BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues:
|
|
|
|
|
|
|
|
Product, net
|
$
|
2,894.7
|
|
|
$
|
2,780.1
|
|
|
$
|
8,455.0
|
|
|
$
|
8,061.1
|
|
Revenues from anti-CD20 therapeutic programs
|
595.8
|
|
|
511.7
|
|
|
1,689.6
|
|
|
1,445.3
|
|
Other
|
109.6
|
|
|
147.2
|
|
|
562.0
|
|
|
420.2
|
|
Total revenues
|
3,600.1
|
|
|
3,439.0
|
|
|
10,706.6
|
|
|
9,926.6
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
Cost of sales, excluding amortization and impairment of acquired intangible assets
|
430.0
|
|
|
460.8
|
|
|
1,508.3
|
|
|
1,327.8
|
|
Research and development
|
540.4
|
|
|
507.9
|
|
|
1,588.9
|
|
|
1,985.6
|
|
Selling, general and administrative
|
554.5
|
|
|
497.7
|
|
|
1,709.8
|
|
|
1,515.2
|
|
Amortization and impairment of acquired intangible assets
|
283.9
|
|
|
281.9
|
|
|
422.2
|
|
|
493.2
|
|
Collaboration profit (loss) sharing
|
60.2
|
|
|
47.5
|
|
|
181.8
|
|
|
129.2
|
|
Loss on divestiture of Hillerød, Denmark manufacturing operations
|
(17.7
|
)
|
|
—
|
|
|
95.5
|
|
|
—
|
|
(Gain) loss on fair value remeasurement of contingent consideration
|
(57.8
|
)
|
|
(87.9
|
)
|
|
(66.3
|
)
|
|
(91.6
|
)
|
Restructuring charges
|
0.3
|
|
|
6.0
|
|
|
1.5
|
|
|
9.2
|
|
Acquired in-process research and development
|
—
|
|
|
27.5
|
|
|
—
|
|
|
112.5
|
|
Total cost and expenses
|
1,793.8
|
|
|
1,741.4
|
|
|
5,441.7
|
|
|
5,481.1
|
|
Income from operations
|
1,806.3
|
|
|
1,697.6
|
|
|
5,264.9
|
|
|
4,445.5
|
|
Other income (expense), net
|
(27.3
|
)
|
|
115.1
|
|
|
132.6
|
|
|
39.6
|
|
Income before income tax expense and equity in loss of investee, net of tax
|
1,779.0
|
|
|
1,812.7
|
|
|
5,397.5
|
|
|
4,485.1
|
|
Income tax expense
|
211.3
|
|
|
369.8
|
|
|
881.9
|
|
|
956.0
|
|
Equity in loss of investee, net of tax
|
21.8
|
|
|
—
|
|
|
66.8
|
|
|
—
|
|
Net income
|
1,545.9
|
|
|
1,442.9
|
|
|
4,448.8
|
|
|
3,529.1
|
|
Net income (loss) attributable to noncontrolling interests, net of tax
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
|
45.2
|
|
Net income attributable to Biogen Inc.
|
$
|
1,545.9
|
|
|
$
|
1,444.4
|
|
|
$
|
4,448.8
|
|
|
$
|
3,483.9
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Biogen Inc.
|
$
|
8.40
|
|
|
$
|
7.17
|
|
|
$
|
23.38
|
|
|
$
|
16.86
|
|
Diluted earnings per share attributable to Biogen Inc.
|
$
|
8.39
|
|
|
$
|
7.15
|
|
|
$
|
23.35
|
|
|
$
|
16.83
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in calculating:
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Biogen Inc.
|
184.0
|
|
|
201.4
|
|
|
190.3
|
|
|
206.6
|
|
Diluted earnings per share attributable to Biogen Inc.
|
184.2
|
|
|
201.9
|
|
|
190.5
|
|
|
207.0
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net income attributable to Biogen Inc.
|
$
|
1,545.9
|
|
|
$
|
1,444.4
|
|
|
$
|
4,448.8
|
|
|
$
|
3,483.9
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Unrealized gains (losses) on securities available for sale, net of tax
|
0.1
|
|
|
(0.2
|
)
|
|
10.3
|
|
|
(1.8
|
)
|
Unrealized gains (losses) on cash flow hedges, net of tax
|
59.1
|
|
|
5.2
|
|
|
38.1
|
|
|
109.0
|
|
Gains (losses) on net investment hedges
|
21.2
|
|
|
—
|
|
|
46.9
|
|
|
—
|
|
Unrealized gains (losses) on pension benefit obligation, net of tax
|
0.8
|
|
|
(0.2
|
)
|
|
1.5
|
|
|
0.2
|
|
Currency translation adjustment
|
79.4
|
|
|
8.5
|
|
|
51.3
|
|
|
(38.8
|
)
|
Total other comprehensive income (loss), net of tax
|
160.6
|
|
|
13.3
|
|
|
148.1
|
|
|
68.6
|
|
Comprehensive income attributable to Biogen Inc.
|
1,706.5
|
|
|
1,457.7
|
|
|
4,596.9
|
|
|
3,552.5
|
|
Comprehensive income (loss) attributable to noncontrolling interests, net of tax
|
—
|
|
|
(1.5
|
)
|
|
(0.4
|
)
|
|
45.2
|
|
Comprehensive income
|
$
|
1,706.5
|
|
|
$
|
1,456.2
|
|
|
$
|
4,596.5
|
|
|
$
|
3,597.7
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
As of September 30,
2019
|
|
As of December 31,
2018
|
ASSETS
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
2,343.9
|
|
|
$
|
1,224.6
|
|
Marketable securities
|
2,093.5
|
|
|
2,313.4
|
|
Accounts receivable, net
|
1,933.5
|
|
|
1,958.5
|
|
Due from anti-CD20 therapeutic programs
|
582.3
|
|
|
526.9
|
|
Inventory
|
751.8
|
|
|
929.9
|
|
Other current assets
|
743.2
|
|
|
687.6
|
|
Total current assets
|
8,448.2
|
|
|
7,640.9
|
|
Marketable securities
|
1,813.9
|
|
|
1,375.9
|
|
Property, plant and equipment, net
|
3,138.1
|
|
|
3,601.2
|
|
Operating lease assets
|
422.0
|
|
|
—
|
|
Intangible assets, net
|
3,392.4
|
|
|
3,120.0
|
|
Goodwill
|
5,746.1
|
|
|
5,706.4
|
|
Deferred tax asset
|
3,284.5
|
|
|
2,153.9
|
|
Investments and other assets
|
1,238.8
|
|
|
1,690.6
|
|
Total assets
|
$
|
27,484.0
|
|
|
$
|
25,288.9
|
|
LIABILITIES AND EQUITY
|
Current liabilities:
|
|
|
|
Current portion of notes payable
|
$
|
1,495.3
|
|
|
$
|
—
|
|
Taxes payable
|
125.6
|
|
|
63.5
|
|
Accounts payable
|
382.2
|
|
|
370.5
|
|
Accrued expenses and other
|
2,429.1
|
|
|
2,861.2
|
|
Total current liabilities
|
4,432.2
|
|
|
3,295.2
|
|
Notes payable
|
4,458.2
|
|
|
5,936.5
|
|
Deferred tax liability
|
2,820.4
|
|
|
1,636.2
|
|
Long-term operating lease liabilities
|
410.5
|
|
|
—
|
|
Other long-term liabilities
|
1,370.9
|
|
|
1,389.4
|
|
Total liabilities
|
13,492.2
|
|
|
12,257.3
|
|
Commitments and contingencies
|
|
|
|
|
|
Equity:
|
|
|
|
Biogen Inc. shareholders’ equity:
|
|
|
|
Preferred stock, par value $0.001 per share
|
—
|
|
|
—
|
|
Common stock, par value $0.0005 per share
|
0.1
|
|
|
0.1
|
|
Additional paid-in capital
|
—
|
|
|
—
|
|
Accumulated other comprehensive loss
|
(92.3
|
)
|
|
(240.4
|
)
|
Retained earnings
|
17,065.2
|
|
|
16,257.0
|
|
Treasury stock, at cost
|
(2,977.1
|
)
|
|
(2,977.1
|
)
|
Total Biogen Inc. shareholders’ equity
|
13,995.9
|
|
|
13,039.6
|
|
Noncontrolling interests
|
(4.1
|
)
|
|
(8.0
|
)
|
Total equity
|
13,991.8
|
|
|
13,031.6
|
|
Total liabilities and equity
|
$
|
27,484.0
|
|
|
$
|
25,288.9
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30,
|
|
2019
|
|
2018
|
Cash flows from operating activities:
|
|
|
|
Net income
|
$
|
4,448.8
|
|
|
$
|
3,529.1
|
|
Adjustments to reconcile net income to net cash flows from operating activities:
|
|
|
|
Depreciation, amortization and impairments
|
567.6
|
|
|
686.9
|
|
Acquired in-process research and development
|
—
|
|
|
112.5
|
|
Share-based compensation
|
143.9
|
|
|
119.0
|
|
Contingent consideration
|
(66.3
|
)
|
|
(91.6
|
)
|
Loss on divestiture of Hillerød, Denmark manufacturing operations
|
95.5
|
|
|
—
|
|
Deferred income taxes
|
28.4
|
|
|
(44.8
|
)
|
Unrealized (gain) loss on strategic investments
|
(189.8
|
)
|
|
(136.9
|
)
|
Loss on equity method investment
|
63.5
|
|
|
—
|
|
Other
|
87.4
|
|
|
68.7
|
|
Changes in operating assets and liabilities, net:
|
|
|
|
Accounts receivable
|
(2.4
|
)
|
|
(254.0
|
)
|
Inventory
|
47.3
|
|
|
(31.9
|
)
|
Accrued expenses and other current liabilities
|
(109.1
|
)
|
|
100.7
|
|
Income tax assets and liabilities
|
64.6
|
|
|
315.6
|
|
Other changes in operating assets and liabilities, net
|
(61.0
|
)
|
|
(81.0
|
)
|
Net cash flows provided by operating activities
|
5,118.4
|
|
|
4,292.3
|
|
Cash flows from investing activities:
|
|
|
|
Proceeds from sales and maturities of marketable securities
|
3,867.6
|
|
|
7,994.7
|
|
Purchases of marketable securities
|
(4,052.1
|
)
|
|
(6,093.8
|
)
|
Contingent consideration paid related to Fumapharm AG acquisition
|
(300.0
|
)
|
|
(1,200.0
|
)
|
Acquisition of Nightstar Therapeutics plc, net of cash acquired
|
(744.4
|
)
|
|
—
|
|
Proceeds from divestiture of Hillerød, Denmark manufacturing operations
|
923.7
|
|
|
—
|
|
Purchases of property, plant and equipment
|
(404.1
|
)
|
|
(544.7
|
)
|
Acquired in-process research and development
|
—
|
|
|
(112.5
|
)
|
Acquisitions of intangible assets
|
—
|
|
|
(3.0
|
)
|
Purchase of Ionis Pharmaceuticals, Inc. stock
|
—
|
|
|
(462.9
|
)
|
Proceeds from sales of strategic investments
|
476.0
|
|
|
—
|
|
Other
|
(4.6
|
)
|
|
1.2
|
|
Net cash flows used in investing activities
|
(237.9
|
)
|
|
(421.0
|
)
|
Cash flows from financing activities:
|
|
|
|
Purchases of treasury stock
|
(3,775.2
|
)
|
|
(3,000.0
|
)
|
Payments related to issuance of stock for share-based compensation arrangements, net
|
(16.9
|
)
|
|
(6.7
|
)
|
Repayment of borrowings
|
—
|
|
|
(3.2
|
)
|
Net distribution to noncontrolling interest
|
4.3
|
|
|
(36.9
|
)
|
Other
|
43.8
|
|
|
11.8
|
|
Net cash flows used in financing activities
|
(3,744.0
|
)
|
|
(3,035.0
|
)
|
Net increase (decrease) in cash and cash equivalents
|
1,136.5
|
|
|
836.3
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(17.2
|
)
|
|
(23.4
|
)
|
Cash and cash equivalents, beginning of the period
|
1,224.6
|
|
|
1,573.8
|
|
Cash and cash equivalents, end of the period
|
$
|
2,343.9
|
|
|
$
|
2,386.7
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
Common stock
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury stock
|
|
Total
Biogen Inc.
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance, June 30, 2019
|
—
|
|
|
$
|
—
|
|
|
208.6
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(252.9
|
)
|
|
$
|
16,182.8
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
12,952.9
|
|
|
$
|
(4.1
|
)
|
|
$
|
12,948.8
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
1,545.9
|
|
|
|
|
|
|
1,545.9
|
|
|
—
|
|
|
1,545.9
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
160.6
|
|
|
|
|
|
|
|
|
160.6
|
|
|
—
|
|
|
160.6
|
|
Capital contribution by noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Repurchase of common stock pursuant to the 2019 Share Repurchase Program, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3.1
|
)
|
|
(717.9
|
)
|
|
(717.9
|
)
|
|
|
|
(717.9
|
)
|
Retirement of common stock pursuant to the 2019 Share Repurchase Program, at cost
|
|
|
|
|
(3.1
|
)
|
|
—
|
|
|
(55.1
|
)
|
|
|
|
(662.8
|
)
|
|
3.1
|
|
|
717.9
|
|
|
—
|
|
|
|
|
—
|
|
Issuance of common stock under stock option and stock purchase plans
|
|
|
|
|
0.1
|
|
|
—
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
|
7.3
|
|
|
|
|
7.3
|
|
Issuance of common stock under stock award plan
|
|
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
(0.7
|
)
|
Compensation related to share-based payments
|
|
|
|
|
|
|
|
|
47.8
|
|
|
|
|
|
|
|
|
|
|
47.8
|
|
|
|
|
47.8
|
|
Balance, September 30, 2019
|
—
|
|
|
$
|
—
|
|
|
205.7
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(92.3
|
)
|
|
$
|
17,065.2
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
13,995.9
|
|
|
$
|
(4.1
|
)
|
|
$
|
13,991.8
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - (Continued)
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
Common stock
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury stock
|
|
Total
Biogen Inc.
