BIOGEN INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion should be read in conjunction with our consolidated
financial statements and the accompanying notes beginning on page F-1 of this
report.
For our discussion of the year ended December 31, 2020, compared to the year
ended December 31, 2019, please read Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations located in our Annual
Report on Form 10-K for the year ended December 31, 2020.
Executive Summary
Introduction
Biogen is a global biopharmaceutical company focused on discovering, developing
and delivering worldwide innovative therapies for people living with serious
neurological and neurodegenerative diseases as well as related therapeutic
adjacencies. We have a leading portfolio of medicines to treat multiple
sclerosis (MS), have introduced the first approved treatment for spinal muscular
atrophy (SMA) and are providing the first and only approved treatment to address
a defining pathology of Alzheimer's disease. We also commercialize biosimilars
of advanced biologics and focus on advancing our pipeline in neuroscience and
specialized immunology. Lastly, we are focused on accelerating our efforts in
digital health to support our commercial and pipeline programs while also
creating opportunities for potential digital therapeutics. We support our drug
discovery and development efforts through the commitment of significant
resources to discovery, research and development programs and business
development opportunities.
Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and
FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; ADUHELM for
the treatment of Alzheimer's disease; and FUMADERM for the treatment of severe
plaque psoriasis. We have certain business and financial rights with respect to
RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions;
RITUXAN HYCELA for the treatment of non-Hodgkin's lymphoma and CLL; GAZYVA for
the treatment of CLL and follicular lymphoma; OCREVUS for the treatment of PPMS
and RMS; and other potential anti-CD20 therapies, including mosunetuzumab,
pursuant to our collaboration arrangements with Genentech, a wholly-
owned member of the Roche Group. For additional information on our collaboration
arrangements with Genentech, please read Note 18, Collaborative and Other
Relationships, to our consolidated financial statements included in this report.
Our innovative drug development and commercialization activities are
complemented by our biosimilar business that expands access to medicines and
reduces the cost burden for healthcare systems. Through our agreements with
Samsung Bioepis, our joint venture with Samsung BioLogics, we market and sell
BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an adalimumab
biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing
REMICADE, in certain countries in Europe. We have also secured the exclusive
rights to commercialize BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS,
which was approved in the U.S., the E.U. and the U.K. during the third quarter
of 2021. For additional information on our collaboration arrangements with
Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to
our consolidated financial statements included in this report.
We seek to ensure an uninterrupted supply of medicines to patients around the
world. To that end, we continually review our manufacturing capacity,
capabilities, processes and facilities. In order to support our future growth
and drug development pipeline, we are expanding our large molecule production
capacity by building a large-scale biologics manufacturing facility in
Solothurn, Switzerland. In the second quarter of 2021 a portion of the facility
received a GMP multi-product license from SWISSMEDIC. We believe that the
Solothurn facility will support our anticipated near-term needs for the
manufacturing of ADUHELM and other biologic assets. In addition, we believe that
the Solothurn site may provide us with the ability to further expand if we need
additional large scale manufacturing capacity to support future clinical and
commercial manufacturing requirements. If we are unable to fully utilize our
manufacturing facilities, due to lower than forecasted demand for our products,
we will incur excess capacity charges which will have a negative effect on our
financial condition and results of operations.
Our revenue depends upon continued sales of our products as well as the
financial rights we have in our anti-CD20 therapeutic programs, and, unless we
develop, acquire rights to and/or commercialize new products and technologies,
we will be substantially dependent on sales from our products and our financial
rights in our anti-CD20 therapeutic programs for many years.
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In the longer term, our revenue growth will depend upon the successful clinical
development, regulatory approval and launch of new commercial products as well
as additional indications for our existing products, our ability to obtain and
maintain patents and other rights related to our marketed products, assets
originating from our research and development efforts and/or successful
execution of external business development opportunities.
Business Environment
For a detailed discussion on our business environment, please read Item 1.
Business, included in this report. For additional information on our competition
and pricing risks that could negatively impact our product sales, please read
Item 1A. Risk Factors, included in this report.
ADUHELM (aducanumab)
U.S.
In June 2021 the FDA granted accelerated approval of ADUHELM, which we are
developing and commercializing in collaboration with Eisai, based on reduction
in amyloid beta plaques observed in patients treated with ADUHELM. As part of
the accelerated approval, we will conduct a confirmatory trial to verify the
clinical benefit of ADUHELM in patients with Alzheimer's disease. The FDA may
withdraw approval if, among other things, the confirmatory trial fails to verify
clinical benefit of ADUHELM, ADUHELM's benefit-risk is no longer positive or we
fail to comply with the conditions of the accelerated approval.
The U.S. ADUHELM product label states that treatment with ADUHELM should be
initiated in patients with mild cognitive impairment or mild dementia stage of
disease, the population which was studied in clinical trials. We expect patient
uptake will be gradual and we do not expect all eligible patients will be
treated with ADUHELM for a variety of reasons, including appropriate patient
selection criteria, a complex diagnostic and care pathway, the lack of readiness
of healthcare providers and institutions to initiate treatment, concern
regarding the accelerated approval of ADUHELM and its data and the ability to
obtain and maintain adequate reimbursement for ADUHELM. In January 2022 the
Centers for Medicare and Medicaid Services (CMS) released a proposed NCD
decision memorandum, stating the proposed NCD would cover FDA approved
monoclonal antibodies that target amyloid for the treatment of Alzheimer's
disease for people with Medicare only if they are enrolled in qualifying
clinical trials. We expect a final Medicare NCD by the second quarter of 2022,
which should clarify Medicare reimbursement for the class of antibodies directed
against amyloid. If the final
NCD is not broader than the proposed NCD, our future operating results may be
negatively impacted.
Under our collaboration agreement with Eisai (ADUHELM Collaboration Agreement),
we and Eisai will co-promote ADUHELM with a region-based profit split, with
Eisai reimbursing us for 45.0% of development and commercialization costs
incurred by the collaboration for the advancement of ADUHELM in the U.S.
Shipments of ADUHELM commenced during the second quarter of 2021.
We have made, and may continue to make, commercial, medical and infrastructure
investments in support of activities associated with the launch of ADUHELM in
the U.S.
Rest of World
In October 2020 the EMA accepted for review the Marketing Authorization
Application for aducanumab and in December 2020 the MHLW accepted for review the
Japanese NDA for aducanumab.
In December 2021 the CHMP of the EMA adopted a negative opinion on the MAA for
aducanumab in Europe. We are seeking a re-examination of the opinion by the
CHMP.
If we do not receive regulatory approval or are unable to successfully
commercialize aducanumab in other jurisdictions, our financial condition,
business and operations may be adversely affected.
TECFIDERA
In 2020 U.S. federal courts in West Virginia and Delaware entered judgments in
favor of the defendants in patent infringement proceedings relating to TECFIDERA
Orange-Book listed patents. We appealed both decisions. In late 2021 the U.S.
Court of Appeals for the Federal Circuit (Federal Circuit) affirmed the judgment
of the West Virginia federal court. The appeals in the Delaware cases were
stayed and we expect will remain so until the decision in the West Virginia case
becomes final.
Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply
discounted prices compared to TECFIDERA. The generic competition for TECFIDERA
has significantly reduced our TECFIDERA revenue and is expected to continue to
have a substantial and increasing negative impact on our U.S. TECFIDERA revenue
in the future.
In May 2021 the European General Court annulled the EMA's decision not to
validate applications for approval of TECFIDERA generics on the basis that the
EMA conducted the wrong assessment when determining TECFIDERA's entitlement to
regulatory data and marketing protection. Our Company, the EMA and the EC have
each appealed the General Court's decision as wrongly decided and the appeal is
pending.
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In November 2021 the CHMP of the EMA issued an ad hoc opinion referencing the
General Court's decision which concluded that "the totality of the available
data cannot establish that [monoethyl fumarate] exerts a clinically relevant
therapeutic contribution within FUMADERM." The EC will decide TECFIDERA's
entitlement to regulatory data and market protection. If data and market
protection is not upheld, we could face generic competition in the E.U. as early
as the first half of 2022, which would have an adverse impact on our TECFIDERA
sales in the E.U. and our results of operations.
For additional information, please read the discussion under Results of
Operations - Product Revenue - Multiple Sclerosis (MS) - Fumarate below.
Business Update Regarding COVID-19
The COVID-19 pandemic continues to present a substantial public health and
economic challenge around the world. The length of time and full extent to which
the COVID-19 pandemic directly or indirectly impacts our business, results of
operations and financial condition, including sales, expense, reserves and
allowances, the supply chain, manufacturing, clinical trials, research and
development costs and employee-related costs, depends on future developments
that are highly uncertain, subject to change and are difficult to predict,
including as a result of new information that may emerge concerning COVID-19 and
the actions taken to contain or treat COVID-19 as well as the economic impact on
local, regional, national and international customers and markets.
We are monitoring the demand for our products, including the duration and degree
to which we may see delays in starting new patients on a product due to
hospitals diverting the resources that are necessary to administer certain of
our products to care for COVID-19 patients, including products, such as TYSABRI
and SPINRAZA, that are administered in a physician's office or hospital setting.
We may also see reduced demand for immunosuppressant therapies during the
COVID-19 pandemic.
While we are currently continuing the clinical trials we have underway in sites
across the globe, COVID-19 precautions have impacted the timeline for some of
our clinical trials and these precautions may, directly or indirectly, have a
further impact on timing in the future. To help mitigate the impact of the
COVID-19 pandemic to our clinical trials, we are pursuing innovative approaches
such as remote monitoring, remote patient visits and supporting home infusions.
These alternative measures have resulted in an immaterial increase to the cost
of the clinical trials underway.
Factors such as the COVID-19 pandemic, adverse weather events, labor or raw
material shortages and other supply chain disruptions could result in product
shortages or other difficulties and delays in manufacturing our products.
For additional information on the various risks posed by the COVID-19 pandemic,
please read Item 1A. Risk Factors included in this report.
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Financial Highlights
Diluted earnings per share attributable to Biogen Inc. were $10.40 for 2021,
representing a decrease of 58.1% as compared to $24.80 in the same period in
2020.
As described below under Results of Operations, our net income and diluted
earnings per share attributable to Biogen Inc. for the year ended December 31,
2021, compared to the year ended December 31, 2020, reflects the following:
Revenue
•Total revenue was $10,981.7 million for 2021, representing a $2,462.9 million,
or 18.3%, decrease compared to $13,444.6 million in 2020.
•Product revenue, net totaled $8,846.9 million for 2021, representing a $1,845.3
million, or 17.3%, decrease compared to $10,692.2 million in 2020. This decrease
was primarily due to a $1,735.4 million, or 22.2%, decrease in MS product
revenue and a $147.0 million, or 7.2%, decrease in SPINRAZA product revenue,
partially offset by a $35.3 million, or 4.4%, increase in revenue from our
biosimilar business.
•The decrease in MS product revenue was primarily due to a decrease in U.S.
TECFIDERA demand as a result of multiple TECFIDERA generic entrants in the U.S.
market.
•The decrease in SPINRAZA revenue was primarily due to a decrease in demand as a
result of increased competition in the U.S. and Germany as well as a decrease in
pricing in the U.S. and rest of world markets, partially offset by an increase
in sales volumes in Latin America and certain distributor markets.
•Revenue from anti-CD20 therapeutic programs totaled $1,658.5 million for 2021,
representing a $319.3 million, or 16.1%, decrease compared to $1,977.8 million
in 2020. This decrease was primarily due to a $480.2 million, or 45.5%, decrease
in RITUXAN revenue, partially offset by a $146.3 million, or 17.3%, increase in
royalty revenue on sales of OCREVUS. Sales of RITUXAN have been adversely
affected by the onset of biosimilar competition.
•Other revenue totaled $476.3 million for 2021, representing a $298.3 million,
or 38.5%, decrease from $774.6 million in 2020.
•The decrease in other revenue was primarily due to higher contract
manufacturing revenue in 2020, resulting from $346.2 million in revenue related
to the delivery of the license for certain of our manufacturing-related
intellectual property to a contract manufacturing customer.
Expense
•Total cost and expense was $8,141.0 million for 2021, representing a $753.5
million, or 8.5%, decrease compared to $8,894.5 million in 2020. This decrease
was primarily due to a $1,489.7 million, or 37.3%, decrease in research and
development expense.
•The decrease in research and development expense was primarily due to
$1,893.3 million in upfront payments recognized in 2020 in connection with our
collaborations with Sangamo, Denali and Sage, partially offset by a
$125.0 million upfront payment recognized in connection with our collaboration
with InnoCare in 2021.
•The decrease was partially offset by a $304.5 million, or 16.9%, increase in
cost of sales, which was primarily driven by $164.0 million of charges
associated with inventory and purchase commitments in excess of forecasted
demand related to ADUHELM during 2021 as well as higher impairment charges
recorded during 2021 as compared to 2020.
As described below under Financial Condition, Liquidity and Capital Resources:
•We generated $3,639.9 million of net cash flow from operations for 2021.
•Cash, cash equivalents and marketable securities totaled approximately $4,694.5
million as of December 31, 2021.
•We repurchased and retired approximately 6.0 million shares of our common stock
at a cost of approximately $1.8 billion during 2021 under our 2020 Share
Repurchase Program. Approximately $2.8 billion remained available under our 2020
Share Repurchase Program as of December 31, 2021.
Acquisitions, Collaborative and Other Relationships
For additional information on our acquisitions, collaborative and other
relationships discussed below,
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please read Note 2, Acquisitions, Note 18, Collaborative and Other
Relationships, and Note 19, Investments in Variable Interest Entities, to our
consolidated financial statements included in this report.
Bio-Thera Solutions
In April 2021 we entered into a commercialization and license agreement to
develop, manufacture and commercialize BAT1806, a Phase 3 clinical stage
anti-interleukin-6 (IL-6) receptor monoclonal antibody that is a proposed
biosimilar referencing ACTEMRA. In connection with this agreement, we made an
upfront payment of $30.0 million to Bio-Thera Solutions.
InnoCare Pharma Limited
In July 2021 we entered into a collaboration and license agreement with InnoCare
for orelabrutinib, an oral small molecule Bruton's tyrosine kinase inhibitor for
the potential treatment of MS. In connection with this agreement, we made an
upfront payment of $125.0 million to InnoCare.
For additional information on our collaboration arrangement with InnoCare,
please read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
Mosunetuzumab
In January 2022 we exercised our option with Genentech to participate in the
joint development and commercialization of mosunetuzumab, a late-stage
bispecific antibody in development for B-cell non-Hodgkin's lymphoma and other
therapeutic areas. In connection with this exercise, we recorded a $30.0 million
option exercise fee payable to Genentech in December 2021.
BIIB115 Option Exercise
In December 2021 we exercised our option with Ionis and obtained a worldwide,
exclusive, royalty-bearing license to develop and commercialize BIIB115, a
preclinical investigational ASO in development for SMA. In connection with this
option exercise, we made an opt-in payment of $60.0 million to Ionis.
Samsung Bioepis - Biogen's Joint Venture with Samsung BioLogics
In January 2022 we entered into an agreement to sell to Samsung Biologics our
equity in Samsung Bioepis. Under the terms of the proposed transaction, we would
receive $1.0 billion in cash at closing and $1.3 billion to be deferred over two
payments of $812.5 million due at the first anniversary and $437.5 million due
at the second anniversary of the closing of the transaction. We would also be
eligible
to receive up to an additional $50.0 million upon the achievement of certain
commercial milestones.
Closing of the transaction is currently anticipated in mid-2022, contingent on
the effectiveness of a securities registration statement filed by Samsung
Biologics and satisfaction of certain regulatory and other customary closing
conditions.
For additional information on the proposed transaction and our collaboration
arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other
Relationships, to our consolidated financial statements included in this report.
Other Key Developments
Exchange Offer
In February 2021 we completed our Exchange Offer of our tendered 2045 Senior
Notes for our 2051 Senior Notes and cash, and an offer to purchase our tendered
2045 Senior Notes for cash.
For additional information on our Exchange Offer, please read Note 12,
Indebtedness, to our consolidated financial statements included in this report.
North Carolina Gene Therapy Manufacturing Facility
In March 2021 we announced our plans to build a new gene therapy manufacturing
facility in RTP, NC to support our gene therapy pipeline across multiple
therapeutic areas. The new facility will be 175,000 square feet and is expected
to be operational by the end of 2023, with an estimated total investment of
approximately $200.0 million. Construction for this new facility began during
the fourth quarter of 2021.
Solothurn, Switzerland Manufacturing Facility
In May 2021 we announced that a portion of our Solothurn manufacturing facility
received a GMP multi-product license from SWISSMEDIC.
For additional information on our Solothurn manufacturing facility, please read
Note 10, Property, Plant and Equipment, to our consolidated financial statements
included in this report.
BIIB125 (zuranolone)
In June 2021 we and Sage announced positive Phase 3 results for BIIB125
(zuranolone) for the potential treatment of MDD and PPD. In October 2021 we and
Sage announced our plan to submit an NDA to the FDA for zuranolone in the second
half of 2022, with rolling submission expected to start in early 2022. The
planned initial submission package will seek approval of zuranolone for MDD, and
an additional filing for PPD is anticipated in the first half of 2023.
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For additional information on our collaboration arrangement with Sage, please
read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
Lecanemab (BAN2401)
In June 2021 the FDA granted Breakthrough Therapy designation for lecanemab, an
anti-amyloid antibody for the potential treatment of Alzheimer's disease, which
we are developing in collaboration with Eisai. In September 2021 Eisai initiated
a rolling submission to the FDA of a BLA for lecanemab. The BLA is being
submitted under the accelerated approval pathway and is primarily based on
clinical, biomarker and safety data from the Phase 2b clinical trial in people
with early Alzheimer's disease and confirmed amyloid pathology.
BYOOVIZ (ranibizumab-nuna)
In September 2021 we and Samsung Bioepis announced that the FDA has approved
BYOOVIZ (ranibizumab-nuna), a biosimilar referencing LUCENTIS for the treatment
of neovascular (wet) age-related macular degeneration, macular edema following
retinal vein occlusion, and myopic choroidal neovascularization. In addition to
the U.S. approval, BYOOVIZ was approved in the E.U. and the U.K. during the
third quarter of 2021.
BIIB067 (tofersen)
In October 2021 we announced topline results from our pivotal Phase 3 VALOR
study of BIIB067 (tofersen), an investigational antisense drug being evaluated
for people with SOD1 ALS, indicating that the primary endpoint was not met. We
are engaging with regulators and other key stakeholders to determine potential
next steps.
RESULTS OF OPERATIONS
Revenue
Revenue is summarized as follows:
                                                                                                                    % Change                               $ Change

