Financial Statements
17. Goodwill and other intangible assets
Changes in intangible assets in 2010 were as follows:
| Changes in Intangible Assets | [Table 4.43] |
|---|
| | Acquired goodwill
| Technolo-
gies
| Trade-
marks
| Marketing and distribution rights
| Production rights
| R&D
projects
| Other rights and advance payments | Total
|
| | € million | € million | € million | € million | € million | € million | € million | € million |
| Cost of acquisition or generation, December 31, 2009 | 8,704 | 10,240 | 3,966 | 966 | 2,169 | 1,138 | 2,296 | 29,479 |
| Changes in scope of consolidation | - | - | - | - | - | - | (1) | (1) |
| Acquisitions | 12 | 11 | - | - | 2 | 1 | 5 | 31 |
| Capital expenditures | - | 17 | 2 | 58 | - | 127 | 205 | 409 |
| Retirements | - | (13) | (5) | (2) | (11) | (5) | (79) | (115) |
| Transfers | - | 81 | - | (9) | 1 | (115) | 45 | 3 |
| Transfers (IFRS 5) | - | - | - | - | - | - | - | - |
| Inflation adjustment (IAS 29) | 7 | - | - | 1 | - | - | - | 8 |
| Remeasurement (IFRS 3) | 4 | - | - | - | 2 | - | 5 | 11 |
| Exchange differences | 275 | 40 | 65 | 46 | 6 | 25 | 136 | 593 |
| December 31, 2010 | 9,002 | 10,376 | 4,028 | 1,060 | 2,169 | 1,171 | 2,612 | 30,418 |
| | | | | | | | | |
| Accumulated amortization and impairment losses, December 31, 2009 |
- |
3,615 |
1,004 |
455 |
1,315 |
1 |
1,543 |
7,933 |
| Changes in scope of consolidation | - | - | - | - | - | - | (1) | (1) |
| Retirements | - | (11) | (3) | (2) | (7) | (5) | (78) | (106) |
| Amortization and impairment losses in 2010 |
- |
1,010 |
592 |
90 |
182 |
237 |
168 |
2,279 |
| Amortization | - | 797 | 163 | 80 | 151 | - | 156 | 1,347 |
| Impairment losses | - | 213 | 429 | 10 | 31 | 237 | 12 | 932 |
| Impairment loss reversals | - | - | - | - | - | - | - | - |
| Transfers | - | - | - | 4 | - | - | (4) | - |
| Transfers (IFRS 5) | - | - | - | - | - | - | - | - |
| Exchange differences | - | 17 | 15 | 19 | 3 | - | 96 | 150 |
| December 31, 2010 | - | 4,631 | 1,608 | 566 | 1,493 | 233 | 1,724 | 10,255 |
| Carrying amounts, December 31, 2010 |
9,002 |
5,745 |
2,420 |
494 |
676 |
938 |
888 |
20,163 |
| Carrying amounts, December 31, 2009 |
8,704 |
6,625 |
2,962 |
511 |
854 |
1,137 |
753 |
21,546 |
Other rights and advance payments include internally generated software. Costs of €31 million for internally generated software incurred during the application development phase were capitalized in 2010 (2009: €56 million). The carrying amount of internally generated software was €93 million (2009: €79 million).
The research and development projects include €94 million relating to the active ingredient alemtuzumab for the treatment of multiple sclerosis (MS). Bayer has returned the worldwide distribution and development rights for alemtuzumab to Genzyme Corp., United States. Bayer is continuing to co-develop this drug. If it is approved in the MS indication, Bayer will have global co-promotion rights and will be entitled to royalties and revenue-based milestone payments.
