Johnson & Johnson - Index

Johnson & Johnson - report - Index

repair technologies. The value of the IPR&D was calculated using
cash flow projections discounted for the risk inherent in such
projects. Probability of success factors ranging from 38–95%
were used to reflect inherent clinical and regulatory risk and the
discount rate applied was 17%.
The IPR&D charge related to the acquisition of Future
Medical Systems S.A. was $15 million and is associated with the
NEXTRA and DUO PUMP product technologies. The value of the
IPR&D was calculated using cash flow projections discounted for
the risk inherent in such projects. A probability of success factor
of 90% for both technologies was used to reflect inherent clinical
and regulatory risk and the discount rate applied was 22%.
The IPR&D charge related to the acquisition of Vascular
Control Systems, Inc. was $87 million and is associated with the
FLOSTAT system technology. The value of the IPR&D was calculated
using cash flow projections discounted for the risk inherent
in such projects. A probability of success factor of 75% was used
to reflect inherent clinical and regulatory risk and the discount
rate applied was 21%.
The IPR&D charge related to the acquisition of ColBar
Lifescience Ltd. was $49 million and is associated with the
EVOLENCE® family of products, which are biodegradable dermal
fillers. The value of the IPR&D was calculated using cash flow
projections discounted for the risk inherent in such projects.
Probability of success factors ranging from 70 – 80% were used
to reflect inherent clinical and regulatory risk and the discount
rate applied was 21%.
The IPR&D charge related to the acquisition of Ensure
Medical, Inc. was $66 million and is associated with the femoral
artery closure device. The value of the IPR&D was calculated
using cash flow projections discounted for the risk inherent in
such projects. A probability of success factor of 75% was used to
reflect inherent clinical and regulatory risk and the discount rate
applied was 22%.
Certain businesses were acquired for $987 million in cash
and $141 million of liabilities assumed during 2005. These acquisitions
were accounted for by the purchase method and, accordingly,
results of operations have been included in the financial
statements from their respective dates of acquisition.
The 2005 acquisitions included: TransForm Pharmaceuticals,
Inc., a company specializing in the discovery of superior formulations
and novel crystalline forms of drug molecules; Closure
Medical Corporation, a company with expertise and intellectual
property in the biosurgicals market; Peninsula Pharmaceuticals,
Inc., a biopharmaceutical company focused on developing and
commercializing antibiotics to treat life-threatening infections;
and rights to all consumer and professionally dispensed
REMBRANDT® Brand of oral care products, such as whitening
toothpastes, strips, systems and mouth rinses.
The excess of purchase price over the estimated fair value
of tangible assets acquired amounted to $720 million and has
been assigned to identifiable intangible assets, with any residual
recorded to goodwill. Approximately $362 million has been identified
as the value of IPR&D primarily associated with the acquisitions
of TransForm Pharmaceuticals, Inc., Closure Medical
Corporation and Peninsula Pharmaceuticals, Inc.
The IPR&D charge related to the acquisition of TransForm
Pharmaceuticals Inc. was $50 million and is associated with
research related to the discovery and application of superior formulations.
The value of the IPR&D was calculated using cash
flow projections discounted for the risk inherent in such projects.
The discount rate applied was 10%.
The IPR&D charge related to the acquisition of Closure
Medical Corporation was $51 million and is associated with
the OMNEX™ Surgical Sealant in vascular indications outside
Europe and in other potential indications worldwide. The value
of the IPR&D was calculated using cash flow projections discounted
for the risk inherent in such projects. A probability of
success factor of 90% for vascular indications and 60% for
all other indications was used to reflect inherent clinical and
regulatory risk. The discount rate applied to both vascular and
other indications was 15%.
The IPR&D charge related to the acquisition of Peninsula
Pharmaceuticals, Inc. was $252 million and is associated with the
development of doripenem, which is in Phase III clinical trials. The
value of the IPR&D was calculated using cash flow projections
discounted for the risk inherent in such projects. A probability of
success factor of 80% was used to reflect inherent clinical and
regulatory risk and the discount rate applied was 14%.
The remaining $9 million in IPR&D was associated with the
acquisition of international commercial rights to certain patents
and know-how in the field of sedation and analgesia from Scott
Lab, Inc. The value of the IPR&D was calculated using cash flow
projections discounted for the risk inherent in such projects.
The discount rate was 17%.
With the exception of the Consumer Healthcare business of
Pfizer Inc., supplemental pro forma information for 2007, 2006
and 2005 per SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets, is not provided, as the
impact of the aforementioned acquisitions did not have a material
effect on the Company’s results of operations, cash flows or
financial position.
Divestitures in 2007, 2006 and 2005 did not have a material
effect on the Company’s results of operations, cash flows or
financial position.
18. Legal Proceedings
PRODUCT LIABILITY
The Company is involved in numerous product liability cases in
the United States, many of which concern adverse reactions to
drugs and medical devices. The damages claimed are substantial,
and while the Company is confident of the adequacy of the
warnings and instructions for use that accompany such products,
it is not feasible to predict the ultimate outcome of litigation.
However, the Company believes that if any liability results
from such cases, it will be substantially covered by existing
amounts accrued in the Company’s balance sheet and, where
available, by third-party product liability insurance.
66 JOHNSON & JOHNSON 2007 ANNUAL REPORT