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ANNUAL
REPORT
2019
PERFORMANCE HIGHLIGHTS
Total Revenues
($ in millions)
Product Revenues
($ in millions and % of total product revenues)
$14,378
2019
2018
2019
2018
2017
2016
2015
$13,453
$12,274
$11,449
$10,764
SPINRAZA
$2,097 $1,724
18.4% 15.8%
TYSABRI
$1,892 $1,864
16.6% 17.1%
Other 4
$851 $662
6.1%
7.5%
TECFIDERA
$4,433 $4,274
38.95% 39.3%
VUMERITY5
$6 –
0.05% –
Interferon6
$2,102 $2,363
18.5% 21.7%
GAAP Diluted EPS/Non-GAAP Diluted EPS 1
2019
2018
2017
2016
2015
$31.42
$33.57
$21.582
$26.20
$11.922
$21.81
Product Revenues by Region (% of total product revenues)
$16.93
$20.22
U.S.
Rest of the world
$15.34
$17.01
2019
2018
2017
Free Cash Flow 1,3
($ in millions)
41%
37%
32%
59%
63%
68%
$6,264
$3,917
2019
2018
2017
2016
2015
$2,484
$2,706
$2,223
1 Non-GAAP diluted earnings per share (EPS) and Free Cash Flow are Non-GAAP
financial measures. A reconciliation of GAAP to Non-GAAP diluted EPS and
Free Cash Flow amounts is set forth on pages 9–13 of this Annual Report.
2 GAAP diluted EPS for 2018 and 2017 includes charges of $125 million and
$1,176 million, respectively, related to the impact of the Tax Cuts and Jobs Act of 2017.
3 Free Cash Flow for 2016 through 2019 reflects an increase in capital expenditures
related to the construction of our large-scale biologics manufacturing facility in
Solothurn, Switzerland.
4 For 2019 and 2018 Other includes product revenues from FAMPYRA, FUMADERM,
BENEPALI, FLIXABI and IMRALDI. For 2018 Other also includes product revenues from
ZINBRYTA, which was voluntary withdrawn from the market in March 2018.
5 VUMERITY was approved by the U.S. Food and Drug Administration in
October 2019 and became available in the U.S. in November 2019.
6 Interferon includes AVONEX and PLEGRIDY.
+4.5%
increase in total
product revenues
year over year
100%
total renewal
electricity purchased
by Biogen
46%
of manager-level
and above positions
held by women
Concept, design and realization
PETRANIX Corporate and Financial Communications AG
Adliswil, Zurich – Switzerland
www.petranix.com
Printing
Donnelley Financial Solutions, dfinsolutions.com
Biogen 2019 Annual Report 1
CEO LETTER
My fellow stockholders,
2019 was a remarkable year for Biogen as we
delivered strong operating performance across
all of our core business areas, double-digit
earnings growth versus a year ago and strong
execution of our strategy. We strengthened our
pipeline by adding seven new clinical programs,
which we believe will help us further expand
our multi-franchise portfolio and drive mid- and
long-term growth.
2019 was also marked by changing developments
for aducanumab, an investigational treatment
for early Alzheimer’s disease. In October 2019,
together with our collaboration partner Eisai Co.,
Ltd. (Eisai), we announced plans to pursue regulato-
ry approval for aducanumab in the U.S. This decision
was based on a new analysis, conducted in consul-
tation with the U.S. Food and Drug Administration
(FDA), of a larger dataset from the Phase 3 EMERGE
and ENGAGE studies of aducanumab that had
been discontinued in March 2019 following a
pre-specified futility analysis.
The extraordinary events surrounding aducanumab
and the progress across our portfolio is a testa -
ment to Biogen’s commitment to follow the science
– one that was made possible by fearless, dedicat-
ed colleagues.
Before turning to 2019 in more detail, we want to
acknowledge the health and economic challenges
facing all of us as a result of the current COVID-19
pandemic. Many of our communities as well as
a number of our colleagues have been directly
affected by COVID-19. We are committed to doing
all we can to ensure the health and safety of all our
employees and to provide an uninterrupted supply
of our medicines to patients around the world. We
are grateful to everyone at Biogen who has helped
us maintain our manufacturing and business
operations so that patients can continue to receive
our therapies. We are closely monitoring the ongoing
and ever-changing developments and the impact it
may have on our business operations, including our
sales, manufacturing and clinical trials.
"We work with purpose to advance
science to address the urgent and
long-term challenges facing humanity."
Michel Vounatsos, Chief Executive Officer
Our purpose
At Biogen we pioneer science with the goal of
better understanding and preserving the underlying
qualities of our essential human nature. We strongly
believe that neuroscience is the next frontier that
will see real scientific progress and breakthrough,
and we believe that our diverse, talented workforce,
with more than 7,700 employees worldwide, is
uniquely positioned to take on some of the most
challenging healthcare needs and to move Biogen
forward. As we work to improve patients’ lives, we
also care deeply about making a difference in our
society as a whole through science that may have
the potential to, among other things, improve brain
health, mobility and vision. We focus on science that
seeks to solve societal problems and create access
to innovation. We work with purpose to advance
science to address the urgent and long-term
challenges facing humanity.
2 Biogen 2019 Annual Report
CEO LETTER
Delivering sustainable performance
In 2019 we generated $14.4 billion in full-year total
revenues, a 7% increase versus the prior year, and
we generated net cash flows from operations of
approximately $7.1 billion. GAAP diluted earnings
per share for 2019 were $31.42, an increase of
46% over 2018, and Non-GAAP diluted earnings per
share increased 28% over the prior year to $33.57.
Our business and cash generation remained strong
and provided us with the flexibility to allocate capital
to create long-term stockholder value. In 2019
we spent approximately $2.3 billion in research
and development and repurchased approximately
24 million shares of our common stock for a total
value of approximately $5.9 billion. In addition, we
spent approximately $515 million in 2019 on
2019
total revenues
+7%
capital expenditures, including a significant
investment in the large scale biologics
manufacturing facility we are building in
Solothurn, Switzerland.
These results reflect the resilience of our
multiple sclerosis (MS) business as
well as the continued growth of both
SPINRAZA and our biosimilars business.
Capturing the neuroscience opportunity
To review Biogen’s strong 2019 performance –
as well as Biogen’s future – let’s consider some
key statistics.
for example, the advancements that followed the
discoveries of anesthesia, medical imaging, penicil-
lin, organ transplants, HIV treatment and immuno-
therapy. For Biogen, we believe our expertise and
capabilities could lead to the next major inflection
point in neuroscience.
Our view is that neurological diseases are deeply con-
nected. As the pathways of disease are interrelated,
so are the potential approaches to treating them. Our
experience in MS gives our scientists and researchers
deeper insights into remyelination and repair, neuro-
protection and axonal health, with potential appli-
cations in Alzheimer’s disease, Parkinson disease,
amyotrophic lateral sclerosis (ALS) and stroke.
Leading in Alzheimer’s disease
The announcement in October 2019 of our plan to
pursue regulatory filing for aducanumab in the U.S.
was one of the highlights of our year.
In March 2019 we announced the discontinuation
of EMERGE and ENGAGE, our two Phase 3 studies,
based on the results of a pre-specified futility anal-
ysis that predicted that both studies were unlikely
to meet their primary endpoint upon completion. In
retrospect, we now know that the result of the futility
analysis, based on a smaller and earlier dataset,
was incorrect. Following the discontinuation of the
studies, additional data from a greater number of
patients became available.
It is estimated that approximately 50 million people
worldwide suffer from dementia and approximately
10 million suffer from Parkinson’s disease.
Neurological disease is the leading cause of disability
and the second largest cause of death globally. 1,2
Aging populations will almost certainly increase these
numbers significantly. It is estimated that the global
population over the age of 60 will be nearly 1.5 billion
by 2030, and by 2050 those over 60 will be nearly
2 billion, with 1.5 billion over the age of 65. 3,4
These numbers are only part of the story. There
are important inflection points in medical history
when a breakthrough in knowledge or technology
generates new ideas and treatments. Consider,
A new analysis of this larger dataset, conducted in
consultation with the FDA, showed that the Phase
3 EMERGE study met its pre-specified primary and
secondary endpoints by showing a significant reduc-
tion in clinical decline. And, we believe that results
from a subset of patients in the Phase 3 ENGAGE
study who received sufficient exposure to high dose
aducanumab support the findings from EMERGE,
though ENGAGE did not meet its primary endpoint.
Over the past months, we have been actively
engaging with the FDA and are working diligently to
complete the regulatory filing in the U.S. as soon
as possible. We are also actively engaging with
regulators in Europe and in Japan based on the
positive results of the new findings.
Biogen 2019 Annual Report 3
BIOGEN FORWARD
Our approach to deliver sustainable value
Strong core business and
investing for future growth
EXECUTING
ON THE CORE
BUSINESS
CREATING
NEW SOURCE
OF VALUE
Maximizing the resilience
of our MS core business
Leading in
Alzheimer's disease
Accelerating
our neuromuscular franchise
Developing and expanding our neuroscience
portfolio and pursuing therapeutic adjacencies
Unlocking the
potential of biosimilars
Continuous improvement and
diligent capital allocation
One of our first priorities was to offer eligible
patients who had been enrolled in the discontinued
aducanumab studies the possibility of restarting the
investigational treatment. The first patient in the U.S.
returned to dosing in March 2020, and we are also
actively working in Europe and Japan to re-open sites.
If approved, aducanumab would become the first
therapy to reduce clinical decline in patients at early
stages of the disease. While this brings tremendous
hope, there remain significant challenges as
patients are usually diagnosed late in the progres-
sion of the disease. Consequently, we have started
working collaboratively with healthcare stakeholders
to help support efforts that could enable the system
to diagnose patients early enough so they might
benefit from potential treatment.
The path for innovation is not straightforward –
especially for Alzheimer’s disease research – and
aducanumab’s journey has been humbling, fueled
by both a drive to address the unmet need and
hope. All along, we have worked with determination
to follow the science with patients in mind.
We also believe it will take more than one therapy
to treat Alzheimer’s disease, so we continue to
advance a broad portfolio of potential Alzheimer’s
therapies. In March 2019 our collaboration partner
Eisai announced the start of CLARITY AD, a Phase 3
study of BAN2401, an anti-amyloid beta antibody
co-developed with Biogen to potentially treat
patients with early Alzheimer’s disease. In addition,
our portfolio includes BIIB080, a tau-targeted
anti sense oligonucleotide (ASO) in Phase 1; BIIB076,
an anti-tau antibody in Phase 1; and gosuranemab
(BIIB092), a distinct anti-tau antibody in Phase 2, as
well as a number of pre-clinical programs.
In addition to our Alzheimer’s disease pipeline
and pre-clinical programs, we have entered into a
number of transactions with potential applications
in Alzheimer’s disease:
– In December 2019 we entered into a collaboration
with Camp4 Therapeutics, whose platform
may bring additional capability in the identification
of potential druggable targets for Alzheimer’s
disease, among others.
4 Biogen 2019 Annual Report
CEO LETTER
GROWING OUR MULTI-FRANCHISE PORTFOLIO
NEUROCOGNITIVE
DISORDERS
PAIN
MOVEMENT DISORDERS
Near-term
value creation
opportunities
OPHTHALMOLOGY
OPHTHALMOLOGY
LUPUS
STROKE
IMMUNOLOGY/OTHER
ACUTE NEUROLOGY
ALZHEIMER’S DISEASE
ALZHEIMER’S DISEASE
SMA
NEUROMUSCULAR
(SMA + ALS)
NEUROMUSCULAR
(SMA + ALS)
MULTIPLE SCLEROSIS
MULTIPLE SCLEROSIS
MULTIPLE SCLEROSIS
MULTIPLE SCLEROSIS
YESTERDAY
TODAY
EARLY 2020s
OUR VISION
BIOSIMILARS
BIOSIMILARS
BIOSIMILARS
– In January 2020 we entered into an agreement
with Pfizer Inc., which was completed in March,
and acquired a Phase 1 asset for the potential
treatment of patients with behavioral and neuro-
logical symptoms across various psychiatric and
neurological diseases, including the treatment of
sundowning in Alzheimer’s disease.
– In February 2020 we announced a global collab-
oration with Sangamo Therapeutics, Inc., which
became effective in April 2020, to develop gene
regulation therapies for Alzheimer’s, Parkinson’s,
neuromuscular and other neurological diseases.
Resilience in MS
In 2019 we remained a global market leader in MS
with an approximately 34% market share of the
approximately one million MS patients being treated
worldwide. Our portfolio ranges from symptomatic
treatment to disease-modifying therapies and, with
25 active MS clinical trials, we continue pioneering
research across all stages of MS.
In October 2019, together with Alkermes plc, we
announced FDA approval for VUMERITY, a novel
fumarate treatment for relapsing MS. We are excited
about the prospect of this new option for patients.
VUMERITY offers the well-characterized efficacy
of TECFIDERA, the most prescribed oral medicine
for relapsing MS in the U.S., and showed superior
patient-reported gastrointestinal tolerability.
We continued to advance the Phase 2b study
of opicinumab (anti-LINGO) as a potential remyelin-
ating agent for MS. If successful, opicinumab
would represent a first-in-class therapy to potentially
repair or restore function in MS patients, an
entirely different approach from current disease-
modifying therapies.
We recently had two label updates in the European
Union to allow, where clinically needed, the use
of AVONEX and PLEGRIDY during pregnancy and
breastfeeding, and we have several portfolio
innovations in progress, such as the evaluation of
Biogen 2019 Annual Report 5
extended interval dosing with TYSABRI, that we
believe are primed to strengthen the business from
multiple facets. Looking ahead, our unwavering
commitment in MS continues.
Continued growth and regional
expansion in spinal muscular atrophy
SPINRAZA, the first treatment approved for infants,
children and adults with spinal muscle atrophy
(SMA), continued to grow in the U.S. and even more
so outside the U.S. In 2019 full-year SPINRAZA
revenues increased 22% from 2018 to $2.1 billion,
driven by 9% growth in the U.S. to $933 million and
34% growth outside the U.S. to $1.2 billion.
By the end of 2019 SPINRAZA was approved in
over 50 countries with formal reimbursement
in 40 countries, including China. More than
10,000 patients have been treated with SPINRAZA
globally, including in clinical studies, the Expanded
Access Program and the post-marketing setting.
Despite progress, a cure has yet to be found for this
devastating disease, and our commitment to the
SMA community remains unwavering. The results
of the NURTURE study in pre-symptomatic infants,
presented at the annual Cure SMA meeting in June
2019, showed that treating patients earlier improved
outcomes. We are pleased that newborn screening
for SMA has increasingly become routine and imple-
mented in 23 states in the U.S. to date. In September
2019 we announced that we plan to initiate DEVOTE,
a new Phase 2/3 study evaluating the safety and
potential for even greater efficacy of a higher dose of
SPINRAZA in the treatment of SMA. The first patient
in the study was dosed in March 2020.
SPINRAZA’s success is an example of Biogen’s
pioneering science and strong execution capabili-
ties. In less than four years, SPINRAZA has become
a foundation of care for SMA, providing life-changing
benefits to many patients and turning what was an
often-fatal disease for infants with the most severe
form of SMA into a potentially survivable condition.
Double-digit growth in biosimilars
A core part of our strategy is to unlock the potential
of biosimilars as a growth driver and as part of
our value proposition to support a sustainable
healthcare system. Biosimilars are products that
have been demonstrated to be similar in efficacy
and safety to the originator’s approved biological
product, with the advantage that they offer cost
savings, providing payers and health systems the
budgetary headroom to fund innovation.
In 2019 our biosimilars business grew 35%,
generating $738 million in revenues. More than
200,000 patients were treated with our three
anti-tumor necrosis factor (anti-TNF) biosimilars,
an increase of approximately 70% versus the
prior year. Overall, we estimate that our anti-TNF
biosimilars have contributed healthcare savings of
approximately €1.8 billion in Europe in 2019.
In December 2019 we bolstered our biosimilar
business by securing the exclusive rights to
commercialize two potential ophthalmology bio-
similar products, SB11 referencing LUCENTIS and
SB15 referencing EYLEA, in major markets world-
wide, including the U.S., Canada, Europe, Japan
and Australia.
Advancing significant opportunities
for value creation
The progress of our pipeline reflects our goal to
bring innovative new therapies to patients and
further supports our strategy of building a multi-
franchise neuroscience portfolio.
"The progress of our pipeline reflects our
goal to bring innovative new therapies
to patients and further supports our
strategy of building a multi-franchise
neuroscience portfolio."
We are pioneers in neuroscience and are not afraid
to go where others won’t. Our focus enables us to
leverage the interconnectivity in neuroscience and
to develop unique asymmetric core capabilities that
we believe may increase the probability of success
of our pipeline.
6 Biogen 2019 Annual Report
CEO LETTER
We closed 2019 with a pipeline that included
27 clinical programs, of which 6 are in Phase 3,
12 are in Phase 2 and 9 are in Phase 1 – as well
as a deep pre-clinical pipeline across multiple
modalities. We believe that no other company is as
well-positioned to develop breakthrough medicines
for patients living with devastating neurological and
neurodegenerative diseases. Looking forward, we
expect multiple mid- to late-stage readouts by the
end of 2021.
We have an unwavering commitment to neuromus-
cular disorders, and we are inspired by the progress
of tofersen (BIIB067), an ASO being studied for the
potential treatment of a rare form of ALS in adults
with a confirmed superoxide dismutase 1 (SOD1)
mutation. At the 71st annual meeting of the
American Academy of Neurology in May
>10,000
patients treated with
SPINRAZA globally 6
2019 we presented positive results of
a Phase 1/2 study of tofersen, and we
have started enrollment of VALOR, a
pivotal Phase 3 study. We believe the
Phase 1/2 data further demonstrate
the potential of targeting genetic
drivers of disease.
In December 2019 we announced positive
top-line results from the Phase 2 LILAC study
evaluating the efficacy and safety of BIIB059 (anti-
BDCA2) in patients with lupus. The study results
showed that BIIB059, a monoclonal antibody,
demonstrated a statistically significant reduction
of disease activity in people with cutaneous lupus
and systemic lupus erythematosus, as compared
to those who received placebo. There are currently
only a limited number of treatment options available
to help manage these difficult-to-treat and chronic
diseases, and we are excited by the prospect to
advance BIIB059 to Phase 3.
We continued to further our pipeline in ophthal-
mology. In March 2019 we acquired Nightstar
Therapeutics plc, a clinical-stage gene therapy
company. As a result, we added two mid- to
late-stage clinical assets, as well as preclinical
programs, that focus on adeno-associated virus
treatments for inherited retinal disorders that can
lead to blindness. Following the acquisition, we
completed enrollment of the Phase 3 STAR study
of BIIB111 (timrepigene emparvovec) for the
potential treatment of choroideremia, a rare,
degenerative, X-linked retinal disorder that leads
to blindness and currently has no approved treat-
ments. The study is designed to investigate the
safety and efficacy of a single subretinal injection
of the gene therapy.
While we hope to continue the clinical trials that we
have underway, we expect that COVID-19 precau-
tions may impact the timeline of some of our trials.
Where science meets humanity
We feel a great sense of responsibility in our role as
a corporate citizen to make a positive impact both
today and in the future. To do this, we must always
consider and act on environmental, social and
governance (ESG) issues as an integral part of how
we do our business – every day.
In 2019, for the fourth time, Biogen was listed as the
number one company for the biotechnology industry
in the Dow Jones Sustainability World Indices.
Since 2014 Biogen has been carbon neutral, as
reflected in our use of 100% renewable electricity
and financially supported carbon offset projects. It
is clear that more is needed, and we are working to
find solutions that align with the recommendations
of climate scientists to move beyond carbon offsets.
Also, we treat water as a precious commodity –
strictly monitoring and looking for ways to reduce
use. We continue to actively employ green chemistry
processes and techniques to reduce our waste,
water and energy consumption.
Our employees are actively involved in our
corporate responsibility efforts. In September
2019 more than 3,000 Biogen employees across
more than 30 countries volunteered their time
and energy for our annual Care Deeply Day. Since
2010 this global day of service has supported
more than 100 community-based organizations,
science education programs, nutrition and food
security and other local needs.
Biogen 2019 Annual Report 7
In 2019 we took two major steps in providing
greater transparency on how critical decisions are
made about access to our medicines. In June we
published our updated Pricing Principles that outline
how we determine responsible pricing for our thera-
pies, and in December we published our framework
of Access Programs for investigational therapies.
Our thinking on these very important matters has
been guided by health equity and affordability while
sustaining innovation.
The Biogen Foundation supports our commitment
to science, technology, engineering and math
education (STEM). In 2019 more than 4,220 stu-
dents participated in education sessions at our
Community Labs in our Cambridge, Massachusetts,
and Research Triangle Park, North Carolina,
locations. Since our Community Labs began, nearly
55,000 children have been engaged in our hands-
on programs, and in 2019 54% of those students
came from low-income households and/or groups
traditionally underrepresented in science.
Our multi-front response to the COVID-19 pandemic
Biogen is engaging on many fronts to respond to
the COVID-19 global crisis by focusing our efforts on
the following major areas.
Through the Biogen Foundation, we have committed
$10 million to support the global response efforts
and the immediate needs of communities. Our
donations are focused on expanding testing options,
easing the strain on medical systems and support-
ing access to necessities like food.
We have directed employees to work from home
and provided support, including financial support,
to all Biogen employees and their families worldwide
to protect their health and safety and prevent the
disease from further spreading.
We have deployed our scientific resources and
capabilities, which include equipment and supplies,
to help support organizations as they work on the
front lines to treat and contain the virus.
Biogen’s ongoing success is rooted in the
strength of our diverse people and our inclusive
culture. We firmly believe that diverse teams drive
better performance. Within Biogen today, we are
proud of the fact that 46% of our director-level
and above positions are held by women, and that 26%
of director-level and above roles in the U.S. are held
by racial or ethnic minorities. Recently, we have taken
important steps in setting goals to ensure diversity in
our clinical trial programs. This is part of our commit-
ment to address the needs of the patients we serve.
In the U.S. alone, we know that African Americans
make up only 5% of clinical trial participants, while
Hispanic representation is 1%. 5 This is not sufficient
representation, a fact we are working to help change.
In 2020 we will continue to advance our corporate
responsibility leadership. Ultimately, we believe
that by doing the right thing for our community and
the world, we can help build sustainable value for
all our stakeholders.
We are helping to increase the understanding
of COVID-19 and advance research efforts and
potential therapeutic options. For example, we
have entered into a consortium with the Broad
Institute of MIT and Harvard, and Partners
HealthCare to create a COVID-19 biobank.
We will enable impacted Biogen employees, as well
as close contacts, to donate blood samples and
related health data, which will then be analyzed
by scientists and researchers and will be openly
shared with the global scientific community.
Our teams are mobilized as we work to ensure
patients continue to have access to our therapies and
are closely monitoring developments and potential
impacts on our business. As we’ve moved forward
through this crisis, the importance of our work and the
vital role our team plays in supplying critical therapies
for people living with serious neurological and neuro-
degenerative diseases has become even clearer.
8 Biogen 2019 Annual Report
CEO LETTER
Looking to the future
Given the fluidity of the current environment, we
anticipate that there may be near-term impacts
on our business or operations from the COVID-19
pandemic. However, we believe that we have
multiple opportunities for long-term value creation
as we continue to build a multi-franchise neuro-
science portfolio.
As always, we will remain financially disciplined,
continue to drive efficiencies and operate with
integrity as we aim to continue to deliver long-term
value to our stockholders and society. We believe
that neuroscience is at an inflection point, and
Biogen is at the forefront. We are hopeful about
the prospect of creating new sources of value for
our stockholders and continuing to deliver on our
purpose to lead in this space as we work to develop
new therapies for the betterment of humanity.
None of our accomplishments or our prospects
for future success would be possible without
the commitment of the people of Biogen, the
trust of our stockholders and the support all of
our stakeholders – scientists, collaboration
partners, healthcare providers, advocacy groups,
caregivers and patients.
My sincere thanks and appreciation to all of you.
Together, we are tackling some of the most difficult
and devastating diseases, and we believe we can
have a profound, positive impact on society. We
are dedicated to working ethically and compliantly
with a passion for science to help deliver innovative
therapies for patients and value for our stockholders.
At Biogen, we are pioneering science for humanity.
Millions are waiting for life-changing therapies,
which is why we can’t wait. The time is now.
Michel Vounatsos
Chief Executive Officer
1 https://www.alz.co.uk/research/WorldAlzheimerReport2018.pdf?2 (2018)
2 https://www.parkinson.org/Understanding-Parkinsons/Statistics
3 https://www.forbes.com/sites/williamhaseltine/2018/04/02/aging-populations-will-challenge-healthcare-systems-all-over-the-world/
#5a8efe7c2cc3
4 https://www.un.org/development/desa/en/news/population/our-world-is-growing-older.html
5 https://www.fda.gov/media/84982/download
6 As of December 31, 2019, more than 10,000 patients have been treated with SPINRAZA across the post-marketing setting, the Expanded Access
Program and clinical trials.
GAAP TO NON-GAAP RECONCILIATION
Biogen 2019 Annual Report 9
Diluted EPS and net income attributable to Biogen Inc.
(Unaudited, $ in millions, except per share amounts)
GAAP Diluted EPS
2019
2018
2017 1
2016
2015
$31.42
$21.58
$11.92
$16.93
$15.34
Adjustments to net income attributable to Biogen Inc.
2.15
4.62
9.89
3.29
1.67
$33.57
$26.20
$21.81
$20.22
$17.01
$5,889
$4,431
$2,539
$3,703
$3,547
Non–GAAP Diluted EPS
GAAP Net Income Attributable to Biogen Inc.
Amortization of acquired intangible assets A, B
TECFIDERA litigation settlement charge B
Acquired in-process research and development
Research and development
(Gain) loss on fair value remeasurement of contingent considerationC
Premium paid on purchase of Ionis common stock D
(Gain) loss on equity security investments
Net distribution to noncontrolling interests E
Restructuring, business transformation and other cost saving initiatives:
2017 corporate strategy implementation F
Restructuring charges F
Cambridge manufacturing facility rationalization costs
Hemophilia business separation costs
Gain on deconsolidation of variable interest entities
Loss on divestiture of Hillerød Denmark manufacturing operations G
Stock option expense H
Acquisition-related transaction and integration costs
Accelerated share-based compensation expense
Income tax effect related to reconciling items
Elimination of deferred tax asset
Swiss Tax reform I
U.S. Tax reform J
Amortization included in Equity in loss of investee, net of tax K
–
3
2
–
–
–
55
26
28
7
31
–
(54)
–
78
490
–
–
–
(64)
–
747
–
113
10
(12)
162
(200)
(128)
815
–
120
–
63
–
–
132
18
1
–
19
–
–
–
–
–
374
455
–
–
15
–
–
–
–
33
55
18
(4)
–
–
–
–
365
–
–
–
31
–
–
–
–
93
–
–
–
–
–
–
–
44
11
12
–
–
–
–
–
–
–
(147)
(236)
(225)
(104)
11
–
125
1,174
–
–
–
–
–
–
–
–
Non–GAAP Net Income Attributable to Biogen Inc.
$6,291
$5,378
$4,645
$4,423
$3,932
Free Cash Flow Reconciliation
Net Cash Flows Provided by Operating Activities 2
$7,079
$6,188
$4,551
$4,522
$3,716
Purchases of property, plant and equipment (Capital Expenditures)
Contingent consideration related to Fumapharm AG acquisition
Free Cash Flow
(515)
(300)
(771)
(867)
(616)
(1,500)
(1,200)
(1,200)
(643)
(850)
$6,264
$3,917
$2,484
$2,706
$2,223
1 On February 1, 2017, we completed the spin-off of our hemophilia business. Our consolidated results of operations reflect the financial
results of our hemophilia business through January 31, 2017.
2 Does not reflect the reclassification of amounts for 2016 and 2015 pursuant to the adoption of Accounting Standards
Update No. 2016–09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.
10 Biogen 2019 Annual Report
GAAP TO NON-GAAP RECONCILIATION
Notes to GAAP to Non-GAAP Reconciliation
A Amortization and impairment of acquired
intangible assets for the twelve months ended
December 31, 2019, reflects the impact of a
$215.9 million impairment charge related to
certain in-process research and development
(IPR&D) assets associated with the Phase 2b
study of BG00011 (STX-100) for the potential
treatment of idiopathic pulmonary fibrosis, which
was discontinued during the third quarter of 2019.
Holding Ltd., Forward Pharma A/S (Forward
Pharma) and certain related parties, which was
effective as of February 1, 2017. Pursuant to this
agreement, we obtained U.S. and rest of world
licenses to Forward Pharma’s intellectual property,
including Forward Pharma’s intellectual property
related to TECFIDERA. In exchange, we paid
Forward Pharma $1.25 billion in cash, of which
$795.2 million was recognized within intangible
assets in the first quarter of 2017.
Amortization and impairment of acquired intangible
assets for the twelve months ended December 31,
2018, includes the impact of impairment charges
related to certain IPR&D assets associated with our
vixotrigine (BIIB074) program totaling $189.3 million
that were recognized during the third quarter of
2018. During the third quarter of 2018 we complet-
ed a 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 poten-
tial 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 reassessment, 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.
B In January 2017 we entered into a settlement
and license agreement among Biogen Swiss
Manufacturing GmbH, Biogen International
We had an intellectual property dispute with
Forward Pharma in the U.S. concerning intellectual
property related to TECFIDERA.
In March 2017 the U.S. intellectual property
dispute was decided in our favor. Forward Pharma
appealed to the U.S. Court of Appeals for the
Federal Circuit. We evaluated the recoverability
of the U.S. asset acquired from Forward Pharma
and recorded a $328.2 million impairment charge
in the first quarter of 2017 to adjust the carrying
value of the acquired U.S. asset to fair value
reflecting the impact of the developments in the
U.S. legal dispute and continued to amortize the
remaining net book value of the U.S. intangible
asset in our consolidated statements of income
utilizing an economic consumption model. The
U.S. Court of Appeals for the Federal Circuit
upheld the U.S. Patent and Trademark Office's
March 2017 ruling and in January 2019 denied
Forward Pharma's petition for rehearing. We
evaluated the recoverability of the U.S. asset
based upon these most recent developments and
recorded a $176.8 million impairment charge in
the fourth quarter of 2018 to reduce the remain-
ing net book value of the U.S. asset to zero.
We have an intellectual property dispute with
Forward Pharma in the European Union concerning
intellectual property related to TECFIDERA.
In March 2018 the European Patent Office (EPO)
revoked Forward Pharma’s European Patent
No. 2 801 355. Forward Pharma has filed an
appeal to the Technical Boards of Appeal of the
EPO and the appeal is pending. Based upon our
assessment of this ruling, we continue to amortize
Biogen 2019 Annual Report 11
the remaining net book value of the rest of world
intangible asset in our consolidated statements of
income utilizing an economic consumption model.
The remaining net book value of the TECFIDERA
rest of world intangible asset as of December 31,
2019, was $36.1 million.
For the twelve months ended December 31, 2019,
compared to the prior year period, 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's
intellectual property, including Forward Pharma's
intellectual property related to TECFIDERA, and
higher expected lifetime revenues of TYSABRI.
C (Gain) loss on fair value remeasurement of contin-
gent consideration for the twelve months ended
December 31, 2019, reflects our adjustment to the
value of our contingent consideration obligations
related to the BG00011 asset, resulting in a gain
of $61.2 million during the third quarter of 2019.
(Gain) loss on fair value remeasurement of contin-
gent consideration for the twelve months ended
December 31, 2018, reflects our adjustment
to the fair value of our contingent consideration
obligations related to our vixotrigine program for
the potential treatment of TGN.
In the third quarter of 2018 we decided to delay
the initiation of the Phase 3 studies of vixotrigine
for the potential treatment of TGN. As a result
of that decision, we 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.
In the fourth quarter of 2018 we received feedback
from the FDA regarding the design of the Phase 3
studies of vixotrigine for the potential treatment of
TGN. Following this feedback, we adjusted the fair
value of our contingent consideration obligations
related to our vixotrigine program for the poten-
tial treatment of TGN to reflect the increased
probabilities of success and recognized a loss of
$80.6 million in the fourth quarter of 2018.
D In June 2018 we closed a 10-year exclusive col-
laboration agreement with Ionis Pharmaceuticals,
Inc. (Ionis) to develop novel antisense oligonu-
cleotide drug candidates for a broad range of
neurological diseases (the 2018 Ionis Agreement)
for a total payment of $1.0 billion, consisting of
an upfront payment of $375.0 million and the
purchase of approximately 11.5 million shares of
Ionis common stock at a cost of $625.0 million.
The 11.5 million shares of Ionis common stock were
purchased at a premium to their fair value at the
transaction closing date. The premium consisted of
acquiring the shares at a price above the fair value
based on the trailing 10-day weighted-average close
price prior to entering into the 2018 Ionis Agreement
in April 2018 and the effect of certain holding period
restrictions. We recorded an asset of $462.9 million
in investments and other assets in our condensed
consolidated balance sheets reflecting the fair value
of the common stock as of the purchase date and
a charge of $162.1 million to research and devel-
opment expense in our condensed consolidated
statements of income in the second quarter of 2018
reflecting the premium paid for the common stock.
E Net distribution to noncontrolling interests reflects
the $50.0 million payment to Neurimmune
SubOne AG (Neurimmune), net of Neurimmune's
tax, to further reduce the previously negotiated
royalty rates payable on products developed under
our amended collaboration and license agreement
with Neurimmune, including royalties payable
on potential commercial sales of aducanumab,
by an additional 5%.
F 2017 corporate strategy implementation and
restructuring charges are related to our efforts to
create a leaner and simpler operating model.
G In August 2019 we completed the sale of all of the
outstanding shares of our subsidiary that owned
our biologics manufacturing operations in Hillerød,
12 Biogen 2019 Annual Report
GAAP TO NON-GAAP RECONCILIATION
Denmark to FUJIFILM Corporation (FUJIFILM).
Upon the closing of this transaction, we received
approximately $881.9 million in cash, which may
be adjusted based on 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 commit-
ment obligation of approximately $74.0 million
associated with such guarantees. We may adjust
this estimate based upon changes in business
conditions, which may result in the increase or
reduction of this adverse commitment obligation
in subsequent periods. 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 activi-
ties at the Hillerød facility. For the disposition of
a business, our policy is to recognize contingent
consideration when the consideration is real-
izable. 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 $164.4 million in
our consolidated statements of income. This loss
included a pre-tax loss of $95.5 million, which
was recorded in loss on divestiture of Hillerød,
Denmark manufacturing operations.
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
approximately $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 probabil-
ity-weighted estimate of future manufacturing
activity. We also recorded a tax expense of
$68.9 million related to this transaction. During
the fourth quarter of 2019 we recorded a
$40.2 million reduction in our estimate of the
future minimum batch commitment utilizing our
current manufacturing forecast, which reflects the
impact of forecasted batches of aducanumab,
resulting in a reduction in the pre-tax loss on
divestiture from $95.5 million to $55.3 million.
H Stock option expense reflects the accelerated vest-
ing of stock options previously granted to Nightstar
Therapeutics plc (NST) employees as a result of our
acquisition of NST in the second quarter of 2019.
I During the third quarter of 2019 a new taxing
regime in the country and certain cantons of
Switzerland was enacted and we refer to this as
Swiss Tax Reform. As a result of the impact of
Swiss Tax Reform, we recorded an income tax
benefit of approximately $54.3 million resulting
from a remeasurement of our deferred tax assets
and liabilities in the third quarter of 2019.
J The Tax Cuts and Jobs Act of 2017 (2017 Tax
Act) resulted in significant changes to the U.S.
corporate income tax system. These changes
include a federal statutory rate reduction from
35% to 21%, the elimination or reduction of certain
domestic deductions and credits and limitations on
the deductibility of interest expense and executive
compensation. The 2017 Tax Act also transitions
international taxation from a worldwide system
to a modified territorial system, which has the
effect of subjecting certain earnings of our foreign
subsidiaries and collaborations to immediate U.S.
taxation as global intangible low-taxed income
Biogen 2019 Annual Report 13
(GILTI) or Subpart F income, and includes base
erosion prevention measures on U.S. earnings and
the reduced effective tax rate on income that comes
from U.S. exports, called Foreign Derived Intangible
Income. During the fourth quarter of 2018 we
elected to recognize deferred taxes for the basis
differences expected to reverse as GILTI is incurred
and have established initial deferred tax balances,
as of the enactment date of the 2017 Tax Act.
U.S. tax reform amounts for the twelve months
ended December 31, 2018, reflects the effect
of an expense of $135.8 million related to the
establishment of GILTI deferred taxes.
Tax reform amounts for the twelve months ended
December 31, 2018, reflects the effect of a net
reduction of $34.6 million to our 2017 preliminary
estimate associated with a one-time mandatory
deemed repatriation tax on accumulated foreign
subsidiaries' previously untaxed foreign earnings,
an expense of $12.7 million for the remeasurement
of our deferred tax balances and an $11.0 million
expense to reflect other aspects of the 2017 Tax Act.
K Amortization included in equity in loss of investee,
net of tax reflects the amortization of the differ-
ences between the fair value of our investment in
Samsung Bioepis Co., Ltd. and the carrying value
of our interest in the underlying net assets of the
investee. These basis differences are amortized
over their economic life.
NOTES:
Our “Non-GAAP net income attributable to Biogen
Inc.” and “Non-GAAP diluted earnings per share”
financial measures exclude the following items from
“GAAP net income attributable to Biogen Inc.” and
“GAAP diluted earnings per share”: (1) purchase
accounting, merger-related and other adjustments,
(2) hemophilia business separation costs, (3) re-
structuring, business transformation and other cost
saving initiatives, (4) (gain) loss on equity security
investments, (5) stock option expense, (6) other
select items and (7) their related tax effects. “Free
Cash Flow” is defined as net cash flows provided
by operating activities less purchases of property,
plant and equipment and contingent consideration
related to our acquisition of Fumapharm AG as
disclosed within our Annual Report on Form 10-K.
We believe that the disclosure of these Non-GAAP
financial measures provides additional insight
into the ongoing economics of our business and
reflects how we manage our business internally,
set operational goals and form the basis of our
management incentive programs. These Non-GAAP
financial measures are not in accordance with
generally accepted accounting principles in the
United States and should not be viewed in isolation
or as a substitute for reported, or GAAP, net income
attributable to Biogen Inc., GAAP diluted earnings
per share and net cash flows provided by operating
activities. Numbers may not foot due to rounding.
Additional reconciliations of our Non-GAAP financial
measures can be found in the Investors section of
www.biogen.com.
14 Biogen 2019 Annual Report
SAFE HARBOR
This Annual Report contains forward-looking
statements, including statements made pursuant to
the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, relating to: our strat-
egy and plans; corporate strategy update; pipeline
potential and progress; potential of our commercial
business and pipeline programs; the prospects
of our product portfolio; capital allocation and
investment strategy; clinical development programs,
clinical trials and data readouts and presentations;
regulatory filings and the timing thereof; risks and
uncertainties associated with drug development and
commercialization; the potential benefits, safety and
efficacy of our products and investigational thera-
pies; anticipated benefits and potential of invest-
ments, collaborations and business development
activities; our future financial and operating results;
and the potential impact of the COVID-19 pandemic
on our business and operations. These forward-look-
ing statements may be accompanied by such
words as “aim,” “anticipate,” “believe,” “could,”
“estimate,” “expect,” “forecast,” “goal,” “intend,”
“may,” “plan,” “potential,” “possible,” “will,” “would”
and other words and terms of similar meaning. Drug
development and commercialization involve a high
degree of risk, and only a small number of research
and development programs result in commercializa-
tion of a product. Results in early stage clinical trials
may not be indicative of full results or results from
later stage or larger scale clinical trials and do not
ensure regulatory approval. You should not place
undue reliance on these statements or the scientific
data presented.
These statements involve risks and uncertainties that
could cause actual results to differ materially from
those reflected in such statements, including: our
dependence on sales from our products; difficulties in
obtaining and maintaining adequate coverage, pricing
and reimbursement for our products; failure to protect
and enforce our data, intellectual property and other
proprietary rights and the risks and uncertainties
relating to intellectual property claims and challenges;
uncertainty of long-term success in developing,
licensing or acquiring other product candidates or
additional indications for existing products; failure
to compete effectively due to significant product
competition in the markets for our products; failure
to successfully execute or realize the anticipated
benefits of our strategic and growth initiatives; the
risk that positive results in a clinical trial may not be
replicated in subsequent or confirmatory trials or suc-
cess in early stage clinical trials may not be predictive
of results in later stage or large scale clinical trials or
trials in other potential indications; risks associated
with clinical trials, including our ability to adequately
manage clinical activities, unexpected concerns that
may arise from additional data or analysis obtained
during clinical trials, regulatory authorities may require
additional information or further studies or may fail to
approve or may delay approval of our drug candidates;
the occurrence of adverse safety events, restrictions
on use with our products or product liability claims;
risks relating to technology failures or breaches; our
dependence on collaborators, joint venture partners
and other third parties for the development, regulatory
approval and commercialization of products and
other aspects of our business, which are outside of
our full control; risks associated with current and
potential future healthcare reforms; risks relating to
management and key personnel changes, including
attracting and retaining key personnel; failure to
comply with legal and regulatory requirements; the
risks of doing business internationally, including
currency exchange rate fluctuations; risks relating to
investment in our manufacturing capacity; problems
with our manufacturing processes; risks related to
commercialization of biosimilars; fluctuations in our
operating results; fluctuations in our effective tax rate;
risks related to investment in properties; the market,
interest and credit risks associated with our portfolio
of marketable securities; risks relating to share
repurchase programs; risks relating to access to
capital and credit markets; risks related to indebt-
edness; environmental risks; risks relating to the
distribution and sale by third parties of counterfeit or
unfit versions of our products; risks relating to the use
of social media for our business; change in control
provisions in certain of our collaboration agreements;
the impact related to the effect of COVID-19 or other
public health epidemics on our sales and operations,
including employees; and the other risks and uncer-
tainties that are described in the Risk Factors section
of our most recent annual or quarterly report and in
other reports we have filed with the U.S. Securities
and Exchange Commission.
Biogen 2019 Annual Report 15
These statements are based on our current beliefs
and expectations and speak only as of April 10,
2020. We do not undertake any obligation to publicly
update any forward-looking statements, except as
required by law.
NOTE REGARDING TRADEMARKS: AVONEX®,
BIOGEN®, PLEGRIDY®, SPINRAZA®, TECFIDERA®,
TYSABRI® and VUMERITY® are registered trademarks
of Biogen. BENEPALI™, FLIXABI™, FUMADERM™
and IMRALDI™ are trademarks of Biogen. Other
trademarks referenced in this Annual Report are the
property of their respective owners.
16 Biogen 2019 Annual Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-19311
BIOGEN INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
33-0112644
(I.R.S. Employer Identification No.)
225 Binney Street, Cambridge, MA 02142
(617) 679-2000
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.0005 par value
Trading Symbol(s)
BIIB
Name of Each Exchange Where Registered
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated
filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes
No
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (without admitting
that any person whose shares are not included in such calculation is an affiliate) computed by reference to the price at
which the common stock was last sold as of the last business day of the registrant’s most recently completed second
fiscal quarter was $43,010,112,437.
As of February 4, 2020, the registrant had 174,064,011 shares of common stock, $0.0005 par value, outstanding.
Portions of the definitive proxy statement for our 2020 Annual Meeting of Stockholders are incorporated by reference
into Part III of this report.
DOCUMENTS INCORPORATED BY REFERENCE
BIOGEN INC.
ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2019
TABLE OF CONTENTS
Item 1.
Business
Item 1A.
Risk Factors
Item 1B. Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Item 13.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
Item 15.
Exhibits and Financial Statement Schedules
Item 16.
Form 10-K Summary
PART IV
Signatures
Consolidated Financial Statements
Page
1
33
48
48
49
49
50
52
55
86
88
88
88
89
90
90
90
90
90
91
91
95
F- 1
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are being made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995 (the Act) with the intention of obtaining the benefits of the “Safe Harbor”
provisions of the Act. These forward-looking statements may be accompanied by such words as “aim,” “anticipate,”
“believe,” “could,” “estimate,” “expect,” “forecast,” "goal," “intend,” “may,” “plan,” “potential,” “possible,” “will,”
“would” and other words and terms of similar meaning. Reference is made in particular to forward-looking
statements regarding:
•
the anticipated amount, timing and accounting of revenues; contingent, milestone, royalty and other payments
under licensing, collaboration, acquisition or divestiture agreements; tax positions and contingencies;
collectability of receivables; pre-approval inventory; cost of sales; research and development costs;
compensation and other selling, general and administrative expenses; amortization of intangible assets;
foreign currency exchange risk; estimated fair value of assets and liabilities; and impairment assessments;
• expectations, plans and prospects relating to sales, pricing, growth and launch of our marketed and pipeline
products;
•
the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our patents
and other proprietary and intellectual property rights, tax audits, assessments and settlements, pricing matters,
sales and promotional practices, product liability and other matters;
• patent terms, patent term extensions, patent office actions and expected availability and period of regulatory
exclusivity;
•
the potential impact of increased product competition in the markets in which we compete, including increased
competition from generics, biosimilars, prodrugs and products approved under abbreviated regulatory pathways;
• our plans and investments in our core and emerging growth areas, as well as implementation of our corporate
strategy;
•
the drivers for growing our business, including our plans and intention to commit resources relating to research
and development programs and business development opportunities, as well as the potential benefits and
results of, and the anticipated timing to complete, certain business development transactions;
• our ability to finance our operations and business initiatives and obtain funding for such activities;
•
the costs and timing of potential clinical trials, filings and approvals, and the potential therapeutic scope of the
development and commercialization of our and our collaborators’ pipeline products;
• adverse safety events involving our marketed products, generic or biosimilar versions of our marketed products
or any other products from the same class as one of our products;
•
the potential impact of healthcare reform in the United States (U.S.) and measures being taken worldwide
designed to reduce healthcare costs and limit the overall level of government expenditures, including the
impact of pricing actions and reduced reimbursement for our products;
• our manufacturing capacity, use of third-party contract manufacturing organizations, plans and timing relating to
changes in our manufacturing capabilities and activities in new or existing manufacturing facilities;
•
•
•
•
the impact of the continued uncertainty of the credit and economic conditions in certain countries in Europe
and our collection of accounts receivable in such countries;
the potential impact on our results of operations and liquidity of the United Kingdom's (U.K.) departure from the
European Union (E.U.);
lease commitments, purchase obligations and the timing and satisfaction of other contractual obligations; and
the impact of new laws, including the Swiss Federal Act on Tax Reform and AHV Financing, regulatory
requirements, judicial decisions and accounting standards.
These forward-looking statements involve risks and uncertainties, including those that are described in Item
1A. Risk Factors included in this report and elsewhere in this report, that could cause actual results to differ
materially from those reflected in such statements. You should not place undue reliance on these statements.
Forward-looking statements speak only as of the date of this report. Except as required by law, we do not undertake
any obligation to publicly update any forward-looking statements, whether as a result of new information, future
developments or otherwise.
NOTE REGARDING COMPANY AND PRODUCT REFERENCES
References in this report to:
• “Biogen,” the “company,” “we,” “us” and “our” refer to Biogen Inc. and its consolidated subsidiaries;
• “RITUXAN” refers to both RITUXAN (the trade name for rituximab in the U.S., Canada and Japan) and
MabThera (the trade name for rituximab outside the U.S., Canada and Japan); and
• "ELOCTATE" refers to both ELOCTATE (the trade name for Antihemophilic Factor (recombinant), Fc Fusion
Protein in the U.S., Canada and Japan) and ELOCTA (the trade name for Antihemophilic Factor
(recombinant), Fc Fusion Protein in the E.U.).
NOTE REGARDING TRADEMARKS
AVONEX®, PLEGRIDY®, RITUXAN®, RITUXAN HYCELA®, SPINRAZA®, TECFIDERA®, TYSABRI®, VUMERITY® and
ZINBRYTA® are registered trademarks of Biogen.
BENEPALITM, FLIXABITM, FUMADERMTM and IMRALDITM are trademarks of Biogen.
ALPROLIX®, ELOCTATE®, ENBREL®, EYLEA®, FAMPYRATM, GAZYVA®, HUMIRA®, LUCENTIS®, OCREVUS®,
REMICADE®, SkySTARTM and other trademarks referenced in this report are the property of their respective owners.
Item 1.
Business
Overview
PART I
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; Alzheimer’s
disease (AD) and dementia; neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic
lateral sclerosis (ALS); movement disorders, including Parkinson's disease; 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, VUMERITY 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 18, Collaborative and
Other Relationships, to our consolidated financial statements included in this report.
For over two decades we have led in the research and development of new therapies to treat MS, resulting in
our leading portfolio of MS treatments. Now our research is focused on additional improvements in the treatment of
MS, such as the development of next generation therapies for MS, with a goal to reverse or possibly repair damage
caused by the disease. We also introduced the first approved treatment for SMA and are continuing to pursue
research and development for potential advancements in the treatment of SMA, including a muscle enhancement
program, novel antisense oligonucleotide (ASO) drug candidates and an oral splicing modulator. We are also applying
our scientific expertise to solve some of the most challenging and complex diseases, including AD, ALS, Parkinson's
disease, choroideremia (CHM), X-linked retinitis pigmentosa (XLRP), systemic lupus erythematosus (SLE), cutaneous
lupus erythematosus (CLE), cognitive impairment associated with schizophrenia (CIAS), stroke, epilepsy and pain.
Our innovative drug development and commercialization activities are complemented by our biosimilar business
that expands 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 certain countries in Europe and have
exclusive rights to commercialize these products in China. Additionally, we have exclusive rights to commercialize two
potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major
markets worldwide, including the U.S., Canada, Europe, Japan and Australia. For additional information on our
collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to
our consolidated financial statements included in this report.
1
Key Business Developments
The following is a summary of key developments affecting our business since the beginning of 2019.
For additional information on our acquisitions, collaborative and other relationships discussed below, please
read Note 2, Acquisitions, Note 3, Divestitures, Note 18, Collaborative and Other Relationships, and Note 19,
Investments in Variable Interest Entities, to our consolidated financial statements included in this report.
Acquisitions, Collaborative and Other Relationships
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 are leveraging Skyhawk's SkySTAR
technology platform with the goal of discovering innovative small molecule treatments for patients with neurological
diseases, including MS and SMA. We are responsible for the development and potential commercialization of any
therapies resulting from this collaboration. In October 2019 we amended this agreement to add an additional
discovery program.
Nightstar Therapeutics plc
In June 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 (AAV) 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.
Divestiture of Hillerød, Denmark Manufacturing Operations
In August 2019 we completed the sale of all of the outstanding shares of our subsidiary that owned our
biologics manufacturing operations in Hillerød, Denmark to FUJIFILM Corporation (FUJIFILM).
Samsung Bioepis
In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to
commercialize two potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing
EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia. We also acquired an
option to extend our existing commercial agreement with Samsung Bioepis for BENEPALI, IMRALDI and FLIXABI in
Europe and obtained exclusive rights to commercialize these products in China.
BIIB080 Option Exercise
In December 2019 we exercised our option with Ionis Pharmaceuticals, Inc. (Ionis) and obtained a worldwide,
exclusive, royalty-bearing license to develop and commercialize BIIB080 (tau ASO), an investigational treatment for
AD.
Pfizer Inc.
In January 2020 we entered into an agreement to acquire PF-05251749, a novel CNS-penetrant small molecule
inhibitor of casein kinase 1 (CK1), for the potential treatment of patients with behavioral and neurological symptoms
across various psychiatric and neurological diseases from Pfizer Inc. (Pfizer). In particular, we plan to develop the
Phase 1 asset for the treatment of sundowning in AD and irregular sleep wake rhythm disorder (ISWRD) in
Parkinson’s disease. This transaction is subject to customary closing conditions, including the expiration of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S. We expect this
transaction to close in the first quarter of 2020.
Other Key Developments
VUMERITY
In October 2019 the U.S. Food and Drug Administration (FDA) approved VUMERITY for the treatment of RMS.
The FDA approval of VUMERITY was based on a New Drug Application (NDA) submitted under the 505(b)(2) filing
pathway. It included interim exposure and safety findings from EVOLVE-MS-1, an ongoing, Phase 3, single-arm, open
label, two-year safety study evaluating VUMERITY in patients with relapsing remitting MS (RRMS), and data from
pharmacokinetic bridging studies comparing VUMERITY and TECFIDERA to establish bioequivalence, and relied, in
part, on the FDA's findings of safety and efficacy for TECFIDERA. In November 2019 VUMERITY became available in
the U.S.
2
Aducanumab (A mAb)
In October 2019 we and our collaboration partner Eisai Co., Ltd. (Eisai) announced that we plan to pursue
regulatory approval for aducanumab, our anti-amyloid beta antibody candidate for the potential treatment of AD, in
the U.S.
2019 Share Repurchase Programs
In March 2019 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common
stock (March 2019 Share Repurchase Program). Our March 2019 Share Repurchase Program does not have an
expiration date. All share repurchases under our March 2019 Share Repurchase Program will be retired.
In December 2019 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common
stock (December 2019 Share Repurchase Program). Our December 2019 Share Repurchase Program does not have
an expiration date. All share repurchases under our December 2019 Share Repurchase Program will be retired.
Board of Directors Update
In June 2019 stockholders elected two new independent directors, William A. Hawkins and Jesus B. Mantas, to
Biogen's Board of Directors, who are each serving for a one-year term until the 2020 annual meeting of stockholders
and their successors are duly elected and qualified.
Management Changes
During 2019 we announced the following management changes:
• The appointment of Alfred Sandrock, Jr., M.D., Ph.D. as Executive Vice President, Research and
Development; and
• The appointment of Alphonse Galdes, Ph.D., as Executive Vice President, Pharmaceutical Operations and
Technology.
For additional information on these and our other executive officers, please read the subsection entitled
"Information about our Executive Officers" included in this report.
Product and Pipeline Developments
Core Growth Areas
Multiple Sclerosis and Neuroimmunology
TECFIDERA (dimethyl fumarate)
•
•
In May 2019, at the 71st annual meeting of the American Academy of Neurology (AAN) in Philadelphia, PA,
we presented re-analyzed pooled images from the Phase 3 DEFINE and CONFIRM studies that showed that
treatment with TECFIDERA significantly slowed the rate of whole brain volume loss by 35.9% during the
second year of treatment compared to placebo.
In September 2019, at the 35th Congress of the European Committee for Treatment and Research in MS
(ECTRIMS) and 24th Annual Conference of Rehabilitation in MS in Stockholm, Sweden, we presented new
10-year results from the ongoing Phase 3 ENDORSE extension study and comparative effectiveness
analyses of TECFIDERA that support the consistent, long-term benefits of treatment with TECFIDERA.
TYSABRI (natalizumab)
•
•
•
In January 2019 the first patient was enrolled in the global Phase 3b NOVA study evaluating the efficacy
and safety of extended interval dosing (EID; every six weeks) for natalizumab compared to standard interval
dosing in patients with RMS.
In May 2019, at the 71st annual meeting of the AAN in Philadelphia, PA, we presented updated safety
analyses from the TOUCH database safety analysis evaluating EID of natalizumab (of approximately every
six weeks) compared to every four-week dosing based on the TOUCH prescribing program database.
In September 2019, at the 35th Congress of ECTRIMS and 24th Annual Conference of Rehabilitation in MS
in Stockholm, Sweden, we presented new data from the observational, open-label, single-arm STRIVE study
that support the real-world long-term effectiveness of TYSABRI in patients with early RMS, who are within
three years from diagnosis and are anti-JC virus antibody negative.
3
AVONEX (interferon beta-1a) and PLEGRIDY (peginterferon beta-1a)
•
•
In September 2019, at the 35th Congress of ECTRIMS and 24th Annual Conference of Rehabilitation in MS
in Stockholm, Sweden, we presented new data from two real-world observational studies that provide
further support that exposure to interferon beta treatment, including AVONEX and PLEGRIDY, before
conception and/or during pregnancy is not expected to have an adverse effect on pregnancy or infant
growth outcomes.
In October 2019 the European Medicines Agency (EMA) updated the summaries of product characteristics
for AVONEX and PLEGRIDY to remove pregnancy contraindications and, where clinically needed, to allow use
during pregnancy and breastfeeding in women with RMS.
VUMERITY (diroximel fumarate; DRF)
•
•
•
•
•
In May 2019, at the 71st annual meeting of the AAN in Philadelphia, PA, we presented updated safety and
exploratory efficacy results from the ongoing open-label EVOLVE-MS-1 study of VUMERITY in RMS.
In May 2019 we presented new interim data from the EVOLVE-MS-1 study at the annual meeting of the
Consortium of Multiple Sclerosis Centers in Seattle, WA. These data indicated that VUMERITY was
generally well tolerated and significantly reduced disease activity in newly diagnosed RMS patients and
those previously treated with interferons or glatiramer acetate. Treatment discontinuations due to
gastrointestinal events occurred at a low rate over one year.
In July 2019 we and Alkermes plc announced positive topline results from EVOLVE-MS-2, a large,
randomized, double-blind, five-week, Phase 3 study of VUMERITY for RMS, compared to TECFIDERA.
VUMERITY was statistically superior to TECFIDERA on the study's pre-specified primary endpoint, with
patients treated with VUMERITY self-reporting significantly fewer days of key gastrointestinal symptoms with
intensity scores 2 on the Individual Gastrointestinal Symptom and Impact Scale, as compared to
TECFIDERA (p=0.0003).
In September 2019, at the 35th Congress of ECTRIMS and 24th Annual Conference of Rehabilitation in MS
in Stockholm, Sweden, we presented interim data from the Phase 3 EVOLVE-MS-1 study that support the
potential of VUMERITY as a novel oral fumarate.
In November 2019, at the 27th Annual Meeting of the European Charcot Foundation in Italy, we presented
results from the Phase 3 EVOLVE-MS-2 study demonstrating the improved patient-assessed gastrointestinal
tolerability of VUMERITY compared to TECFIDERA.
BIIB091 (BTK inhibitor)
•
In May 2019 the first participant was dosed in the Phase 1 study of BIIB091 in MS.
•
In December 2019 dosing began for the final multiple ascending dose cohort in the Phase 1 study of
BIIB091 in MS.
Alzheimer's Disease and Dementia
Aducanumab (A mAb)
•
•
In March 2019 we and our collaboration partner Eisai announced the decision to discontinue the global
Phase 3 trials, ENGAGE and EMERGE, designed to evaluate the efficacy and safety of aducanumab in
patients with mild cognitive impairment due to AD and mild AD dementia.
In October 2019 we and our collaboration partner Eisai announced that we plan to pursue regulatory
approval for aducanumab in the U.S. and that the Phase 3 EMERGE study met its primary endpoint showing
a significant reduction in clinical decline. We believe that results from a subset of patients in the Phase 3
ENGAGE study who received sufficient exposure to high dose aducanumab support the findings from
EMERGE. The decision to file is based on a new analysis, conducted in consultation with the FDA, of a
larger dataset from the Phase 3 EMERGE and ENGAGE trials that were discontinued in March 2019
following a futility analysis.
•
In December 2019, at the 12th Clinical Trials on Alzheimer's Disease annual meeting in San Diego, CA, we
presented topline results from the Phase 3 EMERGE and ENGAGE trials of aducanumab.
4
BAN2401 (A mAb)
•
In May 2019 our collaboration partner Eisai dosed the first patient in the global Phase 3 study (Clarity AD)
of BAN2401 in early AD.
BIIB092 (gosuranemab)
•
In September 2019 we completed enrollment of the Phase 2 study of gosuranemab for early AD.
Neuromuscular Disorders
SPINRAZA (nusinersen)
•
•
•
•
•
•
•
•
•
In February 2019 SPINRAZA was approved by the China National Medical Products Association for the
treatment of 5q SMA.
In April 2019 we presented new data illustrating the rapidly progressive nature of SMA in adults,
adolescents and older children. We also presented data from the NURTURE study, highlighting the benefits
of pre-symptomatic treatment and findings on the role of neurofilament as a potential biomarker for
predicting motor function in SMA. These data were presented at the Muscular Dystrophy Association
Clinical and Scientific Conference in Orlando, FL.
In April 2019 data from CS2/CS12, an open-label study of the safety and tolerability of SPINRAZA in
individuals with later-onset SMA, were published in the peer-reviewed journal Neurology, the medical journal
of the AAN. The data showed that individuals with later-onset SMA, treated with SPINRAZA, regained motor
function that had been previously lost and that treatment stabilized their disease activity leading to
improvements in activities of daily living.
In May 2019, at the 71st annual meeting of the AAN in Philadelphia, PA, we presented data from the
NURTURE study that demonstrated that pre-symptomatic infants with SMA treated with SPINRAZA over
three years achieved motor milestones that are more consistent with normal childhood development, as
well as interim results from the ENDEAR/CHERISH/SHINE open-label extension study that showed that
treatment with SPINRAZA, particularly when initiated earlier, leads to progressive motor milestone
improvements and increased survival rates for individuals with infantile-onset SMA.
In May 2019 The National Institute for Health and Care Excellence (NICE) in the U.K. recommended funding
for SPINRAZA on the National Health Service. The positive recommendation is for the treatment of infants,
children and adults with 5q SMA, including pre-symptomatic and symptomatic SMA Types 1, 2 and 3.
In June and July 2019 we presented new results from the NURTURE study, adding data to the longest study
of SMA in pre-symptomatic infants (n=25). The data reported, after up to 45.1 months of analysis,
continued to demonstrate efficacy and safety in patients treated pre-symptomatically with SPINRAZA in
comparison to the natural history of SMA. These new data also showed that patients treated with
SPINRAZA had continuous improvement, with the majority of patients achieving motor milestones within
timeframes consistent with normal development. These data were presented at the Cure SMA Annual SMA
Conference in Anaheim, CA and the 5th Congress of the European Academy of Neurology in Oslo, Norway.
In September 2019 we announced that we plan to initiate DEVOTE, a new Phase 2/3 study evaluating
whether a higher dose of SPINRAZA can offer even greater efficacy in treating SMA, as well as the safety
and tolerability of SPINRAZA, when administered at a higher dose.
In September 2019 we presented new data further demonstrating the safety and efficacy of treatment with
SPINRAZA in individuals with later-onset SMA at the 13th Congress of the European Paediatric Neurology
Society in Athens, Greece. An integrated analysis from SHINE, an open-label extension study for patients
with SMA who participated in prior SPINRAZA studies, found that children with later-onset SMA (Type 2 or
Type 3) experienced improvements or stabilization in one or more measures of motor function for up to
nearly six years, in contrast to the expected decline observed in natural history cohorts.
In October 2019 the journal Neuromuscular Disorders published data from NURTURE, the first study
investigating a treatment targeting the underlying cause of SMA in infants treated pre-symptomatically. Data
from the NURTURE study demonstrated that infants who initiated treatment with SPINRAZA prior to the
onset of clinical symptoms attained unparalleled results compared to the natural history of the disease.
These published results from the NURTURE study were previously presented at the 2019 Cure SMA Annual
5
SMA Conference in Anaheim, CA and the 5th Congress of the European Academy of Neurology in Oslo,
Norway.
BIIB067 (tofersen) - ALS
•
•
In March 2019 the first patient was dosed in the Phase 3 VALOR study of tofersen in adults with ALS with a
confirmed superdioxide dismutate 1 (SOD1) mutation.
In May 2019 we presented interim results of the Phase 1/2 study of tofersen. The data demonstrated a
statistically significant reduction in SOD1 protein levels and a numerical trend towards slowing of clinical
decline in SOD1-ALS patients treated with tofersen compared to placebo. The data were presented at the
71st annual meeting of the AAN in Philadelphia, PA and The European Network for the Cure of ALS meeting
in Tours, France.
