics and the LifeCell and Zeltiq acquisitions.

Botox^® Therapeutics increased $132.5 million, or 15.1%, versus the prior year period driven by demand.

The increase in Facial Aesthetics revenues was driven in part by Botox^® Cosmetics which increased $54.0 million, or 10.2%, versus the prior year period primarily due to demand growth. Also contributing was an increase in Juvederm Collection revenues of $36.3 million, or 11.2% versus the prior year period driven primarily by demand, offset, in part, by an increase in discounts due to competitors.

The decline in Restasis^® revenues of $14.4 million, or 1.4%, was primarily due to differences in year-over-year trade buying patterns. As a result of the U.S. District Court for the Eastern District of Texas issuing an adverse trial decision finding that the four asserted patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05% are invalid, there is a potential risk for future declines in Restasis^® revenues.

Cost of Sales

Excluding the LifeCell Acquisition and the Zeltiq Acquisition, segment gross margin remained flat at 94.9% in the nine months ended September 30, 2017 versus the prior year period.

Selling and Marketing Expenses

The increase in selling and marketing expenses primarily relates to the increased costs from the LifeCell Acquisition and Zeltiq Acquisition of $130.6 million as well as increased promotional costs for key brands and new products Rhofade^®, Xen^® and Kybella^®.

General and Administrative Expenses

The increase in general and administrative costs is primarily due to the acquisitions of LifeCell and Zeltiq.

103

US General Medicine Segment

The following table presents top product sales and net contribution for the US General Medicine segment for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,						Change
	2017			2016⁽¹⁾			Dollars			%
Total Central Nervous System (CNS)	$	1,010.9		$	964.6		$	46.3			4.8	%
Namenda XR^®		355.0			486.5			(131.5	)		(27.0	)%
Viibryd^®/Fetzima^®		244.2			252.6			(8.4	)		(3.3	)%
Saphris^®		117.5			123.6			(6.1	)		(4.9	)%
Vraylar^™		200.1			51.1			149.0		n.m.
Namzaric^®		94.0			38.0			56.0			147.4	%
Namenda^® IR		0.1			12.8			(12.7	)		(99.2	)%
Total Gastrointestinal (GI)		1,241.8			1,277.0			(35.2	)		(2.8	)%
Linzess^®		506.3			452.0			54.3			12.0	%
Asacol^®/Delzicol^®		152.7			297.9			(145.2	)		(48.7	)%
Carafate^®/Sulcrate^®		176.6			167.7			8.9			5.3	%
Zenpep^®		153.8			145.1			8.7			6.0	%
Canasa^®/Salofalk^®		115.7			135.0			(19.3	)		(14.3	)%
Viberzi^®		113.7			55.3			58.4			105.6	%
Other GI		23.0			24.0			(1.0	)		(4.2	)%
Total Women's Health		758.4			865.1			(106.7	)		(12.3	)%
Lo Loestrin^®		332.8			296.0			36.8			12.4	%
Estrace^® Cream		265.1			276.4			(11.3	)		(4.1	)%
Minastrin^® 24		56.1			247.5			(191.4	)		(77.3	)%
Liletta^®		23.1			15.0			8.1			54.0	%
Other Women's Health		81.3			30.2			51.1			169.2	%
Total Anti-Infectives		190.7			167.1			23.6			14.1	%
Teflaro^®		92.7			101.9			(9.2	)		(9.0	)%
Avycaz^®		42.7			26.9			15.8			58.7	%
Dalvance^®		40.9			26.7			14.2			53.2	%
Other Anti-Infectives		14.4			11.6			2.8			24.1	%
Diversified Brands		923.2			1,038.8			(115.6	)		(11.1	)%
Bystolic^®/ Byvalson^®		454.7			479.0			(24.3	)		(5.1	)%
Armour Thyroid		117.8			121.8			(4.0	)		(3.3	)%
Savella^®		74.3			74.1			0.2			0.3	%
Lexapro^®		39.4			50.8			(11.4	)		(22.4	)%
Enablex^®		2.8			14.7			(11.9	)		(81.0	)%
PacPharma		9.7			49.7			(40.0	)		(80.5	)%
Other Diversified Brands		224.5			248.7			(24.2	)		(9.7	)%
Other Revenues		145.9			78.3			67.6			86.3	%
Net revenues	$	4,270.9		$	4,390.9		$	(120.0	)		(2.7	)%
Operating expenses:
Cost of sales⁽²⁾		623.2			649.6			(26.4	)		(4.1	)%
Selling and marketing		838.3			902.8			(64.5	)		(7.1	)%
General and administrative		129.7			128.2			1.5			1.2	%
Segment contribution	$	2,679.7		$	2,710.3		$	(30.6	)		(1.1	)%
Segment margin		62.7	%		61.7	%					1.0	%
Segment gross margin⁽³⁾		85.4	%		85.2	%					0.2	%

⁽¹⁾	Includes revenues earned that were distributed through our former Anda Distribution business to third party customers.

⁽²⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽³⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

104

Net Revenues

The decrease in segment revenues in the nine months ended September 30, 2017 over the prior period is primarily due to a decline in Diversified Brand revenues, Women’s Health revenues, and Gastrointestinal revenues versus the prior year period, offset, in part, by increase in Other Revenues and CNS revenues.

Diversified Brand revenues declined $115.6 million, or 11.1% versus the prior year period, due in part to a decline of $40.0 million in PacPharma revenues as the Company out licensed these product rights. Included within “Other Revenues” for the nine months ended September 30, 2017 is an increase in royalty revenues related to these products of $30.6 million. Also contributing to the decline in Diversified Brands is a decline in Bystolic^®/ Byvalson^®revenues of $24.3 million, or 5.1% as a result of decreased demand, and the impact of loss of exclusivity on certain products including Enablex^®. Other Diversified Brands declined $24.2 million or 9.7% due to demand declines.

Women’s Health revenues declined $106.7 million, or 12.3%, primarily due to the loss of exclusivity on Minastrin^® 24. Offsetting this decline, in part, are revenues on our new product, Taytulla^® of $50.1 million and increased sales of Lo Loestrin^® of 12.4% due primarily to strong demand growth and higher average selling prices.

Declines within our Gastrointestinal franchise of $35.2 million, or 2.8%, were primarily driven by a reduction in demand for Asacol^® HD following the launch of an authorized generic in August 2016. Offsetting this decline, in part, is an increase in royalty revenue of $30.7 million relating to our authorized generic version of Asacol^® HD, which is included within “Other Revenues”. Further offsetting this decline was growth in Linzess^® and newly launched Viberzi^®. Linzess^® revenues increased $54.3 million, or 12.0%, versus the prior year period primarily due to strong demand growth.

