Nuevas IFRS y modificaciones a las normas

Acquisitions – 2010

Marcadia

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Effective 29 December 2010 the Group acquired a 100% controlling interest in Marcadia Biotech, Inc., (‘Marcadia’), a privately owned US company based in Carmel, Indiana. Marcadia is a biopharmaceutical company focused on developing a broad portfolio of drug candidates for the treatment of diabetes and obesity. Marcadia is now reported as part of the Roche Pharmaceuticals operating segment. The acquisition of Marcadia will allow the Group to integrate Marcadia’s development pipeline into its own Research and Development portfolio. Marcadia’s research programmes focus on new peptide therapies for the treatment of Type 2 diabetes and obesity. These include next generation peptides such as MAR701, a novel compound currently in Phase I development. Based on Marcadia’s unique peptide chemistry technology, these peptides are designed to offer patients improved efficacy, safety and convenience.

The total purchase consideration was 359 million Swiss francs, of which 273 million Swiss francs was paid in cash and 86 million Swiss francs arises from a contingent consideration arrangement. The payment from this arrangement is based on the achievement of two separate performance milestones that may arise between 2013 and 2015 and the range of outcomes, undiscounted, is between zero and 250 million US dollars, equivalent to 234 million Swiss francs at 31 December 2010 exchange rates. A liability of 86 million Swiss francs was recognised at the acquisition date, based on management’s best estimate of the probability- adjusted expected cash outflow from the arrangement. As at 31 December 2010 the amount recognised for this arrangement was unchanged based on the most recent management estimates.

The purchase consideration has been allocated as shown in the table below. The assets and liabilities and the amounts allocated to them are provisional based on preliminary information and valuations of the assets and liabilities of Marcadia. They are subject to adjustment during 2011 if new information is obtained about the facts and circumstances that existed at the acquisition date.

Marcadia acquisition: net assets acquired

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in millions of CHF

Carrying value prior to acquisition Fair value adjustments Carrying value upon acquisition

Property, plant and equipment – – –

Intangible assets

– Product intangibles: in use – 89 89

– Product intangibles: not available for use – 196 196

Inventories – – –

Deferred income taxes 9 (116) (107)

Cash 35 – 35

Other net assets (liabilities) 1 – 1

Net identifiable assets 45 169 214

Goodwill 145

Purchase consideration 359

Goodwill represents a control premium and synergies that can be obtained from the Group’s existing business. None of the goodwill recognised is expected to be deductible for income tax purposes.

The fair value of other net assets (liabilities) includes receivables with a fair value of 5 million Swiss francs. Other acquisitions

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Effective 28 May 2010 the Group acquired a 100% controlling interest in Medingo Ltd. (‘Medingo’), a majority-owned subsidiary of the Elron group, based in Israel. Medingo is engaged in the development of a semi-disposable insulin patch pump and is reported as part of the Diagnostics operating segment. The acquisition broadens the Group’s portfolio of innovative insulin delivery technologies and strengthens its position in the diabetes care business. The total purchase consideration was 210 million Swiss francs, of which 178 million Swiss francs was paid in cash and 32 million Swiss francs arises from a contingent consideration arrangement. The payment from this arrangement is based on the achievement of four separate performance milestones that may arise between 2012 and 2014 and the range of outcomes, undiscounted, is between zero and 42 million US dollars, equivalent to 39 million Swiss francs at 31 December 2010 exchange rates. A liability of 32 million Swiss francs was recognised at the acquisition date, based on management’s best estimate of the probability-adjusted expected cash outflow from the arrangement. As at 31 December 2010 the amount recognised for this arrangement was unchanged based on the most recent management estimates.

Effective 3 September 2010 the Group acquired a 100% controlling interest in BioImagene, Inc.,

(‘BioImagene’), a privately owned US company, based in Sunnyvale, California. BioImagene is engaged in the digital pathology workflow and analysis field and is reported as part of the Diagnostics operating segment. The acquisition complements and strengthens the Group’s portfolio in image analysis and diagnosis. The total purchase consideration was 86 million Swiss francs in cash.

There were other minor business combinations in the Diagnostics business with a total purchase consideration of 2 million Swiss francs in cash.

The combined purchase consideration has been allocated as follows: Other acquisitions – 2010: net assets acquired

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in millions of CHF

Carrying value

prior to acquisition adjustmentsFair value upon acquisitionCarrying value

Property, plant and equipment 2 – 2

Intangible assets

– Product intangibles: in use – 195 195

– Product intangibles: not available for use – 52 52

– Technology intangibles: in use – 4 4

Inventories 2 – 2

Deferred income taxes – (50) (50)

Cash – – –

Other net assets (liabilities) (26) – (26)

Net identifiable assets (liabilities) (22) 201 179

Goodwill 119

Purchase consideration 298

Goodwill represents a control premium and synergies that can be obtained from the Group’s existing business. None of the goodwill recognised is expected to be deductible for income tax purposes. The fair value of other net assets (liabilities) does not include any receivables.

