10-Q 1 biib-2013331x10q.htm 10-Q BIIB-2013.3.31-10Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2013
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19311
BIOGEN IDEC INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
33-0112644
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
133 Boston Post Road, Weston, MA 02493
(781) 464-2000
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):
Large accelerated filer þ
 
Accelerated filer ¨
Non-accelerated filer ¨
 
Smaller reporting company  ¨
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  ¨    No  þ
The number of shares of the issuer’s Common Stock, $0.0005 par value, outstanding as of April 18, 2013, was 237,374,815 shares.
 





BIOGEN IDEC INC.
FORM 10-Q — Quarterly Report
For the Quarterly Period Ended March 31, 2013
TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
Financial Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
PART II — OTHER INFORMATION
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 


2


NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are based on our current beliefs and expectations. The following cautionary statements 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 “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “will” and other words and terms of similar meaning. Reference is made in particular to forward-looking statements regarding:
the anticipated amount, timing and accounting of revenues, contingency payments, milestone, royalty and other payments under licensing, collaboration or acquisition agreements, tax positions and contingencies, doubtful accounts, cost of sales, research and development costs, compensation and other expenses, amortization of intangible assets, and foreign currency forward contracts;
the anticipated benefits and impact resulting from our acquisition of TYSABRI rights from Elan Pharma International Ltd.;
the commercial launch of TECFIDERA;
our plans to develop further risk stratification protocols for TYSABRI and the impact of such protocols;
the potential launch of our long-lasting recombinant Factors VIII and IX;
anticipated timing of regulatory filings for PLEGRIDY (Peginterferon beta-1a);
the timing, outcome and impact of proceedings related to: patents and other intellectual property rights; tax audits, assessments and settlements; product liability and other legal or regulatory proceedings;
the impact of increased product competition in the multiple sclerosis (MS) market, including competition from and growth of our own products;
the costs to be incurred in connection with Genentech's arbitration with Hoechst;
the deferral of TYSABRI revenue in Italy;
the costs, timing and therapeutic scope of the development and commercialization of our pipeline products;
our intent to exercise our put option requiring Knopp Neurosciences, Inc. (Knopp) to purchase our Class B common share ownership in Knopp;
the impact of budget cuts in the U.S. and other measures worldwide designed to reduce healthcare costs to constrain the overall level of government expenditures, including the impact of pricing actions in Europe;
the impact of the continued uncertainty and deterioration of the credit and economic conditions in certain countries in Europe and our collection of accounts receivable in such countries;
patent terms, patent term extensions, patent office actions and data and market exclusivity rights;
our ability to finance our operations and business initiatives and obtain funding for such activities;
the impact of new laws and accounting standards;
the timing and expected financial impact of relocating our corporate headquarters in Weston, Massachusetts to Cambridge, Massachusetts;
the expected timing of the licensure of our manufacturing facility in Hillerød, Denmark; and
the drivers for growing our business, including our plans to pursue business development and research opportunities, and competitive conditions.

3


These forward-looking statements involve risks and uncertainties, including those that are described in the “Risk Factors” section of this report and elsewhere within this report that could cause actual results to differ materially from those reflected in such statements. You should not place undue reliance on these statements. Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking statements.
NOTE REGARDING COMPANY AND PRODUCT REFERENCES
Throughout this report, “Biogen Idec,” the “Company,” “we,” “us” and “our” refer to Biogen Idec Inc. and its consolidated subsidiaries. References to “RITUXAN” refer to both RITUXAN (the trade name for rituximab in the U.S., Canada and Japan) and MabThera (the trade name for rituximab outside the U.S., Canada and Japan), and “ANGIOMAX” refers to both ANGIOMAX (the trade name for bivalirudin in the U.S., Canada and Latin America) and ANGIOX (the trade name for bivalirudin in Europe).
NOTE REGARDING TRADEMARKS
AVONEX®, AVONEX PEN®, RITUXAN®, and TYSABRI® are registered trademarks of Biogen Idec. FUMADERMTM, PLEGRIDYTM and TECFIDERATM are trademarks of Biogen Idec. The following are trademarks of the respective companies listed: ANGIOMAX® and ANGIOX® — The Medicines Company; ARZERRA® — Glaxo Group Limited; BENLYSTA® — Human Genome Sciences, Inc.; BETASERON® — Bayer Schering Pharma AG; EXTAVIA® — Novartis AG; FAMPYRA® — Acorda Therapeutics, Inc.; and REBIF® — Ares Trading S.A.

4



PART I FINANCIAL INFORMATION

BIOGEN IDEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 
 
For the Three Months
Ended March 31,
 
2013
 
2012
Revenues:
 
 
 
Product, net
$
1,095,779

 
$
975,488

Unconsolidated joint business
264,606

 
284,552

Other
54,711

 
31,974

Total revenues
1,415,096

 
1,292,014

Cost and expenses:
 
 
 
Cost of sales, excluding amortization of acquired intangible assets
133,749

 
133,197

Research and development
284,340

 
355,962

Selling, general and administrative
352,598

 
300,089

Collaboration profit sharing
85,357

 
85,894

Amortization of acquired intangible assets
51,301

 
45,961

Fair value adjustment of contingent consideration
2,277

 
1,258

Restructuring charge

 
283

Total cost and expenses
909,622

 
922,644

Gain on sale of rights
5,051

 

Income from operations
510,525

 
369,370

Other income (expense), net
(14,457
)
 
15,144

Income before income tax expense and equity in loss of investee, net of tax
496,068

 
384,514

Income tax expense
65,508

 
82,148

Equity in loss of investee, net of tax
3,811

 

Net income
426,749

 
302,366

Net loss attributable to noncontrolling interests, net of tax

 
(295
)
Net income attributable to Biogen Idec Inc.
$
426,749

 
$
302,661

Net income per share:
 
 
 
Basic earnings per share attributable to Biogen Idec Inc.
$
1.80

 
$
1.26

Diluted earnings per share attributable to Biogen Idec Inc.
$
1.79

 
$
1.25

Weighted-average shares used in calculating:
 
 
 
Basic earnings per share attributable to Biogen Idec Inc.
236,837

 
239,754

Diluted earnings per share attributable to Biogen Idec Inc.
238,304

 
241,828




See accompanying notes to these unaudited condensed consolidated financial statements.

5


BIOGEN IDEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 
 
For the Three Months
Ended March 31,
 
2013
 
2012
Net income
$
426,749

 
$
302,366

Other comprehensive income:
 
 
 
Unrealized gains (losses) on securities available for sale, net of tax of $654 and $1,122
(1,117
)
 
1,911

Unrealized gains (losses) on foreign currency forward contracts, net of tax of $1,421 and $2,143
11,603

 
(18,363
)
Unrealized gains on pension benefit obligation
1,263

 
189

Currency translation adjustment
(24,419
)
 
25,154

Total other comprehensive income (loss), net of tax
(12,670
)
 
8,891

Comprehensive income
414,079

 
311,257

Comprehensive loss attributable to noncontrolling interests, net of tax

 
(230
)
Comprehensive income attributable to Biogen Idec Inc.
$
414,079

 
$
311,487






































See accompanying notes to these unaudited condensed consolidated financial statements.

6


BIOGEN IDEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts)
 
 
As of March 31,
2013
 
As of December 31,
2012
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
663,302

 
$
570,721

Reverse repurchase agreements
2,968,000

 

Marketable securities

 
1,134,989

Accounts receivable, net
753,611

 
686,848

Due from unconsolidated joint business
267,429

 
268,395

Inventory
506,557

 
447,373

Other current assets
169,939

 
136,011

Total current assets
5,328,838

 
3,244,337

Marketable securities

 
2,036,658

Property, plant and equipment, net
1,736,811

 
1,742,226

Intangible assets, net
1,581,511

 
1,631,547

Goodwill
1,210,718

 
1,201,296

Investments and other assets
306,839

 
274,054

Total assets
$
10,164,717

 
$
10,130,118

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Current portion of notes payable and line of credit
$
203,317

 
$
453,379

Taxes payable
28,045

 
20,066

Accounts payable
165,207

 
203,999

Accrued expenses and other
885,093

 
979,945

Total current liabilities
1,281,662

 
1,657,389

Notes payable and other financing arrangements
711,831

 
687,396

Long-term deferred tax liability
156,667

 
217,272

Other long-term liabilities
674,951

 
604,266

Total liabilities
2,825,111

 
3,166,323

Commitments and contingencies


 


Equity:
 
 
 
Biogen Idec Inc. shareholders’ equity
 
 
 
Preferred stock, par value $0.001 per share

 

Common stock, par value $0.0005 per share
128

 
127

Additional paid-in capital
3,858,955

 
3,854,525

Accumulated other comprehensive loss
(67,975
)
 
(55,305
)
Retained earnings
4,913,543

 
4,486,794

Treasury stock, at cost
(1,365,641
)
 
(1,324,618
)
Total Biogen Idec Inc. shareholders’ equity
7,339,010

 
6,961,523

Noncontrolling interests
596

 
2,272

Total equity
7,339,606

 
6,963,795

Total liabilities and equity
$
10,164,717

 
$
10,130,118


See accompanying notes to these unaudited condensed consolidated financial statements.

7


BIOGEN IDEC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
 
For the Three Months
Ended March 31,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
426,749

 
$
302,366

Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
97,453

 
83,945

Share-based compensation
36,757

 
32,396

Deferred income taxes
(66,525
)
 
(3,876
)
Other
(33,442
)
 
(29,073
)
Changes in operating assets and liabilities, net:
 
 
 
Accounts receivable
(75,546
)
 
(89,066
)
Inventory
(60,809
)
 
(19,027
)
Accrued expenses and other current liabilities
(180,910
)
 
(82,031
)
Other changes in operating assets and liabilities, net
35,212

 
(1,009
)
Net cash flows provided by operating activities
178,939

 
194,625

Cash flows from investing activities:
 
 
 
Proceeds from sales and maturities of marketable securities
4,329,506

 
824,434

Purchases of marketable securities
(1,160,680
)
 
(677,092
)
Purchases of reverse repurchase agreements
(2,968,000
)
 

Acquisitions of business, net of cash acquired

 
(72,401
)
Purchases of property, plant and equipment
(33,289
)
 
(54,551
)
Other
(11,596
)
 
(19,772
)
Net cash flows provided by investing activities
155,941

 
618

Cash flows from financing activities:
 
 
 
Purchase of treasury stock
(41,023
)
 
(463,171
)
Proceeds from issuance of stock for share-based compensation arrangements
21,817

 
24,080

Repayment of borrowings under senior notes
(450,000
)
 

Proceeds from borrowings under line of credit facility
200,000

 

Other
30,782

 
22,827

Net cash flows used in financing activities
(238,424
)
 
(416,264
)
Net increase (decrease) in cash and cash equivalents
96,456

 
(221,021
)
Effect of exchange rate changes on cash and cash equivalents
(3,875
)
 
4,618

Cash and cash equivalents, beginning of the period
570,721

 
514,542

Cash and cash equivalents, end of the period
$
663,302

 
$
298,139














See accompanying notes to these unaudited condensed consolidated financial statements.

