Intangible Assets and Goodwill

Intangible Assets

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



		As of December 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	$	(535.6	)	$	7.7	$	543.3	$	(523.6	)	$	19.7
Developed technology	15-23 years	3,005.3		(2,689.0		)	316.3		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 trade names	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	4-18 years	3,971.4		(1,160.4		)	2,811.0		3,481.7		(776.1		)	2,705.6
Total intangible assets		$	8,264.6	$	(4,385.0	)	$	3,879.6	$	7,742.3	$	(3,934.0	)	$	3,808.3

Amortization of acquired intangible assets totaled $814.7 million, $385.6 million and $382.6 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Amortization of acquired intangible assets for the year ended December 31, 2017, includes $444.2 million of amortization and impairment charges related to our U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, as discussed below. Amortization of acquired intangible assets for 2017 also reflects a $31.2 million impairment charge related to the Article 20 Procedure of ZINBRYTA in the E.U. For additional information on the Article 20 Procedure of ZINBRYTA and resulting impairment of ZINBRYTA related assets, please read Note 20, Collaborative and Other Relationships, to these consolidated financial statements.

Balances in the table above as of December 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 on the spin-off of our hemophilia business, please read Note 3, Hemophilia Spin-Off, to these consolidated financial statements. In-process research and development balances include adjustments related to foreign currency exchange rate fluctuations.

Out-licensed Patents

Out-licensed patents to third-parties primarily relate to patents acquired in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003.

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 December 31, 2017 was $309.5 million.

IPR&D

IPR&D represents the fair value assigned to research and development assets that we acquired and had not reached technological feasibility at the date of acquisition. Upon commercialization, we will determine the estimated useful life and amortize these amounts based upon an economic consumption method. The carrying value associated with our IPR&D assets as of December 31, 2017 and 2016 relates to the various IPR&D programs we acquired in connection with our acquisitions of Convergence, Stromedix Inc. (Stromedix) and Biogen International Neuroscience GmbH (BIN) in 2015, 2012 and 2010, respectively. These amounts have and will be adjusted for foreign exchange rate fluctuations.

An analysis of anticipated lifetime revenues and anticipated development costs is performed annually during our long-range planning cycle, which was updated in the third quarter of 2017. This analysis is based upon certain assumptions that we evaluate on a periodic basis, including anticipated future product sales, the expected impact of changes in the amount of development costs and the probabilities of our programs succeeding, the introduction of new products by our competitors and changes in our commercial and pipeline product candidates.

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. The net book value of this asset as of December 31, 2017 was $2,236.2 million.

The net change in acquired and in-licensed rights and patents during 2017 reflects $90.0 million in total milestone payments paid to Ionis Pharmaceuticals, Inc. (Ionis) for the approvals of SPINRAZA in the E.U. and Japan in June 2017 and July 2017, respectively, the $25.0 million milestone payment paid to Samsung Bioepis, for the approval of IMRALDI, an adalimumab biosimilar referencing HUMIRA, in the E.U. in August 2017, and the net carrying value recognized in relation to our acquisition of TECFIDERA license rights, as described below. These net increases were in part offset by amortization and the $31.2 million impairment charge related to the Article 20 Procedure of ZINBRYTA.

For additional information on our relationships with Ionis and Samsung Bioepis and the European Commission (EC) approved restrictions on the use of ZINBRYTA, please read Note 20, Collaborative and Other Relationships, to these consolidated financial statements.

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 this 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 paid 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 and in the first quarter of 2017 we recognized an intangible asset of $795.2 million related to this agreement. The pre-tax charge recognized in the fourth quarter of 2016 represented 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. The intangible 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 appealed to the U.S. Court of Appeals for the Federal Circuit and the appeal is pending. We evaluated the recoverability of the U.S. asset acquired from Forward Pharma and recorded an impairment charge in the first quarter of 2017 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. In January 2018 the European Patent Office (EPO) announced its decision revoking Forward Pharma’s European Patent No. 2 801 355. Forward Pharma has stated that it expects to file an appeal to the Technical Board of Appeal of the EPO. Based upon our assessment of these rulings, we continue to amortize the remaining net book value of the U.S. and rest of world intangible assets in our consolidated statements of income utilizing an economic consumption model.

For additional information on these disputes, please read Note 21, Litigation, to these consolidated financial statements.

Estimated Future Amortization of Intangible Assets

Our amortization expense is based on the economic consumption and impairment 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 events or changes in circumstances would significantly affect the anticipated lifetime revenues of any of these products.

Our most recent long-range planning cycle was completed in the third quarter of 2017. Based upon this analysis, the estimated future amortization of acquired intangible assets for the next five years is expected to be as follows:



(In millions)	As of December 31, 2017
2018	$	423.5
2019	401.8
2020	381.6
2021	254.3
2022	242.3

Goodwill

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



	As of December 31,
(In millions)	2017			2016
Goodwill, beginning of year	$	3,669.3		$	2,663.8
Elimination of goodwill allocated to our hemophilia business	(314.1		)	—
Increase to goodwill	1,267.3			1,026.9
Other	10.0			(21.4		)
Goodwill, end of year	$	4,632.5		$	3,669.3

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 on the spin-off of our hemophilia business, please read Note 3, Hemophilia Spin-Off, to these consolidated financial statements.

The increase in goodwill during 2017 and 2016 was related to $1.5 billion and $1.2 billion in contingent milestones achieved (exclusive of $232.7 million and $173.1 million in tax benefits), respectively, and payable to the former shareholders of Fumapharm AG or holders of their rights.

Other includes changes related to foreign currency exchange rate fluctuations. As of December 31, 2017, we had no accumulated impairment losses related to goodwill.

For additional information on future contingent payments to the former shareholders of Fumapharm AG or holders of their rights, please read Note 22, Commitments and Contingencies, to these consolidated financial statements.