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance, December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
221.0
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(240.4
|
)
|
|
$
|
16,257.0
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
13,039.6
|
|
|
$
|
(8.0
|
)
|
|
$
|
13,031.6
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
4,448.8
|
|
|
|
|
|
|
4,448.8
|
|
|
—
|
|
|
4,448.8
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
148.1
|
|
|
|
|
|
|
|
|
148.1
|
|
|
(0.4
|
)
|
|
147.7
|
|
Capital contribution by noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
4.3
|
|
|
4.3
|
|
Repurchase of common stock pursuant to the 2019 Share Repurchase Program, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.0
|
)
|
|
(1,627.8
|
)
|
|
(1,627.8
|
)
|
|
|
|
(1,627.8
|
)
|
Retirement of common stock pursuant to the 2019 Share Repurchase Program, at cost
|
|
|
|
|
(7.0
|
)
|
|
—
|
|
|
(74.8
|
)
|
|
|
|
(1,553.0
|
)
|
|
7.0
|
|
|
1,627.8
|
|
|
—
|
|
|
|
|
—
|
|
Repurchase of common stock pursuant to the 2018 Share Repurchase Program, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8.9
|
)
|
|
(2,147.4
|
)
|
|
(2,147.4
|
)
|
|
|
|
(2,147.4
|
)
|
Retirement of common stock pursuant to the 2018 Share Repurchase Program, at cost
|
|
|
|
|
(8.9
|
)
|
|
—
|
|
|
(110.5
|
)
|
|
|
|
(2,036.9
|
)
|
|
8.9
|
|
|
2,147.4
|
|
|
—
|
|
|
|
|
—
|
|
Issuance of common stock under stock option and stock purchase plans
|
|
|
|
|
0.2
|
|
|
—
|
|
|
33.5
|
|
|
|
|
|
|
|
|
|
|
33.5
|
|
|
|
|
33.5
|
|
Issuance of common stock under stock award plan
|
|
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
|
|
(50.7
|
)
|
|
|
|
|
|
(50.7
|
)
|
|
|
|
(50.7
|
)
|
Compensation related to share-based payments
|
|
|
|
|
|
|
|
|
151.8
|
|
|
|
|
|
|
|
|
|
|
151.8
|
|
|
|
|
151.8
|
|
Balance, September 30, 2019
|
—
|
|
|
$
|
—
|
|
|
205.7
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(92.3
|
)
|
|
$
|
17,065.2
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
13,995.9
|
|
|
$
|
(4.1
|
)
|
|
$
|
13,991.8
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - (Continued)
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
Common stock
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury stock
|
|
Total
Biogen Inc.
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance, June 30, 2018
|
—
|
|
|
$
|
—
|
|
|
225.2
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
(261.6
|
)
|
|
$
|
15,499.5
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
12,260.9
|
|
|
$
|
(7.2
|
)
|
|
$
|
12,253.7
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
1,444.4
|
|
|
|
|
|
|
1,444.4
|
|
|
(1.5
|
)
|
|
1,442.9
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
13.3
|
|
|
|
|
|
|
|
|
13.3
|
|
|
—
|
|
|
13.3
|
|
Capital contribution by noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
1.9
|
|
|
1.9
|
|
Issuance of common stock under stock option and stock purchase plans
|
|
|
|
|
—
|
|
|
—
|
|
|
8.7
|
|
|
|
|
|
|
|
|
|
|
8.7
|
|
|
|
|
8.7
|
|
Issuance of common stock under stock award plan
|
|
|
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
(1.1
|
)
|
|
|
|
(1.1
|
)
|
Compensation related to share-based payments
|
|
|
|
|
|
|
|
|
40.2
|
|
|
|
|
0.2
|
|
|
|
|
|
|
40.4
|
|
|
|
|
40.4
|
|
Balance, September 30, 2018
|
—
|
|
|
$
|
—
|
|
|
225.2
|
|
|
$
|
0.1
|
|
|
$
|
47.8
|
|
|
$
|
(248.3
|
)
|
|
$
|
16,944.1
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
13,766.6
|
|
|
$
|
(6.8
|
)
|
|
$
|
13,759.8
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - (Continued)
(unaudited, in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
Common stock
|
|
Additional
paid-in
capital
|
|
Accumulated
other
comprehensive
loss
|
|
Retained
earnings
|
|
Treasury stock
|
|
Total
Biogen Inc.
shareholders’
equity
|
|
Noncontrolling
interests
|
|
Total
equity
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
Balance, December 31, 2017
|
—
|
|
|
$
|
—
|
|
|
235.3
|
|
|
$
|
0.1
|
|
|
$
|
97.8
|
|
|
$
|
(318.4
|
)
|
|
$
|
15,810.4
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
12,612.8
|
|
|
$
|
(14.7
|
)
|
|
$
|
12,598.1
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
3,483.9
|
|
|
|
|
|
|
3,483.9
|
|
|
45.2
|
|
|
3,529.1
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
68.6
|
|
|
|
|
|
|
|
|
68.6
|
|
|
(0.3
|
)
|
|
68.3
|
|
Capital contribution by noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
13.0
|
|
|
13.0
|
|
Distribution to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(50.0
|
)
|
|
(50.0
|
)
|
Repurchase of common stock pursuant to the 2016 Share Repurchase Program, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10.5
|
)
|
|
(3,000.0
|
)
|
|
(3,000.0
|
)
|
|
|
|
(3,000.0
|
)
|
Retirement of common stock pursuant to the 2016 Share Repurchase Program, at cost
|
|
|
|
|
(10.5
|
)
|
|
—
|
|
|
(171.2
|
)
|
|
|
|
(2,828.8
|
)
|
|
10.5
|
|
|
3,000.0
|
|
|
—
|
|
|
|
|
—
|
|
Issuance of common stock under stock option and stock purchase plans
|
|
|
|
|
0.1
|
|
|
—
|
|
|
33.3
|
|
|
|
|
|
|
|
|
|
|
33.3
|
|
|
|
|
33.3
|
|
Issuance of common stock under stock award plan
|
|
|
|
|
0.3
|
|
|
—
|
|
|
(39.9
|
)
|
|
|
|
|
|
|
|
|
|
(39.9
|
)
|
|
|
|
(39.9
|
)
|
Compensation related to share-based payments
|
|
|
|
|
|
|
|
|
127.8
|
|
|
|
|
0.2
|
|
|
|
|
|
|
128.0
|
|
|
|
|
128.0
|
|
Adoption of new accounting guidance
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
|
478.4
|
|
|
|
|
|
|
479.9
|
|
|
|
|
479.9
|
|
Balance, September 30, 2018
|
—
|
|
|
$
|
—
|
|
|
225.2
|
|
|
$
|
0.1
|
|
|
$
|
47.8
|
|
|
$
|
(248.3
|
)
|
|
$
|
16,944.1
|
|
|
(23.8
|
)
|
|
$
|
(2,977.1
|
)
|
|
$
|
13,766.6
|
|
|
$
|
(6.8
|
)
|
|
$
|
13,759.8
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Summary of Significant Accounting Policies
References in these notes to "Biogen," the "company," "we," "us" and "our" refer to Biogen Inc. and its consolidated subsidiaries.
Business Overview
Biogen is a global biopharmaceutical company focused on discovering, developing and delivering worldwide innovative therapies for people living with serious neurological and neurodegenerative diseases as well as related therapeutic adjacencies. Our core growth areas include multiple sclerosis (MS) and neuroimmunology, neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis (ALS), movement disorders, including Parkinson's disease and progressive supranuclear palsy, Alzheimer's disease (AD) and dementia and ophthalmology. We are also focused on discovering, developing and delivering worldwide innovative therapies in our emerging growth areas of immunology, neurocognitive disorders, acute neurology and pain. In addition, we commercialize biosimilars of advanced biologics. We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities.
Our marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS, SPINRAZA for the treatment of SMA and FUMADERM for the treatment of severe plaque psoriasis. We also have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, chronic lymphocytic leukemia (CLL) and other conditions, RITUXAN HYCELA for the treatment of non-Hodgkin's lymphoma and CLL, GAZYVA for the treatment of CLL and follicular lymphoma, OCREVUS for the treatment of primary progressive MS (PPMS) and relapsing MS (RMS) and other potential anti-CD20 therapies pursuant to our collaboration arrangements with Genentech, Inc. (Genentech), a wholly-owned member of the Roche Group. For additional information on our collaboration arrangements with Genentech, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (2018 Form 10-K).
Our innovative drug development and commercialization activities are complemented by our biosimilar products that expand access to medicines and reduce the cost burden for healthcare systems. Through Samsung Bioepis Co., Ltd. (Samsung Bioepis), our joint venture with Samsung BioLogics Co., Ltd. (Samsung BioLogics), we market and sell BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an adalimumab biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing REMICADE, in the European Union (E.U.). For additional information on our collaboration arrangement with Samsung Bioepis, please read Note 17, Collaborative and Other Relationships, to these unaudited condensed consolidated financial statements (condensed consolidated financial statements).
Basis of Presentation
In the opinion of management, our condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The information included in this quarterly report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and the accompanying notes included in our 2018 Form 10-K. Our accounting policies are described in the “Notes to Consolidated Financial Statements” in our 2018 Form 10-K and updated, as necessary, in this report. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2019, are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.
We operate as one operating segment, focused on discovering, developing and delivering worldwide therapies for people living with serious neurological and neurodegenerative diseases as well as related therapeutic adjacencies.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Consolidation
Our condensed consolidated financial statements reflect our financial statements, those of our wholly-owned subsidiaries and those of certain variable interest entities where we are the primary beneficiary. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interests in our condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and transactions are eliminated in consolidation.
In determining whether we are the primary beneficiary of an entity, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. These considerations impact the way we account for our existing collaborative relationships and other arrangements. We continuously assess whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in us consolidating or deconsolidating one or more of our collaborators or partners.
Use of Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates.
Assets and Liabilities Held For Sale
Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, we cease depreciation and separately present such assets and liabilities of the disposal group in our condensed consolidated balance sheet. We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale. We assess the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and recognize any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the remeasured carrying value does not exceed the carrying value less costs to sell of the asset or disposal group at the time it was initially classified as held for sale.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed below, we do not believe that the adoption of recently issued standards have or may have a material impact on our condensed consolidated financial statements or disclosures.
Leases
In February 2016 the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), a new standard issued to increase transparency and comparability among organizations related to their leasing activities. This standard established a right-of-use model that requires all lessees to recognize right-of-use assets and lease liabilities on their balance sheet that arise from leases as well as provide disclosures with respect to certain qualitative and quantitative information related to a company's leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date: ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvement for Lessors, and ASU No. 2019-01, Leases (Topic 842): Codification Improvements. We adopted these amendments with ASU 2016-02 (collectively, the new leasing standards) effective January 1, 2019.
We adopted the new leasing standards using the modified retrospective transition approach, as of January 1, 2019, with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, we elected the package of transition practical expedients, which allowed us to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. We also elected the practical expedient to not reassess certain land easements and made an accounting policy election to not recognize leases with an initial term of 12 months or less within our condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in our condensed consolidated statements of income over the lease term. Upon adoption of the new leasing standards we recognized an operating lease asset of approximately $463.0 million and a corresponding operating lease liability of approximately $526.0 million, which are included in our condensed consolidated balance sheet. The adoption of the new leasing standards did not have an impact on our condensed consolidated statements of income.
We determine if an arrangement is a lease at contract inception. Operating lease assets represent our right to use an underlying asset for the lease term and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, we include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. We use the implicit rate when readily determinable and use our incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments. Our incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease.
The lease payments used to determine our operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable and are recognized in our operating lease assets in our condensed consolidated balance sheets. In addition, our contracts contain lease and non-lease components. We separate lease payments for the identified assets from any non-lease payments included in the contract. For certain equipment leases, such as vehicles, we apply a portfolio approach to effectively account for the operating lease assets and liabilities.
Our operating leases are reflected in operating lease assets, accrued expenses and other and in long-term operating lease liabilities in our condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We also have real estate lease agreements which are subleased to third parties. Operating leases for which we are the sublessor are included in accrued expenses and other and other long-term liabilities in our condensed consolidated balance sheets. We recognize sublease income on a straight-line basis over the lease term in our condensed consolidated statements of income.
For additional information on the adoption of the new leasing standards, please read Note 11, Leases, to these condensed consolidated financial statements.
Credit Losses
In June 2016 the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2020. These standards require that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Based on the composition of our investment portfolio and other financial assets, current market conditions and historical credit loss activity, the adoption of these standards is not expected to have a material impact on our consolidated financial position and results of operations and related disclosures.
Debt Securities
In March 2017 the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This standard amends the amortization period for certain purchased callable debt securities held at a premium by shortening the amortization period to the earliest call date. This standard became effective for us on January 1, 2019, and was adopted using a modified retrospective transition approach. The adoption of this standard did not result in a significant adjustment to our marketable debt securities.
Fair Value Measurements
In August 2018 the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. This standard will become effective for us on January 1, 2020. We do not expect that the adoption of this standard will have a material impact on our disclosures.
Derivative Instruments and Hedging Activities
In October 2018 the FASB issued ASU No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. This standard permits the use of the OIS rate based on the SOFR as a United States (U.S.) benchmark interest rate for hedge accounting purposes under Accounting Standards Codification (ASC) 815, Derivative and Hedging. This standard became effective for us on January 1, 2019, and did not have an impact on our condensed consolidated results of operations or financial position.
Collaborative Arrangements
In November 2018 the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This standard makes targeted improvements for collaborative arrangements as follows:
|
|
•
|
Clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under ASC 606, Revenue from Contracts with Customers, when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in ASC 606 should be applied, including recognition, measurement, presentation and disclosure requirements;
|
|
|
•
|
Adds unit-of-account guidance to ASC 808, Collaborative Arrangements, to align with the guidance in ASC 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of ASC 606; and
|
|
|
•
|
Precludes a company from presenting transactions with collaborative arrangement participants that are not directly related to sales to third parties with revenue recognized under ASC 606 if the collaborative arrangement participant is not a customer.
|
This standard will become effective for us on January 1, 2020; however, early adoption is permitted. A retrospective transition approach is required for either all contracts or only for contracts that are not completed at the date of initial application of ASC 606, with a cumulative adjustment to opening retained earnings, as of January 1, 2018. We are currently evaluating the potential impact that this standard may have on our consolidated financial position, results of operations and related disclosures.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
2. Acquisitions
Acquisition of Nightstar Therapeutics plc
On June 7, 2019, we completed our acquisition of all of the outstanding shares of Nightstar Therapeutics plc (NST), a clinical-stage gene therapy company focused on adeno-associated virus treatments for inherited retinal disorders. As a result of this acquisition, we added two mid-to late-stage clinical assets, as well as preclinical programs, in ophthalmology. These assets include BIIB111 (formerly known as NSR-REP1), which is in Phase 3 development for the potential treatment of choroideremia, a rare, degenerative, X-linked inherited retinal disorder that leads to blindness and currently has no approved treatments, and BIIB112 (formerly known as NSR-RPGR), which is in Phase 2/3 development for the potential treatment of X-linked retinitis pigmentosa, which is a rare inherited retinal disease with no currently approved treatments.
Under the terms of this acquisition, we paid NST shareholders $25.50 in cash for each issued and outstanding NST share, which totaled $847.6 million. In addition, we paid $4.6 million in cash for equity compensation, which is attributable to pre-combination services and is reflected as a component of the total purchase price paid. The fair value of equity compensation attributable to the post-combination service period was $26.2 million, of which $18.4 million was recognized as a charge to selling, general and administrative expense with the remaining $7.8 million as a charge to research and development expense in our condensed consolidated statements of income. These amounts were associated with the accelerated vesting of stock options previously granted to NST employees and were fully paid in cash as of June 30, 2019. We funded this acquisition through available cash and accounted for it as an acquisition of a business.
The following table summarizes the estimated fair values of the separately identifiable assets acquired and liabilities assumed as of June 7, 2019:
|
|
|
|
|
(In millions)
|
|
Cash and cash equivalents
|
$
|
107.8
|
|
Marketable securities
|
7.5
|
|
In-process research and development intangible assets
|
700.0
|
|
Goodwill
|
112.6
|
|
Deferred tax liability
|
(77.0
|
)
|
Other, net
|
1.3
|
|
Total purchase price
|
$
|
852.2
|
|
Our estimate of the fair value of the in-process research and development (IPR&D) programs acquired was determined through a probability adjusted discounted cash flow analysis utilizing a discount rate of 12.5%. This valuation was primarily driven by the value associated with BIIB111. The fair value associated with BIIB111 was $480.0 million. We have recorded an additional IPR&D asset related to BIIB112 of $220.0 million. Some of the more significant assumptions utilized in our asset valuations included the estimated net cash flows for each year for each asset or product, including net revenues, cost of sales, research and development and other operating expenses, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream as well as other factors. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements.
