e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2009
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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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
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(I.R.S. Employer
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incorporation or
organization)
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Identification No.)
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14 Cambridge Center,
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02142
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Cambridge, Massachusetts
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(Zip code)
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(Address of principal executive
offices)
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(617) 679-2000
(Registrants
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.0005 par value
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The Nasdaq Global Select Market
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
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.
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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)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of the registrants common stock
held by non-affiliates of the registrant (without admitting that
any person whose shares are not included in such calculation is
an affiliate) computed by reference to the price at which the
common stock was last sold as of the last business day of the
registrants most recently completed second fiscal quarter
was $13,005,469,098.
As of February 5, 2010, the registrant had
269,601,262 shares of common stock, $0.0005 par value,
outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for our 2010 Annual
Meeting of Stockholders are incorporated by reference into
Part III of this report.
BIOGEN
IDEC INC.
ANNUAL
REPORT ON
FORM 10-K
For the
Year Ended December 31, 2009
TABLE OF
CONTENTS
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
In addition to historical information, this report contains
forward-looking statements that are based on our current beliefs
and expectations. 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:
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the anticipated level, mix and timing of future product sales,
royalty revenues, milestone payments, expenses, liabilities,
contractual obligations and amortization of intangible assets;
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the growth trends for TYSABRI and our ability to improve the
benefit-risk profile of TYSABRI;
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the assumed remaining life of the core technology relating to
AVONEX;
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the markets for our products;
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competitive conditions and the development, timing and impact of
competitive products;
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the incidence, timing, outcome and impact of litigation,
proceedings related to patents and other intellectual property
rights, tax assessments and other legal proceedings;
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our effective tax rate for future periods, our ability to
realize the benefits of our deferred tax assets and the
treatment of our undistributed foreign earnings of our
non-U.S. subsidiaries;
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the timing and impact of accounting standards;
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the design, costs, development and timing of therapeutic areas
and indications targeted by programs in our clinical pipeline;
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the outcome and impact of healthcare reform efforts;
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the timing and outcome of regulatory filings and meetings with
regulatory authorities;
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our ability to finance our operations, meet our manufacturing
needs and source funding for such activities;
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the impact that our Weston facility will have on our operating
expenses and the timing of occupancy;
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the status, intended use and financial impact of our
manufacturing facilities;
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our share repurchase programs;
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the drivers for growing our business; and
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our plans to expend additional funds and resources on external
business development and research opportunities.
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These forward-looking statements are based on our current
beliefs and expectations and involve risks and uncertainties
that could cause actual results to differ materially from those
reflected in such forward-looking statements. Important factors
that could cause actual results to differ from our expectations
and could negatively impact our financial position and results
of operations are discussed in the Risk Factors
section 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,
whether as a result of new information, future events, or
otherwise.
NOTE REGARDING
COMPANY AND PRODUCT REFERENCES
Throughout this report, Biogen Idec, we,
us and our refer to Biogen Idec Inc. and
its consolidated subsidiaries, RITUXAN refers to
both RITUXAN (the trade name for rituximab in the U.S., Canada
and Japan) and MabThera (the trade name for rituximab outside
the U.S., Canada and Japan), and ANGIOMAX refers to
both ANGIOMAX (the trade name for bivalirudin in the U.S.,
Canada and Latin America) and ANGIOX (the trade name for
bivalirudin in Europe).
NOTE REGARDING
TRADEMARKS
AVONEX®,
RITUXAN®
and
ADENTRI®
are registered trademarks, and
FUMADERMtm
is a trademark of Biogen Idec Inc. or its subsidiaries.
TYSABRI®
and
TOUCH®
are registered trademarks of Elan Pharmaceuticals, Inc.;. The
following are trademarks of the respective companies listed:
ACTEMRA®
Chugai Seiyaku Kabushiki Kaisha;
AMPYRATM
Acorda Therapeutics, Inc.;
ANGIOMAX®
and
ANGIOX®
The Medicines Company;
ARZERRATM
Glaxo Group Limited;
BETASERON®
and
BETAFERON®
Bayer Schering Pharma AG;
CAMPATH®
Genzyme Corporation;
CIMZIA®
UCB Pharma, S.A.;
COPAXONE®
Teva Pharmaceutical Industries Limited;
ENBREL®
Immunex Corporation;
EXTAVIA®
Novartis AG;
HUMIRA®
Abbott Biotechnology Ltd.;
ONCOVINTM
Eli Lilly and Company;
ORENCIA®
Bristol-Myers Squibb Company;
REBIF®
Ares Trading S.A.;
REMICADE®
Centocor Ortho Biotech Inc.;
SIMPONITM
Johnson & Johnson; and
TREANDA®
Cephalon, Inc.
NOTE REGARDING
REFERENCES TO THE CODIFICATION
In June 2009, the Financial Accounting Standards Board (FASB),
issued the FASB Accounting Standards Codification
(Codification). Effective July 1, 2009, the Codification
became the single source for all authoritative generally
accepted accounting principles (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; however the
Codification does change the way we refer to GAAP within our
financial statements.
PART I
Overview
Biogen Idec 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 worldwide benefit from Biogen Idecs significant
products that address medical needs in the areas of neurology,
oncology and immunology.
Marketed
Products
We have four therapeutic products on the market, which are
summarized in the table below.
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Revenues to Biogen Idec (in millions)
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Product
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Summary of Approved Indications
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2009
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2008
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2007
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AVONEX
(interferon beta-1a)
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Multiple sclerosis
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$
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2,322.9
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$
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2,202.6
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$
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1,867.8
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RITUXAN
(rituximab)
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Non-Hodgkins lymphoma
Rheumatoid arthritis
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$
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1,094.9
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$
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1,128.2
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$
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926.1
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TYSABRI
(natalizumab)
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Multiple sclerosis
Crohns disease
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$
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776.0
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$
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588.6
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$
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229.9
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FUMADERM
(dimethylfumarate and monoethylfumarate salts)
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Psoriasis
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$
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49.6
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$
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43.4
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$
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21.5
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Additional financial information about our product revenues,
other revenues and geographic areas in which we operate is set
forth in our Consolidated Financial Statements and in
Note 20, Segment Information to our Consolidated
Financial Statements.
Research
and Development
We devote significant resources to research and development
programs and external business development opportunities. We
intend to focus our research and development efforts on finding
novel therapeutics in areas of high unmet medical need within
our core and emergent focus areas of neurology, oncology,
immunology, cardiopulmonary and hemophilia.
In 2009, 2008 and 2007, our research and development costs
totaled $1,283.1 million, $1,072.1 million and
$925.2 million, respectively. We incurred charges
associated with acquired in-process research and development of
$25.0 million and $84.2 million in 2008 and 2007
respectively. No acquired in-process research and development
charges were incurred in 2009.
CEO
Retirement
On January 4, 2010, we announced that James C. Mullen will
retire as our President and Chief Executive Officer on
June 8, 2010, and will retire from our Board of Directors
upon the completion of his current term as a director at our
2010 Annual Meeting of Stockholders. We entered into a
transition agreement with Mr. Mullen on January 4,
2010, which is filed as an exhibit to this report. Under the
transition agreement, we agreed with Mr. Mullen (1) to
continue to pay Mr. Mullens current base salary of
$1.2 million through June 8, 2010, (2) to pay
Mr. Mullen a bonus for 2009 calculated as 125% of his 2009
base salary of $1.2 million multiplied by our corporate
multiplier for 2009 determined based on our achievement of goals
established at the beginning of 2009, (3) to pay
Mr. Mullen a bonus for 2010 calculated as 125% of his
prorated base salary, (4) to vest all of
Mr. Mullens unvested equity awards on the date of his
retirement, (5) to allow Mr. Mullen to exercise his
vested stock options until June 8, 2013 or their
expiration, whichever is earlier, and (6) that if we make a
public announcement of a transaction that constitutes a change
in control prior to June 8, 2010, Mr. Mullen will be
entitled to a severance payment in the
1
amount of three times the sum of his annual base salary and
target bonus and a related tax payment provided under his
employment agreement upon consummation of the transaction. We
have initiated a search for Mr. Mullens successor.
Available
Information
We were formed as a California corporation in 1985 and became a
Delaware corporation in 1997. Our principal executive offices
are located at 14 Cambridge Center, Cambridge, Massachusetts
02142 and our telephone number is
(617) 679-2000.