8

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1.
Business
Overview
Biogen Idec is a global biotechnology company focused on discovering, developing, manufacturing and marketing therapies for the treatment of multiple sclerosis and other autoimmune disorders, neurodegenerative diseases and hemophilia. We also collaborate on the development and commercialization of RITUXAN and anti-CD20 product candidates for the treatment of non-Hodgkin's lymphoma and other conditions.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The information included in this quarterly report on Form 10-Q should be read in conjunction with our consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012 (2012 Form 10-K). Our accounting policies are described in the “Notes to Consolidated Financial Statements” in our 2012 Form 10-K and updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.
Consolidation
Our condensed consolidated financial statements reflect our financial statements, those of our wholly-owned subsidiaries and those of certain variable interest entities where we are the primary beneficiary. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interests in our condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and transactions are eliminated in consolidation.
In determining whether we are the primary beneficiary of an entity and therefore required to consolidate, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. These considerations impact the way we account for our existing collaborative relationships and other arrangements. We continuously assess whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in us consolidating or deconsolidating our partner(s) to collaborations and other arrangements.
 Use of Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments and methodologies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
2.
Subsequent Events
TYSABRI
On April 2, 2013, we acquired full ownership and strategic, commercial and decision-making rights to TYSABRI from Elan Pharma International, Ltd (Elan), an affiliate of Elan Corporation, plc. Upon the closing of the transaction, the previous collaboration agreement between Elan and us, whereby worldwide TYSABRI profits were split 50/50, was terminated. For additional information related to this collaboration, please read Note 21, Collaborative and Other Relationships to our consolidated financial statements included within our 2012 Form 10-K.

9

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Upon the closing of the transaction, we made an upfront payment of $3.25 billion to Elan. The transaction was funded from our existing cash and reverse repurchase agreements and will be accounted for as an asset acquisition. The upfront payment will be capitalized in the second quarter of 2013 as an intangible asset within our condensed consolidated balance sheets as TYSABRI has reached technological feasibility and will be amortized over the asset estimated useful life using an economic consumption method.
Following the closing of the transaction, we will reflect 100% of the revenues, cost of sales and operating expenses related to TYSABRI within our condensed consolidated statements of income. We will continue to share TYSABRI profits with Elan equally until April 30, 2013. Commencing May 1, 2013 and for the first twelve months thereafter, we will make future contingent payments to Elan of 12% of worldwide net sales of TYSABRI, and thereafter, 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales that exceed $2.0 billion. In 2014, the $2.0 billion threshold will be pro-rated for the portion of 2014 remaining after the first 12 months expires. Our payments to Elan will be recognized as cost of sales within our condensed consolidated statements of income.
3.
Accounts Receivable
Our accounts receivable primarily arise from product sales in the U.S. and Europe and mainly represent amounts due from our wholesale distributors, public hospitals and other government entities. Concentrations of credit risk with respect to our accounts receivable, which are typically unsecured, are limited due to the wide variety of customers and markets using our products, as well as their dispersion across many different geographic areas. The majority of our accounts receivable have standard payment terms which generally require payment within 30 to 90 days. We monitor the financial performance and credit worthiness of our large customers so that we can properly assess and respond to changes in their credit profile. We provide reserves against trade receivables for estimated losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve. To date, our historical write-offs of accounts receivable have not been significant.
The credit and economic conditions within Italy, Spain and Portugal, among other members of the European Union, remain uncertain. Uncertain credit and economic conditions have generally led to a lengthening of time to collect our accounts receivable in some of these countries. In some regions in these countries where our collections have slowed and a significant portion of these receivables are routinely being collected over periods in excess of one year, we have discounted our receivables and reduced related revenues based on the period of time that we estimate those amounts will be paid, to the extent such period exceeds one year, using the country’s market-based borrowing rate for such period. The related receivables are classified at the time of sale as long-term assets. We accrete interest income on these receivables, which is recognized as a component of other income (expense), net within our condensed consolidated statements of income.
Our net accounts receivable balances from product sales in selected European countries are summarized as follows:
 
As of March 31, 2013
(In millions)
Current
Balance Included
within Accounts
Receivable, net
 
Non-Current
Balance Included
within Investments
and Other Assets
 
Total
Spain
$
79.3

 
$

 
$
79.3

Italy
$
106.9

 
$
6.4

 
$
113.3

Portugal
$
15.0

 
$
9.2

 
$
24.2

 
 
As of December 31, 2012
(In millions)
Current
Balance Included
within Accounts
Receivable, net
 
Non-Current
Balance Included
within Investments
and Other Assets
 
Total
Spain
$
78.9

 
$

 
$
78.9

Italy
$
94.4

 
$
10.2

 
$
104.6

Portugal
$
16.6

 
$
7.4

 
$
24.0

Approximately $15.6 million and $11.8 million of the aggregated balances for these countries were overdue more than one year as of March 31, 2013 and December 31, 2012, respectively.

10

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Pricing of TYSABRI in Italy - AIFA
In the fourth quarter of 2011, Biogen Idec SRL received a notice from the Italian National Medicines Agency (AIFA) stating that sales of TYSABRI for the period from February 2009 through February 2011 exceeded by EUR30.7 million a reimbursement limit established pursuant to a Price Determination Resolution (Price Resolution) granted by AIFA in February 2007. In December 2011, we filed an appeal against AIFA in administrative court seeking a ruling that the reimbursement limit does not apply and that the position of AIFA is unenforceable. In November 2012, we were notified that the Price Resolution would not automatically renew pending resolution of the dispute. For the period from October 2011 to February 2013, we deferred a significant portion of our revenues on sales of TYSABRI in Italy.
In February 2013, the reimbursement limit established pursuant to the Price Resolution expired. Through court proceedings in 2012, we have secured our rights to ensure that negotiations occur to re-establish final fixed pricing. During the period of negotiation to establish a new reimbursement limit with AIFA, we have continued to defer a significant portion of our revenues on sales of TYSABRI in Italy. Since being notified that AIFA believes a reimbursement limit is in effect, we have deferred an aggregate of $90.4 million, of which $13.9 million was deferred during the three months ended March 31, 2013. At the time of sale, our net accounts receivable balances from product sales in Italy include the amount of deferred revenue discussed above as our customers pay the invoice price of the product. For additional information, please read Note 20, Litigation to these condensed consolidated financial statements.
4.
Reserves for Discounts and Allowances
An analysis of the amount of, and change in, reserves is summarized as follows:
(In millions)
Discounts
 
Contractual
Adjustments
 
Returns
 
Total
Balance, as of December 31, 2012
$
15.5

 
$
194.8

 
$
26.8

 
$
237.1

Current provisions relating to sales in current year
35.6

 
137.3

 
3.7

 
176.6

Adjustments relating to prior years
(0.8
)
 
3.1

 
0.2

 
2.5

Payments/returns relating to sales in current year
(19.3
)
 
(44.2
)
 

 
(63.5
)
Payments/returns relating to sales in prior years
(13.1
)
 
(83.3
)
 
(3.9
)
 
(100.3
)
Balance, as of March 31, 2013
$
17.9

 
$
207.7

 
$
26.8

 
$
252.4

The total reserves above, included in our condensed consolidated balance sheets, are summarized as follows:
(In millions)
As of March 31,
2013
 
As of December 31,
2012
Reduction of accounts receivable
$
48.4

 
$
46.1

Component of accrued expenses and other
204.0

 
191.0

Total reserves
$
252.4

 
$
237.1

5.
Inventory
The components of inventory are summarized as follows:
(In millions)
As of
March 31,
2013
 
As of
December 31,
2012
Raw materials
$
109.8

 
$
101.8

Work in process
276.1

 
230.5

Finished goods
120.7

 
115.1

Total inventory
$
506.6

 
$
447.4

As of March 31, 2013, the carrying value of our inventory includes $54.2 million associated with our Factor VIII, Factor IX, Serum-Free AVONEX and PLEGRIDY programs, which have been capitalized in advance of regulatory approval.

11

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

6.
Intangible Assets and Goodwill
Intangible Assets
Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:
 
 
 
As of March 31, 2013
 
As of December 31, 2012
(In millions)
Estimated
Life
 
Cost
 
Accumulated
Amortization
 
Net
 
Cost
 
Accumulated
Amortization
 
Net
Out-licensed patents
13-23 years
 
$
578.0

 
$
(428.5
)
 
$
149.5

 
$
578.0

 
$
(421.0
)
 
$
157.0

Core developed 
technology
15-23 years
 
3,005.3

 
(2,006.9
)
 
998.4

 
3,005.3

 
(1,965.7
)
 
1,039.6

In-process research and development
Up to 15 years upon
commercialization
 
330.1

 

 
330.1

 
330.1

 

 
330.1

Trademarks and 
tradenames
Indefinite
 
64.0

 

 
64.0

 
64.0

 

 
64.0

Acquired and in-licensed rights 
and patents
6-16 years
 
55.1

 
(15.6
)
 
39.5

 
53.7

 
(12.9
)
 
40.8

Total intangible assets
 
 
$
4,032.5

 
$
(2,451.0
)
 
$
1,581.5

 
$
4,031.1

 
$
(2,399.6
)
 
$
1,631.5

For the three months ended March 31, 2013, amortization of acquired intangible assets totaled $51.3 million, as compared to $46.0 million, in the prior year comparative period.
Core Developed Technology
Core 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. Our most recent long range planning cycle was completed in the third quarter of 2012, which reflected a small decrease in the expected lifetime revenue of AVONEX resulting in an increase in amortization expense.
Acquired and In-licensed Rights and Patents
In connection with our acquisition of TYSABRI rights on April 2, 2013, the $3.25 billion upfront payment we made to Elan will be capitalized as an intangible asset commencing in the second quarter of 2013 and will be amortized over the asset estimated useful life using an economic consumption method. For a more detailed description of this transaction, please read Note 2, Subsequent Events to these condensed consolidated financial statements.
In 2011, we licensed rights for the diagnostic and therapeutic application of recombinant virus-like particles, known as VP1 proteins, to detect antibodies of the JC virus (JCV) in serum or blood. As of March 31, 2013 and December 31, 2012, we have recognized an intangible asset totaling $27.1 million and $25.7 million, respectively, reflecting the total amount of upfront payments made and other time-based milestone payments. For additional information related to this arrangement, please read Note 8, Intangible Assets and Goodwill to our consolidated financial statements included within our 2012 Form 10-K.
The estimated future amortization for acquired intangible assets, including the TYSABRI rights we acquired from Elan on April 2, 2013, is expected to be as follows:
(In millions)
As of March 31, 2013
2013 (remaining nine months)
$
277.0