Impairment losses on intangible assets totaled €932 million. The “Schering” brand was capitalized in the amount of €405 million following the acquisition of Schering AG, Berlin, Germany, in 2006. As part of our new brand strategy we plan to focus increasingly on the “Bayer” umbrella brand. A €405 million impairment loss was therefore recognized on the intangible asset represented by the “Schering” brand. The research and development project for sagopilone to treat lung cancer was discontinued on account of an adverse side-effect profile. Another development project for cancer treatment, Bonefos™, also was considered to be no longer of value due to heavy competitive pressure. Impairment losses totaling €202 million were therefore recognized on the respective intangible assets. A reappraisal of the market potential for the cancer drug Zevalin™ led to the recognition of a €132 million impairment loss. Further impairment losses totaling €135 million were recorded on trademark and production rights for three product families in the Women’s Healthcare and General Medicine business unit. Impairment losses were also recognized on intangible assets in the Pharmaceuticals (€14 million), Consumer Health (€39 million) and MaterialScience (€4 million) segments, as well as in “Other Segments” (€1 million).
Details of acquisitions and divestitures are contained in
Notes [6.2] and
[6.3]. Details of the impairment testing procedure for goodwill and other intangible assets are given in
Note [4].
Changes in intangible assets in 2009 were as follows:
| Changes in Intangible Assets (Previous Year) | [Table 4.44] |
|---|
| | Acquired goodwill
| Technolo-
gies
| Trade-
marks
| Marketing and distribution rights
| Production rights
| R&D
projects
| Other rights and advance payments | Total
|
| | € million | € million | € million | € million | € million | € million | € million | € million |
| Cost of acquisition or generation, December 31, 2008 | 8,647 | 10,265 | 3,985 | 1,004 | 2,142 | 1,359 | 1,925 | 29,327 |
| Changes in scope of consolidation | - | - | - | - | - | - | 1 | 1 |
| Acquisitions | 177 | 1 | 3 | 2 | 34 | 4 | 229 | 450 |
| Capital expenditures | - | 14 | - | 13 | 6 | 162 | 132 | 327 |
| Retirements | - | (5) | - | (2) | - | (172) | (41) | (220) |
| Transfers | - | 201 | 2 | (53) | 7 | (201) | 44 | - |
| Transfers (IFRS 5) | (92) | (225) | - | - | (20) | (5) | (2) | (344) |
| Inflation adjustment (IAS 29) | - | - | - | - | - | - | - | - |
| Remeasurement (IFRS 3) | - | - | - | - | - | - | - | - |
| Exchange differences | (28) | (11) | (24) | 2 | - | (9) | 8 | (62) |
| December 31, 2009 | 8,704 | 10,240 | 3,966 | 966 | 2,169 | 1,138 | 2,296 | 29,479 |
| | | | | | | | | |
| Accumulated amortization and impairment losses, December 31, 2008 | - | 2,766 | 833 | 386 | 1,166 | 173 | 1,405 | 6,729 |
| Changes in scope of consolidation | - | - | - | - | - | - | - | - |
| Retirements | - | (5) | - | - | - | (172) | (39) | (216) |
| Amortization and impairment losses in 2009 | - | 938 | 171 | 121 | 151 | - | 156 | 1,537 |
| Amortization | - | 938 | 167 | 88 | 151 | - | 132 | 1,476 |
| Impairment losses | - | - | 4 | 33 | - | - | 24 | 61 |
| Impairment loss reversals | - | - | - | - | - | - | - | - |
| Transfers | - | (5) | 4 | (53) | - | - | 54 | - |
| Transfers (IFRS 5) | - | (75) | - | - | (2) | - | - | (77) |
| Exchange differences | - | (4) | (4) | 1 | - | - | (33) | (40) |
| December 31, 2009 | - | 3,615 | 1,004 | 455 | 1,315 | 1 | 1,543 | 7,933 |
| Carrying amounts, December 31, 2009 | 8,704 | 6,625 | 2,962 | 511 | 854 | 1,137 | 753 | 21,546 |
| Carrying amounts, December 31, 2008 | 8,647 | 7,499 | 3,152 | 618 | 976 | 1,186 | 520 | 22,598 |
Changes in the carrying amounts of goodwill for the operating segments in 2010 and 2009 were as follows:
| Goodwill by Reporting Segment | [Table 4.45] |
|---|
| | Pharma-
ceuticals
| Consumer
Health
| HealthCare
| Crop
Protection
| Environ-
mental
Science,
BioScience | Crop-
Science
|
| | € million | € million | € million | € million | € million | € million |
Carrying amounts,
January 1, 2009 |
5,553 |
1,323 |
6,876 |
1,088 |
506 |
1,594 |
Changes in scope
of consolidation |
- |
- |
- |
- |
- |
- |
| Acquisitions | 4 | 17 | 21 | - | 132 | 132 |
| Capital expenditures | - | - | - | - | - | - |
| Retirements | - | - | - | - | - | - |
| Amortization and impairment losses in 2009 |
- |
- |
- |
- |
- |
- |
| Transfers | - | - | - | - | - | - |
| Transfers (IFRS 5) | (92) | - | (92) | - | - | - |
Inflation adjustment
(IAS 29) | - | - | - | - | - | - |
Remeasurement
(IFRS 3) | - | - | - | - | - | - |
| Exchange differences | (5) | (12) | (17) | 9 | (13) | (4) |
Carrying amounts,
December 31, 2009 |
5,460 |
1,328 |
6,788 |
1,097 |
625 |
1,722 |
Changes in scope
of consolidation |
- |
- |
- |
- |
- |
- |
| Acquisitions | - | - | - | - | 2 | 2 |
| Capital expenditures | - | - | - | - | - | - |
| Retirements | - | - | - | - | - | - |
| Amortization and impairment losses in 2010 |
- |
- |
- |
- |
- |
- |
| Transfers | 1 | - | 1 | (3) | 2 | (1) |
| Transfers (IFRS 5) | - | - | - | - | - | - |
Inflation adjustment
(IAS 29) | - | 7 | 7 | - | - | - |
Remeasurement
(IFRS 3) | - | - | - | - | - | - |
| Exchange differences | 122 | 80 | 202 | 27 | 41 | 68 |
Carrying amounts,
December 31, 2010 |
5,583 |
1,415 |
6,998 |
1,121 |
670 |
1,791 |
| Goodwill by Reporting Segment | [Table 4.45] |
|---|
| | Material-
Science | Reconcilia-
tion | Bayer
Group |
| | € million | € million | € million |
| Carrying amounts, January 1, 2009 | 177 | - | 8,647 |
| Changes in scope of consolidation | - | - | - |
| Acquisitions | 24 | - | 177 |
| Capital expenditures | - | - | - |
| Retirements | - | - | - |
| Amortization and impairment losses in 2009 | - | - | - |
| Transfers | - | - | - |
| Transfers (IFRS 5) | - | - | (92) |
| Inflation adjustment (IAS 29) | - | - | - |
| Remeasurement (IFRS 3) | - | - | - |
| Exchange differences | (7) | - | (28) |
| Carrying amounts, December 31, 2009 | 194 | - | 8,704 |
| Changes in scope of consolidation | - | - | - |
| Acquisitions | 10 | - | 12 |
| Capital expenditures | - | - | - |
| Retirements | - | - | - |
| Amortization and impairment losses in 2010 | - | - | - |
| Transfers | - | - | - |
| Transfers (IFRS 5) | - | - | - |
| Inflation adjustment (IAS 29) | - | - | 7 |
| Remeasurement (IFRS 3) | 4 | - | 4 |
| Exchange differences | 5 | - | 275 |
| Carrying amounts, December 31, 2010 | 213 | - | 9,002 |
Goodwill and other intangible assets with an indefinite useful life that are of material significance for the Bayer Group are allocated to the following strategic business entities or cash-generating units:
| Intangible Assets with Indefinite Useful Life | [Table 4.46] |
|---|
Reporting segment | Cash-
generating
unit
| Goodwill
| Intangible assets with
indefinite useful life |
| | | € million | € million |
| Pharmaceuticals | Women’s Healthcare | 2,890 | 156 |
| Pharmaceuticals | Specialized Therapeutics | 1,229 | 198 |
| Consumer Health | OTC | 982 | 22 |
| Pharmaceuticals | Diagnostic Imaging | 939 | 16 |
| Pharmaceuticals | Oncology | 378 | 115 |
| Consumer Health | Medrad business | 302 | 523 |
Since it is uncertain whether acquired or inlicensed research and development projects will eventually result in the production of saleable products, the period over which the corresponding capitalized asset is expected to generate an economic benefit for the company cannot be determined. Development projects were capitalized in a total amount of €938 million as of the end of 2010 (2009: €1,137 million).