                                                     For the Years Ended December 31,                       2021                2020                2021               2020
                                                                                                             vs.                 vs.                 vs.                vs.
(In millions, except percentages)              2021                 2020                2019                2020                2019                2020               2019
Product revenue, net:
United States                             $    3,805.7          $  5,900.1          $  6,713.8               (35.5) %            (12.1) %       $ (2,094.4)         $ (813.7)
Rest of world                                  5,041.2             4,792.1             4,666.0                 5.2                 2.7               249.1             126.1
Total product revenue, net                     8,846.9            10,692.2            11,379.8               (17.3)               (6.0)           (1,845.3)           (687.6)
Revenue from anti-CD20 therapeutic
programs                                       1,658.5             1,977.8             2,290.4               (16.1)              (13.6)             (319.3)           (312.6)
Other revenue                                    476.3               774.6               707.7               (38.5)                9.5              (298.3)             66.9
Total revenue                             $   10,981.7          $ 13,444.6          $ 14,377.9               (18.3) %             (6.5) %       $ (2,462.9)         $ (933.3)


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Product Revenue
Product revenue is summarized as follows:
                                                                                                                      % Change                               $ Change

                                                       For the Years Ended December 31,                       2021                2020                2021               2019
                                                                                                               vs.                 vs.                 vs.                vs.
(In millions, except percentages)                2021                 2020                2019                2020                2019                2020               2018
Multiple Sclerosis (MS):
Fumarate(1)                                $   2,362.3            $  3,905.4          $  4,438.2               (39.5) %            (12.0) %       $ (1,543.1)         $ (532.8)
Interferon(2)                                  1,566.1               1,877.5             2,101.8               (16.6)              (10.7)             (311.4)           (224.3)
TYSABRI                                        2,063.1               1,946.1             1,892.2                 6.0                 2.8               117.0              53.9
FAMPYRA                                          105.2                 103.1                97.1                 2.0                 6.2                 2.1               6.0
Subtotal: MS                                   6,096.7               7,832.1             8,529.3               (22.2)               (8.2)           (1,735.4)           (697.2)

Spinal Muscular Atrophy:
SPINRAZA                                       1,905.1               2,052.1             2,097.0                (7.2)               (2.1)             (147.0)            (44.9)

Alzheimer's disease:
ADUHELM(3)                                         3.0                     -                   -                     nm                -                 3.0                 -

Biosimilars:
BENEPALI                                         498.3                 481.6               486.2                 3.5                (0.9)               16.7              (4.6)
IMRALDI                                          233.4                 216.3               184.0                 7.9                17.6                17.1              32.3
FLIXABI                                           99.4                  97.9                68.1                 1.5                43.8                 1.5              29.8
Subtotal: Biosimilars                            831.1                 795.8               738.3                 4.4                 7.8                35.3              57.5

Other:
FUMADERM                                          11.0                  12.2                15.2                (9.8)              (19.7)               (1.2)             (3.0)

Total product revenue, net                 $   8,846.9            $ 10,692.2          $ 11,379.8               (17.3) %             (6.0) %    

  $ (1,845.3)         $ (687.6)




(1) Fumarate includes TECFIDERA and VUMERITY. VUMERITY became commercially
available in the E.U. during the fourth quarter of 2021.
(2) Interferon includes AVONEX and PLEGRIDY.
(3) In June 2021 the FDA granted accelerated approval of ADUHELM, which became
commercially available in the U.S. during the second quarter of 2021. For
additional information, please read Note 18, Collaborative and Other
Relationships - Eisai Co., Ltd. - ADUHELM Collaboration Agreement, to our
consolidated financial statements included in this report.
nm Not meaningful
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Multiple Sclerosis (MS)
Fumarate
[[Image Removed: biib-20211231_g20.jpg]]

