e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30,
2009
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number 0-19311
BIOGEN IDEC INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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33-0112644
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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14 Cambridge Center, Cambridge, MA 02142
(617) 679-2000
(Address, including zip code,
and telephone number, including
area code, of registrants 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 þ 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 þ 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):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(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 þ
The number of shares of the issuers Common Stock,
$0.0005 par value, outstanding as of October 14, 2009,
was 289,198,517 shares.
BIOGEN
IDEC INC.
FORM 10-Q
Quarterly Report
For the Quarterly Period Ended September 30, 2009
TABLE OF CONTENTS
2
PART I
FINANCIAL INFORMATION
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For the Three Months
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For the Nine Months
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Ended September 30,
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Ended September 30,
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2009
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2008
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2009
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2008
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Revenues:
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Product
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$
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801,689
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$
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758,260
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$
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2,326,067
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$
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2,107,816
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Unconsolidated joint business
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283,919
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298,979
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838,307
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825,024
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Other revenues
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34,910
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35,725
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85,918
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95,754
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Total revenues
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1,120,518
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1,092,964
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3,250,292
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3,028,594
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Costs and expenses:
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Cost of sales, excluding amortization of acquired intangible
assets
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93,486
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107,493
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282,404
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300,828
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Research and development
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304,055
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268,800
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999,986
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779,291
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Selling, general and administrative
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226,755
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232,824
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669,415
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694,342
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Collaboration profit sharing
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60,697
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43,533
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152,608
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98,368
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Amortization of acquired intangible assets
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51,347
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94,464
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233,830
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242,114
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Acquired in-process research and development
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25,000
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Total costs and expenses
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736,340
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747,114
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2,338,243
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2,139,943
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Income from operations
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384,178
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345,850
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912,049
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888,651
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Other income (expense), net
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9,360
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(23,713
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)
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30,886
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(24,651
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)
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Income before income tax expense
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393,538
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322,137
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942,935
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864,000
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Income tax expense
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113,936
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114,337
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271,869
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282,320
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Net income
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279,602
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207,800
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671,066
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581,680
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Net income attributable to noncontrolling interest, net of tax
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1,939
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1,012
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6,571
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5,167
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Net income attributable to Biogen Idec Inc.
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$
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277,663
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$
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206,788
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$
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664,495
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$
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576,513
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Basic earnings per share attributable to
Biogen Idec Inc.
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$
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0.96
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$
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0.71
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$
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2.30
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$
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1.97
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Diluted earnings per share attributable to
Biogen Idec Inc.
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$
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0.95
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$
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0.70
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$
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2.28
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$
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1.95
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Weighted-average shares used in calculating:
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Basic earnings per share attributable to
Biogen Idec Inc.
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288,917
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291,408
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288,416
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292,613
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Diluted earnings per share attributable to
Biogen Idec Inc.
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291,037
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293,921
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290,368
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295,515
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See accompanying notes to these unaudited consolidated financial
statements.
3
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As of September 30,
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As of December 31,
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2009
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2008
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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585,788
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$
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622,385
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Marketable securities
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821,888
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719,586
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Collateral received for loaned securities
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29,991
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Accounts receivable, net
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550,995
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446,665
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Due from unconsolidated joint business
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193,279
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206,925
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Loaned securities
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29,446
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Inventory
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278,686
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263,602
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Other current assets
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141,623
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139,400
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Total current assets
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2,572,259
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2,458,000
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Marketable securities
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1,497,447
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891,406
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Property, plant and equipment, net
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1,634,696
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1,594,754
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Intangible assets, net
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1,927,115
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2,161,058
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Goodwill
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1,138,621
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1,138,621
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Investments and other assets
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256,299
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235,152
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Total assets
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$
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9,026,437
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$
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8,478,991
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LIABILITIES AND EQUITY
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Current liabilities:
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Collateral payable on loaned securities
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$
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$
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29,991
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Accounts payable
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108,547
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107,417
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Taxes payable
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59,961
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223,260
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Accrued expenses and other
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537,408
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534,887
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Current portion of notes payable and line of credit
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15,452
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27,667
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Total current liabilities
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721,368
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923,222
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Notes payable and line of credit
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1,085,844
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1,085,431
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Long-term deferred tax liability
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289,654
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356,017
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Other long-term liabilities
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331,761
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280,369
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Total liabilities
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2,428,627
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2,645,039
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Commitments and contingencies (Notes 12, 14 and 15)
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Equity:
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Preferred stock, par value $0.001 per share
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Common stock, par value $0.0005 per share
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149
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149
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Additional paid-in capital
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6,184,315
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6,073,957
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Accumulated other comprehensive income (loss)
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37,114
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(11,106
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)
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Retained earnings
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781,321
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270,180
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Treasury stock, at cost
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(438,710
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)
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(527,097
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)
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Total Biogen Idec Inc. shareholders equity
|
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6,564,189
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5,806,083
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Noncontrolling interest
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33,621
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|
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27,869
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Total equity
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6,597,810
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5,833,952
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Total liabilities and equity
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$
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9,026,437
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$
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8,478,991
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See accompanying notes to these unaudited consolidated financial
statements.
4
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For the Nine Months
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Ended September 30,
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2009
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2008
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Cash flows from operating activities:
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Net income
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$
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671,066
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$
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581,680
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Adjustments to reconcile net income to net cash flows from
operating activities:
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Depreciation and amortization of property, plant and equipment
and intangible assets
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334,761
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340,042
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Acquired in-process research and development
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25,000
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Share-based compensation
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119,902
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104,339
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Non-cash interest (income) expense and foreign exchange
remeasurement loss (gain), net
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(12,861
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)
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(11,288
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)
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Deferred income taxes
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|
(72,580
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)
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|
(57,591
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)
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Realized loss (gain) on sale of marketable securities and
strategic investments
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|
(17,185
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)
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|
|
3,774
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Write-down of inventory to net realizable value
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|
13,431
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|
|
22,472
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|
Impairment of marketable securities, investments and other assets
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|
9,866
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|
|
31,502
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|
Excess tax benefit from stock options
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|
(3,194
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)
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|
(27,424
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)
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Changes in operating assets and liabilities, net:
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|
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|
Accounts receivable
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|
(96,215
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)
|
|
|
(95,337
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)
|
Due from unconsolidated joint business
|
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|
13,646
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|
|
|
(29,856
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)
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Inventory
|
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|
(25,195
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)
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|
|
(34,376
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)
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Other assets
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|
|
8,555
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|
|
|
24,898
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|
Accrued expenses and other current liabilities
|
|
|
(40,565
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)
|
|
|
155,437
|
|
Other liabilities and taxes payable
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|
|
(110,706
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)
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|
|
121,928
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|
|
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities
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|
|
792,726
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|
|
|
1,155,200
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|
|
|
Cash flows from investing activities:
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|
|
|
|
|
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Purchases of marketable securities
|
|
|
(3,001,156
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)
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|
|
(1,801,056
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)
|
Proceeds from sales and maturities of marketable securities
|
|
|
2,334,093
|
|
|
|
2,135,065
|
|
Collateral received under securities leading
|
|
|
29,991
|
|
|
|
30,080
|
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(25,000
|
)
|
Purchases of property, plant and equipment
|
|
|
(110,129
|
)
|
|
|
(221,961
|
)
|
Proceeds from the sale of property, plant and equipment
|
|
|
|
|
|
|
16
|
|
Purchases of other investments
|
|
|
(36,519
|
)
|
|
|
(17,260
|
)
|
Proceeds from the sale of a strategic equity investment
|
|
|
6,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows (used in) provided by investing activities
|
|
|
(777,653
|
)
|
|
|
99,884
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(57,631
|
)
|
|
|
(559,767
|
)
|
Proceeds from issuance of stock for share-based compensation
arrangements
|
|
|
33,236
|
|
|
|
167,032
|
|
Change in cash overdraft
|
|
|
7,497
|
|
|
|
18,052
|
|
Excess tax benefit from stock options
|
|
|
3,194
|
|
|
|
27,424
|
|
Proceeds from borrowings
|
|
|
|
|
|
|
986,980
|
|
Repayment of borrowings
|
|
|
(10,867
|
)
|
|
|
(1,512,474
|
)
|
Obligation under securities lending
|
|
|
(29,991
|
)
|
|
|
(30,080
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(54,562
|
)
|
|
|
(902,833
|
)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(39,489
|
)
|
|
|
352,251
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
2,892
|
|
|
|
(1,212
|
)
|
Cash and cash equivalents, beginning of the period
|
|
|
622,385
|
|
|
|
659,662
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the period
|
|
$
|
585,788
|
|
|
$
|
1,010,701
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited consolidated financial
statements.
5
BIOGEN
IDEC INC. AND SUBSIDIARIES
(unaudited)
Overview
Biogen Idec Inc. (Biogen Idec, we,
us or the Company) is a global
biotechnology company that creates new standards of care in
therapeutic areas with high unmet medical needs. We currently
have four marketed products:
AVONEX®,
RITUXAN®,
TYSABRI®,
and
FUMADERMtm.
Our marketed products are used for the treatment of multiple
sclerosis, or MS, non-Hodgkins lymphoma, or NHL,
rheumatoid arthritis, or RA, Crohns disease and psoriasis.
Basis
of Presentation
In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments,
consisting of only normal recurring accruals, necessary for a
fair statement of our financial position, results of operations
and cash flows. 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, 2008. Our accounting
policies are described in Notes to Consolidated Financial
Statements in our 2008 annual report on
Form 10-K
and updated, as necessary, in this
Form 10-Q.
The year-end consolidated balance sheet data presented for
comparative purposes was derived from audited financial
statements, but does not include all disclosures required by
accounting principles generally accepted in the United States.
The results of operations for the three and nine months ended
September 30, 2009 are not necessarily indicative of the
operating results for the full year or for any other subsequent
interim period.
In June 2009, the Financial Accounting Standards Board, or FASB,
issued the FASB Accounting Standards Codification, or
Codification. Effective this quarter, the Codification became
the single source for all authoritative generally accepted
accounting principles, or GAAP, recognized by the FASB and is
required to be applied to financial statements issued for
interim and annual periods ending after September 15, 2009.
The Codification does not change GAAP and did not impact our
financial position or results of operations.
Effective January 1, 2009, we adopted a newly issued
accounting standard for noncontrolling interests. In accordance
with the accounting standard, we changed the accounting and
reporting for our minority interests (now called noncontrolling
interest) in our consolidated financial statements. Upon
adoption, certain prior period amounts have been reclassified to
conform to the current period financial statement presentation.
These reclassifications did not have a material impact on our
previously reported financial position or results of operations.
Refer to Note 9, Equity, and Note 13, Other
Income (Expense), Net, of this
Form 10-Q
for additional information on the adoption of this standard.
Principles
of Consolidation
The consolidated financial statements reflect our financial
statements, those of our wholly-owned subsidiaries and of our
joint ventures in Italy and Switzerland, Biogen Dompé SRL
and Biogen Dompé Switzerland Gmbh, respectively. We
consolidate variable interest entities in which we are the
primary beneficiary. For such consolidated entities in which we
own less than a 100% interest, we record net income attributable
to noncontrolling interest (minority interest) in our
consolidated statements of income equal to the percentage of
ownership of the respective noncontrolling owners. All material
intercompany balances and transactions have been eliminated in
consolidation.
Use of
Estimates
The preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the
United States requires our management to make estimates and
judgments that may affect the
6
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On
an on-going basis, we evaluate our estimates and judgments,
including those related to revenue recognition and related
allowances, marketable securities, derivatives and hedging
activities, inventory, impairments of long-lived assets
including intangible assets, impairments of goodwill, income
taxes including the valuation allowance for deferred tax assets,
valuation of investments, research and development expenses,
contingencies and litigation, and share-based payments. 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.
Subsequent
Events
We evaluated all events and transactions through
October 21, 2009, the date we issued these financial
statements. During this period we did not have any material
recognizable subsequent events. However, we did have the
following nonrecognizable subsequent events:
|
|
|
|
|
On October 19, 2009, our Board of Directors authorized the
repurchase of our common stock in an amount of up to
$1 billion. The Company intends to retire these shares
following repurchase on the open market. This repurchase program
does not have an expiration date.
|
|
|
|
On October 16, 2009, we extended our September 21,
2009 tender offer to acquire all of the outstanding shares of
Facet Biotech Corporation, or Facet, until December 16,
2009 at the same offering price of $14.50 per share.
|
Inventories are stated at the lower of cost or market with cost
determined under the
first-in,
first-out, or FIFO, method. Included in inventory are raw
materials used in the production of pre-clinical and clinical
products, which are charged to research and development expense
when consumed.
The components of inventories are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Raw materials
|
|
$
|
40.6
|
|
|
$
|
29.8
|
|
Work in process
|
|
|
168.4
|
|
|
|
180.0
|
|
Finished goods
|
|
|
69.7
|
|
|
|
53.8
|
|
|
|
|
|
|
|
|
|
|
Total Inventory
|
|
$
|
278.7
|
|
|
$
|
263.6
|
|
|
|
|
|
|
|
|
|
|
Product
Revenues
We recognize revenue when all of the following criteria are met:
persuasive evidence of an arrangement exists; delivery has
occurred or services have been rendered; the sellers price
to the buyer is fixed or determinable; and collectibility is
reasonably assured.
Revenues from product sales are recognized when title and risk
of loss have passed to the customer, which is typically upon
delivery. However, under the terms of a development and
marketing collaboration agreement with Elan Pharma
International, Ltd., or Elan, an affiliate of Elan Corporation,
plc, we manufacture TYSABRI and collaborate with Elan on the
products marketing, commercial distribution and on-going
7
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
development activities. Therefore, sales of TYSABRI in the
United States are recognized on the sell-through
model, that is, upon shipment of the product by Elan to its
third party distributor rather than upon shipment to Elan. For
sales of TYSABRI outside the United States, we are responsible
for distributing TYSABRI to customers and are primarily
responsible for all operating activities. Generally, revenue on
sales of TYSABRI outside the United States is recognized at the
time of product delivery to our customers and distributors, as
all revenue recognition criteria have been met.
Reserves
Reserves
for Discounts and Allowances
Revenues are recorded net of applicable allowances for trade
term discounts, wholesaler incentives, Medicaid rebates,
Veterans Administration rebates, managed care rebates,
product returns and other applicable allowances. Reserves
established for these discounts and allowances 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 product revenue reserves are based on estimates of the
amounts earned or to be claimed on the related sales. These
estimates take into consideration our historical experience,
current contractual requirements, statutory requirements,
specific known market events and trends and forecasted customer
buying patterns. If actual results vary, we may need to adjust
these estimates, which could have an effect on earnings in the
period of the adjustment.
An analysis of the amount of, and change in, reserves is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
|
(In millions)
|
|
Discounts
|
|
|
Adjustments
|
|
|
Returns
|
|
|
Total
|
|
|
Balance, as of December 31, 2008
|
|
$
|
9.2
|
|
|
$
|
48.1
|
|
|
$
|
18.1
|
|
|
$
|
75.4
|
|
Current provisions relating to sales in current period
|
|
|
54.9
|
|
|
|
140.2
|
|
|
|
14.0
|
|
|
|
209.1
|
|
Adjustments relating to prior periods
|
|
|
|
|
|
|
3.2
|
|
|
|
|
|
|
|
3.2
|
|
Payments/returns relating to sales in current period
|
|
|
(42.2
|
)
|
|
|
(76.6
|
)
|
|
|
(0.5
|
)
|
|
|
(119.3
|
)
|
Payments/returns relating to sales in prior periods
|
|
|
(8.7
|
)
|
|
|
(45.1
|
)
|
|
|
(12.3
|
)
|
|
|
(66.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, as of September 30, 2009
|
|
$
|
13.2
|
|
|
$
|
69.8
|
|
|
$
|
19.3
|
|
|
$
|
102.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total reserves summarized within the table above were
included in our consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Reduction of accounts receivable
|
|
$
|
41.6
|
|
|
$
|
31.6
|
|
Current liability
|
|
|
60.7
|
|
|
|
43.8
|
|
|
|
|
|
|
|
|
|
|
Total reserves
|
|
$
|
102.3
|
|
|
$
|
75.4
|
|
|
|
|
|
|
|
|
|
|
8
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Reserves for discounts, contractual adjustments and returns
reduced gross product revenues as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Discounts
|
|
$
|
18.7
|
|
|
$
|
16.2
|
|
|
$
|
54.9
|
|
|
$
|
46.5
|
|
Contractual adjustments
|
|
|
50.6
|
|
|
|
40.1
|
|
|
|
143.4
|
|
|
|
112.3
|
|
Returns
|
|
|
4.4
|
|
|
|
5.9
|
|
|
|
14.0
|
|
|
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowances
|
|
$
|
73.7
|
|
|
$
|
62.2
|
|
|
$
|
212.3
|
|
|
$
|
173.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross product revenues
|
|
$
|
875.4
|
|
|
$
|
820.5
|
|
|
$
|
2,538.4
|
|
|
$
|
2,281.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of gross product revenues
|
|
|
8.4
|
%
|
|
|
7.6
|
%
|
|
|
8.4
|
%
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad Debt
Reserves
Bad debt reserves are based on our estimated uncollectible
accounts receivable. Given our historical experiences with bad
debts, combined with our credit management policies and
practices, we do not presently maintain significant bad debt
reserves. Reserves for bad debts are reflected as a reduction of
accounts receivable.
|
|
4.
|
Intangible
Assets and Goodwill
|
Intangible assets and goodwill, net of accumulated amortization,
impairment charges and adjustments, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
As of December 31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Estimated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(In millions)
|
|
Life
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Out-licensed patents
|
|
|
12 years
|
|
|
$
|
578.0
|
|
|
$
|
(288.6
|
)
|
|
$
|
289.4
|
|
|
$
|
578.0
|
|
|
$
|
(250.3
|
)
|
|
$
|
327.7
|
|
Core/developed technology
|
|
|
15-23 years
|
|
|
|
3,005.3
|
|
|
|
(1,434.0
|
)
|
|
|
1,571.3
|
|
|
|
3,005.3
|
|
|
|
(1,241.0
|
)
|
|
|
1,764.3
|
|
Trademarks and tradenames
|
|
|
Indefinite
|
|
|
|
64.0
|
|
|
|
|
|
|
|
64.0
|
|
|
|
64.0
|
|
|
|
|
|
|
|
64.0
|
|
In-licensed patents
|
|
|
14 years
|
|
|
|
3.0
|
|
|
|
(1.1
|
)
|
|
|
1.9
|
|
|
|
3.0
|
|
|
|
(0.9
|
)
|
|
|
2.1
|
|
Assembled workforce
|
|
|
4 years
|
|
|
|
2.1
|
|
|
|
(1.6
|
)
|
|
|
0.5
|
|
|
|
2.1
|
|
|
|
(1.2
|
)
|
|
|
0.9
|
|
Distribution rights
|
|
|
2 years
|
|
|
|
12.7
|
|
|
|
(12.7
|
)
|
|
|
|
|
|
|
12.7
|
|
|
|
(10.6
|
)
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
|
|
|
$
|
3,665.1
|
|
|
$
|
(1,738.0
|
)
|
|
$
|
1,927.1
|
|
|
$
|
3,665.1
|
|
|
$
|
(1,504.0
|
)
|
|
$
|
2,161.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
Indefinite
|
|
|
$
|
1,138.6
|
|
|
$
|
|
|
|
$
|
1,138.6
|
|
|
$
|
1,138.6
|
|
|
$
|
|
|
|
$
|
1,138.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
Assets
Effective January 1, 2009, we implemented an amendment to
the accounting and disclosure requirements related to intangible
assets. This amendment provides guidance for determining the
useful life of a recognized intangible asset and requires
enhanced disclosures so that users of financial statements are
able to assess the extent to which the expected future cash
flows associated with the asset are affected by our intent and
ability to renew or extend the arrangement. The adoption of this
guidance did not impact our financial position or
9
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
results of operations as this standard was required to be
implemented prospectively; however, this standard may impact us
in subsequent periods.