The increase in Central Nervous System revenues of $46.3 million, or 4.8%, was driven by the launch of Vraylar™ and Namzaric^® offset, in part, by the continued decline in Namenda XR^® due to decreased demand and conversion to Namzaric^®.

Cost of Sales

The decrease in cost of sales was the result of lower product revenues and the impact of the Company reacquiring rights on select licensed products in the nine months ended September 30, 2017. As part of the rights reacquired, the Company is no longer obligated to pay royalties on the specific products, which increases the Company’s segment gross margin percentage. In the nine months ended September 30, 2016, royalties incurred relating to the reacquired product rights were $50.1 million, offset, in part by, unfavorable product mix.

Selling and Marketing Expenses

The decrease in selling and marketing expenses relates to headcount reductions and lower launch costs.

General and Administrative Expenses

General and administrative expenses are in line period-over-period.

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International Segment

The following table presents top products sales and net contribution for the International segment for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,						Change
	2017			2016			$ Overall Change			$ Currency Change			$ Operational Change			% Overall Change			% Currency Change			% Operational Change
Total Eye Care	$	939.4		$	904.4		$	35.0		$	(1.8	)	$	36.8			3.9	%		(0.2	)%		4.1	%
Lumigan^®/Ganfort^®		271.8			269.2			2.6			(1.3	)		3.9			1.0	%		(0.5	)%		1.5	%
Ozurdex^®		152.5			130.2			22.3			(1.6	)		23.9			17.1	%		(1.2	)%		18.3	%
Alphagan^®/Combigan^®		128.4			127.3			1.1			0.2			0.9			0.9	%		0.2	%		0.7	%
Optive^®		83.5			75.7			7.8			1.2			6.6			10.3	%		1.6	%		8.7	%
Restasis^®		46.7			49.7			(3.0	)		(1.2	)		(1.8	)		(6.0	)%		(2.4	)%		(3.6	)%
Other Eye Drops		123.7			131.2			(7.5	)		(0.5	)		(7.0	)		(5.7	)%		(0.4	)%		(5.3	)%
Other Eye Care		132.8			121.1			11.7			1.4			10.3			9.7	%		1.2	%		8.5	%
Total Medical Aesthetics		977.3			780.0			197.3			(10.0	)		207.3			25.3	%		(1.3	)%		26.6	%
Facial Aesthetics		793.1			658.7			134.4			(8.9	)		143.3			20.4	%		(1.4	)%		21.8	%
Botox^® Cosmetics		402.0			352.9			49.1			(8.9	)		58.0			13.9	%		(2.5	)%		16.4	%
Juvederm Collection		386.0			304.2			81.8			(0.1	)		81.9			26.9	%		0.0	%		26.9	%
Belkyra^® (Kybella^®)		5.1			1.6			3.5			0.1			3.4		n.m.				6.3	%	n.m.
Plastic Surgery		118.0			112.9			5.1			(1.2	)		6.3			4.5	%		(1.1	)%		5.6	%
Breast Implants		116.8			112.5			4.3			(1.2	)		5.5			3.8	%		(1.1	)%		4.9	%
Earfold^™		1.2			0.4			0.8			-			0.8			200.0	%		0.0	%		200.0	%
Regenerative Medicine		10.7			-			10.7			0.1			10.6		n.a.			n.a.			n.a.
Alloderm®		5.0			-			5.0			-			5.0		n.a.			n.a.			n.a.
Other Regenerative Medicine		5.7			-			5.7			0.1			5.6		n.a.			n.a.			n.a.
Body Contouring		46.7			-			46.7			(0.2	)		46.9		n.a.			n.a.			n.a.
Coolsculpting® Systems & Add On Applicators		20.4			-			20.4			-			20.4		n.a.			n.a.			n.a.
Coolsculpting® Consumables		26.3			-			26.3			(0.2	)		26.5		n.a.			n.a.			n.a.
Skin Care		8.8			8.4			0.4			0.2			0.2			4.8	%		2.4	%		2.4	%
Botox^® Therapeutics and Other		426.8			399.0			27.8			(1.5	)		29.3			7.0	%		(0.4	)%		7.4	%
Botox^® Therapeutics		260.6			240.0			20.6			(0.2	)		20.8			8.6	%		(0.1	)%		8.7	%
Asacol^®/Delzicol^®		36.8			40.5			(3.7	)		(2.0	)		(1.7	)		(9.1	)%		(4.9	)%		(4.2	)%
Constella^®		16.1			12.7			3.4			(0.3	)		3.7			26.8	%		(2.4	)%		29.2	%
Other Products		113.3			105.8			7.5			1.0			6.5			7.1	%		0.9	%		6.2	%
Other Revenues		60.1			44.7			15.4			-			15.4			34.5	%		0.0	%		34.5	%
Net revenues	$	2,403.6		$	2,128.1		$	275.5		$	(13.3	)	$	288.8			12.9	%		(0.6	)%		13.5	%
Operating expenses:
Cost of sales⁽¹⁾		341.6			309.3			32.3			(0.2	)		32.5			10.4	%		(0.1	)%		10.5	%
Selling and marketing		673.2			582.7			90.5			(1.2	)		91.7			15.5	%		(0.2	)%		15.7	%
General and administrative		86.5			86.5			-			(0.5	)		0.5			0.0	%		(0.6	)%		0.6	%
Segment contribution	$	1,302.3		$	1,149.6		$	152.7		$	(11.4	)	$	164.1			13.3	%		(1.0	)%		14.3	%
Segment margin		54.2	%		54.0	%											0.2	%
Segment gross margin⁽²⁾		85.8	%		85.5	%											0.3	%

⁽¹⁾	Excludes amortization and impairment of acquired intangibles including product rights, as well as indirect cost of sales not attributable to segment results.

⁽²⁾	Defined as net revenues less segment related cost of sales as a percentage of net revenues.

Net Revenues

The increase in segment net revenues in the nine months ended September 30, 2017 over the prior period is primarily due to the operational growth of total Facial Aesthetics, Eye Care and Botox^® Therapeutics, as well as the acquisition of Zeltiq, which contributed $46.7 million of net revenues during the nine months ended September 30, 2017. Within total Eye Care, Ozurdex^® increased $22.3 million, or 17.1% versus the prior year period, primarily driven by demand growth. Within Facial Aesthetics, Juvederm Collection revenues increased $81.8 million, or 26.9% versus the prior year period, primarily resulting from demand

106

growth. Botox^® Cosmetic sales grew 13.9% driven by demand growth. Botox^® Therapeutics sales also grew 8.6% driven by demand growth.

