BIIB-2015.3.31-10Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19311
 
BIOGEN INC.
(Exact name of registrant as specified in its charter)
Delaware
 
33-0112644
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
225 Binney Street, Cambridge, MA 02142
(617) 679-2000
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):    Yes  x    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check One):
Large accelerated filer x
 
Accelerated filer  o
Non-accelerated filer o
 
Smaller reporting company  o
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):    Yes  o    No  x
The number of shares of the issuer’s Common Stock, $0.0005 par value, outstanding as of April 17, 2015, was 235,229,512 shares.
 

Table of Contents

BIOGEN INC.
FORM 10-Q — Quarterly Report
For the Quarterly Period Ended March 31, 2015
TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
Financial Statements (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
PART II — OTHER INFORMATION
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 


2
Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are being made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) with the intention of obtaining the benefits of the “Safe Harbor” provisions of the Act. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “will” and other words and terms of similar meaning. Reference is made in particular to forward-looking statements regarding:
•
the anticipated amount, timing and accounting of revenues, contingent payments, milestone, royalty and other payments under licensing, collaboration or acquisition agreements, tax positions and contingencies, collectability of receivables, pre-approval inventory, cost of sales, research and development costs, compensation and other expenses, amortization of intangible assets, foreign currency exchange risk, estimated fair value of assets and liabilities, and impairment assessments;
•
expectations relating to sales, growth and pricing of our marketed products;
•
the potential impact of increased product competition in the markets in which we compete;
•
the timing, outcome and impact of administrative, regulatory, legal and other proceedings related to patents and other proprietary and intellectual property rights, tax audits, assessments and settlements, pricing matters, sales and promotional practices, product liability and other matters;
•
the costs, timing, potential approval and therapeutic scope of the development and commercialization of our pipeline products;
•
our intent to commit resources for research and development opportunities;
•
the impact of the continued uncertainty of the credit and economic conditions in certain countries in Europe and our collection of accounts receivable in such countries;
•
our ability to finance our operations and business initiatives and obtain funding for such activities; and
•
the impact of new laws and accounting standards.
These forward-looking statements involve risks and uncertainties, including those that are described in the “Risk Factors” section of this report and elsewhere within this report that could cause actual results to differ materially from those reflected in such statements. You should not place undue reliance on these statements. Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking statements.
NOTE REGARDING COMPANY AND PRODUCT REFERENCES
Throughout this report, “Biogen,” the “Company,” “we,” “us” and “our” refer to Biogen Inc. (formerly Biogen Idec Inc.) and its consolidated subsidiaries. References to “RITUXAN” refer to both RITUXAN (the trade name for rituximab in the U.S., Canada and Japan) and MabThera (the trade name for rituximab outside the U.S., Canada and Japan), and “ANGIOMAX” refers to both ANGIOMAX (the trade name for bivalirudin in the U.S., Canada and Latin America) and ANGIOX (the trade name for bivalirudin in Europe).
NOTE REGARDING TRADEMARKS
ALPROLIX®, AVONEX®, ELOCTATE®, PLEGRIDY®, RITUXAN®, TECFIDERA® and TYSABRI® are registered trademarks of Biogen. ELOCTATM, FUMADERMTM and ZINBRYTATM are trademarks of Biogen. The following are trademarks of the respective companies listed: ANGIOMAX® and ANGIOXTM — The Medicines Company; ARZERRA® — Glaxo Group Limited; BENLYSTA® — GlaxoSmithKline Intellectual Property Limited; BETASERON®— Bayer Pharma AG; EXTAVIA® — Novartis AG; FAMPYRATM — Acorda Therapeutics, Inc.; GAZYVA® —  Genentech, Inc.; and REBIF® — Ares Trading S.A.

3
Table of Contents

PART I FINANCIAL INFORMATION

BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
 
 
For the Three Months
Ended March 31,
 
2015
 
2014
Revenues:
 
 
 
Product, net
$
2,172,322

 
$
1,742,765

Unconsolidated joint business
330,611

 
296,885

Other
52,030

 
90,101

Total revenues
2,554,963

 
2,129,751

Cost and expenses:
 
 
 
Cost of sales, excluding amortization of acquired intangible assets
312,431

 
279,245

Research and development
460,549

 
528,884

Selling, general and administrative
560,361

 
511,674

Amortization of acquired intangible assets
95,903

 
143,258

(Gain) loss on fair value remeasurement of contingent consideration
7,844

 
(799
)
Total cost and expenses
1,437,088

 
1,462,262

Gain on sale of rights
—

 
3,859

Income from operations
1,117,875

 
671,348

Other income (expense), net
(14,986
)
 
(5,601
)
Income before income tax expense and equity in loss of investee, net of tax
1,102,889

 
665,747

Income tax expense
281,881

 
178,414

Equity in loss of investee, net of tax
834

 
7,605

Net income
820,174

 
479,728

Net income (loss) attributable to noncontrolling interests, net of tax
(2,367
)
 
(228
)
Net income attributable to Biogen Inc.
$
822,541

 
$
479,956

Net income per share:
 
 
 
Basic earnings per share attributable to Biogen Inc.
$
3.50

 
$
2.03

Diluted earnings per share attributable to Biogen Inc.
$
3.49

 
$
2.02

Weighted-average shares used in calculating:
 
 
 
Basic earnings per share attributable to Biogen Inc.
234,995

 
236,786

Diluted earnings per share attributable to Biogen Inc.
235,630

 
237,849














See accompanying notes to these unaudited condensed consolidated financial statements.

4
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BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
 
 
For the Three Months
Ended March 31,
 
2015
 
2014
Net income attributable to Biogen Inc.
$
822,541

 
$
479,956

Other comprehensive income:
 
 
 
Unrealized gains (losses) on securities available for sale, net of tax of $766 and $1,014 for the three months ended March 31, 2015 and 2014, respectively
1,299

 
1,725

Unrealized gains (losses) on foreign currency forward contracts, net of tax of $412 and $265 for the three months ended March 31, 2015 and 2014, respectively
87,246

 
5,791

Unrealized gains (losses) on pension benefit obligation
1,258

 
817

Currency translation adjustment
(100,853
)
 
(2,944
)
Total other comprehensive income (loss), net of tax
(11,050
)
 
5,389

Comprehensive income attributable to Biogen Inc.
811,491

 
485,345

Comprehensive income (loss) attributable to noncontrolling interests, net of tax
(2,267
)
 
(228
)
Comprehensive income
$
809,224

 
$
485,117




































See accompanying notes to these unaudited condensed consolidated financial statements.

5
Table of Contents

BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except per share amounts)
 
 
As of March 31,
2015
 
As of December 31,
2014
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,478,051

 
$
1,204,924

Marketable securities
673,946

 
640,460

Accounts receivable, net
1,389,995

 
1,292,445

Due from unconsolidated joint business, net
311,956

 
283,360

Inventory
825,349

 
804,022

Other current assets
579,599

 
447,462

Total current assets
5,258,896

 
4,672,673

Marketable securities
1,377,325

 
1,470,652

Property, plant and equipment, net
1,739,628

 
1,765,683

Intangible assets, net
4,353,123

 
4,028,507

Goodwill
1,849,852

 
1,760,249

Investments and other assets
640,630

 
618,795

Total assets
$
15,219,454

 
$
14,316,559

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Current portion of notes payable
$
3,254

 
$
3,136

Taxes payable
322,075

 
168,058

Accounts payable
236,128

 
229,178

Accrued expenses and other
1,384,774

 
1,819,334

Total current liabilities
1,946,231

 
2,219,706

Notes payable
580,672

 
582,061

Long-term deferred tax liability
130,564

 
50,656

Other long-term liabilities
892,529

 
650,096

Total liabilities
3,549,996

 
3,502,519

Commitments and contingencies


 


Equity:
 
 
 
Biogen Inc. shareholders’ equity
 
 
 
Preferred stock, par value $0.001 per share
—

 
—

Common stock, par value $0.0005 per share
129

 
129

Additional paid-in capital
4,242,426

 
4,196,156

Accumulated other comprehensive loss
(70,538
)
 
(59,488
)
Retained earnings
10,106,460

 
9,283,919

Treasury stock, at cost
(2,611,706
)
 
(2,611,706
)
Total Biogen Inc. shareholders’ equity
11,666,771

 
10,809,010

Noncontrolling interests
2,687

 
5,030

Total equity
11,669,458

 
10,814,040

Total liabilities and equity
$
15,219,454

 
$
14,316,559



See accompanying notes to these unaudited condensed consolidated financial statements.