Our intangible assets consist of patents, licenses,
core/developed technology, trademarks, tradenames, assembled
workforce, and distribution rights, the majority of which arose
in connection with the merger of Biogen Inc. and Idec
Pharmaceuticals Corporation, or the Merger. These intangible
assets were recorded at fair value and are stated net of
accumulated amortization and impairments.
The useful lives of our assets are primarily based on the legal
or contractual life of the underlying patent or contract, which
does not include additional years for the potential extension or
renewal of the contract or patent. Our policy is based on the
general accounting principles for amortization of intangible
assets, which requires that the amortization of intangible
assets reflect the pattern that the economic benefits of the
intangible assets are consumed.
Intangible assets related to patents, licenses,
core/developed
technology, assembled workforce, and distribution rights are
amortized over their remaining estimated useful lives.
Intangible assets related to trademarks and tradenames have
indefinite lives, and as a result are not amortized, but are
subject to review for impairment. 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.
Our most significant intangible asset is the core technology
related to our AVONEX product which was established at the time
of the Merger. The net book value of this asset as of
September 30, 2009 was $1,554.6 million. We believe
the economic benefit of this core technology is consumed as
revenue is generated from our AVONEX product. An analysis of the
anticipated lifetime revenue of AVONEX is performed at least
annually during our long range planning cycle. The results of
this forecast serve as the basis for our assumptions used in the
economic consumption amortization model for our core technology
intangible assets. Although we believe this process has allowed
us to reliably determine the best estimate of the pattern in
which we will consume the economic benefits of our core
technology intangible asset, the model could result in deferring
amortization charges to future periods in certain instances, due
to continued sales of the product at a nominal level after
patent expiration or otherwise. In order to ensure amortization
charges are not unreasonably deferred to future periods we use
the straight-line method to determine the minimum annual amount
of amortization expense, or the minimum amortization amount.
This minimum amortization amount is recalculated each year based
on the remaining unamortized balance of the intangible asset and
the remaining estimated useful life of the intangible asset and
is compared to the amount of amortization determined under the
economic consumption model. We record amortization based upon
the higher of the amount of amortization determined under the
economic consumption model or the minimum amortization amount
determined under the straight-line method.
In September 2009, we were issued a U.S. patent for the use
of beta interferon for immunomodulation or treating a viral
condition, viral disease, cancers or tumors. This patent,
expiring in September 2026, covers the treatment of multiple
sclerosis with AVONEX, which is our brand of recombinant beta
interferon. This patent extends the expected remaining life of
our core intangible asset through 2026 and thus, under the
straight-line method, reduces the minimum amortization amount.
We completed our most recent long range planning cycle in the
third quarter, which includes an analysis of the anticipated
product sales of AVONEX. The outcome of this analysis is based
on certain assumptions that we evaluate on a periodic basis,
such as the expected impact of competitor products and our own
pipeline product candidates, as well as the issuance of new
patents or extension of existing patents. Based on this
years analysis, we have continued to amortize this asset
on the economic consumption model for the third quarter of 2009,
and expect to apply the same model for the subsequent three
quarters. The results of our
10
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
analysis were most significantly impacted by the extension of
the assumed remaining life of the core intangible asset due to
the issuance of the U.S. patent in September 2009.
Summary
of Expense Recognized Related to Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
For the Nine Months
|
|
|
Ended September 30,
|
|
Ended September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Amortization of acquired intangible assets
|
|
$
|
51.3
|
|
|
$
|
94.5
|
|
|
$
|
233.8
|
|
|
$
|
242.1
|
|
Acquired in-process research and development
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
25.0
|
|
The decrease in amortization related to our acquired intangible
assets for the three and nine months ended September 30,
2009, as compared to the prior year comparative periods, was
primarily due to the decrease in amortization attributable to
our core intangible asset. This decrease in amortization
resulted from changes in the estimate of the future revenues of
AVONEX which serves as the basis for our calculation of economic
consumption for core technology.
Amortization of acquired intangible assets is expected to be
approximately $283.0 million for the twelve months ended
December 31, 2009 and between $160.0 million and
$220.0 million for each of the following five years.
In the first quarter of 2008, we recorded an in-process research
and development, or IPR&D, charge of $25.0 million
related to a HSP90-related milestone payment made to the former
shareholders of Conforma Therapeutics, Inc., or Conforma,
pursuant to the terms of our acquisition of Conforma in 2006.
|
|
5.
|
Fair
Value Measurements
|
Effective January 1, 2009, we adopted a newly issued
accounting standard for fair value measurements of all
nonfinancial assets and nonfinancial liabilities not recognized
or disclosed at fair value in the financial statements on a
recurring basis. The adoption of the accounting standard for
these assets and liabilities did not have a material impact on
our financial position or results of operations; however, this
standard may impact us in subsequent periods and require
additional disclosures.
During the quarter ended June 30, 2009, we implemented
newly issued accounting standards which provide guidance for
determining fair value when the volume and level of activity for
the asset or liability have significantly decreased and
identifying circumstances that indicate that a transaction is
not orderly. Specifically, the new standards provide additional
guidelines for making fair value measurements more consistent
with the principles presented and provide authoritative guidance
in determining whether a market is active or inactive, and
whether a transaction is distressed. This guidance is applicable
to all assets and liabilities (i.e. financial and nonfinancial)
and requires enhanced disclosures, including interim and annual
disclosure of the input and valuation techniques (or changes in
techniques) used to measure fair value and the defining of the
major security types comprising debt and equity securities held
based upon the nature and risk of the security. The adoption of
the new standards did not impact our financial position or
results of operations; however, adoption has enhanced
disclosures for our investments in marketable debt securities
and resulted in the reclassification of certain amounts included
within our previously reported disclosures to conform to the
presentation adopted in the current year.
During the second quarter of 2009, we also implemented a newly
issued accounting standard requiring disclosure about the fair
value of financial instruments in interim as well as in annual
financial statements. The adoption of this standard has resulted
in the disclosure of the fair values attributable to our debt
instruments within our interim report. Since this guidance
addresses disclosure requirements, the adoption of this standard
did not impact our financial position or results of operations.
11
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Summary
of Assets and Liabilities Recorded at Fair Value
The tables below present information about our assets and
liabilities that are measured at fair value on a recurring basis
as of September 30, 2009 and December 31, 2008 and
indicate the fair value hierarchy of the valuation techniques we
utilized to determine such fair value. In general, fair values
determined by Level 1 inputs utilize quoted prices
(unadjusted) in active markets for identical assets or
liabilities. Fair values determined by Level 2 inputs
utilize data points that are observable, such as quoted prices,
interest rates and yield curves. Fair values determined by
Level 3 inputs utilize unobservable data points for the
asset or liability.
A majority of our financial assets and liabilities have been
classified as Level 2. These assets and liabilities have
been initially valued at the transaction price and subsequently
valued typically utilizing third party pricing services. The
pricing services use many inputs to determine value, including
reportable trades, benchmark yields, credit spreads,
broker/dealer quotes, bids, offers, current spot rates, other
industry, and economic events. We validate the prices provided
by our third party pricing services by reviewing their pricing
methods and matrices, obtaining market values from other pricing
sources, and analyzing pricing data in certain instances. The
fair values of our cash equivalents, derivative contracts,
marketable debt securities, and plan assets for deferred
compensation are determined through market and observable
sources and have been classified as Level 2. After
completing our validation procedures, we did not adjust or
override any fair value measurements provided by our pricing
services as of September 30, 2009 and December 31,
2008.
Our strategic investments are investments in publicly traded
equity securities where fair value is readily determinable and
have therefore been classified as Level 1 assets.
Our venture capital investments are the only assets for which we
used Level 3 inputs to determine the fair value. Venture
capital investments represented approximately 0.3% of total
assets as of both September 30, 2009 and December 31,
2008. The underlying assets in these funds are initially
measured at transaction prices and subsequently valued using the
pricing of recent financing or by reviewing the underlying
economic fundamentals and liquidation value of the companies.
Gains and losses (realized and unrealized) included in earnings
for the period are reported in other income (expense), net.
The carrying amounts reflected in the consolidated balance
sheets for cash, accounts receivable, due from unconsolidated
joint business, other current assets, accounts payable, accrued
expenses and other approximate fair value due to their
short-term nature.
12
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
The following tables set forth our financial assets and
liabilities that were recorded at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
Balance as of
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
September 30,
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
(In millions)
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
483.5
|
|
|
$
|
|
|
|
$
|
483.5
|
|
|
$
|
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
446.2
|
|
|
|
|
|
|
|
446.2
|
|
|
|
|
|
Government securities
|
|
|
1,638.9
|
|
|
|
|
|
|
|
1,638.9
|
|
|
|
|
|
Mortgage and other asset backed securities
|
|
|
234.2
|
|
|
|
|
|
|
|
234.2
|
|
|
|
|
|
Strategic investments
|
|
|
4.2
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
Venture capital investments
|
|
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
23.1
|
|
Derivative contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets for deferred compensation
|
|
|
13.2
|
|
|
|
|
|
|
|
13.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,843.3
|
|
|
$
|
4.2
|
|
|
$
|
2,816.0
|
|
|
$
|
23.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
36.0
|
|
|
|
|
|
|
|
36.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36.0
|
|
|
$
|
|
|
|
$
|
36.0
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
|
|
|
|
Balance as of
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Active Markets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
(In millions)
|
|
2008
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
500.9
|
|
|
$
|
|
|
|
$
|
500.9
|
|
|
$
|
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
328.5
|
|
|
|
|
|
|
|
328.5
|
|
|
|
|
|
Government securities
|
|
|
1,005.0
|
|
|
|
|
|
|
|
1,005.0
|
|
|
|
|
|
Mortgage and other asset backed securities
|
|
|
306.9
|
|
|
|
|
|
|
|
306.9
|
|
|
|
|
|
Strategic investments
|
|
|
4.6
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
Venture capital investments
|
|
|
23.9
|
|
|
|
|
|
|
|
|
|
|
|
23.9
|
|
Derivative contracts
|
|
|
1.9
|
|
|
|
|
|
|
|
1.9
|
|
|
|
|
|
Plan assets for deferred compensation
|
|
|
13.3
|
|
|
|
|
|
|
|
13.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,185.0
|
|
|
$
|
4.6
|
|
|
$
|
2,156.5
|
|
|
$
|
23.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
46.0
|
|
|
|
|
|
|
|
46.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
46.0
|
|
|
$
|
|
|
|
$
|
46.0
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
The following table provides a roll forward of the fair value of
our venture capital investments, where fair value is determined
by Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Beginning Balance
|
|
$
|
21.6
|
|
|
$
|
24.6
|
|
|
$
|
23.9
|
|
|
$
|
28.1
|
|
Total net unrealized gains (losses) included in earnings
|
|
|
0.9
|
|
|
|
2.2
|
|
|
|
(2.2
|
)
|
|
|
(2.6
|
)
|
Purchases, issuances, and settlements
|
|
|
0.6
|
|
|
|
1.6
|
|
|
|
1.4
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
23.1
|
|
|
$
|
28.4
|
|
|
$
|
23.1
|
|
|
$
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary
of Liabilities Recorded at Carrying Value
The fair values of our debt instruments were estimated using
market observable inputs, including quoted prices in active
markets, market indices and interest rate measurements. Within
the hierarchy of fair value measurements, these are Level 2
fair values.
The fair and carrying value of our debt instruments are detailed
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
(In millions)
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
|
Value
|
|
|
Credit line from Dompé
|
|
$
|
17.5
|
|
|
$
|
17.5
|
|
|
$
|
16.4
|
|
|
$
|
16.8
|
|
Notes payable to Fumedica
|
|
|
31.7
|
|
|
|
29.7
|
|
|
|
37.5
|
|
|
|
38.5
|
|
6.0% Senior Notes due 2013
|
|
|
476.7
|
|
|
|
449.6
|
|
|
|
429.8
|
|
|
|
449.6
|
|
6.875% Senior Notes due 2018
|
|
|
602.1
|
|
|
|
604.5
|
|
|
|
562.4
|
|
|
|
608.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,128.0
|
|
|
$
|
1,101.3
|
|
|
$
|
1,046.1
|
|
|
$
|
1,113.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments that potentially subject us to
concentrations of credit risk are accounts receivable and
marketable securities. The majority of our accounts receivable
are payable by wholesale distributors and large pharmaceutical
companies and collateral is generally not required from these
large customers. We monitor the financial performance and credit
worthiness of our large customers so that we can properly assess
and respond to changes in their credit profile. Our portfolio of
marketable securities is subject to concentration limits set
within our investment policy that help to mitigate our credit
exposure.
14
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Marketable
Securities, including Strategic Investments
The following tables summarize our marketable securities and
strategic investments (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Amortized
|
|
As of September 30, 2009 (In millions):
|
|
Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Cost
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
167.1
|
|
|
$
|
1.5
|
|
|
$
|
|
|
|
$
|
165.6
|
|
Non-current
|
|
|
279.1
|
|
|
|
6.7
|
|
|
|
(0.2
|
)
|
|
|
272.6
|
|
Government securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
650.5
|
|
|
|
1.5
|
|
|
|
|
|
|
|
649.0
|
|
Non-current
|
|
|
988.4
|
|
|
|
6.8
|
|
|
|
(1.1
|
)
|
|
|
982.7
|
|
Mortgage and other asset backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
4.3
|
|
|
|
0.1
|
|
|
|
|
|
|
|
4.2
|
|
Non-current
|
|
|
229.9
|
|
|
|
5.4
|
|
|
|
(0.1
|
)
|
|
|
224.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
2,319.3
|
|
|
$
|
22.0
|
|
|
$
|
(1.4
|
)
|
|
$
|
2,298.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic investments, non-current
|
|
$
|
4.2
|
|
|
$
|
0.9
|
|
|
$
|
(0.2
|
)
|
|
$
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Amortized
|
|
As of December 31, 2008 (In millions):
|
|
Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Cost
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
128.2
|
|
|
$
|
0.4
|
|
|
$
|
|
|
|
$
|
127.8
|
|
Non-current
|
|
|
200.3
|
|
|
|
2.6
|
|
|
|
|
|
|
|
197.7
|
|
Government securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
582.8
|
|
|
|
1.5
|
|
|
|
|
|
|
|
581.3
|
|
Non-current
|
|
|
422.2
|
|
|
|
8.7
|
|
|
|
|
|
|
|
413.5
|
|
Mortgage and other asset backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
13.9
|
|
|
|
|
|
|
|
|
|
|
|
13.9
|
|
Non-current
|
|
|
293.0
|
|
|
|
3.3
|
|
|
|
(0.3
|
)
|
|
|
290.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,640.4
|
|
|
$
|
16.5
|
|
|
$
|
(0.3
|
)
|
|
$
|
1,624.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic investments, non-current
|
|
$
|
4.6
|
|
|
$
|
0.5
|
|
|
$
|
(0.1
|
)
|
|
$
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the tables above, as of September 30, 2009 and
December 31, 2008, government securities included
$384.1 million and $139.1 million, respectively, of
Federal Deposit Insurance Corporation, or FDIC, guaranteed
senior notes issued by financial institutions under the
Temporary Liquidity Guarantee Program. In addition, the balances
as of December 31, 2008 include amounts related to our
loaned securities.
Certain commercial paper and short-term debt securities with
original maturities of less than 90 days are included in
cash and cash equivalents on the accompanying consolidated
balance sheets and are not included
15
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
in the tables above. As of September 30, 2009 and
December 31, 2008, the commercial paper, including accrued
interest, had fair and carrying values of $95.1 million and
$42.7 million, respectively, and short-term debt securities
had fair and carrying values of $388.4 million and
$458.2 million, respectively.
Summary
of Contractual Maturities:
Available-for-Sale
Securities
The estimated fair value and amortized cost of securities,
excluding strategic investments,
available-for-sale
by contractual maturity as of September 30, 2009 and
December 31, 2008 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
(In millions)
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Due in one year or less
|
|
$
|
731.4
|
|
|
$
|
728.7
|
|
|
$
|
714.9
|
|
|
$
|
713.0
|
|
Due after one year through five years
|
|
|
1,397.2
|
|
|
|
1,382.8
|
|
|
|
733.7
|
|
|
|
722.0
|
|
Due after five years
|
|
|
190.7
|
|
|
|
187.2
|
|
|
|
191.8
|
|
|
|
189.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,319.3
|
|
|
$
|
2,298.7
|
|
|
$
|
1,640.4
|
|
|
$
|
1,624.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average maturity of our marketable securities as of
September 30, 2009 and December 31, 2008, was
15 months and 13 months, respectively.
Impairments
Other-than-Temporary
Impairments
In April 2009, we implemented newly issued accounting standards
which provided guidance for the recognition, measurement and
presentation of
other-than-temporary
impairments. These newly issued standards amended the
other-than-temporary
impairment model for debt securities and requires additional
disclosures regarding the calculation of credit losses and the
factors considered in reaching a conclusion that an investment
is not
other-than-temporarily
impaired. The impairment model for equity securities was not
affected.
Prior to our adoption of these new accounting standards in April
2009, we recognized all
other-than-temporary
impairment amounts related to our debt securities in earnings as
required under the previously effective guidance which required
that management assert that it had the ability and intent to
hold a debt security until maturity or until we recovered the
cost of our investment. Under the new accounting standards, an
other-than-temporary
impairment must be recognized through earnings if an investor
has the intent to sell the debt security or if it is more likely
than not that the investor will be required to sell the debt
security before recovery of its amortized cost basis. However,
even if an investor does not expect to sell a debt security,
expected cash flows to be received must be evaluated to
determine if a credit loss has occurred. In the event of a
credit loss, only the amount associated with the credit loss is
recognized in income. The amount of losses relating to other
factors, including those resulting from changes in interest
rates, are recorded in accumulated other comprehensive income.
The adoption of this guidance did not have a material impact on
our financial position or results of operations.
Evaluating
Investments for
Other-than-Temporary
Impairments
We conduct periodic reviews to identify and evaluate each
investment that has an unrealized loss, in accordance with the
meaning of
other-than-temporary
impairment and its application to certain investments, as
required by the general accounting principles provided under the
Investment for Debt and Equity Securities Topic of the
Codification. An unrealized loss exists when the current fair
value of an individual security is less
16
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
than its amortized cost basis. Unrealized losses on
available-for-sale
securities that are determined to be temporary, and not related
to credit loss, are recorded, net of tax, in accumulated other
comprehensive income.
For
available-for-sale
debt securities with unrealized losses, management performs an
analysis to assess whether we intend to sell or whether we would
more likely than not be required to sell the security before the
expected recovery of the amortized cost basis. Where we intend
to sell a security, or may be required to do so, the
securitys decline in fair value is deemed to be
other-than-temporary
and the full amount of the unrealized loss is recorded within
earnings as an impairment loss.