Fumarate revenue includes sales from TECFIDERA and VUMERITY. During the fourth
quarter of 2021 VUMERITY was approved for the treatment of RRMS in the E.U.,
Switzerland and the U.K.
For 2021 compared to 2020, the 60.3% decrease in U.S. Fumarate revenue was
primarily due to a decrease in TECFIDERA demand as a result of multiple
TECFIDERA generic entrants entering the U.S. market. The decrease was partially
offset by an increase in VUMERITY sales volumes in the U.S.
For 2021 compared to 2020, the 9.4% increase in rest of world Fumarate revenue
was primarily due to an increase in TECFIDERA sales volumes of 6.2%.
In 2020 U.S. federal courts in West Virginia and Delaware entered judgments in
favor of the defendants in patent infringement proceedings relating to TECFIDERA
Orange-Book listed patents. We appealed both decisions. In late 2021 the Federal
Circuit affirmed the judgment of the West Virginia federal court. The appeals in
the Delaware cases were stayed and we expect will remain so until the decision
in the West Virginia case becomes final.
Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply
discounted prices compared to TECFIDERA. The generic competition for TECFIDERA
has significantly reduced our TECFIDERA revenue and is expected to continue to
have a substantial and increasing negative impact on our U.S. TECFIDERA revenue
in the future.
In May 2021 the European General Court annulled the EMA's decision not to
validate applications for approval of TECFIDERA generics on the basis that the
EMA conducted the wrong
assessment when determining TECFIDERA's entitlement to regulatory data and
marketing protection. Our Company, the EMA and the EC have each appealed the
General Court's decision as wrongly decided and the appeal is pending.
In November 2021 the CHMP of the EMA issued an ad hoc opinion referencing the
General Court's decision which concluded that "the totality of the available
data cannot establish that [monoethyl fumarate] exerts a clinically relevant
therapeutic contribution within FUMADERM." The EC will decide TECFIDERA's
entitlement to regulatory data and market protection. If data and market
protection is not upheld, we could face generic competition in the E.U. as early
as the first half of 2022, which would have an adverse impact on our TECFIDERA
sales in the E.U. and our results of operations.
For additional information, please read Note 20, Litigation, to our consolidated
financial statements included in this report.
We expect that TECFIDERA revenue will continue to decline in 2022, compared to
2021, as a result of increasing generic competition.
We expect an increase in VUMERITY sales volumes in 2022, compared to 2021,
mostly driven by demand growth, including the continued launch of VUMERITY in
the E.U.
Interferon
[[Image Removed: biib-20211231_g21.jpg]]
For 2021 compared to 2020, the 22.8% decrease in U.S. Interferon revenue was
primarily due to a decrease in Interferon sales volumes of 18.7%. The net
decline in sales volumes reflects the continued decline of the Interferon market
as patients transition to other higher efficacy and oral MS therapies.
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For 2021 compared to 2020, the 3.5% decrease in rest of world Interferon revenue
was primarily due to a decrease in Interferon sales volumes of 3.8%.
We expect that Interferon revenue will continue to decline in both the U.S. and
rest of world markets in 2022, compared to 2021, as a result of increasing
competition from other MS products, including biosimilars, and further pricing
reductions in certain European markets.
TYSABRI
[[Image Removed: biib-20211231_g22.jpg]]
For 2021 compared to 2020, the 4.1% increase in U.S. TYSABRI revenue was
primarily due to an increase in pricing, partially offset by a decrease in sales
volumes.
For 2021 compared to 2020, the 8.4% increase in rest of world TYSABRI revenue
was primarily due to favorable volume impacts, partially offset by decreases in
pricing.
We anticipate TYSABRI revenue to be relatively flat on a global basis in 2022,
compared to 2021, despite increasing competition from additional treatments for
MS. We expect to continue to face price reductions in certain European markets.
Spinal Muscular Atrophy
SPINRAZA
[[Image Removed: biib-20211231_g23.jpg]]
For 2021 compared to 2020, the 25.4% decrease in U.S. SPINRAZA revenue was
primarily due to a decrease in sales volumes of 24.2%, resulting from increased
competition.
For 2021 compared to 2020, the 4.2% increase in rest of world SPINRAZA revenue
was primarily due to an increase in sales volumes, particularly in Latin America
and certain distributor markets. These increases were offset by lower volumes
resulting from increased competition in certain established markets,
particularly Germany.
We face competition from a gene therapy product and an oral product. In 2022 we
expect that SPINRAZA revenue will be subject to increased competition, likely
resulting in continued patient discontinuations and a lower rate of new patient
starts, combined with the impact of loading dose dynamics, as patients
transition to dosing once every four months, and lower prices in certain rest of
world countries.
For additional information on our collaboration arrangements with Ionis, please
read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
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Alzheimer's Disease
ADUHELM
[[Image Removed: biib-20211231_g24.jpg]]
In June 2021 the FDA granted accelerated approval of ADUHELM, which became
commercially available in the U.S. during the second quarter of 2021.
We expect minimal sales of ADUHELM in 2022.
For additional information on our collaboration arrangements with Eisai, please
read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
Biosimilars
BENEPALI, IMRALDI and FLIXABI
[[Image Removed: biib-20211231_g25.jpg]]
During the third quarter of 2021 BYOOVIZ, a biosimilar referencing LUCENTIS, was
approved in the U.S., the E.U and the U.K.
For 2021 compared to 2020, the 4.4% increase in biosimilar revenue was primarily
due to the
favorable impact of higher volumes and foreign currency exchange, partially
offset by decreases in pricing in certain markets.
We anticipate a slight decline in revenue from our biosimilars business in 2022
compared to 2021, despite the launch of BYOOVIZ in the U.S. and an anticipated
modest increase in sales volume in 2022, as we continue to face price reductions
in certain markets.
For additional information on our collaboration arrangements with Samsung
Bioepis, please read Note 18, Collaborative and Other Relationships, to our
consolidated financial statements included in this report.
Revenue from Anti-CD20 Therapeutic Programs
Genentech (Roche Group)
Our share of RITUXAN, including RITUXAN HYCELA, and GAZYVA collaboration
operating profits in the U.S. and other revenue from anti-CD20 therapeutic
programs are summarized in the table below. For purposes of this discussion, we
refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN.
[[Image Removed: biib-20211231_g26.jpg]]
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————————————————– ——————————

T a ble of C on ten ts Share of Biogen’s pre-tax profits in the we for RITUXAN and GAZYVA The following table provides a summary of amounts comprising our share of pre-tax earnings in we for RITUXAN and GAZYVA:

                                               For the Years Ended December 31,
(In millions)                                 2021               2020           2019
Product revenue, net                   $    2,032.0           $ 3,334.1      $ 4,747.4
Cost and expense                              291.8               433.0          622.7
Pre-tax profits in the U.S.            $    1,740.2           $ 2,901.1      $ 4,124.7
Biogen's share of pre-tax profits      $      647.7           $ 1,080.2     

$1,542.4

For 2021 compared to 2020, the decrease in U.S. product revenue, net was
primarily due to a decrease in sales volumes of RITUXAN in the U.S. of 38.8%,
primarily due to the onset of competition from multiple biosimilar products.
For 2021 compared to 2020, product revenue, net also reflects an increase in
GAZYVA sales volumes of 8.5%.
For 2021 compared to 2020, the decrease in collaboration cost and expense was
primarily due to lower cost of sales, distribution costs and selling and
marketing expense related to RITUXAN.
We are aware of several other anti-CD20 molecules, including biosimilar
products, that have been approved and are competing with RITUXAN and GAZYVA in
the oncology and other markets. In November 2019, January 2020 and January 2021
biosimilar products referencing RITUXAN were launched in the U.S. and are being
offered at lower prices. This competition has had a significant adverse impact
on the pre-tax profits of our collaboration
arrangements with Genentech, as the sales of RITUXAN have decreased
substantially compared to prior periods. We expect that biosimilar competition
will continue to increase as these products capture additional market share and
that this will have a significant adverse impact on our co-promotion profits in
the U.S. in future years.
Other Revenue from Anti-CD20 Therapeutic Programs
Other revenue from anti-CD20 therapeutic programs consist of royalty revenue on
sales of OCREVUS and our share of pre-tax co-promotion profits from RITUXAN in
Canada.
For 2021 compared to 2020, the increase in other revenue from anti-CD20
therapeutic programs was primarily due to sales growth of OCREVUS. Royalty
revenue recognized on sales of OCREVUS for the years ended December 31, 2021,
2020 and 2019, totaled $991.7 million, $845.4 million and $687.5 million,
respectively.
OCREVUS royalty revenue is based on our estimates from third party and market
research data of OCREVUS sales occurring during the corresponding period.
Differences between actual and estimated royalty revenue will be adjusted for in
the period in which they become known, which is generally expected to be the
following quarter.
For additional information on our collaboration arrangements with Genentech,
including information regarding the pre-tax profit-sharing formula and its
impact on future revenue from anti-CD20 therapeutic programs, please read Note
18, Collaborative and Other Relationships, to our consolidated financial
statements included in this report.
Other Revenue
Other revenue is summarized as follows:
                                                                                                            % Change                              $ Change

                                                For the Years Ended December 31,                    2021                2020               2021              2020
                                                                                                     vs.                 vs.                vs.              vs.
(In millions, except percentages)            2021                2020             2019              2020                2019               2020        

2019

Revenue from collaborative and
other relationships                     $       20.7          $  21.6          $ 106.2                (4.2) %            (79.7) %       $   (0.9)         $ (84.6)
Other royalty and corporate
revenue                                        455.6            753.0            601.5               (39.5)               25.2            (297.4)           151.5
Total other revenue                     $      476.3          $ 774.6          $ 707.7               (38.5) %              9.5  %       $ (298.3)         $  66.9

Revenue from collaborative relationships and other Revenue from collaborative relationships and other primarily includes revenue from royalties on biosimilar products from Samsung Bioepis. For more information on our collaboration agreements with Samsung Bioepis, please read Note 18, Collaborative relationships and others, to our consolidated financial statements included in this report.

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Other Royalty and Corporate Revenue
[[Image Removed: biib-20211231_g27.jpg]]
We receive royalties from net sales on products related to patents that we have
out-licensed and we record other corporate revenue primarily from amounts earned
under contract manufacturing agreements.
For 2021 compared to 2020, the decrease in other corporate revenue was primarily
due to higher contract manufacturing revenue during the year ended December 31,
2020, resulting from $346.2 million in revenue related to the delivery of the
license for certain of our manufacturing-related intellectual property to a
contract manufacturing customer. For additional information, please read Note 4,
Revenue, to our consolidated financial statements included in this report.
Reserves for Discounts and Allowances
Revenue from product sales is recorded net of reserves established for
applicable discounts and allowances, including those associated with the
implementation of pricing actions in certain international markets where we
operate.
These reserves are based on estimates of the amounts earned or to be claimed on
the related sales and are classified as reductions of accounts receivable (if
the amount is payable to our customer) or a liability (if the amount is payable
to a party other than our customer). These estimates reflect our historical
experience, current contractual and statutory requirements, specific known
market events and trends, industry data and forecasted customer buying and
payment patterns. Actual amounts may ultimately differ from our estimates. If
actual results vary, we adjust these estimates, which could have an effect on
earnings in the period of adjustment.
Reserves for discounts, contractual adjustments and returns that reduced gross
product revenue are summarized as follows:
                    [[Image Removed: biib-20211231_g28.jpg]]
For the years ended December 31, 2021, 2020 and 2019, reserves for discounts and
allowances as a percentage of gross product revenue were 28.6%, 27.1% and 24.3%,
respectively.
Discounts
Discounts include trade term discounts and wholesaler incentives.
For 2021 compared to 2020, the decrease in discounts was primarily driven by a
decrease in gross sales.
Contractual Adjustments
Contractual adjustments primarily relate to Medicaid and managed care rebates in
the U.S., pharmacy rebates, co-payment (copay) assistance, Veterans
Administration, 340B discounts, specialty pharmacy program fees and other
government rebates or applicable allowances.
For 2021 compared to 2020, the decrease in contractual adjustments was primarily
driven by lower TECFIDERA sales in the U.S., resulting in lower Medicaid,
managed care and government rebates, partially offset by managed care rebates in
the U.S. from VUMERITY sales.
Returns
Product return reserves are established for returns made by wholesalers. In
accordance with contractual terms, wholesalers are permitted to return product
for reasons such as damaged or expired product. The majority of wholesaler
returns are due to product expiration. Provisions for product returns are
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recognized in the period the related revenue is recognized, resulting in a
reduction to product sales.
For 2021 compared to 2020, return reserves were relatively consistent.
For additional information on our revenue reserves, please read Note 4, Revenue,
to our consolidated financial statements included in this report.
Cost and Expense
A summary of total cost and expense is as follows:
                                                                                                                          % Change                              $ Change

