Pfizer 2015 Annual Report Download - page 81

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
80
2015 Financial Report
The above adjustments were then adjusted for the applicable tax impact. The taxes associated with the adjustments related to the preliminary
estimate of the fair value adjustment for acquired intangible assets, property, plant and equipment and inventory reflect the statutory tax rates
in the various jurisdictions where the adjustments are expected to be incurred. The taxes associated with the adjustments for the elimination of
Hospira’s historical intangible asset amortization expense, the fair value adjustment for the acquired debt and the non-recurring acquisition-
related costs directly attributable to the acquisition were based on the tax rate in the jurisdiction in which the related deductible costs were
incurred.
Marketed Vaccines Business of Baxter International Inc. (Baxter)
On December 1, 2014 (which falls in the first fiscal quarter of 2015 for our international operations), we acquired Baxter’s portfolio of marketed
vaccines for a final purchase price of $648 million. The portfolio that was acquired consists of NeisVac-C and FSME-IMMUN/TicoVac.
NeisVac-C is a vaccine that helps protect against meningitis caused by group C meningococcal meningitis and FSME-IMMUN/TicoVac is a
vaccine that helps protect against tick-borne encephalitis. In connection with this acquisition, we recorded $376 million in Identifiable intangible
assets, less accumulated amortization primarily consisting of $371 million in Developed technology rights. We also recorded $194 million of
Inventories and $12 million in Goodwill. The final allocation of the consideration transferred to the assets acquired and the liabilities assumed
has been completed.
InnoPharma, Inc. (InnoPharma)
On September 24, 2014, we completed our acquisition of InnoPharma, a privately-held pharmaceutical development company, for an upfront
cash payment of $225 million and contingent consideration with an estimated acquisition-date fair value of approximately $67 million. The
contingent consideration consists of up to $135 million in additional milestone payments based on application filing with, and acceptance by,
the U.S. Food and Drug Administration (FDA), or approval of marketing applications related to certain pipeline products by the FDA. We
believe this acquisition represents a potential innovative growth opportunity for our sterile injectables portfolio in areas such as oncology and
central nervous disorders. In connection with this acquisition, we recorded $247 million in Identifiable intangible assets, less accumulated
amortization consisting of $212 million in IPR&D and $35 million in Developed technology rights; $81 million in net deferred tax liabilities; and
$125 million in Goodwill. The final allocation of the consideration transferred to the assets acquired and the liabilities assumed has been
completed.
B. Licensing Agreements
Cellectis SA (Cellectis)
In June 2014, we entered into a global arrangement with Cellectis to develop Chimeric Antigen Receptor T-cell immunotherapies in the field of
oncology directed at select cellular surface antigen targets. In August 2014, in connection with this licensing agreement, we made an upfront
payment of $80 million to Cellectis, which was recorded in Research and development expenses. We will also fund research and development
costs associated with 15 Pfizer-selected targets and, for the benefit of Cellectis, a portion of the research and development costs associated
with four Cellectis-selected targets within the arrangement. Cellectis is eligible to receive development, regulatory and commercial milestone
payments of up to $185 million per product that results from the Pfizer-selected targets. Cellectis is also eligible to receive tiered royalties on
net sales of any products that are commercialized by Pfizer. In addition, in August 2014, we acquired approximately 10% of the capital of
Cellectis through the purchase of newly issued shares, for a total investment of approximately $35 million. As of November 30, 2015, Pfizer’s
ownership in Cellectis had been reduced to approximately 7.94% of Cellectis’ outstanding shares due to subsequent share issuances by
Cellectis, including the initial public offering of Cellectis American Depository Shares.
Nexium Over-the-Counter Rights
In August 2012, we entered into an agreement with AstraZeneca PLC (AstraZeneca) for the exclusive, global, over-the-counter (OTC) rights
for Nexium, a leading prescription drug approved to treat the symptoms of gastroesophageal reflux disease. In connection with this Consumer
Healthcare licensing agreement, we made an upfront payment of $250 million to AstraZeneca, which was recorded in Research and
development expenses when incurred. On May 27, 2014, we launched Nexium 24HR in the U.S., and on July 11, 2014, we paid AstraZeneca
a related $200 million product launch milestone payment. On August 1, 2014, we launched Nexium Control in Europe, and on September 15,
2014, we paid AstraZeneca a related $50 million product launch milestone payment. These post-approval milestone payments were recorded
in Identifiable intangible assets, less accumulated amortization and are being amortized over the estimated useful life of the Nexium brand.
Included in Other current liabilities at December 31, 2015 are accrued milestone payments to AstraZeneca of $93 million. AstraZeneca is
eligible to receive additional milestone payments of approximately $200 million, based on the level of worldwide sales as well as quarterly
royalty payments based on worldwide sales.
C. Collaborative Arrangements
In the normal course of business, we enter into collaborative arrangements with respect to in-line medicines, as well as medicines in
development that require completion of research and regulatory approval. Collaborative arrangements are contractual agreements with third
parties that involve a joint operating activity, typically a research and/or commercialization effort, where both we and our partner are active
participants in the activity and are exposed to the significant risks and rewards of the activity. Our rights and obligations under our collaborative
arrangements vary. For example, we have agreements to co-promote pharmaceutical products discovered by us or other companies, and we
have agreements where we partner to co-develop and/or participate together in commercializing, marketing, promoting, manufacturing and/or
distributing a drug product.