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Table of Contents

BIOGEN INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
 
 
For the Three Months
Ended March 31,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
820,174

 
$
479,728

Adjustments to reconcile net income to net cash flows from operating activities:
 
 
 
Depreciation and amortization
147,937

 
190,963

Share-based compensation
52,063

 
46,340

Deferred income taxes
16,739

 
(79,558
)
Other
(32,921
)
 
(71,476
)
Changes in operating assets and liabilities, net:
 
 
 
Accounts receivable
(128,287
)
 
(197,685
)
Inventory
(21,507
)
 
(16,980
)
Accrued expenses and other current liabilities
(205,467
)
 
(171,368
)
Current taxes payable
154,017

 
(18,640
)
Other changes in operating assets and liabilities, net
(69,711
)
 
(56,698
)
Net cash flows provided by operating activities
733,037

 
104,626

Cash flows from investing activities:
 
 
 
Proceeds from sales and maturities of marketable securities
373,563

 
757,512

Purchases of marketable securities
(322,958
)
 
(666,211
)
Acquisitions of business, net of cash acquired

(198,798
)
 
—

Purchases of property, plant and equipment
(97,830
)
 
(54,306
)
Contingent consideration related to Fumapharm AG acquisition
(250,000
)
 
(25,000
)
Other
(6,748
)
 
(6,002
)
Net cash flows provided by (used in) investing activities
(502,771
)
 
5,993

Cash flows from financing activities:
 
 
 
Proceeds from issuance of stock for share-based compensation arrangements
25,614

 
22,363

Excess tax benefit from stock options
66,429

 
79,456

Other
(11,287
)
 
13,056

Net cash flows provided by financing activities
80,756

 
114,875

Net increase in cash and cash equivalents
311,022

 
225,494

Effect of exchange rate changes on cash and cash equivalents
(37,895
)
 
545

Cash and cash equivalents, beginning of the period
1,204,924

 
602,562

Cash and cash equivalents, end of the period
$
1,478,051

 
$
828,601















See accompanying notes to these unaudited condensed consolidated financial statements.

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Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


1.    Summary of Significant Accounting Policies
Business Overview
Biogen is a global biopharmaceutical company focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders. Our principal marketed products include AVONEX, PLEGRIDY, TECFIDERA, TYSABRI, and FAMPYRA for multiple sclerosis (MS), ALPROLIX for hemophilia B and ELOCTATE for hemophilia A. We also collaborate on the development and commercialization of RITUXAN for the treatment of non-Hodgkin's lymphoma, chronic lymphocytic leukemia and other conditions and share profits and losses for GAZYVA which is approved for the treatment of chronic lymphocytic leukemia.
Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial statements for interim periods in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The information included in this quarterly report on Form 10-Q should be read in conjunction with our consolidated financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Form 10-K). Our accounting policies are described in the “Notes to Consolidated Financial Statements” in our 2014 Form 10-K and updated, as necessary, in this Form 10-Q. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2015, are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.
Consolidation
Our condensed consolidated financial statements reflect our financial statements, those of our wholly-owned subsidiaries and those of certain variable interest entities where we are the primary beneficiary. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interests in our condensed consolidated statements of income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and transactions are eliminated in consolidation.
In determining whether we are the primary beneficiary of an entity and therefore required to consolidate, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. These considerations impact the way we account for our existing collaborative relationships and other arrangements. We continuously assess whether we are the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in us consolidating or deconsolidating one or more of our collaborators or partners.
 Use of Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments and methodologies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, net of accumulated depreciation. Accumulated depreciation on property, plant and equipment was $1,217.8 million and $1,186.4 million as of March 31, 2015 and December 31, 2014, respectively.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

2.    Acquisitions
Convergence Pharmaceuticals
On February 12, 2015, we completed our acquisition of all of the outstanding stock of Convergence Pharmaceuticals (Convergence), a clinical-stage biopharmaceutical company with a focus on developing product candidates for neuropathic pain. Convergence’s lead candidate is its Phase 2 clinical candidate (CNV1014802), which has demonstrated clinical activity in proof-of-concept studies for trigeminal neuralgia (TGN), a chronic orphan disease. Additionally, CNV1014802 has potential applicability in several other neuropathic pain states.
The purchase price consisted of a $200.1 million cash payment at closing, plus contingent consideration in the form of development and approval milestones up to a maximum of $450.0 million, of which $350.0 million is associated with the development and approval of CNV1014802 for the treatment of TGN. The acquisition was funded from our existing cash on hand and has been accounted for as the acquisition of a business. In addition to obtaining the rights to CNV1014802 and additional product candidates in preclinical development, we retained the services of key employees of Convergence.
Upon acquisition, we recorded a liability of $238.5 million representing the fair value of the contingent consideration. This amount was estimated through a valuation model that incorporates industry-based probability adjusted assumptions relating to the achievement of these milestones and thus the likelihood of making the contingent payments. This fair value measurement is based upon significant inputs not observable in the market and therefore represents a Level 3 measurement. Subsequent changes in the fair value of this obligation will be recognized as adjustments to contingent consideration and reflected within our condensed consolidated statements of income. For additional information related to our fair value of this obligation, please read Note 7, Fair Value Measurements to these condensed consolidated financial statements.
The purchase price consists of the following:
(In millions)
 
Cash portion of consideration
$
200.1

Contingent consideration
238.5

Total purchase price
$
438.6

The following table summarizes the estimated fair values of the separately identifiable assets acquired and liabilities assumed as of February 12, 2015:
(In millions)
 
In-process research and development
$
424.6

Other intangible assets
7.6

Goodwill
92.3

Deferred tax liability
(84.9
)
Other, net
(1.0
)
Total purchase price
$
438.6

Our preliminary estimate of the fair value of the specifically identifiable assets acquired and liabilities assumed as of the date of acquisition is subject to the finalization of management’s analysis related to certain matters, such as finalizing our assessment of the intangible assets acquired and filing Convergence's final tax return. The final determination of these fair values will be completed as additional information becomes available but no later than one year from the acquisition date. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to our financial position.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Our estimate of the fair value of the in-process research and development (IPR&D) programs acquired was determined through a probability adjusted cash flow analysis based on probability weighted net cash flow utilizing a discount rate of 11%. This valuation was primarily driven by the value associated with the lead candidate, CNV1014802, which is in development for the treatment of TGN and is expected to be completed no earlier than 2020, at a remaining cost of approximately $143.0 million. The fair value associated with CNV1014802 for the treatment of TGN was $170.0 million. We have recorded additional IPR&D assets related to the use of CNV1014802 in two additional neuropathic pain indications. The remaining costs of development for these two indications is approximately $446.0 million, with an expected completion of date of no earlier than 2022. These fair value measurements were based on significant inputs not observable in the market and thus represents Level 3 fair value measurements.
The goodwill recognized is largely attributable to establishing a deferred tax liability for the acquired IPR&D intangible assets which have no tax basis. The goodwill is not tax deductible.
Pro forma results of operations would not be materially different as a result of the acquisition of Convergence and therefore are not presented. Subsequent to the acquisition date, our results of operations include the results of operations of Convergence.
3.    Accounts Receivable
Our accounts receivable primarily arise from product sales in the U.S. and Europe and mainly represent amounts due from our wholesale distributors, public hospitals and other government entities. Concentrations of credit risk with respect to our accounts receivable, which are typically unsecured, are limited due to the wide variety of customers and markets using our products, as well as their dispersion across many different geographic areas. The majority of our accounts receivable have standard payment terms which generally require payment within 30 to 90 days. We monitor the financial performance and credit worthiness of our customers so that we can properly assess and respond to changes in their credit profile. We provide reserves against trade receivables for estimated losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve. To date, our historical reserves and write-offs of accounts receivable have not been significant.
The credit and economic conditions within Spain and Portugal, among other members of the E.U. continue to remain uncertain. Uncertain credit and economic conditions have generally led to a lengthening of time to collect our accounts receivable in these countries. In Portugal and select regions in Spain, where our collections have slowed and a significant portion of these receivables are routinely being collected beyond our contractual payment terms and over periods in excess of one year, we have discounted our receivables and reduced related revenues based on the period of time that we estimate those amounts will be paid, to the extent such period exceeds one year, using the country’s market-based borrowing rate for such period. The related receivables are classified at the time of sale as non-current assets. We accrete interest income on these receivables, which is recognized as a component of other income (expense), net within our condensed consolidated statements of income.
Our net accounts receivable balances from product sales in selected European countries are summarized as follows:
 
As of March 31, 2015
(In millions)
Current
Balance Included
within Accounts
Receivable, net
 
Non-Current
Balance Included
within Investments
and Other Assets
 
Total
Spain
$
71.1

 
$
2.2

 
$
73.3

Portugal
$
12.9

 
$
7.7

 
$
20.6

 
As of December 31, 2014
(In millions)
Current
Balance Included
within Accounts
Receivable, net
 