Our website address is www.biogenidec.com. We make available
free of charge through the Investor Relations section of our
website our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K
and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission (SEC). We
include our website address in this report only as an inactive
textual reference and do not intend it to be an active link to
our website. The contents of our website are not incorporated
into this filing.
Marketed
Products
Our marketed products address the following diseases: multiple
sclerosis (MS); non-Hodgkins lymphoma (NHL); rheumatoid
arthritis (RA); Crohns disease (CD); and psoriasis. As
part of our ongoing development efforts, we are also seeking to
expand our marketed products into other diseases, such as
Antineutrophil cytoplasmic antibodies (ANCA) associated
vasculitis, chronic lymphocytic leukemia (CLL), and ulcerative
colitis. The approved indications for, and ongoing development
of, our marketed products are summarized in the table below.
Drug development involves a high degree of risk, and the status,
timing and scope of our clinical trials, drug approvals and
applications for approval are subject to change. Important
factors that could adversely affect our drug development efforts
are discussed in the Risk Factors section of this
report.
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Approved or
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Development or
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Product
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Targeted Indications
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Status
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Marketing Collaborators
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AVONEX
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Relapsing MS
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Approved in U.S. and numerous other countries worldwide
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None
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Ulcerative colitis
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Phase 2
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None
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RITUXAN(1)
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NHL
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Approved in U.S. and numerous other countries worldwide
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Roche Group and its sublicensees
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RA
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Approved in U.S. and numerous other countries worldwide
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Roche Group and its sublicensees
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CLL
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In U.S. registration
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Roche Group and its sublicensees
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ANCA-associated vasculitis
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Phase 2/3
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Roche Group (Our rights are limited to U.S.)
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TYSABRI(2)
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Relapsing MS
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Approved in U.S. and numerous other countries worldwide
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Elan Pharmaceuticals
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CD
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Approved in U.S.
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Elan Pharmaceuticals
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FUMADERM
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Severe psoriasis
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Approved in Germany
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None
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(1) |
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RITUXAN is indicated for the treatment of (1)(a) relapsed or
refractory, low-grade or follicular, CD20-positive, B-cell NHL
as a single agent, (b) previously untreated follicular,
CD20-positive, B-cell NHL in combination with cyclophosphamide,
vincristine and prednisone (CVP) chemotherapy,
(c) non-progressing (including stable disease), low-grade,
CD20-positive, B-cell NHL, as a single agent, after first-line
CVP chemotherapy, and (d) previously untreated diffuse
large B-cell, CD20-positive NHL in combination with
cyclophosphamide, doxorubicin, Oncovin and prednisone or other
anthracycline-based chemotherapy regimens and
(2) moderately- to severely-active RA, in combination with
methotrexate, in adult patients who have inadequate response to
one or more tumor necrosis factor (TNF) antagonist therapies. |
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TYSABRI is indicated for the treatment of (1) relapsing MS
as a monotherapy and (2) moderately to severely active CD
with evidence of inflammation with an inadequate response to or
inability to tolerate conventional CD therapies and TNF
inhibitors. |
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AVONEX
AVONEX is one of the leading therapeutic products for relapsing
forms of MS with over 135,000 patients currently using
AVONEX. MS is a progressive neurological disease in which the
body loses the ability to transmit messages along nerve cells,
leading to a loss of muscle control, paralysis and, in some
cases, death. Patients with active relapsing MS experience an
uneven pattern of disease progression characterized by periods
of stability that are interrupted by
flare-ups of
the disease after which the patient returns to a new baseline of
functioning. AVONEX is a recombinant form of the interferon beta
protein produced in the body in response to viral infection.
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.
2009
Developments
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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, which
expires in September 2026, covers the treatment of multiple
sclerosis with AVONEX.
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In April 2009, we announced data results from an open label,
ten-year extension study of MS patients, known as CHAMPIONS,
indicating that early treatment with AVONEX reduces relapse
rates and may reduce disease progression for up to ten years.
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RITUXAN
RITUXAN is one of the most prescribed oncology therapeutics in
the world with over 2.1 million patient exposures across
all indications. RITUXAN is a monoclonal antibody that is used
worldwide to treat NHL and RA. NHL is a cancer that affects
lymphocytes, which are a type of white blood cell that help to
fight infection. RA is a chronic disease that occurs when the
immune system mistakenly attacks the bodys joints,
resulting in inflammation, pain and joint damage.
We collaborate with the Roche Group, through its wholly-owned
member Genentech, Inc., on the development and commercialization
of RITUXAN. Please read Note 17, Collaborations to
our Consolidated Financial Statements for a description of this
collaboration.
2009
Developments
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In November 2009, the U.S. Food and Drug Administration
(FDA) issued a complete response on applications for RITUXAN
plus fludarabine and cyclophosphamide for the treatment of
people with CLL, a cancer that affects white blood cells. The
FDA has not requested any new data to complete its review of
these applications. We and Genentech have engaged in final label
discussions with the FDA and expect to finalize these
discussions during the first quarter of 2010.
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In October 2009, we announced that the FDA issued a complete
response indicating that they did not believe that approval
could be supported for RITUXAN in RA patients with an inadequate
response to non-biological disease modifying agents.
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In October 2009, data from a Phase 2/3 clinical trial of RITUXAN
in ANCA-associated vasculitis, known as RAVE, was presented at
the American College of Rheumatology. The trial met its primary
endpoint of noninferiority, showing that RITUXAN is as effective
as cyclophosphamide in treating
ANCA-associated
vasculitis, a type of inflammation of the blood vessels.
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In September 2009, we announced that a Phase 3 study showed that
RITUXAN provided significant clinical benefit to patients with
low-grade follicular lymphoma who were treated with RITUXAN as
maintenance therapy after primary treatment with RITUXAN and
chemotherapy.
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In March 2009, we announced that a Phase 3 study of RITUXAN in
lupus nephritis did not meet its primary endpoint.
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3
TYSABRI
We believe that TYSABRI is one of the most efficacious
treatments for MS. TYSABRI is a monoclonal antibody
(natalizumab) that was initially approved by the FDA in November
2004 to treat relapsing MS. In February 2005, in consultation
with the FDA, we and our collaborator Elan Corporation plc
(Elan) voluntarily suspended the marketing and commercial
distribution of TYSABRI based on reports of cases of progressive
multifocal leukoencephalopathy (PML) in patients treated with
TYSABRI in clinical studies. PML is an opportunistic viral
infection of the brain that often leads to death or severe
disability. In July 2006, TYSABRI was reintroduced in the U.S.,
and introduced in the European Union, as a monotherapy treatment
for relapsing MS. TYSABRI is also approved in the U.S. to
treat CD, which is an inflammatory disease of the intestines.
TYSABRI is marketed under risk management or minimization plans
as agreed to with local regulatory authorities. In the U.S.,
TYSABRI was reintroduced with a risk minimization action plan
known as the TOUCH Prescribing Program, a rigorous system
intended to educate physicians and patients about the risks
involved and to assure appropriate use of the product.
We collaborate with Elan on the development and
commercialization of TYSABRI. Please read Note 17,
Collaborations to our Consolidated Financial Statements
for a description of this collaboration.
2009
Developments
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In November 2009, we revised the U.S. prescribing
information for TYSABRI to reflect that the risk of developing
PML increases with longer treatment duration, and for patients
treated for 24 to 36 months is generally similar to the
rates seen in clinical trials. The revised label also reflects
that there is limited experience beyond three years of treatment.
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In the fourth quarter 2009, the European Medicines Agency (EMA)
began a review of TYSABRI to determine whether any additional
measures were necessary to ensure the safe use of TYSABRI. In
January 2010, the EMA recommended updating the TYSABRI label in
the E.U. to reflect that the risk of PML increases after two
years of therapy. The EMA also recommended that patients have
regular MRI scans and be re-informed of the risk of PML after
two years on therapy.
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FUMADERM
FUMADERM is the most prescribed oral systemic treatment for
severe psoriasis in Germany. Psoriasis is a skin disease in
which cells build up on the skin surface and form scales and red
patches.