Cost of Sales

The increase in cost of sales was primarily due to the increase in net revenues, offset, in part, by favorable product mix. Segment gross margins improved to 85.8% for the nine months ended September 30, 2017 compared to 85.5% for the nine months ended September 30, 2016.

Selling and Marketing Expenses

The increase in selling and marketing expenses relates to the addition of Zeltiq, which contributed spending of $22.8 million, as well as increased promotional spending associated with Ozurdex^®, Botox^® Cosmetic and the Juvederm Collection and recent product launches.

General and Administrative Expenses

General and administrative expenses are in line period-over-period.

Corporate

Corporate represents the results of corporate initiatives as well as the impact of select revenues and shared costs. The following represents the corporate amounts for the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30, 2017
	Integration and Restructuring			Fair Value Adjustments			Effect of Purchase Accounting			Other			Revenues and Shared Costs			Total
Net Sales	$	-		$	-		$	-		$	-		$	18.3		$	18.3
Operating expenses:
Cost of sales(1)		50.8			(127.3	)		129.5			12.5			207.4			272.9
Selling and marketing		53.5			-			26.4			1.5			3.5			84.9
General and administrative		126.9			-			45.8			73.8			500.7			747.2
Contribution	$	(231.2	)	$	127.3		$	(201.7	)	$	(87.8	)	$	(693.3	)	$	(1,086.7	)

⁽¹⁾Excludes amortization and impairment of acquired intangibles including product rights.

107


	Nine Months Ended September 30, 2016
	Integration and Restructuring			Fair Value Adjustments			Effect of Purchase Accounting			Reclassification of Sales Distributed Through Anda to Discontinued Operations			Other			Revenues and Shared Costs			Total
Net Sales	$	-		$	-		$	-		$	(80.0	)	$	-		$	26.5		$	(53.5	)
Operating expenses:
Cost of sales(1)		16.0			13.4			48.8			(78.2	)		-			207.2			207.2
Selling and marketing		38.0			-			55.3			-			0.1			5.9			99.3
General and administrative		196.8			0.1			35.7			-			122.9			337.3			692.8
Contribution	$	(250.8	)	$	(13.5	)	$	(139.8	)	$	(1.8	)	$	(123.0	)	$	(523.9	)	$	(1,052.8	)

⁽¹⁾Excludes amortization and impairment of acquired intangibles including product rights.

In the nine months ended September 30, 2017, integration and restructuring charges included costs related to the integration of LifeCell and Zeltiq as well as the Company’s internal restructuring programs. As part of the Company’s internal restructuring programs, the Company incurred severance and other restructuring costs relating to the commercial organization of $20.0 million as the Company intends to eliminate approximately 400 commercial organization positions, as well as severance and other restructuring costs relating to the global manufacturing operations of $45.1 million as the Company intends to close select facilities. In the nine months ended September 30, 2017 the Company incurred purchase accounting effects of $126.2 million in cost of sales related to the fair value inventory step-up from the LifeCell and Zeltiq acquisitions as products were sold to the Company’s third party customers. The Company also incurred charges related to the purchase accounting impact on stock-based compensation related to the Allergan, Forest and Zeltiq acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses, including cash stock-based compensation charge of $31.5 million associated with the Zeltiq Acquisition. In the nine months ended September 30, 2017, general and administrative costs included legal settlement charges of $74.3 million.

In the nine months ended September 30, 2016, integration and restructuring charges primarily related to the integration of the Legacy Allergan business as well as charges incurred with the terminated merger with Pfizer, Inc. of $87.2 million. In the nine months ended September 30, 2016, the Company incurred purchase accounting effects of $42.4 million in cost of sales primarily related to the fair value inventory step-up from the Allergan and Forest acquisitions as products were sold to the Company’s third party customers. The Company also incurred charges related to the purchase accounting impact on stock-based compensation related to the Allergan and Forest acquisitions, which increased cost of sales, selling and marketing and general and administrative expenses. In the nine months ended September 30, 2016, general and administrative costs included legal settlement charges of $100.0 million.

Shared costs primarily include above site and unallocated costs associated with running our global manufacturing facilities and corporate General & Administrative expenses. In the nine months ended September 30, 2017, the Company incurred transactional foreign exchange losses of $94.5 million versus transactional foreign exchange gains of $61.2 million, excluding mark-to-market unrealized losses for foreign currency option contracts, in the nine months ended September 30, 2016.

108

Research and Development Expenses

R&D expenses consisted of the following components in the nine months ended September 30, 2017 and 2016 ($ in millions):

	Nine Months Ended September 30,				Change
	2017		2016		Dollars			%
Ongoing operating expenses	$	1,193.1	$	1,007.9	$	185.2			18.4	%
Brand-related milestone payments and upfront license payments		386.5		542.1		(155.6	)		(28.7	)%
Acquisition accounting fair market value adjustment to stock-based compensation		14.5		31.8		(17.3	)		(54.4	)%
Acquisition, integration, and restructuring charges		22.1		14.8		7.3			49.3	%
Contingent consideration adjustments, net		75.7		65.8		9.9			15.0	%
Total expenditures	$	1,691.9	$	1,662.4	$	29.5			1.8	%

The increase in ongoing operating expenses in the nine months ended September 30, 2017 versus the prior year period is primarily due to increased product development spending primarily in the Central Nervous System and Gastrointestinal therapeutic areas coupled with higher personnel costs.

Acquisition, integration and restructuring charges in the nine months ended September 30, 2017 includes $13.6 million of severance and restructuring costs related to a planned internal reduction of approximately 100 R&D employees.

The following represents brand related milestone payments and upfront license payments in the nine months ended September 30, 2017 and 2016, respectively ($ in millions):

	Nine Months Ended September 30,
($ in millions)	2017		2016
Lysosomal Therapeutics, Inc.	$	145.0	$	-
Editas Medicine, Inc.		90.0		-
Assembly Biosciences, Inc.		50.0		-
Akarna Therapeutics, Ltd.		39.6		48.2
Heptares Therapeutics Ltd.		15.0		125.0
Lyndra, Inc.		15.0		-
Merck & Co.		-		100.0
Topokine Therapeutics, Inc.		-		85.8
Anterios, Inc.		-		89.2
RetroSense Therapeutics, LLC		-		59.7
Other		31.9		34.2
	$	386.5	$	542.1

In the nine months ended September 30, 2017, the adjustment to contingent consideration primarily related to the advancement of the Company’s True Tear^TM product and products acquired as part of the Tobira Acquisition. In the nine months ended September 30, 2016, the adjustment to contingent consideration included charges related to the advancement of Rhofade^®.