We have recognized goodwill in relation to the fair value associated with NST workforce's expertise and early research in retinal disorders. We also recognized goodwill in relation to the establishment of a deferred tax liability for the acquired IPR&D intangible assets, which have no tax basis. This deferred tax liability is net of the related impacts on the deferred taxes for global intangible low-taxed income (GILTI). Goodwill that is tax deductible for GILTI purposes is approximately $35.0 million.
Our preliminary estimate of the fair value of the specifically identifiable assets acquired and liabilities assumed as of the date of acquisition is subject to the finalization of management’s analysis related to certain matters, such as preparing and submitting certain income tax and non-income tax filings and returns. The final determination of these fair values will be completed as additional information becomes available but no later than one year from the date of acquisition. Although the final determination may result in asset and liability fair values that are different
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
than the preliminary estimates of these amounts, it is not expected that those differences will be material to our financial position.
Pro forma results of operations as a result of this acquisition have not been presented as this acquisition is not material to our condensed consolidated statements of income. Subsequent to the acquisition date, our results of operations include the results of operations of NST.
3. Divestitures
Divestiture of Hillerød, Denmark Manufacturing Operations
On August 1, 2019, we completed our sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM Corporation (FUJIFILM). Upon the closing of this transaction, we received approximately $881.9 million in cash, which is subject to the finalization of certain working capital adjustments and may be further adjusted based on other contractual terms, which are discussed below. We determined that the operations disposed of in this transaction did not meet the criteria to be classified as discontinued operations under the applicable guidance.
As part of this transaction, we have provided FUJIFILM with certain minimum batch production commitment guarantees. There is a risk that the minimum contractual batch production commitments will not be met. Based upon current estimates we expect to incur an adverse commitment obligation of approximately $114.0 million associated with such guarantees. We may adjust this estimate based upon changes in business conditions, which may result in the recognition of additional losses. We also may be obligated to indemnify FUJIFILM for liabilities that existed relating to certain business activities incurred prior to the closing of this transaction.
In addition, we may earn certain contingent payments based on future manufacturing activities at the Hillerød facility. For the disposition of a business, our policy is to recognize contingent consideration when the consideration is realizable. We currently believe the probability of earning these payments is remote and therefore we did not include these contingent payments in our calculation of the fair value of the operations.
As part of this transaction, we entered into certain manufacturing services agreements with FUJIFILM pursuant to which FUJIFILM will use the Hillerød facility to produce commercial products for us, such as TYSABRI, as well as other third-party products.
In connection with this transaction we recognized a total net loss of approximately $160.2 million in our condensed consolidated statements of income. This loss included a pre-tax loss of $95.5 million, which reflects a decrease of $17.7 million to our previously recorded pre-tax loss. The loss recognized was based on exchange rates and business conditions on the closing date of this transaction, and included costs to sell our Hillerød, Denmark manufacturing operations of approximately $11.2 million and our estimate of the fair value of an adverse commitment of $114.0 million associated with the guarantee of future minimum batch production at the Hillerød facility. The value of this adverse commitment was determined using a probability-weighted estimate of future manufacturing activity. We also recorded a tax expense of $64.7 million related to this transaction.
In addition, we sold to FUJIFILM $41.8 million of raw materials that were remaining at the Hillerød facility on the closing date of this transaction. These materials were sold at cost, which approximates fair value.
Our estimate of the fair value of the adverse commitment is a Level 3 measurement and is based on forecasted batch production at the Hillerød facility.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
4. Revenues
Product Revenues
Revenues by product are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
United
States
|
|
Rest of
World
|
|
Total
|
|
United
States
|
|
Rest of
World
|
|
Total
|
Multiple Sclerosis (MS):
|
|
|
|
|
|
|
|
|
|
|
|
TECFIDERA
|
$
|
842.0
|
|
|
$
|
280.4
|
|
|
$
|
1,122.4
|
|
|
$
|
842.1
|
|
|
$
|
247.9
|
|
|
$
|
1,090.0
|
|
Interferon*
|
360.3
|
|
|
169.7
|
|
|
530.0
|
|
|
421.5
|
|
|
168.6
|
|
|
590.1
|
|
TYSABRI
|
263.0
|
|
|
220.6
|
|
|
483.6
|
|
|
253.0
|
|
|
217.2
|
|
|
470.2
|
|
FAMPYRA
|
—
|
|
|
24.2
|
|
|
24.2
|
|
|
—
|
|
|
22.5
|
|
|
22.5
|
|
Subtotal: MS product revenues
|
1,465.3
|
|
|
694.9
|
|
|
2,160.2
|
|
|
1,516.6
|
|
|
656.2
|
|
|
2,172.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spinal Muscular Atrophy:
|
|
|
|
|
|
|
|
|
|
|
|
SPINRAZA
|
236.7
|
|
|
310.4
|
|
|
547.1
|
|
|
223.9
|
|
|
243.8
|
|
|
467.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biosimilars:
|
|
|
|
|
|
|
|
|
|
|
|
BENEPALI
|
—
|
|
|
115.9
|
|
|
115.9
|
|
|
—
|
|
|
123.4
|
|
|
123.4
|
|
IMRALDI
|
—
|
|
|
49.3
|
|
|
49.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
FLIXABI
|
—
|
|
|
18.4
|
|
|
18.4
|
|
|
—
|
|
|
11.4
|
|
|
11.4
|
|
Subtotal: Biosimilar product revenues
|
—
|
|
|
183.6
|
|
|
183.6
|
|
|
—
|
|
|
134.8
|
|
|
134.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
FUMADERM
|
—
|
|
|
3.8
|
|
|
3.8
|
|
|
—
|
|
|
4.8
|
|
|
4.8
|
|
Total product revenues
|
$
|
1,702.0
|
|
|
$
|
1,192.7
|
|
|
$
|
2,894.7
|
|
|
$
|
1,740.5
|
|
|
$
|
1,039.6
|
|
|
$
|
2,780.1
|
|
*Interferon includes AVONEX and PLEGRIDY.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
United
States
|
|
Rest of
World
|
|
Total
|
|
United
States
|
|
Rest of
World
|
|
Total
|
Multiple Sclerosis (MS):
|
|
|
|
|
|
|
|
|
|
|
|
TECFIDERA
|
$
|
2,429.5
|
|
|
$
|
841.9
|
|
|
$
|
3,271.4
|
|
|
$
|
2,396.8
|
|
|
$
|
766.9
|
|
|
$
|
3,163.7
|
|
Interferon*
|
1,067.3
|
|
|
518.0
|
|
|
1,585.3
|
|
|
1,237.5
|
|
|
528.4
|
|
|
1,765.9
|
|
TYSABRI
|
772.3
|
|
|
647.0
|
|
|
1,419.3
|
|
|
768.2
|
|
|
631.3
|
|
|
1,399.5
|
|
FAMPYRA
|
—
|
|
|
71.2
|
|
|
71.2
|
|
|
—
|
|
|
69.9
|
|
|
69.9
|
|
ZINBRYTA
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1.4
|
|
Subtotal: MS product revenues
|
4,269.1
|
|
|
2,078.1
|
|
|
6,347.2
|
|
|
4,402.5
|
|
|
1,997.9
|
|
|
6,400.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spinal Muscular Atrophy:
|
|
|
|
|
|
|
|
|
|
|
|
SPINRAZA
|
690.6
|
|
|
863.2
|
|
|
1,553.8
|
|
|
617.8
|
|
|
636.5
|
|
|
1,254.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biosimilars:
|
|
|
|
|
|
|
|
|
|
|
|
BENEPALI
|
—
|
|
|
360.2
|
|
|
360.2
|
|
|
—
|
|
|
359.9
|
|
|
359.9
|
|
IMRALDI
|
—
|
|
|
132.3
|
|
|
132.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
FLIXABI
|
—
|
|
|
49.9
|
|
|
49.9
|
|
|
—
|
|
|
29.2
|
|
|
29.2
|
|
Subtotal: Biosimilar product revenues
|
—
|
|
|
542.4
|
|
|
542.4
|
|
|
—
|
|
|
389.1
|
|
|
389.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
FUMADERM
|
—
|
|
|
11.6
|
|
|
11.6
|
|
|
—
|
|
|
17.3
|
|
|
17.3
|
|
Total product revenues
|
$
|
4,959.7
|
|
|
$
|
3,495.3
|
|
|
$
|
8,455.0
|
|
|
$
|
5,020.3
|
|
|
$
|
3,040.8
|
|
|
$
|
8,061.1
|
|
*Interferon includes AVONEX and PLEGRIDY.
We recognized revenues from two wholesalers accounting for 28.7% and 18.4% of gross product revenues for the three months ended September 30, 2019, and 30.1% and 17.0% of gross product revenues for the nine months ended September 30, 2019.
We recognized revenues from two wholesalers accounting for 30.7% and 19.3% of gross product revenues for the three months ended September 30, 2018, and 32.4% and 18.0% of gross product revenues for the nine months ended September 30, 2018.
An analysis of the change in reserves for discounts and allowances is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Discounts
|
|
Contractual
Adjustments
|
|
Returns
|
|
Total
|
Balance, as of December 31, 2018
|
$
|
127.8
|
|
|
$
|
888.8
|
|
|
$
|
34.7
|
|
|
$
|
1,051.3
|
|
Current provisions relating to sales in current year
|
480.3
|
|
|
2,149.7
|
|
|
16.1
|
|
|
2,646.1
|
|
Adjustments relating to prior years
|
(0.4
|
)
|
|
(46.7
|
)
|
|
4.6
|
|
|
(42.5
|
)
|
Payments/credits relating to sales in current year
|
(349.3
|
)
|
|
(1,510.0
|
)
|
|
(0.7
|
)
|
|
(1,860.0
|
)
|
Payments/credits relating to sales in prior years
|
(129.3
|
)
|
|
(564.4
|
)
|
|
(15.4
|
)
|
|
(709.1
|
)
|
Balance, as of September 30, 2019
|
$
|
129.1
|
|
|
$
|
917.4
|
|
|
$
|
39.3
|
|
|
$
|
1,085.8
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
The total reserves above, which are included in our condensed consolidated balance sheets, are summarized as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Reduction of accounts receivable, net
|
$
|
201.6
|
|
|
$
|
176.6
|
|
Component of accrued expenses and other
|
884.2
|
|
|
874.7
|
|
Total revenue-related reserves
|
$
|
1,085.8
|
|
|
$
|
1,051.3
|
|
Revenues from Anti-CD20 Therapeutic Programs
Revenues from anti-CD20 therapeutic programs are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Biogen’s share of pre-tax profits in the U.S. for RITUXAN, RITUXAN HYCELA and GAZYVA
|
$
|
393.2
|
|
|
$
|
358.0
|
|
|
$
|
1,161.2
|
|
|
$
|
1,066.6
|
|
Other revenues from anti-CD20 therapeutic programs
|
202.6
|
|
|
153.7
|
|
|
528.4
|
|
|
378.7
|
|
Total revenues from anti-CD20 therapeutic programs
|
$
|
595.8
|
|
|
$
|
511.7
|
|
|
$
|
1,689.6
|
|
|
$
|
1,445.3
|
|
For additional information on our collaboration arrangements with Genentech, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K.
Other Revenues
Other revenues are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenues from collaborative and other relationships:
|
|
|
|
|
|
|
|
(Loss) profit earned under our 50% share of the co-promotion losses on ZINBRYTA in the U.S. with AbbVie
|
$
|
0.3
|
|
|
$
|
(0.7
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
(7.9
|
)
|
Revenues earned under our technical development agreement, manufacturing services agreements and royalty revenues on biosimilar products with Samsung Bioepis
|
12.9
|
|
|
48.1
|
|
|
89.9
|
|
|
80.7
|
|
Other royalty and corporate revenues:
|
|
|
|
|
|
|
|
|
|
Royalty
|
3.3
|
|
|
7.9
|
|
|
9.9
|
|
|
35.8
|
|
Other corporate
|
93.1
|
|
|
91.9
|
|
|
462.4
|
|
|
311.6
|
|
Total other revenues
|
$
|
109.6
|
|
|
$
|
147.2
|
|
|
$
|
562.0
|
|
|
$
|
420.2
|
|
Other corporate revenues primarily reflect amounts earned under contract manufacturing agreements with our strategic partners, including Bioverativ Inc. (Bioverativ). During the three and nine months ended September 30, 2019, we recognized $65.6 million and $306.9 million, respectively, in revenues under the manufacturing and supply agreement with Bioverativ entered into in connection with the spin-off of our hemophilia business, compared to $36.5 million and $131.1 million, respectively, in the prior year comparative periods.
During the third quarter of 2019 we amended our agreement with a contract manufacturing customer. Under the amended agreement, we will license certain of our manufacturing-related intellectual property to the customer. We will be eligible to receive $500.0 million in a series of three payments. The first payment is due upon a regulatory achievement related to the customer’s product manufactured using our manufacturing-related intellectual property, with subsequent payments payable upon the first and second anniversaries of the regulatory achievement. We do not expect to recognize any amounts related to this arrangement in 2019 as we do not expect the regulatory achievement to occur until 2020. If we earn this payment, we expect to allocate the consideration between the license for the manufacturing-related intellectual property and the manufacturing product supply services.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
For additional information on our collaboration arrangement with Samsung Bioepis, please read Note 17, Collaborative and Other Relationships, to these condensed consolidated financial statements. For additional information on our collaboration arrangement with AbbVie Inc., please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K. For additional information on our manufacturing and supply agreement with Bioverativ, please read Note 3, Hemophilia Spin-Off, to our consolidated financial statements included in our 2018 Form 10-K.
5. Inventory
The components of inventory are summarized as follows:
|
|
|
|
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Raw materials
|
$
|
159.3
|
|
|
$
|
196.3
|
|
Work in process
|
421.7
|
|
|
606.7
|
|
Finished goods
|
170.8
|
|
|
133.5
|
|
Total inventory
|
$
|
751.8
|
|
|
$
|
936.5
|
|
|
|
|
|
Balance Sheet Classification:
|
|
|
|
Inventory
|
$
|
751.8
|
|
|
$
|
929.9
|
|
Investments and other assets
|
—
|
|
|
6.6
|
|
Total inventory
|
$
|
751.8
|
|
|
$
|
936.5
|
|
In the first quarter of 2019 we sold to Bioverativ hemophilia-related inventory on hand with a cost basis totaling $173.5 million pursuant to the terms of the manufacturing and supply agreement with Bioverativ entered into in connection with the spin-off of our hemophilia business.
Long-term inventory, which primarily consists of work in process, is included in investments and other assets in our condensed consolidated balance sheets.
Divestiture of Hillerød, Denmark Manufacturing Operations
On August 1, 2019, we completed our sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM. This transaction included the sale of $14.0 million of work in process inventory.
In addition, we sold to FUJIFILM approximately $41.8 million of raw materials that were remaining at the Hillerød facility on the closing date of this transaction. These materials were sold at cost, which approximates fair value.
