UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-19311

BIOGEN INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0112644
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

225 Binney Street, Cambridge, MA 02142

(617) 679-2000

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0005 par value	BIIB	The	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files):    Yes  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

The number of shares of the issuer’s Common Stock, $0.0005 par value, outstanding as of July 19, 2019, was 184,447,218 shares.

BIOGEN INC.

FORM 10-Q — Quarterly Report

For the Quarterly Period Ended June 30, 2019

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Income — For the Three and Six Months Ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Comprehensive Income — For the Three and Six Months Ended June 30, 2019 and 2018	6
	Condensed Consolidated Balance Sheets — As of June 30, 2019 and December 31, 2018	7
	Condensed Consolidated Statements of Cash Flows — For the Six Months Ended June 30, 2019 and 2018	8
	Condensed Consolidated Statements of Equity — For the Three and Six Months Ended June 30, 2019 and 2018	9
	Notes to Condensed Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	74
Item 4.	Controls and Procedures	76
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	92
Item 6.	Exhibits	92
Signatures		94

2

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are being made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 (the Act) with the intention of obtaining the benefits of the “Safe Harbor” provisions of the Act. These forward-looking statements may be accompanied by such words as “aim,” “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “plan,” “potential,” “possible,” “will,” "would" and other words and terms of similar meaning. Reference is made in particular to forward-looking statements regarding:

• the anticipated amount, timing and accounting of revenues; contingent, milestone, royalty and other payments under licensing, collaboration, acquisition or divestiture agreements; tax positions and contingencies; collectability of receivables; pre-approval inventory; cost of sales; research and development costs; compensation and other selling, general and administrative expenses; amortization of intangible assets; foreign currency exchange risk; estimated fair value of assets and liabilities; and impairment assessments;

• expectations, plans and prospects relating to sales, pricing, growth and launch of our marketed and pipeline products;

• the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to our patents and other proprietary and intellectual property rights, tax audits, assessments and settlements, pricing matters, sales and promotional practices, product liability and other matters;

• patent terms, patent term extensions, patent office actions and expected availability and period of regulatory exclusivity;

• the potential impact of increased product competition in the markets in which we compete, including increased competition from generics, biosimilars, prodrugs and other products approved under abbreviated regulatory pathways;

• our plans and investments in our core and emerging growth areas, as well as implementation of our corporate strategy;

• the drivers for growing our business, including our plans and intention to commit resources relating to research and development programs and business development opportunities, as well as the potential benefits and results of, and the anticipated timing to complete, certain business development transactions, including divestitures;

• our ability to finance our operations and business initiatives and obtain funding for such activities;

• the costs and timing of potential clinical trials, filings and approvals, and the potential therapeutic scope of the development and commercialization of our and our collaborators’ pipeline products;

• adverse safety events involving our marketed products or generic or biosimilar versions of our marketed products;

• the potential impact of healthcare reform in the United States (U.S.) and measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, including the impact of pricing actions and reduced reimbursement for our products;

• our manufacturing capacity, use of third-party contract manufacturing organizations, plans and timing relating to changes in our manufacturing capabilities, including anticipated investments and divestitures, and activities in new or existing manufacturing facilities;

• the impact of the continued uncertainty of the credit and economic conditions in certain countries in Europe and our collection of accounts receivable in such countries;

• the potential impact on our results of operations and liquidity of the United Kingdom's (U.K.) intent to voluntarily depart from the European Union (E.U.);

• lease commitments, purchase obligations and the timing and satisfaction of other contractual obligations; and

• the impact of new laws, including the Swiss Federal Act on Tax Reform and AHV Financing, regulatory requirements, judicial decisions and accounting standards.

3

These forward-looking statements involve risks and uncertainties, including those that are described in Item 1A. Risk Factors included in this report and elsewhere in this report that could cause actual results to differ materially from those reflected in such statements. You should not place undue reliance on these statements. Forward-looking statements speak only as of the date of this report. Except as required by law, we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.