Other
Sources of Revenue
We receive royalty revenues on sales by our licensees of other
products covered under patents that we own. We have also sold or
exclusively licensed to third parties rights to certain products
previously included within our product line. Royalty or supply
agreement revenues received based upon those products are
recorded as corporate partner revenue.
Our royalty revenues are dependent upon our licensees
sales of licensed products which could vary significantly due to
competition, manufacturing difficulties and other factors that
are outside our control. In addition, the expiration or
invalidation of any underlying patents could reduce or eliminate
the royalty revenues derived from such patents. Royalties on
sales of ANGIOMAX (bivalirudin) by The Medicines Company (TMC)
represent our most significant source of other revenue. TMC
markets ANGIOMAX primarily in the U.S. and the European
Union for use as an anticoagulant in patients undergoing
percutaneous coronary intervention. Please read the subsection
entitled Other Revenue Royalty Revenues
in the Managements Discussion and Analysis of
Financial Condition and Results of Operations section of
this report for a description of this royalty arrangement and
factors that could adversely effect this portion of our revenues.
In 2009, 2008 and 2007, our royalty revenues totaled
$124.4 million, $116.2 million and
$102.1 million, respectively, and our corporate partner
revenues totaled $5.1 million, $13.4 million and
$6.6 million, respectively. Additional financial
information about our product revenues, other revenues and
geographic areas in which we operate is set forth in our
Consolidated Financial Statements and in Note 20,
Segment Information to our Consolidated Financial
Statements.
4
Registrational
Product Candidates
In addition to the ongoing development of our marketed products,
we currently have a number of product candidates in or near
registrational stage development. Drug development involves a
high degree of risk, and the status, timing and scope of our
clinical trials, drug approvals and applications for approval
are subject to change. Important factors that could adversely
affect our drug development efforts are discussed in the
Risk Factors section of this report.
BG-12
BG-12 is an oral compound that is being tested in relapsing MS.
During 2009, we completed patient enrollment in two Phase 3
trials of BG-12 in relapsing MS, known as DEFINE and CONFIRM,
with the CONFIRM trial including a glatiramer acetate (COPAXONE)
reference comparator arm. Both studies have a two year treatment
period with each study involving approximately 1,200 to
1,500 patients worldwide. The FDA has granted BG-12 fast
track status, which may result in an expedited review.
Daclizumab
Daclizumab is a monoclonal antibody that is being tested in
relapsing MS. A Phase 2b trial of daclizumab in MS, known as
SELECT, is currently underway. The SELECT trial has a one year
treatment period and is expected to involve approximately
600 patients worldwide. The SELECT trial is the first of
two registrational trials required by regulatory authorities. We
expect to begin patient enrollment in a Phase 3 trial of
daclizumab in relapsing MS, known as DECIDE, during the first
half of 2010. The DECIDE trial has a two year treatment period
and is expected to involve approximately 1,400 patients
worldwide. The DECIDE trial is the second registrational trial
required by regulatory authorities.
We collaborate with Facet Biotech Corporation (Facet) on the
development and commercialization of daclizumab. In January
2010, we agreed with our collaborator, Facet, to assume the
manufacture of daclizumab and began the process of transferring
from Facet the manufacturing technology necessary for us to
manufacture daclizumab. Any delay in completing or implementing
such transfer could adversely affect the timing of our
daclizumab trials. Please read Note 17, Collaborations
to our Consolidated Financial Statements for a description
of this collaboration.
Fampridine
Fampridine is an oral compound that is being developed as a
treatment to improve walking ability in people with MS. In
December 2009, we filed for approval of fampridine in the
European Union and Canada for this indication. Fampridine was
approved in the U.S. on January 22, 2010 under the trade name
AMPYRA (dalfampridine). AMPYRA is indicated to improve walking
in patients with MS. This was demonstrated by an increase in
walking speed. Acorda is developing and marketing AMPYRA in the
U.S. We collaborate with Acorda on the development and
commercialization of fampridine in markets outside the U.S.
Please read Note 17, Collaborations to our
Consolidated Financial Statements for a description of this
collaboration.
GA101
GA101 is a monoclonal antibody that is being tested in CLL.
During the second half of 2009, we began patient enrollment in a
Phase 3 trial of GA101 in combination with chlorambucil as
compared to rituximab plus chlorambucil or chlorambucil alone in
patients with previously untreated CLL. The study is designed to
have a treatment period of approximately 6 months, with a
minimum five year
follow-up
period, and involve approximately 800 patients worldwide.
We collaborate with the Roche Group, through its wholly-owned
member Genentech, on the development and commercialization of
GA101. Please read Note 17, Collaborations to our
Consolidated Financial Statements for a description of this
collaboration.
5
Humanized
Anti-CD20 MAb (ocrelizumab)
Ocrelizumab is a monoclonal antibody that is being tested in RA.
We and Genentech initiated four Phase 3 trials evaluating
ocrelizumab in RA, known as SCRIPT, FEATURE, STAGE and FILM, and
a Phase 2 trial known as CINEMA.
The SCRIPT study will evaluate the efficacy and safety of
ocrelizumab, compared with placebo, in patients with active RA
who have an inadequate response to at least one anti-TNF-alpha
therapy. This study has a one year treatment period and involves
approximately 800 patients worldwide.
In January 2010, we and Genentech determined that the FEATURE
study, which evaluated a single infusion of ocrelizumab versus
placebo (with dual infusions as an active control) in
seropositive RA patients with an inadequate response to prior
therapies, did not meet its primary efficacy endpoint as a
single infusion.
In December 2009, we and Genentech announced that STAGE, which
evaluated ocrelizumab in combination with methotrexate, met its
primary endpoint of improving signs and symptoms (as measured by
criteria, known as the ACR 20 response, established by the
American College of Rheumatology) in RA patients who had an
inadequate response to methotrexate at both 24 and 48 weeks.
In October 2009, a safety review of ocrelizumab data in RA and
lupus nephritis (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, redosing was stopped in FILM, which
evaluated ocrelizumab given in combination with methotrexate to
methotrexate naïve RA patients. Redosing was also stopped
in the Asia Pacific region for the SCRIPT, FEATURE and STAGE
studies.
The CINEMA study will evaluate the efficacy and safety of
ocrelizumab in combination with methotrexate compared with
infliximab plus methotrexate in patients with active RA who have
an inadequate response to certain anti-TNF-alpha therapies. This
study has a treatment period of approximately 6 months and
involves approximately 300 patients.
We collaborate with the Roche Group, through its wholly-owned
member Genentech, on the development and commercialization of
ocrelizumab. Please read Note 17, Collaborations to
our Consolidated Financial Statements for a description of this
collaboration.
Lixivaptan
Lixivaptan is an oral compound that is being tested in
hyponatremia, an electrolyte disorder that contributes to
negative patient outcomes in congestive heart failure and many
other chronic diseases. Three Phase 3 trials of lixivaptan in
hyponatremia are currently underway. These studies have a
60 day or six month treatment period and involve
approximately 100 to 650 patients worldwide.
We collaborate with Cardiokine Biopharma LLC on the development
and commercialization of lixivaptan. Please read Note 17,
Collaborations to our Consolidated Financial Statements
for a description of this collaboration.
Long-Acting
rFactor IX
Long-acting recombinant Factor IX (Factor IX) is a
proprietary long-acting Factor IX product that is being tested
in hemophilia B, a disorder in which blood clotting is impaired.
In January 2010, we began patient enrollment in a Phase 2b/3
trial of Factor IX in hemophilia B, known as
B-LONG. This
study has a 14 month treatment period and will involve
approximately 75 patients. Factor IX has received orphan
drug designation for the treatment of hemophilia B from both the
FDA and EMA.
We collaborate with Swedish Orphan Biovitrum AB (Biovitrum) on
the development and commercialization of Factor IX. Please read
Note 17, Collaborations to our Consolidated
Financial Statements for a description of this collaboration.
6
PEGylated
interferon beta-1a
PEGylated interferon beta-1a is designed to prolong the effects
and reduce the dosing frequency of interferon beta-1a. During
the first half of 2009, we began patient enrollment in a Phase 3
trial of PEGylated interferon beta-1a in relapsing MS, known as
ADVANCE. The study is designed to have a two year treatment
period and involve approximately 1,200 patients worldwide.
The FDA has granted PEGylated interferon beta-1a fast track
status, which may result in an expedited review.