For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
6. Intangible Assets and Goodwill
Intangible Assets
Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019
|
|
As of December 31, 2018
|
(In millions)
|
Estimated
Life
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
|
Cost
|
|
Accumulated
Amortization
|
|
Net
|
Out-licensed patents
|
13-23 years
|
|
$
|
543.3
|
|
|
$
|
(542.5
|
)
|
|
$
|
0.8
|
|
|
$
|
543.3
|
|
|
$
|
(542.3
|
)
|
|
$
|
1.0
|
|
Developed
technology
|
15-28 years
|
|
3,005.3
|
|
|
(2,764.6
|
)
|
|
240.7
|
|
|
3,005.3
|
|
|
(2,734.8
|
)
|
|
270.5
|
|
In-process research and development
|
Indefinite until commercialization
|
|
954.8
|
|
|
—
|
|
|
954.8
|
|
|
476.0
|
|
|
—
|
|
|
476.0
|
|
Trademarks and
tradenames
|
Indefinite
|
|
64.0
|
|
|
—
|
|
|
64.0
|
|
|
64.0
|
|
|
—
|
|
|
64.0
|
|
Acquired and in-licensed rights
and patents
|
4-18 years
|
|
3,638.7
|
|
|
(1,506.6
|
)
|
|
2,132.1
|
|
|
3,638.7
|
|
|
(1,330.2
|
)
|
|
2,308.5
|
|
Total intangible assets
|
|
|
$
|
8,206.1
|
|
|
$
|
(4,813.7
|
)
|
|
$
|
3,392.4
|
|
|
$
|
7,727.3
|
|
|
$
|
(4,607.3
|
)
|
|
$
|
3,120.0
|
|
For the three and nine months ended September 30, 2019, amortization and impairment of acquired intangible assets totaled $283.9 million and $422.2 million, respectively, compared to $281.9 million and $493.2 million, respectively, in the prior year comparative periods.
Amortization and impairments of acquired intangible assets for the three and nine months ended September 30, 2019, reflects the impact of a $215.9 million impairment charge related to certain IPR&D assets associated with the Phase 2b study of BG00011 (STX-100) for the potential treatment of idiopathic pulmonary fibrosis (IPF), which was discontinued during the third quarter of 2019, as discussed below.
Amortization of acquired intangible assets for the three and nine months ended September 30, 2018, reflects the impact of impairment charges related to certain IPR&D assets associated with our vixotrigine (BIIB074) program totaling $189.3 million, as discussed below.
Amortization of acquired intangible assets, excluding impairment charges, totaled $68.0 million and $206.3 million for the three and nine months ended September 30, 2019, respectively, compared to $92.6 million and $303.9 million, respectively, in the prior year comparative periods.
The decrease in amortization of acquired intangible assets, excluding impairment charges, was primarily due to a net overall decrease in our expected rate of amortization for acquired intangible assets. This decrease was primarily due to lower amortization subsequent to the impairment in the fourth quarter of 2018 of the U.S. license to Forward Pharma A/S' (Forward Pharma) intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, and higher expected lifetime revenues of TYSABRI.
Developed Technology
Developed technology primarily relates to our AVONEX product, which was recorded in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. The net book value of this asset as of September 30, 2019, was $236.6 million.
IPR&D
IPR&D represents the fair value assigned to research and development assets that we acquired as part of a business combination and had not yet reached technological feasibility at the date of acquisition. We review amounts capitalized as acquired IPR&D for impairment annually, as of October 31, and whenever events or changes in circumstances indicate to us that the carrying value of the assets might not be recoverable.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
In connection with our acquisition of NST on June 7, 2019, we acquired IPR&D programs with an estimated fair value of $700.0 million. For additional information on our acquisition of NST, please read Note 2, Acquisitions, to these condensed consolidated financial statements.
BG00011
During the third quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of IPF due to safety concerns. As a result, we recognized an impairment charge of approximately $215.9 million during the third quarter of 2019 to reduce the fair value of the IPR&D intangible asset to zero. We also adjusted the value of our contingent consideration obligations related to this asset resulting in a gain of $61.2 million in the third quarter of 2019.
Vixotrigine
During the third quarter of 2018 we completed the Phase 2b study of vixotrigine for the potential treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the potential treatment of PLSR. As a result, we recognized an impairment charge of approximately $60.0 million during the third quarter of 2018 to reduce the fair value of the IPR&D intangible asset to zero.
In addition, we delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of trigeminal neuralgia (TGN) as we awaited the outcome of ongoing interactions with the U.S. Food and Drug Administration (FDA) regarding the design of the Phase 3 studies, a more detailed review of the data from the Phase 2b study of vixotrigine for the potential treatment of PLSR and insights from the Phase 2 study of vixotrigine for the potential treatment of small fiber neuropathy. We reassessed the fair value of the TGN program using reduced expected lifetime revenues, higher expected clinical development costs and a lower cumulative probability of success. As a result of that assessment, we recognized an impairment charge of $129.3 million during the third quarter of 2018 to reduce the fair value of the TGN IPR&D intangible asset to $41.8 million at that date. We also adjusted the value of our contingent consideration obligations related to the TGN program to reflect the lower cumulative probabilities of success resulting in a gain of $89.6 million in the third quarter of 2018.
The IPR&D impairment charges were included in amortization of acquired intangible assets and the gain resulting from the remeasurement of our contingent consideration obligation was recorded in (gain) loss on fair value remeasurement of contingent consideration in our condensed consolidated statements of income. The fair values of the intangible assets and contingent consideration obligations were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenues, costs and probabilities of success.
Acquired and In-licensed Rights and Patents
Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from Elan Pharma International Ltd., an affiliate of Elan Corporation plc. Acquired and in-licensed rights and patents also includes our rest of world license to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, and other amounts related to our other marketed products and other programs acquired through business combinations. The net book value of the TYSABRI asset as of September 30, 2019, was $1,889.6 million and the net book value of the TECFIDERA asset as of September 30, 2019, was $45.6 million. For additional information on our TECFIDERA license rights, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in our 2018 Form 10-K.
Estimated Future Amortization of Intangible Assets
Our amortization expense is based on the economic consumption and impairment of intangible assets. Our most significant intangible assets are related to our TYSABRI, AVONEX, SPINRAZA and TECFIDERA products and other programs acquired through business combinations. Annually, during our long-range planning cycle, we perform an analysis of anticipated lifetime revenues of our TYSABRI, AVONEX, SPINRAZA and TECFIDERA products. This analysis is also updated whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of any of these products. Impairments are recorded in the period in which they are incurred.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Our most recent long-range planning cycle was completed in the second quarter of 2019. Based upon this most recent analysis, the estimated future amortization of acquired intangible assets for the next five years is expected to be as follows:
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
2019 (remaining three months)
|
$
|
65.0
|
|
2020
|
255.0
|
|
2021
|
215.0
|
|
2022
|
215.0
|
|
2023
|
220.0
|
|
2024
|
210.0
|
|
Goodwill
The following table provides a roll forward of the changes in our goodwill balance:
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
Goodwill, beginning of period
|
$
|
5,706.4
|
|
Increase in goodwill
|
112.6
|
|
Elimination of goodwill allocated to Hillerød, Denmark manufacturing operations
|
(69.5
|
)
|
Other
|
(3.4
|
)
|
Goodwill, end of period
|
$
|
5,746.1
|
|
The increase in goodwill during the nine months ended September 30, 2019, was related to our acquisition of NST. For additional information on our acquisition of NST, please read Note 2, Acquisitions, to these condensed consolidated financial statements.
The elimination of goodwill represents an allocation based upon the relative fair value of our Hillerød, Denmark manufacturing operations. In connection with the divestiture of our Hillerød, Denmark manufacturing operations, our remaining goodwill was reviewed for impairment, and based upon this review, no impairments were recognized. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.
As of September 30, 2019, we had no accumulated impairment losses related to goodwill.
Other includes changes related to foreign currency exchange rate fluctuations.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
7. Fair Value Measurements
The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 (In millions)
|
Total
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
1,655.8
|
|
|
$
|
—
|
|
|
$
|
1,655.8
|
|
|
$
|
—
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
Corporate debt securities
|
2,702.2
|
|
|
—
|
|
|
2,702.2
|
|
|
—
|
|
Government securities
|
868.2
|
|
|
—
|
|
|
868.2
|
|
|
—
|
|
Mortgage and other asset backed securities
|
337.0
|
|
|
—
|
|
|
337.0
|
|
|
—
|
|
Marketable equity securities
|
336.7
|
|
|
18.5
|
|
|
318.2
|
|
|
—
|
|
Derivative contracts
|
161.7
|
|
|
—
|
|
|
161.7
|
|
|
—
|
|
Plan assets for deferred compensation
|
26.3
|
|
|
—
|
|
|
26.3
|
|
|
—
|
|
Total
|
$
|
6,087.9
|
|
|
$
|
18.5
|
|
|
$
|
6,069.4
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative contracts
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
Contingent consideration obligations
|
343.5
|
|
|
—
|
|
|
—
|
|
|
343.5
|
|
Total
|
$
|
353.3
|
|
|
$
|
—
|
|
|
$
|
9.8
|
|
|
$
|
343.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (In millions)
|
Total
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets:
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
705.5
|
|
|
$
|
—
|
|
|
$
|
705.5
|
|
|
$
|
—
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
Corporate debt securities
|
2,459.2
|
|
|
—
|
|
|
2,459.2
|
|
|
—
|
|
Government securities
|
969.6
|
|
|
—
|
|
|
969.6
|
|
|
—
|
|
Mortgage and other asset backed securities
|
260.5
|
|
|
—
|
|
|
260.5
|
|
|
—
|
|
Marketable equity securities
|
615.4
|
|
|
51.7
|
|
|
563.7
|
|
|
—
|
|
Derivative contracts
|
66.9
|
|
|
—
|
|
|
66.9
|
|
|
—
|
|
Plan assets for deferred compensation
|
25.4
|
|
|
—
|
|
|
25.4
|
|
|
—
|
|
Total
|
$
|
5,102.5
|
|
|
$
|
51.7
|
|
|
$
|
5,050.8
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
Derivative contracts
|
$
|
24.6
|
|
|
$
|
—
|
|
|
$
|
24.6
|
|
|
$
|
—
|
|
Contingent consideration obligations
|
409.8
|
|
|
—
|
|
|
—
|
|
|
409.8
|
|
Total
|
$
|
434.4
|
|
|
$
|
—
|
|
|
$
|
24.6
|
|
|
$
|
409.8
|
|
There have been no impairments of our assets measured and carried at fair value during the three and nine months ended September 30, 2019. In addition, there were no changes in valuation techniques or inputs utilized or transfers between fair value measurement levels during the three and nine months ended September 30, 2019. The fair value of Level 2 instruments classified as cash equivalents, marketable debt securities and our marketable equity security investment in Ionis Pharmaceuticals, Inc. (Ionis) were determined through third-party pricing services or an option pricing valuation model. For additional information on our June 2018 investment in Ionis common stock, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K. For a description of our validation procedures related to prices provided by third-party pricing
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
services and our option pricing valuation model, please read Note 1, Summary of Significant Accounting Policies - Fair Value Measurements, to our consolidated financial statements included in our 2018 Form 10-K.
Debt Instruments
The fair and carrying values of our debt instruments, which are Level 2 liabilities, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019
|
|
As of December 31, 2018
|
(In millions)
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
2.900% Senior Notes due September 15, 2020
|
$
|
1,509.9
|
|
|
$
|
1,495.3
|
|
|
$
|
1,489.5
|
|
|
$
|
1,480.8
|
|
3.625% Senior Notes due September 15, 2022
|
1,037.8
|
|
|
996.3
|
|
|
1,000.4
|
|
|
995.5
|
|
4.050% Senior Notes due September 15, 2025
|
1,888.8
|
|
|
1,739.1
|
|
|
1,745.1
|
|
|
1,737.8
|
|
5.200% Senior Notes due September 15, 2045
|
2,054.2
|
|
|
1,722.8
|
|
|
1,802.6
|
|
|
1,722.4
|
|
Total
|
$
|
6,490.7
|
|
|
$
|
5,953.5
|
|
|
$
|
6,037.6
|
|
|
$
|
5,936.5
|
|
The fair values of each of our series of Senior Notes were determined through market, observable and corroborated sources. For additional information on our debt instruments, please read Note 12, Indebtedness, to our consolidated financial statements included in our 2018 Form 10-K.
Contingent Consideration Obligations
In connection with our acquisitions of Convergence Pharmaceuticals Ltd., Stromedix Inc. (Stromedix) and Biogen International Neuroscience GmbH in 2015, 2012 and 2010, respectively, we agreed to make additional payments based upon the achievement of certain milestone events. The following table provides a roll forward of the fair values of our contingent consideration obligations, which includes Level 3 measurements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Fair value, beginning of period
|
$
|
401.3
|
|
|
$
|
499.9
|
|
|
$
|
409.8
|
|
|
$
|
523.6
|
|
Changes in fair value
|
(57.8
|
)
|
|
(87.9
|
)
|
|
(66.3
|
)
|
|
(91.6
|
)
|
Payments
|
—
|
|
|
—
|
|
|
—
|
|
|
(20.0
|
)
|
Fair value, end of period
|
$
|
343.5
|
|
|
$
|
412.0
|
|
|
$
|
343.5
|
|
|
$
|
412.0
|
|
As of September 30, 2019 and December 31, 2018, $196.0 million and $265.0 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our condensed consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and other.
For the three and nine months ended September 30, 2019, changes in the fair value of our contingent consideration obligations were primarily due to the discontinuation of the Phase 2b study of BG00011 for the potential treatment of IPF resulting in a reduction of our contingent consideration obligations of $61.2 million, partially offset by a decrease in interest rates used to revalue our contingent consideration liabilities and the passage of time.
For the three and nine months ended September 30, 2018, changes in the fair value of our contingent consideration obligations were primarily due to lower cumulative probabilities of success related to our vixotrigine program for the potential treatment of TGN, an increase in interest rates used to revalue our contingent consideration liabilities and the passage of time. In addition, we dosed our first patient in the Phase 2b study of BG00011 for the potential treatment of IPF in September 2018 and paid an $81.5 million milestone payment to the former shareholders of Stromedix during the fourth quarter of 2018.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
8. Financial Instruments
The following table summarizes our financial assets with maturities of less than 90 days from the date of purchase included in cash and cash equivalents in our condensed consolidated balance sheets:
|
|
|
|
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Commercial paper
|
$
|
255.9
|
|
|
$
|
231.2
|
|
Overnight reverse repurchase agreements
|
176.9
|
|
|
—
|
|
Money market funds
|
1,103.2
|
|
|
279.5
|
|
Short-term debt securities
|
119.8
|
|
|
194.8
|
|
Total
|
$
|
1,655.8
|
|
|
$
|
705.5
|
|
The carrying values of our commercial paper, including accrued interest, overnight reverse repurchase agreements, money market funds and short-term debt securities approximate fair value due to their short-term maturities.