Amortization

Amortization in the nine months ended September 30, 2017 and 2016 was as follows:

	Nine Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars		%
Amortization	$	5,274.9	$	4,831.9	$	443.0		9.2	%

109

Amortization for the nine months ended September 30, 2017 increased as compared to the prior period primarily as a result of amortization related to the acquired LifeCell and Zeltiq products of $122.0 million as well as amortization from approved products during the year ended December 31, 2016 and the nine months ended September 30, 2017.

IPR&D Impairments and Asset Sales and Impairments, Net

IPR&D impairments and Asset sales and impairments, net consisted of the following components in the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,					Change
($ in millions)	2017		2016			Dollars		%
IPR&D impairments	$	1,245.3	$	316.9		$	928.4		293.0	%
Asset sales and impairments, net		3,896.2		(24.0	)		3,920.2	n.m.

In the nine months ended September 30, 2017, the Company evaluated all of its dry eye related assets for impairment as a result of the U.S. District Court for the Eastern District of Texas issuing an adverse trial decision finding that the four asserted patents covering Restasis^® (Cyclosporine Ophthalmic Emulsion) 0.05% are invalid. As a result of our review of all potential scenarios relating to these assets and a decrease in our assessment of the likelihood of revenue extending through the full patent term of 2024, the Company recognized an impairment of $3,230.0 million related to Restasis^® as well as $164.0 million related to other Dry Eye IPR&D assets obtained in the Allergan acquisition.

In the nine months ended September 30, 2017, the Company impaired the intangible asset related to Aczone^® by $646.0 million as a result of recent market dynamics, including erosion in the brand acne market, an anticipated decline in the market outlook, and recent generic entrants. In the nine months ended September 30, 2017, IPR&D impairments included $486.0 million related to an anticipated approval delay due to certain product specifications for a CNS project obtained as part of the Allergan acquisition, a $91.3 million impairment of a women’s healthcare project based on the Company’s intention to divest the non-strategic asset, a $278.0 million impairment due to a delay in anticipated launch of a women’s healthcare project coupled with an anticipated decrease in product demand, a $44.0 million impairment due to a decrease in projected cash flows due to a decline in market demand assumptions of an eye care project obtained as part of the Allergan acquisition, a $20.0 million impairment of an eye care project obtained as part of the Allergan acquisition and a $17.0 million of a medical aesthetics project obtained as part of the Allergan acquisition. In addition, the Company terminated its License, Transfer and Development Agreement for SER-120 (nocturia) with Serenity Pharmaceuticals, LLC which resulted in an impairment of $140.0 million.

During the nine months ended September 30, 2016, the Company recorded an impairment of an international eye care pipeline project of $35.0 million based on a decrease in projected cash flows due to market conditions as well as an impairment of $20.0 million for a specified indication of a Botox^® therapeutic product based on a decrease in projected cash flows due to a decline in market demand assumptions. In addition, during the nine months ended September 30, 2016, the Company impaired IPR&D projects relating to women’s healthcare of $24.0 million and osteoarthritis of approximately $190.0 million based on clinical trial results. Also in the nine months ended September 30, 2016, the Company recorded a $42.0 million IPR&D impairments on a gastroenterology project based on the lack of future availability of active pharmaceutical ingredients.

Asset sales and impairments, net in the nine months ended September 30, 2016, included the gain on the sale of certain investments.

Interest Income

Interest income in the nine months ended September 30, 2017 and 2016 was as follows:

	Nine Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars		%
Interest income	$	53.0	$	23.5	$	29.5		125.5	%

Interest income in the nine months ended September 30, 2017 increased versus the nine months ended September 30, 2016 resulting from the investment of proceeds received in the Teva Transaction.

110

Interest Expense

Interest expense consisted of the following components in the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,				Change
($ in millions)	2017		2016		Dollars			%
Fixed Rate Notes	$	791.6	855.9		$	(64.3	)		(7.5	)%
Floating Rate Notes		18.7	17.6			1.1			6.2	%
Euro Denominated Notes		11.3		-		11.3		n.a.
Term loan indebtedness		-	116.2			(116.2	)		(100.0	)%
Revolving Credit Facility		-	2.6			(2.6	)		(100.0	)%
Other		10.7	10.6			0.1			0.9	%
Interest expense	$	832.3	$	1,002.9	$	(170.6	)		(17.0	)%

Interest expense in the nine months ended September 30, 2017 decreased versus the nine months ended September 30, 2016 due to the pay down of term loan indebtedness with use of proceeds received in the Teva Transaction as well as scheduled maturities and early debt extinguishment of senior secured notes.

Other (expense) income, net

Other (expense) income, net consisted of the following components in the nine months ended September 30, 2017 and 2016:

	Nine Months Ended September 30,					Change
($ in millions)	2017			2016		Dollars			%
Net income impact of other-than-temporary loss on investment in Teva securities	$	(3,273.5	)	$	-	$	(3,273.5	)	n.a.
Debt extinguishment costs as part of the debt tender offer		(161.5	)		-		(161.5	)	n.a.
Dividend income		76.7			34.1		42.6			124.9	%
Naurex recovery		20.0			-		20.0		n.a.
Pfizer termination fee (Allergan plc only)		-			150.0		(150.0	)		(100.0	)%
Other (expense) income, net		(28.3	)		0.1		(28.4	)	n.m.
Other (expense) income, net	$	(3,366.6	)	$	184.2	$	(3,550.8	)	n.a.

Teva Securities

The closing Teva Transaction date opening stock price discounted at a rate of 5.9 percent due to the lack of marketability was used to initially value the shares. At March 31, 2017, the Company determined that the decline in value since August 2, 2016 was other-than-temporary. At March 31, 2017, the Company impaired the value of its investment by $1,978.0 million as a component of other (expense) income. At September 30, 2017, the Company determined that the decline in value since March 31, 2017 was also other-than-temporary. As a result, the Company impaired the value of its investment by $1,295.5 million at September 30, 2017 as a component of other (expense) income. The determinations were made based on the amount of time that the stock price had been below the initial value, intentions regarding the potential holding period of the shares, and the materiality of the decline in share price. The Company will continue to monitor the share price and additional impairments to the investment may occur.

Debt Extinguishment

In the nine months ended September 30, 2017, the Company repaid $2,843.3 million of senior notes. As a result of the extinguishment, the Company recognized a loss of $161.5 million, within “Other income/ (expense)” for the early tender payment and non-cash write-off of premiums and debt fees related to the repurchased notes, including $170.5 million of a make-whole premium.

