Restructuring, Business Transformation and Other Cost Saving Initiatives

9 Months Ended

Sep. 30, 2023

Restructuring and Related Activities [Abstract]

Restructuring, Business Transformation and Other Cost Saving Initiatives

2023 Fit for Growth Restructuring Program

In 2023 we initiated additional cost saving measures as part of our Fit for Growth program to reduce operating costs, while improving operating efficiency and effectiveness. The Fit for Growth program is expected to generate approximately $1.0 billion in gross operating expense savings by 2025, some of which will be reinvested in various initiatives. The Fit for Growth program is currently estimated to include net headcount reduction of approximately 1,000 employees.

Total charges incurred from our 2023 cost saving initiatives are summarized as follows:

	For the Three Months Ended September 30, 2023						For the Nine Months Ended September 30, 2023
(In millions)	Severance Costs		Accelerated Depreciation and Other Costs		Total		Severance Costs		Accumulated Depreciation and Other Costs		Total
Selling, general and administrative	$	—	$	5.9	$	5.9	$	—	$	17.4	$	17.4
Research and development	—		0.2		0.2		—		0.7		0.7
Restructuring charges	37.7		17.3		55.0		62.6		33.8		96.4
Total charges	$	37.7	$	23.4	$	61.1	$	62.6	$	51.9	$	114.5

Other Costs: includes costs associated with items such as asset abandonment and write-offs, facility closure costs, pretax gains and losses resulting from the termination of certain leases, employee non-severance expense, consulting fees and other costs.

Reata Integration

Following the closing of the Reata acquisition, we implemented an integration plan designed to realize operating synergies through cost savings and avoidance. We expect to incur restructuring charges of approximately $30.0 million in 2023. These amounts are primarily related to severance and are expected to be paid by the end of 2024. For the three and nine months ended September 30, 2023, we recognized approximately $21.0 million of net pre-tax restructuring charges, primarily consisting of employee severance costs.

2022 Cost Saving Initiatives

In December 2021 and May 2022 we announced our plans to implement a series of cost-reduction measures during 2022. These savings are being achieved through a number of initiatives, including reductions to our workforce, the substantial elimination of our commercial ADUHELM infrastructure, deprioritization of certain research and development programs, the consolidation of certain real estate locations and operating efficiencies across our selling, general and administrative and research and development functions. Charges related to our 2022 cost saving initiatives were substantially incurred during 2022 with remaining payments expected to be made through 2026.

Total charges incurred from our 2022 cost saving initiatives are summarized as follows:

	For the Three Months Ended September 30,
	2023						2022
(In millions)	Severance Costs		Accelerated Depreciation and Other Costs		Total		Severance Costs		Accumulated Depreciation and Other Costs(1)		Total
Restructuring charges	$	—	$	—	$	—	$	21.6	$	(6.2)	$	15.4
Total charges	$	—	$	—	$	—	$	21.6	$	(6.2)	$	15.4
	For the Nine Months Ended September 30,
	2023						2022
(In millions)	Severance Costs		Accelerated Depreciation and Other Costs		Total		Severance Costs		Accumulated Depreciation and Other Costs(1)		Total
Restructuring charges	$	—	$	2.6	$	2.6	$	110.2	$	13.9	$	124.1
Total charges	$	—	$	2.6	$	2.6	$	110.2	$	13.9	$	124.1

(1) Amounts reflect a gain recorded during the third quarter of 2022 of approximately $5.3 million related to the partial termination of a portion of our lease located at 300 Binney Street.

Charges and spending related to our 2023 and 2022 workforce reductions and Reata Integration are summarized as follows:

	Workforce Reductions
(In millions)	2023		2022
Restructuring reserve as of December 31	$	35.9	$	—
Expense	7.1		27.7
Payment	(15.6)		(6.2)
Foreign currency and other adjustments	0.6		—
Restructuring reserve as of March 31	28.0		21.5
Expense	17.8		60.9
Payment	(13.4)		(29.7)
Foreign currency and other adjustments	(0.1)		(0.5)
Restructuring reserve as of June 30	32.3		52.2
Expense	58.7		21.6
Payment	(31.8)		(32.3)
Foreign currency and other adjustments	0.1		(1.3)
Restructuring reserve as of September 30	$	59.3	$	40.2

Goodwill and Intangible Assets Disclosure [Text Block]

Intangible Assets

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

		As of September 30, 2023						As of December 31, 2022
(In millions)	Estimated Life	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Completed technology	4-28 years	$	11,053.8	$	(5,793.2)	$	5,260.6	$	7,415.3	$	(5,629.2)	$	1,786.1
In-process research and development	Indefinite until commercialization	1,920.0		—		1,920.0		—		—		—
Priority review voucher	Indefinite	100.0		—		100.0		—		—		—
Trademarks and trade names	Indefinite	64.0		—		64.0		64.0		—		64.0
Total intangible assets		$	13,137.8	$	(5,793.2)	$	7,344.6	$	7,479.3	$	(5,629.2)	$	1,850.1

Amortization and Impairments

For the three and nine months ended September 30, 2023, amortization and impairment of acquired intangible assets totaled $60.9 million and $164.0 million, respectively, compared to $56.5 million and $190.9 million, respectively, in the prior year comparative periods. For the three and nine months ended September 30, 2023 and 2022, we had no impairment charges.

Completed Technology

Completed technology primarily relates to our other marketed products and programs acquired through asset acquisitions, licenses and business combinations. In connection with our acquisition of Reata in September 2023 we acquired SKYCLARYS, a commercially-approved product in the U.S., with an estimated fair value of approximately

$3.6 billion.

IPR&D Related to Business Combinations

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. Upon commercialization, we will determine the estimated useful life and amortize these amounts based upon an economic consumption method. IPR&D balances also include adjustments related to foreign currency exchange rate fluctuations. The carrying value associated with our IPR&D assets as of September 30, 2023, relates to the IPR&D programs we acquired in connection with our acquisition of Reata in September 2023 with an estimated fair value of approximately $1.9 billion.

Priority Review Voucher

In connection with our acquisition of Reata in September 2023 we acquired a rare pediatric disease priority review voucher that may be used to obtain priority review by the FDA for a future regulatory submission or sold to a third party. We recorded the priority review voucher based on its estimated fair value of $100.0 million as an intangible asset. The estimated fair value was based on recent external purchase and sale transactions of similar vouchers.

For additional information on our acquisition of Reata, please read Note 2, Acquisitions, to these condensed consolidated financial statements.

Estimated Future Amortization of Intangible Assets

The estimated future amortization of finite-lived intangible assets for the next five years is expected to be as follows:

(In millions)	As of September 30, 2023
2023 (remaining three months)	$	75.0
2024	325.0
2025	430.0
2026	440.0
2027	435.0
2028	445.0

Goodwill

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

(In millions)	As of September 30, 2023
Goodwill, December 31, 2022	$	5,749.0
Goodwill resulting from Reata acquisition	1,057.3
Other	1.2
Goodwill, September 30, 2023	$	6,807.5

For additional information on our acquisition of Reata, please read Note 2, Acquisitions, to these condensed consolidated financial statements.

As of September 30, 2023, we had no accumulated impairment losses related to goodwill. Other includes adjustments related to foreign currency exchange rate fluctuations.