Regardless of our intent to sell a security, we perform
additional analysis on all securities with unrealized losses to
evaluate losses associated with the creditworthiness of the
security. Credit losses are identified where we do not expect to
receive cash flows sufficient to recover the amortized cost
basis of a security.
For equity securities, when assessing whether a decline in fair
value below our cost basis is
other-than-temporary,
we consider the fair market value of the security, the duration
of the securitys decline, and the financial condition of
the issuer. We then consider our intent and ability to hold the
equity security for a period of time sufficient to recover our
carrying value. Where we have determined that we lack the intent
and ability to hold an equity security to its expected recovery,
the securitys decline in fair value is deemed to be
other-than-temporary
and is recorded within earnings as an impairment loss.
Recognition
and Measurement of
Other-than-Temporary
Impairment
During the nine months ended September 30, 2009, we
recognized $3.6 million in charges for the
other-than-temporary
impairment of available for sale securities primarily related to
mortgage and asset backed securities when we lacked the ability
and intent to hold the securities to recovery. No impairment
losses were recognized through earnings related to available for
sale securities during the three months ended September 30,
2009.
For the three and nine months ended September 30, 2008, we
recognized $14.1 million and $19.3 million,
respectively, in charges for the
other-than-temporary
impairment of
available-for-sale
securities primarily related to mortgage and asset backed
securities.
For the three and nine months ended September 30, 2009 we
recorded increases of $0.6 million and $4.3 million,
respectively, in unrealized net gains accounted for through
accumulated other comprehensive income, a component of
shareholders equity. This compares to an increase of
$2.4 million and a decrease of $5.7 million in
unrealized net gains, respectively, in the comparable periods of
the prior year.
Proceeds
from Marketable Securities, excluding Strategic
Investments
The proceeds from maturities and sales of marketable securities,
excluding strategic investments, which were primarily reinvested
and resulting realized gains and losses, were as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
|
|
|
For the Nine Months
|
|
|
|
Ended September 30,
|
|
|
Ended September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Proceeds from maturities and sales
|
|
$
|
696.5
|
|
|
$
|
743.2
|
|
|
$
|
2,334.1
|
|
|
$
|
2,135.1
|
|
Realized gains
|
|
$
|
3.1
|
|
|
$
|
0.9
|
|
|
$
|
17.0
|
|
|
$
|
11.6
|
|
Realized losses
|
|
$
|
1.3
|
|
|
$
|
10.6
|
|
|
$
|
3.4
|
|
|
$
|
15.4
|
|
The realized losses for the three and nine months ended
September 30, 2009 and 2008 primarily relate to losses on
the sale of corporate debt securities and non-agency
mortgage-backed securities.
17
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Securities
Lending
We previously loaned certain securities from our portfolio to
other institutions. We held collateral in the amount of
$30.0 million as of December 31, 2008. The cash
collateral was recorded as collateral received for loaned
securities on the accompanying consolidated balance sheet. No
such loans were outstanding as of September 30, 2009 and
accordingly no collateral was held as of September 30, 2009.
|
|
7.
|
Derivative
Instruments
|
Forward
Contracts and Interest Rate Swaps
On January 1, 2009, we adopted a newly issued accounting
standard which requires additional disclosure about our
objectives for using derivative instruments, the level of
derivative activity we engage in, and the effect of derivative
instruments and related hedged items on our financial position
and performance. The adoption of this standard did not impact
our financial position or results of operations.
Our primary market exposure is to interest rates and foreign
exchange rates. We use certain derivative instruments to help
manage this exposure. We execute these instruments with
financial institutions we judge to be creditworthy and the
majority of the foreign currencies are denominated in currencies
of major industrial countries. We do not hold or issue
derivative instruments for trading or speculative purposes.
We recognize all derivative instruments as either assets or
liabilities at fair value in our consolidated balance sheets. We
classify the cash flows from these instruments in the same
category as the cash flows from the hedged items.
Forward
Contracts
Due to the global nature of our operations, portions of our
revenues are in currencies other than the U.S. dollar. The
value of revenue measured in U.S. dollars is subject to
changes in currency exchange rates. In order to mitigate these
changes we use forward contracts to lock in exchange rates. We
do not engage in currency speculation.
All foreign currency forward contracts in effect as of
September 30, 2009 and December 31, 2008 had durations
of 1 to 12 months. 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). 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 at each reporting date.
Foreign currency forward contracts that were entered into to
hedge forecasted revenue were as follows:
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
|
As of September 30,
|
|
|
As of December 31,
|
|
Foreign Currency: (In millions)
|
|
2009
|
|
|
2008
|
|
|
Euro
|
|
$
|
399.0
|
|
|
$
|
489.4
|
|
Canadian Dollar
|
|
|
36.7
|
|
|
|
34.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
435.7
|
|
|
$
|
523.5
|
|
|
|
|
|
|
|
|
|
|
The portion of the fair value of these contracts that was
included in accumulated other comprehensive income (loss) within
total equity reflected losses of $34.7 million and
$44.1 million as of September 30, 2009 and
December 31, 2008, respectively. 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 obligations under the contract. As
18
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
of September 30, 2009 and December 31, 2008,
respectively, credit risk did not materially change the fair
value of our foreign currency forward contracts.
In relation to our foreign currency forward contracts, we
recognize gains and losses in earnings due to hedge
ineffectiveness. During the three and nine months ended
September 30, 2009 we recognized net losses of
$0.1 million and $0.9 million, respectively. During
the three and nine months ended September 30, 2008, we
recognized net losses of $1.3 million and
$2.4 million, respectively. In addition, we recognized
$16.3 million and $28.6 million, respectively, of
losses in product revenue for the settlement of certain
effective cash flow hedge instruments for the three and nine
months ended September 30, 2009 as compared to losses
recognized in the amount of $2.3 million and
$20.0 million, respectively, during the prior year
comparative periods. These settlements were recorded in the same
period as the related forecasted revenue.
Interest
Rate Swaps
In connection with the issuance of our 6.0% and
6.875% Senior Notes in March 2008, we entered into interest
rate swaps for an aggregate notional amount of
$550.0 million, which were settled in December 2008. Under
the settlement we received $53.9 million. As the interest
rate swaps were settled in 2008, no hedge ineffectiveness was
recognized for the three and nine months ended
September 30, 2009. In the three and nine months ended
September 30, 2008, we recognized a net gain of
$1.3 million and a net loss of $3.6 million,
respectively, in earnings due to hedge ineffectiveness.
Additionally, upon termination of the swaps in December 2008,
the carrying amount of the 6.875% Senior Notes increased
$62.8 million. This amount will be recognized as a
reduction of interest expense and amortized using the effective
interest rate method over the remaining life of the
6.875% Senior Notes. During the three and nine months ended
September 30, 2009, approximately $1.3 million and
$4.0 million, respectively, was recorded as a reduction of
interest expense.
Summary
of Derivatives designated as Hedging Instruments
The following table summarizes the fair value and presentation
in the consolidated balance sheets for derivatives designated as
hedging instruments as of September 30, 2009 and
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Balance Sheet
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
(In millions)
|
|
Location
|
|
|
Fair Value
|
|
|
Location
|
|
|
Fair Value
|
|
|
September 30, 2009
|
|
|
Other Current Assets
|
|
|
$
|
|
|
|
|
Accrued Expenses and Other
|
|
|
$
|
34.8
|
|
December 31, 2008
|
|
|
Other Current Assets
|
|
|
$
|
1.9
|
|
|
|
Accrued Expenses and Other
|
|
|
$
|
46.0
|
|
As noted above, the interest rate swaps were settled in December
2008.
19
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
The following table summarizes the effect of derivatives
designated as hedging instruments on the consolidated statements
of income for the three and nine months ended September 30,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Amount
|
|
|
|
|
|
|
Recognized in
|
|
|
|
Reclassified from
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Other
|
|
|
|
Other
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
Income
|
|
Income
|
|
Income
|
|
Income
|
|
Amount of
|
|
|
on Derivative
|
|
Statement
|
|
into Income
|
|
Statement
|
|
Gain/(Loss)
|
|
|
Gain/(Loss)
|
|
Location
|
|
Gain/(Loss)
|
|
Location
|
|
Recorded
|
(In millions)
|
|
(Effective Portion)
|
|
(Effective Portion)
|
|
(Effective Portion)
|
|
(Ineffective Portion)
|
|
(Ineffective Portion)
|
|
For the Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(34.7
|
)
|
|
Revenue
|
|
$
|
(16.3
|
)
|
|
Other income (expense)
|
|
$
|
(0.1
|
)
|
Interest rate swap
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
5.7
|
|
|
Revenue
|
|
$
|
(2.3
|
)
|
|
Other income (expense)
|
|
$
|
(1.3
|
)
|
Interest rate swap
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
|
Interest expense
|
|
$
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(34.7
|
)
|
|
Revenue
|
|
$
|
(28.6
|
)
|
|
Other income (expense)
|
|
$
|
(0.9
|
)
|
Interest rate swap
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
September 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
5.7
|
|
|
Revenue
|
|
$
|
(20.0
|
)
|
|
Other income (expense)
|
|
$
|
(2.4
|
)
|
Interest rate swap
|
|
$
|
|
|
|
Interest expense
|
|
$
|
|
|
|
Interest expense
|
|
$
|
(3.6
|
)
|
Other
Derivatives
During the quarter ended September 30, 2009 we entered into
several foreign currency forward contracts to mitigate the
foreign currency risk related to certain intercompany
transactions. We have not elected hedge accounting for these
transactions. As of September 30, 2009 the aggregate
notional amount of our outstanding foreign currency contracts
was $115.6 million. The fair value of these contracts was a
liability of $1.2 million. Net losses of $2.2 million
and a de minimis amount, respectively, were recognized as a
component of other income (expense), net related to these
contracts in the three and nine months ended September 30,
2009.
|
|
8.
|
Property,
Plant and Equipment
|
Property, plant and equipment are recorded at historical cost,
net of accumulated depreciation.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
September 30,
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
Accumulated depreciation
|
|
$
|
622.9
|
|
|
$
|
537.0
|
|
20
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
The following tables reflect the reconciliation at the beginning
and the end of the period of the carrying amount of equity
attributable to the shareholders of Biogen Idec Inc., equity
attributable to noncontrolling interests, and total equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months Ended September 30, 2009
|
|
|
Three Months Ended September 30, 2008
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
(In millions)
|
|
Equity
|
|
|
interest
|
|
|
Equity
|
|
|
Equity
|
|
|
interest
|
|
|
Equity
|
|
|
Beginning Balance
|
|
$
|
6,212.5
|
|
|
$
|
33.2
|
|
|
$
|
6,245.7
|
|
|
$
|
5,522.9
|
|
|
$
|
26.2
|
|
|
$
|
5,549.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
277.7
|
|
|
|
1.9
|
|
|
|
279.6
|
|
|
|
206.8
|
|
|
|
1.0
|
|
|
|
207.8
|
|
Unrealized gains(losses) on securities available for sale, net
of tax of $0.3 and $(0.7)
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
(0.5
|
)
|
|
|
1.3
|
|
|
|
|
|
|
|
1.3
|
|
Unrealized gains(losses) on foreign currency forward contracts,
net of tax of $0.8 and $(7.6)
|
|
|
(2.3
|
)
|
|
|
|
|
|
|
(2.3
|
)
|
|
|
13.0
|
|
|
|
|
|
|
|
13.0
|
|
Unrealized gains(losses) on pension benefit obligation, net of
tax of $(0.1) and $0.0
|
|
|
0.2
|
|
|
|
|
|
|
|
0.2
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
(0.2
|
)
|
Translation adjustments
|
|
|
28.4
|
|
|
|
1.3
|
|
|
|
29.7
|
|
|
|
(101.8
|
)
|
|
|
(2.7
|
)
|
|
|
(104.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
|
303.5
|
|
|
|
3.2
|
|
|
|
306.7
|
|
|
|
119.1
|
|
|
|
(1.7
|
)
|
|
|
117.4
|
|
Distribution to noncontrolling interest
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
(1.4
|
)
|
|
|
(1.4
|
)
|
Capital contribution from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
|
|
1.6
|
|
Repurchase of common stock for Treasury, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock from conversion of subordinated notes
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock under stock option and stock purchase
plans
|
|
|
8.8
|
|
|
|
|
|
|
|
8.8
|
|
|
|
77.6
|
|
|
|
|
|
|
|
77.6
|
|
Issuance of common stock under stock award plans
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
(2.0
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
(1.0
|
)
|
Compensation expense related to share-based payments
|
|
|
42.8
|
|
|
|
|
|
|
|
42.8
|
|
|
|
38.5
|
|
|
|
|
|
|
|
38.5
|
|
Tax benefit from share-based payments
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
(1.4
|
)
|
|
|
11.4
|
|
|
|
|
|
|
|
11.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
6,564.2
|
|
|
$
|
33.6
|
|
|
$
|
6,597.8
|
|
|
$
|
5,768.5
|
|
|
$
|
24.7
|
|
|
$
|
5,793.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Nine Months Ended September 30, 2009
|
|
|
Nine Months Ended September 30, 2008
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
|
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Total
|
|
(In millions)
|
|
Equity
|
|
|
interest
|
|
|
Equity
|
|
|
Equity
|
|
|
interest
|
|
|
Equity
|
|
|
Beginning Balance
|
|
$
|
5,806.1
|
|
|
$
|
27.9
|
|
|
$
|
5,834.0
|
|
|
$
|
5,534.3
|
|
|
$
|
19.7
|
|
|
$
|
5,554.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
664.5
|
|
|
|
6.6
|
|
|
|
671.1
|
|
|
|
576.5
|
|
|
|
5.2
|
|
|
|
581.7
|
|
Unrealized gains(losses) on securities available for sale, net
of tax of $(1.7) and $2.6
|
|
|
3.0
|
|
|
|
|
|
|
|
3.0
|
|
|
|
(6.2
|
)
|
|
|
|
|
|
|
(6.2
|
)
|
Unrealized gains(losses) on foreign currency forward contracts,
net of tax of $0.3 and $(4.5)
|
|
|
9.6
|
|
|
|
|
|
|
|
9.6
|
|
|
|
7.6
|
|
|
|
|
|
|
|
7.6
|
|
Unrealized gains on pension benefit obligation, net of tax of
$(0.1) and $0.0
|
|
|
0.2
|
|
|
|
|
|
|
|
0.2
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
Translation adjustment
|
|
|
35.4
|
|
|
|
1.9
|
|
|
|
37.3
|
|
|
|
(47.1
|
)
|
|
|
(1.0
|
)
|
|
|
(48.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
712.7
|
|
|
|
8.5
|
|
|
|
721.2
|
|
|
|
530.7
|
|
|
|
4.2
|
|
|
|
534.9
|
|
Distribution to noncontrolling interest
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
(2.8
|
)
|
|
|
|
|
|
|
(2.8
|
)
|
|
|
(2.8
|
)
|
Capital contribution from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.6
|
|
|
|
3.6
|
|
Repurchase of common stock for Treasury, at cost
|
|
|
(57.6
|
)
|
|
|
|
|
|
|
(57.6
|
)
|
|
|
(559.8
|
)
|
|
|
|
|
|
|
(559.8
|
)
|
Issuance of common stock from conversion of subordinated notes
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.2
|
|
Issuance of common stock under stock option and stock purchase
plans
|
|
|
33.2
|
|
|
|
|
|
|
|
33.2
|
|
|
|
167.3
|
|
|
|
|
|
|
|
167.3
|
|
Issuance of common stock under stock award plans
|
|
|
(40.5
|
)
|
|
|
|
|
|
|
(40.5
|
)
|
|
|
(42.8
|
)
|
|
|
|
|
|
|
(42.8
|
)
|
Compensation expense related to share-based payments
|
|
|
124.7
|
|
|
|
|
|
|
|
124.7
|
|
|
|
109.8
|
|
|
|
|
|
|
|
109.8
|
|
Tax benefit from share-based payments
|
|
|
(14.4
|
)
|
|
|
|
|
|
|
(14.4
|
)
|
|
|
28.8
|
|
|
|
|
|
|
|
28.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Balance
|
|
$
|
6,564.2
|
|
|
$
|
33.6
|
|
|
$
|
6,597.8
|
|
|
$
|
5,768.5
|
|
|
$
|
24.7
|
|
|
$
|
5,793.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As noted within Note 1, Business Overview, of this
Form 10-Q,
effective January 1, 2009, we adopted a newly issued
accounting standard for noncontrolling interests. The newly
issued accounting standard requires enhanced disclosures to
clearly distinguish between our interests and the interests of
noncontrolling owners.
We changed the accounting and reporting for our minority
interests by recharacterizing them as noncontrolling interests
and classifying them as a separate component of total equity in
our accompanying consolidated balance sheets. Additionally, net
income attributable to noncontrolling interest is now shown
separately from net income in the consolidated statements of
income. As a result, our accompanying consolidated statements of
income include net income, which represents net income prior to
any allocation to minority shareholders and net income
attributable to noncontrolling interest, as well as a new line
item titled
22
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
net income attributable to Biogen Idec Inc., which is the
equivalent of the previously reported net income line item.
These reclassifications had no effect on our previously reported
financial position or results of operations. Refer to
Note 1, Business Overview, and Note 13,
Other Income (Expense), Net, of this
Form 10-Q
for additional information on the adoption of this guidance.
Basic and diluted earnings per share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
277.7
|
|
|
$
|
206.8
|
|
|
$
|
664.5
|
|
|
$
|
576.5
|
|
Adjustment for net income allocable to preferred stock
|
|
|
(0.5
|
)
|
|
|
(0.4
|
)
|
|
|
(1.1
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used in calculating basic and diluted earnings per
share
|
|
$
|
277.2
|
|
|
$
|
206.4
|
|
|
$
|
663.4
|
|
|
$
|
575.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
288.9
|
|
|
|
291.4
|
|
|
|
288.4
|
|
|
|
292.6
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and ESPP
|
|
|
0.6
|
|
|
|
1.1
|
|
|
|
0.7
|
|
|
|
1.6
|
|
Time-vested restricted stock units
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
1.3
|
|
|
|
1.2
|
|
Performance-vested restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
2.1
|
|
|
|
2.5
|
|
|
|
2.0
|
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating diluted earnings per share
|
|
|
291.0
|
|
|
|
293.9
|
|
|
|
290.4
|
|
|
|
295.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following amounts were not included in the calculation of
net income per diluted share because their effects were
anti-dilutive or the performance criteria had not been met for
the performance-vested restricted stock units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to preferred stock
|
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
$
|
1.1
|
|
|
$
|
1.0
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
8.4
|
|
|
|
6.7
|
|
|
|
7.4
|
|
|
|
6.4
|
|
Time-vested restricted stock units
|
|
|
2.3
|
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
1.4
|
|
Performance-vested restricted stock units
|
|
|
0.2
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
Convertible preferred stock
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11.4
|
|
|
|
9.0
|
|
|
|
10.1
|
|
|
|
8.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
On January 1, 2009, we adopted a newly issued accounting
standard which addresses whether instruments granted in
share-based payment transactions are participating securities
prior to vesting, and therefore need to be included in the
earnings allocation in computing earnings per share under the
two-class method. This newly issued accounting standard requires
us to include all unvested share-based payment awards that
contain nonforfeitable rights to dividends or dividend
equivalents, whether paid or unpaid, as participating securities
and to include them in the number of shares outstanding in our
basic and diluted EPS calculations pursuant to the two-class
method. Our awards do not have nonforfeitable rights to
dividends or dividend equivalents and therefore the adoption of
this guidance did not impact our financial position or results
of operations.