Dividend income

As a result of the Teva Transaction, the Company acquired 100.3 million Teva ordinary shares. During the nine months ended September 30, 2017 and 2016, the Company received dividend income of $76.7 million and $34.1 million, respectively.

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Other-than-temporary impairments

The Company recorded other-than-temporary impairment charges on other equity investments and cost method investments of $26.1 million in the nine months ended September 30, 2017.

Naurex Recovery

Pfizer termination fee

(Benefit) for Income Taxes

	Nine Months Ended September 30,						Change
($ in millions)	2017			2016			Dollars			%
(Benefit) for income taxes	$	(2,752.1	)	$	(825.8	)	$	(1,926.3	)		233.3	%
Effective tax rate		27.6	%		48.0	%

The effective tax rate for the nine months ended September 30, 2016 was favorably impacted by income earned in jurisdictions with tax rates lower than the Irish statutory rate and U.S. losses tax benefited at rates greater than the Irish statutory rate. Additionally, the tax benefit for the nine months ended September 30, 2016 included the following items: an expense of $179.5 million primarily related to a change in a valuation allowance on a portion of U.S. capital loss carryforwards resulting from restructuring associated with the sale of the global generics business, a benefit of $48.2 million related to the change in tax rates applicable to certain temporary differences, a benefit of $40.3 million for the recognition of previously unrecognized tax benefits and a benefit of $37.9 million for the New Jersey Grow income tax credit.

The effective tax rate for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016 was impacted by impairment charges tax benefited at a less favorable rate.

Discontinued Operations

On July 27, 2015, the Company announced that it entered into the Teva Transaction, which closed on August 2, 2016. On October 3, 2016, the Company completed the divestiture of the Anda Distribution business for $500.0 million.

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Net cash proceeds received	$	33,304.5
August 2, 2016 fair value of Teva shares		5,038.6
Total Proceeds	$	38,343.1
Net assets sold to Teva, excluding cash		(12,076.7	)
Other comprehensive income disposed		(1,544.8	)
Deferral of proceeds relating to additional elements of agreements with Teva		(518.9	)
Pre-tax gain on sale of generics business	$	24,202.7
Income taxes		(8,321.2	)
Net gain on sale of generics business	$	15,881.5

The following table presents key financial results of the businesses included in "(Loss) / Income from discontinued operations" for the three and nine months ended September 30, 2016 ($ in millions):

	Three Months Ended September 30,		Nine Months Ended September 30,
	2016		2016
Net revenues	$	756.5	$	4,504.3
Operating expenses:
Cost of sales (excludes amortization and impairment of acquired intangibles including product rights)		531.0		2,798.3
Research and development		37.3		269.6
Selling and marketing		69.1		352.6
General and administrative		90.3		399.4
Amortization		-		4.8
Total operating expenses		727.7		3,824.7
Operating income		28.8		679.6
Other (expense) income, net		15,881.5		15,881.1
Provision for income taxes		308.4		687.5
Net income from discontinued operations	$	15,601.9	$	15,873.2

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Liquidity and Capital Resources

Working Capital Position

Working capital at September 30, 2017 and December 31, 2016 is summarized as follows:

	September 30,		December 31,		Increase
($ in millions):	2017		2016		(Decrease)
Current Assets:
Cash and cash equivalents	$	1,612.7	$	1,724.0	$	(111.3	)
Marketable securities		3,829.1		11,501.5		(7,672.4	)
Accounts receivable, net		2,808.6		2,531.0		277.6
Inventories		899.8		718.0		181.8
Prepaid expenses and other current assets		962.6		1,383.4		(420.8	)
Total current assets		10,112.8		17,857.9		(7,745.1	)
Current liabilities:
Accounts payable and accrued expenses	$	4,541.7	$	5,019.0	$	(477.3	)
Income taxes payable		221.1		57.8		163.3
Current portion of long-term debt and capital leases		3,797.0		2,797.9		999.1
Total current liabilities		8,559.8		7,874.7		685.1
Working Capital	$	1,553.0	$	9,983.2	$	(8,430.2	)
Current Ratio		1.18		2.27

Working capital decreased $8,430.2 million primarily due to the following uses of working capital:

•

The Company acquired LifeCell for $2,874.4 million, net of cash acquired, in the nine months ended September 30, 2017, which primarily is reflected in long-term assets and liabilities;

•

The Company acquired Zeltiq for $2,368.7 million, net of cash acquired, in the nine months ended September 30, 2017, which primarily is reflected in long-term assets and liabilities;

•

The Company repaid $2,700.0 million of indebtedness which were maturing during 2017 in the nine months ended September 30, 2017 and reclassified $3,750.0 million of indebtedness from long-term liabilities to current liabilities;

•

A decrease in the value of Teva securities of $1,674.1 million;

•

The Company utilized cash and cash equivalents to pay dividends in the nine months ended September 30, 2017 of $917.0 million and to purchase intangible assets of $604.3 million; and

•

A decrease in income tax receivables of $448.7 million as the amount prepaid in the year ended December 31, 2016 begins to be realized.

Cash Flows from Operations

Summarized cash flow from operations is as follows:

	Nine Months Ended September 30,
($ in millions)	2017		2016
Net cash provided by operating activities	$	3,825.0	$	1,535.2

Cash flows from operations represent net income adjusted for certain non-cash items and changes in assets and liabilities. Cash provided by operating activities increased $2,289.8 million in the nine months ended September 30, 2017 versus the prior year period, due primarily to $2,571.7 million in cash tax payments made in connection with the sale of the generics business in the nine months ended September 30, 2016. Excluding this payment, cash flows from operations decreased $281.9 million. The nine months ended September 30, 2016 included the contribution of the former Generics Business and Anda Distribution Business.

Management expects that available cash balances and the remaining 2017 cash flows from operating activities will provide sufficient resources to fund our operating liquidity needs and expected 2017 capital expenditure funding requirements.

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Investing Cash Flows

Our cash flows from investing activities are summarized as follows:

	Nine Months Ended September 30,
($ in millions)	2017			2016
Net cash provided by / (used in) investing activities	$	(82.3	)	$	17,607.3

Investing cash flows consist primarily of cash used in acquisitions of businesses and intangible assets (primarily product rights), capital expenditures and purchases of investments and marketable securities partially offset by proceeds from the sale of a business, investments and marketable securities. Included in the nine months ended September 30, 2017 was the net cash provided by the sale of marketable securities of $6,040.6 million offset, in part, by the cash purchases of LifeCell for $2,874.4 million and Zeltiq of $2,346.7 million, net of cash acquired, and the purchase of intangible assets of $604.3 million. Included in the nine months ended September 30, 2016 were cash proceeds received from the sale of the generics business to Teva of $33,304.5 million offset, in part, by purchases of marketable securities of $15,445.5 million, cash used for capital expenditures of $250.5 million and cash used in connection with the ForSight Acquisition of $74.5 million.

