Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

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



		As of September 30, 2019							As of December 31, 2018
(In millions)	Estimated Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Out-licensed patents	13-23 years	$	543.3	$	(542.5	)	$	0.8	$	543.3	$	(542.3	)	$	1.0
Developed technology	15-28 years	3,005.3		(2,764.6		)	240.7		3,005.3		(2,734.8		)	270.5
In-process research and development	Indefinite until commercialization	954.8		—			954.8		476.0		—			476.0
Trademarks and tradenames	Indefinite	64.0		—			64.0		64.0		—			64.0
Acquired and in-licensed rights and patents	4-18 years	3,638.7		(1,506.6		)	2,132.1		3,638.7		(1,330.2		)	2,308.5
Total intangible assets		$	8,206.1	$	(4,813.7	)	$	3,392.4	$	7,727.3	$	(4,607.3	)	$	3,120.0

For the three and nine months ended September 30, 2019, amortization and impairment of acquired intangible assets totaled $283.9 million and $422.2 million, respectively, compared to $281.9 million and $493.2 million, respectively, in the prior year comparative periods.

Amortization and impairments of acquired intangible assets for the three and nine months ended September 30, 2019, reflects the impact of a $215.9 million impairment charge related to certain IPR&D assets associated with the Phase 2b study of BG00011 (STX-100) for the potential treatment of idiopathic pulmonary fibrosis (IPF), which was discontinued during the third quarter of 2019, as discussed below.

Amortization of acquired intangible assets for the three and nine months ended September 30, 2018, reflects the impact of impairment charges related to certain IPR&D assets associated with our vixotrigine (BIIB074) program totaling $189.3 million, as discussed below.

Amortization of acquired intangible assets, excluding impairment charges, totaled $68.0 million and $206.3 million for the three and nine months ended September 30, 2019, respectively, compared to $92.6 million and $303.9 million, respectively, in the prior year comparative periods.

The decrease in amortization of acquired intangible assets, excluding impairment charges, was primarily due to a net overall decrease in our expected rate of amortization for acquired intangible assets. This decrease was primarily due to lower amortization subsequent to the impairment in the fourth quarter of 2018 of the U.S. license to Forward Pharma A/S' (Forward Pharma) intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, and higher expected lifetime revenues of TYSABRI.

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, 2019, was $236.6 million.

IPR&D

IPR&D represents the fair value assigned to research and development assets that we acquired as part of a business combination and had not yet reached technological feasibility at the date of acquisition. We review amounts capitalized as acquired IPR&D for impairment annually, as of October 31, and whenever events or changes in circumstances indicate to us that the carrying value of the assets might not be recoverable.

In connection with our acquisition of NST on June 7, 2019, we acquired IPR&D programs with an estimated fair value of $700.0 million. For additional information on our acquisition of NST, please read Note 2, Acquisitions, to these condensed consolidated financial statements.

BG00011

During the third quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of IPF due to safety concerns. As a result, we recognized an impairment charge of approximately $215.9 million during the third quarter of 2019 to reduce the fair value of the IPR&D intangible asset to zero. We also adjusted the value of our contingent consideration obligations related to this asset resulting in a gain of $61.2 million in the third quarter of 2019.

Vixotrigine

During the third quarter of 2018 we completed the Phase 2b study of vixotrigine for the potential treatment of painful lumbosacral radiculopathy (PLSR). The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the potential treatment of PLSR. As a result, we recognized an impairment charge of approximately $60.0 million during the third quarter of 2018 to reduce the fair value of the IPR&D intangible asset to zero.

In addition, we delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of trigeminal neuralgia (TGN) as we awaited the outcome of ongoing interactions with the U.S. Food and Drug Administration (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 potential treatment of PLSR and insights from the Phase 2 study of vixotrigine for the potential treatment of small fiber neuropathy. We reassessed the fair value of the TGN program using reduced expected lifetime revenues, higher expected clinical development costs and a lower cumulative probability of success. 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 TGN IPR&D intangible asset to $41.8 million at that date. We also adjusted the value of our contingent consideration obligations related to the TGN program to reflect the lower cumulative probabilities of success resulting in a gain of $89.6 million in the third quarter of 2018.

The IPR&D impairment charges were included in amortization of acquired intangible assets and the gain resulting from the remeasurement of our contingent consideration obligation was recorded in (gain) loss on fair value remeasurement of contingent consideration in our condensed consolidated statements of income. The fair values of the intangible assets and contingent consideration obligations 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.

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 Pharma International Ltd., an affiliate of Elan Corporation plc. Acquired and in-licensed rights and patents also includes our rest of world license to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, 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 September 30, 2019, was $1,889.6 million and the net book value of the TECFIDERA asset as of September 30, 2019, was $45.6 million. For additional information on our TECFIDERA license rights, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in our 2018 Form 10-K.

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 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 second quarter of 2019. 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 September 30, 2019
2019 (remaining three months)	$	65.0
2020	255.0
2021	215.0
2022	215.0
2023	220.0
2024	210.0

Goodwill

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



(In millions)	As of September 30, 2019
Goodwill, beginning of period	$	5,706.4
Increase in goodwill	112.6
Elimination of goodwill allocated to Hillerød, Denmark manufacturing operations	(69.5		)
Other	(3.4		)
Goodwill, end of period	$	5,746.1

The increase in goodwill during the nine months ended September 30, 2019, was related to our acquisition of NST. For additional information on our acquisition of NST, please read Note 2, Acquisitions, to these condensed consolidated financial statements.

The elimination of goodwill represents an allocation based upon the relative fair value of our Hillerød, Denmark manufacturing operations. In connection with the divestiture of our Hillerød, Denmark manufacturing operations, our remaining goodwill was reviewed for impairment, and based upon this review, no impairments were recognized. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements.

As of September 30, 2019, we had no accumulated impairment losses related to goodwill.

Other includes changes related to foreign currency exchange rate fluctuations.