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, 2015		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	909.5	$	—	$	909.5	$	—
Marketable debt securities:
Corporate debt securities	1,510.9		—		1,510.9		—
Government securities	2,875.9		—		2,875.9		—
Mortgage and other asset backed securities	494.1		—		494.1		—
Marketable equity securities	37.5		37.5		—		—
Derivative contracts	27.2		—		27.2		—
Plan assets for deferred compensation	40.1		—		40.1		—
Total	$	5,895.2	$	37.5	$	5,857.7	$	—
Liabilities:
Derivative contracts	$	14.7	$	—	$	14.7	$	—
Contingent consideration obligations	506.0		—		—		506.0
Total	$	520.7	$	—	$	14.7	$	506.0



(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		—		—
Derivative contracts	72.7		—		72.7		—
Plan assets for deferred compensation	36.9		—		36.9		—
Total	$	2,943.9	$	6.9	$	2,937.0	$	—
Liabilities:
Derivative contracts	$	5.4	$	—	$	5.4	$	—
Contingent consideration obligations	215.5		—		—		215.5
Total	$	220.9	$	—	$	5.4	$	215.5

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.

Debt Instruments

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



	As of December 31,
(In millions)	2015		2014
Notes payable to Fumedica	$	9.4	$	12.6
6.875% Senior Notes due March 1, 2018	602.6		634.6
2.900% Senior Notes due September 15, 2020	1,497.5		—
3.625% Senior Notes due September 15, 2022	1,014.2		—
4.050% Senior Notes due September 15, 2025	1,764.6		—
5.200% Senior Notes due September 15, 2045	1,757.6		—
Total	$	6,645.9	$	647.2

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 values of each of our series of Senior Notes were determined through market, observable, and corroborated sources. For additional information related to our debt instruments, please read Note 11, 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)	2015			2014
Fair value, beginning of year	$	215.5		$	280.9
Additions	274.5			—
Changes in fair value	30.5			(38.9		)
Payments	(14.5		)	(26.5		)
Fair value, end of year	$	506.0		$	215.5

As of December 31, 2015 and 2014, approximately $301.3 million and $200.0 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and other.

There were no changes in valuation techniques or transfers between fair value measurement levels during the years ended December 31, 2015 and 2014. During the third quarter 2014, we updated the probabilities of success related to the early stage programs acquired through our recent acquisitions. We adjusted the value of our contingent consideration liabilities to reflect these changes. The change in probability of success, combined with a delay in one of the projects, resulted in a net gain of $49.4 million during 2014, which was recorded in (gain) loss on fair value remeasurement of contingent consideration and reduced the fair value of our contingent consideration obligations. The fair values of the intangible assets and contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenues and probabilities of success. 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.

In connection with our acquisition of Convergence in February 2015, we recorded a liability of $274.5 million, representing the fair value of the contingent consideration. This valuation was based on probability weighted net cash outflow projections of $450.0 million, discounted using a rate of 2%, which was the estimated cost of debt financing for market participants. This liability reflects the revised estimate from the date of acquisition for our initial clinical development plans, resulting probabilities of success and the timing of certain milestone payments. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements. As of December 31, 2015, the fair value of this contingent consideration obligation was $297.5 million, discounted using a rate of 3%, and approximately $197.2 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within a year.

In connection with our acquisition of Stromedix in March 2012, we recorded a contingent consideration obligation of $122.2 million. As of December 31, 2015 and 2014, the fair value of this contingent consideration obligation was $131.5 million and $130.5 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 2%, which is a measure of the credit risk associated with settling the liability. For 2015 compared to 2014, the net increase in the fair value of this obligation was primarily due to changes in the discount rate, partially offset by changes in the expected timing related to the achievement of certain remaining developmental milestones.

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, 2015 and 2014, the fair value of this contingent consideration obligation was $0.0 million and $15.5 million, respectively. For 2015 compared to 2014, the net decrease in the fair value of this obligation was primarily due to payments of $14.5 million of sales-based milestones. Our obligations under this agreement were completed as of December 31, 2015.

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, 2015 and 2014, the fair value of this contingent consideration obligation was $77.0 million and $69.5 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $365.0 million, discounted using a rate of 3%, which is a measure of the credit risk associated with settling the liability. For 2015 compared to 2014, the net increase in the fair value of this obligation was primarily due to 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 Convergence, we also allocated $424.6 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. This estimate was also adjusted from our preliminary estimate as of the date of acquisition to reflect revised estimates to our initial clinical development plans, resulting probabilities of success and the timing of certain milestone payments. These assets will be tested for impairment annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.