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GOODWILL, INTANGIBLE ASSETS, AND ACQUISITIONS | 12 Months Ended
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Dec. 29, 2024
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL, INTANGIBLE ASSETS, AND ACQUISITIONS |
5. GOODWILL, INTANGIBLE ASSETS, AND ACQUISITIONS
Goodwill
In millions |
Balance as of January 1, 2023(1) | $ | 3,239 |
Impairment | (712) |
Acquisition | 18 |
Balance as of December 31, 2023 | 2,545 |
Impairment | (1,466) |
Acquisition | 34 |
Balance as of December 29, 2024 | $ | 1,113 |
_____________ (1) The balance as of January 1, 2023 includes accumulated impairment of $3,914 million related to our GRAIL reporting unit. 2024 Impairment of Goodwill Goodwill is reviewed for impairment annually, during the second quarter of our fiscal year, or more frequently if an event occurs indicating the potential for impairment. In May 2024, we performed our annual goodwill impairment test for our two reporting units: Core Illumina and GRAIL. We performed a quantitative test for both reporting units. GRAIL’s carrying value exceeded its fair value, estimated as $580 million, and we recorded a goodwill impairment of $1,466 million in Q2 2024. There was no impairment for Core Illumina, as its fair value exceeded its carrying value. To determine the fair value of GRAIL as of May 2024, we utilized enterprise value estimates of GRAIL, as estimated by investment bankers for purposes of determining pricing for the Spin-Off. Estimates and assumptions used to derive the investment bankers’ enterprise value estimates included estimated revenues for a two year period based on assumed growth rates and implied revenue multiples for comparable companies. These estimates and assumptions represent a Level 3 measurement as they are supported by little or no market activity and reflect our own assumptions in measuring fair value. An increase in estimated enterprise values for GRAIL of 100% would still have resulted in a full impairment of goodwill. In prior periods, we used a combination of both an income (discounted cash flow) and market approach to determine the fair value of GRAIL. The income approach utilized estimated cash flows for GRAIL based on a long-range plan, for a 15 year period, which contemplated FDA approval. Based on this approach, in Q3 2023, we estimated the fair value of GRAIL to be $3.6 billion and using this same approach in Q4 2023 suggested no further decrement in fair value. Initial analyst coverage of GRAIL from December 2023 into the spring of 2024 suggested that GRAIL could be valued between $3 billion and $4 billion. By May 2024, prior to the consummation of the GRAIL Spin-Off, additional information about GRAIL had become available in GRAIL’s amended Form 10 filings and a publicly available management presentation, which included updated disclosure about GRAIL’s business and anticipated near term financial trends. Prior to the consummation of the GRAIL Spin-Off, the amount of GRAIL’s Disposal Funding, $974 million, was also disclosed. Analyst and banker valuation estimates then began to estimate fair values between $400 million and $770 million, consistent with the impairment recorded in Q2 2024. To determine the fair value of Core Illumina, we used a combination of both an income and market approach consistent with prior periods. The income approach utilized estimated discounted cash flows for the reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows and a discount rate and represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. We evaluated GRAIL’s IPR&D intangible asset for potential impairment, in May 2024, as part of our annual test. We also concluded that the when-issued trading activity for GRAIL’s common stock, in June 2024, represented a triggering event that required an additional impairment test be performed. The carrying value of the IPR&D asset exceeded its estimated fair value and we recorded an impairment of $420 million in Q2 2024. The fair value of GRAIL’s IPR&D was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach, which represent a Level 3 measurement, included projected cash flows and a discount rate of 46.5%. The discount rate was derived from reconciling GRAIL’s long-range plan, which contemplated FDA approval and estimated cash flows for a 15 year period, to observed market values of GRAIL based on when-issued trading activity. An increase of 300 basis points to the discount rate used in our analysis would have resulted in additional impairment of $20 million. There is substantial risk inherent in forecasting revenues and spend associated with research and development, including assumptions around the timing and level of resources and investment to be made, which were made more challenging in light of the Spin-Off and related Disposal Funding. We performed a recoverability test for GRAIL’s definite-lived intangible assets, which included developed technology and trade name, noting no impairment. No impairment was noted for Core Illumina definite-lived intangible assets. 2023 Impairment of Goodwill In Q3 2023, we concluded that the sustained decrease in the Company’s stock price and overall market capitalization during the quarter was a triggering event indicating the fair values of our reporting units might be less than their carrying amounts and that an interim impairment test was required. Based on our analysis, we concluded GRAIL’s carrying value exceeded its fair value and recorded a goodwill impairment of $712 million, primarily due to the decrease in the Company’s consolidated market capitalization and a higher discount rate selected for the fair value calculation of GRAIL. There was no impairment for Core Illumina, as its fair value exceeded its carrying value. We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows for both GRAIL and Core Illumina and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For GRAIL, the selected discount rate was 24.0%. An increase of 50 to 100 basis points to the discount rate would have resulted in additional impairment of $200 million to $350 million. The estimates and assumptions used in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors. In conjunction with our interim goodwill impairment test, we also evaluated GRAIL’s IPR&D intangible asset for potential impairment. We performed our impairment test by comparing the carrying value of the IPR&D intangible asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach, which represent a Level 3 measurement, included projected cash flows and a selected discount rate of 19.0%. Based on our analysis, the carrying value of GRAIL’s IPR&D intangible asset exceeded its estimated fair value and we recorded an impairment of $109 million in Q3 2023, primarily due to a decrease in projected cash flows and a higher discount rate selected for the fair value calculation of the IPR&D asset. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL, which included developed technology and trade name, and to Core Illumina and noted no impairment. In Q4 2023, we concluded, among other events, that our formal announcement to divest GRAIL represented a triggering event that required an additional interim impairment test be performed. As a result of our analysis, no impairment was recorded for Core Illumina or GRAIL. The fair value of GRAIL exceeded its carrying value by approximately $950 million and the selected discount rate used in the analysis was 23.0%. An increase of 100 basis points to the discount rate would still have resulted in no impairment for GRAIL. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL and Core Illumina and noted no impairment. 2022 Impairment of Goodwill On July 13, 2022, the EU General Court ruled that the European Commission had jurisdiction under the EU Merger Regulation to review our acquisition of GRAIL. Additionally, on September 6, 2022, the European Commission issued its decision prohibiting the acquisition. See note 9. Legal Proceedings. These decisions, along with a continued and significant decrease in the Company’s stock price and market capitalization, required us to perform an interim impairment test in Q3 2022. Based on our analysis, we concluded GRAIL’s carrying value exceeded its fair value and recorded a goodwill impairment of $3,914 million, primarily due to the negative impact of capital market conditions and a higher discount rate selected for the fair value calculation of GRAIL. There was no impairment for Core Illumina. We performed our interim goodwill impairment test using a combination of both an income and a market approach to determine the fair value of each reporting unit. The income approach utilized the estimated discounted cash flows for each reporting unit, while the market approach utilized comparable company information. Estimates and assumptions used in the income approach included projected cash flows for both GRAIL and Core Illumina and a discount rate for each reporting unit. Discount rates were determined using a weighted average cost of capital for risk factors specific to each reporting unit and other market and industry data. For GRAIL, the discount rate selected was 22.0%. In order to further validate the reasonableness of the fair values concluded for our reporting units, a reconciliation to market capitalization was performed by estimating a reasonable implied control premium and other market factors. In conjunction with our interim goodwill impairment test, we also evaluated GRAIL’s IPR&D intangible asset for potential impairment. We performed our impairment test by comparing the carrying value of the IPR&D intangible asset to its estimated fair value, which was determined by the income approach, using a discounted cash flow model. Estimates and assumptions used in the income approach included projected cash flows and a discount rate. Based on our analysis, the carrying value of the IPR&D intangible asset did not exceed its estimated fair value and no impairment was recorded. We also performed a recoverability test for the definite-lived intangible assets assigned to GRAIL, which included developed technology and trade name, and to Core Illumina and noted no impairment. Intangible Assets
| December 29, 2024 |  | December 31, 2023
In millions | Gross Carrying Amount |  | Accumulated Amortization |  | Intangible Assets, Net |  | Gross Carrying Amount |  | Accumulated Amortization |  | Impairment |  | Intangible Assets, Net
Developed technologies | $ | 465 |  |  | $ | (305) |  |  | $ | 160 |  |  | $ | 2,807 |  |  | $ | (585) |  |  | $ | — |  |  | $ | 2,222 |
Licensed technologies | 234 |  |  | (114) |  |  | 120 |  |  | 274 |  |  | (133) |  |  | — |  |  | 141 |
License agreements | 19 |  |  | (13) |  |  | 6 |  |  | 14 |  |  | (13) |  |  | — |  |  | 1 |
Customer relationships | 16 |  |  | (14) |  |  | 2 |  |  | 14 |  |  | (13) |  |  | — |  |  | 1 |
Database | 12 |  |  | (5) |  |  | 7 |  |  | 12 |  |  | (3) |  |  | — |  |  | 9 |
Trade name | 2 |  |  | (2) |  |  | — |  |  | 43 |  |  | (14) |  |  | — |  |  | 29 |
Total finite-lived intangible assets, net | 748 |  |  | (453) |  |  | 295 |  |  | 3,164 |  |  | (761) |  |  | — |  |  | 2,403 |
In-process research and development (IPR&D) | — |  |  | — |  |  | — |  |  | 705 |  |  | — |  |  | (115) |  |  | 590 |
Total intangible assets, net | $ | 748 |  |  | $ | (453) |  |  | $ | 295 |  |  | $ | 3,869 |  |  | $ | (761) |  |  | $ | (115) |  |  | $ | 2,993 |
The significant decrease in developed technologies, trade name, and IPR&D reflect the GRAIL intangible assets disposed of in connection with the Spin-Off. See note 2. GRAIL Spin-Off for details. Also, in Q1 2024, we placed into service (reflected in developed technologies), with a useful life of 10 years, the $35 million IPR&D intangible asset we acquired in 2021, net of impairments recognized in 2024 and 2023 of $3 million and $6 million, respectively. As a result of the Fluent BioSciences acquisition in Q3 2024, we recorded a developed technology asset of $42 million, with a useful life of 7 years, and a customer relationship asset of $2 million, with a useful life of 11 years. We are still finalizing the allocation of the purchase price as it relates to the completion of certain tax returns. We expect to finalize the valuation as soon as practicable, but no later than one year after the acquisition. As a result of an acquisition in Q4 2023, we recorded a developed technology asset of $19 million, with a useful life of 10 years. We finalized the allocation of the purchase price in Q4 2024 with no material adjustments to provisional amounts. The estimated future annual amortization of finite-lived intangible assets is shown in the following table. Actual amortization expense to be reported in future periods could differ from these estimates as a result of acquisitions, divestitures, and asset impairments, among other factors.
In millions | Estimated Annual Amortization
2025 | $ | 69 |
2026 | 57 |
2027 | 55 |
2028 | 52 |
2029 | 23 |
Thereafter | 39 |
Total | $ | 295 |

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