BIIB100 (XPO1 inhibitor) - ALS
•
In June 2019 the first patient was dosed in the Phase 1 study of BIIB100 in sporadic ALS.
Movement Disorders
BIIB054 (cinpanemab) - Parkinson's Disease
•
In May 2019 we completed enrollment of the Phase 2 study of BIIB054 for Parkinson's disease.
BIIB094 (ION859) - Parkinson's Disease
•
In August 2019 the first patient in the Phase 1 study of BIIB094, an ASO targeting leucine-rich repeat
kinase 2 (LRRK2) for Parkinson's disease, was dosed.
Ophthalmology
BIIB111 (timrepigene emparvovec) - CHM
•
In November 2019 we completed enrollment of the Phase 3 STAR study of timrepigene emparvovec for
CHM.
Emerging Growth Areas
Immunology
Dapirolizumab Pegol (anti-CD40L) - SLE
•
In June 2019 our collaboration partner UCB presented interim results from the Phase 2b study of
dapirolizumab pegol (DZP) in patients with active SLE despite standard-of-care treatment. The primary
endpoint of the study, which was to demonstrate a dose response at 24 weeks on the British Isles Lupus
Assessment Group-based Composite Lupus Assessment (p=0.07), was not met. The study did
demonstrate consistent and potentially meaningful improvements for the majority of clinical endpoints in
patients treated with DZP compared with placebo. In addition, biomarker data demonstrated evidence of
proof of biology. DZP was well tolerated and demonstrated an acceptable safety profile. The data were
presented at the European Congress of Rheumatology (EULAR) 2019 in Madrid, Spain.
BIIB059 (anti-BDCA2) - CLE/SLE
•
•
In May 2019 we completed enrollment of the Phase 2 LILAC study of BIIB059 for CLE and SLE.
In December 2019 we announced positive top-line results from the Phase 2 LILAC study evaluating the
efficacy and safety of BIIB059 in CLE and SLE. The CLE part of the study met its primary endpoint
(p<0.001) by demonstrating a dose response of BIIB059 on the percent change from baseline in the
Cutaneous Lupus Erythematosus Disease Area and Severity Index Activity (CLASI-A) score at week 16 in
individuals with CLE. Study participants with CLE treated with 50 mg, 150 mg and 450 mg of BIIB059
experienced reductions in CLASI-A scores of 40.9% (p=0.008), 48.0% (p=0.001) and 42.5% (p=0.001),
respectively, versus 14.5% with placebo. CLASI-A is a well-defined and reliable outcome measure that has
been shown to detect meaningful change in CLE skin disease activity.
The SLE part of the study also met its primary endpoint of reducing disease activity in individuals with SLE
as measured by change from baseline in total active joint count at week 24 (treatment difference = -3.4 for
BIIB059 450 mg versus placebo, p=0.037). Total active joint count is the total number of tender or swollen
6
joints, with joint involvement being a common symptom in people with SLE. In addition, improvements in
skin disease and overall disease activity were consistently observed across multiple secondary endpoints.
Neurocognitive Disorders
BIIB104 (AMPA) - CIAS
•
In June 2019 the FDA granted BIIB104 fast track designation for CIAS.
Acute Neurology
BIIB093 (glibenclamide IV) - Brain Contusion
•
In October 2019 we dosed the first patient in the Phase 2 study of BIIB093 for brain contusion.
Biosimilars
Samsung Bioepis - Biogen's Joint Venture with Samsung BioLogics
•
•
In June 2019 we presented real-world evidence confirming the safety and efficacy of BENEPALI, IMRALDI
and FLIXABI and the high adherence of patients to treatment. The data were presented at EULAR 2019 in
Madrid, Spain.
In October 2019 we presented new data highlighting real-world evidence confirming the safety and efficacy
of IMRALDI and FLIXABI for patients with inflammatory bowel disease. These data were presented at the
United European Gastroenterology Week 2019 in Barcelona, Spain.
Genentech Relationship
Anti-CD20 Therapies
GAZYVA (obinutuzumab)
•
In June 2019 Roche announced positive topline results for NOBILITY, a Phase 2 study investigating the
safety and efficacy of GAZYVA for adults with proliferative lupus nephritis. The study met its primary
endpoint, showing GAZYVA, in combination with standard of care (mycophenolate mofetil or mycophenolic
acid and corticosteroids), demonstrated enhanced efficacy compared to placebo plus standard of care
alone in achieving complete renal response at one year. In addition, GAZYVA met key secondary endpoints
showing improved overall renal responses (complete and partial renal response) and serologic markers of
disease activity as compared to placebo.
•
In September 2019 Roche announced that the FDA granted breakthrough therapy designation to GAZYVA
for adults with lupus nephritis. This designation was granted based on data from the Phase 2 NOBILITY
study in adult patients with proliferative lupus nephritis, as discussed above.
Discontinued Programs
•
•
•
In August 2019 we discontinued the Phase 2b study of BG00011 (STX-100) for the potential treatment of
idiopathic pulmonary fibrosis (IPF) due to safety concerns.
In September 2019 we and our collaboration partner Eisai announced the decision to discontinue the
global Phase 3 studies (MISSION AD1 and MISSION AD2) of the investigational oral BACE (beta amyloid
cleaving enzyme) inhibitor elenbecestat (development code: E2609) in patients with early AD.
In December 2019 we announced that the Phase 2 PASSPORT study investigating gosuranemab in
individuals with progressive supranuclear palsy (PSP) did not meet its primary endpoint. Based on these
results, we discontinued development of gosuranemab in PSP and other primary tauopathies. Safety results
of the Phase 2 PASSPORT study were generally consistent with previous studies of gosuranemab. We will
continue our ongoing Phase 2 TANGO study of gosuranemab for mild cognitive impairment due to AD or
mild AD, given differences in disease pathology.
7
Marketed Products
The following graph shows our revenues by product and revenues from anti-CD20 therapeutic programs for the
years ended December 31, 2019, 2018 and 2017.
(1) Interferon includes product revenues from AVONEX and PLEGRIDY.
(2) For 2019, 2018 and 2017 other includes product revenues from FAMPYRA, FUMADERM, BENEPALI and FLIXABI. For 2019
and 2018 other also includes product revenues from IMRALDI, which was launched in Europe in October 2018. For 2019
other also includes product revenues from VUMERITY, which was available in the U.S. in November 2019. For 2018 and
2017 other also includes product revenues from ZINBRYTA, which was voluntary withdrawn from the market in March 2018.
For 2017 other also includes product revenues from ALPROLIX and ELOCTATE through January 31, 2017. No product
revenues for ALPROLIX and ELOCTATE were recognized subsequent to February 1, 2017, the effective date of the spin-off of
our hemophilia business.
(3) Anti-CD20 therapeutic programs include revenues from RITUXAN, RITUXAN HYCELA, GAZYVA and OCREVUS.
Product sales for TECFIDERA, AVONEX and TYSABRI as well as our share of pre-tax profits in the U.S. for
RITUXAN each accounted for more than 10% of our total revenues for the years ended December 31, 2019, 2018
and 2017. Product sales for SPINRAZA also accounted for more than 10% of our total revenues for the years ended
December 31, 2019 and 2018. For additional financial information about our product and other revenues and
geographic areas where we operate, please read Note 4, Revenues, and Note 24, Segment Information, to our
consolidated financial statements included in this report and Item 6. Selected Financial Data and Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. A
discussion of the risks attendant to our operations is set forth in Item 1A. Risk Factors included in this report.
8
Multiple Sclerosis and Neuroimmunology
We develop, manufacture and market a number of products designed to treat patients with MS. MS is a
progressive neurological disease in which the body loses the ability to transmit messages along nerve cells, leading
to a loss of muscle control, paralysis and, in some cases, death. Patients with active RMS experience an uneven
pattern of disease progression characterized by periods of stability that are interrupted by flare-ups of the disease
after which the patient returns to a new baseline of functioning.
Our MS products and major markets are as follows:
Product
Indication
Collaborator
Major Markets
RMS in the U.S.
RRMS in the E.U.
None
RMS
None
RMS in the U.S.
RRMS in the E.U.
RMS
RRMS in the E.U.
Crohn's disease in the U.S.
None
None
U.S.
France
Germany
Italy
Japan
Spain
U.K.
U.S.
France
Germany
Italy
Japan
Spain
U.S.
France
Germany
Italy
Spain
U.K.
U.S.
France
Germany
Italy
Spain
U.K.
RMS in the U.S.
Alkermes Pharma Ireland
Limited, a subsidiary of
Alkermes plc (Alkermes)
U.S.
Walking ability for patients with MS
Acorda Therapeutics,
Inc. (Acorda)
France
Germany
Neuromuscular Disorders
SMA is characterized by loss of motor neurons in the spinal cord and lower brain stem, resulting in severe and
progressive muscular atrophy and weakness. Ultimately, individuals with the most severe type of SMA can become
paralyzed and have difficulty performing the basic functions of life, like breathing and swallowing. Due to a deletion
or mutations in the SMN1 gene, people with SMA do not produce enough survival motor neuron (SMN) protein, which
is critical to the survival of the neurons that control muscles. The severity of SMA correlates with the amount of SMN
protein. People with Type 1 SMA, the most severe life-threatening form, produce very little SMN protein and do not
achieve the ability to sit without support, and typically do not live beyond two years of age without respiratory
support and nutritional interventions. People with Type 2 and Type 3 SMA produce greater amounts of SMN protein
and have less severe, but still life-altering, forms of SMA.
9
Our SMA product and major markets are as follows:
Product
Indication
Collaborator
Major Markets
SMA
Ionis
U.S.
Brazil
Canada
France
Germany
Italy
Japan
Spain
Turkey
For additional information on our collaboration arrangements with Ionis, please read Note 18, Collaborative and
Other Relationships, to our consolidated financial statements included in this report.
Biosimilars
Biosimilars are a group of biologic medicines that are similar to currently available biologic therapies known as
originators. Under our agreement with Samsung Bioepis, we commercialize three anti-tumor necrosis factor (TNF)
biosimilars in certain countries in Europe: BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an
adalimumab biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing REMICADE. Additionally,
we have exclusive rights to commercialize BENEPALI, IMRALDI and FLIXABI in China and two potential ophthalmology
biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including
the U.S., Canada, Europe, Japan and Australia.
Our current biosimilar products and major markets are as follows:
Product
Indication
Rheumatoid arthritis
Juvenile idiopathic arthritis
Psoriatic arthritis
Axial spondyloarthritis
Plaque psoriasis
Paediatric plaque psoriasis
Rheumatoid arthritis
Juvenile idiopathic arthritis
Axial spondyloarthritis
Psoriatic arthritis
Psoriasis
Paediatric plaque psoriasis
Hidradenitis suppurativa
Adolescent hidradenitis suppurativa
Crohn’s disease
Paediatric Crohn's disease
Ulcerative colitis
Uveitis
Paediatric Uveitis
Rheumatoid arthritis
Crohn’s disease
Paediatric Crohn’s disease
Ulcerative colitis
Paediatric ulcerative colitis
Ankylosing spondylitis
Psoriatic arthritis
Psoriasis
Major Markets
France
Germany
Italy
Spain
U.K.
France
Germany
U.K.
France
Germany
Italy
For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18,
Collaborative and Other Relationships, to our consolidated financial statements included in this report.
10
Genentech Relationships
We have agreements with Genentech that entitle us to certain business and financial rights with respect to
RITUXAN, RITUXAN HYCELA, GAZYVA, OCREVUS and other potential anti-CD20 therapies.
Our current anti-CD20 therapeutic programs and major markets are as follows:
Product
Indication
Non-Hodgkin's lymphoma
CLL
Rheumatoid arthritis
Two forms of ANCA-associated vasculitis
Pemphigus vulgaris
Non-Hodgkin's lymphoma
CLL
In combination with chlorambucil for previously untreated CLL
Follicular lymphoma
In combination with chemotherapy followed by GAZYVA alone
for previously untreated follicular lymphoma
RMS
PPMS
Major Markets
U.S.
Canada
U.S.
U.S.
U.S.
Australia
Germany
Switzerland
For additional information on our collaboration arrangements with Genentech, please read Note 1, Summary of
Significant Accounting Policies, and Note 18, Collaborative and Other Relationships, to our consolidated financial
statements included in this report.
Other
Product
Indication
Collaborator
Major Markets
Moderate to severe plaque
psoriasis
None
Germany
11
Patient Support and Access
Distribution Arrangements
We interact with patients, advocacy
organizations and healthcare societies in order to gain
insights into unmet needs. The insights gained from
these engagements help us support patients with
services, programs and applications that are designed
to help patients lead better lives. Among other things,
we provide customer service and other related
programs for our products, such as disease and
product specific websites, insurance research
services, financial assistance programs and the
facilitation of the procurement of our marketed
products.
We are dedicated to helping patients obtain
access to our therapies. Our patient representatives
have access to a suite of financial assistance tools.
With those tools, we help patients understand their
insurance coverage and, if needed, help patients
compare and select new insurance options and
programs. In the U.S., we have established programs
that provide co-pay assistance or free marketed
product for qualified uninsured or underinsured
patients, based on specific eligibility criteria. We also
provide charitable contributions to independent
charitable organizations that assist patients with out-
of-pocket expenses associated with their therapy.
Marketing and Distribution
Sales Force and Marketing
We promote our products worldwide, including in
the U.S., most of the major countries of the E.U. and
Japan, primarily through our own sales forces and
marketing groups. In some countries, particularly in
areas where we continue to expand into new
geographic areas, we partner with third parties.
We and Eisai co-promote AVONEX, TYSABRI and
TECFIDERA in Japan in certain settings.
RITUXAN, RITUXAN HYCELA, GAZYVA and
OCREVUS are marketed by the Roche Group and its
sublicensees.
We commercialize BENEPALI, IMRALDI and
FLIXABI in collaboration with Samsung Bioepis in
certain countries in Europe.
We focus our sales and marketing efforts on
specialist physicians in private practice or at major
medical centers. We use customary industry practices
to market our products and to educate physicians,
such as sales representatives calling on individual
physicians, advertisements, professional symposia,
direct mail, public relations and other methods.
We distribute our products in the U.S. principally
through wholesale distributors of pharmaceutical
products, mail order specialty distributors or shipping
service providers. In other countries, the distribution
of our products varies from country to country,
including through wholesale distributors of
pharmaceutical products and third-party distribution
partners who are responsible for most marketing and
distribution activities.
Eisai distributes AVONEX, TYSABRI, TECFIDERA
and PLEGRIDY in India and other Asia-Pacific markets,
excluding China.
RITUXAN, RITUXAN HYCELA, GAZYVA and
OCREVUS are distributed by the Roche Group and its
sublicensees.
We distribute BENEPALI, IMRALDI and FLIXABI in
certain countries in Europe and have exclusive rights
to distribute these products in China.
Our product sales to two wholesale distributors,
AmerisourceBergen and McKesson, each accounted
for more than 10% of our total revenues for the years
ended December 31, 2019, 2018 and 2017, and on
a combined basis, accounted for approximately 47%,
50% and 56% of our gross product revenues for the
years ended December 31, 2019, 2018 and 2017,
respectively. For additional information, please read
Note 4, Revenues, to our consolidated financial
statements included in this report.
Patents and Other Proprietary Rights
Patents are important to obtaining and
protecting exclusive rights in our products and product
candidates. We regularly seek patent protection in the
U.S. and in selected countries outside the U.S. for
inventions originating from our research and
development efforts. In addition, we license rights to
various patents and patent applications.
U.S. patents, as well as most foreign patents,
are generally effective for 20 years from the date the
earliest application was filed; however, U.S. patents
that issue on applications filed before June 8,
1995, may be effective until 17 years from the issue
date, if that is later than the 20-year date. In some
cases, the patent term may be extended to recapture
a portion of the term lost during regulatory review of
the claimed therapeutic or, in the case of the U.S.,
because of U.S. Patent and Trademark Office (USPTO)
delays in prosecuting the application. Specifically, in
the U.S., under the Drug Price Competition and Patent
Term Restoration Act of 1984, commonly known as
the Hatch-Waxman Act, a patent that covers a drug
approved by the FDA may be eligible for patent term
extension (for up to 5 years, but not beyond a total of
12
14 years from the date of product approval) as
compensation for patent term lost during the FDA
regulatory review process. The duration and extension
of the term of foreign patents varies, in accordance
with local law. For example, supplementary protection
certificates (SPCs) on some of our products have
been granted in a number of European countries,
compensating in part for delays in obtaining
marketing approval.
Regulatory exclusivity, which may consist of
regulatory data protection and market protection, also
can provide meaningful protection for our products.
Regulatory data protection provides to the holder of a
drug or biologic marketing authorization, for a set
period of time, the exclusive use of the proprietary
pre-clinical and clinical data that it created at
significant cost and submitted to the applicable
regulatory authority to obtain approval of its product.
After the applicable set period of time, third parties
are then permitted to rely upon such data to file for
approval of their abbreviated applications for, and to
market (subject to any applicable market protection),
their generic drugs and biosimilars referencing such
data. Market protection provides to the holder of a
drug or biologic marketing authorization the exclusive
right to commercialize its product for a set period of
time, thereby preventing the commercialization of
another product containing the same active
ingredient(s) during that period. Although the World
Trade Organization's agreement on trade-related
aspects of intellectual property rights (TRIPS) requires
signatory countries to provide regulatory exclusivity to
innovative pharmaceutical products, implementation
and enforcement varies widely from country to
country.
We also rely upon other forms of unpatented
confidential information to remain competitive. We
protect such information principally through
confidentiality agreements with our employees,
consultants, outside scientific collaborators,
scientists whose research we sponsor and other
advisers. In the case of our employees, these
agreements also provide, in compliance with relevant
law, that inventions and other intellectual property
conceived by such employees during their employment
shall be our exclusive property.
Our trademarks are important to us and are
generally covered by trademark applications or
registrations in the USPTO and the patent or
trademark offices of other countries. We also use
trademarks licensed from third parties, such as the
trademark FAMPYRA, which we license from Acorda.
Trademark protection varies in accordance with local
law, and continues in some countries as long as the
trademark is used and in other countries as long as
the trademark is registered. Trademark registrations
generally are for fixed but renewable terms.
Our Patent Portfolio
The following table describes our patents in the
U.S. and Europe that we currently consider of primary
importance to our marketed products, including the
territory, patent number, general subject matter and
expected expiration dates. Except as otherwise noted,
the expected expiration dates include any granted
patent term extensions and issued SPCs. In some
instances, there are later-expiring patents relating to
our products directed to, among other things,
particular forms or compositions, methods of
manufacturing or use of the drug in the treatment of
particular diseases or conditions. We also continue to
pursue additional patents and patent term extensions
in the U.S. and other territories covering various
aspects of our products that may, if issued, extend
exclusivity beyond the expiration of the patents listed
in the table.
13
Product
TECFIDERA
AVONEX and
PLEGRIDY
PLEGRIDY
Territory
U.S.
U.S.
Europe
Europe
U.S.
U.S.
U.S.
U.S.
Europe
Europe
Patent No.
7,619,001
8,399,514
1131065
2137537
7,588,755
7,446,173
8,524,660
8,017,733
1656952
1476181
TYSABRI
U.S.
6,602,503
FAMPYRA
VUMERITY
SPINRAZA
U.S.
U.S.
Europe
Europe
Europe
Europe
Europe
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
Europe
Europe
Europe
Europe
7,807,167
9,493,567
0804237
1485127
2676967
1732548
2377536
8,669,281
9,090,558
10,080,733
7,101,993
7,838,657
8,110,560
8,361,977
8,980,853
9,717,750
9,926,559
10,266,822
10,436,802
1910395
2548560
3305302
3308788
Footnotes follow on next page.
General Subject Matter
Methods of treatment
Methods of treatment
Formulations of dialkyl fumarates and their use for
treating autoimmune diseases
Methods of use
Use of recombinant beta interferon for
immunomodulation
Polymer conjugates of interferon beta-1a
Methods of treatment
Polymer conjugates of interferon beta-1a
Polymer conjugates of interferon-beta-1a and uses
thereof
Polymer conjugates of interferon-beta-1a and uses
thereof
Humanized recombinant antibodies; nucleic acids and
host cells; processes for production; therapeutic
compositions; methods of use
Methods of treatment
Methods of treatment
Humanized immunoglobulins; nucleic acids;
pharmaceutical compositions; medical uses
Methods of use
Methods of use
Sustained-release aminopyridine compositions for
increasing walking speed in patients with MS
Sustained-release aminopyridine compositions for
treating MS
Compounds and pharmaceutical compositions
Methods of treatment
Crystalline forms, pharmaceutical compositions and
methods of treatment
Oligonucleotides containing 2’-O-modified purines
SMA treatment via targeting of SMN2 splice site
inhibitory sequences
SMA treatment via targeting of SMN2 splice site
inhibitory sequences
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
SMA treatment via targeting of SMN2 splice site
inhibitory sequences
Methods for Treating Spinal Muscular Atrophy
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
Compositions and methods for modulation of SMN2
splicing
14
Patent
Expiration(1)
2020
2028(2)
2024(3)
2028(4)
2026
2022
2023
2027
2024(5)
2023(6)
2020
2023
2027
2020(7)
2023
2027
2025(8)
2025(9)
2033
2033
2033
2023
2027
2025
2030
2030
2030
2034
2025
2035
2026(10)
2026(11)
2030
2026
(1) In addition to patent protection, certain of our products are entitled to regulatory exclusivity in the U.S. and the E.U. expected
until the dates set forth below:
Product
TECFIDERA
PLEGRIDY
FAMPYRA
SPINRAZA
Territory
E.U.
U.S.
E.U.
E.U.
U.S.
E.U.
Expected Expiration
2024
2026
2024
2021
2023
2029
(2) For additional information, please read Note 20, Litigation, to our consolidated financial statements included in this
report.
(3) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2024.
(4) This patent was revoked in a European opposition. This decision is being appealed. This patent is subject to granted
SPCs in certain European countries, which extended the patent term in those countries to 2029.
(5) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2024.
(6) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2028.
(7) Reflects SPCs granted in most European countries and pediatric extension in some countries.
(8) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2026.
(9) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2026.
(10) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2031.
(11) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries
to 2031.
The existence of patents does not guarantee our right to practice the patented technology or commercialize the
patented product. Patents relating to pharmaceutical, biopharmaceutical and biotechnology products, compounds
and processes, such as those that cover our existing products, compounds and processes and those that we will
likely file in the future, do not always provide complete or adequate protection. Litigation, interferences, oppositions,
inter partes reviews, administrative challenges or other similar types of proceedings are, have been and may in the
future be necessary in some instances to determine the validity and scope of certain of our patents, regulatory
exclusivities or other proprietary rights, and in other instances to determine the validity, scope or non-infringement of
certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products. We
also face challenges to our patents, regulatory exclusivities or other proprietary rights covering our products by
manufacturers of generics, biosimilars, prodrugs and products approved under abbreviated regulatory pathways. A
discussion of certain risks and uncertainties that may affect our patent position, regulatory exclusivities or other
proprietary rights is set forth in Item 1A. Risk Factors included in this report, and a discussion of legal proceedings
related to certain patents described above is set forth in Note 20, Litigation, to our consolidated financial
statements included in this report.
15
Competition
Competition in the biopharmaceutical industry is
intense and comes from many sources, including
biotechnology and pharmaceutical companies. Many
of our competitors, certain of whom have substantially
greater financial, marketing, research and
development and other resources than we do, are
working to develop or have commercialized products
similar to or competitive with those we market or are
developing and have considerable experience in
undertaking clinical trials and in obtaining regulatory
approval to market pharmaceutical products. In
addition, the commercialization of certain of our own
approved products, products of our collaborators and
pipeline product candidates may negatively impact
future sales of our existing products.
We believe that competition and leadership in
the industry is based on managerial and technological
excellence and innovation as well as establishing
patent and other proprietary positions through
research and development. The achievement of a
leadership position also depends largely upon our
ability to maximize the approval, acceptance and use
of products resulting from research and the
availability of adequate financial resources to fund
facilities, equipment, personnel, clinical testing,
manufacturing and marketing. Another key aspect of
remaining competitive within the industry is recruiting
and retaining leading scientists and technicians. We
believe that we have been successful in attracting and
retaining skilled and experienced scientific personnel.
Competition among products approved for sale
may be based, among other things, on patent
position, product efficacy, safety, convenience/delivery
devices, reliability, availability and price. In addition,
early entry of a new pharmaceutical product into the
market may have important advantages in gaining
product acceptance and market share. Accordingly,
the relative speed with which we can develop
products, complete the testing and approval process
and supply commercial quantities of products will
have a significant impact on our competitive position.
The introduction of new products or
technologies, including the development of new
processes or technologies by competitors or new
information about existing products or technologies,
results in increased competition for our marketed
products and pricing pressure on our marketed
products. The development of new or improved
treatment options or standards of care or cures for
the diseases our products treat reduces and could
eliminate the use of our products or may limit the
utility and application of ongoing clinical trials for our
product candidates.
We also face increased competitive pressures
from the introduction of generic versions, prodrugs
and biosimilars of existing products as well as
products approved under abbreviated regulatory
pathways. Such products are likely to be sold at
substantially lower prices than branded products,
which may significantly reduce both the price that we
are able to charge for our products and the volume of
products we sell. In addition, when a generic version
of one of our products is commercialized, it may, in
some cases, be automatically substituted for our
product and reduce our revenues in a short period of
time.
Additional information about the competition that
our marketed products face is set forth below.
Multiple Sclerosis
TECFIDERA, AVONEX, PLEGRIDY, TYSABRI and
VUMERITY each compete with one or more of the
following products as well as generic and biosimilar
versions of such products:
Competing Product
AUBAGIO (teriflunomide)
BETASERON/BETAFERON
(interferon-beta-1b)
COPAXONE
(glatiramer acetate)
EXTAVIA
(interferon-beta-1b)
GILENYA (fingolimod)
GLATOPA (glatiramer
acetate)
LEMTRADA
(alemtuzumab)
MAVENCLAD (cladribine)
MAYZENT (siponimod)
OCREVUS (ocrelizumab)
REBIF
(interferon-beta-1)
Competitor
Sanofi Genzyme
Bayer Group
Teva Pharmaceuticals
Industries Ltd.
Novartis AG
Novartis AG
Sandoz, a division of
Novartis AG
Sanofi Genzyme
EMD Serono
Novartis AG
Genentech
EMD Serono
FAMPYRA is indicated as a treatment to improve
walking in adult patients with MS who have a walking
disability and is the first treatment that addresses
this unmet medical need with demonstrated efficacy
in people with all types of MS. FAMPYRA is currently
the only therapy approved to improve walking in
patients with MS.
Competition in the MS market is intense. Along
with us, a number of companies are working to
develop additional treatments for MS that may in the
future compete with our MS products. One such
product that was approved in the U.S. in 2017 and in
the E.U. in 2018 is OCREVUS, a treatment for RMS
and PPMS that was developed by Genentech. While
we have a financial interest in OCREVUS, future sales
of our MS products may be adversely affected if
16
OCREVUS continues to gain market share, or if other
MS products that we or our competitors are
developing are commercialized. Future sales may also
be negatively impacted by the introduction of generics,
prodrugs of existing therapies, biosimilars of existing
products or products approved under abbreviated
regulatory pathways.
Spinal Muscular Atrophy
We face competition from a new gene therapy
product that was approved in the U.S. in May 2019
for the treatment of SMA. Additionally, we are aware of
other products in development that, if successfully
developed and approved, may compete with SPINRAZA
in the SMA market, including potential oral products.
Future sales of SPINRAZA may be adversely affected
by the commercialization of competing products.
Psoriasis
FUMADERM competes with several different
types of therapies in the psoriasis market within
Germany, including oral systemics such as
methotrexate and cyclosporine.
Biosimilars
BENEPALI, IMRALDI and FLIXABI, the three
biosimilar products we currently commercialize in
certain countries in Europe for Samsung Bioepis,
compete with their reference products, ENBREL,
HUMIRA and REMICADE, respectively, as well as other
biosimilars of those reference products.
Genentech Relationships in Other Indications
RITUXAN, RITUXAN HYCELA and GAZYVA in Oncology
RITUXAN, RITUXAN HYCELA and GAZYVA
compete with a number of therapies in the oncology
market, including TREANDA (bendamustine HCL),
ARZERRA (ofatumumab), IMBRUVICA (ibrutinib) and
ZYDELIG (idelalisib).
We also expect that over time RITUXAN HYCELA
and GAZYVA will increasingly compete with RITUXAN in
the oncology market. In addition, we are aware of anti-
CD20 molecules, including biosimilar products, in
development that if successfully developed and
approved, could compete with RITUXAN, RITUXAN
HYCELA and GAZYVA in the oncology market. The
introduction of a biosimilar product can result in a
significant reduction in net sales for the relevant
product, as other manufacturers typically offer their
versions at lower prices. In November 2019 and
January 2020 biosimilar products referencing
RITUXAN were launched in the U.S. and this could
adversely affect the pre-tax profits of our collaboration
arrangements with Genentech, which could, in turn
adversely affect our co-promotion profits in the U.S. in
future years.
RITUXAN in Rheumatoid Arthritis
RITUXAN competes with several different types
of therapies in the rheumatoid arthritis market,
including, among others, traditional disease-modifying
anti-rheumatic drugs such as steroids, methotrexate
and cyclosporine, TNF inhibitors, ORENCIA
(abatacept), ACTEMRA (tocilizumab) and XELJANZ
(tofacitinib).
We are also aware of other products, including
biosimilars, in development that, if approved, may
compete with RITUXAN in the rheumatoid arthritis
market.
Research and Development Programs
A commitment to research is fundamental to our
mission. Our research efforts are focused on better
understanding the underlying biology of diseases so
we can discover and deliver treatments that have the
potential to make a real difference in the lives of
patients with high unmet medical needs. By applying
our expertise in biologics and our growing capabilities
in small molecule, antisense, gene therapy, gene
editing and other technologies, we target specific
medical needs where we believe new or better
treatments are needed.
We intend to continue committing significant
resources to targeted research and development
opportunities where there is a significant unmet need
and where a drug candidate has the potential to be
highly differentiated. As part of our ongoing research
and development efforts, we have devoted significant
resources to conducting clinical studies to advance
the development of new pharmaceutical products and
technologies and to explore the utility of our existing
products in treating disorders beyond those currently
approved in their labels.
For additional information on our research and
development expense included in our consolidated
statements of income, please read Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this
report.
17
The table below highlights our current research and development programs that are in clinical trials and the
current phase of such programs. Drug development involves a high degree of risk and investment, and the status,
timing and scope of our development programs are subject to change. Important factors that could adversely affect
our drug development efforts are discussed in Item 1A. Risk Factors included in this report.
Opicinumab (anti-LINGO) - MS
Phase 2
MS and Neuroimmunology
BIIB061 (oral remyelination) - MS
BIIB091 (BTK inhibitor) - MS
Aducanumab (A mAb)* - Alzheimer's
BAN2401 (A mAb)* - Alzheimer's
Phase 1
Phase 1
Phase 3
Phase 3
Alzheimer's Disease and Dementia
BIIB092 (gosuranemab) - Alzheimer's
Phase 2
Core
Growth
Areas
Neuromuscular Disorders,
including SMA and ALS
BIIB076 (anti-tau mAb) - Alzheimer's
BIIB080 (tau ASO) - Alzheimer's
BIIB067 (tofersen) - ALS
BIIB078 (IONIS-C9Rx)# - ALS
BIIB110 (ActRIIA/B ligand trap) - SMA
BIIB100 (XP01 inhibitor) - ALS
Phase 3
Phase 1
Phase 1
Phase 1
Phase 1
Phase 1
Movement Disorders,
including Parkinson's Disease
BIIB054 (cinpanemab) - Parkinson's
Phase 2
BIIB094 (ION859)# - Parkinson's
Phase 1
Ophthalmology
Immunology / Other
BIIB111 (timrepigene emparvovec) - CHM
Phase 3
BIIB112 (RPGR gene therapy) - XLRP
Phase 2/3
Dapirolizumab pegol (anti-CD40L)* - SLE
BIIB059 (anti-BDCA2) - CLE/SLE
Phase 2
Phase 2
Phase 2
Neurocognitive Disorders
BIIB104 (AMPA) - CIAS
BIIB093 (glibenclamide IV) - LHI^ Stroke
Phase 3
Emerging
Growth
Areas
Acute Neurology
TMS-007# - Acute Ischemic Stroke
Natalizumab - Epilepsy
BIIB093 (glibenclamide IV) - Brain Contusion
BIIB074 (vixotrigine) - Trigeminal Neuralgia
Pain
BIIB074 (vixotrigine) - Small Fiber Neuropathy
Phase 2
Phase 2
Phase 2
Phase 2
Phase 2
Biosimilars
SB11 (referencing LUCENTIS)
Phase 3
BIIB095 (Nav 1.7) - Neuropathic Pain
Phase 1
* Collaboration program
# Option agreement
^ Large Hemispheric Infarction (LHI)
For information about certain of our agreements with collaborators and other third parties, please read the
subsection entitled Business Relationships below and Note 2, Acquisitions, Note 18, Collaborative and Other
Relationships, and Note 19, Investments in Variable Interest Entities, to our consolidated financial statements
included in this report.
18
Business Relationships
As part of our business strategy, we establish
business relationships, including entering into
licenses, joint ventures and collaborative
arrangements with other companies, universities and
medical research institutions, to assist in the clinical
development and/or commercialization of certain of
our products and product candidates and to provide
support for our research programs. We also evaluate
opportunities for acquiring products or rights to
products and technologies that are complementary to
our business from other companies, universities and
medical research institutions.
Below is a brief description of certain business
relationships and collaborations that expand our
pipeline and provide us with certain rights to existing
and potential new products and technologies. For
additional information on certain of these
relationships, including their ongoing financial and
accounting impact on our business, please read Note
2, Acquisitions, Note 18, Collaborative and Other
Relationships, and Note 19, Investments in Variable
Interest Entities, to our consolidated financial
statements included in this report.
Acorda Therapeutics, Inc.
We have a collaboration and license agreement
with Acorda to develop and commercialize products
containing fampridine, such as FAMPYRA, in markets
outside the U.S. We are responsible for all regulatory
activities and the future clinical development of
related products in those markets.
Alkermes
We have an exclusive license and collaboration
agreement with Alkermes for VUMERITY, which was
approved for the treatment of RMS in the U.S. in
October 2019 and became available in the U.S. in
November 2019. Under this agreement, we received
an exclusive, worldwide license to develop and
commercialize VUMERITY.
Bristol-Myers Squibb Company
We have an exclusive license agreement with
Bristol-Myers Squibb Company (BMS) for the
development and potential commercialization of
BIIB092 (gosuranemab), a phase 2 investigational
therapy with potential in AD. Under this agreement, we
received worldwide rights to gosuranemab and are
responsible for the full development and potential
commercialization of gosuranemab in AD.
Eisai Co., Ltd.
We have a collaboration agreement with Eisai to
jointly develop and commercialize BAN2401, an Eisai
product candidate for the potential treatment of AD.
Eisai serves as the global operational and regulatory
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lead for BAN2401 and all costs, including research,
development, sales and marketing expenses, are
shared equally between us and Eisai. Upon marketing
approval, we and Eisai will co-promote BAN2401 and
share profits equally.
We also have a collaboration agreement with
Eisai to jointly develop and commercialize
aducanumab (the Aducanumab Collaboration
Agreement). Under the Aducanumab Collaboration
Agreement, the two companies will co-promote
aducanumab with a region-based profit split and we
lead the ongoing development of aducanumab.
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.
Genentech, Inc. (Roche Group)
We have collaboration arrangements with
Genentech which entitle us to certain business and
financial rights with respect to RITUXAN, RITUXAN
HYCELA, GAZYVA, OCREVUS and other potential anti-
CD20 therapies.
Ionis Pharmaceuticals, Inc.
We have an exclusive, worldwide option and
collaboration agreement with Ionis relating to the
development and commercialization of antisense
therapeutics for up to three gene targets. Under a
separate collaboration and license agreement with
Ionis, we have an exclusive, worldwide license to
develop and commercialize SPINRAZA for the
treatment of SMA. We also have a 10-year exclusive
collaboration agreement with Ionis to develop novel
ASO drug candidates for a broad range of neurological
diseases, which we refer to as the 2018 Ionis
Agreement.
In addition, we have research collaboration
agreements with Ionis under which both companies
perform discovery level research and will develop and
commercialize new ASO drug candidates for the
potential treatment of SMA and additional antisense
or other therapeutics for the potential treatment of
neurological diseases.
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
(as amended, the Neurimmune Agreement). We are
responsible for the development, manufacturing and
commercialization of all licensed products.
Samsung Bioepis Co., Ltd.
We and Samsung BioLogics established a joint
venture, Samsung Bioepis, to develop, manufacture
and market biosimilar products. We also have an
agreement with Samsung Bioepis to commercialize,
over a 10-year term, 3 anti-TNF biosimilar product
candidates in Europe and, in the case of BENEPALI,
Japan. Under this agreement, we are commercializing
BENEPALI, an etanercept biosimilar referencing
ENBREL, IMRALDI, an adalimumab biosimilar
referencing HUMIRA, and FLIXABI, an infliximab
biosimilar referencing REMICADE, in certain countries
in Europe.
In December 2019 we completed a transaction
with Samsung Bioepis and secured the exclusive
rights to commercialize two potential ophthalmology
biosimilar products, SB11 referencing LUCENTIS and
SB15 referencing EYLEA, in major markets worldwide,
including the U.S., Canada, Europe, Japan and
Australia. We also acquired an option to extend our
existing commercial agreement with Samsung Bioepis
for BENEPALI, IMRALDI and FLIXABI in Europe and
obtained exclusive rights to commercialize these
products in China.
In addition to our joint venture and
commercialization agreements with Samsung Bioepis,
we license certain of our proprietary technology to
Samsung Bioepis in connection with Samsung
Bioepis' development, manufacture and
commercialization of its biosimilar products. We also
provide technical development and technology
transfer services to Samsung Bioepis.
Skyhawk Therapeutics, Inc.
We have a collaboration and research and
development services agreement with Skyhawk
pursuant to which the companies are leveraging
Skyhawk’s SkySTAR technology platform with the goal
of discovering innovative small molecule treatments
for patients with neurological diseases, including MS
and SMA. We are responsible for the development
and potential commercialization of any therapies
resulting from this collaboration.
TMS Co., Ltd.
We have an exclusive option agreement with TMS
Co., Ltd. (TMS) granting us the option to acquire
TMS-007, a plasminogen activator with a novel
mechanism of action associated with breaking down
blood clots which is in Phase 2 development in Japan,
and backup compounds for the treatment of stroke.
Regulatory
Our current and contemplated activities and the
products, technologies and processes that result from
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such activities are subject to substantial government
regulation.
Regulation of Pharmaceuticals
Product Approval and Post-Approval Regulation in
the U.S.
APPROVAL PROCESS
Before new pharmaceutical products may be
sold in the U.S., preclinical studies and clinical trials
of the products must be conducted and the results
submitted to the FDA for approval. With limited
exceptions, the FDA requires companies to register
both pre-approval and post-approval clinical trials and
disclose clinical trial results in public databases.
Failure to register a trial or disclose study results
within the required time periods could result in
penalties, including civil monetary penalties. Clinical
trial programs must establish efficacy, determine an
appropriate dose and dosing regimen and define the
conditions for safe use. This is a high-risk process
that requires stepwise clinical studies in which the
candidate product must successfully meet
predetermined endpoints. The results of the
preclinical and clinical testing of a product are then
submitted to the FDA in the form of a Biologics
License Application (BLA) or a NDA. In response to a
BLA or NDA, the FDA may grant marketing approval,
request additional information or deny the application
if it determines the application does not provide an
adequate basis for approval.
Product development and receipt of regulatory
approval takes a number of years, involves the
expenditure of substantial resources and depends on
a number of factors, including the severity of the
disease in question, the availability of suitable
alternative treatments, potential safety signals
observed in preclinical or clinical tests and the risks
and benefits of the product as demonstrated in
clinical trials. The FDA has substantial discretion in
the product approval process, and it is impossible to
predict with any certainty whether and when the FDA
will grant marketing approval. The agency may require
the sponsor of a BLA or NDA to conduct additional
clinical studies or to provide other scientific or
technical information about the product, and these
additional requirements may lead to unanticipated
delays or expenses. Furthermore, even if a product is
approved, the approval may be subject to limitations
based on the FDA's interpretation of the existing pre-
clinical and/or clinical data.
The FDA has developed four distinct approaches
intended to facilitate the development and expedite
the regulatory review of therapeutically important
drugs, especially when the drugs are the first
available treatment or have advantages over existing
treatments: accelerated approval, fast track,
breakthrough therapy and priority review.
• Accelerated Approval: The FDA may grant
“accelerated approval” to products that treat
serious or life-threatening illnesses and that
provide meaningful therapeutic benefits to
patients over existing treatments. Under this
pathway, the FDA may approve a product based
on surrogate endpoints or clinical endpoints
other than survival or irreversible morbidity.
When approval is based on surrogate endpoints
or clinical endpoints other than survival or
morbidity, the sponsor will be required to provide
the FDA with confirmatory data post-approval to
verify and describe clinical benefit. Under the
FDA's accelerated approval regulations, if the
FDA concludes that a drug that has been shown
to be effective can be safely used only if
distribution or use is restricted, it may require
certain post-marketing restrictions to assure
safe use. In addition, for products approved
under accelerated approval, sponsors may be
required to submit all copies of their promotional
materials, including advertisements, to the FDA
at least 30 days prior to initial dissemination.
The FDA may withdraw approval if, for instance,
post-marketing studies fail to verify clinical
benefit, it becomes clear that restrictions on the
distribution of the product are inadequate to
ensure its safe use or if a sponsor fails to
comply with the conditions of the accelerated
approval.
• Fast Track: The FDA may grant "fast track" status
to products that treat a serious condition and
have data demonstrating the potential to
address an unmet medical need or a drug that
has been designated as a qualified infectious
disease product.
• Breakthrough Therapy: The FDA may grant
“breakthrough therapy” status to drugs designed
to treat, alone or in combination with another
drug or drugs, a serious or life-threatening
disease or condition and for which preliminary
clinical evidence suggests a substantial
improvement over existing therapies based on a
clinically significant endpoint. Breakthrough
therapy status entitles the sponsor to earlier and
more frequent meetings with the FDA regarding
the development of nonclinical and clinical data
and permits the FDA to offer product
development or regulatory advice for the purpose
of shortening the time to product approval.
Breakthrough therapy status does not guarantee
that a product will be eligible for priority review
and does not ensure FDA approval.
• Priority Review: “Priority review” only applies to
applications (original or efficacy supplement) for
a drug that treats a serious condition and, if
approved, would provide a significant
improvement in safety or effectiveness of the
treatment, diagnosis or prevention of a serious
condition. Priority review may also be granted for
any supplement that proposes a labeling change
due to studies completed in response to a
written request from the FDA for pediatric
studies, for an application for a drug that has
been designated as a qualified infectious
disease product or for any application or
supplement for a drug submitted with a priority
review voucher.
In December 2016 the FDA issued a rare
pediatric disease priority review voucher to us in
connection with the approval of SPINRAZA.
POST-MARKETING STUDIES
Regardless of the approval pathway employed,
the FDA may require a sponsor to conduct additional
post-marketing studies as a condition of approval to
provide data on safety and effectiveness. If a sponsor
fails to conduct the required studies, the FDA may
withdraw its approval. In addition, if the FDA
concludes that a drug that has been shown to be
effective can be safely used only if distribution or use
is restricted, it can mandate post-marketing
restrictions to assure safe use. In such a case, the
sponsor may be required to establish rigorous
systems to assure use of the product under safe
conditions. These systems are usually referred to as
Risk Evaluation and Mitigation Strategies (REMS). The
FDA can impose financial penalties for failing to
comply with certain post-marketing commitments,
including REMS. In addition, any changes to an
approved REMS must be reviewed and approved by
the FDA prior to implementation.
ADVERSE EVENT REPORTING
We monitor information on side effects and
adverse events reported during clinical studies and
after marketing approval and report such information
and events to regulatory agencies. Non-compliance
with the FDA's safety reporting requirements may
result in civil or criminal penalties. Side effects or
adverse events that are reported during clinical trials
can delay, impede or prevent marketing approval.
Based on new safety information that emerges after
approval, the FDA can mandate product labeling
changes, impose a new REMS or the addition of
elements to an existing REMS, require new post-
marketing studies (including additional clinical trials)
or suspend or withdraw approval of the product. These
requirements may affect our ability to maintain
marketing approval of our products or require us to
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make significant expenditures to obtain or maintain
such approvals.
APPROVAL OF CHANGES TO AN APPROVED
PRODUCT
If we seek to make certain types of changes to
an approved product, such as adding a new indication,
making certain manufacturing changes or changing
manufacturers or suppliers of certain ingredients or
components, the FDA will need to review and approve
such changes in advance. In the case of a new
indication, we are required to demonstrate with
additional clinical data that the product is safe and
effective for a use other than what was initially
approved. FDA regulatory review may result in denial
or modification of the planned changes, or
requirements to conduct additional tests or
evaluations that can substantially delay or increase
the cost of the planned changes.
REGULATION OF PRODUCT ADVERTISING AND
PROMOTION
The FDA regulates all advertising and promotion
activities and communications for products under its
jurisdiction both before and after approval. Pursuant
to FDA guidance, a company can make safety and
efficacy claims from data either in or consistent with
the label. However, physicians may prescribe legally
available drugs for uses that are not described in the
drug's labeling. Such off-label prescribing is common
across medical specialties, and often reflect a
physician's belief that the off-label use is the best
treatment for patients. The FDA does not regulate the
behavior of physicians in their choice of treatments,
but FDA regulations do impose stringent restrictions
on manufacturers' communications regarding off-label
uses. Failure to comply with applicable FDA
requirements may subject a company to adverse
publicity, enforcement action by the FDA, corrective
advertising and the full range of civil and criminal
penalties available to the government.
Regulation of Combination Products
Combination products are defined by the FDA to
include products comprising two or more regulated
components (e.g., a biologic and a device). Biologics
and devices each have their own regulatory
requirements, and combination products may have
additional requirements. Some of our marketed
products meet this definition and are regulated under
this framework and similar regulations outside the
U.S., and we expect that some of our pipeline product
candidates may be evaluated for regulatory approval
under this framework as well.
In May 2017 new regulations governing medical
devices (MDR) and in-vitro diagnostic medical devices
(IVDR) entered into force in the E.U. although these
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are not expected to fully apply until May 2020 with
respect to the MDR regulations and May 2022 with
respect to the IVDR regulations. All products covered
by these regulations will be required to comply with
them at the end of the transitional periods. These
regulations introduce new requirements, including for
clinical investigation of certain classifications of
medical devices, require increased regulatory scrutiny,
enhance the requirements for post market
surveillance and vigilance and provide for greater
transparency. These regulations also change the
requirements for assessment of the medical device
components of integral drug-device combination
products, necessitating assessment of the device
components under both the medical device and
medicinal product regulatory regimes.
Product Approval and Post-Approval Regulation
Outside the U.S.
We market our products in numerous
jurisdictions outside the U.S. Most of these
jurisdictions have product approval and post-approval
regulatory processes that are similar in principle to
those in the U.S. In Europe, for example, where a
substantial part of our ex-U.S. efforts are focused,
there are several routes for marketing approval,
depending on the type of product for which approval is
sought. Under the centralized procedure, a company
submits a single application to the EMA. The
marketing authorization application is similar to the
NDA or BLA in the U.S. and is evaluated by the
Committee for Medicinal Products for Human Use
(CHMP), the expert scientific committee of the EMA
responsible for human medicines. If the CHMP
determines that the marketing authorization
application fulfills the requirements for quality, safety
and efficacy and that the medicine has a positive
benefit risk balance, it will adopt a positive opinion
recommending the granting of the marketing
authorization by the European Commission (EC). The
CHMP opinion is not binding, but is typically adopted
by the EC. A marketing authorization application
approved by the EC is valid in all member states of
the E.U. The centralized procedure is required for all
biological products, orphan medicinal products and
new treatments for neurodegenerative disorders, and
it is available for certain other products, including
those which constitute a significant therapeutic,
scientific or technical innovation.
In addition to the centralized procedure, the
European regulatory framework includes the following
options for regulatory review and approval in E.U.
member states:
• a national procedure, where the first application
is made to the competent authority in one E.U.
country only;
• a decentralized procedure, where applicants
submit identical applications to several E.U.
countries and receive simultaneous approval, if
the medicine has not yet been authorized in any
E.U. country; and
• a mutual recognition procedure, where applicants
that have a medicine authorized in one E.U.
country can apply for mutual recognition of this
authorization in other E.U. countries.
an obligation to inform regulatory agencies of any new
information which may influence the evaluation of
benefits and risks of the medicinal product
concerned.
In the U.S., E.U. and other jurisdictions,
regulatory agencies, including the FDA, conduct
periodic inspections of NDA and BLA holders to
assess their compliance with pharmacovigilance
obligations.
As in the U.S., the E.U. also has distinct
Good Manufacturing Practices
approaches intended to optimize the regulatory
pathways for therapeutically important drugs,
including the Priority Medicines Evaluation Scheme
(PRIME), accelerated assessment and conditional
marketing authorization. PRIME is intended to provide
additional support to medicine developers throughout
the development process. Regulatory review timelines
in the E.U. may be truncated under accelerated
assessment for products that address an unmet
medical need. In addition, conditional marketing
authorizations may be granted for such products in
the interest of public health, where the benefit of
immediate availability outweighs the risk of less
comprehensive data than normally required.
Conditional marketing authorizations are valid for one
year and can be renewed annually. The marketing
authorization holder is required to complete specific
obligations (ongoing or new studies and, in some
cases, additional activities) with a view to providing
comprehensive data confirming that the benefit risk
balance is positive. Once comprehensive data on the
product have been obtained, the marketing
authorization may be converted into a standard
marketing authorization.
Aside from the U.S. and E.U., there are countries
in other regions where it is possible to receive an
"accelerated" review whereby the national regulatory
authority will commit to truncated review timelines for
products that meet specific medical needs.
In the E.U. there is detailed legislation on
pharmacovigilance and extensive guidance on good
pharmacovigilance practices. A failure to comply with
E.U. pharmacovigilance obligations may result in
significant financial penalties for the marketing
authorization holder.
Regardless of the approval process employed,
various parties share responsibilities for the
monitoring, detection and evaluation of adverse
events post-approval, including national competent
authorities, the EMA, the EC and the marketing
authorization holder. The EMA’s Pharmacovigilance
Risk Assessment Committee is responsible for
assessing and monitoring the safety of human
medicines and makes recommendations on product
safety issues. Marketing authorization holders have
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Regulatory agencies regulate and inspect
equipment, facilities and processes used in the
manufacturing and testing of pharmaceutical and
biologic products prior to approving a product. If, after
receiving approval from regulatory agencies, a
company makes a material change in manufacturing
equipment, location or process, additional regulatory
review and approval may be required. We also must
adhere to current Good Manufacturing Practices
(cGMP) and product-specific regulations enforced by
regulatory agencies following product approval. The
FDA, the EMA and other regulatory agencies also
conduct periodic visits to re-inspect equipment,
facilities and processes following the initial approval
of a product. If, as a result of these inspections, it is
determined that our equipment, facilities or processes
do not comply with applicable regulations and
conditions of product approval, regulatory agencies
may seek civil, criminal or administrative sanctions or
remedies against us, including significant financial
penalties and the suspension of our manufacturing
operations.
Good Clinical Practices
The FDA, the EMA and other regulatory agencies
promulgate regulations and standards for designing,
conducting, monitoring, auditing and reporting the
results of clinical trials to ensure that the data and
results are accurate and that the rights and welfare of
trial participants are adequately protected (commonly
referred to as current Good Clinical Practices (cGCP)).
Regulatory agencies enforce cGCP through periodic
inspections of trial sponsors, principal investigators
and trial sites, contract research organizations (CROs)
and institutional review boards. If our studies fail to
comply with applicable cGCP guidelines, the clinical
data generated in our clinical trials may be deemed
unreliable and relevant regulatory agencies may
require us to perform additional clinical trials before
approving our marketing applications. Noncompliance
can also result in civil or criminal sanctions. We rely
on third parties, including CROs, to carry out many of
our clinical trial-related activities. Failure of such third
parties to comply with cGCP can likewise result in
rejection of our clinical trial data or other sanctions.
In April 2014 the EC adopted a new Clinical Trial
Regulation, which was effective in June 2014 but is
not expected to apply until 2021. The regulation
harmonizes the procedures for assessment and
governance of clinical trials throughout the E.U. and
will require that information on the authorization,
conduct and results of each clinical trial conducted in
the E.U. be publicly available.
Approval of Biosimilars
The Patient Protection and Affordable Care Act
(PPACA) amended the Public Health Service Act
(PHSA) to authorize the FDA to approve biological
products, referred to as biosimilars or follow-on
biologics, that are shown to be "highly similar" to
previously approved biological products based upon
potentially abbreviated data packages. The biosimilar
must show it has no clinically meaningful differences
in terms of safety and effectiveness from the
reference product, and only minor differences in
clinically inactive components are allowable in
biosimilar products. The approval pathway for
biosimilars does, however, grant a biologics
manufacturer a 12-year period of exclusivity from the
date of approval of its biological product before
biosimilar competition can be introduced. There is
uncertainty, however, as the approval framework for
biosimilars originally was enacted as part of the
PPACA. There have been, and there are likely to
continue to be, federal legislative and administrative
efforts to repeal, substantially modify or invalidate
some or all of the provisions of the PPACA. If the
PPACA is repealed, substantially modified or
invalidated, it is unclear what, if any, impact such
action would have on biosimilar regulation.
A biosimilars approval pathway has been in place
in the E.U. since 2003. The EMA has issued a
number of scientific and product specific biosimilar
guidelines, including requirements for approving
biosimilars containing monoclonal antibodies. In the
E.U., biosimilars are generally approved under the
centralized procedure. The approval pathway allows
sponsors of a biosimilar to seek and obtain regulatory
approval based in part on reliance on the clinical trial
data of an innovator product to which the biosimilar
has been demonstrated, through comprehensive
comparability studies, to be “similar.” In many cases,
this allows biosimilars to be brought to market
without conducting the full complement of clinical
trials typically required for novel biologic drugs.
Orphan Drug Act
Under the U.S. Orphan Drug Act, the FDA may
grant orphan drug designation to drugs or biologics
intended to treat a “rare disease or condition,” which
generally is a disease or condition that affects fewer
than 200,000 individuals in the U.S. If a product
which has an orphan drug designation subsequently
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receives an initial FDA approval for the indication for
which it has such designation, the product is entitled
to orphan exclusivity, i.e., the FDA may not approve
any other applications to market the same drug for
the same indication for a period of seven years
following marketing approval, except in certain very
limited circumstances, such as if the later product is
shown to be clinically superior to the orphan product.
Legislation similar to the U.S. Orphan Drug Act has
been enacted in other countries to encourage the
research, development and marketing of medicines to
treat, prevent or diagnose rare diseases. In the E.U.,
medicinal products that receive and maintain an
orphan designation are entitled to 10 years of market
exclusivity following approval, protocol assistance and
access to the centralized procedure for marketing
authorization. SPINRAZA has been granted orphan
drug designation in the U.S., E.U. and Japan.
Regulation Pertaining to Pricing and
Reimbursement
In both domestic and foreign markets, sales of
our products depend, to a significant extent, on the
availability and amount of reimbursement by third-
party payors, including governments, private health
plans and other organizations. Substantial uncertainty
exists regarding the pricing and reimbursement of our
products, and drug prices continue to receive
significant scrutiny. Governments may regulate
coverage, reimbursement and pricing of our products
to control cost or affect utilization of our products.
Challenges to our pricing strategies, by either
government or private stakeholders, could harm our
business. The U.S. and foreign governments have
enacted and regularly consider additional reform
measures that affect health care coverage and costs.
Private health plans may also seek to manage cost
and utilization by implementing coverage and
reimbursement limitations. Other payors, including
managed care organizations, health insurers,
pharmacy benefit managers, government health
administration authorities and private health insurers,
seek price discounts or rebates in connection with the
placement of our products on their formularies and, in
some cases, may impose restrictions on access,
coverage or pricing of particular drugs based on
perceived value.
Within the U.S.
• Medicaid: Medicaid is a joint federal and state
program that is administered by the states for
low income and disabled beneficiaries. Under
the Medicaid Drug Rebate Program, we are
required to pay a rebate for each unit of product
reimbursed by the state Medicaid programs. The
amount of the rebate is established by law and
is adjusted upward if the average manufacturer
price (AMP) increases more than inflation
(measured by the Consumer Price Index - Urban).
The rebate amount is calculated each quarter
based on our report of current AMP and best
price for each of our products to the Centers for
Medicare & Medicaid Services (CMS). The
requirements for calculating AMP and best price
are complex. We are required to report any
revisions to AMP or best price previously
reported within a certain period, which revisions
could affect our rebate liability for prior quarters.
In addition, if we fail to provide information timely
or we are found to have knowingly submitted
false information to the government, the statute
governing the Medicaid Drug Rebate Program
provides for civil monetary penalties.
• Medicare: Medicare is a federal program that is
administered by the federal government. The
program covers individuals age 65 and over as
well as those with certain disabilities. Medicare
Part B generally covers drugs that must be
administered by physicians or other health care
practitioners, are provided in connection with
certain durable medical equipment or are certain
oral anti-cancer drugs and certain oral
immunosuppressive drugs. Medicare Part B pays
for such drugs under a payment methodology
based on the average sales price (ASP) of the
drugs. Manufacturers, including us, are required
to provide ASP information to the CMS on a
quarterly basis. The manufacturer-submitted
information is used to calculate Medicare
payment rates. If a manufacturer is found to
have made a misrepresentation in the reporting
of ASP, the governing statute provides for civil
monetary penalties.
Medicare Part D provides coverage to enrolled
Medicare patients for self-administered drugs
(i.e., drugs that are not administered by a
physician). Medicare Part D is administered by
private prescription drug plans approved by the
U.S. government. Each drug plan establishes its
own Medicare Part D formulary for prescription
drug coverage and pricing, which the drug plan
may modify from time-to-time. The prescription
drug plans negotiate pricing with manufacturers
and pharmacies, and may condition formulary
placement on the availability of manufacturer
discounts. In addition, manufacturers, including
us, are required to provide to the CMS a
discount of up to 70% on brand name
prescription drugs utilized by Medicare Part D
beneficiaries when those beneficiaries reach the
coverage gap in their drug benefits.
• Federal Agency Discounted Pricing: Our products
are subject to discounted pricing when
purchased by federal agencies via the Federal
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Supply Schedule (FSS). FSS participation is
required for our products to be covered and
reimbursed by the Veterans Administration (VA),
Department of Defense, Coast Guard and Public
Health Service (PHS). Coverage under Medicaid,
Medicare and the PHS pharmaceutical pricing
program is also conditioned upon FSS
participation. FSS pricing is intended not to
exceed the price that we charge our most-favored
non-federal customer for a product. In addition,
prices for drugs purchased by the VA,
Department of Defense (including drugs
purchased by military personnel and dependents
through the TriCare retail pharmacy program),
Coast Guard and PHS are subject to a cap on
pricing equal to 76% of the non-federal average
manufacturer price (non-FAMP). An additional
discount applies if non-FAMP increases more
than inflation (measured by the Consumer Price
Index - Urban). In addition, if we fail to provide
information timely or we are found to have
knowingly submitted false information to the
government, the governing statute provides for
civil monetary penalties.
• 340B Discounted Pricing: To maintain coverage
of our products under the Medicaid Drug Rebate
Program and Medicare Part B, we are required to
extend significant discounts to certain covered
entities that purchase products under Section
340B of the PHS pharmaceutical pricing
program. Purchasers eligible for discounts
include hospitals that serve a disproportionate
share of financially needy patients, community
health clinics and other entities that receive
certain types of grants under the PHSA. For all of
our products, we must agree to charge a price
that will not exceed the amount determined
under statute (the “ceiling price”) when we sell
outpatient drugs to these covered entities. In
addition, we may, but are not required to, offer
these covered entities a price lower than the
340B ceiling price. The 340B discount formula is
based on AMP and is generally similar to the
level of rebates calculated under the Medicaid
Drug Rebate Program.
Outside the U.S.
Outside the U.S., our products are paid for by a
variety of payors, with governments being the primary
source of payment. Governments may determine or
influence reimbursement of products and may also
set prices or otherwise regulate pricing. Negotiating
prices with governmental authorities can delay
commercialization of our products. Governments may
use a variety of cost-containment measures to control
the cost of products, including price cuts, mandatory
rebates, value-based pricing and reference pricing
(i.e., referencing prices in other countries and using
those reference prices to set a price). Budgetary
pressures in many countries are continuing to cause
governments to consider or implement various cost-
containment measures, such as price freezes,
increased price cuts and rebates and expanded
generic substitution and patient cost-sharing.
Regulation Pertaining to Sales and Marketing
We are subject to various federal and state laws
pertaining to health care “fraud and abuse,” including
anti-kickback laws and false claims laws. Anti-
kickback laws generally prohibit a prescription drug
manufacturer from soliciting, offering, receiving or
paying any remuneration to generate business,
including the purchase or prescription of a particular
drug. Although the specific provisions of these laws
vary, their scope is generally broad and there may be
no regulations, guidance or court decisions that clarify
how the laws apply to particular industry practices.
There is therefore a possibility that our practices
might be challenged under anti-kickback or similar
laws. False claims laws prohibit anyone from
knowingly and willingly presenting, or causing to be
presented, for payment to third-party payors (including
Medicare and Medicaid), claims for reimbursed drugs
or services that are false or fraudulent, claims for
items or services not provided as claimed or claims
for medically unnecessary items or services. Our
activities relating to the sale and marketing of our
products may be subject to scrutiny under these laws.
Violations of fraud and abuse laws may be punishable
by criminal or civil sanctions, including fines and civil
monetary penalties, and exclusion from federal health
care programs (including Medicare and Medicaid). In
the U.S., federal and state authorities are paying
increased attention to enforcement of these laws
within the pharmaceutical industry and private
individuals have been active in alleging violations of
the laws and bringing suits on behalf of the
government under the federal civil False Claims Act. If
we were subject to allegations concerning, or were
convicted of violating, these laws, our business could
be harmed.
Laws and regulations have been enacted by the
federal government and various states to regulate the
sales and marketing practices of pharmaceutical
manufacturers. The laws and regulations generally
limit financial interactions between manufacturers and
health care providers or require disclosure to the
government and public of such interactions. The laws
include federal “sunshine” provisions. The sunshine
provisions apply to pharmaceutical manufacturers
with products reimbursed under certain government
programs and require those manufacturers to
disclose annually to the federal government (for re-
disclosure to the public) certain payments made to
physicians and certain other healthcare practitioners
or to teaching hospitals. State laws may also require
26
disclosure of pharmaceutical pricing information and
marketing expenditures. Many of these laws and
regulations contain ambiguous requirements. Given
the lack of clarity in laws and their implementation,
our reporting actions could be subject to the penalty
provisions of the pertinent federal and state laws and
regulations. Outside the U.S., other countries have
implemented requirements for disclosure of financial
interactions with healthcare providers and additional
countries may consider or implement such laws.
Other Regulations
Foreign Anti-Corruption
We are subject to various federal and foreign
laws that govern our international business practices
with respect to payments to government officials.