2014
367.7

2015
362.8

2016
365.8

2017
355.1

Total
$
1,728.4


12

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Goodwill
The following table provides a roll-forward of the changes in our goodwill balance:
(In millions)
As of
March 31,
2013
 
As of
December 31,
2012
Goodwill, beginning of period
$
1,201.3

 
$
1,146.3

Goodwill acquired during the period
13.5

 
48.2

Other
(4.1
)
 
6.8

Goodwill, end of period
$
1,210.7

 
$
1,201.3

The increase in goodwill during the three months ended March 31, 2013 was related to the $15.0 million contingent payment due to former shareholders of Fumapharm AG (net of $1.5 million tax benefit), which became payable upon the approval of TECFIDERA in the U.S. by the U.S. Food and Drug Administration (FDA).
For the three months ended March 31, 2013, we adjusted goodwill to establish a deferred tax asset related to our Stromedix Inc. (Stromedix) transaction. For additional information related to our transaction with Stromedix, please read Note 2, Acquisitions to our consolidated financial statements included within our 2012 Form 10-K.
As of March 31, 2013, we had no accumulated impairment losses related to goodwill.
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)
As of
March 31,
2013
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
358.6

 
$

 
$
358.6

 
$

Reverse repurchase agreements
2,968.0

 

 
2,968.0

 

Marketable debt securities:
 
 
 
 
 
 
 
Corporate debt securities

 

 

 

Government securities

 

 

 

Mortgage and other asset backed securities

 

 

 

Marketable equity securities
11.6

 
11.6

 

 

Venture capital investments
18.0

 

 

 
18.0

Derivative contracts
7.0

 

 
7.0

 

Plan assets for deferred compensation
15.1

 

 
15.1

 

Total
$
3,378.3

 
$
11.6

 
$
3,348.7

 
$
18.0

Liabilities:
 
 
 
 
 
 
 
Derivative contracts
$
3.2

 
$

 
$
3.2

 
$

Contingent consideration obligations
293.7

 

 

 
293.7

Total
$
296.9

 
$

 
$
3.2

 
$
293.7

Our reverse repurchase agreement matured on April 1, 2013. This agreement was entered into in anticipation of our acquisition of TYSABRI rights from Elan and it matured with no difference in fair value. The reverse repurchase agreement was collaterialized by our counterparty setting aside U.S. government and agency securities with a fair value of approximately 102% of the principal amount.

13

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

(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

There has been no impairment of our assets measured at fair value during the three months ended March 31, 2013. In addition, there were no changes in valuation techniques or inputs utilized or transfers between fair value measurement levels during the three months ended March 31, 2013. 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 our consolidated financial statements included within our 2012 Form 10-K.
Marketable Equity Securities and Venture Capital Investments
Our marketable equity securities represent investments in publicly traded equity securities. Our venture capital investments, which are Level 3 measurements, include investments in certain venture capital funds, accounted for at fair value, that primarily invest in small privately-owned, venture-backed biotechnology companies. These venture capital investments represented approximately 0.2% of total assets as of March 31, 2013 and December 31, 2012, respectively.
The following table provides a roll-forward of the fair value of our venture capital investments that are Level 3 assets:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Fair value, beginning of period
$
20.3

 
$
23.5

Unrealized gains included in earnings
0.6

 
0.4

Unrealized losses included in earnings
(1.4
)
 
(1.8
)
Settlements
(1.5
)
 

Fair value, end of period
$
18.0

 
$
22.1


14

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

 Debt Instruments
The fair and carrying values of our debt instruments, which are Level 2 liabilities, are summarized as follows:
 
As of March 31, 2013
 
As of December 31, 2012
(In millions)
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes payable to Fumedica
$
19.3

 
$
17.5

 
$
20.0

 
$
17.9

Credit facility
200.0

 
200.0

 

 

6.0% Senior Notes due March 1, 2013

 

 
453.7

 
450.0

6.875% Senior Notes due March 1, 2018
670.1

 
584.8

 
681.6

 
586.4

Total
$
889.4

 
$
802.3

 
$
1,155.3

 
$
1,054.3

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 6.875% Senior Notes was determined through market, observable, and corroborated sources. For additional information related to our debt instruments, please read Note 11, Indebtedness to these condensed consolidated financial statements.
Contingent Consideration Obligations
The following table provides a roll-forward of the fair values of our contingent consideration obligations that are Level 3 measurements:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Fair value, beginning of period
$
293.9

 
$
151.0

Additions

 
117.6

Changes in fair value
2.3

 
1.3

Payments
(2.5
)
 

Fair value, end of period
$
293.7

 
$
269.9

As of March 31, 2013 and December 31, 2012, approximately $272.0 million and $271.5 million, respectively, of the fair value of our total contingent consideration obligations were reflected as components of other long-term liabilities within our condensed consolidated balance sheets with the remaining balances reflected as a component of accrued expenses and other.
8.
Financial Instruments
Marketable Securities
The following tables summarize our marketable debt and equity securities:
As of March 31, 2013 (In millions)
Fair
Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Amortized
Cost
Available-for-sale:
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
 
 
 
Current
$

 
$

 
$

 
$

Non-current

 

 

 

Government securities
 
 
 
 
 
 
 
Current

 

 

 

Non-current

 

 

 

Mortgage and other asset backed securities
 
 
 
 
 
 
 
Current

 

 

 

Non-current

 

 

 

Total marketable debt securities
$

 
$

 
$

 
$

Marketable equity securities, non-current
$
11.6

 
$
4.9

 
$

 
$
6.7


15

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

 
As of December 31, 2012 (In millions)
Fair
Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Amortized
Cost
Available-for-sale:
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
 
 
 
Current
$
346.9

 
$
0.3

 
$

 
$
346.6

Non-current
654.1

 
2.8

 
(0.6
)
 
651.9

Government securities
 
 
 
 
 
 
 
Current
783.4

 
0.3

 

 
783.1

Non-current
874.4

 
0.8

 

 
873.6

Mortgage and other asset backed securities
 
 
 
 
 
 
 
Current
4.8

 

 

 
4.8

Non-current
508.1

 
1.4

 
(1.3
)
 
508.0

Total marketable debt securities
$
3,171.7

 
$
5.6

 
$
(1.9
)
 
$
3,168.0

Marketable equity securities, non-current
$
9.0

 
$
3.0

 
$

 
$
6.0

The following table summarizes our financial assets with maturities of less than 90 days from the date of purchase included within cash and cash equivalents on the accompanying condensed consolidated balance sheet:
(In millions)
As of
March 31,
2013
 
As of
December 31,
2012
Commercial paper
$

 
$
40.7

Overnight repurchase agreements

 
67.4

Short-term debt securities
358.6

 
331.3

Total
$
358.6

 
$
439.4

The carrying values of our commercial paper, including accrued interest, overnight repurchase agreements, and our short-term debt securities approximate fair value.
Summary of Contractual Maturities: Available-for-Sale Securities
The estimated fair value and amortized cost of our marketable debt securities available-for-sale by contractual maturity are summarized as follows:
 
As of March 31, 2013
 
As of December 31, 2012
(In millions)
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
Due in one year or less
$

 
$

 
$
1,135.0

 
$
1,134.5

Due after one year through five years

 

 
1,744.3

 
1,741.2

Due after five years

 

 
292.4

 
292.3

Total available-for-sale securities
$

 
$

 
$
3,171.7

 
$
3,168.0

The average maturity of our marketable debt securities available-for-sale as of December 31, 2012 was 14 months.

16

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Proceeds from Marketable Debt Securities
The proceeds from maturities and sales of marketable debt securities and resulting realized gains and losses are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Proceeds from maturities and sales
$
4,329.5

 
$
824.4

Realized gains
$
6.3

 
$
0.7

Realized losses
$
(2.0
)
 
$
(0.7
)
Strategic Investments
As of March 31, 2013 and December 31, 2012, our strategic investment portfolio was comprised of investments totaling $64.4 million and $64.2 million, respectively, which are included in investments and other assets in our accompanying condensed consolidated balance sheets.
Our strategic investment portfolio includes investments in marketable equity securities of certain biotechnology companies and our investments in venture capital funds accounted for at fair value which totaled $29.6 million and $29.3 million as of March 31, 2013 and December 31, 2012, respectively. Our strategic investment portfolio also includes other equity investments in privately-held companies and additional investments in venture capital funds accounted for under the cost method. The carrying value of these investments totaled $34.8 million and $34.9 million as of March 31, 2013 and December 31, 2012, respectively.
Net Gains, Impairments and Changes to Fair Value
During the three months ended March 31, 2013 and 2012, we realized net losses, impairments and changes to fair value recorded through income of $0.3 million and net gains of $11.3 million, respectively, on our strategic investment portfolio. The net gains recognized during the three months ended March 31, 2012 included a gain of $9.0 million recognized upon our acquisition of Stromedix as we previously held an equity interest. For a more detailed description of this transaction, please read Note 2, Acquisitions to our consolidated financial statements included within our 2012 Form 10-K.
Impairments
For the three months ended March 31, 2013 and 2012, we recognized impairment charges on our marketable equity securities of certain biotechnology companies, investments in venture capital funds accounted for under the cost method and investments in privately-held companies totaling $0.3 million and $0.5 million, respectively.
9.
Derivative Instruments
Foreign Currency Forward Contracts - Hedging Instruments
Due to the global nature of our operations, portions of our revenues are earned in currencies other than the U.S. dollar. The value of revenues measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. In order to mitigate these changes we use foreign currency forward contracts to lock in exchange rates associated with a portion of our forecasted international revenues.
Foreign currency forward contracts in effect as of March 31, 2013 and December 31, 2012 had durations of 1 to 12 months. These contracts have been designated as cash flow hedges and accordingly, to the extent effective, any unrealized gains or losses on these foreign currency forward contracts are reported in accumulated other comprehensive income (loss). Realized gains and losses for the effective portion of such contracts are recognized in revenue when the sale of product in the currency being hedged is recognized. To the extent ineffective, hedge transaction gains and losses are reported in other income (expense), net.

