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INTANGIBLE ASSETS AND GOODWILL | 9 Months Ended
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Sep. 30, 2024
Goodwill and Intangible Assets Disclosure [Abstract] |
INTANGIBLE ASSETS AND GOODWILL | INTANGIBLE ASSETS AND GOODWILL Intangible Assets The major components of intangible assets consist of:
|  | September 30, 2024 |  | December 31, 2023
(in millions) |  | Gross Carrying Amount |  | Accumulated Amortization and Impairments |  | Net Carrying Amount |  | Gross Carrying Amount |  | Accumulated Amortization and Impairments |  | Net Carrying Amount
Finite-lived intangible assets: |  |  |  |  |  |  |  |  |  |  |  |
Product brands |  | $ | 22,495 |  |  | $ | (18,885) |  |  | $ | 3,610 |  |  | $ | 22,579 |  |  | $ | (18,243) |  |  | $ | 4,336 |
Corporate brands |  | 978 |  |  | (686) |  |  | 292 |  |  | 985 |  |  | (633) |  |  | 352 |
Product rights/patents |  | 3,265 |  |  | (3,231) |  |  | 34 |  |  | 3,323 |  |  | (3,270) |  |  | 53 |
Partner relationships |  | 164 |  |  | (164) |  |  | — |  |  | 161 |  |  | (161) |  |  | — |
Technology and other |  | 217 |  |  | (204) |  |  | 13 |  |  | 214 |  |  | (202) |  |  | 12 |
Total finite-lived intangible assets |  | 27,119 |  |  | (23,170) |  |  | 3,949 |  |  | 27,262 |  |  | (22,509) |  |  | 4,753 |
Acquired in-process research and development |  | 5 |  |  | — |  |  | 5 |  |  | 5 |  |  | — |  |  | 5 |
B&L Trademark |  | 1,698 |  |  | — |  |  | 1,698 |  |  | 1,698 |  |  | — |  |  | 1,698 |
|  | $ | 28,822 |  |  | $ | (23,170) |  |  | $ | 5,652 |  |  | $ | 28,965 |  |  | $ | (22,509) |  |  | $ | 6,456 |
Long-lived assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Impairment charges associated with these assets are included in Asset impairments in the Condensed Consolidated Statements of Operations. The Company continues to monitor the recoverability of its finite-lived intangible assets and tests the intangible assets for impairment if indicators of impairment are present. The Company estimates the fair values of long-lived assets with finite lives using an undiscounted cash flow model which utilizes Level 3 unobservable inputs. The undiscounted cash flow model relies on assumptions regarding revenue growth rates, gross profit, selling, general and administrative expenses and research and development expenses. There were no asset impairments for the three months ended September 30, 2024. Asset impairments for the nine months ended September 30, 2024 were $6 million and primarily related to the discontinuance of a certain product brand. Asset impairments for the three and nine months ended September 30, 2023, were $4 million and $54 million, respectively. Asset impairments for the nine months ended September 30, 2023, primarily related to: (i) $37 million related to the Company’s Uceris® Foam product, as discussed below, (ii) $8 million, in aggregate, attributable to certain trade names no longer in use and (iii) $9 million related to the discontinuance of certain product lines. In the second quarter of 2023, the U.S. Food and Drug Administration (“FDA”) approved an Abbreviated New Drug Application (“ANDA”) submitted by a competitor for a budesonide (a steroid (cortisone-like) medicine) foam to help treat mild to moderate active ulcerative colitis. This product, which began to be sold by the competitor in the three months ended June 30, 2023, is a generic version of the Company’s Uceris® Foam product. During the second quarter of 2023, the Company revised its long-term outlook for the Uceris® Foam product to reflect the entrant of this, and potentially other, generic competitors. As a result, the Company recognized an impairment of $37 million to reduce the carrying value of the Uceris® Foam product related intangible assets to their estimated fair value. The Uceris® Foam product related intangible assets had no remaining carrying value as of December 31, 2023. Xifaxan® intangible assets included in the unaudited Condensed Consolidated Balance Sheets had a carrying value of $1,751 million and an estimated remaining useful life of 39 months as of September 30, 2024. On August 10, 2022, the U.S. District Court for the District of Delaware held that the U.S. Patents protecting the use of Xifaxan® for the reduction in risk of hepatic encephalopathy (“HE”) recurrence were valid and infringed and certain U.S. Patents protecting the composition and use of Xifaxan® for treating inflammatory bowel syndrome with diarrhea (“IBS-D”) were invalid (the “Norwich Legal Decision”). The Norwich Legal Decision prohibited the FDA from