Those laws include the U.S. Foreign Corrupt Practices
Act (FCPA), which prohibits U.S. companies and their
representatives from paying, offering to pay, promising
to pay or authorizing the payment of anything of value
to any foreign government official, government staff
member, political party or political candidate for the
purpose of obtaining or retaining business or to
otherwise obtain favorable treatment or influence a
person working in an official capacity. In many
countries, the health care professionals we regularly
interact with may meet the FCPA's definition of a
foreign government official. The FCPA also requires
public companies to make and keep books and
records that accurately and fairly reflect their
transactions and to devise and maintain an adequate
system of internal accounting controls.
The laws to which we are subject also include
the U.K. Bribery Act 2010 (Bribery Act), which
proscribes giving and receiving bribes in the public
and private sectors, bribing a foreign public official
and failing to have adequate procedures to prevent
employees and other agents from giving bribes. U.S.
companies that conduct business in the U.K.
generally will be subject to the Bribery Act. Penalties
under the Bribery Act include significant fines for
companies and criminal sanctions for corporate
officers under certain circumstances.
NIH Guidelines
We seek to conduct research at our U.S.
facilities in compliance with the current U.S. National
Institutes of Health Guidelines for Research Involving
Recombinant DNA Molecules (NIH Guidelines). By
local ordinance, we are required to, among other
things, comply with the NIH Guidelines in relation to
our facilities in Research Triangle Park (RTP), NC and
are required to operate pursuant to certain permits.
Other Laws
Our present and future business has been and
will continue to be subject to various other laws and
regulations. Various laws, regulations and
recommendations relating to data privacy and
protection, safe working conditions, laboratory
practices, the experimental use of animals and the
purchase, storage, movement, import, export and use
and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and
infectious disease agents, used in connection with
our research work are or may be applicable to our
activities. Certain agreements entered into by us
involving exclusive license rights may be subject to
national or international antitrust regulatory control,
the effect of which cannot be predicted. The extent of
government regulation, which might result from future
legislation or administrative action, cannot accurately
be predicted.
The European Parliament and the Council of the
European Union adopted a comprehensive general
data privacy regulation (GDPR) in 2016 to replace the
current E.U. Data Protection Directive and related
country-specific legislation. The GDPR took effect in
May 2018 and governs the collection and use of
personal data in the E.U. The GDPR, which is wide-
ranging in scope, imposes several requirements
relating to the consent of the individuals to whom the
personal data relates, the information provided to the
individuals, the security and confidentiality of the
personal data, data breach notification and the use of
third-party processors in connection with the
processing of the personal data. The GDPR also
imposes strict rules on the transfer of personal data
out of the E.U. to the U.S., provides an enforcement
authority and imposes large penalties for
noncompliance, including the potential for fines of up
to €20.0 million or 4% of the annual global revenues
of the infringer, whichever is greater.
Environmental Matters
We strive to comply in all material respects with
applicable laws and regulations concerning the
environment. While it is impossible to predict
accurately the future costs associated with
environmental compliance and potential remediation
activities, compliance with environmental laws is not
expected to require significant capital expenditures
and has not had, and is not expected to have, a
material adverse effect on our operations or
competitive position.
Manufacturing
We are committed to ensuring an uninterrupted
supply of medicines to patients around the world. To
that end, we continually review our manufacturing
capacity, capabilities, processes and facilities. We
believe that our manufacturing facilities, together with
the third-party contract manufacturing organizations
we outsource to, currently provide sufficient capacity
27
for our products and to Samsung Bioepis, our joint
venture that develops, manufactures and markets
biosimilar products, and other strategic contract
manufacturing partners. In order to support our drug
development pipeline, we are expanding our large
molecule production capacity by building a large-scale
biologics manufacturing facility in Solothurn,
Switzerland. We expect this facility to be partially
operational by the end of 2020.
Manufacturing Facilities
Our drug substance manufacturing facility
includes:
Facility
RTP, NC
Drug Substance Manufactured
AVONEX
PLEGRIDY
TYSABRI
Other*
* Other includes products manufactured for contract
manufacturing partners.
In addition to our drug substance manufacturing
facility, we have a drug product manufacturing facility
and supporting infrastructure in RTP, NC, including a
parenteral facility and an oral solid dose products
manufacturing facility.
The parenteral facility adds capabilities and
capacity for filling biologics into vials and is principally
used for filling product candidates. The oral solid
dose products facility can supplement our outsourced
small molecule manufacturing capabilities, including
the manufacture of TECFIDERA.
We also have an oligonucleotide synthesis
manufacturing facility in RTP, NC. This facility gives us
the capability to manufacture ASO drugs like
SPINRAZA as well as our other ASO candidates
currently in our clinical pipeline.
In order to support our drug development
pipeline, we are building a large-scale biologics
manufacturing facility in Solothurn, Switzerland, which
we expect to be partially operational by the end of
2020.
Genentech is responsible for all worldwide
manufacturing activities for bulk RITUXAN, RITUXAN
HYCELA and GAZYVA and has sourced the
manufacture of certain bulk RITUXAN, RITUXAN
HYCELA and GAZYVA requirements to a third party.
Acorda supplies FAMPYRA to us pursuant to its supply
agreement with Alkermes, Inc. and Ionis supplies the
active pharmaceutical ingredient (API) for SPINRAZA.
Alkermes currently supplies VUMERITY to us pursuant
to our supply agreement with Alkermes. In October
2019 we entered into a new supply agreement and
amended our license and collaboration agreement
with Alkermes pursuant to which we have the election,
following a transition period, to manufacture
VUMERITY or have manufacturing transitioned to a
third party.
Third-Party Suppliers and Manufacturers
We principally use third parties to manufacture
the API and the final product for our small molecule
products and product candidates, including
TECFIDERA and FUMADERM, and the final drug
product for our large molecule products and, to a
lesser extent, product candidates.
We source all of our fill-finish and the majority of
final product assembly and storage operations for our
products, along with a substantial part of our label
and packaging operations, to a concentrated group of
third-party contract manufacturing organizations. Raw
materials, delivery devices, such as syringes and
auto-injectors, and other supplies required for the
production of our products and product candidates
are procured from various third-party suppliers and
manufacturers in quantities adequate to meet our
needs. Continuity of supply of such raw materials,
devices and supplies is assured using a strategy of
dual sourcing where possible or by a risk-based
inventory strategy. Our third-party service providers,
suppliers and manufacturers may be subject to
routine cGMP inspections by the FDA or comparable
agencies in other jurisdictions and undergo
assessment and certification by our quality
management group.
28
Our Employees
As of December 31, 2019, we had approximately 7,400 employees worldwide.
Information about our Executive Officers (as of February 6, 2020)
Officer
Michel Vounatsos
Susan H. Alexander
Jeffrey D. Capello
Alphonse Galdes, Ph.D.
Ginger Gregory, Ph.D.
Chirfi Guindo
Current Position
Chief Executive Officer
Executive Vice President, Chief Legal Officer and Secretary
Executive Vice President and Chief Financial Officer
Executive Vice President, Pharmaceutical Operations and
Technology
Executive Vice President and Chief Human Resources Officer
Executive Vice President, Global Product Strategy and
Commercialization
Executive Vice President, Corporate Development
Vice President, Chief Accounting Officer
Year
Joined
Biogen
2016
2006
2017
1995
2017
2017
2018
2018
1998
Age
58
63
55
67
52
54
42
54
62
Daniel Karp
Robin C. Kramer
Alfred W. Sandrock, Jr., M.D., Ph.D. Executive Vice President, Research and Development
Michel Vounatsos
Experience
Mr. Vounatsos has served as our Chief Executive Officer and as a member of our Board of Directors since January
2017. Prior to that, from April 2016 to December 2016, Mr. Vounatsos served as our Executive Vice President,
Chief Commercial Officer. Prior to joining Biogen, Mr. Vounatsos spent 20 years at Merck & Co., Inc. (Merck), a
pharmaceutical company, where he most recently served as President, Primary Care, Customer Business Line and
Merck Customer Centricity. In this role, he led Merck’s global primary care business unit, a role which
encompassed Merck’s cardiology-metabolic, general medicine, women’s health and biosimilars groups and
developed and instituted a strategic framework for enhancing the company’s relationships with key constituents,
including the most significant providers, payors and retailers and the world’s largest governments. Mr. Vounatsos
previously held leadership positions across Europe and in China for Merck. Prior to that, Mr. Vounatsos held
management positions at Ciba-Geigy, a pharmaceutical company. Mr. Vounatsos currently serves on the advisory
board of Tsinghua University School of Pharmaceutical Sciences, on the Supervisory Board of Liryc, the
Electrophysiology and Heart Modeling Institute at the University of Bordeaux, on the board of directors of N-Lorem
Foundation and as a member of the MIT Presidential CEO Advisory Board.
Education
Universite Victor Segalen, Bordeaux II, France, C.S.C.T. Certificate in Medicine
HEC School of Management - Paris, M.B.A.
Susan H. Alexander
Experience
Ms. Alexander has served as our Executive Vice President, Chief Legal Officer and Secretary since April 2018. Prior
to that, Ms. Alexander served as our Executive Vice President, Chief Legal, Corporate Services and Secretary from
March 2017 to March 2018, as our Executive Vice President, Chief Legal Officer and Secretary from December
2011 to March 2017 and as our Executive Vice President, General Counsel and Corporate Secretary from 2006 to
December 2011. Prior to joining Biogen, Ms. Alexander served as the Senior Vice President, General Counsel and
Corporate Secretary of PAREXEL International Corporation, a biopharmaceutical services company, from 2003 to
January 2006. From 2001 to 2003 Ms. Alexander served as General Counsel of IONA Technologies, a software
company. From 1995 to 2001 Ms. Alexander served as Counsel at Cabot Corporation, a specialty chemicals and
performance materials company. Prior to that, Ms. Alexander was a partner at the law firms of Hinckley, Allen &
Snyder and Fine & Ambrogne.
Public Company Boards
Invacare Corporation, a medical and healthcare product company
Education
Wellesley College, B.A.
Boston University School of Law, J.D.
29
Jeffrey D. Capello
Experience
Mr. Capello has served as our Executive Vice President and Chief Financial Officer since December 2017 and
served as our Chief Accounting Officer from July 2018 to November 2018. Prior to joining Biogen, Mr. Capello
served as the Chief Financial Officer of Beacon Health Options, Inc., a behavioral health company, with
responsibility for finance, human resources, information technology, real estate and procurement from October
2016 until November 2017. From July 2015 until September 2016 Mr. Capello was the founder and Chief
Executive Officer of Monomoy Advisors, which focuses on helping companies drive shareholder value. From July
2014 until June 2015 Mr. Capello served as the Executive Vice President and Chief Financial Officer of Ortho-
Clinical Diagnostics, an in-vitro diagnostics company that was acquired by the Carlyle Group from Johnson &
Johnson, with responsibility for global finance and business development. From March 2010 to December 2013 Mr.
Capello served as Chief Financial Officer and Executive Vice President of Boston Scientific Corporation (Boston
Scientific), a medical device company, where he was responsible for the worldwide management of Boston
Scientific’s finance, information systems, business development and corporate strategy functions. Mr. Capello
joined Boston Scientific in June 2008 and served as Senior Vice President and Chief Accounting Officer until March
2010. From 2006 to 2008 he was the Senior Vice President and Chief Financial Officer with responsibilities for
global finance and business development at PerkinElmer, Inc. (PerkinElmer), a life sciences tool company.
Previously, he served as PerkinElmer’s Vice President of Finance, Corporate Controller, Treasurer and Chief
Accounting Officer from 2001 to 2006. Prior to his tenure at PerkinElmer, Mr. Capello was a Partner at
PricewaterhouseCoopers LLP, both in the U.S. and in the Netherlands.
Education
University of Vermont, B.S. Business Administration
Harvard Business School, M.B.A.
Alphonse Galdes, Ph.D.
Experience
Dr. Galdes has served as our Executive Vice President, Pharmaceutical Operations and Technology since
September 2019. Since joining Biogen in 1995, Dr. Galdes has held several senior executive positions, including
most recently as Senior Vice President, Asset Development and Portfolio Management from November 2015 to
September 2019 and Senior Vice President, Technical Development from October 2010 to November 2015. Dr.
Galdes was a Rhodes Scholar at Oxford University and performed post-doctoral research work at the Department of
Biological Chemistry at Harvard Medical School.
Education
University of Malta, B.Sc. Chemistry and Biology
University of Malta, M.Sc. Biochemistry
Oxford University, Ph.D. Biochemistry
Ginger Gregory, Ph.D.
Experience
Dr. Gregory has served as our Executive Vice President and Chief Human Resources Officer since July 2017. Prior
to joining Biogen, Dr. Gregory served as Executive Vice President and Chief Human Resources Officer at Shire PLC,
a global specialty biopharmaceutical company, from February 2014 to April 2017. Prior to that, Dr. Gregory held
executive-level human resources positions for several multinational companies across a variety of industries,
including Dunkin’ Brands Group Inc., a restaurant holding company, where she served as Chief Human Resource
Officer, Novartis AG, a pharmaceutical company, where she was the division head of Human Resources for Novartis
Vaccines and Diagnostics, Novartis Consumer Health and Novartis Institutes of BioMedical Research and Novo
Nordisk A/S, a pharmaceutical company, where she served as Senior Vice President, Corporate People &
Organization at the company’s headquarters in Copenhagen, Denmark. Earlier in her career, Dr. Gregory held a
variety of human resources generalist and specialist positions at BMS, a pharmaceutical company, and served as a
consultant with Booz Allen & Hamilton, an information technology consulting company, in the area of organization
change and effectiveness.
Education
University of Massachusetts, B.A. Psychology
The George Washington University, Ph.D. Psychology
30
Chirfi Guindo
Experience
Mr. Guindo has served as our Executive Vice President, Global Product Strategy and Commercialization since
February 2019. Prior to that, Mr. Guindo served as our Executive Vice President and Head of Global Marketing,
Market Access and Customer Innovation from November 2017 to February 2019. Prior to joining Biogen, Mr.
Guindo spent 27 years in the global pharmaceutical industry and has held several leadership positions at Merck, a
pharmaceutical company, in Canada, the U.S., France, Africa and the Netherlands. He worked in several disciplines
including Finance, Sales & Marketing, General Management and Global Strategy/Product Development in specialty,
acute and hospital care. Most recently Mr. Guindo was Vice President and Managing Director and President and
Managing Director of Merck Canada from October 2014 to November 2017. From January 2011 to October 2014,
he was Vice President and General Manager, Global HIV Franchise at Merck.
Education
Ecole Central de Paris (France), Engineering
Stern School of Business, New York University, M.B.A. Finance/Economics
Daniel Karp
Experience
Mr. Karp has served as our Executive Vice President, Corporate Development since June 2018. Prior to joining
Biogen, Mr. Karp held a number of positions of increasing responsibility at Pfizer, a biopharmaceutical company,
including as Vice President, Worldwide Business Development and Head of Business Development for Worldwide
Research and Development from May 2016 to June 2018, as Vice President, Worldwide Business Development
and BD Lead for Pfizer Vaccines, Oncology and Consumer Healthcare from January 2014 to May 2016, as Senior
Director, Worldwide Business Development from December 2010 to December 2013, as Director, Worldwide
Business Development from January 2008 to December 2010, as Senior Manager, Worldwide Business
Development from May 2007 to December 2007 and as Manager, U.S. Business Development from July 2006 to
April 2007. Prior to that, Mr. Karp held roles in healthcare and life sciences strategy consulting.
Education
Duke University, B.S. Biology
Wharton School of the University of Pennsylvania, M.B.A.
Robin C. Kramer
Experience
Ms. Kramer has served as our Vice President, Chief Accounting Officer since November 2018. Prior to joining
Biogen, Ms. Kramer served as the Senior Vice President and Chief Accounting Officer of Hertz Global Holdings,
Inc., a car rental company, from May 2014 to November 2018. Prior to that, Ms. Kramer was an audit partner at
Deloitte & Touche LLP (Deloitte), a professional services firm, from 2007 to 2014, including serving in Deloitte's
National Office Accounting Standards and Communications Group from 2007 to 2010. From 2005 to 2007 Ms.
Kramer served as Chief Accounting Officer of Fisher Scientific International, Inc., a laboratory supply and
biotechnology company, and from 2004 to 2005 Ms. Kramer served as Director, External Reporting, Accounting
and Control for the Gillette Company, a personal care company. Ms. Kramer also held partner positions in the
public accounting firms of Ernst & Young LLP and Arthur Anderson LLP. Ms. Kramer is a licensed certified public
accountant (CPA) in Massachusetts. She is a member of the Massachusetts Society of CPAs and the American
Institute of CPAs and served as a Board Member for the Massachusetts State Board of Accountancy from
September 2011 to December 2015.
Education
Salem State University, B.B.A. Accounting
31
Alfred W. Sandrock, Jr., M.D., Ph.D.
Experience
Dr. Sandrock has served as our Executive Vice President, Research and Development since September 2019. Prior
to that, Dr. Sandrock served as our Chief Medical Officer from October 2017 to January 2020, as our Executive
Vice President, Chief Medical Officer Neurology and Neurodegeneration from October 2015 to October 2017, as our
Chief Medical Officer and Group Senior Vice President from April 2013 to October 2015 and as our Chief Medical
Officer and Senior Vice President of Development Sciences from February 2012 to April 2013. Prior to that, Dr.
Sandrock held several other senior executive positions since joining Biogen in 1998, including Senior Vice
President of Neurology Research and Development and Vice President of Clinical Development, Neurology.
Public Company Boards
Neurocrine Biosciences, Inc., a life sciences company
Education
Stanford University, B.A. Human Biology
Harvard Medical School, M.D.
Harvard University, Ph.D. Neurobiology
Massachusetts General Hospital, internship in Medicine, residency and chief residency in Neurology and
clinical fellowship in Neuromuscular Disease and Clinical Neurophysiology (electromyography)
Available Information
Our principal executive offices are located at 225 Binney Street, Cambridge, MA 02142 and our telephone
number is (617) 679-2000. Our website address is www.biogen.com. We make available free of charge through the
Investors section of our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is
electronically filed with or furnished to the U.S. Securities and Exchange Commission (SEC). We include our website
address in this report only as an inactive textual reference and do not intend it to be an active link to our website.
The contents of our website are not incorporated into this report.
32
Item 1A.
Risk Factors
We are substantially dependent on revenues from our products.
Our revenues depend upon continued sales of our products, as well as the financial rights we have in our anti-
CD20 therapeutic programs, and, unless we develop, acquire rights to and/or commercialize new products and
technologies, we will be substantially dependent on sales from our products and our financial rights in our anti-CD20
therapeutic programs for many years. Additionally, a significant portion of our revenues are concentrated on sales of
our products in increasingly competitive markets. Any of the following negative developments relating to any of our
products or any of our anti-CD20 therapeutic programs may adversely affect our revenues and results of operations
or could cause a decline in our stock price:
• safety or efficacy issues;
• our ability to maintain a positive reputation among patients, healthcare providers and others, which may be
impacted by our pricing and reimbursement decisions;
•
•
the introduction or greater acceptance of competing products, including generics, biosimilars, prodrugs and
products approved under abbreviated regulatory pathways;
limitations and additional pressures on product pricing or price increases, including those resulting from
governmental or regulatory requirements, increased competition or changes in, or implementation of,
reimbursement policies and practices of payors and other third parties; or
• adverse legal, administrative, regulatory or legislative developments.
SPINRAZA has been approved by, among others, the FDA, the EC and the Japanese Ministry of Health, Labor
and Welfare, and is in the early stages of commercial launch in certain markets. In addition to risks associated with
new product launches and the other factors described in these Risk Factors, our ability to successfully commercialize
SPINRAZA may be adversely affected due to:
•
the introduction of a new gene therapy product that was approved in the U.S. in May 2019 for the
treatment of SMA, and other products in development that, if successfully developed and approved, may
compete with SPINRAZA in the SMA market, including potential oral products;
• our limited marketing experience within certain SMA markets, which may impact our ability to develop
additional relationships with the associated medical and scientific community; and
•
the lack of readiness of healthcare providers within certain SMA markets to treat patients with SMA.
Sales of our products depend, to a significant extent, on adequate coverage, pricing and reimbursement from third-
party payors, which are subject to increasing and intense pressure from political, social, competitive and other sources.
Our inability to obtain and maintain adequate coverage, or a reduction in pricing or reimbursement, could have an
adverse effect on our business, reputation, revenues and results of operations, could curtail or eliminate our ability to
adequately fund research and development programs for the discovery and commercialization of new products or could
cause a decline or volatility in our stock price.
Sales of our products depend, to a significant extent, on the availability and extent of adequate coverage,
pricing and reimbursement from government health administration authorities, private health insurers and other
organizations. When a new pharmaceutical product is approved, the availability of government and private
reimbursement for that product may be uncertain, as is the pricing and amount for which that product will be
reimbursed.
Pricing and reimbursement for our products may be adversely affected by a number of factors, including:
• changes in, and implementation of, federal, state or foreign government regulations or private third-party
payors’ reimbursement policies;
• pressure by employers on private health insurance plans to reduce costs;
• consolidation and increasing assertiveness of payors, including managed care organizations, health
insurers, pharmacy benefit managers, government health administration authorities, private health insurers
and other organizations, seeking price discounts or rebates in connection with the placement of our
33
products on their formularies and, in some cases, the imposition of restrictions on access or coverage of
particular drugs or pricing determined based on perceived value; and
• our value-based contracting program pursuant to which we aim to tie the pricing of our products to their
clinical values by either aligning price to patient outcomes or adjusting price for patients who discontinue
therapy for any reason, including efficacy or tolerability concerns.
Our ability to set the price for our products varies significantly from country to country and as a result so can
the price of our products. Certain countries set prices by reference to the prices in other countries where our
products are marketed. Thus, our inability to obtain and maintain adequate prices in a particular country may not
only limit the revenues from our products within that country but may also adversely affect our ability to secure
acceptable prices in existing and potential new markets. This may create the opportunity for third-party cross-border
trade or influence our decision to sell or not to sell a product, thus adversely affecting our geographic expansion
plans and revenues.
Drug prices are under significant scrutiny in the markets in which our products are prescribed. We expect drug
pricing and other health care costs to continue to be subject to intense political and societal pressures on a global
basis. In addition, competition from current and future competitors may negatively impact our ability to maintain
pricing and our market share. New products or treatments brought to market by our competitors could cause
revenues for our products to decrease due to potential price reductions and lower sales volumes.
Payors, including managed care organizations, health insurers, pharmacy benefit managers, government health
administration authorities, private health insurers and other organizations, increasingly seek ways to reduce their
costs. Many payors continue to adopt benefit plan changes that shift a greater portion of prescription costs to
patients. Such measures include more limited benefit plan designs, higher patient co-pay or co-insurance obligations
and limitations on patients' use of commercial manufacturer co-pay payment assistance programs (including through
co-pay accumulator adjustment or maximization programs). Payors also increasingly seek price discounts or rebates
in connection with the placement of our products on their formularies or those they manage and control costs by
imposing restrictions on access to or usage of our products, such as by requiring prior authorization or step therapy.
Significant consolidation in the health insurance industry has resulted in a few large insurers and pharmacy benefit
managers exerting greater pressure in pricing and usage negotiations with drug manufacturers, significantly
increasing discounts and rebates required of manufacturers and limiting patient access and usage. Further
consolidation among insurers, pharmacy benefit managers and other payors would increase the negotiating leverage
such entities have over us and other drug manufacturers. Ultimately, additional discounts, rebates, coverage or plan
changes, restrictions or exclusions as described above could have a material adverse effect on sales of our affected
products.
Our failure to obtain or maintain adequate coverage, pricing or reimbursement for our products could have an
adverse effect on our business, reputation, revenues and results of operations, could curtail or eliminate our ability
to adequately fund research and development programs for the discovery and commercialization of new products or
could cause a decline or volatility in our stock price.
If we are unable to obtain and maintain adequate protection for our data, intellectual property and other proprietary
rights, our business may be harmed.
Our success depends in part on our ability to obtain and defend patent and other intellectual property rights
that are important to the commercialization of our products and product candidates. The degree of patent protection
afforded to our products and processes in the U.S. and in other important markets remains uncertain and depends,
in part, upon decisions of the patent offices, courts, administrative bodies and lawmakers in these countries. We
may fail to successfully obtain or preserve patent protection for the technologies incorporated into our products and
processes, or the protection we obtain may not be of sufficient breadth and degree to protect our commercial
interests in all countries where we conduct business. Under the Hatch-Waxman Act, a manufacturer may file an
Abbreviated New Drug Application, seeking approval of a generic copy of an approved innovator product, or a NDA
under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which may be for a new or improved version of
the original innovator product. The manufacturers are allowed to rely on the safety and efficacy data of the
innovator's product, may not need to conduct clinical trials, can market a competing version of a product after the
expiration or loss of patent exclusivity or the expiration or loss of regulatory exclusivity and often charge significantly
lower prices. Upon the expiration or loss of patent protection or the expiration or loss of regulatory exclusivity for a
product, a major portion of revenues for that product may be reduced in a short period of time. When others exploit
our inventions, the expected benefit from them are reduced. Furthermore, our products may be determined to
34
infringe patents or other intellectual property rights held by third parties, which could result in financial, legal,
business or reputational harm to us.
We also rely on regulatory exclusivity for protection of our products. Implementation and enforcement of
regulatory exclusivity, which may consist of regulatory data protection and market protection, varies widely from
country to country. Failure to qualify for regulatory exclusivity, or failure to obtain or maintain the extent or duration of
such protections that we expect in each of the markets for our products due to challenges, changes or
interpretations in the law or otherwise, could affect our revenues for our products or our decision on whether to
market our products in a particular country or countries or could otherwise have an adverse impact on our results of
operations.
Litigation, interferences, oppositions, inter partes reviews, administrative challenges or other similar types of
proceedings are, have been and may in the future be necessary in some instances to determine the validity and
scope of certain of our patents, regulatory exclusivities or other proprietary rights, and in other instances to
determine the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to
the manufacture, use or sale of our products. We also face challenges to our patent and regulatory protections
covering our products by third parties, including manufacturers of generics and biosimilars that may choose to
launch or attempt to launch their products before the expiration of our patent or regulatory exclusivity. Litigation,
interference, oppositions, inter partes reviews, administrative challenges or other similar types of proceedings are
unpredictable and are often protracted, expensive and distracting to management. Negative outcomes of such
proceedings adversely affect the validity and scope of our patent or other proprietary rights. Settlements of Hatch-
Waxman litigation typically result in reducing the period of patent protection, accelerating reduction in revenue from
affected products. Adverse outcomes in intellectual property litigation also could hinder our ability to manufacture
and market our products, require us to seek a license for the infringed product or technology or result in the
assessment of significant monetary damages against us that may exceed amounts, if any, accrued in our financial
statements. An adverse determination in a judicial or administrative proceeding or a failure to obtain necessary
licenses could prevent us from manufacturing or selling our products. Furthermore, payments under any licenses
that we are able to obtain would reduce our profits derived from the covered products and services. Any of these
circumstances could result in financial, business or reputational harm to us or could cause a decline or volatility in
our stock price.
Our long-term success depends upon the successful development of new products and additional indications for
existing products.
Our long-term viability and growth will depend upon the successful development of additional indications for our
existing products as well as the successful development of new products and technologies from our research and
development activities, our biosimilars joint venture with Samsung BioLogics or licenses or acquisitions from third
parties.
Product development is very expensive and involves a high degree of uncertainty and risk. Only a small number
of research and development programs result in the commercialization of a product. Furthermore, the development
of novel approaches for the treatment of diseases, including development efforts in new modalities such as those
based on the ASO platform and gene therapy, may present additional challenges and risks, including obtaining
regulatory approval from the FDA and other regulatory agencies that have limited experience with the development of
such therapies. In addition, clinical trial data are subject to differing interpretations and, even if we view data as
sufficient to support the safety, effectiveness and/or approval of an investigational therapy, regulatory authorities
may disagree and may require additional data, may limit the scope of the approval or may deny approval altogether.
Consequently, it may be difficult to predict the time and cost of product development of novel approaches for the
treatment of diseases.
In addition, success in preclinical work or early stage clinical trials does not ensure that later stage or larger
scale clinical trials will be successful. Clinical trials may indicate that our product candidates lack efficacy, have
harmful side effects, result in unexpected adverse events or raise other concerns that may significantly reduce the
likelihood of regulatory approval. This may result in terminated programs, significant restrictions on use and safety
warnings in an approved label, adverse placement within the treatment paradigm or significant reduction in the
commercial potential of the product candidate.
Even if we could successfully develop new products or indications, we may make a strategic decision to
discontinue development of a product candidate or indication if, for example, we believe commercialization will be
difficult relative to the standard of care or other opportunities in our pipeline.
35
If we fail to compete effectively, our business and market position would suffer.
The biopharmaceutical industry and the markets in which we operate are intensely competitive. We compete in
the marketing and sale of our products, the development of new products and processes, the acquisition of rights to
new products with commercial potential and the hiring and retention of personnel. We compete with biotechnology
and pharmaceutical companies that have a greater number of products on the market and in the product pipeline,
substantially greater financial, marketing and research and development and other resources and other technological
or competitive advantages. One or more of our competitors may benefit from significantly greater sales and
marketing capabilities, may develop products that are accepted more widely than ours or may receive patent
protection that dominates, blocks or adversely affects our product development or business.
Our products are also susceptible to increasing competition in many markets from generics, biosimilars,
prodrugs and products approved under abbreviated regulatory pathways. Generic versions of drugs, biosimilars,
prodrugs and products approved under abbreviated regulatory pathways are likely to be sold at substantially lower
prices than branded products. Accordingly, the introduction of such products, as well as other lower-priced competing
products, may significantly reduce both the price that we are able to charge for our products and the volume of
products we sell, which will negatively impact our revenues. In addition, when a generic version of one of our
products is commercialized, it may, in some cases, be automatically substituted for our product and reduce our
revenues in a short period of time.
In the MS market, we face intense competition as the number of products and competitors continues to
expand. Due to our significant reliance on sales of our MS products, including TECFIDERA, our business could be
harmed if we are unable to successfully compete in the MS market. More specifically, our ability to compete,
maintain and grow our share in the MS market may be adversely affected due to a number of factors, including:
•
•
the introduction of more efficacious, safer, less expensive or more convenient alternatives to our MS
products, including our own products and products of our collaborators;
the introduction of biosimilars, follow-on products, generic versions of branded MS products, prodrugs or
products approved under abbreviated regulatory pathways, which would be significantly less costly than our
products to bring to market and would be offered for sale at lower prices, and could result in a significant
percentage of the sales of our products being lost to such biosimilars, follow-on products, generic versions
of branded MS products, prodrugs or products approved under abbreviated regulatory pathways;
•
the off-label use by physicians of therapies indicated for other conditions to treat MS patients;
• patient dynamics, including the size of the patient population and our ability to attract and maintain new
and current patients to our therapies;
• damage to physician and patient confidence in any of our MS products, generic or biosimilars of our MS
products or any other product from the same class as one of our products, or to our sales and reputation
as a result of label changes or adverse experiences or events that may occur with patients treated with our
MS products or generic or biosimilars of our MS products;
•
inability to obtain appropriate pricing and reimbursement for our MS products compared to our competitors
in key international markets; or
• our ability to obtain and maintain patent, data or market exclusivity for our MS products.
In the SMA market, we face competition from a new gene therapy product that was approved in the U.S. in May
2019 for the treatment of SMA. Additionally, we are aware of other products in development that, if successfully
developed and approved, may compete with SPINRAZA in the SMA market, including potential oral products. Future
sales of SPINRAZA may be adversely affected by the commercialization of competing products.
Our business may be adversely affected if we do not successfully execute or realize the anticipated benefits of our
strategic and growth initiatives.
The successful execution of our strategic and growth initiatives may depend upon internal development
projects, commercial initiatives, external opportunities, which may include the acquisition, partnering and in-licensing
of products, technologies and companies or the entry into strategic alliances and collaborations, or the disposition
of certain of our assets or operations.
36
While we believe we have a number of promising programs in our pipeline, failure or delay of internal
development projects to advance or difficulties in executing on our commercial initiatives could impact our current
and future growth, resulting in additional reliance on external development opportunities for growth.
Supporting the further development of our existing products and potential new products in our pipeline will
require significant capital expenditures and management resources, including investments in research and
development, sales and marketing, manufacturing capabilities and other areas of our business. We have in the past
made, and may continue to make, significant operating and capital expenditures for potential new products in our
pipeline prior to regulatory approval with no assurance that such investment will be recouped, which may adversely
affect our financial condition, business and operations.
The availability of high quality, fairly valued external product development is limited and the opportunity for their
acquisition is highly competitive. As such, we are not certain that we will be able to identify suitable candidates for
acquisition or if we will be able to reach agreement. Furthermore, if we decide to dispose of certain of our assets or
operations, we are not certain that we will be able to identify a suitable counterparty or if we will be able to reach
agreement.
We may fail to initiate or complete transactions for many reasons and we may not be able to achieve the full
strategic and financial benefits expected to result from transactions, or the benefits may be delayed or not occur at
all. We may also face additional costs or liabilities in completed transactions that were not contemplated prior to
completion.
Any failure in the execution of a transaction, in the integration of an acquired asset or business or in achieving
expected synergies could result in slower growth, higher than expected costs, the recording of asset impairment
charges and other actions which could adversely affect our business, financial condition and results of operations.
Successful preclinical work or early stage clinical trials does not ensure success in later stage trials, regulatory
approval or commercial viability of a product.
Positive results in a clinical trial may not be replicated in subsequent or confirmatory trials. Additionally,
success in preclinical work or early stage clinical trials does not ensure that later stage or larger scale clinical trials
will be successful or that regulatory approval will be obtained. In addition, even if later stage clinical trials are
successful, regulatory authorities may delay or decline approval of our product candidates. Regulatory authorities
may disagree with our view of the data, require additional studies or disagree with our trial design or endpoints.
Regulatory authorities may also fail to approve the facilities or processes used to manufacture a product candidate,
our dosing or delivery methods or companion devices. Regulatory authorities may grant marketing approval that is
more restricted than anticipated. These restrictions may include limiting indications to narrow patient populations
and the imposition of safety monitoring, educational requirements and risk evaluation and mitigation strategies. The
occurrence of any of these events could result in significant costs and expenses, have an adverse effect on our
business, financial condition and results of operations and cause our stock price to decline or experience periods of
volatility.
Even if we are able to successfully develop new products or indications, sales of new products or products with
additional indications may not meet investor expectations. We may also make a strategic decision to discontinue
development of a product candidate or indication if, for example, we believe commercialization will be difficult
relative to the standard of care or other opportunities in our pipeline.
Clinical trials and the development of biopharmaceutical products is a lengthy and complex process. If we fail to
adequately manage our clinical activities, our clinical trials or potential regulatory approvals may be delayed or denied.
Conducting clinical trials is a complex, time-consuming and expensive process. Our ability to complete clinical
trials in a timely fashion depends on a number of key factors. These factors include protocol design, regulatory and
institutional review board approval, patient enrollment rates and compliance with cGCP. If we or our third-party clinical
trial providers or third-party CROs do not successfully carry out these clinical activities, our clinical trials or the
potential regulatory approval of a product candidate may be delayed or be unsuccessful.
We have opened clinical trial sites and are enrolling patients in a number of countries where our experience is
limited. In most cases, we use the services of third parties to carry out our clinical trial related activities and rely on
such parties to accurately report their results. Our reliance on third parties for these activities may impact our ability
to control the timing, conduct, expense and quality of our clinical trials. One CRO has responsibility for a substantial
portion of our activities and reporting related to our clinical trials. If this CRO does not adequately perform, many of
our trials may be affected. We may need to replace our CROs. Although we believe there are a number of other CROs
37
we could engage to continue these activities, the replacement of an existing CRO may result in the delay of the
affected trials or otherwise adversely affect our efforts to obtain regulatory approvals and commercialize our product
candidates.
Adverse safety events or restrictions on use and safety warnings for our products can negatively affect our business,
product sales and stock price.
Adverse safety events involving our marketed products, generic or biosimilar versions of our marketed products
or any other products from the same class as one of our products may have a negative impact on our business.
Discovery of safety issues with our products could create product liability and could cause additional regulatory
scrutiny and requirements for additional labeling or safety monitoring, withdrawal of products from the market and
the imposition of fines or criminal penalties. Adverse safety events may also damage physician, patient and/or
investor confidence in our products and our reputation. Any of these could result in liabilities, loss of revenues,
material write-offs of inventory, material impairments of intangible assets, goodwill and fixed assets, material
restructuring charges or other adverse impacts on our results of operations.
Regulatory authorities are making greater amounts of stand-alone safety information directly available to the
public through periodic safety update reports, patient registries and other reporting requirements. The reporting of
adverse safety events involving our products or products similar to ours and public rumors about such events may
increase claims against us and may also cause our product sales or stock price to decline or experience periods of
volatility.
Restrictions on use or significant safety warnings that may be required to be included in the label of our
products, such as the risk of developing progressive multifocal leukoencephalopathy (PML) or liver injury in the label
for certain of our products, may significantly reduce expected revenues for those products and require significant
expense and management time.
A breakdown or breach of our technology systems could subject us to liability or interrupt the operation of our
business.
We are increasingly dependent upon technology systems and data to operate our business. Our ability to
effectively manage our business depends on the security, reliability and adequacy of our technology systems and
data, which includes use of cloud technologies, including Software as a Service (SaaS), Platform as a Service (PaaS)
and Infrastructure as a Service (IaaS). A breakdown, invasion, corruption, destruction or breach of our technology
systems, including the cloud technologies that we utilize, and/or unauthorized access to our data and information
could subject us to liability or negatively impact the operation of our business. Our technology systems, including the
cloud technologies that we utilize, continue to increase in multitude and complexity, making them potentially
vulnerable to breakdown, malicious intrusion and random attack. Likewise, data privacy or security breaches by
individuals authorized to access our technology systems, including the cloud technologies that we utilize, may pose a
risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, our
patients, customers or other business partners, may be exposed to unauthorized persons or to the public.
Cyber-attacks are increasing in their frequency, sophistication and intensity, and are becoming increasingly
difficult to detect. They are often carried out by motivated, well-resourced, skilled and persistent actors, including
nation states, organized crime groups, “hacktivists” and employees or contractors acting with malicious intent.
Cyber-attacks could include the deployment of harmful malware and key loggers, ransomware, a denial-of-service
attack, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and
availability of our technology systems and data. Cyber-attacks could also include supply chain attacks, which could
cause a delay in the manufacturing of our products or products produced for contract manufacturing. Our key
business partners face similar risks and any security breach of their systems could adversely affect our security
posture. In addition, our increased use of cloud technologies could heighten these and other operational risks, and
any failure by cloud technology service providers to adequately safeguard their systems and prevent cyber-attacks
could disrupt our operations and result in misappropriation, corruption or loss of confidential or propriety
information.
While we continue to build and improve our systems and infrastructure, including our business continuity plans,
there can be no assurance that our efforts will prevent breakdowns or breaches in our systems that could adversely
affect our business and operations and/or result in the loss of critical or sensitive information, which could result in
financial, legal, business, operational or reputational harm to us, loss of competitive advantage or loss of consumer
confidence. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims
related to security breaches, cyber-attacks and other related breaches.
38
We depend on relationships with collaborators, joint venture partners and other third parties for revenues, and for
the development, regulatory approval, commercialization and marketing of certain of our products and product
candidates, which are outside of our full control.
We rely on a number of significant collaborative and other third-party relationships, including joint venture
partners, for revenues, and for the development, regulatory approval, commercialization and marketing of certain of
our products and product candidates. We also outsource to third parties certain aspects of our regulatory affairs and
clinical development relating to our products and product candidates. Reliance on collaborative and other third-party
relationships, including joint venture partners, subjects us to a number of risks, including:
• we may be unable to control the resources our collaborators, joint venture partners or third parties devote
to our programs, products or product candidates;
• disputes may arise under an agreement, including with respect to the achievement and payment of
milestones or ownership of rights to technology developed with our collaborators, joint venture partners or
other third parties, and the underlying agreement with our collaborators, joint venture partners or other third
parties may fail to provide us with significant protection or may fail to be effectively enforced if the
collaborators, joint ventures partners or third parties fail to perform;
•
•
the interests of our collaborators, joint venture partners or third parties may not always be aligned with our
interests, and such parties may not pursue regulatory approvals or market a product in the same manner
or to the same extent that we would, which could adversely affect our revenues;
third-party relationships, joint ventures and collaborations often require the parties to cooperate, and failure
to do so effectively could adversely affect product sales, or the clinical development or regulatory approvals
of products under joint control, could result in termination of the research, development or
commercialization of product candidates or could result in litigation or arbitration;
• any failure on the part of our collaborators, joint venture partners or other third parties to comply with
applicable laws, regulatory requirements and/or applicable contractual obligations in the marketing, sale
and maintenance of the marketing authorization of our products or to fulfill any responsibilities our
collaborators, joint venture partners or other third parties may have to protect and enforce any intellectual
property rights underlying our products could have an adverse effect on our revenues as well as involve us
in possible legal proceedings; and
• any improper conduct or actions on the part of our collaborators, joint venture partners or other third
parties could subject us to civil or criminal investigations and monetary and injunctive penalties, impact the
accuracy and timing of our financial reporting and/or adversely impact our ability to conduct business, our
operating results and our reputation.
Given these risks, there is considerable uncertainty regarding the success of our current and future
collaborative efforts. If these efforts fail, our product development or commercialization of new products could be
delayed, or revenues from products could decline and/or we may not realize the anticipated benefits of the
collaboration arrangements and/or joint ventures.
Our results of operations may be adversely affected by current and potential future healthcare reforms.
In the U.S., federal and state legislatures, health agencies and third-party payors continue to focus on
containing the cost of health care. Legislative and regulatory proposals, enactments to reform health care insurance
programs and increasing pressure from social sources could significantly influence the manner in which our products
are prescribed and purchased. For example, provisions of the PPACA have resulted in changes in the way health care
is paid for by both governmental and private insurers, including increased rebates owed by manufacturers under the
Medicaid Drug Rebate Program, annual fees and taxes on manufacturers of certain branded prescription drugs, the
requirement that manufacturers participate in a discount program for certain outpatient drugs under Medicare Part D
and the expansion of the number of hospitals eligible for discounts under Section 340B of the PHSA. These changes
have had and are expected to continue to have a significant impact on our business.
We may face uncertainties as a result of federal and administrative efforts to repeal, substantially modify or
invalidate some or all of the provisions of the PPACA. There is no assurance that the PPACA, as currently enacted or
as amended in the future, will not adversely affect our business and financial results, and we cannot predict how
future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
39
The administration has also indicated an intent to address prescription drug pricing and recent Congressional
hearings have brought increased public attention to the costs of prescription drugs. These actions and the
uncertainty about the future of the PPACA and healthcare laws may put downward pressure on pharmaceutical
pricing and increase our regulatory burdens and operating costs.
There is also significant economic pressure on state budgets that may result in states increasingly seeking to
achieve budget savings through mechanisms that limit coverage or payment for our drugs. In recent years, some
states have considered legislation and ballot initiatives that would control the prices of drugs, including laws to allow
importation of pharmaceutical products from lower cost jurisdictions outside the U.S. and laws intended to impose
price controls on state drug purchases. State Medicaid programs are increasingly requesting manufacturers to pay
supplemental rebates and requiring prior authorization by the state program for use of any drug for which
supplemental rebates are not being paid. Government efforts to reduce Medicaid expenses may lead to increased
use of managed care organizations by Medicaid programs. This may result in managed care organizations influencing
prescription decisions for a larger segment of the population and a corresponding limitation on prices and
reimbursement for our products.
In the E.U. and some other international markets, the government provides health care at low cost to
consumers and regulates pharmaceutical prices, patient eligibility or reimbursement levels to control costs for the
government-sponsored health care system. Many countries have announced or implemented measures, and may in
the future implement new or additional measures, to reduce health care costs to limit the overall level of government
expenditures. These measures vary by country and may include, among other things, patient access restrictions,
suspensions on price increases, prospective and possible retroactive price reductions and other recoupments and
increased mandatory discounts or rebates, recoveries of past price increases and greater importation of drugs from
lower-cost countries. These measures have negatively impacted our revenues and may continue to adversely affect
our revenues and results of operations in the future.
Management and key personnel changes may disrupt our operations, and we may have difficulty retaining key
personnel or attracting and retaining qualified replacements on a timely basis for management and other key
personnel who may leave the Company.
We have experienced changes in management and other key personnel in critical functions across our
organization in recent years. Changes in management and other key personnel have the potential to disrupt our
business, and any such disruption could adversely affect our operations, programs, growth, financial condition or
results of operations. Further, new members of management may have different perspectives on programs and
opportunities for our business, which may cause us to focus on new business opportunities or reduce or change
emphasis on our existing business programs.
Our success is dependent upon our ability to attract and retain qualified management and key personnel in a
highly competitive environment. Qualified individuals are in high demand, and we may incur significant costs to
attract them, particularly at the executive level. We may face difficulty in attracting and retaining key talent for a
number of reasons, including management changes, the underperformance or discontinuation of one or more late
stage programs or recruitment by competitors. We cannot ensure that we will be able to hire or retain the personnel
necessary for our operations or that the loss of any such personnel will not have a material impact on our financial
condition and results of operations.
If we fail to comply with the extensive legal and regulatory requirements affecting the health care industry, we could
face increased costs, penalties and a loss of business.
Our activities, and the activities of our collaborators, distributors and other third-party providers, are subject to
extensive government regulation and oversight both in the U.S. and in foreign jurisdictions. The FDA and comparable
agencies in other jurisdictions directly regulate many of our most critical business activities, including the conduct of
preclinical and clinical studies, product manufacturing, advertising and promotion, product distribution, adverse event
reporting and product risk management. Our interactions in the U.S. or abroad with physicians and other health care
providers that prescribe or purchase our products are also subject to government regulation designed to prevent
fraud and abuse in the sale and use of products and place significant restrictions on the marketing practices of
health care companies. Health care companies such as ours are facing heightened scrutiny of their relationships
with health care providers from anti-corruption enforcement officials. In addition, health care companies such as
ours have been the target of lawsuits and investigations alleging violations of government regulation, including
claims asserting submission of incorrect pricing information, impermissible off-label promotion of pharmaceutical
products, payments intended to influence the referral of health care business, submission of false claims for
government reimbursement, antitrust violations or violations related to environmental matters. There is also
40
enhanced scrutiny of company-sponsored patient assistance programs, including insurance premium and co-pay
assistance programs and donations to third-party charities that provide such assistance. The U.S. government has
challenged some of our donations to third-party charities that provide patient assistance. If we, or our vendors or
donation recipients, are found to fail to comply with relevant laws, regulations or government guidance in the
operation of these programs, we could be subject to significant fines or penalties. Risks relating to compliance with
laws and regulations may be heightened as we continue to expand our global operations and enter new therapeutic
areas with different patient populations, which may have different product distribution methods, marketing programs
or patient assistance programs from those we currently utilize or support.
Conditions and regulations governing the health care industry are subject to change, with possible retroactive
effect, including:
• new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or judicial
decisions, related to health care availability, pricing or marketing practices, compliance with wage and hour
laws and other employment practices, method of delivery, payment for health care products and services,
compliance with health information and data privacy and security laws and regulations, tracking and
reporting payments and other transfers of value made to physicians and teaching hospitals, extensive anti-
bribery and anti-corruption prohibitions, product serialization and labeling requirements and used product
take-back requirements;
• changes in the FDA and foreign regulatory approval processes that may delay or prevent the approval of
new products and result in lost market opportunity;
• government shutdowns or relocations may result in delays to the review and approval process, slowing the
time necessary for new drug candidates to be reviewed and/or approved, which may adversely affect our
business;
•
requirements that provide for increased transparency of clinical trial results and quality data, such as the
EMA's clinical transparency policy, which could impact our ability to protect trade secrets and competitively-
sensitive information contained in approval applications or could be misinterpreted leading to reputational
damage, misperception or legal action, which could harm our business; and
• changes in FDA and foreign regulations that may require additional safety monitoring, labeling changes,
restrictions on product distribution or use or other measures after the introduction of our products to
market, which could increase our costs of doing business, adversely affect the future permitted uses of
approved products or otherwise adversely affect the market for our products.
Violations of governmental regulation may be punishable by criminal and civil sanctions against us, including
fines and civil monetary penalties and exclusion from participation in government programs, including Medicare and
Medicaid, as well as against executives overseeing our business. In addition to penalties for violation of laws and
regulations, we could be required to repay amounts we received from government payors or pay additional rebates
and interest if we are found to have miscalculated the pricing information we have submitted to the government. We
cannot ensure that our compliance controls, policies and procedures will in every instance protect us from acts
committed by our employees, collaborators, partners or third-party providers that would violate the laws or
regulations of the jurisdictions in which we operate. Whether or not we have complied with the law, an investigation
into alleged unlawful conduct could increase our expenses, damage our reputation, divert management time and
attention and adversely affect our business.
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Our sales and operations are subject to the risks of doing business internationally.
We are increasing our presence in international markets, particularly emerging markets, subjecting us to many
risks that could adversely affect our business and revenues. There is no guarantee that our efforts and strategies to
expand sales in international markets will succeed. Emerging market countries may be especially vulnerable to
periods of global and local political, legal, regulatory and financial instability and may have a higher incidence of
corruption and fraudulent business practices. Further, certain countries may require local clinical trial data as part of
the drug registration process in addition to global clinical trials, which can add to overall drug development and
registration timelines. We may also be required to increase our reliance on third-party agents and unfamiliar
operations and arrangements previously utilized by companies we partner or collaborate with or acquire in emerging
markets.
Our sales and operations are subject to the risks of doing business internationally, including:
•
less favorable intellectual property or other applicable laws;
•
the introduction or greater acceptance of competing products, including generics, biosimilars, prodrugs and
products approved under abbreviated regulatory pathways;
•
the inability to obtain necessary foreign regulatory or pricing approvals of products in a timely manner;
•
•
•
•
limitations and additional pressures on our ability to obtain and maintain product pricing or receive price
increases, including those resulting from governmental or regulatory requirements;
the inability to successfully complete subsequent or confirmatory clinical trials in countries where our
experience is limited;
longer payment and reimbursement cycles and uncertainties regarding the collectability of accounts
receivable;
fluctuations in foreign currency exchange rates that may adversely impact our revenues, net income and
value of certain of our investments;
• difficulties in staffing and managing international operations;
•
the imposition of governmental controls;
• diverse data privacy and protection requirements;
•
•
increasingly complex standards for complying with foreign laws and regulations that may differ substantially
from country to country and may conflict with corresponding U.S. laws and regulations;
the far-reaching anti-bribery and anti-corruption legislation in the U.K., including the Bribery Act, and
elsewhere and escalation of investigations and prosecutions pursuant to such laws;
•
the effects of the implementation of the U.K.’s departure from the E.U., known as Brexit;
• compliance with complex import and export control laws;
•
restrictions on direct investments by foreign entities and trade restrictions;
• greater political or economic instability;
• changes in tax laws;
•
the imposition of tariffs or embargoes and other trade restrictions, including the recent tariffs imposed by
the U.S. and China and the possibility of additional tariffs or other trade restrictions relating to trade
between the two countries; and
•
the impact of public health epidemics on employees and the global economy, such as the coronavirus
currently impacting China and elsewhere.
In addition, our international operations are subject to regulation under U.S. law. For example, the FCPA
prohibits U.S. companies and their representatives from paying, offering to pay, promising to pay or authorizing the
payment of anything of value to any foreign government official, government staff member, political party or political
42
candidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a
person working in an official capacity. In many countries, the health care professionals we regularly interact with may
meet the FCPA's definition of a foreign government official. Failure to comply with domestic or foreign laws could
result in various adverse consequences, including: possible delay in approval or refusal to approve a product, recalls,
seizures or withdrawal of an approved product from the market, disruption in the supply or availability of our products
or suspension of export or import privileges, the imposition of civil or criminal sanctions, the prosecution of
executives overseeing our international operations and damage to our reputation. Any significant impairment of our
ability to sell products outside of the U.S. could adversely impact our business and financial results.
We are building a large-scale biologics manufacturing facility, which will result in the incurrence of significant
investment with no assurance that such investment will be recouped.
We believe we currently have sufficient large-scale manufacturing capacity to meet our near-term manufacturing
requirements. However, in order to support our drug development pipeline, in 2015 we made the decision to expand
our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn,
Switzerland with no assurance that the additional capacity would be required. We expect the Solothurn
manufacturing facility to be partially operational by the end of 2020; however, there can be no assurance that we will
be able to meet our expected timeline. If there are delays in bringing the Solothurn manufacturing facility online, we
may not have sufficient large-scale manufacturing capacity to meet our long-term manufacturing requirements.
In addition, we have made significant investments in connection with the building of this manufacturing facility
with no assurance that such investment will be recouped. If we are unable to adequately and timely manufacture and
supply our products and product candidates or if we do not fully utilize our manufacturing facilities, our business may
be harmed. Charges resulting from excess capacity would have a negative effect on our financial condition and
results of operations.
Manufacturing issues could substantially increase our costs, limit supply of our products and/or reduce our
revenues.
The process of manufacturing our products is complex, highly regulated and subject to numerous risks,
including:
• Risks of Reliance on Third Parties and Single Source Providers. We rely on third-party suppliers and
manufacturers for many aspects of our manufacturing process for our products and product candidates. In
some cases, due to the unique manner in which our products are manufactured, we rely on single source
providers of raw materials and manufacturing supplies. These third parties are independent entities subject
to their own unique operational and financial risks that are outside of our control. These third parties may
not perform their obligations in a timely and cost-effective manner or in compliance with applicable
regulations, and they may be unable or unwilling to increase production capacity commensurate with
demand for our existing or future products. Finding alternative providers could take a significant amount of
time and involve significant expense due to the specialized nature of the services and the need to obtain
regulatory approval of any significant changes to our suppliers or manufacturing methods. We cannot be
certain that we could reach agreement with alternative providers or that the FDA or other regulatory
authorities would approve our use of such alternatives.
• Risks Relating to Compliance with cGMP. We and our third-party providers are generally required to maintain
compliance with cGMP and other stringent requirements and are subject to inspections by the FDA and
comparable agencies in other jurisdictions to confirm such compliance. Any delay, interruption or other
issues that arise in the manufacture, fill-finish, packaging or storage of our products as a result of a failure
of our facilities or the facilities or operations of third parties to pass any regulatory agency inspection could
significantly impair our ability to develop and commercialize our products. Significant noncompliance could
also result in the imposition of monetary penalties or other civil or criminal sanctions and damage our
reputation.
• Global Bulk Supply Risks. We rely on our principal manufacturing facilities for the production of drug
substance for our large molecule products and product candidates. Our global bulk supply of these
products and product candidates depends on the uninterrupted and efficient operation of these facilities,
which could be adversely affected by equipment failures, labor shortages, natural disasters, power failures,
cyber-attacks and numerous other factors. In addition, we are building a large-scale biologics manufacturing
facility in Solothurn, Switzerland, which we expect to be partially operational by the end of 2020. However,
there can be no assurance that we will be able to meet our expected timeline. If there are delays in bring
43
the Solothurn manufacturing facility online, we may not have sufficient large-scale manufacturing capacity to
meet our long-term manufacturing requirements.
• Risk of Product Loss. The manufacturing process for our products is extremely susceptible to product loss
due to contamination, oxidation, equipment failure or improper installation or operation of equipment or
vendor or operator error. Even minor deviations from normal manufacturing processes could result in
reduced production yields, product defects and other supply disruptions. If microbial, viral or other
contaminations are discovered in our products or manufacturing facilities, we may need to close our
manufacturing facilities for an extended period of time to investigate and remediate the contaminant.
Any adverse developments affecting our manufacturing operations or the operations of our third-party suppliers
and manufacturers may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or
other interruptions in the commercial supply of our products. We may also have to take inventory write-offs and incur
other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or
seek more costly manufacturing alternatives. Such developments could increase our manufacturing costs, cause us
to lose revenues or market share as patients and physicians turn to competing therapeutics, diminish our
profitability or damage our reputation.
In addition, although we have business continuity plans to reduce the potential for manufacturing disruptions or
delays and reduce the severity of a disruptive event, there is no guarantee that these plans will be adequate, which
could adversely affect our business and operations.
Our success in commercializing biosimilars developed by Samsung Bioepis is subject to risks and uncertainties
inherent in the development, manufacture and commercialization of biosimilars. If Samsung Bioepis is unsuccessful in
the development, manufacture and commercialization of biosimilars, we may not realize the anticipated benefits of our
investment in Samsung Bioepis.
Our success in commercializing biosimilars developed by Samsung Bioepis is subject to a number of risks,
including:
• Reliance on Third Parties. We are dependent on the efforts of Samsung Bioepis and other third parties over
whom we have limited or no control in the development and manufacturing of biosimilars products. In
addition, following the divestiture of our Hillerød, Denmark manufacturing operations, we are dependent on
FUJIFILM for the manufacture of biosimilar products. If Samsung Bioepis, FUJIFILM or other third parties fail
to perform successfully, we may not realize the anticipated benefits of our investment in Samsung Bioepis;
• Regulatory Compliance. Biosimilar products may face regulatory hurdles or delays due to the evolving and
uncertain regulatory and commercial pathway of biosimilars products in certain jurisdictions;
•
Intellectual Property and Regulatory Challenges. Biosimilar products may face extensive patent clearances,
patent infringement litigation, injunctions or regulatory challenges, which could prevent the commercial
launch of a product or delay it for many years or result in imposition of monetary damages, penalties or
other civil sanctions and damage our reputation;
• Failure to Gain Market and Patient Acceptance. Market success of biosimilar products will be adversely
affected if patients, physicians and/or payors do not accept biosimilar products as safe and efficacious
products offering a more competitive price or other benefit over existing therapies;
• Ability to Provide Adequate Supply. Manufacturing biosimilars is complex. If we encounter any manufacturing
or supply chain difficulties, we may be unable to meet higher than anticipated demand. In addition,
following the divestiture of our Hillerød, Denmark manufacturing operations, we are dependent on FUJIFILM
for the manufacture of biosimilar products. FUJIFILM may not perform their obligations in a timely and cost
effective manner or in compliance with applicable regulations and may be unable or unwilling to increase
production capacity commensurate with demand for our existing or future biosimilar products;
• Competitive Challenges. Biosimilar products face significant competition, including from innovator products
and from biosimilar products offered by other companies. In some jurisdictions, local tendering processes
may restrict biosimilar products from being marketed and sold in those jurisdictions. The number of
competitors in a jurisdiction, the timing of approval and the ability to market biosimilar products
successfully in a timely and cost-effective manner are additional factors that may impact our success and/
or the success of Samsung Bioepis in this business area; and
44
• Legal and Regulatory Requirements. Any improper conduct or actions on the part of Samsung Bioepis or our
joint venture partner, Samsung BioLogics, could damage our reputation and be distracting to management.
In particular, Samsung BioLogics is currently subject to an ongoing criminal investigation, which may impact
the operations of Samsung Bioepis and its business or divert the attention of the Samsung Bioepis
management team from its ongoing operations and business.
If Samsung Bioepis is unsuccessful in the development, manufacture and commercialization of biosimilar
products, we may not realize the anticipated benefits of our investment in Samsung Bioepis.
In addition, as Samsung Bioepis is a privately-held entity, our ability to liquidate our investment in Samsung
Bioepis may be limited and we may realize significantly less than the value of such investment.
Our operating results are subject to significant fluctuations.
Our quarterly revenues, expenses and net income (loss) have fluctuated in the past and are likely to fluctuate
significantly in the future due to the risks described in these Risk Factors as well as the timing of charges and
expenses that we may take. We have recorded, or may be required to record, charges that include:
•
the cost of restructurings or other initiatives to streamline our operations and reallocate resources;
•
•
impairments with respect to investments, fixed assets and long-lived assets, including in-process research
and development (IPR&D) and other intangible assets;
inventory write-downs for failed quality specifications, charges for excess or obsolete inventory and charges
for inventory write downs relating to product suspensions, expirations or recalls;
• changes in the fair value of contingent consideration;
• bad debt expenses and increased bad debt reserves;
• outcomes of litigation and other legal or administrative proceedings, regulatory matters and tax matters;
• milestone payments under license and collaboration agreements;
• payments in connection with acquisitions, divestitures and other business development activities; and
•
failure to meet certain contractual commitments, including, for example, the minimum batch production
commitment guarantees we have provided as part of the transaction with FUJIFILM.
Our revenues and certain assets and liabilities are also subject to foreign currency exchange rate fluctuations
due to the global nature of our operations. Although we have foreign currency forward contracts to hedge specific
forecasted transactions denominated in foreign currencies, our efforts to mitigate the impact of fluctuating currency
exchange rates may not be successful. As a result, currency fluctuations among our reporting currency, the
U.S. dollar, and other currencies in which we do business will affect our operating results, often in unpredictable
ways. Our net income may also fluctuate due to the impact of charges we may be required to take with respect to
foreign currency hedge transactions. In particular, we may incur higher than expected charges from early termination
of a hedge relationship.
Our operating results during any one period do not necessarily suggest the anticipated results of future periods.
Our effective tax rate fluctuates, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
As a global biopharmaceutical company, we are subject to taxation in numerous countries, states and other
jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates (including
withholding taxes) in the various places that we operate. In preparing our financial statements, we estimate the
amount of tax that will become payable in each of such places. Our effective tax rate may be different than
experienced in the past due to numerous factors, including changes in the mix of our profitability from country to
country, the results of examinations and audits of our tax filings, adjustments to the value of our uncertain tax
positions, interpretations by tax authorities or other bodies with jurisdiction, the result of tax cases, changes in
accounting for income taxes and changes in tax laws either prospectively or retrospectively (including by regulation).
Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or
our current expectations.
In addition, our inability to secure or sustain acceptable arrangements with tax authorities and future changes
in the tax laws, among other things, may result in tax obligations in excess of amounts accrued in our financial
45
statements.
The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) resulted in significant changes to the U.S. corporate income
tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction
of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive
compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified
territorial system, which has the effect of subjecting certain earnings of our foreign subsidiaries and collaborations
to immediate U.S. taxation as global intangible low-taxed income (GILTI) or Subpart F income, and includes base
erosion prevention measures on U.S. earnings and the reduced effective tax rate on income that comes from U.S.
exports, called Foreign Derived Intangible Income. These changes became effective in 2018.
The 2017 Tax Act also includes a one-time mandatory deemed repatriation tax on accumulated foreign
subsidiaries' previously untaxed foreign earnings (the Transition Toll Tax). The Transition Toll Tax will be paid over an
eight-year period, which started in 2018, and will not accrue interest.
Our estimates concerning the impact of the 2017 Tax Act on our accounting and on our business remain
subject to developing interpretations of the provisions of the 2017 Tax Act. U.S. Treasury regulations, administrative
interpretations or court decisions interpreting the 2017 Tax Act may require further adjustments and changes in our
estimates, which could have a material adverse effect on our business, results of operations or financial condition.
The Swiss Federal Act on Tax Reform and AHV Financing (TRAF) will result in significant changes to the Swiss
cantonal income tax system. These changes include the elimination of historic favorable cantonal tax regimes, the
introduction of a patent box regime and the introduction of a research and development super deduction. The TRAF
also provides for transitional rules to lessen the immediate impact of the elimination of the favorable cantonal tax
regimes. These changes became effective on January 1, 2020. In response to the TRAF, each canton must enact
cantonal tax reform to comply with the framework provided by the TRAF and are also expected to lower the statutory
tax rate to compensate for the elimination of the historic favorable cantonal tax regimes. We will account for the
impact of the TRAF and the specific cantonal tax reform changes in the period in which each canton in which we
operate enacts the cantonal tax reform. Zug, a canton in which we operate, enacted cantonal tax reform in the third
quarter of 2019 and Solothurn, another canton in which we operate, will hold a public referendum on the enactment
of cantonal tax reform on February 9, 2020. Upon the enactment of Zug cantonal tax reform, we were required to
remeasure our Swiss deferred tax assets and liabilities, to account for the elimination of the historic favorable
cantonal tax regimes, the impact of the transitional rules and the change in the statutory cantonal tax rate. Further
remeasurement of our Swiss deferred tax assets and liabilities could have a significant impact on our income tax
provision in the period of enactment.
