Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:



		As of June 30, 2014							As of December 31, 2013
(In millions)	Estimated Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Out-licensed patents	13-23 years	$	543.3	$	(465.9	)	$	77.4	$	578.0	$	(450.8	)	$	127.2
Developed technology	15-23 years	3,005.3		(2,283.7		)	721.6		3,005.3		(2,165.4		)	839.9
In-process research and development	Indefinite until commercialization	330.9		—			330.9		327.4		—			327.4
Trademarks and tradenames	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	6-17 years	3,271.5		(216.0		)	3,055.5		3,240.0		(123.8		)	3,116.2
Total intangible assets		$	7,215.0	$	(2,965.6	)	$	4,249.4	$	7,214.7	$	(2,740.0	)	$	4,474.7

For the three and six months ended June 30, 2014, amortization of acquired intangible assets totaled $116.8 million and $260.1 million, respectively, as compared to $82.2 million and $133.5 million, respectively, in the prior year comparative periods. For the three and six months ended June 30, 2014, compared to the same periods in 2013, the change in amortization of acquired intangible assets was primarily driven by our acquisition of the TYSABRI rights from Elan Pharma International Ltd. (Elan) and an increase in the amount of amortization recorded in relation to our AVONEX intangible asset.

Out-licensed Patents

Out-licensed patents to third-parties primarily relate to patents acquired in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. During the six months ended June 30, 2014, we recorded a charge of $34.7 million related to the impairment of one of our out-licensed patents to reflect a change in its estimated fair value, due to a change in the underlying competitive market for that product, which occurred during the first quarter of 2014. The charge is included in amortization of acquired intangibles. The fair value of the intangible asset was based on discounted cash flow calculated using Level 3 fair value measurements and inputs including estimated revenues.

Developed Technology

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. The net book value of this asset as of June 30, 2014 was $711.9 million. We amortize this intangible asset using the economic consumption method based on actual and expected revenues generated from the sales of our AVONEX product.

Acquired and In-licensed Rights and Patents

Acquired and in-licensed rights and patents primarily relate to our acquisition of the TYSABRI rights from Elan. The net intangible asset capitalized related to this acquisition was $3,178.3 million. In the second quarter of 2013, we began amortizing this intangible asset over the estimated useful life using an economic consumption method based on actual and expected revenues generated from the sales of our TYSABRI product. The net book value of this asset as of June 30, 2014 was $2,995.1 million. For a more detailed description of this transaction, please read Note 2, Acquisitions to our consolidated financial statements included within our 2013 Form 10-K.

The increase in acquired and in-licensed rights and patents during the six months ended June 30, 2014 was primarily related to the $20.0 million contingent payment due to the former owners of Syntonix Pharmaceuticals, Inc., which became payable upon the approval of ALPROLIX in the U.S. by the U.S. Food and Drug Administration (FDA) in the first quarter of 2014. We have recorded an additional $7.8 million of acquired in-licensed rights and patents related to this consideration, along with a corresponding deferred tax liability of the same amount.

Estimated Future Amortization of Intangible Assets

Our amortization expense is based on the economic consumption of the intangible assets. Our most significant intangible assets are related to our AVONEX and TYSABRI products. Annually, during our long-range planning cycle, we perform an analysis of anticipated lifetime revenues of AVONEX and TYSABRI. This analysis is updated whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of either product.

Our most recent long range planning cycle was updated in the third quarter of 2013, and included the impact of our acquisition of TYSABRI rights from Elan and a decrease in the expected future product revenues of AVONEX, resulting in an increase in amortization expense as compared to prior quarters. The results of our analysis were impacted by changes in the estimated impact of TECFIDERA, as well as other existing and potential oral and alternative MS formulations, including PLEGRIDY, that may compete with AVONEX and TYSABRI. Based upon this recent analysis, the estimated future amortization for acquired intangible assets for the balance of 2014 and the next five years is expected to be as follows:



(In millions)	As of June 30, 2014
2014 (remaining six months)	$	217.2
2015	333.4
2016	318.8
2017	322.0
2018	323.1
2019	302.9
Total	$	1,817.4

Goodwill

The following table provides a roll forward of the changes in our goodwill balance:



(In millions)	As of June 30, 2014		As of December 31, 2013
Goodwill, beginning of period	$	1,232.9	$	1,201.3
Increase to goodwill	131.9		35.7
Other	—		(4.1		)
Goodwill, end of period	$	1,364.8	$	1,232.9

The increase in goodwill during the six months ended June 30, 2014 was related to the accrual of a $150.0 million contingent payment (exclusive of an $18.1 million tax benefit) to be made to former shareholders of Fumapharm AG and holders of their rights. During the quarter ended June 30, 2014, we reached the $2.0 billion cumulative sales level related to the Fumapharm Products. For additional information related to future contingent payments, please read Note 19, Commitments and Contingencies to these condensed consolidated financial statements.

As of June 30, 2014, we had no accumulated impairment losses related to goodwill.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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