Property, Plant and Equipment

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Accumulated depreciation on property, plant and equipment was $1,030.4 million and $941.1 million as of June 30, 2013 and December 31, 2012, respectively.

For the three and six months ended June 30, 2013, we capitalized interest costs related to construction in progress totaling approximately $1.9 million and $5.0 million, respectively, as compared to $8.6 million and $16.8 million, respectively, in the prior year comparative periods.

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. As of June 30, 2013 and December 31, 2012, cost incurred by the developer in relation to the construction of these buildings totaled approximately $131.9 million and $86.5 million, respectively. In July 2013, one of the office buildings was completed. We will assess and determine if the assets and corresponding liabilities should be derecognized during the third quarter of 2013. Upon completion of the second building, we will assess and determine if the remaining assets and corresponding liabilities should also be derecognized.

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. We expect to incur a charge between $20.0 million and $30.0 million in connection with this process. This estimate represents our remaining lease obligation for the vacated portion of our Weston facility, net of sublease income expected to be received.

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. In July 2013, the facility was approved by the FDA and EMA for the manufacture of commercial TYSABRI.

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.