approving the Norwich First ANDA (as defined in “The Norwich I Xifaxan® Litigation” in Note 17, “LEGAL PROCEEDINGS”) until October 2029. On April 11, 2024, the U.S. Court of Appeals for the Federal Circuit issued an opinion affirming the Norwich Legal Decision and the District Court’s denial of Norwich’s motion requesting modification of the Norwich Legal Decision (the “Norwich Appeal Decision”). Under the Norwich Appeal Decision, the FDA remains enjoined from approving the Norwich First ANDA until October 2029. The Company has filed, and expects to file, lawsuits against additional third-party generic manufacturers that have sent the Company Notices of Paragraph IV Certification for Xifaxan®. See “Xifaxan® Paragraph IV Proceedings” of Note 17, “LEGAL PROCEEDINGS” for details of this litigation matter and the Xifaxan® Generics Litigation. The Xifaxan® intangible assets were last assessed for potential impairment during the third quarter of 2022. This assessment resulted in no impairment of the carrying value of the Xifaxan® finite-lived intangible assets as of September 30, 2022. As part of that assessment, the Company also determined that no change to the remaining useful lives of its Xifaxan® finite-lived intangible assets was required. During the period September 30, 2022 through September 30, 2024 there were no material adverse changes to the facts and circumstances of the Xifaxan® Generics Litigation or to actual or expected business performance for Xifaxan®. Based on these factors, no impairment to the carrying value of the Xifaxan® finite-lived intangible assets was identified as of September 30, 2024. Although the FDA remains enjoined from approving the Norwich First ANDA until October 2029, it is possible that the Xifaxan® Generics Litigation and other potential future developments: (i) may adversely impact the estimated future cash flows associated with these products, which could result in an impairment of the value of these intangible assets in one or more future periods and (ii) may result in shortened useful lives of the Xifaxan® intangible assets, which would increase amortization expense in future periods. Any such impairment or shortening of the useful lives of Xifaxan® could be material to the results of operations of the Company in the period or periods in which they were to occur. Estimated amortization expense of finite-lived intangible assets for the remainder of 2024 and each of the five succeeding years ending December 31 and thereafter is as follows:
(in millions) |  | Remainder of 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 |  | 2029 |  | Thereafter |  | Total |
Amortization |  | $ | 261 |  |  | $ | 993 |  |  | $ | 871 |  |  | $ | 833 |  |  | $ | 235 |  |  | $ | 216 |  |  | $ | 540 |  |  | $ | 3,949 |  |
Goodwill The changes in the carrying amounts of goodwill during the nine months ended September 30, 2024 and the year ended December 31, 2023 were as follows:
(in millions) |  |  |  | Bausch + Lomb |  | Salix |  | International |  |  |  | Solta Medical |  | Diversified |  | Total
Balance, January 1, 2023 |  |  |  | $ | 5,246 |  |  | $ | 3,159 |  |  | $ | 789 |  |  |  |  | $ | 115 |  |  | $ | 2,238 |  |  | $ | 11,547 |
Additions |  |  |  | 31 |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 31 |
Impairment |  |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | (493) |  |  | (493) |
Foreign exchange and other |  |  |  | 37 |  |  | — |  |  | 73 |  |  |  |  | — |  |  | (12) |  |  | 98 |
Balance, December 31, 2023 |  |  |  | 5,314 |  |  | 3,159 |  |  | 862 |  |  |  |  | 115 |  |  | 1,733 |  |  | 11,183 |
Additions |  |  |  | 2 |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | 2 |
Foreign exchange and other |  |  |  | 4 |  |  | — |  |  | (16) |  |  |  |  | — |  |  | (2) |  |  | (14) |
Balance, September 30, 2024 |  |  |  | $ | 5,320 |  |  | $ | 3,159 |  |  | $ | 846 |  |  |  |  | $ | 115 |  |  | $ | 1,731 |  |  | $ | 11,171 |
