Biogen
Annual Report 2021

Plain-text annual report

ANNUAL REPORT 2021 CEO LETTER Neuroscience, Biogen’s principal area of focus, is an attractive field with great potential for innovation and scientific breakthroughs that address significant unmet needs of patients living with devastating diseases.” Michel Vounatsos, Chief Executive Officer My fellow stockholders, The year 2021 was an eventful one for Biogen and our portfolio, and one of continued execution across our base business. Neuroscience, Biogen’s principal area of focus, is an attractive field with great potential for innovation and scientific breakthroughs that address significant unmet needs of patients living with devastating diseases. Our emphasis on scientific advancements in service of humanity has driven our leadership in multiple sclerosis (MS), our innovation in spinal muscular atrophy (SMA), and our success in biosimilars. We also achieved important milestones, including: – FDA approval of ADUHELM (aducanumab-avwa), the first novel therapy approved for Alzheimer’s disease since 2003. – Important data readouts for potential treatments in depression, stroke, amyotrophic lateral sclerosis (ALS). To fully realize the significant opportunity we see ahead, we are pursuing a strategic plan that leverages our core competencies in neurology and in related growth areas. Alzheimer’s Disease Update In June 2021, the FDA granted accelerated approval to ADUHELM, the first treatment directed at an underlying pathophysiology of Alzheimer’s disease, the presence of amyloid beta plaques in the brain. ADUHELM’s introduction to the market proceeded more slowly than we would have hoped amid questions around the product’s mechanism of action and clinical data. In April 2022, we were disappointed that the U.S. Centers for Medicare & Medicaid Services (CMS) issued an unprecedented final coverage determination that effectively denies all Medicare beneficiaries access to ADUHELM. This ruling may also limit coverage for any future FDA- approved treatment in the class. – The formation of Biogen Digital Health, a global unit dedicated to pioneering personalized and digital medicine in neuroscience. This is not the first time a new class of therapy on the cutting edge of scientific discovery has faced headwinds. We continue to believe that ADUHELM Biogen Annual Report 2021 1 CEO Letter represents the first major innovation in decades and the beginning of what we hope will be a wave of new developments in this area. To this end, we continue to advance lecanemab, another amyloid-beta targeting investigational therapy under development in our collaboration with Eisai Co., Ltd. (Eisai). In June 2021, the FDA granted Breakthrough Therapy designation for lecanemab, and in December 2021 lecanemab also received Fast Track designation. The readout of the Phase 3 confirmatory Clarity AD clinical trial is expected in the fall of 2022, and it is currently under rolling submission for a Biologics License Application (BLA) under the accelerated approval pathway, with filing expected to be completed in the second quarter of 2022. When additional data from this new class of treatments become available, we will request that CMS reconsider its coverage decision for all FDA-approved amyloid-beta targeting therapies. Biogen continues to advocate for patients to have rapid and equitable access to all FDA- approved therapies to treat Alzheimer’s disease and for the continuity of care for Medicare beneficiaries already being treated with ADUHELM. Beyond our programs targeting amyloid, we are pursuing a multi-modality approach focused on other targets in Alzheimer’s disease. In a Phase 1b study, BIIB080, a tau-directed ASO, met the primary objective of safety and tolerability. Furthermore, data demonstrated a durable time and dose-dependent reduction of tau protein in cerebrospinal fluid and, based upon these results, we expect to initiate a Phase 2 study. Growing evidence suggests tau may be a key driver of neurodegeneration in Alzheimer’s disease. In addition, in February 2022 we initiated a Phase 1 study for BIIB113, a small molecule with a mechanism of action that targets tau protein aggregation. 2021 Pipeline Highlights We received significant data readouts during the year in a number of promising areas. We see high potential for zuranolone (BIIB125), an investigational two-week, once-daily drug in development for the potential treatment of major depressive disorder (MDD) and postpartum depression (PPD), to help transform the treatment of these diseases. Zuranolone now has positive data from five randomized clinical studies in MDD and PPD. Given the strength of this clinical data and the potentially differentiated profile of zuranolone, we are preparing to start, together with Sage Therapeutics, Inc. (Sage), a rolling submission with the FDA for a New Drug Application for the potential treatment of MDD. We expect to complete the filing in the U.S. in the second half of this year. In stroke, we received positive results from the Phase 2 study of BIIB131 (TMS-007), in acute ischemic stroke. Acute ischemic stroke accounts for about 87% 1 of all strokes worldwide. Unfortunately, approved thrombolytic agents, the current standard of care, are limited in their use due to their benefit- risk profile in later time windows where they are administered within 3 to 4.5 hours 1 of symptom onset. During the Phase 2a study, patients were dosed 4.5 to 12 hours after the onset of stroke symptoms, with treatment times averaging approximately 9.5 hours. Patients who received BIIB131 experienced no symptomatic intracranial hemorrhage. In addition, the study demonstrated significant impacts on blood vessel reopening and patient functional recovery. As we advance BIIB131, we also have BIIB093 (glibenclamide IV), currently in Phase 3, being studied for the treatment and prevention of severe cerebral edema in large hemispheric infarction, one of the most severe types of ischemic stroke 2 where cerebral edema often leads to high morbidity and mortality. In lupus, we announced the first patient dosed in the Phase 3 study of BIIB059 in systemic lupus erythematosus (SLE). SLE is a chronic autoimmune disease that affects multiple organ systems. The Phase 3 study will evaluate the clinical efficacy and assess the safety of BIIB059 as compared to placebo. We have set enrollment targets for the study that reflect the high prevalence of SLE in Black or African American and Hispanic and Latino communities, which are disproportionately impacted by the disease. ALS also remains an area of focus for Biogen, where we continue to engage with regulators to evaluate the next step for tofersen in SOD1 ALS. In the Phase 3 study, the primary endpoint as measured by the Revised Amyotrophic Lateral Sclerosis Functional Rating Scale (ALSFRS-R) did not reach statistical significance; however, signs of reduced disease progression across multiple secondary and exploratory endpoints were observed. Furthermore, the totality of evidence from the Phase 3 and its ongoing open- label extension showed that participants who started tofersen earlier experienced better outcomes, further suggesting a positive clinical effect. 2 Biogen Annual Report 2021 CEO Letter Advancing Digital Health Recent advances in the understanding of disease biology, along with an exponential acceleration in technologies, are paving the way for a shift in how diseases of the central nervous system (CNS) are diagnosed, measured and treated. This is why in 2021 we formed Biogen Digital Health, a global unit dedicated to pioneering personalized and digital medicine in neuroscience. We believe that now, more than ever, biology and technology should go hand in hand to better meet patient needs while enabling a shift toward more prevention-focused, affordable and equitable care. Building complementary digital solutions that predict, measure and prevent disease is of particular importance in neuroscience due to the heterogeneity and complexity of measuring neurological disease progression. We believe that now, more than ever, biology and technology should go hand in hand to better meet patient needs while enabling a shift toward more prevention-focused, affordable and equitable care. For example, developing validated digital biomarkers may enable us to accelerate clinical development and increase the probability of success of our pipeline assets, and also create opportunities for clinicians to better monitor disease progression with more sensitive and predictive measures than those currently available. As pioneers in neuroscience, we will explore synergistic opportunities for digital therapeutics to further address the unmet needs of patients. 2021 Financial Performance Our financial results for full-year 2021 underscored Biogen’s ability to execute in the face of challenges. The company generated GAAP diluted earnings per share of $10.40 and Non-GAAP diluted earnings per share of $19.13 on $11.0 billion in revenue. Notwithstanding generic competition to TECFIDERA (dimethyl fumarate) in the U.S., which materially impacted our revenue base in 2021, we maintained global leadership in MS, including the significant progress of VUMERITY (diroximel fumarate) to treat relapsing MS. In SMA, the global expansion of SPINRAZA contributed to incremental revenue growth year over year outside the U.S. Our work in biosimilars has accelerated over the past few years as we strive to bring greater value to healthcare systems and access to patients while enhancing our own cash flow generation opportunities. During the year, we generated approximately $3.6 billion in net cash flow from operations. We spent approximately $250 million on capital expenditures, resulting in free cash flow of approximately $3.4 billion 3. We ended 2021 with $4.7 billion in cash, cash equivalents and marketable securities, and a healthy balance sheet. We expect that we will continue to generate significant cash flow in 2022, providing us with multiple options for capital allocation. Late in 2021, we announced a series of cost reduction measures to lower the company’s expenses and bring them in line with our revised revenue expectations. The plan, which we began implementing in early 2022, is expected to yield approximately $500 million in annualized savings, a significant portion of which will be realized this year. Some of these savings will be offset by investments in Biogen’s pipeline and strategic initiatives. Contributing to a Better World Our Environmental, Social and Governance (ESG) efforts prioritize climate, health and equity, with a focus on vulnerable populations, as well as ongoing leadership in governance, transparency and disclosure. Reflecting our broader commitment to these priorities, we continued to tie a portion of our employees’ and executive officers’ compensation to advancing our ESG efforts. ESG oversight is formally embedded into our Board’s Governance Principles. One hallmark of our ESG efforts is Healthy Climate, Healthy Lives™, a $250 million initiative to eliminate fossil fuel emissions across our operations by 2040 to contribute to improved public health. In 2021, we grew our electric vehicle program to 12 countries and expanded our environmental impact assessment for key facilities and products. We joined with nine other industry leaders to launch Energize, a bold effort to decarbonize the pharmaceutical value chain. And we did not stop there. We collaborated with global scientific leaders on a meta-analysis of air pollution Biogen Annual Report 2021 3 CEO Letter Our Environmental, Social and Governance (ESG) efforts prioritize climate, health and equity, with a focus on vulnerable populations, as well as ongoing leadership in governance, transparency and disclosure. and dementia and a groundbreaking survey of 450-plus health clinic staff from 47 U.S. states to garner real- world insights into the health impacts of the climate crisis. Additionally, we accelerated our ongoing work with MIT to create a state-of-the-art integrated model of how various climate actions impact public health. We also have advanced our Diversity, Equity and Inclusion (DE&I) strategy, with an ongoing focus on hiring and engaging a diverse workforce, promoting health equity, and making notable gains in supplier diversity. We shared the results of a global pay equity analysis with employees and publicly disclosed our EEO-1 data (Equal Employment Opportunity), which provides a demographic breakdown of our U.S. workforce by gender and race, and released our first stand-alone DE&I Report in October 2021. We strive to build on our priorities for health equity and access across our operations. For example, we continue to expand efforts globally in order to reach more patients, with a growing focus on low- and middle-income countries. Globally, we are taking further action to ensure that our research and clinical trials are inclusive and representative. We aim to remove barriers for treatment and overcome the stigma of dementia. Black or African American and Hispanic and Latino populations are respectively two and one-and-a-half times more likely than older White Americans to have Alzheimer’s disease, yet they are also more likely to be diagnosed later in the course of their disease 4. To change this, we are working with advocates and organizations such as The Balm in Gilead, Inc., the National Association of Free and Charitable Clinics, Black Health Matters, the Global Alzheimer's Platform, the National Minority Quality Forum and USAgainstAlzheimer’s to improve early detection and care. We also continue to invest significantly in building a diverse talent pipeline through STEM equity education. In 2021, we entered into a collaboration with Morehouse School of Medicine to launch a Health Equity Fellowship program, through which M.D. and/or Ph.D. students will advance projects at Biogen that support more equitable healthcare experiences for patients in underrepresented and underserved communities. As a result of our ESG commitments and progress, we were listed as the top biotech leader on the Dow Jones Sustainability World Index for a seventh time and won the 2021 U.S. Chamber of Commerce Foundation’s best sustainability program award. Potential for Growth and Value Creation We have entered 2022 with a robust and diversified pipeline, which includes approximately 30 clinical programs across a broad set of disease areas and multiple modalities, 10 of which are in Phase 3 or filed. We attribute this success to our own innovative research and to the more than 30 business development deals we have reached over the past five years, spanning a range of disease areas including MS, depression, stroke, and Parkinson’s disease. Our work going forward is based on four strategic pillars to drive growth and value creation over the medium to long term. The first of these pillars is Biogen’s continued leadership in neuroscience, which as of April 29th, 2022, comprises over 20 of our approximately 30 programs in clinical development. We continue to believe in significant potential opportunities in Alzheimer’s disease and depression, two large therapeutic areas with great unmet need. For 2022, we expect two remaining data readouts in these areas, including additional Phase 3 data for zuranolone and pivotal data for lecanamab, with the potential to complete two new regulatory filings. In the long term, we have the opportunity to build upon our planned entry into neuropsychiatry with BIIB104 (AMPA PAM), an investigational drug which is currently being evaluated in a Phase 2 study for cognitive impairment associated with schizophrenia. A second pillar of potential growth is our specialized immunology portfolio with two promising Phase 3 4 Biogen Annual Report 2021 CEO Letter programs in lupus, a disease that affects an estimated 1.5 million Americans and at least five million people worldwide 5. We believe we have potential first-in-class molecules for both systemic lupus erythematosus (SLE), with dapirolizumab pegol (anti-CD40L) being developed in collaboration with UCB and BIIB059 (anti-BDCA2), and cutaneous lupus erythematosus (CLE), with BIIB059. Lupus is a therapeutic area with a different risk profile, and we are continuing to evaluate additional opportunities across specialized immunology. The third pillar is biosimilars, which contributed revenue of $831.1 million in 2021. Our goal is to bring more biosimilar products to more patients across geographies, supporting the sustainability of healthcare systems and accessibility for all. We continue to believe in significant potential opportunities in Alzheimer’s disease and depression, two large therapeutic areas with great unmet need. To that end, we announced in January 2022 an agreement with Samsung Biologics Co., Ltd. (Samsung Biologics) to sell our equity stake in the Samsung Bioepis Co., Ltd. (Samsung Bioepis) joint venture to Samsung Biologics. This positions us to pursue further biosimilars opportunities in order to provide patient access to biologic medicines and to contribute to healthcare sustainability. With the closing of this transaction, we will retain our current role as the commercialization partner for the Samsung Bioepis anti-TNF portfolio and ophthalmology programs. Lastly, our fourth pillar is directed at accelerating our efforts in digital health. We aim to leverage our significant database and utilize machine learning and artificial intelligence to develop digital health solutions that may improve patient care, accelerate drug development, and further the understanding of underlying pathologies. In summary, we expect executing on our four strategic pillars will create the opportunity for future growth and value creation. Focused on Execution in 2022 Our focus in 2022 will remain on execution and agility as we expect a number of important milestones. This includes maintaining leadership in our core business, the launch of VUMERITY in the EU, and our expected entry into the U.S. biosimilars market with BYOOVIZ, a biosimilar referencing LUCENTIS®. In the light of the recent decision of CMS to limit coverage for ADUHELM in the U.S., we will be reevaluating certain elements of our infrastructure and reprioritizing our capital allocation in the interest of creating long-term value for our shareholders. As a research-driven biotechnology company, we continue to be centered on delivering therapies at the cutting edge of innovation. We believe we have unique capabilities and experience to leverage progress in neuroscience, technology and biology. In scientific discovery and development, we know the road is not always linear, but I believe we have the best people across Biogen to advance science and access in the pursuit of helping patients and society. I want to thank all my colleagues who work tirelessly to make Biogen such a special company and uphold the highest standards of ethics and integrity. I also want to extend thanks to our collaborators for their essential contributions, and to our investors who entrust us with their capital, which makes everything we do possible. Sincerely, Michel Vounatsos, Chief Executive Officer of Biogen 1 American Stroke Association. 2 2018 AHA guidelines on management of ischemic stroke. 3 Free cash flow defined as net cash flow from operations less capital expenditures. 4 aaic.alz.org/downloads2020/2020_Race_and_Ethnicity_Fact_Sheet.pdf. 5 Lupus Foundation of America www.lupus.org/resources/lupus-facts-and-statistics. Biogen Annual Report 2021 5 GAAP TO NON-GAAP RECONCILIATION Diluted EPS and Net Income attributable to Biogen Inc. (Unaudited, $ in millions, except per share amounts) GAAP EPS – Diluted 2021 6,7 2020 7 2019 2018 7 2017 7,8 $10.40 $24.80 $31.42 $21.58 $11.92 Adjustments to net income attributable to Biogen Inc. (see below) 8.73 (1.05) 2.15 3.56 9.41 Non-GAAP EPS – Diluted $19.13 $23.75 $33.57 $25.14 $21.33 GAAP Net Income Attributable to Biogen Inc. $1,556 $4,001 $5,889 $4,431 $2,539 Amortization and impairment of acquired intangible assets A Acquisition-related transaction and integration costs (Gain) loss on fair value remeasurement of contingent consideration A (Gain) loss on divestiture of Hillerød, Denmark, manufacturing operations B (Gain) loss on equity security investments Premium paid on early debt redemption or debt exchange Net distribution to noncontrolling interests Restructuring, business transformation and other cost-saving initiatives Other reconciling items Income tax effect related to reconciling items Elimination of deferred tax assets/Valuation allowance associated with deferred tax assets C Swiss tax reform D U.S. tax reform 866 – (51) – 465 – (86) (93) 490 28 (64) 55 747 – (12) – 821 (694) (200) (128) 10 (4) 9 – (384) – – – 9 – 3 1 94 90 – – – – 5 33 31 – (54) – 78 815 – 63 – – – 132 19 19 – 44 23 10 (90) (219) 11 – – – 125 1,174 – – Amortization included in equity in loss of investee, net of tax 38 40 Non–GAAP Net Income Attributable to Biogen Inc. $2,861 $ 3,830 $6,291 $ 5,160 $4,542 Free cash flow Reconciliation 9 Net cash flow (outflow) from operating activities $3,640 $4,230 $7,079 $6,188 $4,551 Net cash flow (outflow) from investing activities Net cash flow (outflow) from financing activities (564) (609) 471 (2,046) (2,963) (2,086) (5,273) (5,860) (4,472) (2,380) Net increase (decrease) in cash and cash equivalents $990 $(1,652) $1,690 $(330) $(792) Net cash flow (outflow) from operating activities $3,640 $4,230 $7,079 $6,188 $4,551 Purchases of property, plant and equipment (Capital Expenditures) (258) (425) (515) (771) (867) Free cash flow $3,382 $3,805 $6,564 $5,417 $3,684 6 Beginning in the third quarter of 2021, amortization expense recorded in intangible assets that arose from collaboration and licensing arrangements is no longer excluded from our Non-GAAP results on a prospective basis. Prior period Non-GAAP results have not been updated to reflect this change. 7 Beginning in the second quarter of 2021, material upfront payments and premiums paid on the acquisition of common stock associated with significant collaboration and licensing arrangements along with the related transaction costs incurred are no longer excluded from Non-GAAP research and development expense and selling, general and administrative expense. Beginning in the first quarter of 2022, payments made on the acquisition of in-process research and development assets are no longer excluded in the determination of Non-GAAP net income. Prior period Non-GAAP results have been updated to reflect these changes. 8 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. 9 Free cash flow is defined as net cash flow from operations less capital expenditures. 6 Biogen Annual Report 2021 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, 2021, reflects the impact of a $365.0 million impairment charge related to BIIB111 (timrepigene emparvovec), a $220.0 million impairment charge related to BIIB112 (cotoretigene toliparvovec) and a $44.3 million impairment charge related to vixotrigine (BIIB074) for the potential treatment of trigeminal neuralgia (TGN). During the second quarter of 2021 we announced that our Phase 3 STAR study of BIIB111 and our Phase 2/3 XIRIUS study of BIIB112 did not meet their primary endpoints. In the third quarter of 2021 we suspended further development on these programs based on the decision by management as part of its strategic review process. For the year ended December 31, 2021, we recognized an impairment charge of $365.0 million related to BIIB111 and an impairment charge of $220.0 million related to BIIB112, reducing the remaining book values of these in-process research and development (IPR&D) intangible assets to zero. Amortization and impairment of acquired intangible assets for the twelve months ended December 31, 2020, reflects the impact of the impairment charges related to BIIB111, which was obtained as part of the Nightstar Therapeutics plc acquisition, and BIIB054 (cinpanemab) as well as a $19.3 million impairment charge related to one of our IPR&D intangible assets. During the fourth quarter of 2020 we recognized an impairment charge of $115.0 million related to BIIB111 as a result of third-party manufacturing delays that impacted the timing and increased the costs associated with advancing BIIB111 through Phase 3 development. In February 2021 we announced that we discontinued development of BIIB054 as a potential treatment of Parkinson’s disease as our Phase 2 SPARK study did not meet its primary or secondary endpoints. Although we made this determination in February 2021, it was based on conditions that existed as of December 31, 2020. As a result, we recognized an impairment charge of approximately $75.4 million during the fourth quarter of 2020 to reduce the fair value of the related IPR&D intangible asset to zero. We also adjusted the value of our contingent consideration obligation related to BIIB054, resulting in a gain of $51.0 million in the fourth quarter of 2020. 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 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. We also adjusted the value of our contingent consideration obligations related to BG00011, resulting in a gain of $61.2 million in the third quarter of 2019. B 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. 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. 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 Biogen Annual Report 2021 7 GAAP to Non-GAAP Reconciliation 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) acquisitions and divestitures, (2) hemophilia business separation costs, (3) restructuring, business transformation and other cost-saving initiatives, (4) (gain) loss on equity security investments, (5) other select items and (6) their related tax effects. “Free Cash Flow” is defined as net cash flow from operations less capital expenditures. We believe that these and other Non-GAAP financial measures provide additional insight into the ongoing economics of our business and reflect how we manage our business internally, set operational goals, and form the basis of our management incentive programs. Non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. 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. 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, an investigational treatment for Alzheimer’s disease, resulting in a reduction in the pre-tax loss on divestiture from $95.5 million to $55.3 million. During the fourth quarter of 2020 we reduced our estimate of the fair value of the adverse commitment by approximately $62.0 million based on our current manufacturing forecasts. Additionally, we recorded a reduction to our pre-tax loss of approximately $30.5 million due to a refund of interest paid associated with a tax matter. As of December 31, 2020, the cumulative loss on the divestiture of the Hillerød, Denmark, manufacturing operations was $33.2 million. 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. Consistent with our assessment as of the transaction date, 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. C Income tax expense for the twelve months ended December 31, 2020, included $90.3 million in income tax expense related to a net valuation allowance against certain deferred tax assets, due to the decisions of the U.S. District Court of the Northern District of West Virginia and the U.S. District Court of the District of Delaware that the asserted claims of our U.S. patent No. 8,399,514, which cover the treatment of multiple sclerosis with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label, are invalid. D During the third quarter of 2019 a new taxing regime in the country and certain cantons of Switzerland was enacted, which we refer to 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 twelve months ended December 31, 2019. 8 Biogen Annual Report 2021 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 strategy and plans; potential of, and expectations for, our commercial business and pipeline programs; capital allocation and investment strategy; clinical development programs, clinical trials and data readouts and presentations; risks and uncertainties associated with drug development and commercialization; regulatory discussions, submissions, filings and approvals and the timing thereof; the potential benefits, safety and efficacy of our and our collaboration partners’ products and investigational therapies; the anticipated benefits and potential of investments, collaborations and business development activities; our future financial and operating results; and the anticipated timeline and potential benefits of our Healthy Climate, Healthy Lives initiative. 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. Drug development and commercialization involve a high degree of risk, and only a small number of research and development programs result in commercialization 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; 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; difficulties in obtaining and maintaining adequate coverage, pricing and reimbursement for our products; failure to successfully execute or realize the anticipated benefits of our strategic and growth initiatives; 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 related to commercialization of biosimilars; the risk that positive results in a clinical trial may not be replicated in subsequent or confirmatory trials or success 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; risks that 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 of our products or product liability claims; 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; failure to obtain, protect and enforce our data, intellectual property and other proprietary rights and the risks and uncertainties relating to intellectual property claims and challenges; the direct and indirect impacts of the ongoing COVID-19 pandemic on our business, results of operations and financial condition; risks relating to technology failures or breaches; 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; fluctuations in our effective tax rate; fluctuations in our operating results; risks related to investment in properties; the market, interest and credit risks associated with our investment portfolio; risks relating to share repurchase programs; risks relating to access to capital and credit markets; risks related to indebtedness; change in control provisions in certain of our collaboration agreements; environmental risks; risks that the goals of our Healthy Climate, Healthy Lives initiative will not be completed in a timely manner or at all and its anticipated benefits will not be achieved; and any other Biogen Annual Report 2021 9 Safe Harbor risks and uncertainties that are described in other reports we have filed with the U.S. Securities and Exchange Commission. These statements are based on our current beliefs and expectations and speak only as of April 21, 2022. We do not undertake any obligation to publicly update any forward-looking statements, except as required by law. NOTE REGARDING TRADEMARKS: AVONEX®, PLEGRIDY®, SPINRAZA®, TECFIDERA®, TYSABRI® and VUMERITY® are registered trademarks of Biogen. ADUHELM®, BENEPALI™, BYOOVIZ™, FLIXABI™, FUMADERM®, Healthy Climate, Healthy Lives™ and IMRALDI™ are trademarks of Biogen. Other trademarks referenced in this Annual Report are the property of their respective owners. 10 Biogen Annual Report 2021 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, 2021 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 organizatio ii n) 33-0112644 (I.R.S. Employero Identification No.) 225 Binney Street, Cambridge, MA 02142 (617) 679-2000 (Address, including zip ci ode, and telephone number, including area code, of Registrant’s ii principai ) l executive offices ff 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(b) of the Act: Act. Act. 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 Yes x Indicate by check mark if the registrant is not required to file reportsrr Yes o Indicate by check mark whether the registrant (1) has filed all reportsr pursuant to Section 13 or Section 15(d) of the No x No o required to be filed by Section 13 or 15(d) of period that the registrant was the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o rr 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 x No o 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. x Large accelerated filer Non-accelerated filer x ☐ 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reportinrr U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ g under Section 404(b) of the Sarbanes-Oxley Act (15 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x 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 affilff 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 $51,264,577,902. iate) computed by reference to the As of February 2, 2022, the registrant had 146,962,793 shares of common stock, $0.0005 par value, outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for our 2022 Annual Meeting of Stockholders are incorporated by reference into Part Irr II of this report. BIOGEN INC. ANNUAL REPORT ON FORM 10-K For the Year Ended December 31, 2021 TABLE OF CONTENTS Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Item 3. Item 4. Properties Legal Proceedings Mine Safety Disclosures PART I PART II Item 5. Item 6. Item 7. Item 7A. Item 8. Item 9. Item 9A. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Reserved Management’s Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Item 9B. Other Information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 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 37 51 52 52 53 54 56 56 87 88 89 89 90 90 91 91 91 91 91 92 92 96 F- 1 NOTE REGARDING FORWARD-LOOKING STATEMENTS This report crr ontains 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 revenue; contingent, milestone, royalty and other payments under licensing, collaboration, acquisition or divestiture agreements; tax positions and contingencies; collectability of receivables; pre-approval inventory;r compensation and other selling, general and administrative expense; amortirr zation of intangible assets; foreign currency exchange risk; estimated fair value of assets and liabilities; and impairment assessments; cost of sales; research and development costs; expectations, plans and prospects relating to sales, pricing, growth and launch of our marketed and pipeline products; the potential impact of increased product competition in the markets in which we compete, including increased competition from new originator therapies, generics, prodrugs and biosimilars of existing products and products approved under abbreviated regulatory pathways, including generic or biosimilar versions of our products; patent terms, patent term extensions, patent officeff exclusivity; actions and expected availability and period of regulatory our plans and investments in our portfolio as well as implementation of our corporate strategy; the drivers for growing our business, including our plans and intention to commit resources relating to discovery,r research and development programs and business development opportunities as well as the potential benefits and results of, and the anticipated completion of, certain business development transactions; the expectations, development plans and anticipated timelines, including costs and timing of potential clinical trials, filings and approvals, of our products, drug candidates and pipeline programs, including collaborations with third-parties, as well as the potential therapeutic scope of the development and commercialization of our and our collaborators’ pipeline products; rr legal and other proceedings related to our patents the timing, outcome and impact of administrative, regulatory,rr and other proprietary and intellectual property rights, tax audits, assessments and settlements, pricing matters, sales and promotional practices, product liability and other matters; our ability to finance our operations and business initiatives and obtain funding for such activities; 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 direct and indirect impact of the COVID-19 pandemic on our business and operations, including sales, expense, reservesrr tacks or other privacy or data security incidents, research and development costs, clinical trials and employees; and allowances, the supply chain, manufacturing, cyber-at rr 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, activities in new or existing manufacturing facilities and the expected timeline for the Solothurn manufacturing facility to begin manufacturing products or product candidates and for the gene therapy manufacturing facility in Research Triangle Park (RTP), North Carolina to be operational; the impact of the continued uncertai collection of accounts receivable in such countries; rr nty of the credit and economic conditions in certain countries and our lease commitments, purchase obligations and the timing and satisfaction of other contractual obligations; and the impact of new laws (including tax), regulatory requirements, judicial decisions and accounting standards. These forward-looking statements involve risks and uncertainties, including those that are described in Item 1A. Factors included in this report and elsewhere in this report,rr Riskii 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. that could cause actual results to differ materially NOTE REGARDING COMPANY AND PRODUCT REFERENCES References in this report trr o: • “Biogen,” the “company,” “we,” “us” and “our” refer to Biogen Inc. and its consolidated subsidiaries; and • “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). NOTE REGARDING TRADEMARKS AVONEX®, PLEGRIDY®, RITUXAN®, RITUXAN HYCELA®, SPINRAZA®, TECFIDERA®, TYSABRI® and VUMERITY® are registered trademarks of Biogen. ADUHELM™, BENEPALI™, BYOOVIZ™, FLIXABI™, FUMADERM™, IMRALDI™ and Healthy Climate Healthy Lives™ are trademarks of Biogen. ENBREL®, EYLEA®, FAMP FF YRA™, GAZYVA®, HUMIRA®, LUCENTIS®, OCREVUS®, REMICADE® and other trademarks referenced in this report are the propertyrr 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 encies. We have a leading portfolio of medicines to treat multiple sclerosis (MS), have introduced therapeutic adjacd the first approved treatment for spinal muscular atrophy (SMA) and are providing the first and only approved treatment to address a defining pathology of Alzheimer’s disease. We also commercialize biosimilars of advanced biologics and focus on advancing our pipeline in neuroscience and specialized immunology. Lastly, we are focused on accelerating our effor opportunities for potential digital therapeutics. We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities. in digital health to support our commercial and pipeline programs while also creating tsr ff Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; ADUHELM for the treatment of Alzheimer's disease; and FUMADERM for the treatment of severe plaque psoriasis. We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, chronic lymphocytiyy c 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, including mosunetuzumab, pursuant to our collaboration arrangements with Genentech, Inc. (Genentech), a wholly-owned collaboration arrangements with Genentech, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report. member of the Roche Group. For additional information on our yy 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 developing next generation treatments for MS. We introduced the first approved treatment for SMA and are continuing to pursue research and development for potential advancements in the treatment of SMA. We are also applying our scientific expertise to solve some of the most challenging and complex diseases, including Alzheimer's disease, ALS, Parkinson's disease, majora depressive disorder (MDD), postpartumrr depression (PPD), systemic lupus erythyy ematosus (SLE), cutaneous lupus erythyy ematosus (CLE), cognitive impairment associated with schizophrenia (CIAS), stroke and neuropathic pain. Our innovative drug development and commercialization activities are complemented by our biosimilar business that expands access to medicines and reduces the cost burden for healthcare systems. Through our agreements with 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. We have also secured the exclusive rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, which was approved in the U.S., the European Union (E.U.) and the U.K. during the third quarter 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.rr rr of 2021. Key Business Developments The following is a summary or f key developments affecting our business since the beginning of 2021. For additional information on our acquisitions, collaborative and other relationships discussed below, 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.rr Acquisitions, Collaborative and Other Relationships Bio-Thera Solutions In April 2021 we entered into a commercialization and license agreement to develop, manufacture and commercialize BAT1806, a Phase 3 clinical stage anti-interleukin-6 (IL-6) receptor monoclonal antibody that is a proposed biosimilar referencing ACTEMRA. In connection with this agreement, we made an upfront payment of $30.0 million to Bio-Thera Solutions. 1 InnoCare Pharma Limited In August 2021 we closed a collaboration and license agreement with InnoCare Pharma Limited (InnoCare) for orelabrutinib, an oral small molecule Bruton's tyrosine kinase inhibitor for the potential treatment of MS. Orelabrutinib is currently being studied in a multi-country,r placebo-controlled Phase 2 trial in relapsing-remitting MS (RRMS). Under the terms of this collaboration, we have exclusive rights to orelabrutinib in the field of MS worldwide and certain autoimmune diseases outside of China (including Hong Kong, Macau and Taiwan), while InnoCare retains exclusive worldwide rights to orelabrutinib in the field of oncology and certain autoimmune diseases in China (including Hong Kong, Macau and Taiwan). In connection with this agreement, we made an upfront payment of $125.0 million to InnoCare. Mosunetuzumab In January 2022 we exercised our option with Genentech to participate in the joint development and commercialization of mosunetuzumab, a late-stage bispecific antibody in development for B-cell non-Hodgkin’s lymphoma and other therapeutic areas. In connection with this exercise, we recorded a $30.0 million option exercise fee payable to Genentech in December 2021. BIIB115 Option Exercise In December 2021 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB115, a preclinical investigational ASO in development for SMA. In connection with this option exercise, we made an opt-in payment of $60.0 million to Ionis. Samsung Bioepis - Biogen's Joint Venture with Samsung BioLogics In January 2022 we entered into an agreement to sell to Samsung Biologics our equity in Samsung Bioepis. Under the terms of the proposed transaction, we would receive $1.0 billion in cash at closing and $1.3 billion to be deferred over two payments of $812.5 million due at the first anniversary arr anniversary orr upon the achievement of certain commercial milestones. f the closing of the transaction. We would also be eligible to receive up to an additional $50.0 million nd $437.5 million due at the second Closing of the transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities nd other customary closing registration statement filed by Samsung Biologics and satisfaction of certain regulatory arr conditions. For additional information on the proposed transaction and our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report. Other Key Developments ADUHELM (aducanumab) In June 2021 the U.S. Food and Drug Administration (FDA) granted accelerated approval of ADUHELM, which we are developing and commercializing in collaboration with Eisai Co., Ltd. (Eisai), based on reduction in amyloid beta plaques observed in patients treated with ADUHELM. As part orr confirmatory t withdraw approval if, among other things, the confirmatory t rr ADUHELM's benefit-risk is no longer positive or we fail to comply with the conditions of the accelerated approval. ff he clinical benefit of ADUHELM in patients with Alzheimer’s disease. The FDA may f the accelerated approval, we will conduct a linical benefit of ADUHELM, rial fails to verify cff rial to verify t rr In December 2021 the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) adopted a negative opinion on the Marketing Authorization Application (MAA) for aducanumab in Europe. We are seeking a re-examination of the opinion by the CHMP. In January 2022 the Centers for Medicare and Medicaid Servirr ces (CMS) released a proposed National Coverage Determination (NCD) decision memorandum stating the proposed NCD would cover FDA approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifyiff ng clinical trials. We expect a final Medicare NCD by the second quarter clarify Medicare reimbursement for the class of antibodies directed against amyloid. of 2022, which should r 2 BIIB125 (zuranolone) In June 2021 we and Sage Therapeutics, Inc. (Sage) announced positive Phase 3 results for BIIB125 (zuranolone) for the potential treatment of MDD and PPD. In October 2021 we and Sage announced our plan to submit a New Drug Application (NDA) to the FDA for zuranolone in the second half of 2022, with rolling submission expected to start irr n the first half of 2022. The planned initial submission package will seek approval of zuranolone for MDD and an additional filing for PPD is anticipated in the first half of 2023. Lecanemab (BAN2401) In June 2021 the FDA granted Breakthrough Therapy designation for lecanemab, an anti-amyloid antibody for the potential treatment of Alzheimer's disease, which we are developing in collaboration with Eisai. In September 2021 Eisai initiated a rolling submission to the FDA of a Biologics License Application (BLA) for lecanemab. The BLA is being submitted under the accelerated approval pathway and is primarily based in clinical, biomarker and safety data from the Phase 2b clinical trial in patients with early Alzheimer's disease and confirmed amyloid pathology. BYOOVIZ (ranibizumab-nuna) In September 2021 we announced that the FDA has approved BYOOVIZ (ranibizumab-nuna), a biosimilar referencing LUCENTIS for the treatment of neovascular (wet) age-related macular degeneration, macular edema following retinal vein occlusion and myopic choroidal neovascularization. In addition to the U.S. approval, BYOOVIZ was approved in the E.U. and the U.K. during the third quarter of 2021. BIIB067 (tofersen) In October 2021 we announced topline results from our pivotal Phase 3 VALOR study of BIIB067 (tofersen), an investigational antisense drug being evaluated for people with superoxide dismutase 1 (SOD1) amyotrophic lateral sclerosis (ALS), indicating that the primary endpoint was not met. Exchange Offer In February 2rr 021 we completed a private offer to exchange (Exchange Offer) our tendered 5.200% Senior Notes due September 15, 2045 (2045 Senior Notes) for a new series of 3.250% Senior Notes due February 1rr (2051 Senior Notes) and cash, and an offer to purchase our tendered 2045 Senior Notes for cash. 5, 2051 North Carolina Gene Therapy Manufacturing Facility March 2021 we announced our plans to build a new gene therapy manufacturing facility in RTP, North Carolina to support our gene therapy pipeline across multiple therapeutic areas. The new facility will be approximately 175,000 square feet and is expected to be operational by the end of 2023. Construction for this new facility began during the fourth quarter of 2021. rr Solothurn, Switzerland Manufacturing Facility May 2021 we announced that a portirr on of our Solothurn manufacturing facility received a Good Manufacturing Practice (GMP) multi-product license from the Swiss Agency for Therapeutic Products (SWISSMEDIC). Management Changes In July 2021 we announced the appointment of Rachid Izzar to the Executive Committee of the Company as well as Head of the Alzheimer's Disease and Dementia Business Unit. In November 2021 we announced the retirement of Alfred Sandrock and the appointment of Priya Singhal, Head of Global Safety and Regulatory Sciences, as interim Head of Research and Development. For additional information on our executive officers, please read the subsection entitled "Information about our Executive Officers" included in this report. Product and Pipeline Developments Neurolrr ogygg Multiple Sclerosis and Neuroimmunology TECFIDERA (dimethyl fumerate) • In April 2021 China's National Medical Products Administration approved TECFIDERA for the treatment of RMS. 3 VUMERITY (diroximel fumarate; DRF) • In November 2021 the European Commission (EC) granted marketing authorization for VUMERITY in the E.U. for the treatment of RRMS. PLEGRIDY (peginterferon beta-1a) • In January 2021 the FDA approved a new intramuscular (IM) injection route of administration for PLEGRIDY for the treatment of RRMS. TYSABRI (natalizumab) • • • In April 2021 the EC granted marketing authorization for a new subcutaneous (SC) injection route of administration for TYSABRI for the treatment of RRMS. In April 2021, at the 2021 American Academy of Neurology (AAN) Virtual Annual Meeting, we presented new data on quality of life benefits and analyses of extended interval dosing with TYSABRI. In August 2021 we announced results from the two-year prospective, randomized, interventional, controlled, open-label Phase 3b NOVA study. NOVA was designed to estimate a potential differ efficacy of every six-weeks (Q6W) 300mg intravenous (IV) dosing compared to the efficacy of the approved every f (Q4W) dose in people treated with TYSABRI for RRMS. ence between the rr r our-week ff Alzheimer's Disease and Dementia ADUHELM (aducanumab) n June 2021 the FDA granted accelerated approval for ADUHELM as the first and only Alzheimer's disease treatment to address a defining pathology of the disease by reducing amyloid beta plaques in the brain. In July 2021 the FDA approved an updated label for ADUHELM injection 100 mg/mL solution. In July 2021, at the Alzheimer's Association International Conference (AAIC), we presented the design for the first real-world observational Phase 4 study of Alzheimer's disease called ICARE AD-US. In November 2021, at the 2021 Clinical Trials on Alzheimer's Disease (CTAD) conference, we announced that data from the ADUHELM Phase 3 clinical trials showed a statistically significant correlation between plasma p-tau reduction and less cognitive and functional decline in Alzheimer’s disease. We also presented data from the Phase 3b redosing study, EMBARK, which examined the impact of patients with Alzheimer's disease stopping ADUHELM treatment for an extended period of time before re-initiating treatment. In November 2021 we received a negative trend vote on the aducanumab MAA in the E.U. In December 2021 the CHMP adopted a negative opinion on the MAA for aducanumab. In December 2021 the First Committee on New Drugs (NDC) of the Pharmaceutical Affairs and Food Sanitation Council that advises the Ministry of Health, Labour and Welfare (MHLW) in Japan decided to continue deliberations on the application for the manufacturing and marketing approval of aducanumab for the treatment of Alzheimer's disease. In January 2022 the CMS released a proposed NCD decision memorandum, stating the proposed NCD would cover FDA approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifying clinical trials. • • • • • • • BAN2401 (lecanemab) • • • • In June 2021 the FDA granted Breakthrough Therapy designation for lecanemab for the potential treatment of Alzheimer's disease. ssessment of the clinical In July 2021, at the AAIC, Eisai presented results of a longitudinal preliminary arr effects of lecanemab following 18 months of treatment in the open-label extension (OLE) of the Phase 2b ff proof-of -cff oncept study in subjects with early Alzheimer's disease. In September 2021 Eisai initiated a rolling submission to the FDA of a BLA for lecanemab. The BLA is being submitted under the accelerated approval pathway and is primarily based on clinical, biomarker and safety data from the Phase 2b clinical trial (Study 201) in patients with early Alzheimer's disease and confirmed amyloid pathology. In November 2021 Eisai presented results of new clinical, biomarker and safety assessments of brain amyloid reduction and five-year clinical status of people living with early Alzheimer's disease from the 4 lecanemab Phase 2b 201 and the OLE studies. The findings were presented and discussed in a late- breaking roundtable session at the 2021 CTAD conference. • In December 2021 we and Eisai announced that lecanemab was granted Fast Track designation by the FDA. Neuromuscular Disorders SPINRAZA (nusinersen) • • • • In January 2021 the first patient was dosed in the global RESPOND study, which will examine the clinical benefit and assess the safety of SPINRAZA in infants and children with SMA. In April 2021, at the AAN 2021 Virtual Annual Meeting, we announced new data from the Phase 2/3 DEVOTE study. Initial findings from the DEVOTE study suggest no new safety concerns and support continued development of a higher dose of SPINRAZA. In June 2021, at the virtual Cure SMA Research & Clinical Care Meeting, we announced new data on the long-term effiff cacy of SPINRAZA. In September 2021 we announced plans to initiate a global Phase 3b clinical study, ASCEND. The ASCEND study is designed to evaluate the clinical outcomes and assess the safety of a higher dose of SPINRAZA in children, teens and adults with later-onset SMA following treatment of Evrysdi. Movement Disorders SAGE-324 (GABAA receptor PAM) n April 2021 we and Sage reported that the Phase 2 KINETIC study evaluating SAGE-324 in the treatment of patients with essential tremor (ET) met its primary endpoint. Neuropsychiatry BIIB125 (zuranolone) • • • • In June 2021 we and Sage announced positive results from the Phase 3 WATERFALL an investigational two-week, once-daily therapeutic being evaluated for MDD. FF study for zuranolone, In October 2021 we and Sage shared positive data from the LANDSCAPE and NEST clinical development program. This study evaluated the efficacy and safety of zuranolone for the treatment of MDD and PPD. The data was presented at the European College of Neuropsychopharmacology Congress. In October 2021 we and Sage announced plans to submit a NDA to the FDA for zuranolone for the potential treatment of MDD in the second half of 2022 with rolling submission expected to start irr n early 2022. Plans also include the submission of a NDA to the FDA for zuranalone for the treatment of PPD, in the first half of 2023. In December 2021 we and Sage announced positive data from the 12-month Phase 3 open-label SHORELINE study for zuranolone. The SHORELINE study, part of the LANDSCAPE clinical program, was designed to naturalistically follow adult patients with MDD and evaluate the safety and tolerability of zuranolone as well as the need for repeat dosing for up to one year. Specialized Immunology Immunology BIIB059 (anti-BDCA2) - SLE • In June 2021 the first patient was dosed in the Phase 3 TOPAZ-1 study of BIIB059 for SLE. The Phase 3 study will evaluate the clinical efficacy and assess the safety of BIIB059 in participants with active SLE. Neuropathic Pain BIIB074 (vixotrigine) • In September 2021 we announced positive results that the Phase 2 CONVEY study of vixotrigine, a non- opioid investigational oral pain drug being evaluated for the treatment of small fiber neuropathy. The CONVEY study 200 mg twice daily arm met its primary endpoint. The CONVEY study 350 mg twice daily arm did not meet its primary endpoint. 5 Biosimilarsrr BAT1806 • • In April 2021 we entered into a commercialization and license agreement to develop, manufacture and commercialize BAT1806, a Phase 3 clinical stage anti-interleukin-6 (IL-6) receptor monoclonal antibody that is a proposed biosimilar referencing ACTEMRA (tocilizumab). In June 2021 we and Bio-Thera Solutions, Ltd. (Bio-Thera) announced positive results that the Phase 3 study of BAT1806, a proposed biosimilar referencing ACTEMRA (tocilizumab), met its primary endpoint. Samsung Bioepis - Biogen's Joint Venture with Samsung BioLogics • In June 2021 Samsung Bioepis announced that the CHMP adopted a positive opinion of BYOOVIZ (ranibizumab-nuna), a biosimilar referencing LUCENTIS, and in August 2021 BYOOVIZ was approved by the EMA. • In September 2021 Samsung Bioepis announced the FDA approval of BYOOVIZ. i Digi tal Health • • In January 2021 we announced a virtual research study, in collaboration with Apple Inc., to investigate the role Apple Watch and iPhone could play in monitoring cognitive performance and screening for decline in cognitive health including mild cognitive impairment (MCI). In December 2021 we announced an expanded collaboration with TheraPanacea focused on multiple therapeutic areas in neuroscience. The expanded collaboration aims to leverage machine learning and artificial intelligence analysis to develop digital health solutions that may improve patient care, accelerate drug development, and further the understanding of the underlying pathologies of neurological diseases. rr Discontinued or Suspended Programrr s • • • In May 2021 we announced that the Phase 2/3 XIRIUS study of cotoretigene toliparvove therapy being investigated as a one-time therapy for patients with X-linked retinitis pigmentosa, did not meet its primary endpoint. Based on these results, we suspended further decision of management as part orr f its strategic review process. development based on the rr rr c (BIIB112), a gene In June 2021 we announced that the Phase 3 STAR study of timrepigene emparvovec (BIIB111), an investigational gene therapy for the potential treatment of choroideremia, did not meet its primary endpoint. Based on these results, we suspended further development based on the decision of management as part of its strategic review process. rr In June 2021 we announced that the Phase 2 TANGO study of BIIB092 (gosuranemab), an investigational anti-tau antibody that was being evaluated as a potential treatment for Alzheimer's disease, did not meet its primary endpoint. Based on these results, we discontinued development of gosuranemab. 