The following table summarizes share-based compensation expense
included within our consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Research and development
|
|
$
|
15.6
|
|
|
$
|
14.0
|
|
|
$
|
46.0
|
|
|
$
|
45.8
|
|
Selling, general and administrative
|
|
|
27.2
|
|
|
|
24.5
|
|
|
|
78.7
|
|
|
|
64.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
|
42.8
|
|
|
|
38.5
|
|
|
|
124.7
|
|
|
|
109.8
|
|
Capitalized share-based payment costs
|
|
|
(1.7
|
)
|
|
|
(1.8
|
)
|
|
|
(4.8
|
)
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in total costs and
expenses
|
|
|
41.1
|
|
|
|
36.7
|
|
|
|
119.9
|
|
|
|
104.3
|
|
Income tax effect
|
|
|
(12.6
|
)
|
|
|
(11.4
|
)
|
|
|
(36.8
|
)
|
|
|
(32.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in net income
attributable to Biogen Idec, Inc.
|
|
$
|
28.5
|
|
|
$
|
25.3
|
|
|
$
|
83.1
|
|
|
$
|
72.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share-based compensation programs consist of share-based
awards which include stock options, time-vested restricted stock
units and performance-vested restricted stock units, as well as
our employee stock purchase plan. The following table summarizes
share-based compensation expense associated with each of these
programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Stock options
|
|
$
|
5.5
|
|
|
$
|
4.9
|
|
|
$
|
16.6
|
|
|
$
|
14.3
|
|
Time-vested restricted stock units
|
|
|
34.4
|
|
|
|
30.5
|
|
|
|
99.9
|
|
|
|
89.5
|
|
Performance-vested restricted stock units
|
|
|
(0.3
|
)
|
|
|
0.1
|
|
|
|
3.0
|
|
|
|
0.8
|
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
Employee stock purchase plan
|
|
|
3.2
|
|
|
|
3.0
|
|
|
|
5.2
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
42.8
|
|
|
$
|
38.5
|
|
|
$
|
124.7
|
|
|
$
|
109.8
|
|
Capitalized share-based payment costs
|
|
|
(1.7
|
)
|
|
|
(1.8
|
)
|
|
|
(4.8
|
)
|
|
|
(5.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in total costs and
expenses
|
|
$
|
41.1
|
|
|
$
|
36.7
|
|
|
$
|
119.9
|
|
|
$
|
104.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Stock
Options
The fair values of our stock option grants are estimated as of
the date of grant using a Black-Scholes option valuation model.
The estimated fair values of the stock options, including the
effect of estimated forfeitures, are then expensed over the
options vesting periods. A summary of stock options
granted during the three and nine months ended
September 30, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Number
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
Number
|
|
Exercise
|
|
Number
|
|
Exercise
|
(In millions, except share price)
|
|
Granted(a)
|
|
Price
|
|
Granted
|
|
Price
|
|
Granted
|
|
Price
|
|
Granted
|
|
Price
|
|
Stock Options
|
|
|
|
|
|
$
|
47.96
|
|
|
|
0.1
|
|
|
$
|
65.70
|
|
|
|
1.0
|
|
|
$
|
50.02
|
|
|
|
1.4
|
|
|
$
|
60.89
|
|
|
|
(a)
|
Approximately 14,000 stock
options were granted during the quarter ended September 30,
2009.
|
Time-Vested
Restricted Stock Units
The fair values of our time-vested restricted stock units, or
RSUs, are based on the market value of our stock on the date of
grant and are recognized over the applicable service period,
adjusted for the effect of estimated forfeitures. A summary of
RSU activity for the three and nine months ended
September 30, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Number
|
|
Grant Date
|
|
Number
|
|
Grant Date
|
|
Number
|
|
Grant Date
|
|
Number
|
|
Grant Date
|
(In millions, except share price)
|
|
Granted
|
|
Fair Value
|
|
Granted
|
|
Fair Value
|
|
Granted
|
|
Fair Value
|
|
Granted
|
|
Fair Value
|
|
Time-Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
|
|
|
0.1
|
|
|
$
|
48.42
|
|
|
|
0.2
|
|
|
$
|
51.87
|
|
|
|
2.5
|
|
|
$
|
49.35
|
|
|
|
2.8
|
|
|
$
|
60.04
|
|
Performance-Vested
Restricted Stock Units
2009
Grant Activity
We apply a graded vesting expense methodology when accounting
for the performance-vested restricted stock units, or PVRSUs,
issued during 2009 in accordance with generally accepted
accounting principles for share-based compensation. During the
nine months ended September 30, 2009, approximately 321,000
PVRSUs were granted with a weighted average grant date fair
value of $49.46 per share. Approximately 307,000 of these PVRSUs
were granted during the first quarter of 2009, primarily in
connection with our annual awards made in February; the
remainder of the PVRSUs granted during the nine months ended
September 30, 2009 were made in conjunction with promotions
and new hires.
The number of PVRSUs reflected as granted represents the target
number of shares that are eligible to vest in full or in part
and are earned subject to the attainment of certain performance
criteria established at the beginning of the performance period;
the performance period ends December 31, 2009. Participants
may ultimately earn up to 200% of the target number of shares
granted in the event that the maximum performance thresholds are
attained. Accordingly, additional PVRSUs may be issued upon
final determination of the number of awards earned.
25
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Once the earned number of performance-vested awards has been
determined, the earned PVRSUs will then vest in three equal
increments on (1) the later of the first anniversary of the
grant date or the date of results determination; (2) the
second anniversary of the grant date; and (3) the third
anniversary of the grant date. The vesting of these awards is
also subject to the respective employees continued
employment. Compensation expense associated with these PVRSUs is
initially based upon the number of shares expected to vest after
assessing the probability that certain performance criteria will
be met and the associated targeted payout level that is
forecasted will be achieved, net of estimated forfeitures.
Cumulative adjustments are recorded quarterly to reflect
subsequent changes in the estimated outcome of
performance-related conditions until the date results are
determined.
2007
Grant Activity
During 2007, our Board of Directors awarded a total of 120,000
PVRSUs to Dr. Cecil Pickett, our former President, Research
and Development. Vesting of these PVRSUs was subject to certain
performance criteria established at the beginning of each of
four performance periods, beginning January 1 on each of 2007,
2008, 2009 and 2010, and Dr. Picketts continued
employment through the end of the respective performance
periods. In February 2008, a total of 27,000 shares were
issued based upon the attainment of performance criteria set for
2007. An additional 30,000 shares were issued in February
2009 based on the attainment of performance criteria set for
2008. No additional shares were issued to Dr. Pickett
during the three and nine months ended September 30, 2009
and 2008, respectively. Dr. Pickett retired from the
position of President, Research and Development effective
October 5, 2009. Accordingly, no additional PVRSUs awarded
to Dr. Pickett will vest or be issued. Expense previously
recognized in relation to unvested awards was reversed during
the current quarter.
Employee
Stock Purchase Plan
The purchase price of common stock under the employee stock
purchase plan, or ESPP, is equal to 85% of the lower of
(i) the market value per share of the common stock on the
participants entry date into an offering period or
(ii) the market value per share of the common stock on the
purchase date. However, for each participant whose entry date is
other than the start date of the offering period, the amount
shall in no event be less than the market value per share of the
common stock as of the beginning of the related offering period.
The fair value of the discounted purchases made under the
employee stock purchase plan are calculated using the
Black-Scholes model. The fair value of the look-back provision
plus the 15% discount is recognized as compensation expense over
the purchase period. We apply a graded vesting approach since
our ESPP provides for multiple purchase periods and is, in
substance, a series of linked awards.
The table below provides a summary of shares issued under our
ESPP for the three and nine months ended September 30, 2009
and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
(In millions)
|
|
Shares Issued
|
|
Shares Issued
|
|
Shares Issued
|
|
Shares Issued
|
|
Employee Stock Purchase Plan
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
0.4
|
|
26
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
The following table provides a comparative summary of our
effective tax rates and income tax expense for the three and
nine months ended September 30, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
For the Nine Months Ended September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Effective tax rate
|
|
|
29.0
|
%
|
|
|
35.5
|
%
|
|
|
(18.3
|
)%
|
|
|
28.8
|
%
|
|
|
32.7
|
%
|
|
|
(11.9
|
)%
|
Income tax expense
|
|
$
|
113.9
|
|
|
$
|
114.3
|
|
|
|
(0.3
|
)%
|
|
$
|
271.9
|
|
|
$
|
282.3
|
|
|
|
(3.7
|
)%
|
Our effective tax rate will fluctuate from period to period due
to several factors inherent in the nature of our global
operations and business transactions. The factors that most
significantly impact our tax rate include the variability of the
proportion of our taxable earnings in multiple jurisdictions,
changes in tax laws and acquisition and licensing transactions.
Our effective tax rate for the three and nine months ended
September 30, 2009 was favorably impacted by certain
adjustments to our transfer pricing and other estimates made in
conjunction with the filing of our income tax returns during the
current quarter. These adjustments had a favorable impact of
1.9% and 0.8% on our tax rate for the three and nine months
ended September 30, 2009, respectively. In addition, our
tax rate for the nine months ended September 30, 2009, was
also favorably impacted by changes in the tax laws of certain
states in which we operate. These tax law changes required us to
establish deferred tax assets for certain tax credits and adjust
certain deferred tax liabilities and reserves for uncertain tax
positions resulting in a favorable impact of 3.2% on our
effective tax rate for the nine months ended September 30,
2009. As these tax law changes became effective during the first
quarter of 2009, these changes did not have an impact on our
effective tax rate for the three months ended September 30,
2009.
The favorable impact of these items on our effective tax rate
for the nine months ended September 30, 2009 was offset by
the impact of the collaboration and license agreement entered
into with Acorda Therapeutics, Inc., or Acorda, on June 30,
2009. As there is no income tax benefit associated with the
$110.0 million July 1, 2009 upfront payment made to
Acorda and other registrational costs of Fampridine-SR, these
payments had a 2.4% and 2.3% unfavorable impact on our effective
tax rate for the three and nine months ended September 30,
2009, respectively. Refer to Note 14,
Collaborations, of this
Form 10-Q
for additional information related to the Acorda transaction.
In connection with the acquisition of Syntonix Pharmaceuticals,
or Syntonix, in January 2007, we agreed to make additional
future consideration payments contingent upon the achievement of
certain milestone events. In accordance with the acquisition
agreement, we expect to make a $40.0 million milestone
payment to the former shareholders of Syntonix in the fourth
quarter of 2009. This amount will be recorded as a charge to
IPR&D when the related milestone has been achieved. This
payment was anticipated in determining our full year effective
tax rate. As this amount is not deductible for United States
income tax purposes, our 2009 effective tax rate would be
favorably impacted in the event that the achievement of these
milestones is not met or is delayed beyond the fourth quarter of
2009.
Our effective tax rate for the nine months ended
September 30, 2008 was favorably impacted by the
restructuring of our operations in foreign jurisdictions as well
as other activities and adjustments made.
27
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Reconciliation between the U.S. federal statutory tax rate
and our effective tax rate for the three and nine months ended
September 30, 2009 and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes
|
|
|
2.2
|
|
|
|
4.4
|
|
|
|
1.6
|
|
|
|
3.0
|
|
Taxes on foreign earnings
|
|
|
(7.7
|
)
|
|
|
(7.4
|
)
|
|
|
(5.8
|
)
|
|
|
(9.0
|
)
|
Credits and net operating loss utilization
|
|
|
(1.5
|
)
|
|
|
1.1
|
|
|
|
(4.1
|
)
|
|
|
0.1
|
|
Fair value adjustment
|
|
|
0.9
|
|
|
|
3.8
|
|
|
|
2.0
|
|
|
|
3.6
|
|
IPR&D
|
|
|
0.9
|
|
|
|
|
|
|
|
1.1
|
|
|
|
1.0
|
|
Permanent items
|
|
|
(1.0
|
)
|
|
|
(0.9
|
)
|
|
|
(1.5
|
)
|
|
|
(0.8
|
)
|
Other
|
|
|
0.2
|
|
|
|
(0.5
|
)
|
|
|
0.5
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
29.0
|
%
|
|
|
35.5
|
%
|
|
|
28.8
|
%
|
|
|
32.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 12, 2006, we received a Notice of Assessment
from the Massachusetts Department of Revenue for
$38.9 million, including penalties and interest, with
respect to the 2002 tax year. Subsequently, we filed a petition
with the Massachusetts Appellate Tax Board, seeking among other
items, abatements of corporate excise tax for the 2001, 2002 and
2003 tax years. We believe that we have meritorious defenses to
the proposed adjustment and are vigorously opposing the
assessment. We believe that the assessment does not impact the
level of liabilities for income tax contingencies. However,
there is a possibility that we may not prevail in all of our
assertions. If this is resolved unfavorably in the future, it
could have a material impact on our results of operations in the
period the resolution occurs. We are subject to examinations by
the Massachusetts Department of Revenue for additional tax years
and, therefore, may be assessed for a similar proposed
adjustment to those additional tax years. Refer to Note 15,
Litigation, of this
Form 10-Q
for additional information.
We file income tax returns in the United States federal
jurisdiction, and various states and foreign jurisdictions. With
few exceptions, we are no longer subject to U.S. federal,
state and local, or
non-U.S. income
tax examinations by tax authorities for years before 2001.
During the second quarter of 2007, the Internal Revenue Service,
or IRS, completed its examination of our consolidated federal
income tax returns for the fiscal years 2003 and 2004 and issued
an assessment. During the first quarter of 2009 the IRS
completed an examination of our consolidated federal income tax
returns for fiscal years 2005 and 2006 and issued an assessment.
Our level of liabilities for income tax contingencies
approximate the assessment amounts for items agreed to with the
IRS; we are appealing several other items. If these items are
resolved unfavorably in the future, the outcome could have an
adverse impact on our results of operations in the period the
resolution occurs.
28
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
|
|
13.
|
Other
Income (Expense), Net
|
Total other income (expense), net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
|
For the
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Interest income
|
|
$
|
10.9
|
|
|
$
|
16.8
|
|
|
$
|
37.8
|
|
|
$
|
55.0
|
|
Interest expense
|
|
|
(8.5
|
)
|
|
|
(8.1
|
)
|
|
|
(27.6
|
)
|
|
|
(37.6
|
)
|
Impairments of investments
|
|
|
(0.5
|
)
|
|
|
(17.4
|
)
|
|
|
(10.1
|
)
|
|
|
(32.0
|
)
|
Net gains (losses) on foreign currency transactions
|
|
|
3.2
|
|
|
|
(1.8
|
)
|
|
|
10.6
|
|
|
|
(2.8
|
)
|
Net realized gains (losses) on marketable securities
|
|
|
1.8
|
|
|
|
(9.7
|
)
|
|
|
13.7
|
|
|
|
(3.8
|
)
|
Other, net
|
|
|
2.5
|
|
|
|
(3.5
|
)
|
|
|
6.5
|
|
|
|
(3.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
$
|
9.4
|
|
|
$
|
(23.7
|
)
|
|
$
|
30.9
|
|
|
$
|
(24.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
on Investments
In April 2009, we implemented newly issued accounting standards
which provided guidance for recognition and presentation of
other-than-temporary
impairments. The adoption of the guidance did not have a
material impact on our financial position or results of
operations; however, this standard amended the
other-than-temporary
impairment model for debt securities. The impairment model for
equity securities was not affected. Refer to Note 6,
Financial Instruments, of this
Form 10-Q
for additional information on the adoption of this guidance.
During the three and nine months ended September 30, 2009,
we recognized impairment losses of $0.5 million and
$6.5 million, respectively, on our strategic investments
and non-marketable securities. In addition, during the three and
nine months ended September 30, 2008, we recognized
$3.3 million and $12.7 million, respectively, in
charges for the impairment of strategic investments and
non-marketable securities that were determined to be
other-than-temporary.
No impairment losses were recognized through earnings related to
available for sale securities during the three months ended
September 30, 2009. For the nine months ended
September 30, 2009, we recognized $3.6 million in
charges. For the three and nine months ended September 30,
2008, we recognized $14.1 million and $19.3 million,
respectively, in charges for the
other-than-temporary
impairment of available for sale securities primarily related to
mortgage and asset backed securities.
Noncontrolling
Interest
Effective January 1, 2009, we changed the accounting and
reporting for our minority interests by recharacterizing them as
noncontrolling interest. Prior year amounts related to
noncontrolling interest, historically reflected as a component
of other income (expense), net, have been reclassified to
conform to current year presentation. Amounts previously
reported as minority interest are now shown separately from net
income in the accompanying consolidated statements of income and
total $1.9 million and $6.6 million, respectively, for
the three and nine months ended September 30, 2009, as
compared to $1.0 million and $5.2 million,
respectively, in the prior year comparative periods. Refer to
Note 1, Business Overview, and Note 9,
Equity, of this
Form 10-Q
for additional information on the adoption of this guidance.
29
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
In connection with our business strategy, we have entered into
various collaboration agreements which provide us with rights to
develop, produce and market products using certain know-how,
technology and patent rights maintained by our collaborative
partners. Terms of the various collaboration agreements may
require us to make milestone payments upon the achievement of
certain product research and development objectives and pay
royalties on future sales, if any, of commercial products
resulting from the collaboration.
Effective January 1, 2009, we adopted a newly issued
accounting standard for the accounting and disclosure of an
entitys collaborative arrangements. This newly issued
standard prescribes that certain transactions between
collaborators be recorded in the income statement on either a
gross or net basis, depending on the characteristics of the
collaboration relationship, and provides for enhanced disclosure
of collaborative relationships. In accordance with this
guidance, we must also evaluate our collaborative agreements for
proper income statement classification based on the nature of
the underlying activity. Amounts due from our collaborative
partners related to development activities are generally
reflected as a reduction of research and development expense
because the performance of contract development services is not
central to our operations. For collaborations with
commercialized products, if we are the principal (as defined in
reporting revenue as a principal versus net as an agent as
required by the Revenue Recognition Topic of the
Codification) we record revenue and the corresponding operating
costs in their respective line items within our consolidated
statements of income. If we are not the principal, we record
operating costs as a reduction of revenue. The guidance
describes the principal as the party who is responsible for
delivering the product or service to the customer, has latitude
to determine price, and has the risks and rewards of providing
product or service to the customer, including inventory and
credit risk. The adoption of this newly issued accounting
standard did not impact our financial position or results of
operations; however it resulted in enhanced disclosures for our
collaboration activities.
Genentech
We collaborate with Genentech, Inc., or Genentech, a member of
the Roche Group, on the development and commercialization of
RITUXAN. We also have rights to collaborate with Genentech on
the development and commercialization of (1) anti-CD20
products that Genentech acquires or develops, which we refer to
as New Anti-CD20 Products, and (2) anti-CD20 products that
Genentech licenses from a third party, which we refer to as
Third Party Anti-CD20 Products. Currently, there is only one New
Anti-CD20 Product, ocrelizumab, and only one Third Party
Anti-CD20 Product, GA101. Our collaboration rights for New
Anti-CD20 Products are limited to the United States and our
collaboration rights for Third Party Anti-CD20 Products are
dependent upon Genentechs underlying license rights. A
joint development committee, or JDC, composed of three members
from each company must unanimously approve a development plan
for each specific indication of certain pharmaceutical products,
and Genentech has responsibility for implementation of JDC
approved development plans in accordance with the provisions of
our collaboration agreement. In the event that we undergo a
change in control, as defined in the collaboration agreement,
Genentech has the right to present an offer to buy the rights to
RITUXAN, and we must either accept Genentechs offer or
purchase Genentechs rights to RITUXAN on the same terms as
its offer. If Genentech presents such an offer, then they will
be deemed concurrently to have exercised a right, in exchange
for a royalty on net sales in the United States of any
anti-CD20 product acquired or developed by Genentech or any
anti-CD20 product that Genentech licenses from a third party
that is developed under the agreement, to purchase our interest
in each such product. Our collaboration with Genentech was
created through a contractual arrangement and not through a
joint venture or other legal entity.