Goodwill is not amortized but is tested for impairment at least annually on October 1st at the reporting unit level. A reporting unit is the same as, or one level below, an operating segment. The Company performs its annual impairment test by first assessing qualitative factors. Where the qualitative assessment suggests that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a quantitative fair value test is performed for that reporting unit (Step 1). The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants. The Company estimates the fair value of a reporting unit using a discounted cash flow model which utilizes Level 3 unobservable inputs. The discounted cash flow model relies on assumptions regarding revenue growth rates, gross profit, projected working capital needs, selling, general and administrative expenses, research and development expenses, capital expenditures, income tax rates, discount rates and terminal growth rates. To estimate fair value, the Company discounts the forecasted cash flows of each reporting unit. The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return a market participant would expect to earn. The quantitative fair value test is performed utilizing long-term growth rates and discount rates applied to the estimated cash flows in estimation of fair value. To estimate cash flows beyond the final year of its model, the Company estimates a terminal value by applying an in-perpetuity growth assumption and discount factor to determine the reporting unit’s terminal value. To forecast a reporting unit’s cash flows the Company takes into consideration economic conditions and trends, estimated future operating results, management’s and a market participant’s view of growth rates and product lives, and anticipates future economic conditions. Revenue growth rates inherent in these forecasts are based on input from internal and external market research that compare factors such as growth in global economies, recent industry trends and product life-cycles. Macroeconomic factors such as changes in economies, changes in the competitive landscape including the unexpected loss of exclusivity to the Company’s product portfolio, changes in government legislation, product life-cycles, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets. Accordingly, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future and such charges could be material. 2023 Interim Assessment Dermatology Through the nine months ended September 30, 2023, the Dermatology reporting unit performed largely in line with the forecast used in its last quantitative fair value test (September 30, 2022). During the third quarter of 2023, as a result of lower realized pricing attributable to shifts in the coverage mix for certain products, discontinuation of certain products as a result of the impact of recent legislation, and revised expectations of future selling, advertising, and promotion costs required to mitigate further revenue erosion, the Company’s preliminary assessment of future business performance indicated that the reporting unit’s future financial results were expected to be below the assumptions used in the last quantitative fair value test. After considering the limited headroom as a result of the impairment to goodwill of the Dermatology reporting unit when last tested (September 30, 2022), the Company determined that these changes in facts and circumstances, as well as increases in market interest rates during the three months ended September 30, 2023, suggested that the fair value of the Dermatology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit. The quantitative fair value test utilized the Company’s most recent cash flow projections for the Dermatology reporting unit as revised in the third quarter of 2023 which reflected current market conditions and current trends in business performance. The quantitative fair value test utilized a long-term growth rate of 0.0% and a discount rate of 10.75%. Based on the quantitative fair value test, the carrying value of the Dermatology reporting unit exceeded its fair value at September 30, 2023, and the Company recognized a goodwill impairment of $151 million for the three months ended September 30, 2023. As of September 30, 2023 and September 30, 2024, the Dermatology reporting unit had remaining goodwill of $329 million. Neurology Through the nine months ended September 30, 2023, the Neurology reporting unit performed largely in line with the forecast used in its last quantitative fair value test (October 1, 2022). During the third quarter of 2023, as a result of actions taken by management in response to changing market dynamics driven by recent legislation, changes to the future expected commercial insurance coverage for certain key products, and a projected shift in the channels of business, the Company’s preliminary assessment of future business performance indicated that the reporting unit’s future financial results were expected to be below the assumptions used in the last quantitative fair value test. After considering the limited headroom as a result of the impairment to goodwill of the Neurology reporting unit when last tested (October 1, 2022), the Company determined that these changes in facts and circumstances, as well