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Fair Value Measurements

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENTS

The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:


	As of December 31, 2021
(In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	1,632.2	$	—	$	1,632.2	$	—
Marketable debt securities:
Corporate debt securities	1,108.2		—		1,108.2		—
Government securities	1,192.7		—		1,192.7		—
Mortgage and other asset backed securities	132.2		—		132.2		—
Marketable equity securities	1,048.5		181.7		866.8		—
Derivative contracts	80.9		—		80.9		—
Plan assets for deferred compensation	33.4		—		33.4		—
Total	$	5,228.1	$	181.7	$	5,046.4	$	—
Liabilities:
Derivative contracts	$	10.8	$	—	$	10.8	$	—
Contingent consideration obligations	209.1		—		—		209.1
Total	$	219.9	$	—	$	10.8	$	209.1


	As of December 31, 2020
(In millions)	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	626.9	$	—	$	626.9	$	—
Marketable debt securities:
Corporate debt securities	1,301.5		—		1,301.5		—
Government securities	627.1		—		627.1		—
Mortgage and other asset backed securities	122.4		—		122.4		—
Marketable equity securities	1,974.3		271.1		1,703.2		—
Derivative contracts	20.5		—		20.5		—
Plan assets for deferred compensation	28.2		—		28.2		—
Total	$	4,700.9	$	271.1	$	4,429.8	$	—
Liabilities:
Derivative contracts	$	217.2	$	—	$	217.2	$	—
Contingent consideration obligations	259.8		—		—		259.8
Total	$	477.0	$	—	$	217.2	$	259.8

There have been no material impairments of our assets measured and carried at fair value during the years ended December 31, 2021 and 2020. In addition, there have been no changes in valuation techniques during the years ended December 31, 2021 and 2020. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities was determined through third-party pricing services. The fair value of Level 2 instruments classified as marketable equity securities represents our investments in the common stock of Sangamo Therapeutics, Inc. (Sangamo), Denali Therapeutics Inc. (Denali) and Sage Therapeutics, Inc. (Sage) and are valued using an option pricing valuation model as the investments are each subject to certain holding period restrictions. The holding period restrictions for a portion of our Sangamo investment expired during the second quarter of 2021. The fair value of this portion of our Sangamo investment was a Level 1 measurement as of December 31, 2021. For additional information on our investments in Sangamo, Denali and Sage common stock, please read Note 8, Financial Instruments, to these consolidated financial statements.

For a description of our validation procedures related to prices provided by third-party pricing services and our option pricing valuation model, please read the Fair Value Measurements section within Note 1, Summary of Significant Accounting Policies, to these consolidated financial statements.

The following tables summarize the significant unobservable inputs in the fair value measurement of our contingent consideration obligations as of December 31, 2021 and 2020:

As of December 31, 2021

(In millions)

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Liabilities:

Contingent consideration obligation

$209.1

Discounted cash flow

Discount rate

1.30%

Expected timing of achievement of development milestones

2023 to 2027

—

As of December 31, 2020

(In millions)

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Liabilities:

Contingent consideration obligation

$259.8

Discounted cash flow

Discount rate

0.60%

Expected timing of achievement of development milestones

2021 to 2025

—

The weighted average discount rate was calculated based on the relative fair value of our contingent consideration obligations. In addition, we apply various probabilities of technological and regulatory success, ranging from 10.9% to certain probability as of December 31, 2021, to the valuation models to estimate the fair values of our contingent consideration obligations.

Nonrecurring Fair Value Measurements

For the year ended December 31, 2021, we recorded impairment charges of $365.0 million related to BIIB111 and $220.0 million related to BIIB112. As a result, the remaining book values associated with these programs were reduced to zero. For additional information, please read Note 6, Intangible Assets and Goodwill, to these consolidated financial statements.

Debt Instruments

The fair values of our debt instruments, which are Level 2 liabilities, are summarized as follows:


	As of December 31,
(In millions)	2021		2020
3.625% Senior Notes due September 15, 2022	$	1,020.0	$	1,054.1
4.050% Senior Notes due September 15, 2025	1,895.2		2,003.1
2.250% Senior Notes due May 1, 2030	1,475.9		1,557.2
5.200% Senior Notes due September 15, 2045(1)	1,463.0		2,365.1
3.150% Senior Notes due May 1, 2050	1,457.7		1,536.4
3.250% Senior Notes due February 15, 2051(1)	692.9		—
Total	$	8,004.7	$	8,515.9

(1) In February 2021 we completed a private offer to exchange (Exchange Offer) our tendered 5.200% Senior Notes due September 15, 2045 (2045 Senior Notes), whereby approximately $624.6 million of our 2045 Senior Notes were exchanged for approximately $700.7 million of a new series of 3.250% Senior Notes due February 15, 2051 (2051 Senior Notes). For additional information on our Exchange Offer, please read Note 12, Indebtedness, to these consolidated financial statements.