Our marketable equity securities gains (losses) are recorded in other income (expense), net in our condensed consolidated statements of income. The following tables summarize our marketable debt and equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 (In millions)
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Corporate debt securities
|
|
|
|
|
|
|
|
Current
|
$
|
1,655.9
|
|
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
1,657.4
|
|
Non-current
|
1,040.4
|
|
|
4.7
|
|
|
(0.3
|
)
|
|
1,044.8
|
|
Government securities
|
|
|
|
|
|
|
|
Current
|
435.6
|
|
|
0.5
|
|
|
(0.1
|
)
|
|
436.0
|
|
Non-current
|
431.8
|
|
|
0.8
|
|
|
(0.4
|
)
|
|
432.2
|
|
Mortgage and other asset backed securities
|
|
|
|
|
|
|
|
Current
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
Non-current
|
335.7
|
|
|
1.6
|
|
|
(0.4
|
)
|
|
336.9
|
|
Total marketable debt securities
|
$
|
3,899.5
|
|
|
$
|
9.1
|
|
|
$
|
(1.2
|
)
|
|
$
|
3,907.4
|
|
Marketable equity securities, non-current
|
$
|
218.8
|
|
|
$
|
120.7
|
|
|
$
|
(2.8
|
)
|
|
$
|
336.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018 (In millions)
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Corporate debt securities
|
|
|
|
|
|
|
|
Current
|
$
|
1,608.4
|
|
|
$
|
—
|
|
|
$
|
(0.9
|
)
|
|
$
|
1,607.5
|
|
Non-current
|
854.9
|
|
|
0.7
|
|
|
(3.9
|
)
|
|
851.7
|
|
Government securities
|
|
|
|
|
|
|
|
Current
|
706.1
|
|
|
0.1
|
|
|
(0.4
|
)
|
|
705.8
|
|
Non-current
|
264.0
|
|
|
0.1
|
|
|
(0.3
|
)
|
|
263.8
|
|
Mortgage and other asset backed securities
|
|
|
|
|
|
|
|
Current
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
Non-current
|
260.5
|
|
|
0.4
|
|
|
(0.5
|
)
|
|
260.4
|
|
Total marketable debt securities
|
$
|
3,694.0
|
|
|
$
|
1.3
|
|
|
$
|
(6.0
|
)
|
|
$
|
3,689.3
|
|
Marketable equity securities, non-current
|
$
|
496.2
|
|
|
$
|
127.7
|
|
|
$
|
(8.5
|
)
|
|
$
|
615.4
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Summary of Contractual Maturities: Available-for-Sale Securities
The estimated fair value and amortized cost of our marketable debt securities available-for-sale by contractual maturity are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019
|
|
As of December 31, 2018
|
(In millions)
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
Due in one year or less
|
$
|
2,091.6
|
|
|
$
|
2,093.5
|
|
|
$
|
2,314.6
|
|
|
$
|
2,313.4
|
|
Due after one year through five years
|
1,686.0
|
|
|
1,691.7
|
|
|
1,235.9
|
|
|
1,232.7
|
|
Due after five years
|
121.9
|
|
|
122.2
|
|
|
143.5
|
|
|
143.2
|
|
Total available-for-sale securities
|
$
|
3,899.5
|
|
|
$
|
3,907.4
|
|
|
$
|
3,694.0
|
|
|
$
|
3,689.3
|
|
The average maturity of our marketable debt securities available-for-sale as of September 30, 2019 and December 31, 2018, were approximately 15 months and 12 months, respectively.
Proceeds from Marketable Debt Securities
The proceeds from maturities and sales of marketable debt securities and resulting realized gains and losses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Proceeds from maturities and sales
|
$
|
611.8
|
|
|
$
|
1,192.0
|
|
|
$
|
3,867.6
|
|
|
$
|
7,994.7
|
|
Realized gains
|
$
|
0.7
|
|
|
$
|
0.4
|
|
|
$
|
2.3
|
|
|
$
|
3.0
|
|
Realized losses
|
$
|
(0.1
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(10.8
|
)
|
Strategic Investments
As of September 30, 2019 and December 31, 2018, our strategic investment portfolio was comprised of investments totaling $394.5 million and $676.3 million, respectively, which is included in investments and other assets in our condensed consolidated balance sheet.
Our strategic investment portfolio includes investments in equity securities of certain biotechnology companies, which are reflected within our disclosures included in Note 7, Fair Value Measurements, to these condensed consolidated financial statements, venture capital funds where the underlying investments are in equity securities of certain biotechnology companies and non-marketable equity securities.
Our investments in equity securities include shares of Ionis common stock acquired in June 2018. This investment is classified as a Level 2 marketable security due to certain holding period restrictions and is remeasured each reporting period and carried at fair value. The effect of the holding period restrictions on our investment in Ionis common stock valuation are estimated using an option pricing valuation model. The most significant assumptions within the model are the term of the restrictions and the stock price volatility, which is based upon historical volatility of similar companies. We also use a constant maturity risk-free interest rate to match the remaining term of the restrictions on our investment in Ionis common stock and a dividend yield of zero based upon the fact that Ionis and similar companies generally have not historically granted cash dividends. The remainder of our investments in equity securities of certain publicly-traded biotechnology companies are regularly measured and carried at fair value and classified as Level 1.
The decrease in our strategic investment portfolio for the nine months ended September 30, 2019, primarily reflects our sale of a portion of our investment in Ionis common stock for approximately $382.0 million as well as our sale of our investment in a non-marketable equity security, partially offset by an increase in the fair value of our remaining investment in Ionis common stock.
For additional information on our June 2018 investment in Ionis common stock, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
9. Derivative Instruments
Foreign Currency Forward Contracts - Hedging Instruments
Due to the global nature of our operations, portions of our revenues and operating expenses are recorded in currencies other than the U.S. dollar. The value of revenues and operating expenses measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. In order to mitigate these changes, we use foreign currency forward contracts to lock in exchange rates associated with a portion of our forecasted international revenues and operating expenses.
Foreign currency forward contracts in effect as of September 30, 2019 and December 31, 2018, had durations of 1 to 15 months and 1 to 12 months, respectively. These contracts have been designated as cash flow hedges and unrealized gains or losses on the portion of these foreign currency forward contracts that are included in the effectiveness test are reported in accumulated other comprehensive income (loss) (referred to as AOCI in the tables below). Realized gains and losses of such contracts are recognized in revenues when the sale of product in the currency being hedged is recognized and in operating expenses when the expense in the currency being hedged is recorded. We recognize all cash flow hedge reclassifications from accumulated other comprehensive income and fair value changes of excluded portions in the same line item in our condensed consolidated statements of income that has been impacted by the hedged item.
The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenues and operating expenses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
(In millions)
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Euro
|
$
|
1,943.7
|
|
|
$
|
1,701.4
|
|
British pound
|
60.9
|
|
|
215.3
|
|
Swiss franc
|
36.9
|
|
|
131.4
|
|
Japanese yen
|
29.8
|
|
|
98.8
|
|
Canadian dollar
|
25.0
|
|
|
92.2
|
|
Total foreign currency forward contracts
|
$
|
2,096.3
|
|
|
$
|
2,239.1
|
|
The pre-tax portion of the fair value of these foreign currency forward contracts that were included in accumulated other comprehensive income (loss) in total equity reflected net gains of $65.7 million and $27.3 million as of September 30, 2019 and December 31, 2018, respectively. We expect the net gains of $65.7 million to be settled over the next 15 months, of which $59.8 million of these gains are expected to be settled over the next 12 months, with any amounts in accumulated other comprehensive income (loss) to be reported as an adjustment to revenues or operating expenses. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of September 30, 2019 and December 31, 2018, credit risk did not change the fair value of our foreign currency forward contracts.
The following tables summarize the effect of foreign currency forward contracts designated as hedging instruments in our condensed consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
Net Gains/(Losses)
Reclassified from AOCI into Operating Income (in millions)
|
|
Net Gains/(Losses)
Recognized in Operating Income (in millions)
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
Revenues
|
|
$
|
35.2
|
|
|
$
|
(8.4
|
)
|
|
Revenues
|
|
$
|
0.8
|
|
|
$
|
0.3
|
|
Operating expenses
|
|
$
|
(0.8
|
)
|
|
$
|
(0.3
|
)
|
|
Operating expenses
|
|
$
|
0.4
|
|
|
$
|
0.4
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
Net Gains/(Losses)
Reclassified from AOCI into Operating Income (in millions)
|
|
Net Gains/(Losses)
Recognized in Operating Income (in millions)
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
Revenues
|
|
$
|
79.8
|
|
|
$
|
(51.7
|
)
|
|
Revenues
|
|
$
|
8.2
|
|
|
$
|
7.3
|
|
Operating expenses
|
|
$
|
(2.0
|
)
|
|
$
|
0.6
|
|
|
Operating expenses
|
|
$
|
(0.8
|
)
|
|
$
|
—
|
|
Interest Rate Contracts - Hedging Instruments
We have entered into interest rate swap contracts on certain borrowing transactions to manage our exposure to interest rate changes.
In connection with the issuance of our 2.90% Senior Notes, we entered into interest rate swaps with an aggregate notional amount of $675.0 million, which expire on September 15, 2020. The interest rate swap contracts are designated as hedges of the fair value changes in our 2.90% Senior Notes attributable to changes in interest rates. The carrying value of our 2.90% Senior Notes as of September 30, 2019 and December 31, 2018, includes approximately $2.1 million and $14.5 million, respectively, related to changes in the fair value of these interest rate swap contracts. Since the specific terms and notional amount of the swaps match the debt being hedged, it is assumed to be a highly effective hedge and all changes in the fair value of the swaps are recorded as a component of our 2.90% Senior Notes with no net impact recorded in income. Any net interest payments made or received on the interest rate swap contracts are recorded as a component of interest expense in our condensed consolidated statements of income.
Net Investment Hedges - Hedging Instruments
In February 2012 we entered into a joint venture agreement with Samsung BioLogics, establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar products. In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018 and, upon closing, we paid 759.5 billion South Korean won ($676.6 million) to Samsung BioLogics. Our investment in the equity of Samsung Bioepis is exposed to the currency fluctuations in the South Korean won.
In order to mitigate the currency fluctuations between the U.S. dollar and South Korean won, we have entered into foreign currency forward contracts. Foreign currency forward contracts in effect as of September 30, 2019, had remaining durations of one month. These contracts have been designated as net investment hedges. We recognize changes in the spot exchange rate in accumulated other comprehensive income (loss). The pre-tax portion of the fair value of these foreign currency forward contracts that were included in accumulated other comprehensive income (loss) in total equity reflected net gains of $41.6 million and net losses of $3.8 million as of September 30, 2019 and December 31, 2018, respectively. We exclude fair value changes related to the forward rate from our hedging relationship and will amortize the forward points in other income (expense), net in our condensed consolidated statements of income over the term of the contract. The pre-tax portion of the fair value of the forward points that were included in accumulated other comprehensive income (loss) in total equity reflected gains of $8.8 million and $7.3 million as of September 30, 2019 and December 31, 2018, respectively.
The following tables summarize the effect of our net investment hedge in our condensed consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
Net Gains/(Losses)
Recognized in Other Comprehensive Income (Effective Portion) (in millions)
|
|
Net Gains/(Losses)
Recognized in Other Comprehensive Income (Amounts Excluded from Effectiveness Testing)
(in millions)
|
|
Net Gains/(Losses)
Recognized in Net Income
(Amounts Excluded from Effectiveness Testing) (in millions)
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
Gains (losses) on net investment hedge
|
|
$
|
22.0
|
|
|
$
|
—
|
|
|
Gains (losses) on net investment hedge
|
|
$
|
1.4
|
|
|
$
|
—
|
|
|
Other income (expense)
|
|
$
|
2.2
|
|
|
$
|
—
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
|
Net Gains/(Losses)
Recognized in Other Comprehensive Income (Effective Portion) (in millions)
|
|
Net Gains/(Losses)
Recognized in Other Comprehensive Income (Amounts Excluded from Effectiveness Testing)
(in millions)
|
|
Net Gains/(Losses)
Recognized in Net Income
(Amounts Excluded from Effectiveness Testing) (in millions)
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
|
Location
|
|
2019
|
|
2018
|
Gains (losses) on net investment hedge
|
|
$
|
45.4
|
|
|
$
|
—
|
|
|
Gains (losses) on net investment hedge
|
|
$
|
8.1
|
|
|
$
|
—
|
|
|
Other income (expense)
|
|
$
|
6.6
|
|
|
$
|
—
|
|
For additional information on our collaboration arrangement with Samsung Bioepis, please read Note 17, Collaborative and Other Relationships, to these condensed consolidated financial statements.
Foreign Currency Forward Contracts - Other Derivatives
We also enter into other foreign currency forward contracts, usually with durations of one month or less, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions.
The aggregate notional amount of these outstanding foreign currency forward contracts was $848.4 million and $735.1 million as of September 30, 2019 and December 31, 2018, respectively. Net losses of $10.3 million and $14.2 million related to these contracts were recognized as a component of other income (expense), net for the three and nine months ended September 30, 2019, respectively, compared to net gains of $5.2 million and $4.8 million, respectively, in the prior year comparative periods.
Summary of Derivatives
While certain of our derivative instruments are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities in our condensed consolidated balance sheets. The amounts in the table below would not be materially different if the derivative assets and liabilities were offset.
The following table summarizes the fair value and presentation in our condensed consolidated balance sheets of our outstanding derivative instruments, including those designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Balance Sheet Location
|
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Cash Flow Hedging Instruments:
|
|
|
|
|
|
|
Asset derivative instruments
|
|
Other current assets
|
|
$
|
152.2
|
|
|
$
|
65.8
|
|
|
|
Investments and other assets
|
|
$
|
7.5
|
|
|
$
|
—
|
|
Liability derivative instruments
|
|
Accrued expenses and other
|
|
$
|
1.6
|
|
|
$
|
6.9
|
|
Fair Value Hedging Instruments:
|
|
|
|
|
|
|
Liability derivative instruments
|
|
Accrued expenses and other
|
|
$
|
2.1
|
|
|
$
|
14.5
|
|
Other Derivatives:
|
|
|
|
|
|
|
Asset derivative instruments
|
|
Other current assets
|
|
$
|
2.0
|
|
|
$
|
1.1
|
|
Liability derivative instruments
|
|
Accrued expenses and other
|
|
$
|
6.1
|
|
|
$
|
3.2
|
|
10. Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Accumulated depreciation on property, plant and equipment was $1,555.3 million and $1,797.4 million as of September 30, 2019 and December 31, 2018, respectively. For the three and nine months ended September 30, 2019, depreciation expense totaled $45.5 million and $145.4 million, respectively, compared to $64.8 million and $194.0 million, respectively, in the prior year comparative periods.
Solothurn, Switzerland Facility
We are building a large-scale biologics manufacturing facility in Solothurn, Switzerland. We expect this facility to be partially operational by the end of 2020. Upon completion, the facility will include 393,000 square feet related to a large-scale biologics manufacturing facility, 290,000 square feet of warehouse, utilities and support space and
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
51,000 square feet of administrative space. As of September 30, 2019 and December 31, 2018, we had approximately $1.8 billion and $1.6 billion, respectively, capitalized as construction in progress related to this facility. As of September 30, 2019, we had contractual commitments of approximately $63.7 million outstanding related to the construction of this facility.
Divestiture of Hillerød, Denmark Manufacturing Operations
On August 1, 2019, we completed our sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM. This transaction included $631.5 million of property, plant and equipment, which was primarily comprised of $312.5 million for buildings and $287.3 million for machinery and equipment. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.