Financing Cash Flows

Our cash flows from financing activities are summarized as follows:

	Nine Months Ended September 30,
($ in millions)	2017			2016
Net cash (used in) financing activities	$	(3,873.1	)	$	(12,688.1	)

Financing cash flows consist primarily of borrowings and repayments of debt, repurchases of ordinary shares and proceeds from the exercise of stock options. Cash used in financing activities in the nine months ended September 30, 2017 primarily related to the repayment of indebtedness of $5,579.2 million, which included debt repurchased under the tender offer completed on May 30, 2017 and the early redemption of certain debt securities, the payment of dividends of $917.0 million and payments relating to contingent consideration and other financing of $515.2 million, offset, in part by the long-term borrowings of $3,025.0 million. Cash used in financing activities in the nine months ended September 30, 2016 included payments of debt of $10,831.0 million, contingent consideration of $77.7 million, dividends of $208.8 million and the repurchase of ordinary shares of $2,758.6 million, including $2,689.9 million repurchased under the Company’s share repurchase program, offset by borrowings under the credit facility of $1,050.0 million.

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Debt and Borrowing Capacity

Total debt and capital leases consisted of the following ($ in millions):

	Balance As of						Fair Market Value As of
	September 30, 2017			December 31, 2016			September 30, 2017		December 31, 2016
Senior Notes:
Floating Rate Notes
$500.0 million floating rate notes due March 12, 2018 *	$	500.0		$	500.0		$	501.8	$	502.5
$500.0 million floating rate notes due March 12, 2020 **		500.0			500.0			509.0		509.4
		1,000.0			1,000.0			1,010.8		1,011.9	��
Fixed Rate Notes
$1,000.0 million 1.850% notes due March 1, 2017		-			1,000.0			-		1,001.1
$500.0 million 1.300% notes due June 15, 2017		-			500.0			-		499.7
$1,200.0 million 1.875% notes due October 1, 2017		-			1,200.0			-		1,202.5
$3,000.0 million 2.350% notes due March 12, 2018		3,000.0			3,000.0			3,008.9		3,018.0
$250.0 million 1.350% notes due March 15, 2018		250.0			250.0			249.4		248.4
$1,050.0 million 4.375% notes due February 1, 2019		350.0			1,050.0			361.0		1,090.0
$500.0 million 2.450% notes due June 15, 2019		500.0			500.0			503.5		501.2
$400.0 million 6.125% notes due August 14, 2019		400.0			400.0			430.0		437.7
$3,500.0 million 3.000% notes due March 12, 2020		3,500.0			3,500.0			3,562.8		3,541.8
$650.0 million 3.375% notes due September 15, 2020		650.0			650.0			668.5		663.6
$750.0 million 4.875% notes due February 15, 2021		450.0			750.0			485.1		803.3
$1,200.0 million 5.000% notes due December 15, 2021		1,200.0			1,200.0			1,317.3		1,297.7
$3,000.0 million 3.450% notes due March 15, 2022		3,000.0			3,000.0			3,102.0		3,030.7
$1,700.0 million 3.250% notes due October 1, 2022		1,700.0			1,700.0			1,740.5		1,693.1
$350.0 million 2.800% notes due March 15, 2023		350.0			350.0			348.5		335.6
$1,200.0 million 3.850% notes due June 15, 2024		1,200.0			1,200.0			1,255.3		1,211.7
$4,000.0 million 3.800% notes due March 15, 2025		4,000.0			4,000.0			4,146.3		3,995.6
$2,500.0 million 4.550% notes due March 15, 2035		2,500.0			2,500.0			2,658.6		2,458.5
$1,000.0 million 4.625% notes due October 1, 2042		456.7			1,000.0			479.3		967.6
$1,500.0 million 4.850% notes due June 15, 2044		1,500.0			1,500.0			1,637.7		1,496.4
$2,500.0 million 4.750% notes due March 15, 2045		1,200.0			2,500.0			1,300.8		2,466.9
		26,206.7			31,750.0			27,255.5		31,961.1

Euro Denominated Notes
€750.0 million 0.500% notes due June 1, 2021		884.0			-			887.4		-
€700.0 million 1.250% notes due June 1, 2024		825.0			-			832.0		-
€550.0 million 2.125% notes due June 1, 2029		648.2			-			662.2		-
€700.0 million floating rate notes due June 1, 2019 ***		825.0			-			825.6		-
		3,182.2			-			3,207.2		-
Total Senior Notes Gross		30,388.9			32,750.0			31,473.5		32,973.0
Unamortized premium		104.1			171.2			-	-
Unamortized discount		(84.8	)		(95.8	)		-	-
Total Senior Notes Net		30,408.2			32,825.4			31,473.5		32,973.0
Other Indebtedness
Debt Issuance Costs		(126.6	)		(144.6	)
Other		51.8			85.5
Total Other Borrowings		(74.8	)		(59.1	)
Capital Leases		2.7			2.4
Total Indebtedness	$	30,336.1		$	32,768.7

*	Interest on the 2018 floating rate note is three month USD LIBOR plus 1.080% per annum

**	Interest on the 2020 floating rate note is three month USD LIBOR plus 1.255% per annum

***	Interest on the €700.0 million floating rate notes is the three month EURIBOR plus 0.350% per annum

Fair market value in the table above is determined in accordance with ASC Topic 820 “Fair Value Measurement” (“ASC 820”) under Level 2 based upon quoted prices for similar items in active markets.

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Senior Notes

Euro Denominated Notes

On May 26, 2017, Allergan Funding SCS, a limited partnership (société en commandite simple) organized under the laws of the Grand Duchy of Luxembourg and an indirect wholly-owned subsidiary of Allergan plc, issued a €700.0 million floating rate notes due 2019 (the “2019 Floating Rate Notes”), €700.0 million 0.500% notes due 2021 (the “0.500% 2021 Notes”), €750.0 million 1.250% notes due 2024 (the “1.250% 2024 Notes”), and €550.0 million 2.125% notes due 2029 (the “2.125% 2029 Notes”), collectively the “Euro Denominated Notes”. The notes are fully and unconditionally guaranteed by Allergan Funding SCS’s indirect parents, Warner Chilcott Limited and Allergan Capital S.a.r.l. (“Allergan Capital”), and by Allergan Finance, LLC, a subsidiary of Allergan Capital, on an unsecured and unsubordinated basis.