Non-Current
Balance Included
within Investments
and Other Assets
 
Total
Spain
$
62.5

 
$
5.0

 
$
67.5

Portugal
$
15.1

 
$
7.6

 
$
22.7


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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Approximately $11.4 million and $11.1 million of the total net accounts receivable balances for these countries were overdue more than one year as of March 31, 2015 and December 31, 2014, respectively.
Pricing of TYSABRI in Italy - AIFA
In the fourth quarter of 2011, Biogen Italia SRL (formerly Biogen Idec Italia SRL), our Italian subsidiary, received notice from the Italian National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) that sales of TYSABRI after mid-February 2009 exceeded a reimbursement limit established pursuant to a Price Determination Resolution granted by AIFA in December 2006. In December 2011, we filed an appeal against AIFA in administrative court in Rome, Italy seeking a ruling that the reimbursement limit is unenforceable. That appeal is pending.
In June 2014, AIFA approved a resolution, effective for a 24 month term, setting the price for TYSABRI in Italy. This resolution also eliminated the reimbursement limit from February 2013 going forward. As a result, in June 2014, we recognized $53.5 million of TYSABRI revenues related to the periods beginning February 2013 that were previously deferred. AIFA and Biogen Italia SRL remain in discussions for a possible resolution for the period from mid-February 2009 through January 2013. In October 2014, we proposed a settlement to resolve all of AIFA's claims relating to sales of TYSABRI in excess of the reimbursement limit for this period for an aggregate lump sum repayment of EUR35.6 million. We have approximately EUR75 million recorded as accrued expenses and deferred revenue within our condensed consolidated balance sheets for this matter.
For information relating to our agreement with AIFA relating to sales of TYSABRI in Italy, please read Note 4, Accounts Receivable to our consolidated financial statements included within our 2014 Form 10-K.
4.    Reserves for Discounts and Allowances
An analysis of the change in reserves for discounts and allowances is summarized as follows:
(In millions)
Discounts
 
Contractual
Adjustments
 
Returns
 
Total
Balance, as of December 31, 2014
$
47.6

 
$
387.1

 
$
49.1

 
$
483.8

Current provisions relating to sales in current year
101.8

 
441.2

 
10.2

 
553.2

Adjustments relating to prior years
(2.4
)
 
(10.2
)
 
(5.9
)
 
(18.5
)
Payments/credits relating to sales in current year
(50.3
)
 
(166.7
)
 
(0.7
)
 
(217.7
)
Payments/credits relating to sales in prior years
(41.3
)
 
(170.7
)
 
(4.6
)
 
(216.6
)
Balance, as of March 31, 2015
$
55.4

 
$
480.7

 
$
48.1

 
$
584.2

The total reserves above, included in our condensed consolidated balance sheets, are summarized as follows:
(In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Reduction of accounts receivable
$
144.9

 
$
124.6

Component of accrued expenses and other
439.3

 
359.2

Total reserves
$
584.2

 
$
483.8


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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

5.    Inventory
The components of inventory are summarized as follows:
(In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Raw materials
$
139.7

 
$
128.3

Work in process
513.1

 
511.5

Finished goods
172.6

 
164.2

Total inventory
$
825.3

 
$
804.0

6.    Intangible Assets and Goodwill
Intangible Assets
Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:
 
 
 
As of March 31, 2015
 
As of December 31, 2014
(In millions)
Estimated
Life
 
Cost
 
Accumulated
Amortization
 
Net
 
Cost
 
Accumulated
Amortization
 
Net
Out-licensed patents
13-23 years
 
$
543.3

 
$
(487.8
)
 
$
55.5

 
$
543.3

 
$
(481.7
)
 
$
61.6

Developed 
technology
15-23 years
 
3,005.3

 
(2,447.5
)
 
557.8

 
3,005.3

 
(2,396.8
)
 
608.5

In-process research and development
Indefinite until commercialization
 
726.1

 
—

 
726.1

 
314.1

 
—

 
314.1

Trademarks and 
tradenames
Indefinite
 
64.0

 
—

 
64.0

 
64.0

 
—

 
64.0

Acquired and in-licensed rights 
and patents
6-17 years
 
3,288.9

 
(339.2
)
 
2,949.7

 
3,280.4

 
(300.1
)
 
2,980.3

Total intangible assets
 
 
$
7,627.6

 
$
(3,274.5
)
 
$
4,353.1

 
$
7,207.1

 
$
(3,178.6
)
 
$
4,028.5

For the three months ended March 31, 2015, amortization of acquired intangible assets totaled $95.9 million, as compared to $143.3 million in the prior year comparative period. The decrease in amortization of acquired intangible assets was primarily driven by a $34.7 million impairment charge recorded in the first quarter of 2014 related to one of our out-licensed patents, higher expected lifetime revenues of TYSABRI and a decrease in AVONEX revenues during the quarter.
Developed Technology
Developed technology primarily relates to our AVONEX product, which was recorded in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. The net book value of this asset as of March 31, 2015 was $548.7 million. We amortize this intangible asset using the economic consumption method based on actual and expected revenues generated from the sales of our AVONEX product.
In-process Research and Development (IPR&D)
IPR&D represents the fair value assigned to research and development assets that we acquire that have not reached technological feasibility at the date of acquisition. Upon commercialization, we determine the estimated useful life. In connection with our acquisition of Convergence in February 2015, we acquired IPR&D programs with an estimated fair value of $424.6 million. For a more detailed description of this transaction, please read Note 2, Acquisitions to these condensed consolidated financial statements.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Acquired and In-licensed Rights and Patents
Acquired and in-licensed rights and patents primarily relate to our acquisition of the TYSABRI rights from Elan Corporation plc (Elan). Elan was acquired by Perrigo Company plc (Perrigo) in December 2013. The net book value of this asset as of March 31, 2015 was $2,886.6 million. We amortize this intangible asset over the estimated useful life using an economic consumption method based on actual and expected revenues generated from the sales of our TYSABRI product.
Estimated Future Amortization of Intangible Assets
Our amortization expense is based on the economic consumption of the intangible assets. Our most significant intangible assets are related to our AVONEX and TYSABRI products. Annually, during our long-range planning cycle, we perform an analysis of anticipated lifetime revenues of AVONEX and TYSABRI. This analysis is updated whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of either product.
Our most recent long range planning cycle was updated in the third quarter of 2014. Our analysis included an increase in the expected future product revenues of TYSABRI, resulting in a decrease in the rate of amortization expense as compared to prior quarters. Our analysis also included a decrease in the expected future product revenues of AVONEX, resulting in an increase in the rate of amortization expense as compared to prior quarters. The results of our TYSABRI and AVONEX analyses were impacted by changes in the estimated impact of TECFIDERA, as well as other existing and potential oral and alternative MS formulations, including PLEGRIDY, that may compete with TYSABRI and AVONEX. Based upon this recent analysis, the estimated future amortization for acquired intangible assets is expected to be as follows:
(In millions)
As of
March 31,
2015
2015 (remaining nine months)
$
269.0

2016
313.3

2017
286.1

2018
281.6

2019
270.4

2020
263.4

Total
$
1,683.8

Goodwill
The following table provides a roll forward of the changes in our goodwill balance:
(In millions)
As of
March 31,
2015
Goodwill, beginning of period
$
1,760.2

Increase to goodwill
92.3

Other
(2.7
)
Goodwill, end of period
$
1,849.9

The increase in goodwill during the three months ended March 31, 2015 was related to our acquisition of Convergence. Other includes changes related to foreign exchange. For additional information related to this transaction, please read Note 2, Acquisitions to these condensed consolidated financial statements.
As of March 31, 2015, we had no accumulated impairment losses related to goodwill.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

7.    Fair Value Measurements
The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:
As of March 31, 2015 (In millions)
Total
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
752.5

 
$
—

 
$
752.5

 
$
—

Marketable debt securities:
 
 
 
 
 
 
 
Corporate debt securities
991.0

 
—

 
991.0

 
—

Government securities
850.6

 
—

 
850.6

 
—

Mortgage and other asset backed securities
209.6

 
—

 
209.6

 
—

Marketable equity securities
6.2

 
6.2

 
—

 
—

Venture capital investments
12.1

 
—

 
—

 
12.1

Derivative contracts
168.2

 
—

 
168.2

 
—

Plan assets for deferred compensation
44.1

 
—

 
44.1

 
—

Total
$
3,034.3

 
$
6.2

 
$
3,016.0

 
$
12.1

Liabilities:
 
 
 
 
 
 
 
Derivative contracts
$
12.6

 
$
—

 
$
12.6

 
$
—

Contingent consideration obligations
461.8

 
—

 
—

 
461.8

Total
$
474.4

 
$
—

 
$
12.6

 
$
461.8

As of December 31, 2014 (In millions)
Total
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Cash equivalents
$
716.3

 
$
—

 
$
716.3

 
$
—

Marketable debt securities:
 
 
 
 
 
 
 
Corporate debt securities
1,063.0

 
—

 
1,063.0

 
—

Government securities
849.8

 
—

 
849.8

 
—

Mortgage and other asset backed securities
198.3

 
—

 
198.3

 
—

Marketable equity securities
6.9

 
6.9

 
—

 
—

Venture capital investments
14.5

 
—

 
—

 
14.5

Derivative contracts
72.7

 
—

 
72.7

 
—

Plan assets for deferred compensation
36.9

 
—

 
36.9

 
—

Total
$
2,958.4

 
$
6.9

 
$
2,937.0

 
$
14.5

Liabilities:
 
 
 
 
 
 
 
Derivative contracts
$
5.4

 
$
—

 
$
5.4

 
$
—

Contingent consideration obligations
215.5

 
—

 
—

 
215.5

Total
$
220.9

 
$
—

 
$
5.4

 
$
215.5

There have been no impairments of our assets measured and carried at fair value during the three months ended March 31, 2015. In addition, there were no changes in valuation techniques or inputs utilized or transfers between fair value measurement levels during the three months ended March 31, 2015. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third party pricing services. For a description of our validation procedures related to prices provided by third party pricing