The Bayer Cross, which was reacquired for the North America region in 1994, having been awarded to the United States and Canada under the reparations agreements at the end of the First World War, is recognized as an intangible asset with an indefinite useful life. The company name “Medrad,” which passed to Bayer with the acquisition of Schering AG, Berlin, Germany, in 2006, also has an indefinite useful life. The period for which the Bayer Group will derive an economic benefit from this name cannot be determined as Bayer intends to make continuous use of it. The Bayer Cross is capitalized at €107 million, the “Medrad” name at €305 million.
Technologies
The Bayer Group endeavors to obtain patent protection for its products and technologies in the major markets. Depending on the jurisdiction, patent protection may be available for:
- individual active ingredients,
- specific compounds, formulations and combinations containing active ingredients,
- manufacturing processes,
- working methods,
- equipment,
- intermediates for the manufacture of active ingredients and products,
- isolated genes or proteins,
- new uses for existing active ingredients or products,
- material combinations and
- semi-finished products.
The protection that a patent provides varies from country to country, depending on the type of claim granted, the scope of the claim’s coverage and the legal remedies available for enforcement.
The Bayer Group currently owns some 78,000 patents or patent applications. Although in our Pharmaceuticals segment the patents on Avalox™/Avelox™, Betaferon™/Betaseron™, Kogenate™, Levitra™, Magnevist™, Mirena™, Nexavar™, Xarelto™, YAZ™, Yasmin™ and Yasminelle™ are particularly important to our business, we believe that no single patent (or group of related patents) is crucial to our business as a whole.
Term and expiration of patents
Patents are valid for varying periods, depending on the laws of the jurisdiction granting the patent. In some jurisdictions, patent protection begins from the date a patent application was filed; in others, it begins on the date the patent is granted.
The European Union member countries as well as the United States, Japan and certain other countries extend patent terms or issue supplementary protection certificates to compensate for patent term loss due to regulatory review and for the substantial investments in product research and development. We endeavor to obtain such patent term extensions or supplementary certificates wherever possible. Apart from substance and product patents, we continue to seek
- patents on processes and intermediates used in manufacturing an active ingredient,
- patents relating to specific uses for an active ingredient,
- patents relating to novel compositions and formulations, and
- market exclusivity in countries where this is possible (such as the United States).
The following table sets forth the expiration dates in our major markets of the most important patents covering Avalox™/Avelox™, Betaferon™/Betaseron™, Kogenate™, Levitra™, Magnevist™, Mirena™, Nexavar™, Xarelto™, YAZ™, Yasmin™ and Yasminelle™.