30
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
While Genentech is responsible for the worldwide manufacturing
of RITUXAN, development and commercialization rights and
responsibilities under this collaboration are divided as follows:
United
States
We share with Genentech co-exclusive rights to develop,
commercialize and market RITUXAN and New Anti-CD20 Products in
the United States. Although we contribute to the marketing and
continued development of RITUXAN, we have a limited sales force
dedicated to RITUXAN and limited development activity. Genentech
is primarily responsible for the commercialization of RITUXAN in
the United States. Its responsibilities include selling and
marketing, customer service, order entry, distribution, shipping
and billing, and other administrative support. Genentech also
incurs the majority of continuing development costs for RITUXAN.
Canada
We and Genentech have assigned our rights to develop,
commercialize and market RITUXAN, in Canada to F.
Hoffmann-La Roche Ltd., or Roche.
Outside
the United States and Canada
We have granted Genentech exclusive rights to develop,
commercialize and market RITUXAN outside the United States and
Canada. Under the terms of separate sublicense agreements
between Genentech and Roche, development and commercialization
of RITUXAN outside the United States and Canada is the
responsibility of Roche, except in Japan where RITUXAN is
co-marketed by Zenyaku Kogyo Co. Ltd., or Zenyaku, and Chugai
Pharmaceutical Co. Ltd, or Chugai, an affiliate of Roche. We do
not have any direct contractual arrangements with Roche, Zenyaku
or Chugai for such development or commercialization.
Revenues from unconsolidated joint business consists of
(1) our share of pretax co-promotion profits in the United
States (2) reimbursement of selling and development
expenses in the United States; and (3) revenue on sales of
RITUXAN outside the United States, which consist of our share of
pretax co-promotion profits in Canada and royalty revenue on
sales of RITUXAN outside the United States and Canada by Roche,
Zenyaku and Chugai. Pre-tax co-promotion profits are calculated
and paid to us by Genentech in the United States and by Roche in
Canada. Pre-tax co-promotion profits consist of United States
and Canadian sales of RITUXAN to third-party customers net of
discounts and allowances less the cost to manufacture RITUXAN,
third-party royalty expenses, distribution, selling, and
marketing expenses, and joint development expenses incurred by
Genentech, Roche and us. We record our royalty and co-promotion
profits revenue on sales of RITUXAN outside the United States on
a cash basis.
Revenues from unconsolidated joint business consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Biogen Idec Inc.s share of co-promotion profits in the
United States
|
|
$
|
203.3
|
|
|
$
|
192.2
|
|
|
$
|
581.3
|
|
|
$
|
527.9
|
|
Reimbursement of selling and development expenses in the United
States
|
|
|
15.8
|
|
|
|
16.8
|
|
|
|
47.5
|
|
|
|
45.4
|
|
Revenue on sales of RITUXAN outside the United States
|
|
|
64.8
|
|
|
|
90.0
|
|
|
|
209.5
|
|
|
|
251.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unconsolidated joint business
|
|
$
|
283.9
|
|
|
$
|
299.0
|
|
|
$
|
838.3
|
|
|
$
|
825.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Under the collaboration agreement, our current pretax
co-promotion profit-sharing formula, which resets annually, is
stated within the table below. In 2009 and 2008, the 40%
threshold was met during the first quarter.
|
|
|
|
|
|
|
Biogen Idec
|
|
|
Inc.s Share of
|
|
|
Co-promotion
|
Co-promotion Operating Profits
|
|
Profits
|
|
First $50 million
|
|
|
30
|
%
|
Greater than $50 million
|
|
|
40
|
%
|
Our agreement with Genentech provides that the successful
development and commercialization of the first New Anti-CD20
Product will decrease our percentage of co-promotion profits of
the collaboration. Specifically, for each calendar year or
portion thereof following the approval date of the first New
Anti-CD20 Product, the pretax co-promotion profit-sharing
formula for RITUXAN and New Anti-CD20 Products sold by us and
Genentech will change as follows:
|
|
|
|
|
|
|
|
|
|
|
Biogen Idec
|
|
|
|
|
Inc.s Share of
|
|
|
First New Anti-CD20 Product U.S.
|
|
Co-promotion
|
Co-promotion Operating Profits
|
|
Gross Product Sales
|
|
Profits
|
|
First $50 million(1)
|
|
Not Applicable
|
|
|
30
|
%
|
Greater than $50 million
|
|
Until such sales exceed $150 million
in any calendar year(2)
|
|
|
38
|
%
|
|
|
Or
|
|
|
|
|
|
|
After such sales exceed $150 million in
any calendar year until such sales
exceed $350 million in any calendar year(3)
|
|
|
35
|
%
|
|
|
Or
|
|
|
|
|
|
|
After such sales exceed $350 million in
any calendar year(4)
|
|
|
30
|
%
|
|
|
|
(1) |
|
not applicable in the calendar year the first New Anti-CD20
Product is approved if $50 million in
co-promotion
operating profits has already been achieved in such calendar
year through sales of RITUXAN. |
|
(2) |
|
if we are recording our share of RITUXAN co-promotion profits at
40%, upon the approval date of the first New Anti-CD20 Product,
our share of co-promotion profits for RITUXAN and the New
Anti-CD20 Product will be immediately reduced to 38% following
the approval date of the first New Anti-CD20 Product until the
$150 million in first New Anti-CD20 Product sales level is
achieved. |
|
(3) |
|
if $150 million in first New Anti-CD20 Product sales is
achieved in the same calendar year the first New Anti-CD20
Product receives approval, then the 35% co-promotion
profit-sharing rate will not be effective until January 1 of the
following calendar year. Once the $150 million in first New
Anti-CD20 Product sales level is achieved then our share of
co-promotion profits for the balance of the year and all
subsequent years (after the first $50 million in
co-promotion operating profits in such years) will be 35% until
the $350 million in first New Anti-CD20 Product sales level
is achieved. |
|
(4) |
|
if $350 million in first New Anti-CD20 Product sales is
achieved in the same calendar year that $150 million in new
product sales is achieved, then the 30% co-promotion
profit-sharing rate will not be effective until January 1 of the
following calendar year (or January 1 of the second following
calendar year if the first New Anti-CD20 Product receives
approval and, in the same calendar year, the $150 million
and $350 million in first New Anti-CD20 Product sales
levels are achieved). Once the $350 million in first New
Anti-CD20 Product sales level is achieved then our share of
co-promotion profits for the balance of the year and all
subsequent years will be 30%. |
32
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
We will participate in Third Party Anti-CD20 Products on similar
financial terms as for ocrelizumab.
Currently, we record our share of the expenses incurred by the
collaboration for the development of New Anti-CD20 Products in
research and development expense in our consolidated statements
of income. After a New Anti-CD20 Product is approved, we will
record our share of the development expenses related to that
product as a reduction of our share of pretax co-promotion
profits in revenues from unconsolidated joint business. We
incurred $14.7 million and $47.3 million in
development expense related to New Anti-CD20 products for the
three and nine months ended September 30, 2009,
respectively, as compared to $9.0 million and
$31.6 million, respectively, during the prior year
comparative periods. Reimbursement to Genentech for our share of
these costs occurs through the net amount of co-promotion
profits in the United States remitted to us.
Elan
We have a collaboration agreement with Elan to collaborate in
the development, manufacture and commercialization of TYSABRI.
Under the terms of the agreement, we manufacture TYSABRI and
collaborate with Elan on the products marketing,
commercial distribution and on-going development activities. The
collaboration with Elan is designed to effect an equal sharing
of profits and losses generated by the activities of the
collaboration between Elan and us. Under the agreement, however,
once sales of TYSABRI exceeded specific thresholds, Elan was
required to make milestone payments to us in order to continue
sharing equally in the collaborations results. As of
September 30, 2009, Elan has paid to us milestone payments
of $75.0 million in the third quarter of 2008 and
$50.0 million in the first quarter of 2009. We have
recorded these amounts as deferred revenue upon receipt and are
recognizing the entire $125.0 million as product revenue in
our consolidated statements of income over the term of the
collaboration agreement based on a units of revenue method
whereby the revenue recognized is based on the ratio of units
shipped in the current period over the total units expected to
be shipped over the remaining term of the collaboration. No
additional milestone payments are required under the agreement
to maintain the current profit sharing split. Our collaboration
agreement with Elan provides Elan or us with the option to buy
the rights to TYSABRI in the event that the other company was to
undergo a change of control (as defined in the collaboration
agreement).
In the United States, we sell TYSABRI to Elan who sells the
product to third party distributors. Our sales price to Elan in
the United States is set prior to the beginning of each
quarterly period to effect an approximate equal sharing of the
gross margin between Elan and us. We recognize revenue for sales
in the United States of TYSABRI upon Elans shipment of the
product to the third party distributors. We incur manufacturing
and distribution costs, research and development expenses,
commercial expenses, and general and administrative expenses. We
record these expenses to their respective line items within our
consolidated statements of income when they are incurred.
Research and development and sales and marketing expenses are
shared equally with Elan and the reimbursement of these expenses
is recorded as reductions of the respective expense categories.
During the three and nine months ended September 30, 2009,
we recorded $5.2 million and $16.6 million,
respectively, as reductions of research and development expense
for reimbursements from Elan as compared to $4.0 million
and $17.8 million, respectively, of research and
development expense recorded for reimbursement from Elan during
the prior year comparative periods. In addition, for the three
and nine months ended September 30, 2009, we recorded
$14.7 million and $46.9 million, respectively, as
reductions of selling, general and administrative expense for
reimbursements from Elan as compared to $9.3 million and
$26.8 million, respectively, in the prior year comparative
periods.
Outside the United States, or rest of world, we are responsible
for distributing TYSABRI to customers and are primarily
responsible for all operating activities. Generally, we
recognize revenue for sales of TYSABRI in the rest of world at
the time of product delivery to our customers. Payments are made
to Elan for their share of the rest of world net operating
profits to effect an equal sharing of collaboration operating
profit. These payments also include the reimbursement for our
portion of third-party royalties that Elan pays
33
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
on behalf of the collaboration relating to rest of world sales.
These amounts are reflected in the collaboration profit sharing
line in our consolidated statements of income. For the three and
nine months ended September 30, 2009, $60.7 million
and $152.6 million, respectively, was reflected in the
collaboration profit sharing line for our collaboration with
Elan, as compared to $43.5 million and $98.4 million,
respectively, for the prior year comparative periods. As rest of
world sales of TYSABRI increase, our collaboration profit
sharing expense is expected to increase.
Acorda
On June 30, 2009, we entered into a collaboration and
license agreement with Acorda to develop and commercialize
products containing Fampridine-SR in markets outside the United
States. Fampridine-SR is an oral sustained-release compound,
which is being developed to improve walking ability in people
with MS. The transaction represents a sublicensing of an
existing license agreement between Acorda and Elan. The parties
have also entered into a related supply agreement. The
$110.0 million upfront payment made on July 1, 2009
was recorded as research and development expense during the
second quarter 2009 as the product candidate has not received
regulatory approval.
Under the terms of the agreement, we will commercialize
Fampridine-SR and any aminopyridine products developed in our
territory and will also have responsibility for regulatory
activities and future clinical development of Fampridine-SR in
those markets. We may incur additional milestone payments of up
to $400.0 million based upon the successful achievement of
regulatory and commercial sales milestones. We will also make
tiered royalty payments to Acorda on sales outside of the United
States. The consideration that we pay for products will reflect
all amounts due from Acorda to Elan for sales in markets outside
the United States, including royalties owed. We can also carry
out future joint development activities under a cost-sharing
arrangement.
Elan will continue to manufacture commercial supply of
Fampridine-SR, based upon its existing supply agreement with
Acorda. Under the existing agreements with Elan, Acorda will pay
Elan 7% of the upfront and milestone payments that Acorda
receives from us.
A summary of activity related to this collaboration for the
three and nine months ended September 30, 2009 and 2008,
respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Upfront payments made to Acorda
|
|
$
|
|
|
|
$
|
|
|
|
$
|
110.0
|
|
|
$
|
|
|
Total expense incurred by Biogen Idec Inc., excluding upfront
and milestone payments
|
|
$
|
0.5
|
|
|
$
|
|
|
|
$
|
0.5
|
|
|
$
|
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
0.5
|
|
|
$
|
|
|
|
$
|
110.5
|
|
|
$
|
|
|
34
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Acorda
|
|
$
|
110.0
|
|
Total expense incurred by Biogen Idec Inc., excluding upfront
and milestone payments
|
|
$
|
0.5
|
|
Estimate of additional expense to be incurred by us in
development of
Fampridine-SR
|
|
$
|
10.0
|
|
Neurimmune
We have a collaboration agreement with Neurimmune SubOne AG, or
Neurimmune, a subsidiary of Neurimmune Therapeutics AG, for the
development and commercialization of antibodies for the
treatment of Alzheimers disease. Neurimmune will conduct
research to identify potential therapeutic antibodies and we
will be responsible for the development, manufacturing and
commercialization of all products. We may pay Neurimmune up to
$360.0 million in remaining milestone payments, as well as
royalties on sales of any resulting commercial products.
Milestone payments are reflected within our consolidated
statements of income when achieved. The royalty term for sales
in each country will be no less than 12 years from the
first commercial sale of product using such compound in such
country.
We have determined that we are the primary beneficiary of
Neurimmune in accordance with the guidance provided by the
Consolidation Topic of the Codification. As such, we
consolidate the results of Neurimmune. The assets and
liabilities of Neurimmune are not significant as it is a
research and development organization. We reimburse Neurimmune
for all research and development costs incurred in support of
the collaboration. These amounts are also reflected in research
and development expense in our statements of income. A summary
of activity related to this collaboration for the three and nine
months ended September 30, 2009 and 2008, respectively, is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Total upfront and milestone payments made to Neurimmune
|
|
$
|
|
|
|
$
|
2.5
|
|
|
$
|
7.5
|
|
|
$
|
10.5
|
|
Total expense incurred by Neurimmune in support of the
collaboration
|
|
$
|
1.9
|
|
|
$
|
1.3
|
|
|
$
|
5.5
|
|
|
$
|
4.5
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
1.9
|
|
|
$
|
3.8
|
|
|
$
|
13.0
|
|
|
$
|
15.0
|
|
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Neurimumune
|
|
$
|
20.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
12.0
|
|
Estimate of additional expense to be incurred by us in
development of the lead compound
|
|
$
|
440.0
|
|
35
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Cardiokine
We have a collaboration agreement with Cardiokine Biopharma LLC,
or Cardiokine, a subsidiary of Cardiokine Inc., for the joint
development of Lixivaptan, an oral compound for the potential
treatment of hyponatremia in patients with congestive heart
failure. The royalty term under the agreement for sales in each
country will be no less than 10 years from the first
commercial sale of a Lixivaptan product in such country. If
successful, we will be responsible for certain development
activities, manufacturing and global commercialization of
Lixivaptan, and Cardiokine has an option for limited
co-promotion in the United States. Under the terms of the
agreement, we may pay up to $150.0 million in remaining
development milestone payments as well as royalties on
commercial sales.
We have determined that we are the primary beneficiary of
Cardiokine in accordance with the guidance provided by the
Consolidation Topic of the Codification. As such, we
consolidate the results of Cardiokine. The assets and
liabilities of Cardiokine are not significant as it is a
research and development organization. We reimburse Cardiokine
for 90% of research and development costs incurred in support of
the collaboration. A summary of activity related to this
collaboration for the three and nine months ended
September 30, 2009 and 2008, respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total upfront and milestone payments made to Cardiokine
|
|
$
|
20.0
|
|
|
|
|
|
|
$
|
20.0
|
|
|
|
|
|
Total expense incurred by the collaboration
|
|
$
|
17.2
|
|
|
$
|
15.3
|
|
|
$
|
48.5
|
|
|
$
|
38.9
|
|
Biogen Idec Inc.s share of expense reflected within our
consolidated statements of income
|
|
$
|
35.5
|
|
|
$
|
13.8
|
|
|
$
|
63.7
|
|
|
$
|
35.0
|
|
Collaboration expense allocated to noncontrolling interests, net
of tax
|
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
$
|
4.8
|
|
|
$
|
3.9
|
|
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Cardiokine
|
|
$
|
70.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
106.8
|
|
Estimate of additional expense to be incurred by us in
development of the Lixivaptan (all indications)
|
|
$
|
430.0
|
|
Biovitrum
We have a collaboration agreement with Biovitrum AB, or
Biovitrum, to jointly develop and commercialize Factor VIII and
Factor IX for the treatment of hemophilia. Under the agreement,
development costs are shared equally. We have commercial rights
to North America and Biovitrum has commercial rights to Europe.
Each party shares in the others net sales based on a
royalty percentage of up to 33.3%. All other territories are to
be managed by a third party with us and Biovitrum sharing
equally in all royalties, license fees and other revenues
arising from arrangements with third party licenses and
distributors.
Amounts incurred by us in the development of the Factor XIII and
Factor IX are reflected as research and development expense in
our consolidated statements of income, reduced by amounts due
from Biovitrum. A
36
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
summary of collective activity related to the Factor VIII and
Factor IX programs for the three and nine months ended
September 30, 2009 and 2008, respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total expense incurred by the collaboration
|
|
$
|
6.8
|
|
|
$
|
8.4
|
|
|
$
|
33.2
|
|
|
$
|
26.9
|
|
Biogen Idec Inc.s share of expense reflected within our
consolidated statements of income
|
|
$
|
3.4
|
|
|
$
|
4.2
|
|
|
$
|
16.6
|
|
|
$
|
13.5
|
|
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments received from Biovitrum
|
|
$
|
4.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
44.8
|
|
Estimate of additional expense to be incurred by the
collaboration in development of Factors XIII and IX
|
|
$
|
95.0
|
|
Under the agreement, Biovitrum may pay us an additional
$19.0 million in milestone payments.
Mondo
We have an agreement with MondoGen, or Mondo, a subsidiary of
MondoBiotech AG, to develop and commercialize Aviptadil, a
clinical compound for the treatment of pulmonary arterial
hypertension, or PAH. Under the agreement, we are responsible
for manufacturing, development, and commercialization of the
compound and could incur up to $30.0 million in milestone
payments for successful development and commercialization of the
program in the United States and Europe, as well as royalty
payments on commercial sales. In February 2009, the parties
revised the agreement to clarify that our development funding
obligation should not exceed $13.3 million, inclusive of
all amounts incurred during 2009 and the three months ended
December 31, 2008, if we decide not to pursue the
collaboration beyond 2009.
We have determined that we are the primary beneficiary of Mondo,
and as such, we consolidate the results of Mondo. The assets and
liabilities of Mondo are not significant as it is a research and
development organization. Expenses incurred by the collaboration
are reflected in research and development expense in our
consolidated statements of income.