14
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

services, refer to Note 1, Summary of Significant Accounting Policies: Fair Value Measurements, to our consolidated financial statements included within our 2014 Form 10-K.
Marketable Equity Securities and Venture Capital Investments
Our marketable equity securities represent investments in publicly traded equity securities. Our venture capital investments, which are all Level 3 measurements, include investments in certain venture capital funds, accounted for at fair value, that primarily invest in small privately-owned, venture-backed biotechnology companies.
The following table provides a roll forward of the fair value of our venture capital investments, which includes Level 3 measurements:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Fair value, beginning of period
$
14.5

 
$
21.9

Unrealized gains included in earnings
—

 
2.9

Unrealized losses included in earnings
(2.4
)
 
(1.2
)
Fair value, end of period
$
12.1

 
$
23.6

Debt Instruments
The fair and carrying values of our debt instruments, which are Level 2 liabilities, are summarized as follows:
 
As of March 31, 2015
 
As of December 31, 2014
(In millions)
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes payable to Fumedica
$
12.9

 
$
12.1

 
$
12.6

 
$
11.7

6.875% Senior Notes due March 1, 2018
633.9

 
571.8

 
634.6

 
573.5

Total
$
646.8

 
$
583.9

 
$
647.2

 
$
585.2

The fair value of our notes payable to Fumedica was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair value of our 6.875% Senior Notes was determined through market, observable, and corroborated sources. For additional information related to our debt instruments, please read Note 12, Indebtedness to our consolidated financial statements included within our 2014 Form 10-K.
Contingent Consideration Obligations
The following table provides a roll forward of the fair values of our contingent consideration obligations which includes Level 3 measurements:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Fair value, beginning of period
$
215.5

 
$
280.9

Additions
238.5

 
—

Changes in fair value
7.8

 
(0.8
)
Payments
—

 
(5.0
)
Fair value, end of period
$
461.8

 
$
275.1

As of March 31, 2015 and December 31, 2014, approximately $397.5 million and $200.0 million, respectively, of the fair value of our total contingent consideration obligations were reflected as components of other long-term liabilities within our condensed consolidated balance sheets with the remaining balances reflected as a component of accrued expenses and other.
In connection with our acquisition of Convergence in February 2015, we recorded a liability of $238.5 million, representing the fair value of the contingent consideration. This valuation was based on probability weighted net cash outflow projections of $450.0 million, discounted using a rate of 2%, which is the estimated cost of debt financing for market participants.

15
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Acquired IPR&D
In connection with our acquisition of Convergence, we also allocated $424.6 million of the total purchase price to acquired IPR&D, which was capitalized as an intangible asset. The amount allocated to acquired IPR&D was based on significant inputs not observable in the market and thus represented a Level 3 fair value measurement. These assets will be tested for impairment annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. For a more detailed description of this transaction, please read Note 2, Acquisitions to these condensed consolidated financial statements.
8.    Financial Instruments
Marketable Securities
The following tables summarize our marketable debt and equity securities:
As of March 31, 2015 (In millions)
Fair
Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Amortized
Cost
Available-for-sale:
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
 
 
 
Current
$
385.3

 
$
0.1

 
$
(0.1
)
 
$
385.3

Non-current
605.7

 
0.8

 
(0.4
)
 
605.3

Government securities
 
 
 
 
 
 
 
Current
288.5

 
—

 
(0.1
)
 
288.6

Non-current
562.1

 
0.6

 
(0.1
)
 
561.6

Mortgage and other asset backed securities
 
 
 
 
 
 
 
Current
0.1

 
—

 
—

 
0.1

Non-current
209.5

 
0.4

 
(0.1
)
 
209.2

Total marketable debt securities
$
2,051.2

 
$
1.9

 
$
(0.8
)
 
$
2,050.1

Marketable equity securities, non-current
$
6.2

 
$
0.3

 
$
—

 
$
5.9

As of December 31, 2014 (In millions)
Fair
Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Amortized
Cost
Available-for-sale:
 
 
 
 
 
 
 
Corporate debt securities
 
 
 
 
 
 
 
Current
$
370.4

 
$
—

 
$
(0.2
)
 
$
370.6

Non-current
692.6

 
0.2

 
(1.5
)
 
693.9

Government securities
 
 
 
 
 
 
 
Current
269.9

 
—

 
(0.1
)
 
270.0

Non-current
579.9

 
0.3

 
(0.4
)
 
580.0

Mortgage and other asset backed securities
 
 
 
 
 
 
 
Current
0.2

 
—

 
—

 
0.2

Non-current
198.1

 
0.2

 
(0.2
)
 
198.1

Total marketable debt securities
$
2,111.1

 
$
0.7

 
$
(2.4
)
 
$
2,112.8

Marketable equity securities, non-current
$
6.9

 
$
1.2

 
$
(0.2
)
 
$
5.9


16
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

The following table summarizes our financial assets with maturities of less than 90 days from the date of purchase included within cash and cash equivalents on the accompanying condensed consolidated balance sheet:
(In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Commercial paper
$
10.3

 
$
54.2

Overnight reverse repurchase agreements
308.6

 
305.0

Money market funds
427.2

 
321.2

Short-term debt securities
6.4

 
35.9

Total
$
752.5

 
$
716.3

The carrying values of our commercial paper, including accrued interest, overnight reverse repurchase agreements, money market funds and our short-term debt securities approximate fair value due to their short term maturities.
Summary of Contractual Maturities: Available-for-Sale Securities
The estimated fair value and amortized cost of our marketable debt securities available-for-sale by contractual maturity are summarized as follows:
 
As of March 31, 2015
 
As of December 31, 2014
(In millions)
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
Due in one year or less
$
673.9

 
$
674.0

 
$
640.5

 
$
640.8

Due after one year through five years
1,252.0

 
1,251.0

 
1,343.7

 
1,345.2

Due after five years
125.3

 
125.1

 
126.9

 
126.8

Total available-for-sale securities
$
2,051.2

 
$
2,050.1

 
$
2,111.1

 
$
2,112.8

The average maturity of our marketable debt securities available-for-sale as of March 31, 2015 and December 31, 2014 was approximately 15 months, respectively.
Proceeds from Marketable Debt Securities
The proceeds from maturities and sales of marketable debt securities and resulting realized gains and losses are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Proceeds from maturities and sales
$
373.6

 
$
757.5

Realized gains
$
0.2

 
$
0.2

Realized losses
$
(0.3
)
 
$
(0.1
)
Strategic Investments
As of March 31, 2015 and December 31, 2014, our strategic investment portfolio was comprised of investments totaling $45.3 million and $47.8 million, respectively, which are included in investments and other assets in our accompanying condensed consolidated balance sheets.
Our strategic investment portfolio includes investments in marketable equity securities of certain biotechnology companies and our investments in venture capital funds accounted for at fair value which totaled $18.3 million and $21.4 million as of March 31, 2015 and December 31, 2014, respectively. Our strategic investment portfolio also includes other equity investments in privately-held companies and additional investments in venture capital funds accounted for under the cost method. The carrying value of these investments totaled $27.0 million and $26.4 million as of March 31, 2015 and December 31, 2014, respectively.

17
Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

9.    Derivative Instruments
Foreign Currency Forward Contracts - Hedging Instruments
Due to the global nature of our operations, portions of our revenues are earned in currencies other than the U.S. dollar. The value of revenues measured in U.S. dollars is therefore subject to changes in foreign currency exchange rates. In order to mitigate these changes we use foreign currency forward contracts to lock in exchange rates associated with a portion of our forecasted international revenues.
Foreign currency forward contracts in effect as of March 31, 2015 and December 31, 2014 had durations of 1 to 21 months and 1 to 15 months, respectively. These contracts have been designated as cash flow hedges and accordingly, to the extent effective, any unrealized gains or losses on these foreign currency forward contracts are reported in accumulated other comprehensive income (loss) (referred to as AOCI in the tables below). Realized gains and losses for the effective portion of such contracts are recognized in revenue when the sale of product in the currency being hedged is recognized. To the extent ineffective, hedge transaction gains and losses are reported in other income (expense), net.
The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenues is summarized as follows:
 
Notional Amount
Foreign Currency: (In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Euro
$
1,482.3

 
$
1,174.6

Canadian dollar
45.3

 
56.7

British pound sterling
29.2

 
34.5

Japanese yen
16.6

 
16.6

Australian dollar
15.1

 
19.9

Total foreign currency forward contracts
$
1,588.5

 
$
1,302.3

The portion of the fair value of these foreign currency forward contracts that was included in accumulated other comprehensive income (loss) within total equity reflected gains of $159.8 million and $72.1 million as of March 31, 2015 and December 31, 2014, respectively. We expect all contracts to be settled over the next 21 months and any amounts in accumulated other comprehensive income (loss) to be reported as an adjustment to revenue. We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its contractual obligations. As of March 31, 2015 and December 31, 2014, credit risk did not change the fair value of our foreign currency forward contracts.
The following table summarizes the effect of derivatives designated as hedging instruments on our condensed consolidated statements of income:
For the Three Months Ended March 31,
Net Gains/(Losses)
Reclassified from AOCI into Operating Income
(Effective Portion)
 