11. Leases
We lease real estate, including laboratory and office space, and certain equipment.
Our leases have remaining lease terms ranging from less than one year to nine years. Certain leases include one or more options to renew, exercised at our sole discretion, with renewal terms that can extend the lease term from one year to six years.
In addition, we sublease certain real estate to third parties. Our sublease portfolio consists of operating leases, with remaining lease terms ranging from less than one year to nine years. Our subleases do not include an option to renew as they are coterminous with our operating leases.
All of our leases qualify as operating leases. The following table summarizes the presentation in our condensed consolidated balance sheets of our operating leases:
|
|
|
|
|
|
|
(In millions)
|
Balance sheet location
|
|
As of September 30, 2019
|
Assets:
|
|
|
|
Operating lease assets
|
Operating lease assets
|
|
$
|
422.0
|
|
|
|
|
|
Liabilities
|
|
|
|
Current operating lease liabilities
|
Accrued expenses and other
|
|
$
|
70.6
|
|
Non-current operating lease liabilities
|
Long-term operating lease liabilities
|
|
410.5
|
|
Total operating lease liabilities
|
|
|
$
|
481.1
|
|
The following table summarizes the effect of lease costs in our condensed consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
Income Statement Location
|
|
2019
|
|
2019
|
Operating lease cost
|
Research and development
|
|
$
|
1.8
|
|
|
$
|
5.5
|
|
|
Selling, general and administrative
|
|
21.3
|
|
|
62.7
|
|
Sublease income
|
Selling, general and administrative
|
|
(6.2
|
)
|
|
(19.3
|
)
|
|
Other (income) expense, net
|
|
(1.0
|
)
|
|
(2.9
|
)
|
Net lease cost
|
|
|
$
|
15.9
|
|
|
$
|
46.0
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
The minimum lease payments for the next five years and thereafter is expected to be as follows:
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
2019 (remaining three months)
|
$
|
29.9
|
|
2020
|
80.0
|
|
2021
|
74.8
|
|
2022
|
71.5
|
|
2023
|
70.2
|
|
2024
|
67.3
|
|
Thereafter
|
148.7
|
|
Total lease payments
|
$
|
542.4
|
|
Less: interest
|
61.3
|
|
Present value of operating lease liabilities
|
$
|
481.1
|
|
Under the prior lease accounting guidance minimum rental commitments under non-cancelable leases, net of income from subleases, for each of the next five years and total thereafter as of December 31, 2018, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
|
Total
|
Minimum lease payments
|
$
|
87.0
|
|
|
$
|
80.7
|
|
|
$
|
75.9
|
|
|
$
|
71.7
|
|
|
$
|
71.0
|
|
|
$
|
215.3
|
|
|
$
|
601.6
|
|
Less: income from subleases(1)
|
(26.8
|
)
|
|
(25.6
|
)
|
|
(23.7
|
)
|
|
(24.0
|
)
|
|
(24.3
|
)
|
|
(58.4
|
)
|
|
(182.8
|
)
|
Net minimum lease payments
|
$
|
60.2
|
|
|
$
|
55.1
|
|
|
$
|
52.2
|
|
|
$
|
47.7
|
|
|
$
|
46.7
|
|
|
$
|
156.9
|
|
|
$
|
418.8
|
|
|
|
(1)
|
Represents sublease income expected to be received for the vacated manufacturing facility in Cambridge, MA, the vacated portion of our Weston, MA facility and other facilities throughout the world.
|
The weighted average remaining lease term and weighted average discount rate of our operating leases are as follows:
|
|
|
|
|
As of September 30, 2019
|
Weighted average remaining lease term in years
|
7.2
|
|
Weighted average discount rate
|
3.3
|
%
|
Supplemental disclosure of cash flow information related to our operating leases included in cash flows provided by operating activities in our condensed consolidated statements of cash flows is as follows:
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2019
|
Cash paid for amounts included in the measurement of lease liabilities
|
$
|
23.5
|
|
|
$
|
70.3
|
|
Operating lease assets obtained in exchange for lease obligations
|
$
|
4.6
|
|
|
$
|
17.3
|
|
Divestiture of Hillerød, Denmark Manufacturing Operations
On August 1, 2019, we completed our sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM. This transaction included $2.2 million of operating lease assets and $2.2 million of operating lease liabilities. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
12. Equity
Share Repurchases
In March 2019 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2019 Share Repurchase Program). Our 2019 Share Repurchase Program does not have an expiration date. All share repurchases under our 2019 Share Repurchase Program will be retired. Under our 2019 Share Repurchase Program, we repurchased and retired approximately 3.1 million and 7.0 million shares of our common stock at a cost of approximately $717.9 million and $1.6 billion during the three and nine months ended September 30, 2019, respectively.
From October 1, 2019 through October 21, 2019, we repurchased and retired approximately 2.3 million shares of our common stock at a cost of approximately $508.6 million under our 2019 Share Repurchase Program. Approximately $2.9 billion remained available under our 2019 Share Repurchase Program as of October 21, 2019.
In August 2018 our Board of Directors authorized a program to repurchase up to $3.5 billion of our common stock (2018 Share Repurchase Program), which was completed as of June 30, 2019. All share repurchases under our 2018 Share Repurchase Program were retired. Under our 2018 Share Repurchase Program, we repurchased and retired approximately 8.9 million shares of our common stock at a cost of approximately $2.1 billion during the nine months ended September 30, 2019.
In July 2016 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2016 Share Repurchase Program), which was completed as of June 30, 2018. All share repurchases under our 2016 Share Repurchase Program were retired. Under our 2016 Share Repurchase Program, we repurchased and retired approximately 10.5 million shares of our common stock at a cost of approximately $3.0 billion during the nine months ended September 30, 2018.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize the changes in accumulated other comprehensive income (loss), net of tax by component:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Unrealized Gains (Losses) on Securities Available for Sale, Net of Tax
|
|
Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax
|
|
Gains (Losses) on Net Investment Hedge
|
|
Unfunded Status of Postretirement Benefit Plans, Net of Tax
|
|
Currency Translation Adjustments
|
|
Total
|
Balance, December 31, 2018
|
|
$
|
(4.0
|
)
|
|
$
|
34.7
|
|
|
$
|
3.5
|
|
|
$
|
(31.3
|
)
|
|
$
|
(243.3
|
)
|
|
$
|
(240.4
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
11.6
|
|
|
115.8
|
|
|
53.5
|
|
|
1.5
|
|
|
51.3
|
|
|
233.7
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(1.3
|
)
|
|
(77.7
|
)
|
|
(6.6
|
)
|
|
—
|
|
|
—
|
|
|
(85.6
|
)
|
Net current period other comprehensive income (loss)
|
|
10.3
|
|
|
38.1
|
|
|
46.9
|
|
|
1.5
|
|
|
51.3
|
|
|
148.1
|
|
Balance, September 30, 2019
|
|
$
|
6.3
|
|
|
$
|
72.8
|
|
|
$
|
50.4
|
|
|
$
|
(29.8
|
)
|
|
$
|
(192.0
|
)
|
|
$
|
(92.3
|
)
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
Unrealized Gains (Losses) on Securities Available for Sale, Net of Tax
|
|
Unrealized Gains (Losses) on Cash Flow Hedges, Net of Tax
|
|
Gains (Losses) on Net Investment Hedge
|
|
Unfunded Status of Postretirement Benefit Plans, Net of Tax
|
|
Currency Translation Adjustments
|
|
Total
|
Balance, December 31, 2017
|
|
$
|
(1.6
|
)
|
|
$
|
(104.5
|
)
|
|
$
|
—
|
|
|
$
|
(36.8
|
)
|
|
$
|
(175.5
|
)
|
|
$
|
(318.4
|
)
|
Amounts reclassified, net of tax, upon adoption of ASU No. 2016-01
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Balance, January 1, 2018
|
|
(0.1
|
)
|
|
(104.5
|
)
|
|
—
|
|
|
(36.8
|
)
|
|
(175.5
|
)
|
|
(316.9
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(7.9
|
)
|
|
58.3
|
|
|
—
|
|
|
0.2
|
|
|
(38.8
|
)
|
|
11.8
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
6.1
|
|
|
50.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56.8
|
|
Net current period other comprehensive income (loss)
|
|
(1.8
|
)
|
|
109.0
|
|
|
—
|
|
|
0.2
|
|
|
(38.8
|
)
|
|
68.6
|
|
Balance, September 30, 2018
|
|
$
|
(1.9
|
)
|
|
$
|
4.5
|
|
|
$
|
—
|
|
|
$
|
(36.6
|
)
|
|
$
|
(214.3
|
)
|
|
$
|
(248.3
|
)
|
The following table summarizes the amounts reclassified from accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Income Statement Location
|
|
Amounts Reclassified from Accumulated Other Comprehensive Income
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Gains (losses) on securities available for sale
|
Other income (expense)
|
|
$
|
0.6
|
|
|
$
|
(0.1
|
)
|
|
$
|
1.6
|
|
|
$
|
(7.7
|
)
|
|
Income tax benefit (expense)
|
|
(0.1
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on cash flow hedges
|
Revenues
|
|
35.2
|
|
|
(8.4
|
)
|
|
79.8
|
|
|
(51.7
|
)
|
|
Operating expenses
|
|
(0.8
|
)
|
|
(0.3
|
)
|
|
(2.0
|
)
|
|
0.6
|
|
|
Other income (expense)
|
|
0.1
|
|
|
0.1
|
|
|
0.2
|
|
|
0.2
|
|
|
Income tax benefit (expense)
|
|
(0.1
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on net investment hedge
|
Other income (expense)
|
|
2.2
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
Income tax benefit (expense)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications, net of tax
|
|
|
$
|
37.1
|
|
|
$
|
(8.7
|
)
|
|
$
|
85.6
|
|
|
$
|
(56.8
|
)
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
13. Earnings per Share
Basic and diluted earnings per share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to Biogen Inc.
|
$
|
1,545.9
|
|
|
$
|
1,444.4
|
|
|
$
|
4,448.8
|
|
|
$
|
3,483.9
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
184.0
|
|
|
201.4
|
|
|
190.3
|
|
|
206.6
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
Stock options and employee stock purchase plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Time-vested restricted stock units
|
0.1
|
|
|
0.4
|
|
|
0.1
|
|
|
0.3
|
|
Market stock units
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
|
0.1
|
|
Performance stock units settled in stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Dilutive potential common shares
|
0.2
|
|
|
0.5
|
|
|
0.2
|
|
|
0.4
|
|
Shares used in calculating diluted earnings per share
|
184.2
|
|
|
201.9
|
|
|
190.5
|
|
|
207.0
|
|
Amounts excluded from the calculation of net income per diluted share because their effects were anti-dilutive were insignificant.
14. Share-based Payments
Share-based Compensation Expense
The following table summarizes share-based compensation expense included in our condensed consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Research and development
|
$
|
15.4
|
|
|
$
|
21.0
|
|
|
$
|
65.2
|
|
|
$
|
60.5
|
|
Selling, general and administrative
|
34.2
|
|
|
29.4
|
|
|
116.8
|
|
|
83.1
|
|
Subtotal
|
49.6
|
|
|
50.4
|
|
|
182.0
|
|
|
143.6
|
|
Capitalized share-based compensation costs
|
(1.7
|
)
|
|
(3.5
|
)
|
|
(7.8
|
)
|
|
(9.7
|
)
|
Share-based compensation expense included in total cost and expenses
|
47.9
|
|
|
46.9
|
|
|
174.2
|
|
|
133.9
|
|
Income tax effect
|
(8.1
|
)
|
|
(7.7
|
)
|
|
(29.1
|
)
|
|
(21.8
|
)
|
Share-based compensation expense included in net income attributable to Biogen Inc.
|
$
|
39.8
|
|
|
$
|
39.2
|
|
|
$
|
145.1
|
|
|
$
|
112.1
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
The following table summarizes share-based compensation expense associated with each of our share-based compensation programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Market stock units
|
$
|
9.3
|
|
|
$
|
7.4
|
|
|
$
|
24.8
|
|
|
$
|
20.6
|
|
Time-vested restricted stock units
|
37.9
|
|
|
29.9
|
|
|
104.4
|
|
|
96.6
|
|
Cash settled performance units
|
0.3
|
|
|
5.8
|
|
|
(0.3
|
)
|
|
9.4
|
|
Performance units
|
0.2
|
|
|
3.0
|
|
|
1.0
|
|
|
4.2
|
|
Performance stock units settled in stock
|
(1.1
|
)
|
|
1.3
|
|
|
13.0
|
|
|
3.4
|
|
Performance stock units settled in cash
|
1.3
|
|
|
1.1
|
|
|
3.2
|
|
|
1.5
|
|
Employee stock purchase plan
|
1.7
|
|
|
1.9
|
|
|
9.7
|
|
|
7.9
|
|
NST stock options
|
—
|
|
|
—
|
|
|
26.2
|
|
|
—
|
|
Subtotal
|
49.6
|
|
|
50.4
|
|
|
182.0
|
|
|
143.6
|
|
Capitalized share-based compensation costs
|
(1.7
|
)
|
|
(3.5
|
)
|
|
(7.8
|
)
|
|
(9.7
|
)
|
Share-based compensation expense included in total cost and expenses
|
$
|
47.9
|
|
|
$
|
46.9
|
|
|
$
|
174.2
|
|
|
$
|
133.9
|
|
We estimate the fair value of our obligations associated with our performance units, cash settled performance units and performance stock units settled in cash at the end of each reporting period through expected settlement. Cumulative adjustments to these obligations are recognized each quarter to reflect changes in the stock price and estimated outcome of the performance-related conditions.
Stock option expense reflects the accelerated vesting of stock options previously granted to NST employees as a result of our acquisition of NST. For additional information on our acquisition of NST, please read Note 2, Acquisitions, to these condensed consolidated financial statements.
15. Income Taxes
Tax Rate
A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Statutory rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
State taxes
|
0.9
|
|
|
0.6
|
|
|
0.7
|
|
|
0.7
|
|
Taxes on foreign earnings
|
(5.0
|
)
|
|
(0.5
|
)
|
|
(4.7
|
)
|
|
(1.3
|
)
|
Credits and net operating loss utilization
|
(1.5
|
)
|
|
(1.0
|
)
|
|
(1.0
|
)
|
|
(0.8
|
)
|
Purchased intangible assets
|
0.4
|
|
|
0.3
|
|
|
0.4
|
|
|
0.5
|
|
Divestiture of Denmark manufacturing operations
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
Internal reorganization of certain intellectual property rights
|
(1.5
|
)
|
|
—
|
|
|
(2.1
|
)
|
|
—
|
|
GILTI
|
1.6
|
|
|
1.3
|
|
|
1.6
|
|
|
1.4
|
|
U.S. tax reform
|
—
|
|
|
(0.6
|
)
|
|
—
|
|
|
(0.3
|
)
|
Swiss tax reform
|
(3.1
|
)
|
|
—
|
|
|
(1.0
|
)
|
|
—
|
|
Other permanent items
|
(0.1
|
)
|
|
0.3
|
|
|
0.2
|
|
|
0.3
|
|
Other
|
(0.8
|
)
|
|
(1.0
|
)
|
|
(0.3
|
)
|
|
(0.2
|
)
|
Effective tax rate
|
11.9
|
%
|
|
20.4
|
%
|
|
16.3
|
%
|
|
21.3
|
%
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Changes in Tax Rate
For the three months ended September 30, 2019, compared to the same period in 2018, the decrease in our effective tax rate was primarily due to the enactment of a new taxing regime in the country and certain cantons of Switzerland, which we refer to as Swiss Tax Reform. As a result of the impact of Swiss Tax Reform, in the three months ended September 30, 2019, we recorded an income tax benefit of approximately $54.3 million, resulting from a remeasurement of our deferred tax assets and liabilities. In addition, in the three months ended September 30, 2019, we recognized a net benefit for the impact of the internal reorganization of certain intellectual property rights and a net benefit of $15.8 million resulting from the finalization of tax returns in various jurisdictions related to the 2018 fiscal year. We also had a higher effective tax rate in 2018 resulting from our sale of inventory, the tax effect of which had been included within prepaid taxes at January 1, 2018, at a higher effective tax rate than the 2018 statutory tax rate.