In addition, the enactment of some or all of the recommendations set forth or that may be forthcoming in the
Organization for Economic Cooperation and Development’s project on “Base Erosion and Profit Shifting” (BEPS) by
tax authorities and economic blocs in the countries in which we operate, could unfavorably impact our effective tax
rate. These initiatives focus on common international principles for the entitlement to taxation of global corporate
profits and minimum global tax rates.
Our investments in properties may not be fully realized.
We own or lease real estate primarily consisting of buildings that contain research laboratories, office space
and manufacturing operations. For strategic or other operational reasons, we may decide to consolidate or co-locate
certain aspects of our business operations or dispose of one or more of our properties, some of which may be
located in markets that are experiencing high vacancy rates and decreasing property values. If we determine that the
fair value of any of our owned properties is lower than their book value, we may not realize the full investment in
these properties and incur significant impairment charges or additional depreciation when the expected useful lives
of certain assets have been shortened due to the anticipated closing of facilities. If we decide to fully or partially
vacate an owned or leased property, we may incur significant cost, including facility closing costs, employee
separation and retention expenses, lease termination fees, rent expense in excess of sublease income and
impairment of leasehold improvements and accelerated depreciation of assets. Any of these events may have an
adverse impact on our results of operations.
Our portfolio of marketable securities is subject to market, interest and credit risk that may reduce its value.
We maintain a portfolio of marketable securities for investment of our cash. Changes in the value of our
portfolio of marketable securities could adversely affect our earnings. In particular, the value of our investments may
decline due to increases in interest rates, downgrades of the bonds and other securities included in our portfolio,
instability in the global financial markets that reduces the liquidity of securities included in our portfolio, declines in
46
the value of collateral underlying the securities included in our portfolio and other factors. Each of these events may
cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than
our acquisition cost. Although we attempt to mitigate these risks through diversification of our investments and
continuous monitoring of our portfolio's overall risk profile, the value of our investments may nevertheless decline.
There can be no assurance that we will continue to repurchase shares or that we will repurchase shares at
favorable prices.
From time to time our Board of Directors authorizes share repurchase programs, including our March 2019
Share Repurchase Program and our December 2019 Share Repurchase Program. The amount and timing of share
repurchases are subject to capital availability and our determination that share repurchases are in the best interest
of our shareholders and are in compliance with all respective laws and our agreements applicable to the repurchase
of shares. Our ability to repurchase shares will depend upon, among other factors, our cash balances and potential
future capital requirements for strategic transactions, our results of operations, our financial condition and other
factors beyond our control that we may deem relevant. A reduction in repurchases under, or the completion of, our
2019 share repurchase programs could have a negative effect on our stock price. We can provide no assurance that
we will repurchase shares at favorable prices, if at all.
We may not be able to access the capital and credit markets on terms that are favorable to us.
We may seek access to the capital and credit markets to supplement our existing funds and cash generated
from operations for working capital, capital expenditure and debt service requirements and other business
initiatives. The capital and credit markets have experienced extreme volatility and disruption in the past, which leads
to uncertainty and liquidity issues for both borrowers and investors. In the event of adverse capital and credit market
conditions, we may be unable to obtain capital or credit market financing on favorable terms. Changes in credit
ratings issued by nationally recognized credit rating agencies could also adversely affect our cost of financing and
the market price of our securities.
Our indebtedness could adversely affect our business and limit our ability to plan for or respond to changes in our
business.
Our indebtedness, together with our significant contingent liabilities, including milestone and royalty payment
obligations, could have important consequences to our business; for example, such obligations could:
•
increase our vulnerability to general adverse economic and industry conditions;
•
limit our ability to access capital markets and incur additional debt in the future;
•
•
require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow for other purposes, including business
development efforts, research and development and mergers and acquisitions; and
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate, thereby placing us at a competitive disadvantage compared to our competitors that have less
debt.
Our business involves environmental risks, which include the cost of compliance and the risk of contamination or
injury.
Our business and the business of several of our strategic partners involve the controlled use of hazardous
materials, chemicals, biologics and radioactive compounds. Although we believe that our safety procedures for
handling and disposing of such materials comply with state, federal and foreign standards, there will always be the
risk of accidental contamination or injury. If we were to become liable for an accident, or if we were to suffer an
extended facility shutdown, we could incur significant costs, damages and penalties that could harm our business.
Manufacturing of our products and product candidates also requires permits from government agencies for water
supply and wastewater discharge. If we do not obtain appropriate permits, including permits for sufficient quantities
of water and wastewater, we could incur significant costs and limits on our manufacturing volumes that could harm
our business.
The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products
could have a negative impact on our reputation and business.
Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet
our rigorous manufacturing, distribution and testing standards. A patient who receives a counterfeit or unfit drug may
47
be at risk for a number of dangerous health consequences. Our reputation and business could suffer harm as a
result of counterfeit or unfit drugs sold under our brand name. In addition, inventory that is stolen from warehouses,
plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could
adversely impact patient safety, our reputation and our business.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our products and the diseases our therapies are
designed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations
relating to such use are not always clear. This evolution creates uncertainty and risk of noncompliance with
regulations applicable to our business. For example, patients may use social media channels to comment on the
effectiveness of a product or to report an alleged adverse event. When such disclosures occur, there is a risk that
we fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend
the company or the public's legitimate interests in the face of the political and market pressures generated by social
media due to restrictions on what we may say about our products. There is also a risk of inappropriate disclosure of
sensitive information or negative or inaccurate posts or comments about us on any social networking website. If any
of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face
overly restrictive regulatory actions or incur other harm to our business.
Some of our collaboration agreements contain change in control provisions that may discourage a third party from
attempting to acquire us.
Some of our collaboration agreements include change in control provisions that could reduce the potential
acquisition price an acquirer is willing to pay or discourage a takeover attempt that could be viewed as beneficial to
shareholders. Upon a change in control, some of these provisions could trigger reduced milestone, profit or royalty
payments to us or give our collaboration partner rights to terminate our collaboration agreement, acquire operational
control or force the purchase or sale of the programs that are the subject of the collaboration.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Below is a summary of our owned and leased properties as of December 31, 2019.
Massachusetts
In Cambridge, MA we own approximately 508,000 square feet of real estate space, consisting of a building that
houses a research laboratory and a cogeneration plant totaling approximately 263,000 square feet and a building
that contains research, development and quality laboratories totaling approximately 245,000 square feet.
In addition, we lease a total of approximately 1,157,000 square feet in Massachusetts, which is summarized as
follows:
• 800,000 square feet in Cambridge, MA, which is comprised of offices for our corporate headquarters and
other administrative and development functions and laboratories, of which 289,000 square feet is
subleased by multiple companies for general office space, laboratories and manufacturing facilities; and
• 357,000 square feet of office space in Weston, MA, of which 174,000 square feet is subleased through
the remaining term of our lease agreement.
Our Massachusetts lease agreements expire at various dates through the year 2028.
North Carolina
In RTP, NC we own approximately 1,022,000 square feet of real estate space, which is summarized as follows:
• 357,000 square feet of laboratory and office space;
• 188,000 square foot multi-purpose facility, including an ASO manufacturing suite and administrative space;
• 175,000 square feet related to a large-scale biologics manufacturing facility;
• 105,000 square feet related to a small-scale biologics manufacturing facility;
48
• 84,000 square feet of warehouse space and utilities;
• 70,000 square feet related to a parenteral fill-finish facility; and
• 43,000 square feet related to a large-scale purification facility.
In addition, we lease approximately 40,000 square feet of warehouse space in Durham, NC.
Switzerland
In order to support our drug development pipeline, 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 51,000 square feet of administrative space.
Other International
We lease office space in Baar, Switzerland, our international headquarters; the U.K.; Germany; France;
Denmark and numerous other countries. Our international lease agreements expire at various dates through the year
2030.
Item 3.
Legal Proceedings
For a discussion of legal matters as of December 31, 2019, please read Note 20, Litigation, to our consolidated
financial statements included in this report, which is incorporated into this item by reference.
Item 4.
Mine Safety Disclosures
Not applicable.
49
Item 5.
Purchases of Equity Securities
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
PART II
Market and Stockholder Information
Our common stock trades on The Nasdaq Global Select Market under the symbol “BIIB.” As of February 4,
2020, there were approximately 540 shareholders of record of our common stock.
Dividends
We have not paid cash dividends since our inception. While we historically have not paid cash dividends and do
not have a current intention to pay cash dividends, we continually review our capital allocation strategies, including,
among other things, payment of cash dividends, share repurchases and acquisitions.
Issuer Purchases of Equity Securities
The following table summarizes our common stock repurchase activity during the fourth quarter of 2019:
Period
October 2019
November 2019
December 2019
Total
Total Number of
Shares Purchased
(#)
3,215,407 $
1,550,825 $
2,928,634 $
7,694,866 $
Average Price
Paid per Share
($)
238.71
292.01
297.99
272.01
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
(#)
3,215,407 $
1,550,825 $
2,928,634 $
Approximate Dollar Value
of Shares That May Yet Be
Purchased Under
Our Programs ($ in
millions)
2,604.7
2,151.8
6,279.1
In December 2019 our Board of Directors authorized our December 2019 Share Repurchase Program, which is
a program to repurchase up to $5.0 billion of our common stock. Our December 2019 Share Repurchase Program
does not have an expiration date. All share repurchases under our December 2019 Share Repurchase Program will
be retired. We did not repurchase shares of our common stock under our December 2019 Share Repurchase
Program during the year ended December 31, 2019.
In March 2019 our Board of Directors authorized our March 2019 Share Repurchase Program, which is a
program to repurchase up to $5.0 billion of our common stock. Our March 2019 Share Repurchase Program does
not have an expiration date. All share repurchases under our March 2019 Share Repurchase Program will be retired.
Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 14.7 million shares of
our common stock at a cost of approximately $3.7 billion during the year ended December 31, 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 year
ended December 31, 2019.
50
Performance Graph
The performance graph below compares the five-year cumulative total stockholder return on our common stock,
the Nasdaq Pharmaceutical Index, the S&P 500 Index and the Nasdaq Biotechnology Index.
On February 1, 2017, we completed the spin-off of our hemophilia business, Bioverativ Inc. (Bioverativ), as an
independent, publicly traded company. In connection with the spin-off, each Biogen shareholder received one share
of Bioverativ common stock for every two shares of Biogen common stock they owned. For additional information on
the spin-off of our hemophilia business, please read Note 3, Hemophilia Spin-Off, 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).
The performance graph below assumes the investment of $100.00 on December 31, 2014, in our common
stock and each of the three indexes, with dividends being reinvested. Our stock prices have been adjusted for the
effect of the spin-off of our hemophilia business. The five-year cumulative total stockholder return for Biogen does
not reflect the reinvestment by Biogen shareholders of the distribution they received in connection with the spin-off
of our hemophilia business or any subsequent increase or decrease in value of Bioverativ stock subsequent to the
spin-off.
The stock price performance in the graph below is not necessarily indicative of future price performance.
Biogen Inc.
Nasdaq Pharmaceutical Index
S&P 500 Index
Nasdaq Biotechnology Index
2014
$100.00
$100.00
$100.00
$100.00
2015
$90.25
$105.43
$101.38
$111.77
2016
$83.54
$104.29
$113.51
$87.91
2017
$101.74
$124.23
$138.29
$106.95
2018
$96.11
$134.11
$132.23
$97.47
2019
$94.77
$153.57
$173.86
$121.94
The information included under the heading Performance Graph is “furnished” and not “filed” for purposes of
Section 18 of the Securities Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be
deemed to be “soliciting material” subject to Regulation 14A or incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
51
Item 6.
Selected Financial Data
BIOGEN INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
Our results of operations are summarized as follows:
For the Years Ended December 31,
2019
2018
2017
2016
2015
(In millions, except per share amounts)
Results of Operations (1)
Product revenues, net (2)
Revenues from anti-CD20 therapeutic programs
Other revenues
Total revenues
Total cost and expenses (3)
Income from operations
Other income (expense), net
Income before income tax expense and equity
in loss of investee, net of tax
Income tax expense (4)
Equity in loss of investee, net of tax
Net income
Net income (loss) attributable to noncontrolling
interests, net of tax (5)
Net income attributable to Biogen Inc.
Diluted Earnings Per Share (6)
Diluted earnings per share attributable to
Biogen Inc.
Weighted-average shares used in calculating
diluted earnings per share attributable to
Biogen Inc.
$ 11,379.8 $10,886.8 $10,354.7 $ 9,817.9 $ 9,188.5
1,339.2
236.1
10,763.8
5,872.8
4,891.0
(123.7)
1,314.5
316.4
11,448.8
6,297.1
5,151.7
(218.7)
1,559.2
360.0
12,273.9
6,928.1
5,345.8
(217.0)
2,290.4
707.7
14,377.9
7,335.3
7,042.6
83.3
1,980.2
585.9
13,452.9
7,564.3
5,888.6
11.0
7,125.9
1,158.0
79.4
5,888.5
5,899.6
1,425.6
—
4,474.0
5,128.8
2,458.7
—
2,670.1
4,933.0
1,237.3
—
3,695.7
4,767.3
1,161.6
12.5
3,593.2
—
46.2
131.0
5,888.5 $ 4,430.7 $ 2,539.1 $ 3,702.8 $ 3,547.0
(7.1)
43.3
$
$
31.42 $
21.58 $
11.92 $
16.93 $
15.34
187.4
205.3
213.0
218.8
231.2
Our financial condition is summarized as follows:
(In millions)
Financial Condition (1)
Cash, cash equivalents and marketable
securities
Total assets
Notes payable, less current portion (7)
Total Biogen Inc. shareholders’ equity (6)
2019
2018
2017
2016
2015
As of December 31,
$
5,884.0 $ 4,913.9 $ 6,746.3 $ 7,724.5 $ 6,188.9
$ 27,234.3 $25,288.9 $23,652.6 $22,876.8 $19,504.8
$
4,459.0 $ 5,936.5 $ 5,935.0 $ 6,512.7 $ 6,521.5
$ 13,343.2 $13,039.6 $12,612.8 $12,140.1 $ 9,372.8
In addition to the following notes, the financial data included within the tables above should be read in
conjunction with our consolidated financial statements and related notes and Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations included in this report and our previously filed Annual
Reports on Form 10-K.
(1) On February 1, 2017, we completed the spin-off of our hemophilia business. Our consolidated results of operations and
financial condition reflect the financial results of our hemophilia business for all periods through January 31, 2017.
(2) Product revenues, net reflect the impact of the following product launches:
• Commercial sales of VUMERITY in the U.S. began in the fourth quarter of 2019.
52
• Commercial sales of SPINRAZA in the U.S. began in the fourth quarter of 2016 and in rest of world markets
beginning in the first quarter of 2017.
• Under our collaboration agreement with AbbVie Inc. (AbbVie), we began to recognize revenues on sales of ZINBRYTA
to third parties in the E.U. in the third quarter of 2016. In March 2018 we and AbbVie announced the voluntary
worldwide withdrawal of ZINBRYTA for RMS.
• Under our commercial agreement with Samsung Bioepis, we began to recognize revenues on sales of BENEPALI and
FLIXABI to third parties in certain countries in Europe in the first and third quarters of 2016, respectively, and began
to recognize revenues on sales of IMRALDI to third parties in certain countries in Europe in the fourth quarter of
2018.
• We stopped recognizing revenues from ALPROLIX and ELOCTATE effective February 1, 2017, upon the completion of
the spin-off of our hemophilia business.
(3) Total cost and expenses included the following charges:
• Pre-tax research and development expenses related to upfront and milestone payments made upon entering into
strategic agreements or achievement of specified development milestones totaling $253.8 million, $602.7 million,
$494.0 million, $167.6 million and $158.2 million in 2019, 2018, 2017, 2016 and 2015, respectively.
•
Impairment charges related to certain acquired intangible assets totaling $215.9 million, $366.1 million, $359.4
million and $12.2 million in 2019, 2018, 2017 and 2016, respectively. For additional information, please read Note
6, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.
• Pre-tax research and development expenses of $486.2 million in 2018 related to the 2018 Ionis Agreement. For
additional information on our collaboration arrangements with Ionis, please read Note 18, Collaborative and Other
Relationships, to our consolidated financial statements included in this report.
• Pre-tax charges to acquired IPR&D totaling $112.5 million and $120.0 million in 2018 and 2017, respectively, for
upfront payments made upon the closing of our asset purchase transactions, as the underlying assets had not yet
reached technological feasibility.
• Pre-tax charge of $454.8 million in 2016 related to our January 2017 settlement and license agreement with Forward
Pharma A/S (Forward Pharma).
• Pre-tax restructuring and other exit-related costs totaling $1.5 million, $12.0 million, $0.9 million, $103.6 million and
$93.4 million in 2019, 2018, 2017, 2016 and 2015, respectively.
(4) Income tax expense included the following activities:
•
•
•
Income tax expense in 2019 reflects a benefit of approximately $205.0 million related to an internal reorganization
of certain intellectual property rights and the impact of the enactment of a new taxing regime in the country and
certain cantons of Switzerland, which we refer to as Swiss Tax Reform, offset by a $68.9 million tax expense related
to the divestiture of our subsidiary that owned our Hillerød, Denmark manufacturing operations. For additional
information, please read Note 16, Income Taxes, to our consolidated financial statements included in this report.
Income tax expense in 2018 reflects a net increase to expense of approximately $125.0 million recognized upon
finalization of our estimates related to the Transition Toll Tax, the remeasurement of our deferred tax assets and
liabilities, the impact of electing to record deferred taxes on GILTI and other aspects of the 2017 Tax Act. For
additional information, please read Note 16, Income Taxes, to our consolidated financial statements included in this
report.
Income tax expense in 2017 includes a $1,173.6 million estimate pursuant to SEC Staff Accounting Bulletin No.
118. Our estimate included $989.6 million associated with the Transition Toll Tax and $184.0 million related to the
impact of remeasuring our deferred tax balances to reflect the new federal statutory rate and other changes to U.S.
tax law.
(5) Net income (loss) attributable to noncontrolling interests, net of tax included the following activities:
• Pre-tax charges of $50.0 million and $150.0 million for the years ended December 31, 2018 and 2017, respectively,
for payments made under the terms of the Neurimmune Agreement in exchange for reductions in the previously
negotiated royalty rates payable on products developed under the Neurimmune Agreement, including royalties payable
on potential commercial sales of aducanumab.
• A pre-tax charge of $60.0 million for the year ended December 31, 2015, for a milestone payment due to
Neurimmune upon the enrollment of the first patient in a Phase 3 study of aducanumab.
For additional information on our collaboration arrangement with Neurimmune, please read Note 19, Investments in
Variable Interest Entities, to our consolidated financial statements included in this report.
(6) Total Biogen Inc. shareholders' equity reflects the repurchase of approximately 63.4 million shares of our common stock at
a cost of approximately $17.6 billion between December 31, 2015 and December 31, 2019:
53
• During 2019 we repurchased and retired approximately 14.7 million and 8.9 million shares of our common stock at a
cost of approximately $3.7 billion and $2.1 billion under our March 2019 Share Repurchase Program and our 2018
Share Repurchase Program, respectively.
• During 2018 we repurchased and retired approximately 4.3 million and 10.5 million shares of our common stock at a
cost of approximately $1.4 billion and $3.0 billion under our 2018 Share Repurchase Program and a program
authorized by our Board of Directors in July 2016 for the repurchase of up to $5.0 billion of our common stock (2016
Share Repurchase Program), respectively.
• During 2017 we repurchased and retired approximately 3.7 million shares of our common stock at a cost of
approximately $1.0 billion under our 2016 Share Repurchase Program.
• During 2017 we repurchased approximately 1.2 million shares of our common stock at a cost of $365.4 million
under a program authorized by our Board of Directors in February 2011 for the repurchase of up to 20.0 million
shares of our common stock.
• During 2016 we repurchased and retired approximately 3.3 million shares of our common stock at a cost of
approximately $1.0 billion under our 2016 Share Repurchase Program.
• During 2015 we repurchased and retired approximately 16.8 million shares of our common stock at a cost of $5.0
billion under a program authorized by our Board of Directors in May 2015 for the repurchase of up to $5.0 billion of
our common stock.
(7) Notes payable, less current portion reflect:
• Our 2017 repayment of our 6.875% Senior Notes that were issued in 2008 with an aggregate principal amount of
$550.0 million; and
• The issuance of our senior unsecured notes for an aggregate principal amount of $6.0 billion in September 2015.
54
Management’s Discussion and
Item 7.
Analysis of Financial Condition and Results
of Operations
The following discussion should be read in
conjunction with our consolidated financial
statements and the accompanying notes beginning on
page F-1 of this report.
For our discussion of the year ended December
31, 2018, compared to the year ended December 31,
2017, please read Item 7. Management's Discussion
and Analysis of Financial Condition and Results of
Operations located in our 2018 Form 10-K.
Executive Summary
Introduction
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 MS and neuroimmunology; AD
and dementia; neuromuscular disorders, including
SMA and ALS; movement disorders, including
Parkinson's disease; 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, VUMERITY 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, 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 PPMS and
RMS; and other potential anti-CD20 therapies
pursuant to our collaboration arrangements with
Genentech. For additional information on our
collaboration arrangements with Genentech, please
read Note 18, Collaborative and Other Relationships,
to our consolidated financial statements included in
this report.
Our innovative drug development and
commercialization activities are complemented by our
biosimilar products that expand access to medicines
55
and reduce the cost burden for healthcare systems.
Through Samsung Bioepis, our joint venture with
Samsung BioLogics Co., Ltd., we market and sell
BENEPALI, an etanercept biosimilar referencing
ENBREL, IMRALDI, an adalimumab biosimilar
referencing HUMIRA, and FLIXABI, an infliximab
biosimilar referencing REMICADE, in certain countries
in Europe and have exclusive rights to commercialize
these products in China. Additionally, we have
exclusive rights to commercialize two potential
ophthalmology biosimilar products, SB11 referencing
LUCENTIS and SB15 referencing EYLEA, in major
markets worldwide, including the U.S., Canada,
Europe, Japan and Australia. For additional
information on our collaboration arrangements with
Samsung Bioepis, please read Note 18, Collaborative
and Other Relationships, to our consolidated financial
statements included in this report.
Our revenues depend upon continued sales of
our products, as well as the financial rights we have in
our anti-CD20 therapeutic programs, and, unless we
develop, acquire rights to and/or commercialize new
products and technologies, we will be substantially
dependent on sales from our products and our
financial rights in our anti-CD20 therapeutic programs
for many years.
In the longer term, our revenue growth will
depend upon the successful clinical development,
regulatory approval and launch of new commercial
products as well as additional indications for our
existing products, our ability to obtain and maintain
patents and other rights related to our marketed
products, assets originating from our research and
development efforts and/or successful execution of
external business development opportunities.
Business Environment
The biopharmaceutical industry and the markets
in which we operate are intensely competitive. Many
of our competitors are working to develop or have
commercialized products similar to those we market
or are developing and have considerable experience in
undertaking clinical trials and in obtaining regulatory
approval to market pharmaceutical products. In
addition, the commercialization of certain of our own
approved products, products of our collaborators and
pipeline product candidates may negatively impact
future sales of our existing products.
Our products continue to face increasing
competitive pressures from the introduction of generic
versions, prodrugs and biosimilars of existing
products as well as products approved under
abbreviated regulatory pathways. Such products are
likely to be sold at substantially lower prices than
branded products, which may significantly reduce both
the price that we are able to charge for our products
and the volume of products we sell. In addition, when
a generic version of one of our products is
commercialized, it may, in some cases, be
automatically substituted for our product and reduce
our revenues in a short period of time.
Sales of our products depend, to a significant
extent, on the availability and extent of adequate
coverage, pricing and reimbursement from
government health administration authorities, private
health insurers and other organizations. When a new
pharmaceutical product is approved, the availability of
government and private reimbursement for that
product may be uncertain, as is the pricing and
amount for which that product will be reimbursed.
Drug prices are under significant scrutiny in the
markets in which our products are prescribed. We
expect drug pricing and other health care costs to
continue to be subject to intense political and societal
pressures on a global basis.
Our failure to obtain or maintain adequate
coverage, pricing or reimbursement for our products
could have an adverse effect on our business,
reputation, revenues and results of operations, could
curtail or eliminate our ability to adequately fund
research and development programs for the discovery
and commercialization of new products or could cause
a decline or volatility in our stock price.
In addition to the impact of competition, pricing
actions and other measures being taken worldwide
designed to reduce healthcare costs and limit the
overall level of government expenditures, our sales
and operations could also be affected by other risks
of doing business internationally, including the impact
of foreign currency exchange fluctuations, changes in
intellectual property legal protections and changes in
trade regulations and procedures as well as the
impact of the continued uncertainty of the credit and
economic conditions in certain countries in Europe.
For additional information on our competition
and pricing risks that could negatively impact our
product sales, please read Item 1A. Risk Factors and
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk included in this report.
Brexit
In June 2016 the U.K. electorate voted in a
referendum to voluntarily depart from the E.U., known
as Brexit. In March 2017 the U.K. government
formally notified the European Council of its intention
to leave the E.U. and began to negotiate the terms of
its withdrawal and outline the future relationship
between the U.K. and the E.U. upon exit, which
occurred on January 31, 2020. Following the U.K.’s
departure, there is now a transition period during
which existing arrangements will remain in place until
the end of 2020, allowing detailed discussions on the
future relationship between the U.K. and the E.U. to
take place.
The potential impact on our results of operations
and liquidity resulting from Brexit remains unclear. The
actual effects of Brexit will depend upon many factors
and significant uncertainty remains with respect to
the future relationship between the U.K. and the E.U.
The final outcome of the discussions during the
transition period may impact certain of our research,
commercial and general business operations in the
U.K. and the E.U., including the approval and supply
of our products.
Compliance with any resulting regulatory
mandates may prove challenging and the
macroeconomic impact on our sales and consolidated
results of operations from these developments
remains unknown. We do not, however, expect Brexit
to have a material impact on our consolidated results
of operations as approximately 3.5%, 3.3% and 3.2%
of our total product revenues in 2019, 2018 and
2017, respectively, were derived from U.K. sales.
We have implemented measures to meet E.U.
legal and regulatory requirements and to continue to
modify our business operations to prepare for the
finalization of the terms of the U.K.'s separation from
the E.U. However, we cannot predict the direction
Brexit-related developments will take nor the impact of
those developments on our European operations and
the economies of the markets where we operate.
Therefore, we will continue to monitor for
developments in this area and assess any potential
impact on our business and results of operations.
56
Financial Highlights
Diluted earnings per share attributable to Biogen
Inc. were $31.42 for 2019, representing an increase
of 45.6% over $21.58 in the same period in 2018.
As described below under Results of Operations,
our net income and diluted earnings per share
attributable to Biogen Inc. for the year ended
December 31, 2019, compared to the year ended
December 31, 2018, reflects the following:
• Total revenues were $14,377.9 million for 2019,
representing an increase of 6.9% over
$13,452.9 million in 2018.
• Product revenues, net totaled $11,379.8 million
for 2019, representing an increase of 4.5% over
$10,886.8 million in 2018. This increase was
primarily due to a 21.6% increase in revenues
from SPINRAZA and a 35.4% increase in
revenues from our biosimilar business. Product
revenues, net, compared to the same period in
2018, further reflects the unfavorable impact of
foreign currency exchange of $53.0 million.
• Revenues from anti-CD20 therapeutic programs
totaled $2,290.4 million for 2019, representing
an increase of 15.7% over $1,980.2 million in
2018. This increase was primarily due to an
increase in royalty revenues on sales of
OCREVUS.
• Other revenues totaled $707.7 million for 2019,
representing an increase of 20.8% over $585.9
million in 2018. This increase was primarily due
to higher revenues from our manufacturing and
supply agreement with Bioverativ, partially offset
by lower revenues from other contract
manufacturing agreements.
• Total cost and expenses totaled $7,335.3
million for 2019, representing a decrease of
3.0% from $7,564.3 million in 2018. This
decrease was primarily due to:
a 12.2% decrease in research and
development expense, primarily due to
the $482.6 million net charge
recognized in 2018 upon the closing of
the 2018 Ionis Agreement;
a 34.4% decrease in amortization and
impairment of acquired intangible
assets, primarily due to the $366.1
million impairment charges recognized in
2018, which lowered amortization
expense in subsequent periods, partially
offset by the $215.9 million impairment
charges recognized in 2019; and
a net change in (gain) loss on fair value
remeasurement of contingent
consideration, primarily due to the gain
recognized on the remeasurement of our
continent consideration obligation
related to the Phase 2b study of
BG00011 for the potential treatment of
IPF.
This decrease was partially offset by:
a 12.7% increase in selling, general and
administrative expenses, primarily due to
increased commercial and medical
investments as well as the timing of
spend on selling, general and
administrative expense; and
a 7.7% increase in cost of sales,
primarily due to our sales in 2019 to
Bioverativ of hemophilia-related inventory
on hand as of December 31, 2018, and
an increase in sales of products within
our biosimilar business.
• Net income attributable to Biogen Inc. was
favorably impacted by a decrease in our effective
tax rate to 16.3% for the year ended
December 31, 2019, from 24.2% for 2018, due
in part to an internal reorganization of certain
intellectual property rights, the impact of Swiss
Tax Reform and the 2018 unfavorable impacts of
U.S. Tax Reform.
57
As described below under Financial Condition,
Under the terms of the acquisition, we paid NST
Liquidity and Capital Resources:
• We generated $7,078.6 million of net cash flows
from operations for 2019, which were primarily
driven by earnings.
• Cash, cash equivalents and marketable
securities totaled approximately $5,884.0
million as of December 31, 2019.
• We repurchased and retired approximately 23.6
million shares of our common stock at a cost of
approximately $5.8 billion during 2019 under our
March 2019 Share Repurchase Program and our
2018 Share Repurchase Program.
Acquisitions, Collaborative and Other Relationships
For additional information on our acquisitions,
collaborative and other relationships discussed below,
please read Note 2, Acquisitions, Note 3, Divestitures,
Note 18, Collaborative and Other Relationships, and
Note 19, Investments in Variable Interest Entities, to
our consolidated financial statements included in this
report.
Skyhawk Therapeutics, Inc.
In January 2019 we entered into a collaboration
and research and development services agreement
with Skyhawk pursuant to which the companies are
leveraging Skyhawk's SkySTAR technology platform
with the goal of discovering innovative small molecule
treatments for patients with neurological diseases,
including MS and SMA. In connection with this
agreement, we made an upfront payment of $74.0
million to Skyhawk. We are responsible for the
development and potential commercialization of any
therapies resulting from this collaboration. In October
2019 we amended this agreement to add an
additional discovery program. In connection with this
amendment, we made a payment to Skyhawk of
$15.0 million.
Acquisition of Nightstar Therapeutics plc
In June 2019 we completed our acquisition of all
of the outstanding shares of NST, a clinical-stage gene
therapy company focused on AAV 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, which
is in Phase 3 development for the potential treatment
of CHM, a rare, degenerative, X-linked inherited retinal
disorder that leads to blindness and currently has no
approved treatments, and BIIB112 (RPGR gene
therapy), which is in Phase 2/3 development for the
potential treatment of XLRP, which is a rare inherited
retinal disease with no currently approved treatments.
58
shareholders $25.50 in cash for each issued and
outstanding NST share, which totaled $847.6 million.
Divestiture of Hillerød, Denmark Manufacturing
Operations
In August 2019 we completed the sale of all of
the outstanding shares of our subsidiary that owned
our biologics manufacturing operations in Hillerød,
Denmark to FUJIFILM. Upon the closing of this
transaction, we received approximately $881.9 million
in cash, which may be adjusted based on other
contractual terms. 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.
Samsung Bioepis
In December 2019 we completed a transaction
with Samsung Bioepis and secured the exclusive
rights to commercialize two potential ophthalmology
biosimilar products, SB11 referencing LUCENTIS and
SB15 referencing EYLEA, in major markets worldwide,
including the U.S., Canada, Europe, Japan and
Australia. We also acquired an option to extend our
existing commercial agreement with Samsung Bioepis
for BENEPALI, IMRALDI and FLIXABI in Europe and
obtained exclusive rights to commercialize these
products in China. In connection with this transaction,
we made an upfront payment of $100.0 million to
Samsung Bioepis.
BIIB080 Option Exercise
In December 2019 we exercised our option with
Ionis and obtained a worldwide, exclusive, royalty-
bearing license to develop and commercialize
BIIB080, an investigational treatment for AD.
Pfizer Inc.
In January 2020 we entered into an agreement
to acquire PF-05251749, a novel CNS-penetrant small
molecule inhibitor of CK1, for the potential treatment
of patients with behavioral and neurological symptoms
across various psychiatric and neurological diseases
from Pfizer. In particular, we plan to develop the Phase
1 asset for the treatment of sundowning in AD and
ISWRD in Parkinson’s disease. This transaction is
subject to customary closing conditions, including the
expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976
in the U.S. We expect this transaction to close in the
first quarter of 2020.
Other Key Developments
VUMERITY
In October 2019 the FDA approved VUMERITY for
the treatment of RMS. Under the terms of the license
and collaboration agreement with Alkermes, we made
milestone payments totaling $155.0 million to
Alkermes following the FDA's approval of VUMERITY.
In November 2019 VUMERITY became available in the
U.S.
Aducanumab
In October 2019 we and our collaboration
partner Eisai announced that we plan to pursue
regulatory approval for aducanumab in the U.S. and
that the Phase 3 EMERGE study met its primary
endpoint showing a significant reduction in clinical
decline. We believe that results from a subset of
patients in the Phase 3 ENGAGE study who received
sufficient exposure to high dose aducanumab support
findings from EMERGE. The decision to file is based
on a new analysis, conducted in consultation with the
FDA, of a larger dataset from the Phase 3 EMERGE
and ENGAGE trials that were discontinued in March
2019 following a futility analysis.
For additional information on our plans to file for
regulatory approval for aducanumab, please read the
Results of Operations
Revenues
Revenues are summarized as follows:
subsection entitled "Financial Condition, Liquidity and
Capital Resources" included below.
Elenbecestat
In September 2019 we and our collaboration
partner Eisai announced the decision to discontinue
the global Phase 3 studies (MISSION AD1 and
MISSION AD2) of the investigational oral BACE
inhibitor elenbecestat in patients with early AD.
2019 Share Repurchase Programs
In March 2019 our Board of Directors authorized
our March 2019 Share Repurchase Program, which is
a program to repurchase up to $5.0 billion of our
common stock. Our March 2019 Share Repurchase
Program does not have an expiration date. All share
repurchases under our March 2019 Share
Repurchase Program will be retired.
In December 2019 our Board of Directors
authorized our December 2019 Share Repurchase
Program, which is a program to repurchase up to $5.0
billion of our common stock. Our December 2019
Share Repurchase Program does not have an
expiration date. All share repurchases under our
December 2019 Share Repurchase Program will be
retired.
(In millions, except percentages)
Product revenues, net:
United States
Rest of world
Total product revenues, net
Revenues from anti-CD20 therapeutic
programs
Other revenues
Total revenues
For the Years Ended
December 31,
2019
2018
2017
% Change
2019
compared to
2018
2018
compared to
2017
$
6,713.8 $
4,666.0
11,379.8
6,800.5 $
4,086.3
10,886.8
7,017.1
3,337.6
10,354.7
2,290.4
707.7
1,559.2
360.0
$ 14,377.9 $ 13,452.9 $ 12,273.9
1,980.2
585.9
(1.3)%
14.2 %
4.5 %
15.7 %
20.8 %
6.9 %
(3.1)%
22.4 %
5.1 %
27.0 %
62.8 %
9.6 %
59
Product Revenues
Product revenues are summarized as follows:
(In millions, except percentages)
Multiple Sclerosis (MS):
TECFIDERA
Interferon*
TYSABRI
VUMERITY
FAMPYRA
ZINBRYTA
Subtotal: MS product revenues
Spinal Muscular Atrophy:
SPINRAZA
Biosimilars:
BENEPALI
IMRALDI
FLIXABI
Subtotal: Biosimilar product
revenues
Other:
FUMADERM
Hemophilia:
ELOCTATE
ALPROLIX
Subtotal: Hemophilia product
revenues
For the Years Ended
December 31,
2019
2018
2017
% Change
2019 compared
to 2018
2018 compared
to 2017
$
4,432.7 $
2,101.8
1,892.2
5.5
97.1
—
8,529.3
4,274.1 $
2,363.0
1,864.0
—
92.7
1.4
8,595.2
4,214.0
2,645.8
1,973.1
—
91.6
52.7
8,977.2
3.7 %
(11.1)%
1.5 %
**
4.7 %
(100.0)%
(0.8)%
1.4 %
(10.7)%
(5.5)%
**
1.2 %
(97.3)%
(4.3)%
2,097.0
1,724.2
883.7
21.6 %
95.1 %
486.2
184.0
68.1
738.3
485.2
16.7
43.2
545.1
370.8
—
9.0
379.8
0.2 %
1,001.8 %
57.6 %
30.9 %
**
380.0 %
35.4 %
43.5 %
15.2
22.3
39.6
(31.8)%
(43.7)%
—
—
—
—
—
—
48.4
26.0
74.4
**
**
**
**
**
**
Total product revenues, net
$ 11,379.8 $ 10,886.8 $ 10,354.7
4.5 %
5.1 %
* Interferon includes AVONEX and PLEGRIDY.
** Percentage not meaningful.
60
Multiple Sclerosis
TECFIDERA
is expected to have an adverse impact on our
TECFIDERA sales and our results of operations. For
additional information, please read Note 20, Litigation,
to our consolidated financial statements included in
this report.
We anticipate an increase in TECFIDERA demand
in rest of world in 2020, compared to 2019,
notwithstanding the increasing competition from
additional treatments for MS. We expect volume
growth in our rest of world markets to offset volume
declines in the U.S.
Interferon
AVONEX and PLEGRIDY
For 2019 compared to 2018, the 1.6% increase
in U.S. TECFIDERA revenues was primarily due to a
slight net price increase, offset by a small decrease in
unit sales volume.
For 2019 compared to 2018, the 10.3% increase
in rest of world TECFIDERA revenues was primarily
due to increases in unit sales volume of 14%,
primarily related to our European and Japanese
markets, and the favorable impact of foreign currency
exchange of $16.5 million, partially offset by pricing
reductions in certain European countries.
In February 2020 the U.S. Patent Trial and
Appeal Board (PTAB) decided that our U.S. Patent No.
8,399,514 (the ‘514 Patent) is patentable. The ‘514
Patent covers treatment of MS with 480 mg of
dimethyl fumarate per day as provided for in our
TECFIDERA label. This decision may be appealed.
The ‘514 Patent has also been challenged
pursuant to the Hatch-Waxman Act in the U.S. District
Courts of Delaware (the Delaware action) and West
Virginia (the West Virginia action). We are awaiting a
decision in the Delaware action and the trial in the
West Virginia action is ongoing. If we receive an
adverse judgment in either U.S. District Court action,
we will appeal but we may face generic competition
while our appeal is pending.
We will face TECFIDERA generic competition if an
adverse PTAB or U.S. District Court decision is
reached on appeal. In addition, we have entered into
settlement agreements with some of the defendants
in the Delaware action and we now anticipate
TECFIDERA generic competition before the ‘514
Patent expires in February 2028. Generic competition
61
For 2019 compared to 2018, the 14.5%
decrease in U.S. Interferon revenues was primarily
due to a decrease in Interferon unit sales volumes of
13%, which was primarily attributable to patients
transitioning to other MS therapies and a net price
decrease.
For 2019 compared to 2018, the 2.8% decrease
in rest of world Interferon revenues was primarily due
to pricing reductions in certain European countries.
We expect that Interferon revenues will continue
to decline in both the U.S. and rest of world markets
in 2020, compared to 2019, as a result of increasing
competition from our other MS products as well as
other treatments for MS, including biosimilars, and
pricing reductions in certain European markets.
AVONEX
For 2019, 2018 and 2017 U.S. AVONEX
revenues totaled $1,202.1 million, $1,420.2 million
and $1,593.6 million, respectively.
For 2019, 2018 and 2017 rest of world AVONEX
Spinal Muscular Atrophy
revenues totaled $463.8 million, $495.3 million and
$557.9 million, respectively.
SPINRAZA
PLEGRIDY
For 2019, 2018 and 2017 U.S. PLEGRIDY
revenues totaled $224.5 million, $248.1 million and
$295.5 million, respectively.
For 2019, 2018 and 2017 rest of world
PLEGRIDY revenues totaled $211.4 million, $199.4
million and $198.8 million, respectively.
TYSABRI
For 2019 compared to 2018, the 1.6% increase
in U.S. TYSABRI revenues was primarily due to price
increases, partially offset by a decrease in unit sales
volumes of 4%.
For 2019 compared to 2018, the 1.4% increase
in rest of world TYSABRI revenues was primarily due
to an increase in unit sales volumes of 3%.
We anticipate TYSABRI demand to be stable on
a global basis in 2020, compared to 2019, with
expected volume declines in the U.S. due to
increasing competition from additional treatments for
MS, including OCREVUS, offset by volume growth in
our rest of world markets, net of price reductions in
certain rest of world countries.
For 2019 compared to 2018, the 9.3% increase
in U.S. SPINRAZA revenues was primarily due to
increases in unit sales volume of 9%.
For 2019 compared to 2018, the 33.7%
increase in rest of world SPINRAZA revenues was
primarily due to an increase in unit sales volumes of
69%, partially offset by the unfavorable impact of
foreign currency exchange of $43.5 million.
We expect that the rate at which SPINRAZA
revenues will grow will moderate in 2020, compared
to 2019, primarily due to a lower rate of new patient
starts combined with the impact of loading dose
dynamics as patients transition to dosing once every
four months.
We face competition from a new gene therapy
product that was approved in the U.S. in May 2019
for the treatment of SMA. Additionally, we are aware of
other products in development that, if successfully
developed and approved, may compete with SPINRAZA
in the SMA market, including potential oral products.
Future sales of SPINRAZA may be adversely affected
by the commercialization of competing products.
For additional information on our collaboration
arrangements with Ionis, please read Note 18,
Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
62
Biosimilars
BENEPALI, IMRALDI and FLIXABI
Revenues from Anti-CD20 Therapeutic
Programs
Genentech Inc. (Roche Group)
Our share of RITUXAN, including RITUXAN
HYCELA, and GAZYVA collaboration operating profits in
the U.S. and other revenues from anti-CD20
therapeutic programs are summarized in the table
below. For purposes of this discussion we refer to
RITUXAN and RITUXAN HYCELA collectively as
RITUXAN.
For 2019 compared to 2018, the 35.4%
increase in biosimilar revenues was primarily due to
the launch of IMRALDI in the fourth quarter of 2018,
partially offset by the unfavorable impact of foreign
currency exchange of $27.8 million.
In 2020 we expect strong revenue growth for our
biosimilars business, primarily driven by the continued
launch of IMRALDI in Europe, partially offset by price
reductions in certain European countries.
In December 2019 we completed a transaction
with Samsung Bioepis and secured the exclusive
rights to commercialize two potential ophthalmology
biosimilars, SB11 referencing LUCENTIS and SB15
referencing EYLEA, in major markets worldwide,
including the U.S., Canada, Europe, Japan and
Australia. We also acquired an option to extend our
existing commercial agreement with Samsung Bioepis
for BENEPALI, IMRALDI and FLIXABI in Europe and
obtained exclusive rights to commercialize these
products in China.
For additional information on our collaboration
arrangements with Samsung Bioepis, please read
Note 18, Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
Biogen’s Share of Pre-tax Profits in the U.S. for
RITUXAN and GAZYVA
The following table provides a summary of
amounts comprising our share of pre-tax profits in the
U.S. for RITUXAN and GAZYVA:
(In millions)
Product
revenues, net
Cost and
expenses
Pre-tax profits in
the U.S.
Biogen's share of
pre-tax profits
For the Years Ended
December 31,
2019
2018
2017
$4,747.4 $4,484.3 $4,206.9
622.7
669.6
755.2
$4,124.7 $3,814.7 $3,451.7
$1,542.4 $1,431.9 $1,316.4
Our share of RITUXAN annual pre-tax co-
promotion profits in the U.S. in excess of $50.0
million decreased to 37.5% from 39% in the third
quarter of 2017 as gross sales of GAZYVA in the U.S.
63
for the preceding 12-month period exceeded $150.0
million.
For 2019 compared to 2018, the increase in
U.S. product revenues, net was primarily due to
increased net sales of RITUXAN in the U.S. of 5.0%,
which reflects an increase in unit sales volume of 3%,
and selling price increases, partially offset by higher
rates in discounts and allowances.
The increase in U.S. product revenues, net over
2018 also reflects an increase in GAZYVA unit sales
volume of 21%.
For 2019 compared to 2018, the decrease in
collaboration costs and expenses was primarily due to
lower cost of sales and lower selling and marketing
costs on RITUXAN and lower Branded Pharmaceutical
Drug fee expenses for RITUXAN and GAZYVA.
We are aware of anti-CD20 molecules, including
biosimilar products, in development that if
successfully developed and approved, could compete
with RITUXAN and GAZYVA in the oncology market.
The introduction of a biosimilar product can result in a
significant reduction in net sales for the relevant
product, as other manufacturers typically offer their
versions at lower prices. In November 2019 and
January 2020 biosimilar products referencing
RITUXAN were launched in the U.S. and this could
adversely affect the pre-tax profits of our collaboration
arrangements with Genentech, which could, in turn,
adversely affect our co-promotion profits in the U.S. in
future years.
Other Revenues from Anti-CD20 Therapeutic
Programs
Other revenues from anti-CD20 therapeutic
programs consist of royalty revenues on sales of
OCREVUS and our share of pre-tax co-promotion
profits from RITUXAN in Canada.
For 2019 compared to 2018, the increase in
other revenues from anti-CD20 therapeutic programs
was primarily due to the sales growth of OCREVUS.
Royalty revenues recognized on sales of OCREVUS for
the years ended December 31, 2019, 2018 and
2017, totaled $687.5 million, $478.3 million and
$159.3 million, respectively.
OCREVUS royalty revenues are based on our
estimates from third party and market research data
of OCREVUS sales occurring during the corresponding
period. Differences between actual and estimated
royalty revenues will be adjusted for in the period in
which they become known, which is expected to be
the following quarter.
In March 2017 the FDA approved OCREVUS for
the treatment of RMS and PPMS. Pursuant to the
terms of our collaboration arrangements with
Genentech, we receive a tiered royalty on U.S. net
sales from 13.5% and increasing up to 24% if annual
net sales exceed $900.0 million. There will be a 50%
reduction to these royalties if a biosimilar to
OCREVUS is approved in the U.S.
In addition, we receive a gross 3% royalty on net
sales of OCREVUS outside the U.S., with the royalty
period lasting 11 years from the first commercial sale
of OCREVUS on a country-by-country basis. OCREVUS
has been approved for the treatment of RMS and
PPMS in the E.U. and certain other countries.
The commercialization of OCREVUS does not
impact the percentage of the co-promotion profits we
receive for RITUXAN or GAZYVA. Genentech is solely
responsible for development and commercialization of
OCREVUS and funding future costs. Genentech cannot
develop OCREVUS in CLL, non-Hodgkin's lymphoma or
rheumatoid arthritis.
For additional information on our relationship
with Genentech, including information regarding the
pre-tax profit-sharing formula and its impact on future
revenues from anti-CD20 therapeutic programs,
please read Note 18, Collaborative and Other
Relationships, to our consolidated financial
statements included in this report.
Other Revenues
Other revenues are summarized as follows:
(In millions, except percentages)
Revenues from collaborative and other
relationships
Other royalty and corporate revenues
Total other revenues
For The Years
Ended December 31,
2019
2018
2017
% Change
2019
compared to
2018
2018
compared to
2017
$
$
106.2 $
601.5
707.7 $
87.8 $
498.1
585.9 $
36.5
323.5
360.0
21.0%
20.8%
20.8%
140.5%
54.0%
62.8%
64
Revenues from Collaborative and Other
Relationships
Revenues from collaborative and other
relationships primarily include revenues from our
technical development services and manufacturing
agreements with Samsung Bioepis and royalty
revenues on biosimilar products from Samsung
Bioepis.
Following the divestiture of our Hillerød,
Denmark manufacturing operations in August 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 the years ended December 31, 2019 and
2018, we recognized $106.2 million and $96.4
million, respectively, related to the services described
above provided to Samsung Bioepis.
For additional information on our collaborative
and other relationships, including revenues recognized
under our technical development services and
manufacturing agreements with Samsung Bioepis,
please read Note 18, Collaborative and Other
Relationships, to our consolidated financial
statements included in this report.
Other Royalty and Corporate Revenues
For 2019 compared to 2018, the increase in
other royalty and corporate revenues was primarily
due to $383.2 million in revenues recognized in 2019
under the manufacturing and supply agreement with
Bioverativ entered into in connection with the spin-off
of our hemophilia business, compared to $206.7
million recognized in 2018. The increase in Bioverativ
revenues in 2019 over the prior year period was due
to our sales in 2019 of hemophilia-related inventory
on hand as of December 31, 2018. The increase in
corporate revenues was partially offset by the
reduction in royalty revenues due to the expiration of
certain of our patents and a reduction in revenues
from contract manufacturing agreements, other than
Bioverativ, as discussed above.
Reserves for Discounts and Allowances
Revenues from product sales are recorded net
of reserves established for applicable discounts and
allowances, including those associated with the
implementation of pricing actions in certain
international markets where we operate.
These reserves are based on estimates of the
amounts earned or to be claimed on the related sales
and are classified as reductions of accounts
receivable (if the amount is payable to our customer)
or a liability (if the amount is payable to a party other
than our customer). These estimates reflect our
historical experience, current contractual and
statutory requirements, specific known market events
and trends, industry data and forecasted customer
buying and payment patterns. Actual amounts may
ultimately differ from our estimates. If actual results
vary, we adjust these estimates, which could have an
effect on earnings in the period of adjustment.
We receive royalties from net sales on products
related to patents that we have out-licensed and we
record other corporate revenues primarily from
amounts earned under contract manufacturing
agreements.
65
Reserves for discounts, contractual adjustments
Contractual Adjustments
and returns that reduced gross product revenues are
summarized as follows:
For the years ended December 31, 2019, 2018
and 2017, reserves for discounts and allowances as
a percentage of gross product revenues were 24.3%,
23.7% and 22.0%, respectively.
Discounts
Discounts include trade term discounts and
wholesaler incentives.
For 2019 compared to 2018, discounts were
relatively consistent.
Contractual adjustments primarily relate to
Medicaid and managed care rebates, co-payment
assistance (copay), VA and PHS discounts, specialty
pharmacy program fees and other government rebates
or applicable allowances.
For 2019 compared to 2018, the increase in
contractual adjustments was primarily due to higher
managed care rebates and governmental rebates in
the U.S. as well as higher governmental rebates and
allowances in the rest of world, due in part to an
increase in SPINRAZA sales volumes worldwide.
Returns
Product return reserves are established for
returns made by wholesalers. In accordance with
contractual terms, wholesalers are permitted to return
product for reasons such as damaged or expired
product. The majority of wholesaler returns are due to
product expiration. Provisions for product returns are
recognized in the period the related revenue is
recognized, resulting in a reduction to product sales.
For 2019 compared to 2018, return reserves
were relatively consistent.
For additional information on our revenue
reserves, please read Note 4, Revenues, to our
consolidated financial statements included in this
report.
66
Cost and Expenses
A summary of total cost and expenses is as follows:
(In millions, except percentages)
Cost of sales, excluding amortization and
impairment of acquired intangible assets $
Research and development
Selling, general and administrative
Amortization and impairment of acquired
intangible assets
Collaboration profit (loss) sharing
Loss on divestiture of Hillerød, Denmark
manufacturing operations
(Gain) loss on fair value remeasurement
of contingent consideration
Acquired in-process research and
development
Restructuring charges
Total cost and expenses
$
For the Years Ended
December 31,
2019
2018
2017
% Change
2019
compared to
2018
2018
compared to
2017
1,955.4 $
2,280.6
2,374.7
1,816.3 $
2,597.2
2,106.3
1,630.0
2,253.6
1,933.9
489.9
241.6
55.3
747.3
185.0
—
814.7
112.3
7.7 %
(12.2)%
12.7 %
(34.4)%
30.6 %
11.4 %
15.2 %
8.9 %
(8.3)%
64.7 %
—
**
**
(63.7)
(12.3)
62.7
417.9 %
(119.6)%
—
1.5
7,335.3 $
112.5
12.0
7,564.3 $
120.0
0.9
6,928.1
(100.0)%
(87.5)%
(3.0)%
(6.3)%
**
9.2 %
** Percentage not meaningful.
entered into in connection with the spin-off of our
hemophilia business.
Additionally, the increase in product cost of
sales was attributable to an increase in sales of
products within our biosimilar business and an
increase in inventory amounts written down as a
result of excess, obsolescence, unmarketability or
other reasons, partially offset by lower cost of sales
from our contract manufacturing agreements, except
Bioverativ, as discussed above.
Inventory amounts written down as a result of
excess, obsolescence, unmarketability or other
reasons totaled $52.2 million, $41.9 million and
$76.9 million for the years ended December 31,
2019, 2018 and 2017, respectively.
Royalty Cost of Sales
For 2019 compared to 2018, the decrease in
royalty cost of sales was primarily due to a decrease
in royalties payable on sales of TYSABRI resulting
from the expiration of certain third party royalties,
partially offset by increased royalties payable on
higher sales of SPINRAZA and IMRALDI.
Cost of Sales, Excluding Amortization and
Impairment of Acquired Intangible Assets (Cost of
Sales)
Cost of sales, as a percentage of total revenues,
were 13.6%, 13.5% and 13.3% for the years ended
December 31, 2019, 2018 and 2017, respectively.
Product Cost of Sales
For 2019 compared to 2018, the increase in
product cost of sales was primarily due to our sale in
2019 to Bioverativ of hemophilia-related inventory on
hand as of December 31, 2018, with a cost basis
totaling $184.5 million pursuant to the terms of the
manufacturing and supply agreement with Bioverativ
67
Research and Development
We support our drug discovery and development
efforts through the commitment of significant
resources to discovery, research and development
programs and business development opportunities.
A significant amount of our research and
development costs consist of indirect costs incurred
in support of overall research and development
activities and non-specific programs, including
activities that benefit multiple programs, such as
management costs, as well as depreciation,
information technology and facility-based expenses.
These costs are considered other research and
development costs in the table above and are not
allocated to a specific program or stage.
Research and development expense incurred in
support of our marketed products includes costs
associated with product lifecycle management
activities including, if applicable, costs associated
with the development of new indications for existing
products. Late stage programs are programs in Phase
3 development or in registration stage. Early stage
programs are programs in Phase 1 or Phase 2
development. Research and discovery represents
costs incurred to support our discovery research and
translational science efforts. Costs are reflected in
the development stage based upon the program
status when incurred. Therefore, the same program
could be reflected in different development stages in
the same year. For several of our programs, the
research and development activities are part of our
collaborative and other relationships. Our costs reflect
our share of the total costs incurred.
68
For 2019 compared to 2018, the decrease in
Early Stage Programs
research and development expense was primarily due
to a decrease in milestone and upfront expenses and
a decrease in other research and development costs.
These decreases were partially offset by increases in
costs incurred in connection with our early stage
programs and marketed products.
We intend to continue committing significant
resources to targeted research and development
opportunities where there is a significant unmet need
and where a drug candidate has the potential to be
highly differentiated.
Milestone and Upfront Expenses
Research and development expense for 2019
includes:
• $63.0 million charge to research and
development expense upon the completion of a
transaction with Samsung Bioepis to secure the
exclusive rights to commercialize two potential
ophthalmology biosimilar products;
• $45.0 million charge to research and
development expense upon the exercise of our
option to obtain a worldwide, exclusive, royalty-
bearing license from Ionis to develop and
commercialize BIIB080; and
• $46.5 million charge to research and
development expense consisting of a $38.5
million charge upon the entering into a
collaboration and research and development
services agreement with Skyhawk and an
approximately $8.0 million charge upon
entering into an amendment to this agreement
to add an additional discovery program.
Research and development expense for 2018
includes:
• $486.2 million net charge to research and
development expense upon the closing of the
2018 Ionis Agreement; and
• $35.0 million charge to research and
development expense upon the exercise of our
option to obtain a worldwide, exclusive, royalty-
bearing license from Ionis to develop and
commercialize tofersen in ALS.
These payments are classified as research and
development expense as the programs they relate to
had not achieved regulatory approval as of the
payment date.
For additional information about these
collaboration arrangements, please read Note 18,
Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
69
For 2019 compared to 2018, the increase in
spending related to our early stage programs was
primarily due to an increase in costs associated with:
• gosuranemab in PSP and AD pursuant to our
license agreement with BMS;
• cinpanemab in Parkinson's disease;
• BIIB112 in XLRP;
• BIIB104 in CIAS;
• BIIB078 (IONIS-C9Rx) in ALS;
• BIIB091 in MS;
• BIIB110 (ActRIIA/B ligand trap) in SMA; and
• our decision in September 2019 to discontinue
the Phase 2b study of BG00011 for the
potential treatment of IPF, for which we incurred
a one-time close out charge of approximately
$10.0 million.
These increases were partially offset by a
decrease in costs associated with:
•
•
the development of vixotrigine (BIIB074) in
trigeminal neuralgia (TGN);
tofersen in ALS, which was advanced to a late
stage program in the first quarter of 2019;
• our decision in December 2018 to discontinue
development of BIIB087, an investigational AAV-
based gene therapy for the potential treatment
of X-linked retinoschisis, and BIIB088, an
investigational AAV-based gene therapy for the
potential treatment of XLRP, upon the
termination of our collaboration agreement with
Applied Genetic Technologies Corporation; and
• BIIB093 in LHI, which was advanced to a late
stage program in the third quarter of 2018.
Late Stage Programs
For 2019 compared to 2018, the decrease in
spending associated with our late stage programs
was primarily due to a decrease in spending related to
the discontinuation of the global Phase 3 trials,
ENGAGE and EMERGE, of aducanumab, net of Eisai
reimbursement. This decrease was partially offset by
increases in spending related to:
• our share of the termination costs of
approximately $48.0 million resulting from the
decision to discontinue the global Phase 3
studies of elenbecestat in AD;
• BAN2401 in early AD pursuant to our
collaboration arrangement with Eisai, which was
advanced to a late stage program in the first
quarter of 2019;
•
tofersen in ALS, which was advanced to a late
stage program in the first quarter of 2019;
and other programs acquired through business
combinations.
• BIIB093 in LHI, which was advanced to a late
stage program in the third quarter of 2018; and
• BIIB111 in CHM.
Selling, General and Administrative
For 2019 compared to 2018, the increase in
selling, general and administrative expenses was
primarily due to increased commercial and medical
investments as well as the timing of spend on selling,
general and administrative expense.
In 2020 we expect selling, general and
administrative costs, including increases in headcount
and other commercial infrastructure, to significantly
increase as we support pre-launch activities
associated with the potential regulatory approval of
aducanumab.
Amortization and Impairment of Acquired 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,
VUMERITY and TECFIDERA (rest of world) products
Amortization and impairment of acquired
intangible assets for the year ended December 31,
2019, was impacted by the 2019 impairment charges
of $215.9 million related to certain IPR&D assets
associated with the Phase 2b study of BG00011 for
the potential treatment of IPF, which was discontinued
in the third quarter of 2019.
Amortization and impairment of acquired
intangible assets for the year ended December 31,
2018, was impacted by the 2018 impairment charges
of $189.3 million related to certain IPR&D assets
associated with our vixotrigine program and $176.8
million related to our intangible assets associated
with our U.S. license to Forward Pharma's intellectual
property, including Forward Pharma's intellectual
property related to TECFIDERA.
Amortization of acquired intangible assets,
excluding impairment charges, totaled $274.0 million,
$381.2 million and $455.3 million for the years
ended December 31, 2019, 2018 and 2017,
respectively.
For 2019 compared to 2018, the decrease in
amortization of acquired intangible assets, excluding
impairment charges, was primarily due to a lower rate
of amortization for acquired intangible assets,
primarily due to prior year impairments.
We monitor events and expectations regarding
product performance. If new information indicates that
the assumptions underlying our most recent analysis
are substantially different than those utilized in our
current estimates, our analysis would be updated and
may result in a significant change in the anticipated
lifetime revenues of the relevant products. The
occurrence of an adverse event could substantially
increase the amount of amortization expense related
to our acquired intangible assets as compared to
previous periods or our current expectations, which
may result in a significant negative impact on our
future results of operations.
IPR&D related to Business Combinations
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.
BG00011
70
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 a
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 related
IPR&D intangible asset to zero.
In addition, we delayed the initiation of the
Phase 3 studies of vixotrigine for the potential
treatment of TGN as we awaited the outcome of
ongoing interactions with the 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 lower cumulative probability of
success. As a result of that reassessment, 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.
The TGN program has experienced numerous
delays in development in the periods since we
acquired the program and the fair value of this asset
is not significantly in excess of carrying value. In
addition, we are currently testing vixotrigine in another
mid-stage clinical trial, in a different neuropathic pain
indication, for which we also have an IPR&D asset.
Data from that trial is expected in the first half of
2020. This data may affect the economic value of
vixotrigine and the IPR&D assets for one or both
programs could be impaired if assumptions used in
determining their fair value change.
Overall, the value of our acquired IPR&D assets
is dependent upon several variables, including
estimates of future revenues and the effects of
competition, our ability to secure sufficient pricing in a
competitive market, our ability to confirm safety and
71
efficacy based on data from clinical trials and
regulatory feedback, the level of anticipated
development costs and the probability and timing of
successfully advancing a particular research program
from one clinical trial phase to the next. We are
continually reevaluating our estimates concerning
these and other variables, including our life cycle
management strategies, research and development
priorities and development risk, changes in program
and portfolio economics and related impact of foreign
currency exchange rates and economic trends and
evaluating industry and company data regarding the
productivity of clinical research and the development
process. Changes in our estimates and prioritization
of these programs may result in a significant change
to our valuation of our IPR&D assets.
TECFIDERA License Rights
In January 2017 we entered into a settlement
and license agreement among Biogen Swiss
Manufacturing GmbH, Biogen International Holding
Ltd., Forward Pharma and certain related parties,
which was effective as of February 1, 2017. Pursuant
to this agreement, we obtained U.S. and rest of world
licenses to Forward Pharma's intellectual property,
including Forward Pharma's intellectual property
related to TECFIDERA. In exchange, we paid Forward
Pharma $1.25 billion in cash, of which $795.2 million
was recorded within intangible assets in the first
quarter of 2017.
We had an intellectual property dispute with
Forward Pharma in the U.S. concerning intellectual
property related to TECFIDERA.
