Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

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



		As of March 31, 2017							As of December 31, 2016
(In millions)	Estimated Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Out-licensed patents	13-23 years	$	543.3	$	(526.6	)	$	16.7	$	543.3	$	(523.6	)	$	19.7
Developed technology	15-23 years	3,005.3		(2,648.1		)	357.2		3,005.3		(2,634.3		)	371.0
In-process research and development	Indefinite until commercialization	653.7		—			653.7		648.0		—			648.0
Trademarks and tradenames	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	4-18 years	3,887.1		(874.8		)	3,012.3		3,481.7		(776.1		)	2,705.6
Total intangible assets		$	8,153.4	$	(4,049.5	)	$	4,103.9	$	7,742.3	$	(3,934.0	)	$	3,808.3

For the three months ended March 31, 2017, amortization of acquired intangible assets totaled $448.5 million, as compared to $88.8 million in the prior year comparative period. Amortization of acquired intangible assets for the three months ended March 31, 2017, includes $353.6 million of impairment and amortization charges related to our U.S. and rest of world licenses to Forward Pharma's intellectual property related to TECFIDERA, as further discussed below. In-process research and development balances include adjustments related to foreign currency exchange rate fluctuations.

Balances in the table above as of March 31, 2017 also reflect the elimination of certain amounts transferred to Bioverativ in connection with the completion of the spin-off of our hemophilia business. For additional information relating to the spin-off of our hemophilia business, please read Note 2, Hemophilia Spin-Off, to these condensed consolidated financial statements.

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 March 31, 2017 was $349.8 million.

Acquired and In-licensed Rights and Patents

Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from Elan Corporation plc. The net book value of this asset as of March 31, 2017 was $2,418.6 million.

In January 2017 we entered into a settlement and license agreement among Biogen Swiss Manufacturing GmbH, Biogen International Holding Ltd., Forward Pharma A/S (Forward Pharma) and certain related parties, which was effective as of February 1, 2017. Pursuant to the agreement, we obtained U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA. In exchange, we agreed to pay Forward Pharma $1.25 billion in cash. During the fourth quarter of 2016, we recognized a pre-tax charge of $454.8 million related to this agreement, representing the fair value of our license to Forward Pharma’s intellectual property for the period April 2014, when we started selling TECFIDERA, through December 31, 2016. For additional information related to this agreement, please read Note 21, Commitments and Contingencies, to our consolidated financial statements included in our 2016 Form 10-K.

We paid the $1.25 billion in February 2017 and recognized an intangible asset of $795.2 million. The asset represented the fair value of the U.S. and rest of world licenses to Forward Pharma’s intellectual property related to TECFIDERA revenues for the period January 2017, the month in which we entered into the agreement, through December 2020, the last month before royalty payments could first commence pursuant to the agreement.

We have two intellectual property disputes with Forward Pharma, one in the U.S. and one in the E.U., concerning intellectual property related to TECFIDERA. On March 31, 2017, the U.S. intellectual property dispute was decided in our favor. Forward Pharma has announced that it intends to appeal this decision. For additional information related to these disputes, please read Note 18, Litigation, to these condensed consolidated financial statements.

As we prevailed in the U.S. proceeding in March 2017, we evaluated the recoverability of the U.S. asset acquired from Forward Pharma and recorded an impairment charge to adjust the carrying value of the acquired U.S. asset to fair value reflecting the impact of the developments in the U.S. legal dispute. We also continued to amortize the remaining net book value of the U.S. and rest of world intangible assets in our condensed consolidated statements of income utilizing an economic consumption model.

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 we determine events or changes in circumstances would significantly affect the anticipated lifetime revenues of either product. Our most recent long range planning cycle was completed in the third quarter of 2016.

Based upon the above, the estimated future amortization of acquired intangible assets is expected to be as follows:



(In millions)	As of March 31, 2017
2017 (remaining nine months)	$	346.5
2018	425.5
2019	412.4
2020	378.5
2021	239.2
2022	216.7

Goodwill

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



(In millions)	As of March 31, 2017
Goodwill, beginning of period	$	3,669.3
Elimination of goodwill allocated to our hemophilia business	(314.1		)
Increase to goodwill	254.7
Other	1.8
Goodwill, end of period	$	3,611.7

The elimination of goodwill represents an allocation based upon the relative enterprise fair value of the hemophilia business as of the distribution date. For additional information relating to the spin-off of our hemophilia business, please read Note 2, Hemophilia Spin-Off, to these condensed consolidated financial statements.

The increase in goodwill during the three months ended March 31, 2017 was related to $300.0 million in contingent milestones achieved (exclusive of $45.3 million in tax benefits) and payable to the former shareholders of Fumapharm AG or holders of their rights. Other includes changes in foreign currency exchange rates. For additional information related to future contingent payments to the former shareholders of Fumapharm AG or holders of their rights, please read Note 21, Commitments and Contingencies, to our consolidated financial statements included in our 2016 Form 10-K.

As of March 31, 2017, 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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