NOTE REGARDING COMPANY AND PRODUCT REFERENCES

References in this report to:

• “Biogen,” the “company,” “we,” “us” and “our” refer to Biogen Inc. and its consolidated subsidiaries; and

• “RITUXAN” refers to both RITUXAN (the trade name for rituximab in the U.S., Canada and Japan) and MabThera (the trade name for rituximab outside the U.S., Canada and Japan).

NOTE REGARDING TRADEMARKS

AVONEX®, PLEGRIDY®, RITUXAN®, RITUXAN HYCELA®, SPINRAZA®, TECFIDERA®, TYSABRI® and ZINBRYTA® are registered trademarks of Biogen.

BENEPALI^TM, FLIXABI^TM, FUMADERM^TM and IMRALDI^TM are trademarks of Biogen.

ENBREL®, FAMPYRA^TM, GAZYVA®, HUMIRA®, OCREVUS®, REMICADE®, SkySTAR^TM and other trademarks referenced in this report are the property of their respective owners.

4

PART I FINANCIAL INFORMATION

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions, except per share amounts)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Product, net	$	2,880.3		$	2,757.5		$	5,560.3		$	5,281.0
Revenues from anti-CD20 therapeutic programs	576.4			490.4			1,093.8			933.6
Other	160.0			108.6			452.4			273.0
Total revenues	3,616.7			3,356.5			7,106.5			6,487.6
Cost and expenses:
Cost of sales, excluding amortization and impairment of acquired intangible assets	476.3			421.0			1,078.3			867.0
Research and development	484.8			981.0			1,048.5			1,477.7
Selling, general and administrative	587.6			516.2			1,155.3			1,017.5
Amortization and impairment of acquired intangible assets	70.1			107.4			138.3			211.3
Collaboration profit (loss) sharing	63.5			39.2			121.6			81.7
Loss on assets and liabilities held for sale	(2.3		)	—			113.2			—
(Gain) loss on fair value remeasurement of contingent consideration	(20.0		)	1.9			(8.5		)	(3.7		)
Restructuring charges	0.8			1.6			1.2			3.2
Acquired in-process research and development	—			75.0			—			85.0
Total cost and expenses	1,660.8			2,143.3			3,647.9			3,739.7
Income from operations	1,955.9			1,213.2			3,458.6			2,747.9
Other income (expense), net	(197.4		)	(34.5		)	159.9			(75.5		)
Income before income tax expense and equity in loss of investee, net of tax	1,758.5			1,178.7			3,618.5			2,672.4
Income tax expense	248.1			263.7			670.6			586.2
Equity in loss of investee, net of tax	16.3			—			45.0			—
Net income	1,494.1			915.0			2,902.9			2,086.2
Net income (loss) attributable to noncontrolling interests, net of tax	—			48.4			—			46.7
Net income attributable to Biogen Inc.	$	1,494.1		$	866.6		$	2,902.9		$	2,039.5
Net income per share:
Basic earnings per share attributable to Biogen Inc.	$	7.85		$	4.18		$	15.01		$	9.75
Diluted earnings per share attributable to Biogen Inc.	$	7.85		$	4.18		$	14.99		$	9.73
Weighted-average shares used in calculating:
Basic earnings per share attributable to Biogen Inc.	190.3			207.1			193.4			209.2
Diluted earnings per share attributable to Biogen Inc.	190.4			207.3			193.7			209.5

See accompanying notes to these unaudited condensed consolidated financial statements.

5

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in millions)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Net income attributable to Biogen Inc.	$	1,494.1		$	866.6		$	2,902.9		$	2,039.5
Other comprehensive income:
Unrealized gains (losses) on securities available for sale, net of tax	3.3			0.6			10.2			(1.6		)
Unrealized gains (losses) on cash flow hedges, net of tax	(37.9		)	132.8			(21.0		)	103.8
Gains (losses) on net investment hedges	11.7			—			25.7			—
Unrealized gains (losses) on pension benefit obligation, net of tax	0.1			0.9			0.7			0.4
Currency translation adjustment	(10.3		)	(92.0		)	(28.1		)	(47.3		)
Total other comprehensive income (loss), net of tax	(33.1		)	42.3			(12.5		)	55.3
Comprehensive income attributable to Biogen Inc.	1,461.0			908.9			2,890.4			2,094.8
Comprehensive income (loss) attributable to noncontrolling interests, net of tax	(0.4		)	48.4			(0.4		)	46.7
Comprehensive income	$	1,460.6		$	957.3		$	2,890.0		$	2,141.5

See accompanying notes to these unaudited condensed consolidated financial statements.