17

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenues is summarized as follows:
 
Notional Amount
Foreign Currency: (in millions)
As of
March 31,
2013
 
As of
December 31,
2012
Euro
$
456.7

 
$
492.2

Canadian dollar
26.6

 
31.8

Total foreign currency forward contracts
$
483.3

 
$
524.0

The portion of the fair value of these foreign currency forward contracts that was included in accumulated other comprehensive income (loss) within total equity reflected gains of $1.2 million and losses of $11.8 million as of March 31, 2013 and December 31, 2012, respectively. We expect all contracts to be settled over the next 12 months and any amounts in accumulated other comprehensive income (loss) to be reported as an adjustment to revenue. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of March 31, 2013 and December 31, 2012, respectively, credit risk did not materially change the fair value of our foreign currency forward contracts.
The following table summarizes the effect of derivatives designated as hedging instruments on our condensed consolidated statements of income:
 
As of March 31,
 
For the Three Months Ended March 31,
 
Gains/(Losses)
Recognized in AOCI
(Effective Portion)
 
Gains/(Losses)
Reclassified from AOCI into Net Income
(Effective Portion)
 
Gains/(Losses)
Recognized into Net Income
(Ineffective Portion)
(In millions)
2013
 
2012
 
Location
 
2013
 
2012
 
Location
 
2013
 
2012
Hedging instruments
$
1.2

 
$
16.0

 
Revenue
 
$
1.1

 
$
5.4

 
Other income (expense)
 
$
0.2

 
$
1.9

We recognized in product revenue net gains of $1.1 million and $5.4 million for the settlement of certain effective cash flow hedge instruments for the three months ended March 31, 2013 and 2012, respectively. These settlements were recorded in the same period as the related revenues were generated.
In relation to our foreign currency forward contracts, due to hedge ineffectiveness, we recognized in other income (expense) net gains of $0.2 million and $1.9 million for the three months ended March 31, 2013 and 2012, respectively.
Foreign Currency Forward Contracts - Other Derivatives
We also enter into other foreign currency forward contracts, usually with one month durations, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions.
The aggregate notional amount of these other outstanding foreign currency contracts was $138.6 million and $243.2 million as of March 31, 2013 and December 31, 2012, respectively. A net gain of $0.9 million related to these contracts was recognized as a component of other income (expense), net, for the three months ended March 31, 2013, respectively, as compared to a net loss of $4.3 million in the prior year comparative period.

18

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Summary of Derivatives
While certain of our derivatives are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities within our condensed consolidated balance sheets.
The following table summarizes the fair value and presentation in our condensed consolidated balance sheets for our outstanding derivatives including those designated as hedging instruments:
(In millions)
Balance Sheet Location
Fair Value As of March 31, 2013
Hedging Instruments:
 
 
Asset derivatives
Other current assets
$
5.1

Liability derivatives
Accrued expenses and other
$
2.7

Other Derivatives:
 
 
Asset derivatives
Other current assets
$
1.9

Liability derivatives
Accrued expenses and other
$
0.5

 
 
 
(In millions)
Balance Sheet Location
Fair Value As of December 31, 2012
Hedging Instruments:
 
 
Asset derivatives
Other current assets
$
0.6

Liability derivatives
Accrued expenses and other
$
11.5

Other Derivatives:
 
 
Asset derivatives
Other current assets
$
1.2

Liability derivatives
Accrued expenses and other
$
2.9

10.
Property, Plant and Equipment
Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Accumulated depreciation on property, plant and equipment was $983.8 million and $941.1 million as of March 31, 2013 and December 31, 2012, respectively.
For the three months ended March 31, 2013, we capitalized interest costs related to construction in progress totaling approximately $3.2 million as compared to $8.2 million in the prior year comparative period.
Cambridge Leases
In July 2011, we executed leases for two office buildings currently under construction in Cambridge, Massachusetts with a planned occupancy during the second half of 2013. Construction of these facilities began in late 2011. In accordance with accounting guidance applicable to entities involved with the construction of an asset that will be leased when the construction is completed, we are considered the owner of these properties during the construction period. Accordingly, we record an asset along with a corresponding financing obligation on our condensed consolidated balance sheet for the amount of total project costs incurred related to the construction in progress for these buildings. Upon completion of the buildings, we will assess and determine if the assets and corresponding liabilities should be derecognized. As of March 31, 2013 and December 31, 2012, cost incurred by the developer in relation to the construction of these buildings totaled approximately $112.8 million and $86.5 million, respectively.
As a result of our decision to relocate our corporate headquarters in Cambridge, Massachusetts, we expect to vacate part of our Weston, Massachusetts facility in the second half of 2013 and incur a charge between $15.0 million to $30.0 million. This estimate represents our remaining lease obligation for the vacated portion of our Weston facility, net of sublease income expected to be received.

19

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Hillerød, Denmark Facility
As of September 2012, our large-scale biologics manufacturing facility in Hillerød, Denmark was ready for its intended use as we began the process of manufacturing clinical products for sale to third parties. As a result, we transferred $465.9 million from construction in progress to various fixed asset accounts. We ceased capitalizing a majority of the interest expense and began recording depreciation on the various assets during the third quarter of 2012. The average estimated useful life for the facility and its assets is 20 years. The facility is currently not licensed to produce commercial product, a process we expect to be completed in 2013.
Research Triangle Park (RTP) Lease
In December 2012, we entered into an arrangement with Eisai, Inc. (Eisai) to lease a portion of their facility in RTP to manufacture our and Eisai's oral solid dose products and for Eisai to provide us with vial-filling services for biologic therapies and packaging services for oral solid dose products. The 10 year operating lease agreement, which is cancellable after 5 years, became effective in February 2013 and gives us the option to purchase the facility. 
11.
Indebtedness
Credit Facility
In March 2013, we entered into a $750.0 million senior unsecured revolving credit facility, which we may choose to use for future working capital and general corporate purposes. The terms of this revolving credit facility include a financial covenant that require us to not exceed a maximum debt to EBITDA ratio. This facility terminates in March 2014. As of March 31, 2013, we had outstanding borrowings of $200.0 million and were in full compliance with all covenants. The weighted average interest rate on outstanding borrowings as of March 31, 2013 was 1.5%.
Senior Notes
On March 1, 2013, we repaid the $450.0 million aggregate principal amount of our 6.0% Senior Notes.
12.
Equity
Total equity as of March 31, 2013 increased $375.8 million compared to December 31, 2012. This increase was primarily driven by net income attributable to Biogen Idec Inc. of $426.7 million partially offset by repurchases of our common stock totaling $41.0 million.
Share Repurchases
In February 2011, our Board of Directors authorized the repurchase of up to 20.0 million shares of common stock. This authorization does not have an expiration date. During the three months ended March 31, 2013, approximately 0.3 million shares were repurchased at a cost of $41.0 million.
Approximately 5.9 million shares of our common stock remain available for repurchase under the 2011 authorization.
 
We repurchased approximately 4.0 million shares at a cost of approximately $463.2 million under the 2011 authorization during the three months ended March 31, 2012.
Noncontrolling Interests
The following table reconciles equity attributable to noncontrolling interests:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Noncontrolling interests, beginning of period
$
2.3

 
$
1.5

Net income (loss) attributable to noncontrolling interests, net of tax

 
(0.3
)
Currency translation adjustment

 
0.1

Deconsolidation of noncontrolling interest
(1.7
)
 

Distributions to noncontrolling interests

 
1.3

Noncontrolling interests, end of period
$
0.6

 
$
2.6


20

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

For additional information related to our deconsolidation of noncontrolling interest, please read Note 18, Investments in Variable Interest Entities to these condensed consolidated financial statements.
13.
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax by component:
(In millions)
Unrealized Gains (Losses) on Securities Available for Sale
 
Unrealized Gains (Losses) on Foreign Currency Forward Contracts
 
Unfunded Status of Postretirement Benefit Plans
 
Translation Adjustments
 
Total
Balance, as of December 31, 2012
$
4.2

 
$
(10.7
)
 
$
(21.7
)
 
$
(27.1
)
 
$
(55.3
)
Other comprehensive income (loss) before reclassifications
1.6

 
12.6

 
1.2

 
(24.4
)
 
(9.0
)
Amounts reclassified from accumulated other comprehensive income (loss)
(2.7
)
 
(1.0
)
 

 

 
(3.7
)
Net current period other comprehensive income (loss)
(1.1
)
 
11.6

 
1.2

 
(24.4
)
 
(12.7
)
Balance, as of March 31, 2013
$
3.1

 
$
0.9

 
$
(20.5
)
 
$
(51.5
)
 
$
(68.0
)
Securities Available for Sale: Balances included within accumulated other comprehensive income (loss) related to unrealized holding gains (losses) are shown net of tax of $1.8 million and $2.5 million as of March 31, 2013 and December 31, 2012, respectively. Other comprehensive income (loss) recognized during the period before reclassifications are shown net of tax of $0.7 million. Amounts reclassified from accumulated other comprehensive income (loss) are shown net of tax of $1.4 million and were recognized in other income (expense) during the three months ended March 31, 2013.
Foreign Currency Forward Contracts: Balances included within accumulated other comprehensive income (loss) related to unrealized gains (losses) are shown net of tax of $0.3 million and $1.1 million as of March 31, 2013 and December 31, 2012, respectively. Other comprehensive income (loss) recognized during the period before reclassifications are shown net of tax of $1.6 million. Amounts reclassified from accumulated other comprehensive income (loss) are shown net of tax of $0.1 million and were recognized in revenues during the three months ended March 31, 2013.
Postretirement Benefit Plans: Tax amounts related to the unfunded status of pension and retirement benefit plans were immaterial for all amounts presented.
14.
Earnings per Share
Basic and diluted earnings per share are calculated as follows:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Numerator:
 
 
 
Net income attributable to Biogen Idec Inc.
$
426.7

 
$
302.7

Denominator:
 
 
 
Weighted average number of common shares outstanding
236.8

 
239.8

Effect of dilutive securities:
 
 
 
Stock options and employee stock purchase plan
0.4

 
0.6

Time-vested restricted stock units
0.8

 
1.1

Market stock units
0.3

 
0.3

Dilutive potential common shares
1.5

 
2.0

Shares used in calculating diluted earnings per share
238.3

 
241.8

Amounts excluded from the calculation of net income per diluted share because their effects were anti-dilutive were insignificant.