                                                          For the Years Ended December 31,                        2021                2020               2021               2020
                                                                                                                   vs.                vs.                vs.                vs.
(In millions, except percentages)                    2021                   2020               2019               2020                2019               2020               2019
Cost of sales, excluding amortization
and impairment of acquired intangible
assets                                        $    2,109.7              $ 1,805.2          $ 1,955.4                16.9  %            (7.7) %       $   304.5          $  (150.2)
Research and development                           2,501.2                3,990.9            2,280.6               (37.3)              75.0           (1,489.7)           1,710.3
Selling, general and administrative                2,674.3                2,504.5            2,374.7                 6.8                5.5              169.8              129.8
Amortization and impairment of acquired
intangible assets                                    881.3                  464.8              489.9                89.6               (5.1)             416.5              (25.1)
Collaboration profit (loss) sharing                    7.2                  232.9              241.6               (96.9)              (3.6)            (225.7)              (8.7)
(Gain) loss on divestiture of Hillerød,
Denmark manufacturing operations                         -                  (92.5)              55.3                     nm                 nm            92.5             (147.8)
(Gain) loss on fair value remeasurement
of contingent consideration                          (50.7)                 (86.3)             (63.7)              (41.3)              35.5               35.6              (22.6)
Acquired in-process research and
development                                           18.0                   75.0                  -               (76.0)                   nm           (57.0)              75.0
Restructuring charges                                    -                      -                1.5                     nm                 nm               -               (1.5)
Total cost and expense                        $    8,141.0              $ 8,894.5          $ 7,335.3                (8.5) %            21.3  %       $  (753.5)         $ 1,559.2




