Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2015

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, 2015							As of December 31, 2014
(In millions)	Estimated Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Out-licensed patents	13-23 years	$	543.3	$	(493.9	)	$	49.4	$	543.3	$	(481.7	)	$	61.6
Developed technology	15-23 years	3,005.3		(2,492.1		)	513.2		3,005.3		(2,396.8		)	608.5
In-process research and development	Indefinite until commercialization	752.0		—			752.0		314.1		—			314.1
Trademarks and tradenames	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	3-17 years	3,296.7		(380.5		)	2,916.2		3,280.4		(300.1		)	2,980.3
Total intangible assets		$	7,661.3	$	(3,366.5	)	$	4,294.8	$	7,207.1	$	(3,178.6	)	$	4,028.5

For the three and six months ended June 30, 2015, amortization of acquired intangible assets totaled $92.0 million and $187.9 million, respectively, as compared to $116.8 million and $260.1 million, respectively, in the prior year comparative periods. For the three and six months ended June 30, 2015, compared to the same periods in 2014, the decrease in amortization of acquired intangible assets was primarily driven by a decrease in AVONEX and TYSABRI revenues during the comparative periods and higher expected lifetime revenues of TYSABRI as discussed below. Amortization of acquired intangible assets during the six months ended June 30, 2014 also includes a $34.7 million impairment charge related to one of our out-licensed patents.

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, 2015 was $504.3 million.

In-process Research and Development (IPR&D)

IPR&D represents the fair value assigned to research and development assets that we acquire that have not reached technological feasibility at the date of acquisition. Upon commercialization, we will determine the estimated useful life. In connection with our acquisition of Convergence in February 2015, we acquired IPR&D programs with an estimated fair value of $424.6 million. This amount will be adjusted for foreign exchange rate fluctuations. For a more detailed description of this transaction, please read Note 2, Acquisitions to these condensed consolidated financial statements.

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 Corporation plc (Elan). Elan was acquired by Perrigo Company plc (Perrigo) in December 2013. The net book value of this asset as of June 30, 2015 was $2,851.9 million.

Estimated Future Amortization of Intangible Assets

Our amortization expense is based on the economic consumption of 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 also 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 2014. Our analysis included an increase in the expected future product revenues of TYSABRI, resulting in a decrease in the rate of amortization expense as compared to prior quarters. Our analysis also included a decrease in the expected future product revenues of AVONEX. The results of our TYSABRI and AVONEX analyses 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 TYSABRI and AVONEX. Based upon this recent analysis, the estimated future amortization for acquired intangible assets is expected to be as follows:



(In millions)	As of June 30, 2015
2015 (remaining six months)	$	185.5
2016	312.5
2017	285.8
2018	281.6
2019	270.6
2020	263.8
Total	$	1,599.8

Goodwill

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



(In millions)
Balance, as of December 31, 2014	$	1,760.2
Increase to goodwill	390.0
Other	4.1
Balance, as of June 30, 2015	$	2,154.3

The increase in goodwill during the six months ended June 30, 2015 was related to a $300.0 million contingent payment achieved (exclusive of a $38.3 million tax benefit) and to be paid to former shareholders of Fumapharm AG or holders of their rights and our acquisition of Convergence. Other includes changes related to foreign exchange. For additional information related to future contingent payments to the former shareholders of Fumapharm AG or holders of their rights, please read Note 18, Commitments and Contingencies to these condensed consolidated financial statements. For additional information related to our acquisition of Convergence, please read Note 2, Acquisitions to these condensed consolidated financial statements.

As of June 30, 2015, 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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