Intangible Assets and Goodwill

Intangible Assets

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



		As of December 31, 2018							As of December 31, 2017
(In millions)	Estimated Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Out-licensed patents	13-23 years	$	543.3	$	(542.3	)	$	1.0	$	543.3	$	(535.6	)	$	7.7
Developed technology	15-23 years	3,005.3		(2,734.8		)	270.5		3,005.3		(2,689.0		)	316.3
In-process research and development	Indefinite until commercialization	476.0		—			476.0		680.6		—			680.6
Trademarks and trade names	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	4-18 years	3,638.7		(1,330.2		)	2,308.5		3,971.4		(1,160.4		)	2,811.0
Total intangible assets		$	7,727.3	$	(4,607.3	)	$	3,120.0	$	8,264.6	$	(4,385.0	)	$	3,879.6

Amortization and impairments of acquired intangible assets totaled $747.3 million, $814.7 million and $385.6 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Amortization and impairments of acquired intangible assets for the year ended December 31, 2018, includes the impact of a $176.8 million impairment charge related to our intangible asset associated with our U.S. license to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, as discussed below. Amortization and impairment of acquired intangible assets for 2018 also reflects the impact of impairment charges related to certain IPR&D assets associated with our vixotrigine (BIIB074) program totaling $189.3 million, also discussed below.

Amortization and impairments of acquired intangible assets for the year ended December 31, 2017, includes the impact of a $328.2 million impairment charge related to our intangible assets associated with our U.S. license to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA. Amortization and impairment of acquired intangible assets for 2017 also includes a $31.2 million impairment charge related to our acquired and in-licensed rights and patents intangible asset associated with ZINBRYTA after the initiation of an European Medicines Agency (EMA) review (referred to as an Article 20 Procedure) of ZINBRYTA following the report of a case of fatal fulminant liver failure, as well as four cases of serious liver injury.

Amortization and impairments of acquired intangible assets for the year ended December 31, 2016, included impairment charges of $12.2 million related to two of our IPR&D intangible assets resulting from the termination of our collaboration agreements with Rodin Therapeutics, Inc. and Ataxion Inc.

Amortization of acquired intangible assets, excluding impairment charges, totaled $381.2 million, $455.3 million and $373.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

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, 2018, was $265.0 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, 2018 and 2017, relates to the various IPR&D programs we acquired in connection with our acquisitions of Convergence Pharmaceuticals (Convergence), Stromedix Inc. (Stromedix) and Biogen International Neuroscience GmbH (BIN) in 2015, 2012 and 2010, respectively. IPR&D balances include adjustments related to foreign currency exchange rate fluctuations.

An analysis of anticipated lifetime revenues and anticipated development costs is performed annually during our long-range planning cycle, which was most recently updated in the third quarter of 2018. 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.

Vixotrigine

During the third quarter of 2018 we completed a Phase 2b study of vixotrigine for the treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints; therefore, we discontinued development of vixotrigine for the treatment of PLSR and we recognized an impairment charge of approximately $60.0 million during the third quarter of 2018 to reduce the fair value of the related IPR&D intangible asset to zero. In addition, we delayed the initiation of the Phase 3 studies of vixotrigine for the treatment of TGN as we awaited the outcome of ongoing interactions with the FDA regarding the design of the Phase 3 studies, a more detailed review of the data from the Phase 2b study of vixotrigine for the treatment of PLSR and insights from the Phase 2 study of vixotrigine for the treatment of small fiber neuropathy. We reassessed the fair value of our vixotrigine program for the treatment of TGN using reduced expected lifetime revenues, higher expected clinical development costs and lower cumulative probabilities of success, and, as a result of that assessment, we recognized an impairment charge of $129.3 million during the third quarter of 2018 to reduce the fair value of the IPR&D intangible asset associated with our vixotrigine program for the treatment of TGN to $41.8 million.

In late December 2018 we received feedback from the FDA regarding the design of the Phase 3 vixotrigine program for the treatment of TGN. Following this feedback, we are now planning to initiate the Phase 3 vixotrigine program for the treatment of TGN.

The IPR&D impairment charges that resulted from the developments in our vixotrigine program for the treatment of TGN, as discussed above, were included in amortization and impairment of acquired intangible assets. The fair value of the intangible assets were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenues, costs and probabilities of success.

We may recognize additional impairment charges in the future depending upon our ability to advance vixotrigine for the treatment of TGN or other indications.

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. Acquired and in-licensed rights and patents also includes 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, and other amounts related to our other marketed products and other programs acquired through business combinations. The net book value of the TYSABRI asset as of December 31, 2018, was $2,027.1 million.

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, of which $795.2 million was recorded within intangible assets in the first quarter of 2017.

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. We evaluated the recoverability of the U.S. asset acquired from Forward Pharma and recorded a $328.2 million 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 and continued to amortize the remaining net book value of the U.S. intangible asset in our consolidated statements of income utilizing an economic consumption model. The U.S. Court of Appeals for the Federal Circuit upheld the U.S. Patent and Trademark Office’s (USPTO) March 2017 ruling and in January 2019 denied Forward Pharma's petition for rehearing. We evaluated the recoverability of the U.S. asset based upon these most recent developments recorded a $176.8 million impairment charge in the fourth quarter of 2018 to reduce the remaining net book value of the U.S. asset to zero.

In March 2018 the European Patent Office (EPO) revoked Forward Pharma’s European Patent No. 2 801 355. Forward Pharma has filed an appeal to the Technical Board of Appeal of the EPO and the appeal is pending. Based upon our assessment of this ruling, we continue to amortize the remaining net book value of the rest of world intangible asset in our consolidated statements of income utilizing an economic consumption model. The remaining net book value of the TECFIDERA intangible asset as of December 31, 2018, was $71.0 million.

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 TYSABRI, AVONEX, SPINRAZA and TECFIDERA products and other programs acquired through business combinations. Annually, during our long-range planning cycle, we perform an analysis of the anticipated lifetime revenues of our TYSABRI, AVONEX, SPINRAZA and TECFIDERA products. This analysis is also updated whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of any of these products. Impairments are recorded in the period in which they are incurred.

Our most recent long-range planning cycle was completed in the third quarter of 2018. Based upon this most recent 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, 2018
2019	$	270.0
2020	290.0
2021	250.0
2022	250.0
2023	230.0

Goodwill

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



	As of December 31,
(In millions)	2018			2017
Goodwill, beginning of year	$	4,632.5		$	3,669.3
Elimination of goodwill allocated to our hemophilia business	—			(314.1		)
Increase to goodwill	1,080.1			1,267.3
Other	(6.2		)	10.0
Goodwill, end of year	$	5,706.4		$	4,632.5

The elimination of goodwill represents an allocation based upon the relative enterprise fair value of our hemophilia business as of February 1, 2017. 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 to goodwill during 2018 and 2017 was related to $1.2 billion and $1.5 billion in contingent milestones achieved (exclusive of $119.9 million and $232.7 million in tax benefits), respectively, and payable to the former shareholders of Fumapharm AG and holders of their rights. In the fourth quarter of 2018 we achieved the $20.0 billion cumulative sales level threshold and accrued our last $300.0 million contingent payment related to FUMADERM and TECFIDERA (together, the Fumapharm Products), which will be paid in the first quarter of 2019. For additional information on contingent payments to the former shareholders of Fumapharm AG and holders of their rights, please read Note 22, Commitments and Contingencies, to these consolidated financial statements.

Other includes changes related to foreign currency exchange rate fluctuations. As of December 31, 2018, we had no accumulated impairment losses related to goodwill.