6

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions, except per share amounts)

	As of June 30, 2019			As of December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,723.4		$	1,224.6
Marketable securities	1,228.8			2,313.4
Accounts receivable, net	1,959.6			1,958.5
Due from anti-CD20 therapeutic programs	557.5			526.9
Inventory	776.7			929.9
Assets held for sale	683.4			—
Other current assets	980.4			687.6
Total current assets	7,909.8			7,640.9
Marketable securities	1,309.3			1,375.9
Property, plant and equipment, net	3,077.5			3,601.2
Operating lease assets	434.4			—
Intangible assets, net	3,681.3			3,120.0
Goodwill	5,749.2			5,706.4
Deferred tax asset	2,820.1			2,153.9
Investments and other assets	1,306.0			1,690.6
Total assets	$	26,287.6		$	25,288.9
LIABILITIES AND EQUITY
Current liabilities:
Taxes payable	427.2			63.5
Accounts payable	377.1			370.5
Liabilities held for sale	88.6			—
Accrued expenses and other	2,318.0			2,861.2
Total current liabilities	3,210.9			3,295.2
Notes payable	5,948.5			5,936.5
Deferred tax liability	2,400.6			1,636.2
Long-term operating lease liabilities	423.0			—
Other long-term liabilities	1,355.8			1,389.4
Total liabilities	13,338.8			12,257.3
Commitments and contingencies
Equity:
Biogen Inc. shareholders’ equity:
Preferred stock, par value $0.001 per share	—			—
Common stock, par value $0.0005 per share	0.1			0.1
Additional paid-in capital	—			—
Accumulated other comprehensive loss	(252.9		)	(240.4		)
Retained earnings	16,182.8			16,257.0
Treasury stock, at cost	(2,977.1		)	(2,977.1		)
Total Biogen Inc. shareholders’ equity	12,952.9			13,039.6
Noncontrolling interests	(4.1		)	(8.0		)
Total equity	12,948.8			13,031.6
Total liabilities and equity	$	26,287.6		$	25,288.9

See accompanying notes to these unaudited condensed consolidated financial statements.

7

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	For the Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	2,902.9		$	2,086.2
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation, amortization and impairments	238.1			340.4
Acquired in-process research and development	—			85.0
Share-based compensation	98.0			81.7
Contingent consideration	(8.5		)	(3.7		)
Loss on assets and liabilities held for sale	113.2			—
Deferred income taxes	71.6			(57.4		)
Unrealized (gain) loss on strategic investments	(199.2		)	1.0
Other	91.1			45.1
Changes in operating assets and liabilities, net:
Accounts receivable	(2.9		)	(187.2		)
Inventory	108.7			(40.1		)
Accrued expenses and other current liabilities	(216.1		)	13.3
Income tax assets and liabilities	306.9			183.4
Other changes in operating assets and liabilities, net	(80.3		)	8.7
Net cash flows provided by operating activities	3,423.5			2,556.4
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities	3,255.8			6,802.7
Purchases of marketable securities	(2,075.1		)	(4,774.3		)
Contingent consideration paid related to Fumapharm AG acquisition	(300.0		)	(900.0		)
Acquisition of Nightstar Therapeutics plc, net of cash acquired	(744.4		)	—
Purchases of property, plant and equipment	(314.0		)	(381.5		)
Acquired in-process research and development	—			(85.0		)
Acquisitions of intangible assets	—			(3.0		)
Purchase of Ionis Pharmaceuticals, Inc. stock	—			(462.9		)
Proceeds from sales of strategic investments	309.7			—
Other	(4.0		)	2.1
Net cash flows provided by investing activities	128.0			198.1
Cash flows from financing activities:
Purchases of treasury stock	(3,057.3		)	(3,000.0		)
Payments related to issuance of stock for share-based compensation arrangements, net	(23.6		)	(14.3		)
Net distribution to noncontrolling interest	4.3			(38.9		)
Other	21.6			(6.9		)
Net cash flows used in financing activities	(3,055.0		)	(3,060.1		)
Net increase (decrease) in cash and cash equivalents	496.5			(305.6		)
Effect of exchange rate changes on cash and cash equivalents	2.3			(18.0		)
Cash and cash equivalents, beginning of the period	1,224.6			1,573.8
Cash and cash equivalents, end of the period	$	1,723.4		$	1,250.2