Net Gains/(Losses)
Recognized into Net Income
(Ineffective Portion)
Location
 
2015
 
2014
 
Location
 
2015
 
2014
Revenue
 
$
35.0

 
$
(4.7
)
 
Other income (expense)
 
$
2.2

 
$
(0.2
)

18
Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Foreign Currency Forward Contracts - Other Derivatives
We also enter into other foreign currency forward contracts, usually with one month durations, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions.
The aggregate notional amount of these outstanding foreign currency contracts was $494.2 million and $365.2 million as of March 31, 2015 and December 31, 2014, respectively. A net loss of $9.7 million related to these contracts was recognized as a component of other income (expense), net, for three months ended March 31, 2015, respectively, as compared to a net loss of $1.4 million, in the prior year comparative period.
Summary of Derivatives
While certain of our derivatives are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities within our condensed consolidated balance sheets.
The following table summarizes the fair value and presentation in our condensed consolidated balance sheets for our outstanding derivatives including those designated as hedging instruments:
(In millions)
Balance Sheet Location
Fair Value As of March 31, 2015
Hedging Instruments:
 
 
Asset derivatives
Other current assets
$
160.1

 
Investments and other assets
$
6.2

Liability derivatives
Accrued expenses and other
$
1.3

 
Other long-term liabilities
$
3.7

Other Derivatives:
 
 
Asset derivatives
Other current assets
$
1.9

Liability derivatives
Accrued expenses and other
$
7.6

 
 
 
(In millions)
Balance Sheet Location
Fair Value As of December 31, 2014
Hedging Instruments:
 
 
Asset derivatives
Other current assets
$
69.5

 
Investments and other assets
$
1.9

Other Derivatives:
 
 
Asset derivatives
Other current assets
$
1.3

Liability derivatives
Accrued expenses and other
$
5.4

10.    Equity
Total equity as of March 31, 2015 increased $855.4 million compared to December 31, 2014. This increase was primarily driven by net income attributable to Biogen Inc. of $822.5 million and an increase in additional paid in capital resulting from our share-based compensation arrangements totaling $46.3 million.
Share Repurchases
In February 2011, our Board of Directors authorized the repurchase of up to 20.0 million shares of common stock. This authorization does not have an expiration date. During the three months ended March 31, 2015 and 2014, we did not repurchase any shares of common stock. As of March 31, 2015, approximately 1.3 million shares of our common stock remain available for repurchase under the 2011 authorization.

19
Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Noncontrolling Interests
The following table reconciles equity attributable to noncontrolling interests (NCI):
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
NCI, beginning of period
$
5.0

 
$
0.6

Net income (loss) attributable to NCI, net of tax
(2.4
)
 
(0.2
)
Fair value of net assets and liabilities acquired and assigned to NCI
—

 
4.0

Translation adjustment and other
0.1

 
—

NCI, end of period
$
2.7

 
$
4.4

11.    Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax by component:
(In millions)
Unrealized Gains (Losses) on Securities Available for Sale
 
Unrealized Gains (Losses) on Foreign Currency Forward Contracts
 
Unfunded Status of Postretirement Benefit Plans
 
Translation Adjustments
 
Total
Balance, as of December 31, 2014
$
(0.4
)
 
$
71.7

 
$
(31.6
)
 
$
(99.2
)
 
$
(59.5
)
Other comprehensive income (loss) before reclassifications
1.2

 
122.1

 
1.3

 
(100.9
)
 
23.7

Amounts reclassified from accumulated other comprehensive income (loss)
0.1

 
(34.8
)
 
—

 
—

 
(34.7
)
Net current period other comprehensive income (loss)
1.3

 
87.3

 
1.3

 
(100.9
)
 
(11.1
)
Balance, as of March 31, 2015
$
0.9

 
$
159.0

 
$
(30.3
)
 
$
(200.1
)
 
$
(70.5
)
(In millions)
Unrealized Gains (Losses) on Securities Available for Sale
 
Unrealized Gains (Losses) on Foreign Currency Forward Contracts
 
Unfunded Status of Postretirement Benefit Plans
 
Translation Adjustments
 
Total
Balance, as of December 31, 2013
$
5.6

 
$
(23.7
)
 
$
(19.6
)
 
$
10.0

 
$
(27.7
)
Other comprehensive income (loss) before reclassifications
1.8

 
1.5

 
0.8

 
(2.9
)
 
1.2

Amounts reclassified from accumulated other comprehensive income (loss)
(0.1
)
 
4.3

 
—

 
—

 
4.2

Net current period other comprehensive income (loss)
1.7

 
5.8

 
0.8

 
(2.9
)
 
5.4

Balance, as of March 31, 2014
$
7.3

 
$
(17.9
)
 
$
(18.8
)
 
$
7.1

 
$
(22.4
)

20
Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

The following table summarizes the amounts reclassified from accumulated other comprehensive income:
(In millions)
Income Statement Location
Amounts Reclassified from Accumulated Other Comprehensive Income
For the Three Months
Ended March 31,
2015
 
2014
Gains (losses) on securities available for sale
Other income (expense)
$
(0.1
)
 
$
0.1

 
Income tax benefit (expense)
—

 
—

 
 
 
 
 
Gains (losses) on foreign currency forward contracts
Revenues
35.0

 
(4.7
)
 
Income tax benefit (expense)
(0.2
)
 
0.4

 
 
 
 
 
Total reclassifications, net of tax
 
$
34.7

 
$
(4.2
)
12.    Earnings per Share
Basic and diluted earnings per share are calculated as follows:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Numerator:
 
 
 
Net income attributable to Biogen Inc.
$
822.5

 
$
480.0

Denominator:
 
 
 
Weighted average number of common shares outstanding
235.0

 
236.8

Effect of dilutive securities:
 
 
 
Stock options and employee stock purchase plan
0.1

 
0.1

Time-vested restricted stock units
0.3

 
0.6

Market stock units
0.2

 
0.3

Dilutive potential common shares
0.6

 
1.0

Shares used in calculating diluted earnings per share
235.6

 
237.8

Amounts excluded from the calculation of net income per diluted share because their effects were anti-dilutive were insignificant.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

13.     Share-based Payments
Share-based Compensation Expense
The following table summarizes share-based compensation expense included within our condensed consolidated statements of income:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Research and development
$
35.4

 
$
29.4

Selling, general and administrative
55.6

 
47.2

Subtotal
91.0

 
76.6

Capitalized share-based compensation costs
(3.4
)
 
(2.6
)
Share-based compensation expense included in total cost and expenses
87.6

 
74.0

Income tax effect
(26.7
)
 
(22.3
)
Share-based compensation expense included in net income attributable to Biogen Inc.
$
60.9

 
$
51.7

The following table summarizes share-based compensation expense associated with each of our share-based compensation programs:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Market stock units
$
17.0

 
$
14.9

Time-vested restricted stock units
31.9

 
29.2

Cash settled performance units
23.8

 
21.4

Performance units
13.2

 
6.3

Employee stock purchase plan
5.1

 
4.8

Subtotal
91.0

 
76.6

Capitalized share-based compensation costs
(3.4
)
 
(2.6
)
Share-based compensation expense included in total cost and expenses
$
87.6

 
$
74.0

Grants Under Share-based Compensation Plans
The following table summarizes our equity grants to employees, officers and directors under our current stock plans:
 
For the Three Months
Ended March 31,
 
2015
 
2014
Market stock units
175,000

 
214,000

Cash settled performance shares
112,000

 
172,000

Performance units
89,000

 
50,000

Time-vested restricted stock units
351,000

 
392,000

In addition, for the three months ended March 31, 2015, approximately 68,000 shares were issued under our employee stock purchase plan compared to approximately 74,000 shares issued in the prior year comparative period.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

14.    Income Taxes
For the three months ended March 31, 2015, our effective tax rate was 25.6%, as compared to 26.8%, in the prior year comparative period.
A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
 
For the Three Months
Ended March 31,
 
2015
 
2014
Statutory rate
35.0
 %
 
35.0
 %
State taxes
(0.4
)
 
1.2

Taxes on foreign earnings
(8.4
)
 
(8.4
)
Credits and net operating loss utilization
(0.7
)
 
(1.3
)
Purchased intangible assets
1.0

 
1.5

Manufacturing deduction
(1.6
)
 
