Fair Value Measurements

The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:



(In millions)	As of December 31, 2014		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	716.3	$	—	$	716.3	$	—
Marketable debt securities:
Corporate debt securities	1,063.0		—		1,063.0		—
Government securities	849.8		—		849.8		—
Mortgage and other asset backed securities	198.3		—		198.3		—
Marketable equity securities	6.9		6.9		—		—
Venture capital investments	14.5		—		—		14.5
Derivative contracts	72.7		—		72.7		—
Plan assets for deferred compensation	36.9		—		36.9		—
Total	$	2,958.4	$	6.9	$	2,937.0	$	14.5
Liabilities:
Derivative contracts	$	5.4	$	—	$	5.4	$	—
Contingent consideration obligations	215.5		—		—		215.5
Total	$	220.9	$	—	$	5.4	$	215.5



(In millions)	As of December 31, 2013		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	424.7	$	—	$	424.7	$	—
Marketable debt securities:
Corporate debt securities	439.8		—		439.8		—
Government securities	674.7		—		674.7		—
Mortgage and other asset backed securities	131.4		—		131.4		—
Marketable equity securities	11.2		11.2		—		—
Venture capital investments	21.9		—		—		21.9
Derivative contracts	3.8		—		3.8		—
Plan assets for deferred compensation	22.7		—		22.7		—
Total	$	1,730.2	$	11.2	$	1,697.1	$	21.9
Liabilities:
Derivative contracts	$	23.5	$	—	$	23.5	$	—
Contingent consideration obligations	280.9		—		—		280.9
Total	$	304.4	$	—	$	23.5	$	280.9

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

Marketable Equity Securities and Venture Capital Investments

Our marketable equity securities represent investments in publicly traded equity securities. Our venture capital investments, which are all Level 3 measurements, include investments in certain venture capital funds, accounted for at fair value, that primarily invest in small privately-owned, venture-backed biotechnology companies. These venture capital investments represented approximately 0.1% and 0.2% of total assets of December 31, 2014 and 2013, respectively.

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



	As of December 31,
(In millions)	2014			2013
Fair value, beginning of year	$	21.9		$	20.3
Unrealized gains included in earnings	5.4			10.5
Unrealized losses included in earnings	(7.3		)	(6.3		)
Purchases	—			0.7
Settlements	(5.5		)	(3.3		)
Fair value, end of year	$	14.5		$	21.9

Debt Instruments

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



	As of December 31,
(In millions)	2014		2013
Notes payable to Fumedica	$	12.6	$	17.5
6.875% Senior Notes due March 1, 2018	634.6		647.9
Total	$	647.2	$	665.4

The fair value of our notes payable to Fumedica was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair value of our 6.875% Senior Notes was determined through market, observable, and corroborated sources. For additional information related to our debt instruments, please read Note 12, Indebtedness to these consolidated financial statements.

Contingent Consideration Obligations

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



	As of December 31,
(In millions)	2014			2013
Fair value, beginning of year	$	280.9		$	293.9
Additions	—			—
Changes in fair value	(38.9		)	(0.5		)
Payments	(26.5		)	(12.5		)
Fair value, end of year	$	215.5		$	280.9

As of December 31, 2014 and 2013, approximately $200.0 million and $251.9 million, respectively, of the fair value of our total contingent consideration obligations were reflected as components of other long-term liabilities within our consolidated balance sheets with the remaining balances reflected as a component of accrued expenses and other. For additional information related to the changes in fair value, please read Note 7, Intangible Assets and Goodwill to these consolidated financial statements.

In connection with our acquisition of Stromedix in March 2012, we recorded a contingent consideration obligation of $122.2 million. As of December 31, 2014 and 2013, the fair value of this contingent consideration obligation was $130.5 million and $140.7 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $419.0 million, discounted using a rate of 3.0%, which is a measure of the credit risk associated with settling the liability. For 2014 compared to 2013, the net decrease in the fair value of this obligation was primarily due changes in the probability and expected timing related to the achievement of certain remaining developmental milestones and in the discount rate.

Upon completion of our purchase of the noncontrolling interest in our joint venture investments in Biogen Dompé SRL and Biogen Dompé Switzerland GmbH in September 2011, we recorded a contingent consideration obligation of $38.8 million. As of December 31, 2014 and 2013, the fair value of this contingent consideration obligation was $15.5 million and $31.6 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $22.0 million, discounted using a rate of 2.0%, which is a measure of the credit risk associated with settling the liability. For 2014 compared to 2013, the net decrease in the fair value of this obligation was primarily due to payments of $16.5 million sales-based and regulatory approval milestones.

In connection with our acquisition of Biogen Idec International Neuroscience GmbH (BIN), formerly Panima Pharmaceuticals AG (Panima), in December 2010, we recorded a contingent consideration obligation of $81.2 million. As of December 31, 2014 and 2013, the fair value of this contingent consideration obligation was $69.5 million and $108.6 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $362.5 million, discounted using a rate of 3.6%, which is a measure of the credit risk associated with settling the liability. For 2014 compared to 2013, the net decrease in the fair value of this obligation was primarily due to $10.0 million of payments of development milestones, changes in the probability and expected timing related to the achievement of certain remaining developmental milestones and in the discount rate.

Acquired IPR&D

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

There were no changes in valuation techniques or transfers between fair value measurement levels during the years ended December 31, 2014 and 2013. During the third quarter 2014, we updated the probabilities of success related to the early stage programs acquired through our recent acquisitions. We have adjusted the value of our contingent consideration liabilities to reflect these changes. For additional information, please read Note 7, Intangible Assets and Goodwill to these consolidated financial statements. For additional information related to the valuation techniques and inputs utilized in valuation of our financial assets and liabilities, please read Note 1, Summary of Significant Accounting Policies to these consolidated financial statements.