as increases in market interest rates during the three months ended September 30, 2023, suggested that the fair value of the Neurology reporting unit could be less than its carrying amount, and therefore a quantitative fair value test was performed for the reporting unit. The quantitative fair value test for the Neurology reporting unit utilized the most recent cash flow projections for the Neurology reporting unit as revised in the third quarter of 2023 to reflect current market conditions and current trends in business performance. The quantitative assessment utilized a long-term growth rate of -2.5% and a discount rate of 10.50%. Based on the quantitative fair value test, the carrying value of the Neurology reporting unit exceeded its fair value at September 30, 2023, and the Company recognized a goodwill impairment of $251 million for the three months ended September 30, 2023. As of September 30, 2023 and September 30, 2024, the Neurology reporting unit had remaining goodwill of $1,192 million and $1,175 million, respectively. 2023 Annual Impairment Test The Company’s annual goodwill impairment test as of October 1, 2023, included performing separate quantitative fair value tests for the International reporting unit, the Generics reporting unit of the Diversified segment and the Vision Care, Surgical and Pharmaceuticals reporting units of the Bausch + Lomb segment. The International reporting unit exceeded its carrying value by more than 75% and each of the reporting units of the Bausch + Lomb segment, exceeded their respective carrying values by more than 25%. Generics The Generics reporting unit operates in the United States, where shifting market dynamics have led to increased competition with respect to generic pharmaceuticals which impacts both pricing and potential market share. The Company expects these dynamics to intensify in the future, and as such has revised its long-term forecasts, including for the sale of Company branded products when they reach loss of exclusivity in the future to reflect these developments. The quantitative fair value test for the Generics reporting unit utilized the most recent cash flow projections for the reporting unit as revised in the fourth quarter of 2023 to reflect current market conditions and current trends in business performance. The quantitative assessment utilized a long-term growth rate of 1.0% and a discount rate of 10.25% in the estimation of the reporting unit’s fair value. Based on the quantitative fair value test, the carrying value of the Generics reporting unit exceeded its fair value as of October 1, 2023, and the Company recognized a goodwill impairment of $91 million. As of December 31, 2023 and September 30, 2024, the Generics reporting unit had remaining goodwill of $227 million. For its remaining reporting units, the Company conducted its annual goodwill impairment test as of October 1, 2023, by first assessing qualitative factors. Based on its qualitative assessment as of October 1, 2023, management believed that, it was more likely than not that the carrying amounts of its remaining reporting units were less than their respective fair values and therefore concluded that a quantitative fair value test for those reporting units was not required. December 31, 2023 During the period October 1, 2023 through December 31, 2023, the Company continued to monitor the market conditions and trends in business performance for all its reporting units, particularly as they pertain to the Dermatology, Neurology and Generics reporting units, and determined that, no events occurred, or circumstances changed that would indicate that the fair value of any reporting unit might be below its carrying value. However, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future and those charges could be material. 2024 Interim Assessment During the nine months ended September 30, 2024, the Company continued to monitor the market conditions and trends in business performance for all its reporting units, particularly as they pertain to the Dermatology, Neurology and Generics reporting units, and determined that, no events occurred, or circumstances changed that would indicate that the fair value of any reporting unit might be below its carrying value. However, if market conditions deteriorate, or if the Company is unable to execute its strategies, it may be necessary to record impairment charges in the future and any such charges could be material. Accumulated goodwill impairment charges through September 30, 2024 were $5,497 million.

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