For the nine months ended September 30, 2019, compared to the same period in 2018, the decrease in our effective tax rate was primarily due to the combination of the internal reorganization of certain intellectual property rights and the impact of Swiss Tax Reform. This decrease was partially offset by a $64.7 million tax expense related to the divestiture of our subsidiary that owned our Hillerød, Denmark manufacturing operations. We also had a higher effective tax rate in 2018 resulting from our sale of inventory, the tax effect of which had been included within prepaid taxes at January 1, 2018, at a higher effective tax rate than the 2018 statutory tax rate.
Although we are recognizing a loss on the divestiture of our Hillerød, Denmark manufacturing operations, the divestiture requires us to write off certain deferred tax assets and resulted in a taxable gain in certain jurisdictions.
As a result of the internal reorganization of certain intellectual property rights, as of September 30, 2019, we recorded a deferred tax asset of $754.2 million and a deferred tax liability of $603.4 million.
Accounting for Uncertainty in Income Taxes
We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in various U.S. states and in U.S. federal and other foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal tax examination for years before 2013 or state, local or non-U.S. income tax examinations for years before 2010.
The U.S. Internal Revenue Service and other national tax authorities routinely examine our intercompany transfer pricing with respect to intellectual property related transactions and it is possible that they may disagree with one or more positions we have taken with respect to such valuations.
Federal and State Uncertain Tax Positions
It is reasonably possible that we will adjust the value of our uncertain tax positions related to certain transfer pricing, collaboration and other issues as we receive additional information from various taxing authorities, including reaching settlements with such authorities.
16. Other Consolidated Financial Statement Detail
Other Income (Expense), Net
Components of other income (expense), net, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest income
|
$
|
30.5
|
|
|
$
|
26.0
|
|
|
$
|
90.8
|
|
|
$
|
81.4
|
|
Interest expense
|
(45.8
|
)
|
|
(49.0
|
)
|
|
(141.4
|
)
|
|
(151.2
|
)
|
Gain (loss) on investments, net
|
(4.1
|
)
|
|
141.1
|
|
|
198.9
|
|
|
132.0
|
|
Foreign exchange gains (losses), net
|
(4.2
|
)
|
|
0.2
|
|
|
(4.7
|
)
|
|
(13.8
|
)
|
Other, net
|
(3.7
|
)
|
|
(3.2
|
)
|
|
(11.0
|
)
|
|
(8.8
|
)
|
Total other income (expense), net
|
$
|
(27.3
|
)
|
|
$
|
115.1
|
|
|
$
|
132.6
|
|
|
$
|
39.6
|
|
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Gain (loss) on investments, net, as reflected in the table above, relate to debt securities, equity securities of certain biotechnology companies, venture capital funds where the underlying investments are in equity securities of certain biotechnology companies and non-marketable equity securities.
The following table summarizes our gain (loss) on investments, net that relates to our equity securities held as of September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net gains (losses) recognized during the period on equity securities
|
$
|
(4.6
|
)
|
|
$
|
141.2
|
|
|
$
|
197.3
|
|
|
$
|
139.7
|
|
Less: Net gains (losses) recognized during the period on equity securities sold during the period
|
$
|
4.4
|
|
|
$
|
—
|
|
|
$
|
46.8
|
|
|
$
|
(0.5
|
)
|
Unrealized gains (losses) recognized during the period on equity securities held as of September 30, 2019
|
$
|
(9.0
|
)
|
|
$
|
141.2
|
|
|
$
|
150.5
|
|
|
$
|
140.2
|
|
Accrued Expenses and Other
Accrued expenses and other consists of the following:
|
|
|
|
|
|
|
|
|
(In millions)
|
As of
September 30,
2019
|
|
As of
December 31,
2018
|
Revenue-related reserves for discounts and allowances
|
$
|
884.2
|
|
|
$
|
874.7
|
|
Employee compensation and benefits
|
259.5
|
|
|
320.9
|
|
Royalties and licensing fees
|
222.3
|
|
|
224.7
|
|
Collaboration expenses
|
188.7
|
|
|
261.6
|
|
Current portion of contingent consideration obligations
|
147.5
|
|
|
444.8
|
|
Construction in progress
|
49.5
|
|
|
125.2
|
|
Other
|
677.4
|
|
|
609.3
|
|
Total accrued expenses and other
|
$
|
2,429.1
|
|
|
$
|
2,861.2
|
|
Other Long-term Liabilities
Other long-term liabilities were $1,370.9 million and $1,389.4 million as of September 30, 2019 and December 31, 2018, respectively, and included accrued income taxes totaling $801.7 million and $791.4 million, respectively.
17. Collaborative and Other Relationships
Eisai Co., Ltd.
BAN2401 and Elenbecestat Collaboration
We have a collaboration agreement with Eisai Co., Ltd. (Eisai) to jointly develop and commercialize BAN2401, a monoclonal antibody that targets amyloid beta aggregates, and elenbecestat, the oral BACE (base amyloid cleaving enzyme) inhibitor, two Eisai product candidates for the potential treatment of AD (the BAN2401 and Elenbecestat Collaboration).
In September 2019 we and Eisai announced the decision to discontinue the global Phase 3 trials, MISSION AD1 and MISSION AD2, designed to assess the efficacy and safety of elenbecestat in patients with mild cognitive impairment and mild AD. As a result of this decision, in the third quarter of 2019, we accrued approximately $48.0 million related to our share of the termination of various clinical trials and research and development contracts incurred under the BAN2401 and Elenbecestat Collaboration.
The BAN2401 and Elenbecestat Collaboration also provided Eisai with an option to jointly develop and commercialize aducanumab, our anti-amyloid beta antibody candidate for early AD (Aducanumab Option), and an option to jointly develop and commercialize one of our anti-tau monoclonal antibodies (Anti-Tau Option). In October
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
2017 Eisai exercised its Aducanumab Option and we entered into a new collaboration agreement for the joint development and commercialization of aducanumab (Aducanumab Collaboration Agreement). Eisai has not yet exercised its Anti-Tau Option.
For additional information on our BAN2401 and Elenbecestat Collaboration, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K.
For the three and nine months ended September 30, 2019 and 2018, sales and marketing expense related to the BAN2401 and Elenbecestat Collaboration was immaterial.
A summary of development expense related to the BAN2401 and Elenbecestat Collaboration is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Total development expense incurred by the collaboration related to the advancement of BAN2401 and elenbecestat
|
$
|
168.7
|
|
|
$
|
64.9
|
|
|
$
|
305.3
|
|
|
$
|
176.0
|
|
Biogen's share of BAN2401 and elenbecestat development expense reflected in research and development expense in our condensed consolidated statements of income
|
$
|
84.3
|
|
|
$
|
32.5
|
|
|
$
|
152.6
|
|
|
$
|
88.0
|
|
Aducanumab Collaboration Agreement
Under the Aducanumab Collaboration Agreement, we and Eisai will co-promote aducanumab with a region-based profit split and we lead the ongoing development of aducanumab.
In March 2019, based on a pre-specified futility analysis, we discontinued the global Phase 3 trials, EMERGE and ENGAGE, designed to evaluate the efficacy and safety of aducanumab in patients with early AD. A new analysis of a larger dataset from these trials, conducted in consultation with the FDA, showed that the Phase 3 EMERGE study met its pre-specified primary and secondary endpoints. On October 22, 2019, we and Eisai announced that we plan to pursue regulatory approval for aducanumab in the U.S.
For the period through March 31, 2018, we were responsible for 100% of development costs incurred by the collaboration for the advancement of aducanumab (aducanumab development expense). For the period April 1, 2018 through December 31, 2018, Eisai reimbursed us for 15% of aducanumab development expense incurred and, beginning January 1, 2019, is reimbursing us for 45% of aducanumab development expense incurred.
In the first quarter of 2019, as a result of the decision to discontinue the Phase 3 EMERGE and ENGAGE trials following the futility analysis, we accrued approximately $45.0 million related to the termination of various clinical trials and research and development contracts net of the expected 45% Eisai reimbursement of development costs incurred under the Aducanumab Collaboration Agreement.
Sales and marketing expense are shared in proportion to the same region-based profit split that will be utilized to co-promote aducanumab. For additional information on the Aducanumab Collaboration Agreement, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
A summary of development and sales and marketing expense related to the Aducanumab Collaboration Agreement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
(In millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Total aducanumab development expense
|
$
|
4.7
|
|
|
$
|
64.8
|
|
|
$
|
170.5
|
|
|
$
|
204.8
|
|
Biogen's share of aducanumab development expense reflected in research and development expense in our condensed consolidated statements of income
|
$
|
2.6
|
|
|
$
|
55.1
|
|
|
$
|
93.8
|
|
|
$
|
183.6
|
|
|
|
|
|
|
|
|
|
Total aducanumab sales and marketing expense incurred by the collaboration
|
$
|
0.1
|
|
|
$
|
12.1
|
|
|
$
|
21.3
|
|
|
$
|
33.3
|
|
Biogen's share of aducanumab sales and marketing expense reflected in selling, general and administrative expense in our condensed consolidated statements of income
|
$
|
—
|
|
|
$
|
5.1
|
|
|
$
|
11.7
|
|
|
$
|
19.0
|
|
In addition, we and Eisai co-promote AVONEX, TYSABRI and TECFIDERA in Japan in certain settings and Eisai distributes AVONEX, TYSABRI, TECFIDERA and PLEGRIDY in India and other Asia-Pacific markets, excluding China.
Other Research and Discovery Arrangements
These arrangements may include the potential for future milestone payments based on the achievement of certain clinical and commercial development payable over a period of several years.
Skyhawk Therapeutics, Inc.
In January 2019 we entered into a collaboration and research and development services agreement with Skyhawk Therapeutics, Inc. (Skyhawk) pursuant to which the companies will leverage Skyhawk's SkySTAR technology platform with the goal of discovering innovative small molecule treatments for patients with neurological diseases, including MS and SMA. We will be responsible for the development and potential commercialization of any therapies resulting from this collaboration and we may also pay Skyhawk up to a total of approximately $2.0 billion in additional milestone payments as well as potential royalties on net commercial sales.
In connection with this agreement, we made an upfront payment of $74.0 million to Skyhawk, of which $38.5 million was recorded as research and development expense in our condensed consolidated statements of income and $35.5 million was recorded as prepaid research and development expenditures within investments and other assets in our condensed consolidated balance sheets and will be expensed as the services are provided.
Samsung Bioepis
Joint Venture Agreement
In February 2012 we entered into a joint venture agreement with Samsung BioLogics, establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar products. In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018 and, upon closing, we paid 759.5 billion South Korean won ($676.6 million) to Samsung BioLogics. As of September 30, 2019, our ownership percentage remained at approximately 49.9%.
We recognize our share of the results of operations related to our investment in Samsung Bioepis under the equity method of accounting one quarter in arrears when the results of the entity become available, which is reflected as equity in income (loss) of investee, net of tax in our condensed consolidated statements of income. During 2015, as our share of losses exceeded the carrying value of our initial investment, we suspended recognizing additional losses. In the first quarter of 2019 we restarted recognizing our share of Samsung Bioepis' income (losses), and we began recognizing amortization on certain basis differences resulting from our November 2018 investment.
Upon investment, the equity method of accounting requires us to identify and allocate differences between the fair value of our investment and the carrying value of our interest in the underlying net assets of the investee. These
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
basis differences are amortized over their economic life. The total basis difference was approximately $675 million, consisting of approximately $115 million attributed to inventory, approximately $615 million attributed to developed technology and approximately $170 million attributed to IPR&D. A deferred tax liability of $225 million was established for the acquired assets that had no tax basis. The basis differences related to inventory and developed technology will be amortized, net of tax, over their estimated useful lives of 1.5 years and 15 years, respectively, one quarter in arrears.
Our joint venture partner, Samsung BioLogics, is currently subject to an ongoing criminal investigation that we continue to monitor. While this investigation could impact the operations of Samsung Bioepis and its business, we have assessed the value of our investment in Samsung Bioepis and continue to believe that the fair value of the investment is in excess of its net book value.
For the three and nine months ended September 30, 2019, we recognized losses on our investment of $21.8 million and $66.8 million, respectively. These losses reflect our share of losses totaling $0.8 million and $9.3 million, respectively, and amortization of basis differences totaling $21.1 million and $57.6 million, respectively.
As of September 30, 2019 and December 31, 2018, the carrying value of our investment in Samsung Bioepis totaled 687.3 billion South Korean won ($572.8 million) and 759.5 billion South Korean won ($680.6 million), respectively, which is classified as a component of investments and other assets in our condensed consolidated balance sheets.
Commercial Agreement
We reflect revenues on sales of BENEPALI, IMRALDI and FLIXABI to third parties in product revenues, net in our condensed consolidated statements of income and record the related cost of revenues and sales and marketing expenses in our condensed consolidated statements of income to their respective line items when these costs are incurred.
We share 50% of the profit or loss related to our commercial agreement with Samsung Bioepis, which is recognized in collaboration profit (loss) sharing in our condensed consolidated statements of income. For the three and nine months ended September 30, 2019, we recognized net profit-sharing expense of $60.1 million and $181.6 million, respectively, to reflect Samsung Bioepis' 50% sharing of the net collaboration profits, compared to $47.7 million and $131.2 million, respectively, in the prior year comparative periods.
Other Services
Simultaneous with the formation of Samsung Bioepis, we also entered into a license agreement, a technical development services agreement and a manufacturing agreement with Samsung Bioepis. For the three and nine months ended September 30, 2019, we recognized $12.9 million and $89.9 million, respectively, in revenues related to these services, which is reflected in collaborative and other relationships revenues as a component of other revenues in our condensed consolidated statements of income, compared to $48.1 million and $80.7 million, respectively, in the prior year comparative periods.
Following the divestiture of our Hillerød, Denmark manufacturing operations on August 1, 2019, FUJIFILM assumed responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis. We no longer recognize revenues for the manufacturing completed after the divestiture date under our technical development services and manufacturing agreements with Samsung Bioepis. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.
For additional information on our collaboration arrangement with Samsung Bioepis and our other significant collaboration arrangements, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2018 Form 10-K.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
18. Investments in Variable Interest Entities
Consolidated Variable Interest Entities
Our condensed consolidated financial statements include the financial results of variable interest entities in which we are the primary beneficiary. The following are our significant variable interest entities.