In March 2017 the U.S. intellectual property
dispute was decided in our favor. Forward Pharma
appealed to the U.S. Court of Appeals for the Federal
Circuit. We evaluated the recoverability of the U.S.
asset acquired from Forward Pharma and recorded a
$328.2 million impairment charge in the first quarter
of 2017 to adjust the carrying value of the acquired
U.S. asset to fair value reflecting the impact of the
developments in the U.S. legal dispute and continued
to amortize the remaining net book value of the U.S.
intangible asset in our consolidated statements of
income utilizing an economic consumption model. The
U.S. Court of Appeals for the Federal Circuit upheld
the USPTO's March 2017 ruling and in January 2019
denied Forward Pharma’s petition for rehearing. We
evaluated the recoverability of the U.S. asset based
upon these most recent developments and recorded a
$176.8 million impairment charge in the fourth
quarter of 2018 to reduce the remaining net book
value of the U.S. asset to zero.
We have an intellectual property dispute with
Forward Pharma in the E.U. concerning intellectual
property related to TECFIDERA.
In March 2018 the European Patent Office (EPO)
revoked Forward Pharma’s European Patent No. 2 801
355. Forward Pharma has filed an appeal to the
Technical Boards of Appeal of the EPO and a hearing
has been set for June 2020. Based upon our
assessment of this ruling, we continue to amortize
the remaining net book value of the rest of world
intangible asset in our consolidated statements of
income utilizing an economic consumption model. The
remaining net book value of the TECFIDERA rest of
world intangible asset as of December 31, 2019, was
$36.1 million.
For additional information on the dispute with
Forward Pharma in the E.U., please read Note 20,
Litigation, to our consolidated financial statements
included in this report.
For additional information on the amortization
and impairment of acquired intangible assets, please
read Note 6, Intangible Assets and Goodwill, to our
consolidated financial statements included in this
report.
Collaboration Profit (Loss) Sharing
Collaboration profit (loss) sharing primarily
includes Samsung Bioepis' 50% share of the profit or
loss related to our biosimilars commercial agreement
with Samsung Bioepis.
For 2019, 2018 and 2017 we recognized a net
profit-sharing expense of $241.6 million, $187.4
million and $111.0 million, respectively, to reflect
Samsung Bioepis’ 50% sharing of the net
collaboration profits. The increases in profit-sharing
expense for the comparative periods were primarily
due to increased collaboration profits resulting from
increased biosimilar sales.
For additional information on our collaboration
arrangements with Samsung Bioepis, please read
Note 18, Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
72
Loss on Divestiture of Hillerød, Denmark
Manufacturing Operations
Divestiture of Hillerød, Denmark Manufacturing
Operations
In August 2019 we completed the sale of all of
the outstanding shares of our subsidiary that owned
our biologics manufacturing operations in Hillerød,
Denmark to FUJIFILM. Upon the closing of this
transaction, we received approximately $881.9 million
in cash, which may be 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 $74.0 million associated with such
guarantees and have accrued for this obligation. We
may adjust this estimate based upon changes in
business conditions, which may result in the increase
or reduction of this adverse commitment obligation in
subsequent periods. 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 $164.4
million in our consolidated statements of income. This
loss included a pre-tax loss of $95.5 million, which
was recorded in loss on divestiture of Hillerød,
Denmark manufacturing operations. 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 approximately $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 $68.9
million related to this transaction. During the fourth
quarter of 2019 we recorded a $40.2 million
reduction in our estimate of the future minimum batch
commitment utilizing our current manufacturing
forecast, which reflects the impact of forecasted
aducanumab batches, resulting in a reduction in the
pre-tax loss on divestiture from $95.5 million to
$55.3 million.
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.
For additional information on the divestiture of
our Hillerød, Denmark manufacturing operations,
please read Note 3, Divestitures, to our consolidated
financial statements included in this report.
(Gain) Loss on Fair Value Remeasurement of
Contingent Consideration
Consideration payable for certain of our
business combinations includes future payments that
are contingent upon the occurrence of a particular
event or events. We record an obligation for such
contingent consideration payments at fair value on
the acquisition date. We then revalue our contingent
consideration obligations each reporting period.
Changes in the fair value of our contingent
consideration obligations, other than changes due to
payments, are recognized as a (gain) loss on fair
value remeasurement of contingent consideration in
our consolidated statements of income.
The gain on fair value remeasurement of
contingent consideration for 2019 was primarily due
to the discontinuation of the Phase 2b study of
BG00011 for the potential treatment of IPF, partially
offset by changes in the probability and expected
timing of achievement of certain developmental
milestones, a decrease in interest rates used to
revalue our contingent consideration liabilities and the
passage of time.
The gain on fair value remeasurement of
contingent consideration for 2018 was primarily due
to delays in the expected timing of achievement of
milestones related to our vixotrigine program for the
potential treatment of TGN and an increase in
discount rates used to revalue our contingent
consideration liabilities, partially offset by the
passage of time.
The loss on fair value remeasurement of
contingent consideration for 2017 was primarily due
to the increase in the probability of achieving certain
developmental milestones based upon the
progression of the underlying clinical programs.
For additional information on our IPR&D
intangible assets related to our discontinued
BG00011 program for the potential treatment of IPF
and our vixotrigine program for the potential treatment
of TGN, please read Note 6, Intangible Assets and
Goodwill, to our consolidated financial statements
included in this report.
73
Acquired In-Process Research and Development
recorded as acquired IPR&D in our consolidated
statements of income as BIIB093 had not yet reached
technological feasibility.
For additional information on our acquisitions of
BIIB110, BIIB104, BIIB100 and BIIB093, please read
Note 2, Acquisitions, to our consolidated financial
statements included in this report.
Other Income (Expense), Net
BIIB110 Acquisition
In July 2018 we acquired BIIB110 and ALG-802
from AliveGen Inc. (AliveGen). BIIB110 and ALG-802
represent novel ways of targeting the myostatin
pathway. In connection with the closing of this
transaction, we made an upfront payment of $27.5
million to AliveGen, which was recorded as acquired
IPR&D in our consolidated statements of income as
BIIB110 has not yet reached technological feasibility.
BIIB104 Acquisition
In April 2018 we acquired BIIB104 from Pfizer.
BIIB104 is a first-in-class, Phase 2b AMPA receptor
potentiator for CIAS. In connection with the closing of
this transaction, we made an upfront payment of
$75.0 million to Pfizer, which was recorded as
acquired IPR&D in our consolidated statements of
income as BIIB104 has not yet reached technological
feasibility.
BIIB100 Acquisition
In January 2018 we acquired BIIB100 from
Kayropharm Therapeutics Inc. (Karyopharm). BIIB100
is a Phase 1 investigational oral compound for the
treatment of certain neurological and
neurodegenerative diseases, primarily in ALS. In
connection with the closing of this transaction, we
made an upfront payment of $10.0 million to
Karyopharm, which was recorded as acquired IPR&D
in our consolidated statements of income as BIIB100
has not yet reached technological feasibility.
BIIB093 Acquisition
In May 2017 we acquired BIIB093 from Remedy
Pharmaceuticals Inc. (Remedy). In connection with the
closing of this transaction, we made an upfront
payment of $120.0 million to Remedy, which was
Effective January 1, 2018, other income
(expense) reflects the recognition of net gains
(losses) recorded in relation to changes in the fair
value of our strategic investments following our
adoption of Accounting Standards Update (ASU) No.
2016-01, Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial
Assets and Financial Liabilities. Prior to the adoption
of this standard, we recognized changes in fair value
of our strategic investment in accumulated other
comprehensive income (loss), net. Changes in the fair
value of our strategic investments could have a
significant impact on our results of operations in any
given period.
For 2019 compared to 2018, the change in other
income (expense), net primarily reflects net gains
totaling $204.7 million recognized on our investments
related to our holdings in equity and debt securities,
compared to net gains totaling $119.5 million in
2018. The net gains recognized during the year ended
December 31, 2019, primarily reflect an increase in
the fair value in our investment in Ionis common stock
from December 31, 2018, partially offset by the net
loss recognized on our sale of a portion of our
investment in Ionis common stock during the second
and third quarters of 2019 reflecting the decrease in
the fair value of the shares sold from March 31,
2019.
Proceeds from our sale of a portion of our
investment in Ionis common stock during the year
ended December 31, 2019, totaled approximately
74
$382.0 million. The original cost basis upon
acquisition in June 2018 for the shares sold during
the year ended December 31, 2019, totaled
approximately $312.5 million.
Net gains recognized on our investments related
to our holdings in equity and debt securities for the
year ended December 31, 2019, also reflects an
increase in the fair value of an investment in a non-
marketable equity security from December 31, 2018,
that was realized for a net gain of approximately
$87.7 million upon sale in the second quarter of
2019.
Income Tax Provision
January 1, 2018, at a higher effective tax rate than
the 2018 statutory tax rate.
For additional information on the divestiture of
our Hillerød, Denmark manufacturing operations,
please read Note 3, Divestitures, to our consolidated
financial statements included in this report.
Accounting for Uncertainty in Income Taxes
For additional information on our uncertain tax
positions and income tax rate reconciliation for 2019,
2018 and 2017, please read Note 16, Income Taxes,
to our consolidated financial statements included in
this report.
Equity in Loss of Investee, Net of Tax
Our effective tax rate fluctuates from year to
year due to the global nature of our operations. The
factors that most significantly impact our effective tax
rate include changes in tax laws, variability in the
allocation of our taxable earnings among multiple
jurisdictions, the amount and characterization of our
research and development expenses, the levels of
certain deductions and credits, acquisitions and
licensing transactions.
For the year ended December 31, 2019, as
compared to 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 $68.9 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 the unfavorable effects of the
2017 Tax Act and our sale of inventory, the tax effect
of which had been included within prepaid taxes at
75
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
December 31, 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
consolidated statements of income. During 2015, as
our share of losses exceeded the carrying value of
our 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.
Noncontrolling Interests, Net of Tax
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 year ended December 31, 2019, equity
in loss of investee, net of tax reflects our share of
losses totaling $1.2 million and amortization of basis
differences totaling $78.2 million.
For additional information on our collaboration
arrangements with Samsung Bioepis, please read
Note 18, Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
For 2018 net income attributable to
noncontrolling interests, net of tax, was primarily
related to a $50.0 million pre-tax payment made to
Neurimmune to reduce the previously negotiated
royalty rates payable on products developed under the
Neurimmune Agreement, including royalties payable
on potential commercial sales of aducanumab, by 5%.
For 2017 net income attributable to
noncontrolling interests, net of tax, was primarily
related to a $150.0 million pre-tax payment made to
Neurimmune to reduce the previously negotiated
royalty rates payable on products developed under the
Neurimmune Agreement, including royalties payable
on potential commercial sales of aducanumab, by
15%.
For additional information on our collaboration
arrangement with Neurimmune, please read Note 19,
Investments in Variable Interest Entities, to our
consolidated financial statements included in this
report.
76
Financial Condition, Liquidity and Capital Resources
Our financial condition is summarized as follows:
(In millions, except percentages)
Financial assets:
Cash and cash equivalents
Marketable securities — current
Marketable securities — non-current
Total cash, cash equivalents and marketable securities
Borrowings:
Current portion of notes payable
Notes payable
Total borrowings
Working Capital:
Current assets
Current liabilities
Total working capital
** Percentage not meaningful.
As of December 31,
2019
2018
% Change
2019
compared to
2018
$
$
$
$
$
$
2,913.7 $
1,562.2
1,408.1
5,884.0 $
1,495.8 $
4,459.0
5,954.8 $
1,224.6
2,313.4
1,375.9
4,913.9
—
5,936.5
5,936.5
8,381.8 $
(4,863.8)
3,518.0 $
7,640.9
(3,295.2)
4,345.7
137.9 %
(32.5)%
2.3 %
19.7 %
**
(24.9)%
0.3 %
9.7 %
47.6 %
(19.0)%
For the year ended December 31, 2019, certain
For the year ended December 31, 2018, certain
significant cash flows were as follows:
significant cash flows were as follows:
• $7.1 billion in net cash flows provided by
• $6.2 billion in net cash flows provided by
operating activities, net of:
operating activities, net of:
$1.1 billion in total net payments for
income taxes; and
$74.0 million upfront payment made to
Skyhawk upon entering into a collaboration
and research and development services
agreement;
• $5.9 billion used for share repurchases;
• $923.7 million in proceeds received on the
divestiture of our Hillerød, Denmark
manufacturing operations, including the sale of
raw materials that were remaining at the Hillerød
facility on the closing date of this transaction;
• $744.4 million payment made for our acquisition
of NST, net of cash acquired;
• $479.3 million in proceeds received on sales of
strategic investments;
• $514.5 million used for purchases of property,
plant and equipment;
• $300.0 million for the final contingent payment
made to former shareholders of Fumapharm AG
and holders of their rights; and
• $155.0 million in payments made to Alkermes
following the FDA's approval of VUMERITY.
$1.0 billion in total net payments for
income taxes; and
$375.0 million in an upfront payment
made to Ionis upon the closing of the
2018 Ionis Agreement and a $162.1
million expense reflecting the premium
paid for the purchase of Ionis common
stock;
• $4.4 billion used for share repurchases;
• $1.5 billion in contingent payments made to
former shareholders of Fumapharm AG and
holders of their rights;
• $770.6 million used for purchases of property,
plant and equipment;
• $676.6 million payment made to Samsung
BioLogics upon the closing of the share
purchase transaction increasing our ownership
percentage in Samsung Bioepis to approximately
49.9%;
• $462.9 million payment made to Ionis reflecting
the fair value of the Ionis common stock
purchased upon the closing the 2018 Ionis
Agreement; and
• $112.5 million in payments made for the
acquisitions of BIIB100, BIIB104 and BIIB110.
77
Overview
We have historically financed our operating and
capital expenditures primarily through cash flows
earned through our operations. We expect our
operating expenditures, particularly those related to
research and development, clinical trials,
commercialization of new products and international
expansion to continue to grow. However, we expect to
continue funding our current and planned operating
requirements principally through our cash flows from
operations, as well as our existing cash resources.
We believe that our existing funds, when combined
with cash generated from operations and our access
to additional financing resources, if needed, are
sufficient to satisfy our operating, working capital,
strategic alliance, milestone payment, capital
expenditure and debt service requirements for the
foreseeable future. In addition, we may choose to
opportunistically return cash to shareholders and
pursue other business initiatives, including acquisition
and licensing activities. We may, from time to time,
also seek additional funding through a combination of
new collaborative agreements, strategic alliances and
additional equity and debt financings or from other
sources should we identify a significant new
opportunity.
Aducanumab
In October 2019 we and our collaboration
partner Eisai announced that we plan to pursue
regulatory approval for aducanumab in the U.S. We
plan to actively commit funds to developing our
commercialization program for aducanumab so that
we would be in a position to launch aducanumab if we
receive regulatory approval. If we do not receive
regulatory approval or are unable to successfully
commercialize aducanumab, our financial condition,
business and operations may be adversely affected.
For additional information on certain risks that
could negatively impact our financial position or future
results of operations, please read Item 1A. Risk
Factors and Item 7A. Quantitative and Qualitative
Disclosures About Market Risk included in this report.
Cash, Cash Equivalents and Marketable Securities
Until required for another use in our business,
we typically invest our cash reserves in bank deposits,
certificates of deposit, commercial paper, corporate
notes, U.S. and foreign government instruments,
overnight reverse repurchase agreements and other
interest-bearing marketable debt instruments in
accordance with our investment policy. It is our policy
to mitigate credit risk in our cash reserves and
marketable securities by maintaining a well-diversified
portfolio that limits the amount of exposure as to
institution, maturity and investment type.
78
As of December 31, 2019, we had cash, cash
equivalents and marketable securities totaling
approximately $5.9 billion compared to approximately
$4.9 billion as of December 31, 2018. The net
increase in cash, cash equivalents and marketable
securities at December 31, 2019, from December 31,
2018, was primarily due to cash flows from
operations, cash received upon the divestiture of our
Hillerød, Denmark manufacturing operations, net
proceeds from marketable securities and proceeds
from sales of strategic investments, partially offset by
cash used for share repurchases, cash used for our
acquisition of NST, net purchases of property, plant
and equipment, contingent payments made to former
shareholders of Fumapharm AG and holders of their
rights and upfront and milestone payments made to
Alkermes and Skyhawk.
Investments and other assets in our
consolidated balance sheet as of December 31, 2019
and 2018, includes the carrying value of our
investment in Samsung Bioepis of $580.2 million and
$680.6 million, respectively. As Samsung Bioepis is a
privately-held entity, our ability to liquidate our
investment in Samsung Bioepis may be limited and
we may realize significantly less than the value of
such investment. Investments in other assets, as of
December 31, 2019 and 2018, also includes the fair
value of our investment in Ionis common stock of
$329.6 million and $563.8 million, respectively, which
is subject to certain holding period restrictions.
For additional information on our acquisition of
NST, please read Note 2, Acquisitions, to our
consolidated financial statements included in this
report. For additional information on the divestiture of
our Hillerød, Denmark manufacturing operations,
please read Note 3, Divestitures, to our consolidated
financial statements included in this report. For
additional information on our collaboration
arrangements with Ionis, Samsung Bioepis, Alkermes
and Skyhawk, please read Note 18, Collaborative and
Other Relationships, to our consolidated financial
statements included in this report.
Borrowings
The following is a summary of our principal
indebtedness as of December 31, 2019:
• $1.5 billion aggregate principal amount of 2.90%
Senior Notes due September 15, 2020;
• $1.0 billion aggregate principal amount of
3.625% Senior Notes due September 15, 2022;
• $1.75 billion aggregate principal amount of
4.05% Senior Notes due September 15, 2025;
and
• $1.75 billion aggregate principal amount of
5.20% Senior Notes due September 15, 2045.
These Senior Notes were issued at discount and
are amortized as additional interest expense over the
period from issuance through maturity.
For a summary of the fair values of our
outstanding borrowings as of December 31, 2019 and
2018, please read Note 7, Fair Value Measurements,
to our consolidated financial statements included in
this report.
2015 Credit Facility
In August 2015 we entered into a $1.0 billion,
five-year senior unsecured revolving credit facility
under which we were permitted to draw funds for
working capital and general corporate purposes. The
terms of the revolving credit facility included a
financial covenant that required us not to exceed a
maximum consolidated leverage ratio. As of
December 31, 2019, we had no outstanding
borrowings and were in compliance with all covenants
under this facility. This credit facility was replaced with
the new revolving credit facility entered into in January
2020, as discussed below.
2020 Credit Facility
In January 2020 we entered into a $1.0 billion,
five-year senior unsecured revolving credit facility
under which we are permitted to draw funds for
working capital and general corporate purposes. The
terms of the revolving credit facility include a financial
covenant that requires us not to exceed a maximum
consolidated leverage ratio. This revolving credit
facility replaced the revolving credit facility entered
into in August 2015.
Working Capital
Working capital is defined as current assets less
current liabilities. The change in working capital at
December 31, 2019, from December 31, 2018,
reflects an increase in total current assets of $740.9
million and an increase in total current liabilities of
$1,568.6 million.
The net increase in total current assets was
primarily driven by an increase in net cash, cash
equivalents and marketable securities, as described
above, offset by a decrease in inventory resulting from
our sale of hemophilia-related inventory to Bioverativ.
The net increase in total current liabilities was
primarily due to the reclassification of $1.5 billion of
our Senior Notes to current liabilities from notes
payable, as these Senior Notes are due within one
year. This increase was partially offset by a reduction
in accrued expenses and other.
79
The net decrease in accrued expenses and other
was primarily related to a decrease in the accrual of
contingent payments related to FUMADERM and
TECFIDERA and a decrease in the accrual for
construction in progress, partially offset by the accrual
of the $100.0 million upfront payment to Samsung
Bioepis, which was paid in January 2020.
Share Repurchase Programs
In December 2019 our Board of Directors
authorized our December 2019 Share Repurchase
Program, which is a program to repurchase up to $5.0
billion of our common stock. Our December 2019
Share Repurchase Program does not have an
expiration date. All share repurchases under our
December 2019 Share Repurchase Program will be
retired. We did not repurchase shares of our common
stock under our December 2019 Share Repurchase
Program during the year ended December 31, 2019.
In March 2019 our Board of Directors authorized
our March 2019 Share Repurchase Program, which is
a program to repurchase up to $5.0 billion of our
common stock. Our March 2019 Share Repurchase
Program does not have an expiration date. All share
repurchases under our March 2019 Share
Repurchase Program will be retired. Under our March
2019 Share Repurchase Program, we repurchased
and retired approximately 14.7 million shares of our
common stock at a cost of approximately $3.7 billion
during the year ended December 31, 2019.
In August 2018 our Board of Directors
authorized our 2018 Share Repurchase Program,
which was a program to repurchase up to $3.5 billion
of our common stock. Our 2018 Share Repurchase
Program 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 and 4.3 million shares of
our common stock at a cost of approximately $2.1
billion and $1.4 billion during the years ended
December 31, 2019 and 2018, respectively.
In July 2016 our Board of Directors authorized
our 2016 Share Repurchase Program, which was a
program to repurchase up to $5.0 billion of our
common stock. Our 2016 Share Repurchase Program
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 and 3.7 million shares of
our common stock at a cost of approximately $3.0
billion and $1.0 billion during the years ended
December 31, 2018 and 2017, respectively.
Cash Flows
The following table summarizes our cash flow activity:
(In millions, except percentages)
Net cash flows provided by operating
activities
Net cash flows provided by (used in)
investing activities
Net cash flows used in financing
activities
$
$
$
For the Years Ended
December 31,
2019
2018
2017
% Change
2019
compared to
2018
2018
compared to
2017
7,078.6 $
6,187.7 $
4,551.0
14.4 %
36.0 %
470.5 $
(2,046.3) $
(2,963.1)
(123.0)%
(30.9)%
(5,860.4) $
(4,472.0) $
(2,380.0)
31.0 %
87.9 %
Operating Activities
Cash flows from operating activities represent
the cash receipts and disbursements related to all of
our activities other than investing and financing
activities. We expect cash provided from operating
activities will continue to be our primary source of
funds to finance operating needs and capital
expenditures for the foreseeable future.
Operating cash flow is derived by adjusting our
net income for:
• non-cash operating items such as depreciation
and amortization, impairment charges,
unrealized gain (loss) on strategic investments,
acquired IPR&D and share-based compensation;
• changes in operating assets and liabilities which
reflect timing differences between the receipt
and payment of cash associated with
transactions and when they are recognized in
results of operations; and
• changes in the fair value of contingent payments
associated with our acquisitions of businesses
and payments related to collaborations.
For 2019 compared to 2018, net cash flows
provided by operating activities increased primarily
due to higher net income.
Investing Activities
For 2019 compared to 2018, the increase in net
cash flows provided by investing activities was
primarily due to a decrease in contingent payments
made to former shareholders of Fumapharm AG and
holders of their rights, the proceeds received upon the
divestiture of our Hillerød, Denmark manufacturing
operations, the proceeds received on our sales of
strategic investments and the $462.9 million payment
made to Ionis reflecting the fair value of the Ionis
common stock purchased upon the closing of the
2018 Ionis Agreement in the prior year comparative
period. This increase was partially offset by a
decrease in net proceeds related to marketable
securities, the cash used for our acquisition of NST
and $155.0 million in milestone payments made to
Alkermes following the FDA's approval of VUMERITY,
which was recorded as an intangible asset during the
fourth quarter of 2019.
Financing Activities
For 2019 compared to 2018, the increase in net
cash flows used in financing activities was primarily
due to an increase in cash used for share
repurchases.
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Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019, excluding amounts
related to uncertain tax positions, funding commitments, contingent development, regulatory and commercial
milestone payments, contingent payments and contingent consideration related to our business combinations, as
described below.
Payments Due by Period
Total
Less than
1 Year
1 to 3
Years
3 to 5
Years
After
5 Years
(In millions)
Non-cancellable operating leases (1), (2) $
Long-term debt obligations (3)
Purchase and other obligations (4)
Defined benefit obligation
372.3 $
60.6 $
105.9 $
8,792.2
1,013.6
102.5
1,730.8
266.1
—
1,387.2
183.0
—
Total contractual obligations
$ 10,280.6 $
2,057.5 $
1,676.1 $
89.3 $
323.8
329.4
—
742.5 $
116.5
5,350.4
235.1
102.5
5,804.5
(1) We lease properties and equipment for use in
our operations. Amounts reflected within the
table above detail future minimum rental
commitments under non-cancelable operating
leases as of December 31 for each of the
periods presented. In addition to the minimum
rental commitments, these leases may require
us to pay additional amounts for taxes,
insurance, maintenance and other operating
expenses.
(2) Obligations are presented net of sublease
income expected to be received for the vacated
small-scale biologics manufacturing facility in
Cambridge, MA, the vacated portion of our
Weston, MA facility and other facilities
throughout the world.
(3) Long-term debt obligations are related to our
Senior Notes, including principal and interest
payments.
(4) Purchase and other obligations primarily include
$697.0 million related to the remaining
payments on the Transition Toll Tax, contractual
commitments to our suppliers, $52.0 million in
contractual commitments for the construction of
our large-scale biologics manufacturing facility in
Solothurn, Switzerland and $8.3 million related
to the fair value of net liabilities on derivative
contracts.
Royalty Payments
TYSABRI
In 2013 we acquired from Elan Pharma
International Ltd. (Elan), an affiliate of Elan
Corporation plc, full ownership of all remaining rights
to TYSABRI that we did not already own or control.
Under the acquisition agreement, we are obligated to
make contingent payments to Elan of 18% on annual
worldwide net commercial sales up to $2.0 billion and
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25% on annual worldwide net commercial sales that
exceed $2.0 billion. Royalty payments to Elan and
other third parties are recognized as cost of sales in
our consolidated statements of income. Elan was
acquired by Perrigo Company plc (Perrigo) in
December 2013 and Perrigo subsequently sold its
rights to these payments to a third-party effective
January 2017.
SPINRAZA
In 2016 we exercised our option to develop and
commercialize SPINRAZA from Ionis. Under our
agreement with Ionis, we make royalty payments to
Ionis on annual worldwide net commercial sales of
SPINRAZA using a tiered royalty rate between 11%
and 15%, which are recorded as cost of sales in our
consolidated statements of income. For additional
information on our collaboration arrangements with
Ionis, please read Note 18, Collaborative and Other
Relationships, to our consolidated financial
statements included in this report.
VUMERITY
In October 2019 the FDA approved VUMERITY
for the treatment of RMS. Under our agreement with
Alkermes, we make royalty payments to Alkermes on
worldwide net commercial sales of VUMERITY using a
royalty rate of 15%, which are recorded as cost of
sales in our consolidated statements of income.
Royalties payable on net commercial sales of
VUMERITY are subject, under certain circumstances,
to tiered minimum annual payment requirements for a
period of five years following FDA approval. For
additional information on our collaboration
arrangement with Alkermes, please read Note 18,
Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
Contingent Consideration related to Business
Combinations
In connection with our acquisitions of
Convergence Pharmaceuticals Holdings Limited
(Convergence) and Biogen International Neuroscience
GmbH (BIN), we agreed to make additional payments
based upon the achievement of certain milestone
events.
As the acquisitions of Convergence and BIN
occurred after January 1, 2009, we recognized the
contingent consideration liabilities associated with
these transactions at their fair value on the
acquisition date and revalue the remaining obligations
each reporting period. We may pay up to
approximately $735.0 million in remaining milestones
related to these acquisitions.
Fumapharm AG
In 2006 we acquired Fumapharm AG. As part of
this acquisition we acquired FUMADERM and
TECFIDERA (together, the Fumapharm Products). We
were required to make contingent payments to former
shareholders of Fumapharm AG and holders of their
rights based on the attainment of certain cumulative
sales levels of Fumapharm Products and the level of
total net sales of Fumapharm Products in the prior 12-
month period, as defined in the acquisition
agreement, until such time as the cumulative sales
level reached $20.0 billion, at which time no further
contingent payments were due. During the first
quarter of 2019 we paid the final $300.0 million
contingent payment as we achieved the $20.0 billion
cumulative sales level related to the Fumapharm
Products in the fourth quarter of 2018.
Contingent Development, Regulatory and
Commercial Milestone Payments
Based on our development plans as of
December 31, 2019, we could make potential future
milestone payments to third parties of up to
approximately $6.8 billion, including approximately
$1.2 billion in development milestones, approximately
$1.4 billion in regulatory milestones and
approximately $4.2 billion in commercial milestones,
as part of our various collaborations, including
licensing and development programs. Payments under
these agreements generally become due and payable
upon achievement of certain development, regulatory
or commercial milestones. Because the achievement
of these milestones was not considered probable as
of December 31, 2019, such contingencies have not
been recorded in our financial statements. Amounts
related to contingent milestone payments are not
considered contractual obligations as they are
contingent on the successful achievement of certain
development, regulatory or commercial milestones.
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Provided various development, regulatory or
commercial milestones are achieved, we anticipate
that we may pay approximately $430.0 million of
milestone payments in 2020, including $75.0 million
upon the regulatory filing with the FDA for approval of
aducanumab and $100.0 million if aducanumab is
launched in the U.S.
Other Funding Commitments
As of December 31, 2019, we have several
ongoing clinical studies in various clinical trial stages.
Our most significant clinical trial expenditures are to
CROs. The contracts with CROs are generally
cancellable, with notice, at our option. We recorded
accrued expenses of approximately $24.0 million in
our consolidated balance sheet for expenditures
incurred by CROs as of December 31, 2019. We have
approximately $514.0 million in cancellable future
commitments based on existing CRO contracts as of
December 31, 2019.
As part of the sale of our Hillerød, Denmark
manufacturing operations to FUJIFILM, 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 $74.0 million associated
with such guarantees and have accrued for this
obligation. We may adjust this estimate based upon
changes in business conditions, which may result in
the increase or reduction of this adverse commitment
obligation in subsequent periods.
Tax Related Obligations
We exclude liabilities pertaining to uncertain tax
positions from our summary of contractual obligations
as we cannot make a reliable estimate of the period
of cash settlement with the respective taxing
authorities. As of December 31, 2019, we have
$136.9 million of net liabilities associated with
uncertain tax positions.
As of December 31, 2019 and 2018, we have
accrued income tax liabilities of $697.0 million under
the Transition Toll Tax. Of the amounts accrued as of
December 31, 2019, no amounts are expected to be
paid within one year due to an approximately $87.0
million carryforward of taxes paid in relation to the
company's 2017 tax return. The Transition Toll Tax will
be paid over an eight-year period, which started in
2018, and will not accrue interest. For additional
information on the Transition Toll Tax, please read
Note 16, Income Taxes, to our consolidated financial
statements included in this report.
Other Off-Balance Sheet Arrangements
We do not have any relationships with entities
often referred to as structured finance or special
purpose entities that were established for the
purpose of facilitating off-balance sheet
arrangements. As such, we are not exposed to any
financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships. We
consolidate variable interest entities if we are the
primary beneficiary.
New Accounting Standards
For a discussion of new accounting standards
and their expected impact on our consolidated
financial statements or disclosures, please read
Note 1, Summary of Significant Accounting Policies, to
our consolidated financial statements included in this
report.
Legal Matters
For a discussion of legal matters as of
December 31, 2019, please read Note 20, Litigation,
to our consolidated financial statements included in
this report.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial
statements, which have been prepared in accordance
with accounting principles generally accepted in the
U.S. (U.S. GAAP), 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. Other significant accounting
policies are outlined in Note 1, Summary of Significant
Accounting Policies, to our consolidated financial
statements included in this report.
Revenue Recognition
We recognize revenues when our customer
obtains control of promised goods or services, in an
amount that reflects the consideration which we
expect to receive in exchange for those goods or
services. We recognize revenues following the five-
step model prescribed under Financial Accounting
Standards Board (FASB) Accounting Standards
Codification 606, Revenue from Contracts with
83
Customers: (i) identify contract(s) with a customer; (ii)
identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the
transaction price to the performance obligations in
the contract; and (v) recognize revenues when (or as)
we satisfy the performance obligation.
Product Revenues
In the U.S., we sell our products primarily to
wholesale distributors and specialty pharmacy
providers. In other countries, we sell our products
primarily to wholesale distributors, hospitals,
pharmacies and other third-party distribution partners.
These customers subsequently resell our products to
health care providers and patients. In addition, we
enter into arrangements with health care providers
and payors that provide for government-mandated or
privately-negotiated discounts and allowances related
to our products.
Product revenues are recognized when the
customer obtains control of our product, which occurs
at a point in time, typically upon delivery to the
customer. We expense incremental costs of obtaining
a contract as and when incurred if the expected
amortization period of the asset that we would have
recognized is one year or less or the amount is
immaterial.
Reserves for Discounts and Allowances
Product revenues are recorded net of reserves
established for applicable discounts and allowances
that are offered within contracts with our customers,
health care providers or payors, including those
associated with the implementation of pricing actions
in certain of the international markets in which we
operate. Our process for estimating reserves
established for these variable consideration
components do not differ materially from our historical
practices.
Product revenue reserves, which are classified
as a reduction in product revenues, are generally
characterized in the following categories: discounts,
contractual adjustments and returns.
These reserves are based on estimates of the
amounts earned or to be claimed on the related sales
and are classified as reductions of accounts
receivable (if the amount is payable to our customer)
or a liability (if the amount is payable to a party other
than our customer). Our estimates of reserves
established for variable consideration are calculated
based upon a consistent application of our
methodology utilizing the expected value method.
These estimates reflect our historical experience,
current contractual and statutory requirements,
specific known market events and trends, industry
data and forecasted customer buying and payment
patterns. The transaction price, which includes
variable consideration reflecting the impact of
discounts and allowances, may be subject to
constraint and is included in the net sales price only
to the extent that it is probable that a significant
reversal of the amount of cumulative revenues
recognized will not occur in a future period. Actual
amounts may ultimately differ from our estimates. If
actual results vary, we adjust these estimates, which
could have an effect on earnings in the period of
adjustment.
In addition to discounts, rebates and product
returns, we also maintain certain customer service
contracts with distributors and other customers in the
distribution channel that provide us with inventory
management, data and distribution services, which
are generally reflected as a reduction of revenues. To
the extent we can demonstrate a separable benefit
and fair value for these services we classify these
payments in selling, general and administrative
expenses.
For additional information on our revenues,
please read Note 4, Revenues, to our consolidated
financial statements included in this report.
Acquired Intangible Assets, including IPR&D
When we purchase a business, the acquired
IPR&D is measured at fair value, capitalized as an
intangible asset and tested for impairment at least
annually, as of October 31, until commercialization,
after which time the IPR&D is amortized over its
estimated useful life. If we acquire an asset or group
of assets that do not meet the definition of a
business under applicable accounting standards, the
acquired IPR&D is expensed on its acquisition date.
Future costs to develop these assets are recorded to
research and development expense as they are
incurred.
We have acquired, and expect to continue to
acquire, intangible assets through the acquisition of
biotechnology companies or through the consolidation
of variable interest entities. These intangible assets
primarily consist of technology associated with human
therapeutic products and IPR&D product candidates.
When significant identifiable intangible assets are
acquired, we generally engage an independent third-
party valuation firm to assist in determining the fair
values of these assets as of the acquisition date.
Management will determine the fair value of less
significant identifiable intangible assets acquired.
Discounted cash flow models are typically used in
these valuations, and these models require the use of
significant estimates and assumptions including but
not limited to:
• estimating the timing of and expected costs to
complete the in-process projects;
84
• projecting regulatory approvals;
• estimating future cash flows from product sales
resulting from completed products and in
process projects; and
• developing appropriate discount rates and
probability rates by project.
We believe the fair values assigned to the
intangible assets acquired are based upon
reasonable estimates and assumptions given
available facts and circumstances as of the
acquisition dates.
If these projects are not successfully developed,
the sales and profitability of the company may be
adversely affected in future periods. Additionally, the
value of the acquired intangible assets may become
impaired. No assurance can be given that the
underlying assumptions used to estimate expected
project sales, development costs or profitability, or the
events associated with such projects, will transpire as
estimated.
Impairment and Amortization of Long-lived Assets
and Accounting for Goodwill
Long-lived Assets Other than Goodwill
Long-lived assets to be held and used include
property, plant and equipment as well as intangible
assets, including IPR&D and trademarks. Property,
plant and equipment are reviewed for impairment
whenever events or changes in circumstances
indicate that the carrying amount of the assets may
not be recoverable. We review our intangible assets
with indefinite lives for impairment annually, as of
October 31, and whenever events or changes in
circumstances indicate that the carrying value of an
asset may not be recoverable.
When performing our impairment assessment,
we calculate the fair value using the same
methodology as described above under Acquired
Intangible Assets, including IPR&D. If the carrying value
of our acquired IPR&D exceeds its fair value, then the
intangible asset is written down to its fair value.
Changes in the estimates and assumptions used in
determining the fair value of our acquired IPR&D could
result in an impairment. Impairments are recorded
within amortization and impairment of acquired
intangible assets in our consolidated statements of
income. Assets that have previously been impaired,
including our vixotrigine program for the treatment of
neuropathic pain, such as TGN, could become further
impaired in the future.
Our most significant intangible assets are our
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 and obtaining the fair value of the U.S. and rest
of world licenses to Forward Pharma’s intellectual
property, including Forward Pharma’s intellectual
property related to TECFIDERA. We amortize the
intangible assets related to our TYSABRI, AVONEX,
SPINRAZA, VUMERITY and TECFIDERA (rest of world)
products using the economic consumption method
based on revenues generated from the products
underlying the related intangible assets. An analysis
of the anticipated lifetime revenues of TYSABRI,
AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest
of world) is performed annually during our long-range
planning cycle and whenever events or changes in
circumstances would significantly affect the
anticipated lifetime revenues of our TYSABRI, AVONEX,
SPINRAZA, VUMERITY or TECFIDERA (rest of world)
products.
For additional information on the impairment
charges related to our long-lived assets during 2019,
2018 and 2017, please read Note 6, Intangible Assets
and Goodwill, to our consolidated financial statements
included in this report.
Goodwill
Goodwill relates largely to amounts that arose in
connection with the merger of Biogen, Inc. and IDEC
Pharmaceuticals Corporation in 2003 and amounts
that were paid in connection with the acquisition of
Fumapharm AG. Our goodwill balances represent the
difference between the purchase price and the fair
value of the identifiable tangible and intangible net
assets when accounted for using the purchase
method of accounting.
We assess our goodwill balance within our
single reporting unit annually, as of October 31, and
whenever events or changes in circumstances
indicate the carrying value of goodwill may not be
recoverable to determine whether any impairment in
this asset may exist and, if so, the extent of such
impairment. We compare the fair value of our
reporting unit to its carrying value. If the carrying
value of the net assets assigned to the reporting unit
exceeds the fair value of our reporting unit, we would
record an impairment loss equal to the difference.
We completed our required annual impairment
test in the fourth quarters of 2019, 2018 and 2017
and determined in each of those periods that the
carrying value of goodwill was not impaired. In each
year, the fair value of our reporting unit, which
includes goodwill, was significantly in excess of the
carrying value of our reporting unit.
Contingent Consideration
We record contingent consideration resulting
from a business combination at its fair value on the
acquisition date. Each reporting period thereafter, we
85
revalue the remaining obligations and record
increases or decreases in their fair value as an
adjustment to contingent consideration expense in
our consolidated statements of income. Changes in
the fair value of our contingent consideration
obligations can result from changes to one or multiple
inputs, including adjustments to the discount rates
and achievement and timing of any cumulative sales-
based and development milestones or changes in the
probability of certain clinical events and changes in
the assumed probability associated with regulatory
approval. These fair value measurements represent
Level 3 measurements as they are based on
significant inputs not observable in the market.
Significant judgment is employed in determining
the appropriateness of these assumptions as of the
acquisition date and for each subsequent period.
Accordingly, changes in assumptions described above,
could have a material impact on the amount of
contingent consideration expense we record in any
given period.
Income Taxes
We prepare and file income tax returns based on
our interpretation of each jurisdiction’s tax laws and
regulations. In preparing our consolidated financial
statements, we estimate our income tax liability in
each of the jurisdictions in which we operate by
estimating our actual current tax expense together
with assessing temporary differences resulting from
differing treatment of items for tax and financial
reporting purposes. These differences result in
deferred tax assets and liabilities, which are included
in our consolidated balance sheets. Upon our election
in the fourth quarter of 2018 to record deferred taxes
for GILTI, we have included amounts related to U.S.
GILTI taxes within temporary difference. Significant
management judgment is required in assessing the
realizability of our deferred tax assets. In performing
this assessment, we consider whether it is more likely
than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation
of future taxable income during the periods in which
those temporary differences become deductible. In
making this determination, under the applicable
financial accounting standards, we are allowed to
consider the scheduled reversal of deferred tax
liabilities, projected future taxable income and the
effects of tax planning strategies. In the event that
actual results differ from our estimates, we adjust our
estimates in future periods and we may need to
establish a valuation allowance, which could
materially impact our consolidated financial position
and results of operations.
We account for uncertain tax positions using a
“more-likely-than-not” threshold for recognizing and
resolving uncertain tax positions. We evaluate
uncertain tax positions on a quarterly basis and
consider various factors including, but not limited to,
changes in tax law, the measurement of tax positions
taken or expected to be taken in tax returns, the
effective settlement of matters subject to audit,
information obtained during in process audit activities
and changes in facts or circumstances related to a
tax position. We adjust the level of the liability to
reflect any subsequent changes in the relevant facts
surrounding the uncertain positions. Our liabilities for
uncertain tax positions can be relieved only if the
contingency becomes legally extinguished, through
either payment to the taxing authority or the expiration
of the statute of limitations, the recognition of the
benefits associated with the position meet the “more-
likely-than-not” threshold or the liability becomes
effectively settled through the examination process.
We consider matters to be effectively settled once the
taxing authority has completed all of its required or
expected examination procedures, including all
appeals and administrative reviews, we have no plans
to appeal or litigate any aspect of the tax position and
we believe that it is highly unlikely that the taxing
authority would examine or re-examine the related tax
position. We also accrue for potential interest and
penalties related to unrecognized tax benefits in
income tax expense.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
We are subject to certain risks that may affect
our results of operations, cash flows and fair values
of assets and liabilities, including volatility in foreign
currency exchange rates, interest rate movements,
pricing pressures worldwide and weak economic
conditions in the foreign markets in which we operate.
We manage the impact of foreign currency exchange
rates and interest rates through various financial
instruments, including derivative instruments such as
foreign currency forward contracts, interest rate lock
contracts and interest rate swap contracts. We do not
enter into financial instruments for trading or
speculative purposes. The counterparties to these
contracts are major financial institutions, and there is
no significant concentration of exposure with any one
counterparty.
Foreign Currency Exchange Risk
Our results of operations are subject to foreign
currency exchange rate fluctuations due to the global
nature of our operations. As a result, our consolidated
financial position, results of operations and cash
flows can be affected by market fluctuations in foreign
currency exchange rates, primarily with respect to the
Euro, British pound sterling, Canadian dollar, Swiss
franc, Japanese yen and South Korean won.
86
While the financial results of our global activities
are reported in U.S. dollars, the functional currency
for most of our foreign subsidiaries is their respective
local currency. Fluctuations in the foreign currency
exchange rates of the countries in which we do
business will affect our operating results, often in
ways that are difficult to predict. In particular, as the
U.S. dollar strengthens versus other currencies, the
value of the non-U.S. revenues will decline when
reported in U.S. dollars. The impact to net income as
a result of a strengthening U.S. dollar will be partially
mitigated by the value of non-U.S. expenses, which
will also decline when reported in U.S. dollars. As the
U.S. dollar weakens versus other currencies, the
value of the non-U.S. revenues and expenses will
increase when reported in U.S. dollars.
We have established revenue and operating
expense hedging and balance sheet risk management
programs to protect against volatility of future foreign
currency cash flows and changes in fair value caused
by volatility in foreign currency exchange rates.
During the second quarter of 2018 the
International Practices Task Force of the Center for
Audit Quality categorized Argentina as a country with a
projected three-year cumulative inflation rate greater
than 100%, which indicated that Argentina’s economy
is highly inflationary. This categorization did not have
a material impact on our results of operations or
financial position as of December 31, 2019, and is
not expected to have a material impact on our results
of operations or financial position in the future.
Revenue and Operating Expense Hedging Program
Our foreign currency hedging program is
designed to mitigate, over time, a portion of the
impact resulting from volatility in exchange rate
changes on revenues and operating expenses. We
use foreign currency forward contracts to manage
foreign currency risk, with the majority of our forward
contracts used to hedge certain forecasted revenue
and operating expense transactions denominated in
foreign currencies in the next 15 months. We do not
engage in currency speculation. For a more detailed
disclosure of our revenue and operating expense
hedging program, please read Note 9, Derivative
Instruments, to our consolidated financial statements
included in this report.
Our ability to mitigate the impact of foreign
currency exchange rate changes on revenues and net
income diminishes as significant foreign currency
exchange rate fluctuations are sustained over
extended periods of time. In particular, devaluation or
significant deterioration of foreign currency exchange
rates are difficult to mitigate and likely to negatively
impact earnings. The cash flows from these contracts
are reported as operating activities in our
consolidated statements of cash flows.
Balance Sheet Risk Management Hedging Program
We also use forward contracts to mitigate the
foreign currency exposure related to certain balance
sheet items. The primary objective of our balance
sheet risk management program is to mitigate the
exposure of foreign currency denominated net
monetary assets and liabilities of foreign affiliates. In
these instances, we principally utilize currency forward
contracts. We have not elected hedge accounting for
the balance sheet related items. The cash flows from
these contracts are reported as operating activities in
our consolidated statements of cash flows.
The following quantitative information includes
the impact of currency movements on forward
contracts used in our revenue, operating expense and
balance sheet hedging programs. As of December 31,
2019 and 2018, a hypothetical adverse 10%
movement in foreign currency exchange rates
compared to the U.S. dollar across all maturities
would result in a hypothetical decrease in the fair
value of forward contracts of approximately $265.0
million and $290.0 million, respectively. The
estimated fair value change was determined by
measuring the impact of the hypothetical exchange
rate movement on outstanding forward contracts. Our
use of this methodology to quantify the market risk of
such instruments is subject to assumptions and
actual impact could be significantly different. The
quantitative information about market risk is limited
because it does not take into account all foreign
currency operating transactions.
Net Investment Hedge Program
Our net investment hedging program is designed
to mitigate currency fluctuations between the U.S.
dollar and South Korean won as a result of exercising
our option to increase our ownership percentage in
Samsung Bioepis to approximately 49.9%. We entered
into foreign currency forward contracts to manage the
foreign currency risk with our forward contracts used
to hedge changes in the spot rate over the next 10
months. As of December 31, 2019 and 2018, a
hypothetical adverse 10% movement would result in a
hypothetical decrease in fair value of approximately
$43.0 million and $64.0 million, respectively. The
estimated fair value was determined by measuring the
impact of the hypothetical spot rate movement on
outstanding forward contracts.
Interest Rate Risk
Our investment portfolio includes cash
equivalents and short-term investments. The fair
value of our marketable securities is subject to
change as a result of potential changes in market
87
interest rates. The potential change in fair value for
interest rate sensitive instruments has been
assessed on a hypothetical 100 basis point adverse
movement across all maturities. As of December 31,
2019 and 2018, we estimate that such hypothetical
100 basis point adverse movement would result in a
hypothetical loss in fair value of approximately $21.0
million and $19.0 million, respectively, to our interest
rate sensitive instruments. The fair values of our
investments were determined using third-party pricing
services or other market observable data.
To achieve a desired mix of fixed and floating
interest rate debt, we entered into interest rate swap
contracts during 2015 for certain of our fixed-rate
debt. These derivative contracts effectively converted
a fixed-rate interest coupon to a floating-rate LIBOR-
based coupon over the life of the respective note. As
of December 31, 2019 and 2018, a 100 basis-point
adverse movement (increase in LIBOR) would increase
annual interest expense by approximately
$6.8 million.
Pricing Pressure
Governments in certain international markets in
which we operate have implemented measures, and
may in the future implement new or additional
measures, to reduce health care costs to limit the
overall level of government expenditures. These
measures vary by country and may include, among
other things, patient access restrictions, suspensions
on price increases, prospective and possible
retroactive price reductions and other recoupments
and increased mandatory discounts or rebates,
recoveries of past price increases and greater
importation of drugs from lower-cost countries. In
addition, certain countries set prices by reference to
the prices in other countries where our products are
marketed. Thus, our inability to obtain and maintain
adequate prices in a particular country may adversely
affect our ability to secure acceptable prices in
existing and potential new markets, which may limit
market growth. The continued implementation of
pricing actions throughout Europe may also lead to
higher levels of parallel trade.
In the U.S., federal and state legislatures, health
agencies and third-party payors continue to focus on
containing the cost of health care. Legislative and
regulatory proposals, enactments to reform health
care insurance programs and increasing pressure
from social sources could significantly influence the
way our products are prescribed and purchased. It is
possible that additional federal health care reform
measures will be adopted in the future, which could
result in increased pricing pressure and reduced
reimbursement for our products and otherwise have
an adverse impact on our consolidated financial
position or results of operations. There is also
significant economic pressure on state budgets that
may result in states increasingly seeking to achieve
budget savings through mechanisms that limit
coverage or payment for our drugs. Managed care
organizations are also continuing to seek price
discounts and, in some cases, impose restrictions on
the coverage of certain drugs.
Our products are also susceptible to increasing
competition in many markets from generic versions,
biosimilars and prodrugs of existing products as well
as products approved under abbreviated regulatory
pathways. Such products are likely to be sold at
substantially lower prices than branded
products. Accordingly, the introduction of such
products, as well as other lower-priced competing
products, may significantly reduce both the price that
we are able to charge for our products and the volume
of products we sell, which will negatively impact our
revenues. In addition, when a generic version of one
of our products is commercialized, it may, in some
cases, be automatically substituted for our product
and reduce our revenues in a short period of time.
Credit Risk
We are subject to credit risk from our accounts
receivable related to our product sales. The majority
of our accounts receivable arise from product sales in
the U.S. and Europe with concentrations of credit risk
limited due to the wide variety of customers and
markets using our products, as well as their
dispersion across many different geographic areas.
Our accounts receivable are primarily due from
wholesale and other third-party distributors, public
hospitals, pharmacies and other government entities.
We monitor the financial performance and
creditworthiness of our customers so that we can
properly assess and respond to changes in their
credit profile. We operate in certain countries where
weakness in economic conditions can result in
extended collection periods. We continue to monitor
these conditions, including the volatility associated
with international economies and the relevant
financial markets, and assess their possible impact
on our business. To date, we have not experienced
any significant losses with respect to the collection of
our accounts receivable.
We believe that our allowance for doubtful
accounts was adequate as of December 31, 2019
and 2018. However, if significant changes occur in the
availability of government funding or the
reimbursement practices of these or other
governments, we may not be able to collect on
amounts due to us from customers in such countries
and our results of operations could be adversely
affected.
Item 8.
Supplementary Data
Financial Statements and
The information required by this Item 8 is
contained on pages F-1 through F-82 of this report
and is incorporated herein by reference.
Changes in and Disagreements
Item 9.
with Accountants on Accounting and
Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures and
Internal Control over Financial Reporting
Controls and Procedures
We have carried out an evaluation, under the
supervision and with the participation of our
management, including our principal executive officer
and principal financial officer, of the effectiveness of
the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934,
as amended), as of December 31, 2019. Based upon
that evaluation, our principal executive officer and
principal financial officer concluded that, as of the end
of the period covered by this report, our disclosure
controls and procedures are effective in ensuring that
(a) the information required to be disclosed by us in
the reports that we file or submit under the Securities
Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the
SEC’s rules and forms and (b) such information is
accumulated and communicated to our management,
including our principal executive officer and principal
financial officer, as appropriate to allow timely
decisions regarding required disclosure. In designing
and evaluating our disclosure controls and
procedures, our management recognized that any
controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance
of achieving the desired control objectives, and our
management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control
over financial reporting during the quarter ended
December 31, 2019, that have materially affected, or
are reasonably likely to materially affect, our internal
control over financial reporting.
88
independent registered public accounting firm, as
stated in their attestation report, which is included
herein.
Item 9B. Other Information
None.
Management’s Annual Report on Internal Control
over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over our
financial reporting. Internal control over financial
reporting is defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act as a process
designed by, or under the supervision of, a company’s
principal executive and principal financial officers and
effected by a company’s board of directors,
management and other personnel to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
U.S. GAAP. Our internal control over financial reporting
includes those policies and procedures that:
• pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect
our transactions and dispositions of our assets;
• provide reasonable assurance that transactions
are recorded as necessary to permit preparation
of financial statements in accordance with
U.S. GAAP, and that our receipts and
expenditures are being made only in accordance
with authorizations of our management and
directors; and
• provide reasonable assurance regarding
prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that
could have a material effect on our financial
statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or
detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the
risk that controls may become inadequate because of
changes in conditions, or that the degree of
compliance with the policies or procedures may
deteriorate.
Our management assessed the effectiveness of
our internal control over financial reporting as of
December 31, 2019. In making this assessment,
management used the criteria set forth by the
Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in its 2013 Internal
Control — Integrated Framework.
Based on our assessment, our management has
concluded that, as of December 31, 2019, our
internal control over financial reporting is effective
based on those criteria.
The effectiveness of our internal control over
financial reporting as of December 31, 2019, has
been audited by PricewaterhouseCoopers LLP, an
89
PART III
Item 10. Directors, Executive Officers
and Corporate Governance
The information concerning our executive
officers is set forth under the heading Information
about our Executive Officers in Item 1 of this report.
The text of our code of business conduct, which
includes the code of ethics that applies to our
principal executive officer, principal financial officer,
principal accounting officer or controller, and persons
performing similar functions, is posted on our website,
www.biogen.com, under the “Corporate Governance”
subsection of the “Investors” section of the site. We
intend to make all required disclosures regarding any
amendments to, or waivers from, provisions of our
code of business conduct at the same location of our
website.
The response to the remainder of this item is
incorporated by reference from the discussion
responsive thereto in the sections entitled
“Proposal 1 - Election of Directors,” “Corporate
Governance at Biogen” and “Miscellaneous -
Stockholder Proposals” contained in the proxy
statement for our 2020 annual meeting of
stockholders.
Item 11. Executive Compensation
The response to this item is incorporated by
reference from the discussion responsive thereto in
the sections entitled “Executive Compensation
Matters” and “Corporate Governance at Biogen”
contained in the proxy statement for our 2020 annual
meeting of stockholders.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and
Related Stockholder Matters
The response to this item is incorporated by
reference from the discussion responsive thereto in
the sections entitled “Stock Ownership” and “Equity
Compensation Plan Information” contained in the proxy
statement for our 2020 annual meeting of
stockholders.
Item 13. Certain Relationships and
Related Transactions, and Director
Independence
The response to this item is incorporated by
reference from the discussion responsive thereto in
the sections entitled “Certain Relationships and
Related Person Transactions” and “Corporate
Governance at Biogen” contained in the proxy
statement for our 2020 annual meeting of
stockholders.
Item 14. Principal Accountant Fees and
Services
The response to this item is incorporated by
reference from the discussion responsive thereto in
the section entitled “Proposal 2 - Ratification of the
Selection of our Independent Registered Public
Accounting Firm” contained in the proxy statement for
our 2020 annual meeting of stockholders.
90
PART IV
Item 15.
Exhibits and Financial Statement Schedules
a.
(1) Consolidated Financial Statements:
The following financial statements are filed as part of this report:
Financial Statements
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Certain totals may not sum due to rounding.
(2) Exhibits
Page Number
F-2
F-3
F-4
F-5
F-6
F-9
F-80
The exhibits listed on the Exhibit Index beginning on page 92, which is incorporated herein by reference, are
filed or furnished as part of this report or are incorporated into this report by reference.
(3) Financial Statement Schedules
Schedules are omitted because they are not applicable, or are not required, or because the information is
included in the consolidated financial statements and notes thereto.
Item 16.
Form 10-K Summary
Not applicable.
91
Exhibit No.
2.1†
2.2
3.1
3.2
3.3
4.1
4.2
4.3
4.4+
10.1
10.2
10.3†
10.4†
10.5
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
EXHIBIT INDEX
Description
Asset Purchase Agreement among Biogen Idec International Holding Ltd., Elan Pharma
International Limited and Elan Pharmaceuticals, Inc., dated as of February 5, 2013. Filed
as Exhibit 2.1 to our Current Report on Form 8-K/A filed on February 12, 2013.
Separation Agreement between Biogen Inc. and Bioverativ Inc. dated as of January 31,
2017. Filed as Exhibit 2.1 to our Current Report on Form 8-K filed on February 2, 2017.
Amended and Restated Certificate of Incorporation, as amended. Filed as Exhibit 3.1 to
our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
Certificate of Amendment to the Certificate of Incorporation. Filed as Exhibit 3.1 to our
Current Report on Form 8-K filed on March 27, 2015.
Fourth Amended and Restated Bylaws. Filed as Exhibit 3.1 to our Current Report on Form
8-K filed on June 9, 2017.
Reference is made to Exhibit 3.1 for a description of the rights, preferences and privileges
of our Series A Preferred Stock and Series X Junior Participating Preferred Stock.
Indenture between Biogen Inc. and U.S. Bank National Association, dated as of September
15, 2015. Filed as Exhibit 4.1 to our Current Report on Form 8-K filed on September 16,
2015.
First Supplemental Indenture between Biogen Inc. and U.S. Bank National Association,
dated September 15, 2015. Filed as Exhibit 4.2 to our Current Report on Form 8-K filed
on September 16, 2015.
Description of Securities.
Credit Agreement between Biogen Inc., Bank of America, N.A., Goldman Sachs Bank USA
and other lenders party thereto, dated August 28, 2015. Filed as Exhibit 10.1 to our Current
Report on Form 8-K filed on September 1, 2015.
Credit Agreement, dated as of January 28, 2020, among Biogen Inc., Bank of America,
N.A., as administrative agent, swing ling lender and the L/C issuer, and the other lenders
party thereto. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 3,
2020.
Second Amended and Restated Collaboration Agreement between Biogen Idec Inc. and
Genentech, Inc., dated as of October 18, 2010. Filed as Exhibit 10.5 to our Annual Report
on Form 10-K for the year ended December 31, 2010.
Letter Agreement regarding GA101 financial terms between Biogen Idec Inc. and
Genentech, Inc., dated October 18, 2010. Filed as Exhibit 10.6 to our Annual Report on
Form 10-K for the year ended December 31, 2010.
Settlement and License Agreement, dated January 17, 2017, between Biogen Swiss
Manufacturing GmbH, Biogen International Holdings ltd., Forward Pharma A/S and other
parties thereto. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February
1, 2017.
Biogen Inc. 2017 Omnibus Equity Plan. Filed as Appendix B to our Definitive Proxy Statement
on Schedule 14A filed on April 26, 2017.
Form of restricted stock unit award agreement under the Biogen Inc. 2017 Omnibus Equity
Plan. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017.
Form of market stock unit award agreement under the Biogen Inc. 2017 Omnibus Equity
Plan. Filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017.
Form of performance unit award agreement under the Biogen Inc. 2017 Omnibus Equity
Plan. Filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2017.
Form of cash-settled performance unit award agreement under the Biogen Inc. 2017
Omnibus Equity Plan. Filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2017.
Form of performance stock units award agreement (cash-settled) under the Biogen Inc.
2017 Omnibus Equity Plan. Filed as Exhibit 10.10 to our Annual Report on Form 10-K for
the year ended December 31, 2017.
Form of performance stock units award agreement under the Biogen Inc. 2017 Omnibus
Equity Plan. Filed as Exhibit 10.11 to our Annual Report on Form 10-K for the year ended
December 31, 2017.
92
Exhibit No.
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
Description
Form of performance stock units award agreement under the Biogen Inc. 2017 Omnibus
Equity Plan. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2018.
Form of performance stock units award agreement (cash settled) under the Biogen Inc.
2017 Omnibus Equity Plan. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q
for the quarter ended March 31, 2018.
Form of restricted stock unit award agreement (2018 one-time transition grant) under
the Biogen Inc. 2017 Omnibus Equity Plan. Filed as Exhibit 10.3 to our Quarterly Report
on Form 10-Q for the quarter ended March 31, 2018.
Form of market stock unit award agreement under the Biogen Inc. 2017 Omnibus Equity
Plan (for grants commencing in July 2019). Filed as Exhibit 10.1 to our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2019.
Form of performance stock units award agreement under the Biogen Inc. 2017 Omnibus
Equity Plan (for grants commencing in July 2019). Filed as Exhibit 10.2 to our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2019.
Form of performance stock units award agreement (cash settled) under the Biogen Inc.
2017 Omnibus Equity Plan (for grants commencing in July 2019). Filed as Exhibit 10.3
to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
Biogen Idec Inc. 2008 Amended and Restated Omnibus Equity Plan. Filed as Exhibit 10.1
to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.
Form of performance unit award agreement under the Biogen Idec Inc. 2008 Omnibus
Equity Plan. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2014.
Form of market stock unit award agreement under the Biogen Idec Inc. 2008 Omnibus
Equity Plan. Filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2014.
Form of restricted stock unit award agreement under the Biogen Idec Inc. 2008 Omnibus
Equity Plan. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on August 1,
2008.
Form of nonqualified stock option award agreement under the Biogen Idec Inc. 2008
Omnibus Equity Plan. Filed as Exhibit 10.2 to our Current Report on Form 8-K filed on
August 1, 2008.
Form of cash-settled performance shares award agreement under the Biogen Idec Inc.
2008 Omnibus Equity Plan. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2010.
Biogen Inc. 2006 Non-Employee Directors Equity Plan, as amended. Filed as Exhibit 10.1
to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
Biogen Inc. 2015 Employee Stock Purchase Plan. Filed as Appendix A to our Definitive
Proxy Statement on Schedule 14A filed on April 30, 2015.
Biogen Idec Inc. 2008 Performance-Based Management Incentive Plan. Filed as Appendix
B to our Definitive Proxy Statement on Schedule 14A filed on May 8, 2008.
Biogen Inc. 2019 Form of Performance-Based Management Incentive Plan. Filed as Exhibit
10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.
Biogen Idec Inc. Voluntary Executive Supplemental Savings Plan, as amended and restated
effective January 1, 2004. Filed as Exhibit 10.13 to our Annual Report on Form 10-K for
the year ended December 31, 2003.
Biogen Idec Inc. Supplemental Savings Plan, as amended. Filed as Exhibit 10.23 to our
Annual Report on Form 10-K for the year ended December 31, 2015.
Biogen Idec Inc. Voluntary Board of Directors Savings Plan, as amended. Filed as Exhibit
10.24 to our Annual Report on Form 10-K for the year ended December 31, 2015.
Biogen Inc. Executive Severance Policy - U.S. Executive Vice President, as amended
effective June 19, 2019. Filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2019.
Annual Retainer Summary for Board of Directors. Filed as Exhibit 10.31 to our Annual
Report on Form 10-K for the year ended December 31, 2018.
Annual Retainer Summary for Board of Directors (effective January 1, 2020). Filed as
Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30,
2019.
93
Exhibit No.
10.35*
10.36*
10.37*
10.38*
10.39*
10.40*
21+
23+
31.1+
31.2+
32.1++
101++
Description
Form of indemnification agreement for directors and executive officers. Filed as Exhibit
10.1 to our Current Report on Form 8-K filed on June 7, 2011.
Employment Agreement between Biogen Inc. and Michel Vounatsos dated December 18,
2016 and effective as of January 6, 2017. Filed as Exhibit 10.1 to our Current Report on
Form 8-K filed on December 19, 2016.
Letter regarding employment arrangement of Jeffrey Capello dated November 14, 2017.
Filed as Exhibit 10.31 to our Annual Report on Form 10-K for the year ended December 31,
2017.
Letter regarding employment arrangement of Michael Ehlers dated April 16, 2016. Filed as
Exhibit 10.33 to our Annual Report on Form 10-K for the year ended December 31, 2017.
Letter regarding employment arrangement of Susan Alexander dated December 13, 2005.
