Commitments and Contingencies

Leases

We rent laboratory and office space and certain equipment under non-cancelable operating leases. These lease agreements contain various clauses for renewal at our option and, in certain cases, escalation clauses typically linked to rates of inflation. Rental expense under these leases, net of amounts recognized in relation to our exiting the Weston facility, which terminate at various dates through 2028, amounted to $56.1 million in 2013. Rent expense was $49.0 million in 2012 and $46.2 million in 2011. In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.

As of December 31, 2013, minimum rental commitments under non-cancelable leases, net of income from subleases, for each of the next five years and total thereafter were as follows:



(In millions)	2014		2015			2016			2017			2018			Thereafter			Total
Minimum lease payments (1)	$	66.8	$	64.2		$	57.0		$	54.9		$	49.8		$	384.4		$	677.1
Less: income from subleases	—		(5.6		)	(6.0		)	(6.0		)	(6.3		)	(41.5		)	(65.4		)
Net minimum lease payments	$	66.8	$	58.6		$	51.0		$	48.9		$	43.5		$	342.9		$	611.7

(1)

Includes future minimum rental commitments related to leases executed for two office buildings in Cambridge, Massachusetts, which completed construction in July and November 2013. The leases both have 15 year terms and we have options to extend the term of each lease for two additional five-year terms. Future minimum rental commitments under these leases will total approximately $340.0 million over the initial 15 year lease terms.

As a result of our decision to relocate our corporate headquarters to Cambridge, Massachusetts, we vacated part of our Weston, Massachusetts facility in the fourth quarter of 2013. We incurred a charge of $27.2 million in connection with this move. This charge represents our remaining lease obligation for the vacated portion of our Weston facility, net of sublease income expected to be received. The term of our sublease to the vacated portion of our Weston facility started in January 2014 and will continue through the remaining term of our lease agreement.

For additional information related to these transactions, please read Note 11, Property, Plant and Equipment to these consolidated financial statements.

Under certain of our lease agreements, we are contractually obligated to return leased space to its original condition upon termination of the lease agreement. At the inception of a lease with such conditions, we record an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, for each such lease, we record interest expense to accrete the asset retirement obligation liability to full value and depreciate each capitalized asset retirement obligation asset, both over the term of the associated lease agreement. Our asset retirement obligations were not significant as of December 31, 2013 or 2012.

Tax Related Obligations

As of December 31, 2013, we have approximately $99.4 million of liabilities associated with uncertain tax positions.

Other Funding Commitments

During the year ended December 31, 2013, we contributed the remaining 13.5 billion South Korean won (approximately $12.4 million) to Samsung Bioepis to complete our obligation to contribute an aggregate of approximately 49.5 billion South Korean won (approximately $45.0 million) for our 15 percent ownership interest of Samsung Bioepis. For additional information related to our relationship with Samsung Bioepis, please read Note 20, Collaborative and Other Relationships to these consolidated financial statements.

As of December 31, 2013, we have funding commitments of up to approximately $14.0 million as part of our investment in biotechnology oriented companies and venture capital funds.

As of December 31, 2013, we have several on-going clinical studies in various clinical trial stages. Our most significant clinical trial expenditures are to clinical research organizations (CROs). The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $28.2 million on our consolidated balance sheet for expenditures incurred by CROs as of December 31, 2013. We have approximately $424.1 million in cancellable future commitments based on existing CRO contracts as of December 31, 2013.

Contingent Development and Commercial Milestone Payments

Based on our development plans as of December 31, 2013, we have committed to make potential future milestone payments to third parties of up to approximately $2.0 billion as part of our various collaborations, including licensing and development programs. Payments under these agreements generally become due and payable only upon achievement of certain development, regulatory or commercial milestones. Because the achievement of these milestones had not occurred as of December 31, 2013, such contingencies have not been recorded in our financial statements.

TYSABRI Contingent Payments

On April 2, 2013, we acquired full ownership of, and strategic, commercial and decision-making rights to, TYSABRI from Elan. Under the terms of the acquisition agreement, we continued to share TYSABRI profits with Elan on an equal basis until April 30, 2013. We recorded the profit split for the month ended April 30, 2013, as cost of sales within our consolidated statements of income as we controlled TYSABRI effective April 2, 2013. Commencing May 1, 2013 and for the first twelve months thereafter, we will make contingent payments to Elan of 12% on 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. Royalty payments to Elan and other third parties are recognized as cost of sales within our consolidated statements of income.

Contingent Consideration related to Business Combinations

In connection with our purchase of the noncontrolling interests in our joint venture investments in Biogen Dompé SRL and Biogen Dompé Switzerland GmbH and our acquisitions of Stromedix, Biogen Idec International Neuroscience GmbH (BIN), Biogen Idec Hemophilia Inc. (BIH), and Fumapharm AG, we agreed to make additional payments based upon the achievement of certain milestone events. These milestones may not be achieved.

As the acquisitions of the noncontrolling interests in our joint venture investments and our acquisitions of Stromedix and BIN, formerly Panima Pharmaceuticals AG, occurred after January 1, 2009, we record contingent consideration liabilities at their fair value on the acquisition date and revalue these obligations each reporting period. For additional information related to the acquisitions of the noncontrolling interests in our joint venture investments and our acquisition of Stromedix please read Note 2, Acquisitions, to these consolidated financial statements.

In connection with our acquisition of BIH, formerly Syntonix, in January 2007, we agreed to pay up to an additional $80.0 million if certain milestone events associated with the development of BIH’s lead product, ALPROLIX are achieved. The first $40.0 million contingent payment was achieved in the first quarter of 2010. An additional $20.0 million contingent payment will occur if prior to the tenth anniversary of the closing date, the FDA grants approval of a Biologic License Application for ALPROLIX. A second $20.0 million contingent payment will occur if prior to the tenth anniversary of the closing date, a marketing authorization is granted by the EMA for ALPROLIX. For additional information related to our acquisition of BIH transactions please read Note 2, Acquisitions to these consolidated financial statements.

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 second quarter of 2013, we paid this $15.0 million contingent payment as TECFIDERA was approved in the U.S. for MS by the FDA. We are also required to make the following additional contingent payments to former shareholders of Fumapharm AG based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales of Fumapharm Products in the prior twelve month period, 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. Any portion of the payment which is tax deductible will be recorded as a reduction to goodwill. Payments are due within 60 days following the end of the quarter in which the applicable cumulative sales level has been reached. During 2013, we accrued the $25.0 million contingent payment as we reached the $1.0 billion cumulative sales level related to the Fumapharm Products.