(2.0
)
Other permanent items
0.6

 
0.3

Other
0.1

 
0.5

Effective tax rate
25.6
 %
 
26.8
 %
For the three months ended March 31, 2015, compared to the same period in 2014, the decrease in our income tax rate was due to a benefit resulting from the remeasurement of one of our uncertain tax positions related to state income tax reporting, partially offset by a higher percentage of our income being earned in the U.S.
Accounting for Uncertainty in Income Taxes
We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. With few exceptions, including the proposed disallowance we discuss below, we are no longer subject to U.S. federal tax examination for years before 2013 or state, local, or non-U.S. income tax examinations for years before 2004.
In March 2015, we received a final assessment from the Danish Tax Authority (SKAT) for fiscal 2009, regarding withholding taxes and the treatment of certain intercompany transactions involving our Danish affiliate and another of our affiliates. The audits of our tax filings for 2010 through 2013 are not completed but have been prepared in a manner consistent with prior filings, with similar transactions, which may result in an assessment for those years. The total amount assessed for 2009 is $45.6 million, including interest. For all periods potentially under dispute, we believe that positions taken in our tax filings are valid and we are contesting the assessment vigorously.
Federal Uncertain Tax Positions
During the three months ended March 31, 2015, the net effect of adjustments to our uncertain tax positions was a net benefit of $16.4 million primarily related to the state impact of a federal uncertain tax item. It is reasonably possible that we will adjust the value of our uncertain tax positions related to our unconsolidated joint business and certain transfer pricing issues as we receive additional information from various taxing authorities, including reaching settlements with the authorities. In addition, the IRS and other national tax authorities routinely examine our intercompany transfer pricing with respect to intellectual property related transactions and it is possible that they may disagree with one or more positions we have taken with respect to such valuations.
In October 2011, in conjunction with our examination, the IRS proposed a disallowance of approximately $130.0 million in deductions for tax years 2007, 2008 and 2009 related to payments for services provided by our wholly owned Danish subsidiary located in Hillerød, Denmark. We believe that these items represent valid deductible business expenses and are vigorously defending our position. We have initiated a mutual agreement procedure between the IRS and SKAT for the years 2001 through 2009, in an attempt to reach agreement on the issue. In addition, we have applied for a bilateral advanced pricing agreement for the years 2010 through 2014 to resolve similar issues for the subsequent years.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

15.    Other Consolidated Financial Statement Detail
Other Income (Expense), Net
Components of other income (expense), net, are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions)
2015
 
2014
Interest income
$
3.3

 
$
2.7

Interest expense
(6.7
)
 
(7.6
)
Gain (loss) on investments, net
(1.7
)
 
3.0

Foreign exchange gains (losses), net
(13.0
)
 
(3.3
)
Other, net
3.1

 
(0.4
)
Total other income (expense), net
$
(15.0
)
 
$
(5.6
)
Accrued Expenses and Other
Accrued expenses and other consists of the following:
(In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Revenue-related rebates
$
439.3

 
$
359.2

Employee compensation and benefits
202.3

 
393.8

Royalties and licensing fees
150.4

 
172.4

Deferred revenue
124.9

 
120.9

Current portion of contingent consideration obligations
64.4

 
265.5

Other
403.5

 
507.5

Total accrued expenses and other
$
1,384.8

 
$
1,819.3

Other Long-Term Liabilities
Other long-term liabilities consists of the following:
(In millions)
As of
March 31,
2015
 
As of
December 31,
2014
Contingent consideration obligation
$
397.5

 
$
200.0

Employee compensation and benefits
213.3

 
200.7

Other
281.7

 
249.4

Total other long-term liabilities
$
892.5

 
$
650.1

16.    Investments in Variable Interest Entities
Consolidated Variable Interest Entities
Our condensed consolidated financial statements include the financial results of variable interest entities in which we are the primary beneficiary.
Neurimmune SubOne AG
In 2007, we entered into a collaboration agreement with Neurimmune SubOne AG (Neurimmune), a subsidiary of Neurimmune AG, for the development and commercialization of antibodies for the treatment of Alzheimer’s disease. Neurimmune conducts research to identify potential therapeutic antibodies and we are responsible for the development, manufacturing and commercialization of all products. Our anti-amyloid beta antibody, aducanumab (BIIB037), for the treatment of Alzheimer’s disease resulted from this collaboration. In December 2014, we reported positive interim data from the Phase 1b trial of aducanumab. Based upon our current development plans, we may pay Neurimmune up to $335.0 million in remaining milestone payments, of which $60.0 million is payable upon the initiation of a late stage clinical trial. We may also pay royalties in the low-to-mid-teens on sales of any resulting commercial products.
Amounts that are incurred by Neurimmune for research and development expenses in support of the collaboration that we reimburse are reflected in research and development expense in our condensed consolidated statements of income. Future milestone payments, if any, will be reflected within our condensed consolidated statements of income as a charge to noncontrolling interest, net of tax, when such milestones are achieved.
For the three months ended March 31, 2015, the collaboration incurred expenses totaling $12.8 million, which is reflected as research and development expense within our condensed consolidated statements of income, as compared to $11.0 million, in the prior year comparative period.
The assets and liabilities of Neurimmune are not significant to our financial position or results of operations as it is a research and development organization. We have provided no financing to Neurimmune other than contractually required amounts.
Unconsolidated Variable Interest Entities
We have relationships with other variable interest entities that we do not consolidate as we lack the power to direct the activities that significantly impact the economic success of these entities. These relationships include investments in certain biotechnology companies and research collaboration agreements.
As of March 31, 2015 and December 31, 2014, the total carrying value of our investments in biotechnology companies totaled $8.5 million and $7.9 million, respectively. Our maximum exposure to losses related to these variable interest entities is limited to the carrying value of our investments.
We have entered into research collaboration agreements with certain variable interest entities where we are required to fund certain development activities. These development activities are included in research and development expense within our condensed consolidated statements of income, as they are incurred. We have provided no financing to these variable interest entities other than previously contractually required amounts.
For additional information related to our investments in variable interest entities, please read Note 19, Investments in Variable Interest Entities to our consolidated financial statements included within our 2014 Form 10-K.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

17.    Collaborative and Other Relationships
Samsung Bioepis
Joint Venture Agreement
In February 2012, we entered into a joint venture agreement with Samsung BioLogics Co. Ltd. (Samsung Biologics), establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar pharmaceuticals. Samsung Biologics contributed 280.5 billion South Korean won (approximately $250.0 million) for an 85% stake in Samsung Bioepis and we contributed approximately 49.5 billion South Korean won (approximately $45.0 million) for the remaining 15% ownership interest. Under the joint venture agreement, we have no obligation to provide any additional funding and our ownership interest may be diluted due to financings in which we do not participate. As of March 31, 2015, our ownership interest is approximately 10%, which reflects our additional contribution of 6.3 billion South Korean won (approximately $5.7 million) in the first quarter of 2015 and the effect of an additional equity financing by Samsung Biologics in which we did not participate. We maintain an option to purchase additional stock in Samsung Bioepis that would allow us to increase our ownership percentage up to 49.9%. The exercise of this option is within our control and is based on paying for 49.9% of the total investment made by Samsung Biologics into Samsung Bioepis in excess of what we have already contributed during the agreement plus interest.
As of March 31, 2015 and December 31, 2014, the carrying value of our investment in Samsung Bioepis totaled 13.6 billion and 9.1 billion South Korean won (approximately $12.4 million and $8.6 million), respectively, which is classified as a component of investments and other assets within our condensed consolidated balance sheets. Based on our level of influence over Samsung Bioepis, we account for this investment under the equity method of accounting and we recognize our share of the results of operations related to our investment in Samsung Bioepis one quarter in arrears when the results of the entity become available, which is reflected as equity in loss of investee, net of tax within our condensed consolidated statements of income. During the three months ended March 31, 2015, we recognized a loss on our investment of $0.8 million, as compared to $7.6 million, in the prior year comparative period.
Commercial Agreement
On December 17, 2013, pursuant to our rights under the joint venture agreement with Samsung Biologics, we entered into an agreement with Samsung Bioepis to commercialize anti-tumor necrosis factor (TNF) biosimilar product candidates in Europe and, in the case of one anti-TNF biosimilar candidate, Japan. Under the terms of this agreement, we paid $36.0 million, which was recorded as a research and development expense within our condensed consolidated statements of income as the programs they relate to had not achieved regulatory approval. Samsung Bioepis is eligible to receive an additional $75.0 million in additional milestones related to clinical development and regulatory approval of the product candidates. Upon commercialization, there will be a 50% profit share with Samsung Bioepis.
Other Services
Simultaneous with the formation of Samsung Bioepis, we also entered into a license agreement, a technical development services agreement and a manufacturing agreement with Samsung Bioepis. For the three months ended March 31, 2015, we recognized $18.9 million in other revenues in relation to these services, as compared to $24.1 million in the prior year comparative period, which is reflected as a component of other revenues within our condensed consolidated statement of income.
For additional information related to our other significant collaboration arrangements, please read Note 20, Collaborative and Other Relationships to our consolidated financial statements included within our 2014 Form 10-K.
18.    Litigation
’755 Patent Litigation
On May 28, 2010, Biogen MA Inc. (formerly Biogen Idec MA Inc.) filed a complaint in the U.S. District Court for the District of New Jersey alleging infringement by Bayer Healthcare Pharmaceuticals Inc. (Bayer) (manufacturer, marketer and seller of BETASERON and manufacturer of EXTAVIA), EMD Serono, Inc. (manufacturer, marketer and seller of REBIF), Pfizer, Inc. (co-marketer of REBIF), and Novartis Pharmaceuticals Corp. (marketer and seller of EXTAVIA) of our U.S. Patent No. 7,588,755 (’755 Patent), which claims the use of interferon beta for immunomodulation or treating a viral condition, viral disease, cancers or tumors. The complaint seeks monetary damages, including lost profits and royalties. Bayer had previously filed a complaint against us in the same court, on May 27, 2010, seeking a declaratory judgment that it does not infringe the ’755 Patent and that the patent is invalid, and seeking monetary relief in the form of attorneys' fees, costs and expenses. The court has consolidated the two lawsuits, and we refer to the two actions as the “Consolidated ’755 Patent Actions.”
Bayer, Pfizer, Novartis and EMD Serono have all filed counterclaims in the Consolidated ’755 Patent Actions seeking declaratory judgments of patent invalidity and non-infringement, and seeking monetary relief in the form of costs and attorneys' fees, and EMD Serono and Bayer have each filed a counterclaim seeking a declaratory judgment that the ’755 Patent is unenforceable based on alleged inequitable conduct. Bayer has also amended its complaint to seek such a declaration. No trial date has been set.
Italian National Medicines Agency
In the fourth quarter of 2011, Biogen Italia SRL received notice from the Italian National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) that sales of TYSABRI after mid-February 2009 exceeded a reimbursement limit established pursuant to a Price Determination Resolution (Price Resolution) granted by AIFA in December 2006. On December 23, 2011, we filed an appeal in the Regional Administrative Tribunal of Lazio (Il Tribunale Amministrativo Regionale per il Lazio) in Rome seeking a ruling that the reimbursement limit in the Price Resolution should apply as written to only “the first 24 months” of TYSABRI sales, which ended in mid-February 2009. The appeal is still pending. In June 2014, AIFA approved a resolution affirming that there is no reimbursement limit from and after February 2013. AIFA and Biogen Italia SRL are discussing a possible resolution for the period from mid-February 2009 through January 2013.
Average Manufacturer Price Litigation
In 2011, we and several other pharmaceutical companies were served with a complaint originally filed under seal on October 28, 2008 in the United States District Court for the Eastern District of Pennsylvania by Ronald Streck on behalf of himself and the United States, 24 states and the District of Columbia (collectively the “States”). The complaint alleges that Biogen violated the False Claims Act, 31 U.S.C. § 3729 et seq. and local statutory counterparts by under reporting Average Manufacturer Price (AMP) information to the Centers for Medicare and Medicaid Services. The United States and the States have declined to intervene. We have agreed to a settlement of the case. The federal government has consented to the settlement, and we are now seeking the consent of the States. As of March 31, 2015, we recorded the proposed settlement, which did not have a significant impact on our results of operations.
Government Matters
We have learned that state and federal governmental authorities are investigating our sales and promotional practices and have received related subpoenas. We have also received a subpoena from the federal government for documents relating to our relationship with certain pharmacy benefit managers. We are cooperating with the government in these matters.
Qui Tam Litigation
In August, 2012, we learned that a relator, on behalf of the United States and certain states, filed a suit under seal on February 17, 2011 against us, Elan Corporation, plc, and Elan Pharmaceuticals, Inc. in the United States District Court for the Western District of Virginia. We have neither seen nor been served with the complaint, but understand that it was filed under the Federal False Claims Act.