Former
Registrational Programs
Based upon the October 2009 safety review of ocrelizumab data in
RA and LN clinical trials described above, we decided to close
the ocrelizumab BELONG study in LN. The SCRIPT study of
ocrelizumab in RA described above remains ongoing. We plan to
work with regulators to determine the next step for this program.
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
end the galiximab TARGET trial in NHL. Neither decision was a
consequence of any safety concerns. We are evaluating our
options for these programs.
In December 2009, we determined to close our ADENTRI clinical
trial for the treatment of acute decompensated heart failure
with renal insufficiency after reviewing preliminary results
from the trial.
Other
Research and Development Programs
We intend to continue to commit significant resources to
research and development opportunities, focusing on novel
therapeutics in areas of high unmet medical need. Highlighted
below are several of our development programs that currently are
not in registrational trials. Drug development involves a high
degree of risk, and the status, timing and scope of our
development programs are subject to change. Important factors
that could adversely affect our drug development efforts are
discussed in the Risk Factors section of this report.
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Development or
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Therapeutic Area
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Product Candidate
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Targeted Indications
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Status
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Marketing Collaborators
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Neurology
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BIIB014
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Parkinsons disease early and late stage
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Phase 2
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Ocrelizumab
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MS
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Phase 2
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Roche Group
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Neublastin
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Neuropathic pain
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Phase 1
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LINGO
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MS
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Phase 1
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BART
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Alzheimers Disease
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Preclinical
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Neurimmune SubOne AG
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Oncology
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Hsp90 Inhibitor (CNF2024)
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Solid tumors gastrointestinal stromal tumors
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Phase 2
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GA101
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NHL
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Phase 2
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Roche Group (Our rights are limited to U.S.)
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Anti-CD80 MAb (galiximab)
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NHL
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Phase 2
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Anti-CD23 MAb (lumiliximab)
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CLL
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Phase 2
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Anti-IGF-1R (BIIB022)
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Solid tumors liver cancer
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Phase 2
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Volociximab (M200)
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Non-small cell lung cancer
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Phase 1
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Facet Biotech Corporation
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Anti-CRIPTO
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Solid tumors
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Phase 1
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RAF Inhibitor (BIIB024)
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Solid tumors
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Preclinical
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Anti-Fn14
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Solid tumors
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Preclinical
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Immunology
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BG-12
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RA
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Phase 2
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Anti-TWEAK
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RA
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Phase 1
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Anti-CD40L Fab
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Systemic lupus erythematosus
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Preclinical
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UCB, S.A.
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Anti-FcRn
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Pemphigus
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Preclinical
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Cardiopulmonary
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Lixivaptan
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Congestive heart failure
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Phase 2
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Cardiokine Biopharma LLC
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Hemophilia
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Long-acting rFactor VIII
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Hemophilia A
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Phase 1
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Swedish Orphan Biovitrum AB
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7
Patents
and Other Proprietary Rights
Patents are important to developing and protecting our
competitive position. We regularly seek patent protection in the
U.S. and in selected countries outside the U.S. for
inventions originating from our research and development
efforts. In addition, we license rights to various patents and
patent applications, generally, in return for the payment of
royalties to the patent owner. U.S. patents, as well as
most foreign patents, are generally effective for 20 years
from the date the earliest (priority) application was filed;
however, U.S. patents that issue on applications filed
before June 8, 1995 may be effective until
17 years from the issue date, if that is later than the
20 year date. In some cases, the patent term may be
extended to recapture a portion of the term lost during FDA
regulatory review or because of U.S. Patent and Trademark
Office (USPTO) delays in prosecuting the application. The
duration of foreign patents varies similarly, in accordance with
local law.
We also rely upon unpatented confidential information to remain
competitive. We protect such information principally through
confidentiality agreements with our employees, consultants,
outside scientific collaborators, scientists whose research we
sponsor and other advisers. In the case of our employees, these
agreements also provide, in compliance with relevant law, that
inventions and other intellectual property conceived by such
employees during their employment shall be our exclusive
property.
Our trademarks, including RITUXAN and AVONEX, are important to
us and are generally covered by trademark applications or
registrations in the USPTO and the patent offices of other
countries. We also use trademarks licensed from third parties,
such as the mark TYSABRI which we license from Elan. Trademark
protection varies in accordance with local law, and continues in
some countries as long as the mark is used and in other
countries as long as the mark is registered. Trademark
registrations generally are for fixed but renewable terms.
Our patent position and proprietary rights are subject to
certain risks and uncertainties. Please read the Risk
Factors section of this report for information about
certain risks and uncertainties that may affect our patent
position and proprietary rights.
Additional information about the patents and other proprietary
rights covering our marketed products is set forth below.
AVONEX
and Beta Interferon
Our U.S. patent No. 7,588,755, granted in September
2009, claims the use of beta interferon for immunomodulation or
treating a viral condition, viral disease, cancers or tumors.
This patent, which expires in September 2026, covers the
treatment of MS with AVONEX.
We have non-exclusive rights under certain third-party patents
and patent applications to manufacture, use and sell AVONEX,
including patents owned by the Japanese Foundation for Cancer
Research which expire in 2011 and 2013 in the U.S., and a
European patent owned by Rentschler Biotechnologie GmbH and
which expires in 2012. Additionally, third parties own pending
U.S. patent applications related to recombinant
interferon-beta. These applications, which fall outside of the
GATT amendments to the U.S. patent statute, are not
published by the USPTO and, if they mature into granted patents,
may be entitled to a term of seventeen years from the grant
date. There is at least one pending interference proceeding in
the USPTO involving such third party applications, and
additional interferences could be declared in the future. We are
unable to predict which, if any, such applications will mature
into patents with claims relevant to our AVONEX product.
RITUXAN
and Anti-CD20 Antibodies
We have several U.S. patents and patent applications, and
numerous corresponding foreign counterparts, directed to
anti-CD20 antibody technology, including RITUXAN. The principal
patents with claims to RITUXAN or its uses expire in the
U.S. between 2015 and 2018 and in the rest of the world in
2013, subject to any available patent term extensions. In
addition, we and our collaborator, Genentech, have filed
numerous patent applications directed to anti-CD20 antibodies
and their uses to treat various diseases. These pending patent
applications have the potential of issuing as patents in the
U.S. and in the rest of world with claims to anti-CD20
antibody molecules for periods beyond that stated above for
RITUXAN. In 2008, a European patent of ours claiming the
treatment with
8
anti-CD20 antibodies of certain auto-immune indications,
including rheumatoid arthritis, was revoked by the European
Patent Office. We are appealing that decision.
Genentech, our collaborator on RITUXAN, has secured an exclusive
license to five U.S. patents and counterpart U.S. and
foreign patent applications assigned to Xoma Corporation that
relate to chimeric antibodies against the CD20 antigen. These
patents expire between 2007 and 2014. Genentech has granted us a
non-exclusive sublicense to make, have made, use and sell
RITUXAN under these patents and patent applications. We, along
with Genentech, share the cost of any royalties due to Xoma in
our co-promotion territory on sales of RITUXAN.
TYSABRI
We and our collaborator, Elan, have patents and patent
applications covering TYSABRI in the U.S. and other
countries. These patents and patent applications cover TYSABRI
and related manufacturing methods, as well as various methods of
treatment using the product. In the U.S., the principal patents
covering the product and use of the product to treat MS
generally expire between 2015 and 2020. Additional
U.S. patents and applications covering other indications,
including treatment of irritable bowel disease, and methods of
manufacturing generally expire between 2012 and 2020. In the
rest of world, patents on the product and methods of
manufacturing the product generally expire between 2015 and
2020, subject to any supplemental protection (i.e., patent term
extension) certificates that may be obtained. In the rest of
world, patents and patent applications covering methods of
treatment using TYSABRI generally expire between 2012 and 2020.
Sales,
Marketing and Distribution
We focus our sales and marketing efforts on specialist
physicians in private practice or at major medical centers. We
use customary pharmaceutical company practices to market our
products and to educate physicians, such as sales
representatives calling on individual physicians,
advertisements, professional symposia, direct mail, selling
initiatives, public relations and other methods. We provide
customer service and other related programs for our products,
such as disease and product-specific websites, insurance
research services and order, delivery and fulfillment services.