Filed as Exhibit 10.58 to our Annual Report on Form 10-K for the year ended December 31,
2009.
Letter regarding employment arrangement for Paul McKenzie dated December 14, 2015.
Filed as Exhibit 10.4 to our Quarterly Report on Form 10-Q for the quarter ended March
31, 2018.
Subsidiaries.
Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm.
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
The following materials from Biogen Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2019, formatted in iXBRL (Inline Extensible Business Reporting Language):
(i) the Consolidated Statements of Income, (ii) the Consolidated Statements of
Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated
Statements of Cash Flows, (v) the Consolidated Statements of Equity and (vi) Notes to
Consolidated Financial Statements.
*
†
+
Management contract or compensatory plan or arrangement.
Confidential treatment has been granted or requested with respect to portions of this exhibit.
Filed herewith.
++
Furnished herewith.
94
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
BIOGEN INC.
By:
/S/ MICHEL VOUNATSOS
Michel Vounatsos
Chief Executive Officer
Date: February 6, 2020
95
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Capacity
Date
/S/ MICHEL VOUNATSOS
Michel Vounatsos
/S/ JEFFREY D. CAPELLO
Jeffrey D. Capello
/S/ ROBIN C. KRAMER
Robin C. Kramer
/S/ STELIOS PAPADOPOULOS
Stelios Papadopoulos
/S/ ALEXANDER J. DENNER
Alexander J. Denner
/S/ CAROLINE D. DORSA
Caroline D. Dorsa
/S/ WILLIAM A. HAWKINS
William A. Hawkins
/S/ NANCY L. LEAMING
Nancy L. Leaming
/S/ JESUS B. MANTAS
Jesus B. Mantas
/S/ RICHARD C. MULLIGAN
Richard C. Mulligan
/S/ ROBERT W. PANGIA
Robert W. Pangia
/S/ BRIAN S. POSNER
Brian S. Posner
/S/ ERIC K. ROWINSKY
Eric K. Rowinsky
/S/ LYNN SCHENK
Lynn Schenk
/S/ STEPHEN A. SHERWIN
Stephen A. Sherwin
Director and Chief Executive Officer
(principal executive officer)
February 6, 2020
Executive Vice President and Chief
Financial Officer (principal financial
officer)
February 6, 2020
Vice President, Chief Accounting
Officer (principal accounting officer)
February 6, 2020
Director and Chairman of the Board of
Directors
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
Director
February 6, 2020
96
BIOGEN INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page Number
F-2
F-3
F-4
F-5
F-6
F-9
F-80
F- 1
BIOGEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
For the Years Ended December 31,
2019
2018
2017
Revenues:
Product, net
Revenues from anti-CD20 therapeutic programs
Other
Total revenues
Cost and expenses:
Cost of sales, excluding amortization and impairment of
acquired intangible assets
Research and development
Selling, general and administrative
Amortization and impairment of acquired intangible assets
Collaboration profit (loss) sharing
Loss on divestiture of Hillerød, Denmark manufacturing
operations
(Gain) loss on fair value remeasurement of contingent
consideration
Acquired in-process research and development
Restructuring charges
Total cost and expenses
Income from operations
Other income (expense), net
Income before income tax expense and equity in loss of
investee, net of tax
Income tax expense
Equity in loss of investee, net of tax
Net income
Net income (loss) attributable to noncontrolling interests, net
of tax
Net income attributable to Biogen Inc.
Net income per share:
Basic earnings per share attributable to Biogen Inc.
Diluted earnings per share attributable to Biogen Inc.
Weighted-average shares used in calculating:
Basic earnings per share attributable to Biogen Inc.
Diluted earnings per share attributable to Biogen Inc.
—
—
$
11,379.8 $
10,886.8 $
2,290.4
707.7
14,377.9
1,980.2
585.9
13,452.9
1,955.4
2,280.6
2,374.7
489.9
241.6
55.3
(63.7)
—
1.5
7,335.3
7,042.6
83.3
7,125.9
1,158.0
79.4
5,888.5
1,816.3
2,597.2
2,106.3
747.3
185.0
(12.3)
112.5
12.0
7,564.3
5,888.6
11.0
5,899.6
1,425.6
—
4,474.0
—
5,888.5 $
43.3
4,430.7 $
31.47 $
31.42 $
21.63 $
21.58 $
$
$
$
187.1
187.4
204.9
205.3
10,354.7
1,559.2
360.0
12,273.9
1,630.0
2,253.6
1,933.9
814.7
112.3
62.7
120.0
0.9
6,928.1
5,345.8
(217.0)
5,128.8
2,458.7
—
2,670.1
131.0
2,539.1
11.94
11.92
212.6
213.0
See accompanying notes to these consolidated financial statements.
F- 2
BIOGEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
Net income attributable to Biogen Inc.
$
5,888.5 $
4,430.7 $
2,539.1
For the Years Ended December 31,
2019
2018
2017
Other comprehensive income:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) recognized during the period, net
of tax
Less: reclassification adjustment for (gains) losses included
in net income, net of tax
Unrealized gains (losses) on securities available for sale,
net of tax
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) recognized during the period, net
of tax
Less: reclassification adjustment for (gains) losses included
in net income, net of tax
Unrealized gains (losses) on cash flow hedges, net of tax
Gains (losses) on net investment hedges:
Gains (losses) recognized during the period, net of tax
Less: reclassification adjustment for (gains) losses included
in net income, net of tax
Gains (losses) on net investment hedges, net of tax
Unrealized gains (losses) on pension benefit obligation, net
of tax
Currency translation adjustment
Total other comprehensive income (loss), net of tax
11.8
(3.6)
8.2
88.1
(115.0)
(26.9)
28.6
(7.0)
21.6
(1.5)
103.8
105.2
(10.6)
6.7
(3.9)
97.4
41.8
139.2
5.0
(1.5)
3.5
5.5
(67.8)
76.5
(3.5)
12.7
9.2
(193.8)
31.5
(162.3)
—
—
—
(4.1)
158.7
1.5
Comprehensive income attributable to Biogen Inc.
5,993.7
4,507.2
2,540.6
Comprehensive income (loss) attributable to noncontrolling
interests, net of tax
Comprehensive income
(0.4)
42.9
131.0
$
5,993.3 $
4,550.1 $
2,671.6
See accompanying notes to these consolidated financial statements.
F- 3
BIOGEN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
ASSETS
As of December 31,
2019
2018
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Due from anti-CD20 therapeutic programs
Inventory
Other current assets
Total current assets
Marketable securities
Property, plant and equipment, net
Operating lease assets
Intangible assets, net
Goodwill
Deferred tax asset
Investments and other assets
Total assets
Current liabilities:
Current portion of notes payable
Taxes payable
Accounts payable
Accrued expenses and other
Total current liabilities
Notes payable
Deferred tax liability
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies
Equity:
Biogen Inc. shareholders’ equity
LIABILITIES AND EQUITY
Preferred stock, par value $0.001 per share
Common stock, par value $0.0005 per share
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Treasury stock, at cost; 23.8 million and 23.8 million shares, respectively
Total Biogen Inc. shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
$
$
$
2,913.7 $
1,562.2
1,880.5
590.2
804.2
631.0
8,381.8
1,408.1
3,247.3
427.0
3,527.4
5,757.8
3,232.1
1,252.8
27,234.3 $
1,495.8 $
71.4
530.8
2,765.8
4,863.8
4,459.0
2,810.8
412.7
1,348.9
13,895.2
—
0.1
—
(135.2)
16,455.4
(2,977.1)
13,343.2
(4.1)
13,339.1
27,234.3 $
1,224.6
2,313.4
1,958.5
526.9
929.9
687.6
7,640.9
1,375.9
3,601.2
—
3,120.0
5,706.4
2,153.9
1,690.6
25,288.9
—
63.5
370.5
2,861.2
3,295.2
5,936.5
1,636.2
—
1,389.4
12,257.3
—
0.1
—
(240.4)
16,257.0
(2,977.1)
13,039.6
(8.0)
13,031.6
25,288.9
See accompanying notes to these consolidated financial statements.
F- 4
BIOGEN INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
For the Years Ended December 31,
2018
2017
2019
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash flows from operating
activities:
Depreciation, amortization and impairments
Acquired in-process research and development
Share-based compensation
Deferred income taxes
Contingent consideration
Loss on divestiture of Hillerød, Denmark manufacturing operations
Other
Changes in operating assets and liabilities, net:
Accounts receivable
Due from anti-CD20 therapeutic programs
Inventory
Accrued expenses and other current liabilities
Income tax assets and liabilities
Other liabilities
Net cash flows provided by operating activities
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities
Purchases of marketable securities
Contingent consideration related to Fumapharm AG acquisition
Acquisition of Nightstar Therapeutics plc, net of cash acquired
Proceeds from divestiture of Hillerød, Denmark manufacturing
operations
Acquired in-process research and development
Purchases of property, plant and equipment
Acquisitions of intangible assets
Purchase of Ionis Pharmaceuticals, Inc. stock
Investment in Samsung Bioepis
Proceeds from sales of strategic investments
Other
Net cash flows provided by (used in) investing activities
Cash flows from financing activities:
Purchases of treasury stock
Net contribution (distribution) to noncontrolling interests
Repayments of borrowings
Net cash contribution to Bioverativ, Inc.
Contingent consideration payments
Other
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
$ 5,888.5 $ 4,474.0 $ 2,670.1
680.6
—
182.3
67.1
(63.7)
55.3
69.2
68.8
(63.3)
(19.2)
240.2
16.1
(43.3)
7,078.6
6,007.0
(5,252.6)
(300.0)
(744.4)
923.7
—
(514.5)
(155.0)
—
—
479.3
27.0
470.5
1,016.6
112.5
157.5
108.3
(12.3)
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(69.1)
(205.2)
5.7
(52.1)
465.5
321.7
(135.4)
6,187.7
9,173.7
(7,694.8)
(1,500.0)
—
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(770.6)
(3.0)
(462.9)
(676.6)
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(2,046.3)
1,081.0
120.0
128.0
91.7
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(435.6)
(232.0)
(94.5)
(227.4)
1,303.9
(79.0)
4,551.0
5,565.9
(5,355.2)
(1,200.0)
—
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(120.0)
(867.4)
(975.4)
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—
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(11.0)
(2,963.1)
(5,868.3)
4.3
—
—
—
3.6
(5,860.4)
1,688.7
0.4
1,224.6
(1,365.4)
(134.1)
(560.9)
(302.7)
(3.0)
(13.9)
(2,380.0)
(792.1)
39.4
2,326.5
$ 2,913.7 $ 1,224.6 $ 1,573.8
(4,352.6)
(36.4)
(3.2)
—
(58.2)
(21.6)
(4,472.0)
(330.6)
(18.6)
1,573.8
See accompanying notes to these consolidated financial statements.
F- 5
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-
F
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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; Alzheimer’s
disease (AD) and dementia; neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic
lateral sclerosis (ALS); movement disorders, including Parkinson's disease; 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, VUMERITY 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 18, Collaborative and
Other Relationships, to these consolidated financial statements.
Our innovative drug development and commercialization activities are complemented by our biosimilar business
that expands 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 certain countries in Europe and have
exclusive rights to commercialize these products in China. Additionally, we have exclusive rights to commercialize two
potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major
markets worldwide, including the U.S., Canada, Europe, Japan and Australia. For additional information on our
collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to
these consolidated financial statements.
Consolidation
Our 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 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 a variable interest 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.
F- 9
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Use of Estimates
The preparation of our 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.
Revenue Recognition
In May 2014 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.
2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition
requirements, including most industry specific guidance. This standard requires a company to recognize revenues
when it transfers goods or services to customers in an amount that reflects the consideration that the company
expects to receive for those goods or services. This standard became effective for us on January 1, 2018, and was
adopted using the modified retrospective method. The adoption of this standard as of January 1, 2018, did not
change our revenue recognition.
We recognize revenues when our customer obtains control of promised goods or services, in an amount that
reflects the consideration which we expect to receive in exchange for those goods or services. We recognize
revenues following the five-step model prescribed under the FASB Accounting Standards Codification (ASC) 606,
Revenue from Contracts with Customers: (i) identify contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.
Product Revenues
In the United States (U.S.), we sell our products primarily to wholesale distributors and specialty pharmacy
providers. In other countries, we sell our products primarily to wholesale distributors, hospitals, pharmacies and
other third-party distribution partners. These customers subsequently resell our products to health care providers
and patients. In addition, we enter into arrangements with health care providers and payors that provide for
government-mandated or privately-negotiated discounts and allowances related to our products.
Product revenues are recognized when the customer obtains control of our product, which occurs at a point in
time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when
incurred if the expected amortization period of the asset that we would have recognized is one year or less or the
amount is immaterial.
Reserves for Discounts and Allowances
Product revenues are recorded net of reserves established for applicable discounts and allowances that are
offered within contracts with our customers, health care providers or payors, including those associated with the
implementation of pricing actions in certain of the international markets in which we operate. Our process for
estimating reserves established for these variable consideration components do not differ materially from our
historical practices.
Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized
in the following categories: discounts, contractual adjustments and returns.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are
classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount
is payable to a party other than our customer). Our estimates of reserves established for variable consideration are
calculated based upon a consistent application of our methodology utilizing the expected value method. These
estimates reflect our historical experience, current contractual and statutory requirements, specific known market
events and trends, industry data and forecasted customer buying and payment patterns. The transaction price, which
includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and
is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the
cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from our
estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of
adjustment.
F- 10
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Discounts include trade term discounts and wholesaler incentives. Trade term discounts and wholesaler
incentives primarily relate to estimated obligations for credits to be granted to wholesalers for remitting payment on
their purchases within established incentive periods and credits to be granted to wholesalers for compliance with
various contractually-defined inventory management practices, respectively. We determine these reserves based on
our historical experience, including the timing of customer payments.
Contractual adjustments primarily relate to Medicaid and managed care rebates, co-payment (copay)
assistance, Veterans Administration (VA) and Public Health Service (PHS) discounts, specialty pharmacy program
fees and other governmental rebates or applicable allowances.
• Medicaid rebates relate to our estimated obligations to states under established reimbursement
arrangements. Rebate accruals are recorded in the same period the related revenue is recognized, resulting
in a reduction of product revenue and the establishment of a liability which is included in other current
liabilities. Our liability for Medicaid rebates consists of estimates for claims that a state will make for the
current quarter, claims for prior quarters that have been estimated for which an invoice has not been
received, invoices received for claims from the prior quarters that have not been paid and an estimate of
potential claims that will be made for inventory that exists in the distribution channel at period end.
• Governmental rebates or chargebacks, including VA and PHS discounts, represent our estimated obligations
resulting from contractual commitments to sell products to qualified healthcare providers at prices lower
than the list prices we charge to wholesalers which provide those products. The wholesaler charges us for
the difference between what the wholesaler pays for the products and the ultimate selling price to the
qualified healthcare providers. Rebate and chargeback reserves are established in the same period as the
related revenue is recognized, resulting in a reduction in product revenue and accounts receivable.
Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider
from the wholesaler, and we generally issue credits for such amounts within a few weeks of the wholesaler
notifying us about the resale. Our reserves for VA, PHS and chargebacks consist of amounts that we expect
to issue for inventory that exists at the wholesalers that we expect will be sold to qualified healthcare
providers and chargebacks that wholesalers have claimed for which we have not issued a credit.
• Managed care rebates represent our estimated obligations to third parties, primarily pharmacy benefit
managers. Rebate accruals are recorded in the same period the related revenue is recognized, resulting in
a reduction of product revenue and the establishment of a liability which is included in accrued expenses
and other current liabilities. These rebates result from performance-based goals, formulary position and
price increase limit allowances (price protection). The calculation of the accrual for these rebates is based
on an estimate of the customer’s buying patterns and the resulting applicable contractual rebate rate(s) to
be earned over a contractual period.
• Copay assistance represents financial assistance to qualified patients, assisting them with prescription
drug co-payments required by insurance. The calculation of the accrual for copay is based on an estimate of
claims and the cost per claim that we expect to receive associated with inventory that exists in the
distribution channel at period end.
• Other governmental rebates, non-U.S. pharmaceutical taxes or applicable allowances primarily relate to
mandatory rebates and discounts in international markets where government-sponsored healthcare
systems are the primary payors for healthcare.
Product returns are established for returns expected to be made by wholesalers and are recorded in the period
the related revenue is recognized, resulting in a reduction to product revenues. In accordance with contractual terms,
wholesalers are permitted to return product for reasons such as damaged or expired product. The majority of
wholesaler returns are due to product expiration. Expired product return reserves are estimated through a
comparison of historical return data to their related sales on a production lot basis. Historical rates of return are
determined for each product and are adjusted for known or expected changes in the marketplace specific to each
product.
In addition to discounts, rebates and product returns, we also maintain certain customer service contracts with
distributors and other customers in the distribution channel that provide us with inventory management, data and
distribution services, which are generally reflected as a reduction of revenues. To the extent we can demonstrate a
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
separable benefit and fair value for these services we classify these payments in selling, general and administrative
expenses.
Revenues from Anti-CD20 Therapeutic Programs
Our collaboration with Genentech is within the scope of ASC 808, Collaborative Agreements, which provides
guidance on the presentation and disclosure of collaborative arrangements. For purposes of this footnote we refer to
RITUXAN and RITUXAN HYCELA collectively as RITUXAN.
Our share of the pre-tax co-promotion profits on RITUXAN and GAZYVA and royalty revenues on the sale of
OCREVUS resulted from an exchange of a license. As we do not have future performance obligations under the
license or collaboration agreement, revenues are recognized as the underlying sales occur.
Revenues from anti-CD20 therapeutic programs consist of:
(i) our share of pre-tax profits and losses in the U.S. for RITUXAN and GAZYVA; and
(ii) other revenues from anti-CD20 therapeutic programs, which primarily consist of our share of pre-tax co-
promotion profits on RITUXAN in Canada and royalty revenues on sales of OCREVUS.
Pre-tax co-promotion profits on RITUXAN and GAZYVA are calculated and paid to us by Genentech in the U.S.
Pre-tax co-promotion profits on RITUXAN are calculated and paid to us by the Roche Group in Canada. Pre-tax co-
promotion profits consist of U.S. and Canadian net sales to third-party customers less applicable costs to
manufacture, third-party royalty expenses, distribution, selling and marketing expenses and joint development
expenses incurred by Genentech and the Roche Group. Our share of the pre-tax profits on RITUXAN and GAZYVA in
the U.S. and pre-tax co-promotion profits on RITUXAN in Canada include estimates that are based on information
received from Genentech and Roche. These estimates are subject to change and actual results may differ.
For additional information on our relationship with Genentech, please read Note 18, Collaborative and Other
Relationships, to these consolidated financial statements.
Other Revenues
Royalty Revenues
We receive royalty revenues on sales by our licensees of products covered under patents that we own. We do
not have future performance obligations under these license arrangements. We record these revenues based on
estimates of the sales that occurred during the relevant period as a component of other revenues. The relevant
period estimates of sales are based on interim data provided by licensees and other third parties and analysis of
historical royalties that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate.
Differences between actual and estimated royalty revenues are adjusted for in the period in which they become
known, typically the following quarter. Historically, adjustments have not been material when compared to actual
amounts paid by licensees.
Collaborative and Other Relationships
We have a number of significant collaborative and other third-party relationships for revenues and for the
development, regulatory approval, commercialization and marketing of certain of our products and product
candidates. Where we are the principal on sales transactions with third parties, we recognize revenues, cost of sales
and operating expenses on a gross basis in their respective lines in our consolidated statements of income. Where
we are not the principal on sales transactions with third parties, we record our share of the revenues, cost of sales
and operating expenses on a net basis in collaborative and other relationships included in other revenues in our
consolidated statements of income.
Our development and commercialization arrangements with Genentech and Samsung Bioepis represent
collaborative arrangements as each party is an active participant in one or more joint operating activities and is
exposed to significant risks and rewards of these arrangements. These arrangements resulted from an exchange of
a license and utilize the sales and usage based royalty exception. Therefore, revenues relating to royalties or profit-
sharing amounts received are recognized as the underlying sales occur.
For additional information on our collaboration arrangements with Genentech and Samsung Bioepis, please
read Note 18, Collaborative and Other Relationships, to these consolidated financial statements.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Corporate Revenues
We record other corporate revenues primarily from amounts earned under contract manufacturing agreements.
Revenues under contract manufacturing agreements are recognized when the customer obtains control of the
product, which may occur at a point in time or over time depending on the terms and conditions of the agreement.
Fair Value Measurements
We have certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2
or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
• Level 1 — Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical
assets or liabilities that we have the ability to access;
• Level 2 — Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities
in active markets or other market observable inputs such as interest rates, yield curves, foreign currency
spot rates and option pricing valuation models; and
• Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement
and unobservable.
The majority of our financial assets have been classified as Level 2. Our financial assets (which include our
cash equivalents, marketable debt securities and certain of our marketable equity securities, derivative contracts
and plan assets for deferred compensation) have been initially valued at the transaction price and subsequently
valued, at the end of each reporting period, utilizing third-party pricing services or option pricing valuation models.
The pricing services utilize industry standard valuation models, including both income and market-based approaches
and observable market inputs to determine value. These observable market inputs include reportable trades,
benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and
economic events.
We validate the prices provided by our third-party pricing services by understanding the models used, obtaining
market values from other pricing sources and analyzing pricing data in certain instances. The option pricing valuation
models use assumptions within the model, including the term, stock price volatility, constant maturity risk-free
interest rate and dividend yield. After completing our validation procedures, we did not adjust or override any fair
value measurements provided by our pricing services as of December 31, 2019 and 2018.
Other Assets and Liabilities
The carrying amounts reflected in our consolidated balance sheets for current accounts receivable, due from
anti-CD20 therapeutic programs, other current assets, accounts payable and accrued expenses and other,
approximate fair value due to their short-term maturities.
Cash and Cash Equivalents
We consider only those investments that are highly liquid, readily convertible to cash and that mature within
three months from date of purchase to be cash equivalents. As of December 31, 2019 and 2018, cash equivalents
were comprised of money market funds, commercial paper, overnight reverse repurchase agreements and other debt
securities with maturities less than 90 days from the date of purchase.
Accounts Receivable
The majority of our accounts receivable arise from product sales and primarily represent amounts due from our
wholesale and other third-party distributors, public hospitals, pharmacies and other government entities and have
standard payment terms that generally require payment within 30 to 90 days.
We do not adjust our receivables for the effects of a significant financing component at contract inception if we
expect to collect the receivables in one year or less from the time of sale.
In countries where we have experienced a pattern of payments extending beyond our contractual payment term
and we expect to collect receivables greater than one year from the time of sale, we have assessed whether the
customer has a significant financing component and discounted our receivables and reduced related revenues over
the period of time that we estimate those amounts will be paid using the country’s market-based borrowing rate for
such period. The related receivables are classified at the time of sale as non-current assets. We accrete interest
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
income on these receivables, which is recorded as a component of other income (expense), net in our consolidated
statements of income.
We provide reserves against accounts receivable for estimated losses that may result from a customer's
inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk include cash and cash
equivalents, investments, derivatives and accounts receivable. We attempt to minimize the risks related to cash and
cash equivalents and investments by investing in a broad and diverse range of financial instruments as previously
defined by us. We have established guidelines related to credit ratings and maturities intended to safeguard principal
balances and maintain liquidity. Our investment portfolio is maintained in accordance with our investment policy,
which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single
issuer. We minimize credit risk resulting from derivative instruments by choosing only highly rated financial
institutions as counterparties.
Concentrations of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated
due to the wide variety of customers and markets using our products, as well as their dispersion across many
different geographic areas. We monitor the financial performance and creditworthiness of our customers so that we
can properly assess and respond to changes in their credit profile. We continue to monitor these conditions and
assess their possible impact on our business.
Marketable Securities and Other Investments
Marketable Debt Securities
Available-for-sale marketable debt securities are recorded at fair market value and unrealized gains and losses
are included in accumulated other comprehensive income (loss) in equity, net of related tax effects, unless the
security has experienced a credit loss, we have determined that we have the intent to sell the security or we have
determined that it is more likely than not that we will have to sell the security before its expected recovery. Realized
gains and losses are reported in other income (expense), net, on a specific identification basis.
Marketable Equity Securities and Venture Capital Funds
Our marketable equity securities are recorded at fair market value and, beginning January 1, 2018, unrealized
gains and losses are included in other income (expense), net in our consolidated statements of income. Prior to
January 1, 2018, unrealized gains and losses were included in accumulated other comprehensive income (loss) in
equity, net of related tax effects. Our marketable equity securities represent investments in publicly traded equity
securities and are included in investments and other assets in our consolidated balance sheets.
Our investments in venture capital funds are recorded at net asset value, which approximates fair value, and,
beginning January 1, 2018, unrealized gains and losses are included in other income (expense), net in our
consolidated statements of income. Prior to January 1, 2018, these investments were accounted for under the cost
method of accounting. The underlying investments of the venture capital funds in which we invest are in equity
securities of certain biotechnology companies and are included in investments and other assets in our consolidated
balance sheets.
Non-Marketable Equity Securities
We also invest in equity securities of companies whose securities are not publicly traded and where fair value
is not readily available. These investments are recorded using either the equity method of accounting or the cost
minus impairment adjusted for changes in observable prices, depending on our ownership percentage and other
factors that suggest we have significant influence. We monitor these investments to evaluate whether any increase
or decline in their value has occurred, based on the implied value of recent company financings, public market prices
of comparable companies and general market conditions. These investments are included in investments and other
assets in our consolidated balance sheets.
Evaluating Marketable Debt Securities for Other-than-Temporary Impairments
We conduct periodic reviews to identify and evaluate each investment that has an unrealized loss, in
accordance with the meaning of other-than-temporary impairment. An unrealized loss exists when the current fair
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
value of an individual security is less than its amortized cost basis. Unrealized losses on available-for-sale debt
securities that are determined to be temporary, and not related to credit loss, are recorded, net of tax, in
accumulated other comprehensive income.
For available-for-sale debt securities with unrealized losses, management performs an analysis to assess
whether we intend to sell or whether we would more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where we intend to sell a security, or may be required to do so, the
security’s decline in fair value is deemed to be other-than-temporary and the full amount of the unrealized loss is
reflected in earnings as an impairment loss.
Regardless of our intent to sell a security, we perform additional analysis on all securities with unrealized
losses to evaluate losses associated with the creditworthiness of the security. Credit losses are identified where we
do not expect to receive cash flows sufficient to recover the amortized cost basis of a security.
Equity Method of Accounting
In circumstances where we have the ability to exercise significant influence over the operating and financial
policies of a company in which we have an investment, we utilize the equity method of accounting for recording
investment activity. In assessing whether we exercise significant influence, we consider the nature and magnitude of
our investment, the voting and protective rights we hold, any participation in the governance of the other company
and other relevant factors such as the presence of a collaborative or other business relationship. Under the equity
method of accounting, we record in our consolidated statements of income our share of income or loss of the other
company. If our share of losses exceeds the carrying value of our investment, we will suspend recognizing additional
losses and will continue to do so unless we commit to providing additional funding.
Inventory
Inventories are stated at the lower of cost or net realizable value with cost based on the first-in, first-out
method. We classify our inventory costs as long-term when we expect to utilize the inventory beyond our normal
operating cycle and include these costs in investments and other assets in our consolidated balance sheets.
Inventory that can be used in either the production of clinical or commercial products is expensed as research and
development costs when identified for use in a clinical manufacturing campaign.
Capitalization of Inventory Costs
We capitalize inventory costs associated with our products prior to regulatory approval, when, based on
management’s judgment, future commercialization is considered probable and the future economic benefit is
expected to be realized. We consider numerous attributes in evaluating whether the costs to manufacture a
particular product should be capitalized as an asset. We assess the regulatory approval process and where the
particular product stands in relation to that approval process, including any known safety or efficacy concerns,
potential labeling restrictions and other impediments to approval. We evaluate our anticipated research and
development initiatives and constraints relating to the product and the indication in which it will be used. We
consider our manufacturing environment including our supply chain in determining logistical constraints that could
hamper approval or commercialization. We consider the shelf life of the product in relation to the expected timeline
for approval and we consider patent related or contract issues that may prevent or delay commercialization. We also
base our judgment on the viability of commercialization, trends in the marketplace and market acceptance criteria.
Finally, we consider the reimbursement strategies that may prevail with respect to the product and assess the
economic benefit that we are likely to realize. We expense previously capitalized costs related to pre-approval
inventory upon a change in such judgment, due to, among other potential factors, a denial or significant delay of
approval by necessary regulatory bodies.
Obsolescence and Unmarketable Inventory
At each reporting period we review our inventories for excess or obsolescence and write-down obsolete or
otherwise unmarketable inventory to its estimated net realizable value. If the actual net realizable value is less than
that estimated by us, or if it is determined that inventory utilization will further diminish based on estimates of
demand, additional inventory write-downs may be required. Additionally, our products are subject to strict quality
control and monitoring that we perform throughout the manufacturing process. In the event that certain batches or
units of product no longer meet quality specifications, we will record a charge to cost of sales to write-down any
unmarketable inventory to its estimated net realizable value. In all cases, product inventory is carried at the lower of
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
cost or its estimated net realizable value. Amounts written-down due to unmarketable inventory are charged to cost
of sales.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, subject to reviews for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The cost of normal,
recurring or periodic repairs and maintenance activities related to property, plant and equipment are expensed as
incurred. The cost for planned major maintenance activities, including the related acquisition or construction of
assets, is capitalized if the repair will result in future economic benefits.
Interest costs incurred during the construction of major capital projects are capitalized until the underlying
asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the
life of the underlying asset. We also capitalize certain direct and incremental costs associated with the validation
effort required for licensing by regulatory agencies of new manufacturing equipment for the production of a
commercially approved drug. These costs primarily include direct labor and material and are incurred in preparing the
equipment for its intended use. The validation costs are either amortized over the life of the related equipment or
expensed as cost of sales when the product produced in the validation process is sold.
In addition, we capitalize certain internal use computer software development costs. If the software is an
integral part of production assets, these costs are included in machinery and equipment and are amortized on a
straight-line basis over the estimated useful lives of the related software, which generally range from three to five
years.
We generally depreciate or amortize the cost of our property, plant and equipment using the straight-line
method over the estimated useful lives of the respective assets, which are summarized as follows:
Asset Category
Land
Buildings
Leasehold Improvements
Furniture and Fixtures
Machinery and Equipment
Computer Software and Hardware
Useful Lives
Not depreciated
15 to 40 years
Lesser of the useful life or the term of the respective lease
5 to 7 years
5 to 20 years
3 to 5 years
When we dispose of property, plant and equipment, we remove the associated cost and accumulated
depreciation from the related accounts in our consolidated balance sheets and include any resulting gain or loss in
our consolidated statements of income.
Leases
In February 2016 the FASB issued 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.
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
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
easements and made an accounting policy election to not recognize leases with an initial term of 12 months or less
within our consolidated balance sheets and to recognize those lease payments on a straight-line basis in our
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 consolidated balance sheets. The adoption of the new
leasing standards did not have an impact on our 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 consolidated balance sheets. Our lease agreements may include both lease and non-lease
components, which we account for as a single lease component when the payments are fixed. Variable payments
included in the lease agreement are expensed as incurred. 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 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 consolidated
balance sheets. We recognize sublease income on a straight-line basis over the lease term in our consolidated
statements of income.
For additional information on the adoption of the new leasing standards, please read Note 11, Leases, to these
consolidated financial statements.
Intangible Assets
Our intangible assets consist of completed technology (comprised of acquired and in-licensed rights and
patents, developed technology, out-licensed patents), in-process research and development (IPR&D) acquired after
January 1, 2009, trademarks and trade names. Our intangible assets are recorded at fair value at the time of their
acquisition and are stated in our consolidated balance sheets net of accumulated amortization and impairments, if
applicable.
Intangible assets related to acquired and in-licensed rights and patents, developed technology and out-licensed
patents are amortized over their estimated useful lives using the economic consumption method if anticipated future
revenues can be reasonably estimated. The straight-line method is used when revenues cannot be reasonably
estimated. Amortization is recorded within amortization and impairment of acquired intangible assets in our
consolidated statements of income.
Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI
from Elan Pharma International Ltd. (Elan), an affiliate of Elan Corporation, plc. Acquired and in-licensed rights and
patents also include our rest of world license to Forward Pharma A/S' (Forward Pharma) 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. 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. We amortize the intangible assets related to our TYSABRI, AVONEX,
SPINRAZA, VUMERITY and TECFIDERA (rest of world) products using the economic consumption method based on
revenues generated from the products underlying the related intangible assets. An analysis of the anticipated
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
lifetime revenues of our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products is
performed annually during our long-range planning cycle and whenever events or changes in circumstances would
significantly affect the anticipated lifetime revenues of our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA
(rest of world) products.
Intangible assets related to trademarks, trade names and IPR&D prior to commercialization are not amortized
because they have indefinite lives; however, they are subject to review for impairment. We review our intangible
assets with indefinite lives for impairment annually, as of October 31, and whenever events or changes in
circumstances indicate that the carrying value of an asset may not be recoverable.
Acquired In-process Research and Development (IPR&D)
Acquired IPR&D represents the fair value assigned to research and development assets that have not reached
technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the
acquired technology into commercially viable products, estimating the resulting revenues from the projects and
discounting the net cash flows to present value. The revenues and costs projections used to value acquired IPR&D
are, as applicable, reduced based on the probability of success of developing a new drug. Additionally, the
projections consider the relevant market sizes and growth factors, expected trends in technology and the nature and
expected timing of new product introductions by us and our competitors. The rates utilized to discount the net cash
flows to their present value are commensurate with the stage of development of the projects and uncertainties in the
economic estimates used in the projections. Upon the acquisition of IPR&D, we complete an assessment of whether
our acquisition constitutes the purchase of a single asset or a group of assets. We consider multiple factors in this
assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the
development process and stage of completion, quantitative significance and our rationale for entering into the
transaction.
If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is
capitalized as an intangible asset. If we acquire an asset or group of assets that do not meet the definition of a
business under applicable accounting standards, then the acquired IPR&D is expensed on its acquisition date.
Future costs to develop these assets are recorded to research and development expense as they are incurred.
When performing our impairment assessment, we calculate the fair value using the same methodology as
described above. If the carrying value of our acquired IPR&D exceeds its fair value, then the intangible asset is
written down to its fair value. Changes in estimates and assumptions used in determining the fair value of our
acquired IPR&D could result in an impairment. Impairments are recorded within amortization and impairment of
acquired intangible assets in our consolidated statements of income. Assets that have been previously impaired,
including our vixotrigine (BIIB074) program for the potential treatment of neuropathic pain, such as trigeminal
neuralgia (TGN), could become further impaired in the future.
Goodwill
Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible
and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized,
but is reviewed for impairment. Goodwill is reviewed for impairment annually, as of October 31, and whenever events
or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable.
We compare the fair value of our reporting unit to its carrying value. If the carrying value of the net assets
assigned to the reporting unit exceeds the fair value of our reporting unit, we would record an impairment loss equal
to the difference. As described in Note 24, Segment Information, to these consolidated financial statements, we
operate in one operating segment, which is our only reporting unit.
Impairment of Long-Lived Assets
Long-lived assets to be held and used, including property, plant and equipment, and definite-lived intangible
assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of the assets or asset group may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the
use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to
recover the carrying amount of the assets, the assets are written-down to their fair values. Long-lived assets to be
disposed of are carried at fair value less costs to sell.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Contingent Consideration
The consideration for our acquisitions often includes future payments that are contingent upon the occurrence
of a particular event or events. We record an obligation for such contingent payments at fair value on the acquisition
date. We estimate the fair value of contingent consideration obligations through valuation models that incorporate
probability-adjusted assumptions related to the achievement of the milestones and thus likelihood of making related
payments. We revalue our contingent consideration obligations each reporting period. Changes in the fair value of
our contingent consideration obligations are recognized in our consolidated statements of income. Changes in the
fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including
adjustments to the discount rates, changes in the amount or timing of expected expenditures associated with
product development, changes in the amount or timing of cash flows and reserves associated with products upon
commercialization, changes in the assumed achievement or timing of any cumulative sales-based and development
milestones, changes in the probability of certain clinical events and changes in the assumed probability associated
with regulatory approval.
Discount rates in our valuation models represent a measure of the credit risk associated with settling the
liability. The period over which we discount our contingent obligations is based on the current development stage of
the product candidates, our specific development plan for that product candidate adjusted for the probability of
completing the development step and when the contingent payments would be triggered. In estimating the probability
of success, we utilize data regarding similar milestone events from several sources, including industry studies and
our own experience. These fair value measurements are based on significant inputs not observable in the market.
Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition
date and for each subsequent period.
Derivative Instruments and Hedging Activities
Cash Flow and Fair Value Derivative Instruments
We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance
sheets. Changes in the fair value of our derivative instruments are recognized each period in current earnings or
accumulated other comprehensive income (loss), depending on whether the derivative instrument is designated as
part of a hedge transaction and, if so, the type of hedge transaction. We classify the cash flows from these
instruments in the same category as the cash flows from the hedged items. We do not hold or issue derivative
instruments for trading or speculative purposes.
We assess at inception and on an ongoing basis, whether the derivative instruments that are used in hedging
transactions are highly effective in offsetting the changes in cash flows or fair values of the hedged items. We
exclude the forward points portion of the derivative instruments used in a hedging transaction from the effectiveness
test and record the fair value gain or loss related to this portion each period in our consolidated statements of
income in the same line as the underlying hedged item. If we determine that a forecasted transaction is no longer
probable of occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any
related unrealized gain or loss on the contract is recognized in current earnings.
Net Investment Derivative Instruments
We are exposed to the impact of foreign exchange fluctuations on our investment in the equity of Samsung
Bioepis, which is denominated in a currency other than the U.S. dollar, and could adversely impact the U.S. dollar
value of this investment. Using derivative instruments, we have hedged our net investment position to mitigate the
effects of foreign exchange fluctuations. We recognize these designated net investment hedges as either assets or
liabilities, at fair value, in our consolidated balance sheets. We hedge the changes in the spot exchange rate in
accumulated other comprehensive income (loss) and exclude changes to the forward rate and amortize the forward
points in other income (expense), net in our consolidated statements of income over the term of the contract. We
classify the cash flows from these instruments in the same category as the cash flows from the hedged items.
For additional information on our derivative instruments and hedging activities, please read Note 9, Derivative
Instruments, to these consolidated financial statements.
Translation of Foreign Currencies
The functional currency for most of our foreign subsidiaries is their local currency. For our non-U.S. subsidiaries
that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates
of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency
F- 19
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
exchange rates for the period. Adjustments resulting from the translation of the financial statements of our foreign
operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated
other comprehensive income, a separate component of equity. For subsidiaries where the functional currency of the
assets and liabilities differ from the local currency, non-monetary assets and liabilities are translated at the rate of
exchange in effect on the date assets were acquired while monetary assets and liabilities are translated at current
rates of exchange as of the balance sheet date. Income and expense items are translated at the average foreign
currency rates for the period. Translation adjustments of these subsidiaries are included in other income (expense),
net in our consolidated statements of income.
Royalty Cost of Sales
We make royalty payments to a number of third parties under license or purchase agreements associated with
our acquisition of intellectual property. These royalty payments are typically calculated as a percentage (royalty rate)
of the sales of our products in a particular year. That royalty rate may remain constant, increase or decrease within
each year based on the total amount of sales during the annual period. Each quarterly period, we estimate our total
royalty obligation for the full year and recognize the proportional amount as cost of sales based on actual quarterly
sales as a percentage of full year estimated sales. For example, if the level of net sales in any calendar year
increases the royalty rate within the year, we will record our cost of sales at an even rate over the year, based on the
estimated blended royalty rate.
Accounting for Share-Based Compensation
Our share-based compensation programs grant awards that have included stock options, restricted stock units
that vest based on stock performance known as market stock units (MSUs), performance-vested restricted stock
units that settle in cash (CSPUs), time-vested restricted stock units (RSUs), performance-vested restricted stock
units that can be settled in cash or shares of our common stock (PUs) at the sole discretion of the Compensation
and Management Development Committee of our Board of Directors, performance-vested stock units that settle in
stock or cash (PSUs) and shares issued under our employee stock purchase plan (ESPP). Compensation expense is
recognized based on the estimated fair value of the awards at grant date. We recognize compensation expense for
the number of awards expected to vest after taking into consideration an estimate of award forfeitures over the
requisite service period, which is generally the vesting period. Where awards are made with non-substantive vesting
periods (for instance, where a portion of the award vests upon retirement eligibility), we estimate and recognize
expense based on the period from the grant date to the date the employee becomes retirement eligible.
The fair values of our MSUs are estimated using a lattice model with a Monte Carlo simulation. We apply an
accelerated attribution method to recognize share-based compensation expense over the applicable service period
for our MSUs. The probability of actual shares expected to be earned is considered in the grant date valuation,
therefore the expense is not adjusted to reflect the actual units earned.
The fair values of our RSUs are based on the market value of our stock on the date of grant. Compensation
expense for RSUs is recognized straight-line over the applicable service period.
We apply an accelerated attribution method to recognize share-based compensation expense when accounting
for our CSPUs, PUs and PSUs that settle in cash, and the fair value of the liability is remeasured at the end of each
reporting period through expected settlement. Compensation expense associated with CSPUs, PUs and PSUs that
settle in cash are based upon the stock price and the number of units expected to be earned after assessing the
probability that certain performance criteria will be met and the targeted payout level associated with the
performance criteria expected to be achieved. Cumulative adjustments are recorded each quarter to reflect changes
in the stock price and estimated outcome of the performance-related conditions until the date results are
determined and settled. If performance criteria are not met or not expected to be met, any compensation expense
previously recognized to date associated with the awards will be reversed.
The fair values of PSUs that settle in stock are based upon the stock price on the date of grant. Compensation
expense is recognized for the number of units expected to be earned after assessing the probability that certain
performance criteria will be met and the targeted payout level associated with the performance criteria expected to
be achieved. Cumulative adjustments are recorded each quarter to reflect the estimated outcome of the
performance-related conditions until the date results are determined and settled. If performance criteria are not met
or not expected to be met, any compensation expense previously recognized to date associated with the awards will
be reversed.
F- 20
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Research and Development Expenses
Research and development expenses consist of expenses incurred in performing research and development
activities, which include compensation and benefits, facilities and overhead expenses, clinical trial expenses and
fees paid to contract research organizations (CROs), clinical supply and manufacturing expenses, write-offs of
inventory that was previously capitalized in anticipation of product launch and determined to no longer be realizable
and other outside expenses and upfront fees and milestones paid to third-party collaborators. Research and
development expenses are expensed as incurred. Upfront and milestone payments made to third-party collaborators
are expensed as incurred up to the point of regulatory approval. Milestone payments made upon regulatory approval
are capitalized and amortized over the remaining useful life of the related product. Payments we make for research
and development services prior to the services being rendered are recorded as prepaid assets in our consolidated
balance sheets and are expensed as the services are provided. We also accrue the costs of ongoing clinical trials
associated with programs that have been terminated or discontinued for which there is no future economic benefit at
the time the decision is made to terminate or discontinue the program.
From time to time, we enter into development agreements in which we share expenses with a collaborative
partner. We record payments received from our collaborative partners for their share of the development costs as a
reduction of research and development expense, except as discussed in Note 18, Collaborative and Other
Relationships, to these consolidated financial statements. Because an initial indication has been approved for both
RITUXAN and GAZYVA, expenses incurred by Genentech in the ongoing development of RITUXAN and GAZYVA are not
recorded as research and development expense, but rather reduce our share of profits recorded as a component of
revenues from anti-CD20 therapeutic programs.
For collaborations with commercialized products, if we are the principal, we record revenues and the
corresponding operating costs in their respective line items in our consolidated statements of income. If we are not
the principal, we record operating costs as a reduction of revenue.
Selling, General and Administrative Expenses
Selling, general and administrative expenses are primarily comprised of compensation and benefits associated
with sales and marketing, finance, human resources, legal, information technology and other administrative
personnel, outside marketing, advertising and legal expenses and other general and administrative costs.
Advertising costs are expensed as incurred. For the years ended December 31, 2019, 2018 and 2017,
advertising costs totaled $79.2 million, $90.2 million and $75.2 million, respectively.
Income Taxes
The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for
under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax
consequences of temporary differences between the financial statement carrying amounts and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability
of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of
deferred tax assets will not be realized. We recognize deferred taxes associated with our global intangible low-taxed
income (GILTI) tax calculations.
The income tax consequences from the intra-entity transfers of inventory within our consolidated group, both
current and deferred, are recorded as a prepaid tax or deferred charge and recognized through our consolidated
statements of income when the inventory is sold to a third party.
In October 2016 the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets
Other Than Inventory. This standard eliminates the deferral of the tax effects of intra-entity asset transfers other than
inventory. As a result, the income tax consequences from the intra-entity transfer of an asset other than inventory
and associated changes to deferred taxes will be recognized when the transfer occurs.
We adopted this standard on January 1, 2018, using the modified retrospective method, through a cumulative-
effect adjustment to retained earnings as of that date. Upon adoption, we recognized additional net deferred tax
assets of approximately $0.5 billion, offset by a corresponding net increase to retained earnings of
approximately $0.5 billion. In the fourth quarter of 2018, when we elected to begin recognizing deferred taxes on the
GILTI tax calculation, we recorded an additional deferred tax liability of $0.4 billion with a corresponding reduction to
F- 21
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
our retained earnings as these differences are related to intra-entity transactions. We will recognize incremental
deferred income tax expense thereafter as these deferred tax assets and liabilities are utilized.
We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving
uncertain tax positions. We evaluate uncertain tax positions on a quarterly basis and consider various factors
including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in
tax returns, the effective settlement of matters subject to audit, information obtained during in process audit
activities and changes in facts or circumstances related to a tax position. We also accrue for potential interest and
penalties related to unrecognized tax benefits in income tax expense.
Contingencies
We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if
the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the
amount can be reasonably estimated or a range of loss can be determined. These accruals represent management’s
best estimate of probable loss. Disclosure also is provided when it is reasonably possible that a loss will be incurred
or when it is reasonably possible that the amount of a loss will exceed the recorded provision. On a quarterly basis,
we review the status of each significant matter and assess its potential financial exposure. Significant judgment is
required in both the determination of probability and as to whether an exposure is reasonably estimable. Because of
uncertainties related to these matters, accruals are based only on the best information available at the time. As
additional information becomes available, we reassess the potential liability related to pending claims and litigation
and may change our estimates.
Earnings per Share
Basic earnings per share is computed by dividing undistributed net income attributable to Biogen Inc. by the
weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed
based on the treasury method by dividing net income by the weighted-average number of common shares
outstanding during the period plus potentially dilutive common equivalent shares outstanding.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the 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 consolidated financial statements
or disclosures.
Leases
In February 2016 the FASB issued the new leasing standards to increase transparency and comparability
among organizations related to their leasing activities. For additional information on the adoption of the new leasing
standards, please read the section titled Lease above, and Note 11, Leases, to these 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.
Based on the composition of our investment portfolio, accounts receivable and other financial assets, current
market conditions and historical credit loss activity, the adoption of these standards are not expected to have a
material impact on our consolidated financial position and results of operations and related disclosures.
F- 22
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 became effective for us on January 1, 2020. The adoption
of this standard will not 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 use of the OIS rate based on the SOFR as a U.S. benchmark interest
rate for hedge accounting purposes under ASC 815, Derivatives and Hedging. This standard became effective for us
on January 1, 2019, and did not have an impact on our 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 became effective for us on January 1, 2020. 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. The adoption of this standard did not
have a material impact on our consolidated financial position, results of operations and related disclosures.
2. Acquisitions
Acquisition of Nightstar Therapeutics plc
In June 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 (timrepigene emparvovec), 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 (RPGR gene therapy), 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.
F- 23
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under the terms of the 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 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.
We finalized purchase accounting for this acquisition in the fourth quarter of 2019. The following table
summarizes the fair values of the separately identifiable assets acquired and liabilities assumed:
(In millions)
Cash and cash equivalents
Marketable securities
In-process research and development intangible assets
Goodwill
Deferred tax liability
Other, net
Total purchase price
$
$
107.8
7.5
700.0
117.5
(81.9)
1.3
852.2
The fair value of the 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 GILTI. Goodwill that is tax deductible for GILTI purposes is approximately $35.5
million.
Pro forma results of operations as a result of this acquisition have not been presented as this acquisition is
not material to our consolidated statements of income. Subsequent to June 7, 2019, the acquisition date, our
results of operations include the results of operations of NST.
BIIB100 Acquisition
In January 2018 we acquired BIIB100 (XP01 inhibitor) from Karyopharm Therapeutics Inc. (Karyopharm).
BIIB100 is a Phase 1 investigational oral compound for the treatment of certain neurological and neurodegenerative
diseases, primarily in ALS. BIIB100 is a novel therapeutic candidate that works by inhibiting a protein known as
XPO1, with the goal of reducing inflammation and neurotoxicity, along with increasing neuroprotective responses.
We accounted for this transaction as an asset acquisition as the value being acquired primarily relates to a
single asset. In connection with the closing of this transaction, we made an upfront payment of $10.0 million to
Karyopharm, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB100 had not
yet reached technological feasibility. We may also pay Karyopharm up to $207.0 million in additional milestone
payments as well as tiered royalties on potential net commercial sales in the mid-single digit to low-teen
percentages.
F- 24
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
BIIB104 Acquisition
In April 2018 we acquired BIIB104 (AMPA) from Pfizer Inc. (Pfizer). BIIB104 is a first-in-class, Phase 2b ready
AMPA receptor potentiator for cognitive impairment associated with schizophrenia. AMPA receptors mediate fast
excitatory synaptic transmission in the central nervous system, a process which can be disrupted in a number of
neurological and psychiatric diseases, including schizophrenia.
We accounted for this transaction as an asset acquisition as the value being acquired primarily relates to a
single asset. In connection with the closing of this transaction, we made an upfront payment of $75.0 million to
Pfizer, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB104 had not yet
reached technological feasibility. We may also pay Pfizer up to $515.0 million in additional development and
commercialization milestone payments as well as tiered royalties on potential net commercial sales in the low to
mid-teen percentages.
TMS Co., Ltd.
In June 2018 we entered into an exclusive option agreement with TMS Co., Ltd. (TMS) granting us the option to
acquire TMS-007, a plasminogen activator with a novel mechanism of action associated with breaking down blood
clots, which is in Phase 2 development in Japan, and backup compounds for the treatment of stroke. In exchange for
the purchase option, we made a $4.0 million upfront payment to TMS, which was recorded as research and
development expense in our consolidated statements of income as TMS-007 had not yet reached technological
feasibility.
If we exercise the purchase option, we will make an additional payment of $18.0 million upon closing of the
asset acquisition, which will be recorded as acquired IPR&D expense in our consolidated statements of income as
TMS-007 will not have reached technological feasibility at that time. In addition, we may pay TMS up to $335.0
million in additional development and commercialization milestone payments as well as tiered royalties on potential
net commercial sales in the high-single digit to low-teen percentages. If we exercise the purchase option,
consummation of the asset acquisition may be subject to the expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S.
BIIB110 Acquisition
In July 2018 we acquired BIIB110 (ActRIIA/B ligand trap) and ALG-802 from AliveGen Inc. (AliveGen). BIIB110
and ALG-802 represent novel ways of targeting the myostatin pathway. We initially plan to study BIIB110 in multiple
neuromuscular indications, including SMA and ALS.
We accounted for this transaction as an asset acquisition as the value being acquired primarily relates to a
single asset. In connection with the closing of this transaction, we made an upfront payment of $27.5 million to
AliveGen, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB110 had not yet
reached technological feasibility. We may also pay AliveGen up to $535.0 million in additional development and
commercialization milestones.
BIIB093 Acquisition
In May 2017 we acquired BIIB093 (glibencamide IV) from Remedy Pharmaceuticals Inc. (Remedy). BIIB093 is in
a Phase 3 study for large hemispheric infarction (LHI), a severe form of ischemic stroke where brain swelling
(cerebral edema) often leads to a disproportionately large share of stroke-related morbidity and mortality. The U.S.
Food and Drug Administration (FDA) granted BIIB093 orphan drug designation for severe cerebral edema in patients
with acute ischemic stroke. The FDA has also granted BIIB093 fast track designation.
We are responsible for the future development and commercialization of BIIB093 and Remedy may share in the
cost of development for the target indication for BIIB093 in LHI stroke.
We accounted for this transaction as an asset acquisition as we did not acquire any employees from Remedy
nor did we acquire any significant processes required in the development of BIIB093. In connection with the closing
of this transaction, we made an upfront payment of $120.0 million to Remedy, which was recorded as acquired
IPR&D in our consolidated statements of income as BIIB093 had not yet reached technological feasibility. We may
also pay Remedy certain development and sales based milestone payments that are substantially payable upon or
after regulatory approval, as well as royalties on potential net commercial sales.
F- 25
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3.
Divestitures
Divestiture of Hillerød, Denmark Manufacturing Operations
In August 2019 we completed the 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 may be 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 $74.0 million
associated with such guarantees and have accrued for this obligation. We may adjust this estimate based upon
changes in business conditions, which may result in the increase or reduction of this adverse commitment obligation
in subsequent periods. 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 $164.4 million in our
consolidated statements of income. This loss included a pre-tax loss of $95.5 million, which was recorded in loss on
divestiture of Hillerød, Denmark manufacturing operations. 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 approximately $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 $68.9 million related to this transaction. During the
fourth quarter of 2019 we recorded a $40.2 million reduction in our estimate of the future minimum batch
commitment utilizing our current manufacturing forecast, which reflects the impact of forecasted aducanumab
batches, resulting in a reduction in the pre-tax loss on divestiture from $95.5 million to $55.3 million.
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.
F- 26
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
4. Revenues
Product Revenues
Revenues by product are summarized as follows:
United
States
2019
Rest of
World
Total
United
States
2018
Rest of
World
Total
United
States
2017
Rest of
World
Total
For the Years Ended December 31,
$ 3,306.5
1,426.6
$ 1,126.2
675.2
1,041.8
850.4
5.5
—
—
—
97.1
—
$ 4,432.7
2,101.8
1,892.2
5.5
97.1
—
$ 3,253.2
1,668.3
1,025.0
—
—
—
$ 1,020.9
$ 4,274.1
$ 3,294.0
$
920.0
$ 4,214.0
694.7
839.0
—
92.7
1.4
2,363.0
1,864.0
1,889.1
1,113.8
—
92.7
1.4
—
—
—
756.7
859.3
—
91.6
52.7
2,645.8
1,973.1
—
91.6
52.7
5,780.4
2,748.9
8,529.3
5,946.5
2,648.7
8,595.2
6,296.9
2,680.3
8,977.2
933.4
1,163.6
2,097.0
854.0
870.2
1,724.2
657.0
226.7
883.7
—
—
—
—
—
—
—
—
486.2
184.0
68.1
486.2
184.0
68.1
738.3
738.3
15.2
15.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
485.2
16.7
43.2
485.2
16.7
43.2
545.1
545.1
22.3
22.3
—
—
—
—
—
—
—
—
—
—
—
370.8
370.8
—
9.0
—
9.0
379.8
379.8
39.6
39.6
42.2
21.0
6.2
5.0
48.4
26.0
63.2
11.2
74.4
$ 6,713.8
$ 4,666.0
$ 11,379.8
$ 6,800.5
$ 4,086.3
$10,886.8
$ 7,017.1
$ 3,337.6
$10,354.7
(In millions)
Multiple Sclerosis
(MS):
TECFIDERA
Interferon*
TYSABRI
VUMERITY
FAMPYRA
ZINBRYTA
Subtotal: MS
Product Revenues
Spinal Muscular
Atrophy:
SPINRAZA
Biosimilars:
BENEPALI
IMRALDI
FLIXABI
Subtotal:
Biosimilar product
revenues
Other:
FUMADERM
Hemophilia:
ELOCTATE
ALPROLIX
Subtotal:
Hemophilia product
revenues
Total product
revenues
*Interferon includes AVONEX and PLEGRIDY.
We recognized revenues from two wholesalers accounting for 30% and 17% of gross product revenues in 2019,
32% and 18% of gross product revenues in 2018 and 34% and 21% of gross product revenues in 2017, respectively.
As of December 31, 2019, two wholesale distributors individually accounted for approximately 24.1% and
13.9% of net accounts receivable associated with our product sales, as compared to 27.7% and 15.6% as of
December 31, 2018, respectively.
F- 27
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
An analysis of the change in reserves for discounts and allowances is summarized as follows:
(In millions)
2019
Beginning balance
Current provisions relating to sales in current year
Adjustments relating to prior years
Payments/returns relating to sales in current year
Payments/returns relating to sales in prior years
Ending balance
(In millions)
2018
Beginning balance
Current provisions relating to sales in current year
Adjustments relating to prior years
Payments/returns relating to sales in current year
Payments/returns relating to sales in prior years
Ending balance
(In millions)
2017
Beginning balance
Current provisions relating to sales in current year
Adjustments relating to prior years
Payments/returns relating to sales in current year
Payments/returns relating to sales in prior years
Ending balance
Discounts
Contractual
Adjustments
Returns
Total
127.8 $
666.2
0.3
(535.5)
(127.7)
131.1 $
888.8 $
3,011.5
(54.1)
(2,242.9)
(576.0)
1,027.3 $
34.7 $
20.9
5.5
(0.2)
(20.4)
40.5 $
1,051.3
3,698.6
(48.3)
(2,778.6)
(724.1)
1,198.9
Discounts
Contractual
Adjustments
Returns
Total
109.6 $
679.3
(0.3)
(551.7)
(109.1)
127.8 $
606.0 $
2,686.7
(10.0)
(1,887.6)
(506.3)
888.8 $
46.0 $
23.1
(1.8)
(1.1)
(31.5)
34.7 $
761.6
3,389.1
(12.1)
(2,440.4)
(646.9)
1,051.3
Discounts
Contractual
Adjustments
Returns
Total
71.6 $
482.7 $
583.0
(0.1)
(475.8)
(69.1)
109.6 $
2,307.4
15.0
(1,756.9)
(442.2)
606.0 $
51.2 $
26.9
(8.9)
(0.1)
(23.1)
46.0 $
605.5
2,917.3
6.0
(2,232.8)
(534.4)
761.6
$
$
$
$
$
$
The total reserves above, which are included in our consolidated balance sheets, are summarized as follows:
(In millions)
Reduction of accounts receivable
Component of accrued expenses and other
Total revenue-related reserves
Revenues from Anti-CD20 Therapeutic Programs
As of December 31,
2019
2018
$
$
197.8 $
1,001.1
1,198.9 $
176.6
874.7
1,051.3
Revenues from anti-CD20 therapeutic programs are summarized in the table below. For purposes of this
footnote we refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN.
(In millions)
Biogen's share of pre-tax profits in the U.S. for RITUXAN
and GAZYVA, including the reimbursement of selling and
development expenses
Other revenues from anti-CD20 therapeutic programs
Total revenues from anti-CD20 therapeutic programs
For the Years Ended December 31,
2019
2018
2017
$
$
1,542.4 $
1,431.9 $
748.0
548.3
2,290.4 $
1,980.2 $
1,316.4
242.8
1,559.2
Approximately 16%, 15% and 13% of our total revenues in 2019, 2018 and 2017, respectively, are derived from
our collaboration arrangements with Genentech. For additional information on our collaboration arrangements with
Genentech, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements.
F- 28
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Revenues
Other revenues are summarized as follows:
(In millions)
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 Inc. $
Revenues earned under our technical development
services and manufacturing service agreements and
royalty revenues on biosimilar products with Samsung
Bioepis
Revenues earned under manufacturing services agreement
on shipments of ELOCTA and ALPROLIX to Swedish Orphan
Biovitrum AB (Sobi) and royalties from Sobi on sales of
ELOCTA and ALPROLIX
Other royalty and corporate revenues:
For the Years Ended December 31,
2019
2018
2017
— $
(8.6) $
(16.9)
106.2
96.4
42.7
—
—
10.7
Royalty
Other corporate
Total other revenues
17.0
584.5
38.7
459.4
$
707.7 $
585.9 $
69.8
253.7
360.0
Other corporate revenues primarily reflect amounts earned under contract manufacturing agreements with our
strategic customers, including Bioverativ Inc. (Bioverativ). During the years ended December 31, 2019, 2018 and
2017, we recognized $383.2 million, $206.7 million and $64.8 million, respectively, in revenues under the
manufacturing and supply agreement with Bioverativ entered into in connection with the spin-off of our hemophilia
business.
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
expect the regulatory achievement to occur in 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.
For additional information on our collaboration arrangements with AbbVie Inc. (AbbVie) and Samsung Bioepis,
please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements.
5.
Inventory
The components of inventory are summarized as follows:
(In millions)
Raw materials
Work in process
Finished goods
Total inventory
Balance Sheet Classification:
Inventory
Investments and other assets
Total inventory
As of December 31,
2019
2018
169.7 $
460.0
174.5
804.2 $
804.2 $
—
804.2 $
196.3
606.7
133.5
936.5
929.9
6.6
936.5
$
$
$
$
F- 29
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During 2019 we sold to Bioverativ hemophilia-related inventory on hand as of December 31, 2018, with a cost
basis totaling $184.5 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 consolidated balance sheets.
Inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons are
charged to cost of sales, and totaled $52.2 million, $41.9 million and $76.9 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
Divestiture of Hillerød, Denmark Manufacturing Operations
In August 2019 we completed the 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 consolidated financial statements.
6.
Intangible Assets and Goodwill
Intangible Assets
Intangible assets, net of accumulated amortization, impairment charges and adjustments are summarized as
follows:
(In millions)
Completed technology
In-process research
and development
Trademarks and trade
names
Total intangible
assets
As of December 31, 2019
As of December 31, 2018
Accumulated
Amortization
Accumulated
Amortization
Estimated Life
Net
4-28 years $7,379.3 $(4,881.4) $ 2,497.9 $7,187.3 $(4,607.3) $2,580.0
Cost
Cost
Net
Indefinite until
commercialization
965.5
Indefinite
64.0
—
—
965.5
476.0
64.0
64.0
—
—
476.0
64.0
$8,408.8 $(4,881.4) $ 3,527.4 $7,727.3 $(4,607.3) $3,120.0
Amortization and Impairments
Amortization and impairments of acquired intangible assets totaled $489.9 million, $747.3 million and $814.7
million for the years ended December 31, 2019, 2018 and 2017, respectively. Amortization of acquired intangible
assets, excluding impairment charges, totaled $274.0 million, $381.2 million and $455.3 million for the years
ended December 31, 2019, 2018 and 2017, respectively. The decrease in amortization of acquired intangible
assets, excluding impairment charges, over the three years was primarily due to a lower rate of amortization for
acquired intangible assets, primarily due to prior year impairments.
For the year ended December 31, 2019, amortization and impairments of acquired intangible assets reflects
the impact of a $215.9 million impairment charge to reduce the fair value of IPR&D assets associated with
BG00011 (STX-100) to zero, as discussed below.
Amortization and impairments of acquired intangible assets for the year ended December 31, 2018, reflects
the impact of impairment charges related to certain IPR&D assets associated with our vixotrigine program totaling
$189.3 million, as discussed below.
Amortization and impairments of acquired intangible assets for the years ended December 31, 2018 and 2017,
reflect the impact of impairment charges of $176.8 million and $328.2 million, respectively, related to our intangible
F- 30
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
assets associated with our U.S. license to Forward Pharma's intellectual property, including Forward Pharma's
intellectual property related to TECFIDERA.
Completed Technology
Completed technology primarily relates to our acquisition of all remaining rights to TYSABRI from Elan. The net
book value of the TYSABRI asset as of December 31, 2019, was $1.8 billion.