nm Not meaningful
Cost of Sales, Excluding Amortization and Impairment of Acquired Intangible
Assets
[[Image Removed: biib-20211231_g29.jpg]]
Cost of sales, as a percentage of total revenue, were 19.2%, 13.4% and 13.6% for
the years ended December 31, 2021, 2020 and 2019, respectively.
Product Cost of Sales
For 2021 compared to 2020, the increase in product cost of sales was primarily
due to product mix and higher cost of sales associated with contract
manufacturing agreements. The increase was also
due to the write-off of ADUHELM inventory during the year ended December 31,
2021, as discussed below.
Inventory amounts written down as a result of excess, obsolescence or
unmarketability totaled $167.6 million, $26.6 million and $52.2 million for the
years ended December 31, 2021, 2020 and 2019, respectively.
During the fourth quarter of 2021 we recorded approximately $164.0 million of
charges associated with inventory and purchase commitments in excess of
forecasted demand related to ADUHELM, which was recognized in cost of sales
within our consolidated statements of income. In addition, we recognized the
expected share of these charges from Eisai's 45.0% share in collaboration profit
(loss) sharing within our consolidated statements of income. As of December 31,
2021, we had approximately $223.0 million of inventory related to ADUHELM. We
may record additional write-downs of ADUHELM inventory if the final NCD is not
broader than the proposed NCD.
For additional information, please read Note 18, Collaborative and Other
Relationships, to our consolidated financial statements included in this report.
Royalty Cost of Sales
For 2021 compared to 2020, the increase in royalty cost of sales was primarily
due to higher
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royalties payable on higher sales of TYSABRI and VUMERITY.
Research and Development[[Image Removed: biib-20211231_g30.jpg]]
[[Image Removed: biib-20211231_g31.jpg]]
We support our drug discovery and development efforts through the commitment of
significant resources to discovery, research and development programs and
business development opportunities.
A significant amount of our research and development costs consist of indirect
costs incurred in support of overall research and development activities and
non-specific programs, including activities that benefit multiple programs, such
as management costs, as well as depreciation, information technology and
facility-based expenses. These costs are considered other research and
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development costs in the table above and are not allocated to a specific program
or stage.
Research and development expense incurred in support of our marketed products
includes costs associated with product lifecycle management activities
including, if applicable, costs associated with the development of new
indications for existing products. Late stage programs are programs in Phase 3
development or in registration stage. Early stage programs are programs in Phase
1 or Phase 2 development. Research and discovery represents costs incurred to
support our discovery research and translational science efforts. Costs are
reflected in the development stage based upon the program status when incurred.
Therefore, the same program could be reflected in different development stages
in the same year. For several of our programs, the research and development
activities are part of our collaborative and other relationships. Our costs
reflect our share of the total costs incurred.
For 2021 compared to 2020, the decrease in research and development expense was
primarily due to approximately $1,084.0 million, $601.3 million and
$208.0 million in upfront payments recognized upon the closing of our
collaborations with Sage, Denali and Sangamo, respectively, in 2020. This
decrease was partially offset by approximately $125.0 million in an upfront
payment recognized upon the closing of our collaboration with InnoCare in the
third quarter of 2021, the development of zuranolone for the potential treatment
of MDD and PPD, the development of BIIB124 (SAGE-324) for the potential
treatment of essential tremor, which we are developing in collaboration with
Sage, and closeout costs associated with BIIB111 (timrepigene emparvovec) and
BIIB112 (cotoretigene).
In 2021 we recorded upfront payments related to our new collaborations as part
of research and development expense. Excluding upfront payments, we expect our
core research and development expense to increase in 2022, driven by continued
investment in our pipeline. We intend to continue committing significant
resources to targeted research and development opportunities where there is a
significant unmet need and where a drug candidate has the potential to be highly
differentiated.
Milestone and Upfront Expense
Research and development expense for 2021 includes:
•$125.0 million charge to research and development expense in connection with
the upfront payment associated with entering into our collaboration with
InnoCare in the third quarter of 2021;
•$60.0 million charge to research and development expense upon the exercise of
our option under our collaboration agreement with Ionis to develop and
commercialize BIIB115, a preclinical investigational ASO in development for SMA;
•$30.0 million charge to research and development expense related to the option
exercise fee payable to Genentech to jointly develop and commercialize
mosunetuzumab, a late-stage bispecific antibody in development for B-cell
non-Hodgkin's lymphoma and other therapeutic areas; and
•$30.0 million charge to research and development expense in connection with the
upfront payment associated with entering into a commercialization and license
agreement with Bio-Thera to develop, manufacture and commercialize BAT1806, a
proposed biosimilar referencing ACTEMRA.
Research and development expense for 2020 includes:
•$1,084.0 million charge to research and development expense in connection with
the upfront payment associated with entering into our collaboration with Sage in
the fourth quarter of 2020;
•$601.3 million charge to research and development expense in connection with
the upfront payment associated with entering into our collaboration with Denali
in the third quarter of 2020; and
•$208.0 million charge to research and development expense in connection with
the upfront payment associated with entering into our collaboration with Sangamo
in the second quarter of 2020.
The upfront payments associated with these collaborations are classified as
research and development expense as the programs they relate to had not achieved
regulatory approval as of the payment date.
For additional information about these collaboration arrangements, please read
Note 18, Collaborative and Other Relationships, to our consolidated financial
statements included in this report.
Early Stage Programs
For 2021 compared to 2020, the decrease in spending related to our early stage
programs was primarily due to a decrease in costs associated with:
•the discontinuation of opicinumab (anti-LINGO) in MS;
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•the discontinuation of BIIB054 (cinpanemab) in Parkinson's disease and the
discontinuation of gosuranemab (BIIB092) in Alzheimer's disease;
•the advancement of dapirolizumab pego, an anti-CD40L pegylated Fab that we are
developing in collaboration with UCB, for the potential treatment of SLE into
late stage; and
•the advancement of BIIB059 (anti-BDCA2) for the potential treatment of SLE into
late stage.
These decreases were partially offset by an increase in costs associated with:
•an increase in spending in the development of BIIB124 for the potential
treatment of essential tremor;
•an increase in spending in the development of BIIB122 (DNL151) for the
potential treatment of Parkinson's disease, which we are developing in
collaboration with Denali; and
•an increase in spending in the development of BIIB135 (orelabrutinib) for the
potential treatment of MS.
Late Stage Programs
For 2021 compared to 2020, the increase in spending associated with our late
stage programs was primarily due to:
•an increase in spending in the development of zuranolone for the potential
treatment of MDD and PPD;
•the advancement of dapirolizumab pegol for the potential treatment of SLE into
late stage;
•the advancement of BIIB059 for the potential treatment of SLE into late stage;
•an increase in spending related to our option exercise with Genentech to
jointly develop and commercialize mosunetuzumab, a late-stage bispecific
antibody in development for B-cell non-Hodgkin's lymphoma and other therapeutic
areas;
•an increase in spending related to lecanemab; and
•close out costs related to BIIB111.
These increases were partially offset by a decrease in costs associated with the
advancement of ADUHELM from late stage to marketed.
Marketed Programs
For 2021 compared to 2020, the increase in spending associated with our marketed
programs was primarily due to an increase in costs associated with:
•the advancement of ADUHELM from late stage to marketed upon the accelerated
approval of ADUHELM in the U.S.
In March 2019 Eisai initiated a global Phase 3 trial for the development of
lecanemab in early Alzheimer's disease. Under our collaboration arrangement,
Eisai serves as the global operational and regulatory lead for lecanemab and all
costs, including research, development, sales and marketing expense, are shared
equally between us and Eisai.
For additional information on our collaboration arrangements with Eisai, please
read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
Selling, General and Administrative
[[Image Removed: biib-20211231_g32.jpg]]
For 2021 compared to 2020, the increase in selling, general and administrative
expense was primarily due to an increase in personnel in support of the launch
of ADUHELM in the U.S. Beginning in the second quarter of 2021, reimbursement
from Eisai for its share of U.S. ADUHELM selling, general and administrative
expense is recognized in collaboration profit (loss) sharing in our consolidated
statements of income.
In 2022 we expect selling, general and administrative costs to decrease as we
plan to implement cost-reduction measures with a significant portion expected to
be realized in 2022.
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Amortization and Impairment of Acquired Intangible Assets
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Our amortization expense is based on the economic consumption and impairment of
intangible assets. Our most significant amortizable intangible assets are
related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world)
products and other programs acquired through business combinations.
For the year ended December 31, 2021, amortization and impairment of acquired
intangible assets reflects the impact of a $365.0 million impairment charge
related to BIIB111, a $220.0 million impairment charge related to BIIB112 and a
$44.3 million impairment charge related to vixotrigine (BIIB074) for the
potential treatment of trigeminal neuralgia (TGN).
For the year ended December 31, 2020, amortization and impairment of acquired
intangible assets reflects the impact of a $115.0 million impairment charge
related to BIIB111, a $75.4 million impairment charge related to BIIB054 and a
$19.3 million impairment charge related to one of our other IPR&D intangible
assets.
Amortization of acquired intangible assets, excluding impairment charges,
totaled $252.0 million, $255.1 million and $274.0 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
We monitor events and expectations regarding product performance. If new
information indicates that the assumptions underlying our most recent analysis
are substantially different than those utilized in our current estimates, our
analysis would be updated and may result in a significant change in the
anticipated lifetime revenue of the relevant products. The occurrence of an
adverse event could substantially increase the amount of amortization expense
related to our acquired intangible assets as compared to previous periods or our
current expectations, which
may result in a significant negative impact on our future results of operations.
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. 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.
Overall, the value of our acquired IPR&D assets is dependent upon several
variables, including estimates of future revenue and the effects of competition,
our ability to secure sufficient pricing in a competitive market, our ability to
confirm safety and efficacy based on data from clinical trials and regulatory
feedback, the level of anticipated development costs and the probability and
timing of successfully advancing a particular research program from one clinical
trial phase to the next. We are continually reevaluating our estimates
concerning these and other variables, including our life cycle management
strategies, research and development priorities and development risk, changes in
program and portfolio economics and related impact of foreign currency exchange
rates and economic trends and evaluating industry and company data regarding the
productivity of clinical research and the development process. Changes in our
estimates may result in a significant change to our valuation of our IPR&D
assets.
Vixotrigine
In the periods since we acquired vixotrigine, there have been numerous delays in
the initiation of Phase 3 studies for the potential treatment of TGN and for the
potential treatment of diabetic painful neuropathy (DPN), another form of
neuropathic pain. We have engaged with the FDA regarding the design of the Phase
3 studies of vixotrigine for the potential treatment of TGN and DPN and are now
performing an additional clinical trial of vixotrigine.
The performance of this additional clinical trial delayed the initiation of the
Phase 3 studies of vixotrigine for the potential treatment of TGN, and, as a
result, we recognized an impairment charge of $44.3 million related to
vixotrigine for the potential treatment of TGN during the first quarter of 2021.
As of December 31, 2021, the carrying value associated with the remaining IPR&D
asset for DPN was $132.7 million and the fair value of this asset was not
significantly in excess of its carrying value.
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BIIB111 and BIIB112
During the fourth quarter of 2020 we recognized an impairment charge of
$115.0 million related to BIIB111 as a result of third-party manufacturing
delays that impacted the timing and increased the costs associated with
advancing BIIB111 through Phase 3 development.
During the second quarter of 2021 we announced that our Phase 3 STAR study of
BIIB111 and our Phase 2/3 XIRIUS study of BIIB112 did not meet their primary
endpoints. In the third quarter of 2021 we suspended further development on
these programs based on the decision by management as part of its strategic
review process. For the year ended December 31, 2021, we recognized an
impairment charge of $365.0 million related to BIIB111 and an impairment charge
of $220.0 million related to BIIB112, reducing the remaining book values of
these IPR&D intangible assets to zero.
In addition, for the year ended December 31, 2021, as a result of our decision
to suspend further development of BIIB111 and BIIB112, we recognized charges of
approximately $39.1 million related to our manufacturing arrangements and other
costs that we expect to incur as a result of suspending these programs, which
were recorded as research and development expense in our consolidated statements
of income.
For additional information on the amortization and impairment of our acquired
intangible assets, please read Note 6, Intangible Assets and Goodwill, to our
consolidated financial statements included in this report.
Collaboration Profit (Loss) Sharing
[[Image Removed: biib-20211231_g34.jpg]]
Collaboration profit (loss) sharing primarily includes Samsung Bioepis' 50.0%
share of the profit or loss related to our biosimilars commercial agreement with
Samsung Bioepis and, beginning in the second quarter of 2021, Eisai's 45.0%
share of
income and expense in the U.S. related to the ADUHELM Collaboration Agreement.
For the years ended December 31, 2021, 2020 and 2019 we recognized net
profit-sharing expense of $285.4 million, $266.5 million and $241.6 million,
respectively, to reflect Samsung Bioepis' 50.0% sharing of the net collaboration
profits.
For the year ended December 31, 2021, we recognized net profit-sharing income of
$233.2 million to reflect Eisai's 45.0% share of loss related to the ADUHELM
Collaboration Agreement. We also recognized net profit-sharing income of
$45.0 million to reflect Eisai's 45.0% share of the $100.0 million milestone
payment made to Neurimmune related to the launch of ADUHELM in the U.S.
For the year ended December 31, 2020, we recognized net profit-sharing income of
$33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone
payment made to Neurimmune related to the completed submission of the BLA for
the approval of ADUHELM to the FDA.
For additional information on our collaboration arrangements with Samsung
Bioepis and Eisai, please read Note 18, Collaborative and Other Relationships,
to our consolidated financial statements included in this report.
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(Gain) Loss on Divestiture of Hillerød, Denmark Manufacturing Operations
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In March 2019 we entered into a share purchase agreement with FUJIFILM to sell
all of the outstanding shares of our subsidiary that owned our biologics
manufacturing operations in Hillerød, Denmark. The transaction closed in August
2019.
During the year ended December 31, 2020, we reduced our estimate of the fair
value of the adverse commitment associated with the guarantee of future batch
production by approximately $62.0 million based on our current manufacturing
forecasts. Additionally, we recorded a reduction to our pre-tax loss of
approximately $30.5 million due to a refund of interest paid associated with a
tax matter.
For additional information on the divestiture of our Hillerød, Denmark
manufacturing operations, please read Note 3, Divestitures, to our consolidated
financial statements included in this report.
(Gain) Loss on Fair Value Remeasurement of Contingent Consideration
[[Image Removed: biib-20211231_g36.jpg]]
Consideration payable for certain of our business combinations includes future
payments that are contingent upon the occurrence of a particular event or
events. We record an obligation for such
contingent consideration payments at fair value on the acquisition date. We then
revalue our contingent consideration obligations each reporting period. Changes
in the fair value of our contingent consideration obligations, other than
changes due to payments, are recognized as a (gain) loss on fair value
remeasurement of contingent consideration in our consolidated statements of
income.
The gain on fair value remeasurement of contingent consideration for 2021 was
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.
The gain on fair value remeasurement of contingent consideration for 2020 was
primarily due to the remeasurement of the contingent consideration associated
with our BIIB054 program as well as 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.
For additional information on our IPR&D intangible assets, please read Note 6,
Intangible Assets and Goodwill, to our consolidated financial statements
included in this report.
Acquired In-Process Research and Development
[[Image Removed: biib-20211231_g37.jpg]]
BIIB118 Acquisition
In March 2020 we acquired BIIB118 (CK1 inhibitor) for the potential treatment of
patients with behavioral and neurological symptoms across various psychiatric
and neurological diseases from Pfizer Inc. (Pfizer). In connection with this
acquisition, we made an upfront payment of $75.0 million to Pfizer, which was
accounted for as an asset acquisition and
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recorded as acquired IPR&D in our consolidated statements of income as BIIB118
has not yet reached technological feasibility.
For additional information on our acquisition of BIIB118, please read Note 2,
Acquisitions, to our consolidated financial statements included in this report.
Other Income (Expense), Net
[[Image Removed: biib-20211231_g38.jpg]]
For 2021 compared to 2020, the change in other income (expense), net primarily
reflects net unrealized losses on our holdings in equity securities.
For the year ended December 31, 2021, net unrealized losses and realized gains
on our holdings in equity securities were approximately $831.4 million and $10.3
million, respectively, compared to net unrealized and realized gains of $681.8
million and $12.1 million, respectively, in 2020. The net unrealized losses
recognized during the year ended December 31, 2021, primarily reflect decreases
in the aggregate fair value of our investments in Denali, Sage, Sangamo and
Ionis common stock of approximately $819.6 million.
For the year ended December 31, 2021, net interest expense was $242.6 million,
compared to $180.5 million in 2020. This increase was primarily due to a lower
amount of interest being capitalized to capital projects in 2021, compared to
2020, due to a portion of our Solothurn facility being placed in service in 2021
and lower interest income earned on our investments in 2021, compared to 2020.
On April 30, 2020, we issued our senior unsecured notes for an aggregate
principal amount of $3.0 billion (2020 Senior Notes).
We expect a moderate increase in interest expense in 2022, compared to 2021,
primarily due to lower interest being capitalized as a result of assets being
placed into service during 2021.
For additional information on our 2020 Senior Notes, please read Note 12,
Indebtedness, to our
consolidated financial statements included in this report.
Income Tax Provision
[[Image Removed: biib-20211231_g39.jpg]]
Our effective tax rate fluctuates from year to year due to the global nature of
our operations. The factors that most significantly impact our effective tax
rate include changes in tax laws, variability in the allocation of our taxable
earnings among multiple jurisdictions, the amount and characterization of our
research and development expense, the levels of certain deductions and credits,
acquisitions and licensing transactions.
For the year ended December 31, 2021, compared to 2020, the decrease in our
effective tax rate, excluding the impact of the Neurimmune deferred tax asset,
as discussed below, was primarily due to the change in the territorial mix of
our profitability, which included the adverse effect of generic competition for
TECFIDERA in the U.S. market, the tax impacts of the BIIB111 and BIIB112
impairment charges and the impact of the non-cash tax effects of changes in the
value of our equity investments, where we recorded net unrealized losses in 2021
and net unrealized gains in 2020. Our 2020 effective tax rate also reflected an
income tax expense related to the establishment of a valuation allowance against
certain deferred tax assets, the realization of which is dependent on future
sales of TECFIDERA in the U.S.
In addition, for the year ended December 31, 2021, compared to 2020, the
decrease in our effective tax rate was significantly impacted by a current year
deferred tax benefit in Switzerland resulting from the accelerated approval of
ADUHELM by the FDA in the U.S., recognized during the second
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quarter of 2021. We recorded a net deferred tax asset of approximately
$490.0 million during the second quarter of 2021. The net deferred tax asset is
comprised of approximately $945.0 million of gross deferred tax asset, reduced
by approximately $455.0 million of unrecognized tax benefit. During the fourth
quarter of 2021 we recorded a valuation allowance of approximately
$390.0 million related to this deferred tax asset. The deferred tax benefit
relates to Neurimmune's tax basis in ADUHELM, the realization of which is
dependent on future sales of ADUHELM and approval of the Swiss cantonal tax
authorities, with an equal and offsetting amount assigned to net income (loss)
attributable to noncontrolling interests, net of tax in our consolidated
statements of income, resulting in a zero net impact to net income attributable
to Biogen Inc.
For additional information on our collaboration arrangement with Neurimmune,
please read Note 19, Investments in Variable Interest Entities, to our
consolidated financial statements included in this report.
For additional information on our income taxes please read Note 16, Income
Taxes, to our consolidated financial statements included in this report.
Accounting for Uncertainty in Income Taxes
For additional information on our uncertain tax positions and income tax rate
reconciliation for 2021, 2020 and 2019, please read Note 16, Income Taxes, to
our consolidated financial statements included in this report.
Equity in (Income) Loss of Investee, Net of Tax
[[Image Removed: biib-20211231_g40.jpg]]
In February 2012 we entered into a joint venture agreement with Samsung
BioLogics establishing an entity, Samsung Bioepis, to develop, manufacture and
market biosimilar products.
In June 2018 we exercised our option under our joint venture agreement to
increase our ownership
percentage in Samsung Bioepis from approximately 5.0% to approximately 49.9%.
The share purchase transaction was completed in November 2018. As of
December 31, 2021, our ownership percentage remained at approximately 49.9%.
We recognize our share of the results of operations related to our investment in
Samsung Bioepis under the equity method of accounting one quarter in arrears
when the results of the entity become available, which is reflected as equity in
(income) loss of investee, net of tax in our consolidated statements of income.
We recognize amortization on certain basis differences resulting from our
November 2018 investment.
Certain officers and affiliates of our joint venture partner, Samsung BioLogics,
are currently subject to ongoing criminal proceedings that we continue to
monitor. While these proceedings could impact the operations of Samsung Bioepis
and its business, we have assessed the value of our investment in Samsung
Bioepis and continue to believe that the fair value of the investment is in
excess of its net book value.
For the year ended December 31, 2021, we recognized net income on our investment
of $34.9 million, reflecting our share of Samsung Bioepis' operating profits,
net of tax totaling $64.6 million offset by amortization of basis differences
totaling $29.7 million.
For the year ended December 31, 2020, we recognized net income on our investment
of $5.3 million, reflecting our share of Samsung Bioepis' operating profits, net
of tax totaling $45.3 million offset by amortization of basis differences
totaling $40.0 million.
Net income on our investment for the year ended December 31, 2021, reflects a
$31.2 million benefit related to the release of a valuation allowance on
deferred tax assets associated with Samsung Bioepis. The valuation allowance was
released in the second quarter of 2021 based on a consideration of the positive
and negative evidence, including the historic earnings of Samsung Bioepis.
For additional information on our collaboration arrangements with Samsung
Bioepis, please read Note 18, Collaborative and Other Relationships, to our
consolidated financial statements included in this report.
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Noncontrolling Interests, Net of Tax
[[Image Removed: biib-20211231_g41.jpg]]
Our consolidated financial statements include the financial results of our
variable interest entity, Neurimmune, as we determined that we are the primary
beneficiary.
For 2021 the change in net income (loss) attributable to noncontrolling
interests, net of tax, was primarily due to the recognition of a current year
deferred tax benefit associated with the accelerated approval of ADUHELM by the
FDA in the U.S. During the second quarter of 2021 we recorded a net deferred tax
asset of approximately $490.0 million related to Neurimmune's tax basis in
ADUHELM, the realization of which is dependent on future sales of ADUHELM and
approval of the Swiss cantonal tax authorities.
During the fourth quarter of 2021 we recorded a valuation allowance of
approximately $390.0 million related to this deferred tax asset. There is an
equal and offsetting amount assigned to net income (loss) attributable to
noncontrolling interests, net of tax in our consolidated statements of income,
resulting in a zero net impact to net income attributable to Biogen Inc.
For 2021 the change in net income (loss) attributable to noncontrolling
interests, net of tax, was also due to the $100.0 million milestone payment to
Neurimmune related to the launch of ADUHELM in the U.S. during the second
quarter of 2021.
For 2020 the change in net income (loss) attributable to noncontrolling
interests, net of tax, was primarily due to the $75.0 million milestone payment
to Neurimmune related to the completed submission of the BLA for the approval of
ADUHELM to the FDA.
For additional information on our collaboration agreement with Neurimmune,
please read Note 19, Investments in Variable Interest Entities, to our
consolidated financial statements included in this report.
For additional information on our income taxes please read Note 16, Income
Taxes, to our consolidated financial statements included in this report.