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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)

Forward Pharma Litigation
On November 18, 2014 Forward Pharma A/S (“Forward Pharma”) filed suit against us in the Regional Court of Dusseldorf, Germany alleging that TECFIDERA infringes German Utility Model DE 20 2005 022 112 U1, which was registered on April 24, 2014 and expires in October 2015. A hearing has been scheduled for early 2016.
Forward Pharma seeks a declaration of infringement and a determination of damages. We believe that we have good and valid defenses to the complaint. We have not formed an opinion that an unfavorable outcome is either “probable” or “remote” and are unable to estimate the magnitude or range of any potential loss.
  Product Liability and Other Legal Proceedings
We are also involved in product liability claims and other legal proceedings generally incidental to our normal business activities. While the outcome of any of these proceedings cannot be accurately predicted, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our business or financial condition.
19.    Commitments and Contingencies
In 2006, we acquired Fumapharm AG. As part of this acquisition we acquired FUMADERM and TECFIDERA (together, Fumapharm Products). We paid $220.0 million upon closing of the transaction and agreed to pay an additional $15.0 million if a Fumapharm Product was approved for MS in the U.S. or E.U. In the second quarter of 2013, we paid this $15.0 million contingent payment as TECFIDERA was approved in the U.S. for MS by the U.S. Food and Drug Administration (FDA). We are also required to make additional contingent payments to former shareholders of Fumapharm AG or holders of their rights based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales of Fumapharm Products in the prior twelve month period, as defined in the acquisition agreement.
During the three months ended March 31, 2015, we paid a $250.0 million contingent payment as we reached the $4.0 billion cumulative sales level related to the Fumapharm Products in the fourth quarter of 2014.
We will owe an additional $300.0 million contingent payment for every additional $1.0 billion in cumulative sales level of Fumapharm Products reached if the prior 12 months sales of the Fumapharm Products exceed $3.0 billion, until such time as the cumulative sales level reaches $20.0 billion, at which time no further contingent payments shall be due. These payments will be accounted for as an increase to goodwill as incurred, in accordance with the accounting standard applicable to business combinations when we acquired Fumapharm. Any portion of the payment which is tax deductible will be recorded as a reduction to goodwill. Payments are due within 60 days following the end of the quarter in which the applicable cumulative sales level has been reached.
20.    Segment Information
We operate as one operating segment, which is focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders, and, therefore, our chief operating decision-maker manages the operations of our company as a single operating segment.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes beginning on page 4 of this quarterly report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Form 10-K). Certain totals may not sum due to rounding.
Executive Summary
Introduction
Biogen is a global biopharmaceutical company focused on discovering, developing, manufacturing and delivering therapies for neurological, autoimmune and hematologic disorders. Our principal marketed products include TECFIDERA, AVONEX, TYSABRI and RITUXAN.
Our current revenues depend upon continued sales of our principal products. We may be substantially dependent on sales from our principal products for many years, including an increasing reliance on sales of TECFIDERA as we expand into additional markets. In the longer term, our revenue growth will be dependent upon the successful clinical development, regulatory approval and launch of new commercial products, our ability to obtain and maintain patents and other rights related to our marketed products and assets originating from our research and development efforts, and successful execution of external business development opportunities. As part of our ongoing research and development efforts, we have devoted significant resources to conducting clinical studies to advance the development of new pharmaceutical products and to explore the utility of our existing products in treating disorders beyond those currently approved in their labels.
 
Financial Highlights
For the three months ended March 31, 2015, diluted earnings per share attributable to Biogen Inc. was $3.49, as compared to $2.02, in the prior year comparative period.
As described below under “Results of Operations,” our operating results for the three months ended March 31, 2015 reflect the following:
•
Product revenues, net totaled $2,172.3 million in the first quarter of 2015, representing an increase of 24.6% over the same period in 2014. This increase was driven by a 63.1% increase in worldwide TECFIDERA revenues and our recent product additions of ALPROLIX and ELOCTATE.
•
Our share of RITUXAN and GAZYVA operating profits totaled $330.6 million in the first quarter of 2015, representing an increase of 11.4% over the same period in 2014.
•
Other revenues totaled $52.0 million in the first quarter of 2015, representing a decrease of 42.3% from the same period in 2014. This decrease was driven by a 47.8% decrease in royalty revenue primarily due to the expiration of U.S. patent rights that gave rise to royalty payments related to ANGIOMAX and a 38.3% decrease in corporate partner revenue.


27
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•
Total cost and expenses totaled $1,437.1 million in the first quarter of 2015, representing a decrease of 1.7% compared to the same period in 2014. This decrease was driven by a 33.1% decrease in the amortization of acquired intangible assets and a 12.9% decrease in research and development expense, partially offset by an 11.9% increase in cost of sales and a 9.5% increase in selling, general and administrative expense.
The decrease in research and development expense was primarily related to upfront amounts paid to Eisai Co., Ltd. (Eisai) and Sangamo BioSciences, Inc. (Sangamo) in the first quarter of 2014.
We generated $733.0 million of net cash flows from operations for the three months ended March 31, 2015, which were primarily driven by earnings, partially offset by an increase in working capital. Cash, cash equivalents and marketable securities totaled approximately $3,529.3 million as of March 31, 2015.
Acquisitions
On February 12, 2015, we completed our acquisition of all of the outstanding stock of Convergence Pharmaceuticals (Convergence), a clinical-stage biopharmaceutical company with a focus on developing product candidates for neuropathic pain. For additional information related to this transaction, please read Note 2, Acquisitions to our condensed consolidated financial statements included within this report.
Business Environment
We conduct our business within the biopharmaceutical industry, which is highly competitive. Many of our competitors are working to develop or have commercialized products similar to those we market or are developing. In addition, the commercialization of certain of our own approved MS products and pipeline product candidates may negatively impact future sales of our existing MS products. Our products may also face increased competitive pressures from the introduction of generic versions, related prodrug derivatives or biosimilars of existing products and other technologies, such as gene therapies.
 