The fair values of each of our series of Senior Notes were determined through market, observable and corroborated sources. For additional information related to our Senior Notes, please read Note 12, Indebtedness, to these consolidated financial statements.

Contingent Consideration Obligations

In connection with our acquisitions of Convergence and Biogen International Neuroscience GmbH (BIN), we agreed to make additional payments based upon the achievement of certain milestone events. The following table provides a roll forward of the fair values of our contingent consideration obligations, which includes Level 3 measurements:


	As of December 31,
(In millions)	2021		2020
Fair value, beginning of year	$	259.8	$	346.1
Changes in fair value	(50.7)		(86.3)

Fair value, end of year	$	209.1	$	259.8

As of December 31, 2021 and 2020, approximately $209.1 million and $110.3 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our consolidated balance sheets with the remaining balance reflected as a component of accrued expense and other.

For the year ended December 31, 2021, changes in the fair value of our contingent consideration obligations were primarily due to reductions in the probability of technical and regulatory success and delays in the expected timing of the achievement of certain remaining developmental milestones related to our vixotrigine programs.

For the year ended December 31, 2020, changes in the fair value of our contingent consideration obligations were primarily due to our discontinuing development of BIIB054 for the potential treatment of Parkinson's disease, resulting in a reduction of our contingent consideration obligations of $51.0 million as well as other changes in the

probability and the expected timing of the achievement of certain remaining developmental milestones, changes in the interest rates used to revalue our contingent consideration liabilities and the passage of time.

The fair values of the contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs. For additional information on the valuation techniques and inputs utilized in the valuation of our financial assets and liabilities, please read Note 1, Summary of Significant Accounting Policies, to these consolidated financial statements.

Convergence Pharmaceuticals Holdings Limited

In connection with our acquisition of Convergence in February 2015 we recorded a contingent consideration obligation of $274.5 million. As of December 31, 2021 and 2020, the fair value of this contingent consideration obligation was $209.1 million and $259.8 million, respectively. Our most recent valuation was determined based upon net cash flow projections of $400.0 million, probability weighted and discounted using a rate of 1.3%, which is a measure of the credit risk associated with settling the liability.

Biogen International Neuroscience GmbH

In connection with our acquisition of BIN in December 2010 we recorded a contingent consideration obligation of $81.2 million. We discontinued further development of BIIB054 for the potential treatment of Parkinson's disease based on the results of a Phase 2 study of BIIB054. Additionally, during the third and fourth quarters of 2020 we discontinued other programs related to our acquisition of BIN for which we had immaterial contingent consideration obligations. As a result, the fair value of the contingent consideration obligations related to our acquisition of BIN was adjusted to zero, resulting in a gain of $101.5 million for the year ended December 31, 2020.

Acquired IPR&D

The fair values of the acquired IPR&D assets were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenue and probabilities of success. These assets are tested for impairment annually until commercialization, after which time the acquired IPR&D will be amortized over its estimated useful life using the economic consumption method.

In connection with our acquisition of NST, we recognized $480.0 million and $220.0 million of acquired IPR&D intangible assets for BIIB111 and BIIB112, respectively. During the fourth quarter of 2020 we recognized an impairment charge of $115.0 million related to BIIB111. During the third quarter of 2021 we suspended further development on these programs and recognized an impairment charge of $365.0 million related to BIIB111 and an impairment charge of $220.0 million related to BIIB112, reducing the fair value of these IPR&D intangible assets to zero.

In connection with our acquisition of BIN, we recognized a $110.9 million acquired IPR&D intangible asset. During the fourth quarter of 2020 we discontinued further development of BIIB054 for the potential treatment of Parkinson's disease and recognized an impairment charge of $75.4 million to reduce the fair value of the IPR&D intangible asset to zero.

In connection with our acquisition of Stromedix Inc., we recognized a $219.2 million acquired IPR&D intangible asset. During the third quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of IPF and recognized an impairment charge of $215.9 million to reduce the fair value of the IPR&D intangible asset to zero.

For additional information on our IPR&D intangible assets, including a discussion of our most significant assumptions, please read Note 6, Intangible Assets and Goodwill, to these consolidated financial statements.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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