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————————————————– ——————————

T a ble of CONTENTS FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES Our financial position is summarized as follows:

                                                                     As of December 31,                   % Change
                                                                                                            2021
                                                                                                             vs.
(In millions, except percentages)                                 2021                2020                  2020
Financial assets:
Cash and cash equivalents                                     $  2,261.4          $  1,331.2                    69.9  %
Marketable securities - current                                  1,541.1             1,278.9                    20.5
Marketable securities - non-current                                892.0               772.1                    15.5

Total cash, cash equivalents and marketable securities $4,694.5

       $  3,382.2                    38.8  %

Loans:

Current portion of notes payable                              $    999.1          $        -                         nm
Notes payable                                                    6,274.0             7,426.2                   (15.5)
Total borrowings                                              $  7,273.1          $  7,426.2                    (2.1) %
Working Capital:
Current assets                                                $  7,856.5          $  6,887.1                    14.1  %
Current liabilities                                             (4,298.2)           (3,742.2)                   14.9
Total working capital                                         $  3,558.3          $  3,144.9                    13.1  %




nm Not meaningful
For the year ended December 31, 2021, certain significant cash flows were as
follows:
•$3.6 billion in net cash flow provided by operating activities, which reflected
an upfront payment of $125.0 million made in connection with entering into our
collaboration with InnoCare and recognized as research and development expense;
•$1.8 billion used for share repurchases;
•$170.0 million used in connection with our Exchange Offer;
•$258.1 million used for purchases of property, plant and equipment;
•$247.9 million in total net payments for income taxes; and
•$100.0 million milestone payment to Neurimmune.
For the year ended December 31, 2020, certain significant cash flows were as
follows:
•$4.2 billion in net cash flows provided by operating activities, which
reflected $1.9 billion of upfront payments and the premium on stock purchases
made in connection with entering into our collaborations with Sage, Denali and
Sangamo and recognized as research and development expense;
•$6.7 billion used for share repurchases;
•$3.0 billion in proceeds received from the
issuance of our 2020 Senior Notes;
•$1.5 billion payment made for the redemption of our 2.90% Senior Notes due
September 15, 2020, prior to their maturity;
•$906.7 million in total net payments for income taxes;
•$441.0 million used to purchase Sage common stock;
•$423.7 million used to purchase Denali common stock;
•$141.8 million used to purchase Sangamo common stock; and
•$424.8 million used for purchases of property, plant and equipment.
Overview
We have historically financed our operating and capital expenditures primarily
through cash flow earned through our operations. We expect our operating
expenditures, particularly those related to research and development, clinical
trials, commercialization of new products and international expansion to
continue to grow. However, we expect to continue funding our current and planned
operating requirements primarily through our cash flow earned from our
operations as well as our existing cash resources. We believe generic
competition for TECFIDERA in the U.S. will continue to reduce our cash flow from
operations in 2022 and will have a significant adverse impact on our future cash
flow
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from operations. Additionally, in 2022 we will repay or refinance $1.0 billion
related to our 3.625% Senior Note due September 15, 2022.
We believe that our existing funds, when combined with cash generated from
operations and our access to additional financing resources, if needed, are
sufficient to satisfy our operating, working capital, strategic alliance,
milestone payment, capital expenditure and debt service requirements for the
foreseeable future. In addition, we may choose to opportunistically return cash
to shareholders and pursue other business initiatives, including acquisition and
licensing activities. We may, from time to time, also seek additional funding
through a combination of new collaborative agreements, strategic alliances and
additional equity and debt financings or from other sources should we identify a
significant new opportunity.
For additional information on certain risks that could negatively impact our
financial position or future results of operations, please read Item 1A. Risk
Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk
included in this report.
Cash, Cash Equivalents and Marketable Securities
Until required for another use in our business, we typically invest our cash
reserves in bank deposits, certificates of deposit, commercial paper, corporate
notes, U.S. and foreign government instruments, overnight reverse repurchase
agreements and other interest-bearing marketable debt instruments in accordance
with our investment policy. It is our policy to mitigate credit risk in our cash
reserves and marketable securities by maintaining a well-diversified portfolio
that limits the amount of exposure as to institution, maturity and investment
type.
As of December 31, 2021, we had cash, cash equivalents and marketable securities
totaling approximately $4.7 billion compared to approximately $3.4 billion as of
December 31, 2020. The change in cash, cash equivalents and marketable
securities at December 31, 2021, from December 31, 2020, was primarily due to
net cash flow provided by operating activities, partially offset by cash used
for share repurchases and capital expenditures, cash payments made in connection
with our Exchange Offer and a milestone payment made to Neurimmune.
Investments and other assets in our consolidated balance sheet as of
December 31, 2021 and 2020, include the carrying value of our investment in
Samsung Bioepis of $599.9 million and $620.2 million, respectively. As Samsung
Bioepis is a privately-held entity, our ability to liquidate our investment in
Samsung Bioepis may be limited and we may realize significantly less than the
value of
such investment. The investment is also subject to foreign currency exchange
fluctuations.
In connection with our collaboration with Sangamo, we purchased approximately
24 million shares of Sangamo common stock in April 2020. As of December 31, 2021
and 2020, the fair value of this investment was $173.7 million and
$333.7 million, respectively.
In connection with our collaboration with Denali, we purchased approximately
13 million shares of Denali common stock in September 2020. As of December 31,
2021 and 2020, the fair value of this investment was $550.7 million and
$935.7 million, respectively.
In connection with our collaboration with Sage, we purchased approximately
6.2 million shares of Sage common stock in December 2020. As of December 31,
2021 and 2020, the fair value of this investment was $231.9 million and
$433.9 million, respectively.
Our investment in Ionis common stock had a fair value of $87.5 million and
$249.1 million as of December 31, 2021 and 2020, respectively. The decrease was
partially due to the sale of a portion of our investment in Ionis common stock
during the first quarter of 2021.
For additional information on our collaboration arrangements with Samsung
Bioepis, Sangamo, Denali, Sage and Ionis, please read Note 18, Collaborative and
Other Relationships, to our consolidated financial statements included in this
report.
Borrowings
In February 2021 we completed our Exchange Offer, consisting of the following:
•$624.6 million aggregate principal amount of our 2045 Senior Notes was
exchanged for $700.7 million aggregate principal amount of our 2051 Senior Notes
and approximately $151.8 million of aggregate cash payments; and
•$8.9 million aggregate principal amount of our 2045 Senior Notes was redeemed
for approximately $12.1 million of aggregate cash payments, excluding accrued
and unpaid interest.
In April 2020 we issued our 2020 Senior Notes for an aggregate principal amount
of $3.0 billion, consisting of the following:
•$1.5 billion aggregate principal amount of 2.25% Senior Notes due May 1, 2030;
and
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•$1.5 billion aggregate principal amount of 3.15% Senior Notes due May 1, 2050.
The following is a summary of our currently outstanding senior secured notes
issued in 2015 (2015 Senior Notes):
•$1.0 billion aggregate principal amount of 3.625% Senior Notes due September
15, 2022;
•$1.75 billion aggregate principal amount of 4.05% Senior Notes due September
15, 2025; and
•$1.12 billion aggregate principal amount of 5.20% Senior Notes due September
15, 2045.
Our 2020 Senior Notes and our 2015 Senior Notes were issued at a discount, which
are amortized as additional interest expense over the period from issuance
through maturity.
For a summary of the fair values of our outstanding borrowings as of
December 31, 2021 and 2020, please read Note 7, Fair Value Measurements, to our
consolidated financial statements included in this report.
Credit Facility
In January 2020 we entered into a $1.0 billion, five-year senior unsecured
revolving credit facility under which we are permitted to draw funds for working
capital and general corporate purposes. The terms of the revolving credit
facility include a financial covenant that requires us not to exceed a maximum
consolidated leverage ratio. As of December 31, 2021 and 2020, we had no
outstanding borrowings and were in compliance with all covenants under this
facility.
Working Capital
Working capital is defined as current assets less current liabilities. Working
capital was $3.6 billion and $3.1 billion as of December 31, 2021 and 2020,
respectively. The change in working capital reflects an increase in total
current assets of approximately $969.4 million and an increase in total current
liabilities of approximately $556.0 million.
The increase in total current assets was primarily driven by an increase in net
cash, cash equivalents and marketable securities, due to net cash flow provided
by operating activities, partially offset by cash used for share repurchases and
capital expenditures, cash payments made in connection with our Exchange Offer
and a milestone payment made to Neurimmune.
The increase in total current liabilities was primarily due to the
reclassification of $1.0 billion of our Senior Notes due September 15, 2022, to
current liabilities from notes payable, as these Senior Notes
are due within one year. This increase was partially offset by a reduction in
accounts payable as well as accrued expense and other, which was primarily
related to decreases in the accrual of contingent payments, the accrual for
employee compensation and benefits and the fair values of derivative
liabilities.
Share Repurchase Programs
In October 2020 our Board of Directors authorized our 2020 Share Repurchase
Program, which is a program to repurchase up to $5.0 billion of our common
stock. Our 2020 Share Repurchase Program does not have an expiration date. All
share repurchases under our 2020 Share Repurchase Program will be retired. Under
our 2020 Share Repurchase Program, we repurchased and retired approximately
6.0 million and 1.6 million shares of our common stock at a cost of
approximately $1.8 billion and $400.0 million during the years ended
December 31, 2021 and 2020, respectively. Approximately $2.8 billion remained
available under our 2020 Share Repurchase Program as of December 31, 2021.
In December 2019 our Board of Directors authorized our December 2019 Share
Repurchase Program, which was a program to repurchase up to $5.0 billion of our
common stock that was completed as of September 30, 2020. All shares repurchased
under our December 2019 Share Repurchase Program were retired. Under our
December 2019 Share Repurchase Program, we repurchased and retired approximately
16.7 million shares of our common stock at a cost of approximately $5.0 billion
during the year ended December 31, 2020.
In March 2019 our Board of Directors authorized our March 2019 Share Repurchase
Program, which was a program to repurchase up to $5.0 billion of our common
stock that was completed as of March 31, 2020. All shares repurchased under our
March 2019 Share Repurchase Program were retired. Under our March 2019 Share
Repurchase Program, we repurchased and retired approximately 4.1 million and
14.7 million shares of our common stock at a cost of approximately $1.3 billion
and $3.7 billion during the years ended December 31, 2020 and 2019,
respectively.
In August 2018 our Board of Directors authorized our 2018 Share Repurchase
Program, which was a program to repurchase up to $3.5 billion of our common
stock that was completed as of June 30, 2019. All share repurchases under our
2018 Share Repurchase Program were retired. Under our 2018 Share Repurchase
Program, we repurchased and retired approximately 8.9 million shares of our
common stock at a cost of approximately $2.1 billion during the year ended
December 31, 2019.
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Cash Flow
The following table summarizes our cash flow activity:
                                                                                                                            % Change