Neurimmune SubOne AG
We have a collaboration and license agreement with Neurimmune SubOne AG (Neurimmune) for the development and commercialization of antibodies for the potential treatment of AD, including aducanumab. We are responsible for the development, manufacturing and commercialization of all collaboration products. This agreement is effective for the longer of the duration of certain patents relating to a licensed product or 12 years from the first commercial sale of any product using such a licensed compound.
We consolidate the results of Neurimmune as we determined that we are the primary beneficiary of Neurimmune because we have the power through the collaboration to direct the activities that most significantly impact the entity’s economic performance and we are required to fund 100% of the research and development costs incurred in support of the collaboration.
Under the terms of our collaboration and license agreement with Neurimmune (the Neurimmune Agreement), the royalty rates payable on products developed under the Neurimmune Agreement, including royalty rates payable on potential commercial sales of aducanumab, range from the high single digits to sub-teens.
Research and development costs for which we reimbursed Neurimmune are reflected in research and development expense in our condensed consolidated statements of income. During the three and nine months ended September 30, 2019 and 2018, amounts reimbursed were immaterial.
The assets and liabilities of Neurimmune are not significant to our condensed consolidated financial position or results of operations as it is a research and development organization. We have provided no financing to Neurimmune other than contractually required amounts.
Unconsolidated Variable Interest Entities
We have relationships with variable interest entities that we do not consolidate as we lack the power to direct the activities that significantly impact the economic success of these entities. These relationships include investments in certain biotechnology companies and research collaboration agreements.
As of September 30, 2019 and December 31, 2018, the carrying value of our investments in certain biotechnology companies representing potential unconsolidated variable interest entities totaled $23.1 million and $28.7 million, respectively. Our maximum exposure to loss related to these variable interest entities is limited to the carrying value of our investments.
We have also entered into research collaboration agreements with certain variable interest entities where we are required to fund certain development activities. These development activities are included in research and development expense in our condensed consolidated statements of income as they are incurred. We have provided no financing to these variable interest entities other than previously contractually required amounts.
For additional information on our investments in Neurimmune and other variable interest entities, please read Note 20, Investments in Variable Interest Entities, to our consolidated financial statements included in our 2018 Form 10-K.
19. Litigation
We are currently involved in various claims and legal proceedings, including the matters described below. For information as to our accounting policies relating to claims and legal proceedings, including use of estimates and contingencies, please read Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in our 2018 Form 10-K.
With respect to some loss contingencies, an estimate of the possible loss or range of loss cannot be made until management has further information, including, for example, (i) which claims, if any, will survive dispositive
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
motion practice; (ii) information to be obtained through discovery; (iii) information as to the parties' damages claims and supporting evidence; (iv) the parties’ legal theories; and (v) the parties' settlement positions.
The claims and legal proceedings in which we are involved also include challenges to the scope, validity or enforceability of the patents relating to our products, pipeline or processes and challenges to the scope, validity or enforceability of the patents held by others. These include claims by third parties that we infringe their patents. An adverse outcome in any of these proceedings could result in one or more of the following and have a material impact on our business or consolidated results of operations and financial position: (i) loss of patent protection; (ii) inability to continue to engage in certain activities; and (iii) payment of significant damages, royalties, penalties and/or license fees to third parties.
Loss Contingencies
IMRALDI Patent Litigation
In September 2018 Fresenius Kabi Deutschland GmbH (Fresenius Kabi) commenced proceedings for damages and injunctive relief against Biogen France SAS in the Tribunal de Grande Instance de Paris, alleging that IMRALDI, the adalimumab biosimilar product of Samsung Bioepis UK Limited that Biogen commercializes in Europe, infringes the French counterpart of European Patent No. 3 148 510 (the ‘510 Patent), which was issued in June 2018 and expires in May 2035. No hearing on the merits has been scheduled.
In October 2018 Fresenius Kabi commenced preliminary injunction proceedings against Biogen (Denmark) Manufacturing ApS and Biogen Denmark A/S in Denmark's Maritime and Commercial High Court alleging infringement of the Danish Utility Models. In June 2019 the Danish court denied Fresenius Kabi's request for a preliminary injunction and Fresenius Kabi has appealed that decision.
In November 2018 Fresenius Kabi commenced infringement proceedings for damages and injunctive relief against Biogen Italia S.R.L. in the District Court of Milan relating to the Italian counterpart of the ‘510 Patent, and against Biogen GmbH in the Düsseldorf Regional Court relating to the German counterpart of the ‘510 Patent. A hearing in the proceeding in Germany has been set for March 2020. No hearing on the merits has been scheduled.
An estimate of the possible loss or range of loss in the above matters cannot be made at this time.
In August 2018 Biogen Idec Ltd. (Biogen UK) and Samsung Bioepis UK Limited filed an action in the United Kingdom Patents Court to revoke the United Kingdom (U.K.) counterpart of the ‘510 Patent. Fresenius Kabi counterclaimed for infringement, damages and injunctive relief. In July 2019 the United Kingdom Patents Court entered a consent order in which it declared that the U.K. counterpart of the '510 Patent is invalid, ordered the patent revoked and dismissed Fresenius Kabi's counterclaims.
In December 2018 Biogen B.V. and Samsung Bioepis UK Limited filed an action in the District Court of the Hague, Netherlands to revoke the Dutch counterpart of the ‘510 Patent. In September 2019 the parties entered an Agreement to Discontinue Proceedings wherein Fresenius Kabi declared the Dutch counterpart of the '510 Patent invalid and surrendered it in full.
In July 2019 Gedeon Richter PLC commenced proceedings against Biogen GmbH in the Düsseldorf Regional Court alleging infringement of the German counterpart of European Patent No. 3 212 667 (the '667 Patent), which was issued in September 2018 and expires in October 2035, and seeking damages and injunctive relief. A hearing has been set for November 2020. An estimate of the possible loss or range of loss cannot be made at this time.
In July 2019 Biogen Idec Ltd. (Biogen UK) and Samsung Bioepis UK Limited filed an action in the United Kingdom Patents Court to revoke the U.K. counterpart of the '667 Patent, and in August 2019 Biogen B.V. (Netherlands) and Samsung Bioepis UK Limited filed an action in the District Court of the Hague, Netherlands to revoke the Dutch counterpart of the '667 Patent. A hearing has been set for May 2020 in the Dutch matter and October 2020 in the U.K. matter.
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
Qui Tam Litigation
In July 2015 a qui tam action filed by Michael Bawduniak on behalf of the U.S. and certain states was unsealed by the U.S. District Court for the District of Massachusetts. The action alleges sales and promotional activities in violation of the federal False Claims Act and state law counterparts and seeks single and treble damages, civil penalties, interest, attorneys’ fees and costs. Our motion to dismiss was denied in part. No trial date has been set. The U.S. has not made an intervention decision. An estimate of the possible loss or range of loss cannot be made at this time.
In July 2018 we and certain other drug manufacturers and pharmacy benefit managers were served with a qui tam action filed by John Borzilleri on behalf of the U.S. and certain states in the U.S. District Court for the District of Rhode Island. The case was filed under seal in January 2014 and unsealed in April 2018 after the U.S. government declined to intervene. The case alleged agreements with pharmacy benefit managers in violation of the federal False Claims Act and state law counterparts and seeks single and treble damages, civil penalties, interest, attorneys' fees and costs. In September 2019 the court dismissed the action on the U.S. government's motion.
Securities Litigation
We and certain current and former officers were defendants in an action filed by a shareholder in October 2016 in the U.S. District Court for the District of Massachusetts alleging violations of federal securities laws under 15 U.S.C §78j(b) and §78t(a) and 17 C.F.R. §240.10b-5 and seeking a declaration of the action as a class action and an award of damages, interest and attorneys' fees. In June 2019 the U.S. Court of Appeals for the First Circuit affirmed the judgment dismissing the complaint with prejudice.
Dismissed Shareholder Derivative Litigation
On January 13, 2017, Mary Ann Mullaney, a Biogen shareholder, filed a complaint in the U.S. District Court for the District of Delaware asserting derivative claims on behalf of Biogen against certain of the company’s current and former directors and officers alleging that those individuals (i) breached their fiduciary duties by failing to oversee the company’s operations, (ii) breached their fiduciary duties and Section 14(a) of the Securities Exchange Act of 1934, as amended, and (iii) were unjustly enriched. The complaint sought unspecified damages, interest, attorneys’ fees and other costs. The parties filed a Joint Stipulation for Voluntary Dismissal and Proposed Order, which the court granted on August 6, 2019.
Other Matters
Hatch-Waxman Act Litigation relating to TECFIDERA Orange-Book Listed Patents
In 2017, 2018 and 2019 we initiated patent infringement proceedings against multiple parties pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, in the U.S. District Courts.
Patent infringement proceedings pursuant to the Hatch-Waxman Act are pending against Accord Healthcare Inc., Alkem Laboratories Ltd., Amneal Pharmaceuticals LLC, Aurobindo Pharma U.S.A., Inc., Banner Life Sciences LLC, Cipla Limited, Glenmark Pharmaceuticals Ltd., Graviti Pharmaceuticals Pvt. Ltd., Hetero USA Inc., Lupin Atlantis Holdings SA, Macleods Pharmaceuticals, Ltd., MSN Laboratories Pvt. Ltd., Pharmathen S.A., Prinston Pharmaceutical Inc., Sandoz Inc., Sawai USA, Inc., Shilpa Medicare Limited, Slayback Pharma LLC, Torrent Pharmaceuticals Ltd., TWi Pharmaceuticals, Inc., Windlas Healthcare Pvt. Ltd. and Zydus Pharmaceuticals (USA) Inc. in the U.S. District Court for the District of Delaware and against Mylan Pharmaceuticals Inc. in the U.S. District Court for the Northern District of West Virginia.
A trial date has been set in the Delaware action against Banner Life Sciences LLC for March 2020. A trial date has been set for December 2019 in the other Delaware actions and a trial date has been set for February 2020 in the West Virginia action against Mylan Pharmaceuticals Inc.
Petition for Inter Partes Review
In July 2018 Mylan Pharmaceuticals Inc. filed a petition with the U.S. Patent Trial and Appeal Board (PTAB) seeking inter partes review of our U.S. Patent No. 8,399,514 (the '514 Patent). The '514 Patent includes claims covering the treatment of MS with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label. On February 6, 2019, the PTAB instituted inter partes review of the '514 Patent (the "Mylan IPR"). Thereafter, the PTAB
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
granted the petition of Sawai USA, Inc. and Sawai Pharmaceutical Co. Ltd. and joined them as petitioners in the Mylan IPR. A hearing has been scheduled for November 2019.
European Patent Office Oppositions
In 2016 the European Patent Office (EPO) revoked our European patent number 2 137 537 (the '537 Patent), which includes claims covering the treatment of MS with 480 mg of dimethyl fumarate as provided for in our TECFIDERA label. We have appealed to the Technical Boards of Appeal of the EPO and the appeal is pending. A hearing has been set for March 2020.
In March 2018 the EPO revoked Forward Pharma’s European Patent No. 2 801 355, which expires in October 2025. Forward Pharma has filed an appeal to the Technical Boards of Appeal of the EPO and the appeal is pending. A hearing has been set for June 2020. The settlement and license agreement that we entered with Forward Pharma in January 2017 did not resolve the issues pending in this proceeding and we and Forward Pharma intend to permit the Technical Boards of Appeal and the Enlarged Board of Appeal, if applicable, to make a final determination.
TYSABRI Patent Revocation Matters
In November 2017 Bioeq GMBH, affiliated with the Polpharma Group, brought an action in the Polish Patent Office seeking to revoke Polish Patent Number 215263 (the Polish ‘263 Patent), the Polish patent corresponding to our European Patent Number 1 485 127 (the EU ‘127 Patent) (“Administration of agents to treat inflammation”). The Polish ‘263 Patent concerns administration of natalizumab (TYSABRI) to treat MS. The Polish ‘263 Patent expires in February 2023. No hearing on the merits has been set in this matter.
Swiss Pharma International AG, also affiliated with the Polpharma Group, filed actions in the District Court of the Hague, Netherlands (January 2016), the German Patents Court (March 2016) and the Commercial Court of Rome (November 2017) seeking to invalidate the Dutch, German and Italian counterparts of the EU '127 Patent, which also concerns administration of natalizumab (TYSABRI) to treat MS and expires in February 2023. The Dutch and German counterparts were ruled invalid. The decision in the Dutch action was affirmed in September 2019 and our appeal as to the German action is pending. No date for a hearing on the merits has been set in the Italian action.
'755 Patent Litigation
In May 2010 Biogen MA Inc. (formerly Biogen Idec MA Inc.) filed a complaint in the U.S. District Court for the District of New Jersey alleging infringement by Bayer Healthcare Pharmaceuticals Inc. (Bayer) (manufacturer, marketer and seller of BETASERON and manufacturer of EXTAVIA), EMD Serono, Inc. (EMD Serono) (manufacturer, marketer and seller of REBIF), Pfizer Inc. (Pfizer) (co-marketer of REBIF) and Novartis Pharmaceuticals Corp. (Novartis) (marketer and seller of EXTAVIA) of our U.S. Patent No. 7,588,755 (the '755 Patent), which claims the use of interferon beta for immunomodulation or treating a viral condition, viral disease, cancers or tumors. The complaint seeks monetary damages, including lost profits and royalties.
Bayer, Pfizer, Novartis and EMD Serono filed counterclaims seeking declaratory judgments of patent invalidity and non-infringement and seeking monetary relief in the form of costs and attorneys' fees. Bayer had previously filed a complaint against us in the same court, on May 27, 2010, seeking a declaratory judgment that it does not infringe the '755 Patent and that the '755 Patent is invalid, and seeking monetary relief in the form of attorneys' fees, costs and expenses.
In September 2018 the trial court entered judgment against EMD Serono and Pfizer that the '755 Patent is infringed and valid and ordered a new trial on damages. In October 2018 EMD Serono and Pfizer filed an appeal from the judgment in the U.S. Court of Appeals for the Federal Circuit, which is pending. The trial court has not yet scheduled the new damages trial or a trial against Bayer and Novartis.
Government Matters
We have learned that state and U.S. governmental authorities are investigating our sales and promotional practices and have received related subpoenas. We are cooperating with the investigation.
We have also received subpoenas and other requests from the U.S. government for documents and information relating to our relationship with non-profit organizations that assist patients taking drugs sold by Biogen and the government has challenged some of our contributions to these organizations. We are cooperating with the
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
investigation and have participated in preliminary discussions with the government regarding potential resolution of aspects of the matter.
We have also received subpoenas and other requests from the U.S. government for documents and information relating to Biogen's co-pay assistance programs. We cooperated with the investigation and have received no communication from the government in this matter since December 2017.
Tax Matter
In the second quarter of 2018 the State Treasury of Goias, Brazil issued tax assessments for the period 2013 through February 2018 relating to tax on the circulation of goods and totaling approximately $70.0 million including interest and penalties. We dispute the assessments and have filed defenses with the Administrative Court of Appeals for the State of Goias, which are pending. We have not formed an opinion that an unfavorable outcome of the dispute is either probable or remote.
Product Liability and Other Legal Proceedings
We are also involved in product liability claims and other legal proceedings generally incidental to our normal business activities. While the outcome of any of these proceedings cannot be accurately predicted, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our business or financial condition.