6 Marketed Products The following graph shows our revenue by product and revenue from anti-CD20 therapeutic programs for the years ended December 31, 2021, 2020 and 2019. (1) Fumarate includes TECFIDERA and VUMERITY. VUMERITY became commercially available in the E.U. during the fourth quarter 2021. (2) Interferon includes AVONEX and PLEGRIDY. (3) In June 2021 the FDA granted accelerated approval of ADUHELM, which became commercially available in the U.S. during the second quarter Co., Ltd. - ADUHELM Collaborati (4) Other includes FAMPYRA, FUMADERM, BENEPALI, IMRALDI and FLIXABI. (5) Anti-CD20 therapeutic programs include RITUXAN, RITUXAN HYCELA, GAZYVA and OCREVUS. of 2021. For additional information, please read Note 18, Collaborative and Other Relationships - Eisai on Agreement, to our consolidated financial statements included in this report. rr rr rr ii of Product sales for TECFIDERA, AVONEX, TYSABRI and SPINRAZA each accounted for more than 10.0% of our total revenue for the years ended December 31, 2021, 2020 and 2019. For additional financial information about our product and other revenue and geographic areas where we operate, please read Note 4, Revenue, and Note 24, Segment Informatio ff Discii ussion and Analysl risks attendant to our operations is set forthrr n, to our consolidated financial statements included in this report and Item 7. Management's f Operatio rr orsrr in Item 1A. Risk FactFF ns included in this report. A discussion of the included in this report. is of Financial Condition and Results ott 7 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 nerverr 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 may return to a lower baseline of functioning. cells, leading The MS products we market and our major markets are as follows: Product Indication Collaborator Major Markets RMS in the U.S. RRMS in the E.U. None RMS in the U.S. RRMS in the E.U. Alkermes Pharma Ireland Limited, a subsidiary orr f Alkermes plc (Alkermes) 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. Germany Israel Switzerland 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. Walking ability for patients with MS Acorda Therapeutics, Inc. (Acorda) France Germany For additional information on our collaboration arrangements with Alkermes and Acorda, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report. 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 survirr val 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 8 achieve the ability to sit without support,r 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. Our SMA product and majora markets are as follows: Product Indication Collaborator Major Markets SMA Ionis Pharmaceuticals Inc. (Ionis) U.S. Brazil Canada China France Germany Italy Japan Spain Turkey For additional information on our collaboration arrangements with Ionis, please read Note 18, Collaborativ rr e and Other Relationships, to our consolidated financial statements included in this report. Alzheimer's Disease Alzheimer's disease is characterized by two abnormalities in the brain: amyloid plaques and neurofibrillaryrr tangles. Amyloid plaques, which are found in the tissue between the nerverr called beta amyloid along with degenerating bits of neurons and other cells. cells, are unusual clumps of a protein Our Alzheimer's disease product and majora market is as follows: Product Indication Collaborator Major Market Alzheimer's disease Eisai U.S. For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborativ rr e 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 developed by companies known as "originators". Under our agreements 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. We have also secured the exclusive rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, which was approved in the U.S., the E.U. and the U.K. during the third quarter of 2021. 9 Our current biosimilar products and majora markets are as follows: Product Indication Rheumatoid arthritis Juvenile idiopathic arthr r Psoriatic arthritis Axial spondyloarthritis Plaque psoriasis Paediatric plaque psoriasis itis itis Rheumatoid arthritis r Juvenile idiopathic arthr 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, including mosunetuzumab. Our current anti-CD20 therapeutic programs and majora 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 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 Patient Support and Access We interact with patients, advocacy rr 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. We believe all healthcare stakeholders have a shared responsibility to ensure patients have equitable access to new, innovative medicines. We regularly review our pricing strategy and prioritize patient access to our therapies. We have a value- based contracting program designed to align the price of our therapies to the value our therapies deliver to patients. We also work with regulators, clinical researchers, ethicists, physicians and patient 11 advocacy organizations and communities, among others, to determine how best to address requests for access to our investigational therapies in a manner that is consistent with our patient-focused values and compliant with regulatory srr tandards and protocols. In appropriate situations, patients may have access to investigational therapies through Early Access Programs, single patient access or emergency use based on humanitarian or compassionate grounds. Marketing and Distribution Sales Force and Marketing We promote our marketed products worldwide, including in the U.S., Europe and Japan, primarily through our own sales forces and marketing groups. In some countries, partirr cularly in areas where we continue to expand into new geographic areas, we partner with third-partir es. We and Eisai co-promote AVONEX, TYSABRI and TECFIDERA in Japan in certain settings. We and Eisai co-promote ADUHELM with a region-based profit split. RITUXAN, RITUXAN HYCELA, GAZYVA and OCREVUS are marketed by the Roche Group and its sublicensees. We commercialize BENEPALI, IMRALDI and FLIXABI pursuant to our agreement with Samsung Bioepis in certain countries in Europe. ff tsrr on We focus our sales and marketing effor 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. Distribution Arrangements We distribute our products in the U.S. principally through wholesale and specialty distributors of pharmaceutical products and specialty pharmacies, mail order specialty distributors or shipping servirr ce providers. In other countries, the distribution of our products varies from country t including through wholesale distributors of pharmaceutical products and third-partyrr distribution partners who are responsible for most marketing and distribution activities. rr o country,rr We distribute BENEPALI, IMRALDI and FLIXABI in certain countries in Europe and have an option to acquire exclusive rights to distribute these products in China. Our product sales to two wholesale distributors each accounted for more than 10.0% of our total revenue for the years ended December 31, 2021, 2020 and 2019, and on a combined basis, accounted for approximately 38.9%, 45.8% and 47.0% of our gross product revenue for the years ended December 31, 2021, 2020 and 2019, respectively. For additional information, please read Note 4, Revenue, 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 and those we license or acquire. In addition, we license rights to various patents and patent applications. U.S. patents, as well as most foreign patents, are generally effecff tive 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 n of the term lost during regulatory review of a portiorr 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 14 years from the date of product approval) as compensation for patent term lost during the FDA regulatory r of the term of foreign patents varies, in accordance with local law. For example, supplementary prr certirr ficates (SPCs) on some of our products have been granted in a number of European countries, compensating in part for delays in obtaining marketing approval. r eview process. The duration and extension rotection Eisai distributes AVONEX, TYSABRI, TECFIDERA Regulatory exclusivity, which may consist of 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. ata protection and market protection, also regulatory dr 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 12 regulatory authority to obtain approval of its product. After the period of exclusive use, third-partirr es are permitted to reference such data in abbreviated applications for approval and to market (subject to any applicable market protection) their generic drugs and biosimilars. Market protection provides the holder of a drug or biologic marketing authorization the exclusive right to commercialize its product for a 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 regulatoryrr 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 refraining from public disclosure and 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 propertyr conceived by such employees during their employment are our exclusive property. Our trademarks are important to us and are generally covered by trademark applications or FF registrations in the USPTO and the patent or trademark offices of other countries. We also use trademarks licensed from third-partirr es, such as the A, which we license from Acorda. trademark FAMPYR 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 PLEGRIDY TYSABRI FAMPYRA VUMERITY SPINRAZA ADUHELM Territory U.S. Europe U.S. U.S. U.S. Europe Europe U.S. U.S. U.S. Europe Europe Europe Europe U.S. U.S. U.S. Patent No. 8,399,514 1131065 7,446,173 8,524,660 8,017,733 1656952 1476181 7,807,167 9,493,567 10,233,245 1485127 2676967 1732548 2377536 8,669,281 9,090,558 10,080,733 Europe 2,970,101 U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. U.S. Europe Europe Europe Europe Europe U.S. U.S. 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 1,910,395 2,548,560 3,305,302 3,308,788 3,449,926 8,906,367 10,131,708 General Subject Matter Methods of treatment Formulations of dialkyl fumarates and their use for treating autoimmune diseases 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 Methods of treatment Methods of treatment Methods of treatment 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 Crystalline forms, pharmaceutical compositions and methods of treatment Prodrugs of fumarates and their use in treating various diseases 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 Compositions and methods for modulation of SMN2 splicing Method of providing disease-specific binding molecules and targets Methods of treating Alzheimer's disease Patent Expiration(1) 2028(2) 2024(3) 2022 2023 2027 2024(4) 2023(5) 2023 2027 2027 2023(2) 2027 2025(6) 2025(7) 2033 2033 2033 2034 2023 2027 2025 2030 2030 2030 2034 2025 2035 2026(8) 2026(9) 2030 2026 2030 2032(10) 2028 Footnotes follow on next page. 14 (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 Territory E.U. U.S. E.U. U.S. E.U. ADUHELM U.S. SPINRAZA Expected Expiration 2024 2026 2024 2023 2029 2033 (2) For additional information as to the validity of this patent, 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 is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2024. (5) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2028. (6) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2026. (7) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2026. (8) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2031. (9) This patent is subject to granted SPCs in certain European countries, which extended the patent term in those countries to 2031. (10) A patent with this subject matter may be entitled to patent term extension in the U.S. 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 r ights, and in other instances to determine the validity, scope or non-infringement of certain patent rights claimed by third-partir es to be pertinent to the manufacture, use or sale of our products. We also face challenges to our patents, regulatory exclusivities or other proprietary r parties, such as manufacturers of generics, biosimilars, prodrugs and products approved under abbreviated regulatory pr exclusivities or other proprietary r of legal proceedings related to certain patents described above is set forth in Note 20, Litigaii financial statements included in this report. Factors included in this report, and the discussion tion, to our consolidated athways. A discussion of certain risks and uncertainties that may affect our patent position, regulatory ights covering our products by third- ights is set forthr in Item 1A. Riskii r rr r 15 Competition Competition in the biopharmaceutical industry is intense. There are many companies, including biotechnology and pharmaceutical companies, engaged in developing products for the indications our approved products are approved to treat and the therapeutic areas we are targeting with our research and development activities. Some of our competitors may have substantially greater financial, marketing, research and development and other resources than we do. ositions through 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 pr research and development. The achievement of a leadership position also depends largely upon our ability to maximize the approval, acceptance and use of our product candidates and the availability of adequate financial resources to fund facilities, equipment, personnel, clinical testing, manufacturing and marketing. Another key aspect of remaining competitive in the industry is recruiting and retaining leading scientists and technicians to conduct our research activities and advance our development programs, including with the commercial expertise to effectively market our products. Competition among products approved for sale may be based, among other things, on patent position, product efficacy, safety, patient convenience, delivery devices, reliability, availability, reimbursement 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. 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 also face increased competitive pressures from the introduction of generic versions, prodrugs and biosimilars of existing products and 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, in some markets, when a generic or biosimilar version of one of our products is commercialized, it may be automatically substituted for our product and significantly reduce our revenue in a short prr eriod of time. We believe our long-term competitive position depends upon our success in discovering and developing innovative, cost-effective products that serve unmet medical needs, along with our ability to manufacture products efficiently and to launch and market them effecff environment. tively in a highly competitive Additional information about the competition that our marketed products face is set forth below and in Item 1A. Risk FactFF ors included in this report. Multiple Sclerosis TECFIDERA, AVONEX, PLEGRIDY, TYSABRI and VUMERITY each compete with one or more of the following branded products as well as generic and biosimilar versions of these products: Competing Product AUBAGIO (teriflunomide) BETASERON/BETAFERON (interferon-beta-1b) COPAXONE (glatiramer acetate) EXTAVIA (interferon-beta-1b) Competitor Sanofi Genzyme Bayer Group Teva Pharmaceuticals Industries Ltd. Novartis AG Novartis AG GILENYA (fingolimod) GLATOPA (glatiramer acetate) Sandoz, a division of Novartis AG LEMTRADA (alemtuzumab) MAVENCLAD (cladribine) MAYZENT (siponimod) OCREVUS (ocrelizumab) PONVORY (ponesimod) Sanofi Genzyme EMD Serono Novartis AG Genentech Janssen Pharmaceutical Companies of Johnson & Johnson REBIF (interferon-beta-1) ZEPOSIA (ozanimod) BAFIERTAM (monomethyl fumarate) EMD Serono BMS Banner Life Sciences KESIMPTA (ofatumumab) Novartis AG Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and is expected to continue to have a substantial and increasing negative impact on our U.S. TECFIDERA revenue in the future. 16 In May 2021 the European General Court annulled the EMA's decision not to validate applications for approval of TECFIDERA generics on the basis that the EMA conducted the wrong assessment when determining TECFIDERA's entitlement to regulatory data and marketing protection. Our Company, the EMA and the EC have each appealed the General Court’s decision as wrongly decided and the appeal is pending. In November 2021 the CHMP of the EMA issued an ad hoc opinion referencing the General Court’s decision which concluded that "the totality of the available data cannot establish that [monoethyl fumarate] exerts a clinically relevant therapeutic contribution within FUMADERM." The EC will decide TECFIDERA’s entitlement to regulatory data and market protection. If data and market protection is not upheld, we could face generic competition in the E.U. as early as the first half of 2022, which would have an adverse impact on our TECFIDERA sales in the E.U. and our results of operations. 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 OCREVUS continues to gain market share, or if other MS products that we or our competitors are developing are commercialized. Spinal Muscular Atrophy We face competition from a gene therapy product and an oral product. We expect that we will experience competition from both products in additional jurisdictions in the future, which may adversely affect our sales of SPINRAZA. Additionally, we are aware of other products now in development that, if launched, may also compete with SPINRAZA. 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 17 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 several other anti-CD20 molecules, including biosimilar products, that have recently been approved and are expected to compete with RITUXAN, RITUXAN HYCELA and GAZYVA in the oncology market. In November 2019, January 2020 and January 2021 osimbi ilar products referencing RITUXAN were ed at lower launched in the U.S and are being offer prices. This competition has adversely affected the pre-tax profits of our collaboration arrangements with Genentech and could have a significant adverse affect our co-promotion profits in the U.S. in future years. ff RITUXAN in Rheumatoid Arthritis RITUXAN competes with several different types of therapies in the rheumatoid arthritis market, including, among others, traditional disease-modifyiff ng 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 ff tsrr mission. Our research effor are focused on better understanding the underlying biology of diseases so we can discover and deliver treatments that have the ff potential to make a real differ 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 ence in the lives of 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 f our ongoing research highly differentiated. As part or 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 Discii ussion and Analysis of Financial Condition and Results ott ns included in this report.r rr f Operatio 18 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 Facto rs included in this report. FF BIIB135 (orelabrutinib)* BIIB061 (oral remyelination) - MS BIIB091 (BTK inhibitor) - MS BIIB107 (anti-VLA4) - MS Phase 2 Phase 1 Phase 1 Phase 1 Aducanumab (Aβ mAb)* - Alzheimer's Filed in E.U., Japan, Other Markets Lecanemab (Aβ mAb)* - Alzheimer's BIIB080 tau ASO) - Alzheimer's BIIB076 (anti-tau mAb) - Alzheimer's Tofersen (SOD1 ASO) - ALS BIIB078 (IONIS-C9Rx)# - ALS BIIB105 (ataxin-2 ASO)# - ALS BIIB100 (XP01 inhibitor) - ALS Phase 3 Phase 3 Phase 1 Phase 1 Phase 1 Phase 1 Phase 1 BIIB124 (SAGE-324)* - Essential Tremor Phase 2 MS and Neuroimmunology Alzheimer's Disease and Dementia Neuromuscular Disorders, including SMA and ALS Parkinson's Disease and Movement Disorders BIIB094 (ION859)# - Parkinson's BIIB118 (CK1 inhibitor) - ISWRD in Parkinson's BIIB101 (ION464)# - Multiple System Atrophy BIIB122 (DNL151)* - Parkinson's BIIB125 (zuranolone)* - PPD Neuropsychiatry BIIB125 (zuranolone)* - MDD BIIB104 (AMPA PAM) - CIAS BIIB093 (glibenclamide IV) - LHI^ Stroke Neurovascular BIIB093 (glibenclamide IV) - Brain Contusion Neuropathic Pain BIIB131 (TMS-007) - Acute Ischemic Stroke BIIB074 (vixotrigine) - Trigeminal Neuralgia BIIB074 (vixotrigine) - Small Fiber Neuropathy Phase 1 Phase 1 Phase 1 Phase 1 Phase 3 Phase 3 Phase 2 Phase 3 Phase 2 Phase 2 Phase 2 Phase 2 Genetic Neurodevelopmental Disorders BIIB121 (UBE3A ASO)# - Angelman Syndrome Phase 1 Specialized Immunology BIIB059 (anti-BDCA2) - SLE Dapirolizumab pegol (anti-CD40L)* - SLE BIIB059 (anti-BDCA2) - CLE BYOOVIZ (referencing LUCENTIS®)* Biosimilars SB15 (referencing EYLEA®)* BIIB800 (referencing ACTEMRA®)* * Collaboration program **Not yet commercially available # Option agreement ^ Large Hemispheric Infarction (LHI); postpartum depression (PPD); major depressive disorder (MDD) Phase 3 Phase 3 Phase 2 Approved** Phase 3 Phase 3 For information about certain of our agreements with collaborators and other third-partirr es, please read the subsection entitled Business Relationships below and Note 2, Acquisitions, Note 18, Collaborative and Other Relationshipsi included in this report. , and Note 19, Investments in Variable Interest Entities, to our consolidated financial statements 19 Business Relationships As part orr f 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 18, Collaborative and Other Relationships, and Note 19, Investments in Variable Interest Entities, to our consolidated financial statements included in this report. rr Acorda Therapeutics, Inc. We have a collaboration and license agreement with Acorda to develop and commercialize products containing fampridine, such as FAMP YRA, in markets outside the U.S. We are responsible for all regulatoryr activities and the future clinical development of related products in those markets. FF 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 commercially available in the U.S. in November 2019. During the fourth quarter of 2021 VUMERITY was approved for the treatment of RRMS in the E.U., Switzerland and the U.K. Under this agreement, we have an exclusive, worldwide license to develop and commercialize VUMERITY. rr Denali Therapeutics Inc. We have a collaboration and license agreement with Denali to co-develop and co-commercialize Denali’s small molecule inhibitors of LRRK2 for Parkinson’s disease. In the LRRK2 collaboration, we and Denali share responsibility and costs for global development as well as profits and losses for commercialization in the U.S. and China. Outside the U.S. and China, we are responsible for commercialization and pay Denali tiered royalties. In addition to the LRRK2 program, we also have an exclusive option to license two preclinical programs from Denali’s Transport Vehicle platform, including its 20 Antibody Transport Vehicle: Abeta program and a second program utilizing its Transport Vehicle technology. Further, we have a right of first negotiation on two additional Transport Vehicle-enabled therapeutics, should Denali decide to seek a collaboration for such programs. Eisai Co., Ltd. We have a collaboration agreement with Eisai to jointly develop and commercialize lecanemab (BAN2401), an Eisai product candidate for the potential treatment of Alzheimer's disease. Eisai serves as the global operational and regulatory lead for lecanemab and all costs, including research, development, sales and marketing expense, are shared equally between us and Eisai. If lecanemab receives marketing approval, we and Eisai will co- promote lecanemab and share profits equally. We also have a collaboration agreement with Eisai to jointly develop and commercialize ADUHELM (aducanumab) (the ADUHELM Collaboration Agreement). Under the ADUHELM Collaboration Agreement, the two companies will co-promote ADUHELM with a region-based profit split and we lead the ongoing development and commercialization of ADUHELM. 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, including mosunetuzumab. 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 antisense oligonucleotide (ASO) drug candidates for a broad range of neurological diseases. In addition, we have research collaboration agreements with Ionis under which both companies perform discovery l commercialize new ASO drug candidates for the potential treatment of SMA and additional antisense rr evel research and will develop and or other therapeutics for the potential treatment of neurological diseases. InnoCare Pharma Limited We have a collaboration and license agreement with InnoCare for orelabrutinib, an oral small molecule Bruton's tyrosine kinase inhibitor for the potential treatment of MS. Orelabrutinib is currently being studied in a multi-country,r placebo-controlled Phase 2 trial in relapsing-remitting MS. Under the terms of this collaboration, we have exclusive rights to orelabrutinib in the field of MS worldwide and certain autoimmune diseases outside of China (including Hong Kong, Macau and Taiwan), while InnoCare retains exclusive worldwide rights to orelabrutinib in the field of oncology and certain autoimmune diseases in China (including Hong Kong, Macau and Taiwan). 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 Alzheimer's disease, including ADUHELM (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 certain countries 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 January 2022 we entered into an agreement to sell to Samsung Biologics our equity in Samsung Bioepis. Under the terms of the proposed transaction, we would receive $1.0 billion in cash at closing and $1.3 billion to be deferred over two payments of $812.5 million due at the first anniversary arr nd $437.5 million due at the second anniversary or f the closing of the transaction. We would also be eligible to receive up to an additional $50.0 million upon the achievement of certain commercial milestones. Closing of the transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities registration statement filed by Samsung Biologics and satisfaction of certain regulatory arr nd other customary closing conditions. For additional information on the proposed transaction and our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.rr In December 2019 we completed a transaction r with Samsung Bioepis and acquired an option to extend our existing commercial agreement with Samsung Bioepis for BENEPALI, IMRALDI and FLIXABI in certai n countries in Europe. We have also secured the exclusive rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, which was approved in the U.S., the E.U. and the U.K. during the third quarter of 2021. 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. Sage Therapeutics, Inc. We have a global collaboration and license agreement with Sage to jointly develop and commercialize zuranolone for the potential treatment of major depressive disorder, postpartum depression and other psychiatric disorders and SAGE-324 for the potential treatment of essential tremor and other neurological disorders. We and Sage share equal responsibility and costs for development as well as profits and losses for commercialization in the U.S. Outside the U.S., we are responsible for development and commercialization, excluding Japan, Taiwan and South Korea with respect to zuranolone, and will pay Sage tiered royalties. Sangamo Therapeutics, Inc. We have a collaboration and license agreement with Sangamo to develop and commercialize ST-501 for tauopathies, including Alzheimer’s disease; ST-502 for synucleinopathies, including Parkinson’s disease; a third neuromuscular disease target; and up to nine additional neurological disease targets to be identified and selected within a five-year period. The companies are leveraging Sangamo's proprietary zr finger protein technology delivered via adeno- associated virus to modulate the expression of key genes involved in neurological diseases. Sangamo will perform early research activities, costs for which will be shared by the companies, and we will assume responsibility and costs beyond the early research activities. inc Regulatory Our current and contemplated activities and the products, technologies and processes that result from such activities are subject to substantial government regulation. 21 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 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 r eview of therapeutically important intended to facilitate the development and expedite the regulatory r 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 rr Approvalvv : The FDA may grant “accelerated approval” to products that treat serious or life-threatening illnesses and that 22 tive can be safely used only if 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 survirr val 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 aff nd describe clinical benefit. Under the FDA's accelerated approval regulations, if the FDA concludes that a drug that has been shown to be effecff 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 cff 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. linical • Fast TraTT ck: 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 Therapypp : 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 preliminaryrr 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 arr 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. dvice for the purpose • Priority Rt eview: “Priority review” only applies to ff supplement) for applications (original or efficacy a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effecff treatment, diagnosis or prevention of a serious condition. Priority review may also be granted for tiveness of the 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-MTT ARMM KETING 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 VV REPORTINGTT We monitor information on side effects and gencies. Non-compliance during clinical studies and adverse events reportedrr after marketing approval and report such information and events to regulatory arr with the FDA's safety reporting requirements may result in civil or criminal penalties. Side effecff ts 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 affecff marketing approval of our products or require us to make significant expenditures to obtain or maintain such approvals. t our ability to maintain 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 23 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 effecff 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. tive for a use other than what REGULATIONTT OF PRODUCT ADVERT VV ISINTT G AND PROMOTION ff 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 either in or consistent with the product 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 ff across medical specialties, and often reflects a physician's belief that the off-label 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. use is the best ff ff 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 ar under this framework as well. pproval In May 2017 new regulations governing medical devices (MDR) and in-vitro diagnostic medical devices (IVDR) entered into force in the E.U. The MDR became applicable in May 2021. The IVDR regulations are not expected to fully apply until May 2022. 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 sr requirements for post market survei crutiny, enhance the rr llance 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 r r egimes. Product Approval and Post-Approval Regulation Outside the U.S. rocesses that are similar in principle to We market our products in numerous jurisdictions outside the U.S. Most of these jurisdictions have product approval and post-approval regulatory pr 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 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 effiff cacy 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 EC. The CHMP opinion is not binding, but is typically adopted by the EC. A MAA 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 r eview and approval in the E.U. options for regulatory r member states: • • • a national procedure, where the first application is made to the competent authority in one E.U. member state only; a decentralized procedure, where applicants submit identical applications to several E.U. member states and receive simultaneous approval, if the medicine has not yet been authorized in any E.U. member state; and a mutual recognition procedure, where applicants that have a medicine authorized in one E.U. member state can apply for mutual recognition of this authorization in other E.U. member states As in the U.S., the E.U. also has distinct approaches intended to optimize the regulatory 24 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 products in the interest of public health, where the benefit of immediate availability outweighs the risk of having 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 the E.U., there are countries in other regions where it is possible to receive an "accelerated" review whereby the national regulatory ar timelines for products that meet specific medical needs. uthority will commit to truncated review In the E.U. there is detailed legislation on pharmacovigilance and extensive guidance on good pharmacovigilance practices. A failure to comply with the 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 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., the E.U. and other jurisdictions, regulatory ar gencies, including the FDA, conduct periodic inspections of NDA, BLA and marketing authorization holders to assess their compliance with pharmacovigilance obligations. Good Manufacturing Practices Regulatory agencies regulate and inspect gencies, a 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 arr company makes a material change in manufacturing equipment, location or process, additional regulatoryrr review and approval may be required. We also must adhere to current Good Manufacturing Practices (cGMP) and product-specific regulations enforced by gencies following product approval. The regulatory ar FDA, the EMA and other regulatory arr 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. gencies also Good Clinical Practices The FDA, the EMA and other regulatory agencies promulgate regulations and standards for designing, conducting, monitoring, auditing and reportirr ng 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 arr 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-partir es, including CROs, to carry orr ut 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. gencies may In April 2014 the EC adopted a new Clinical Trial Regulation, which was entered into force in June 2014 but will not apply until January 2022. There are transitional provisions for clinical trials which are ongoing at the date of application. Clinical trial applications may also continue to be made under the Clinical Trial Directive (the existing regulatoryr framework) until January 2023. All clinical trials must fully comply with the Clinical Trial Regulation by January 2025. 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 Affor ff dable Care Act ff tiveness from the (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 differ ences in terms of safety and effecff 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 orr f the PPACA. There have been, and there are likely to continue to be, federal legislative and administrative efforts to repeal, substantially modify off 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. r invalidate 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 affecff ts fewer than 200,000 individuals in the U.S. If a product which has an orphan drug designation subsequently 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 25 following marketing approval, except in certain veryrr 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., the 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 r 26 revisions to AMP or best price previously within a certain period, which revisions reportedr could affect our rebate liability for prior quarter s. 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. r • Medicarerr : 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-subm itted information is used to calculate Medicare payment rates. If a manufacturer is found to have made a misrepresentation in the reportirr ng of ASP, the governing statute provides for civil monetary penalties. rr formulary f provides coverage to enrolled inistered drugs Medicare Part Dr Medicare patients for self-admff (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 Drr rr or prescription drug coverage and pricing, which the drug plan may modify f rom 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 70.0% on brand name prescription drugs utilized by Medicare Part D beneficiaries when those beneficiaries reach the coverage gap in their drug benefits. ff Legislation is pending in Congress that includes and significant modifications to Medicare Part Br Medicare Part D. Specifically, the Build Back Better Act includes provisions that would, among other things: rr n drugs paid for by Medicare and 1) allow CMS to directly negotiate the prices of certai impose a significantly discounted maximum price; 2) impose inflation penalties (in the form of rebates) for price increases that exceed the rate of inflation; and 3) re-design the Medicare Part D benefit in a way that increases the financial liability of manufacturers. If enacted, this legislation could harm our business. l Agency Discii ounted Pricing: Our products FF • Federa are subject to discounted pricing when purchased by federal agencies via the Federal 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. FF • 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 a disproportionate include hospitals that serverr 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 primaryrr 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). Budgetaryrr 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 ff ing, receiving or 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, offer 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 particrr ular 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-partyr 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 servicrr 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 prr 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. enalties, and exclusion from federal health es. Our Laws and regulations have been enacted by the federal government and various states to regulate the sales and marketing practices of pharmaceutical 27 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 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 reportir ng 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 ff yy ing to pay, promising ng of value 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, offer to pay or authorizing the payment of anythi to any foreign government official, government staffff 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 officia 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. l capacity. In many ff The laws to which we are subject also include ct), which the U.K. Bribery Act 2010 (Bribery Ar proscribes giving and receiving bribes in the public and private sectors, bribing a foreign public offiff cial 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. 28 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 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 cr ontrol, 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 E.U. 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-partyrr 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 4.0% of the annual global revenue of the infringer, whichever is greater. Manufacturing We seek to ensure 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 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 future growth and drug development pipeline, we are expanding our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland. In the second quarter of 2021 a portir on of the facility received a GMP multi-product license from SWISSMEDIC. In March 2021 we announced our plans to build a new gene therapy manufacturing facility in RTP, North Carolina to support our gene therapy pipeline across multiple therapeutic areas. The new facility will be approximately 175,000 square feet and is expected to be operational by the end of 2023. Construction for this new facility began during the fourthrr quarter of 2021. 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 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, North Carolina. 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 future growth and drug development pipeline, we are building a large-scale biologics manufacturing facility in Solothurn, Switzerland. In the second quarter of 2021 a portir on of the facility received a GMP multi-product license from SWISSMEDIC. 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 partyrr . 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 a supply agreement. In October 2019 we entered into a new supply agreement and amended our license and collaboration agreement with Alkermes. We have elected to initiate a technology transfer and, following a transition period, to manufacture VUMERITY or have VUMERITY manufactured by a third- party we have engaged in exchange for paying an increased royalty rate to Alkermes on any portirr on of future worldwide net commercial sales of VUMERITY that is manufactured by us or our designee. Third-Party Suppliers and Manufacturers 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 the majora ity of our fill-finish and all of our 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 through inventoryrr management and dual sourcing as appropriate. 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. Environmental Matters We remain committed to reducing our environmental footprint by eliminating harmful emissions and by minimizing resources used to manufacture our products. Since 2014 we have taken responsibility for our impact on climate change by matching 100% of our electricity usage with renewable energy, credits and offsets, driving efficiency initiatives internally and working with our suppliers. Green chemistry i company, continually exploring new ways to make our rr s embraced throughout our 29 drug development processes safer, more efficient and more sustainable while also saving resources. Our Executive Committee has responsibility for evaluating the impact of climate change on the business and overseeing actions taken by the company to limit its adverse impact on the environment. In 2020 we launched our Healthy Climate, Healthy Lives initiative, which is our 20-year, $250 million initiative to address climate, health and equity. We aim to eliminate fossil fuel emissions across our operations by 2040, engage employees and suppliers and collaborate with renowned institutions to advance the science and action to improve health outcomes. As part orr f our commitment, we have tied a portion of our employees' and executive officers' 2021 compensation to advancing our Environmental, Social and Governance strategy. 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. Human Capital As of December 31, 2021, we had approximately 9,610 employees worldwide. Approximately 5,645 employees were employed in the U.S. and approximately 3,965 employees were employed in foreign countries. Diversity, Equity and Inclusion At Biogen, prejudice, racism and intolerance are unacceptable. We are committed to Diversity, Equity and Inclusion (DE&I) across all aspects of our organization, including hiring, promotion and development practices. As of December 31, 2021, 25.8% of Biogen’s director-level and above positions were held by ethnic or racial minorities in the U.S. Our policies and practices are global, but the laws in many countries outside the U.S. do not permit us to collect ethnic or racial data on our employees. Globally, el and 47.8% of Biogen’s positions at director-lev above were held by women as of December 31, 2021. rr In 2020 we introduced an updated DE&I strategy that outlines actionable steps to deepen our commitment across the business, building upon a strong foundation. This plan includes a four-part strategy to build our talent and leadership pipeline, improve health outcomes for minority communities in the disease areas we treat and expand sourcing with 30 minority-owned businesses. We plan to create greater yy awareness and capability in our organization through leadership accountability and transparency. To establish and progress this strategy, we rely on a cross-company governing body of employees known as the Diversity, Equity & Inclusion Strategic Council. We are honored to be recognized as a company of choice. For the fourthr consecutive year, we scored 100.0% on the 2021 Disability Equality Index, which measures our policies and practices related to disability inclusion. Additionally, for the second consecutive year, we were awarded by Disability:IN North Carolina with the 2021 DI-NC Employer Award for our commitment to champion and invest in disability inclusion at the affiliate and national levels. For the eighth consecutive year, we were recognized as a Best Place to Work for LGBTQ Equality by the Human Rights Campaign, scoring 100.0% on their Corporate Equality Index. In 2021 we were also ranked in the top five of Fortune 500's Measure Up initiative, which highlights r the most progressive companies on DE&I effor ts. ff In January 2021 we shared the results of a global pay equity analysis. The analysis confirmed that fairness and equity are embedded in our compensation practices around the globe with respect to gender and additionally in the U.S. with respect to race. In 2021 we also committed to strengthen the DE&I awareness and capability of our employees. We ended 2021 with close to 90.0% of people managers trained on inclusive recruiting and hiring, and a majority of global employees trained on DE&I curriculum. Philosophy on Pay Equity We are committed to ensuring our employees receive equal pay for equal work. We establish components and ranges of compensation based on market and benchmark data. Within this context, we strive to pay all employees equitably within a reasonable range, taking into consideration factors such as role; market data; internal equity; job location; relevant experience; and individual, business unit and company performance. In addition, we are committed to providing flexible benefits designed to allow our diverse global workforce to have reward opportunities that meet their varied needs so that they are inspired to perform their best on behalf of patients and stockholders each day. We regularly review our compensation practices and analyze the equity of compensation decisions, for individual employees and our workforce as a whole. If we identify eff mployees with pay gaps, we review and take action to attain fidelity between our stated philosophy and actions. We institute measures, such as communications and trainings, to recognize, interrupt and prevent bias in hiring, performance management and compensation decisions and we provide resources to further rr make equitable decisions about pay. develop managers and leaders to help them Talent and Development Our employees are encouraged to take advantage of an array of professional development resources. Managers coach employees for performance, and also engage in employee development discussions to support growth and learning. We provide our employees access to over 17,000 on-demand learning modules in English, French, German, Spanish, Japanese, Portuguese Mandarin. Additionally, we have a wide selection of courses and trainings that are offered through Biogen University, our global validated learning management system. and r To create and sustain a workplace as diverse and inclusive as the patients we serve, we offer programs that invest in our talent pipeline and in our current leaders, including: • Activate, Reflect and Co-Create: Preparing top talent for the rigors of executive roles. • Women’s Leadership Program: Addressing the unique challenges faced by female leaders to increase influence and impact. • Executive Leadership Retreat: Immersing leaders in topics designed to help them shape culture and build resilience. • The Partner rr ship, Inc's BioDiversity Fellows Program: To continue to bolster our talent pipeline with a diverse mix of leaders, high potential, mid-career, underrepresented minorities partirr cipate in this program, which we helped create. Our Employee Resource Networks (ERNs) provide invaluable opportunities for employees to share knowledge and build connections. Our current ERNs include: • IGNITE: Brings together early-cyy areer professionals and their advocates. • AccessAbility: Supports employees with disabilities and employees who are caretakers of individuals with disabilities. • Biogen Veterans Network: Encourages veterans and allies of veterans to connect and support one another. • Mosaic: Fosters awareness and appreciation ent cultural backgrounds, in addition ff of differ 31 to promoting networking and development opportunities for members. • ReachOUT: Supports a best-in-class working environment for LGBTQ employees and embraces all LGBTQ employees and their allies. • Women’s Innovation Network: Creates networking, mentoring and learning opportunities for women and allies worldwide. • ourIMPACT: Advances climate, health and equity at work, in employees' personal lives and in the communities where we live and work. Creating a culture where all colleagues feel supported and valued is paramount to our corporate mission. The ongoing COVID-19 pandemic has led to unique challenges, and we are striving to ensure the health, safety and general well-being of our employees. We continue to evolve our programs to meet our employees’ health and wellness needs, which we believe is essential to attract and retain employees of the highest caliber. For example, we have refreshed our flexible working arrangement policies to allow for more flexibility around work hours to help employees balance the demands of their work and home lives, shiftedff many of our on-site wellness services to virtual, including virtual behavior health, nutrition, fitness and overall well-being classes and counseling, rolled out the Headspace meditation app globally at no cost, provided workshops and programming to help employees cope with stress, isolation and building resilience, along with financial planning workshops and counseling sessions, expanded our child- and back-up care services to meet the growing childcare needs of our employees and provided additional holidays and time off for recharging, voting and volunteering. Employee surveys rr We utilize an employee survey program to pulse employees through email and mobile apps as well as provide an opportunity for commentary arr nd facilitate is designed to feedback to questions. The survey empower managers and leaders with anonymous information on their practices related to building culture, performance and an engaged workforce, allowing them to create plans and measure effiff cacy for continuous improvement. We care deeply about employee feedback and are building an analytiyy cs community across Human Resources to bring more rigor and sophistication to the collection and analysis of employee opinions. We use their perspectives to guide us to take actions that improve engagement and support and help maintain our reputation as a great place to work for all of our employees. Succession planning Each year we conduct a talent review across our global enterprise that includes, among other important topics, a review of succession plans for many of our roles. To help ensure the long-term continuity of our business, we actively manage the development of talent to fill the roles that are most critical to the on- going success of our company. In addition, each year our Board of Directors reviews the succession plan for our executives. Workplace Health and Safety The well-being of our employees is a top priority, and we believe each and every employee plays a role in creating a safe and healthy workplace. Our employees have varied roles and functions, which is why we empower them to promote a safe working environment, regardless of whether work happens in the lab, in an officeff or in a manufacturing plant. Our policies and practices are intended to protect not only our employees, but also the surrounding communities in which we operate. In 2021 we continued to make significant progress integrating Human Performance into our Environment, Health and Safety programs. We believe that, when it comes to safety, workers are part of the solution. We encourage employees to collaboratively engage in proactive problem solving through practices such as Open Reporting and Work Observation and Risk Conversations. Additionally, our physical safety program focused on detailed evaluations of critical tasks that could expose employees to serious injuryrr or fatality if controls are absent or not used. The actions we implement as a result of these evaluations reduce the risks associated with these essential activities and ensure our operational systems are safer and more resilient for employees. We also utilize “After Action Reviews” following the completion of a project. These reviews enable us to not only focus on areas for improvement, but also to learn and apply good practices from what goes well. By engaging and empowering our employees through such programs, we believe that we can help change how the entire industry approaches safety performance and risk management. 