See accompanying notes to these unaudited condensed consolidated financial statements.

8

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in millions)

	Preferred stock			Common stock				Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings			Treasury stock					Total Biogen Inc. shareholders’ equity			Noncontrolling interests			Total equity
	Shares	Amount		Shares		Amount											Shares		Amount
Balance, March 31, 2019	—	$	—	219.0		$	0.1	$	—		$	(219.8	)	$	17,026.7		(23.8	)	$	(2,977.1	)	$	13,829.9		$	(7.9	)	$	13,822.0
Net income														1,494.1								1,494.1			—			1,494.1
Other comprehensive income (loss), net of tax											(33.1		)									(33.1		)	(0.4		)	(33.5		)
Capital contribution by noncontrolling interest																						—			4.2			4.2
Repurchase of common stock pursuant to the 2019 Share Repurchase Program, at cost																	(3.9	)	(909.9		)	(909.9		)				(909.9		)
Retirement of common stock pursuant to the 2019 Share Repurchase Program, at cost				(3.9	)	—		(19.7		)				(890.2		)	3.9		909.9			—						—
Repurchase of common stock pursuant to the 2018 Share Repurchase Program, at cost																	(6.5	)	(1,491.6		)	(1,491.6		)				(1,491.6		)
Retirement of common stock pursuant to the 2018 Share Repurchase Program, at cost				(6.5	)	—		(44.9		)				(1,446.7		)	6.5		1,491.6			—						—
Issuance of common stock under stock option and stock purchase plans				—		—		9.6														9.6						9.6
Issuance of common stock under stock award plan				—		—		—						(1.1		)						(1.1		)				(1.1		)
Compensation related to share-based payments								55.0														55.0						55.0
Balance, June 30, 2019	—	$	—	208.6		$	0.1	$	—		$	(252.9	)	$	16,182.8		(23.8	)	$	(2,977.1	)	$	12,952.9		$	(4.1	)	$	12,948.8

See accompanying notes to these unaudited condensed consolidated financial statements.

9

BIOGEN INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - (Continued)

(unaudited, in millions)

	Preferred stock			Common stock				Additional paid-in capital			Accumulated other comprehensive loss			Retained earnings			Treasury stock					Total Biogen Inc. shareholders’ equity			Noncontrolling interests			Total equity
	Shares	Amount		Shares		Amount											Shares		Amount
Balance, December 31, 2018	—	$	—	221.0		$	0.1	$	—		$	(240.4	)	$	16,257.0		(23.8	)	$	(2,977.1	)	$	13,039.6		$	(8.0	)	$	13,031.6
Net income														2,902.9								2,902.9			—			2,902.9
Other comprehensive income (loss), net of tax											(12.5		)									(12.5		)	(0.4		)	(12.9		)
Capital contribution by noncontrolling interest																						—			4.3			4.3
Repurchase of common stock pursuant to the 2019 Share Repurchase Program, at cost																	(3.9	)	(909.9		)	(909.9		)				(909.9		)
Retirement of common stock pursuant to the 2019 Share Repurchase Program, at cost				(3.9	)	—		(19.7		)				(890.2		)	3.9		909.9			—						—
Repurchase of common stock pursuant to the 2018 Share Repurchase Program, at cost																	(8.9	)	(2,147.4		)	(2,147.4		)				(2,147.4		)
Retirement of common stock pursuant to the 2018 Share Repurchase Program, at cost