A summary of activity related to this collaboration for the
three and nine months ended September 30, 2009 and 2008,
respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total expense incurred by the collaboration
|
|
$
|
4.0
|
|
|
$
|
2.7
|
|
|
$
|
10.9
|
|
|
$
|
11.7
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
4.0
|
|
|
$
|
2.7
|
|
|
$
|
10.9
|
|
|
$
|
11.7
|
|
37
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Mondo
|
|
$
|
7.5
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
40.8
|
|
UCB
In June 2009, UCB, S.A., or UCB, and we announced the
discontinuation of the Phase 2 clinical trial for this
collaborations only product candidate due to the absence
of clinically relevant efficacy. Since the inception of our
collaboration agreement with UCB, we have incurred a total of
$98.0 million in research and development expenses for the
development and commercialization of an oral alpha4 integrin, or
VLA-4, antagonist for the treatment of relapsing remitting MS.
A summary of activity related to this collaboration for the
three and nine months ended September 30, 2009 and 2008,
respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total expense incurred by the collaboration
|
|
$
|
5.3
|
|
|
$
|
7.2
|
|
|
$
|
27.7
|
|
|
$
|
23.7
|
|
Biogen Idec Inc.s share of expense reflected within our
consolidated statements of income
|
|
$
|
3.7
|
|
|
$
|
5.0
|
|
|
$
|
18.0
|
|
|
$
|
15.3
|
|
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to UCB
|
|
$
|
30.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
68.0
|
|
Estimate of additional expense to be incurred by us in
development of the compound in this indication
|
|
$
|
4.5
|
|
Facet
Biotech
We have a collaboration agreement with Facet aimed at advancing
the development and commercialization of daclizumab in MS and
volociximab in solid tumors. Daclizumab is a humanized
monoclonal antibody that binds to the IL-2 receptor on activated
T cells. Volociximab is an anti-angiogenic chimeric antibody
directed against alpha5 beta1 integrin, or VLA5. Under the
agreement, development, and commercialization costs and profits
are shared equally. We may incur up to an additional
$650.0 million of payments upon achievement of development
and commercial milestones.
38
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
A summary of activity related to this collaboration for the
three and nine months ended September 30, 2009 and 2008,
respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total expense incurred by the collaboration
|
|
$
|
10.6
|
|
|
$
|
13.3
|
|
|
$
|
28.3
|
|
|
$
|
52.9
|
|
Biogen Idec Inc.s share of expense reflected within our
consolidated statements of income
|
|
$
|
5.3
|
|
|
$
|
6.7
|
|
|
$
|
14.2
|
|
|
$
|
26.4
|
|
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Facet
|
|
$
|
50.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
115.1
|
|
Estimate of additional expense to be incurred by us in
development of current indications of daclizumab and volociximab
|
|
$
|
500.0
|
|
On September 21, 2009, we commenced a tender offer to
acquire all of the outstanding shares of Facet for approximately
$356.0 million or $14.50 per share in cash. On
October 16, 2009, we extended the offer to
December 16, 2009 at the same offering price of $14.50 per
share. Our all-cash proposal is not subject to any financing
contingency or approval by Biogen Idec shareholders. We may
incur additional costs to complete this transaction in the event
that this tender offer is successfully completed. We do not
expect these additional transaction costs to be material to our
financial position or results of operations.
Vernalis
We have a collaboration agreement with Vernalis plc, or
Vernalis, aimed at advancing the development and
commercialization of an adenosine A2a receptor antagonist for
treatment of Parkinsons disease. Under the agreement, we
received exclusive worldwide rights to develop and commercialize
the compound. We are responsible for funding all development
costs and may incur up to an additional $85.0 million of
milestone payments upon achievement of certain objectives, as
well as royalties on commercial sales.
A summary of activity related to this collaboration for the
three and nine months ended September 30, 2009 and 2008,
respectively, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
For the Nine
|
|
|
Months Ended
|
|
Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Total expense incurred by the collaboration and reflected within
our consolidated statements of income
|
|
$
|
3.3
|
|
|
$
|
4.4
|
|
|
$
|
10.4
|
|
|
$
|
13.2
|
|
39
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
A summary of activity related to this collaboration since
inception, along with an estimate of additional future
development expense expected to be incurred by us, is as follows:
|
|
|
|
|
|
|
As of
|
|
|
September 30,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Vernalis
|
|
$
|
13.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
65.3
|
|
Estimate of additional expense to be incurred by us in
development of the compound in this indication
|
|
$
|
230.0
|
|
Along with several other major pharmaceutical and biotechnology
companies, Biogen, Inc. (now Biogen Idec MA, Inc., one of our
wholly-owned subsidiaries) or, in some cases, Biogen Idec Inc.,
was named as a defendant in lawsuits filed by the City of New
York and numerous Counties of the State of New York. All of the
cases except for cases filed by the County of Erie,
County of Oswego and County of Schenectady, or the Three County
Actions are the subject of a Consolidated Complaint,
first filed on September 15, 2005 in the U.S. District
Court for the District of Massachusetts in Multi-District
Litigation No. 1456, or the MDL proceedings. The complaints
allege that the defendants (i) fraudulently reported the
Average Wholesale Price for certain drugs for which Medicaid
provides reimbursement, or the Covered Drugs; (ii) marketed
and promoted the sale of Covered Drugs to providers based on the
providers ability to collect inflated payments from the
government and Medicaid beneficiaries that exceeded payments
possible for competing drugs; (iii) provided financing
incentives to providers to over-prescribe Covered Drugs or to
prescribe Covered Drugs in place of competing drugs; and
(iv) overcharged Medicaid for illegally inflated Covered
Drugs reimbursements. Among other things, the complaints allege
violations of New York state law and advance common law claims
for unfair trade practices, fraud, and unjust enrichment. In
addition, the amended Consolidated Complaint alleges that the
defendants failed to accurately report the best
price on the Covered Drugs to the Secretary of Health and
Human Services pursuant to rebate agreements, and excluded from
their reporting certain discounts and other rebates that would
have reduced the best price. With respect to the MDL
proceedings, some of the plaintiffs claims were dismissed,
and the parties, including Biogen Idec, began a mediation of the
outstanding claims on July 1, 2008. We have not formed an
opinion that an unfavorable outcome is either
probable or remote in any of these
cases, and do not express an opinion at this time as to their
likely outcome or as to the magnitude or range of any potential
loss. We believe that we have good and valid defenses to each of
these complaints and are vigorously defending against them.
On September 12, 2006, the Massachusetts Department of
Revenue, or the DOR, issued a notice of assessment against
Biogen Idec MA, Inc. for $38.9 million of corporate excise
tax with respect to the 2002 tax year, which includes associated
interest and penalties. On December 6, 2006, we filed an
abatement application with the DOR, seeking abatements for 2001,
2002 and 2003 tax years. The abatement application was denied on
July 24, 2007. On July 25, 2007, we filed a petition
with the Massachusetts Appellate Tax Board, seeking, among other
items, abatements of corporate excise tax for 2001, 2002 and
2003 tax years and adjustments in certain credits and credit
carryforwards for 2001, 2002 and 2003 tax years. Issues before
the Board include the computation of Biogen Idec MAs sales
factor for 2001, 2002 and 2003 tax years, computation of Biogen
Idec MAs research credits for those same years, and the
availability of deductions for certain expenses and partnership
flow-through items. We anticipate that the trial will take place
in 2010. We intend to contest this matter vigorously.
On October 4, 2004, Genentech, Inc. received a subpoena
from the U.S. Department of Justice requesting documents
related to the promotion of RITUXAN. We market RITUXAN in the
United States in collaboration
40
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
with Genentech. Genentech has disclosed that it is cooperating
with the associated investigation, and that it has been advised
the investigation is civil in nature. We are cooperating with
the U.S. Department of Justice in its investigation of
Genentech. The potential outcome of this matter and its impact
on us cannot be determined at this time.
On October 27, 2008, Sanofi-Aventis Deutschland GmbH, or
Sanofi, filed suit against Genentech and Biogen Idec in federal
court in Texas (E.D. Tex.), which we refer to as the Texas
Action claiming that RITUXAN and certain other Genentech
products infringe U.S. Patents 5,849,522, or the 522
patent, and 6,218,140, or the 140 patent. Sanofi seeks
preliminary and permanent injunctions, compensatory and
exemplary damages, and other relief. On October 27, 2008,
Genentech and Biogen Idec filed a complaint against Sanofi,
Sanofi-Aventis U.S. LLC, and Sanofi-Aventis U.S. Inc.
in federal court in California (N.D. Cal.), which we refer
to as the California Action seeking a declaratory judgment that
RITUXAN and other Genentech products do not infringe the
522 patent or the 140 patent, and a declaratory
judgment that those patents are invalid. On May 22, 2009,
the United States Court of Appeals for the Federal Circuit
granted Genentechs and our petition for a writ of mandamus
transferring the Texas Action to the federal court in
California, and denied Sanofis petition for rehearing on
August 10, 2009. In addition, on October 24, 2008,
Hoechst GmbH filed with the ICC International Court of
Arbitration (Paris) a request for arbitration against Genentech,
relating to a terminated agreement between Hoechsts
predecessor and Genentech that pertained to the above-referenced
patents and related patents outside the U.S. Hoechst is
seeking payment of royalties on sales of Genentech products,
damages for breach of contract, and other relief. We have not
formed an opinion that an unfavorable outcome is either
probable or remote, and do not express
an opinion at this time as to the likely outcome of the matters
or as to the magnitude or range of any potential loss. We
believe that we have good and valid defenses and intend
vigorously to defend against the allegations against us.
In addition, we are 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
conditions.
We operate in one business segment, which is the business of
development, manufacturing and commercialization of novel
therapeutics for human health care and therefore, our chief
operating decision-maker manages the operation of the Company as
a single operating segment.
|
|
17.
|
New
Accounting Pronouncements
|
From time to time, new accounting pronouncements are issued by
the FASB or other standard setting bodies that are adopted by
the Company as of the specified effective date. Unless otherwise
discussed, the Companys management believes that the
impact of recently issued standards that are not yet effective
will not have a material impact on its consolidated financial
position or results of operations upon adoption.
Recently
Issued Accounting Standards
In August 2009, the FASB issued Accounting Standards Update
No. 2009-05,
Measuring Liabilities at Fair Value, or ASU
2009-05. ASU
2009-05
amends Accounting Standards Codification Topic 820, Fair
Value Measurements. Specifically, ASU
2009-05
provides clarification that in circumstances in which a quoted
price in an active market for the identical liability is not
available, a reporting entity is required to measure fair value
using one or more of the following methods: 1) a valuation
technique that uses a) the quoted price of the identical
liability when traded as an asset or b) quoted prices for
similar liabilities or similar liabilities when traded as assets
and/or
2) a valuation technique that is consistent with the
principles of Topic 820 of the
41
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
Accounting Standards Codification (e.g. an income approach or
market approach). ASU
2009-05 also
clarifies that when estimating the fair value of a liability, a
reporting entity is not required to adjust to include inputs
relating to the existence of transfer restrictions on that
liability. The adoption of this standard did not have an impact
on our financial position or results of operations; however,
this standard may impact us in future periods.
In September 2009, the FASB issued ASU
No. 2009-12,
Fair Value Measurements and Disclosure, or ASU
2009-12.
This standard provides additional guidance on using the net
asset value per share, provided by an investee, when estimating
the fair value of an alternate investment that does not have a
readily determinable fair value and enhances the disclosures
concerning these investments. Examples of alternate investments,
within the scope of this standard, include investments in hedge
funds and private equity, real estate, and venture capital
partnerships. This Standard is effective for interim and annual
periods ending after December 15, 2009. At of
September 30, 2009, our only investments falling within the
scope of this Standard are our venture capital investments. For
these investments we use the net asset value to assess fair
value. Refer to Note 5, Fair Value Measurements, of
this Form 10-Q for additional disclosure related to our
venture capital investments. We are currently evaluating the
potential impact of this standard on our financial position and
results of operations.
In October 2009, the FASB issued ASU
No. 2009-13,
Multiple-Deliverable Revenue Arrangements, or ASU
2009-13. ASU
2009-13,
amends existing revenue recognition accounting pronouncements
that are currently within the scope of FASB Accounting Standards
Codification, or ASC, Subtopic
605-25
(previously included within
EITF 00-21,
Revenue Arrangements with Multiple Deliverables, or
EITF 00-21).
The consensus to EITF Issue
No. 08-01,
Revenue Arrangements with Multiple Deliverables, or
EITF 08-01,
provides accounting principles and application guidance on
whether multiple deliverables exist, how the arrangement should
be separated, and the consideration allocated. This guidance
eliminates the requirement to establish the fair value of
undelivered products and services and instead provides for
separate revenue recognition based upon managements
estimate of the selling price for an undelivered item when there
is no other means to determine the fair value of that
undelivered item.
EITF 00-21
previously required that the fair value of the undelivered item
be the price of the item either sold in a separate transaction
between unrelated third parties or the price charged for each
item when the item is sold separately by the vendor. This was
difficult to determine when the product was not individually
sold because of its unique features. Under
EITF 00-21,
if the fair value of all of the elements in the arrangement was
not determinable, then revenue was deferred until all of the
items were delivered or fair value was determined. This new
approach is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on
or after June 15, 2010. We are currently evaluating the
potential impact of this standard on our financial position and
results of operations.
Other
Recently Issued Accounting Standards
In June 2009, the FASB issued the following two new accounting
standards, which have not yet been integrated into the
Codification. Accordingly, these accounting standards will
remain authoritative until integrated:
|
|
|
|
|
SFAS No. 166, Accounting for Transfers of Financial
Assets, an amendment of FASB Statement No. 140, or
SFAS 166; and
|
|
|
|
SFAS No. 167, Amendments to FASB Interpretation
No. 46 (R), or SFAS 167
|
SFAS 166 prescribes the information that a reporting entity
must provide in its financial reports about a transfer of
financial assets; the effects of a transfer on its financial
position, financial performance, and cash flows; and a
transferors continuing involvement in transferred
financial assets. Specifically, among other
42
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
aspects, this standard amends previously issued accounting
guidance, modifies the financial-components approach and removes
the concept of a qualifying special purpose entity when
accounting for transfers and servicing of financial assets and
extinguishments of liabilities, and removes the exception from
applying the general accounting principles for the consolidation
of variable interest entities that are qualifying
special-purpose entities. This new accounting standard is
effective for transfers of financial assets occurring on or
after January 1, 2010. We have not determined the effect
that the adoption of SFAS 166 will have on our financial
position or results of operations but the effect will generally
be limited to future transactions.
SFAS 167 amends previously issued accounting guidance for
the consolidation of variable interest entities to require an
enterprise to determine whether its variable interest or
interests give it a controlling financial interest in a variable
interest entity. This amended consolidation guidance for
variable interest entities also replaces the existing
quantitative approach for identifying which enterprise should
consolidate a variable interest entity, which was based on which
enterprise is exposed to a majority of the risks and rewards,
with a qualitative approach, based on which enterprise has both
(1) the power to direct the economically significant
activities of the entity and (2) the obligation to absorb
losses of the entity that could potentially be significant to
the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the
variable interest entity. This new standard has broad
implications and may affect how we account for the consolidation
of common structures, such as joint ventures, equity method
investments, collaboration and other agreements and purchase
arrangements. Under this revised guidance, more entities may
meet the definition of a variable interest entity, and the
determination about who should consolidate a variable interest
entity is required to be evaluated continuously. We are
evaluating all entities that fall within the scope of the
amended guidance to determine whether we may be required to
consolidate additional entities or deconsolidate existing
consolidated entities on January 1, 2010, which is the
effective date of SFAS 167; however we have not yet
completed our implementation analysis. Accordingly, we have not
determined the effect that the adoption of this standard will
have on our financial position or results of operation.
Recently
Adopted Accounting Standards
Effective January 1, 2009, we adopted a newly issued
accounting standard for business combinations. This standard
requires an acquiring company to measure all assets acquired and
liabilities assumed, including contingent considerations and all
contractual contingencies, at fair value as of the acquisition
date. In addition, an acquiring company is required to
capitalize IPR&D and either amortize it over the life of
the product, or write it off if the project is abandoned or
impaired. Due to the fact that this guidance is applicable to
acquisitions completed after January 1, 2009 and we did not
have any business combinations in the first nine months of 2009,
the adoption did not impact our financial position or results of
operations. The standard also amended accounting for uncertainty
in income taxes as required by the Income Tax Topic of
the Codification. Previously, accounting standards generally
required post-acquisition adjustments related to business
combination deferred tax asset valuation allowances and
liabilities for uncertain tax positions to be recorded as an
increase or decrease to goodwill. This new standard does not
permit this accounting and, generally, requires any such changes
to be recorded in current period income tax expense. Thus, all
changes to valuation allowances and liabilities for uncertain
tax positions established in acquisition accounting, whether the
business combination was accounted for under this guidance, will
be recognized in current period income tax expense.
In April, 2009, the FASB issued a new accounting standard
providing guidance for the accounting of assets acquired and
liabilities assumed in a business combination that arise from
contingencies, This guidance amends and clarifies previous
accounting standards to address application issues regarding the
initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising
from contingencies in a business combination. Due to the fact
that this guidance is applicable to acquisitions completed after
January 1, 2009 and we did not have any business
combinations in the first nine months of 2009, the adoption did
not impact our financial position or results of operations.
43
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
continued)
In June 2009, the SEC issued Staff Accounting
Bulletin No. 112, which updates the SECs rules
and regulations to be consistent with the accounting principles
and standards established with guidance issued by the FASB
during 2009 related to the measurement of assets and liabilities
assumed at fair value as of the acquisition date and the
reporting of amounts associated with noncontrolling interests.
This bulletin did not impact our financial position or results
of operations; however, the adoption of this new accounting
resulted in the reclassification of certain prior period amounts
related to noncontrolling interests to conform to the current
financial statement presentation.
In April 2009, the Securities and Exchange Commission, or SEC,
issued Staff Accounting Bulletin No. 111 which aligns
SEC regulations to the accounting standards issued by the FASB
during 2009 on accounting for
other-than-temporary
impairments for marketable debt securities. Specifically, it
amends Topic 5.M., Other Than Temporary Impairment of Certain
Investments in Debt and Equity Securities, to exclude debt
securities from its scope. This bulletin did not impact our
financial position or results of operations; however, we conduct
periodic reviews to evaluate our investments for the
other-than-temporary
impairments in accordance with the Investments
Debt and Equity Securities Topic of the Codification. Refer
to Note 1, Business Overview, Note 9,
Equity, and Note 13, Other Income (Expense), Net,
of this
Form 10-Q
for additional information on the adoption of the new accounting
standard for noncontrolling interests.
44
|
|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
Forward-Looking
Information
In addition to historical information, this report contains
forward-looking statements that are based on our current beliefs
and expectations. These statements involve risks and
uncertainties that could cause actual results to differ
materially from those reflected in such forward-looking
statements. These forward-looking statements do not relate
strictly to historical or current facts and they may be
accompanied by such words as anticipate,
believe, estimate, expect,
forecast, intend, may,
plan, project, target,
will and other words and terms of similar meaning.