                                                         For the Years Ended December 31,                         2021                   2020
                                                                                                                   vs.                    vs.
(In millions, except percentages)                   2021                   2020               2019                2020                   2019
Net cash flow provided by operating
activities                                   $    3,639.9              $ 4,229.8          $ 7,078.6                 (13.9) %                (40.2) %
Net cash flow provided by (used in)
investing activities                               (563.7)                (608.6)             470.5                   7.4                  (229.4)
Net cash flow used in financing
activities                                       (2,086.2)              (5,272.7)          (5,860.4)                 60.4                    10.0




nm Not meaningful
Operating Activities
Cash flow from operating activities represents the cash receipts and
disbursements related to all of our activities other than investing and
financing activities. We expect cash provided from operating activities will
continue to be our primary source of funds to finance operating needs and
capital expenditures for the foreseeable future.
Operating cash flow is derived by adjusting our net income for:
•non-cash operating items such as depreciation and amortization, impairment
charges, unrealized gain (loss) on strategic investments, acquired IPR&D and
share-based compensation;
•changes in operating assets and liabilities, which reflect timing differences
between the receipt and payment of cash associated with transactions and when
they are recognized in results of operations; and
•changes in the fair value of contingent payments associated with our
acquisitions of businesses and payments related to collaborations.
For 2021 compared to 2020, the decrease in net cash flow provided by operating
activities was
primarily due to lower net income. Net income in 2020 reflected approximately
$1,084.0 million, $601.3 million and $208.0 million of upfront payments made in
connection with entering into our
collaborations with Sage, Denali and Sangamo, respectively.
Investing Activities
For 2021 compared to 2020, the decrease in net cash flow used in investing
activities was primarily due to the purchases of the common stock of Sangamo,
Denali and Sage totaling $1.0 billion during 2020 as well as higher capital
expenditures and acquisitions of IPR&D and other intangible assets in 2020,
partially offset by higher net proceeds received from the sale of marketable
securities in 2020 as compared to the current year.
Financing Activities
For 2021 compared to 2020, the decrease in net cash flow used in financing
activities was primarily due to the greater number of shares repurchased in 2020
as compared to the comparative period in 2021, partially offset by cash used in
connection with our Exchange Offer and a milestone payment to Neurimmune in
2021.
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Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
The following table summarizes our contractual obligations as of December 31,
2021, excluding amounts related to uncertain tax positions, funding commitments,
contingent development, regulatory and commercial milestone payments, contingent
payments and contingent consideration related to our business combinations, as
described below.
                                                                                  Payments Due by Period
                                                                      Less than            1 to 3             3 to 5             After
(In millions)                                        Total              1 Year             Years              Years             5 Years

Non-cancellable operating leases (1)(2) $321.1 $71.7 $112.8 $71.3 $65.3
Long-term debts (3)

                     11,580.3            1,259.9              465.4            2,126.8            7,728.2
Purchase and other obligations (4)                    982.9              230.1              509.1              239.2                4.5
Defined benefit obligation                            132.4                  -                  -                  -              132.4
Total contractual obligations                    $ 13,016.7          $ 1,561.7          $ 1,087.3          $ 2,437.3          $ 7,930.4