We have also established programs in the U.S. which provide
qualified uninsured or underinsured patients with marketed
products at no or reduced charge. Additional information about
our sales, marketing and distribution efforts for our marketed
products is set forth below.
AVONEX
We continue to focus our marketing and sales activities on
maximizing the potential of AVONEX in the U.S. and the rest
of world in the face of increased competition. The principal
markets for AVONEX are the U.S., Germany, France, and Italy. In
the U.S., Canada, Brazil, Argentina, Australia, Japan and most
of the major countries of the European Union, we market and sell
AVONEX through our own sales forces and marketing groups and
distribute AVONEX principally through wholesale distributors of
pharmaceutical products, mail order specialty distributors or
shipping service providers. In other countries, we sell AVONEX
to distribution partners who are then responsible for most
marketing and distribution activities.
RITUXAN
In the U.S., we contribute a sales force and other resources to
the marketing of RITUXAN, which is managed primarily by the
Roche Group through its wholly-owned member and our collaborator
Genentech. RITUXAN is generally sold to wholesalers, specialty
distributors and directly to hospital pharmacies. Marketing
efforts are focused on hematologists, medical oncologists and
rheumatologists in private practice, at community hospitals and
at major medical centers in the U.S. The Roche Group
provides marketing support services for RITUXAN, including
customer service, order entry, shipping, billing, insurance
verification assistance, managed care sales support, medical
information and sales training.
In the rest of world, the Roche Group and its sublicensees
market and sell RITUXAN without our participation.
9
TYSABRI
The principal markets for TYSABRI are the U.S., Germany, France
and Italy.
In the U.S., we are principally responsible for marketing
TYSABRI for MS and Elan is principally responsible for marketing
TYSABRI for CD. We and Elan use our respective sales forces and
marketing groups for these activities. Elan is responsible for
TYSABRI distribution in the U.S. and uses a third party
distributor to ship TYSABRI directly to customers.
In the rest of world, we are responsible for TYSABRI marketing
and distribution and we use a combination of our own sales force
and marketing group and third party service providers.
FUMADERM
We have been marketing and distributing FUMADERM directly in
Germany since February 2009 and previously used a third party
service provider.
Competition
Competition in the biotechnology and pharmaceutical industries
is intense and comes from many and varied sources, including
specialized biotechnology firms and large pharmaceutical
companies. Many of our competitors are working to develop
products similar to those we are developing or already market
and have considerable experience in undertaking clinical trials
and in obtaining regulatory approval to market pharmaceutical
products. Certain of these companies have substantially greater
financial, marketing, research and development and human
resources than we do.
We believe that competition and leadership in the industry will
be based on managerial and technological superiority and
establishing patent and other proprietary positions through
research and development. The achievement of a leadership
position also depends largely upon our ability to identify and
exploit commercially the products resulting from research and
the availability of adequate financial resources to fund
facilities, equipment, personnel, clinical testing,
manufacturing and marketing. Another key aspect of remaining
competitive within the industry is recruiting and retaining
qualified scientists and technicians. We believe that we have
been successful in attracting skilled and experienced scientific
personnel.
Competition among products approved for sale may be based, among
other things, on patent position, product efficacy, safety,
convenience, reliability, availability and price. In addition,
early entry of a new pharmaceutical product into the market may
have important advantages in gaining product acceptance and
market share. Accordingly, the relative speed with which we can
develop products, complete the testing and approval process and
supply commercial quantities of products will have an important
impact on our competitive position.
We may face increased competitive pressures as a result of the
emergence of biosimilars. Most of our marketed products,
including AVONEX, RITUXAN and TYSABRI, are licensed under the
Public Health Service Act as biological products. Unlike small
molecule drugs, which are subject to the generic drug provisions
(Hatch-Waxman Act) of the U.S. Food, Drug, and Cosmetic
Act, currently there is no process in the U.S. for the
submission or approval of biological products based upon
abbreviated data packages or a showing of sameness to another
approved product. There is public dialogue at the FDA and in the
Congress, however, regarding the scientific and statutory basis
upon which such products, known as biosimilars or follow-on
biologics, could be approved and marketed in the U.S. We
cannot be certain when, or if, Congress will create a statutory
pathway for the approval of biosimilars. In the European Union,
the EMA has issued guidelines for approving of biological
products through an abbreviated pathway, and several biosimilars
have been approved. If a biosimilar version of one of our
products were approved, it could reduce our sales of that
product.
Additional information about the competition that our marketed
products face is set forth below.
10
AVONEX
AND TYSABRI
AVONEX and TYSABRI both compete primarily with three other
products:
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BETASERON (interferon-beta-1b), which is marketed by Bayer
HealthCare Pharmaceuticals, the U.S. pharmaceuticals
affiliate of Bayer Schering Pharma AG, in the U.S. and is
marketed under the name BETAFERON by Bayer Schering Pharma AG in
the European Union. BETASERON and BETAFERON together generated
worldwide revenues of approximately $1.7 billion in 2008.
EXTAVIA, a branded version of interferon beta-1b marketed by
Novartis AG, is sold in the European Union and was launched in
the U.S. in October 2009.
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COPAXONE (glatiramer acetate), which is marketed by Teva
Pharmaceutical Industries Ltd. in the U.S. and copromoted
by Teva Pharmaceutical Industries and Sanofi-Aventis in Europe.
COPAXONE generated worldwide revenues of approximately
$2.3 billion in 2008.
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REBIF (interferon-beta-1a), which is co-promoted by EMD Serono,
a subsidiary of Merck Serono, and Pfizer Inc. in the
U.S. and is marketed by Merck Serono in the European Union.
REBIF generated worldwide revenues of approximately
$2.0 billion in 2008.
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Along with us, a number of companies are working to develop
products to treat MS that may in the future compete with AVONEX
and TYSABRI. For example, an oral formulation of cladribine
(developed by Merck Serono) was filed with the EMA and is the
subject of discussions with the FDA regarding a refiling for
approval as therapy for MS and FTY720 (fingolimod) (developed by
Novartis AG) has been filed with the EMA and FDA for approval as
an oral therapy for MS. In addition, alemtuzumab (developed by
Genzyme Corporation) and laquinimod (developed by Teva
Pharmaceutical Industries) are in late-stage development for the
treatment of MS.
AVONEX and TYSABRI also face competition from off-label uses of
drugs approved for other indications.
RITUXAN
IN ONCOLOGY
RITUXAN competes with several different types of therapies in
the oncology market, including:
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CAMPATH (marketed by Bayer HealthCare Pharmaceuticals), which is
indicated for B-cell CLL (an unapproved and unpromoted use of
RITUXAN).
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TREANDA (marketed by Cephalon) and ARZERRA (marketed by GenMab
in collaboration with GlaxoSmithKline), which is indicated for
refractory CLL patients to both alemtuzumab and fludarabine (an
unapproved and unpromoted use of RITUXAN).
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We are also aware of other anti-CD20 molecules in development
that, if successfully developed and registered, may compete with
RITUXAN in the oncology market.
RITUXAN
IN RA
RITUXAN competes with several different types of therapies in
the RA market, including:
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traditional therapies for RA, including disease-modifying
anti-rheumatic drugs such as steroids, methotrexate and
cyclosporine, and pain relievers such as acetaminophen.
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TNF inhibitors, such as REMICADE (infliximab) and SIMPONI
(golimumab) (marketed by Johnson & Johnson), HUMIRA
(adalimumab) (marketed by Abbott Laboratories), ENBREL
(etanercept) (marketed by Amgen, Inc. and Pfizer) and CIMZIA
(certolizumab pegol) (marketed by UCB, S.A.).
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ORENCIA (abatacept) (marketed by Bristol-Myers Squibb Company).
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ACTEMRA (tocilizumab) (marketed by the Roche Group).
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We are also aware of other products in development that, if
successfully developed and registered, may compete with RITUXAN
in the RA market.
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FUMADERM
FUMADERM competes with several different types of therapies in
the psoriasis market within Germany, including oral systemics
such as methotrexate and cyclosporine.
Regulatory
Our current and contemplated activities and the products and
processes that will result from such activities are subject to
substantial government regulation.