| Expiration Dates of Most Important Patents | [Table 4.47] |
|---|
| | Market |
| | Germany | France | U.K. | Italy | Spain | Japan | U.S.A. | Canada |
| Products | | | | | | | | |
| Avalox™/Avelox™ | | | | | | | | |
| Active ingredient | 2014 | 2014 | 2014 | 2014 | 2014 | 2014 | 2014 | 2015 |
Active ingredient
monohydrate |
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
2016 |
| Tablets | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 | 2019 |
| Betaferon™/Betaseron™ | | | | | | | | |
| Active ingredient | - | - | - | - | - | - | - | 2016 |
| Kogenate™ | | | | | | | | |
| Active ingredient | - | - | - | - | - | - | 2014 | 2019 |
| Formulation | 2017 | 2017 | 2017 | 2017 | 2017 | 2017 | 2017 | 2017 |
| Levitra™ | | | | | | | | |
| Active ingredient | 2018 | 2018 | 2018 | 2018 | 2018 | 2020 | 2018 | 2018 |
| Magnevist™ | | | | | | | | |
| Active ingredient | - | - | - | - | - | - | 2011 | - |
| Formulation | - | - | - | - | - | - | - | 2010 |
| Process | - | - | - | - | - | - | 2013 | - |
| Mirena™ | | | | | | | | |
| Applicator | 2015 | 2015 | 2015 | 2015 | 2015 | - | 2015 | 2015 |
| Process | 2013 | 2013 | 2013 | 2013 | 2013 | 2013 | 2013 | 2013 |
| Nexavar™ | | | | | | | | |
| Active ingredient | 2020a | 2021 | 2021 | 2021 | 2021 | 2020a | 2020 | 2020 |
| Xarelto™ | | | | | | | | |
| Active ingredient | 2020e | 2023 | 2020e | 2023 | 2023d | 2020 | 2021 | 2020 |
| YAZ™ | | | | | | | | |
| Formulation | 2020e | 2020e | 2020e | 2022 | 2023d | 2020e | -c | 2020 |
| Dosage regimen | -f | -f | -f | -f | -f | 2014b | 2014 | 2014 |
| Production process | 2025 | 2025 | 2025 | 2025 | 2025 | 2026b | 2025 | 2026b |
| Yasmin™ | | | | | | | | |
| Formulation | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | -c | 2020 |
| Production process | 2025 | 2025 | 2025 | 2025 | 2025 | 2026b | 2025 | 2026b |
| Yasminelle™ | | | | | | | | |
| Formulation | 2020 | 2020 | 2020 | 2020 | 2020 | 2020 | -c | 2020 |
| Production process | 2025 | 2025 | 2025 | 2025 | 2025 | 2026b | 2025 | 2026b |
a Current patent expiration. An application has been submitted to extend patent protection through 2021. b Patent pending c The patent was invalidated in the first instance in March 2008. In August 2009, the U.S. Court of Appeals for the
Federal Circuit affirmed this decision. Bayer filed a petition for review in the U.S. Supreme Court. The petition was
rejected in May 2010. d Patent expiration updated e Current patent expiration. An application has been submitted to extend patent protection. f The patent was revoked by a Technical Board of Appeal of the European Patent Office in October 2010. |
Information on specific patent disputes is given in
Note [32].
Trademarks
We seek to obtain extensive trademark protection for our products in all jurisdictions in which they are marketed or are to be marketed in the near future. As well as product names, we also register particularly distinctive slogans, logos, graphic elements and designs as global trademarks.
Wherever possible, trademarks are registered through supranational trademark protection systems, for example as European Community Trademarks or international trademarks, and additionally with the national trademark registration offices. The protection actually provided by a trademark may vary considerably from one country to another depending on the distinctiveness of the trademark.
HealthCare: Adalat™, Advantage™, Aleve™/Flanax™/Apronax™, Alka-Seltzer™, Aspirin™, Avalox™/Avelox™, Baytril™, Bepanthen™/Bepanthol™, Berocca™, Betaferon™/Betaseron™, Canesten™, Ciprobay™/Ciproxin™/Baycip™/Cipro™, Contour™, Kogenate™, Levitra™, Magnevist™, Mirena™, Nexavar™, One A Day™, Redoxon™, Rennie™, Supradyn™, Ultravist™, Xarelto™, YAZ™, Yasmin™ and Yasminelle™.
CropScience: Basta™/Liberty™/Ignite™, Confidor™/Gaucho™/Admire™/Merit™, Flint™/Stratego™/Sphere™/Nativo™, Invigor™ and Proline™/Input™/Prosaro™.
MaterialScience: Bayblend™, BaySystems™, Desmodur™, Desmopan™, Desmophen™, Makrolon™ and Vulkollan™.
We currently have more than 63,000 national trademark registrations or pending registrations, along with over 750 Community Trade Marks, which are valid throughout the European Union, and some 2,000 international trademarks, which provide protection in various countries. Trademarks are particularly important for those products that are not protected by patents and are exposed to strong competitive pressure from generic products. However, with the exception of the company name “Bayer” and the “Bayer Cross” logo, we do not believe that any single trademark is crucial to our business as a whole.