(1) We lease properties and equipment for use in our operations. Amounts
reflected within the table above detail future minimum rental commitments under
non-cancelable operating leases as of December 31 for each of the periods
presented. In addition to the minimum rental commitments, these leases may
require us to pay additional amounts for taxes, insurance, maintenance and other
operating expenses.
(2) Obligations are presented net of sublease income expected to be received for
our vacated small-scale biologics manufacturing facility in Cambridge, MA, the
vacated portion of our Weston, MA facility and other facilities throughout the
world.
(3) Long-term debt obligations are related to our 2015 Senior Notes and our 2020
Senior Notes, including principal and interest payments.
(4) Purchase and other obligations include $633.0 million related to the
remaining payments on a one-time mandatory deemed repatriation tax on
accumulated foreign subsidiaries' previously untaxed foreign earnings (the
Transition Toll Tax) and $10.8 million related to the fair value of net
liabilities on derivative contracts.
Royalty Payments
TYSABRI
We are obligated to make contingent payments of 18.0% on annual worldwide net
sales of TYSABRI up to $2.0 billion and 25.0% on annual worldwide net sales of
TYSABRI that exceed $2.0 billion. Royalty payments are recognized as cost of
sales in our consolidated statements of income.
SPINRAZA
We make royalty payments on annual worldwide net sales of SPINRAZA using a
tiered royalty rate between 11.0% and 15.0%, which are recognized as cost of
sales in our consolidated statements of income.
VUMERITY
In October 2019 the FDA approved VUMERITY for the treatment of RMS. During the
fourth quarter of 2021 VUMERITY was approved for the treatment of RRMS in the
E.U., Switzerland and the U.K. Under our agreement with Alkermes Pharma Ireland
Limited, a subsidiary of Alkermes plc (Alkermes), we make royalty payments to
Alkermes on worldwide net sales of VUMERITY using a royalty rate of 15.0%, which
are recorded as cost of sales in our consolidated statements of income.
In October 2019 we entered into a new supply agreement and amended our license
and collaboration agreement with Alkermes. We have elected to initiate a
technology transfer and, following
a transition period, to manufacture VUMERITY or have VUMERITY manufactured by a
third-party we have engaged in exchange for paying an increased royalty rate to
Alkermes on any portion of future worldwide net sales of VUMERITY that is
manufactured by us or our designee. For additional information on our
collaboration arrangement with Alkermes, please read Note 18, Collaborative and
Other Relationships, to our consolidated financial statements included in this
report.
Contingent Consideration related to Business Combinations
In connection with our acquisition of Convergence Pharmaceuticals Ltd. we agreed
to make additional payments based upon the achievement of certain milestone
events.
We recognized the contingent consideration liabilities associated with this
acquisition at their fair value on the acquisition date and revalue these
obligations each reporting period. We may pay up to approximately $400.0 million
in remaining milestones related to this acquisition.
Contingent Development, Regulatory and Commercial Milestone Payments
Based on our development plans as of December 31, 2021, we could trigger
potential future milestone payments to third-parties of up to approximately
$10.0 billion, including approximately $2.0 billion in development milestones,
approximately
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$900.0 million in regulatory milestones and approximately $7.1 billion in
commercial milestones, as part of our various collaborations, including
licensing and development programs. Payments under these agreements generally
become due and payable upon achievement of certain development, regulatory or
commercial milestones. Because the achievement of these milestones was not
considered probable as of December 31, 2021, such contingencies have not been
recorded in our financial statements. Amounts related to contingent milestone
payments are not considered contractual obligations as they are contingent on
the successful achievement of certain development, regulatory or commercial
milestones.
If certain clinical and commercial milestones are met, we may pay up to
$133.9 million in milestones in 2022 under our current agreements. Additionally,
if aducanumab receives regulatory approval in the jurisdictions where we have
submitted filings, we may pay up to $100.0 million in additional milestones to
Neurimmune, which includes $50.0 million if launched in three or more countries
in the E.U. and $50.0 million if launched in Japan. Milestones payable to
Neurimmune are shared expenses under the ADUHELM Collaboration Agreement.
For additional information on our collaboration arrangements with Eisai, please
read Note 18, Collaborative and Other Relationships, to our consolidated
financial statements included in this report.
For additional information on our collaboration arrangement with Neurimmune,
please read Note 19, Investments in Variable Interest Entities, to our
consolidated financial statements included in this report.
Other Funding Commitments
As of December 31, 2021, we have several ongoing clinical studies in various
clinical trial stages. Our most significant clinical trial expenditures are to
CROs. The contracts with CROs are generally cancellable, with notice, at our
option. We recorded accrued expense of approximately $27.3 million in our
consolidated balance sheets for expenditures incurred by CROs as of December 31,
2021. We have approximately $676.1 million in cancellable future commitments
based on existing CRO contracts as of December 31, 2021.
As part of the sale of our Hillerød, Denmark manufacturing operations to
FUJIFILM, we provided FUJIFILM with certain minimum batch production commitment
guarantees. There is a risk that the minimum contractual batch production
commitments will not be met. Based upon current estimates we do not expect to
incur an adverse commitment obligation associated with such guarantees. We
developed this
estimate using a probability-weighted estimate of future manufacturing activity
and may further adjust this estimate based upon changes in business conditions,
which may result in the increase or reduction of this adverse commitment
obligation in subsequent periods.
For additional information on the divestiture of our Hillerød, Denmark
manufacturing operations, please read Note 3, Divestitures, to our consolidated
financial statements included in this report.
Tax Related Obligations
We exclude liabilities pertaining to uncertain tax positions from our summary of
contractual obligations as we cannot make a reliable estimate of the period of
cash settlement with the respective taxing authorities. As of December 31, 2021,
we have approximately $106.8 million of liabilities associated with uncertain
tax positions.
As of December 31, 2021 and 2020, we have accrued income tax liabilities of
approximately $633.0 million and $697.0 million, respectively, under the
Transition Toll Tax. Of the amounts accrued as of December 31, 2021,
approximately $72.7 million is expected to be paid within one year. The
Transition Toll Tax will be paid in installments over an eight--year period,
which started in 2018, and will not accrue interest.
Other Off-Balance Sheet Arrangements
We do not have any relationships with entities often referred to as structured
finance or special purpose entities that were established for the purpose of
facilitating off-balance sheet arrangements. As such, we are not exposed to any
financing, liquidity, market or credit risk that could arise if we had engaged
in such relationships. We consolidate variable interest entities if we are the
primary beneficiary.
New Accounting Standards
For a discussion of new accounting standards please read Note 1, Summary of
Significant Accounting Policies, to our consolidated financial statements
included in this report.
Legal Matters
For a discussion of legal matters as of December 31, 2021, please read Note 20,
Litigation, to our consolidated financial statements included in this report.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements, which have been
prepared in accordance
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with accounting principles generally accepted in the U.S. (U.S. GAAP), requires
us to make estimates, judgments and assumptions that may affect the reported
amounts of assets, liabilities, equity, revenue and expense and related
disclosure of contingent assets and liabilities. On an ongoing basis we evaluate
our estimates, judgments and assumptions. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable, the
results of which form the basis for making judgments about the carrying values
of assets, liabilities and equity and the amount of revenue and expense. Actual
results may differ from these estimates. Other significant accounting policies
are outlined in Note 1, Summary of Significant Accounting Policies, to our
consolidated financial statements included in this report.
Revenue Recognition
We recognize revenue when our customer obtains control of promised goods or
services, in an amount that reflects the consideration which we expect to
receive in exchange for those goods or services. We recognize revenue following
the five-step model prescribed under Financial Accounting Standards Board (FASB)
Accounting Standards Codification 606, Revenue from Contracts with Customers:
(i) identify contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv)
allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) we satisfy the performance obligations.
Product Revenue
In the U.S., we sell our products primarily to wholesale distributors and
specialty pharmacy providers. In other countries, we sell our products primarily
to wholesale distributors, hospitals, pharmacies and other third-party
distribution partners. These customers subsequently resell our products to
health care providers and patients. In addition, we enter into arrangements with
health care providers and payors that provide for government-mandated or
privately-negotiated discounts and allowances related to our products.
Product revenue is recognized when the customer obtains control of our product,
which occurs at a point in time, typically upon delivery to the customer. We
expense incremental costs of obtaining a contract as and when incurred if the
expected amortization period of the asset that we would have recognized is one
year or less or the amount is immaterial.
Reserves for Discounts and Allowances
Product revenue is recorded net of reserves established for applicable discounts
and allowances that are offered within contracts with our customers, health care
providers or payors, including those associated with the implementation of
pricing actions in certain of the international markets in which we operate. Our
process for estimating reserve established for these variable consideration
components do not differ materially fro our historical practices.
Product revenue reserves, which are classified as a reduction in product
revenue, are generally characterized in the following categories: discounts,
contractual adjustments and returns.
These reserves are based on estimates of the amounts earned or to be claimed on
the related sales and are classified as reductions of accounts receivable (if
the amount is payable to our customer) or a liability (if the amount is payable
to a party other than our customer). Our estimates of reserves established for
variable consideration are calculated based upon a consistent application of our
methodology utilizing the expected value method. These estimates reflect our
historical experience, current contractual and statutory requirements, specific
known market events and trends, industry data and forecasted customer buying and
payment patterns. The transaction price, which includes variable consideration
reflecting the impact of discounts and allowances, may be subject to constraint
and is included in the net sales price only to the extent that it is probable
that a significant reversal of the amount of the cumulative revenue recognized
will not occur in a future period. Actual amounts may ultimately differ from our
estimates. If actual results vary, we adjust these estimates, which could have
an effect on earnings in the period of adjustment.
As of December 31, 2021, a 10.0% change in our discounts, contractual
adjustments and reserves would have resulted in a decrease of our pre-tax
earnings by approximately $359.7 million.
In addition to discounts, rebates and product returns, we also maintain certain
customer service contracts with distributors and other customers in the
distribution channel that provide us with inventory management, data and
distribution services, which are generally reflected as a reduction of revenue.
To the extent we can demonstrate a separable benefit and fair value for these
services we classify these payments in selling, general and administrative
expense in our consolidated statements of income.
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For additional information on our revenue, please read Note 4, Revenue, to our
consolidated financial statements included in this report.
Inventory
At each reporting period we review our inventories for excess or obsolescence
and write-down obsolete or otherwise unmarketable inventory to its estimated net
realizable value. The determination of obsolete or excess inventory, requires
management to make estimates based on assumptions about the future demand of our
products, product expiration dates, estimated future sales and our general
future plans. If customer demand subsequently differs from our forecasts,
requirements for inventory write-offs that differ from our estimates may become
necessary.
Although we believe that the assumptions we use in estimating inventory
write-downs are reasonable, no assurance can be given that significant future
changes in these assumptions or changes in future events and market conditions
could result in different estimates.
During the fourth quarter of 2021 we wrote-off approximately $120.0 million of
inventory in excess of forecasted demand related to ADUHELM. As of December 31,
2021, we had approximately $223.0 million of inventory related to ADUHELM. We
may record additional write-downs of ADUHELM inventory if the final NCD is not
broader than the proposed NCD.
Acquired Intangible Assets, including IPR&D
When we purchase a business, the acquired IPR&D is measured at fair value,
capitalized as an intangible asset and tested for impairment at least annually,
as of October 31, until commercialization, after which time the IPR&D is
amortized over its estimated useful life. If we acquire an asset or group of
assets that do not meet the definition of a business under applicable accounting
standards, the acquired IPR&D is expensed on its acquisition date. Future costs
to develop these assets are recorded to research and development expense as they
are incurred.
We have acquired, and expect to continue to acquire, intangible assets through
the acquisition of biotechnology companies or through the consolidation of
variable interest entities. These intangible assets primarily consist of
technology associated with human therapeutic products and IPR&D product
candidates. When significant identifiable intangible assets are acquired, we
generally engage an independent third-party valuation firm to assist in
determining the fair values of these assets as of the acquisition date.
Management will determine the fair value of less significant identifiable
intangible assets acquired. Discounted cash flow models are typically used in
these valuations, and these models require the use of significant estimates and
assumptions including but not limited to:
•estimating the timing of and expected costs to complete the in-process
projects;
•projecting regulatory approvals;
•estimating future cash flow from product sales resulting from completed
products and in process projects; and
•developing appropriate discount rates and probability rates by project.
We believe the fair values assigned to the intangible assets acquired are based
upon reasonable estimates and assumptions given available facts and
circumstances as of the acquisition dates.
If these projects are not successfully developed, the sales and profitability of
the company may be adversely affected in future periods. Additionally, the value
of the acquired intangible assets may become impaired. No assurance can be given
that the underlying assumptions used to estimate expected project sales,
development costs or profitability, or the events associated with such projects,
will transpire as estimated.
Impairment and Amortization of Long-lived Assets
Long-lived assets to be held and used include property, plant and equipment as
well as intangible assets, including IPR&D and trademarks. Property, plant and
equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. We review our intangible assets with indefinite lives for
impairment annually, as of October 31, and whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable.
When performing our impairment assessment, we calculate the fair value using the
same methodology as described above under Acquired Intangible Assets, including
IPR&D. If the carrying value of our acquired IPR&D exceeds its fair value, then
the intangible asset is written down to its fair value. Changes in estimates and
assumptions used in determining the fair value of our acquired IPR&D could
result in an impairment. Impairments are recorded within amortization and
impairment of acquired intangible assets in our consolidated statements of
income.
Based on our most recent impairment assessment we incurred impairment charges of
approximately $629.3 million for the year ended December 31, 2021, mainly
related to the discontinuation of IPR&D programs. For additional
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information on our impairments, Note 6, Intangible Assets and Goodwill, to our
consolidated financial statements included in this report.
Our most significant intangible assets are our 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. We amortize the
intangible assets related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and
TECFIDERA (rest of world) products using the economic consumption method based
on revenue generated from the products underlying the related intangible assets.
An analysis of the anticipated lifetime revenue of our TYSABRI, AVONEX,
SPINRAZA, VUMERITY and TECFIDERA (rest of world) products is performed annually
during our long-range planning cycle and whenever events or changes in
circumstances would significantly affect the anticipated lifetime revenue of our
TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products.
For additional information on the impairment charges related to our long-lived
assets during 2021, 2020 and 2019, please read Note 6, Intangible Assets and
Goodwill, to our consolidated financial statements included in this report.
Contingent Consideration
We record contingent consideration resulting from a business combination at its
fair value on the acquisition date. Each reporting period thereafter, we revalue
the remaining obligations and record increases or decreases in their fair value
as an adjustment to contingent consideration expense in our consolidated
statements of income. Changes in the fair value of our contingent consideration
obligations can result from changes to one or multiple inputs, including
adjustments to the discount rates and achievement and timing of any cumulative
sales-based and development milestones or changes in the probability of certain
clinical events and changes in the assumed probability associated with
regulatory approval. These fair value measurements represent Level 3
measurements as they are based on significant inputs not observable in the
market.
Significant judgment is employed in determining the appropriateness of these
assumptions as of the acquisition date and for each subsequent period.
Accordingly, changes in assumptions described above, could have a material
impact on the amount of contingent consideration expense we record in any given
period.
Income Taxes
We prepare and file income tax returns based on our interpretation of each
jurisdiction's tax laws and
regulations. In preparing our consolidated financial statements, we estimate our
income tax liability in each of the jurisdictions in which we operate by
estimating our actual current tax expense together with assessing temporary
differences resulting from differing treatment of items for tax and financial
reporting purposes. These differences result in deferred tax assets and
liabilities, which are included in our consolidated balance sheets. Upon our
election in the fourth quarter of 2018 to record deferred taxes for global
intangible low-taxed income (GILTI), we have included amounts related to GILTI
taxes within temporary difference.
Significant management judgment is required in assessing the realizability of
our deferred tax assets. In performing this assessment, we consider whether it
is more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods in which those
temporary differences become deductible. In making this determination, under the
applicable financial accounting standards, we are allowed to consider the
scheduled reversal of deferred tax liabilities, projected future taxable income
and the effects of tax planning strategies. In the event that actual results
differ from our estimates, we adjust our estimates in future periods and we may
need to establish a valuation allowance, which could materially impact our
consolidated financial position and results of operations.
We account for uncertain tax positions using a "more likely than not" threshold
for recognizing and resolving uncertain tax positions. We evaluate uncertain tax
positions on a quarterly basis and consider various factors including, but not
limited to, changes in tax law, the measurement of tax positions taken or
expected to be taken in tax returns, the effective settlement of matters subject
to audit, information obtained during in process audit activities and changes in
facts or circumstances related to a tax position. We adjust the level of the
liability to reflect any subsequent changes in the relevant facts surrounding
the uncertain positions. Our liabilities for uncertain tax positions can be
relieved only if the contingency becomes legally extinguished, through either
payment to the taxing authority or the expiration of the statute of limitations,
the recognition of the benefits associated with the position meet the "more
likely than not" threshold or the liability becomes effectively settled through
the examination process. We consider matters to be effectively settled once the
taxing authority has completed all of its required or expected examination
procedures, including all appeals and administrative reviews, we have no plans
to appeal or litigate any aspect of the tax position and we believe that it is
highly unlikely that the taxing authority would examine or re-examine the
related tax
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Position of the table of contents. We also recognize potential interest and penalties related to unrecognized tax benefits in income tax expense.

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