Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

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)	As of December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	439.4	$	—	$	439.4	$	—
Marketable debt securities:
Corporate debt securities	1,001.0		—		1,001.0		—
Government securities	1,657.8		—		1,657.8		—
Mortgage and other asset backed securities	512.9		—		512.9		—
Marketable equity securities	9.0		9.0		—		—
Venture capital investments	20.3		—		—		20.3
Derivative contracts	1.8		—		1.8		—
Plan assets for deferred compensation	14.3		—		14.3		—
Total	$	3,656.5	$	9.0	$	3,627.2	$	20.3
Liabilities:
Derivative contracts	$	14.4	$	—	$	14.4	$	—
Contingent consideration obligations	293.9		—		—		293.9
Total	$	308.3	$	—	$	14.4	$	293.9

(In millions)	As of December 31, 2011		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	399.8	$	—	$	399.8	$	—
Marketable debt securities:
Corporate debt securities	602.6		—		602.6		—
Government securities	1,716.5		—		1,716.5		—
Mortgage and other asset backed securities	273.8		—		273.8		—
Marketable equity securities	0.1		0.1		—		—
Venture capital investments	23.5		—		—		23.5
Derivative contracts	39.5		—		39.5		—
Plan assets for deferred compensation	11.6		—		11.6		—
Total	$	3,067.4	$	0.1	$	3,043.8	$	23.5
Liabilities:
Derivative contracts	$	0.5	$	—	$	0.5	$	—
Contingent consideration obligations	151.0		—		—		151.0
Total	$	151.5	$	—	$	0.5	$	151.0

The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through valuation models of third party pricing services. For a description of our validation procedures related to prices provided by third party pricing services, refer to Note 1, Summary of Significant Accounting Policies: Fair Value Measurements, to these consolidated financial statements.

Marketable Equity Securities and Venture Capital Investments

Our marketable equity securities represent investments in publicly traded equity securities. Our venture capital investments, which are all Level 3 measurements, include investments in certain venture capital funds, accounted for at fair value, which primarily invest in small privately-owned, venture-backed biotechnology companies. These venture capital investments represented approximately 0.2% of total assets of December 31, 2012 and 2011, respectively.

The following table provides a roll forward of the fair value of our venture capital investments, which are all Level 3 assets:

	As of December 31,
(In millions)	2012			2011
Fair value, beginning of year	$	23.5		$	20.8
Unrealized gains included in earnings	5.4			2.4
Unrealized losses included in earnings	(9.2		)	(1.4		)
Purchases	0.6			1.7
Fair value, end of year	$	20.3		$	23.5

Debt Instruments

The fair values of our debt instruments, which are all Level 2 measurements, are summarized as follows:

	As of December 31,
(In millions)	2012		2011
Notes payable to Fumedica	$	20.0	$	22.4
6.0% Senior Notes due March 1, 2013	453.7		474.1
6.875% Senior Notes due March 1, 2018	681.6		663.9
Total	$	1,155.3	$	1,160.4

The fair value of our notes payable to Fumedica was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair value of our Senior Notes was determined through market, observable, and corroborated sources.

Contingent Consideration Obligations

The following table provides a roll forward of the fair values of our contingent consideration obligations, which are all Level 3 measurements:

	As of December 31,
(In millions)	2012			2011
Fair value, beginning of year	$	151.0		$	81.2
Additions	122.2			38.8
Changes in fair value	27.2			36.0
Payments	(6.5		)	(5.0		)
Fair value, end of year	$	293.9		$	151.0

As of December 31, 2012 and 2011, approximately $271.5 million and $140.3 million, respectively, of the fair value of our total contingent consideration obligations were reflected as components of other long-term liabilities within our consolidated balance sheets with the remaining balances reflected as a component of accrued expenses and other.

In connection with our acquisition of Stromedix in March 2012, we recorded a contingent consideration obligation of $122.2 million representing the fair value of the contingent consideration. This valuation was based on probability weighted net cash outflow projections of $487.5 million, discounted using a rate of 4.4%, which is a measure of the credit risk associated with settling the liability. As of December 31, 2012, the fair value of this contingent consideration obligation was $135.3 million. Our most recent valuation was determined based upon probability weighted net cash outflow projections discounted using a rate of 3.6%. The increase in the fair value of this obligation of $13.1 million since the acquisition date was primarily due to changes in the discount rate and in the probability and expected timing related to the achievement of certain developmental milestones.

Upon completion of our purchase of the noncontrolling interest in our joint venture investments in Biogen Dompé SRL and Biogen Dompé Switzerland GmbH in September 2011, we recorded a contingent consideration obligation of $38.8 million. As of December 31, 2012 and 2011, the fair value of this contingent consideration obligation was $29.8 million and $31.9 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $38.5 million, discounted using a rate of 2.4%, which is a measure of the credit risk associated with settling the liability. The decrease in the fair value of this obligation of $9.0 million since the acquisition date was primarily due to changes in the discount rate and in the probability and expected timing related to the achievement of certain cumulative sales-based and developmental milestones as well as the payment of a $4.0 million developmental milestone.

In connection with our acquisition of BIN in the fourth quarter of 2010, we recorded a contingent consideration obligation of $81.2 million. As of December 31, 2012 and 2011, the fair value of this contingent consideration obligation was $128.8 million and $119.1 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $387.5 million, discounted using a rate of 3.6%, which is a measure of the credit risk associated with settling the liability. The increase in the fair value of this obligation of $47.6 million since the acquisition date was primarily due to changes in the discount rate and in the probability and expected timing related to the achievement of certain remaining developmental milestones, offset by payments of $7.5 million in developmental milestones.

Acquired IPR&D

In connection with our acquisition of Stromedix, we allocated $219.2 million of the total purchase price to acquired IPR&D, which was capitalized as an intangible asset. The amount allocated to acquired IPR&D was based on significant inputs not observable in the market and thus represented a Level 3 fair value measurement. These assets are tested for impairment annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.

There has been no impairment of our assets measured at fair value during the years ended December 31, 2012 and 2011. In addition, there were no changes in valuation techniques or inputs utilized or transfers between fair value measurement levels during the years ended December 31, 2012 and 2011. For additional information related to the valuation techniques and inputs utilized in valuation of our financial assets and liabilities, please read Note 1, Summary of Significant Accounting Policies to these consolidated financial statements.