Completed technology also includes $155.0 million in milestone payments made to Alkermes Pharma Ireland
Limited, a subsidiary of Alkermes plc (Alkermes), following the approval of VUMERITY in the U.S. in October 2019,
technology related to our AVONEX product, which we recorded in connection with the merger of Biogen, Inc. and IDEC
Pharmaceuticals Corporation in 2003, our rest of world license to Forward Pharma's intellectual property, including
Forward Pharma's intellectual property related to TECFIDERA, as discussed below, and other amounts related to our
other marketed products and other programs acquired through business combinations.
TECFIDERA License Rights
In January 2017 we entered into a settlement and license agreement among Biogen Swiss Manufacturing
GmbH, Biogen International Holding Ltd., Forward Pharma and certain related parties, which was effective as of
February 1, 2017. Pursuant to this agreement, we obtained U.S. and rest of world licenses to Forward Pharma's
intellectual property, including Forward Pharma's intellectual property related to TECFIDERA. In exchange, we paid
Forward Pharma $1.25 billion in cash, of which $795.2 million was recorded within intangible assets in the first
quarter of 2017.
We had an intellectual property dispute with Forward Pharma in the U.S. concerning intellectual property related
to TECFIDERA.
In March 2017 the U.S. intellectual property dispute was decided in our favor. Forward Pharma appealed to the
U.S. Court of Appeals for the Federal Circuit. We evaluated the recoverability of the U.S. asset acquired from Forward
Pharma and recorded a $328.2 million impairment charge in the first quarter of 2017 to adjust the carrying value of
the acquired U.S. asset to fair value reflecting the impact of the developments in the U.S. legal dispute and
continued to amortize the remaining net book value of the U.S. intangible asset in our consolidated statements of
income utilizing an economic consumption model. The U.S. Court of Appeals for the Federal Circuit upheld the U.S.
Patent and Trademark Office’s March 2017 ruling and in January 2019 denied Forward Pharma's petition for
rehearing. We evaluated the recoverability of the U.S. asset based upon these most recent developments and
recorded a $176.8 million impairment charge in the fourth quarter of 2018 to reduce the remaining net book value
of the U.S. asset to zero.
We have an intellectual property dispute with Forward Pharma in the European Union (E.U.) concerning
intellectual property related to TECFIDERA.
In March 2018 the European Patent Office (EPO) revoked Forward Pharma’s European Patent No. 2 801 355.
Forward Pharma has filed an appeal to the Technical Boards of Appeal of the EPO and a hearing has been set for
June 2020. Based upon our assessment of this ruling, we continue to amortize the remaining net book value of the
rest of world intangible asset in our consolidated statements of income utilizing an economic consumption model.
The remaining net book value of the TECFIDERA rest of world intangible asset as of December 31, 2019, was $36.1
million.
For additional information on the dispute with Forward Pharma in the E.U., please read Note 20, Litigation, to
these consolidated financial statements.
IPR&D Related to Business Combinations
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. Upon
commercialization, we will determine the estimated useful life and amortize these amounts based upon an economic
consumption method. The carrying value associated with our IPR&D assets as of December 31, 2019 and 2018,
relates to the various IPR&D programs we acquired in connection with our acquisitions of NST, Convergence
Pharmaceuticals Holdings Limited (Convergence), Stromedix Inc. (Stromedix) and Biogen International Neuroscience
GmbH (BIN) in 2019, 2015, 2012 and 2010, respectively. IPR&D balances include adjustments related to foreign
currency exchange rate fluctuations.
F- 31
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
An analysis of anticipated lifetime revenues and anticipated development costs is performed annually during
our long-range planning cycle, which was most recently updated in the second quarter of 2019. This analysis is
based upon certain assumptions that we evaluate on a periodic basis, including anticipated future product sales, the
expected impact of changes in the amount of development costs and the probabilities of our programs succeeding,
the introduction of new products by our competitors and changes in our commercial and pipeline product candidates.
In connection with our acquisition of NST in June 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 consolidated financial statements.
BG00011
During the third quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of
idiopathic pulmonary fibrosis (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 a 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
related IPR&D intangible asset to zero.
In addition, we delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of TGN as
we awaited the outcome of ongoing interactions with the 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
lower cumulative probability of success. As a result of that reassessment, 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.
The IPR&D impairment charges were included in amortization and impairment 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 consolidated statements of income. The fair value 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.
Estimated Future Amortization of Intangible Assets
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)
2020
2021
2022
2023
2024
As of December 31, 2019
$
260.0
220.0
225.0
230.0
220.0
F- 32
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Goodwill
The following table provides a roll forward of the changes in our goodwill balance:
(In millions)
Goodwill, beginning of year
Increase to goodwill
Elimination of goodwill allocated to Hillerød, Denmark manufacturing
operations
Other
Goodwill, end of year
As of December 31,
2019
2018
5,706.4 $
117.5
(69.5)
3.4
5,757.8 $
4,632.5
1,080.1
—
(6.2)
5,706.4
$
$
The increase to goodwill during 2019 was related to our acquisition of NST. For additional information on our
acquisition of NST, please read Note 2, Acquisitions, to these consolidated financial statements.
The increase to goodwill during 2018 was related to $1.2 billion in contingent milestones achieved (exclusive
of $119.9 million in tax benefits) and payable to the former shareholders of Fumapharm AG and holders of their
rights. In the fourth quarter of 2018 we achieved the $20.0 billion cumulative sales level threshold and accrued the
final contingent payment of $300.0 million related to FUMADERM and TECFIDERA (together, the Fumapharm
Products), which was paid in the first quarter of 2019.
The elimination of goodwill represents an allocation based upon the relative fair value of our Hillerød, Denmark
manufacturing operations at the divestiture date. 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 consolidated financial statements.
As of December 31, 2019, we had no accumulated impairment losses related to goodwill.
Other includes changes related to foreign currency exchange rate fluctuations.
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 December 31, 2019 (In millions)
Assets:
Cash equivalents
Marketable debt securities:
Corporate debt securities
Government securities
Mortgage and other asset backed securities
Marketable equity securities
Derivative contracts
Plan assets for deferred compensation
Total
Liabilities:
Derivative contracts
Contingent consideration obligations
Total
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
2,541.1 $
— $
2,541.1 $
1,695.1
1,013.9
261.3
329.6
43.8
27.7
5,912.5 $
—
—
—
—
—
—
—
—
8.3 $
—
8.3 $
—
346.1
346.1
1,695.1
1,013.9
261.3
337.5
43.8
27.7
5,920.4 $
8.3 $
346.1
354.4 $
F- 33
$
$
$
—
—
—
7.9
—
—
7.9 $
— $
—
— $
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2018 (In millions)
Assets:
Cash equivalents
Marketable debt securities:
Corporate debt securities
Government securities
Mortgage and other asset backed securities
Marketable equity securities
Derivative contracts
Plan assets for deferred compensation
Total
Liabilities:
Derivative contracts
Contingent consideration obligations
Total
Quoted
Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
705.5 $
— $
705.5 $
2,459.2
969.6
260.5
615.4
66.9
25.4
5,102.5 $
24.6 $
409.8
434.4 $
$
$
$
—
—
—
51.7
—
—
51.7 $
— $
—
— $
2,459.2
969.6
260.5
563.7
66.9
25.4
5,050.8 $
24.6 $
—
24.6 $
—
409.8
409.8
—
—
—
—
—
—
—
—
There have been no changes in valuation techniques or transfers between fair value measurement levels during
the years ended December 31, 2019 and 2018. 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
collaboration arrangements with Ionis, please read Note 18, Collaborative and Other Relationships, to these
consolidated financial statements. For a description of our validation procedures related to prices provided by third-
party pricing services and our option pricing valuation model, please read Note 1, Summary of Significant Accounting
Policies - Fair Value Measurements, to these consolidated financial statements.
Debt Instruments
The fair values of our debt instruments, which are Level 2 liabilities, are summarized as follows:
(In millions)
2.900% Senior Notes due September 15, 2020
3.625% Senior Notes due September 15, 2022
4.050% Senior Notes due September 15, 2025
5.200% Senior Notes due September 15, 2045
Total
Contingent Consideration Obligations
As of December 31,
2019
2018
$
$
1,509.6 $
1,038.9
1,897.2
2,107.9
6,553.6 $
1,489.5
1,000.4
1,745.1
1,802.6
6,037.6
In connection with our acquisitions of Convergence, Stromedix and BIN 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:
(In millions)
Fair value, beginning of year
Changes in fair value
Payments and other
Fair value, end of year
As of December 31,
2019
2018
$
$
409.8 $
(63.7)
—
346.1 $
523.6
(12.3)
(101.5)
409.8
As of December 31, 2019 and 2018, approximately $197.7 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
F- 34
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
our consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and
other.
For the year ended December 31, 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 changes in the
probability and expected timing of achievement of certain developmental milestones, a decrease in interest rates
used to revalue our contingent consideration liabilities and the passage of time.
For the year ended December 31, 2018, changes in the fair value of our contingent consideration obligations
were primarily due to delays in the expected timing of achievement of milestones related to the TGN program and an
increase in discount rates used to revalue our contingent consideration liabilities, partially offset by the passage of
time. For the year ended December 31, 2018, payments and other reflects an $81.5 million milestone payment
made to the former shareholders of Stromedix.
The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash
flow calculation using Level 3 fair value measurements and inputs including estimated revenues and probabilities of
success. For additional information on the valuation techniques and inputs utilized in the valuation of our financial
assets and liabilities, please read Note 1, Summary of Significant Accounting Policies, to these consolidated financial
statements.
Convergence Pharmaceuticals Holdings Limited
In connection with our acquisition of Convergence in February 2015 we recorded a contingent consideration
obligation of $274.5 million. As of December 31, 2019 and 2018, the fair value of this contingent consideration
obligation was $244.6 million and $246.6 million, respectively. Our most recent valuation was determined based
upon net cash flow projections of $400.0 million, probability weighted and discounted using a rate of 2.1%, which is
a measure of the credit risk associated with settling the liability.
For 2019 compared to 2018, the net decrease in our contingent consideration obligation was primarily due to
changes in the expected timing and probabilities of success related to the achievement of certain developmental
milestones, partially offset by a decrease in discount rates used to revalue our contingent consideration liabilities
and the passage of time. Accrued expenses and other in our consolidated balances sheets include $148.5 million
as we expect to make the payment within one year.
Stromedix Inc.
In connection with our acquisition of Stromedix in March 2012 we recorded a contingent consideration
obligation of $122.2 million. 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 adjusted the fair value of this contingent
consideration obligation to zero, resulting in a gain of $61.2 million in the third quarter of 2019. As of December 31,
2018, the fair value of this contingent consideration obligation was $83.0 million.
Biogen Idec International Neuroscience GmbH
In connection with our acquisition of BIN in December 2010 we recorded a contingent consideration obligation
of $81.2 million. As of December 31, 2019 and 2018, the fair value of this contingent consideration obligation was
$101.5 million and $80.2 million, respectively. Our most recent valuation was determined based upon net cash
outflow projections of $335.0 million, probability weighted and discounted using a rate of 2.3%, which is a measure
of the credit risk associated with settling the liability.
For 2019 compared to 2018, the net increase in our contingent consideration obligation was primarily due to
changes in the expected timing and probabilities of success related to the achievement of certain developmental
milestones, a decrease in discount rates used to revalue our contingent consideration liabilities and the passage of
time. No amounts are reflected as a current liability in our consolidated balance sheets at December 31, 2019, as
we do not expect to make a payment in the next year.
Acquired IPR&D
The fair values of the acquired IPR&D assets were based on a probability-adjusted discounted cash flow
calculation using Level 3 fair value measurements and inputs including estimated revenues and probabilities of
success. These assets are tested for impairment annually until commercialization, after which time the acquired
F- 35
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
IPR&D will be amortized over its estimated useful life using the economic consumption method. In connection with
our acquisition of Stromedix, we recognized a $219.2 million acquired IPR&D intangible asset. During the third
quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of IPF due to safety
concerns and recognized an impairment charge of $215.9 million to reduce the fair value of the IPR&D intangible
asset to zero. In connection with our acquisition of Convergence we recognized a $424.6 million acquired IPR&D
intangible asset. During the third quarter of 2018 we recognized impairment charges related to certain IPR&D assets
associated with our vixotrigine program totaling $189.3 million. For additional information on our IPR&D intangible
assets, including a discussion of our most significant assumptions, please read Note 6, Intangible Assets and
Goodwill, to these consolidated financial statements.
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 consolidated balance sheets:
(In millions)
Commercial paper
Overnight reverse repurchase agreements
Money market funds
Short-term debt securities
Total
As of December 31,
2019
2018
$
$
384.4 $
368.8
1,628.5
159.4
2,541.1 $
231.2
—
279.5
194.8
705.5
The carrying values of our commercial paper, including accrued interest, overnight reverse repurchase
agreements, money market funds and our short-term debt securities approximate fair value due to their short-term
maturities.
Marketable equity securities gains (losses) are recorded in other income (expense), net in our consolidated
statements of income. The following tables summarize our marketable debt and equity securities, classified as
available for sale:
As of December 31, 2019 (In millions)
Corporate debt securities
Current
Non-current
Government securities
Current
Non-current
Mortgage and other asset backed securities
Current
Non-current
Total marketable debt securities
Marketable equity securities, non-current
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
$
1,057.2 $
633.9
502.9
510.1
0.7
260.2
2,965.0 $
218.4 $
1.0 $
3.0
0.4
0.8
—
0.8
6.0 $
132.1 $
— $
—
1,058.2
636.9
—
(0.3)
—
(0.4)
(0.7) $
(13.0) $
503.3
510.6
0.7
260.6
2,970.3
337.5
F- 36
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of December 31, 2018 (In millions)
Corporate debt securities
Current
Non-current
Government securities
Current
Non-current
Mortgage and other asset backed securities
Current
Non-current
Total marketable debt securities
Marketable equity securities, non-current
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
$
1,608.4 $
854.9
706.1
264.0
0.1
260.5
3,694.0 $
496.2 $
— $
0.7
0.1
0.1
—
0.4
1.3 $
127.7 $
(0.9) $
(3.9)
1,607.5
851.7
(0.4)
(0.3)
—
(0.5)
(6.0) $
(8.5) $
705.8
263.8
0.1
260.4
3,689.3
615.4
Summary of Contractual Maturities: Available-for-Sale Debt Securities
The estimated fair value and amortized cost of our marketable debt securities available-for-sale by contractual
maturity are summarized as follows:
(In millions)
Due in one year or less
Due after one year through five years
Due after five years
Total marketable debt securities
As of December 31, 2019
As of December 31, 2018
Estimated
Fair Value
$
$
1,562.2 $
1,234.5
173.6
2,970.3 $
Amortized
Cost
1,560.8 $
1,230.4
173.8
2,965.0 $
Estimated
Fair Value
2,313.4 $
1,232.7
143.2
3,689.3 $
Amortized
Cost
2,314.6
1,235.9
143.5
3,694.0
The average maturity of our marketable debt securities available-for-sale as of December 31, 2019 and 2018,
were 14 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:
(In millions)
Proceeds from maturities and sales
Realized gains
Realized losses
For the Years Ended December 31,
2019
2018
2017
$
$
$
6,007.0 $
6.0 $
1.5 $
9,173.7 $
3.2 $
11.7 $
5,565.9
3.0
22.4
Realized losses for the year ended December 31, 2019, primarily relate to sales of corporate bonds, agency
mortgage-backed securities and other asset-backed securities. Realized losses for the year ended December 31,
2018, primarily relate to sales of corporate bonds, agency mortgage-backed securities and other asset-backed
securities. Realized losses for the year ended December 31, 2017, primarily relate to impairments recognized on
certain of our available-for-sale marketable debt securities, sales of agency mortgage-backed securities, corporate
bonds and government securities.
Strategic Investments
As of December 31, 2019 and 2018, our strategic investment portfolio was comprised of investments totaling
$393.9 million and $676.3 million, respectively, which are included in investments and other assets in our
consolidated balance sheets.
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 consolidated
financial statements, venture capital funds where the underlying investments are in equity securities of certain
biotechnology companies and non-marketable equity securities.
F- 37
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 year ended December 31, 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 the June 2018 investment in Ionis common stock, please read Note 18,
Collaborative and Other Relationships, to these consolidated financial statements.
Samsung Bioepis
In June 2018 we exercised our option under our joint venture agreement with Samsung BioLogics 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 December 31, 2019 and 2018, the carrying value of our investment in Samsung Bioepis totaled 670.8
billion South Korean won ($580.2 million) and 759.5 billion South Korean won ($680.6 million), respectively, which
is classified as a component of investments and other assets within our consolidated balance sheets.
For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18,
Collaborative and Other Relationships, to these consolidated financial statements.
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 December 31, 2019 and 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 consolidated statements of income that has been
impacted by the hedged item.
F- 38
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenues
and operating expenses is summarized as follows:
Foreign Currency: (In millions)
Euro
British pound sterling
Swiss francs
Japanese yen
Canadian dollar
Notional Amount
As of December 31,
2019
2018
$
1,892.4 $
—
—
—
—
1,701.4
215.3
131.4
98.8
92.2
2,239.1
Total foreign currency forward contracts
$
1,892.4 $
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 $0.5 million as of
December 31, 2019, net gains of $27.3 million as of December 31, 2018, and net losses of $113.0 million as of
December 31, 2017. We expect the net gains of $0.5 million to be settled over the next 15 months, of which $2.4
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 December 31, 2019 and 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 consolidated statements of income:
For the Years Ended December 31,
Net Gains/(Losses)
Reclassified from AOCI into Operating Income (in millions)
Net Gains/(Losses)
Recognized in Operating Income (in millions)
Location
Revenues
Operating expenses
2019
2018
Location
$
$
118.6 $
(3.3) $
(42.5) Revenues
0.2 Operating expenses
2019
2018
$
$
2.9 $
0.2 $
10.8
(0.1)
For the Years Ended December 31,
Net Gains/(Losses)
Reclassified from AOCI into Operating Income (in millions)
Net Gains/(Losses)
Recognized Directly into Net Income (in millions)
Location
Revenues
Operating expenses
2017
Location
$
$
(32.5) Other income (expense)
0.6 Other income (expense)
2017
$
$
8.9
(0.2)
Interest Rate Contracts - Hedging Instruments
We have entered into interest rate lock contracts or interest rate swap contracts on certain borrowing
transactions to manage our exposure to interest rate changes and to reduce our overall cost of borrowing.
Interest Rate Swap Contracts
In connection with the issuance of our 2.90% Senior Notes, as described in Note 12, Indebtedness, to these
consolidated financial statements, 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 December 31, 2019 and 2018, includes approximately $2.3 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 consolidated statements of income.
F- 39
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 these 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 December 31,
2019, had remaining durations of 10 months. 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 losses of $1.5 million and $3.8 million as of December 31, 2019 and
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 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 $2.9 million and $7.3 million as of December 31,
2019 and 2018, respectively.
The following table summarizes the effect of our net investment hedges in our consolidated financial
statements:
For the Years Ended December 31,
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
Gains (losses) on net
investment hedge
2019
2018
$25.3 $ (3.8)
Location
Gains (losses) on net
investment hedge
2019
2018
$ 3.3 $ —
Location
Other income
(expense)
2019
2018
$ 7.0 $ 1.5
For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18,
Collaborative and Other Relationships, to these consolidated financial statements.
Foreign Currency Forward Contracts - Other Derivative Instruments
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 contracts as of December 31, 2019 and
2018, were $793.8 million and $735.1 million, respectively. Net losses of $5.9 million and net gains of $2.0 million
and $4.5 million related to these contracts were recorded as a component of other income (expense), net, for the
years ended December 31, 2019, 2018 and 2017, respectively.
Summary of Derivative Instruments
While certain of our derivative instruments are subject to netting arrangements with our counterparties, we do
not offset derivative assets and liabilities in our consolidated balance sheets. The amounts in the table below would
not be substantially different if the derivative assets and liabilities were offset.
F- 40
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the fair value and presentation in our consolidated balance sheets of our
outstanding derivative instruments, including those designated as hedging instruments:
(In millions)
Cash Flow Hedging Instruments:
Asset derivative instruments
Liability derivative instruments Accrued expenses and other
Other current assets
Balance Sheet Location
Net Investment Hedging
Instruments:
Asset derivative instruments
Fair Value Hedging Instruments
Other long-term liabilities
Other current assets
Liability derivative instruments Accrued expenses and other
Other long-term liabilities
Other Derivative Instruments:
Asset derivative instruments
Liability derivative instruments Accrued expenses and other
Other current assets
Fair Value
As of December 31, 2019
Fair Value
As of December 31, 2018
$
$
$
$
$
$
$
$
33.8 $
2.0 $
1.7 $
2.0 $
2.3 $
— $
8.0 $
2.4 $
65.8
6.9
—
—
—
14.5
1.1
3.2
10. Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Components of
property, plant and equipment, net are summarized as follows:
(In millions)
Land
Buildings
Leasehold improvements
Machinery and equipment
Computer software and hardware
Furniture and fixtures
Construction in progress
Total cost
Less: accumulated depreciation
Total property, plant and equipment, net
As of December 31,
2019
2018
$
$
118.1 $
835.0
99.5
844.5
798.4
58.3
2,084.4
4,838.2
(1,590.9)
3,247.3 $
144.5
1,282.8
94.4
1,258.1
798.7
61.6
1,758.5
5,398.6
(1,797.4)
3,601.2
Depreciation expense totaled $190.6 million, $269.4 million and $266.3 million for 2019, 2018 and 2017,
respectively.
For 2019, 2018 and 2017 we capitalized interest costs related to construction in progress totaling
approximately $68.8 million, $54.0 million and $30.7 million, respectively. The increase in capitalized interest costs
is primarily due to the construction of our large-scale biologics manufacturing facility in Solothurn, Switzerland, as
discussed below.
Solothurn, Switzerland Manufacturing Facility
In order to support our drug development pipeline, 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 51,000 square feet of administrative space. As of December 31,
2019 and 2018, we had approximately $1.9 billion and $1.6 billion, respectively, capitalized as construction in
progress related to this facility.
F- 41
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Divestiture of Hillerød, Denmark Manufacturing Operations
In August 2019 we completed the 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 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 ten 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
consolidated balance sheets of our operating leases:
(In millions)
Assets:
Balance sheet location
As of December 31,
2019
Operating lease assets
Operating lease assets
Liabilities
Current operating lease liabilities
Accrued expenses and other
Non-current operating lease liabilities
Long-term operating lease liabilities
Total operating lease liabilities
$
$
$
427.0
73.6
412.7
486.3
The following table summarizes the effect of lease costs in our consolidated statements of income:
(In millions)
Operating lease cost
Variable lease cost
Sublease income
Net lease cost
Income Statement Location
Research and development
Selling, general and administrative
Research and development
Selling, general and administrative
Selling, general and administrative
Other (income) expense, net
For the year ended
December 31,
2019
$
$
6.7
84.6
1.2
23.7
(25.6)
(3.9)
86.7
F- 42
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Variable lease cost primarily related to operating expenses, taxes and insurance associated with our operating
leases. As these costs are generally variable in nature, they are not included in the measurement of the operating
lease asset and related lease liability.
The minimum lease payments for the next five years and thereafter is expected to be as follows:
(In millions)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: interest
Present value of operating lease liabilities
As of December 31,
2019
$
$
$
87.6
81.5
75.7
72.5
69.0
158.3
544.6
58.3
486.3
Under the prior lease accounting guidance minimum rental commitments under non-cancelable leases, net of
income from subleases, for each of the five years and total thereafter as of December 31, 2018, were as follows:
(In millions)
Minimum lease payments
Less: income from subleases(1)
Net minimum lease
payments
2019
2020
2021
2022
2023
Thereafter
Total
$
87.0 $
(26.8)
80.7 $
(25.6)
75.9 $
(23.7)
71.7 $
(24.0)
71.0 $ 215.3 $ 601.6
(182.8)
(58.4)
(24.3)
$
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:
Weighted average remaining lease term in years
Weighted average discount rate
As of December 31,
2019
7.07
3.2%
Supplemental disclosure of cash flow information related to our operating leases included in cash flows
provided by operating activities in our consolidated statements of cash flows is as follows:
(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating lease assets obtained in exchange for lease obligations
For the year ended
December 31,
2019
$
$
93.8
35.9
F- 43
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
12.
Indebtedness
Our indebtedness is summarized as follows:
(In millions)
Current portion:
2.900% Senior Notes due September 15, 2020
Current portion of notes payable
Non-current portion:
2.900% Senior Notes due September 15, 2020
3.625% Senior Notes due September 15, 2022
4.050% Senior Notes due September 15, 2025
5.200% Senior Notes due September 15, 2045
Non-current portion of notes payable
2015 Senior Notes
As of December 31,
2019
2018
$
$
1,495.8 $
1,495.8 $
—
996.6
1,739.5
1,722.9
$
4,459.0 $
—
—
1,480.8
995.5
1,737.8
1,722.4
5,936.5
The following is a summary of our principal indebtedness as of December 31, 2019:
• $1.5 billion aggregate principal amount of 2.90% Senior Notes due September 15, 2020, valued at
99.792% of par;
• $1.0 billion aggregate principal amount of 3.625% Senior Notes due September 15, 2022, valued at
99.920% of par;
• $1.75 billion aggregate principal amount of 4.05% Senior Notes due September 15, 2025, valued at
99.764% of par; and
• $1.75 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2045, valued at
99.294% of par.
The costs associated with these offerings of approximately $47.5 million have been recorded as a reduction to
the carrying amount of the debt in our consolidated balance sheets. These costs along with the discounts will be
amortized as additional interest expense using the effective interest rate method over the period from issuance
through maturity.
These notes are senior unsecured obligations. These Senior Notes may be redeemed at our option at any time
at 100% of the principal amount plus accrued interest and a specified make-whole amount. These Senior Notes
contain a change of control provision that may require us to purchase the notes at a price equal to 101% of the
principal amount plus accrued and unpaid interest to the date of purchase under certain circumstances.
In connection with the 2.90% Senior Notes offering due in 2020, we entered into interest rate swap contracts.
The carrying value of the 2.90% Senior Notes as of December 31, 2019 and 2018, includes approximately $2.3
million and $14.5 million, respectively, related to changes in the fair value of these contracts. For additional
information on our interest rate contracts, please read Note 9, Derivative Instruments, to these consolidated financial
statements.
2015 Credit Facility
In August 2015 we entered into a $1.0 billion, five-year senior unsecured revolving credit facility under which we
were permitted to draw funds for working capital and general corporate purposes. The terms of the revolving credit
facility included a financial covenant that required us not to exceed a maximum consolidated leverage ratio. As of
December 31, 2019, we had no outstanding borrowings and were in compliance with all covenants under this facility.
In January 2020 we entered into a new $1.0 billion, five-year senior unsecured revolving credit facility that
replaced the credit facility entered into in August 2015. For additional information, please read Note 26, Subsequent
Events, to these consolidated financial statements.
F- 44
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Debt Maturity
The total gross payments due under our debt arrangements are as follows:
(In millions)
2020
2021
2022
2023
2024
2025 and thereafter
Total
As of December 31, 2019
1,500.0
$
—
1,000.0
—
—
3,500.0
6,000.0
$
The fair value of our debt is disclosed in Note 7, Fair Value Measurements, to these consolidated financial
statements.
13.
Equity
Preferred Stock
We have 8.0 million shares of Preferred Stock authorized, of which 1.75 million shares are authorized as
Series A, 1.0 million shares are authorized as Series X junior participating and 5.25 million shares are
undesignated. Shares may be issued without a vote or action of shareholders from time to time in classes or series
with the designations, powers, preferences and the relative, participating, optional or other special rights of the
shares of each such class or series and any qualifications, limitations or restrictions thereon as set forth in the
instruments governing such shares. Any such Preferred Stock may rank prior to common stock as to dividend rights,
liquidation preference or both, and may have full or limited voting rights and may be convertible into shares of
common stock. No shares of Preferred Stock were issued and outstanding during 2019, 2018 and 2017.
Common Stock
The following table describes the number of shares authorized, issued and outstanding of our common stock
as of December 31, 2019, 2018 and 2017:
As of December 31, 2019
As of December 31, 2018
As of December 31, 2017
(In millions)
Common stock
Authorized
1,000.0
Issued
198.0
Outstanding
174.2
Authorized
1,000.0
Issued
221.0
Outstanding
197.2
Authorized
1,000.0
Issued
235.3
Outstanding
211.5
Share Repurchases
In December 2019 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common
stock (December 2019 Share Repurchase Program). Our December 2019 Share Repurchase Program does not have
an expiration date. All share repurchases under our December 2019 Share Repurchase Program will be retired. We
did not repurchase shares of our common stock under our December 2019 Share Repurchase Program during the
year ended December 31, 2019.
In March 2019 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common
stock (March 2019 Share Repurchase Program). Our March 2019 Share Repurchase Program does not have an
expiration date. All share repurchases under our March 2019 Share Repurchase Program will be retired. Under our
March 2019 Share Repurchase Program, we repurchased and retired approximately 14.7 million shares of our
common stock at a cost of approximately $3.7 billion during the year ended December 31, 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 and 4.3 million shares of our common stock at a cost of approximately $2.1 billion
and $1.4 billion during the years ended December 31, 2019 and 2018, respectively.
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
F- 45
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2016 Share Repurchase Program were retired. Under our 2016 Share Repurchase Program, we repurchased and
retired approximately 10.5 million and 3.7 million shares of common stock at a cost of approximately $3.0 billion
and $1.0 billion during the years ended December 31, 2018 and 2017, respectively.
Amounts paid to repurchase shares in excess of their par value are allocated between additional paid-in capital
and retained earnings, with payments in excess of our additional paid-in-capital balance recorded as a reduction to
retained earnings.
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, Net of
Tax
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
Amounts reclassified from
accumulated other
comprehensive income
(loss)
Net current period other
comprehensive income
(loss)
Balance, December 31, 2019 $
11.8
88.1
28.6
(1.5)
103.8
230.8
(3.6)
(115.0)
(7.0)
—
—
(125.6)
8.2
4.2 $
(26.9)
21.6
(1.5)
103.8
105.2
7.8 $
25.1 $
(32.8) $
(139.5) $ (135.2)
(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, Net of
Tax
Unfunded
Status of
Postretirement
Benefit Plans,
net of tax
Currency
Translation
Adjustments
Total
Balance, December 31, 2017 $
Amounts reclassified, net
of tax, upon adoption of
ASU 2016-01
Balance, January 1, 2018
Other comprehensive
income (loss) before
reclassifications
Amounts reclassified from
accumulated other
comprehensive income
(loss)
Net current period other
comprehensive income
(loss)
(1.6) $
(104.5) $
— $
(36.8) $
(175.5) $ (318.4)
1.5
(0.1)
—
(104.5)
(10.6)
97.4
—
—
5.0
—
(36.8)
—
(175.5)
1.5
(316.9)
5.5
(67.8)
29.5
6.7
41.8
(1.5)
—
—
47.0
(3.9)
139.2
3.5
5.5
(67.8)
76.5
Balance, December 31, 2018 $
(4.0) $
34.7 $
3.5 $
(31.3) $
(243.3) $ (240.4)
F- 46
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (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, Net of
Tax
Unfunded
Status of
Postretirement
Benefit Plans,
net of tax
Currency
Translation
Adjustments
Total
Balance, December 31, 2016 $
(10.8) $
57.8 $
— $
(32.7) $
(334.2) $ (319.9)
Other comprehensive
income (loss) before
reclassifications
Amounts reclassified from
accumulated other
comprehensive income
(loss)
Net current period other
comprehensive income
(loss)
(3.5)
(193.8)
12.7
31.5
9.2
(162.3)
—
—
—
(4.1)
158.7
(42.7)
—
—
44.2
(4.1)
158.7
1.5
Balance, December 31, 2017 $
(1.6) $
(104.5) $
— $
(36.8) $
(175.5) $ (318.4)
The following table summarizes the amounts reclassified from accumulated other comprehensive income:
(In millions)
Gains (losses) on securities available for
sale
Gains (losses) on cash flow hedges
Income Statement Location
2019
2018
2017
Amounts Reclassified from
Accumulated Other Comprehensive Income
For the Years Ended December 31,
Other income (expense)
Income tax benefit (expense)
$
4.5 $
(0.9)
(8.5) $
1.8
Revenues
Operating expenses
Other income (expense)
Income tax benefit (expense)
118.6
(3.3)
0.3
(0.6)
7.0
(42.5)
0.2
0.3
0.2
1.5
(19.5)
6.8
(32.5)
0.6
0.3
0.1
—
Gains (losses) on net investment hedge
Other Income (expense)
Total reclassifications, net of tax
$
125.6 $
(47.0) $
(44.2)
14.
Earnings per Share
Basic and diluted earnings per share are calculated as follows:
(In millions)
Numerator:
For the Years Ended December 31,
2019
2018
2017
Net income attributable to Biogen Inc.
$
5,888.5 $
4,430.7 $
2,539.1
Denominator:
Weighted average number of common shares outstanding
Effect of dilutive securities:
Stock options and employee stock purchase plan
Time-vested restricted stock units
Market stock units
Performance stock units settled in stock
Dilutive potential common shares
Shares used in calculating diluted earnings per share
187.1
—
0.2
0.1
—
0.3
187.4
204.9
—
0.3
0.1
—
0.4
205.3
212.6
0.1
0.2
0.1
—
0.4
213.0
Amounts excluded from the calculation of net income per diluted share because their effects were anti-dilutive
were insignificant.
F- 47
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Earnings per share for the years ended December 31, 2019, 2018 and 2017, reflects, on a weighted average
basis, the repurchase of approximately 23.6 million shares, 14.8 million shares and 3.7 million shares of our
common stock, respectively, under our March 2019, 2018 and 2016 Share Repurchase Programs.
15. Share-Based Payments
Share-Based Compensation Expense
The following table summarizes share-based compensation expense included in our consolidated statements of
income:
(In millions)
Research and development
Selling, general and administrative
Subtotal
Capitalized share-based compensation costs
Share-based compensation expense included in total cost
and expenses
Income tax effect
For the Years Ended December 31,
2019
2018
2017
$
77.1 $
75.8 $
148.3
225.4
(8.9)
216.5
(35.7)
105.8
181.6
(11.5)
170.1
(27.5)
74.0
95.7
169.7
(9.6)
160.1
(42.8)
Share-based compensation expense included in net income
attributable to Biogen Inc.
$
180.8 $
142.6 $
117.3
The following table summarizes share-based compensation expense associated with each of our share-based
compensation programs:
(In millions)
Market stock units
Time-vested restricted stock units
Cash settled performance units
Performance units
Performance stock units settled in stock
Performance stock units settled in cash
Employee stock purchase plan
NST stock options
Subtotal
Capitalized share-based compensation costs
Share-based compensation expense included in total cost
and expenses
For the Years Ended December 31,
2019
2018
2017
$
30.4 $
27.2 $
134.0
0.7
1.6
15.5
5.5
11.5
26.2
225.4
(8.9)
126.6
7.8
3.1
4.7
1.7
10.5
—
181.6
(11.5)
22.4
107.3
18.4
12.3
—
—
9.3
—
169.7
(9.6)
$
216.5 $
170.1 $
160.1
As of December 31, 2019, unrecognized compensation cost related to unvested share-based compensation
was approximately $210.4 million, net of estimated forfeitures. We expect to recognize the cost of these unvested
awards over a weighted-average period of 1.9 years.
Share-Based Compensation Plans
We have three share-based compensation plans pursuant to which awards are currently being made: (i) the
Biogen Inc. 2006 Non-Employee Directors Equity Plan (2006 Directors Plan); (ii) the Biogen Inc. 2017 Omnibus
Equity Plan (2017 Omnibus Equity Plan); and (iii) the Biogen Inc. 2015 Employee Stock Purchase Plan (2015 ESPP).
Directors Plan
In May 2006 our shareholders approved the 2006 Directors Plan for share-based awards to our directors.
Awards granted from the 2006 Directors Plan may include stock options, shares of restricted stock, RSUs, stock
appreciation rights and other awards in such amounts and with such terms and conditions as may be determined by
a committee of our Board of Directors, subject to the provisions of the 2006 Directors Plan. We have reserved a total
of 1.6 million shares of common stock for issuance under the 2006 Directors Plan. The 2006 Directors Plan
F- 48
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
provides that awards other than stock options and stock appreciation rights will be counted against the total number
of shares reserved under the plan in a 1.5-to-1 ratio. In June 2015 our shareholders approved an amendment to
extend the term of the 2006 Directors Plan until June 2025.
Omnibus Plan
In June 2017 our shareholders approved the 2017 Omnibus Equity Plan for share-based awards to our
employees. Awards granted from the 2017 Omnibus Equity Plan may include stock options, shares of restricted
stock, RSUs, performance shares, stock appreciation rights and other awards in such amounts and with such terms
and conditions as may be determined by a committee of our Board of Directors, subject to the provisions of the
2017 Omnibus Equity Plan. Shares of common stock available for grant under the 2017 Omnibus Equity Plan consist
of 8.0 million shares reserved for this purpose, plus shares of common stock that remained available for grant under
our 2008 Omnibus Equity Plan as of June 7, 2017, or that could again become available for grant if outstanding
awards under the 2008 Omnibus Equity Plan as of June 7, 2017, are cancelled, surrendered or terminated in whole
or in part. The 2017 Omnibus Equity Plan provides that awards other than stock options and stock appreciation
rights will be counted against the total number of shares available under the plan in a 1.5-to-1 ratio.
We have not made any awards pursuant to the 2008 Omnibus Equity Plan since our shareholders approved the
2017 Omnibus Equity Plan, and do not intend to make any awards pursuant to the 2008 Omnibus Equity Plan in the
future, except that unused shares under the 2008 Omnibus Equity Plan have been carried over for use under the
2017 Omnibus Equity Plan.
Stock Options
We currently do not grant stock options to our employees or directors. Outstanding stock options previously
granted to our employees and directors generally have a 10-year term and vest over a period of between one and
four years, provided the individual continues to serve at Biogen through the vesting dates. Options granted under all
plans are exercisable at a price per share not less than the fair market value of the underlying common stock on the
date of grant. As of December 31, 2019, all outstanding options were exercisable.
The following table summarizes our stock option activity:
Outstanding at December 31, 2018
Granted
Exercised
Cancelled
Outstanding at December 31, 2019
Shares
27,000 $
— $
(15,000) $
— $
12,000 $
Weighted
Average
Exercise
Price
53.82
—
50.03
—
58.46
The total intrinsic values of options exercised in 2019, 2018 and 2017 totaled $4.2 million, $4.0 million and
$3.4 million, respectively. The aggregate intrinsic values of options outstanding as of December 31, 2019, totaled
$2.9 million. The weighted average remaining contractual term for options outstanding as of December 31, 2019,
was 0.2 years.
The following table summarizes the amount of tax benefit realized for stock options and cash received from the
exercise of stock options:
(In millions)
Tax benefit realized for stock options
Cash received from the exercise of stock options
Market Stock Units (MSUs)
For the Years Ended December 31,
2019
2018
2017
$
$
2.5 $
0.4 $
2.2 $
0.8 $
3.4
0.7
MSUs awarded to employees prior to 2014 vested in four equal annual increments beginning on the first
anniversary of the grant date. Participants may ultimately earn between 0% and 150% of the target number of units
granted based on actual stock performance.
F- 49
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
MSUs awarded to employees in 2014 and thereafter vest in three equal annual increments beginning on the
first anniversary of the grant date, and participants may ultimately earn between 0% and 200% of the target number
of units granted based on actual stock performance.
The vesting of these awards is subject to the respective employee’s continued employment. The number of
MSUs granted represents the target number of units that are eligible to be earned based on the attainment of
certain market-based criteria involving our stock price. The number of MSUs earned is calculated at each annual
anniversary from the date of grant over the respective vesting periods, resulting in multiple performance periods.
Accordingly, additional MSUs may be issued or currently outstanding MSUs may be cancelled upon final
determination of the number of awards earned.
The following table summarizes our MSU activity:
Unvested at December 31, 2018
Granted (a)
Vested
Forfeited
Unvested at December 31, 2019
Shares
180,000 $
147,000 $
(101,000) $
(43,000) $
183,000 $
Weighted
Average
Grant Date
Fair Value
371.32
378.08
356.71
388.68
378.09
(a) MSUs granted during 2019 include awards granted in conjunction with our annual awards made in February 2019 and MSUs
granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to be earned
at the time of grant. MSUs granted in 2019 also reflect an adjustment based upon the final performance multiplier in
relation to shares granted in 2018, 2017 and 2016.
We value grants of MSUs using a lattice model with a Monte Carlo simulation. This valuation methodology
utilizes several key assumptions, the 30 calendar day average closing stock price on the date of grant for MSUs,
expected volatility of our stock price, risk-free rates of return and expected dividend yield.
The assumptions used in our valuation are summarized as follows:
For the Years Ended December 31,
Expected dividend yield
Range of expected stock price volatility
Range of risk-free interest rates
30 calendar day average stock price on grant date $228.59 - $331.18 $279.47 - $346.76 $263.18 - $267.88
Weighted-average per share grant date fair value
$382.59
$378.08
$378.85
2018
—%
27.5% - 32.4%
1.9% - 2.3%
2017
—%
33.0% - 35.6%
0.9% - 1.6%
2019
—%
31.2% - 33.6%
2.46% - 2.53%
The fair values of MSUs vested in 2019, 2018 and 2017 totaled $32.5 million, $26.9 million and $31.4
million, respectively.
Cash Settled Performance Units (CSPUs)
CSPUs awarded to employees vest in three equal annual increments beginning on the first anniversary of the
grant date. The vesting of these awards is subject to the respective employee’s continued employment with such
awards settled in cash. The number of CSPUs granted represents the target number of units that are eligible to be
earned based on the attainment of certain performance measures established at the beginning of the performance
period, which ends on December 31 of each year. Participants may ultimately earn between 0% and 200% of the
target number of units granted based on the degree of actual performance metric achievement. Accordingly,
additional CSPUs may be issued or currently outstanding CSPUs may be cancelled upon final determination of the
number of units earned. CSPUs are classified as liability awards and will be settled in cash based on the 30
calendar day average closing stock price through each vesting date, once the actual vested and earned number of
units is known. Since no shares are issued, these awards do not dilute equity.
F- 50
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes our CSPU activity:
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Shares
50,000
—
(33,000)
(4,000)
13,000
The cash paid in settlement of CSPUs vested in 2019, 2018 and 2017 totaled $10.6 million, $15.1 million
and $16.6 million, respectively.
Performance-vested Restricted Stock Units (PUs)
PUs are granted to certain employees in the form of RSUs that may be settled in cash or shares of our common
stock at the sole discretion of the Compensation and Management Development Committee of our Board of
Directors. These awards are structured and accounted for the same way as the CSPUs, and vest in three equal
annual increments beginning on the first anniversary of the grant date. The number of PUs granted represents the
target number of units that are eligible to be earned based on the attainment of certain performance measures
established at the beginning of the performance period, which ends on December 31 of each year. Participants may
ultimately earn between 0% and 200% of the target number of units granted based on the degree of actual
performance metric achievement. Accordingly, additional PUs may be issued or currently outstanding PUs may be
cancelled upon final determination of the number of units earned. PUs settling in cash are based on the 30 calendar
day average closing stock price through each vesting date once the actual vested and earned number of units is
known.
The following table summarizes our PU activity:
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Shares
48,000
—
(33,000)
(4,000)
11,000
All PUs that vested in 2019, 2018 and 2017 were settled in cash totaling $10.4 million, $17.0 million and
$11.5 million, respectively.
Performance Stock Units (PSUs)
PSUs Settled in Stock
During the first quarter of 2018 we began granting awards for performance-vested RSUs that will settle in
stock. PSUs awarded to employees have a three-year performance period and vest on the third anniversary of the
grant date. The vesting of these awards is subject to the respective employee’s continued employment. The number
of PSUs granted represents the target number of units that are eligible to be earned based on the achievement of
cumulative three-year performance measures established at the beginning of the performance period, which ends on
December 31 of the third year of the performance period.
Participants may ultimately earn between 0% and 200% of the target number of PSUs granted based on the
degree of achievement of the applicable performance metric. Accordingly, additional PSUs may be issued or currently
outstanding PSUs may be cancelled upon final determination of the number of units earned.
F- 51
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes our PSUs that settle in stock activity:
Unvested at December 31, 2018
Granted (a)
Vested
Forfeited
Unvested at December 31, 2019
Weighted
Average
Grant Date
Fair Value
317.26
316.28
—
318.11
316.39
Shares
60,000 $
77,000 $
— $
(26,000) $
111,000 $
(a) PSUs settled in stock granted in 2019 include awards granted in conjunction with our annual awards made in February 2019
and PSUs granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to
be earned at the time of grant.
PSUs Settled in Cash
During the first quarter of 2018 we began granting awards for performance-vested restricted stock units that
will settle in cash. PSUs awarded to employees have three performance periods and vest on the third anniversary of
the grant date. The vesting of these awards is subject to the respective employee’s continued employment. The
number of PSUs granted represents the target number of units that are eligible to be earned based on the
achievement of three annual performance measures established when the performance objectives are defined, which
will be at the beginning of each year and will end on December 31 of such year.
Participants may ultimately earn between 0% and 200% of the target number of PSUs granted based on the
degree of achievement of the applicable performance metric. Accordingly, additional PSUs may be issued or currently
outstanding PSUs may be cancelled upon final determination of the number of units earned. PSUs are classified as
liability awards and will be settled in cash based on the 30 calendar day average closing stock price through the
vesting date, once the actual vested and earned number of PSUs is determined. Since no shares are issued, these
awards do not dilute equity.
The following table summarizes our PSUs that settle in cash activity:
Unvested at December 31, 2018
Granted (a)
Vested
Forfeited
Unvested at December 31, 2019
Shares
40,000
63,000
(1,000)
(20,000)
82,000
(a) PSUs settled in cash granted in 2019 include awards granted in conjunction with our annual awards made in February 2019
and PSUs granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to
be earned at the time of grant.
Time-Vested Restricted Stock Units (RSUs)
RSUs awarded to employees generally vest no sooner than one-third per year over three years on the
anniversary of the date of grant, or upon the third anniversary of the date of the grant, provided the employee
remains continuously employed with us, except as otherwise provided in the plan. Shares of our common stock will
be delivered to the employee upon vesting, subject to payment of applicable withholding taxes. RSUs awarded to
directors for service on our Board of Directors vest on the first anniversary of the date of grant, provided in each
case that the director continues to serve on our Board of Directors through the vesting date. Shares of our common
stock will be delivered to the director upon vesting and are not subject to any withholding taxes.
F- 52
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes our RSU activity:
Unvested at December 31, 2018
Granted (a)
Vested
Forfeited
Unvested at December 31, 2019
Shares
903,000 $
602,000 $
(416,000) $
(151,000) $
938,000 $
Weighted
Average
Grant Date
Fair Value
303.18
304.44
294.71
311.07
306.55
(a) RSUs granted in 2019 primarily represent RSUs granted in conjunction with our annual awards made in February 2019 and
awards made in conjunction with the hiring of new employees. RSUs granted in 2019 also include approximately 15,000
RSUs granted to our Board of Directors.
RSUs granted in 2018 and 2017 had weighted average grant date fair values of $316.32 and $293.41,
respectively.
The fair values of RSUs vested in 2019, 2018 and 2017 totaled $131.5 million, $111.7 million and $100.0
million, respectively.
Employee Stock Purchase Plan (ESPP)
In June 2015 our shareholders approved the 2015 ESPP. The maximum aggregate number of shares of our
common stock that may be purchased under the 2015 ESPP is 6.2 million.
The following table summarizes our ESPP activity:
(In millions, except share amounts)
Shares issued under the 2015 ESPP
Cash received under the 2015 ESPP
16.
Income Taxes
Income Tax Expense
For the Years Ended December 31,
2019
2018
2017
204,000
170,000
$
40.4 $
40.5 $
167,000
39.8
Income before income tax provision and the income tax expense consist of the following:
(In millions)
Income before income taxes (benefit):
Domestic
Foreign
Total
Income tax expense (benefit):
Current:
Federal
State
Foreign
Total
Deferred:
Federal
State
Foreign
Total
Total income tax expense
For the Years Ended December 31,
2019
2018
2017
4,725.3 $
2,400.6
7,125.9 $
3,877.0 $
2,022.6
5,899.6 $
3,540.4
1,588.4
5,128.8
947.4 $
59.1
84.4
1,090.9
1,143.9 $
(2.3)
(1,074.5)
67.1
1,158.0 $
1,131.8 $
45.5
140.0
1,317.3
(62.0) $
(7.4)
177.7
108.3
1,425.6 $
2,201.4
57.0
108.6
2,367.0
241.0
9.9
(159.2)
91.7
2,458.7
$
$
$
$
$
F- 53
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2017 Tax Act
The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) resulted in significant changes to the U.S. corporate income
tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction
of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive
compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified
territorial system, which has the effect of subjecting certain earnings of our foreign subsidiaries and collaborations to
immediate U.S. taxation as GILTI or Subpart F income, and includes base erosion prevention measures on U.S.
earnings and the reduced effective tax rate on income that comes from U.S. exports, called Foreign Derived
Intangible Income. These changes became effective in 2018.
During the fourth quarter of 2017 we recognized within our provision for income taxes a $1.2 billion estimate
pursuant to the U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. Our estimate included
an amount of $989.6 million associated with a one-time mandatory deemed repatriation tax on accumulated foreign
subsidiaries' previously untaxed foreign earnings (the Transition Toll Tax), as discussed below, and $184.0 million
related to the impact of remeasuring our deferred tax balances to reflect the new federal statutory rate and other
changes to U.S. tax law.
During the year ended December 31, 2018, we recognized a net reduction of $34.6 million in our estimated
Transition Toll Tax, an expense of $12.7 million to remeasure our deferred tax balances, an expense of $135.8
million related to establishing deferred taxes for GILTI and an expense of $11.0 million to reflect other aspects of
the 2017 Tax Act.
Transition Toll Tax
The 2017 Tax Act eliminated the deferral of U.S. income tax on the historical unrepatriated earnings by
imposing the Transition Toll Tax. The Transition Toll Tax was assessed on our share of our foreign corporations'
accumulated foreign earnings that were not previously taxed. Earnings in the form of cash and cash equivalents were
taxed at a rate of 15.5% and all other earnings were taxed at a rate of 8.0%.
As of December 31, 2019 and 2018, we have accrued income tax liabilities of $697.0 million under the
Transition Toll Tax. Of the amounts accrued as of December 31, 2019, no amounts are expected to be paid within
one year due to an approximately $87.0 million carryforward of taxes paid in relation to the company's 2017 tax
return. The Transition Toll Tax will be paid over an eight--year period, which started in 2018, and does not accrue
interest.
Unremitted Earnings
At December 31, 2019, we considered our earnings not to be permanently reinvested outside the U.S. and
therefore recorded deferred tax liabilities associated with an estimate of the total withholding taxes expected as a
result of our repatriation of earnings. Other than for earnings, we are permanently reinvested for book/tax basis
differences of approximately $1.5 billion as of December 31, 2019, primarily arising through the impacts of purchase
accounting. These permanently reinvested basis differences could reverse through sales of the foreign subsidiaries,
as well as various other events, none of which were considered probable as of December 31, 2019. The residual
U.S. tax liability, if these differences reverse, would be between $0.3 billion and $0.4 billion as of December 31,
2019.
Article 20 Procedure of ZINBRYTA
In 2017 the European Medicines Agency initiated a review (referred to as an Article 20 Procedure) of ZINBRYTA
following the report of a case of fatal fulminant liver failure, as well as four cases of serious liver injury. As a result of
the Article 20 Procedure of ZINBRYTA, for the year ended December 31, 2017, we recognized a net impairment
charge on certain tax assets related to ZINBRYTA reflected within income tax expense of $48.8 million. This charge
reflected the write-off of $142.6 million related to prepaid taxes, which was partially offset by the recognition of an
unrecorded deferred tax benefit of $93.8 million. For additional information on our collaboration arrangement with
AbbVie, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements.
F- 54
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred Tax Assets and Liabilities
Significant components of our deferred tax assets and liabilities are summarized as follows:
(In millions)
Deferred tax assets:
Tax credits
Inventory, other reserves and accruals
Intangibles, net
Net operating loss
Share-based compensation
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Purchased intangible assets
GILTI
Tax credits
Depreciation, amortization and other
Total deferred tax liabilities
As of December 31,
2019
2018
$
$
$
$
106.6 $
162.0
3,380.0
130.4
23.8
103.7
(1.1)
3,905.4 $
(350.3) $
(1,381.6)
(1,617.2)
(135.0)
(3,484.1) $
102.8
163.9
2,298.6
213.1
25.8
38.9
(20.0)
2,823.1
(232.8)
(544.6)
(1,425.7)
(102.3)
(2,305.4)
In addition to deferred tax assets and liabilities, we have recorded prepaid tax and deferred charges related to
intra-entity sales of inventory. As of December 31, 2019 and 2018, the total deferred charges and prepaid taxes
were $243.8 million and $239.2 million, respectively.
Tax Rate
A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
Statutory rate
State taxes
Taxes on foreign earnings
Credits and net operating loss utilization
Purchased intangible assets
Divestiture of Denmark manufacturing operations
Internal reorganization of certain intellectual property rights
GILTI
Other permanent items
U.S. tax reform
Swiss tax reform
Manufacturing deduction
Impairment of ZINBRYTA related tax assets
Other
Effective tax rate
Changes in Tax Rate
For the Years Ended December 31,
2019
2018
2017
21.0%
0.8
(4.5)
(1.1)
0.4
1.0
(2.1)
1.5
0.2
—
(0.8)
—
—
(0.1)
16.3%
21.0%
0.6
(1.9)
(0.9)
1.2
—
—
1.6
0.3
2.1
—
—
—
0.2
24.2%
35.0%
0.8
(11.1)
(0.8)
1.4
—
—
—
0.7
22.9
—
(1.9)
0.9
—
47.9%
For the year ended December 31, 2019, as compared to 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
the enactment of a new taxing regime in the country and certain cantons of Switzerland. This decrease was partially
offset by a $68.9 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 the unfavorable effects of
F- 55
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the 2017 Tax Act and 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 required 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, we recorded a deferred tax asset
of $754.1 million and a deferred tax liability of $603.3 million as of December 31, 2019.
For the year ended December 31, 2018, as compared to 2017, the decrease in our effective tax rate was
primarily due to the enactment of the 2017 Tax Act. The effects of an overall reduction in the federal statutory rate in
the U.S. were partially offset by the elimination of the manufacturing deduction, the imposition of the GILTI tax on
international earnings, our recording of deferred taxes on GILTI in 2018, limits on the deductibility of certain benefits
on executive compensation and a reduction in the tax benefit associated with the Orphan Drug Credit, all resulting
from the 2017 Tax Act, and a change in accounting rules related to recording the tax impacts of intra-entity
transactions.
Tax Attributes
As of December 31, 2019, we had net operating losses and general business credit carry forwards for federal
income tax purposes of approximately $0.7 million and $1.3 million, respectively, which begin to expire in 2022.
Additionally, for state income tax purposes, we had net operating loss carry forwards of approximately $4.6 million
that begin to expire in 2020. For state income tax purposes, we had research and investment credit carry forwards of
approximately $133.8 million that begin to expire in 2020. For foreign income tax purposes, we had $1,773.8 million
of net operating loss carryforwards that begin to expire in 2025.
In assessing the realizability of our deferred tax assets, we have considered whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. In making this determination, under the applicable financial reporting standards, we are allowed
to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies. Based upon the level of historical taxable income and income tax liability and projections for future
taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not
that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries. In the event that
actual results differ from our estimates or we adjust our estimates in future periods, we may need to establish a
valuation allowance, which could materially impact our consolidated financial position and results of operations.
Accounting for Uncertainty in Income Taxes
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:
(In millions)
Balance at January 1,
Additions based on tax positions related to the current period
Additions for tax positions of prior periods
Reductions for tax positions of prior periods
Statute expirations
Settlement refund (payment)
Balance at December 31,
For the Years Ended December 31,
2019
2018
2017
$
$
114.2 $
5.3
17.2
(10.3)
(0.1)
3.6
129.9 $
66.8 $
0.5
58.7
(13.6)
(2.9)
4.7
114.2 $
32.4
5.7
7.3
(21.8)
(1.4)
44.6
66.8
Our 2017 activity reflects a refund received from a state related to the settlement of an uncertain tax position.
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 2012.
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.
F- 56
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Included in the balance of unrecognized tax benefits as of December 31, 2019, 2018 and 2017, are $122.7
million, $109.1 million and $64.3 million (net of the federal benefit on state issues), respectively, of unrecognized
tax benefits that, if recognized, would affect the effective income tax rate in future periods.
We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. In
2019, 2018 and 2017 we recognized a net interest expense of $4.7 million, $2.2 million and $4.8 million,
respectively. We have accrued $20.0 million and $13.8 million for the payment of interest and penalties as of
December 31, 2019 and 2018, respectively.
Accounting for Uncertainty in Income Taxes
On February 1, 2017, in connection with the spin-off of our hemophilia business, we distributed all of the then
outstanding shares of Bioverativ common stock to Biogen shareholders pursuant to a separation agreement. In
March 2018 Bioverativ was acquired by Sanofi S.A. (Sanofi) and is now an indirect wholly-owned subsidiary of Sanofi.
The spin-off of our hemophilia business was intended to qualify for tax-free treatment to Biogen and its shareholders
under the Internal Revenue Code. Our 2017 tax return remains open to audit. Bioverativ and Sanofi agreed to
indemnify us for certain potential liabilities that may arise.
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 matters and other issues as we receive additional information from various taxing authorities,
including reaching settlements with such authorities.
We estimate that it is reasonably possible that our gross unrecognized tax benefits, exclusive of interest, could
decrease by up to approximately $75.0 million in the next 12 months as a result of various audit closures,
settlements and expiration of the statute of limitations.
17.
Other Consolidated Financial Statement Detail
Supplemental Cash Flow Information
Supplemental disclosure of cash flow information for the years ended December 31, 2019, 2018 and 2017, is
as follows:
(In millions)
Cash paid during the year for:
Interest
Income taxes
For the Years Ended December 31,
2019
2018
2017
$
$
244.2 $
1,064.5 $
243.2 $
1,007.1 $
281.7
1,066.4
Non-cash Operating, Investing and Financing Activity
In the fourth quarter of 2018 we accrued $300.0 million upon reaching $20.0 billion in total cumulative sales
of the Fumapharm Products, which was paid in the first quarter of 2019. In the fourth quarter of 2017 we accrued
$600.0 million upon reaching $15.0 billion and $16.0 billion in total cumulative sales of the Fumapharm Products,
which was paid in the first quarter of 2018. These amounts, net of tax benefit, were accounted for as increases to
goodwill in accordance with the accounting standard applicable to business combinations when we acquired
Fumapharm AG.
In connection with the construction of our large-scale biologics manufacturing facility in Solothurn, Switzerland,
we accrued charges related to processing equipment and engineering services of approximately $50.0 million and
$100.0 million in our consolidated balance sheets as of December 31, 2019 and 2018, respectively. For additional
information on the construction of our manufacturing facility in Solothurn, Switzerland, please read Note 10, Property,
Plant and Equipment, to these consolidated financial statements.
F- 57
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Income (Expense), Net
Components of other income (expense), net, are summarized as follows:
(In millions)
Interest income
Interest expense
Gain (loss) on investments, net
Foreign exchange gains (losses), net
Other, net
Total other income (expense), net
For the Years Ended December 31,
2019
2018
2017
120.0 $
(187.4)
204.7
(7.0)
(47.0)
83.3 $
112.5 $
(200.6)
119.5
(9.9)
(10.5)
11.0 $
78.5
(250.8)
(36.3)
6.3
(14.7)
(217.0)
$
$
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
December 31, 2019, 2018 and 2017:
(In millions)
Net gains (losses) recognized during the period on equity
securities
Less: Net gains (losses) recognized during the period on
equity securities sold during the period
Unrealized gains (losses) recognized during the period on
equity securities held as of December 31
$
$
$
Accrued Expenses and Other
Accrued expenses and other consists of the following:
(In millions)
Revenue-related reserves for discounts and allowances
Employee compensation and benefits
Collaboration expenses
Royalties and licensing fees
Current portion of contingent consideration obligations
Construction in progress
Other
Total accrued expenses and other
Other Long-term Liabilities
For the Years Ended December 31,
2019
2018
2017
200.1 $
127.9 $
(19.8)
50.0 $
(0.6) $
—
150.1 $
128.5 $
(19.8)
As of December 31,
2019
2018
1,001.1 $
309.1
281.6
220.9
148.4
78.0
726.7
2,765.8 $
874.7
320.9
261.6
224.7
444.8
125.2
609.3
2,861.2
$
$
Other long-term liabilities were $1,348.9 million and $1,389.4 million as of December 31, 2019 and 2018,
respectively, and include accrued income taxes totaling $803.3 million and $791.4 million, respectively.
18.
Collaborative and Other Relationships
In connection with our business strategy, we have entered into various collaboration agreements that provide
us with rights to develop, produce and market products using certain know-how, technology and patent rights
maintained by our collaborative partners. Terms of the various collaboration agreements may require us to make
milestone payments upon the achievement of certain product research and development objectives and pay royalties
on future sales, if any, of commercial products resulting from the collaboration.
F- 58
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Depending on the collaborative arrangement, we may record funding receivable or payable balances with our
collaboration partners, based on the nature of the cost-sharing mechanism and activity within the collaboration. Our
significant collaborative arrangements are discussed below.
Genentech, Inc. (Roche Group)
We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's
lymphoma, 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 PPMS and RMS; and other
potential anti-CD20 therapies pursuant to our collaboration arrangements with Genentech, a wholly-owned member
of the Roche Group. For purposes of this footnote we refer to RITUXAN and RITUXAN HYCELA collectively as
RITUXAN.
Our collaboration arrangements will continue in effect until we mutually agree to terminate the collaboration,
except that if we undergo a change in control, as defined in our collaboration agreement, Genentech has the right to
present an offer to buy the rights to RITUXAN and we must either accept Genentech’s offer or purchase Genentech’s
rights on the same terms as its offer. Genentech will also be deemed concurrently to have purchased our rights to
any other anti-CD20 products in development in exchange for a royalty and our rights to GAZYVA in exchange for the
compensation described in the table below. Our collaboration with Genentech was created through a contractual
arrangement and not through a joint venture or other legal entity.
RITUXAN
Genentech and its affiliates are responsible for the worldwide manufacture of RITUXAN, as well as all
development and commercialization activities as follows:
U.S.
We have co-exclusively licensed our rights to develop, commercialize and market RITUXAN in the U.S.
Canada
We have co-exclusively licensed our rights to develop, commercialize and market RITUXAN in Canada.
GAZYVA
The Roche Group and its sub-licensees maintain sole responsibility for the development, manufacture and
commercialization of GAZYVA in the U.S. We recognize our share of the development and commercialization
expenses of GAZYVA as a reduction of our share of pre-tax profits in revenues from anti-CD20 therapeutic programs.
Commercialization of GAZYVA impacts our percentage of the co-promotion profits for RITUXAN, as summarized
in the table below.
OCREVUS
In March 2017 the FDA approved OCREVUS for the treatment of RMS and PPMS. Pursuant to the terms of our
collaboration arrangements with Genentech, we receive a tiered royalty on U.S. net sales from 13.5% and increasing
up to 24% if annual net sales exceed $900.0 million. There will be a 50% reduction to these royalties if a biosimilar
to OCREVUS is approved in the U.S.