Regulation
of Pharmaceuticals
Before new pharmaceutical products may be sold in the
U.S. and other countries, clinical trials of the products
must be conducted and the results submitted to appropriate
regulatory agencies for approval. Clinical trial programs must
establish efficacy, determine an appropriate dose and regimen,
and define the conditions for safe use. This is a high-risk
process that requires stepwise clinical studies in which the
candidate product must successfully meet predetermined
endpoints. In the U.S., the results of the preclinical and
clinical testing of a product are then submitted to the FDA in
the form of a Biologics License Application (BLA) or a New Drug
Application (NDA). In response to a BLA or NDA, the FDA may
grant marketing approval, request additional information or deny
the application if it determines the application does not
provide an adequate basis for approval. Similar submissions are
required by authorities in other jurisdictions who independently
assess the product and may reach the same or different
conclusions. Our initial focus for obtaining marketing approval
outside the U.S. is typically the European Union. There are
currently three potential tracks for marketing approval in E.U.
countries: mutual recognition, decentralized procedures, and
centralized procedures. These review mechanisms may ultimately
lead to approval in all countries within the European Union, but
each method grants all participating countries some
decision-making authority in product approval.
The receipt of regulatory approval often takes a number of
years, involves the expenditure of substantial resources and
depends on a number of factors, including the severity of the
disease in question, the availability of alternative treatments
and the risks and benefits demonstrated in clinical trials. On
occasion, regulatory authorities may require larger or
additional studies, leading to unanticipated delay or expense.
Even after initial FDA approval or approvals from other
regulatory agencies have been obtained, further clinical trials
may be required to provide additional data on safety and
effectiveness. Additional trials are required to gain clearance
for the use of a product as a treatment for indications other
than those initially approved. Furthermore, the FDA and other
regulatory agencies require companies to disclose clinical trial
results. Failure to disclose such results within applicable time
periods could result in penalties, including civil monetary
penalties.
In the U.S., the FDA may grant accelerated approval
status to products that treat serious or life-threatening
illnesses and that provide meaningful therapeutic benefits to
patients over existing treatments. Under this pathway, the FDA
may approve a product based on surrogate endpoints, or clinical
endpoints other than survival or irreversible morbidity, or when
the product is shown to be effective but can be safely used only
if access to or distribution of the product is restricted. When
approval is based on surrogate endpoints or clinical endpoints
other than survival or morbidity, the sponsor will be required
to conduct additional clinical studies to verify and describe
clinical benefit. When accelerated approval requires restricted
use or distribution, the sponsor may be required to establish
rigorous systems to assure use of the product under safe
conditions. These systems are usually referred to as Risk
Minimization Action Plans (RiskMAPs) or Risk Evaluation and
Mitigation Strategies (REMS). In addition, for all products
approved under accelerated approval, sponsors must submit all
copies of its promotional materials, including advertisements,
to the FDA at least thirty days prior to their initial
dissemination. Accelerated approval status does not ensure that
FDA will ultimately approve the product. The FDA may also
withdraw approval under accelerated approval after a hearing if,
for instance, post-marketing studies fail to verify any clinical
benefit or it becomes clear that restrictions on the
distribution of the product are inadequate to ensure its safe
use. TYSABRI was approved in MS under the accelerated approval
pathway and, after efficacy was confirmed, was approved under a
stringent restricted distribution program. TYSABRI was also
approved for Crohns disease under a similar restricted
distribution program. We cannot be certain that the FDA will
approve any products for their proposed indications whether
under accelerated approval or another pathway.
12
If the FDA or other regulatory agency approves a product or new
indication, the agency may require us to conduct additional
post-marketing studies. If we fail to conduct the required
studies or otherwise fail to comply with the conditions of
accelerated approval, the agency may withdraw its approval. In
addition, the FDA and EMA can impose financial penalties for
failing to comply with certain post-marketing commitments,
including RiskMAPs and REMS.
Regulatory authorities track information on side effects and
adverse events reported during clinical studies and after
marketing approval. Non-compliance with FDA safety reporting
requirements may result in civil or criminal penalties. Side
effects or adverse events that are reported during clinical
trials can delay, impede, or prevent marketing approval. The FDA
may conduct post-marketing safety surveillance and may require
additional post-approval studies or clinical trials. These
requirements may affect our ability to maintain marketing
approval of our products or require us to make significant
expenditures to obtain or maintain such approvals. In addition,
adverse events that are reported after marketing approval can
result in changes to the products labeling, additional
limitations being placed on the products use and,
potentially, withdrawal or suspension of the product from the
market.
If we seek to make certain changes to an approved product, such
as adding a new indication, making certain manufacturing
changes, or changing manufacturers or suppliers of certain
ingredients or components, regulatory authorities, including the
FDA and EMA, will need to review and approve such changes in
advance.
In addition, the FDA regulates all advertising and promotion
activities for products under its jurisdiction both before and
after approval. A company can make only those claims relating to
safety and efficacy that are approved by the FDA. However,
physicians may prescribe legally available drugs for uses that
are not described in the drugs labeling. Such off-label
uses are common across medical specialties, and often reflect a
physicians belief that the off-label use is the best
treatment for patients. The FDA does not regulate the behavior
of physicians in their choice of treatments, but the FDA
regulations do impose stringent restrictions on
manufacturers communications regarding off-label uses.
Failure to comply with applicable FDA requirements may subject a
company to adverse publicity, enforcement action by the FDA,
corrective advertising, and the full range of civil and criminal
penalties available to the FDA.
Good
Manufacturing Practices
The FDA, the EMA and other regulatory agencies regulate and
inspect equipment, facilities, and processes used in the
manufacturing of pharmaceutical and biologic products prior to
approving a product. If, after receiving clearance from
regulatory agencies, a company makes a material change in
manufacturing equipment, location, or process, additional
regulatory review and approval may be required. We also must
adhere to current Good Manufacturing Practices and
product-specific regulations enforced by the FDA following
product approval. The FDA, the EMA and other regulatory agencies
also conduct periodic visits to re-inspect equipment,
facilities, and processes following the initial approval of a
product. If, as a result of these inspections, it is determined
that our equipment, facilities, or processes do not comply with
applicable regulations and conditions of product approval,
regulatory agencies may seek civil, criminal, or administrative
sanctions or remedies against us, including the suspension of
our manufacturing operations.
Good
Clinical Practices
The FDA, the EMA and other regulatory agencies promulgate
regulations and standards, commonly referred to as current Good
Clinical Practices (cGCP), for designing, conducting,
monitoring, auditing and reporting the results of clinical
trials to ensure that the data and results are accurate and that
the trial participants are adequately protected. The FDA, the
EMA and other regulatory agencies enforce cGCP through periodic
inspections of trial sponsors, principal investigators and trial
sites. If our study sites fail to comply with applicable cGCP,
the clinical data generated in our clinical trials may be deemed
unreliable and relevant regulatory agencies may require us to
perform additional clinical trials before approving our
marketing applications.
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Orphan
Drug Act
Under the U.S. Orphan Drug Act, the FDA may grant orphan
drug designation to drugs intended to treat a rare disease
or condition, which generally is a disease or condition
that affects fewer than 200,000 individuals in the U.S. If
a product which has an orphan drug designation subsequently
receives the first FDA approval for the indication for which it
has such designation, the product is entitled to orphan
exclusivity, i.e., the FDA may not approve any other
applications to market the same drug for the same indication for
a period of seven years following marketing approval, except in
certain very limited circumstances, such as if the later product
is shown to be clinically superior to the orphan product.
Legislation similar to the U.S. Orphan Drug Act has been
enacted in other countries, including within the European Union.
Regulation Pertaining
to Sales, Marketing and Product Pricing
In the U.S., the federal government regularly considers
reforming health care coverage and costs. For example, reforms
to Medicare have reduced the reimbursement rates for many of our
products. Effective January 1, 2005, Medicare pays
physicians and suppliers that furnish our products under a
payment methodology using average sales price (ASP) information.
Manufacturers, including us, are required to provide ASP
information to the Centers for Medicare and Medicaid Services on
a quarterly basis. The manufacturer-submitted information is
used to compute Medicare payment rates, which are set at ASP
plus 6 percent and updated quarterly. There is a mechanism
for comparison of such payment rates to widely available market
prices, which could cause further decreases in Medicare payment
rates, although this mechanism has yet to be utilized. Effective
January 1, 2006, Medicare began to use the same payment
methodology to determine Medicare rates paid for products
furnished by hospital outpatient departments. As of
January 1, 2010, the reimbursement rate in the hospital
outpatient setting is ASP plus 4 percent. If a manufacturer
is found to have made a misrepresentation in the reporting of
ASP, the statute provides for civil monetary penalties of up to
$10,000 for each misrepresentation and for each day in which the
misrepresentation was applied.