Key Pipeline and Product Developments
ZINBRYTA
We collaborate with AbbVie Biotherapeutics, Inc. (AbbVie) on the development and commercialization of ZINBRYTA. For additional information about this collaboration, please read Note 20, Collaborative and Other Relationships to our consolidated financial statements included within our 2014 Form 10-K.
In March 2015, the European Medicines Agency (EMA) validated our Marketing Authorization Application (MAA) for ZINBRYTA for the treatment of relapsing forms of MS in the E.U.
ALPROLIX
In February 2015, we and Swedish Orphan Biovitrum AB announced positive top-line results of the Kids B-LONG Phase 3 clinical study that evaluated the safety, efficacy and pharmacokinetics of ALPROLIX in children under age 12 with severe hemophilia B. Pediatric data is required as part of the MAA for ALPROLIX that we plan to submit to the EMA.
GAZYVA
In February 2015, the Roche Group announced positive results from the Phase 3 GADOLIN study in non-Hodgkin’s lymphoma. At a pre-planned interim analysis, an independent data monitoring committee determined that the study met its primary endpoint early, showing that people lived significantly longer without disease worsening or death (progression-free survival) when treated with GAZYVA plus bendamustine followed by GAZYVA alone, compared to bendamustine alone.
Biosimilars
In January 2015, the EMA validated and accepted Samsung Bioepis’ MAA for its etanercept biosimilar candidate.
In March 2015, the EMA validated and accepted Samsung Bioepis’ MAA for its infliximab biosimilar candidate.
Aducanumab (BIIB037)
In March 2015, we announced data from a pre-specified interim analysis of PRIME, the Phase 1b study of aducanumab, in which aducanumab demonstrated an acceptable safety profile and positive results on radiologic and clinical measurements in patients with prodromal or mild Alzheimer’s disease. Based on these results, we are advancing the aducanumab clinical program to Phase 3 with plans to initiate enrollment later this year.


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Anti-LINGO
In January 2015, we announced positive top-line results from the Phase 2 acute optic neuritis (AON) RENEW trial in which treatment with anti-LINGO-1 showed evidence of biological repair of the visual system. Anti-LINGO-1 demonstrated an improvement in the study’s primary endpoint, recovery of optic nerve latency (time for a signal to travel from the retina to the visual cortex) relative to placebo. The study showed no effect on secondary endpoints, including change in thickness of the retinal layers (optic nerve neurons and axons) and visual function.
 
Anti-LINGO-1 is also being studied in people with MS through a Phase 2 study, SYNERGY.
Results in our early stage trials for aducanumab and anti-LINGO-1 may not be indicative of results in later stage trials, which, in some cases, may take several years to enroll and complete. Development of biopharmaceutical products are subject to the risks and uncertainties described in our risk factors.

Results of Operations
Revenues
Revenues are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2015
 
2014
Product revenues:
 
 
 
 
 
 
 
United States
$
1,533.7

 
60.0
%
 
$
1,170.2

 
54.9
%
Rest of world
638.6

 
25.0
%
 
572.6

 
26.9
%
Total product revenues
2,172.3

 
85.0
%
 
1,742.8

 
81.8
%
Unconsolidated joint business
330.6

 
12.9
%
 
296.9

 
13.9
%
Other revenues
52.0

 
2.0
%
 
90.1

 
4.2
%
Total revenues
$
2,555.0

 
100.0
%
 
$
2,129.8

 
100.0
%
Product Revenues
Product revenues are summarized as follows:
 
For the Three Months
Ended March 31,
(In millions, except percentages)
2015
 
2014
Multiple Sclerosis (MS):
 
 
 
 
 
 
 
TECFIDERA
$
824.9

 
38.0
%
 
$
505.7

 
29.0
%
Interferon
754.5

 
34.7
%
 
761.5

 
43.7
%
TYSABRI
462.6

 
21.3
%
 
441.0

 
25.3
%
FAMPYRA
20.0

 
0.9
%
 
19.0

 
1.1
%
Hemophilia:
 
 

 
 
 

ALPROLIX
43.1

 
2.0
%
 
—

 
—
%
ELOCTATE
53.6

 
2.5
%
 
—

 
—
%
Other
13.6

 
0.6
%
 
15.6

 
0.9
%
Total product revenues
$
2,172.3

 
100.0
%
 
$
1,742.8

 
100.0
%



29
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Multiple Sclerosis (MS)
TECFIDERA
For the three months ended March 31, 2015, compared to the same period in 2014, the increase in U.S. TECFIDERA revenues was primarily due to a 36% increase in unit sales volume.
For the three months ended March 31, 2015, compared to the same period in 2014, the increase in rest of world TECFIDERA revenues was primarily due to increased unit sales volume in Germany as TECFIDERA sales began in the first quarter of 2014 and the launch of TECFIDERA in additional markets.
TECFIDERA’s launch disrupted the historical market dynamics which benefited our results throughout 2014. This effect has now moderated with the product entering its post-launch years in certain markets including the U.S. and Germany.
In 2011, the German government implemented new legislation to manage pricing related to new drug products introduced within the German market. For the first 12 months after launch, pricing is unregulated. We launched TECFIDERA in Germany in February 2014. During the three months ended March 31, 2015, our unregulated pricing ended and we recognized revenue at the fixed price that was established through negotiations with the German
 
authorities. The price will be fixed for three years and will be lower than our initial launch price. We expect the official price to be made public in May 2015.
Interferon
PLEGRIDY
Sales of PLEGRIDY began in the E.U. and the U.S. in the third and fourth quarters of 2014, respectively.
We expect that PLEGRIDY revenue will increase as PLEGRIDY becomes commercially available in additional markets.
AVONEX
For the three months ended March 31, 2015, compared to the same period in 2014, the increase in U.S. AVONEX revenues was primarily due to price increases, partially offset by a decrease in unit sales volume of 11%, which was attributable in part to patients transitioning to PLEGRIDY and oral MS therapies, including TECFIDERA.
For the three months ended March 31, 2015, compared to the same period in 2014, the decrease in rest of world AVONEX revenues was primarily due to a 15% decrease in unit sales volume primarily in Europe attributable to patients transitioning to PLEGRIDY and MS oral therapies, including


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TECFIDERA, an extra shipment in Brazil, a tender market, during the three months ended March 31, 2014 and pricing reductions in some countries. Rest of world AVONEX revenue for the three months ended March 31, 2015, compared to the same period in 2014, also reflected a $43.3 million negative impact of foreign currency exchange rate changes, partially offset by $16.3 million in gains recognized under our foreign currency hedging program.
TYSABRI
For the three months ended March 31, 2015, compared to the same period in 2014, the increase in U.S. TYSABRI revenues was primarily due to a 16% increase in unit sales volume primarily related to an extra shipping week during the first quarter of 2015 compared to the prior period.
For the three months ended March 31, 2015, compared to the same period in 2014, the decrease in rest of world TYSABRI revenues was primarily due to pricing reductions in some countries, partially offset by a 4% unit sales volume increase primarily in Europe. Rest of world TYSABRI revenue for the three months ended March 31, 2015, compared to the same period in 2014, also reflects a $30.4 million negative impact of foreign currency exchange rate changes, partially offset by $10.6 million in gains recognized under our foreign currency hedging program.
We remain in discussions with the Italian National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) about a resolution relating to a claim that sales of TYSABRI in Italy exceeded a reimbursement limit established pursuant to a Price Determination Resolution granted by AIFA in December 2006 for the period from mid-February 2009 through January 2013. If the Attorney General and AIFA agree to our current proposal, we could recognize approximately EUR40 million in revenue related to this matter. For information relating to our
 
agreement with AIFA relating to sales of TYSABRI in Italy, please read Note 4, Accounts Receivable to our consolidated financial statements included within our 2014 Form 10-K.
Hemophilia
ALPROLIX
Sales of ALPROLIX in the U.S. and Japan began in the second and fourth quarters of 2014, respectively.
ELOCTATE
Sales of ELOCTATE in the U.S. and Japan began in the third quarter of 2014 and in the first quarter of 2015, respectively.
We have a relatively limited product history for ALPROLIX and ELOCTATE. Therefore, it remains difficult to estimate trends of future product sales of these products.


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Unconsolidated Joint Business Revenues
We collaborate with Genentech, Inc., a wholly-owned member of the Roche Group, on the development and commercialization of RITUXAN. In addition, in the U.S. we share operating profits and losses relating to GAZYVA with Genentech. The Roche Group and its sub-licensees maintain sole responsibility for the development, manufacturing and commercialization of GAZYVA in the U.S. For additional information related to this collaboration, including information regarding the pre-tax profit sharing formula and its impact on future unconsolidated joint business revenues, please read Note 20, Collaborative and Other Relationships to our consolidated financial statements included within our 2014 Form 10-K.
Revenues from unconsolidated joint business are summarized as follows:
 
Biogen’s Share of Pre-tax Profits in the U.S. for RITUXAN and GAZYVA
The following table provides a summary of amounts comprising our share of pre-tax profits on RITUXAN and GAZYVA in the U.S.: