Skip to website navigation Skip to article navigation Skip to content

A page refresh occures when a subject is selected.

Skip article navigation.

21. Goodwill

21.1 Key assumptions

21.1 Key assumptions

The calculations performed are based on the cash flow projections as derived from the financials underlying the 10-year strategic plan approved by management and Board of Directors. Given the nature of the industry, the long-term projections are used to fully model the appropriate product lifecycles based on the patent expiry and therapeutic area. These long-term projections, which are based on past performance and management’s expectations of market developments, are adjusted for specific risks and include:

  • the revenue growth rates of newly-launched products;

  • the probability of reaching commercial stage for new prod- ucts and/or indications;

  • the probability of success of future product launches and the expected dates thereof;

  • the post-patent expiry erosion.

The key assumptions, when comparing to 2019, were adapted taking into account the latest developments of the probabilities of success and the post-patent expiry erosion.

For the “value in use” calculations required for the impairment testing, 5.93% discount rate for marketed products, 12.5% discount rate for pipeline products was used.

Taking into account current market evolutions, the cash flows beyond the projected forecasted period (terminal value) are extrapolated using an estimated growth rate of 2%, compared to 3% in 2019. The growth rate does not exceed the long-term average growth rate for the relevant territories in which the CGU operates.

The Group has most of its revenue and expenses in EUR and USD-based countries. The following important exchange rates were used in preparing the future cash flows:


10 Years Projection



1.21 - 1.29

1.16 - 1.23


0.87 - 1.06

0.87 - 1.04


119 - 130

112 - 130


1.06 - 1.08

1.07 - 1.12

Starting from risk-free short-term LIBOR EUR 6 months and long-term EU generic government bonds 20 years (2019: 20 years), the discount rates applied are determined based on the weighted average cost of capital for DCF models, including the 20 year (2019: 20 year) benchmark cost of debt and equity, adjusted to reflect the specific asset and country risks associated with the CGU. Given the industry, the Group used a discount rate for marketed products of 5.93% (2019: 6.54%) and for pipeline products 12.5% (2019: 13.0%).

Marketed products are products that are sold in the market as per year-end; these comprise our products Cimzia®, Vimpat®, Neupro®, Keppra®, Briviact®, Evenity®, Nayzilam® and other products (Zyrtec®, Xyzal® and others). Pipeline products are products that are not sold yet in the market as per year-end (eg. bimekizumab, rozanolixizumab). A different discount rate is used for pipeline products as the risks related to these products are higher than for the products that are already in the market. The discount rates are reviewed at least annually.

Since after-tax cash flows are incorporated into the calculation of the value-in-use of the CGU, a post-tax discount rate is used in order to remain consistent.

The use of the post-tax discount rate approximates the result of using a pre-tax rate applied to pre-tax cash flows. A tax rate up to 20% was used (2019: 20%).