These notes were issued to fund, in part, the payment of the tender offers described below.

Repayments

Tender Offer

Other Activity

The $800.0 million 5.750% fixed rate notes due April 1, 2016 were paid in full at maturity.

The $500.0 million floating rate notes due September 1, 2016 were paid in full at maturity and bore interest at the three-month LIBOR plus 0.875%.

The $1,000.0 million 1.850% senior notes due March 1, 2017 were paid in full at maturity.

The $500.0 million 1.300% senior notes due June 15, 2017 were redeemed and paid in full on April 21, 2017.

The $1,200.0 million 1.875% senior notes due October 1, 2017 were redeemed and paid in full on June 29, 2017.

Credit Facility Indebtedness

Revolving Credit Facility

On June 14, 2017, Allergan plc and certain of its subsidiaries entered into a revolving credit and guaranty agreement (the “Revolver Agreement”) among Allergan Capital, as borrower; Allergan plc, as Ultimate Parent; Warner Chilcott Limited, as Intermediate Parent and Subsidiary Guarantor; Allergan Finance LLC., Allergan Funding SCS, as Subsidiary Guarantors; the lenders from time to time party thereto (the “Revolving Lenders”), J.P. Morgan Chase Bank as Administrative Agent; J.P. Morgan Europe Limited, as London Agent; and the other financial institutions party thereto. Under the Revolver Agreement, the Revolving Lenders have committed to provide an unsecured five-year revolving credit facility in an aggregate principal amount of up to $1.5 billion with the ability to increase the revolving credit facility by $500.0 million to an aggregate principal amount of up to $2.0 billion.

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The obligations under the Revolver Agreement were guaranteed by Warner Chilcott Limited, Allergan Finance LLC and Allergan Funding SCS.

The Company was subject to, and as of September 30, 2017 was in compliance with all, financial and operational covenants under the terms of the Revolver Agreement. At September 30, 2017, there were no outstanding borrowings or letter of credits outstanding under the Revolver Agreement.

Long-term obligations

The following table lists our enforceable and legally binding obligations resulting from collaboration agreements as of September 30, 2017. Certain amounts included herein are based on management’s estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and other factors. Because these estimates and assumptions are necessarily subjective, the enforceable and legally binding obligation we will actually pay in future periods may vary from those reflected in the table.

In addition, such milestone payments will only be payable in the event that the Company achieves contractually defined, success-based milestones, such as:

• the advancement of the specified research and development programs;

• the receipt of regulatory approval for the specified compounds or products; and/or

• sales threshold of the specified compounds or products.

The following is a summary of contractual commitments as of September 30, 2017:

	Payment by Period
($ in millions):	Total		Three Months Ending December 31, 2017		2018-2019		2020-2021		Thereafter
Sales based and other milestone obligations	$	10,057.1	$	0.5	$	25.5	$	205.5	$	9,825.6
R&D / approval milestone obligations		6,012.6		7.3		648.0		1,037.7		4,319.6
Total	$	16,069.7	$	7.8	$	673.5	$	1,243.2	$	14,145.2

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The table above reflects the anticipated timing of R&D and approval related milestones with sales based milestones included in the period thereafter as the achievement of sales targets is variable. Certain agreements also include royalties based on commercial sales. The following table lists the contractual commitments relating to these milestones ($ in millions):

Transaction	Product	Maximum Milestones		R&D / Approval Milestones		Sales Based and Other Milestones
Heptares Therapeutics Ltd	Neurological disorders	$	3,224.5	$	649.5	$	2,575.0
Assembly Biosciences, Inc.	Gastrointestinal products		2,379.0		989.0		1,390.0
AstraZeneca license	Brazikumab		1,265.0		225.0		1,040.0
Akarna Therapeutics, Ltd.	Inflammatory and fibrotic diseases		975.0		600.0		375.0
Tobira Therapeutics, Inc.	Cenicriviroc		898.1		433.1		465.0
Chase Pharmaceuticals Corporation	Neurodegenerative disorders		875.0		325.0		550.0
Merck & Co.	Ubrogepant & Atogepant		865.0		435.0		430.0
Retrosense Therapeutics, LLC	RST-001		495.4		245.4		250.0
Naurex, Inc.	GLYX-13		475.0		75.0		400.0
Anterios, Inc.	Botulinum toxin type A		387.5		207.5		180.0
AqueSys, Inc.	Xen Gel Stent		300.0	-			300.0
Topokine Therapeutics, Ltd	XAF5		260.0		110.0		150.0
Oculeve, Inc.	TrueTear™		200.0		100.0		100.0
Forsight VISION5, Inc.	Bimatoprost Ring		125.0		125.0	-
All Other			3,345.2		1,493.1		1,852.1
Total		$	16,069.7	$	6,012.6	$	10,057.1

Off-Balance Sheet Arrangements

We do not have any material off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, net revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion provides forward-looking quantitative and qualitative information about our potential exposure to market risk. Market risk represents the potential loss arising from adverse changes in the value of financial instruments. The risk of loss is assessed based on the likelihood of adverse changes in fair values, cash flows or future earnings. We are exposed to market risk for changes in the market values of our investments (Investment Risk), the impact of interest rate changes (Interest Rate Risk) and the impact of foreign currency exchange changes (Foreign Currency Exchange Risk).

We maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including both government and government agency obligations with ratings of A or better and money market funds. Our investments in marketable securities are governed by our investment policy which seeks to preserve the value of our principal, provide liquidity and maximize return on the Company’s investment against minimal interest rate risk. Consequently, our interest rate and principal risk are minimal on our non-equity investment portfolio. The quantitative and qualitative disclosures about market risk are set forth below.

Investment Risk

As of September 30, 2017 our total investments in marketable and equity securities of other companies, including equity method investments, but excluding securities considered cash and cash equivalents were $3,905.8 million (included in marketable securities and investments and other assets). The fair values of these investments are subject to significant fluctuations due to volatility of the stock market and changes in general economic conditions.

As of September 30, 2017, the Company owns 100.3 million Teva ordinary shares, which are subject to changes in value based on the price of Teva shares.

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We regularly review the carrying value of our investments and identify and recognize losses, for income statement purposes, when events and circumstances indicate that any declines in the fair values of such investments below our accounting basis are other-than-temporary, including the other-than-temporary impairment of Teva securities in the nine months ended September 30, 2017 of $3,273.5 million.