Directly attributable transaction costs of 2 million Swiss francs were incurred in these acquisitions. These are reported within general and administration expenses in the current period as part of the operating result of the Roche Pharmaceuticals and Diagnostics operating segment (1 million Swiss francs each).

Acquisitions – 2010: impact on results

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in millions of CHF Revenues from external customers Inventory fair value adjustment Amortisation of intangible assets Operating

profit Net income

Impact on reported results

Marcadia – – – – –

Pharmaceuticals Division – – – – –

Medingo – – (8) (18) (13)

BioImagene 1 – (1) (6) (4)

Minor business combinations – – – – –

Diagnostics Division 1 – (9) (24) (17)

Group 1 – (9) (24) (17)

Estimated impact on results if acquisition assumed effective 1 January 2010

Marcadia 21 – (9) (1) –

Pharmaceuticals Division 21 – (9) (1) –

Medingo – – (14) (31) (23)

BioImagene 2 – (1) (19) (12)

Minor business combinations – – (1) (2) (1)

Diagnostics Division 2 – (16) (52) (36)

Group 23 – (25) (53) (36)

The above figures exclude directly attributable acquisition-related costs of 1 million Swiss francs related to acquisitions by the Pharmaceuticals Division and 1 million Swiss francs related to acquisitions by the Diagnostics Division. Corresponding tax impacts are also excluded.

The figures exclude integration costs of 3 million Swiss francs related to Medingo and BioImagene. Corresponding tax impacts are also excluded.

Acquisitions – 2010: net cash outflow

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in millions of CHF

Cash consideration

paid acquired companyCash in Net cash outflow

Marcadia (273) 35 (238)

Other acquisitions (266) – (266)

Total (539) 35 (504)

Acquisitions – 2009

Lonza Singapore

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In 2006 Genentech entered into a supply agreement for the manufacture of certain Genentech products at a facility under construction in Singapore by Lonza Group Ltd. (‘Lonza’). Genentech was committed to fund the pre-commissioning production qualification costs at this facility and, upon FDA licensure, Genentech was committed to purchase 100% of products successfully manufactured at the facility for a period of three years after commissioning of the facility. Genentech also received an exclusive option to purchase Lonza’s Singapore facility during the period from 2007 up to one year after FDA licensure for a purchase price of 290 million US dollars. Genentech also entered into a loan agreement with Lonza to advance up to 299 million US dollars to Lonza for the construction of the Singapore facility. If Genentech exercised its option to purchase the facility then any outstanding advances may be offset against the purchase price. If Genentech did not exercise its purchase option then the advances may be offset against supply purchases. Regardless of whether the purchase option were exercised, Genentech would be obliged to make a milestone payment of 70 million US dollars if certain performance milestones were met at the facility being constructed.

For accounting purposes, due to the nature of the supply agreement and Genentech’s involvement in the construction of the buildings, Genentech has been considered to be the owner of the assets during the construction period even though the funds to construct the building shell and some infrastructure costs are paid by Lonza. As at 31 December 2008, construction in progress totalling 284 million Swiss francs had been capitalised and a liability for the financing obligation totalling 46 million Swiss francs had been recorded, which is net of 225 million US dollars (238 million Swiss francs) that had been advanced by Genentech to Lonza.

On 28 August 2009 Genentech Singapore Pte. Ltd, (‘Genentech Singapore’) exercised the option to purchase 100% ownership in Lonza Biologics Singapore Pte. Ltd. (‘Lonza Singapore’). Lonza Singapore is a cell culture biologic manufacturing facility, which is mechanically complete. It is expected to produce Avastin (bevacizumab) bulk drug substance, has 80,000 litres of fermentation capacity and is located on approximately 10 acres with an option for up to 20 additional acres. As part of the integration between Roche’s and Genentech’s combined technical operations, the biotechnology production facilities in Singapore have been merged and now operate under the name of Roche Singapore Technical Operations. With the exercise of the option and resultant merger, approximately 230 Lonza employees joined Genentech Singapore Technical Operations, for a total site headcount of approximately 325. As at 28 August 2009, under the previous accounting treatment described above, construction in progress totalling 284 million US dollars (301 million Swiss francs) had been capitalised and a similar liability for the financing obligation had been recorded. In addition 225 million US dollars had been advanced by Genentech to Lonza.