32 Information about our Executive Officers (as of February 3, 2022) Officer Michel Vounatsos Susan H. Alexander Current Position Chief Executive Officer Executive Vice President, Chief Legal Officer and Secretary Michael R. McDonnell Executive Vice President and Chief Financial Officer Alphonse Galdes, Ph.D. Executive Vice President, Pharmaceutical Operations and Technology Ginger Gregory, Ph.D. Executive Vice President and Chief Human Resources Officer Chirfi Guindo Rachid Izzar Robin C. Kramer Michel Vounatsos Experience Executive Vice President, Global Product Strategy and Commercialization Executive Vice President, Head of Alzheimer's and Dementia Business Unit Senior Vice President, Chief Accounting Officer Year Joined Biogen 2016 2006 2020 1995 2017 2017 2019 2018 Age 60 65 58 69 54 56 47 56 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 servedrr 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-myy etabolic, 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 Superviso Electrophysiology and Heart Modeling Institute at the University of Bordeaux, as a member of the MIT Presidential CEO Advisory Board and as a member of NetZero International Leadership Counsel. Public Company Boards ry Board of Liryc, the rr l PerkinElmer, Inc., a global scientific technology and life science research company Education l Universite Victor Segalen, Bordeaux II, France, C.S.C.T. Certificate in Medicine l HEC School of Management - Paris, M.B.A. as our Executive Vice President, Chief Legal Offiff cer and Secretary since April 2018. Prior Susan H. Alexander Experience Ms. Alexander has servedrr to that, Ms. Alexander served as our Executive Vice President, Chief Legal, Corporate Services March 2017 to March 2018, as our Executive Vice President, Chief Legal Offiff cer 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 Snyder and Fine & Ambrogne. Public Company Boards at the law firms of Hinckley, Allen & and Secretary from rr rr l Invacare Corporation, a medical and healthcare product company Education l Wellesley College, B.A. l Boston University School of Law, J.D. 33 Michael R. McDonnell Experience Mr. McDonnell has served as our Executive Vice President and Chief Financial Officer since August 2020. Prior to joining Biogen, Mr. McDonnell served as Executive Vice President and Chief Financial Officer of IQVIA Holdings Inc., a leading global provider of advanced analytiyy cs, technology solutions and contract research servirr ces to the life sciences industry, from December 2015 until July 2020. Prior to that, Mr. McDonnell served as the Executive Vice President and Chief Financial Officer of Intelsat, a leading global provider of satellite servirr ces, from November 2008 to December 2015, as Executive Vice President and Chief Financial Officer of MCG Capital Corporation, a publicly-yy held commercial finance company, from September 2004 until October 2008 and as MCG Capital Corporation’s Chief Operating Officer from August 2006 until October 2008. Before joining MCG Capital Corporation, Mr. McDonnell served as Executive Vice President and Chief Financial Officer for EchoStar Communications Corporation DISH Network Corporation), a direct-to-home satellite television operator, from July 2004 until August 2004 f (f/k/a and as its Senior Vice President and Chief Financial Officer from August 2000 to July 2004. Mr. McDonnell spent 14 years at PricewaterhouseCoopers LLP, including 4 years as a partner. Mr. McDonnell is a licensed certified public accountant (CPA). Education l Georgetown University, B.S. Accounting 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 l University of Malta, B.Sc. Chemistry arr l University of Malta, M.Sc. Biochemistryrr l Oxford University, Ph.D. Biochemistryrr nd Biology 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 servedrr 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 l University of Massachusetts, B.A. Psychology l The George Washington University, Ph.D. Psychology 34 Chirfi Guindo Experience as our Executive Vice President and Head of Global Marketing, as our Executive Vice President, Global Product Strategy and Commercialization since Mr. Guindo has servedrr February 2019. Prior to that, Mr. Guindo servedrr Market Access and Customer Innovation from November 2017 to February 2r Guindo spent 27 years in the global pharmaceutical industry and held several leadership positions at Merck, a pharmaceutical company, in Canada, the U.S., France, Africa and the Netherlands. He worked in several disciplines ct Development in specialty, including Finance, Sales & Marketing, General Management and Global Strategy/Produ 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 019. Prior to joining Biogen, Mr. yy l Ecole Central de Paris (France), Engineering l Stern School of Business, New York University, M.B.A. Finance/Economics Rachid Izzar Experience as our President for the Intercontinental Region, which includes Latin Mr. Izzar has served as our Executive Vice President, Head of Alzheimer’s Disease and Dementia Business Unit since July 2021. Prior to that Mr. Izzar servedrr America, Australia, Asia, Japan, the Middle East and Africa, Turkey and Russia, and the Global Biogen Biosimilars Unit. Prior to joining Biogen, Mr. Izzar was a Country Prr included leadership for commercial and manufacturing operations. He held numerous roles at his time with AstraZeneca, including the position of Global Vice President of the Cardiovascular Franchise where he contributed significantly to the development of the franchise within the North American subsidiary,rr as well as in Europe and China. Prior to that, Mr. Izzar was Vice President Strategic Transformation, also, China Portfolio for CEO based in Shanghai and Vice President Commercial International covering China, Australia, Brazil, Russia, America Latin, Asia, Turkey, the Middle East and Africa. Education resident for AstraZeneca in France, where his responsibilities l University of Sherbrooke, Masters of Business Administration l Harvar rr d Business School, Enterprise Executive Transformation Program Robin C. Kramer Experience ff ff as our Vice President, Chief Accounting Officer since December 2020. Prior to that, from November 2018 to December 2020. Prior ff Ms. Kramer has served as our Senior Vice President, Chief Accounting Officer Ms. Kramer servedrr to joining Biogen, Ms. Kramer served as the Senior Vice President and Chief Accounting Officer 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 servedrr 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 public accounting firms of Ernst & Young LLP and Arthur Anderson LLP. Ms. Kramer is a licensed CPA in Massachusetts. She is a member of the Massachusetts Society of CPAs and the American Institute of CPAs. Ms. on the board of directors of Samsung Bioepis and on the board of directors of the Center Kramer currently servesrr for Women and Enterprise. Ms. Kramer previously servedrr as a Board Member for the Massachusetts State Board of Accountancy from September 2011 to December 2015 and Probus Insurance Company Europe DAC from 2016 to 2018. Public Company Boards as Chief Accounting Offiff cer of Fisher Scientific International, Inc., a laboratory srr positions in the of Hertz Global upply and rr l Armata Pharmaceuticals, Inc., a biotechnology company Education l Salem State University, B.B.A. Accounting 35 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 Investorsrr 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 reportsr electronically filed with or furnished to the U.S. Securities and Exchange Commission. 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.r as soon as reasonably practicable after such material is 36 ITEM 1A. RISK FACTORS Risks Related to Our Business We are substantially dependent on revenue from our products. Our revenue depends upon continued sales of our products as well as the financial rights we have in our anti- CD20 therapeutic programs. A significant portion of our revenue is concentrated on sales of our products in increasingly competitive markets and in markets affected directly and indirectly by the COVID-19 pandemic. Any of the following negative developments relating to any of our products or any of our anti-CD20 therapeutic programs may adversely affect our revenue and results of operations or could cause a decline in our stock price: • • • • • • the introduction or greater acceptance of competing products, including new originator therapies, generics, prodrugs and biosimilars of existing products and products approved under abbreviated regulatory pathways; safety or efficacy issues; limitations and additional pressures on product pricing or price increases, including those resulting from governmental or regulatory requirements; increased competition, including from generic or biosimilar versions of our products; or changes in, or implementation of, reimbursement policies and practices of payors and other third-parties; adverse legal, administrative, regulatory orr r legislative developments; our ability to maintain a positive reputation among patients, healthcare providers and others, which may be impacted by our pricing and reimbursement decisions; or the inability or reluctance of patients to receive a diagnosis, prescription or administration of our products or a decision to prescribe and administer competitive therapies as a direct or indirect result of the COVID-19 pandemic. ADUHELM is in the early stages of commercial launch in the U.S. In addition to risks associated with new product launches and the other factors described in these Risk Factors, our ability to successfully commercialize ADUHELM may be adversely affected due to: • • • • • • • • the lack of readiness of healthcare providers to initiate treatment as well as our ability to successfully identify eff ligible patients based on the information included in ADUHELM’s label; concern regarding the accelerated approval of ADUHELM and its data; our ability to obtain and maintain reimbursement for ADUHELM; the lack of market acceptance of ADUHELM; the effecff tiveness of our commercial strategy for marketing ADUHELM; delays in the manufacturing, distribution and supply of ADUHELM; the approval of other new products for the same or similar indications; and our ability to maintain a positive reputation among patients, healthcare providers and others in the Alzheimer’s disease community, which may be impacted by pricing and reimbursement decisions relating to ADUHELM. As part orr f the accelerated approval, we will conduct a confirmatory t r rial to verify the clinical benefit of ADUHELM in patients with Alzheimer's disease. The FDA may withdraw approval if, among other things, the confirmatory t fails to verify clinical benefit, ADUHELM's benefit-risk is no longer positive or we fail to comply with the conditions of the accelerated approval. rial r Our long-term success depends upon the successful development of new products and additional indications for our existing products. Our long-term success will depend upon the successful development of new products from our research and development activities or our licenses or acquisitions from third-parties, including our commercialization agreements with Samsung Bioepis, as well as additional indications for our existing products. Product development is very er xpensive and involves a high degree of uncertainty and risk and may not be successful. Only a small number of research and development programs result in the commercialization of a product. 37 It is difficult to predict the success and the time and cost of product development of novel approaches for the treatment of diseases. The development of novel approaches for the treatment of diseases, including development rts in new modalities such as those based on the antisense oligonucleotide platform and gene therapy, may effoff uthorities that have limited present additional challenges and risks, including obtaining approval from regulatory arr experience with the development of such therapies. Clinical trial data are subject to differ ff ing interpretations and even if we view data as suffiff cient to support the tiveness and/or approval of an investigational therapy, regulatory arr safety, effecff require additional data, limit the scope of the approval or deny approval altogether. Furthermore, the approval of a product candidate by one regulatory arr product candidate. gency does not mean that other regulatory arr uthorities may disagree and may gencies will also approve such 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 ar pproval. 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 difficff ult relative to the standard of care or we prefer to pursue other opportuni ties in our pipeline. rr Sales of new products or products with additional indications may not meet investor expectations. 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, research and development and other resources and other technological or competitive advantages. Our products continue to face increasing competition from the introduction of new originator therapies, generics, prodrugs and biosimilars of existing products and products approved under abbreviated regulatoryr pathways. Some of these products are likely to be sold at substantially lower prices than our branded products. The introduction of such products as well as other lower-pric ed competing products has reduced, and may in the future, 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 revenue. For instance, demand and price for TECFIDERA declined significantly as a result of multiple TECFIDERA generic entrants entering the U.S. market in 2020. In addition, in some markets, when a generic or biosimilar version of one of our products is commercialized, it may be automatically substituted for our product and significantly reduce our revenue in a short period of time. rr Our ability to compete, maintain and grow our business may also be adversely affected due to a number of factors, including: • • • • • • the introduction of other products, including products that may be more efficacious, safer, less expensive or more convenient alternatives to our products, including our own products and products of our collaborators; the off-lff abel use by physicians of therapies indicated for other conditions to treat patients; patient dynamics, including the size of the patient population and our ability to identify, attract and maintain new and current patients to our therapies; the reluctance of physicians to prescribe, and patients to use, our products without additional data on the efficacy and safety of such products; damage to physician and patient confidence in any of our products, generic or biosimilars of our 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, pricing and reimbursement decisions or adverse experiences or events that may occur with patients treated with our products or generic or biosimilars of our products; inability to obtain appropriate pricing and reimbursement for our products compared to our competitors in key international markets; or 38 • our ability to obtain and maintain patent, data or market exclusivity for our 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 and external opportuni products, technologies and companies or the entry into strategic alliances and collaborations. ties, which may include the acquisition and in-licensing of rr 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 made, and may continue to make, significant operating and capital expenditures for potential new products prior to regulatoryr 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. We may fail to initiate or complete transactions for many reasons, including failure to obtain regulatory orr r other approvals as well as disputes or litigation. Furthermore, 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. 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, revenue and results of operations. Sales of our products depend, to a significant extent, on adequate coverage, pricing and reimbursement from third-party payors. 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 the placement of our 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; of payors seeking price discounts or rebates in connection with rr our ability to recieve reimbursement for our products; 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 t rr o country arr nd, as a result, so can the price of our products. Certai products are marketed. Our inability to obtain and maintain adequate prices in a particular country may not only limit the revenue from our products within that country brr ut may also adversely affect our ability to secure acceptable prices in existing and potential new markets, which may limit market growth. This may create the opportunity for n countries set prices by reference to the prices in other countries where our rr 39 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 revenue. 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. Competition from current and future competitors may negatively impact our ability to maintain pricing and our market share. New products marketed by our competitors could cause our revenue to decrease due to potential price reductions and lower sales volumes. Additionally, the introduction of generic or biosimilar versions of our products, follow-on products, prodrugs or products approved under abbreviated regulatory pathways may significantly reduce the price that we are able to charge for our products and the volume of products we sell. Many payors continue to adopt benefit plan changes that shift aff greater portirr on of prescription costs to patients, including 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). Significant consolidation in the health insurance industryrr 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. Additional discounts, rebates, coverage or plan changes, restrictions or exclusions as described above could have a material adverse effect on sales of our affecff ted products. Our failure to obtain or maintain adequate coverage, pricing or reimbursement for our products could have an adverse effect on our business, reputation, revenue and results of operations. We depend on relationships with collaborators, joint venture partners and other third-parties for revenue, 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 collaborative, joint venture and other third-party relationships for revenue and the development, regulatory approval, commercialization and marketing of certain of our products and product candidates. We also outsource certain aspects of our regulatory arr products and product candidates to third-partir es. Reliance on third-parties subjects us to a number of risks, including: ffairs and clinical development relating to our • we may be unable to control the resources our collaborators, joint venture partner r s or third-partir es devote • • • • • to our programs, products or product candidates; disputes may arise under an agreement, including with respect to the achievement and payment of milestones, payment of development or commercial costs, ownership of rights to technology developed, and the underlying agreement may fail to provide us with significant protection or may fail to be effectively enforced if the collaborators, joint ventures partner s or third-partir es fail to perform; r the interests of our collaborators, joint venture partner may not pursue regulatory arr interests, and such parties to the same extent that we would, which could adversely affect our revenue, or may adopt tax strategies that could have an adverse effect on our business, results of operations or financial condition; s or third-partirr es may not always be aligned with our pprovals or market a product in the same manner or rr r relationships require the parties to cooperate, and failure to do so effectively could adversely third-partyr affect product sales or the clinical development or regulatory arr control, could result in termination of the research, development or commercialization of product candidates or could result in litigation or arbitration; pprovals of product candidates under joint any failure on the part of our collaborators, joint venture partner laws, including tax laws, regulatory r responsibilities they may have to protect and enforce any intellectual property rights underlying our products could have an adverse effecff to comply with applicable rr equirements and/or applicable contractual obligations or to fulfill any t on our revenue as well as involve us in possible legal proceedings; and s or third-parties rr rr could any improper conduct or actions on the part orr 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. f our collaborators, joint venture partner s or third-parties rr rr 40 Certain officers and affiff liates of our joint venture partner, Samsung BioLogics, are currently subject to ongoing criminal proceedings that may impact its operations and business or divert tr he attention of the Samsung Bioepis management team from its ongoing operations. In addition, as Samsung Bioepis is a privately-yy held entity, our ability to liquidate our investment may be limited and we may realize significantly less than the value of such investment. Given these risks, there is considerable uncertainty regarding the success of our current and future collaborative efforts. If these effor delayed, revenue from products could decline and/or we may not realize the anticipated benefits of these arrangements. fail, our product development or commercialization of new products could be tsr ff 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-partyrr payors continue to focus on containing the cost of health care. Legislative and regulatory prr roposals, 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 Patient Protection and Affordable Care Act (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 Public Health Servirr ce Act. 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 efforts to repeal, substantially modify off r 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. There is increasing public attention on the costs of prescription drugs and we expect drug pricing and other health care costs to continue to be subject to intense political and societal pressures on a global basis. For example, two committees of the U.S. House of Representatives are investigating the approval and price of ADUHELM. In addition, there have been, and are expected to continue to be, legislative proposals to address prescription drug pricing. Some of these proposals could have significant effects on our business, including an executive order issued in September 2020 to test a “most favored nation” model for Part Brr reimbursement rates to international drug pricing metrics. These actions and the uncertainty about the future of the PPACA and healthcare laws may put downward pressure on pharmaceutical pricing and increase our regulatoryrr burdens and operating costs. and Part Drr drugs that tie There is also significant economic pressure on state budgets, including as a result of the COVID-19 pandemic, 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 expense 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 ar 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-crr ost countries. These measures have negatively impacted our revenue and may continue to adversely affect our revenue and results of operations in the future. nd may include, among other things, patient access restrictions, Our success in commercializing biosimilars is subject to risks and uncertainties inherent in the development, manufacture and commercialization of biosimilars. If we are unsuccessful in such activities, our business may be adversely affected. The development, manufacture and commercialization of biosimilar products require specialized expertise and t to complex regulation. Our success in commercializing biosimilars is subject to a number ostly and subjecb are very cr of risks, including: • Reliance on Third-Parties. We are dependent, in part, on the effor tsrr ff of Samsung Bioepis, collaboration partners and other third-parties over whom we have limited or no control in the development and manufacturing of biosimilars products. If these third-parties fail to perform successfully, our biosimilar product development or commercialization of biosimilar products could be delayed, revenue from biosimilar products could decline and/or we may not realize the anticipated benefits of these arrangements; • Regulatory Compliance. Biosimilar products may face regulatory hurdles or delays due to the evolving and uncertain regulatory ar nd 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; o Gain Market and Patient Acceptance. Market success of biosimilar products will be adversely Failure t rr 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; ff ies we may be unable to meet higher than anticipated demand. We are dependent Ability to Provide Adequate Supply.l Manufacturing biosimilars is complex. If we encounter any manufacturing or supply chain difficult on a third-party for the manufacture of our biosimilar products and such third-partyr may not perform its 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; and Competitive Challenges. Biosimilar products face significant competition, including from innovator products and biosimilar products offered by other companies. Local tendering processes may restrict biosimilar products from being marketed and sold in some 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. Risks Related to Intellectual Property 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, including our long-term viability and growth, depends, in part, on our ability to obtain and defend patent and other intellectual property rights, including certain regulatory forms of exclusivity, that are important to the commercialization of our products and product candidates. Patent protection and/or regulatory er xclusivity in the U.S. and 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 obtain or preserve patent and other intellectual property rights, including certain regulatory forms of exclusivity, 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, which could result in financial, business or reputational harm to us or could cause a decline or volatility in our stock price. In addition, settlements of such proceedings often result in reducing the period of patent and other protections, resulting in a reduction in revenue from affected products. In many markets, including the U.S., manufacturers may be allowed to rely on the safety and efficacy data of the innovator's product and do not need to conduct clinical trials before marketing a competing version of a product after there is no longer patent or regulatory er xclusivity. In such cases, manufacturers often charge significantly lower prices and a major portion rr manufacturers of generics and biosimilars may choose to launch or attempt to launch their products before the expiration of our patent or other intellectual property protections. of the company's revenue may be reduced in a short period of time. In addition, rr Further more, our products may be determined to infringe patents or other intellectual property rights held by third-parties. Legal proceedings, administrative challenges or other types of proceedings are and may in the future be necessary to determine the validity, scope or non-infringement of certain patent rights claimed by third-parties pertinent to the manufacture, use or sale of our products. Such proceedings are unpredictable and are often to be rr 42 protracted and expensive. Negative outcomes of such proceedings could hinder or prevent us from manufacturing and marketing 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. A failure to obtain necessary licenses for an infringed product or technology could prevent us from manufacturing or selling our products. Furthermore, payments under any licenses that we are able to obtain would reduce our profits from the covered products and servirr ces. 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. Risks Related to Development, Clinical Testing and Regulation of Our Products and Product Candidates 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 t r rials. Additionally, pproval will be obtained. Even if later stage clinical trials are successful, uthorities may delay or decline approval of our product candidates. Regulatory authorities may disagree 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 arr regulatory ar 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, including limiting indications to narrow patient populations and the imposition of safety rials and risk evaluation and mitigation strategies. For monitoring, educational requirements, requiring confirmatory t example, as part orr ADUHELM in patients with Alzheimer's disease. The occurrence of any of these events could result in significant costs and expense, have an adverse effect on our business, financial condition and results of operations and/or cause our stock price to decline or experience periods of volatility. f the accelerated approval, we will conduct a confirmatory t rial to verify the clinical benefit of rr r 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, including protocol design, regulatory and institutional review board approval, patient enrollment rates and compliance with current Good Clinical Practices. If we or our third-party clinical trial providers or third-partyrr CROs do not successfully carry orr trials or the potential regulatory ar pproval of a product candidate may be delayed or denied. ut these clinical activities, our clinical rr 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 servirr ces of third-parties ut our clinical trial related activities and rely on to carry orr to accurately report their results. Our reliance on third-parties for these activities may impact our ability such parties 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 of our trials may be affected. We may need to replace our CROs, which may result in the delay of the affected trials or otherwise adversely affect our efforts to obtain regulatory ar related to our clinical trials and if such CRO does not adequately perform, many pprovals and commercialize our product candidates. rr r 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 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 srr requirements for additional labeling or safety monitoring, withdrawal of products from the market and/or 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 adverse impacts on our results of operations. crutiny and Regulatory authorities are making greater amounts of stand-alone safety information directly available to the requirements. The reporting of public through periodic safety update reports, patient registries and other reporting 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 to decline or our stock price to experience periods of volatility. rr 43 Restrictions on use or safety warnings that may be required to be included in the label of our products may significantly reduce expected revenue for those products and require significant expense and management time. 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-partirr es 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 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. Inventory t while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact patient safety, our reputation and our business. rr hat is stolen from warehouses, plants or 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 n alleged adverse event. When such disclosures occur, there is a risk that we fail to designed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear and 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 ar monitor and comply with applicable adverse event reportirr ng 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 social media. We may also encounter criticism on social media regarding our company, management, product candidates or products. The immediacy of social media precludes us from having real-time control over postings made regarding us via social media, whether matters of fact or opinion. Our reputation could be damaged by negative publicity or if adverse information concerning us is posted on social media platforms or similar mediums, which we may not be able to reverse. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face restrictive regulatory ar ctions or incur other harm to our business. Risks Related to Our Operations 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. The COVID-19 pandemic has caused us to modify our business practices in ways that heighten this dependence, including changing the requirement that most of our office-based employees in the U.S. and our other key markets work from the office. As a result, we are increasingly dependent upon our technology systems to operate our business and 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 Servirr ce (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Breakdowns, invasions, corruptions, destructions and/or breaches of our technology systems, including our cloud technologies, and/or unauthorized access to our data and information could subject us to liability, negatively impact our business operations, and/or require replacement of technology and/or ransom payments. Our technology systems, including our cloud technologies, continue to increase in multitude and complexity, increasing our vulnerability when breakdowns, malicious intrusions and random attacks occur. Data privacy or security breaches also pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, patients, customers or other business partner unauthorized persons or to the public. s, may be exposed to rr Cyber-attacks are increasing in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect, when they impact vendors, customers or companies, including vendors, suppliers and other companies in our supply chain. 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 careless or malicious intent. Cyber-attacks include deployment of harmful malware and key loggers, ransomware, a denial-of-ff 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 also include manufacturing, hardware or software supply chain attacks, which could cause a delay in the manufacturing of products or products produced for contract manufacturing or lead to a data privacy or security breach. 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 heightens these and other operational risks, and any failure by cloud or other technology servirr ce 44 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, operational or reputational harm to us, loss of competitive advantage or loss of consumer confidence. Our liability insurance may not be suffiff cient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches. Regulators are imposing new data privacy and security requirements, including new and greater monetary fines for privacy violations. For example, the E.U.’s General Data Protection Regulation established regulations regarding the handling of personal data, and provides an enforcement authority and imposes large penalties for noncompliance. New U.S. data privacy and security laws, such as the California Consumer Privacy Act (CCPA), and others that may be passed, similarly introduce requirements with respect to personal information, and non- compliance with the CCPA may result in liability through private actions (subject to statutorily defined damages in the event of certain data breaches) and enforcement. Failure to comply with these current and future laws, policies, industry standards or legal obligations or any security incident resulting in the unauthorized access to, or acquisition, release or transfer of personal information may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have a material adverse effect on our business and results of operations. Management and other personnel changes may disrupt our operations, and we may have difficulty retaining personnel or attracting and retaining qualified replacements on a timely basis for the management and other personnel who may leave the Company. in management, other personnel and our overall retention rate may disrupt our business, and any such disruption could adversely affect our operations, programs, growth, financial condition or results of operations. New members of management may have different perspectives on programs and opportunities for our business, which may cause us to focus on new opportunities or reduce or change emphasis on our existing 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 or retain them. We may face difficulty in attracting and retaining talent for a number of reasons, including management changes, the underperformance or discontinuation of one or more marketed or late stage programs, recruitment by competitors or changes in the overall labor market. In addition, changes in our organizational structure or in our flexible working arrangements could impact employees' productivity and morale as well as our ability to attract, retain and motivate employees. We cannot ensure that we will be able to hire or retain the personnel necessary for our operations or that the loss of any 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-partyrr providers, are subject to extensive government regulation and oversight in the U.S. and in foreign jurisdictions, and are subject to change and evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our business practices. The FDA and comparable foreign agencies 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, product risk management and our compliance with good practice quality guidelines and regulations. Our interactions 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 are facing heightened scrutiny of their relationships with health care providers and have been the target of lawsuits and investigations alleging violations of government regulation, including claims asserting 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 enhanced scrutiny of company-sponsor assistance programs and donations to third-partyrr challenged some of our donations to third-partyrr ed patient assistance programs, including insurance premium and co-pay submission of incorrect pricing information, impermissible off-label charities that provide patient assistance. If we, or our vendors or charities that provide such assistance. The U.S. government has promotion of yy r r ff 45 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.rr 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 employment practices, method of delivery, payment for health care products and servirr ces, 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 arr nd anti-corruption prohibitions, product serialization and labeling requirements and used product take-back requirements; changes in the FDA and foreign regulatory approval processes or perspectives 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-yy 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 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. the introduction of our products to ff Violations of governmental regulation may be punishable by criminal and civil sanctions, 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. We could also 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 submitted to the government. In addition, legal proceedings and investigations are inherently unpredictable, and large judgments or settlements sometimes occur. While we believe that we have appropriate compliance controls, policies and procedures in place to comply with the laws or regulations of the jurisdictions in which we operate, there is a risk that acts committed by our employees, agents, distributors, collaborators or third- party providers might violate such laws or regulations. Whether or not we have complied with the law, an investigation or litigation related to alleged unlawful conduct could increase our expense, damage our reputation, divert management time and attention and adversely affect our business. Our sales and operations are subject to the risks of doing business internationally. We are increasing our presence in international markets, subjecting us to many risks that could adversely affect our business and revenue. There is no guarantee that our effor 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. Certain countries may require local clinical trial data as part or f 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 collaborate with or acquire in emerging markets. and strategies to expand sales in international tsr ff Our sales and operations are subject to the risks of doing business internationally, including: • • • the impact of public health epidemics, such as the COVID-19 pandemic, on the global economy and the delivery of healthcare treatments; less favorable intellectual property or other applicable laws; the inability to obtain necessary foreign regulatory approvals of products in a timely manner; 46 • • • • • • • • • • • • 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; additional complexity in manufacturing internationally; the inability to successfully complete subsequent or confirmatory cr experience is limited; linical trials in countries where our longer payment and reimbursement cycles and uncertainties regarding the collectability of accounts receivable; fluctuations in foreign currency exchange rates that may adversely impact our revenue, net income and value of certain of our investments; the imposition of governmental controls; diverse data privacy and protection requirements; increasingly complex standards for complying with foreign laws and regulations that may differ from country t nd may conflict with corresponding U.S. laws and regulations; rr o country arr ff substantially the far-reaching anti-bribery arr nd anti-corruption legislation in the United Kingdom (U.K.), including the U.K. Bribery Act 2010, and elsewhere and escalation of investigations and prosecutions pursuant to such laws; compliance with complex import and export control laws; changes in tax laws; and the imposition of tariffs or embargoes and other trade restrictions. In addition, our international operations are subject to regulation under U.S. law. For example, the U.S. Foreign ff ing to pay, al capacity. In many countries, the health care Corrupt Practices Act (FCPA) prohibits U.S. companies and their representatives from paying, offer promising to pay or authorizing the payment of anything of value to any foreign government official, government staffff member, political party or political candidate for the purpose of obtaining or retaining business or to otherwise obtain ff favorable treatment or influence a person working in an offici 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. In addition, while we believe that we have appropriate compliance controls, policies and procedures in place to comply with the FCPA, there is a risk that acts committed by our employees, agents, distributors, collaborators or third-partyrr providers might violate the FCPA and we might be held responsible. If our employees, agents, distributors, collaborators or third-partyrr providers are found to have engaged in such practices, we could suffer severe penalties and may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. 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. In order to support our future growth and drug development pipeline, we are expanding our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland with no assurance that the additional capacity will be required or this investment will be recouped. If we are unable to fully utilize our manufacturing facilities, our business may be harmed. Charges resulting from excess capacity may continue to occur and would have a negative effect on our financial condition and results of operations. Although a portion rr of the Solothurn facility received a GMP multi-product license from SWISSMEDIC in May 2021, the manufacturing of a product or product candidate at the Solothurn facility must be approved by the applicable regulatory arr uthorities will approve the Solothurn facility for the manufacturing of a product or a product candidate. If we do not receive the necessary regulatory approvals of the Solothurn facility or if our future growth and drug development plans increase, we may not have sufficient large-scale manufacturing capacity to meet our long-term manufacturing requirements. gencies, including the FDA. There can be no assurance that the regulatory ar ff 47 Manufacturing issues could substantially increase our costs, limit supply of our products and/or reduce our revenue. The process of manufacturing our products is complex, highly regulated and subject to numerous risks, including: • Riskii s okk f 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 ar pproval of any significant changes to our suppliers or manufacturing methods. We cannot be certai n that we could reach agreement with alternative providers or that the FDA or other regulatory rr authorities would approve our use of such alternatives. Furthermore, factors such as the COVID-19 pandemic, weather events, labor or raw material shortages and other supply chain disruptions could result lties and delays in manufacturing our products, which could have an adverse impact on our results in difficuff in operations or result in product shortages. • Global Bulk Supply Riskii s.kk We rely on our 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 effici adversely affected by equipment failures, labor or raw material shortages, public health epidemics, natural disasters, power failures, cyber-attacks and many other factors. ent operation of these facilities, which could be ff • Riskii s Rkk elating to Compliance with current rr (( GMP (cGMP). We and our third-partyr providers are generally required to maintain compliance with cGMP and other stringent requirements and are subject to inspections by the FDA and other regulatory authorities to confirm 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 operations or those of third-parties to receive regulatory approval or pass any regulatory arr gency 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. • Riskii 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. • Riskii Relating to Government Actions. We and/or our third-party providers may be required by the U.S. federal government to manufacture medical supplies needed to treat COVID-19 patients under the Defense Production Act or other acts or orders of government entities, which may result in delays in the manufacturing and supply of our products. 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 and incur other interruptions in the commercial supply of our products. We may also have to take inventory write-offsff other charges and expense 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 revenue 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. The ongoing COVID-19 pandemic may, directly or indirectly, adversely affect our business, results of operations and financial condition. Our business has and could continue to be adversely affected, directly or indirectly, by the ongoing COVID-19 pandemic. National, state and local governments have implemented and may continue to implement safety 48 precautions. These measures may disrupt normal business operations and may have significant negative impacts on businesses and financial markets worldwide. We continue to monitor our operations and applicable government recommendations, and we have made modifications to our normal operations because of the COVID-19 pandemic, including limiting travel and working from home. We have also suspended the vast majority of our in-person interactions by our customer-facing professionals in healthcare settings. This limits our ability to market our products and educate physicians, which, in turn, could have an adverse effect on our ability to compete in the marketing and sales of our products. Changes in flexible working arrangements could impact employee retention, employees' productivity and morale, strain our technology resources and introduce operational risks. Additionally, the risk of cyber-attacks or other privacy or data security incidents may be heightened as a result of our moving increasingly towards a remote working environment, which may be less secure and more susceptible to hacking attacks. The COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third- s or parties we rely on. Furthermore, delays and disruptions experienced by our collaborators, joint venture partner other third-partir es due to the COVID-19 pandemic could adversely impact the ability of such partirr es to fulfill their obligations, which could affect product sales or the clinical development or regulatory ar candidates under joint control. pprovals of product rr Our ability to continue our existing clinical trials or to initiate new clinical trials has been and may continue to be adversely affected, directly or indirectly, by the COVID-19 pandemic. Restrictions on travel and/or transport of clinical materials as well as diversion of hospital staff aff operations and recruitment, possibly resulting in a slowdown in enrollment and/or deviations from or disruptions in key clinical trial activities, such as clinical trial site monitoring. These challenges may lead to difficulties in meeting protocol-specified procedures. We may need to make certain adjustments to the operation of clinical trials in an effort to minimize risks to trial data integrity during the COVID-19 pandemic. In addition, the impact of the COVID-19 pandemic on the operations of the FDA and other health authorities may delay potential approvals of our product candidates. nd resources to COVID-19 infected patients could disrupt trial In response to the COVID-19 pandemic, legislation has been enacted aimed at providing emergency assistance and health care for individuals, families and businesses and broadly supportirr ng the U.S. economy. Additional state and federal healthcare reform measures may be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and servirr ces, which could result in reduced demand for our products or additional pricing pressures and have a financial impact on our business that we cannot predict. While it is not possible at this time to estimate the entirety of the impact that the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or collaboration partner s, continued spread of COVID-19, measures taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, supply chain and distribution systems, results of operations and financial condition. rr Risks Related to Holding Our Common Stock Our operating results are subject to significant fluctuations. Our quarter rr ly revenue, expense 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 Riskii expense that we may take. We have recorded, or may be required to record, charges that include: Factors as well as the timing of charges and • • • • • • • 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 wrr charges for inventory write-downs relating to product suspensions, expirations or recalls; rite-downs for failed quality specifications, recurring charges for excess or obsolete inventory arr nd changes in the fair value of contingent consideration or our equity investments; bad debt expense and increased bad debt reserves; rr outcomes of litigation and other legal or administrative proceedings, regulatory matters and tax matters; payments in connection with acquisitions, divestitures and other business development activities and under license and collaboration agreements; 49 • • failure to meet certain contractual commitments; and the impact of public health epidemics, such as the COVID-19 pandemic, on employees, the global economy and the delivery of healthcare treatments. Our revenue and certain assets and liabilities are also subject to foreign currency exchange rate fluctuations due to the global nature of our operations. Our effor may not be successful. As a result, currency fluctuations among our reportirr ng currency, the U.S. dollar, and other currencies in which we do business will affect our operating results, oftenff 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. to mitigate the impact of fluctuating currency exchange rates in unpredictable ways. Our net income may tsr ff Our operating results during any one period do not necessarily suggest the anticipated results of future periods. 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. We may decide to consolidate or co-locate certain aspects of our business operations or dispose of one or more of our propertirr es, 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 propertirr es 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 partir ally vacate a property, we may incur significant cost, including facility closing costs, employee separation and retention expense, 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. rr Our investment portfolio 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 as well as investments in equity securities of certain biotechnology companies. Changes in the value of our investment portfolio could adversely affeff ct our earnings. The value of our investments may decline due to, among other things, increases in interest rates, downgrades of the bonds and other securities in our portfrr olio, negative company-spec market sentiment, instability in the global financial markets that reduces the liquidity of securities in our portfrr olio, declines in the value of collateral underlying the securities in our portfr olio and other factors. Each of these events may cause us to record charges to reduce the carryir ng 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 portfr olio's overall risk profile, the value of our investments may nevertheless decline. ific news, biotechnology yy 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. 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 applicable agreements. 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 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 are experiencing, and have in the past experienced, extreme volatility and disruption, which leads to uncertainty and liquidity issues for both borrowers and investors. In the event of adverse 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. 50 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, 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 disadvantage compared to our competitors that have less debt. 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 control or force the purchase or sale of the programs that are the subject of the collaboration. rights to terminate our collaboration agreement, acquire operational rr General Risk Factors 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 tive tax rate is derived from a combination of applicable tax rates, including jurisdictions. As a result, our effecff 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 effecff experienced in the past or our current expectations due to many factors, including changes in the mix of our profitability from country t to the impact of the Tax Cuts and Jobs Act of 2017), 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 and regulations either prospectively or retrospectively. the results of examinations and audits of our tax filings (including those related tive tax rate may be differ rr o country,rr ent than ff 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 statements. The enactment of some or all of the recommendations set forth or that may be forthcr for Economic Cooperation and Development’s projeco 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. oming in the Organization t on “Base Erosion and Profit Shifting” (BEPS) by tax authorities Our business involves environmental risks, which include the cost of compliance and the risk of contamination or injury. rr Our business and the business of several of our strategic partner s 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.rr 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. If we were to become liable for an accident, or if we were to suffer an ff ITEM 1B. UNRESOLVED STAFF COMMENTS None. 51 ITEM 2. PROPERTIES Below is a summary or f our owned and leased properties as of December 31, 2021. 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 offiff ce 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 1,040,000 square feet of real estate space, which is summarized as follows: • • • • • • • 357,000 square feet of laboratory and office space; 206,000 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; 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 65,000 square feet of warehouse space and 103,000 square feet of offiff ce space in Durham, NC. Our North Carolina lease agreements expire at various dates through the year 2031. In March 2021 we announced our plans to build a new gene therapy manufacturing facility in RTP, NC to support our gene therapy pipeline across multiple therapeutic areas. The new facility will be 175,000 square feet and is expected to be operational by the end of 2023, with an estimated total investment of $200.0 million. Construction for this new facility began during the fourth quarter of 2021. rr Switzerland In order to support our future growth and drug development pipeline, we are building a large-scale biologics manufacturing facility in Solothurn, Switzerland. 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. In the second quarter of 2021 a portirr on of the facility received a GMP multi-product license from SWISSMEDIC. Other International We lease office space in Baar, Switzerland, our international headquarters; the U.K.; Germany; France; Japan; Canada and numerous other countries. Our international lease agreements expire at various dates through the year 2031. ITEM 3. LEGAL PROCEEDINGS For a discussion of legal matters as of December 31, 2021, please read Note 20, Litigat consolidated financial statements included in this report, which is incorporated into this item by reference. ii ion, to our 52 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 53 ITEM 5. AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS PART II Market and Stockholder Information , Our common stock trades on The Nasdaq Global Select Market under the symbol “BIIB.” As of February 2rr 2022, there were approximately 479 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 fourthr quarter of 2021: Period October 2021 November 2021 December 2021 Total(1) Total Number of Shares Purchased (#) Average Price Paid per Share ($) — $ — $ — $ — $ — — — — (1) There were no share repurchases during the fourth quarter of 2021. Total Number of Shares Purchased f Publicly as Part orr Announced Programs (#) Approximate Dollar Value of Shares That May Yet Be Purchased Under Our Programs ($ in millions) — $ — $ — $ 2,800.0 2,800.0 2,800.0 In October 2020 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2020 Share Repurchase Program). Our 2020 Share Repurchase Program does not have an expiration date. All share repurchases under our 2020 Share Repurchase Program will be retired. Under our 2020 Share Repurchase Program, we repurchased and retired approximately 6.0 million and 1.6 million shares of our common stock at a cost of approximately $1.8 billion and $400.0 million during the years ended December 31, 2021 and 2020, respectively. Approximately $2.8 billion remained available under our 2020 Share Repurchase Program as of December 31, 2021. 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), which was completed as of September 30, 2020. All shares repurchased under our December 2019 Share Repurchase Program were retired. Under our December 2019 Share Repurchase Program, we repurchased and retired approximately 16.7 million shares of our common stock at a cost of approximately $5.0 billion during the year ended December 31, 2020. 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), which was completed as of March 31, 2020. All shares repurchased under our March 2019 Share Repurchase Program were retired. Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 4.1 million and 14.7 million shares of our common stock at a cost of approximately $1.3 billion and $3.7 billion during the years ended December 31, 2020 and 2019, respectively. 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. 54 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 1rr , 2017, we completed the spin-off off f our hemophilia business, Bioverativ Inc. (Bioverativ), as an independent, publicly traded company. In connection with the spin-off,ff 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 off statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. f our hemophilia business, please read Note 3, Hemophilia Spin-Off, to our consolidated financial The performance graph below assumes the investment of $100.00 on December 31, 2016, in our common stock and each of the three indexes, with dividends being reinvested. Our stock prices have been adjusted for the f our hemophilia business. The five-year cumulative total stockholder return for Biogen does effect of the spin-off off 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 2016 $100.00 $100.00 $100.00 $100.00 2017 $121.79 $119.12 $121.83 $121.66 2018 $115.04 $128.60 $116.49 $110.88 2019 $113.44 $147.25 $153.17 $138.72 2020 $93.61 $162.74 $181.35 $175.38 2021 $91.72 $202.43 $233.41 $175.41 The information included under the heading Perforr rmance 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. 55 ITEM 6. RESERVED MANAGEMENT'S DISCUSSION ITEM 7. AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in tion with our consolidated financial statements n conjunc and the accompanying notes beginning on page F-1 of this report. For our discussion of the year ended December 31, 2020, compared to the year ended December 31, 2019, please read Item 7. Management's Discii ussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the year ended December 31, 2020. 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. We have a leading portfolio of medicines to treat multiple sclerosis (MS), have introduced the first approved treatment for spinal muscular atrophy (SMA) and are providing the first and only approved treatment to address a defining pathology of Alzheimer’s disease. We also commercialize biosimilars of advanced biologics and focus on advancing our pipeline in neuroscience and specialized immunology. Lastly, we are focused on accelerating our effor health to support our commercial and pipeline programs while also creating opportunities for potential digital therapeutics. We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities. in digital tsrr ff Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; ADUHELM for the treatment of Alzheimer's disease; and FUMADERM for the treatment of severe plaque psoriasis. 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, including mosunetuzumab, pursuant to our collaboration arrangements with Genentech, a wholly-yy 56 owned member of the Roche Group. For additional information on our collaboration arrangements with Genentech, please read Note 18, Collaborative and Other Relationshipsi statements included in this report. , to our consolidated financial Our innovative drug development and commercialization activities are complemented by our biosimilar business that expands access to medicines and reduces the cost burden for healthcare systems. Through our agreements with Samsung Bioepis, our joint venture with 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. We have also secured the exclusive rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, which was approved in the U.S., the E.U. and the U.K. during the third quarter of 2021. For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationshipsi consolidated financial statements included in this report.r , to our We seek to ensure an uninterrupted supply of medicines to patients around the world. To that end, we continually review our manufacturing capacity, capabilities, processes and facilities. In order to support our future growth and drug development pipeline, we are expanding our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland. In the second quarter of 2021 a portirr on of the facility received a GMP multi-product license from SWISSMEDIC. We believe that the Solothurn facility will support our anticipated near-term needs for the manufacturing of ADUHELM and other biologic assets. In addition, we believe that the Solothurn site may provide us with the ability to further additional large scale manufacturing capacity to support future clinical and commercial manufacturing requirements. If we are unable to fully utilize our manufacturing facilities, due to lower than forecasted demand for our products, we will incur excess capacity charges which will have a negative effecff our financial condition and results of operations. expand if we need t on rr Our revenue depends 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 ar pproval 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 For a detailed discussion on our business environment, please read Item 1. Business, included in this report. For additional information on our competition and pricing risks that could negatively impact our product sales, please read Item 1A. Risk Factors, included in this report. ADUHELM (aducanumab) U.S. In June 2021 the FDA granted accelerated approval of ADUHELM, which we are developing and commercializing in collaboration with Eisai, based on reduction in amyloid beta plaques observed in patients treated with ADUHELM. As part orr f the accelerated approval, we will conduct a confirmatoryrr trial to verify t ff he clinical benefit of ADUHELM in patients with Alzheimer’s disease. The FDA may withdraw approval if, among other things, the confirmatory t linical benefit of rial fails to verify cff ADUHELM, ADUHELM's benefit-risk is no longer positive or we fail to comply with the conditions of the accelerated approval. rr The U.S. ADUHELM product label states that treatment with ADUHELM should be initiated in patients with mild cognitive impairment or mild dementia stage of disease, the population which was studied in clinical trials. We expect patient uptake will be gradual and we do not expect all eligible patients will be treated with ADUHELM for a variety of reasons, including appropriate patient selection criteria, a complex diagnostic and care pathway, the lack of readiness of healthcare providers and institutions to initiate treatment, concern regarding the accelerated approval of ADUHELM and its data and the ability to obtain and maintain adequate reimbursement for ADUHELM. In January 2022 the Centers for Medicare and Medicaid Services (CMS) released a proposed NCD decision memorandum, stating the proposed NCD would cover FDA approved monoclonal antibodies that target amyloid for the treatment of Alzheimer's disease for people with Medicare only if they are enrolled in qualifyiff ng clinical trials. We expect a final Medicare NCD by the second quarter of 2022, which should clarify Medicare reimbursement for the class of antibodies directed against amyloid. If the final NCD is not broader than the proposed NCD, our future operating results may be negatively impacted. Under our collaboration agreement with Eisai (ADUHELM Collaboration Agreement), we and Eisai will co-promote ADUHELM with a region-based profit split, with Eisai reimbursing us for 45.0% of development and commercialization costs incurred by the collaboration for the advancement of ADUHELM in the U.S. Shipments of ADUHELM commenced during the second quarter of 2021. We have made, and may continue to make, commercial, medical and infrastructure investments in support of activities associated with the launch of ADUHELM in the U.S. Rest of WorWW ld In October 2020 the EMA accepted for review the Marketing Authorization Application for aducanumab and in December 2020 the MHLW accepted for review the Japanese NDA for aducanumab. In December 2021 the CHMP of the EMA adopted a negative opinion on the MAA for aducanumab in Europe. We are seeking a re- examination of the opinion by the CHMP. If we do not receive regulatory approval or are unable to successfully commercialize aducanumab in other jurisdictions, our financial condition, business and operations may be adversely affected. TECFIDERA In 2020 U.S. federal courts in West Virginia and Delaware entered judgments in favor of the defendants in patent infringement proceedings relating to TECFIDERA Orange-Book listed patents. We appealed both decisions. In late 2021 the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) affirmed the judgment of the West Virginia federal court. The appeals in the Delaware cases were stayed and we expect will remain so until the decision in the West Virginia case becomes final. Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and is expected to continue to have a substantial and increasing negative impact on our U.S. TECFIDERA revenue in the future. In May 2021 the European General Court annulled the EMA's decision not to validate applications for approval of TECFIDERA generics on the basis that the EMA conducted the wrong assessment when determining TECFIDERA's entitlement to regulatory data and marketing protection. Our Company, the EMA and the EC have each appealed the General Court’s decision as wrongly decided and the appeal is pending. 57 Factors such as the COVID-19 pandemic, adverse weather events, labor or raw material shortages and other supply chain disruptions could result in product shortages or other diffiff culties and delays in manufacturing our products. For additional information on the various risks posed by the COVID-19 pandemic, please read Item rs included in this report. 1A. Risk Facto FF In November 2021 the CHMP of the EMA issued an ad hoc opinion referencing the General Court’s decision which concluded that "the totality of the available data cannot establish that [monoethyl fumarate] exerts a clinically relevant therapeutic contribution within FUMADERM." The EC will decide TECFIDERA’s entitlement to regulatory data and market protection. If data and market protection is not upheld, we could face generic competition in the E.U. as early as the first half of 2022, which would have an adverse impact on our TECFIDERA sales in the E.U. and our results of operations. For additional information, please read the discussion under Results of Operations - Product Revenue - Multiple Sclerosis (MS) - Fumarate below. Business Update Regarding COVID-19 The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. The length of time and full extent to which the COVID-19 pandemic directly or indirectly impacts our business, results of operations and financial condition, including sales, expense, reservesrr and allowances, the supply chain, manufacturing, clinical trials, research and development costs and employee-related costs, depends on future developments that are highly uncertain, subject to change and are difficult to predict, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19 as well as the economic impact on local, regional, national and international customers and markets. We are monitoring the demand for our products, including the duration and degree to which we may see delays in startirr ng new patients on a product due to hospitals diverting the resources that are necessary to administer certain of our products to care for COVID-19 patients, including products, such as TYSABRI and SPINRAZA, that are administered in a physician's office or hospital setting. We may also see reduced demand for immunosuppressant therapies during the COVID-19 pandemic. While we are currently continuing the clinical trials we have underway in sites across the globe, COVID-19 precautions have impacted the timeline for some of our clinical trials and these precautions may, impact on timing in directly or indirectly, have a further the future. To help mitigate the impact of the COVID-19 pandemic to our clinical trials, we are pursuing innovative approaches such as remote monitoring, remote patient visits and supporting home infusions. These alternative measures have resulted in an immaterial increase to the cost of the clinical trials underway. r 58 Financial Highlights Diluted earnings per share attributable to Biogen Inc. were $10.40 for 2021, representing a decrease of 58.1% as compared to $24.80 in the same period in 2020. As described below under Results ott our net income and diluted earnings per share attributable to Biogen Inc. for the year ended December 31, 2021, compared to the year ended December 31, 2020, reflects the following: rr f Operatio ns, Expense • Revenue • • Total revenue was $10,981.7 million for 2021, representing a $2,462.9 million, or 18.3%, decrease compared to $13,444.6 million in 2020. Product revenue, net totaled $8,846.9 million for 2021, representing a $1,845.3 million, or 17.3%, decrease compared to $10,692.2 million in 2020. This decrease was primarily due to a $1,735.4 million, or 22.2%, decrease in MS product revenue and a $147.0 million, or 7.2%, decrease in SPINRAZA product revenue, partially offset by a $35.3 million, or 4.4%, increase in revenue from our biosimilar business. ◦ ◦ The decrease in MS product revenue was primarily due to a decrease in U.S. TECFIDERA demand as a result of multiple TECFIDERA generic entrants in the U.S. market. The decrease in SPINRAZA revenue was primarily due to a decrease in demand as a result of increased competition in the U.S. and Germany as well as a decrease in pricing in the U.S. and rest of world markets, partially offset by an increase in sales volumes in Latin America and certai n distributor markets. rr ff • Revenue from anti-CD20 therapeutic programs totaled $1,658.5 million for 2021, representing a $319.3 million, or 16.1%, decrease compared to $1,977.8 million in 2020. This decrease was primarily due to a $480.2 million, or 45.5%, decrease in RITUXAN revenue, partially offset a $146.3 million, or 17.3%, increase in royalty revenue on sales of OCREVUS. Sales of RITUXAN have been adversely affected by the onset of biosimilar competition. by ff • Other revenue totaled $476.3 million for 2021, representing a $298.3 million, or 38.5%, decrease from $774.6 million in 2020. ◦ The decrease in other revenue was primarily due to higher contract manufacturing revenue in 2020, resulting from $346.2 million in revenue related to the delivery of the license for certai n of our manufacturing-related rr intellectual property to a contract manufacturing customer. Total cost and expense was $8,141.0 million for 2021, representing a $753.5 million, or 8.5%, decrease compared to $8,894.5 million in 2020. This decrease was primarily due to a $1,489.7 million, or 37.3%, decrease in research and development expense. ◦ ◦ The decrease in research and development expense was primarily due to $1,893.3 million in upfront payments recognized in 2020 in connection with our collaborations with Sangamo, Denali and Sage, partially offset by a $125.0 million upfront payment recognized in connection with our collaboration with InnoCare in 2021. ff The decrease was partially offset by a $304.5 million, or 16.9%, increase in cost of sales, which was primarily driven by $164.0 million of charges associated with inventory and purchase commitments in excess of forecasted demand related to ADUHELM during 2021 as well as higher impairment charges recorded during 2021 as compared to 2020. As described below under Financial Condition, Liquidity at : nd Capital Resources r • We generated $3,639.9 million of net cash flow from operations for 2021. • Cash, cash equivalents and marketable securities totaled approximately $4,694.5 million as of December 31, 2021. • We repurchased and retired approximately 6.0 million shares of our common stock at a cost of approximately $1.8 billion during 2021 under our 2020 Share Repurchase Program. Approximately $2.8 billion remained available under our 2020 Share Repurchase Program as of December 31, 2021. Acquisitions, Collaborative and Other Relationships For additional information on our acquisitions, collaborative and other relationships discussed below, 59 please read Note 2, Acquisitions, Note 18, Collaborative and Other Relationships, and Note 19, Investments in Variable Interest consolidated financial statements included in this report. Entities, to our rr Bio-Thera Solutions In April 2021 we entered into a commercialization and license agreement to develop, manufacture and commercialize BAT1806, a Phase 3 clinical stage anti-interleukin-6 (IL-6) receptor monoclonal antibody that is a proposed biosimilar referencing ACTEMRA. In connection with this agreement, we made an upfront payment of $30.0 million to Bio-Thera Solutions. InnoCare Pharma Limited In July 2021 we entered into a collaboration and license agreement with InnoCare for orelabrutinib, an oral small molecule Bruton's tyrosine kinase inhibitor for the potential treatment of MS. In connection with this agreement, we made an upfront payment of $125.0 million to InnoCare. For additional information on our collaboration arrangement with InnoCare, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report. Mosunetuzumab In January 2022 we exercised our option with Genentech to partirr cipate in the joint development and commercialization of mosunetuzumab, a late-stage bispecific antibody in development for B-cell non- Hodgkin’s lymphoma and other therapeutic areas. In connection with this exercise, we recorded a $30.0 million option exercise fee payable to Genentech in December 2021. BIIB115 Option Exercise In December 2021 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty- bearing license to develop and commercialize BIIB115, a preclinical investigational ASO in development for SMA. In connection with this option exercise, we made an opt-in payment of $60.0 million to Ionis. Samsung Bioepis - Biogen's Joint Venture with Samsung BioLogics In January 2022 we entered into an agreement to sell to Samsung Biologics our equity in Samsung Bioepis. Under the terms of the proposed transaction, we would receive $1.0 billion in cash at closing and $1.3 billion to be deferred over two payments of $812.5 million due at the first anniversary arr nd f the $437.5 million due at the second anniversary or closing of the transaction. We would also be eligible to receive up to an additional $50.0 million upon the achievement of certain commercial milestones. Closing of the transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities registration statement filed by Samsung Biologics and satisfaction of certain regulatory arr nd other customary closing conditions. For additional information on the proposed transaction and our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.rr Other Key Developments Exchange Offer In February 2rr 021 we completed our Exchange Offer of our tendered 2045 Senior Notes for our 2051 Senior Notes and cash, and an offer to purchase our tendered 2045 Senior Notes for cash. For additional information on our Exchange Offer, please read Note 12, Indebtedness, to our consolidated financial statements included in this report.r North Carolina Gene Therapy Manufacturing Facility March 2021 we announced our plans to build a new gene therapy manufacturing facility in RTP, NC to support our gene therapy pipeline across multiple therapeutic areas. The new facility will be 175,000 square feet and is expected to be operational by the end of 2023, with an estimated total investment of approximately $200.0 million. Construction for this new facility began during the fourth quarter of 2021. rr Solothurn, Switzerland Manufacturing Facility May 2021 we announced that a portirr on of our Solothurn manufacturing facility received a GMP multi- product license from SWISSMEDIC. For additional information on our Solothurn manufacturing facility, please read Note 10, Property, Plant and Equipment, to our consolidated financial statements included in this report. BIIB125 (zuranolone) In June 2021 we and Sage announced positive Phase 3 results for BIIB125 (zuranolone) for the potential treatment of MDD and PPD. In October 2021 we and Sage announced our plan to submit an NDA to the FDA for zuranolone in the second half of 2022, with rolling submission expected to start irr n early 2022. The planned initial submission package will seek approval of zuranolone for MDD, and an additional filing for PPD is anticipated in the first half of 2023. 60 For additional information on our collaboration arrangement with Sage, please read Note 18, Collaboratrr ive and Other Relationshipsi consolidated financial statements included in this report. , to our Lecanemab (BAN2401) In June 2021 the FDA granted Breakthrough Therapy designation for lecanemab, an anti-amyloid antibody for the potential treatment of Alzheimer's disease, which we are developing in collaboration with Eisai. In September 2021 Eisai initiated a rolling submission to the FDA of a BLA for lecanemab. The BLA is being submitted under the accelerated approval pathway and is primarily based on clinical, biomarker and safety data from the Phase 2b clinical trial in people with early Alzheimer's disease and confirmed amyloid pathology. BYOOVIZ (ranibizumab-nuna) In September 2021 we and Samsung Bioepis announced that the FDA has approved BYOOVIZ (ranibizumab-nuna), a biosimilar referencing LUCENTIS for the treatment of neovascular (wet) age-related macular degeneration, macular edema following retinal vein occlusion, and myopic choroidal neovascularization. In addition to the U.S. approval, BYOOVIZ was approved in the E.U. and the U.K. during the third quarter of 2021. BIIB067 (tofersen) In October 2021 we announced topline results from our pivotal Phase 3 VALOR study of BIIB067 (tofersen), an investigational antisense drug being evaluated for people with SOD1 ALS, indicating that the primary er ndpoint was not met. We are engaging with regulators and other key stakeholders to determine potential next steps. RESULTS OF OPERATIONS Revenue Revenue is summarized as follows: (In millions, except percentages) 2021 2020 2019 For the Years Ended December 31, % Change $ Change 2021 vs. 2020 2020 vs. 2019 2021 vs. 2020 2020 vs. 2019 Total product revenue, net 8,846.9 10,692.2 11,379.8 Revenue from anti-CD20 therapeutic programs 1,658.5 1,977.8 2,290.4 476.3 774.6 707.7 (17.3) (16.1) (38.5) 2.7 (6.0) (13.6) 9.5 249.1 (1,845.3) (319.3) (298.3) 126.1 (687.6) (312.6) 66.9 $ 3,805.7 $ 5,900.1 $ 6,713.8 (35.5)% (12.1)% $ (2,094.4) $ (813.7) 5,041.2 4,792.1 4,666.0 5.2 Product revenue, net: United States Rest of world Other revenue Total revenue $ 10,981.7 $ 13,444.6 $ 14,377.9 (18.3)% (6.5)% $ (2,462.9) $ (933.3) 61 Product Revenue Product revenue is summarized as follows: (In millions, except percentages) Multiple Sclerosis (MS): Fumarate(1) Interferon(2) TYSABRI FAMPYRA Subtotal: MS Spinal Muscular Atrophy: SPINRAZA Alzheimer's disease: ADUHELM(3) Biosimilars: BENEPALI IMRALDI FLIXABI Subtotal: Biosimilars Other: FUMADERM For the Years Ended December 31, 2021 2020 2019 % Change $ Change 2021 vs. 2020 2020 vs. 2019 2021 vs. 2020 2019 vs. 2018 $ 2,362.3 $ 3,905.4 $ 4,438.2 (39.5)% (12.0)% $ (1,543.1) $ (532.8) 1,566.1 1,877.5 2,101.8 (16.6) (10.7) (311.4) (224.3) 2,063.1 1,946.1 1,892.2 105.2 103.1 97.1 6.0 2.0 2.8 6.2 117.0 2.1 53.9 6.0 6,096.7 7,832.1 8,529.3 (22.2) (8.2) (1,735.4) (697.2) 1,905.1 2,052.1 2,097.0 (7.2) (2.1) (147.0) (44.9) 3.0 — — nm — 3.0 — 498.3 233.4 99.4 831.1 481.6 216.3 97.9 795.8 486.2 184.0 68.1 738.3 3.5 7.9 1.5 4.4 (0.9) 17.6 43.8 7.8 16.7 17.1 1.5 35.3 (4.6) 32.3 29.8 57.5 11.0 12.2 15.2 (9.8) (19.7) (1.2) (3.0) Total product revenue, net $ 8,846.9 $ 10,692.2 $ 11,379.8 (17.3)% (6.0)% $ (1,845.3) $ (687.6) (1) Fumarate includes TECFIDERA and VUMERITY. VUMERITY became commercially available in the E.U. during the fourth quarter of 2021. (2) Interferon includes AVONEX and PLEGRIDY. (3) In June 2021 the FDA granted accelerated approval of ADUHELM, which became commercially available in the U.S. during the second quarter 2021. For additional information, please read Note 18, Collaborative and Other Relationshipsi - Eisai Co., Ltd. - ADUHELM Collaboration Agreement,t to our consolidated financial statements included in this report.rr nm Not meaningful rr of 62 Multiple Sclerosis (MS) Fumarate Fumarate revenue includes sales from TECFIDERA and VUMERITY. During the fourthrr of 2021 VUMERITY was approved for the treatment of RRMS in the E.U., Switzerland and the U.K. quarter For 2021 compared to 2020, the 60.3% decrease in U.S. Fumarate revenue was primarily due to a decrease in TECFIDERA demand as a result of multiple TECFIDERA generic entrants entering the U.S. by an market. The decrease was partially offset increase in VUMERITY sales volumes in the U.S. ff For 2021 compared to 2020, the 9.4% increase in rest of world Fumarate revenue was primarily due to an increase in TECFIDERA sales volumes of 6.2%. In 2020 U.S. federal courts in West Virginia and Delaware entered judgments in favor of the defendants in patent infringement proceedings relating to TECFIDERA Orange-Book listed patents. We appealed both decisions. In late 2021 the Federal Circuit affiff rmed the judgment of the West Virginia federal court. The appeals in the Delaware cases were stayed and we expect will remain so until the decision in the West Virginia case becomes final. Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and is expected to continue to have a substantial and increasing negative impact on our U.S. TECFIDERA revenue in the future. In May 2021 the European General Court annulled the EMA's decision not to validate applications for approval of TECFIDERA generics on the basis that the EMA conducted the wrong assessment when determining TECFIDERA's entitlement to regulatory data and marketing protection. Our Company, the EMA and the EC have each appealed the General Court’s decision as wrongly decided and the appeal is pending. In November 2021 the CHMP of the EMA issued an ad hoc opinion referencing the General Court’s decision which concluded that "the totality of the available data cannot establish that [monoethyl fumarate] exertsrr a clinically relevant therapeutic contribution within FUMADERM." The EC will decide TECFIDERA’s entitlement to regulatory data and market protection. If data and market protection is not upheld, we could face generic competition in the E.U. as early as the first half of 2022, which would have an adverse impact on our TECFIDERA sales in the E.U. and our results of operations. For additional information, please read Note 20, tion, to our consolidated financial statements Litigaii included in this report. We expect that TECFIDERA revenue will continue to decline in 2022, compared to 2021, as a result of increasing generic competition. We expect an increase in VUMERITY sales volumes in 2022, compared to 2021, mostly driven by demand growth, including the continued launch of VUMERITY in the E.U. Interferon For 2021 compared to 2020, the 22.8% decrease in U.S. Interferon revenue was primarily due to a decrease in Interferon sales volumes of 18.7%. The net decline in sales volumes reflects the continued decline of the Interferon market as patients transition to other higher efficacy and oral MS therapies. 63 For 2021 compared to 2020, the 3.5% decrease Spinal Muscular Atrophy in rest of world Interferon revenue was primarily due to a decrease in Interferon sales volumes of 3.8%. SPINRAZA We expect that Interferon revenue will continue to decline in both the U.S. and rest of world markets in 2022, compared to 2021, as a result of increasing competition from other MS products, including biosimilars, and further pricing reductions in certain European markets. TYSABRI For 2021 compared to 2020, the 4.1% increase in U.S. TYSABRI revenue was primarily due to an increase in pricing, partially offset sales volumes. by a decrease in ff For 2021 compared to 2020, the 8.4% increase in rest of world TYSABRI revenue was primarily due to favorable volume impacts, partirr ally offset decreases in pricing. by ff We anticipate TYSABRI revenue to be relatively flat on a global basis in 2022, compared to 2021, despite increasing competition from additional treatments for MS. We expect to continue to face price reductions in certain European markets. For 2021 compared to 2020, the 25.4% decrease in U.S. SPINRAZA revenue was primarily due to a decrease in sales volumes of 24.2%, resulting from increased competition. For 2021 compared to 2020, the 4.2% increase in rest of world SPINRAZA revenue was primarily due to an increase in sales volumes, particularly in Latin America and certain distributor markets. These increases were offset by lower volumes resulting from increased competition in certain established markets, particularly Germany. We face competition from a gene therapy product and an oral product. In 2022 we expect that SPINRAZA revenue will be subject to increased competition, likely resulting in continued patient discontinuations and a lower rate of new patient combined with the impact of loading dose rr starts, dynamics, as patients transition to dosing once every four months, and lower prices in certain rest of world countries. 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. 64 favorable impact of higher volumes and foreign currency exchange, partially offset pricing in certain markets. by decreases in ff We anticipate a slight decline in revenue from our biosimilars business in 2022 compared to 2021, despite the launch of BYOOVIZ in the U.S. and an anticipated modest increase in sales volume in 2022, as we continue to face price reductions in certain markets. 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. Revenue from Anti-CD20 Therapeutic Programs Genentech (Roche Group) share of RITUXAN, including RITUXAN HYCELA, and GAZYVA collaboration operating profits in the U.S. and other revenue 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. Alzheimer's Disease ADUHELM In June 2021 the FDA granted accelerated approval of ADUHELM, which became commercially available in the U.S. during the second quarter of 2021. We expect minimal sales of ADUHELM in 2022. For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.r Biosimilars BENEPALI, IMRALDI and FLIXABI During the third quarter rr of 2021 BYOOVIZ, a biosimilar referencing LUCENTIS, was approved in the U.S., the E.U and the U.K. For 2021 compared to 2020, the 4.4% increase in biosimilar revenue was primarily due to the 65 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: For the Years Ended December 31, (In millions) 2021 2020 2019 Product revenue, net $ 2,032.0 $ 3,334.1 $ 4,747.4 Cost and expense 291.8 433.0 622.7 Pre-tax profits in the U.S. Biogen's share of pre- tax profits $ 1,740.2 $ 2,901.1 $ 4,124.7 $ 647.7 $ 1,080.2 $ 1,542.4 For 2021 compared to 2020, the decrease in U.S. product revenue, net was primarily due to a decrease in sales volumes of RITUXAN in the U.S. of 38.8%, primarily due to the onset of competition from multiple biosimilar products. For 2021 compared to 2020, product revenue, net also reflects an increase in GAZYVA sales volumes of 8.5%. For 2021 compared to 2020, the decrease in collaboration cost and expense was primarily due to lower cost of sales, distribution costs and selling and marketing expense related to RITUXAN. We are aware of several other anti-CD20 molecules, including biosimilar products, that have been approved and are competing with RITUXAN and GAZYVA in the oncology and other markets. In November 2019, January 2020 and January 2021 biosimilar products referencing RITUXAN were launched in the U.S. and are being offered at lower prices. This competition has had a significant adverse impact on the pre-tax profits of our collaboration Other Revenue Other revenue is summarized as follows: arrangements with Genentech, as the sales of RITUXAN have decreased substantially compared to prior periods. We expect that biosimilar competition will continue to increase as these products capture additional market share and that this will have a significant adverse impact on our co-promotion profits in the U.S. in future years. Other Revenue from Anti-CD20 Therapeutic Programs her revenue from anti-CD20 therapeutic programs consist of royalty revenue on sales of OCREVUS and our share of pre-tax co-promotion profits from RITUXAN in Canada. For 2021 compared to 2020, the increase in other revenue from anti-CD20 therapeutic programs was primarily due to sales growth of OCREVUS. Royalty revenue recognized on sales of OCREVUS for the years ended December 31, 2021, 2020 and 2019, totaled $991.7 million, $845.4 million and $687.5 million, respectively. OCREVUS royalty revenue is based on our estimates from third partyrr and market research data of OCREVUS sales occurring during the corresponding ences between actual and estimated period. Differ royalty revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter. ff For additional information on our collaboration arrangements with Genentech, including information regarding the pre-tax profit-sharing formula and its impact on future revenue from anti-CD20 therapeutic programs, please read Note 18, Collaborativ e and Other Relationships, to our consolidated financial statements included in this report. rr (In millions, except percentages) Revenue from collaborative and other relationships Other royalty and corporate revenue Total other revenue For the Years Ended December 31, 2021 2020 2019 % Change $ Change 2021 vs. 2020 2020 vs. 2019 2021 vs. 2020 2020 vs. 2019 $ $ 20.7 $ 21.6 $ 106.2 (4.2)% (79.7)% $ (0.9) $ (84.6) 455.6 753.0 601.5 (39.5) 25.2 (297.4) 151.5 476.3 $ 774.6 $ 707.7 (38.5)% 9.5 % $ (298.3) $ 66.9 Revenue from Collaborative and Other Relationships Revenue from collaborative and other relationships primarily includes royalty revenue on biosimilar products from Samsung Bioepis. For additional information on our collaborative consolidated financial statements included in this report.r arrangements with Samsung Bioepis, please read Note 18, Collaborativ e and Other Relationships, to our rr 66 Other Royalty and Corporate Revenue Reservesrr for discounts, contractual adjustments and returns that reduced gross product revenue are summarized as follows: We receive royalties from net sales on products related to patents that we have out-licensed and we record other corporate revenue primarily from amounts earned under contract manufacturing agreements. For 2021 compared to 2020, the decrease in other corporate revenue was primarily due to higher contract manufacturing revenue during the year ended December 31, 2020, resulting from $346.2 million in revenue related to the delivery of the license for certain of our manufacturing-related intellectual property to a contract manufacturing customer. For additional information, please read Note 4, Revenue, to our consolidated financial statements included in this report. Reserves for Discounts and Allowances Revenue from product sales is recorded net of established for applicable discounts and reservesrr 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 partyr other than our customer). These estimates reflect our historical experience, current contractual and statutory r and trends, industry data and forecasted customer buying and payment patterns. Actual amounts may ultimately differ vary,r we adjust these estimates, which could have an effect on earnings in the period of adjustment. r equirements, specific known market events from our estimates. If actual results ff For the years ended December 31, 2021, 2020 and 2019, reserves for discounts and allowances as a percentage of gross product revenue were 28.6%, 27.1% and 24.3%, respectively. Discounts Discounts include trade term discounts and wholesaler incentives. For 2021 compared to 2020, the decrease in discounts was primarily driven by a decrease in gross sales. Contractual Adjustments Contractual adjustments primarily relate to Medicaid and managed care rebates in the U.S., pharmacy rebates, co-payment (copay) assistance, Veterans Administration, 340B discounts, specialty pharmacy program fees and other government rebates or applicable allowances. For 2021 compared to 2020, the decrease in contractual adjustments was primarily driven by lower TECFIDERA sales in the U.S., resulting in lower Medicaid, managed care and government rebates, ff partially offset from VUMERITY sales. by managed care rebates in the U.S. 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 67 recognized in the period the related revenue is recognized, resulting in a reduction to product sales. For 2021 compared to 2020, return reserves were relatively consistent. For additional information on our revenue reserves, please read Note 4, Revenue, to our consolidated financial statements included in this report. Cost and Expense A summary orr f total cost and expense is as follows: (In millions, except percentages) Cost of sales, excluding amortizat ion and impairment of acquired intangible assets rr For the Years Ended December 31, 2021 2020 2019 % Change $ Change 2021 vs. 2020 2020 vs. 2019 2021 vs. 2020 2020 vs. 2019 $ 2,109.7 $ 1,805.2 $ 1,955.4 16.9 % (7.7)% $ 304.5 $ (150.2) Research and development 2,501.2 3,990.9 2,280.6 (37.3) Selling, general and administrative 2,674.3 2,504.5 2,374.7 6.8 Amortization and impairment of acquired intangible assets Collaboration profit (loss) sharing (Gain) 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 881.3 7.2 — (50.7) 18.0 — 464.8 232.9 489.9 241.6 89.6 (96.9) 75.0 5.5 (5.1) (3.6) (1,489.7) 1,710.3 169.8 129.8 416.5 (225.7) (25.1) (8.7) (92.5) 55.3 nm nm 92.5 (147.8) (86.3) 75.0 — (63.7) (41.3) 35.5 — 1.5 (76.0) nm nm nm 35.6 (57.0) — (22.6) 75.0 (1.5) Total cost and expense $ 8,141.0 $ 8,894.5 $ 7,335.3 (8.5)% 21.3 % $ (753.5) $ 1,559.2 nm Not meaningful Cost of Sales, Excluding Amortization and Impairment of Acquired Intangible Assets due to the write-off of ADUHELM inventory during the year ended December 31, 2021, as discussed below. Inventory arr mounts written down as a result of excess, obsolescence or unmarketability totaled $167.6 million, $26.6 million and $52.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. During the fourthr quarter of 2021 we recorded approximately $164.0 million of charges associated with inventory arr nd purchase commitments in excess of forecasted demand related to ADUHELM, which was recognized in cost of sales within our consolidated statements of income. In addition, we recognized the expected share of these charges from Eisai's 45.0% share in collaboration profit (loss) sharing within our consolidated statements of income. As of December 31, 2021, we had approximately $223.0 million of inventory r may record additional write-downs of ADUHELM inventory i rr proposed NCD. f the final NCD is not broader than the rr elated to ADUHELM. We Cost of sales, as a percentage of total revenue, were 19.2%, 13.4% and 13.6% for the years ended December 31, 2021, 2020 and 2019, respectively. Product Cost of Sales For 2021 compared to 2020, the increase in product cost of sales was primarily due to product mix and higher cost of sales associated with contract manufacturing agreements. The increase was also For additional information, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.r Royalty Cost of Sales For 2021 compared to 2020, the increase in royalty cost of sales was primarily due to higher 68 royalties payable on higher sales of TYSABRI and VUMERITY. 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 69 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. rr the development stage based upon the program status when incurred. Therefore, the same program ff could be reflected in differ the same year. For several of our programs, the research and development activities are part orr collaborative and other relationships. Our costs reflect our share of the total costs incurred. ent development stages in Costs are reflected in f our For 2021 compared to 2020, the decrease in ff research and development expense was primarily due to approximately $1,084.0 million, $601.3 million and $208.0 million in upfront payments recognized upon the closing of our collaborations with Sage, Denali and Sangamo, respectively, in 2020. This decrease by approximately $125.0 million in was partially offset an upfront payment recognized upon the closing of our collaboration with InnoCare in the third quarter of 2021, the development of zuranolone for the potential treatment of MDD and PPD, the development of BIIB124 (SAGE-324) for the potential treatment of essential tremor, which we are developing in collaboration with Sage, and closeout costs associated with BIIB111 (timrepigene emparvov and BIIB112 (cotoretigene). ec) rr In 2021 we recorded upfront payments related to our new collaborations as part of research and development expense. Excluding upfront payments, we expect our core research and development expense to increase in 2022, driven by continued investment in our pipeline. 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 Expense Research and development expense for 2021 includes: • $125.0 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with InnoCare in the third quarter of 2021; 70 • $60.0 million charge to research and development expense upon the exercise of our option under our collaboration agreement with Ionis to develop and commercialize BIIB115, a preclinical investigational ASO in development for SMA; • $30.0 million charge to research and development expense related to the option exercise fee payable to Genentech to jointly develop and commercialize mosunetuzumab, a late-stage bispecific antibody in development for B-cell non-Hodgkin's lymphoma and other therapeutic areas; and • $30.0 million charge to research and development expense in connection with the upfront payment associated with entering into a commercialization and license agreement with Bio-Thera to develop, manufacture and commercialize BAT1806, a proposed biosimilar referencing ACTEMRA. Research and development expense for 2020 includes: • • • $1,084.0 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Sage in the fourth quarter rr of 2020; $601.3 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Denali in the third quarter of 2020; and $208.0 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Sangamo in the second quarter of 2020. The upfront payments associated with these collaborations 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.r Early Stage Programs For 2021 compared to 2020, the decrease in spending related to our early stage programs was primarily due to a decrease in costs associated with: • the discontinuation of opicinumab (anti-LINGO) in MS; • • • the discontinuation of BIIB054 (cinpanemab) in Parkinson's disease and the discontinuation of gosuranemab (BIIB092) in Alzheimer's disease; the advancement of dapirolizumab pego, an anti-CD40L pegylated Fab that we are developing in collaboration with UCB, for the potential treatment of SLE into late stage; and the advancement of BIIB059 (anti-BDCA2) for the potential treatment of SLE into late stage. These decreases were partially offset ff by an increase in costs associated with: • • • an increase in spending in the development of BIIB124 for the potential treatment of essential tremor; an increase in spending in the development of BIIB122 (DNL151) for the potential treatment of Parkinson's disease, which we are developing in collaboration with Denali; and an increase in spending in the development of BIIB135 (orelabrutinib) for the potential treatment of MS. Late Stage Programs For 2021 compared to 2020, the increase in spending associated with our late stage programs was primarily due to: • • • • • • an increase in spending in the development of zuranolone for the potential treatment of MDD and PPD; the advancement of dapirolizumab pegol for the potential treatment of SLE into late stage; the advancement of BIIB059 for the potential treatment of SLE into late stage; an increase in spending related to our option exercise with Genentech to jointly develop and commercialize mosunetuzumab, a late-stage bispecific antibody in development for B-cell non-Hodgkin's lymphoma and other therapeutic areas; an increase in spending related to lecanemab; and close out costs related to BIIB111. These increases were partirr ally offset ff by a decrease in costs associated with the advancement of ADUHELM from late stage to marketed. Marketed Programs For 2021 compared to 2020, the increase in spending associated with our marketed programs was primarily due to an increase in costs associated with: • the advancement of ADUHELM from late stage to marketed upon the accelerated approval of ADUHELM in the U.S. In March 2019 Eisai initiated a global Phase 3 trial for the development of lecanemab in early Alzheimer's disease. Under our collaboration arrangement, Eisai serves as the global operational and regulatory l r ead for lecanemab and all costs, including research, development, sales and marketing expense, are shared equally between us and Eisai. For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.r Selling, General and Administrative For 2021 compared to 2020, the increase in selling, general and administrative expense was primarily due to an increase in personnel in support of the launch of ADUHELM in the U.S. Beginning in the second quarter of 2021, reimbursement from Eisai for its share of U.S. ADUHELM selling, general and administrative expense is recognized in collaboration profit (loss) sharing in our consolidated statements of income. In 2022 we expect selling, general and administrative costs to decrease as we plan to implement cost-reduction measures with a significant portion expected to be realized in 2022. 71 Amortization and Impairment of Acquired Intangible Assets 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 carryirr ng value of the assets might not be recoverable. Overall, the value of our acquired IPR&D assets is dependent upon several variables, including estimates of future revenue and the effects of competition, our ability to secure sufficient pricing in a competitive market, our ability to confirm safety and efficacy based on data from clinical trials and r eedback, the level of anticipated regulatory f development costs and the probability and timing of successfully advancing a partir cular 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 may result in a significant change to our valuation of our IPR&D assets. Vixotr ii igine In the periods since we acquired vixotrigine, there have been numerous delays in the initiation of Phase 3 studies for the potential treatment of TGN and for the potential treatment of diabetic painful neuropathy (DPN), another form of neuropathic pain. We have engaged with the FDA regarding the design of the Phase 3 studies of vixotrigine for the potential treatment of TGN and DPN and are now performing an additional clinical trial of vixotrigine. The performance of this additional clinical trial delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of TGN, and, as a result, we recognized an impairment charge of $44.3 million related to vixotrigine for the potential treatment of TGN during the first quarter of 2021. As of December 31, 2021, the carrying value associated with the remaining IPR&D asset for DPN was $132.7 million and the fair value of this asset was not significantly in excess of its carrying value. rr rr Our amortization expense is based on the economic consumption and impairment of intangible assets. Our most significant amortir zable intangible assets are related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products and other programs acquired through business combinations. For the year ended December 31, 2021, amortirr zation and impairment of acquired intangible assets reflects the impact of a $365.0 million impairment charge related to BIIB111, a $220.0 million impairment charge related to BIIB112 and a $44.3 million impairment charge related to vixotrigine (BIIB074) for the potential treatment of trigeminal neuralgia (TGN). For the year ended December 31, 2020, amortirr zation and impairment of acquired intangible assets reflects the impact of a $115.0 million impairment charge related to BIIB111, a $75.4 million impairment charge related to BIIB054 and a $19.3 million impairment charge related to one of our other IPR&D intangible assets. Amortirr zation of acquired intangible assets, excluding impairment charges, totaled $252.0 million, $255.1 million and $274.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. 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 revenue 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 72 income and expense in the U.S. related to the ADUHELM Collaboration Agreement. For the years ended December 31, 2021, 2020 and 2019 we recoggnized net pr fofit-shari gng expense fof $$285.4 million, $$266.5 million and $$241.6 million, respectively, to refflect S shari gng fof the net collaboration pr fofits. amsung Bioepis’ 50.0% g For the year ended December 31, 2021, we recognized net profit-sharing income of $233.2 million to reflef ect Eisai's 45.0% share of loss related to the ADUHELM Collaboration Agreement. We also recognized net profit-sharing income of $45.0 million to reflect Eisai's 45.0% share of the $100.0 million milestone payment made to Neurimmune related to the launch of ADUHELM in the U.S. For the year ended December 31, 2020, we recognized net profit-sharing income of $33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone payment made to Neurimmune related to the completed submission of the BLA for the approval of ADUHELM to the FDA. For additional information on our collaboration arrangements with Samsung Bioepis and Eisai, please read Note 18, Collaboratrr ive and Other Relationships, to our consolidated financial statements included in this report. BIIB111 and BIIB112 During the fourth quarter rr of 2020 we recognized an impairment charge of $115.0 million related to BIIB111 as a result of third-party manufacturing delays that impacted the timing and increased the costs associated with advancing BIIB111 through Phase 3 development. During the second quarter of 2021 we r announced that our Phase 3 STAR study of BIIB111 and our Phase 2/3 XIRIUS study of BIIB112 did not meet their primary endpoints. In the third quarter of 2021 we suspended further development on these programs based on the decision by management as part of its strategic review process. For the year ended December 31, 2021, we recognized an impairment charge ofof $$365.0 million related to BIIB111 and an impairment chargge fof $$220.0 million related to BIIB112, reduc ging the rem values fof these IPR&D int aining book g gangible assets to zero. In addition, ffor the year ended December 31, rr 2021, as a result off our decision to suspend ffurther development fof BIIB111 and BIIB112, we rec gognized ch garges fof approximately $$39.1 million related to our fmanufactur ging arr gangements and other costs that we expect to incur as a result off s uspending these gprograms, which were recorded as research and development expense in our consolidated statements fof income. g For additional information on the amortir zation and impairment of our acquired intangible assets, please read Note 6, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.r Collaboration Profit (Loss) Sharing Collaboration profit (loss) sharing primarily includes Samsung Bioepis' 50.0% share of the profit or loss related to our biosimilars commercial agreement with Samsung Bioepis and, beginning in the second quarter of 2021, Eisai's 45.0% share of 73 (Gain) Loss on Divestiture of Hillerød, Denmark Manufacturing Operations In March 2019 we entered into a share purchase agreement with FUJIFILM to sell all of the outstanding shares of our subsidiary t manufacturing operations in Hillerød, transaction closed in August 2019. rr hat owned our biologics Denmark. The r During the year ended December 31, 2020, we reduced our estimate of the fair value of the adverse commitment associated with the guarantee of future batch production by approximately $62.0 million based on our current manufacturing forecasts. Additionally, we recorded a reduction to our pre-tax loss of approximately $30.5 million due to a refund of interest paid associated with a tax matter. For additional information on the divestiture of r Denmark manufacturing operations, our Hillerød, please read Note 3, Divestitures, to our consolidated financial statements included in this report. 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 2021 was primarily due to reductions in the probability of technical and regulatory success and delays in the expected timing of the achievement of certain remaining developmental milestones related to our vixotrigine programs. The gain on fair value remeasurement of contingent consideration for 2020 was primarily due to the remeasurement of the contingent consideration associated with our BIIB054 program as well as changes in the probability and the expected timing of the achievement of certain remaining developmental milestones, changes in the interest rates used to revalue our contingent consideration liabilities and the passage of time. For additional information on our IPR&D intangible assets, please read Note 6, Intangible Assets and Goodwill, to our consolidated financial statements included in this report. Acquired In-Process Research and Development (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 BIIB118 Acquisition In March 2020 we acquired BIIB118 (CK1 inhibitor) for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases from Pfizer Inc. (Pfizer). In connection with this acquisition, we made an upfront payment of $75.0 million to Pfizer, which was accounted for as an asset acquisition and 74 recorded as acquired IPR&D in our consolidated statements of income as BIIB118 has not yet reached technological feasibility. For additional information on our acquisition of BIIB118, please read Note 2, Acquisiii tions, to our consolidated financial statements included in this report. Other Income (Expense), Net consolidated financial statements included in this report.r Income Tax Provision For 2021 compared to 2020, the change in other income (expense), net primarily reflects net unrealized losses on our holdings in equity securities. For the year ended December 31, 2021, net unrealized losses and realized gains on our holdings in equity securities were approximately $831.4 million and $10.3 million, respectively, compared to net unrealized and realized gains of $681.8 million and $12.1 million, respectively, in 2020. The net unrealized losses recognized during the year ended December 31, 2021, primarily reflect decreases in the aggregate fair value of our investments in Denali, Sage, Sangamo and Ionis common stock of approximately $819.6 million. For the year ended December 31, 2021, net interest expense was $242.6 million, compared to $180.5 million in 2020. This increase was primarily due to a lower amount of interest being capitalized to capital projects in 2021, compared to 2020, due to a portion of our Solothurn facility being placed in service in 2021 and lower interest income earned on our investments in 2021, compared to 2020. On April 30, 2020, we issued our senior unsecured notes for an aggregate principal amount of $3.0 billion (2020 Senior Notes). We expect a moderate increase in interest expense in 2022, compared to 2021, primarily due to lower interest being capitalized as a result of assets being placed into service during 2021. For additional information on our 2020 Senior Notes, please read Note 12, Indebtedness, to our Our effecff tive 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 expense, the levels of certain deductions and credits, acquisitions and licensing transactions. For the year ended December 31, 2021, compared to 2020, the decrease in our effective tax rate, excluding the impact of the Neurimmune deferred tax asset, as discussed below, was primarily due to the change in the territorial mix of our profitability, which included the adverse effect of generic competition for TECFIDERA in the U.S. market, the tax impacts of the BIIB111 and BIIB112 impairment charges and the impact of the non-cash ts of changes in the value of our equity tax effecff investments, where we recorded net unrealized losses in 2021 and net unrealized gains in 2020. Our 2020 effective tax rate also reflected an income tax expense related to the establishment of a valuation allowance against certain deferred tax assets, the realization of which is dependent on future sales of TECFIDERA in the U.S. In addition, for the year ended December 31, 2021, compared to 2020, the decrease in our effective tax rate was significantly impacted by a current year deferred tax benefit in Switzerland resulting from the accelerated approval of ADUHELM by the FDA in the U.S., recognized during the second 75 percentage in Samsung Bioepis from approximately 5.0% to approximately 49.9%. The share purchase transaction was completed in November 2018. As of December 31, 2021, 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. We recognize amortizat ences resulting rr from our November 2018 investment. ion on certain basis differ ff Certain officers and affilff iates of our joint venture partner, Samsung BioLogics, are currently subject to ongoing criminal proceedings that we continue to monitor. While these proceedings 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, 2021, we rec gognized net income on our investment off $$34.9 million, r feflecti gng our share off Sam g fprofits, net operat ging ffoffset by amortirr zation fof basis $$29.7 million. sung Bioepis' fof tax total ging $$64.6 million ences total ging fff fdifffer For the year ended December 31, 2020, we recognized net income on our investment of $5.3 million, reflecting our share of Samsung Bioepis' operating profits, net of tax totaling $45.3 million offset by amortirr zation of basis differ ences totaling $40.0 million. ff Net income on our investment for the year ended December 31, 2021, reflects a $31.2 million benefit related to the release of a valuation allowance on deferred tax assets associated with Samsung Bioepis. The valuation allowance was released in the second quarter of 2021 based on a consideration of the positive and negative evidence, including the historic earnings of Samsung Bioepis. For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborativ consolidated financial statements included in this report.r e and Other Relationships, to our rr quarter of 2021. We recorded a net deferred tax asset of approximately $490.0 million during the second quarter of 2021. The net deferred tax asset is comprised of approximately $945.0 million of gross deferred tax asset, reduced by approximately $455.0 million of unrecognized tax benefit. During the fourthrr quarter of 2021 we recorded a valuation allowance of approximately $390.0 million related to this deferred tax asset. The deferred tax benefit relates to Neurimmune's tax basis in ADUHELM, the realization of which is dependent on future sales of ADUHELM and approval of the Swiss cantonal tax authorities, with an equal and offset assigned to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc. ting amount ff For additional information on our collaboration arrangement with Neurimmune, please read Note 19, rr Investments in Variable Interest consolidated financial statements included in this report.r Entities, to our For additional information on our income taxes please read Note 16, Income Taxes, to our consolidated financial statements included in this report.r Accounting for Uncertainty in Income Taxes additional information on our uncertain tax positions and income tax rate reconciliation for 2021, 2020 and 2019, please read Note 16, I6 ncome Taxes, to our consolidated financial statements included in this report. Equity in (Income) Loss of Investee, Net of Tax In February 2rr 012 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 76 Noncontrolling Interests, Net of Tax Our consolidated financial statements include the financial results of our variable interest entity, Neurimmune, as we determined that we are the primary br eneficiary. For 2021 the change in net income (loss) attributable to noncontrolling interests, net of tax, was primarily due to the recognition of a current year deferred tax benefit associated with the accelerated approval of ADUHELM by the FDA in the U.S. During the second quarter of 2021 we recorded a net deferred tax asset of approximately $490.0 million related to Neurimmune's tax basis in ADUHELM, the realization of which is dependent on future sales of ADUHELM and approval of the Swiss cantonal tax authorities. During the fourthr quarter of 2021 we recorded a valuation allowance of approximately $390.0 million related to this deferred tax asset. There is an equal ting amount assigned to net income (loss) ff and offset attributable to noncontrolling interests, net of tax in our consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc. For 2021 the change in net income (loss) attributable to noncontrolling interests, net of tax, was also due to the $100.0 million milestone payment to Neurimmune related to the launch of ADUHELM in the U.S. during the second quarter of 2021. For 2020 the change in net income (loss) attributable to noncontrolling interests, net of tax, was primarily due to the $75.0 million milestone payment to Neurimmune related to the completed submission of the BLA for the approval of ADUHELM to the FDA. For additional information on our collaboration agreement with Neurimmune, please read Note 19, Investments in Variable Interest Entities, to our consolidated financial statements included in this report. For additional information on our income taxes please read Note 16, Income Taxes, to our consolidated financial statements included in this report. 77 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 nm Not meaningful For the year ended December 31, 2021, certain significant cash flows were as follows: • • • • • • $3.6 billion in net cash flow provided by operating activities, which reflected an upfront payment of $125.0 million made in connection with entering into our collaboration with InnoCare and recognized as research and development expense; $1.8 billion used for share repurchases; $170.0 million used in connection with our Exchange Offer; $258.1 million used for purchases of property, plant and equipment; $247.9 million in total net payments for income taxes; and $100.0 million milestone payment to Neurimmune. For the year ended December 31, 2020, certain significant cash flows were as follows: • $4.2 billion in net cash flows provided by operating activities, which reflected $1.9 billion of upfront payments and the premium on stock purchases made in connection with entering into our collaborations with Sage, Denali and Sangamo and recognized as research and development expense; • $6.7 billion used for share repurchases; • $3.0 billion in proceeds received from the 78 As of December 31, 2021 2020 % Change 2021 vs. 2020 $ $ $ $ $ $ 2,261.4 $ 1,541.1 892.0 4,694.5 $ 999.1 $ 6,274.0 7,273.1 $ 1,331.2 1,278.9 772.1 3,382.2 — 7,426.2 7,426.2 7,856.5 $ (4,298.2) 3,558.3 $ 6,887.1 (3,742.2) 3,144.9 69.9 % 20.5 15.5 38.8 % nm (15.5) (2.1)% 14.1 % 14.9 13.1 % issuance of our 2020 Senior Notes; • • • • • • $1.5 billion payment made for the redemption of our 2.90% Senior Notes due September 15, 2020, prior to their maturity; $906.7 million in total net payments for income taxes; $441.0 million used to purchase Sage common stock; $423.7 million used to purchase Denali common stock; $141.8 million used to purchase Sangamo common stock; and $424.8 million used for purchases of property, plant and equipment. Overview We have historically financed our operating and capital expenditures primarily through cash flow earned through our operations. We expect our operating expenditures, partirr cularly 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 primarily through our cash flow earned from our operations as well as our existing cash resources. We believe generic competition for TECFIDERA in the U.S. will continue to reduce our cash flow from operations in 2022 and will have a significant adverse impact on our future cash flow from operations. Additionally, in 2022 we will repay or refinance $1.0 billion related to our 3.625% Senior Note due September 15, 2022. ur operating, working capital, 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 off 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. 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 Discii included in this report. About Market Riskii losuresrr 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. such investment. The investment is also subject to foreign currency exchange fluctuations. In connection with our collaboration with Sangamo, we purchased approximately 24 million shares of Sangamo common stock in April 2020. As of December 31, 2021 and 2020, the fair value of this investment was $173.7 million and $333.7 million, respectively. In connection with our collaboration with Denali, we purchased approximately 13 million shares of Denali common stock in September 2020. As of December 31, 2021 and 2020, the fair value of this investment was $550.7 million and $935.7 million, respectively. In connection with our collaboration with Sage, we purchased approximately 6.2 million shares of Sage common stock in December 2020. As of December 31, 2021 and 2020, the fair value of this investment was $231.9 million and $433.9 million, respectively. Our investment in Ionis common stock had a fair value of $87.5 million and $249.1 million as of December 31, 2021 and 2020, respectively. The decrease was partially due to the sale of a portirr on of our investment in Ionis common stock during the first quarter of 2021. For additional information on our collaboration arrangements with Samsung Bioepis, Sangamo, Denali, Sage and Ionis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.r Borrowings As of December 31, 2021, we had cash, cash In February 2021 we completed our Exchange equivalents and marketable securities totaling approximately $4.7 billion compared to approximately $3.4 billion as of December 31, 2020. The change in cash, cash equivalents and marketable securities at December 31, 2021, from December 31, 2020, was primarily due to net cash flow provided by operating activities, partir ally offset repurchases and capital expenditures, cash payments made in connection with our Exchange Offer and a milestone payment made to Neurimmune. by cash used for share ff Investments and other assets in our consolidated balance sheet as of December 31, 2021 and 2020, include the carrying value of our investment in Samsung Bioepis of $599.9 million and $620.2 million, respectively. As Samsung Bioepis is a privately-held investment in Samsung Bioepis may be limited and we may realize significantly less than the value of entity, our ability to liquidate our yy Offer, consisting of the following: • • $624.6 million aggregate principal amount of our 2045 Senior Notes was exchanged for $700.7 million aggregate principal amount of our 2051 Senior Notes and approximately $151.8 million of aggregate cash payments; and $8.9 million aggregate principal amount of our 2045 Senior Notes was redeemed for approximately $12.1 million of aggregate cash payments, excluding accrued and unpaid interest. In April 2020 we issued our 2020 Senior Notes for an aggregate principal amount of $3.0 billion, consisting of the following: • $1.5 billion aggregate principal amount of 2.25% Senior Notes due May 1, 2030; and 79 • $1.5 billion aggregate principal amount of 3.15% Senior Notes due May 1, 2050. The following is a summary or f our currently outstanding senior secured notes issued in 2015 (2015 Senior Notes): • • • $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 $1.12 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2045. Our 2020 Senior Notes and our 2015 Senior Notes were issued at a discount, which are amortized as additional interest expense over the period from issuance through maturity. For a summary orr f the fair values of our outstanding borrowings as of December 31, 2021 and 2020, please read Note 7, Fair Value Measurements, to our consolidated financial statements included in this report. 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. As of December 31, 2021 and 2020, we had no outstanding borrowings and were in compliance with all covenants under this facility. Working Capital Working capital is defined as current assets less current liabilities. Working capital was $3.6 billion and $3.1 billion as of December 31, 2021 and 2020, respectively. The change in working capital reflects an increase in total current assets of approximately $969.4 million and an increase in total current liabilities of approximately $556.0 million. The increase in total current assets was primarily driven by an increase in net cash, cash equivalents and marketable securities, due to net cash flow provided by operating activities, partially offset by cash used for share repurchases and capital expenditures, cash payments made in connection with our Exchange Offer and a milestone payment made to Neurimmune. The increase in total current liabilities was primarily due to the reclassification of $1.0 billion of our Senior Notes due September 15, 2022, to current liabilities from notes payable, as these Senior Notes are due within one year. This increase was partially offset by a reduction in accounts payable as well as accrued expense and other, which was primarily related to decreases in the accrual of contingent payments, the accrual for employee compensation and benefits and the fair values of derivative liabilities. Share Repurchase Programs In October 2020 our Board of Directors authorized our 2020 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock. Our 2020 Share Repurchase Program does not have an expiration date. All share repurchases under our 2020 Share Repurchase Program will be retired. Under our 2020 Share Repurchase Program, we repurchased and retired approximately 6.0 million and 1.6 million shares of our common stock at a cost of approximately $1.8 billion and $400.0 million during the years ended December 31, 2021 and 2020, respectively. Approximately $2.8 billion remained available under our 2020 Share Repurchase Program as of December 31, 2021. In December 2019 our Board of Directors authorized our December 2019 Share Repurchase Program, which was a program to repurchase up to $5.0 billion of our common stock that was completed as of September 30, 2020. All shares repurchased under our December 2019 Share Repurchase Program were retired. Under our December 2019 Share Repurchase Program, we repurchased and retired approximately 16.7 million shares of our common stock at a cost of approximately $5.0 billion during the year ended December 31, 2020. In March 2019 our Board of Directors authorized our March 2019 Share Repurchase Program, which was a program to repurchase up to $5.0 billion of our common stock that was completed as of March 31, 2020. All shares repurchased under our March 2019 Share Repurchase Program were retired. Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 4.1 million and 14.7 million shares of our common stock at a cost of approximately $1.3 billion and $3.7 billion during the years ended December 31, 2020 and 2019, respectively. 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 that 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. 80 Cash Flow The following table summarizes our cash flow activity: (In millions, except percentages) 2021 2020 2019 For the Years Ended December 31, % Change 2021 vs. 2020 2020 vs. 2019 Net cash flow provided by operating activities $ 3,639.9 $ 4,229.8 $ 7,078.6 (13.9)% (40.2)% Net cash flow provided by (used in) investing activities Net cash flow used in financing activities (563.7) (2,086.2) (608.6) (5,272.7) 470.5 (5,860.4) 7.4 60.4 (229.4) 10.0 primarily due to lower net income. Net income in 2020 reflected approximately $1,084.0 million, $601.3 million and $208.0 million of upfront payments made in connection with entering into our collaborations with Sage, Denali and Sangamo, respectively. Investing Activities For 2021 compared to 2020, the decrease in net cash flow used in investing activities was primarily due to the purchases of the common stock of Sangamo, Denali and Sage totaling $1.0 billion during 2020 as well as higher capital expenditures and acquisitions of IPR&D and other intangible assets in 2020, partir ally offset from the sale of marketable securities in 2020 as compared to the current year. by higher net proceeds received ff Financing Activities For 2021 compared to 2020, the decrease in net cash flow used in financing activities was primarily due to the greater number of shares repurchased in 2020 as compared to the comparative period in 2021, partir ally offset our Exchange Offer Neurimmune in 2021. by cash used in connection with and a milestone payment to ff ff nm Not meaningful Operating Activities Cash flow from operating activities represents 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 srr ource 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 2021 compared to 2020, the decrease in net cash flow provided by operating activities was 81 Contractual Obligations and Off-Balance Sheet Arrangements Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2021, 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. (In millions) Non-cancellable operating leases (1)(2) Long-term debt obligations (3) Purchase and other obligations (4) Defined benefit obligation Payments Due by Period Total Less than 1 Year 1 to 3 Years 3 to 5 Years After 5 Years $ 321.1 $ 71.7 $ 112.8 $ 71.3 $ 11,580.3 982.9 132.4 1,259.9 230.1 — 465.4 509.1 — 2,126.8 239.2 — 65.3 7,728.2 4.5 132.4 Total contractual obligations $ 13,016.7 $ 1,561.7 $ 1,087.3 $ 2,437.3 $ 7,930.4 r and equipment for use in our operations. Amounts reflected within the table above detail future minimum rental (1) We lease properties 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 our 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 2015 Senior Notes and our 2020 Senior Notes, including principal and interest payments. (4) Purchase and other obligations include $633.0 million related to the remaining payments on a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings (the Transition Toll Tax) and $10.8 million related to the fair value of net liabilities on derivative contracts. rr Royalty Payments TYSABRI We are obligated to make contingent payments of 18.0% on annual worldwide net sales of TYSABRI up to $2.0 billion and 25.0% on annual worldwide net sales of TYSABRI that exceed $2.0 billion. Royalty payments are recognized as cost of sales in our consolidated statements of income. SPINRAZA We make royalty payments on annual worldwide net sales of SPINRAZA using a tiered royalty rate between 11.0% and 15.0%, which are recognized as cost of sales in our consolidated statements of income. VUMERITY In October 2019 the FDA approved VUMERITY quarter of for the treatment of RMS. During the fourthrr 2021 VUMERITY was approved for the treatment of RRMS in the E.U., Switzerland and the U.K. Under our agreement with Alkermes Pharma Ireland Limited, a subsidiary orr royalty payments to Alkermes on worldwide net sales of VUMERITY using a royalty rate of 15.0%, which are recorded as cost of sales in our consolidated statements of income. f Alkermes plc (Alkermes), we make In October 2019 we entered into a new supply agreement and amended our license and collaboration agreement with Alkermes. We have elected to initiate a technology transfer and, following 82 a transition period, to manufacture VUMERITY or have VUMERITY manufactured by a third-party we have engaged in exchange for paying an increased royalty rate to Alkermes on any portion of future worldwide net sales of VUMERITY that is manufactured by us or our designee. For additional information on our collaboration arrangement with Alkermes, please read Note 18, Collaborativ e and Other Relationships, to our consolidated financial statements included in this report.r rr Contingent Consideration related to Business Combinations In connection with our acquisition of Convergence Pharmaceuticals Ltd. we agreed to make additional payments based upon the achievement of certain milestone events. We recognized the contingent consideration liabilities associated with this acquisition at their fair value on the acquisition date and revalue these obligations each reporting period. We may pay up to approximately $400.0 million in remaining milestones related to this acquisition. Contingent Development, Regulatory and Commercial Milestone Payments Based on our development plans as of December 31, 2021, we could trigger potential future milestone payments to third-parties of up to approximately $10.0 billion, including approximately $2.0 billion in development milestones, approximately $900.0 million in regulatory milestones and approximately $7.1 billion in commercial milestones, as part orr f 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, 2021, 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. If certain clinical and commercial milestones are met, we may pay up to $133.9 million in milestones in 2022 under our current agreements. Additionally, if aducanumab receives regulatory approval in the jurisdictions where we have submitted filings, we may pay up to $100.0 million in additional milestones to Neurimmune, which includes $50.0 million if launched in three or more countries in the E.U. and $50.0 million if launched in Japan. Milestones payable to Neurimmune are shared expenses under the ADUHELM Collaboration Agreement. For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report. estimate using a probability-weighted estimate of future manufacturing activity and may further 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. For additional information on the divestiture of r Denmark manufacturing operations, our Hillerød, please read Note 3, Divestitures, to our consolidated financial statements included in this report. 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, 2021, we have approximately $106.8 million of liabilities associated with uncertain tax positions. As of December 31, 2021 and 2020, we have accrued income tax liabilities of approximately $633.0 million and $697.0 million, respectively, under the Transition Toll Tax. Of the amounts accrued as of December 31, 2021, approximately $72.7 million is expected to be paid within one year. The Transition Toll Tax will be paid in installments over an eight--year period, which started in 2018, and will not accrue interest. Other Off-Balance Sheet Arrangements For additional information on our collaboration We do not have any relationships with entities arrangement with Neurimmune, please read Note 19, Investments in Variable Interest rr consolidated financial statements included in this report. Entities, to our Other Funding Commitments As of December 31, 2021, 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 expense of approximately $27.3 million in our consolidated balance sheets for expenditures incurred by CROs as of December 31, 2021. We have approximately $676.1 million in cancellable future commitments based on existing CRO contracts as of December 31, 2021. As part orr f the sale of our Hillerød, r Denmark manufacturing operations to FUJIFILM, we 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 do not expect to incur an adverse commitment obligation associated with such guarantees. We developed this 83 ofteff n referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-bff alance 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 primaryr beneficiary. New Accounting Standards For a discussion of new accounting standards 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, 2021, please read Note 20, Litigation, to our consolidated financial statements included in this report. ii 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 amounts of assets, liabilities, equity, reportedr revenue and expense and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and assumptions. 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 carryir ng values of assets, liabilities and equity and the amount of revenue and expense. Actual results may differ 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. from ff Revenue Recognition We recognize revenue 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 revenue following the five-step model prescribed under Financial Accounting Standards Board (FASB) Accounting Standards Codification 606, Revenue froff m Contracts wtt ith Customers: (i) identify contract(s) with a customer; (ii) ff he performance obligations in the contract; identify t (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. Product Revenue 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 partner s. 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 iated discounts and allowances related yy privately-negot to our products. rr Product revenue is 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. 84 Reserves for Discounts and Allowances Product revenue is recorded net of reservesrr 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 reserverr established for these variable consideration components do not differ materially fro our historical practices. Product revenue reserves, which are classified as a reduction in product revenue, are generally characterized in the following categories: discounts, contractual adjustments and returns. These reserves are based on estimates of the r equirements, 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 partyr other than our customer). Our estimates of reservesrr 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 r 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 revenue 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. As of December 31, 2021, a 10.0% change in our discounts, contractual adjustments and reserves would have resulted in a decrease of our pre-tax earnings by approximately $359.7 million. 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 revenue. To the extent we can demonstrate a separable benefit and fair value for these services we classify t payments in selling, general and administrative expense in our consolidated statements of income. ff hese For additional information on our revenue, please read Note 4, Revenue, to our consolidated financial statements included in this report. these valuations, and these models require the use of significant estimates and assumptions including but not limited to: 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. The determination of obsolete or excess inventory, requires management to make estimates based on assumptions about the future demand of our products, product expiration dates, estimated future sales and our general future plans. If customer demand subsequently differ s from our forecasts, requirements for inventory wr that differ from our estimates may become necessary. ff rite-offs Although we believe that the assumptions we use in estimating inventory write-downs are reasonable, no assurance can be given that significant future changes in these assumptions or changes in future events and market conditions could result in differ ent estimates. ff During the fourthr quarter of 2021 we wrote-off approximately $120.0 million of inventory in excess of forecasted demand related to ADUHELM. As of December 31, 2021, we had approximately $223.0 million of inventory related to ADUHELM. We may record additional write-downs of ADUHELM inventory i rr proposed NCD. f the final NCD is not broader than the 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, afteff r 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 85 • • • • estimating the timing of and expected costs to complete the in-process projects; projeo cting regulatory approvals; estimating future cash flow from product sales resulting from completed products and in process projeco ts; 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 projeco transpire as estimated. ts, will Impairment and Amortization of Long-lived Assets 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 carryirr ng 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,tt including IPR&D. If the carryirr ng 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 amortirr zation and impairment of acquired intangible assets in our consolidated statements of income. Based on our most recent impairment assessment we incurred impairment charges of approximately $629.3 million for the year ended December 31, 2021, mainly related to the discontinuation of IPR&D programs. For additional information on our impairments, Note 6, Intangible Assets att nd Goodwill, to our consolidated financial statements included in this report. 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. 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 revenue generated from the products underlying the related intangible assets. An analysis of the anticipated lifetime revenue 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 revenue of our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products. For additional information on the impairment charges related to our long-lived assets during 2021, 2020 and 2019, please read Note 6, Intangible Assets and Goodwill, to our consolidated financial statements included in this report. Contingent Consideration We record contingent consideration resulting ff , we from a business combination at its fair value on the acquisition date. Each reporting period thereafter 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 observabrr le 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 86 ff iffer ences resulting from 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 dr differ ing treatment of items for tax and financial ff reportir ng purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Upon our election in the fourthr quarter of 2018 to record deferred taxes for global intangible low-taxed income (GILTI), we have included amounts related to GILTI taxes within temporary drr ence. ff iffer 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 portir on 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 t We are subject to certain risks that may affecff our results of operations, cash flow and fair values of assets and liabilities, including volatility in foreign currency exchange rates, interest rate movements and equity price exposure as well as changes in economic conditions in the markets in which we operate as a result of the COVID-19 pandemic. 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 flow 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. While the financial results of our global activities in U.S. dollars, the functional currency for are reportedr 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, oftenff ways that are diffiff cult to predict. In partirr cular, as the U.S. dollar strengthens versus other currencies, the value of the non-U.S. revenue will decline when in U.S. dollars. The impact to net income as reportedr a result of a strengthening U.S. dollar will be partirr ally mitigated by the value of non-U.S. expense, which will also decline when reportedr in U.S. dollars. As the U.S. dollar weakens versus other currencies, the value of the non-U.S. revenue and expense will increase when reportedr in U.S. dollars. in During the second quarter of 2018 the International Practices Task Force of the Center for Audit Quality categorized Argentina as a country wrr projected three-year cumulative inflation rate greater than 100.0%, 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, 2021, and is not expected to have a material impact on our results of operations or financial position in the future. ith a 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 revenue and operating expense. We use foreign currency forward contracts to manage foreign currency risk, with the majora ity 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, Derivativv ve Instruments, to our consolidated financial statements included in this report. Our ability to mitigate the impact of foreign currency exchange rate changes on revenue 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 flow from these contracts as operating activities in our are reportedr consolidated statements of cash flow. Balance Sheet Risk Management Hedging Program r We also use forward contracts to mitigate the n balance foreign currency exposure related to certai sheet items. The primary orr bjective of our balance sheet risk management program is to mitigate the exposure of foreign currency denominated net monetary assets and liabilities of foreign affilff iates. In these instances, we principally utilize currency forward contracts. We have not elected hedge accounting for the balance sheet related items. The cash flow from these contracts are reported as operating activities in our consolidated statements of cash flow. 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. 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, 2021 and 2020, a hypothetical adverse 10.0% movement in foreign currency exchange rates compared to the U.S. dollar across all maturities 87 would result in a hypothetical decrease in the fair value of forward contracts of approximately $333.1 million and $458.2 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 t ff he market risk of such instruments is subject to assumptions and actual impact could be significantly diffeff rent. 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 the South Korean won as a result of our approximately 49.9% ownership interest in Samsung Bioepis. We entered into foreign currency forward contracts to hedge changes in the spot rate over the next 10 months. As of December 31, 2021 and 2020, a hypothetical adverse 10.0% movement would result in a hypothetical decrease in fair value of approximately $58.7 million and $56.9 million, respectively. The estimated fair value was determined by measuring the impact of the hypothetical spot rate movement on outstanding forward contracts. We plan to unwind our foreign currency forward contracts in conjunction with the closing of our proposed sale of our ownership interest in Samsung Bioepis to Samsung Biologics. Closing of the transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities registration statement filed by Samsung Biologics and satisfaction of certain regulatory ar nd other customary closing conditions. 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 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, 2021 and 2020, we estimate that such hypothetical 100 basis point adverse movement would result in a hypothetical loss in fair value of approximately $14.3 million and $13.2 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. 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 88 to cash and cash equivalents and investments by investing in a broad and diverse range of financial instruments. 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. We operate in certain countries where weakness in economic conditions, including as a result of the COVID-19 pandemic, 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, 2021 and 2020. Equity Price Risk Our strategic investment portfolio includes investments in equity securities of certain biotechnology companies. While we are holding such securities, we are subject to equity price risk, and this may increase the volatility of our income in future periods due to changes in the fair value of equity investments. We may sell such equity securities based on our business considerations, which may include limiting our price risk. Changes in the fair value of these equity securities are impacted by the volatility of the stock market and changes in general economic conditions, among other factors. The potential change in fair value for equity price sensitive instruments has been assessed on a hypothetical 10.0% adverse movement. As of December 31, 2021 and 2020, a hypothetical adverse 10.0% movement would result in a hypothetical decrease in fair value of approximately $104.8 million and $188.8 million, respectively. ITEM 8. SUPPLEMENTARY DATA FINANCIAL STATEMENTS AND The information required by this Item 8 is contained on pages F-1 through F-78 of this report and is incorporated herein by reference. CHANGES IN AND ITEM 9. DISAGREEMENTS 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, 2021. 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 that we file or submit under the in the reportsrr Securities Exchange Act is recorded, processed, summarized and reportedrr the time periods specified in the U.S. Securities and Exchange Commission's rules and forms; and within (b) such information is accumulated and communicated to our management, including our principal executive officer financial officer, as appropriate to allow timely decisions regarding required disclosure. and principal ff 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 reportirr ng during the quarter ended December 31, 2021, that have materially affecff are reasonably likely to materially affecff control over financial reportirr ng. t, our internal ted, or Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reportir ng. Internal control over financial 89 reportir ng 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 reportir ng and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reportir ng 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 reportirr ng 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 rr our internal control over financial reporting December 31, 2021. In making this assessment, by the management used the criteria set forthrr Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control — Integrated Framework. as of Based on our assessment, our management has concluded that, as of December 31, 2021, our internal control over financial reporting based on those criteria. is effective rr The effecff r tiveness of our internal control over financial reporting as of December 31, 2021, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their attestation report, which is included herein. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 90 ITEM 10. OFFICERS AND CORPORATE GOVERNANCE DIRECTORS, EXECUTIVE The information concerning our executive EE tive Offiff cersrr in Item 1 of this report.r under the heading Inforff mation officers is set forthr about our Execu 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 offiff cer or controller, and persons performing similar functions, is posted on our website, www.biogen.com, under the “Corporate Governance” subsection of the “Investorsrr ” 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 2022 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 Mattersrr ” and “Corporate Governance at Biogen” contained in the proxy statement for our 2022 annual meeting of stockholders. PART III SECURITY OWNERSHIP OF ITEM 12. 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 Ownershrr ip” and “Equityt Compensation Plan Inforff mation” contained in the proxy statement for our 2022 annual meeting of stockholders. CERTAIN RELATIONSHIPS AND ITEM 13. 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 TranTT sactions” and “Corporate Governance at Biogen” contained in the proxy statement for our 2022 annual meeting of stockholders. ITEM 14. AND SERVICES PRINCIPAL ACCOUNTANT FEES 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 2022 annual meeting of stockholders. 91 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES a. (1) Consolidated Financial Statements: The following financial statements are filed as part orr f this report: Financial Statements Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Cash Flow Consolidated Statements of Equity Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238) 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-77 The exhibits listed on the Exhibit Index beginning on page 93, which is incorporated herein by reference, are filed or furnished as part or f this report or are incorporated into this report brr y 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. 92 Exhibit No. 2.1† 2.2 3.1 3.3 3.4 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8+ 4.9 10.1 10.2 10.3† 10.4† 10.5 10.7* 10.9* 10.10* EXHIBIT INDEX p 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. Certificate of Amendment of Biogen Inc.'s Amended and Restated Certificate of Incorporation, as amended. Filed as Exhibit 3.1 to our Current Report on Form 8-K filed on June 8, 2021. Fourth Amended and Restated Bylaws. Filed as Exhibit 3.1 to our Current Report on Form 8-K filed on June 9, 2017. Indenture, dated April 30, 2020, between Biogen Inc. and U.S. Bank Second Supplemental National Association, including the forms of Global Notes attached as Exhibit A and Exhibit B, respectively, thereto. Filed as Exhibit 4.2 to our Current Report on Form 8-K filed on April 30, 2020. 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. Third Supplemental Indenture, dated February 16, 2021, between Biogen Inc. and U.S. Bank National Association. Filed as Exhibit 4.2 to our Current Report on Form 8-K filed on February 16, 2021. Form of 3.250% Senior Notes due 2051, in the form of a Global Note bearing a private placement legend. Filed as Exhibit 4.3 to our Current Report on Form 8-K filed on February 16, 2021. Form of 3.250% Senior Notes due 2051, in the form of a Global Note bearing a Regulation S legend. Filed as Exhibit 4.4 to our Current Report on Form 8-K filed on February 16, 2021. Description of Securities. Registration Rights Agreement, dated February 16, 2021, between Biogen Inc. and Deutsche Bank Securities Inc. and Citigroup Global Markets, Inc. with respect to the 3.250% Senior Notes due 2051. Filed as Exhibit 4.5 to our Current Report on Form 8-K filed on February 16, 2021. 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. 93 Exhibit No. 10.11* 10.12* 10.13* 10.14* 10.15* 10.16* 10.17* 10.18* 10.19* * 10.21* 10.22* 10.23* 10.24* 10.25* 10.26* 10.27* * 10.29* 10.30* 10.31* 10.32* 10.33* 10.34* p Description 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. 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, as amended. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021. 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. Biogen Inc. Executive Severance Policy - U.S. Executive Vice President, as amended effective July 13, 2020. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. 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. 94 p 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 Michael McDonnell dated July 16, 2020. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. 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 of Alfred W. Sandrock, Jr. dated May 7, 2013. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. Letter regarding employment arrangement of Alfred Sandrock dated October 19, 2015. Filed as Exhibit 10.37 to our Annual Report on Form 10-K for the year ended December 31, 2015. Letter regarding employment arrangement of Chirfi Guindo dated October 12, 2017. Filed as Exhibit 10.41 to our Annual Report on Form 10-K for the year ended December 31, 2020. 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. Separation Agreement between Biogen Inc. and Jeffrey Capello dated July 16, 2020. Filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Joint Venture Agreement, dated December 6, 2011, by and between Samsung BioLogics Co., Ltd. and Biogen Therapeutics Inc. (f/k/a Biogen Idec Therapeutics Inc.), as amended February 28, 2012, September 29, 2014, and February 20, 2019. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. 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, 2021, formatted in iXBRL (Inline Extensible Business Reportinr g 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 Flow, (v) the Consolidated Statements of Equity and (vi) Notes to Consolidated Financial Statements. Exhibit No. 10.35* 10.36* 10.37* 10.38* 10.39* 10.40* 10.41* 10.42* 10.43* 10.44 21+ 23+ 31.2+ .1+ 101+ * † + Management contract or compensatory plan or arrangement. Confidential treatment has been granted or requested with respect to portions of this exhibit. Exhibit filed with the SEC, but not printed herein. 95 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report trr o 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 3rr , 2022 96 Pursuant to the requirements of the Securities Exchange Act of 1934, this report hr following persons on behalf of the registrant and in the capacities and on the dates indicated. as been signed below by the Name y Capacity p Date /S/ MICHEL VOUNATSOS Michel Vounatsos /S/ MICHAEL R. MCDONNELL Michael R. McDonnell /S/ ROBIN C. KRAMER Robin C. Kramer /S/ STELIOS PAPADOPOULOS Stelios Papadopoulos ALEXANDER J. DENNER /S/ Alexander J. Denner /S/ CAROLINE D. DORSA Caroline D. Dorsa /S/ MARIA C. FREIRE Maria C. Freire /S/ WILLIAM A. HAWKINS William A. Hawkins /S/ WILLIAM D. JONES William D. Jones /S/ NANCY L. LEAMING Nancy L. Leaming JESUS B. MANTAS /S/ Jesus B. Mantas /S/ RICHARD C. MULLIGAN Richard C. Mulligan /S/ BRIAN S. POSNER Brian S. Posner ERIC K. ROWINSKY /S/ Eric K. Rowinsky /S/ STEPHEN A. SHERWIN Stephen A. Sherwin Director and Chief Executive Officer (principal executive officer) February 3rr , 2022 Executive Vice President and Chief Financial Officer (principal financial officer) February 3rr , 2022 Senior Vice President, Chief Accounting Officer (principal accounting offiff cer) February 3rr , 2022 Director and Chairman of the Board of Directors February 3rr , 2022 Director February 3, 2022 Director February 3, 2022 Director February 3rr , 2022 Director February 3, 2022 Director February 3rr , 2022 Director February 3rr , 2022 Director February 3rr , 2022 Director February 3rr , 2022 Director February 3rr , 2022 Director February 3, 2022 Director February 3rr , 2022 97 BIOGEN INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Balance Sheets Consolidated Statements of Cash Flow Consolidated Statements of Equity Notes to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 238) Page Number F-2 F-3 F-4 F-5 F-6FF F-9FF F-77 F-1 BIOGEN INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) For the Years Ended December 31, 2020 2019 2021 Revenue: Product, net Revenue from anti-CD20 therapeutic programs Other Total revenue Cost and expense: Cost of sales, excluding amortizrr ation and impairment of acquired intangible assets Research and development Selling, general and administrative Amortizrr ation and impairment of acquired intangible assets Collaboration profit (loss) sharing (Gain) 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 expense Income from operations Other income (expense), net Income before income tax expense and equity in loss of investee, net of tax Income tax (benefit) expense Equity in (income) 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. $ 8,846.9 $ 10,692.2 $ 11,379.8 1,658.5 476.3 10,981.7 1,977.8 774.6 13,444.6 2,290.4 707.7 14,377.9 2,109.7 2,501.2 2,674.3 881.3 7.2 — (50.7) 18.0 — 8,141.0 2,840.7 (1,095.5) 1,745.2 52.5 (34.9) 1,727.6 171.5 1,805.2 3,990.9 2,504.5 464.8 232.9 (92.5) (86.3) 75.0 — 8,894.5 4,550.1 497.4 5,047.5 992.3 (5.3) 4,060.5 59.9 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 — $ $ $ 1,556.1 $ 4,000.6 $ 5,888.5 10.44 $ 10.40 $ 24.86 $ 24.80 $ 149.1 149.6 160.9 161.3 31.47 31.42 187.1 187.4 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. Other comprehensive income: 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 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 For the Years Ended December 31, 2020 2019 2021 $ 1,556.1 $ 4,000.6 $ 5,888.5 (3.6) 232.8 34.0 21.5 (92.4) 192.3 (2.8) (186.8) (33.6) (33.5) 92.9 (163.8) 3,836.8 60.9 8.2 (26.9) 21.6 (1.5) 103.8 105.2 5,993.7 (0.4) Comprehensive income attributable to Biogen Inc. Comprehensive income (loss) attributable to noncontrolling interests, net of tax 1,748.4 172.1 Comprehensive income $ 1,920.5 $ 3,897.7 $ 5,993.3 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, 2021 2020 Current assets: Cash and cash equivalents Marketable securities Accounts receivable, net Due from anti-CD20 therapeutic programs Inventoryr 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 expense and other Total current liabilities Notes payable Deferred tax liability Long-term operating lease liabilities Other long-term liabilities Total liabilities LIABILITIES AND EQUITY $ $ Commitments, contingencies and guarantees (Notes 21 and 22) Equity: Biogen Inc. shareholders’ 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 srr tock, at cost; 23.8 million and 23.8 million shares, respectively Total Biogen Inc. shareholders’ equity Noncontrolling interests Total equity Total liabilities and equity See accompanying notes to these consolidated financial statements. F-4 $ 23,877.3 $ $ 2,261.4 $ 1,541.1 1,549.4 412.3 1,351.5 740.8 7,856.5 892.0 3,416.4 375.4 2,221.3 5,761.1 1,415.1 1,939.5 1,331.2 1,278.9 1,913.8 413.5 1,068.6 881.1 6,887.1 772.1 3,411.5 433.3 3,084.3 5,762.1 1,369.5 2,899.0 23,877.3 $ 24,618.9 999.1 $ 174.7 589.2 2,535.2 4,298.2 6,274.0 694.5 330.4 1,320.5 12,917.6 — 0.1 68.2 (106.7) 13,911.7 (2,977.1) 10,896.2 63.5 10,959.7 — 142.0 454.9 3,145.3 3,742.2 7,426.2 1,032.8 402.0 1,329.6 13,932.8 — 0.1 — (299.0) 13,976.3 (2,977.1) 10,700.3 (14.2) 10,686.1 24,618.9 BIOGEN INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (In millions) Cash flow from operating activities: Net income Adjustments to reconcile net income to net cash flow from operating activities: Depreciation and amortization Impairment of intangible assets Excess and obsolescence charges related to inventory Acquired in-process research and development Share-based compensation Contingent consideration (Gain)/loss on divestiture of Hillerød, Denmark manufacturing operations Deferred income taxes (Gain) loss on strategic investments (Gain) loss on equity method investment Other Changes in operating assets and liabilities, net: Accounts receivable Due from anti-CD20 therapeutic programs Inventory Accrued expense and other current liabilities Income tax assets and liabilities Other changes in operating assets and liabilities, net Net cash flow provided by operating activities Cash flow from investing activities: Purchases of property, plant and equipment Proceeds from sales and maturities of marketable securities Purchases of marketable securities Contingent consideration paid related to Fumapharm AG acquisition Acquisition of Nightstar Therapeutics plc, net of cash acquired Purchase of Sangamo Therapeutics, Inc. stock Purchase of Denali Therapeutics Inc. stock Purchase of Sage Therapeutics, Inc. stock Proceeds from divestiture of Hillerød, r Denmark manufacturing operations Acquired in-process research and development Acquisitions of intangible assets Proceeds from sales of strategic investments Other For the Years Ended December 31, 2020 2019 2021 $ 1,727.6 $ 4,060.5 $ 5,888.5 487.7 629.3 167.6 18.0 238.6 (50.7) — (426.8) 826.8 (34.9) 202.2 324.8 1.2 (462.4) (95.4) 230.8 (144.5) 457.2 209.7 26.6 75.0 198.3 (86.3) (92.5) 149.0 (681.8) (3.3) 104.6 2.8 176.7 (316.3) 154.2 (67.5) (137.1) 464.7 215.9 52.2 — 182.3 (63.7) 55.3 67.1 (147.3) 77.4 86.9 68.8 (63.3) (19.2) 240.2 16.1 (43.3) 3,639.9 4,229.8 7,078.6 (258.1) 3,405.4 (3,808.7) (424.8) 7,299.4 (6,397.7) — — — — — 28.1 (18.0) (18.8) 93.5 12.9 — — (141.8) (423.7) (441.0) — (75.0) (52.0) 74.9 (26.9) (514.5) 6,007.0 (5,252.6) (300.0) (744.4) — — — 923.7 — (155.0) 479.3 27.0 470.5 Net cash flow (used in) provided by investing activities (563.7) (608.6) Cash flow from financing activities: Purchase of treasury stock Payments related to issuance of stock for share-based compensation arrangements, net Repayments of borrowings and premiums paid on debt exchange Proceeds from borrowings Repayments of borrowings Net (distribution) contribution to noncontrolling interest Other Net cash flow used in financing activities Net increase (decrease) in cash and cash equivalents Effeff ct 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 (1,800.0) (6,679.1) (5,868.3) (0.7) (170.0) — — (94.4) (21.1) (2,086.2) 990.0 (59.8) 1,331.2 (4.6) — 2,967.4 (1,500.0) (71.0) 14.6 (5,272.7) (1,651.5) 69.0 2,913.7 $ 2,261.4 $ 1,331.2 $ — — — — 4.3 3.6 (5,860.4) 1,688.7 0.4 1,224.6 2,913.7 See accompanying notes to these consolidated financial statements. F-5 l a t o T y t i u q e g n i l l o r t n o c n o N s t s e r e t n i l a t o T . c n I n e g o B i l ’ s r e d o h e r a h s y t i u q e k c o t s y r u s a e r T t n u o m A s e r a h S i d e n a t e R i s g n n r a e l d e t a u m u c c A r e h t o e v i s n e h e r p m o c s s o l l a n o i t i d d A n i - i d a p l a t i p a c k c o t s n o m m o C k c o t s d e r r e f e r P t n u o m A s e r a h S t n u o m A s e r a h S Y T I U Q E F O S T N E M E T A T S D E T A D I L O S N O C ) s n o i l l i m n I ( I I I S E R A D S B U S D N A . C N I N E G O B I 9 . 2 9 1 6 . 0 6 . 7 2 7 , 1 5 . 1 7 1 ) 0 . 0 0 1 ( ) 0 . 0 0 1 ( 6 . 5 6 . 5 — — 3 . 2 9 1 1 . 6 5 5 , 1 — — — — — — — — 1 . 6 8 6 , 0 1 $ ) 2 . 4 1 ( $ 3 . 0 0 7 , 0 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( — 4 . 4 5 ) 0 . 5 5 ( 5 . 1 6 . 6 4 2 ) 0 . 0 0 8 , 1 ( — — — — — — ) 0 . 0 0 8 , 1 ( ) 0 . 0 0 8 , 1 ( ) 0 . 6 ( — 4 . 4 5 ) 0 . 5 5 ( 5 . 1 6 . 6 4 2 0 . 0 0 8 , 1 0 . 6 — — — — — — — — 7 . 9 5 9 , 0 1 $ 5 . 3 6 $ 2 . 6 9 8 , 0 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( . 3 6 7 9 3 1 $ , ) . 0 9 9 2 — — — — . 1 6 5 5 1 , ) . 1 8 6 5 1 , ( — ) . 6 2 5 ( — — — — — — — — — — — . 3 2 9 1 ( $ — — — — — — ) . 9 1 3 2 ( 4 . 4 5 ) 4 2 . ( 5 1 . . 6 6 4 2 $ . 1 0 $ . 2 6 7 1 — — — — — — — — — — — — — — — ) 0 6 . ( 2 0 . 4 0 . — — . 7 1 1 9 3 1 $ , ) . 7 6 0 1 ( $ . 2 8 6 $ . 1 0 $ . 8 0 7 1 — — — — — — — — — — — — $ $ — — — — — — — — — — — — x a t f o t e n , ) s s o l ( e m o c n i e v i s n e h e r p m o c r e h t O t s e r e t n i g n i l l o r t n o c n o n o t n o i t u b i r t s D i t s e r e t n i g n i l l o r t n o c n o n m o r f n o i t u b i r t n o c l a t i p a C e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 0 2 0 2 e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 0 2 0 2 n o i t p o k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I s n a p l e s a h c r u p k c o t s d n a d r a w a k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I n a p l d e s a b e r a h s - o t d e t a e r l e s n e p x e n o i t a s n e p m o C 1 2 0 2 , 1 3 r e b m e c e D , e c n a a B l s t n e m y a p r e h t O 0 2 0 2 , 1 3 r e b m e c e D , e c n a a B l e m o c n i t e N . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t o t s e t o n g n i y n a p m o c c a e e S 6 F - 1 . 9 3 3 , 3 1 $ ) 1 . 4 ( $ 2 . 3 4 3 , 3 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( . 4 5 5 4 , 6 1 $ ) . 2 5 3 1 ( $ l a t o T y t i u q e g n i l l o r t n o c n o N s t s e r e t n i l a t o T . c n I n e g o B i l ’ s r e d o h e r a h s y t i u q e k c o t s y r u s a e r T t n u o m A s e r a h S i d e n a t e R i s g n n r a e l d e t a u m u c c A r e h t o e v i s n e h e r p m o c s s o l l a n o i t i d d A n i - i d a p l a t i p a c k c o t s n o m m o C k c o t s d e r r e f e r P t n u o m A s e r a h S t n u o m A s e r a h S ) d e u n i t n o C ( - Y T I U Q E F O S T N E M E T A T S D E T A D I L O S N O C ) s n o i l l i m n I ( I I I S E R A D S B U S D N A . C N I N E G O B I 1 . 6 8 6 , 0 1 $ ) 2 . 4 1 ( $ 3 . 0 0 7 , 0 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( 3 . , 6 7 9 3 1 $ ) . 0 9 9 2 ( $ — $ 1 . 0 $ . 2 6 7 1 0 . 4 ) 0 . 5 7 ( ) 8 . 2 6 1 ( ) 0 . 0 0 4 ( — 5 . 0 6 0 , 4 0 . 1 9 . 9 5 0 . 4 ) 0 . 5 7 ( — — — 0 . 0 0 4 6 . 1 ) 2 . 9 3 3 ( — — ) 8 . 3 6 1 ( 6 . 0 0 0 , 4 — — — — — — — — ) 0 . 0 0 4 ( ) 0 . 0 0 4 ( ) 6 . 1 ( — — — — ) . 6 0 0 0 , 4 — ) 0 . 0 0 0 , 5 ( — ) 0 . 0 0 0 , 5 ( ) 0 . 0 0 0 , 5 ( ) 7 . 6 1 ( — — — — 0 . 0 0 0 , 5 7 . 6 1 ) . 7 8 7 8 4 , ( ) 1 . 9 7 2 , 1 ( — ) 1 . 9 7 2 , 1 ( ) 1 . 9 7 2 , 1 ( ) 1 . 4 ( — — 3 . 9 4 ) 7 . 3 5 ( ) 7 . 0 ( 5 . 4 0 2 — — — — — — 3 . 9 4 ) 7 . 3 5 ( ) 7 . 0 ( 5 . 4 0 2 — — — — — — — — ) — . 7 3 5 ( — — 1 . 9 7 2 , 1 1 . 4 ) . 1 8 0 2 1 , ( — — — — — — — — — — — — . 8 3 6 1 ( — — — — — — ) . 8 0 6 ( — ) 3 . 1 2 1 ( — ) 0 . 1 7 ( — 3 . 9 4 5 . 4 0 2 ) . 7 0 ( $ 1 . 0 $ . 0 8 9 1 — — — — — — — — — — — — — — — — — — — ) 6 . 1 ( — ) . 7 6 1 ( — ) . 1 4 ( . 2 0 . 4 0 — — — — — — — — — — — — — — — — — — $ $ — — — — — — — — — — — — — — — — x a t f o t e n , ) s s o l ( e m o c n i e v i s n e h e r p m o c r e h t O t s e r e t n i g n i l l o r t n o c n o n o t n o i t u b i r t s D i t s e r e t n i g n i l l o r t n o c n o n m o r f n o i t u b i r t n o c l a t i p a C e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 0 2 0 2 t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 r e b m e c e D e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t e R t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 0 2 0 2 t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 r e b m e c e D e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t e R t s o c e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 h c r a M t s o c e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t e R t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 h c r a M t s o c n o i t p o k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I s n a p l e s a h c r u p k c o t s d n a d r a w a k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I n a p l d e s a b e r a h s - o t d e t a e r l e s n e p x e n o i t a s n e p m o C 0 2 0 2 , 1 3 r e b m e c e D , e c n a a B l s t n e m y a p r e h t O 9 1 0 2 , 1 3 r e b m e c e D , e c n a a B l e m o c n i t e N . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t o t s e t o n g n i y n a p m o c c a e e S 7 F - I I I S E R A D S B U S D N A . C N I N E G O B I ) d e u n i t n o C ( - Y T I U Q E F O S T N E M E T A T S D E T A D I L O S N O C ) s n o i l l i m n I ( 1 . 9 3 3 , 3 1 $ ) 1 . 4 ( $ 2 . 3 4 3 , 3 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( . 4 5 5 4 6 1 $ , ) . 2 5 3 1 ( $ — $ . 1 0 $ . 0 8 9 1 l a t o T y t i u q e g n i l l o r t n o c n o N s t s e r e t n i l a t o T . c n I n e g o B i l ’ s r e d o h e r a h s y t i u q e k c o t s y r u s a e r T t n u o m A s e r a h S i d e n a t e R i s g n n r a e 3 . 4 3 . 4 — 5 . 8 8 8 , 5 — 8 . 4 0 1 ) 4 . 0 ( 2 . 5 0 1 5 . 8 8 8 , 5 — — — — — — 6 . 1 3 0 , 3 1 $ ) 0 . 8 ( $ 6 . 9 3 0 , 3 1 $ ) 1 . 7 7 9 , 2 ( $ ) 8 . 3 2 ( ) 9 . 0 2 7 , 3 ( — ) 9 . 0 2 7 , 3 ( ) 9 . 0 2 7 , 3 ( ) 7 . 4 1 ( — — — . 5 8 8 8 5 , . 0 7 5 2 6 1 $ , — ) 4 . 7 4 1 , 2 ( — 8 . 0 4 ) 8 . 3 5 ( 2 . 1 9 1 — — — — — — — 9 . 0 2 7 , 3 7 . 4 1 ) 4 . 9 9 5 3 , ( ) 4 . 7 4 1 , 2 ( ) 4 . 7 4 1 , 2 ( ) 9 . 8 ( — — 8 . 0 4 ) 8 . 3 5 ( 2 . 1 9 1 — — — — — — — ) 8 . 3 5 ( — 4 . 7 4 1 , 2 9 . 8 ) 9 . 6 3 0 2 , ( — — — — — — — — — . 2 5 0 1 l d e t a u m u c c A r e h t o e v i s n e h e r p m o c s s o l ) . 4 0 4 2 ( $ l a n o i t i d d A n i - i d a p l a t i p a c k c o t s n o m m o C k c o t s d e r r e f e r P t n u o m A s e r a h S t n u o m A s e r a h S — — — — — ) 5 . 1 2 1 ( — ) 5 . 0 1 1 ( — . 8 0 4 . 2 1 9 1 $ . 1 0 $ . 0 1 2 2 — — — — — — — — — — — — — — ) . 7 4 1 ( — ) 9 . 8 ( . 2 0 . 4 0 — — — — — — — — — — — — — $ $ — — — — — — — — — — — — x a t f o t e n , ) s s o l ( e m o c n i e v i s n e h e r p m o c r e h t O t s e r e t n i g n i l l o r t n o c n o n m o r f n o i t u b i r t n o c l a t i p a C e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 h c r a M t s o c e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t e R t a , m a r g o r P e s a h c r u p e R e r a h S 9 1 0 2 h c r a M t s o c e h t o t t n a u s r u p k c o t s n o m m o c f o e s a h c r u p e R t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 8 1 0 2 e h t o t t n a u s r u p k c o t s n o m m o c f o t n e m e r i t e R t s o c t a , m a r g o r P e s a h c r u p e R e r a h S 8 1 0 2 n o i t p o k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I s n a p l e s a h c r u p k c o t s d n a d r a w a k c o t s r e d n u k c o t s n o m m o c f o e c n a u s s I n a p l d e s a b e r a h s - o t d e t a e r l e s n e p x e n o i t a s n e p m o C s t n e m y a p 9 1 0 2 , 1 3 r e b m e c e D , e c n a a B l 8 1 0 2 , 1 3 r e b m e c e D , e c n a a B l e m o c n i t e N . s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o c e s e h t o t s e t o n g n i y n a p m o c c a e e S 8 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 encies. We have a leading portfolio of medicines to treat multiple sclerosis (MS), have introduced therapeutic adjacd the first approved treatment for spinal muscular atrophy (SMA) and are providing the first and only approved treatment to address a defining pathology of Alzheimer’s disease. We also commercialize biosimilars of advanced biologics and focus on advancing our pipeline in neuroscience and specialized immunology. Lastly, we are focused on accelerating our effor opportunities for potential digital therapeutics. We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities. in digital health to support our commercial and pipeline programs while also creating tsr ff Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; ADUHELM for the treatment of Alzheimer's disease; and FUMADERM for the treatment of severe plaque psoriasis. We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, chronic lymphocytiyy c 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, including mosunetuzumab, pursuant to our collaboration arrangements with Genentech, Inc. (Genentech), a wholly-owned collaboration arrangements with Genentech, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements. member of the Roche Group. For additional information on our yy Our innovative drug development and commercialization activities are complemented by our biosimilar business that expands access to medicines and reduces the cost burden for healthcare systems. Through our agreements with 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. We have also secured the exclusive rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, which was approved in the U.S., the E.U. and the U.K. during the third quarter information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationshipsi , to these consolidated financial statements. of 2021. For additional rr 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 100.0% of the economics, we record net income (loss) attributable to noncontrolling interests, net of tax 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. yy 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. 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 partner s. rr 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, revenue and expense and related F-9 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and assumptions. 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 carryirr ng values of assets, liabilities and equity and the amount of revenue and expense. Actual results may differ from these estimates. ff The length of time and full extent to which the COVID-19 pandemic directly or indirectly impacts our business, and allowances, the supply chain, results of operations and financial condition, including sales, expense, reservesrr manufacturing, clinical trials, research and development costs and employee-related costs, depends on future developments that are highly uncertain, subject to change and are difficult to predict, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19 as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of the COVID-19 pandemic within our consolidated financial statements and there may be changes to those estimates in future periods. Revenue Recognition We recognize revenue 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 servirr ces. We recognize revenue following the five-step model prescribed under the FASB Accounting Standards Codification (ASC) 606, Revenue froff m rr Contracts contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations. with Customersrr : (i) identify contract(s) with a customer; (ii) identify the performance obligations in the Product Revenue 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 partner addition, we enter into arrangements with health care providers and payors that provide for government-mandated or yy privately-negot s. These customers subsequently resell our products to health care providers and patients. In iated discounts and allowances related to our products. rr Product revenue is 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 revenue is recorded net of reservesrr 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. Product revenue reserves, which are classified as a reduction in product revenue, 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 partyrr other than our customer). Our estimates of reservesrr calculated based upon a consistent application of our methodology utilizing the expected value method. These estimates reflect our historical experience, current contractual and statutory r 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 revenue 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. established for variable consideration are rr equirements, specific known market 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 inventory mrr various contractually-defined our historical experience, including the timing of customer payments. anagement practices, respectively. We determine these reservesrr based on yy F-10 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Contractual adjustments primarily relate to Medicaid and managed care rebates in the U.S., pharmacy 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 accrued expense and other current liabilities in our consolidated balance sheets. 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 quarter s rr hat exists in that have not been paid and an estimate of potential claims that will be made for inventory t the distribution channel at period end. rr • Governmental rebates or chargebacks, including VA and PHS discounts, represent our estimated ff 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 differ ence 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 of product revenue and a reduction in the net 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 expense and other current liabilities in our consolidated balance sheets. These rebates result from performance- based goals, formulary pr accrual for these rebates is based on an estimate of the coverage patterns and the resulting applicable contractual rebate rate(s) to be earned over a contractual period. osition and price increase limit allowances (price protection). The calculation of the • 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. • Pharmacy rebates represent our estimated obligations resulting from contractual commitments to sell products to specific pharmacies. 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 expense and other current liabilities in our consolidated balance sheets. These rebates result from contracted discounts on product purchased or product dispensed. The calculation of the accrual for these rebates is based on an estimate of the pharmacy’s buying or dispensing patterns and the resulting applicable contractual rebate rate(s) to be earned over the contractual period. • 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 prr ayors for healthcare. Product return reserves are established for returns made by wholesalers and are recorded in the period the related revenue is recognized, resulting in a reduction to product revenue. 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 reservesrr 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. are estimated through a 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 F-11 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) distribution servirr ces, which are generally reflected as a reduction of revenue. To the extent we can demonstrate a separable benefit and fair value for these servirr ces we classify t expense in our consolidated statements of income. ff hese payments in selling, general and administrative Revenue 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 revenue 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, revenue is recognized as the underlying sales occur. Revenue 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 revenue from anti-CD20 therapeutic programs, which primarily consist of our share of pre-tax co- promotion profits on RITUXAN in Canada and royalty revenue on sales of OCREVUS. Pre-tax co-promotion profits on RITUXAN and GAZYVA are calculated and paid to us by Genentech and the customers less applicable costs to Roche Group. Pre-tax co-promotion profits consist of net sales to third-partyrr manufacture, third-party royalty expense, distribution, selling and marketing expense and joint development expense incurred by Genentech and the Roche Group. Our share of the pre-tax profits on RITUXAN and GAZYVA include estimates that are based on information received from Genentech and the Roche Group. These estimates are subject to change and actual results may differ. We recognize royalty revenue on sales of OCREVUS based on our estimates from third-party and market ences between actual and research data of OCREVUS sales occurring during the corresponding period. Differ estimated royalty revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter. ff For additional information on our relationship with Genentech, please read Note 18, Collaborative and Other Relationshipsi , to these consolidated financial statements. Other Revenue o Royalt y Rt evenue We recognize royalty revenue related to sales by our licensees of products covered under patents that we own. Collaborative and Other Relationships We have a number of significant collaborative and other third-party relationships for revenue 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-partir es, we recognize revenue, cost of sales and operating expense 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 revenue, cost of sales and operating expense on a net basis in collaborative and other relationships included in other revenue in our consolidated statements of income. Our development and commercialization arrangements with Genentech and Samsung Bioepis represent collaborative arrangements as each partyr 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, revenue relating to royalties or profit- sharing amounts received is recognized as the underlying sales occur. is an active partirr cipant in one or more joint operating activities and is 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. F-12 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Other Corporaterr Revenue We record other corporate revenue primarily from amounts earned under contract manufacturing agreements. Revenue under contract manufacturing agreements is 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 observabrr spot rates and option pricing valuation models; and le inputs such as interest rates, yield curves, foreign currency Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The majora ity 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 servirr ces 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 economic events. s, current spot rates and other industry and quotes, bids, offer r ff We validate the prices provided by our third-partyrr 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 value measurements provided by our pricing servirr ces as of December 31, 2021 and 2020. completing our validation procedures, we did not adjust or override any fair ff Other Assets and Liabilities The carryir ng amounts reflected in our consolidated balance sheets for current accounts receivable, due from anti-CD20 therapeutic programs, other current assets, accounts payable and accrued expense 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, 2021 and 2020, 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 majora ity 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 revenue over the period of time that we estimate those amounts will be paid using the country’r 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 F-13 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 reservesrr 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 aff gainst 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 marketable equity securities are recorded at fair market value and unrealized gains and losses are included in other income (expense), net in our consolidated statements of income. 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 unrealized gains and losses are included in other income (expense), net in our consolidated statements of income. 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 d is not readily available. These investments are recorded using either the equity method of accounting or the cost minus impairment adjust 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. ed for changes in observable rr 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-t value of an individual security is less than its amortized cost basis. Unrealized losses on available-for-sale securities that are determined to be temporary,rr and not related to credit loss, are recorded, net of tax, in accumulated other comprehensive income (loss). emporary impairment. An unrealized loss exists when the current fair debt rr rr F-14 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) For available-for-sarr le 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-trr han-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 amortirr zed 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 partirr cipation 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 carryirr ng 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 t development costs when identified for use in a clinical manufacturing campaign. rr hat can be used in either the production of clinical or commercial products is expensed as research and Capitalization of Inventory Costs We capitalize inventory costs associated with our products prior to regulatory arr pproval, 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 efficff acy 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 urr approval by necessary regulatory bodies. pon a change in such judgment, due to, among other potential factors, a denial or significant delay of 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 urr demand, additional inventory wrr 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 cost or its estimated net realizable value. Amounts written-down due to unmarketable inventory are charged to cost of sales in our consolidated statements of income. rite-downs may be required. Additionally, our products are subject to strict quality diminish based on estimates of tilization will further rr F-15 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 carryirr ng 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 majora 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 majora capital projects are capitalized until the underlying asset is ready for its intended use, at which point the interest costs are amortirr zed 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 arr 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 amortirr zed over the life of the related equipment or expensed as cost of sales when the product produced in the validation process is sold. gencies of new manufacturing equipment for the production of a In addition, we capitalize certain internal use computer software development costs. If the software is an f production assets, these costs are included in machinery arr integral part orr straight-line basis over the estimated useful lives of the related softwaff years. nd equipment and are amortized on a re, which generally range from three to five We generally depreciate or amortirr ze the cost of our propertyrr , plant and equipment using the straight-line method over the estimated useful lives of the respective assets, which are summarized as follows: Asset Categoryrrg y 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 propertyr , 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 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 portfrr olio approach to effectively account for the operating lease assets and liabilities. Our operating leases are reflected in operating lease assets, accrued expense 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 expense and other and other long-term liabilities in our consolidated F-16 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 our leases, 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 amortirr zation and impairments, if applicable. ff Intangible assets related to acquired and in-licensed rights and patents, developed technology and out-licensed patents are amortirr zed over their estimated useful lives using the economic consumption method if anticipated future revenue can be reasonably estimated. The straight-line method is used when revenue cannot be reasonably estimated. Amortirr zation is recorded within amortir zation 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 other amounts related to our other marketed products and 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 revenue generated from the products underlying the related intangible assets. An analysis of the anticipated lifetime revenue 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 revenue 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. rr 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 revenue from the projects and discounting the net cash flow to present value. The revenue and cost 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 flow 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 flow, 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 in our consolidated statements of income as they are incurred. When performing our impairment assessment, we calculate the fair value using the same methodology as described above. If the carryir ng 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 F-17 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) acquired IPR&D could result in an impairment. Impairments are recorded within amortirr zation and impairment of acquired intangible assets in our consolidated statements of income. Goodwill Goodwill represents the differ ff ence 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 reportirr ng unit to its carryirr ng value. If the carryirr ng value of the net assets assigned to the reportir ng unit exceeds the fair value of our reportirr ng unit, we would record an impairment loss equal to the differ operate in one operating segment, which is our only reportir ng unit. ation, to these consolidated financial statements, we ence. As described in Note 24, Segment Informff ff Impairment of Long-Lived Assets Long-lived assets to be held and used, including propertyrr , 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 flow resulting from the use of the asset and its eventual disposition. In the event that such cash flow is not expected to be suffiff cient to recover the carryirr ng 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. Contingent Consideration The consideration for our acquisitions often includes future payments that are contingent upon the occurrence of a partirr cular 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 flow 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. rr 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 t instruments in the same category as the cash flow from the hedged items. We do not hold or issue derivative instruments for trading or speculative purposes. ff he cash flow from these 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 flow or fair values of the hedged items. We exclude F-18 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 t ff he cash flow from these instruments in the same category arr s the cash flow 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 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 (loss), as a separate component of equity. For subsidiaries where the functional currency of the assets and liabilities differ 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. from the local currency, non-monetary assets and liabilities are translated ff Royalty Cost of Sales rr 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) lar year. That royalty rate may remain constant, increase or decrease within of the sales of our products in a particurr each year based on the total amount of sales during the annual period. Each quarter ly 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. rr Accounting for Share-Based Compensation 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 servirr ce 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 F-19 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 reportir ng 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 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. to reflect changes rr ff 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 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 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. to reflect the estimated outcome of the assessing the probability that certain rr ff Research and Development Expense Research and development expense consists of expenses incurred in performing research and development activities, which include compensation and benefits, facilities and overhead expense, clinical trial expense and fees paid to contract research organizations (CROs), clinical supply and manufacturing expense, write-offs of inventory that was previously capitalized in anticipation of product launch and determined to no longer be realizable and other outside expense and upfront fees and milestones paid to third-partyr expense is expensed as incurred. Upfront and milestone payments made to third-partyrr 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 servirr ces 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. collaborators. Research and development collaborators are expensed as 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 to these consolidated financial statements. Because an initial indication has been approved for both Relationships, RITUXAN and GAZYVA, expense 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 revenue from anti-CD20 therapeutic programs. i For collaborations with commercialized products, if we are the principal, we record revenue 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 Expense general and administrative expense is primarily comprised of compensation and benefits associated with sales and marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertisi ng and legal expense and other general and administrative costs. rr rr Advertisi ng costs are expensed as incurred. For the years ended December 31, 2021, 2020 and 2019, r advertisi ng costs totaled $98.7 million, $111.8 million and $79.2 million, respectively. F-20 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 carryirr ng 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 portirr on 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 i transfer of assets other than inventory arr occurs. r s sold to a third-partyrr . The income tax consequences from the intra-entity nd associated changes to deferred taxes are recognized when the transfer 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 quarter 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 (benefit) expense in our consolidated statements of income. ly basis and consider various factors rr Contingencies We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if r or legal proceeding is considered probable and the the potential loss from any claim, asserted or unasserted, 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. Legal costs associated with legal proceedings are expensed when incurred. 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 FASFF B 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. Income Taxes In December 2019 the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifyiff ng the Accounting forff Income Taxes. This standard removes certain exceptions to the general principles in Topic 740 and simplifies certain other aspects of the accounting for income taxes. This standard became effective for us on January 1, 2021, and did not have a material impact on our consolidated financial statements and related disclosures. F-21 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 2. ACQUISITIONS BIIB118 Acquisition In March 2020 we acquired BIIB118 (CK1 inhibitor) for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases from Pfizer Inc. (Pfizer). We are developing BIIB118 for the potential treatment of irregular sleep wake rhythm disorder in Parkinson’s disease and plan to develop BIIB118 for the potential treatment of sundowning in Alzheimer's disease. In connection with this acquisition, we made an upfront payment of $75.0 million to Pfizer, which was accounted for as an asset acquisition and recorded as acquired IPR&D in our consolidated statements of income as BIIB118 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. Acquisition of Nightstar Therapeutics plc 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 included BIIB111 (timrepigene emparvovec), for the potential treatment of choroideremia, and BIIB112 (cotoretigene toliparvov ec), for the potential treatment of X-linked retinitis pigmentosa. rr 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 was attributable to pre-combination servirr ces and was reflected as a component of the total purchase price paid. The fair value of equity compensation attributable to the post-combination servirr ce 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 fourthr quarter of 2019. 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%. We recorded IPR&D assets for BIIB111 and BIIB112 at their initial fair values of $480.0 million and $220.0 million, respectively. 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 revenue, cost of sales, research and development and other operating expense, the potential regulatory ar 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 represent Level 3 fair value measurements. in the market and thus nd rr We 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 was approximately $60.9 million. There is no remaining book value associated with either BIIB111 or BIIB112 as of December 31, 2021, as we have fully impaired both of these IPR&D assets. For additional information, please read Note 6, Intangible Assets att Goodwill, to these consolidated financial statements. nd 3. DIVESTITURES Divestiture of Hillerød, Denmark Manufacturing Operations In August 2019 we completed the sale of all of the outstanding shares of our subsidiary t rr hat owned our biologics manufacturing operations in Hillerød, 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. Denmark to FUJIFILM Corporation (FUJIFILM). Upon the closing of this r F-22 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) As part orr f this transaction, we 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 do not expect to incur an adverse commitment obligation associated with such guarantees. We may further 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 Fff UJIFILM 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 orr f 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-partyrr products. For the year ended December 31, 2019, we recognized a total net loss of approximately $124.2 million related to the transaction in our consolidated statements of income. This loss included a pre-tax loss of $55.3 million, which was recorded in loss on divestiture of Hillerød, 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 r adverse commitments of approximately $74.0 million, primarily associated with the guarantee of future minimum batch production at the Hillerød facility. We also recorded a tax expense of $68.9 million related to this transaction. Denmark manufacturing operations. The loss recognized was based r During the year ended December 31, 2020, we reduced our estimate of the fair value of the adverse commitment associated with the guarantee of future batch production by approximately $62.0 million based on our current manufacturing forecasts. Additionally, we recorded a reduction to our pre-tax loss of approximately $30.5 million due to a refund of interest paid associated with a tax matter. Our estimate of the fair value of the adverse commitments is a Level 3 measurement and is based on forecasted batch production at the Hillerød facility. F-23 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 4. REVENUE Product Revenue Revenue by product are summarized as follows: (In millions) Multiple Sclerosis (MS): Fumarate(1) Interferon(2) TYSABRI FAMPYRA United States 2021 Rest of World For the Years Ended December 31, 2020 Total United States Rest of World Total United States 2019 Rest of World Total $1,089.5 $1,272.8 $ 2,362.3 $2,742.0 $1,163.4 $ 3,905.4 $3,312.0 $1,126.2 $ 4,438.2 983.1 1,142.2 — 583.0 920.9 105.2 1,566.1 2,063.1 105.2 1,273.5 1,096.8 — 604.0 849.3 103.1 1,877.5 1,946.1 103.1 1,426.6 1,041.8 — 675.2 850.4 97.1 2,101.8 1,892.2 97.1 Subtotal: MS 3,214.8 2,881.9 6,096.7 5,112.3 2,719.8 7,832.1 5,780.4 2,748.9 8,529.3 Spinal Muscular Atrophy: SPINRAZA 587.9 1,317.2 1,905.1 787.8 1,264.3 2,052.1 933.4 1,163.6 2,097.0 Alzheimer's disease: ADUHELM(3) Biosimilars: BENEPALI IMRALDI FLIXABI Subtotal: Biosimilars Other: FUMADERM 3.0 — 3.0 — — — — — 498.3 233.4 99.4 831.1 498.3 233.4 99.4 831.1 11.0 11.0 — — — — — — — — 481.6 216.3 97.9 795.8 481.6 216.3 97.9 795.8 12.2 12.2 — — — — — — — — 486.2 184.0 68.1 738.3 486.2 184.0 68.1 738.3 15.2 15.2 Total product revenue $3,805.7 $5,041.2 $ 8,846.9 $5,900.1 $4,792.1 $10,692.2 $6,713.8 $4,666.0 $11,379.8 (1) Fumarate includes TECFIDERA and VUMERITY. VUMERITY became commercially available in the E.U. during the fourth quarter of 2021. (2) Interferon includes AVONEX and PLEGRIDY. (3) In June 2021 the FDA granted accelerated approval of ADUHELM, which became commercially available in the U.S. during the second quarter 2021. For additional information, please read Note 18, Collaborative and Other Relationshipsi - Eisai Co., Ltd. - ADUHELM Collaboration Agreement, to these consolidated financial statements. rr of We recognized revenue from two wholesalers accounting for 28.8% and 10.1% of gross product revenue in 2021, 30.5% and 15.3% of gross product revenue in 2020 and 30.0% and 17.2% of gross product revenue in 2019, respectively. As of December 31, 2021, two wholesale distributors individually accounted for approximately 21.9% and 10.2% of net accounts receivable associated with our product sales, as compared to 21.1% and 8.5% as of December 31, 2020, respectively. An analysis of the change in reserves for discounts and allowances is summarized as follows: (In millions) Beginning balance Current provisions relating to sales in current year Adjustments relating to prior years Payments/credits relating to sales in current year Payments/credits relating to sales in prior years Ending balance December 31, 2021 Discounts Contractual Adjustments Returns Total $ 141.4 $ 1,093.0 $ 41.6 $ 736.7 (4.0) (599.3) (137.1) 2,948.7 (96.1) (2,283.1) (902.9) 15.2 (3.3) (0.4) (15.1) 1,276.0 3,700.6 (103.4) (2,882.8) (1,055.1) $ 137.7 $ 759.6 $ 38.0 $ 935.3 F-24 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (In millions) Beginning balance Current provisions relating to sales in current year Adjustments relating to prior years Payments/credits relating to sales in current year Payments/credits relating to sales in prior years Ending balance (In millions) Beginning balance Current provisions relating to sales in current year Adjustments relating to prior years Payments/credits relating to sales in current year Payments/credits relating to sales in prior years Ending balance December 31, 2020 Discounts Contractual Adjustments Returns Total $ 131.1 $ 1,027.3 $ 40.5 $ 774.7 (1.0) (635.1) (128.3) 3,308.8 (54.0) (2,426.1) (763.0) 19.0 1.3 — (19.2) 1,198.9 4,102.5 (53.7) (3,061.2) (910.5) $ $ 141.4 $ 1,093.0 $ 41.6 $ 1,276.0 December 31, 2019 Discounts Contractual Adjustments Returns Total 127.8 $ 888.8 $ 34.7 $ 666.2 0.3 (535.5) (127.7) 3,011.5 (54.1) (2,242.9) (576.0) 20.9 5.5 (0.2) (20.4) 1,051.3 3,698.6 (48.3) (2,778.6) (724.1) $ 131.1 $ 1,027.3 $ 40.5 $ 1,198.9 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 expense and other Total revenue-related reservesrr Revenue from Anti-CD20 Therapeutic Programs As of December 31, 2021 2020 $ $ 133.2 $ 802.1 935.3 $ 195.4 1,080.6 1,276.0 Revenue from anti-CD20 therapeutic programs is summarized in the table below. For purposes of this footnote, we refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN. (In millions) For the Years Ended December 31, 2021 2020 2019 Biogen's share of pre-tax profits in the U.S. for RITUXAN and GAZYVA Other revenue from anti-CD20 therapeutic programs Total revenue from anti-CD20 therapeutic programs $ $ 647.7 $ 1,080.2 $ 1,010.8 897.6 1,658.5 $ 1,977.8 $ 1,542.4 748.0 2,290.4 Approximately 15.1%, 14.7% and 15.9% of our total revenue in 2021, 2020 and 2019, respectively, was 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-25 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Other Revenue Other revenue is summarized as follows: (In millions) Revenue from collaborative and other relationships: Revenue earned under our technical development agreement, manufacturing servicrr products with Samsung Bioepis es agreements and royalty revenue on biosimilar Other revenue from collaborative and other relationships Other royalty and corporate revenue: Royalty Other corporate Total other revenue For the Years Ended December 31, 2021 2020 2019 $ $ 20.7 $ — 20.9 $ 0.7 27.9 427.7 33.9 719.1 476.3 $ 774.6 $ 106.2 — 17.0 584.5 707.7 Other corporate revenue primarily reflects amounts earned under contract manufacturing agreements with our strategic customers, including Bioverativ Inc. (Bioverativ). During the years ended December 31, 2021, 2020 and 2019, we recognized $18.2 million, $48.6 million and $383.2 million, respectively, in revenue under the manufacturing and supply agreement with Bioverativ entered into in connection with the spin-off off business. f our hemophilia During the third quarter of 2019, we amended our agreement with a contract manufacturing customer pursuant to which we licensed certain of our manufacturing-related intellectual property to the customer. In the second quarter of 2020, the customer received regulatory approval for its product that is being manufactured using certain of our manufacturing-related intellectual property. As a result we were entitled to $500.0 million in a series of three payments. The first payment became due upon a regulatory arr f the regulatory arr second quarter of 2020. The second payment became due upon the first anniversary orr was received during the second quarter of 2021. The third payment is due on the second anniversary orr regulatory ar pproval of such product and was received during the pproval and f the pproval. Other corporate revenue for the year ended December 31, 2020, reflects $346.2 million related to the delivery r of the license for certai n of our manufacturing-related intellectual property under the amended agreement, as discussed above, and the performance of manufacturing product supply servirr ces for such customer. We have allocated the remaining $153.8 million of the $500.0 million transaction price to the performance of manufacturing product supply servirr ces for the customer, which we expect to perform through 2026. The value allocated to the manufacturing servirr ces was based on expected demand for supply and the fair value of comparable manufacturing and development services. For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements. 5. INVENTORY The components of inventory ar re summarized as follows: (In millions) Raw materials Work in process Finished goods Total inventory As of December 31, 2021 2020 $ $ 349.6 $ 814.0 187.9 314.9 544.5 209.2 1,351.5 $ 1,068.6 Inventory arr mounts written down as a result of excess, obsolescence or unmarketability are charged to cost of sales, and totaled $167.6 million, $26.6 million and $52.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Upon review of the ADUHELM inventory it was determined that a portion of the inventory wrr prior to product expiration based on our latest estimates of forecasted demand. During the fourthr ill not be consumed quarter of 2021 F-26 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) we wrote-off approximately $120.0 million of inventory in excess of forecasted demand related to ADUHELM, which was recognized in cost of sales within our consolidated statements of income. As of December 31, 2021, we had approximately $223.0 million of inventory related to ADUHELM. For additional information please read Note 18, Collaborative and Other Relationships, 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) Estimated Life Cost As of December 31, 2021 As of December 31, 2020 Accumulated on rr Amortizati Net Cost Accumulated on rr Amortizati Net Completed technology In-process research and development Trademarks and trade names 4-28 years $ 7,413.1 $ (5,388.5) $ 2,024.6 $ 7,394.3 $ (5,136.5) $ 2,257.8 Indefinite until commercialization 132.7 Indefinite 64.0 — — 132.7 762.5 64.0 64.0 — — 762.5 64.0 Total intangible assets $ 7,609.8 $ (5,388.5) $ 2,221.3 $ 8,220.8 $ (5,136.5) $ 3,084.3 Amortization and Impairments Amortization and impairment of acquired intangible assets totaled $881.3 million, $464.8 million and $489.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Amortization of acquired intangible assets, excluding impairment charges, totaled $252.0 million, $255.1 million and $274.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. The decrease in amortirr zation of acquired intangible assets, excluding impairment charges, over the three years was primarily due to a lower rate off amortization ffor acquired i ntangible assets. g For the year ended December 31, 2021, amortir zation and impairment of acquired intangible assets reflects the impact of a $365.0 million impairment charge related to BIIB111, a $220.0 million impairment charge related to BIIB112 and a $44.3 million impairment charge related to vixotrigine (BIIB074) for the potential treatment of trigeminal neuralgia (TGN). For the year ended December 31, 2020, amortization and impairment of acquired intangible assets reflects the impact of a $115.0 million impairment charge related to BIIB111, a $75.4 million impairment charge related to BIIB054 (cinpanemab) and a $19.3 million impairment charge related to one of our other IPR&D intangible assets. For the year ended December 31, 2019, amortization and impairment of acquired intangible assets reflects the impact of a $215.9 million impairment charge related to certain IPR&D assets associated with the Phase 2b study of BG00011 (STX-100) for the potential treatment of idiopathic pulmonary f third quarter of 2019. ibrosis (IPF), which was discontinued in the rr Completed Technology Completed technology primarily relates to our acquisition of all remaining rights to TYSABRI as well as other amounts related to our other marketed products and programs acquired through business combinations. 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. Included in IPR&D balances are adjustments related to foreign currency exchange rate fluctuations. 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 carryirr ng value of the assets might not be recoverable. The carryir ng value associated with our IPR&D assets as of December 31, 2021, relates to the IPR&D programs we acquired in connection with our acquisition of Converggence Pharmaceuticals Holdings Ltd. (Conv gergence). g F-27 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Vixotrigine In the periods since we acquired vixotrigine, there have been numerous delays in the initiation of Phase 3 studies for the potential treatment of TGN and for the potential treatment of DPN, another form of neuropathic pain. We have engaged with the U.S. Food and Drug Administration (FDA) regarding the design of the Phase 3 studies of vixotrigine for the potential treatment of TGN and DPN and are now performing an additional clinical trial of vixotrigine. The performance of this additional clinical trial delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of TGN, and, as a result, we recognized an impairment charge of $44.3 million related to vixotrigine for the potential treatment of TGN during the first quarter of 2021. As of December 31, 2021, the carryirr ng value associated with the remaining IPR&D asset for DPN was $132.7 million and the fair value of this asset was not significantly in excess of its carrying value. BIIB111 and BIIB112 During the fourthr quarter of 2020 we recognized an impairment charge of $115.0 million related to BIIB111 as a result of third-partyrr manufacturing delays that impacted the timing and increased the costs associated with advancing BIIB111 through Phase 3 development. During the second quarter of 2021 we announced that our Phase 3 STAR study of BIIB111 and our Phase 2/3 XIRIUS study of BIIB112 did not meet their primary er development on these programs based on the decision by management as part orr f its strategic review process. For the year ended December 31, 2021, we recognized an impairment charge ofof $$365.0 million related to BIIB111 and an impairment chargge fof $$220.0 million related to BIIB112, reduc ging the rem int ndpoints. In the third quarter of 2021 we suspended further aining book values fof these IPR&D gangible assets to zero. g rr In addition, ffor the year ended December 31, 2021, as a result off our decision to suspend ffurther r development fof BIIB111 and BIIB112, we rec gognized ch garges fof approximately $$39.1 million related to our ma arr recorded as research and development expense in our consolidated statements fof income. gangements and other costs that we expect to incur as a result off s uspending these fnufactur ging gprograms, which were g BIIB00544 In February 2rr 021 we announced that we discontinued development of BIIB054 as a potential treatment of Parkinson's disease as our Phase 2 SPARK study did not meet its primary or secondary endpoints. Although we made this determination in February 2r result, we recognized an impairment charge of approximately $75.4 million during the fourthr reduce the fair value of the related IPR&D intangible asset to zero. 021, it was based on conditions that existed as of December 31, 2020. As a quarter of 2020 to The IPR&D impairment ch garges were included in amortir zation and impairment off acquired i ntangible assets and fof our conti gngent consideration obl gigation was recorded in g(gain) loss on g fof conti gngent consideration in our consolidated statements fof income. The ffair value fof the gangible assets and conti gngent consideration obl gigations were based on a probability-adjusted discounted cash the ggain resulti gng ffrom the remeasurement ffair value remeasurement int fflow calculation probabilities fof success. using Leve g l 3 fair value measurements and inputs inc f luding estimated revenue, costs and g Estimated Future Amortization of Intangible Assets estimated future amortirr zation of finite-lived intangible assets for the next five years is expected to be as follows: (In millions) 2022 2023 2024 2025 2026 As of December 31, 2021 $ 255.0 210.0 195.0 195.0 180.0 F-28 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 Other Goodwill, end of year As of December 31, 2021 2020 $ $ 5,762.1 $ (1.0) 5,761.1 $ 5,757.8 4.3 5,762.1 As of December 31, 2021, we had no accumulated impairment losses related to goodwill. Other includes adjud stments 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: (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 As of December 31, 2021 Total Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) $ 1,632.2 $ — $ 1,632.2 $ 1,108.2 1,192.7 132.2 1,048.5 80.9 33.4 — — — 181.7 — — 1,108.2 1,192.7 132.2 866.8 80.9 33.4 5,228.1 $ 181.7 $ 5,046.4 $ 10.8 $ 209.1 219.9 $ — $ — — $ 10.8 $ — 10.8 $ $ $ $ — — — — — — — — — 209.1 209.1 F-29 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (In millions) Assets: Cash equivalents Marketable debt securities: Corporate debt securities Government securities Mortgage rr and other asset backed securities Marketable equity securities Derivative contracts Plan assets for deferred compensation Total Liabilities: Derivative contracts Contingent consideration obligations Total As of December 31, 2020 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total $ 626.9 $ — $ 626.9 $ 1,301.5 627.1 122.4 1,974.3 20.5 28.2 — — — 271.1 — — 1,301.5 627.1 122.4 1,703.2 20.5 28.2 4,700.9 $ 271.1 $ 4,429.8 $ 217.2 $ 259.8 477.0 $ — $ — — $ 217.2 $ — 217.2 $ $ $ $ — — — — — — — — — 259.8 259.8 There have been no material impairments of our assets measured and carried at fair value during the years ended December 31, 2021 and 2020. In addition, there have been no changes in valuation techniques during the years ended December 31, 2021 and 2020. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities was determined through third-partyrr pricing services. The fair value of Level 2 instruments classified as marketable equity securities represents our investments in the common stock of Sangamo Therapeutics, Inc. (Sangamo), Denali Therapeutics Inc. (Denali) and Sage Therapeutics, Inc. (Sage) and are valued using an option pricing valuation model as the investments are each subject to certain holding period restrictions. The holding period restrictions for a portir on of our Sangamo investment expired during the second quarter of 2021. The fair value of this portirr on of our Sangamo investment was a Level 1 measurement as of December 31, 2021. For additional information on our investments in Sangamo, Denali and Sage common stock, please read Note 8, Financial Instruments, 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 the Fair Value Measuremen Signii ificff ant Accounting Policies, to these consolidated financial statements. rr f ts section within Note 1, Summary or The following tables summarize the significant unobservabrr le inputs in the fair value measurement of our contingent consideration obligations as of December 31, 2021 and 2020: (In millions) Liabilities: Fair Value Valuation Technique Unobservable Input Range Weighted Average As of December 31, 2021 Contingent consideration obligation $209.1 Discounted cash flow Discount rate 1.30% 1.30% Expected timing of achievement of development milestones 2023 to 2027 — (In millions) Liabilities: Fair Value Valuation Technique Unobservable Input Range Weighted Average As of December 31, 2020 Contingent consideration obligation $259.8 Discounted cash flow Discount rate 0.60% 0.60% Expected timing of achievement of development milestones 2021 to 2025 — F-30 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The weighted average discount rate was calculated based on the relative fair value of our contingent consideration obligations. In addition, we apply various probabilities of technological and regulatory success, ranging from 10.9% to certain probability as of December 31, 2021, to the valuation models to estimate the fair values of our contingent consideration obligations. Nonrecurring Fair Value Measurements For the year ended December 31, 2021, we recorded impairment charges of $365.0 million related to BIIB111 and $$220.0 million related to BIIB112. As a result, the remai gning book values associated with these proggrams were reduced to zero F. or additional information, please read Note 6, Intangible Assets and Goodwill, 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) 3.625% Senior Notes due September 15, 2022 4.050% Senior Notes due September 15, 2025 2.250% Senior Notes due May 1, 2030 5.200% Senior Notes due September 15, 2045(1) 3.150% Senior Notes due May 1, 2050 3.250% Senior Notes due February 15, 2051(1) Total As of December 31, 2021 2020 $ 1,020.0 $ 1,895.2 1,475.9 1,463.0 1,457.7 692.9 $ 8,004.7 $ 1,054.1 2,003.1 1,557.2 2,365.1 1,536.4 — 8,515.9 021 we completed a private offer to exchange (Exchange Offer) our tendered 5.200% Senior Notes due September 15, 2045 (1) In February 2rr (2045 Senior Notes), whereby approximately $624.6 million of our 2045 Senior Notes were exchanged for approximately $700.7 million of a new series of 3.250% Senior Notes due February 1r 12, Indebtedness, to these consolidated financial statements. 5, 2051 (2051 Senior Notes). For additional information on our Exchange Offer , please read Note ff The fair values of each of our series of Senior Notes were determined through market, observable and corroborated sources. For additional information related to our Senior Notes, please read Note 12, Indebtedness, to these consolidated financial statements. Contingent Consideration Obligations In connection with our acquisitions of Convergence and gBiogen International Neuroscience GmbH (BI ,N) 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 Fair value, end of year As of December 31, 2021 2020 $ $ 259.8 $ (50.7) 209.1 $ 346.1 (86.3) 259.8 As of December 31, 2021 and 2020, approximately $209.1 million and $110.3 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our consolidated balance sheets with the remaining balance reflected as a component of accrued expense and other. For the year ended December 31, 2021, changes in the fair value of our contingent consideration obligations were primarily due to reductions in the probability of technical and regulatory success and delays in the expected timing of the achievement of certain remaining developmental milestones related to our vixotrigine programs. For the year ended December 31, 2020, changes in the fair value of our contingent consideration obligations were primarily due to our discontinuing development of BIIB054 for the potential treatment of Parkinson's disease, resulting in a reduction of our contingent consideration obligations of $51.0 million as well as other changes in the F-31 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) probability and the expected timing of the achievement of certain remaining developmental milestones, changes in the interest rates used to revalue our contingent consideration liabilities and the passage of time. 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. 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, 2021 and 2020, the fair value of this contingent consideration obligation was $209.1 million and $259.8 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 1.3%, which is a measure of the credit risk associated with settling the liability. Biogen International Neuroscience GmbH In connection with our acquisition of BIN in December 2010 we recorded a contingent consideration obligation of $81.2 million. We discontinued further development of BIIB054 for the potential treatment of Parkinson's disease based on the results of a Phase 2 study of BIIB054. Additionally, during the third and fourthrr discontinued other programs related to our acquisition of BIN for which we had immaterial contingent consideration obligations. As a result, the fair value of the contingent consideration obligations related to our acquisition of BIN was adjusted to zero, resulting in a gain of $101.5 million for the year ended December 31, 2020. quarters of 2020 we 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 revenue and probabilities of success. These assets are tested for impairment annually until commercialization, after which time the acquired IPR&D will be amortized over its estimated useful life using the economic consumption method. In connection with our acquisition of NST, we recognized $480.0 million and $220.0 million of acquired IPR&D intangible assets for BIIB111 and BIIB112, respectively. During the fourthr impairment charge of $115.0 million related to BIIB111. During the third quarter of 2021 we suspended further development on these programs and recognized an impairment charge of $365.0 million related to BIIB111 and an impairment charge of $$220.0 million related to BIIB112, reduc ging the ffair value fof these IPR&D int gangible assets to zero. quarter of 2020 we recognized an rr In connection with our acquisition of BIN, we recognized a $110.9 million acquired IPR&D intangible asset. During the fourthr quarter of 2020 we discontinued further development of BIIB054 for the potential treatment of Parkinson's disease and recognized an impairment charge of $75.4 million to reduce the fair value of the IPR&D intangible asset to zero. In connection with our acquisition of Stromedix Inc., 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 and recognized an impairment charge of $215.9 million to reduce the fair value of the IPR&D intangible asset to zero. For additional information on our IPR&D intangible assets, including a discussion of our most significant nd Goodwill, to these consolidated financial statements. assumptions, please read Note 6, Intangible Assets att F-32 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 8. FINANCIAL INSTRUMENTS The following table summarizes our financial assets with maturities of less than 90 days from the date of purchase included in cash and cash equivalents in our consolidated balance sheets: (In millions) Commercial paper Overnight reverse repurchase agreements Money market funds Short-term debt securities Total As of December 31, 2021 2020 $ $ 247.6 $ 200.0 901.6 283.0 1,632.2 $ 61.1 37.4 505.1 23.3 626.9 The carryir ng values of our commercial paper, including accrued interest, overnight reverse repurchase agreements, money market funds and our short-rr term debt securities approximate fair value due to their short-rr term maturities. Our 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: (In millions) Marketable debt securities: Corporate debt securities: Current Non-current Government securities: Current Non-current Mortgage rr and other asset backed securities: Current Non-current Total marketable debt securities Marketable equity securities: Marketable equity securities, current Marketable equity securities, non-current Total marketable equity securities Amortized rr Cost As of December 31, 2021 Gross Gross Unrealized Unrealized Losses Gains Fair Value $ 723.6 $ 0.1 $ 385.4 817.0 377.0 1.1 131.8 0.2 — 0.1 — — (0.3) $ (0.8) (0.4) (1.0) — (0.7) 723.4 384.8 816.6 376.1 1.1 131.1 $ $ $ 2,435.9 $ 0.4 $ (3.2) $ 2,433.1 33.9 $ 9.9 $ — $ 1,133.1 151.0 (279.4) 1,167.0 $ 160.9 $ (279.4) $ 43.8 1,004.7 1,048.5 F-33 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (In millions) Marketable debt securities: Corporate debt securities: Current Non-current Government securities: Current Non-current Mortgage rr and other asset backed securities: Current Non-current Total marketable debt securities Marketable equity securities: Marketable equity securities, current Marketable equity securities, non-current Total marketable equity securities rr Amortized Cost As of December 31, 2020 Gross Gross Unrealized Unrealized Losses Gains Fair Value $ 897.8 $ 0.4 $ 402.5 380.6 245.9 0.2 122.1 1.1 0.1 0.5 — 0.2 (0.2) $ (0.1) — — — (0.1) 898.0 403.5 380.7 246.4 0.2 122.2 $ $ $ 2,049.1 $ 2.3 $ (0.4) $ 2,051.0 70.6 $ 15.9 $ 1,168.9 733.8 1,239.5 $ 749.7 $ — $ (14.9) (14.9) $ 86.5 1,887.8 1,974.3 Summary of Contractual Maturities: Available-for-Sale Debt Securities The estimated fair value and amortir zed cost of our marketable debt securities available-for-sale rr by contractual maturity are summarized as follows: (In millions) Due in one year or less Due after ff one year through five years Due after ff five years Total marketable debt securities As of December 31, 2021 As of December 31, 2020 Estimated Fair Value Amortized rr Cost Estimated Fair Value Amortized rr Cost $ $ 1,541.1 $ 1,541.7 $ 1,278.9 $ 1,278.6 868.2 23.8 870.2 24.0 722.6 49.5 721.3 49.2 2,433.1 $ 2,435.9 $ 2,051.0 $ 2,049.1 The average maturity of our marketable debt securities available-for-sale rr as of December 31, 2021 and 2020, was approximately 10 months and 11 months, respectively. Proceeds from Marketable Debt Securities proceeds from maturities and sales of marketable debt securities and resulting realized gains and losses are summarized as follows: (In millions) For the Years Ended December 31, 2021 2020 2019 Proceeds from maturities and sales $ 3,405.4 $ 7,299.4 $ 6,007.0 Realized gains Realized losses 0.2 4.0 17.7 26.0 6.0 1.5 Realized losses for the year ended December 31, 2021, 2020 and 2019, primarily relate to sales of corporate bonds, agency mortgage-backed securities and other asset-backed securities. Strategic Investments As of December 31, 2021 and 2020, our strategic investment portfolio was comprised of investments totaling $1,110.3 million and $2,024.6 million, respectively, which are included in other current assets and investments and other assets in our consolidated balance sheets. F-34 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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. The decrease in our strategic investment portfolio for the year ended December 31, 2021, was primarily due to decreases in the fair value of our investments in Denali, Ionis Pharmaceuticals, Inc. (Ionis), Sage and Sangamo common stock. Sage Therapeutics, Inc. In November 2020 we entered into a global collaboration and license agreement with Sage. In connection with the closing of this transaction in December 2020 we purchased $650.0 million of Sage common stock, or approximately 6.2 million shares at approximately $104.14 per share, which are subject to transfer restrictions. This investment is classified as a Level 2 marketable equity security due to certain holding period restrictions and is remeasured each reporting period and carried at fair value. The effecff investment 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 Sage's common stock and a dividend yield of zero based upon the fact that Sage and similar companies generally have not historically granted cash dividends. ts of certain holding period restrictions on the For additional information on our collaboration arrangement with Sage, please read Note 18, Collaborative and Other Relationships, to these consolidated financial statements. Denali Therapeutics Inc. In August 2020 we entered into a collaboration and license agreement with Denali. As part of this collaboration we purchased $$465.0 million of Denali common stock in September 2020, or approximately 13 million shares at approximately $34.94 per share, which are subject to transfer restrictions. This investment is classified as a Level 2 marketable equity security due to certain holding period restrictions and is remeasured each reporting period and carried at fair value. The effecff 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 Denali's common stock and a dividend yield of zero based upon the fact that Denali and similar companies generally have not historically granted cash dividends. ts of certain holding period restrictions on the investment are estimated using an For additional information on our collaboration agreement with Denali, please read Note 18, Collaborative and Other Relationshipsi , to these consolidated financial statements. Sangamo Therapeutics, Inc. In February 2rr 020 we entered into a collaboration and license agreement with Sangamo. In connection with the closing of this transaction in April 2020 we purchased $225.0 million of Sangamo common stock, or approximately 24 million shares at approximately $9.21 per share, of which approximately 12 million shares remain subject to transfer restrictions as of December 31, 2021. This equity method investment will be remeasured each reporting period and carried at fair value due to our election of the fair value option. The effecff restrictions on the investment 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 Sangamo's common stock and a dividend yield of zero based upon the fact that Sangamo and similar companies generally have not historically granted cash dividends. ts of certain holding period For additional information on our collaboration agreement with Sangamo, please read Note 18, Collaborative and Other Relationshipsi , 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 5.0% 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. F-35 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) As of December 31, 2021 and 2020, the carrying value of our equity method investment in Samsung Bioepis totaled 713.3 billion South Korean won ($599.9 million) and 673.8 billion South Korean won ($620.2 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, , to these consolidated financial statements. Collaborative and Other Relationshipsi 9. DERIVATIVE INSTRUMENTS Foreign Currency Forward Contracts - Hedging Instruments Due to the global nature of our operations, portions of our revenue and operating expense are recorded in currencies other than the U.S. dollar. The value of revenue and operating expense 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 revenue and operating expense. Foreign currency forward contracts in effect as of December 31, 2021 and 2020, had durations of 1 to 15 months and 1 to 24 months, respectively. These contracts have been designated as cash flow hedges and unrealized gains or losses on the portirr on of these foreign currency forward contracts that are included in the effectiveness test are reportedrr below). Realized gains and losses of such contracts are recognized in revenue when the sale of product in the currency being hedged is recognized and in operating expense when the expense in the currency being hedged is recorded. We recognize all cash flow hedge reclassifications from accumulated other comprehensive income (loss) 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. in accumulated other comprehensive income (loss) (referred to as AOCI in the table The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenue and operating expense is summarized as follows: (In millions) Euro British pound Japanese yen Canadian dollar Total foreign currency forward contracts Notional Amount As of December 31, 2021 2020 $ $ 1,828.0 $ 166.2 72.7 59.9 2,979.1 250.6 — — 2,126.8 $ 3,229.7 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 is summarized as follows: (In millions) Unrealized gains Unrealized (losses) Net unrealized gains (losses) For the Years Ended December 31, 2021 2020 2019 $ $ 60.8 $ (7.0) 53.8 $ — $ (212.5) (212.5) $ 6.9 (6.4) 0.5 We expect the net unrealized gains of $53.8 million to be settled over the next 15 months, of which $48.2 million of these unrealized 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 revenue or operating expense. 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 partyr materially change the fair value of our foreign currency forward contracts. to execute its contractual obligations. As of December 31, 2021 and 2020, credit risk did not The following table summarizes the effect of foreign currency forward contracts designated as hedging instruments in our consolidated statements of income: F-36 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Net Gains/(Losses) Reclassified from AOCI into Operating Income (in millions) Net Gains/(Losses) Recognized in Operating Income (in millions) For the Years Ended December 31, Location Revenue 2021 2020 2019 Location 2021 2020 2019 $ (60.0) $ 18.3 $ 118.6 Revenue $ (8.4) $ (9.9) $ Operating expense (0.8) 3.3 (3.3) Operating expense — — 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. 2.9 0.2 Interest Rate Swap Contracts In connection with the issuance of our 2.90% Senior Notes due September 15, 2020, we entered into interest rate swaps with an aggregate notional amount of $675.0 million, which were originally set to expire on September 15, 2020. The interest rate swap contracts were designated as hedges of the fair value changes in our 2.90% Senior Notes attributable to changes in interest rates. In May 2020 we settled our interest rate swap contracts, in conjunction with our early redemption of our 2.90% Senior Notes, resulting in a gain of approximately $3.3 million, which was recorded as a component of interest expense in our consolidated statements of income during the year ended December 31, 2020. Net Investment Hedges - Hedging Instruments 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 5.0% 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, 2021, 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 gains of $10.6 million and net losses of $21.2 million as of December 31, 2021 and 2020, respectively. We exclude fair value changes related to the forward rate from our hedging relationship and will amortizerr 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 net losses of $3.6 million and net gains of $0.2 million as of December 31, 2021 and 2020, respectively. the forward points in other income (expense), net in our consolidated statements of rr The following table summarizes the effect of our net investment hedges in our consolidated financial statements: Net Gains/(Losses) Recognized in Other Comprehensive Income (Effecti ff ve Portion) (in millions) For the Years Ended December 31, 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 2021 2020 2019 Location 2021 2020 2019 Location 2021 2020 2019 Gains (losses) on net investment hedge $ 46.0 $ (35.1) $25.3 Gains (losses) on net investment hedge $(3.2) $ 4.5 $ 3.3 Other income (expense) $(0.6) $ 2.9 $ 7.0 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. F-37 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The aggregate notional amount of these outstanding foreign currency forward contracts was $1,268.0 million and $1,158.0 million as of December 31, 2021 and 2020, respectively. Net losses of $43.3 million, net gains of $30.1 million and net losses of $5.9 million related to these contracts were recorded as a component of other income (expense), net for the years ended December 31, 2021, 2020 and 2019, 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. 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) Balance Sheet Location 2021 2020 Cash Flow Hedging Instruments: Asset derivative instruments Other current assets $ 66.2 $ As of December 31, Liability derivative instruments Accrued expense and other Investments and other assets Other long-term liabilities Net Investment Hedging Instruments: Asset derivative instruments Other current assets Liability derivative instruments Accrued expense and other Other Derivative Instruments: Asset derivative instruments Other current assets Liability derivative instruments Accrued expense and other 5.5 6.6 — 4.1 — 5.1 4.2 — — 157.1 35.7 — 19.7 20.5 4.7 10. PROPERTY, PLANT AND EQUIPMENT Propertyrr , plant and equipment are recorded at historical cost, net of accumulated depreciation. Components of propertyr , plant and equipment, net are summarized as follows: (In millions) Land Buildings Leasehold improvements Machinery and equipment Computer softwar ff e and hardware Furniture and fixtures Construction in progress Total cost Less: accumulated depreciation Total property, plant and equipment, net As of December 31, 2021 2020 $ 207.5 $ 1,699.7 121.0 1,585.5 971.6 67.4 770.3 5,423.0 (2,006.6) $ 3,416.4 $ 119.8 1,025.3 104.6 1,027.8 903.0 62.5 1,950.8 5,193.8 (1,782.3) 3,411.5 Depreciation expense totaled $235.3 million, $201.9 million and $190.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, we capitalized interest costs related to construction in progress totaling approximately $36.3 million, $65.2 million and $68.8 million, respectively. Solothurn, Switzerland Manufacturing Facility order to support our future growth and drug development pipeline, we are building a large-scale biologics manufacturing facility in Solothurn, Switzerland. Upon completion, this facility will include 393,000 square feet F-38 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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, 2021 and 2020, we had approximately $677.0 million and $1.8 billion, respectively, capitalized as construction in progress related to this facility. In the second quarter of 2021, a portion of the facility received a Good Manufacturing Practice multi-product license from the Swiss Agency for Therapeutic Products, resulting in approximately $1.2 billion of fixed assets being placed in rr service during the second quarter of 2021. 11. LEASES We lease real estate, including laboratory arr nd offiff ce space, and certain equipment. Our leases have remaining lease terms ranging from less than one year to nine years. Certai n 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. r In addition, we sublease certain real estate to third-parties. Our sublease portfolio consists of operating leases, with remaining lease terms ranging from three years to seven years. Our subleases do not include an option to renew as they are coterminous with our operating leases. All of our leases qualify aff s operating leases. The following table summarizes the presentation in our consolidated balance sheets of our operating leases: (In millions) Assets: Balance sheet location 2021 2020 As of December 31, Operating lease assets Operating lease assets Liabilities Current operating lease liabilities Non-current operating lease liabilities Total operating lease liabilities Accrued expense and other Long-term operating lease liabilities $ $ $ 89.1 $ 330.4 419.5 $ 375.4 $ 433.3 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 Years Ended December 31, 2021 2020 $ $ 3.4 $ 95.9 0.8 25.7 (23.9) (4.0) 97.9 $ F-39 83.2 402.0 485.2 5.2 93.1 1.1 21.1 (24.2) (3.9) 92.4 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Variable lease cost primarily related to operating expense, 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) 2022 2023 2024 2025 2026 Thereafter Total lease payments Less: interest Present value of operating lease liabilities As of December 31, 2021 99.6 89.7 79.7 57.2 44.8 84.0 455.0 35.5 419.5 $ $ $ 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, 2021 2020 5.43 2.9 % 6.30 2.9 % Supplemental disclosure of cash flow information related to our operating leases included in cash flow provided by operating activities in our consolidated statements of cash flow 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 12. INDEBTEDNESS Our indebtedness is summarized as follows: (In millions) Current portion: 3.625% Senior Notes due September 15, 2022 Current portion of notes payable Non-current portion: 3.625% Senior Notes due September 15, 2022 4.050% Senior Notes due September 15, 2025 2.250% Senior Notes due May 1, 2030 5.200% Senior Notes due September 15, 2045(1) 3.150% Senior Notes due May 1, 2050 3.250% Senior Notes due February 15, 2051(1) Non-current portion rr of notes payable As of December 31, 2021 2020 105.8 $ 18.1 100.2 59.0 As of December 31, 2021 2020 999.1 $ 999.1 $ — $ 1,742.9 1,492.0 1,099.9 1,473.2 466.0 6,274.0 $ — — 997.9 1,741.2 1,491.1 1,723.4 1,472.6 — 7,426.2 $ $ $ $ $ (1) In February 2rr Senior Notes were exchanged for approximately $700.7 million of our 2051 Senior Notes. 021 we completed our Exchange Offer of our tendered 2045 Senior Notes, whereby approximately $624.6 million of our 2045 F-40 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Exchange Offer In February 2021 we completed our Exchange Offer ff of our tendered 2045 Senior Notes for our 2051 Senior Notes and cash, and an offer to purchase our tendered 2045 Senior Notes for cash. An aggregate principal amount of approximately $624.6 million of our 2045 Senior Notes was exchanged for an aggregate principal amount of approximately $700.7 million of our 2051 Senior Notes and aggregate cash payments of approximately $151.8 million. Our Exchange Offer has been accounted for as a debt modification; as such, the cash component has been reflected as additional debt discount and is amortized as an adjustment to interest expense over the term of our 2051 Senior Notes. In addition, we redeemed an aggregate principal amount of approximately $8.9 million of our 2045 Senior Notes for aggregate cash payments of approximately $12.1 million, excluding accrued and unpaid interest. The redemption has been accounted for as a debt extinguishment; as such, we recognized a pre-tax charge of $3.2 million upon the extinguishment of such 2045 Senior Notes. This charge, which was recognized in interest expense in other income (expense), net in our consolidated statements of income for the year ended December 31, 2021, reflects the payment of an early call premium and the write-off of the remaining unamortized issuance costs and discount balances associated with such 2045 Senior Notes. original debt rr Upon settlement, we also made aggregate cash payments of approximately $13.8 million to settle all accrued and unpaid interest from the last interest payment date on our 2045 Senior Notes that were exchanged or redeemed. We incurred approximately $6.1 million of costs associated with our Exchange Offer, which was recognized in interest expense in other income (expense), net in our consolidated statements of income for the year ended December 31, 2021. 2020 Senior Notes On April 30, 2020, we issued senior unsecured notes for an aggregate principal amount of $3.0 billion (2020 Senior Notes), consisting of the following: • $1.5 billion aggregate principal amount of 2.25% Senior Notes due May 1, 2030, valued at 99.973% of par; and • $1.5 billion aggregate principal amount of 3.15% Senior Notes due May 1, 2050, valued at 99.174% of par. Our 2020 Senior Notes are senior unsecured obligations and may be redeemed at our option at any time at 100.0% of the principal amount plus accrued interest and, until a specified period before maturity, a specified make- whole amount. Our 2020 Senior Notes contain a change-of-cff ontrol provision that, under certain circumstances, may require us to purchase our 2020 Senior Notes at a price equal to 101.0% of the principal amount plus accrued and unpaid interest to the date of repurchase. We incurred approximately $24.4 million of costs associated with this offer ff ing, which have been recorded as a reduction to the carryirr ng amount of the debt on our consolidated balance sheet. These costs will be amortized as additional interest expense using the effective interest rate method over the period from issuance through maturity. The discounts will be amortized as additional interest expense over the period from issuance through maturity using the effective interest rate method. Interest on our 2020 Senior Notes is payable May 1 and November 1 of each year, commencing November 1, 2020. 2015 Senior Notes The following is a summary or Notes), consisting of the following: f our currently outstanding senior secured notes issued in 2015 (the 2015 Senior • • • $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 $1.12 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2045, valued at 99.294% of par. F-41 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The original costs associated with this offer ing of approximately $47.5 million have been recorded as a reduction to the carryirr ng 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. ff Our 2015 Senior Notes are senior unsecured obligations and may be redeemed at our option at any time at 100.0% of the principal amount plus accrued interest and a specified make-whole amount. Our 2015 Senior Notes contain a change of control provision that may require us to purchase the notes at a price equal to 101.0% of the principal amount plus accrued and unpaid interest to the date of purchase under certain circumstances. On September 15, 2015, we issued $1.5 billion aggregate principal amount of 2.90% Senior Notes due September 15, 2020, at 99.792% of par. Our 2.90% Senior Notes were senior unsecured obligations. In connection with the 2.90% Senior Notes, we entered into interest rate swap contracts where we received a fixed rate and paid a variable rate. In May 2020 we used the net proceeds from the sale of our 2020 Senior Notes to redeem our 2.90% Senior Notes prior to their maturity and recognized a net pre-tax charge of $9.4 million upon the extinguishment of these notes. This charge, which was recognized in interest expense in other income (expense), net in our consolidated statements of income for the year ended December 31, 2020, reflects the payment of a $12.7 million early call premium and the write off of remaining unamortirr zed original debt issuance costs and discount balances, partially offset by a $3.3 million gain related to the settlement of the associated interest rate swap contracts. For additional information on our interest rate contracts, please read Note 9, Derivativv consolidated financial statements. ve Instruments, to these ff 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 that we entered into in August 2015. As of December 31, 2021, we had no outstanding borrowings and were in compliance with all covenants under this facility. Debt Maturity The total gross payments due under our debt arrangements are as follows: (In millions) 2022 2023 2024 2025 2026 2027 and thereafter ff Total As of December 31, 2021 $ $ 1,000.0 — — 1,750.0 — 4,817.3 7,567.3 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, partici rr in the instruments each such class or series and any qualifications, limitations or restrictions thereon as set forthr 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 2021, 2020 and 2019. pating, optional or other special rights of the shares of F-42 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Common Stock The following table describes the number of shares authorized, issued and outstanding of our common stock as of December 31, 2021, 2020 and 2019: (In millions) Common stock As of December 31, 2021 As of December 31, 2020 As of December 31, 2019 Authorized Issued Outstanding Authorized Issued Outstanding Authorized Issued Outstanding 1,000.0 170.8 147.0 1,000.0 176.2 152.4 1,000.0 198.0 174.2 Share Repurchases In October 2020 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2020 Share Repurchase Program). Our 2020 Share Repurchase Program does not have an expiration date. All share repurchases under our 2020 Share Repurchase Program will be retired. Under our 2020 Share Repurchase Program, we repurchased and retired approximately 6.0 million and 1.6 million shares of our common stock at a cost of approximately $1.8 billion and $400.0 million during the years ended December 31, 2021 and 2020, respectively. Approximately $2.8 billion remained available under our 2020 Share Repurchase Program as of December 31, 2021. 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), which was completed as of September 30, 2020. All shares repurchased under our December 2019 Share Repurchase Program were retired. Under our December 2019 Share Repurchase Program, we repurchased and retired approximately 16.7 million shares of our common stock at a cost of approximately $5.0 billion during the year ended December 31, 2020. 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), which was completed as of March 31, 2020. All shares repurchased under our March 2019 Share Repurchase Program were retired. Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 4.1 million and 14.7 million shares of our common stock at a cost of approximately $1.3 billion and $3.7 billion during the years ended December 31, 2020 and 2019, respectively. 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. 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) December 31, 2021 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, 2020 $ 1.4 $ (179.0) $ (8.5) $ (66.3) $ (46.6) $ (299.0) Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) Balance, December 31, 2021 (6.6) 178.2 3.0 (3.6) 54.6 232.8 33.4 0.6 34.0 21.5 — 21.5 (92.4) 134.1 — 58.2 (92.4) 192.3 $ (2.2) $ 53.8 $ 25.5 $ (44.8) $ (139.0) $ (106.7) F-43 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) (In millions) December 31, 2020 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, 2019 $ 4.2 $ 7.8 $ 25.1 $ (32.8) $ (139.5) $ (135.2) Other comprehensive income (loss) before reclassifications Amounts reclassified from accumulated other comprehensive income (loss) Net current period other comprehensive income (loss) (9.3) (165.0) (30.7) (33.5) 92.9 (145.6) 6.5 (2.8) (21.8) (186.8) (2.9) (33.6) — — (18.2) (33.5) 92.9 (163.8) Balance, December 31, 2020 $ 1.4 $ (179.0) $ (8.5) $ (66.3) $ (46.6) $ (299.0) (In millions) December 31, 2019 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) 11.8 88.1 28.6 (1.5) 103.8 230.8 (3.6) 8.2 (115.0) (26.9) (7.0) 21.6 — (1.5) — (125.6) 103.8 105.2 Balance, December 31, 2019 $ 4.2 $ 7.8 $ 25.1 $ (32.8) $ (139.5) $ (135.2) The following table summarizes the amounts reclassified from accumulated other comprehensive income (loss): Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) For the Years Ended December 31, (In millions) Income Statement Location 2021 2020 2019 Gains (losses) on securities available for sale Other income (expense) $ (3.8) $ (8.2) $ Gains (losses) on cash flow hedges Revenue Income tax benefit (expense) Operating expense Other income (expense) Income tax benefit (expense) Gains (losses) on net investment hedge Other income (expense) 0.8 (60.0) (0.8) 0.2 6.0 (0.6) 1.7 18.3 3.3 0.3 (0.1) 2.9 4.5 (0.9) 118.6 (3.3) 0.3 (0.6) 7.0 Total reclassifications, net of tax $ (58.2) $ 18.2 $ 125.6 F-44 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 14. EARNINGS PER SHARE Basic and diluted shares outstanding used in our earnings per share calculation are calculated as follows: (In millions) Numerator: For the Years Ended December 31, 2021 2020 2019 Net income attributable to Biogen Inc. $ 1,556.1 $ 4,000.6 $ 5,888.5 Denominator: Weighted average number of common shares outstanding 149.1 160.9 187.1 Effect of dilutive securities: Time-vested restricted stock units Market stock units Performance stock units settled in stock Dilutive potential common shares 0.3 0.1 0.1 0.5 0.2 0.1 0.1 0.4 0.2 0.1 — 0.3 Shares used in calculating diluted earnings per share 149.6 161.3 187.4 Amounts excluded from the calculation of net income per diluted share because their effecff ts were anti-dilutive were insignificant. Earnings per share for the years ended December 31, 2021, 2020 and 2019, reflects the repurchase of approximately 6.0 million shares, 22.4 million shares and 23.6 million shares of our common stock, respectively, under our share repurchase programs. For additional information on our share repurchase programs, please read Note 13, Equity, to these consolidated financial statements. 15. SHARE-BASED PAYMENTS Share-Based Compensation Expense 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 expense Income tax effect For the Years Ended December 31, 2021 2020 2019 $ 89.3 $ 80.0 $ 169.5 258.8 (8.0) 250.8 (46.7) 131.3 211.3 (6.2) 205.1 (33.5) Share-based compensation expense included in net income attributable to Biogen Inc. $ 204.1 $ 171.6 $ 77.1 148.3 225.4 (8.9) 216.5 (35.7) 180.8 F-45 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 For the Years Ended December 31, 2021 2020 2019 $ 45.6 $ 40.5 $ 159.8 142.6 — — 23.9 12.2 17.3 — 258.8 (8.0) (1.7) (0.1) 7.9 8.6 13.5 — 211.3 (6.2) Share-based compensation expense included in total cost and expense $ 250.8 $ 205.1 $ 30.4 134.0 0.7 1.6 15.5 5.5 11.5 26.2 225.4 (8.9) 216.5 As of December 31, 2021, unrecognized compensation cost related to unvested share-based compensation was approximately $235.5 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 provides that awards other than stock options and stock appreciation rights will be counted against the total number of shares reservedrr extend the term of the 2006 Directors Plan until June 2025. under the plan in a 1.5-to-1 ratio. In June 2015 our shareholders approved an amendment to 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 reservedrr for this purpose, plus shares of common stock that remained available for grant under the Biogen Idec Inc. 2008 Omnibus Equity Plan (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. F-46 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 serverr 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. All outstanding options were exercised as of December 31, 2020. The total intrinsic values of options exercised in 2020 and 2019 totaled $2.9 million and $4.2 million, respectively. 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, 2020 2019 $ 2.9 $ 0.7 2.5 0.4 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 zero and 150.0% of the target number of units granted based on actual stock performance. MSUs awarded to employees in 2014 and thereafter ff first anniversary of the grant date, and participants may ultimately earn between zero and 200.0% of the target number of units granted based on actual stock performance. vest in three equal annual increments beginning on the 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 f rom 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. rr The following table summarizes our MSU activity: Unvested at December 31, 2020 Granted (1) Vested Forfeited Unvested at December 31, 2021 December 31, 2021 Shares Weighted Average Grant Date Fair Value 201,000 $ 151,000 (80,000) (15,000) 257,000 $ 388.98 358.77 382.95 383.72 372.08 (1) MSUs granted during 2021 include awards granted in conjunction with our annual awards made in February 2021 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 2021 also reflect an adjud stment based upon the final performance multiplier in relation to shares granted in 2020, 2019 and 2018. 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. F-47 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The assumptions used in our valuation are summarized as follows: Expected dividend yield Range of expected stock price volatility Range of risk-free interest rates 30 calendar day average stock price on grant date Weighted-average per share grant date fair value For the Years Ended December 31, 2021 —% 2020 —% 2019 —% 54.8% - 61.6% 0.06% - 0.21% 37.8% - 44.1% 1.41% - 1.48% 31.2% - 33.6% 2.46% - 2.53% $262.23 - $360.31 $257.83 - $325.40 $228.59 - $331.18 $358.77 $398.61 $378.08 The fair values of MSUs vested in 2021, 2020 and 2019 totaled $22.5 million, $26.9 million and $32.5 million, respectively. Cash Settled Performance Units (CSPUs) CSPUs awarded to employees vest in three equal annual increments beginning on the first anniversary or f 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. Partirr cipants may ultimately earn between zero and 200.0% 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. All remaining CSPUs were fully vested as of December 31, 2020. The cash paid in settlement of CSPUs vested in 2020 and 2019 totaled $3.8 million and $10.6 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 orr 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. Partir cipants may ultimately earn between zero and 200.0% 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. All remaining PUs were fully vested as of December 31, 2020. f the grant date. The number of PUs granted represents the All PUs that vested in 2020 and 2019 were settled in cash totaling $3.4 million and $10.4 million, respectively. Performance Stock Units (PSUs) PSUs Settled in Stock During the first quarter rr 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 zero and 200.0% 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-48 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, 2020 Granted (1) Vested Forfeited Unvested at December 31, 2021 Weighted Average Grant Date Fair Value 304.19 276.61 316.66 287.55 289.94 Shares 155,000 $ 110,000 (56,000) (13,000) 196,000 $ (1) PSUs settled in stock granted in 2021 include awards granted in conjunction with our annual awards made in February 2021 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 rr 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 zero and 200.0% 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, 2020 Granted (1) Vested Forfeited Unvested at December 31, 2021 Shares 120,000 60,000 (37,000) (9,000) 134,000 (1) PSUs settled in cash granted in 2021 include awards granted in conjunction with our annual awards made in February 2rr in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to be earned at the time of grant. 021 and PSUs granted Time-Vested Restricted Stock Units (RSUs) awarded to employees generally vest no sooner than one-third per year over three years on the f the date of grant, or upon the third anniversary of the date of the grant, provided the employee anniversary orr 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 orr that the director continues to serverr will be delivered to the director upon vesting and are not subject to any withholding taxes. f the date of grant, provided in each case on our Board of Directors through the vesting date. Shares of our common stock F-49 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) The following table summarizes our RSU activity: Unvested at December 31, 2020 Granted (1) Vested Forfeited Unvested at December 31, 2021 Shares 1,018,000 $ 826,000 (466,000) (176,000) 1,202,000 $ Weighted Average Grant Date Fair Value 314.46 276.90 313.99 294.34 291.54 (1) RSUs granted in 2021 primarily represent RSUs granted in conjunction with our annual awards made in February 2rr conjunction with the hiring of new employees. RSUs granted in 2021 also include approximately 10,000 RSUs granted to our Board of Directors. 021 and awards made in RSUs granted in 2020 and 2019 had weighted average grant date fair values of $318.87 and $304.44, respectively. The fair values of RSUs vested in 2021, 2020 and 2019 totaled $132.2 million, $140.5 million and $131.5 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, 2021 2020 2019 248,000 212,000 $ 54.4 $ 48.6 $ 204,000 40.4 Income before income tax expense and the income tax expense consist of the following: income taxes (benefit): (In millions) Income beforeff Domestic Foreign Total : Income tax expense (benefit)ff Current: Federal State Foreign Total Deferred: Federal State Foreign Total Total income tax expense For the Years Ended December 31, 2021 2020 2019 $ $ $ $ $ 448.3 $ 3,290.0 $ 1,296.9 1,757.5 1,745.2 $ 5,047.5 $ 319.1 $ 647.0 $ 23.1 137.1 479.3 41.2 155.1 843.3 4,725.3 2,400.6 7,125.9 947.4 59.1 84.4 1,090.9 (242.5) $ (1,749.9) $ 1,143.9 (11.9) (172.4) (426.8) (6.8) 1,905.7 149.0 52.5 $ 992.3 $ (2.3) (1,074.5) 67.1 1,158.0 F-50 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Transition Toll Tax The Tax Cuts and Jobs Act of 2017 eliminated the deferral of U.S. income tax on the historical unrepatriated earnings by imposing the one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings (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, 2021 and 2020, we have accrued income tax liabilities of $633.0 million and $697.0 million, respectively, under the Transition Toll Tax. Of the amounts accrued as of December 31, 2021, approximately $72.7 million is expected to be paid within one year. The Transition Toll Tax will be paid in installments over an eight--year period, which started in 2018, and will not accrue interest. Unremitted Earnings At December 31, 2021, 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 differ ences of approximately $1.5 billion as of December 31, 2021, primarily arising through the impacts of ff purchase accounting. These permanently reinvested basis differ subsidiaries, as well as various other events, none of which were considered probable as of December 31, 2021. The residual U.S. tax liability, if these differences reverse, would be between $300.0 million and $400.0 million as of December 31, 2021. ences could reverse through sales of the foreign ff TECFIDERA In 2020 U.S. federal courts in West Virginia and Delaware entered judgments in favor of the defendants in patent infringement proceedings relating to TECFIDERA Orange-Book listed patents. We appealed both decisions. In late 2021 the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) affirmed the judgment of the West Virginia federal court. The appeals in the Delaware cases were stayed and we expect will remain so until the decision in the West Virginia case becomes final. For additional information, please read Note 20, Litigatio consolidated financial statements. n, to these ii Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and is expected to continue to have a substantial and increasing negative impact on our U.S. TECFIDERA revenue in the future. As of December 31, 2020, we assessed the realizability of our deferred tax assets that are dependent on future expected sales of TECFIDERA in the U.S. and reduced the net value of certain deferred tax assets by approximately $1.7 billion and reduced the net value of deferred tax liabilities associated with GILTI and tax credits by approximately $1.6 billion. For the year ended December 31, 2020, the income tax expense associated with these reductions was approximately $90.3 million. We continue to assess the realizability of these deferred tax assets and have recorded an increase in these deferred tax assets of approximately $108.5 million and an increase in these deferred tax liabilities of approximately $103.9 million for the year ended December 31, 2021. F-51 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 Neurimmune's tax basis in ADUHELM 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, 2021 2020 $ 121.0 $ 199.4 1,477.5 475.8 1,973.0 31.7 208.8 (1,961.3) 2,525.9 $ (256.6) $ (1,037.6) (260.2) (250.9) 113.4 165.9 1,546.0 — 2,080.3 23.3 103.1 (1,753.9) 2,278.1 (396.2) (1,143.7) (174.6) (227.0) (1,805.3) $ (1,941.5) $ $ $ The change in the valuation allowance between December 31, 2021 and 2020, was primarily related to the establishment of a valuation allowance against the deferred tax asset related to Neurimmune SubOne AG's (Neurimmune) tax basis in ADUHELM, as discussed below, and the adjustment of a valuation against certain deferred tax assets, the realization of which is dependent on future sales of TECFIDERA in the U.S., as discussed above. In addition to deferred tax assets and liabilities, we have recorded deferred charges related to intra-entity sales of inventory.rr As of December 31, 2021 and 2020, the total deferred charges were $39.6 million and $142.2 million, respectively. As of December 31, 2021 and 2020, the carrying value of our investment in Samsung Bioepis totaled 713.3 billion South Korean won ($599.9 million) and 673.8 billion South Korean won ($620.2 million), respectively, which is classified as a component of investments and other assets within our consolidated balance sheets. As of December 31, 2021, we have not recorded deferred taxes related to this investment as it is not apparent that the basis differ ence will reverse in the foreseeable future. ff F-52 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 Tax credits Purchased intangible assets Divestiture of Denmark manufacturing operations Internal reorganization of certain intellectual propertyrr rights TECFIDERA impairment GILTI Swiss tax reform Neurimmune tax impacts Other Effective tax rate Changes in Tax Rate For the Years Ended December 31, 2021 2020 2019 21.0 % 21.0 % 21.0 % 0.8 (10.5) (3.8) (1.6) — — — 1.3 — (5.3) 1.1 3.0 % 0.7 (3.3) (1.2) 0.7 (0.4) — 1.8 1.3 — (0.1) (0.8) 19.7 % 0.8 (4.5) (1.1) 0.4 1.0 (2.1) — 1.5 (0.8) — 0.1 16.3 % For the year ended December 31, 2021, compared to 2020, the decrease in our effective tax rate, excluding the impact of the Neurimmune deferred tax asset, as discussed below, was primarily due to the change in the territorial mix of our profitability, which included the adverse effect of generic competition for TECFIDERA in the U.S. market, the tax impacts of the BIIB111 and BIIB112 impairment charges and the impact of the non-cash tax effects of changes in the value of our equity investments, where we recorded net unrealized losses in 2021 and net unrealized gains in 2020. Our 2020 effective tax rate also reflected an income tax expense related to the establishment of a valuation allowance against certain deferred tax assets, the realization of which is dependent on future sales of TECFIDERA in the U.S. In addition, for the year ended December 31, 2021, compared to 2020, the decrease in our effective tax rate was significantly impacted by a current year deferred tax benefit in Switzerland resulting from the accelerated approval of ADUHELM by the FDA in the U.S., recognized during the second quarter of 2021. We recorded a net deferred tax asset of approximately $490.0 million during the second quarter of 2021. The net deferred tax asset is comprised of approximately $945.0 million of gross deferred tax asset, reduced by approximately $455.0 million of unrecognized tax benefit, as discussed below. During the fourthrr quarter of 2021 we recorded a valuation allowance of approximately $390.0 million related to this deferred tax asset. The deferred tax benefit relates to Neurimmune's tax basis in ADUHELM, the realization of which is dependent on future sales of ADUHELM and approval of the Swiss cantonal tax authorities, with an equal and offset noncontrolling interests, net of tax in our consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc. For additional information on our collaboration arrangement with Neurimmune, please read Note 19, Investments i e Interest Entities, to these consolidated financial statements. ting amount assigned to net income (loss) attributable to VV tt n Variabl ff For the year ended December 31, 2020, compared to 2019, the increase in our effective tax rate was primarily ff due to the income tax expense related to the establishment of a valuation allowance against certain deferred tax assets, the realization of which is dependent on future sales of TECFIDERA in the U.S., as discussed above, and partially offset by the benefit recognized on the effective settlement of certain tax matters. Additionally, our 2019 effective tax rate benefited from an internal reorganization of certain intellectual property rights and the enactment of a new taxing regime in the country and certain cantons of Switzerland, which we refer to as Swiss Tax Reform, partially offset we recognized a loss on the divestiture of our Hillerød, us to write-off certain deferred tax assets and resulted in a taxable gain in certain jurisdictions. For additional information on the divestiture of our Hillerød, these consolidated financial statements. Denmark manufacturing operations, please read Note 3, Divestitures, to Denmark manufacturing operations, the divestiture required by tax expense related to the divestiture of our Hillerød, Denmark manufacturing operations. Although r r r ff F-53 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Tax Attributes As of December 31, 2021, we had net operating losses and general business credit carry f r orwards for U.S. federal income tax purposes of approximately $0.6 million and $4.8 million, respectively, which begin to expire in 2022 and 2027, respectively. For U.S. state income tax purposes, we had research and investment credit carryr forwards of approximately $147.6 million that begin to expire in 2022. For foreign income tax purposes, we had $16.7 billion of Swiss federal net operating loss carryfr orwards that begin to expire in 2025 and $16.2 billion of Swiss cantonal net operating loss carryfrr orwards 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 portir on 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 reportirr ng 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, net of the recorded valuation allowance. In the event that actual results differ from our estimates or we adjust our estimates in future periods, we may need to adjust or establish a valuation allowance, which could materially impact our consolidated financial position and results of operations. Accounting for Uncertainty in Income Taxes econciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows: (In millions) Beginning balance 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) Ending balance 2021 2020 2019 $ 75.7 $ 129.9 $ 114.2 4.2 509.9 (18.8) (3.2) (4.4) 1.5 51.7 (63.6) (7.9) (35.9) 5.3 17.2 (10.3) (0.1) 3.6 $ 563.4 $ 75.7 $ 129.9 During the year ended December 31, 2021, we increased our gross unrecognized tax benefits by approximately $455.0 million, related to a deferred tax asset for Swiss tax purposes for Neurimmune's tax basis in ADUHELM, as discussed above. This unrecognized tax benefit was recorded as a reduction to the gross deferred tax asset, resulting in the net deferred tax asset, as discussed above, and not as a separate liability on our consolidated balance sheets. Our 2020 activity reflects the impact of the effective settlement of certain tax matters. 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 2017 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. Included in the balance of unrecognized tax benefits as of December 31, 2021, 2020 and 2019, are $87.5 million, $68.8 million and $122.7 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. During the years ended December 31, 2021, 2020 and 2019 we recognized total interest and penalty expense of $2.7 million, $1.0 million and $4.7 million, respectively. We have accrued $24.8 million and $21.2 million for the payment of interest and penalties as of December 31, 2021 and 2020, respectively. F-54 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) It is reasonably possible that we will adjust the value of our uncertain tax positions related to certai n transfer pricing, collaboration matters and other issues as we receive additional information from various taxing authorities, including reaching settlements with such authorities. r We estimate that it is reasonably possible that our gross unrecognized tax benefits, exclusive of interest, could decrease by up to approximately $475.0 million, including approximately $455.0 million related to the unrecognized tax benefits related to Neurimmune's tax basis in ADUHELM, as discussed above, 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, 2021, 2020 and 2019, is as follows: (In millions) Cash paid during the year for: Interest Income taxes For the Years Ended December 31, 2021 2020 2019 $ 280.8 $ 247.9 272.7 $ 906.7 244.2 1,064.5 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 FUMADERM and TECFIDERA (together, the Fumapharm Products), which was paid in the first quarter of 2019. 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. 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, 2021 2020 2019 $ 11.0 $ 42.0 $ (253.6) (824.9) (22.4) (5.6) (222.5) 685.7 (10.7) 2.9 $ (1,095.5) $ 497.4 $ 120.0 (187.4) 204.7 (7.0) (47.0) 83.3 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, 2021, 2020 and 2019: (In millions) For the Years Ended December 31, 2021 2020 2019 Net gains (losses) recognized during the period on equity securities $ (821.1) $ 693.9 $ Less: Net gains (losses) realized during the period and on equity securities 10.3 12.1 Unrealized gains (losses) recognized during the period on equity securities $ (831.4) $ 681.8 $ 200.1 50.0 150.1 The net unrealized losses recognized during the year ended December 31, 2021, primarily reflect decreases in the aggregate fair value of our investments in Denali, Sage, Sangamo and Ionis common stock of approximately $819.6 million. F-55 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Accrued Expense and Other Accrued expense and other consists of the following: (In millions) As of December 31, 2021 2020 Revenue-related reservesrr for discounts and allowances $ 802.1 $ 1,080.6 Collaboration expense Employee compensation and benefits Royalties and licensing fees Derivative liabilities Current portion of contingent consideration obligations Other Total accrued expense and other Other Long-term Liabilities 324.7 345.1 234.7 10.8 — 817.8 389.9 333.8 218.5 181.5 149.6 791.4 $ 2,535.2 $ 3,145.3 Other long-term liabilities were $1,320.5 million and $1,329.6 million as of December 31, 2021 and 2020, respectively, and included accrued income taxes totaling $664.5 million and $709.9 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. 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, including mosunetuzumab, pursuant to our collaboration arrangements with Genentech, a wholly-owned RITUXAN HYCELA collectively as RITUXAN. member of the Roche Group. For purposes of this footnote, we refer to RITUXAN and yy 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 OCREVUS and any other collaboration anti-CD20 products in development in exchange for a royalty as well as our rights to GAZYVA in exchange for the compensation described in the collaboration arrangement. 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. F-56 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 expense of GAZYVA as a reduction of our share of pre-tax profits in revenue 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 24.0% if annual net sales exceed $900.0 million. There will be a 50.0% reduction to these royalties if a biosimilar to OCREVUS is approved in the U.S. In addition, we receive a gross 3.0% 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 brr approved for the treatment of RMS and PPMS in the E.U. and certain other countries. asis. OCREVUS has been 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 revenue was based on our estimates from third-partyrr and market research data of OCREVUS sales occurring during the corresponding period. Differ ences between actual and estimated royalty revenue will be adjusted . for in the period in which they become known, which is generally expected to be the following quarter rr ff Mosunetuzumab In January 2022 we exercised our option with Genentech to partirr cipate in the joint development and commercialization of mosunetuzumab, a late-stage bispecific antibody in development for B-cell non-Hodgkin’s lymphoma and other therapeutic areas. In connection with this exercise, we recorded a $30.0 million option exercise fee payable to Genentech in December 2021, which was recognized in research and development expense in our consolidated statements of income. We also recorded a charge of approximately $20.0 million to reimburse Genentech for our 30.0% of the costs incurred in developing this product candidate during 2021, which was recognized in research and development expense in our consolidated statements of income. Under our collaboration with Genentech, we will be responsible for 30.0% of development costs for mosunetuzumab prior to FDA approval and will be entitled to 30.0% - 37.5% of mosunetuzumab co-promotion operating profits and losses in the U.S. based gsingle-diggit royalties on sales fof mosunetuzumab outside the U.S. on certain events and low Profit-sharing Formulas RITUXAN and Mosunetuzumab Profitff Sharerr Our current pretax co-promotion profit-sharing formula for RITUXAN and mosunetuzumab provides for a 30.0% 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: After First GAZYVA Threshold Date until Second GAZYVA Threshold Date After Second GAZYVA Threshold Date 37.5 % 35.0 % 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 of GAZYVA within any consecutive 12-month period have reached $150.0 million. the date of the First Non-CLL GAZYVA FDA Approval that U.S. gross sales ff after rr Second GAZYVA Threshold Date means the first day of the calendar quarter 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. U.S. gross sales of GAZYVA ff after rr Our share of RITUXAN pre-tax profits in the U.S. in excess of $50.0 million for the years ended December 31, 2021, 2020 and 2019, was 37.5%. F-57 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In addition, should the FDA approve mosunetuzumab or any other anti-CD20 product other than OCREVUS or GAZYVA that is acquired or developed by Genentech and subjeb ct to the collaboration agreement, the above table would no longer apply and our share of the co-promotion operating profits of RITUXAN and the new product would be between 30.0% and 37.5% based on certain events. GAZYVAYY Profitff Share Our current pretax profit-sharing formula for GAZYVA provides for a 35.0% 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: After First GAZYVA Threshold Date until Second GAZYVA Threshold Date After Second GAZYVA Threshold Date 37.5 % 35.0 % Our share of GAZYVA pre-tax profits in excess of $50.0 million for the years ended December 31, 2021, 2020 and 2019, was 37.5%. Revenue from Anti-CD20 Therapeutic Programs Revenue from anti-CD20 therapeutic programs is summarized as follows: (In millions) Biogen's share of pre-tax profits in the U.S. for RITUXAN and GAZYVA Other revenue from anti-CD20 therapeutic programs Total revenue from anti-CD20 therapeutic programs For the Years Ended December 31, 2021 2020 2019 $ $ 647.7 $ 1,080.2 $ 1,010.8 897.6 1,658.5 $ 1,977.8 $ 1,542.4 748.0 2,290.4 Prior to regulatory ar pproval, we record our share of the expense 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 expense related to that product as a reduction of our share of pre-tax profits in revenue 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. Under our agreement with Ionis, we make royalty payments to Ionis on annual worldwide net sales of SPINRAZA using a tiered royalty rate between 11.0% and 15.0%, 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, 2021, 2020 and 2019, totaled $267.1 million, $286.6 million and $293.0 million, respectively. 2012 Ionis Agreement 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 mrr product candidate after option exercise. ilestones as well as royalties on future sales if we successfully develop the In December 2019 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB080 (tau ASO), which is currently in Phase 1 development for the potential treatment of Alzheimer's disease. 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 in the low- to mid-teens if we successfully develop the product candidate after option exercise. F-58 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 servirr ces 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 servirr ces over the term of the agreement. 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 Ionis 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 Ionis 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 Measuremen statements. ts, to these consolidated financial rr We have the option to license therapies arising out of the 2018 Ionis 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 years ended December 31, 2021, 2020 and 2019, we incurred milestones of $22.5 million, $11.3 million and $30.0 million, respectively, related to the advancement of neurological targets identified under this agreement, which were recorded as research and development expense in our consolidated statements of income. 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. BIIB115 In December 2021 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB115, a preclinical investigational ASO in development for SMA. In connection with this option exercise, we made an opt-in payment of $60.0 million to Ionis, which was recorded as research and development expense in our consolidated statements of income. 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. F-59 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 regulatoryr 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 expense 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 expense related to the development, manufacturing and commercialization of tofersen following the option exercise. During the years ending December 31, 2021, 2020 and 2019, we incurred milestones of $10.0 million, $28.0 million and $20.0 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. Lecanemab Collaboration We have a collaboration agreement with Eisai to jointly develop and commercialize lecanemab (BAN2401), an anti-amyloid antibody, and elenbecestat, the oral BACE (base amyloid cleaving enzyme) inhibitor, two Eisai product candidates for the potential treatment of Alzheimer's disease (the Lecanemab Collaboration). In September 2019 we and Eisai discontinued the global Phase 3 studies of elenbecestat in early Alzheimer's disease. Eisai serves as the global operational and regulatory lead for lecanemab and all costs, including research, development, sales and marketing expense, are shared equally between us and Eisai. If lecanemab receives marketing approval, we and Eisai will co-promote lecanemab and share profits equally. In addition, the Lecanemab Collaboration provides both parties with certain rights and obligations in the event of a change in control of either party. rr The Lecanemab Collaboration also provided Eisai with an option to jointly develop and commercialize ADUHELM (aducanumab) (ADUHELM 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 ADUHELM Option and we entered into a new collaboration agreement for the joint development and commercialization of ADUHELM (aducanumab) (the ADUHELM Collaboration Agreement). 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. Eisai has not yet exercised its Anti-Tau Option. F-60 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary orr f development and sales and marketing expense related to the Lecanemab Collaboration is as follows: (In millions) Total development expense incurred by the collaboration related to the advancement of lecanemab and elenbecestat Biogen's share of lecanemab and elenbecestat development expense reflected in research and development expense in our consolidated statements of income Total sales and marketing expense incurred by the Lecanemab Collaboration Biogen's share of lecanemab and elenbecestat sales and marketing expense reflected in selling, general and administrative expense in our consolidated statements of income ADUHELM Collaboration Agreement For the Years Ended December 31, 2021 2020 2019 $ 323.0 $ 219.3 $ 348.7 161.5 27.2 13.6 109.6 9.8 4.9 174.3 32.4 16.2 Under the ADUHELM Collaboration Agreement, we lead the ongoing development of ADUHELM, and we and Eisai will co-promote ADUHELM with a region-based profit split. Beginning January 1, 2019, Eisai is reimbursing us for 45.0% of development costs incurred by the collaboration for the advancement of ADUHELM (ADUHELM development expense). In March 2019, based on a pre-specified futility analysis, we discontinued the global Phase 3 trials, EMERGE r of 2019, as a result of the decision to discontinue the Phase 3 EMERGE and ENGAGE trials and ENGAGE, designed to evaluate the effiff cacy and safety of ADUHELM in patients with early Alzheimer's disease. In the first quarter 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 45.0% Eisai reimbursement of development costs incurred under the ADUHELM Collaboration Agreement. In October 2019 we and Eisai announced that we planned to pursue regulatory approval for ADUHELM in the U.S. A new analysis of a larger dataset from these trials, conducted in scientific collaboration with the FDA, showed that the Phase 3 EMERGE trial met its pre-specified primary and secondary endpoints. In July 2020 we completed the submission of a BLA for the approval of ADUHELM to the FDA and made a $75.0 million milestone payment to Neurimmune. We recognized net profit-sharing income of $33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone payment. In June 2021 ADUHELM was granted accelerated approval by the FDA for the treatment of Alzheimer's disease and had its first commercial sale. As a result of the launch of ADUHELM in the U.S., we made a $100.0 million milestone payment to Neurimmune. For the year ended December 31, 2021, we recognized net profit-sharing income of $45.0 million to reflect Eisai's 45.0% share of the $100.0 million milestone payment. Upon commercialization, both companies will co-promote ADUHELM with a region-based profit split. We will receive a 55.0% 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 20.0% share of the potential profits (losses) in Japan and Asia, excluding China and South Korea. The two companies will share equally in the potential profits (losses) in rest of world markets. Sales and marketing expense are shared in proportion to the same region-based profit split that is utilized to co-promote ADUHELM. A summary orr f development expense, sales and marketing expense and milestone payments related to the ADUHELM Collaboration Agreement is as follows: (In millions) For the Years Ended December 31, 2021 2020 2019 Total ADUHELM development expense $ 183.7 $ 152.0 $ 179.4 Biogen's share of ADUHELM development expense reflected in research and development expense in our consolidated statements of income Total ADUHELM sales and marketing expense incurred by the ADUHELM Collaboration Agreement Biogen's share of ADUHELM sales and marketing expense reflected in selling, general and administrative expense and collaboration profit (loss) sharing in our consolidated statements of income Total ADUHELM collaboration third-party milestones Biogen's share of reimbursement from Eisai of ADUHELM milestone payments reflected in collaboration profit (loss) sharing in our consolidated statements of income 101.1 562.3 301.4 100.0 45.0 83.6 353.0 193.7 75.0 33.8 98.7 27.4 15.1 — — F-61 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Co-promotion Profits and Losses In the U.S. we recognize revenue on sales to third-parties as a component of product revenue, net in our consolidated statements of income. We also record the related cost of revenue and sales and marketing expense in our consolidated statements of income as these costs are incurred. Payments made to and received from Eisai for its 45.0% share of the co-promotion profits or losses in the U.S. are recognized in collaboration profit (loss) sharing in our consolidated statements of income. For the year ended December 31, 2021, we recognized net profit-sharing income of $233.2 million to reflect Eisai's 45.0% sharing of the net collaboration losses in the U.S. 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. During the fourthr quarter of 2021 we recorded approximately $164.0 million of charges associated with inventory and purchase commitments in excess of forecasted demand related to ADUHELM, which was recognized in cost of sales within our consolidated statements of income. In addition, we recognized the expected share of these charges from Eisai's 45.0% share in collaboration profit (loss) sharing within our consolidated statements of income. Amounts receivable from Eisai related to the agreements discussed above were $$285.4 million nda $151.1 million as of December 31, 2021 and 2020, respectively. Amounts payable to Eisai related to the agreements discussed above were $$46.5 million nda $111.9 million as of December 31, 2021 and 2020, respectively. UCB We have a collaboration agreement with UCB to jointly develop and commercialize dapirolizumab pegol, an anti- CD40L pegylated Fab, for the potential treatment of systemic lupus erythemyy indications. Either we or UCB may propose development of dapirolizumab pegol in additional indications. If the parties do not agree to add an indication as an agreed indication to the collaboration, we or UCB may, at the sole expense of the applicable party, pursue development in such excluded indication(s), subject to an opt-in right of the non-pursuing party after proof of clinical activity. atosus and other future agreed All costs incurred for agreed indications, including research, development, sales and marketing expense, are shared equally between us and UCB. Upon marketing approval, we and UCB will co-promote dapirolizumab pegol and share profits equally. A summary orr f development expense related to the UCB collaboration agreement is as follows: (In millions) For the Years Ended December 31, 2021 2020 2019 Total UCB collaboration development expense $ 84.2 $ 58.3 $ Biogen's share of UCB development expense reflected in research and development expense in our consolidated statements of income 42.1 29.2 31.9 16.0 Alkermes In November 2017 we entered into an exclusive license and collaboration agreement with Alkermes Pharma Ireland Limited, a subsidiary of Alkermes plc (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 commercially available in the U.S. During the fourthr treatment of RRMS in the E.U., Switzerland and the U.K. quarter of 2021 VUMERITY was approved for the Under this agreement, we received an exclusive, worldwide license to develop and commercialize VUMERITY and we pay Alkermes royalties of 15.0% on worldwide net commercial sales of VUMERITY, which are recognized in cost of sales within 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. Royalty cost of sales related to sales of VUMERITY for the years ended December 31, 2021, 2020 and 2019, totaled $61.6 million, $12.9 million and $1.6 million, respectively. 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. F-62 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) During the fourthr 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, 2021, 2020 and 2019, we recorded $26.5 million, $32.4 million and $53.5 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. In October 2019 we entered into a new supply agreement and amended our license and collaboration agreement with Alkermes. We have elected to initiate a technology transfer and, following a transition period, to manufacture VUMERITY or have VUMERITY manufactured by a third-party we have engaged in exchange for paying an increased royalty rate to Alkermes on any portion of future worldwide net commercial sales of VUMERITY that is manufactured by us or our designee. 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 FAMP responsible for all regulatory ar FF ctivities and the future clinical development of related products in those markets. YRA, in markets outside the U.S. We are 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 ar nd 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 of $15.0 million, due if ex-U.S. net sales reach $100.0 million over a period of four consecutive quarters, was recognized during the third quarter of 2020 and capitalized within intangible assets, net in our consolidated balance sheets. 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 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, 2021, 2020 and 2019, total cost of sales related to royalties and commercial supply of FAMPYRA reflected in our consolidated statements of income were $46.6 million, $44.5 million and $42.0 million, respectively. Sage Therapeutics, Inc. In November 2020 we entered into a global collaboration and license agreement with Sage to jointly develop and commercialize BIIB125 (zuranolone) for the potential treatment of major depressive disorder and postpartum depression and BIIB124 (SAGE-324) for the potential treatment of essential tremor with potential in other neurological conditions such as epilepsy. In connection with the closing of this transaction in December 2020 we purchased $650.0 million of Sage common stock, or approximately 6.2 million shares at approximately $104.14 per share, which are subject to transfer restrictions. We recorded an asset in investments and other assets in our consolidated balance sheets to reflect the initial fair value of the Sage common stock acquired and a charge of approximately $209.0 million to research and development expense in our consolidated statements of income to reflect the premium paid for the Sage common stock. We also made an upfront payment of $875.0 million that was recorded as research and development expense in our consolidated statements of income. We may also pay Sage development and commercial milestone payments that could total up to approximately $1.6 billion if all the specified milestones set forth in this collaboration are achieved. Both companies will share equal responsibility and costs for development as well as profits and losses for commercialization in the U.S. Outside of the U.S., we are responsible for development and commercialization, excluding Japan, Taiwan and South Korea, with respect to zuranolone and may pay Sage potential tiered royalties in the high teens to low twenties. F-63 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) A summary orr f development and sales and marketing expense related to this collaboration is as follows: (In millions) Total Sage collaboration development expense Biogen's share of Sage development expense reflected in research and development expense in our consolidated statements of income Total Sage sales and marketing expense incurred by the collaboration Biogen's share of Sage sales and marketing expense reflected in selling, general and administrative expense in our consolidated statements of income Denali Therapeutics Inc. For the Years Ended December 31, 2021 $ 167.7 83.8 36.4 18.2 In August 2020 we entered into a collaboration and license agreement with Denali to co-develop and co- commercialize Denali's small molecule inhibitors of leucine-rich repeat kinase 2 (LRRK2) for Parkinson's disease. In addition to the LRRK2 Transport Vr a second pr gogram utiliz ging its Transport Vehicle tec g additional Transport Vehicle-enabled therapeutics, should Denali decide to seek a collaboration ffor such proggrams. ehicle platfform, includingg its Antibody Transport Vehicle (ATV) A: TV enabled anti-amyloid beta pr gogram and gprogram, we also have an exclusive option to license two preclinical hnology. Further, we have a r gight of ff first n gegotiation on two gprograms ffrom Denali’s As part orr ff this collaboration we purchased $$465.0 million of Denali common stock in September 2020, or approximately 13 million shares at approximately $34.94 per share, which are subject to transfer restrictions. We recorded an asset in investments and other assets in our consolidated balance sheets to reflect the initial fair value of the Denali common stock acquired and a charge of approximately $41.3 million to research and development expense in our consolidated statements of income to reflect the premium paid for the Denali common stock. We also made an upfront payment of $560.0 million that was recorded as research and development expense in our consolidated statements of income. We may also pay Denali development and commercial milestone payments that could total up to approximately $1.1 billion if the milestones related to the LRRK2 program are achieved. Under this collaboration, both companies share responsibility and costs for global development based on specified percentages and we are responsible for commercialization and may pay Denali potential tiered royalties. A summary orr f development expense related to this collaboration is as follows: (In millions) For the Years Ended December 31, 2021 2020 2019 Total Denali collaboration development expense $ 42.5 $ 14.6 $ Biogen's share of Denali development expense reflected in research and development expense in our consolidated statements of income 25.5 8.8 — — Sangamo Therapeutics, Inc. In February 2020 we entered into a collaboration and license agreement with Sangamo to develop and commercialize ST-501 for tauopathies, including Alzheimer's disease; ST-502 for synucleinopathies, including Parkinson’s disease; a third neuromuscular disease target; and up to nine additional neurological disease targets to be identified and selected within a five-year period. The companies are leveraging Sangamo’s proprietary zrr protein technology delivered via adeno-associated virus to modulate the expression of key genes involved in neurological diseases. inc finger In connection with the closing of this transaction in April 2020 we purchased $225.0 million of Sangamo common stock, or approximately 24 million shares at approximately $9.21 per share, of which approximately 12 million shares remain subject to transfer restrictions as of December 31, 2021. We recorded an asset in investments and other assets in our consolidated balance sheets to reflect the initial fair value of the Sangamo common stock acquired and a charge of approximately $83.0 million to research and development expense in our consolidated statements of income to reflect the premium paid for the Sangamo common stock. We also made an upfront payment of $125.0 million that was recorded as research and development expense in our consolidated statements of income. We may also pay Sangamo research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if we select all of the targets allowed under this collaboration and all the F-64 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) specified milestones set forth in this collaboration are achieved. Of this amount, up to $80.0 million relates to the selection of targets, $1.9 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones and $380.0 million relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. In addition, we may pay Sangamo tiered royalties on potential net sales of any products developed under this collaboration in the high single digit to double digit sub-teen percentages. A summary orr f development expense related to this collaboration is as follows: (In millions) For the Years Ended December 31, 2021 2020 2019 Total Sangamo collaboration development expense $ 22.7 $ 10.1 $ Biogen's share of Sangamo development expense reflected in research and development expense in our consolidated statements of income 14.6 6.4 — — InnoCare Pharma Limited In July 2021 we entered into a collaboration and license agreement with InnoCare Pharma Limited (InnoCare) for orelabrutinib, an oral small molecule Bruton's tyrosine kinase inhibitor for the potential treatment of MS. Orelabrutinib is currently being studied in a multi-country,r placebo-controlled Phase 2 trial in relapsing-remitting MS. Under the terms of this collaboration, we have exclusive rights to orelabrutinib in the field of MS worldwide and certain autoimmune diseases outside of China (including Hong Kong, Macau and Taiwan), while InnoCare retains exclusive worldwide rights to orelabrutinib in the field of oncology and certain autoimmune diseases in China (including Hong Kong, Macau and Taiwan). In connection with the closing of this transaction in August 2021 we made an upfront payment of $125.0 million that was recorded as research and development expense in our consolidated statements of income. We may also pay InnoCare up to approximately $812.5 million in potential development milestones and potential commercial payments should this collaboration achieve certain development, commercial milestones and sales thresholds. In addition, we may pay InnoCare tiered royalties on potential net sales of any products developed under this collaboration in the low to high teen percentages. Other Research and Discovery Arrangements 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. Other For the years ended December 31, 2021, 2020 and 2019, we recorded $$89.1 million, $$92.1 million and $$80.8 million, respectively, as research and development expense in our consolidated statements of income related to other research and discovery related arrangements. Samsung Bioepis Co., Ltd. Joint Venture Agreement In February 2rr 012 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 85.0% ownership interest in Samsung Bioepis and we contributed 49.5 billion South Korean won (approximately $45.0 million) for the remaining 15.0% ownership interest. In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5.0%, which reflected the effect of previous equity financings in which we did not partirr cipate, 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, 2021, 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 carryirr ng value of our initial investment, we suspended recognizing additional F-65 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) losses. In the first quarter of 2019 we restarted recognizing our share of Samsung Bioepis' (income) losses, and we began recognizing amortirr zation on certain basis differ ences resulting from our November 2018 investment. ff ff Upon investment, the equity method of accounting requires us to identify aff ences between the fair value of our investment and the carrying value of our interest in the underlying net assets of the investee. These basis differ ences are amortized over their economic life. The total basis difference was approximately $675.0 million and relates to inventory,rr developed technology, IPR&D and deferred tax balances. The basis differences related to inventory wrr ere amortized, net of tax, over their estimated useful lives of 1.5 years, and the basis differ to developed technology and IPR&D for marketed products will be amortized, net of tax, over their estimated useful lives of 15 years. nd allocate differ ences related ff ff Certain officers and affiff liates of our joint venture partner, Samsung BioLogics, are currently subject to ongoing criminal proceedings that we continue to monitor. While these proceedings 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, 2021, we rec gognized net income on our investment off $$34.9 million, freflecti gng our share off Sam g basis ences total ging $$29.7 million. fff fdifffer sung Bioepis' operati gng pr fofits, net fof tax tot galing $$64.6 million fofffset fff by amortization fof For the year ended December 31, 2020, we recognized net income on our investment of $5.3 million, reflecting our share of Samsung Bioepis' operating profits, net of tax totaling $45.3 million offset ff differ ences totaling $40.0 million. ff by amortization of basis Net income on our investment for the year ended December 31, 2021, reflects a $31.2 million benefit related to the release of a valuation allowance on deferred tax assets associated with Samsung Bioepis. The valuation allowance was released in the second quarter of 2021 based on a consideration of the positive and negative evidence, including the historic earnings of Samsung Bioepis. As of December 31, 2021 and 2020, the carryirr ng value of our investment in Samsung Bioepis totaled 713.3 billion South Korean won ($599.9 million) and 673.8 billion South Korean won ($620.2 million), respectively, which is classified as a component of investments and other assets within our consolidated balance sheets. In January 2022 we entered into an agreement to sell to Samsung Biologics our equity in Samsung Bioepis. Under the terms of the proposed transaction, we would receive $1.0 billion in cash at closing and $1.3 billion to be deferred over two payments of $812.5 million due at the first anniversary arr anniversary orr upon the achievement of certain commercial milestones. f the closing of the transaction. We would also be eligible to receive up to an additional $50.0 million nd $437.5 million due at the second Closing of the transaction is currently anticipated in mid-2022, contingent on the effectiveness of a securities nd other customary closing registration statement filed by Samsung Biologics and satisfaction of certain regulatory arr conditions. 2019 Development and Commercialization Agreement In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two potential ophthalmology biosimilar products, BYOOVIZ (ranibizumab-nuna), a proposed ranibizumab biosimilar referencing LUCENTIS, and SB15, a proposed aflibercept biosimilar 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 at a pre-specified gross margin. 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 in 2019 and $37.0 million was recorded as an intangible assets, net in our consolidated balance sheets in 2019. F-66 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) During the third quarter of 2020, we paid Samsung Bioepis a $15.0 million development milestone, which was included in research and development expense in our consolidated statements of income. During the third quarter of 2021, we accrued $15.0 million in milestone payments related to the approval of BYOOVIZ in the U.S., the E.U. and the U.K., that were capitalized within intangible assets, net in our consolidated balance sheets. We may also pay Samsung Bioepis up to approximately $180.0 million in additional development, regulatory and sales-based milestones. rr We also acquired an option to extend the term of our 2013 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 an option to acquire exclusive rights to commercialize these products in China. 2013 Commercial Agreement In December 2013 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 ar pproval 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 Inc. (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-r by-country brr asis, and we make royalty payments to AbbVie on behalf of Samsung Bioepis. We began to recognize revenue on sales of IMRALDI to third-partirr es in Europe in the fourthr quarter of 2018. We reflect revenue on sales of BENEPALI, IMRALDI and FLIXABI to third-parties in product revenue, net in our consolidated statements of income and record the related cost of revenue and sales and marketing expense 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 50.0% 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, 2021, 2020 and 2019, we recognized net profit-sharing expense off $$285.4 million, $$266.5 million and $$241.6 million, respectively, to refflect S amsung Bioepis' 50.0% shar ging fof the net collaboration pr fofits. g Other Services Simultaneous with the formation of Samsung Bioepis, we also entered into a technical development services agreement, a manufacturing agreement and a license agreement with Samsung Bioepis. Under the technical development services agreement, we provided Samsung Bioepis technical development and technology transfer services, which included, but were not limited to, cell culture development, purification process development, formulation development and analytiyy cal development. Under the manufacturing agreement, we manufactured clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis pursuant to contractual terms. Following the divestiture of our Hillerød, Denmark manufacturing operations in August 2019, FUJIFILM assumed responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis. We no longer recognize revenue for the manufacturing completed after the divestiture date under the manufacturing agreements with Samsung Bioepis. For additional information on the divestiture of our Hillerød, r statements. Denmark manufacturing operations, please read Note 3, Divestitures, to these consolidated financial r F-67 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Under the license agreement, we granted Samsung Bioepis an exclusive license to use, develop, manufacture and commercialize biosimilar products created by Samsung Bioepis using Biogen product-specific technology. In exchange, we receive single digit royalties on biosimilar products developed and commercialized by Samsung Bioepis. For the years ended December 31, 2021, 2020 and 2019, we recognized $$20.7 m illion $20.9 million and , $106.2 million, respectively, in revenue under the license, technical development services and manufacturing agreements, which is reflected in revenue from collaborative and other relationships, as a component of other revenue in our consolidated statements of income. Amounts receivable from Samsung Bioepis related to the agreements discussed above were $$4.1 million nda $5.1 million as of December 31, 2021 and 2020, respectively. Amounts payable to Samsung Bioepis related to the agreements discussed above were $$148.7 million nda respectively. $99.0 million as of December 31, 2021 and 2020, 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 br eneficiary. The following are our significant variable interest entities. Neurimmune SubOne AG We have a collaboration and license agreement with Neurimmune for the development and commercialization of antibodies for the potential treatment of Alzheimer's disease, including ADUHELM (as amended, the Neurimmune Agreement). We are responsible for the development, manufacturing and commercialization of all collaboration products. The Neurimmune 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 a licensed product. 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 100.0% 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 15.0% reduction in the previously negotiated royalty rates payable on products developed under the Neurimmune Agreement, including royalties payable on potential commercial sales of ADUHELM. 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 commercial sales of ADUHELM, by an additional 5.0%. Our royalty rates payable on products developed under the Neurimmune Agreement, including royalty rates payable on commercial sales of ADUHELM, 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 and the second quarter of 2018, as applicable. of 2017 r Under the terms of the Neurimmune Agreement, we were required to pay Neurimmune a milestone payment of $75.0 million upon the regulatory filing with the FDA for the approval of ADUHELM. During the second quarter of 2020 we paid Neurimmune $75.0 million upon the completed submission of the BLA for the approval of ADUHELM to the FDA, which was recognized as a charge to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income. In addition, during the second quarter of 2020 we recognized net profit- sharing income of $33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone payment, which was recognized in collaboration profit (loss) sharing in our consolidated statements of income. In June 2021 ADUHELM was granted accelerated approval by the FDA. Under the terms of the Neurimmune Agreement, we were required to pay Neurimmune a milestone payment of $100.0 million related to the launch of ADUHELM in the U.S. During the second quarter recognized as a charge to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income. In addition, during the second quarter of 2021 we recognized net profit-sharing income of $45.0 million to reflect Eisai's 45.0% share of the $100.0 million milestone payment, which was recognized in collaboration profit (loss) sharing in our consolidated statements of income. of 2021 we made this $100.0 million payment, which was rr rr F-68 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Additionally, if aducanumab receives regulatory approval in the jurisdictions where we have submitted filings, we may pay up to $100.0 million in additional milestones to Neurimmune, which includes $50.0 million if launched in three or more countries in the E.U. and $50.0 million if launched in Japan. Milestones payable to Neurimmune are shared expenses under the ADUHELM Collaboration Agreement. 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, 2021, 2020 and 2019, amounts reimbursed were immaterial. During the second quarter of 2021 we recorded a net deferred tax asset of approximately $490.0 million. The net deferred tax asset is comprised of approximately $945.0 million of gross deferred tax asset, reduced by approximately $455.0 million of unrecognized tax benefit. The deferred tax benefit relates to Neurimmune's tax basis in ADUHELM, the realization of which is dependent on future sales of ADUHELM and approval of the Swiss cantonal tax authorities. During the fourthrr $390.0 million related to this deferred tax asset. There is an equal and offset (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc. quarter of 2021 we recorded a valuation allowance of approximately ting amount assigned to net income ff Excluding the impact of the Neurimmune deferred tax asset, 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 contractually required amounts. Under the ADUHELM Collaboration Agreement, Eisai had an option to share in the benefit and cost associated with the royalty reductions, as 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 commercial sales of ADUHELM 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. Unconsolidated Variable Interest Entities 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, 2021 and 2020, the carrying value of our investments in certain biotechnology companies representing potential unconsolidated variable interest entities totaled $24.6 million and $12.8 million, respectively. Our maximum exposure to loss related to these variable interest entities is limited to the carryirr ng 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. rr 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 that we infringe their patents. An enforceability of the patents held by others. These include claims by third-parties rr F-69 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 partirr es. Loss Contingencies ADUHELM Securities Litigation and certain current and former officers are named as defendants in an action filed by a shareholder on November 13, 2020, and now pending in the U.S. District Court for the District of Massachusetts. The action alleges violations of federal securities laws under 15 U.S.C §78j(b) and §78t(a) and 17 C.F.R. §240.10b-5 and seeks a declaration of the action as a class action and monetary relief. An estimate of the possible loss or range of loss cannot be made at this time. No trial date has been set. We have filed a motion to dismiss, which is pending. 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 (the French proceeding) and in November 2018 against Biogen GmbH in the Düsseldorf Regional Court (the German proceeding), alleging that IMRALDI, the adalimumab biosimilar product of Samsung Bioepis that Biogen has commercialized in Europe, infringes national counterpartsrr of European Patent No. 3 148 510 (the EP '510 Patent, expiring in May 2035). In May 2020 the European Patent Offiff ce (EPO) held the EP '510 Patent invalid. Fresenius Kabi' has appealed to the EPO's Technical Boards of Appeal, a hearing has been set for June 2022, and the German and French proceedings have been stayed pending the decision on appeal. In June 2020 Fresenius Kabi commenced proceedings in Denmark's Maritime and Commercial High Court alleging that IMRALDI infringes the Danish counterpart orr f European Patent No. 3 145 488 (the EP '488 Patent, expiring in May 2035) and a Danish utility model. In September 2021 the Court ruled that the patent and utility model are invalid and not infringed. Fresenius Kabi has appealed to the High Court of Eastern Denmark and the appeal is pending. The EPO has scheduled a hearing on the validity of the EP '488 Patent for October 2022. In July 2020 the Danish Patent Board of Appeal revoked the Danish utility models that Fresenius Kabi had asserted against Biogen and Fresenius Kabi has appealed to the Danish Maritime and Commercial High Court. No hearing has been scheduled. In July 2019 Gedeon Richter Nyrt crr ommenced proceedings for damages and injunc n tive relief against Biogen GmbH in the Düsseldorf Regional Court alleging infringement of the German counterpart of European Patent No. 3 212 667, which expires in October 2035. The case has been stayed pending proceedings in the EPO seeking to invalidate the patent. In November 2020 Gedeon Richter Nyrt crr ommenced additional proceedings against Biogen GmbH in the Düsseldorf Regional Court alleging infringement of a German utility model. In October 2021 Biogen filed cancellation proceedings in respect of the German utility model and the infringement proceedings have been stayed pending the outcome of the cancellation proceedings. An estimate of the possible loss or range of loss in the 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 counterpartsr statutory t 2022. The U.S. has not made an intervention decision. An estimate of the possible loss cannot be made at this time. rebling of damages, civil penalties, attorneys' fees and costs. A trial is scheduled for the third quarter of and seeks damages of $981.1 million plus r 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. Samsung BioLogics Arbitration F-70 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) In December 2020 we requested arbitration in the International Chamber of Commerce Court of International Arbitration against Samsung BioLogics seeking interpretation of certain provisions of the parties Joint Venture r elief and unspecified damages. Agreement. Samsung BioLogics counterclaimed for breach and seeks declaratory r The arbitration hearing has concluded and a decision is pending. An estimate of the possible loss or range of loss cannot be made at this time. ERISA Class Action Litigation In September 2020 the U.S. District Court for the District of Massachusetts consolidated two cases filed against us in July and August 2020 by participants in the Biogen 401(k) Savings Plan alleging breach of fiduciaryrr duty under ERISA. Plaintiffsff date has been set. An estimate of the possible loss or range of loss cannot be made at this time. seek a declaration of the action as a class action and monetary arr nd other relief. No trial Humana Patient Assistance Litigation In September 2021 Humana Inc. (Humana) filed suit against us in the U.S District Court for the District of Massachusetts alleging damages related to our providing MS patients with free medications and making charitable contributions to non-profit organizations that assist MS patients. Humana alleges violation of the federal RICO Act and state laws and seeks statutory treble damages, attorneys' fees and costs. No trial date has been set. An estimate of the possible loss or range of loss cannot be made at this time. Other Matters Government Investigations The U.S. House of Representatives Committees on Oversight and Reform and Energy and Commerce and the Office of Inspector General of the U.S. Department of Health and Human Servirr ces have announced investigations relating to ADUHELM. In addition, the Company has received a civil investigative demand from the Federal Trade Commission and an inquiry f including healthcare sites, ADUHELM’s approval and ADUHELM’s marketing. rom the Securities and Exchange Commission seeking information relating to ADUHELM, r Hatch-Waxman Act Litigation relating to TECFIDERA Orange-Book Listed Patents In 2017 to 2020 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 (the Delaware Actions), against Accord Healthcare Inc., Alkem Laboratories Ltd., Amneal Pharmaceuticals LLC, Cipla Limited, 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., Shilpa Medicare Limited, Slayback Pharma LLC, Sun Pharmaceutical Industries, Ltd., Sun Pharmaceutical Industries, Inc., Sun Pharma Global FZE, Torrent Pharmaceuticals Ltd., TWi Pharmaceuticals, Inc., Windlas Healthcare Pvt. Ltd. and Zydus Pharmaceuticals (USA) Inc. (collectively, the Delaware Defendants) in the U.S. District Court for the District of Delaware (the Delaware Court)rr and against Mylan in the U.S. District Court for the Northern District of West Virginia (the West Virginia Court). In June 2020 the West Virginia Court entered judgment for Mylan that the asserted claims of the ‘514 Patent are invalid for lack of written description and in November 2021 the Federal Circuit affirff med. The Delaware Court err ntered judgment for the Delaware Defendants on the grounds that the judgment of the West Virginia Court applies to the Delaware Actions under principles of collateral estoppel. The appeals in the Delaware cases were stayed and we expect will remain so until the Federal Circuit's decision in the West Virginia case becomes final. 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). The '514 Patent includes claims covering treatment of MS with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label. In February 2020 the PTAB issued a final written decision upholding the patentability of the ‘514 Patent and in November 2021 the Federal Circuit ruled that the decision was moot. F-71 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) European Patent Office Oppositions In January 2022 the Technical Boards of Appeal of the EPO affirmed the EPO's 2016 decision revoking our European Patent No. 2 137 537, which covers the treatment of MS with 480 mg of dimethyl fumarate as provided for in our TECFIDERA label. TYSABRI Patent Revocation Matters In November 2017 Swiss Pharma International AG, affiff liated with the Polpharma Group, filed an action in the Commercial Court of Rome to invalidate the Italian counterpart of the European Patent No. 1 485 127 (the E.U. '127 Patent) which covers administration of natalizumab (TYSABRI) to treat MS and expires in February 2023. A hearing has been set for June 2022. In August 2020 Polpharma Biologics S.A., also affiff liated with the Polpharma Group, brought an action in the Polish Patent Office to revoke our Polish Patent No. 215263, which corresponds to the E.U. '127 Patent and expires in February 2rr amended patent claims. 023. The action was suspended by the Polish Patent Office in April 2021 pending examination of our In June 2021 Polpharma Biologics S.A., Sandoz B.V. and Sandoz AG filed an action in the District Court of the Hague, Netherlands to invalidate the Dutch counterpart of our European Patent 2 676 967 (the EU '967 Patent), which expires in 2027 and covers methods of treatment using natalizumab (TYSABRI) and pre-treatment testing of patients. A hearing has been set for September 2022. In July 2021 the EPO revoked the EU ‘967 Patent. We have appealed to the EPO’s Technical Boards of Appeal. A hearing date has not been set. In September 2021 Polpharma Biologics S.A., Sandoz AG, Sandoz Limited and Sandoz GmbH filed an action in the English High Court to revoke the UK counterpart of the EU ‘967 Patent and seeking a declaration that the patent would not be infringed by the marketing of Polpharma’s proposed natalizumab biosimilar. A hearing has been set for November 2022. Annulment Proceedings in General Court of the European Union relating to TECFIDERA Pharmaceutical Works Polpharma SA (Polpharma) and Mylan Ireland Ltd. (Mylan Ireland) each filed actions in the General Court of the European Union (Polpharma in October 2018 and Mylan Ireland in November 2020) to annul the European Medicines Agency's (EMA) decision not to validate their applications to market generic versions of TECFIDERA on the grounds that TECFIDERA benefits from regulatory dr ata protection. On May 5, 2021, the European General Court annulled the EMA's non-validation decision with respect to Polpharma. We have appealed the decision to the European Court of Justice and the appeal is pending. The case brought by Mylan Ireland has been stayed. 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 18.0% on annual worldwide net commercial sales up to $2.0 billion and 25.0% 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-partyrr effecff tive January 2017. F-72 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 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 11.0% and 15.0%, 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. During the fourthrr quarter of 2021 VUMERITY was approved for the treatment of RRMS in the E.U., Switzerland and the U.K. Under our agreement with Alkermes, we make royalty payments to Alkermes on worldwide net commercial sales of VUMERITY using a royalty rate of 15.0%, 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 acquisition of Convergence, we agreed to make additional payments based upon the achievement of certain milestone events. As the acquisition of Convergence occurred after January 1, 2009, we recognized the contingent consideration liabilities associated with this transaction at their fair value on the acquisition date and revalue the remaining obligations each reporting period. We may pay up to approximately $400.0 million in remaining milestones related to this acquisition. Fumapharm AG In 2006 we acquired Fumapharm AG. As part or f 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 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 fourthrr contingent payments were due. During the first quarter of 2018. r Contingent Development, Regulatory and Commercial Milestone Payments Based on our development plans as of December 31, 2021, we could trigger potential future milestone payments to third-parties of up to approximately $10.0 billion, including approximately $2.0 billion in development milestones, approximately $900.0 million in regulatory mrr milestones, as part or 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, 2021, 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. f our various collaborations, including licensing and development programs. Payments under ilestones and approximately $7.1 billion in commercial If certain clinical and commercial milestones are met, we may pay up to $133.9 million in milestones in 2022 under our current agreements. Additionally, if aducanumab receives regulatory approval in the jurisdictions where we have submitted filings, we may pay up to $100.0 million in additional milestones to Neurimmune in 2022, which includes $50.0 million if launched in three or more countries in the E.U. and $50.0 million if launched in Japan. Milestones payable to Neurimmune are shared expenses under the ADUHELM Collaboration Agreement. During the second quarter of 2020 we paid Neurimmune $75.0 million upon the completed submission of the BLA for the approval of ADUHELM to the FDA, which was recognized as a charge to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income. r In June 2021 ADUHELM was granted accelerated approval by the FDA. Under the terms of the Neurimmune Agreement, we were required to pay Neurimmune a milestone payment of $100.0 million related to the launch of F-73 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) ADUHELM in the U.S. During the second quarter of 2021 we made this $100.0 million payment, which was recognized as a charge to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income. Other Funding Commitments As of December 31, 2021, 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 expense of approximately $27.3 million in our consolidated balance sheets for expenditures incurred by CROs as of December 31, 2021. We have approximately $676.1 million in cancellable future commitments based on existing CRO contracts as of December 31, 2021. As part orr f the sale of our Hillerød, r Denmark manufacturing operations to FUJIFILM, we 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 do not expect to incur an adverse commitment obligation associated with such guarantees. We developed this estimate using a probability-weighted estimate of future manufacturing activity and may further 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. For additional information on the divestiture of our Hillerød, r Note 3, Divestitures, to these consolidated financial statements. Denmark manufacturing operations, please read Tax Related Obligations We exclude liabilities pertaining to uncertain tax positions from our summary orr f contractual obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of December 31, 2021, we have approximately $106.8 million of liabilities associated with uncertain tax positions. As of December 31, 2021 and 2020, we have accrued income tax liabilities of approximately $633.0 million and $697.0 million, respectively, under the Transition Toll Tax. Of the amounts accrued as of December 31, 2021, approximately $72.7 million is expected to be paid within one year. The Transition Toll Tax will be paid in installments 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, I6 ncome Taxes , to these consolidated financial statements. TT 22. GUARANTEES As of December 31, 2021 and 2020, 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 nd hold harmless the indemnified party for losses suffer business, typically with business partners, contractors, clinical sites and customers. Under these provisions, we generally indemnify aff as a result of our activities. These indemnification provisions generally survirr ve termination of the underlying agreement. The maximum potential amount of future payments we could be required to make under these 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, 2021 and 2020. ed or incurred by the indemnified partyr ff 23. EMPLOYEE BENEFIT PLANS We sponsor various retirement and pension plans. Our estimates of liabilities and expense 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 rr pants may make voluntary contributions. We make matching contributions according to the the age of 21. Partici 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 participant participated in the Biogen, Inc. Retirement Plan. The expense related to our 401(k) Savings Plan primarily consists of our matching contributions. s who previously rr F-74 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Expense related to our 401(k) Savings Plan totaled $58.4 million, $44.3 million and $44.8 million for the years ended December 31, 2021, 2020 and 2019, 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 portir on 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, 2021 and 2020, totaled approximately $131.4 million and $120.0 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 partirr cipants who previously partirr cipated in the Biogen, Inc. Retirement Plan. The Restoration Match and participant contributions vest immediately. Distributions to partirr cipants 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 2021, r 2020 and 2019. Under the Swiss plan, both we and certai government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary.r 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 arr December 31, 2021 and 2020, the Swiss plan had an unfunded net pension obligation of $64.1 million and $75.7 million, respectively, and plan assets that totaled $200.1 million and $170.0 million, respectively. In 2021, 2020 and 2019 we recognized expense totaling $21.5 million, $15.5 million and $14.7 million, respectively, related to our Swiss plan, of which $3.5 million, $2.6 million and $1.2 million, respectively, was included in other income (expense), net in our consolidated statements of income. n of our employees with annual earnings in excess of nd gender. As of The obligations under the German plans are unfunded and totaled $68.4 million and $75.5 million as of December 31, 2021 and 2020, respectively. Net periodic pension cost related to the German plans totaled $7.6 million, $6.2 million and $5.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, of which $2.1 million, $2.0 million and $1.4 million, respectively, was included in other income (expense), net in our consolidated statements of income. 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 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 orr 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 fff unctions. 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. f new product candidates and supports development and registration Enterprise-wide disclosures about product revenue, other revenue and long-lived assets by geographic area are presented below. Revenue is primarily attributed to individual countries based on location of the customer or licensee. F-75 BIOGEN INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Geographic Information The following tables contain certain financial information by geographic area: (In millions) Product revenue from external customers Revenue from anti-CD20 therapeutic programs Other revenue from external customers Long-lived assets U.S. Europe(1) Germany Asia Other Total $ 3,805.7 $ 2,626.0 $ 1,162.4 $ 688.0 $ 564.8 $ 8,846.9 1,596.7 429.9 — 9.7 1,390.5 2,337.8 — — 25.4 — 36.7 16.4 61.8 — 21.7 1,658.5 476.3 3,791.8 December 31, 2021 (In millions) Product revenue from external customers Revenue from anti-CD20 therapeutic programs Other revenue from external customers Long-lived assets U.S. Europe(1) Germany Asia Other Total $ 5,900.1 $ 2,495.3 $ 1,161.1 $ 596.7 $ 539.0 $ 10,692.2 1,897.4 733.6 0.1 8.0 1,496.3 2,290.2 — 0.1 31.2 — 32.9 16.2 80.3 — 10.9 1,977.8 774.6 3,844.8 December 31, 2020 (In millions) Product revenue from external customers Revenue from anti-CD20 therapeutic programs Other revenue from external customers Long-lived assets U.S. Europe(1) Germany Asia Other Total $ 6,713.8 $ 2,668.4 $ 1,126.1 $ 320.3 $ 551.2 $ 11,379.8 2,211.9 585.8 0.2 9.4 1,493.2 2,135.4 — 0.3 27.5 — 112.2 6.2 78.3 — 12.0 2,290.4 707.7 3,674.3 December 31, 2019 (1) Represents amounts related to Europe less those attributable to Germany. Other As of December 31, 2021, 2020 and 2019, approximately $2,237.0 million, $2,180.6 million and $2,028.8 million, respectively, of our long-lived assets were related to the construction of our large-scale biologics manufacturing facility in Solothurn, Switzerland. For additional information on our large-scale biologics manufacturing facility in Solothurn, Switzerland, please read Note 10, Property, Pyy lant and Equipment, to these consolidated financial statements. F-76 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Biogen Inc. Opinions on the FinFF ancial Statements and Internarr l Controlrr over Financial Reportirr ng We have audited the accompanying consolidated balance sheets of Biogen Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reportirr ng as of December 31, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effecff in Internal Control - Integrated Framework (2013) issued by the COSO. tive internal control over financial reportirr ng as of December 31, 2021, based on criteria established Basis forff Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reportirr ng, and for its assessment of the effectiveness of internal control over financial reportir ng, 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 reportirr ng 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. rr 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 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. included obtaining an rr r Definition and Limitations of Internal Control over FinFF ancial Reporting r and the preparation of financial statements for external purposes in A company’s internal control over financial reportir ng is a process designed to provide reasonable assurance regarding the reliability of financial reporting accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertai n 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. rr rr F-77 Because of its inherent limitations, internal control over financial reportirr ng 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. Critrr ical 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 rr including Medicaid and managed care rebates. Within accrued expense and other, As described in Notes 1 and 4 to the consolidated financial statements, the Company recognized revenue from product sales net of reserves, total contractual adjustments amounted to $759.6 million as of December 31, 2021. A portion of this balance includes provisions for Medicaid and managed care rebates in the US. 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 t rr hat exists in the distribution channel at period end. Managed care rebates represent the Company’s estimated obligations to third-parties, primarily pharmacy benefit managers. These rebates result from performance-based goals, formularyr position and price increase limit allowances (price protection). The calculation of the accrual for these rebates is based on an estimate of the coverage patterns and the resulting applicable contractual rebate rate(s) to be earned over a contractual period. Rebate accruals for Medicaid and managed care 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 expense and other current liabilities. 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 the significant judgment by management due to the significant measurement uncertainty involved in developing these reserves, developed using historical experience, current contractual requirements, specific known market events and payment patterns, which in turn led to a high degree of auditor judgment, subjectivity and effor evaluating audit evidence related to these assumptions. t ir n applying procedures and are based on assumptions as the reservesrr rr ff 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 Medicaid and managed care rebate reserves. (i) developing an independent estimate of the Medicaid and managed care rebate reservesrr 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 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. These procedures also included, among others by utilizing third-party rr /s/PricewaterhouseCoopers LLP Boston, Massachusetts February 3rr , 2022 We have servedrr as the Company's auditor since 2003. F-78 CORPORATE INFORMATION BOARD OF DIRECTORS (AS OF APRIL 21, 2022) Stelios Papadopoulos, Ph.D. Chairman, Biogen Inc., Chairman, Exelixis, Inc.; Chairman, Regulus Therapeutics Inc.; Chairman, Eucrates Biomedical Acquisition Corp. 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 Maria C. Freire, Ph.D. Retired President and Executive Director, Foundation for the National Institutes of Health William A. Hawkins Retired Chairman and CEO, Medtronic, Inc.; Senior Advisor, EW Healthcare Partners William D. Jones Director, CEO and President, CityLink Investment Corporation Nancy L. Leaming Retired Chief Executive Officer and President, Tufts Health Plan Jesus Mantas Global Managing Partner, IBM Business Transformation Services Richard C. Mulligan, Ph.D. Mallinckrodt Professor of Genetics, Emeritus, Harvard Medical School and Head of SanaX; Executive Vice Chairman, Sana Biotechnology, Inc. 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. Stephen A. Sherwin, M.D. Clinical Professor of Medicine, University of California, San Francisco Biogen Annual Report 2021 Corporate Information 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.” 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 ADDITIONAL RESOURCES Access Programs: www .biogen.com /en_us/access-programs Biogen Foundation: www .biogen.com /en_us/biogen-foundation DE&I: www .biogen.com /en_us /diversity-inclusion Healthy Climate, Healthy Lives: www .biogen.com /en_us/healthy-climate-healthy-lives Year in Review: www .biogen.com /en_us/yearinreview We include our website addresses in this report only as inactive textual references and do not intend them to be active links to our website. The contents of our website are not incorporated into this report. Biogen Annual Report 2021 

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