Interest Rate Risk

Our exposure to interest rate risk relates primarily to our non-equity investment portfolio. Our cash is invested in money market securities.

Our portfolio of marketable securities includes highly liquid money market securities classified as available-for-sale securities, with no security having a maturity in excess of one year. These include floating rate securities that are exposed to interest rate fluctuations. Because of the short-term nature of these investments, we are subject to minimal interest rate risk and do not believe that an increase in market rates would have a significant negative impact on the realized value of our portfolio.

Floating Rate Debt

At September 30, 2017, borrowings outstanding under the floating rate notes were $1,825.0 million. Assuming a one percent increase in the applicable interest rate on the Company’s floating rates notes, annual interest expense would increase by approximately $18.3 million over the next twelve months.

Fixed Rate Debt

The Company has outstanding borrowings under its fixed rate notes. Changes in market interest rates generally affect the fair value of fixed-rate debt, but do not impact earnings or cash flows.

Foreign Currency Exchange Risk

Overall, we are a net recipient of currencies other than the U.S. dollar and, as such, benefit from a weaker dollar and are adversely affected by a stronger dollar relative to major currencies worldwide. Accordingly, changes in exchange rates, and in particular a strengthening of the U.S. dollar, may negatively affect our consolidated revenues or operating costs and expenses as expressed in U.S. dollars.

From time to time, we have entered into foreign currency option and forward contracts. Accordingly, we have entered into various contracts which change in value as foreign exchange rates change to allow the Company at its option to economically offset the effect of changes in the value of foreign currency assets and liabilities, commitments and anticipated foreign currency denominated sales and operating expenses. We have entered into foreign currency option and forward contracts in amounts between minimum and maximum anticipated foreign exchange exposures.

From time to time, we have used foreign currency option contracts, which provide for the sale or purchase of foreign currencies, if exercised, to economically hedge the currency exchange risks associated with probable but not firmly committed transactions that arise in the normal course of our business. Probable but not firmly committed transactions are comprised primarily of sales of products and purchases of raw material in currencies other than the U.S. dollar. While these instruments were subject to fluctuations in value, such fluctuations were anticipated to offset changes in the value of the underlying exposures.

Other

We do not believe that inflation has had a significant impact on our revenues or operations, nor do we have any material commodity price risks.

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ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Allergan plc maintains “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in Allergan plc’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Allergan plc’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.

As required by SEC Rule 13a-15(b), Allergan plc carried out an evaluation, under the supervision and with the participation of Allergan plc’s management, including Allergan’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Allergan plc s disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation and because of the material weakness described below Allergan plc’s Principal Executive Officer and Principal Financial Officer concluded that Allergan plc’s disclosure controls and procedures were not effective as of September 30, 2017.

Warner Chilcott Limited maintains “disclosure controls and procedures,” as such term is defined under Rule 13a-15(e) of the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Warner Chilcott Limited’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.

As required by SEC Rule 13a-15(b), Warner Chilcott Limited carried out an evaluation, under the supervision and with the participation of Warner Chilcott Limited’s management, including Warner Chilcott Limited’s Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of Warner Chilcott Limited’s disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation and because of the material weakness described below Warner Chilcott Limited’s Principal Executive Officer and Principal Financial Officer concluded that Warner Chilcott Limited’s disclosure controls and procedures were not effective as of September 30, 2017.

Material Weakness and Remediation

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

Our internal controls did not operate effectively to appropriately assess the tax implications of certain transactions between our subsidiaries. This control deficiency did not result in the material misstatement of our current or prior period consolidated financial statements. However, this control deficiency could have resulted in a misstatement to the income tax accounts and disclosures, which would have resulted in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has concluded that this control deficiency constitutes a material weakness.

Changes in Internal Control Over Financial Reporting

In the quarter ended September 30, 2017, the Company has implemented certain changes to its procedures and internal control over financial reporting as it continues to remediate its previously reported material weakness. We have made significant progress towards remediation during the quarter ended September 30, 2017, including enhancing the reports utilized in assessing the tax implications of certain transactions between our subsidiaries and also refining our internal reporting structure. We expect to complete testing of the operating effectiveness of the controls in place to remediate the material weakness in the fourth quarter of 2017. There have been no other changes in the Company’s internal control over financial reporting, during the fiscal quarter ended September 30, 2017, that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For information regarding legal proceedings, refer to “PART I, ITEM 3. LEGAL PROCEEDINGS,” of our Annual Report on Form 10-K for the year ended December 31, 2016 and “Legal Matters” in “NOTE 20 — Commitments and Contingencies” in the accompanying “Notes to Consolidated Financial Statements” in this Quarterly Report.

ITEM 1A.

RISK FACTORS

Except as set forth below, there have been no material changes in the Company’s risk factors from those disclosed in the Company’s Form 10-K for the year ended December 31, 2016.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sale of Unregistered Securities; Uses of Proceeds from Registered Securities

None.

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2017, we repurchased 13,944 of our ordinary shares to satisfy tax withholding obligations in connection with the vesting of restricted shares issued to employees.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publically Announced Program	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program ($ in millions)
July 1 - 31, 2017		2,660	$	251.70	-	-
August 1 - 31, 2017		8,966	$	242.35	-	-
September 1 - 30, 2017		2,318	$	226.97	-	-
July 1 – September 30, 2017		13,944	$	241.58	-	-

In the year ended December 31, 2016, the Company entered into a $10.0 billion accelerated share repurchase program. As part of this program, the Company received and cancelled outstanding shares of 2,039,368 as partial settlement of the program in August 2017.

ITEM 6.

EXHIBITS

Reference is hereby made to the Exhibit Index on page 123.

122

EXHIBIT INDEX

Exhibit		Description

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14a of the Securities Exchange Act of 1934.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14a of the Securities Exchange Act of 1934.
32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. of Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. of the Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Scheme Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Label Definition Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

#	Indicates a management contract or compensatory plan or arrangement.

*	Filed herewith.

**	Furnished herewith and not “filed” for purposes of Section 18 of the Exchange Act.

123

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 1, 2017.

ALLERGAN PLC WARNER CHILCOTT LIMITED

By:		/s/ Maria Teresa Hilado
Name:		Maria Teresa Hilado
Title:		Chief Financial Officer (Principal Financial Officer)

By:		/s/ James C. D’Arecca
Name:		James C. D’Arecca
Title:		Chief Accounting Officer (Principal Accounting Officer)

124

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Warner Chilcott 10-Q2017 Q3 Quarterly report

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