The transaction value was 376 million US dollars, which consists of 306 million US dollars for the Singapore facility and 70 million US dollars of various milestone payments. Of this amount 225 million US dollars was offset by loans previously made by Genentech to Lonza. The net transaction value was 151 million US dollars (159 million Swiss francs), of which 108 million US dollars (114 million Swiss francs) was cash payments in 2009 and 43 million US dollars (46 million Swiss francs) in accrued milestone payments that would be made in 2010. For accounting purposes, 94 million US dollars (99 million Swiss francs) was allocated to the settlement of the existing financing obligation and 14 million US dollars (15 million Swiss francs) to the acquisition of the Lonza Singapore business. This has been allocated as follows:

Lonza Singapore acquisition: net assets acquired

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in millions of CHF Carrying value prior to acquisition Fair value adjustments Carrying value upon acquisition

Property, plant and equipment – – –

Intangible assets – – –

Inventories 16 – 16

Deferred income taxes – – –

Cash 1 – 1

Other net assets (liabilities) (2) – (2)

Net identifiable assets 15 – 15

Goodwill –

Purchase consideration 15

Other acquisitions

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Effective 1 January 2009 the Group acquired an 89.6% controlling interest in Memory Pharmaceuticals Corp. (‘Memory’), a publicly owned US company based in Montvale, New Jersey, that had been listed on the NASDAQ under the symbol ‘MEMY’. Memory develops innovative drug candidates for the treatment of debilitating central nervous system (CNS) disorders such as Alzheimer’s disease and schizophrenia. Memory is reported as part of the Roche Pharmaceuticals operating segment. The acquisition will further strengthen the Group’s research and development pipeline in areas such as Alzheimer’s disease. The purchase consideration was 48 million Swiss francs, paid in cash.

There were other minor business combinations in the Diagnostics business with a total purchase

consideration of 57 million Swiss francs, of which 55 million Swiss francs was in cash and 2 million Swiss francs from a contingent consideration arrangement. A liability of 2 million Swiss francs was recognised at the acquisition date, based on management’s best estimate at that time of the probability-adjusted expected cash outflow from the arrangement. As at 31 December 2009 the amount recognised for this arrangement was reduced to zero, based on the most recent management estimates at that time.

The combined purchase consideration has been allocated as follows: Other acquisitions – 2009: net assets acquired

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in millions of CHF

Carrying value prior to acquisition Fair value adjustments Carrying value upon acquisition

Property, plant and equipment 3 – 3

Goodwill 3 (3) –

Intangible assets

– Product intangibles: in use – 17 17

– Marketing intangibles – 25 25

– Product intangibles: not available for use – 47 47

Inventories 7 – 7

Provisions (4) – (4)

Deferred income taxes 3 (1) 2

Cash 19 – 19

Other net assets (liabilities) (22) – (22)

Net identifiable assets (liabilities) 9 85 94

Non-controlling interests (4)

Goodwill 15

Purchase consideration 105

Subsequent to the effective date of the acquisition on 1 January 2009, the Group purchased the remaining shares in Memory held by third parties to give the Group a 100% interest in Memory. The cash consideration was 6 million Swiss francs, which has been recorded to equity as a change in ownership interest in

subsidiaries.

Goodwill represents a control premium and synergies that can be obtained from the Group’s existing business. None of the goodwill recognised is expected to be deductible for income tax purposes.

The fair value of other net assets (liabilities) includes receivables with a fair value of 4 million Swiss francs which includes an allowance for doubtful accounts of 1 million Swiss francs.

Directly attributable acquisition-related costs of 2 million Swiss francs were incurred in these acquisitions. These are reported within general and administration expenses in the current period as part of the operating result of the Pharmaceuticals operating segment (1 million Swiss francs) and the Diagnostics operating segment (1 million Swiss francs).

Acquisitions – 2009: net cash outflow

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in millions of CHF

Cash consideration paid Cash in acquired company Net cash outflow Lonza Singapore (15) 1 (14) Other acquisitions (103) 19 (84) Total (118) 20 (98)

The above cash consideration does not include the subsequent payment of 6 million Swiss francs to purchase the remaining shares in Memory held by third parties to give the Group a 100% interest in Memory. This is reported as financing cash flow in the statement of cash flows within the heading ‘Change in ownership interest in subsidiaries’.

Contingent consideration arrangements

The Group is party to certain contingent consideration arrangements arising from previous business combination arrangements. The provisions for these arrangements are recorded as part of other provisions (see Note 25) and are set out in the table below.

Provisions for contingent consideration arrangements

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in millions of CHF

2010 2009

At 1 January 15 7

Additional provisions created 3 8

Unused amounts reversed – (2)

Utilised during the year (3) –

Unwinding of discount – –

Business combinations 7

– Marcadia 86 –

– Medingo 32 –

– Minor business combinations – 2

Currency translation effects (1) –

At 31 December 132 15

Expected outflow of resources

– Within one year 17 15

– Between one to two years – –

– Between two to three years 85 –

– More than three years 30 –

Total 132 15

In document Información Financiera Trimestral (página 95-98)