21

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

15.
Share-based Payments
Share-based Compensation Expense
The following table summarizes share-based compensation expense included within our condensed consolidated statements of income:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Research and development
$
25.2

 
$
19.7

Selling, general and administrative
34.3

 
28.8

Subtotal
59.5

 
48.5

Capitalized share-based compensation costs
(2.3
)
 
(1.2
)
Share-based compensation expense included in total cost and expenses
57.2

 
47.3

Income tax effect
(16.6
)
 
(14.4
)
Share-based compensation expense included in net income attributable to Biogen Idec Inc.
$
40.6

 
$
32.9

The following table summarizes share-based compensation expense associated with each of our share-based compensation programs:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Stock options
$
0.3

 
$
0.1

Market stock units
8.5

 
6.0

Time-vested restricted stock units
27.1

 
25.8

Performance-vested restricted stock units settled in shares

 
0.1

Cash settled performance shares
20.4

 
14.8

Employee stock purchase plan
3.2

 
1.7

Subtotal
59.5

 
48.5

Capitalized share-based compensation costs
(2.3
)
 
(1.2
)
Share-based compensation expense included in total cost and expenses
$
57.2

 
$
47.3

Grants Under Share-based Compensation Plans
The following table summarizes our equity grants to employees, officers and directors under our current stock plans:
 
For the Three Months
Ended March 31,
 
2013
 
2012
Market stock units
253,000

 
286,000

Cash settled performance shares
270,000

 
310,000

Time-vested restricted stock units
638,000

 
771,000

No performance-vested restricted stock units or stock options were granted during the three months ended March 31, 2013 and 2012. In addition, for the three months ended March 31, 2013, approximately 112,000 shares were issued under our employee stock purchase plan (ESPP) compared to approximately 106,000 shares issued in the prior year comparative period.

22

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

16.
Income Taxes
For the three months ended March 31, 2013, our effective tax rate was 13.2%, compared to 21.4% in the prior year comparative period.
A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
 
For the Three Months
Ended March 31,
 
2013
 
2012
Statutory rate
35.0
 %
 
35.0
 %
State taxes
7.7

 
0.8

Taxes on foreign earnings
(9.9
)
 
(8.2
)
Credits and net operating loss utilization
(3.3
)
 
(3.7
)
Purchased intangible assets
1.1

 
1.1

Manufacturing deduction
(22.7
)
 
(2.1
)
Other permanent items
5.5

 
(1.8
)
Other
(0.2
)
 
0.3

Effective tax rate
13.2
 %
 
21.4
 %
For the three months ended March 31, 2013, the reduction in our income tax rate compared to the same period in 2012 was primarily the result of a change in our uncertain tax position related to our U.S. federal manufacturing deduction, described below, lower intercompany royalties owed by a foreign wholly owned subsidiary of ours to a U.S. wholly owned subsidiary on the international sales of one of our products and the reinstatement of the federal research and development credit. These favorable items were partially offset by lower orphan drug credits due to reduced expenditures in eligible clinical trials.
Accounting for Uncertainty in Income Taxes
We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. With few exceptions, including the proposed disallowance we discuss below, we are no longer subject to U.S. federal tax examination for years before 2010 or state, local, or non-U.S. income tax examinations for years before 2004.
During the three months ended March 31, 2013, we received updated technical guidance from the IRS concerning our current and prior year filings and calculation of our U.S. federal manufacturing deduction related to our unconsolidated joint business. Based on this guidance we reevaluated the level of our unrecognized benefits, related to uncertain tax positions, and recorded a $33.0 million benefit, which is net of ancillary federal and state tax effects. This benefit is for a previously unrecognized position and relates to years 2005 through 2012 and is net of a $10.0 million expense for non-income based state taxes, which is recorded in other income (expense) within our condensed consolidated statements of income. The benefit related to the federal manufacturing deduction is reflected within manufacturing deduction in the above income tax rate reconciliation and the adverse impact of state income taxes and other federal items is reflected within state taxes and other permanent items, respectively.
In October 2011, in conjunction with our examination, the IRS proposed a disallowance of approximately $130 million in deductions for tax years 2007, 2008 and 2009 related to payments for services provided by our wholly owned Danish subsidiary located in Hillerød, Denmark. We believe that these items represent valid deductible business expenses and will vigorously defend our position.
It is reasonably possible that we will adjust the value of our uncertain tax positions related to the manufacturing deduction as we receive additional information from various taxing authorities. We do not anticipate any other significant changes in our positions in the next twelve months other than expected settlements which have been classified as current liabilities within the accompanying balance sheet.

23

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Contingencies
On June 8, 2010, we received Notices of Assessment from the Massachusetts Department of Revenue (DOR) against Biogen Idec MA Inc. (BIMA), one of our wholly-owned subsidiaries, for $103.5 million of corporate excise tax, including associated interest and penalties, related to our 2004, 2005 and 2006 state tax filings. On February 3, 2013, we filed a petition with the Massachusetts Appellate Tax Board (Massachusetts ATB) appealing the denial of our application for abatement and a hearing has been scheduled for May 2013. For all periods under dispute, we believe that positions taken in our tax filings are valid and we are contesting the assessments vigorously.
The audits of our state tax filings for 2007 and 2008 are not completed. As these filings were prepared in a manner consistent with prior filings, we may receive an assessment for those years as well. Due to tax law changes effective January 1, 2009, the computation and deductions at issue in previous tax filings are not part of our subsequent tax filings in Massachusetts.
We believe that these assessments do not impact the amount of liabilities for income tax contingencies. However, there is a possibility that we may not prevail in defending all of our assertions with the DOR. If these matters are resolved unfavorably in the future, the resolution could have a material adverse impact on our effective tax rate and our results of operations.
17.
Other Consolidated Financial Statement Detail
Other Income (Expense), Net
Components of other income (expense), net, are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions)
2013
 
2012
Interest income
$
4.3

 
$
6.5

Interest expense
(11.5
)
 
(7.4
)
Impairments of investments
(0.3
)
 
(0.5
)
Gain (loss) on investments, net
4.4

 
11.8

Foreign exchange gains (losses), net
(2.6
)
 
1.4

Other, net
(8.8
)
 
3.3

Total other income (expense), net
$
(14.5
)
 
$
15.1

Accrued Expenses and Other
Accrued expenses and other consists of the following:
(In millions)
As of
March 31,
2013
 
As of
December 31,
2012
Revenue-related rebates
$
204.0

 
$
191.0

Deferred revenue
157.1

 
148.0

Employee compensation and benefits
134.5

 
248.5

Collaboration expenses
56.7

 
37.4

Clinical development expenses
47.9

 
51.6

Royalties and licensing fees
42.8

 
45.2

Current portion of contingent consideration obligations
21.7

 
22.4

Other
220.4

 
235.8

Total accrued expenses and other
$
885.1

 
$
979.9


24

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

18.
Investments in Variable Interest Entities
Consolidated Variable Interest Entities
Our condensed consolidated financial statements include the financial results of variable interest entities in which we are the primary beneficiary.
Knopp
During the three months ended March 31, 2013, we terminated our license agreement with Knopp Neurosciences, Inc. (Knopp), a subsidiary of Knopp Holdings, LLC, for the development, manufacture and commercialization of dexpramipexole in people with amyotrophic lateral sclerosis (ALS). We expect to exercise our put option on the 30.0% of the Class B common shares to Knopp.
We had previously determined that we were the primary beneficiary of Knopp because we had the power through the license agreement to direct the activities that most significantly impacted Knopp’s economic performance and were required to fund 100% of the research and development costs incurred in support of the collaboration agreement. As such, we consolidated the results of Knopp. In March 2013, we deconsolidated the results of Knopp upon termination of the license agreement. The assets and liabilities of Knopp were not significant to our financial position or results of operations. We had provided no financing to Knopp other than contractually required amounts previously disclosed in Note 20, Investments in Variable Interest Entities included within our 2012 Form 10-K.
For the three months ended March 31, 2013, the collaboration did not incur any development expenses. For the three months ended March 31, 2012, the collaboration incurred development expenses totaling $22.7 million, which was reflected as research and development expense within our condensed consolidated statements of income.
For additional information, please read Note 20, Litigation to these condensed consolidated financial statements.
Neurimmune SubOne AG
In 2007, we entered into a collaboration agreement with Neurimmune SubOne AG (Neurimmune), a subsidiary of Neurimmune AG, for the development and commercialization of antibodies for the treatment of Alzheimer’s disease. Neurimmune conducts research to identify potential therapeutic antibodies and we are responsible for the development, manufacturing and commercialization of all products. Based upon our current development plans, we may pay Neurimmune up to $345.0 million in remaining milestone payments, as well as royalties on sales of any resulting commercial products.
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 are required to fund 100% of the research and development costs incurred in support of the collaboration agreement. Accordingly, we consolidate the results of Neurimmune.
Amounts that are incurred by Neurimmune for research and development expenses in support of the collaboration that we reimburse are reflected in research and development expense in our condensed consolidated statements of income. Future milestone payments will be reflected within our condensed consolidated statements of income as a charge to the noncontrolling interest, net of tax, when such milestones are achieved.
For the three months ended March 31, 2013, the collaboration incurred development expenses totaling $5.0 million, which is reflected as research and development expense within our condensed consolidated statements of income, compared to $2.5 million in the prior year comparative period.
The assets and liabilities of Neurimmune are not significant to our financial position or results of operations as it is a research and development organization. We have provided no financing to Neurimmune other than previously contractually required amounts.
Unconsolidated Variable Interest Entities
We have relationships with other 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.

