Intangible Assets and Goodwill

Intangible Assets

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



		As of September 30, 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	$	(532.7	)	$	10.6	$	543.3	$	(523.6	)	$	19.7
Developed technology	15-23 years	3,005.3		(2,675.8		)	329.5		3,005.3		(2,634.3		)	371.0
In-process research and development	Indefinite until commercialization	680.6		—			680.6		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	4,002.6		(1,067.9		)	2,934.7		3,481.7		(776.1		)	2,705.6
Total intangible assets		$	8,295.8	$	(4,276.4	)	$	4,019.4	$	7,742.3	$	(3,934.0	)	$	3,808.3

Balances in the table above as of September 30, 2017, 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 3, Hemophilia Spin-Off, to these condensed consolidated financial statements. In-process research and development balances include adjustments related to foreign currency exchange rate fluctuations.

For the three and nine months ended September 30, 2017, amortization of acquired intangible assets totaled $108.9 million and $674.9 million, respectively, as compared to $99.7 million and $281.4 million, respectively, in the prior year comparative periods. Amortization of acquired intangible assets for the three and nine months ended September 30, 2017, includes $30.4 million and $413.4 million, respectively, of amortization and impairment charges related to our U.S. and rest of world licenses to Forward Pharma A/S' (Forward Pharma) intellectual property related to TECFIDERA, as further discussed below.

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 September 30, 2017, was $322.5 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 September 30, 2017, was $2,293.9 million. The increase in acquired and in-licensed rights and patents during the nine months ended September 30, 2017, reflects the $50.0 million and $40.0 million milestone payments due to Ionis Pharmaceuticals, Inc., which became payable upon the approval of SPINRAZA for the treatment of SMA in the E.U. and Japan, respectively, the $25.0 million milestone payment due to Samsung Bioepis, which became payable upon the approval of IMRALDI, an adalimumab biosimilar referencing HUMIRA, in the E.U. and net amounts related to our TECFIDERA license rights, as described below.

TECFIDERA License Rights

In January 2017 we entered into a settlement and license agreement among Biogen Swiss Manufacturing GmbH, Biogen International Holding Ltd., 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 this agreement, through December 2020, the last month before royalty payments could first commence pursuant to this 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. In March 2017 the U.S. intellectual property dispute was decided in our favor. Forward Pharma has appealed to the U.S. Court of Appeals for the Federal Circuit and the appeal is pending. For additional information related to these disputes, please read Note 19, 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 continue 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 TECFIDERA, AVONEX and TYSABRI products. Annually, during our long-range planning cycle, we perform an analysis of anticipated lifetime revenues of TECFIDERA, 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 2017.

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



(In millions)	As of September 30, 2017
2017 (remaining three months)	$	106.8
2018	421.3
2019	404.0
2020	389.6
2021	256.6
2022	244.7

Goodwill

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



(In millions)	As of September 30, 2017
Goodwill, beginning of period	$	3,669.3
Elimination of goodwill allocated to our hemophilia business	(314.1		)
Increase to goodwill	762.4
Other	9.9
Goodwill, end of period	$	4,127.5

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 3, Hemophilia Spin-Off, to these condensed consolidated financial statements.

The increase in goodwill during the nine months ended September 30, 2017, was related to $900.0 million in contingent milestones achieved (exclusive of $137.6 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 September 30, 2017, we had no accumulated impairment losses related to goodwill.