Reference is made in particular to forward-looking statements
regarding the anticipated level and mix of future product sales,
royalty revenues, milestone payments, expenses, liabilities, the
impact of competitive products, the incidence, outcome or impact
of litigation, proceedings related to patents and other
intellectual property rights, tax assessments and other legal
proceedings, our effective tax rate for future periods, the
impact of accounting standards, the development and timing of
programs in our clinical pipeline, our ability to finance our
operations, meet our manufacturing needs and source funding for
such activities, the completion and use of our manufacturing
facility in Hillerød, Denmark, our share repurchase
program, and our plans to spend additional capital on external
business development and research opportunities. Important
factors which could cause actual results to differ from our
expectations and which could negatively impact our financial
position and results of operations are discussed in the section
entitled Risk Factors in Part II of this report
and elsewhere in this report. Forward-looking statements, like
all statements in this report, speak only as of the date of this
report (unless another date is indicated). Unless required by
law, we do not undertake any obligation to publicly update any
forward-looking statements.
The following discussion should be read in conjunction with our
consolidated financial statements and related notes beginning on
page 3 of this quarterly report on
Form 10-Q.
Executive
Summary
Business
Overview
Biogen Idec Inc. (Biogen Idec, we,
us or the Company) is a global
biotechnology company that creates new standards of care in
therapeutic areas with high unmet medical needs. Our business
strategy is focused on discovering and developing
first-in-class
or
best-in-class
products that we can deliver to specialty markets globally.
Patients around the world benefit from Biogen Idecs
significant products that address medical needs in the areas of
neurology, oncology and immunology.
We currently have four marketed products. Our marketed products
are used for the treatment of multiple sclerosis, or MS,
non-Hodgkins lymphoma, or NHL, rheumatoid arthritis, or
RA, Crohns disease and psoriasis, and are summarized in
the table below.
|
|
|
|
Product
|
|
|
Indications
|
AVONEX®
(interferon beta-1a)
|
|
|
Relapsing MS
|
|
|
|
|
RITUXAN®*
(rituximab)
|
|
|
Certain B-cell NHL
RA
|
|
|
|
|
TYSABRI®**
(natalizumab)
|
|
|
Relapsing MS
Crohns disease
|
|
|
|
|
FUMADERMTM
(dimethylfumarate and monoethylfumarate salts)
|
|
|
Severe psoriasis
|
|
|
|
|
|
|
|
* |
|
Outside the United States, Canada and Japan, MabThera is the
trade name for rituximab. We refer to rituximab, RITUXAN and
MabThera collectively as RITUXAN. |
|
** |
|
TYSABRI is indicated in the United States for the treatment of
some patients with moderately to severely active Crohns
disease. |
45
As part of our on-going development efforts, we are seeking to
expand our marketed products into treatment of other diseases,
such as chronic lymphocytic leukemia, or CLL, ANCA-associated
vasculitis, multiple myeloma and ulcerative colitis. In addition
to the on-going development of our marketed products, we
continue to focus our research and development efforts on
finding novel therapeutics in areas of high unmet medical needs,
both within our current focus areas of neurology, oncology,
immunology and cardiology, as well as in new therapeutic areas.
Financial
Highlights
The following table is a summary of results achieved for the
three months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
(In millions, except per share amounts and percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Total revenues
|
|
$
|
1,120.5
|
|
|
$
|
1,093.0
|
|
|
|
2.5
|
%
|
Income from operations
|
|
$
|
384.2
|
|
|
$
|
345.9
|
|
|
|
11.1
|
%
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
277.7
|
|
|
$
|
206.8
|
|
|
|
34.3
|
%
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
$
|
0.95
|
|
|
$
|
0.70
|
|
|
|
35.7
|
%
|
As described below under Results of Operations, our operating
results for the three months ended September 30, 2009 were
primarily driven by:
|
|
|
|
|
Continued TYSABRI growth. TYSABRI provided $207.0 million
of revenue during the third quarter 2009, representing an
increase of 20.9% over the same period in the prior year.
|
|
|
|
Increased AVONEX worldwide revenue. Total AVONEX revenues
totaled $580.0 million in the current period, representing
a 1.1% increase over the prior year comparable period.
|
|
|
|
$283.9 million in revenues from our unconsolidated joint
business; driven by net sales of RITUXAN to third-party
customers in the United States recorded by Genentech totaling
$670.4 million during the current period, representing a
2.3% increase over the same period in 2008. Our share of
co-promotion profits of RITUXAN in the United States totaled
$203.3 million for the third quarter of 2009, representing
an increase of 5.8% over the same period in the prior year.
These amounts were offset by a $25.2 million decrease in
our share of co-promotion profits in Canada and royalty revenues
on sales of RITUXAN outside of the United States primarily
driven by royalty expirations in our rest of world markets.
|
|
|
|
Excluding the impact of amortization related to our acquired
intangible assets, total costs and expenses increased 5.0% as
compared to the prior year comparable period. This increase was
driven by a 13.1% increase in research and development spending
primarily related to the continued advancement of our pipeline
and a 39.4% increase in collaboration profit sharing expense due
to TYSABRI growth. These increases were partially offset by a
13.0% decrease in costs of sales and a reduction in selling,
general and administrative expense of 2.6%. Amortization of
acquired intangible assets decreased 45.6% which is further
described within in Note 4, Intangible Assets and
Goodwill, in Notes to Consolidated Financial
Statements. Including amortization of acquired intangible
assets, total costs and expenses decreased 1.4% over the same
period in the prior year.
|
In addition to the strong operating results achieved for the
three months ended September 30, 2009, year to date we
generated $792.7 million of net cash flows from operations,
which are primarily driven by increases in our earnings.
Cash and cash equivalents and marketable securities totaled
approximately $2,905.1 million as of September 30,
2009.
46
Business
Highlights
|
|
|
|
|
On October 19, 2009, our Board of Directors authorized the
repurchase of our common stock in an amount of up to
$1.0 billion. This is in addition to the 6.0 million
shares remaining from our previous share repurchase
authorization. We have used the prior share repurchase program
principally for share stabilization. This new $1.0 billion
authorization is intended to reduce our shares outstanding, with
the objective of returning excess cash to shareholders. The
Company intends to retire these shares following repurchase on
the open market. This repurchase program does not have an
expiration date.
|
|
|
|
On September 21, 2009, we commenced a tender offer to
acquire all of the outstanding shares of Facet Biotech, or
Facet, for approximately $356.0 million or $14.50 per share
in cash. On October 16, 2009, we extended the tender offer
to December 16, 2009, unless otherwise extended. The tender
offer was previously set to expire on October 19, 2009. The
offer price remained unchanged at $14.50 per share in cash. Our
all-cash proposal is not subject to any financing contingency or
approval by Biogen Idec shareholders.
|
Under our current collaboration agreement with Facet, we have
been jointly developing daclizumab for the treatment of
relapsing multiple sclerosis and volociximab for the treatment
of solid tumors. Refer to Note 14, Collaborations,
in Notes to Consolidated Financial Statements, for
additional discussion.
|
|
|
|
|
On July 1, 2009, we made a $110.0 million upfront
payment to Acorda Therapeutics, Inc., or Acorda, pursuant to our
June 30, 2009 collaboration and license agreement to
develop and commercialize products containing Fampridine-SR in
markets outside the United States.
|
Product
and Pipeline Highlights
|
|
|
|
|
We currently believe that the risk of developing PML increases
with the number of TYSABRI infusions received. We continue to
believe the overall rate of developing PML with TYSABRI therapy
remains consistent with the rate implied in the label. We have
proposed and are currently discussing with regulatory
authorities a potential label change to reflect this increased
risk of PML with increased duration of TYSABRI exposure.
|
|
|
|
On October 19, 2009, Biovitrum AB and we announced plans to
advance the companies long-acting, fully-recombinant
Factor IX Fc fusion protein (rFIXFc) into a registrational
clinical trial in hemophilia B patients. The decision to advance
the program was based on data from a Phase 1/2a open-label,
multi-center, safety dose-escalation and pharmacokinetic study
of intravenous rFIXFc in severe, previously treated hemophilia B
patients. rFIXFc was well tolerated in the study. In addition,
rFIXFc demonstrated a prolonged half-life compared to historical
data for existing therapies, supporting advancement of the
program.
|
|
|
|
We and Genentech, Inc., or Genentech, a member of the Roche
Group, previously submitted a supplemental Biologics License
Application, or sBLA, to the U.S. Food and Drug Administration,
or FDA, seeking to extend the RITUXAN label to a broader
DMARD-IR population. On October 16, 2009, the FDA issued a
Complete Response expressing concern related to the prolonged
nature of RITUXAN-mediated B-cell depletion and the risk for PML
in a less refractory RA population than that covered by our
current label. We expect to meet with the FDA to discuss
risk-benefit for RITUXAN in a less refractory RA population and
determine the appropriate next steps.
|
|
|
|
In September 2009, we were issued U.S. patent no.
7,588,755 for the use of beta interferon for immunomodulation or
treating a viral condition, viral disease, cancers or tumors.
The patent expires in September 2026. This patent covers the
treatment of multiple sclerosis with AVONEX, which is our brand
of recombinant beta interferon.
|
|
|
|
In September 2009, Genentech and we announced that a Phase 3
study (PRIMA) met its endpoint during a pre-planned interim
analysis, and the study was stopped early on the recommendation
of an independent data and safety monitoring board. The primary
endpoint was progression-free survival of patients with
follicular lymphoma who continued receiving RITUXAN alone after
responding to RITUXAN and
|
47
|
|
|
|
|
chemotherapy compared to those who did not continue to receive
RITUXAN. The safety profile of RITUXAN observed in the study was
consistent with that previously reported.
|
|
|
|
|
|
In August 2009, Facet announced its continued plans for the
Phase 3 trial of daclizumab high-yield process in MS and that it
would request a Special Protocol Assessment from the FDA prior
to the initiation of this study. The Phase 3 trial is expected
to begin during the first half of 2010. Upon enrollment of the
first patient into the Phase 3 study, Facet would receive a
$30.0 million milestone payment from us.
|
|
|
|
In July 2009, the FDA granted PEGylated interferon beta-1a Fast
Track designation for relapsing MS. We are currently enrolling
patients in a global Phase 3 study evaluating the efficacy and
safety of either bi-weekly or once-monthly injections of
PEGylated interferon beta-1a in this patient population. The
FDAs Fast Track program is designed to expedite the review
of new drugs that are intended to treat serious or
life-threatening conditions and demonstrate the potential to
address unmet medical needs.
|
|
|
|
In July 2009, Cardiokine enrolled the 300th patient in the
Phase 3 clinical trial for Lixivaptan. We made a
$20.0 million payment to Cardiokine upon achievement of
this milestone which was included within research and
development expense in the quarter ended September 30, 2009.
|
|
|
|
Acorda previously announced that the European Medicines Agency,
or EMEA, notified Acorda that Fampridine-SR is eligible to be
submitted for a Marketing Authorization Application via the
EMEAs Centralized Procedure as a new active substance.
|
Additional information about our product pipeline appears under
the heading Research and Development in
Managements Discussion and Analysis of Financial Condition
and Results of Operations of this quarterly report on
Form 10-Q.
Results
of Operations
Revenues
Revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Product revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
407.8
|
|
|
|
36.4
|
%
|
|
$
|
380.6
|
|
|
|
34.8
|
%
|
|
$
|
1,223.9
|
|
|
|
37.7
|
%
|
|
$
|
1,084.8
|
|
|
|
35.8
|
%
|
Rest of world
|
|
|
393.9
|
|
|
|
35.2
|
%
|
|
|
377.7
|
|
|
|
34.6
|
%
|
|
|
1,102.2
|
|
|
|
33.9
|
%
|
|
|
1,023.0
|
|
|
|
33.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
$
|
801.7
|
|
|
|
71.6
|
%
|
|
$
|
758.3
|
|
|
|
69.4
|
%
|
|
$
|
2,326.1
|
|
|
|
71.6
|
%
|
|
$
|
2,107.8
|
|
|
|
69.6
|
%
|
Unconsolidated joint business
|
|
|
283.9
|
|
|
|
25.3
|
%
|
|
|
299.0
|
|
|
|
27.3
|
%
|
|
|
838.3
|
|
|
|
25.8
|
%
|
|
|
825.0
|
|
|
|
27.2
|
%
|
Other revenues
|
|
|
34.9
|
|
|
|
3.1
|
%
|
|
|
35.7
|
|
|
|
3.3
|
%
|
|
|
85.9
|
|
|
|
2.6
|
%
|
|
|
95.8
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
1,120.5
|
|
|
|
100.0
|
%
|
|
$
|
1,093.0
|
|
|
|
100.0
|
%
|
|
$
|
3,250.3
|
|
|
|
100.0
|
%
|
|
$
|
3,028.6
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
Product
Revenues
Product revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
AVONEX
|
|
$
|
580.0
|
|
|
|
72.3
|
%
|
|
$
|
573.5
|
|
|
|
75.6
|
%
|
|
$
|
1,726.5
|
|
|
|
74.2
|
%
|
|
$
|
1,636.8
|
|
|
|
77.7
|
%
|
TYSABRI
|
|
|
207.0
|
|
|
|
25.8
|
%
|
|
|
171.2
|
|
|
|
22.6
|
%
|
|
|
559.8
|
|
|
|
24.1
|
%
|
|
|
433.0
|
|
|
|
20.5
|
%
|
FUMADERM
|
|
|
12.6
|
|
|
|
1.6
|
%
|
|
|
11.1
|
|
|
|
1.5
|
%
|
|
|
35.4
|
|
|
|
1.5
|
%
|
|
|
32.8
|
|
|
|
1.6
|
%
|
Other
|
|
|
2.1
|
|
|
|
0.3
|
%
|
|
|
2.5
|
|
|
|
0.3
|
%
|
|
|
4.4
|
|
|
|
0.2
|
%
|
|
|
5.2
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
$
|
801.7
|
|
|
|
100.0
|
%
|
|
$
|
758.3
|
|
|
|
100.0
|
%
|
|
$
|
2,326.1
|
|
|
|
100.0
|
%
|
|
$
|
2,107.8
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVONEX
We currently market and sell AVONEX for the treatment of
relapsing MS, including patients with a first clinical episode
and MRI features consistent with MS. AVONEX has been shown in
clinical trials in relapsing MS both to slow the accumulation of
disability and to reduce the frequency of
flare-ups.
Revenues from AVONEX were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
AVONEX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
348.5
|
|
|
$
|
321.9
|
|
|
|
8.3
|
%
|
|
$
|
1,054.2
|
|
|
$
|
935.9
|
|
|
|
12.6
|
%
|
Rest of world
|
|
|
231.5
|
|
|
|
251.6
|
|
|
|
(8.0
|
)%
|
|
|
672.3
|
|
|
|
700.9
|
|
|
|
(4.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total AVONEX revenues
|
|
$
|
580.0
|
|
|
$
|
573.5
|
|
|
|
1.1
|
%
|
|
$
|
1,726.5
|
|
|
$
|
1,636.8
|
|
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in revenues from the sales of AVONEX in the United
States for both the three and nine months ended
September 30, 2009, as compared to the prior year
comparative periods, was primarily due to price increases,
partially offset by decreased patient demand and participation
in our AVONEX Access Program, which provides free product to
eligible patients.
Revenues from the sale of AVONEX within our rest of world
markets decreased for both the three and nine months ended
September 30, 2009, as compared to the same periods in the
prior year, primarily due to the negative impact of foreign
currency exchange rate changes, partially offset by price
increases and increased patient demand.
We expect to face increasing competition in the MS marketplace
in both the United States and rest of world from existing and
new MS treatments, including oral and other alternative
formulations developed by our competitors, the continued growth
of TYSABRI and the commercialization of our other pipeline
product candidates, which may have a continued negative impact
on the unit sales of AVONEX. We expect future unit sales of
AVONEX to be dependent to a large extent on our ability to
compete successfully with the products of our competitors.
TYSABRI
In August 2000, we entered into a collaboration agreement with
Elan Pharma International, Ltd, or Elan, an affiliate of Elan
Corporation, plc. Under the terms of the agreement with Elan, we
manufacture TYSABRI and collaborate with Elan on the
products marketing, commercial distribution and on-going
development activities. TYSABRI is sold as a monotherapy
treatment for relapsing MS to slow the progression of disability
and reduce the frequency of clinical relapses.
TYSABRI is marketed under risk management or minimization plans
as agreed to with local regulatory authorities. In the United
States, TYSABRI was reintroduced with a risk minimization action
plan known as
49
the TOUCH Prescribing Program, a rigorous system intended to
educate physicians and patients about the risks involved and
help assure appropriate use of the product. Since the
reintroduction of TYSABRI to the market in July 2006, we have
disclosed cases of progressive multifocal leukoencephalopathy,
or PML, a known side effect, in patients taking TYSABRI in the
post-marketing setting. We currently believe that the risk of
developing PML increases with the number of TYSABRI infusions
received. We continue to believe the overall rate of developing
PML with TYSABRI therapy remains consistent with the rate
implied in the label. We have proposed and are currently
discussing with regulatory authorities a potential label change
to reflect this increased risk of PML with increased duration of
TYSABRI exposure.
We continue to monitor the growth of TYSABRI unit sales in light
of these results and we continue to develop protocols to
potentially mitigate the outcome of PML in patients being
treated with TYSABRI. We believe that the reported cases of PML
have slowed the growth of TYSABRI in both the United States and
rest of world.
In the United States, we sell TYSABRI to Elan who sells the
product to third party distributors. Our sales price to Elan in
the United States is set prior to the beginning of each
quarterly period to effect an approximate equal sharing of the
gross margin on sales in the United States between Elan and us.
We recognize revenue for sales of TYSABRI in the United States
upon Elans shipment of the product to the third party
distributors. In the rest of world markets, we are responsible
for distributing TYSABRI to customers and are primarily
responsible for all operating activities. We recognize revenue
for sales of TYSABRI in the rest of world at the time of product
delivery to our customers.
Revenues from TYSABRI were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
TYSABRI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
59.3
|
|
|
$
|
56.2
|
|
|
|
5.5
|
%
|
|
$
|
169.7
|
|
|
$
|
144.0
|
|
|
|
17.8
|
%
|
Rest of world
|
|
|
147.7
|
|
|
|
115.0
|
|
|
|
28.4
|
%
|
|
|
390.1
|
|
|
|
289.0
|
|
|
|
35.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TYSABRI revenues
|
|
$
|
207.0
|
|
|
$
|
171.2
|
|
|
|
20.9
|
%
|
|
$
|
559.8
|
|
|
$
|
433.0
|
|
|
|
29.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in revenues from the sale of TYSABRI in the United
States, as compared to the prior year comparative periods,
during the three and nine months ended September 30, 2009,
were primarily due to an increase in number of patients using
TYSABRI in the United States.
Net sales of TYSABRI from our collaboration partner, Elan, to
third-party customers in the United States for the three and
nine months ended September 30, 2009 totaled
$130.7 million and $371.1 million, respectively, as
compared to $121.5 million and $307.0 million,
respectively, in the prior year comparative periods.
Rest of world sales of TYSABRI for the three and nine months
ended September 30, 2009, increased as compared to the same
periods in the prior year, primarily due to an increase in
number of patients using TYSABRI in the United States, partially
offset by the negative impact of foreign currency exchange rate
changes. TYSABRI rest of world revenues for the three and nine
months ended September 30, 2009 also include losses of $4.2
million recognized in relation to the settlement of certain cash
flow hedge instruments.