25

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

As of March 31, 2013 and December 31, 2012, the total carrying value of our investments in biotechnology companies that we have determined to be variable interest entities, but do not consolidate as we do not have the power to direct their activities, totaled $9.1 million and $9.4 million, respectively. Our maximum exposure to loss related to these variable interest entities is limited to the carrying value of our investments.
We have entered into research collaborations with certain variable interest entities where we are required to fund certain development activities. These development activities are included in research and development expense within our condensed consolidated statements of income, as they are incurred.
We have provided no financing to these variable interest entities other than previously contractually required amounts.
For additional information related to our investments in variable interest entities, please read Note 20, Investments in Variable Interest Entities to our consolidated financial statements included within our 2012 Form 10-K.
19.
Collaborative and Other Relationships
Samsung Biosimilar Agreement
In February 2012, we finalized an agreement with Samsung BioLogics Co. Ltd. (Samsung Biologics) that established an entity, Samsung Bioepis, to develop, manufacture and market biosimilar pharmaceuticals. Under the terms of the agreement, Samsung Biologics will contribute 280.5 billion South Korean won (approximately $250.0 million) for an 85 percent stake in Samsung Bioepis and we will contribute approximately 49.5 billion South Korean won (approximately $45.0 million) for the remaining 15 percent ownership interest. Our investment is limited to this contribution as we have no obligation to provide any additional funding; however, we maintain an option to purchase additional stock in Samsung Bioepis that would allow us to increase our ownership percentage up to 49.9 percent. The exercise of this option is within our control.
Samsung Biologics has the power to direct the activities of Samsung Bioepis that will most significantly and directly impact its economic performance. We account for this investment under the equity method of accounting as we maintain the ability to exercise significant influence over Samsung Bioepis through a presence on the entity’s Board of Directors and our contractual relationship. Under the equity method, we record our original investment at cost and subsequently adjust the carrying value of our investments for our share of equity in the entity’s income or losses according to our percentage of ownership. If losses accumulate, we will record our share of losses until our investment has been fully depleted. Once our investment has been fully depleted, we will recognize additional losses only if we provide or are required to provide additional funding. As of March 31, 2013 and December 31, 2012, our cash contributions to Samsung Bioepis totaled 43.0 billion and 36.0 billion South Korean won (approximately $38.6 million and $32.1 million), respectively. As of March 31, 2013 and December 31, 2012, the carrying value of our investment in Samsung Bioepis totaled 35.0 billion and 29.7 billion South Korean won (approximately $31.4 million and $27.8 million), respectively, which is classified as a component of investments and other assets within our condensed consolidated balance sheets. We are obligated to fund an additional 6.5 billion South Korean won (approximately $5.8 million), which is due within the next year. We recognize our share of the results of operations related to our investment in Samsung Bioepis one quarter in arrears when the results of the entity become available, which is reflected as equity in loss of investee, net of tax within our condensed consolidated statements of income. During the three months ended March 31, 2013, we recognized a loss on our investment of $3.8 million.
Simultaneous with the formation of Samsung Bioepis, we entered into a license agreement and technical development and manufacturing services agreements with Samsung Bioepis. Under the terms of the license agreement, we granted Samsung Bioepis an exclusive license to use, develop, manufacture, and commercialize products created by Samsung Bioepis using Biogen Idec product-specific technology. In exchange, we will receive royalties on all products developed and commercialized by Samsung Bioepis. Under the terms of the technical development agreement, we will provide Samsung Bioepis technical development services and technology transfer services, which include, but are not limited to, cell culture development, purification process development, formulation development, and analytical development. Under the terms of our manufacturing agreement, we will manufacture certain clinical drug substance, clinical drug product, commercial drug substance and commercial drug product pursuant to contractual terms. For the three months ended March 31, 2013 and 2012, we recognized $6.8 million and $1.0 million, respectively, in other revenues in relation to these services, which is reflected as a component of other revenues within our condensed consolidated statement of income. In addition, we have recorded $26.1 million under the contract as deferred revenue, which will be recognized as other revenue when the drug substance or product is shipped.
For additional information related to our other significant collaboration arrangements, please read Note 21, Collaborative and Other Relationships to our consolidated financial statements included within our 2012 Form 10-K.

26

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

20.
Litigation
Massachusetts Department of Revenue
On June 8, 2010, we received Notices of Assessment from the Massachusetts DOR against BIMA for $103.5 million of corporate excise tax, including associated interest and penalties, related to our 2004, 2005 and 2006 state tax filings. On February 3, 2011, we filed a petition with the Massachusetts ATB appealing the denial of our application for abatement, and a hearing has been scheduled for May 2013. For all periods under dispute, we believe that positions taken in our tax filings are valid and are contesting the assessments vigorously.
Hoechst — Genentech Arbitration
On October 24, 2008, Hoechst GmbH (Hoechst), an affiliate of Sanofi-Aventis Deutschland GmbH (Sanofi), filed a request for arbitration with the ICC International Court of Arbitration (Paris) claiming that Genentech breached its license agreement (the Hoechst License) with one of Hoechst's predecessors. The Hoechst License, which was in effect from 1991 to October 2008, granted Genentech certain rights with respect to U.S. Patents 5,849,522 (’522 patent) and 6,218,140 (’140 patent) and other potential patents. The Hoechst License provided for potential royalty payments of 0.5% on net sales of certain products defined by the agreement. Genentech maintains that no royalties are due under the Hoechst License because it did not infringe any of the relevant patents.
  In September 2012, the arbitrator ruled that Genentech is liable to Hoechst for royalties with respect to RITUXAN under the Hoechst License, and in February 2013 he awarded Hoechst damages of EUR108 million together with prejudgment interest (estimated to be approximately EUR54 million as of the date of the award).   In December 2012, Genentech filed a Declaration of Appeal in the Paris Court of Appeal to vacate the arbitrator's decision on liability, and the appeal is pending.
Although we are not a party to the arbitration, we expect that any damages recovered by Hoechst may be a cost charged to our collaboration with Genentech. Our revenues from unconsolidated joint business were reduced by approximately $50.0 million in the second quarter of 2011 and by approximately $41.5 million in the first quarter of 2013 to reflect our share of the damages and interest that were awarded to Hoechst. Our share may vary from these amounts if Genentech is successful in challenging the award.
Sanofi ’522 and ’140 Patent Litigation
On October 27, 2008, Sanofi filed suit against Genentech and Biogen Idec in the United States District Court for the Eastern District of Texas (Texas Action) claiming that RITUXAN and certain other Genentech products infringe the ’522 patent and the ’140 patent. The Texas Action was transferred and consolidated with a complaint filed on the same day by Genentech and Biogen Idec against Sanofi in the United States District for the Northern District of California (California Action) seeking declaratory judgments that RITUXAN and the other Genentech products do not infringe the ’522 patent or the ’140 patent and that those patents are invalid and unenforceable.
On April 21, 2011, the federal court in California entered a separate and final judgment that the manufacture and sale of RITUXAN do not infringe the ’522 patent or the ’140 patent. The court stayed further proceedings relating to Biogen Idec's and Genentech's claims seeking a declaration that the asserted patent claims are invalid and unenforceable. On March 22, 2012, the U.S. Court of Appeals for the Federal Circuit affirmed the judgment of non-infringement. No trial date has yet been set on the stayed claims. On May 1, 2012, Genentech filed a motion to enjoin Sanofi and those acting in concert with it, including Hoechst, from continuing the arbitration described above or enforcing any award of royalties under the Hoechst License, but the motion was denied on May 25, 2012. On June 6, 2012, Genentech appealed the denial to the U.S. Court of Appeals for the Federal Circuit and the appeal is pending.
’755 Patent Litigation
On September 15, 2009, we were issued U.S. Patent No. 7,588,755 (’755 Patent), which claims the use of interferon beta for immunomodulation or treating a viral condition, viral disease, cancers or tumors. This patent, which expires in September 2026, covers, among other things, the treatment of MS with our product AVONEX. On May 27, 2010, Bayer Healthcare Pharmaceuticals Inc. (Bayer) filed a lawsuit against us in the U.S. District Court for the District of New Jersey seeking a declaratory judgment of patent invalidity and non-infringement and seeking monetary relief in the form of attorneys' fees, costs and expenses. On May 28, 2010, BIMA filed a lawsuit in the U.S. District Court for the District of New Jersey alleging infringement of the ’755 Patent by EMD Serono, Inc. (manufacturer, marketer and seller of REBIF), Pfizer, Inc. (co-marketer of REBIF), Bayer (manufacturer, marketer and seller of BETASERON and manufacturer of EXTAVIA), and Novartis

27

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Pharmaceuticals Corp. (marketer and seller of EXTAVIA) and seeking monetary damages, including lost profits and royalties. The court has consolidated the two lawsuits, and we refer to the two actions as the “Consolidated ’755 Patent Actions”.
Bayer, Pfizer, Novartis and EMD Serono have all filed counterclaims in the Consolidated ’755 Patent Actions seeking declaratory judgments of patent invalidity and non-infringement, and seeking monetary relief in the form of costs and attorneys' fees, and EMD Serono and Bayer have each filed a counterclaim seeking a declaratory judgment that the ’755 Patent is unenforceable based on alleged inequitable conduct. Bayer has also amended its complaint to seek such a declaration. No trial date has yet been ordered, but we expect that the trial of the Consolidated ’755 Patent Actions will take place in 2014.
GSK ’612 Patent Litigation
On March 23, 2010, we and Genentech were issued U.S. Patent No. 7,682,612 (’612 Patent) relating to a method of treating chronic lymphocytic leukemia (CLL) using an anti-CD20 antibody. The patent, which expires in November 2019, covers, among other things, the treatment of CLL with RITUXAN. On March 23, 2010, we and Genentech filed a lawsuit in the United States District Court for the Southern District of California against Glaxo Group Limited and GlaxoSmithKline LLC (collectively, GSK) alleging infringement of that patent based upon GSK's manufacture, importation, marketing and sale of ARZERRA. We seek damages, including a royalty and lost profits, and injunctive relief. GSK has filed a counterclaim seeking a declaratory judgment of patent invalidity, non-infringement, unenforceability, and inequitable conduct, and seeking monetary relief in the form of costs and attorneys' fees.
On November 15, 2011, the court entered a final judgment in favor of GSK on Biogen Idec's and Genentech's claims and on GSK's counterclaim for non-infringement. The court stayed all further proceedings pending the outcome of the appeal of this judgment filed by Biogen Idec and Genentech. On April 16, 2013, the United States Court of Appeals for the Federal Circuit affirmed the judgment in favor of GSK.
Novartis V&D ’688 Patent Litigation
On January 26, 2011, Novartis Vaccines and Diagnostics, Inc. (Novartis V&D) filed suit against us in the United States District Court for the District of Delaware, alleging that TYSABRI infringes U.S. Patent No. 5,688,688 “Vector for Expression of a Polypeptide in a Mammalian Cell” (’688 Patent), which was granted in November 1997 and expires in November 2014. Novartis V&D seeks a declaration of infringement, a finding of willful infringement, compensatory damages, treble damages, interest, costs and attorneys' fees. On July 18, 2012, the court granted Novartis V&D leave to add Novartis Pharma AG, an alleged exclusive licensee of the ’688 Patent, as co-plaintiff. We have not formed an opinion that an unfavorable outcome is either “probable” or “remote”, and are unable to estimate the magnitude or range of any potential loss. We believe that we have good and valid defenses to the complaint and will vigorously defend against it. A trial has been set for January 2014.
Italian National Medicines Agency
In the fourth quarter of 2011, Biogen Idec SRL received a notice from the Italian National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) stating that sales of TYSABRI for the period from February 2009 through February 2011 exceeded by EUR30.7 million a reimbursement limit established pursuant to a Price Determination Resolution (Price Resolution) granted by AIFA in February 2007. The Price Resolution set the initial price for the sale of TYSABRI in Italy and limited the amount of government reimbursement “for the first 24 months” of TYSABRI sales. As the basis for the claim, the AIFA notice referred to a 2001 Decree that provides for an automatic 24-month renewal of the terms of all Price Resolutions that are not renegotiated prior to the expiration of their term.
On November 17, 2011, Biogen Idec SRL responded to AIFA that the reimbursement limit in the Price Resolution by its terms relates only to the first 24 months of TYSABRI sales, which began in February 2007. On December 23, 2011, we filed an appeal in the Regional Administrative Tribunal of Lazio (Il Tribunale Amministrativo Regionale per il Lazio) in Rome against AIFA, seeking a ruling that our interpretation of the Price Resolution is valid and that the position of AIFA is unenforceable, and the appeal is pending. On November 21, 2012, the tribunal ruled that the Price Resolution would not automatically renew for another 24-month term pending resolution of the dispute. The tribunal has scheduled a hearing on our appeal for June 18, 2013. We have not formed an opinion that an unfavorable outcome of the dispute is either “probable” or “remote”. We believe that we have good and valid grounds for our appeal and will vigorously pursue it.

28

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Average Manufacturer Price Litigation
On September 6, 2011, we and several other pharmaceutical companies were served with a complaint originally filed under seal on October 28, 2008 in the United States District Court for the Eastern District of Pennsylvania by Ronald Streck (the relator) on behalf of himself and the United States, and the states of New Jersey, California, Rhode Island, Michigan, Montana, Wisconsin, Massachusetts, Tennessee, Oklahoma, Texas, Indiana, New Hampshire, North Carolina, Florida, Georgia, New Mexico, Illinois, New York, Virginia, Delaware, Hawaii, Louisiana, Connecticut, and Nevada (collectively, the States), and the District of Columbia, alleging violations of the False Claims Act, 31 U.S.C. § 3729 et seq. and state and District of Columbia statutory counterparts. The United States and the States have declined to intervene, and the District of Columbia has not intervened. The complaint was subsequently unsealed and served, and then amended. The amended complaint alleges that Biogen Idec and other defendants underreport Average Manufacturer Price (AMP) information to the Centers for Medicare and Medicaid Services, thereby causing Biogen Idec and other defendants to underpay rebates under the Medicaid Drug Rebate Program. The relator alleges that the underreporting has occurred because Biogen Idec and other defendants improperly consider various payments that they make to drug wholesalers to be discounts under applicable federal law. We and the other defendants filed a motion to dismiss the complaint, which was granted in part and denied in part on July 3, 2012. As to AMP submissions before January 1, 2007, the court dismissed all state and federal claims against us. As to AMP submissions after January 1, 2007, the court denied our motion to dismiss federal law claims. Plaintiff's remaining state-law claims were dismissed in whole as to claims under New Mexico law and in part as to claims under the laws of Delaware, New Hampshire, Texas, Connecticut, Georgia, Indiana, Montana, New York, Oklahoma, and Rhode Island. A trial has been set for September, 2014. We have not formed an opinion that an unfavorable outcome under the remaining claims is either “probable” or “remote,” and are unable at this stage of the litigation to form an opinion as to the magnitude or range of any potential loss. We believe that we have good and valid defenses and intend to vigorously defend against the allegations.
Government Review of Sales and Promotional Practices
We have learned that state and federal governmental authorities are investigating our sales and promotional practices. We are cooperating with the government.
Qui Tam Litigation
In August, 2012, we learned that a relator, on behalf of the United States and certain states, filed a suit under seal on February 17, 2011 against us, Elan Corporation, plc, and Elan Pharmaceuticals, Inc. in the United States District Court for the Western District of Virginia. We have neither seen nor been served with the complaint, but understand that it was filed under the Federal False Claims Act.
Canada Lease Dispute
On April 18, 2008, First Real Properties Limited filed suit against Biogen Idec Canada Inc. (BI Canada) in the Superior Court of Justice in London, Ontario alleging breach of an offer for lease of property signed by BI Canada in 2007 and an unsigned proposed lease for the same property. The plaintiff's complaint seeks $7.0 million in damages, but the plaintiff submitted an expert report estimating the plaintiff's damages to be approximately $2.5 million after mitigation. The plaintiff also seeks costs of approximately $0.4 million and interest. A trial occurred in February 2013 and the decision is pending.
Knopp Neurosciences Dispute
On February 25, 2013, Knopp filed suit against Biogen Idec International Holding Ltd. in the United States District Court for the District of Massachusetts, alleging Biogen Idec wrongfully terminated its license agreement with Knopp for the development of a product for Amyotrophic Lateral Sclerosis. Knopp seeks damages and injunctive relief, including the transfer of certain biosamples. A trial on Knopp’s biosamples claim is scheduled for June 17, 2013.  No trial date has been set for Knopp’s other claims. We have not formed an opinion that an unfavorable outcome is either “probable” or “remote,” and are unable at this stage of the litigation to form an opinion as to the magnitude or range of any potential loss. We believe that we have good and valid defenses and intend to vigorously defend this suit.
  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.

29

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

21.
Commitments and Contingencies
In 2006, we acquired Fumapharm AG. As part of this acquisition we acquired FUMADERM and TECFIDERA (together, Fumapharm Products). We paid $220.0 million upon closing of the transaction and agreed to pay an additional $15.0 million if a Fumapharm Product is approved for MS in the U.S. or E.U. In the first quarter of 2013, we accrued this $15.0 million contingent payment as TECFIDERA was approved in the U.S. for MS by the FDA. This payment was accounted for as an increase to goodwill within our condensed consolidated balance sheets offset by $1.5 million for a tax deduction. We are also required to make the following additional milestone payments to Fumapharm AG based on the attainment of certain sales levels of Fumapharm Products, less certain costs as defined in the acquisition agreement:
 
 
Cumulative Sales Level
Prior 12 Month Sales
 
$500M
 
$1.0B
 
$2.0B
 
$3.0B
 
Each additional $1.0B up to $20.0B
 
 
Payment Amount (In millions)
< $500 million
 
$

 
$

 
$

 
$

 
$

$500 million - $1.0 billion
 
22.0

 
25.0

 
50.0

 
50.0

 
50.0

$1.0 billion - $1.5 billion
 

 
50.0

 
100.0

 
100.0

 
100.0

$1.5 billion - $2.0 billion
 

 

 
150.0

 
150.0

 
150.0

$2.0 billion - $2.5 billion
 

 

 
200.0

 
200.0

 
200.0

$2.5 billion - $3.0 billion
 

 

 

 
250.0

 
250.0

> $3.0 billion
 

 

 

 

 
300.0

These payments will be accounted for as an increase to goodwill as incurred, in accordance with the accounting standard applicable to business combinations when we acquired Fumapharm. Payments are due within 30 days following the end of the quarter in which the applicable sales level has been reached and are based upon the total sales of Fumapharm Products in the prior twelve month period.
22.
Segment Information
We operate as one business segment, which is the business of discovering, developing, manufacturing and marketing therapies for the treatment of multiple sclerosis and other autoimmune disorders, neurodegenerative diseases and hemophilia and therefore, our chief operating decision-maker manages the operations of our Company as a single operating segment.
23.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scoping of Disclosures about Offsetting Assets and Liabilities (ASU 2013-01). This newly issued accounting standard clarifies the scope of ASU No. 2011-11 to apply to derivatives accounted for in accordance with Topic 815, Derivatives and Hedging, including bifurcated embedded derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with ASC 210-20-45 or ASC 815-10-45 or subject to an enforceable master netting arrangement or similar agreement. This ASU is effective for fiscal years beginning on or after January 1, 2013 and interim periods within those annual periods. The required disclosures should be provided retrospectively for all comparative periods presented. We adopted this standard in the first quarter of 2013 and presented this information in Note 9, Derivative Instruments to these condensed consolidated financial statements. The adoption of this standard did not have an impact on our financial position or results of operations.

30

BIOGEN IDEC INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). This newly issued accounting standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This ASU is effective for reporting periods beginning after December 15, 2012. We adopted this standard in the first quarter of 2013 and presented this information in Note 13, Accumulated Other Comprehensive Income (Loss) to these condensed consolidated financial statements. The adoption of this standard did not have an impact on our financial position or results of operations.

31


Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes beginning on page 5 of this quarterly report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2012 (2012 Form 10-K). Certain totals may not sum due to rounding.
Executive Summary
Introduction
Biogen Idec is a global biotechnology company focused on discovering, developing, manufacturing and marketing therapies for the treatment of multiple sclerosis and other autoimmune disorders, neurodegenerative diseases and hemophilia. We also collaborate on the development and commercialization of RITUXAN and anti-CD20 product candidates for the treatment of non-Hodgkin's lymphoma and other conditions.
In the near term, our revenues are dependent upon continued sales of our three principal products, AVONEX, TYSABRI, and RITUXAN, as well as TECFIDERA, which was recently approved and is in the early stages of commercial launch. In the longer term, our revenue growth will be dependent upon the successful clinical development, regulatory approval and launch of new commercial products, our ability to obtain and maintain patents and other rights related to our marketed products and assets originating from our research and development efforts, and successful execution of external business development opportunities. As part of our on-going research and development efforts, we have devoted significant resources to conducting clinical studies to advance the development of new pharmaceutical products and to explore the utility of our existing products in treating disorders beyond those currently approved in their labels.
Financial Highlights
The following table is a summary of financial results achieved:
 
For the Three Months
Ended March 31,
(In millions, except per share amounts and percentages)
2013 (1) (2)
 
2012 (3)
 
Change %
Total revenues
$
1,415.1

 
$
1,292.0

 
9.5
%
Income from operations
$
510.5

 
$
369.4

 
38.2
%
Net income attributable to Biogen Idec Inc.
$
426.7

 
$
302.7

 
41.0
%
Diluted earnings per share attributable to Biogen Idec Inc.
$
1.79

 
$
1.25

 
43.1
%
(1)
Our share of RITUXAN revenues from unconsolidated joint business reflects a charge of $41.5 million for damages and interest awarded to Hoechst GmbH (Hoechst) in Genentech's arbitration with Hoechst.
(2)
Net income attributable to Biogen Idec Inc., for the three months ended March 31, 2013, includes a $33.0 million benefit, net of ancillary federal and state income and non-income tax effects, related to years 2005 through 2012 for a previously unrecognized manufacturing deduction related to our unconsolidated joint business. 
(3)
Income from operations, as well as net income attributable to Biogen Idec Inc., for the three months ended March 31, 2012, includes a charge to research and development expense of $29.0 million related to an upfront payment made in connection with our development agreement entered into with Isis Pharmaceuticals, Inc. and a $12.4 million reduction resulting from an increase in our returns reserve and write-offs of unsold inventory due to a voluntary withdrawal of a limited amount of AVONEX product that demonstrated a trend in oxidation that may have led to expiry of the product earlier than stated on its label.
As described below under “Results of Operations,” our operating results for the three months ended March 31, 2013 reflect the following:
Worldwide AVONEX revenues totaled $746.1 million in the first quarter of 2013, representing an increase of 12.8% over the same period in 2012.
Our share of TYSABRI revenues totaled $312.2 million in the first quarter of 2013, representing an increase of 9.4% over the same period in 2012.
Our share of RITUXAN revenues totaled $264.6 million in the first quarter of 2013, representing a decrease of 7.0% over the same period in 2012.

32


Total cost and expenses decreased 1.4% in the first quarter of 2013, compared to the same period in 2012. This decrease was primarily the result of a 20.1% decrease in research and development expense partially offset by a 17.5% increase in selling, general and administrative costs over the same period in 2012. These decreases reflect a decrease in spending associated with our late stage product candidates and a decrease in upfront and milestone payments offset by costs incurred in connection with preparing for the product launch of TECFIDERA and potential product launches of Factor VIII and Factor IX.
We generated $178.9 million of net cash flows from operations for the three months ended March 31, 2013, which were primarily driven by earnings. Cash, cash equivalents and reverse repurchase agreements totaled approximately $3.6 billion as of March 31, 2013. On April 2, 2013, we used $3.25 billion of these amounts to fund the upfront payment we made to Elan in connection with our acquisition of the TYSABRI rights.
Acquisitions
On April 2, 2013, we acquired full ownership and strategic, commercial and decision-making rights to TYSABRI from Elan. Upon the closing of the transaction, the previous collaboration agreement between Elan and us, whereby worldwide TYSABRI profits were split 50/50, was terminated. For additional information related to this transaction, please read Note 2, Subsequent Events to our condensed consolidated financial statements included within this report.
Business Environment
We conduct our business within the biotechnology and pharmaceutical industries, which are highly competitive. Many of our competitors are working to develop or have commercialized products similar to those we market or are developing, including oral and other alternative formulations that may compete with AVONEX, TYSABRI or other products we are developing. In addition, the commercialization of certain of our own approved products, such as TECFIDERA, and pipeline product candidates may negatively impact future sales of AVONEX, TYSABRI or both. We may also face increased competitive pressures from the emergence of biosimilars. In the U.S., AVONEX, TYSABRI, and RITUXAN are licensed under the Public Health Service Act (PHSA) as biological products. In March 2010, U.S. healthcare reform legislation amended the PHSA to authorize the U.S. Food and Drug Administration (FDA) to approve biological products, known as biosimilars, that are similar to or interchangeable with previously approved biological products based upon potentially abbreviated data packages.
Global economic conditions continue to present challenges for our industry. Governments in many international markets where we operate have announced or implemented austerity measures to constrain the overall level of government expenditures. These measures, which include efforts aimed at reforming health care coverage and reducing health care costs, particularly in certain countries in Europe, continue to exert pressure on product pricing, have delayed reimbursement for our products, and have negatively impacted our revenues and results of operations. For additional information about certain risks that could negatively impact our financial position or future results of operations, please read the “Risk Factors” section of this report.
The Affordable Care Act
On June 28, 2012, the United States Supreme Court upheld the constitutionality of the 2010 Patient Protection and Affordable Care Act’s (Affordable Care Act) mandate to purchase health insurance but rejected specific funding provisions that incentivized states to expand their current Medicaid programs. As a result of this ruling, we currently expect implementation of most of the major provisions of the Affordable Care Act to continue. Changes to the Affordable Care Act, or other federal legislation regarding health care access, financing, or delivery and other actions taken by individual states concerning the possible expansion of Medicaid could impact our financial position or results of operations.
The American Taxpayer Relief Act of 2012 and Sequestration
The American Taxpayer Relief Act of 2012 (ATRA) was passed by the House of Representatives and the Senate on January 1, 2013, and was signed into law by the President on January 2, 2013.  The ATRA, among other things, extends through 2013 an array of temporary business and individual tax provisions and temporarily delayed the implementation of certain spending reductions (known as “sequestration”).  We do not expect that the ATRA will have a material impact on our financial position or results of operation.

33


During the first quarter of 2013, U.S. Congress began implementing sequestration as a means of reducing government expenditures.  These reductions included a 2% reduction in Medicare reimbursements rates to providers, such as physicians, hospitals and drug plans.  These cuts, which reduce payments to health care providers for Part B drugs, could affect decisions regarding prescribing patterns or site of care, which could adversely impact sales of our products.  In addition, Part D plans managing outpatient prescription drugs that are receiving less reimbursement from the government could seek further discounts from manufacturers, which could adversely affect our sales. In addition to sequestration, additional proposals that have been raised to address government finances include changes to the Medicare program, such as increases to Part D rebates or co-payments or reductions in premium subsidies, increases to the pharmaceutical fee, changes to the coverage gap and reductions in physician payments for Part B drugs.  If enacted, these changes to current policy, together with continuing federal budget cuts, could result in increased pricing pressure and reduced reimbursement for our products, which we currently estimate at approximately 2% of estimated 2013 revenues.
Key Pipeline and Product Developments
TECFIDERA
In March 2013, we announced that the FDA approved TECFIDERA, our first-line oral treatment for people with relapsing forms of multiple sclerosis (MS). The FDA approval was based on TECFIDERA's comprehensive development program, in which TECFIDERA demonstrated significant reductions in MS disease activity coupled with favorable safety and tolerability in the Phase 3 DEFINE and CONFIRM studies.
In March 2013, we also announced that we had received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) in the European Union (E.U.) recommending a marketing authorization be granted for TECFIDERA. The CHMP's recommendation is now referred to the European Commission, which grants marketing authorization for medicines in the E.U.
In April 2013, TECFIDERA was approved in Canada.
We acquired TECFIDERA as part of our acquisition of Fumapharm AG in 2006. For more information about this acquisition and associated milestone obligations, please read the subsection entitled “Contractual Obligations and Off-Balance Sheet Arrangements – Contingent Consideration” of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Long-Lasting Recombinant Factors VIII and IX
We submitted a Biologics License Application to the FDA for marketing approval of our long-lasting recombinant Factor VIII-Fc fusion protein in hemophilia A, a rare inherited disorder which inhibits blood coagulation, during the first quarter of 2013. The regulatory submission was based on the positive top-line results from the Phase 3 study known as A-LONG.
We submitted a Biologics License Application to the FDA for marketing approval of our long-lasting recombinant Factor IX-Fc fusion protein in hemophilia B, a rare inherited disorder which inhibits blood coagulation, during the fourth quarter of 2012. The regulatory submission was based on the positive top-line results from the Phase 3 study known as B-LONG. In March 2013, we announced that the FDA had accepted our application for Factor IX and granted us a standard review timeline.
We collaborate with Swedish Orphan Biovitrum AB on the commercialization of Factor VIII and Factor IX. For information about this collaboration, please read Note 21, Collaborative and Other Relationships to our consolidated financial statements included within our 2012 Form 10-K.
PLEGRIDY (Peginterferon beta-1a)
In January 2013, we released the primary efficacy analysis and safety data from our Phase 3 study, ADVANCE. Results support PLEGRIDY as a potential treatment dosed every two weeks or every four weeks for relapsing-remitting MS. The primary endpoint of ADVANCE, annualized relapse rate at one year, was met for both the two-week and four-week dosing regimens. Results showed that PLEGRIDY also met the secondary endpoints of risk of 12-week confirmed disability progression, proportion of patients who relapsed and magnetic resonance imaging assessments for both dose regimens. We plan to submit marketing applications for PLEGRIDY in the U.S. and E.U. by mid-2013.

34


Results of Operations
Revenues
Revenues are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2013
 
2012
Product revenues:
 
 
 
 
 
 
 
United States
$
604.9

 
42.7
%
 
$
487.8

 
37.8
%
Rest of world
490.9

 
34.7
%
 
487.6

 
37.7
%
Total product revenues
1,095.8

 
77.4
%
 
975.4

 
75.5
%
Unconsolidated joint business
264.6

 
18.7
%
 
284.6

 
22.0
%
Other revenues
54.7

 
3.9
%
 
32.0

 
2.5
%
Total revenues
$
1,415.1

 
100.0
%
 
$
1,292.0

 
100.0
%
Product Revenues
Product revenues are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2013
 
2012
AVONEX
$
746.1

 
68.1
%
 
$
661.6

 
67.8
%
TYSABRI
312.2

 
28.5
%
 
285.5

 
29.3
%
Other product revenues
37.5

 
3.4
%
 
28.3

 
2.9
%
Total product revenues
$
1,095.8

 
100.0
%
 
$
975.4

 
100.0
%
AVONEX
Revenues from AVONEX are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2013
 
2012
 
Change %
United States
$
491.5

 
$
400.5

 
22.7
 %
Rest of world
254.6

 
261.1

 
(2.5
)%
Total AVONEX revenues
$
746.1

 
$
661.6

 
12.8
 %
For the three months ended March 31, 2013, compared to the same period in 2012, the increase in U.S. AVONEX revenues was due to price increases announced in 2012 which became effective in 2013 and an 8% increase in unit sales volume. U.S. AVONEX unit sales volume for the prior year three months ended March 31, 2012 was negatively impacted by a decrease in commercial demand due in part to an unexpected shift in ordering patterns, the transition of pharmacy service providers for a major benefit plan in January 2012 and a recall of a limited amount of AVONEX product that demonstrated a trend in oxidation that may have led to expiry of the product earlier than stated on its label.
For the three months ended March 31, 2013, compared to the same period in 2012, the decrease in rest of world AVONEX revenues was primarily due to the timing of shipments in Brazil, a tender market, which we expect to normalize over the year, and pricing reductions resulting from austerity measures enacted in some countries, partially offset by increased unit demand primarily in Europe. The magnitude of the decrease was mitigated by the 2012 recall mentioned above. The decrease in rest of world AVONEX revenues for the three months ended March 31, 2013, compared to the same period in 2012, also reflects a decrease in gains recognized in relation to the settlement of certain cash flow hedge instruments under our foreign currency hedging program, as well as the negative impacts of foreign currency exchange rates.
Gains recognized in relation to the settlement of certain cash flow hedge instruments under our foreign currency hedging program totaled $0.8 million and $3.9 million, respectively, for the three months ended March 31, 2013, compared to the same period in 2012.

35


We expect AVONEX to continue facing increased competition in the MS marketplace in both the U.S. and rest of world. We and a number of other companies are working to develop or have commercialized additional treatments for MS, including oral and other alternative formulations that may compete with AVONEX. In addition, the continued growth of TYSABRI and the commercialization of certain of our own products, such as TECFIDERA, may negatively impact future sales of AVONEX. Increased competition also may lead to reduced unit sales of AVONEX, as well as increasing price pressures particularly in geographic markets outside the U.S.
TYSABRI
On April 2, 2013, we acquired full ownership and strategic, commercial and decision-making rights to TYSABRI from Elan. Upon the closing of the transaction, U.S. TYSABRI revenue will include 100% of net revenue. For additional information related to this transaction, please read Note 2, Subsequent Events to our condensed consolidated financial statements included within this report.
Revenues from TYSABRI are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2013
 
2012
 
Change %
United States
$
113.4