Another payment reform is the addition of an expanded
prescription drug benefit for all Medicare beneficiaries known
as Medicare Part D. This is a voluntary benefit that is
provided through private plans under contractual arrangements
with the federal government. Like pharmaceutical coverage
through private health insurance, Part D plans establish
formularies that govern the drugs and biologicals that will be
offered and the out- of-pocket obligations for such products. In
addition, plans negotiate discounts from drug manufacturers and
pass on some of those savings to Medicare beneficiaries.
In the U.S., Congress has considered legislation to reform the
healthcare system that likely would have an adverse impact on
our revenues, by, among other things, increasing the current
Medicaid rebate, adding a subsidy for certain
out-of-pocket
patient costs under Medicare Part D, and assessing a
pharmaceutical manufacturer fee. In addition, the passage in the
U.S. of legislation defining a pathway for biosimilar
products likely would have an adverse impact on our revenues.
Future legislation or regulatory actions implementing recent or
future legislation may have a significant effect on our
business. Our ability to successfully commercialize products may
depend in part on the extent to which reimbursement for the
costs of our products and related treatments will be available
in the U.S. and worldwide from government health
administration authorities, private health insurers and other
organizations. Substantial uncertainty exists as to the
reimbursement status of newly approved health care products by
third party payors.
We also participate in the Medicaid rebate program. Under the
Medicaid rebate program, we pay a rebate for each unit of
product reimbursed by Medicaid. The amount of the rebate for
each product is set by law as the larger of 15.1% of average
manufacturer price (AMP) or the difference between AMP and the
best price available from us to any commercial or
non-governmental customer. The rebate amount must be adjusted
upward where the AMP for a products first full quarter of
sales, when adjusted for increases in the Consumer Price
Index Urban exceeds the AMP for the current quarter
with the upward adjustment equal to the excess amount. The
rebate amount is required to be recomputed each quarter based on
our report of current AMP and best price for each of our
products to the Centers for Medicare and Medicaid Services. The
terms of our participation in the program imposes a requirement
for us to report revisions to AMP or best price within a period
not to exceed 12 quarters from the quarter in which the data was
originally due. Any such revisions could have the impact of
increasing or decreasing our rebate liability for
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prior quarters, depending on the direction of the revision. In
addition, if we were found to have knowingly submitted false
information to the government, the statute provides for civil
monetary penalties in the amount not to exceed $100,000 per item
of false information in addition to other penalties available to
the government.
The availability of federal funds to pay for our products under
the Medicaid and Medicare Part B programs requires that we
extend discounts to a variety of community health clinics and
other entities that receive health services grants from the
Public Health Service, as well as hospitals that serve a
disproportionate share of poor Medicare beneficiaries.
We also make our products available for purchase by authorized
users of the Federal Supply Schedule (FSS) of the General
Services Administration pursuant to our FSS contract with the
Department of Veterans Affairs. Under the Veterans Health Care
Act of 1992 (VHC Act) we are required to offer deeply discounted
FSS contract pricing to four federal agencies the
Department of Veterans Affairs, the Department of Defense, the
Coast Guard and the Public Health Service (including the Indian
Health Service) for federal funding to be made
available for reimbursement of any of our products under the
Medicaid program and for our products to be eligible to be
purchased by those four federal agencies and certain federal
grantees. FSS pricing to those four federal agencies must be
equal to or less than the Federal Ceiling Price,
which is discounted, at a minimum, 24% from the Non-Federal
Average Manufacturer Price for the prior fiscal year. In
addition, if we are found to have knowingly submitted false
information to the government, the VHC Act provides for civil
monetary penalties of up to $100,000 per false item of
information in addition to other penalties available to the
government. Under the 2008 National Defense Authorization Act,
we are required to treat the TRICARE retail pharmacy program,
which reimburses military personnel for drug purchases from
retail pharmacies, as an element of the Department of Defense
for purposes of the procurement of drugs by federal agencies to
ensure that the pharmaceuticals paid for by the Department of
Defense under the TRICARE retail pharmacy program are subject to
the pricing standards of the VHC Act.
We are also subject to various federal and state laws pertaining
to health care fraud and abuse, including
anti-kickback laws and false claims laws. Anti-kickback laws
make it illegal for a prescription drug manufacturer to solicit,
offer, receive, or pay any remuneration in exchange for, or to
induce, the referral of business, including the purchase or
prescription of a particular drug. Due to the breadth of the
statutory provisions and the absence of guidance in the form of
regulations and very few court decisions addressing industry
practices, it is possible that our practices might be challenged
under anti-kickback or similar laws. False claims laws prohibit
anyone from knowingly and willingly presenting, or causing to be
presented for payment to third party payors (including Medicare
and Medicaid) claims for reimbursed drugs or services that are
false or fraudulent, claims for items or services not provided
as claimed, or claims for medically unnecessary items or
services. In addition, several states require that companies
implement compliance programs or comply with industry ethics
codes, adopt spending limits, and report to state governments
any gifts, compensation, and other remuneration provided to
physicians. Federal legislation, the Physician Payments Sunshine
Act of 2009, also has been proposed that would require
disclosure to the federal government of payments to physicians.
Our activities relating to the sale and marketing of our
products may be subject to scrutiny under these laws. Violations
of these laws may be punishable by criminal or civil sanctions,
including fines and civil monetary penalties, as well as the
possibility of exclusion from federal health care programs
(including Medicare and Medicaid). In addition, private
individuals may bring similar actions.
Our activities could be subject to challenge for the reasons
discussed above and due to the broad scope of these laws and the
increasing attention being given to them by law enforcement
authorities. Further, there are an increasing number of state
laws that require manufacturers to make reports to states on
pricing and marketing information. Many of these laws contain
ambiguities as to what is required to comply with the laws.
Given the lack of clarity in laws and their implementation, our
reporting actions could be subject to the penalty provisions of
the pertinent state authorities.
Other
Regulations
Foreign
Corrupt Practices Act
We are also subject to the U.S. Foreign Corrupt Practices
Act (FCPA), which prohibits corporations and individuals from
paying, offering to pay, or authorizing the payment of anything
of value to any foreign government
15
official, government staff member, political party, or political
candidate in an attempt to obtain or retain business or to
otherwise influence a person working in an official capacity.
The FCPA also requires public companies to make and keep books
and records that accurately and fairly reflect their
transactions and to devise and maintain an adequate system of
internal accounting controls.
NIH
Guidelines
We conduct relevant research at all of our research facilities
in the U.S. in compliance with the current
U.S. National Institutes of Health Guidelines for Research
Involving Recombinant DNA Molecules (NIH Guidelines) and all
other applicable federal and state regulations. By local
ordinance, we are required to, among other things, comply with
the NIH Guidelines in relation to our facilities in Cambridge,
Massachusetts, San Diego, California, and Research Triangle
Park, North Carolina and are required to operate pursuant to
certain permits.
Other
Laws
Our present and future business has been and will continue to be
subject to various other laws and regulations. Various laws,
regulations and recommendations relating to safe working
conditions, laboratory practices, the experimental use of
animals, and the purchase, storage, movement, import and export
and use and disposal of hazardous or potentially hazardous
substances, including radioactive compounds and infectious
disease agents, used in connection with our research work are or
may be applicable to our activities. Certain agreements entered
into by us involving exclusive license rights may be subject to
national or supranational antitrust regulatory control, the
effect of which cannot be predicted. The extent of government
regulation, which might result from future legislation or
administrative action, cannot accurately be predicted.
Manufacturing
and Raw Materials
We are focused on the manufacture of biologics. The chart below
outlines the location of our primary manufacturing locations and
products manufactured therein.
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Research
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Triangle
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Product
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Park, NC
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Cambridge, MA
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Third Party
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AVONEX
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TYSABRI
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FUMADERM
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CLINICAL PRODUCTS
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In April 2009, the FDA approved our high titer process for the
production of TYSABRI. Similar approval was obtained from the
EMA in December 2008. The new, higher-yield process is being
used to manufacture TYSABRI at our plant in Research Triangle
Park, NC.
