United States securities and exchange commission logo
March 30, 2022
Joseph M. Busky
Chief Financial Officer
Ortho Clinical Diagnostics Holdings plc
1001 Route 202
Raritan, New Jersey 08869
Re: Ortho Clinical
Diagnostics Holdings plc
Form 10-K For the
fiscal year ended January 2, 2022
Filed March 8, 2022
Response dated
March 7, 2022
File No. 001-39956
Dear Mr. Busky:
We have reviewed your March 7, 2022 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
March 1, 2022 letter.
Form 10-K for the fiscal year ended January 2, 2022
Audited Financial Statements of Ortho Clinical Diagnostics Holdings plc,
page F-1
1. We have reviewed your
response to prior comment 4 and have the following additional
comments:
We note you have
concluded that you are the principal related to the Grifols
Agreement and an
agent under certain other Grifols agreements. Please provide us
your evaluation of
ASC 606-10-55-36 through 55-39A for the Agreement.
We note your
portion of the pre-tax net profit shared under the Joint Business was
$57.4 million,
$55.6 million and $70.7 million during the prior three fiscal years and
that these costs
are reflected as a component of Other operating expense, net. Please
Joseph M. Busky
FirstName LastNameJoseph M. Busky
Ortho Clinical Diagnostics Holdings plc
Comapany
March NameOrtho Clinical Diagnostics Holdings plc
30, 2022
March2 30, 2022 Page 2
Page
FirstName LastName
briefly clarify the difference between these numbers and the
numbers under Note 15,
page 127.
We note you considered the nature of the remittance of the net
pre-tax profits to
Grifols and ultimately concluded that an accounting policy of
recording these net
costs as a component of Other operating expense, net is a
reasonable, rational, and
consistently applied accounting policy election which
accurately reflects the nature
of these costs. Please address with more specificity why your
characterization of the
amounts Grifols shares with you as Net Revenue and the amounts
you share with
them as Other operating expense, net is a consistently applied
policy election.
Based on your response, it appears that you are applying ASC
808-10 to the 50-year
collaboration Agreement entered into in 1989. In this regard,
please describe to us
the extent you have considered ASC 808-10-15-6, which sets forth,
in part, that
"participants shall reevaluate whether an arrangement continues
to be a collaborative
arrangement whenever there is a change in either the roles of the
participants in the
arrangement or the participants' exposure to significant risks
and rewards dependent
on the ultimate commercial success of the endeavor." In addition,
please provide us
an evaluation of ASC 808-10-15-8 through 15-9 as it relates to
Active
Participation by the participants in the Hepatitis and HIV
diagnostics businesses. If
you believe Grifols supply of a portion of the antigens used in
your production of
the diagnostics products is a relevant factor, please evaluate it
including whether the
supply is part of the collaboration Agreement or a separate
agreement. If applicable,
address whether your evaluation of Active Participation is
consistent with your
evaluation of the labeling of the profit sharing payments as an
"other"
operating expense. Likewise, please provide us an evaluation of
ASC 808-10-15-10
through 15-13 as it relates to Significant Risks and Rewards in
the Hepatitis and HIV
diagnostics businesses by the participants. Lastly, please
address whether your
"profit sharing arrangement" is a Joint Operating Activity as
described in ASC 808-
10-15-7. Please provide us a copy of the collaboration Agreement.
If the Agreement
is not within the scope of ASC 808-10, please provide us an
evaluation of its terms
relative to your accounting.
Your disclosure on page 33 indicates that your Joint Business
is "structured as a
license, research and supply agreement" through which "you share
control over
significant decisions with unaffiliated third parties." Revise
your future filings to
more clearly explain how control over decisions regarding sales
to third parties are
shared with Grifols.
Based on your disclosure it appears that the payments to
Grifols are the direct costs of
the licensed revenues. Revise the line items in your future
filings to clearly reflect
this fact, or clearly explain how you determined this is not the
case.
You may contact Michael Fay at 202-551-3812 or Kevin Vaughn, Accounting
Branch
Chief, at 202-551-3494 if you have any questions.
Joseph M. Busky
Ortho Clinical Diagnostics Holdings plc
March 30, 2022
Page 3
FirstName LastNameJoseph M. Busky Sincerely,
Comapany NameOrtho Clinical Diagnostics Holdings plc
Division of Corporation
Finance
March 30, 2022 Page 3 Office of Life Sciences
FirstName LastName