In addition, we receive a gross 3% royalty on net sales of OCREVUS outside the U.S., with the royalty period
lasting 11 years from the first commercial sale of OCREVUS on a country-by-country basis. OCREVUS has been
approved for the treatment of RMS and PPMS in the E.U. and certain other countries.
The commercialization of OCREVUS does not impact the percentage of the co-promotion profits we receive for
RITUXAN or GAZYVA. Genentech is solely responsible for development and commercialization of OCREVUS and
funding future costs. Genentech cannot develop OCREVUS in CLL, non-Hodgkin's lymphoma or rheumatoid arthritis.
OCREVUS royalty revenues were based on our estimates from third party and market research data of OCREVUS
sales occurring during the corresponding period. Differences between actual and estimated royalty revenues will be
adjusted for in the period in which they become known, which is expected to be the following quarter.
F- 59
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Profit-sharing Formulas
RITUXAN Profit Share
Our current pretax co-promotion profit-sharing formula for RITUXAN provides for a 30% share on the first $50.0
million of co-promotion operating profits earned each calendar year. Our share of annual co-promotion profits in
excess of $50.0 million varies, as summarized in the table below, upon the following events:
Until GAZYVA First Non-CLL FDA Approval
After GAZYVA First Non-CLL FDA Approval until First GAZYVA Threshold Date
After First GAZYVA Threshold Date until Second GAZYVA Threshold Date
After Second GAZYVA Threshold Date
40.0%
39.0%
37.5%
35.0%
First Non-CLL GAZYVA FDA Approval means the FDA’s first approval of GAZYVA in an indication other than CLL.
First GAZYVA Threshold Date means the earlier of (i) the date of the First Non-CLL GAZYVA FDA approval if U.S.
gross sales of GAZYVA for the preceding consecutive 12-month period were at least $150.0 million or (ii) the
first day of the calendar quarter after the date of the First Non-CLL GAZYVA FDA Approval that U.S. gross sales
of GAZYVA within any consecutive 12-month period have reached $150.0 million.
Second GAZYVA Threshold Date means the first day of the calendar quarter after U.S. gross sales of GAZYVA
within any consecutive 12-month period have reached $500.0 million. The Second GAZYVA Threshold Date can
be achieved regardless of whether GAZYVA has been approved in a non-CLL indication.
Our share of RITUXAN pre-tax profits in the U.S. decreased from 39% to 37.5% in the third quarter of 2017 as
gross sales of GAZYVA in the U.S. for the preceding 12-month period exceeded $150.0 million.
In addition, should the FDA approve an anti-CD20 product other than OCREVUS or GAZYVA that is acquired or
developed by Genentech and subject to the collaboration agreement, our share of the co-promotion operating profits
would be between 30% and 37.5% based on certain events.
GAZYVA Profit Share
Our current pretax profit-sharing formula for GAZYVA provides for a 35% share on the first $50.0 million of
operating profits earned each calendar year. Our share of annual profits in excess of $50.0 million varies, as
summarized in the table below, upon the following events:
Until First GAZYVA Threshold Date
After First GAZYVA Threshold Date until Second GAZYVA Threshold Date
After Second GAZYVA Threshold Date
39.0%
37.5%
35.0%
Our share of GAZYVA operating profits in 2019 and 2018 was 37.5%. In 2017 our share of operating profits on
GAZYVA was 35%.
In November 2017 the FDA approved GAZYVA in combination with chemotherapy, followed by GAZYVA alone, for
people with previously untreated advanced follicular lymphoma.
Revenues from Anti-CD20 Therapeutic Programs
Revenues from anti-CD20 therapeutic programs are summarized as follows:
(In millions)
Biogen's share of pre-tax profits in the U.S. for RITUXAN and
GAZYVA, including the reimbursement of selling and
development expenses
Other revenues from anti-CD20 therapeutic programs
Total revenues from anti-CD20 therapeutic programs
For the Years Ended December 31,
2019
2018
2017
$
$
1,542.4 $
1,431.9 $
748.0
548.3
2,290.4 $
1,980.2 $
1,316.4
242.8
1,559.2
F- 60
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Prior to regulatory approval, we record our share of the expenses incurred by the collaboration for the
development of anti-CD20 products in research and development expense in our consolidated statements of
income. After an anti-CD20 product is approved, we record our share of the development expenses related to that
product as a reduction of our share of pre-tax profits in revenues from anti-CD20 therapeutic programs.
Ionis Pharmaceuticals, Inc.
SPINRAZA
In January 2012 we entered into a collaboration and license agreement with Ionis pursuant to which we have
an exclusive, worldwide license to develop and commercialize SPINRAZA for the treatment of SMA. SPINRAZA was
approved for the treatment of SMA in the U.S., E.U. and Japan in December 2016, June 2017 and July 2017,
respectively.
For the years ended December 31, 2019, 2018 and 2017, we recognized product revenues of $2,097.0
million, $1,724.2 million and $883.7 million, respectively, on our sales of SPINRAZA. Under our agreement with
Ionis, we make royalty payments to Ionis on annual worldwide net sales of SPINRAZA using a tiered royalty rate
between 11% and 15%, which are recognized in cost of sales within our consolidated statements of income. Royalty
cost of sales related to sales of SPINRAZA for the years ended December 31, 2019, 2018 and 2017, totaled
$293.0 million, $238.0 million and $112.4 million, respectively.
During 2017 we made milestone payments to Ionis totaling $150.0 million related to the marketing approvals
discussed above, which were capitalized in intangible assets, net in our consolidated balance sheets.
Antisense Therapeutics
In December 2012 we entered into an agreement with Ionis for the development and commercialization of up
to three gene targets.
Under this agreement, Ionis is responsible for global development of any product candidate through the
completion of a Phase 2 trial and we will provide advice on the clinical trial design and regulatory strategy. We have
an option to license the product candidate until completion of the Phase 2 trial. If we exercise our option, we will pay
a license fee of up to $70.0 million to Ionis and assume global development, regulatory and commercialization
responsibilities. Ionis is eligible to receive up to $130.0 million in additional milestone payments upon the
achievement of certain regulatory milestones as well as royalties on future sales if we successfully develop the
product candidate after option exercise.
Upon entering into this agreement, we made an upfront payment of $30.0 million to Ionis and agreed to make
potential additional payments, prior to licensing, of up to $10.0 million based on the development of the selected
product candidate as well as a mark-up of the cost estimate of the Phase 1 and Phase 2 trials. During 2015 we
recognized this $10.0 million developmental milestone upon the selection of BIIB080 (tau ASO), which is currently in
Phase 1 development for the potential treatment of AD.
In December 2019 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing
license to develop and commercialize BIIB080. In connection with the option exercise, we made a payment of $45.0
million to Ionis, which was recorded as research and development expense in our consolidated statements of
income. Future payments may include additional milestone payments of up to $155.0 million and royalties on future
sales of in the low- to mid-teens if we successfully develop the product candidate after option exercise.
2018 Ionis Agreement
In June 2018 we closed a 10-year exclusive collaboration agreement with Ionis to develop novel antisense
oligonucleotide (ASO) drug candidates for a broad range of neurological diseases (2018 Ionis Agreement) for a total
payment of $1.0 billion, consisting of an upfront payment of $375.0 million and the purchase of approximately 11.5
million shares of Ionis common stock at a cost of $625.0 million.
Upon closing, we recorded $50.9 million of the $375.0 million upfront payment as prepaid services in our
consolidated balance sheets and recognized the remaining $324.1 million as research and development expense in
our consolidated statements of income. The amount recorded as prepaid services represented the value of the
employee resources committed to the arrangement to provide research and discovery services over the term of the
agreement.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The 11.5 million shares of Ionis common stock were purchased at a premium to their fair value at the
transaction closing date. The premium consisted of acquiring the shares at a price above the fair value based on the
trailing 10-day weighted-average close price prior to entering into the 2018 Ionis Agreement in April 2018 and the
effect of certain holding period restrictions. We recorded an asset of $462.9 million in investments and other assets
in our consolidated balance sheets reflecting the fair value of the common stock as of the purchase date and a
charge of $162.1 million to research and development expense in our consolidated statements of income in the
second quarter of 2018 reflecting the premium paid for the common stock.
Our investment in Ionis common stock is remeasured each reporting period. Changes in the fair value of our
investment in Ionis common stock, including the effect of the holding period restrictions, are reflected in other
income (expense), net in our consolidated statements of income. For additional information on the fair value of our
investment in Ionis common stock, please read Note 7, Fair Value Measurements, to these consolidated financial
statements.
We have the option to license therapies arising out of this agreement and will be responsible for the
development and commercialization of such therapies. We may pay development milestones to Ionis of up to $125.0
million or $270.0 million for each program, depending on the indication plus an annual license fee, as well as
royalties on potential net commercial sales.
During the year ended December 31, 2019, we incurred milestones of $30.0 million related to the
advancement of neurological targets identified under this agreement.
2017 SMA Collaboration Agreement
In December 2017 we entered into a collaboration agreement with Ionis to identify new ASO drug candidates
for the potential treatment of SMA. Under this agreement, we have the option to license therapies arising out of this
collaboration and will be responsible for their development and commercialization of such therapies.
Upon entering into this agreement, we made a $25.0 million upfront payment to Ionis and we may pay Ionis up
to $260.0 million in additional development and regulatory milestone payments if new drug candidates advance to
marketing approval. Upon commercialization, we may also pay Ionis up to $800.0 million in additional performance-
based milestone payments and tiered royalties on potential net sales of such therapies.
2013 Long-term Strategic Research Agreement
In September 2013 we entered into a six-year research collaboration agreement with Ionis under which both
companies collaborate to perform discovery level research and subsequent development and commercialization
activities of antisense or other therapeutics for the potential treatment of neurological diseases. Under this
agreement, Ionis performs research on a set of neurological targets identified within the agreement.
Ionis is eligible to receive milestone payments, license fees and royalty payments for all product candidates
developed through this collaboration, with the specific amount dependent upon the modality of the product candidate
advanced by us under the terms of the agreement.
For non-ALS antisense product candidates, Ionis is responsible for global development through the completion
of a Phase 2 trial and we provide advice on the clinical trial design and regulatory strategy. For ALS antisense
product candidates, we are responsible for global development, clinical trial design and regulatory strategy. We have
an option to license a product candidate until completion of the Phase 2 trial. If we exercise our option, we will pay
Ionis up to a $70.0 million license fee and assume global development, regulatory and commercialization
responsibilities. Ionis could receive additional milestone payments upon the achievement of certain regulatory
milestones of up to $130.0 million, plus additional amounts related to the cost of clinical trials conducted by Ionis
under the collaboration, and royalties on future sales if we successfully develop the product candidate after option
exercise.
In December 2018 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing
license to develop and commercialize BIIB067 (tofersen), an investigational treatment for ALS with superoxide
dismutase 1 (SOD1) mutations. In connection with the option exercise, we made a payment of $35.0 million to Ionis,
which was recorded as research and development in our consolidated statements of income. Future payments may
include potential post-licensing milestone payments of up to $55.0 million and royalties in the low to mid-teen
percentages on potential annual worldwide net sales. We are solely responsible for the costs and expenses related
to the development, manufacturing and commercialization of tofersen following the option exercise.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During the years ending December 31, 2019, 2018 and 2017, we incurred milestones of $20.0 million, $18.0
million and $12.0 million, respectively, related to the advancement of programs under this agreement, which were
recorded as research and development expense in our consolidated statements of income.
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 for the potential treatment of AD, and elenbecestat, the
oral BACE (base amyloid cleaving enzyme) inhibitor (the BAN2401 and Elenbecestat Collaboration).
In September 2019 we and Eisai announced the decision to discontinue the global Phase 3 studies (MISSION
AD1 and MISSION AD2) of elenbecestat in early 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.
Eisai serves as the global operational and regulatory lead for BAN2401 and all costs, including research,
development, sales and marketing expenses, are shared equally between us and Eisai. Upon marketing approval we
and Eisai will co-promote BAN2401 and share profits equally. In addition, the BAN2401 and Elenbecestat
Collaboration provides both parties with certain rights and obligations in the event of a change in control of either
party.
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
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.
Under the Aducanumab Collaboration Agreement, the two companies will continue to jointly develop BAN2401
in accordance with the BAN2401 and Elenbecestat Collaboration; however, we are no longer required to pay Eisai any
milestone payments for products containing BAN2401 and we are no longer entitled to any potential development
and commercial milestone payments from Eisai in relation to aducanumab.
A summary of development and sales and marketing expenses related to the BAN2401 and Elenbecestat
Collaboration is as follows:
(In millions)
Total development expense incurred by the collaboration
related to the advancement of BAN2401 and Elenbecestat
Biogen's share of BAN2401 and Elenbecestat development
expense reflected in research and development expense in
our consolidated statements of income
Total sales and marketing expense incurred by the
collaboration
Biogen's share of BAN2401 and Elenbecestat sales and
marketing expense reflected in selling, general and
administrative expense in our consolidated statements of
income
$
$
$
$
Aducanumab Collaboration Agreement
For the Years Ended December 31,
2019
2018
2017
348.7 $
232.0 $
146.2
174.3 $
116.0 $
74.3
32.4 $
10.7 $
16.2 $
5.4 $
—
—
Under the Aducanumab Collaboration Agreement, the two companies 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
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
study met its pre-specified primary and secondary endpoints. In October 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 and subsequently paid 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.
Upon commercialization, both companies will co-promote aducanumab with a region-based profit split. We will
receive a 55% share of the potential profits (losses) in the U.S., a 68.5% share of the potential profits (losses) in
the E.U. and a 20% share of the potential profits (losses) in Japan and Asia, excluding China and South Korea. The
two companies will continue to share equally in the potential profits (losses) in rest of world markets. Sales and
marketing expense incurred before commercialization are shared in proportion to the same region-based profit split
that will be utilized to co-promote aducanumab.
A summary of development and sales and marketing expenses related to the Aducanumab Collaboration
Agreement is as follows:
(In millions)
Total aducanumab development expense
Biogen's share of aducanumab development expense reflected in
research and development expense in our consolidated
statements of income
Total aducanumab sales and marketing expense incurred by the
collaboration
Biogen's share of aducanumab sales and marketing expense
reflected in selling, general and administrative expense in our
consolidated statements of income
$
$
$
$
For the Years Ended December 31,
2019
2018
2017
179.4 $
264.8 $
268.7
98.7 $
234.6 $
268.7
27.4 $
50.6 $
23.6
15.1 $
27.3 $
23.6
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.
Anti-Tau Option
Eisai may exercise the Anti-Tau Option after completion of the Phase 1 clinical trial of such anti-tau monoclonal
antibody. If Eisai exercises its Anti-Tau Option, we will receive an upfront payment from Eisai and will be entitled to
additional development and commercial milestone payments.
Alkermes
In November 2017 we entered into an exclusive license and collaboration agreement with Alkermes for
VUMERITY, a novel fumarate for the treatment of RMS. In October 2019 the FDA approved VUMERITY in the U.S. for
the treatment of RMS. In November 2019 VUMERITY became available in the U.S.
Under this agreement, we received an exclusive, worldwide license to develop and commercialize VUMERITY
and we pay Alkermes a royalty of 15% on worldwide net commercial sales of VUMERITY. Royalties payable on net
commercial sales of VUMERITY are subject, under certain circumstances, to tiered minimum annual payment
requirements for a period of five years following FDA approval.
Alkermes is eligible to receive royalties in the high-single digits to sub-teen double digits of annual net
commercial sales upon successful development and commercialization of new product candidates, other than
VUMERITY, developed under the exclusive license from Alkermes.
Upon entering into this agreement, we made a $28.0 million upfront payment to Alkermes representing our
share of VUMERITY development costs already incurred in 2017. Beginning in 2018 we became responsible for all
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
development expenses related to VUMERITY. In December 2017 we also recognized a $50.0 million expense, which
was paid to Alkermes in 2018, enabling the continuation of the agreement to develop VUMERITY. Both the $28.0
million upfront payment and $50.0 million continuation payment were recorded as research and development
expense in our consolidated financial statements during the year ended December 31, 2017.
During the fourth quarter of 2019, following the FDA's approval of VUMERITY, we paid Alkermes $155.0 million
in milestone payments, which were recorded in intangible assets in our consolidated balance sheets and will be
amortized over the useful life of the product. For the years ended December 31, 2019, 2018 and 2017, we recorded
$53.5 million, $68.7 million and $80.3 million, respectively, in research and development expense in our
consolidated statements of income related to this collaboration.
Alkermes currently supplies VUMERITY to us pursuant to a supply agreement with Alkermes. In October 2019
we entered into a new supply agreement and amended our license and collaboration agreement with Alkermes
pursuant to which we have the election, following a transition period, to manufacture VUMERITY or have
manufacturing transitioned to a third party in exchange for an increase in the royalty rate on worldwide net
commercial sales of VUMERITY that is manufactured by us or our designee.
Bristol-Myers Squibb Company
In June 2017 we completed an exclusive license agreement with Bristol-Myers Squibb Company (BMS) for the
development and potential commercialization of BIIB092 (gosuranemab), an antibody targeting tau, the protein that
forms the deposits, or tangles, in the brain associated with AD.
Under this agreement, we received worldwide rights to gosuranemab and are responsible for the full
development and potential commercialization of gosuranemab in AD and progressive supranuclear palsy (PSP).
In December 2019 we announced that the Phase 2 PASSPORT study investigating gosuranemab in individuals
with PSP did not meet its primary endpoint. Based on these results, we discontinued development of gosuranemab
in PSP and other primary tauopathies. We will continue our ongoing Phase 2 TANGO study of gosuranemab for mild
cognitive impairment due to AD or mild AD, given differences in disease pathology.
Upon entering into this agreement, we made an upfront payment of $300.0 million to BMS and assumed all
remaining obligations to the former shareholders of iPierian, Inc. (iPierian) related to BMS’s acquisition of iPierian in
2014. In June 2017 we recognized a $60.0 million developmental milestone payable to the former shareholders of
iPierian upon dosing of the first patient in the Phase 2 PASSPORT study of gosuranemab for PSP. Both the $300.0
million upfront payment and the $60.0 million developmental milestone payment were recorded as research and
development expense in our consolidated statements of income for the year ended December 31, 2017.
We may pay BMS up to $360.0 million in additional milestone payments, and potential royalties, and we may
pay the former shareholders of iPierian up to $370.0 million in remaining milestone payments as well as potential
royalties on net commercial sales.
For the years ended December 31, 2019 and 2018, we recorded $144.0 million and $97.0 million,
respectively, in research and development expense in our consolidated statements of income related to this
collaboration.
Acorda Therapeutics, Inc.
In June 2009 we entered into a collaboration and license agreement with Acorda Therapeutics, Inc. (Acorda) to
develop and commercialize products containing fampridine, such as FAMPYRA, in markets outside the U.S. We are
responsible for all regulatory activities and the future clinical development of related products in those markets.
Under this agreement, we pay tiered royalties based on the level of ex-U.S. net sales and we may pay potential
milestone payments based on the successful achievement of certain regulatory and commercial milestones, which
would be capitalized as intangible assets upon achievement of the milestones and amortized utilizing an economic
consumption model. The next expected milestone would be $15.0 million, due if ex-U.S. net sales reach $100.0
million over a period of four consecutive quarters. Royalty payments are recognized in cost of sales within our
consolidated statements of income.
In connection with the collaboration and license agreement, we also entered into a supply agreement with
Acorda for the commercial supply of FAMPYRA. This agreement is a sublicense arrangement of an existing
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
agreement between Acorda and Alkermes Inc., who acquired Elan Drug Technologies, the original party to the license
with Acorda.
For the years ending December 31, 2019, 2018 and 2017, total cost of sales related to royalties and
commercial supply of FAMPYRA reflected in our consolidated statements of income were $42.0 million, $36.5
million and $34.0 million, respectively.
AbbVie Inc.
We have a collaboration agreement with AbbVie for the development and commercialization of ZINBRYTA, which
was approved for the treatment of RMS in the U.S. in May 2016 and in the E.U. in July 2016. The collaboration
began selling ZINBRYTA in the third quarter of 2016. In March 2018 we and AbbVie announced the voluntary
worldwide withdrawal of ZINBRYTA for RMS.
Under this agreement, we and AbbVie conducted ZINBRYTA co-promotion activities in the U.S., E.U. and
Canadian territories, where development and commercialization costs and profits were shared equally.
We were responsible for manufacturing and research and development activities and recorded these activities
within their respective lines in our consolidated statements of income, net of any reimbursement of research and
development expenditures received from AbbVie. For the years ended December 31, 2019, 2018 and 2017, the
collaboration incurred $0.6 million, $32.4 million and $39.9 million for research and development activities,
respectively, for which we recognized $0.3 million, $16.2 million and $19.9 million, respectively, in our consolidated
statements of income.
Co-promotion Profits and Losses
In the U.S., AbbVie recognized revenues on sales to third parties and we recognized our 50% share of the co-
promotion profits or losses as a component of total revenues in our consolidated statements of income.
Our share of the co-promotion losses on ZINBRYTA in the U.S. for the year ended December 31, 2019, was
immaterial. For the years ended December 31, 2018 and 2017, we recognized a net reduction in revenues from
collaborative and other relationships, a component of other revenues, of $8.6 million and $16.9 million, respectively,
to reflect our share of the overall net losses within the collaboration for each of those years.
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 are leveraging Skyhawk's SkySTAR
technology platform with the goal of discovering innovative small molecule treatments for patients with neurological
diseases, including MS and SMA. We are 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 $2.4 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 consolidated statements of income and $35.5
million was recorded as prepaid research and development expenditures within investments and other assets in our
consolidated balance sheets and will be expensed as the services are provided. In October 2019 we amended this
agreement to add an additional discovery program. In connection with this amendment, we made a payment to
Skyhawk of $15.0 million, of which approximately $8.0 million was recorded as research and development and
approximately $7.0 million was recorded as prepaid research and development expenditures within investments and
other assets in our consolidated balance sheets.
Other
For the years ended December 31, 2019, 2018 and 2017, we entered into several research, discovery and
other related arrangements that resulted in $30.6 million, $22.0 million and $10.0 million, respectively, recorded as
research and development expense in our consolidated statements of income.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Samsung Bioepis Co., Ltd.
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. Samsung BioLogics contributed 280.5
billion South Korean won (approximately $250.0 million) for an 85% stake in Samsung Bioepis and we contributed
49.5 billion South Korean won (approximately $45.0 million) for the remaining 15% ownership interest. In June 2018
we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung
Bioepis from approximately 5%, which reflected the effect of previous equity financings in which we did not
participate, 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 December 31, 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 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
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 year ended December 31, 2019, we recognized losses on our investment of $79.4 million. These
losses reflect our share of losses totaling $1.2 million and amortization of basis differences totaling $78.2 million.
As of December 31, 2019 and 2018, the carrying value of our investment in Samsung Bioepis totaled 670.8
billion South Korean won ($580.2 million) and 759.5 billion South Korean won ($680.6 million), respectively, which
is classified as a component of investments and other assets within our consolidated balance sheets.
2019 Transaction
In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to
commercialize two potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing
EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia. Samsung Bioepis will
be responsible for development and will supply both products to us.
In connection with this transaction, we made an upfront payment of $100.0 million to Samsung Bioepis in
January 2020, of which $63.0 million was recorded as research and development expense in our consolidated
statements of income and $37.0 million was recorded as an intangible asset in our consolidated balance sheets.
Additionally, we may pay Samsung Bioepis up to $210.0 million in additional development, regulatory and sales-
based milestones, including a $15.0 million development milestone that we may pay in 2020.
We also acquired an option to extend the term of our current European commercial agreement for BENEPALI,
IMRALDI and FLIXABI by an additional five years, subject to payment of an option exercise fee of $60.0 million, and
obtained exclusive rights to commercialize these products in China.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2013 Commercial Agreement
In December 2013 pursuant to our rights under the joint venture agreement with Samsung BioLogics, we
entered into an agreement with Samsung Bioepis to commercialize, over a 10-year term, 3 anti-tumor necrosis factor
(TNF) biosimilar product candidates in Europe and in the case of BENEPALI, Japan. As discussed above, we have an
option to extend this agreement by an additional five years. Under this agreement, we have made upfront and clinical
development milestone payments totaling $46.0 million, which were recorded as research and development expense
in our consolidated statements of income as the programs they relate to had not achieved regulatory approval. We
also agreed to make additional milestone payments of $25.0 million upon regulatory approval in the E.U. for each of
the three anti-TNF biosimilar product candidates. IMRALDI, an adalimumab biosimilar referencing HUMIRA, FLIXABI,
an infliximab biosimilar referencing REMICADE, and BENEPALI, an etanercept biosimilar referencing ENBREL,
received regulatory approval in the E.U. in August 2017, May 2016 and January 2016, respectively, and we
capitalized the related milestone payments totaling $75.0 million as intangible assets, net in our consolidated
balance sheets.
In April 2018 we and Samsung Bioepis announced an agreement with AbbVie related to the commercialization
of IMRALDI. Under the terms of the agreement, AbbVie granted us and Samsung Bioepis patent licenses for the use
and sale of IMRALDI in Europe, on a country-by-country basis, and we make royalty payments to AbbVie on behalf of
Samsung Bioepis. We began to recognize revenues on sales of IMRALDI to third parties in Europe in the fourth
quarter of 2018.
We reflect revenues on sales of BENEPALI, IMRALDI and FLIXABI to third parties in product revenues, net in our
consolidated statements of income and record the related cost of revenues and sales and marketing expenses in
our consolidated statements of income to their respective line items when these costs are incurred. Royalty
payments to AbbVie on sales of IMRALDI are recognized in cost of sales within our consolidated statements of
income.
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 consolidated statements of income. For the years ended
December 31, 2019, 2018 and 2017, we recognized a net profit-sharing expense of $241.6 million, $187.4 million
and $111.0 million, respectively, to reflect Samsung Bioepis' 50% sharing of the net collaboration profits.
Other Services
Simultaneous with the formation of Samsung Bioepis, we also entered into a technical development services
agreement, a manufacturing agreement and a license agreement with Samsung Bioepis.
Under the technical development services agreement, we provide Samsung Bioepis technical development and
technology transfer services, which include, but are not limited to, cell culture development, purification process
development, formulation development and analytical development.
Under the manufacturing agreement, we manufacture clinical and commercial quantities of bulk drug substance
of biosimilar products for Samsung Bioepis pursuant to contractual terms.
Following the divestiture of our Hillerød, Denmark manufacturing operations in August 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 the 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 consolidated financial statements.
Under the license agreement, we granted Samsung Bioepis an exclusive license to use, develop, manufacture
and commercialize biosimilar products created by Samsung Bioepis using Biogen product-specific technology. In
exchange, we receive single digit royalties on all biosimilar products developed and commercialized by Samsung
Bioepis.
For the years ended December 31, 2019, 2018 and 2017, we recognized $106.2 million, $96.4 million and
$42.7 million, respectively, in revenues under the license, technical development services and manufacturing
agreements, which is reflected in revenues from collaborative and other relationships, as a component of other
revenues in our consolidated statements of income.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amounts receivable from Samsung Bioepis related to the agreements discussed above were $85.0 million and
$116.9 million as of December 31, 2019 and 2018, respectively. Amounts payable to Samsung Bioepis as of
December 31, 2019, consisted of the $100.0 million upfront payment related to the 2019 transaction we completed
in December 31, 2019, as discussed above. Amounts payable to Samsung Bioepis as of December 31, 2018, were
$31.5 million.
19.
Investments in Variable Interest Entities
Consolidated Variable Interest Entities
Our 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, our anti-
amyloid beta antibody candidate for the potential treatment of AD (as amended, the Neurimmune Agreement). We
are responsible for the development, manufacturing and commercialization of all licensed 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.
In October 2017 we amended the terms of the Neurimmune Agreement and made a $150.0 million payment to
Neurimmune in exchange for a 15% reduction in the previously negotiated royalty rates payable on products
developed under the Neurimmune Agreement, including royalties payable on potential commercial sales of
aducanumab. In May 2018 we made an additional $50.0 million payment to Neurimmune to further reduce the
previously negotiated royalty rates payable on products developed under the Neurimmune Agreement, including
royalties payable on potential commercial sales of aducanumab, by an additional 5%. Our royalty rates payable on
products developed under the Neurimmune Agreement, including royalty rates payable on potential commercial sales
of aducanumab, now range from the high single digits to sub-teens. As we consolidate the results of Neurimmune,
we treated these payments as distributions and recognized them as charges to noncontrolling interests in the fourth
quarter of 2017 and the second quarter of 2018, as applicable.
Additionally, under the terms of the Neurimmune Agreement, we would be required to pay Neurimmune a
milestone payment of $75.0 million upon the regulatory filing with the FDA for approval of aducanumab and a
milestone payment of $100.0 million if aducanumab is launched in the U.S.
Research and development costs for which we reimburse Neurimmune are reflected in research and
development expense in our consolidated statements of income. During the years ending December 31, 2019, 2018
and 2017, amounts reimbursed were immaterial.
The assets and liabilities of Neurimmune are not significant to our consolidated financial position or results of
operations as it is a research and development organization. We have provided no financing to Neurimmune other
than previously contractually required amounts.
Under the Aducanumab Collaboration Agreement, Eisai had an option to share in the benefit and cost
associated with the royalty reductions discussed above; however, Eisai did not elect to share in the benefit and cost
with respect to either the October 2017 or May 2018 royalty reductions, which will impact the amount of profits
(losses) on potential commercial sales of aducanumab to be shared with Eisai. For additional information on our
collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships, to these
consolidated financial statements.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Unconsolidated Variable Interest Entities
We have relationships with various 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 December 31, 2019 and 2018, the carrying value of our investments in certain biotechnology companies
representing potential unconsolidated variable interest entities totaled $22.7 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 consolidated statements of income as they are incurred. We have provided no financing
to these variable interest entities other than previously contractually required amounts.
20.
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 these consolidated financial
statements.
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
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 has commercialized 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 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. In
Italy, Fresenius Kabi has surrendered the Italian counterpart of the ‘510 Patent and has moved to dismiss its
infringement action. A hearing in the proceeding in Germany has not yet been set but is expected to occur after a
decision on our pending opposition to the ‘510 patent in the EPO.
In July 2019 Gedeon Richter PLC (Gedeon Richter) commenced proceedings against Biogen GmbH in the
Düsseldorf Regional Court alleging infringement of the German counterpart of European Patent No. 3 212 667 (the
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
'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.
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 United Kingdom (U.K.) counterpart of the '667 Patent. In January 2020 the
U.K. court revoked the patent.
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. Gedeon Richter filed a separate
action for infringement in the same court and a hearing in both cases has been set for May 2020.
An estimate of the possible loss or range of loss in the pending IMRALDI patent litigation described above
cannot be made at this time.
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. 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.
Dispute with Former Convergence Shareholders
In November and December 2019 Shareholder Representative Services LLC, on behalf of the former
shareholders of Convergence, sent us correspondence asserting claims of $200.0 million for alleged breach of the
contract under which we acquired Convergence. We dispute the claims.
Other Matters
Petition for Inter Partes Review
In July 2018 Mylan Pharmaceuticals, Inc. (Mylan) filed a petition that was granted by the U.S. Patent Trial and
Appeal Board (PTAB) for inter partes review of our U.S. Patent No. 8,399,514 (the '514 Patent), which covers
treatment of MS with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label. Sawai USA, Inc.
and Sawai Pharmaceutical Co. Ltd. were later joined as petitioners, but in January 2020 the PTAB terminated their
involvement in the proceeding. A hearing on Mylan’s petition was held in November 2019 and on February 5, 2020,
the PTAB issued a final written decision upholding the patentability of the ‘514 Patent.
Hatch-Waxman Act Litigation relating to TECFIDERA Orange-Book Listed Patents
In 2017, 2018 and 2019 we filed patent infringement proceedings relating to TECFIDERA Orange-Book listed
patents pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the
Hatch-Waxman Act, against Accord Healthcare Inc., Alkem Laboratories Ltd., Amneal Pharmaceuticals LLC, Aurobindo
Pharma U.S.A., Inc., 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., Shipla Medicare Limited, Slayback Pharma LLC, Torrent
Pharmaceuticals Ltd., TWi Pharmaceuticals, Inc., Windlas Healthcare Pvt. Ltd. and Zydus Pharmaceuticals (USA) Inc.
(the Delaware Defendants) in the U.S. District Court for the District of Delaware (the Delaware Court) and against
Mylan in the U.S. District Court for the Northern District of West Virginia. The litigation against Aurobindo Pharma
U.S.A., Inc., Glenmark Pharmaceuticals Ltd. and Sawai USA was dismissed in the fourth quarter of 2019.
A trial against the remaining Delaware Defendants was held in the Delaware Court in December 2019 and we
are awaiting a decision.
A trial is ongoing in the West Virginia action against Mylan.
We have entered into settlement agreements with some of the Delaware Defendants and we now anticipate
market entry of a generic product equivalent to TECFIDERA before the ‘514 Patent expires in February 2028.
In December 2018 we filed an action under the Hatch-Waxman Act against Banner Life Sciences LLC (Banner)
for infringement of our U.S. Patent No. 7,619,001 (the ‘001 patent) expiring on June 20, 2020, and claiming
treatment of MS with dimethyl fumarate or methyl hydrogen fumarate or a combination thereof. In January 2020 the
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Delaware Court entered judgment that Banner’s drug product does not infringe the ‘001 patent. We have appealed
the decision.
European Patent Office Oppositions
In 2016 the EPO revoked our European patent number 2 137 537 (the '537 Patent), which covers 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 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 a hearing has been set
for June 2020. For additional information regarding this matter, please read Note 6, Intangible Assets and Goodwill, to
these consolidated financial statements.
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), corresponding to our European
Patent Number 1 485 127 (the E.U. '127 Patent) and covering 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, respectively, of the E.U.
'127 Patent, which also cover administration of natalizumab (TYSABRI) to treat MS and expire in February 2023. The
Dutch and German counterparts were ruled invalid. The decision in the Dutch action was affirmed on appeal and a
hearing has been set for July 2020 in our appeal in the German action. 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 (co-marketer of REBIF) and Novartis Pharmaceuticals Corp. (Novartis) (marketer and seller
of EXTAVIA) of our U.S. Patent No. 7,588,755 ('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 all 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. EMD Serono and Pfizer filed an appeal in the U.S. Court of
Appeals for the Federal Circuit and oral argument is scheduled for March 2020. 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 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
investigation and have participated in preliminary discussions with the government regarding potential resolution of
aspects of the matter. We have accrued the amount of our best estimate of the minimum probable loss in this
matter.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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.
21. Commitments and Contingencies
Royalty Payments
TYSABRI
In 2013 we acquired from Elan full ownership of all remaining rights to TYSABRI that we did not already own or
control. Under the acquisition agreement, we are obligated to make contingent payments to Elan of 18% on annual
worldwide net commercial sales up to $2.0 billion and 25% on annual worldwide net commercial sales that exceed
$2.0 billion. Royalty payments to Elan and other third parties are recognized as cost of sales in our consolidated
statements of income. Elan was acquired by Perrigo Company plc (Perrigo) in December 2013 and Perrigo
subsequently sold its rights to these payments to a third-party effective January 2017.
SPINRAZA
In 2016 we exercised our option to develop and commercialize SPINRAZA from Ionis. Under our agreement with
Ionis, we make royalty payments to Ionis on annual worldwide net commercial sales of SPINRAZA using a tiered
royalty rate between 11% and 15%, which are recorded as cost of sales in our consolidated statements of income.
For additional information on our collaboration arrangements with Ionis, please read Note 18, Collaborative and Other
Relationships, to these consolidated financial statements.
VUMERITY
In October 2019 the FDA approved VUMERITY for the treatment of RMS. Under our agreement with Alkermes,
we make royalty payments to Alkermes on worldwide net commercial sales of VUMERITY using a royalty rate of 15%,
which are recorded as cost of sales in our consolidated statements of income. Royalties payable on net commercial
sales of VUMERITY are subject, under certain circumstances, to tiered minimum annual payment requirements for a
period of five years following FDA approval. For additional information on our collaboration arrangement with
Alkermes, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements.
Contingent Consideration related to Business Combinations
In connection with our acquisitions of Convergence and BIN, we agreed to make additional payments based
upon the achievement of certain milestone events.
As the acquisitions of Convergence and BIN occurred after January 1, 2009, we recognized the contingent
consideration liabilities associated with these transactions at their fair value on the acquisition date and revalue the
remaining obligations each reporting period. We may pay up to approximately $735.0 million in remaining milestones
related to these acquisitions.
Fumapharm AG
In 2006 we acquired Fumapharm AG. As part of this acquisition we acquired the Fumapharm Products. We
were required to make contingent payments to former shareholders of Fumapharm AG and holders of their rights
based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales
of Fumapharm Products in the prior 12-month period, as defined in the acquisition agreement, until such time as the
cumulative sales level reached $20.0 billion, at which time no further contingent payments were due. During the first
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
quarter of 2019 we paid the final $300.0 million contingent payment as we achieved the $20.0 billion cumulative
sales levels related to the Fumapharm Products in the fourth quarter of 2018.
Contingent Development, Regulatory and Commercial Milestone Payments
Based on our development plans as of December 31, 2019, we could make potential future milestone
payments to third parties of up to approximately $6.8 billion, including approximately $1.2 billion in development
milestones, approximately $1.4 billion in regulatory milestones and approximately $4.2 billion in commercial
milestones, as part of our various collaborations, including licensing and development programs. Payments under
these agreements generally become due and payable upon achievement of certain development, regulatory or
commercial milestones. Because the achievement of these milestones was not considered probable as of
December 31, 2019, such contingencies have not been recorded in our financial statements. Amounts related to
contingent milestone payments are not considered contractual obligations as they are contingent on the successful
achievement of certain development, regulatory or commercial milestones.
Provided various development, regulatory or commercial milestones are achieved, we anticipate that we may
pay approximately $430.0 million of milestone payments in 2020, including $75.0 million upon the regulatory filing
with the FDA for approval of aducanumab and $100.0 million if aducanumab is launched in the U.S.
Other Funding Commitments
As of December 31, 2019, we have several ongoing clinical studies in various clinical trial stages. Our most
significant clinical trial expenditures are to CROs. The contracts with CROs are generally cancellable, with notice, at
our option. We recorded accrued expenses of approximately $24.0 million in our consolidated balance sheet for
expenditures incurred by CROs as of December 31, 2019. We have approximately $514.0 million in cancellable
future commitments based on existing CRO contracts as of December 31, 2019.
As part of the sale of our Hillerød, Denmark manufacturing operations to FUJIFILM, 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 $74.0 million associated with such guarantees and have accrued for this obligation. We
may adjust this estimate based upon changes in business conditions, which may result in the increase or reduction
of this adverse commitment obligation in subsequent periods.
Tax Related Obligations
We exclude liabilities pertaining to uncertain tax positions from our summary of contractual obligations as we
cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of
December 31, 2019, we have $136.9 million of net liabilities associated with uncertain tax positions.
As of December 31, 2019 and 2018, we have accrued income tax liabilities of $697.0 million under the
Transition Toll Tax. Of the amounts accrued as of December 31, 2019, no amounts are expected to be paid within
one year due to an approximately $87.0 million carryforward of taxes paid in relation to the company's 2017 tax
return. The Transition Toll Tax will be paid over an eight-year period, which started in 2018, and will not accrue
interest. For additional information on the Transition Toll Tax, please read Note 16, Income Taxes, to these
consolidated financial statements.
Solothurn, Switzerland Manufacturing Facility
In order to support our drug development pipeline, 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. As of December 31,
2019, we had contractual commitments of approximately $52.0 million related to the construction of this facility.
22. Guarantees
As of December 31, 2019 and 2018, we did not have significant liabilities recorded for guarantees.
We enter into indemnification provisions under our agreements with other companies in the ordinary course of
business, typically with business partners, contractors, clinical sites and customers. Under these provisions, we
generally indemnify and hold harmless the indemnified party for losses suffered or incurred by the indemnified party
as a result of our activities. These indemnification provisions generally survive termination of the underlying
agreement. The maximum potential amount of future payments we could be required to make under these
F- 74
indemnification provisions is unlimited. However, to date we have not incurred material costs to defend lawsuits or
settle claims related to these indemnification provisions. As a result, the estimated fair value of these agreements
is minimal. Accordingly, we have no liabilities recorded for these agreements as of December 31, 2019 and 2018.
23. Employee Benefit Plans
We sponsor various retirement and pension plans. Our estimates of liabilities and expenses for these plans
incorporate a number of assumptions, including expected rates of return on plan assets and interest rates used to
discount future benefits.
401(k) Savings Plan
We maintain a 401(k) Savings Plan, which is available to substantially all regular employees in the U.S. over the
age of 21. Participants may make voluntary contributions. We make matching contributions according to the 401(k)
Savings Plan’s matching formula. All matching contributions and participant contributions vest immediately. The
401(k) Savings Plan also holds certain transition contributions on behalf of participants who previously participated
in the Biogen, Inc. Retirement Plan. The expense related to our 401(k) Savings Plan primarily consists of our
matching contributions.
Expense related to our 401(k) Savings Plan totaled $44.8 million, $42.2 million and $42.6 million for the years
ended December 31, 2019, 2018 and 2017, respectively.
Deferred Compensation Plan
We maintain a non-qualified deferred compensation plan, known as the Supplemental Savings Plan (SSP),
which allows a select group of management employees in the U.S. to defer a portion of their compensation. The SSP
also provides certain credits to highly compensated U.S. employees that are paid by the company. These credits are
known as the Restoration Match. The deferred compensation amounts are accrued when earned. Such deferred
compensation is distributable in cash in accordance with the rules of the SSP. Deferred compensation amounts
under such plan as of December 31, 2019 and 2018, totaled approximately $114.6 million and $109.3 million,
respectively, and are included in other long-term liabilities in our consolidated balance sheets. The SSP also holds
certain transition contributions on behalf of participants who previously participated in the Biogen, Inc. Retirement
Plan. The Restoration Match and participant contributions vest immediately. Distributions to participants can be
either in one lump sum payment or annual installments as elected by the participants.
Pension Plans
Our retiree benefit plans include defined benefit plans for employees in our affiliates in Switzerland and
Germany as well as other insignificant defined benefit plans in certain other countries where we maintain an
operating presence.
Our Swiss plan is a government-mandated retirement fund that provides employees with a minimum investment
return. The minimum investment return is determined annually by the Swiss government and was 1.00% in 2019,
2018 and 2017. Under the Swiss plan, both we and certain of our employees with annual earnings in excess of
government determined amounts are required to make contributions into a fund managed by an independent
investment fiduciary. Employer contributions must be in an amount at least equal to the employee’s contribution.
Minimum employee contributions are based on the respective employee’s age, salary and gender. As of
December 31, 2019 and 2018, the Swiss plan had an unfunded net pension obligation of $42.9 million and $48.6
million, respectively, and plan assets that totaled $127.1 million and $93.1 million, respectively. In 2019, 2018 and
2017 we recognized expense totaling $14.7 million, $14.8 million and $12.3 million, respectively, related to our
Swiss plan, of which $1.2 million, $1.3 million and $1.1 million, respectively, was included in other income
(expense), net.
The obligations under the German plans are unfunded and totaled $59.6 million and $45.3 million as of
December 31, 2019 and 2018, respectively. Net periodic pension cost related to the German plans totaled $5.1
million, $5.3 million and $5.2 million for the years ended December 31, 2019, 2018 and 2017, respectively, of
which $1.4 million, $1.5 million and $1.4 million, respectively, was included in other income (expense), net.
24. Segment Information
We operate as one operating segment, focused on discovering, developing and delivering worldwide innovative
therapies for people living with serious neurological and neurodegenerative diseases as well as related therapeutic
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
adjacencies. Our Chief Executive Officer (CEO), as the chief operating decision-maker, manages and allocates
resources to the operations of our company on a total company basis. Our research and development organization is
responsible for the research and discovery of new product candidates and supports development and registration
efforts for potential future products. Our pharmaceutical, operations and technology organization manages the
development of the manufacturing processes, clinical trial supply, commercial product supply, distribution, buildings
and facilities. Our commercial organization is responsible for U.S. and international development of our commercial
products. The company is also supported by corporate staff functions. Managing and allocating resources on a total
company basis enables our CEO to assess the overall level of resources available and how to best deploy these
resources across functions, therapeutic areas and research and development projects that are in line with our long-
term company-wide strategic goals. Consistent with this decision-making process, our CEO uses consolidated, single-
segment financial information for purposes of evaluating performance, forecasting future period financial results,
allocating resources and setting incentive targets.
Enterprise-wide disclosures about product revenues, other revenues and long-lived assets by geographic area
are presented below. Revenues are primarily attributed to individual countries based on location of the customer or
licensee.
Geographic Information
The following tables contain certain financial information by geographic area:
December 31, 2019 (In millions)
Product revenues from external customers
Revenues from anti-CD20 therapeutic programs
Other revenues from external customers
Long-lived assets
U.S.
Europe
$ 6,713.8 $ 3,794.5 $
0.2 $
$ 2,211.9 $
$
9.7 $
585.8 $
$ 1,493.2 $ 2,162.9 $
Asia
320.3 $
— $
112.2 $
6.2 $
Other
Total
551.2 $11,379.8
78.3 $ 2,290.4
707.7
12.0 $ 3,674.3
— $
December 31, 2018 (In millions)
Product revenues from external customers
Revenues from anti-CD20 therapeutic programs
Other revenues from external customers
Long-lived assets
U.S.
Europe
$ 6,800.5 $ 3,370.3 $
0.2 $
$ 1,903.4 $
32.7 $
457.0 $
$
$ 1,152.7 $ 2,442.8 $
Asia
281.2 $
— $
96.2 $
3.9 $
Other
Total
434.8 $10,886.8
76.6 $ 1,980.2
585.9
1.8 $ 3,601.2
— $
December 31, 2017 (In millions)
Product revenues from external customers
Revenues from anti-CD20 therapeutic programs
Other revenues from external customers
Long-lived assets
U.S.
Europe
$ 7,017.1 $ 2,844.8 $
0.6 $
$ 1,475.6 $
$
67.8 $
249.5 $
$ 1,226.9 $ 1,948.2 $
Asia
160.1 $
— $
42.7 $
5.2 $
Other
Total
332.7 $10,354.7
83.0 $ 1,559.2
360.0
2.1 $ 3,182.4
— $
Other
As of December 31, 2019, 2018 and 2017, approximately $2,028.8 million, $1,748.5 million and $1,215.7
million, respectively, of our long-lived assets were related to the construction of our large-scale biologics
manufacturing facility in Solothurn, Switzerland.
In August 2019 we completed the sale of all of the outstanding shares of our subsidiary that owned our
biologics manufacturing operations in Hillerød, Denmark to FUJIFILM. As of December 31, 2018 and 2017,
approximately $646.5 million and $707.1 million, respectively, of our long-lived assets were related to our
manufacturing facility in Hillerød, Denmark.
For additional information on our large-scale biologics manufacturing facility in Solothurn, Switzerland, please
read Note 10, Property, Plant and Equipment, to these consolidated financial statements. For additional information
on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these
consolidated financial statements.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
25. Quarterly Financial Data (Unaudited)
(In millions, except per share amounts)
2019
Product revenues, net
Revenues from anti-CD20 therapeutic
programs
Other revenues
Total revenues
Gross profit (1)
Net income (a)
Net income attributable to Biogen Inc. (a)
Net income per share:
Basic earnings per share attributable to
Biogen Inc.
Diluted earnings per share attributable
to Biogen Inc.
Weighted-average shares used in
calculating:
Basic earnings per share attributable to
Biogen Inc.
Diluted earnings per share attributable
to Biogen Inc.
(In millions, except per share amounts)
2018
Product revenues, net
Revenues from anti-CD20 therapeutic
programs
Other revenues
Total revenues
Gross profit (1)
Net income (b)
Net income attributable to Biogen Inc. (b)
Net income per share:
Basic earnings per share attributable to
Biogen Inc.
Diluted earnings per share attributable
to Biogen Inc.
Weighted-average shares used in
calculating:
Basic earnings per share attributable to
Biogen Inc.
Diluted earnings per share attributable
to Biogen Inc.
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
2,680.0 $
2,880.3 $ 2,894.7 $
2,924.8 $ 11,379.8
517.4 $
292.4 $
3,489.8 $
2,887.8 $
1,408.8 $
1,408.8 $
576.4 $
160.0 $
595.8 $
109.6 $
3,616.7 $ 3,600.1 $
3,140.4 $ 3,170.1 $
1,494.1 $ 1,545.9 $
1,494.1 $ 1,545.9 $
600.8 $
145.7 $
2,290.4
707.7
3,671.3 $ 14,377.9
3,224.2 $ 12,422.5
5,888.5
1,439.7 $
5,888.5
1,439.7 $
7.17 $
7.85 $
8.40 $
8.10 $
31.47
7.15 $
7.85 $
8.39 $
8.08 $
31.42
196.6
197.0
190.3
184.0
190.4
184.2
177.8
178.2
187.1
187.4
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
2,523.5 $
2,757.5 $ 2,780.1 $
2,825.7 $ 10,886.8
443.2 $
164.4 $
3,131.1 $
2,685.1 $
1,171.2 $
1,172.9 $
490.4 $
108.6 $
511.7 $
147.2 $
3,356.5 $ 3,439.0 $
2,935.5 $ 2,978.2 $
915.0 $ 1,442.9 $
866.6 $ 1,444.4 $
534.9 $
165.7 $
1,980.2
585.9
3,526.3 $ 13,452.9
3,037.8 $ 11,636.6
4,474.0
4,430.7
944.9 $
946.8 $
5.55 $
4.18 $
7.17 $
4.74 $
21.63
5.54 $
4.18 $
7.15 $
4.73 $
21.58
211.4
211.7
207.1
201.4
207.3
201.9
199.8
200.3
204.9
205.3
(1) Gross profit is calculated as total revenues less cost of sales, excluding amortization and impairment of acquired intangible
assets.
(a) Net income and net income attributable to Biogen Inc. for 2019 include:
• Pre-tax gains (losses) related to changes in the fair value of our strategic investments of $376.1 million,
($174.2) million, ($4.6) million and $2.8 million for the first, second, third and fourth quarters, respectively.
F- 77
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
•
Impairment charges related to certain intangible assets of $215.9 million in the third quarter. For additional
information, please read Note 6, Intangible Assets and Goodwill, to these consolidated financial statements.
• A total net loss in our consolidated statements of income of approximately $124.2 million related to the
sale of all the outstanding shares of our subsidiary that owned our biologics manufacturing operations in
Hillerød, Denmark to FUJIFILM. This loss included a pre-tax loss of $55.3 million and a tax expense of $68.9
million related to this transaction. For additional information on the divestiture of our Hillerød, Denmark
manufacturing operations, please read, Note 3, Divestitures, to these consolidated financial statements.
• An expense of $63.0 million was recorded in research and development expense in our consolidated
statements of income in the fourth quarter as we completed a transaction with Samsung Bioepis and
secured the exclusive rights to commercialize two potential ophthalmology biosimilar products, SB11
referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including the U.S., Canada,
Europe, Japan and Australia. We also acquired an option to extend our existing commercial agreement with
Samsung Bioepis for BENEPALI, IMRALDI and FLIXABI in Europe and obtained exclusive rights to
commercialize these products in China. For additional information, please read, Note 18, Collaborative and
Other Relationships, to these consolidated financial statements.
• Losses (gains) related to the adjustments to the fair values of our contingent consideration obligations of
$11.5 million, $(20.0) million, $(57.8) million and $2.6 million for the first, second, third and fourth
quarters, respectively. For additional information on the valuation of our contingent consideration obligations,
please read Note 7, Fair Value Measurements, to these consolidated financial statements.
• A payment of $45.0 million to Ionis in the fourth quarter, as we exercised our option to obtain a worldwide,
exclusive, royalty-bearing license from Ionis to develop and commercialize BIIB080. For additional
information, please read, Note 18, Collaborative and Other Relationships, to these consolidated financial
statements.
• A payment of $38.5 million to Skyhawk in the first quarter as we entered into a collaboration and research
and development services agreement with Skyhawk pursuant to which the companies are leveraging
Skyhawk's SkySTAR technology platform with the goal of discovering innovative small molecule treatments
for patients with neurological diseases, including MS and SMA. For additional information, please read, Note
18, Collaborative and Other Relationships, to these consolidated financial statements.
(b) Net income and net income attributable to Biogen Inc. for 2018 include:
• Pre-tax (losses) gains related to changes in the fair value of our strategic investments of $(6.4) million, $5.4
million, $141.2 million and $(12.2) million for the first, second, third and fourth quarters, respectively.
• Pre-tax charges to acquired IPR&D of $10.0 million, $75.0 million and $27.5 million for the first, second and
third quarters, respectively, for upfront payments made upon closing of asset purchase transactions. For
additional information, please read Note 2, Acquisitions, to these consolidated financial statements.
• Pre-tax research and development expenses for the second quarter of $486.2 million related to the 2018
Ionis Agreement. For additional information, please read, Note 18, Collaborative and Other Relationships, to
these consolidated financial statements.
• Pre-tax charge to noncontrolling interests of $50.0 million for the second quarter for a payment to
Neurimmune in exchange for a 5% reduction in the previously negotiated royalty rates payable on products
developed under the Neurimmune Agreement, including royalties payable on potential commercial sales of
aducanumab. For additional information, please read Note 19, Investments in Variable Interest Entities, to
these consolidated financial statements.
•
Impairment charges related to certain intangible assets of $189.3 million and $176.8 million in the third
and fourth quarters, respectively. For additional information, please read Note 6, Intangible Assets and
Goodwill, to these consolidated financial statements.
• Losses (gains) related to the adjustments to the fair values of our contingent consideration obligations of
$(5.6) million, $1.9 million, $(87.9) million and $79.3 million for the first, second, third and fourth quarters,
F- 78
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
respectively. For additional information, please read Note 7, Fair Value Measurements, to these consolidated
financial statements.
• Net increase to income tax expense of $135.8 million for the fourth quarter reflecting the impact of electing
to record deferred taxes on GILTI. For additional information, please read Note 16, Income Taxes, to these
consolidated financial statements.
• An upfront payment of $35.0 million to Ionis, as we exercised our option in the fourth quarter to obtain a
worldwide, exclusive, royalty-bearing license from Ionis to develop and commercialize tofersen. For additional
information, please read Note 18, Collaborative and Other Relationships, to these consolidated financial
statements.
26. Subsequent Events
Pfizer Inc.
In January 2020 we entered into an agreement to acquire PF-05251749, a novel CNS-penetrant small molecule
inhibitor of casein kinase 1, for the potential treatment of patients with behavioral and neurological symptoms
across various psychiatric and neurological diseases from Pfizer. In particular, we plan to develop the Phase 1 asset
for the treatment of sundowning in AD and irregular sleep wake rhythm disorder in Parkinson’s disease. In connection
with the closing of this transaction, we will make an upfront payment of $75.0 million to Pfizer, which will be recorded
as acquired IPR&D in our consolidated statements of income as PF-05251749 has not yet reached technological
feasibility. We may also pay Pfizer up to $635.0 million in potential additional development and commercialization
milestone payments, as well as tiered royalties in the high single digits to sub-teens.
This transaction will be accounted for as an asset acquisition and is subject to customary closing conditions,
including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 in the U.S. We expect the transaction to close in the first quarter of 2020.
2020 Credit Facility
In January 2020 we entered into a $1.0 billion, five-year senior unsecured revolving credit facility under which
we are permitted to draw funds for working capital and general corporate purposes. The terms of the revolving credit
facility include a financial covenant that requires us not to exceed a maximum consolidated leverage ratio. This
revolving credit facility replaced the revolving credit facility entered into in August 2015.
F- 79
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Biogen Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Biogen Inc. and its subsidiaries (the “Company”)
as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income,
equity and cash flows for each of the three years in the period ended December 31, 2019, including the related
notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's
internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
("COSO").
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019 and the manner in which it accounts for income taxes for intra-entity transfers of assets
other than inventory in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
F- 80
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Reserves for Medicaid and Managed Care Rebates
As described in Notes 1 and 4 to the consolidated financial statements, the Company recognized revenue from
product sales net of reserves, including Medicaid and managed care rebates. Within Accrued expenses and other,
total contractual adjustments amounted to $1,027.3 million as of December 31, 2019. This balance primarily
includes provisions for Medicaid and managed care rebates in the U.S. Medicaid rebates relate to the Company’s
estimated obligations to states under established reimbursement arrangements. The Company’s liability for
Medicaid rebates consists of estimates for claims that a state will make for the current quarter, claims for prior
quarters that have been estimated for which an invoice has not been received, invoices received for claims from the
prior quarters that have not been paid, and an estimate of potential claims that will be made for inventory that exists
in the distribution channel at period end. Managed care rebates represent the Company’s obligations to third parties,
primarily pharmacy benefit managers. Managed care rebates result from performance-based goals, formulary
position and price increase limit allowances (price protection). The calculation of the accrual of the managed care
rebate is based on an estimate of the customer’s buying patterns and the resulting applicable contractual rebate
rate(s) to be earned over a contractual period. As disclosed by management, the Medicaid and managed care
estimates reflect historical experience, current contractual and statutory requirements, specific known market events
and trends, industry data and forecasted customer buying and payment patterns.
The principal considerations for our determination that performing procedures relating to reserves for Medicaid and
managed care rebates is a critical audit matter are there was significant judgment by management due to the
significant measurement uncertainty involved in developing these reserves, as the reserves are based on
assumptions developed using historical experience, current contractual requirements, specific known market events
and payment patterns. This in turn led to a high degree of auditor judgment, subjectivity and effort in applying
procedures related to these assumptions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to the reserves for Medicaid and managed care rebates, including controls over the assumptions
used to estimate these rebate reserves. These procedures also included, among others, (i) developing an
independent estimate of the rebate reserves by utilizing third party data related to product demand, data related to
price changes, the terms of the specific rebate programs, the historical trend of actual rebate claims paid and
F- 81
consideration of contractual requirement changes and market events; (ii) comparing the independent estimate to
management’s estimate, and (iii) testing rebate claims paid by the Company, including evaluating the claims for
consistency with the contractual terms of the Company’s rebate agreements.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
February 6, 2020
We have served as the Company's auditor since 2003.
F- 82
CORPORATE INFORMATION
Biogen 2019 Annual Report
Board of Directors (as of April 10, 2020)
Stelios Papadopoulos, Ph.D.
Chairman, Biogen Inc., Chairman, Exelixis, Inc.
and Chairman, Regulus Therapeutics Inc.
Richard C. Mulligan, Ph.D.
Mallinckrodt Professor of Genetics, Emeritus,
Harvard Medical School and Executive
Vice Chairman, Sana Biotechnology
Michel Vounatsos
Chief Executive Officer, Biogen Inc.
Alexander J. Denner, Ph.D.
Founding Partner and Chief Investment
Officer, Sarissa Capital Management LP
Caroline D. Dorsa
Retired Executive Vice President and
Chief Financial Officer, Public Service
Enterprise Group Incorporated
William A. Hawkins
Senior Advisor, EW Healthcare Partners
Nancy L. Leaming
Retired Chief Executive Officer and
President, Tufts Health Plan
Jesus B. Mantas
Senior Managing Partner for Global
Strategy, Platforms and Innovation,
IBM Global Business Services
Robert W. Pangia
Retired Chief Executive Officer,
Ivy Sports Medicine, LLC
Brian S. Posner
Private Investor and Founder and
Managing Partner, Point Rider Group LLC
Eric K. Rowinsky, M.D.
President and Executive Chairman, RGenix, Inc.
The Honorable Lynn Schenk, J.D.
Attorney, Former Chief of Staff to the Governor
of California and Former U.S. Congresswoman
Stephen A. Sherwin, M.D.
Clinical Professor of Medicine, University
of California, San Francisco and Advisor to
Life Sciences Companies
Independent accountant
PricewaterhouseCoopers LLP
101 Seaport Boulevard
Boston, MA 02210
News releases
As a service to our stockholders and prospective
investors, Biogen’s news releases are usually posted
within one hour of being issued and are available at
no cost at investors.biogen.com.
Market information
Our common stock trades on the Nasdaq Global
Select Market under the symbol “BIIB.”
Biogen 2019 Annual Report
CORPORATE INFORMATION
Stockholder Information
Corporate headquarters
Biogen Inc.
225 Binney Street
Cambridge, MA 02142
Phone: (617) 679-2000
SEC Form 10-K
A copy of Biogen’s Annual Report
on Form 10-K filed with the U.S. Securities and
Exchange Commission is available at sec.gov
and upon request to:
Investor Relations Department
Biogen Inc.
225 Binney Street
Cambridge, MA 02142
Phone: (781) 464-2442
Transfer agent
To keep your contact information current and
for stockholder questions regarding lost stock
certificates, address changes and changes of
ownership or names in which the shares are held,
direct inquiries to:
Computershare
Phone: (781) 575-2879
Toll Free Phone: (877) 282-1168
computershare.com
By regular mail:
P.O. Box 505000
Louisville, KY 40233-5000
By overnight delivery:
462 South 4th Street
Suite 1600
Louisville, KY 40202
PERFORMANCE HIGHLIGHTS
Total Revenues
($ in millions)
Product Revenues
($ in millions and % of total product revenues)
$14,378
2019
2018
2019
2018
2017
2016
2015
$13,453
$12,274
$11,449
$10,764
SPINRAZA
$2,097 $1,724
18.4% 15.8%
TYSABRI
$1,892 $1,864
16.6% 17.1%
Other 4
$851 $662
6.1%
7.5%
TECFIDERA
$4,433 $4,274
38.95% 39.3%
VUMERITY5
$6 –
0.05% –
Interferon6
$2,102 $2,363
18.5% 21.7%
GAAP Diluted EPS/Non-GAAP Diluted EPS 1
2019
2018
2017
2016
2015
$31.42
$33.57
$21.582
$26.20
$11.922
$21.81
Product Revenues by Region (% of total product revenues)
$16.93
$20.22
U.S.
Rest of the world
$15.34
$17.01
2019
2018
2017
Free Cash Flow 1,3
($ in millions)
41%
37%
32%
59%
63%
68%
$6,264
$3,917
2019
2018
2017
2016
2015
$2,484
$2,706
$2,223
1 Non-GAAP diluted earnings per share (EPS) and Free Cash Flow are Non-GAAP
financial measures. A reconciliation of GAAP to Non-GAAP diluted EPS and
Free Cash Flow amounts is set forth on pages 9–13 of this Annual Report.
2 GAAP diluted EPS for 2018 and 2017 includes charges of $125 million and
$1,176 million, respectively, related to the impact of the Tax Cuts and Jobs Act of 2017.
3 Free Cash Flow for 2016 through 2019 reflects an increase in capital expenditures
related to the construction of our large-scale biologics manufacturing facility in
Solothurn, Switzerland.
4 For 2019 and 2018 Other includes product revenues from FAMPYRA, FUMADERM,
BENEPALI, FLIXABI and IMRALDI. For 2018 Other also includes product revenues from
ZINBRYTA, which was voluntary withdrawn from the market in March 2018.
5 VUMERITY was approved by the U.S. Food and Drug Administration in
October 2019 and became available in the U.S. in November 2019.
6 Interferon includes AVONEX and PLEGRIDY.
+4.5%
increase in total
product revenues
year over year
100%
total renewal
electricity purchased
by Biogen
46%
of manager-level
and above positions
held by women
Concept, design and realization
PETRANIX Corporate and Financial Communications AG
Adliswil, Zurich – Switzerland
www.petranix.com
Printing
Donnelley Financial Solutions, dfinsolutions.com
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ANNUAL
REPORT
2019