In accordance with our collaboration agreement, Elan has paid to
us milestone payments totaling $125.0 million. We have
recorded these amounts as deferred revenue upon receipt which is
being recognized as product revenue in our consolidated
statements of income over the term of our collaboration with
Elan based on a units of revenue method whereby the revenue
recognized is based on the ratio of units shipped in the current
period over the total units expected to be shipped over the
remaining term of the collaboration. The following table
summarizes the amount of these milestone payments recognized as
revenue for the three and nine months ended September 30,
2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Revenue recognized from milestone payments
|
|
$
|
1.9
|
|
|
$
|
0.6
|
|
|
|
216.7
|
%
|
|
$
|
5.1
|
|
|
$
|
0.6
|
|
|
|
750.0
|
%
|
50
Unconsolidated
Joint Business Revenue
We collaborate with Genentech on the development and
commercialization of RITUXAN which is approved for treating
certain B-cell NHL and RA. While Genentech is responsible for
the worldwide manufacturing of RITUXAN, development and
commercialization rights and responsibilities under this
collaboration are divided between us and Genentech as described
in Note 14, Collaborations, in Notes to
Consolidated Financial Statements
Revenues from unconsolidated joint business consists of
(1) our share of pretax co-promotion profits in the United
States; (2) reimbursement of selling and development
expense in the United States; and (3) revenue on sales of
RITUXAN outside the United States, which consist of our share of
pretax co-promotion profits in Canada and royalty revenue on
sales of RITUXAN outside the United States and Canada by F.
Hoffmann-La Roche Ltd., or Roche, Zenyaku Kogyo, Inc.,
or Zenyaku and Chugai Pharmaceutical Co. Ltd., or Chugai, an
affiliate of Roche. Pre-tax co-promotion profits are calculated
and paid to us by Genentech in the United States and by Roche in
Canada. Pre-tax co-promotion profits consist of United States
and Canadian sales of RITUXAN to third-party customers net of
discounts and allowances less the cost to manufacture RITUXAN,
third-party royalty expenses, distribution, selling and
marketing, and joint development expenses incurred by Genentech,
Roche and us.
The following table provides a summary of revenues from
unconsolidated joint business for the three and nine months
ended September 30, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Biogen Idec Inc.s share of co-promotion profits in the
United States
|
|
$
|
203.3
|
|
|
$
|
192.2
|
|
|
|
5.8
|
%
|
|
$
|
581.3
|
|
|
$
|
527.9
|
|
|
|
10.1
|
%
|
Reimbursement of selling and development expense in the United
States
|
|
|
15.8
|
|
|
|
16.8
|
|
|
|
(6.0
|
)%
|
|
|
47.5
|
|
|
|
45.4
|
|
|
|
4.6
|
%
|
Revenue on sales of RITUXAN outside the United States
|
|
|
64.8
|
|
|
|
90.0
|
|
|
|
(28.0
|
)%
|
|
|
209.5
|
|
|
|
251.7
|
|
|
|
(16.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unconsolidated joint business revenues
|
|
$
|
283.9
|
|
|
$
|
299.0
|
|
|
|
(5.1
|
)%
|
|
$
|
838.3
|
|
|
$
|
825.0
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biogen
Idec Inc.s Share of Co-promotion Profits in the United
States
The following table provides a summary of amounts comprising our
share of co-promotion profits in the United States:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Product revenues, net
|
|
$
|
670.4
|
|
|
$
|
655.4
|
|
|
|
2.3
|
%
|
|
$
|
2,008.0
|
|
|
$
|
1,910.8
|
|
|
|
5.1
|
%
|
Costs and expenses
|
|
|
167.3
|
|
|
|
182.3
|
|
|
|
(8.2
|
)%
|
|
|
547.2
|
|
|
|
586.1
|
|
|
|
(6.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-promotion profits in the United States
|
|
$
|
503.1
|
|
|
$
|
473.1
|
|
|
|
6.3
|
%
|
|
$
|
1,460.8
|
|
|
$
|
1,324.7
|
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.s share of co-promotion profits in the
United States
|
|
$
|
203.3
|
|
|
$
|
192.2
|
|
|
|
5.8
|
%
|
|
$
|
581.3
|
|
|
$
|
527.9
|
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
The increase in net sales of RITUXAN to third-party customers in
the United States recorded by Genentech for the three and nine
months ended September 30, 2009 as compared to the prior
year comparative periods resulted from continued growth for
treatment of B-cell NHL and RA, and RITUXAN price increases.
Total collaboration costs and expenses for the three and nine
months ended September 30, 2009 as compared to the same
periods in the prior year decreased primarily due to higher
costs incurred in development of RITUXAN for use in other
indications during the prior year.
Under the collaboration agreement, our current pretax
co-promotion profit-sharing formula, which resets annually,
provides for a 30% share of co-promotion profits on the first
$50.0 million of co-promotion operating profit with our
share increasing to 40% if co-promotion operating profits exceed
$50.0 million. In 2009 and 2008, the 40% threshold was met
during the first quarter.
In addition, under the collaboration agreement, we also have
rights to collaborate with Genentech on the development and
commercialization of (1) anti-CD20 products that Genentech
acquires or develops, which we refer to as New Anti-CD20
Products, and (2) anti-CD20 products that Genentech
licenses from a third party, which we refer to as Third Party
Anti-CD20 Products. Our collaboration rights for New Anti-CD20
Products are limited to the United States and our collaboration
rights for Third Party Anti-CD20 Products are dependent upon
Genentechs underlying license rights. Currently, there is
only one New Anti-CD20 Product, ocrelizumab, and only one Third
Party Anti-CD20 Product, GA101.
Our agreement with Genentech also provides that the successful
development and commercialization of the first New Anti-CD20
Product will decrease our percentage of co-promotion profits of
the collaboration. Refer to Note 14, Collaborations, in
Notes to Consolidated Financial Statements, for a
detailed discussion of the pretax co-promotion profit sharing
formula for RITUXAN and New Anti-CD20 Products sold by us and
Genentech following the approval date of the first New Anti-CD20
Product. We will participate in Third Party Anti-CD20 Products
on similar financial terms as for ocrelizumab.
Reimbursement
of Selling and Development Expense in the United
States
As discussed within Note 14, Collaborations, in
Notes to Consolidated Financial Statements,
Genentech incurs the majority of continuing development costs
for RITUXAN. Expenses incurred by Genentech in the development
of RITUXAN are not recorded as research and development expense,
but rather reduce our share of co-promotion profits recorded as
a component of unconsolidated joint business revenue.
Selling and development expenses incurred by us in the United
States and reimbursed by Genentech for the three months ended
September 30, 2009 as compared to the three months ended
September 30, 2008 have decreased slightly due to decreases
in costs associated with the development of RITUXAN for use in
RA.
The increase in selling and development expenses incurred by us
in the United States and reimbursed by Genentech for the nine
months ended September 30, 2009 as compared to the same
period in the prior year are primarily to the result of
increased clinical development and marketing expenses.
Revenue
on sales of RITUXAN outside the United States
Revenues on sales of RITUXAN outside the United States decreased
compared to the prior year comparative periods primarily due to
royalty expirations in certain of our rest of world markets and
the negative impact of foreign currency exchange rate changes.
The royalty period with respect to all products is 11 years
from the first commercial sale of such product on a
country-by-country
basis. For the majority of European countries, the first
commercial sale of RITUXAN occurred in the second half of 1998.
Therefore, we continue to expect a significant decrease in
royalty revenues on sales of RITUXAN outside the United States
and Canada in the latter half of 2009. Specifically, the royalty
periods with respect to sales in France, Spain, Germany and the
United Kingdom expire in 2009 and in 2010 with respect to sales
in Italy. The royalty periods with respect to sales in other
countries will subsequently expire through 2012. As a result of
these expirations, we expect a significant decline in royalty
52
revenues derived from sales of RITUXAN outside the United States
in the fourth quarter of 2009 and in future periods.
We record our royalty revenue and co-promotion profit revenue on
sales of RITUXAN outside the United States on a cash basis.
Other
Revenues
Our product line previously included ZEVALIN (ibritumomab
tiuxetan), which is part of a treatment regimen for certain
B-cell NHL, and AMEVIVE (alefacept), a treatment for certain
moderate to severe psoriasis. We have sold or exclusively
licensed the rights to these products to third parties and
continue to receive royalty or supply agreement revenues based
on those products. We also receive royalties on sales by our
licensees of a number of other products covered under patents
that we control.
Other revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Royalty revenues
|
|
$
|
34.5
|
|
|
$
|
35.1
|
|
|
|
(1.7
|
)%
|
|
$
|
83.6
|
|
|
$
|
87.3
|
|
|
|
(4.2
|
)%
|
Corporate partner revenues
|
|
|
0.4
|
|
|
|
0.6
|
|
|
|
(33.3
|
)%
|
|
|
2.3
|
|
|
|
8.5
|
|
|
|
(72.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenues
|
|
$
|
34.9
|
|
|
$
|
35.7
|
|
|
|
(2.2
|
)%
|
|
$
|
85.9
|
|
|
$
|
95.8
|
|
|
|
(10.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
Revenues
We receive revenues from royalties on sales by our licensees of
a number of products covered under patents that we control and
are dependent upon sales of licensed products which could vary
significantly due to competition, manufacturing difficulties and
other factors, including the timing and extent of major events
such as new indication approvals or government sponsored
programs. In addition, the expiration or invalidation of any
underlying patents could reduce or eliminate the royalty
revenues derived from such patents.
Royalty revenues decreased for the three and nine months ended
September 30, 2009 as compared to the prior year
comparative periods primarily due to an overall decline in
royalties from sales of licensed product as well as the
expiration of a license agreement, partially offset by increased
sales of
ANGIOMAX®
(bivalirudin) licensed to The Medicines Company, or TMC.
Our most significant source of royalty revenue is derived from
sales of ANGIOMAX by TMC. TMC sells ANGIOMAX in the United
States, Europe, Canada, and Latin America for use as an
anticoagulant in combination with aspirin in patients with
unstable angina undergoing percutaneous transluminal coronary
angioplasty. Royalty revenues related to the sales of ANGIOMAX
are recognized in an amount equal to the level of net sales
achieved during a calendar year multiplied by the royalty rate
in effect under our royalty agreement with TMC. The royalty rate
increases based upon the level of total net sales earned in any
calendar year, and the increased rate is applied retroactively
to the first dollar of net sales achieved during the year. This
formula has the effect of increasing the amount of royalty
revenue to be recognized in periods subsequent to the first
period of each calendar year in which increased royalty revenues
were recognized. Accordingly, an adjustment is recorded in the
period in which a change in royalty rate has been achieved.
Under the terms of the royalty agreement, TMC is obligated to
pay us royalties earned, on a
country-by-country
basis, until the later of (1) twelve years from the date of
the first commercial sale of ANGIOMAX in such country and
(2) the date upon which the product is no longer covered by
a patent in such country. The annual royalty rate is reduced by
a specified percentage in any country where the product is no
longer covered by a patent and has been reduced to a certain
volume-based market share. TMC began selling ANGIOMAX in the
United States in January 2001. The principal U.S. patent
that covers ANGIOMAX expires in March 2010. Marketing
exclusivity is due to expire in September 2010, due to a grant
of pediatric exclusivity.
53
Corporate
Partner Revenues
Corporate partner revenues represent contract revenues, such as
those generated by ZEVALIN and AMEVIVE, and license fees.
Costs and
Expenses
Cost of
Sales, Excluding Amortization of Acquired Intangible
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Cost of sales, excluding amortization of acquired intangible
assets
|
|
$
|
93.5
|
|
|
$
|
107.5
|
|
|
|
(13.0
|
)%
|
|
$
|
282.4
|
|
|
$
|
300.8
|
|
|
|
(6.1
|
)%
|
The decrease in cost of sales, excluding amortization of
intangible assets for both the three and nine months ended
September 30, 2009 as compared to the comparative periods
in the prior year was primarily due to decreased write-downs
from unmarketable inventory and decreased royalty payments,
partially offset by higher sales volume.
Write-downs
from Unmarketable Inventory
Amounts written down related to unmarketable inventory are
charged to cost of sales, excluding amortization of acquired
intangible assets. Amounts written-down related to unmarketable
inventory were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Write-downs from unmarketable inventory
|
|
$
|
2.0
|
|
|
$
|
12.6
|
|
|
|
(84.1
|
)%
|
|
$
|
13.4
|
|
|
$
|
22.5
|
|
|
|
(40.4
|
)%
|
Research
and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Research and development
|
|
$
|
304.1
|
|
|
$
|
268.8
|
|
|
|
13.1
|
%
|
|
$
|
1,000.0
|
|
|
$
|
779.3
|
|
|
|
28.3
|
%
|
We devote significant resources to research and development
programs focusing our efforts on finding novel therapeutics in
areas of high unmet medical need, both within our current core
focus areas of neurology, oncology, immunology and cardiology as
well as in new therapeutic areas. Over the past few years, we
have incurred significant expenditures related to the
development of new product candidates and exploring the utility
of our existing products in treating disorders beyond those
currently approved in their labels. Costs associated with later
stage clinical trials are, in most cases, more significant than
those incurred in earlier stages of our pipeline. As of
September 30, 2009, including our RITUXAN product
candidates, we had more than 20 pipeline products in Phase 2
trials or beyond.
Research and development expenses consist of upfront fees and
milestones paid to collaborators and expenses incurred in
performing research and development activities including
salaries and benefits, facilities expenses, overhead expenses,
clinical trial and related clinical manufacturing expenses, fees
paid to clinical research organizations, or CROs, and other
outside expenses. Research and development expenses are expensed
as incurred. The timing of upfront fees and milestone payments
in the future may cause variability in future research and
development expense.
The increase in research and development expense for the three
and nine months ended September 30, 2009 as compared to the
comparable periods in the prior year was driven by the continued
advancement of
54
several of our later stage product candidates, partially offset
by a reduction in spending across several other programs
including Baminercept in RA which we terminated in October of
2008. The increase in expense for the nine months ended
September 30, 2009, as compared to the same period in the
prior year is also attributable to the $110.0 million
upfront payment made to Acorda under a recent collaboration and
license agreement.
A summary of milestone and upfront payments made to our
collaboration partners and included within research and
development expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
For the Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
2009
|
|
|
2008
|
|
|
Change %
|
|
|
Total milestone and upfront payments reflected within research
and development expense
|
|
$
|
22.0
|
|
|
$
|
5.5
|
|
|
|
300.0
|
%
|
|
$
|
151.0
|
|
|
$
|
16.1
|
|
|
|
837.9
|
%
|
We have a number of pipeline products in registrational stage
development, including:
|
|
|
|
|
BG-12 for relapsing MS;
|
|
|
|
Humanized Anti-Cd20 MAb (ocrelizumab) for RA;
|
|
|
|
Lixivaptan for hyponatremia commonly seen in acute decompensated
heart failure; and
|
|
|
|
PEGylated interferon beta 1 a for relapsing MS.
|
In addition to the registrational product indications listed
above:
|
|
|
|
|
Acorda, our collaboration partner in the development and
commercialization of products containing Fampridine-SR in
markets outside the United States, previously announced that the
EMEA has communicated that Fampridine-SR is eligible to be
submitted for a Marketing Authorization Application via the
EMEAs Centralized Procedure as a new active substance.
|
|
|
|
In August 2009, Facet, our collaboration partner in the
development of daclizumab, announced its continued plans for the
Phase 3 trial of daclizumab high-yield process in MS and that it
would request a Special Protocol Assessment from the FDA, prior
to the initiation of this study. The Phase 3 trial is expected
to begin during the first half of 2010. Upon enrollment of the
first patient into the Phase 3 study, Facet would receive a
$30.0 million milestone payment from us.
|
|
|
|
On October 19, 2009, Biovitrum and we announced plans to
advance the companies long-acting, fully-recombinant
Factor IX Fc fusion protein (rFIXFc) into a registrational
clinical trial in hemophilia B patients. The decision to advance
the program is based on data from a Phase 1/2a open-label,
multi-center, safety dose-escalation and pharmacokinetic study
of intravenous rFIXFc in severe, previously treated hemophilia B
patients. rFIXFc was well tolerated in the study. In addition,
rFIXFc demonstrated a prolonged half-life compared to historical
data for existing therapies, supporting advancement of the
program.
|
|
|
|
In October 2009, a safety review of ocrelizumab data in RA and
lupus nephritis, or LN, clinical trials was performed revealing
an apparent imbalance in opportunistic infections among
ocrelizumab-treated RA and LN patients in these clinical trials.
Based upon this review, the ocrelizumab FILM study in
methotrexate-naïve RA patients was placed on clinical hold
and dosing was stopped. We also decided to close the ocrelizumab
BELONG study in LN. The other ocrelizumab RA and RRMS studies
remain ongoing. We plan to work with regulators to determine the
next step for these programs.
|
|
|
|
In October 2009, after a strategic review of our Anti-CD80 MAb
(galiximab) and Anti-CD23 MAb (lumiliximab) programs, we decided
to stop recruitment in the lumiliximab LUCID trial in CLL and
prematurely end the galiximab TARGET trial in NHL. Neither
decision was a consequence of any safety concerns. We are
evaluating our options for these programs and are working on a
path forward.
|
55
Selling,
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Selling, general and administrative
|
|
$
|
226.8
|
|
|
$
|
232.8
|
|
|
|
(2.6
|
)%
|
|
$
|
669.4
|
|
|
$
|
694.3
|
|
|
|
(3.6
|
)%
|
Selling, general and administrative expenses are primarily
comprised of salaries and benefits associated with sales and
marketing, finance, legal and other administrative personnel,
outside marketing and legal expenses and other general and
administrative costs. The decreases in selling, general and
administrative expenses were primarily driven by the positive
impact of foreign currency exchange rate changes.
Collaboration
Profit Sharing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Collaboration profit sharing
|
|
$
|
60.7
|
|
|
$
|
43.5
|
|
|
|
39.4
|
%
|
|
$
|
152.6
|
|
|
$
|
98.4
|
|
|
|
55.1
|
%
|
Payments are made to Elan for their share of the rest of world
net operating profits to effect an equal sharing of
collaboration operating profit. These payments include the
reimbursement of our portion of third-party royalties that Elan
pays on behalf of the collaboration, relating to sales outside
of the United States. These amounts are reflected in the
collaboration profit sharing line in our consolidated statements
of income. As rest of world sales of TYSABRI increase, our
collaboration profit sharing expense will increase.
The increases for both the three and nine months ended
September 30, 2009 as compared to the prior year
comparative periods were due to the increase in TYSABRI rest of
world sales resulting in a higher rest of world net operating
profits to be shared with Elan and causing growth in the
third-party royalties Elan paid on behalf of the collaboration.
For the three and nine months ended September 30, 2009, our
collaboration profit sharing expense included $10.7 million
and $28.5 million, respectively, related to the
reimbursement of Elans royalty payments as compared to
$8.0 million and $20.9 million during the prior year
comparable periods.
Amortization
of Acquired Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
Change %
|
|
2009
|
|
2008
|
|
Change %
|
|
Amortization of acquired intangible assets
|
|
$
|
51.3
|
|
|
$
|
94.5
|
|
|
|
(45.6
|
)%
|
|
$
|
233.8
|
|
|
$
|
242.1
|
|
|
|
(3.4
|
)%
|
Our most significant intangible asset is the core technology
related to our AVONEX product. We believe the economic benefit
of our core technology is consumed as revenue is generated from
our AVONEX product, which we refer to as the economic
consumption amortization model. An analysis of the anticipated
product sales o