Property, Plant and Equipment

12 Months Ended

Dec. 31, 2011

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

11.    Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Components of property, plant and equipment, net are summarized as follows:

	As of December 31,
(In millions)	2011			2010
Land	$	51.9		$	107.6
Buildings		597.9			670.2
Leasehold improvements		102.7			100.8
Machinery and equipment		570.1			576.0
Computer software and hardware		439.7			392.8
Furniture and fixtures		37.6			54.5
Construction in progress		553.6			506.9
Total cost		2,353.5			2,408.8
Less: accumulated depreciation		(782.1	)		(767.2	)
Total property, plant and equipment, net	$	1,571.4		$	1,641.6

Our construction in progress balances are primarily related to the construction of our large-scale biologics manufacturing facility in Hillerød, Denmark, where we plan to manufacture TYSABRI drug substance. As of December 31, 2011 and 2010, the construction in progress balance related to this facility totaled $474.0 million and $440.2 million, respectively.

For 2011, 2010 and 2009, we capitalized interest costs related to construction in progress totaling approximately $32.6 million, $28.6 million and $28.5 million, respectively. Capitalized interest costs are primarily related to the development of our large-scale biologics manufacturing facility in Hillerød, Denmark.

Depreciation expense totaled $143.9 million, $144.9 million and $137.9 million for 2011, 2010 and 2009, respectively.

New Cambridge Leases

In July 2011, we executed leases for two office buildings to be built in Cambridge, Massachusetts with a planned occupancy during the second half of 2013. Construction of these facilities began in late 2011. These buildings, totaling approximately 500,000 square feet, will serve as the future location of our corporate headquarters and commercial operations. These buildings will also provide additional general and administrative and research and development office space. The leases both have 15 year terms and we have options to extend the term of each lease for two additional five-year terms. Future minimum rental commitments under these leases will total approximately $340.0 million over the initial 15 year lease terms. In addition to rent, the leases require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses

In accordance with accounting guidance applicable to entities involved with the construction of an asset that will be leased when the construction is completed, we are considered the owner, for accounting purposes, of these properties during the construction period. Accordingly, we will record an asset along with a corresponding financing obligation on our consolidated balance sheet for the amount of total project costs incurred related to the construction in progress for these buildings through completion of the construction period. Upon completion of the buildings, we will assess and determine if the assets and corresponding liabilities should be derecognized. As of December 31, 2011, cost incurred in relation to the construction of these buildings totaled approximately $2.2 million.

As a result of our decision to relocate our corporate headquarters and centralize our campus in Cambridge, Massachusetts, we expect to vacate our Weston, Massachusetts facility upon completion of the new buildings. Based upon our most recent estimates, we expect to incur a charge of approximately $35.0 million upon vacating this facility when the new Cambridge buildings have been completed. This amount represents our remaining Weston lease obligation, net of our estimate of sublease income expected to be recovered.

San Diego Facility

On October 1, 2010, we sold the San Diego facility for cash proceeds, net of transaction costs, of approximately $127.0 million. As part of this transaction, we agreed to lease back the San Diego facility for a period of 15 months. We accounted for this transaction as a financing arrangement as we determined that the transaction did not qualify as a sale due to our continuing involvement under the leaseback terms. Accordingly, we recorded an obligation for the proceeds received in October 2010 and the facility assets remained classified as held for use with the carrying value of the facility continued to be reflected as a component of property, plant and equipment, net within our consolidated balance sheets.

In the first quarter of 2011, we entered into an agreement to terminate our 15 month lease of the San Diego facility effective August 31, 2011. We have had no continuing involvement or remaining obligation after August 31, 2011 and have accounted for this transaction as a sale of property as of that date. No significant gain on sale was recognized and we did not recognize any impairment charges related to the San Diego facility.