The Roche Group, through its wholly-owned member Genentech, is
responsible for all worldwide manufacturing activities for bulk
RITUXAN and has sourced the manufacturing of certain bulk
RITUXAN requirements to an independent third party.
We are in the final stages of constructing a large-scale
biologics manufacturing facility in Hillerød, Denmark which
is intended to manufacture large molecule products. The first
phase is complete, which included construction of a labeling and
packaging facility, administrative building and laboratory
facility, installation of major equipment, and partial
completion of a bulk manufacturing facility. The second phase of
the project, which we began in January 2007, involves the
completion and fit out of the bulk manufacturing facility and
construction of a warehouse. The large scale manufacturing
facility is scheduled to be ready for commercial production in
late 2011. Recent manufacturing improvements have resulted in
favorable production yields on TYSABRI, that have reduced our
expected capacity requirements. As a result, we are evaluating
several alternatives, including whether to delay completion of
the facility.
We source all of our fill-finish and the majority of final
product storage operations for our products, along with a
substantial part of our packaging operations, to a concentrated
group of third party contractors. Many of the raw
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materials and supplies required for the production of AVONEX,
TYSABRI and FUMADERM are available from various suppliers in
quantities adequate to meet our needs. However, due to the
unique nature of the production of our products, we do have
single source providers of several raw materials. We make
efforts to qualify new vendors and to develop contingency plans
so that production is not impacted by short-term issues
associated with single source providers. Each of our third party
service providers, suppliers and manufacturers is subject to
continuing inspection by the FDA or comparable agencies in other
jurisdictions. Any delay, interruption or other issues that
arise in the manufacture, fill-finish, packaging, or storage of
our products, including as a result of a failure of our
facilities or the facilities or operations of third parties to
pass any regulatory agency inspection, could significantly
impair our ability to sell our products.
Important factors that could adversely affect our manufacturing
operations are discussed in the Risk Factors section
of this report.
Our
Employees
As of December 31, 2009, we had approximately
4,750 employees.
Our
Executive Officers
The following is a list of our executive officers, their ages as
of February 9, 2010 and their principal positions.
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Name
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Age
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Position
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James C. Mullen
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Chief Executive Officer and President
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Susan H. Alexander
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Executive Vice President, General Counsel and Corporate Secretary
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Paul J. Clancy
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Executive Vice President, Finance and Chief Financial Officer
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Robert A. Hamm
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Chief Operating Officer
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Michael Lytton
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Executive Vice President, Corporate and Business Development
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Michael F. MacLean
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Senior Vice President and Chief Accounting Officer
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Craig Eric Schneier, Ph.D.
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Executive Vice President, Human Resources, Public Affairs and
Communications
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Reference to our or us in the following
descriptions include Biogen Idec and IDEC Pharmaceuticals
Corporation, and references to the merger mean the merger of
Biogen, Inc. and IDEC Pharmaceuticals Corporation in November
2003.
James C. Mullen is our Chief Executive Officer and
President and is a director, and has served in these positions
since the merger. Mr. Mullen was formerly Chairman of the
Board and Chief Executive Officer of Biogen, Inc. He was named
Chairman of the Board of Directors of Biogen, Inc. in July 2002,
after being named Chief Executive Officer and President of
Biogen, Inc. in June 2000. Mr. Mullen joined Biogen, Inc.
in 1989 as Director, Facilities and Engineering. He was named
Biogen, Inc.s Vice President, Operations in 1992. From
1996 to 1999, Mr. Mullen served as Vice President,
International, with responsibility for building all Biogen, Inc.
operations outside North America. From 1984 to 1988,
Mr. Mullen held various positions at SmithKline Beckman
Corporation (now GlaxoSmithKline plc). Mr. Mullen is a
member of the board of directors and executive committee of the
Biotechnology Industry Organization (BIO) and is a former
chairman of the board of BIO. Mr. Mullen has been a
director of PerkinElmer, Inc. since 2004. Mr. Mullen will
retire as Chief Executive Officer and President on June 8,
2010 and will retire as a director at our 2010 Annual Meeting of
Stockholders.
Susan H. Alexander is our Executive Vice President,
General Counsel and Corporate Secretary and has served in these
positions since January 2006. Prior to that, Ms. Alexander
served as the Senior Vice President, General Counsel and
Corporate Secretary of PAREXEL International Corporation since
September 2003. From June 2001 to September 2003,
Ms. Alexander served as General Counsel of IONA
Technologies. Prior to that, Ms. Alexander
17
served as Counsel at Cabot Corporation from January 1995 to May
2001. Prior to that, Ms. Alexander was a partner at the law
firms of Hinckley, Allen & Snyder and Fine &
Ambrogne.
Paul J. Clancy is our Executive Vice President, Finance
and Chief Financial Officer and has served in that position
since August 2007. Mr. Clancy joined Biogen Idec in 2001,
and has held several senior executive positions, including Vice
President of Business Planning, Portfolio Management and
U.S. Marketing, and Senior Vice President of Finance with
responsibilities for leading the Treasury, Tax, Investor
Relations and Business Planning groups. Prior to joining Biogen
Idec, he spent 13 years at PepsiCo, serving in a range of
financial and general management positions. He holds a B.S. in
finance from Babson College and a M.B.A. from Columbia
University.
Robert A. Hamm is our Chief Operating Officer and has
served in that position since March 2009. Previously,
Mr. Hamm served as Executive Vice President, Pharmaceutical
Operations & Technology from October 2007 to March
2009; Senior Vice President, Neurology Strategic Business Unit
from January 2006 to October 2007; Senior Vice President,
Immunology Business Unit from the merger until January 2006; and
in the same capacity with Biogen, Inc. from November 2002 to
November 2003. Before that, he served as Senior Vice
President Europe, Africa, Canada and Middle East
from October 2001 to November 2002. Prior to that, Mr. Hamm
served as Vice President Sales and Marketing of
Biogen, Inc. from October 2000 to October 2001. Mr. Hamm
previously served as Vice President Manufacturing
from June 1999 to October 2000, Director, Northern Europe and
Distributors from November 1996 until June 1999 and Associate
Director, Logistics from April 1994 until November 1996. From
1987 until April 1994, Mr. Hamm held a variety of
management positions at Syntex Laboratories Corporation,
including Director of Operations and New Product Planning, and
Manager of Materials, Logistics and Contract Manufacturing.
Mr. Hamm has been a member of the board of managers of
Progenitor Cell Therapy, LLC. since 2006 and was a director of
Inhibitex, Inc. from 2005 to 2009.
Michael Lytton is our Executive Vice President, Corporate
and Business Development, and has served in that position since
February 2009. From 2001 to January 2009, he was a General
Partner at Oxford Bioscience Partners, a venture capital firm.
Prior to that, he was partner, chairman of the Technology Group
and a member of the Executive Committee of the law firm Edwards,
Angell, Palmer & Dodge LLP. Prior to that,
Mr. Lytton was a junior partner and co-chairman of the
Biotechnology Practice of the law firm WilmerHale.
Mr. Lytton was a member of the supervisory board of GPC
Biotech AG from 2001 to 2009.
Michael F. MacLean is our Senior Vice President and Chief
Accounting Officer and has served in that position since
December 2006. Mr. MacLean joined us in October 2006 as
Senior Vice President. Prior to joining us, Mr. MacLean was
a managing director of Huron Consulting, where he provided
support regarding financial reporting to management and boards
of directors of Fortune 500 companies. From June 2002 to
October 2005, Mr. MacLean was a partner at KPMG and he was
a partner of Arthur Andersen LLP from September 1999 to May 2002.
Craig Eric Schneier, Ph.D. is our Executive
Vice President, Human Resources, Public Affairs and
Communications and has served in that position since October
2007. Prior to that he was Executive Vice President, Human
Resources from November 2003 to October 2007. Dr. Schneier
served as Executive Vice President, Human Resources of Biogen,
Inc., a position he held from January 2003 until the merger. He
joined Biogen, Inc. in 2001 as Senior Vice President, Strategic
Organization Design and Effectiveness, after having served as an
external consultant to us for eight years. Prior to joining
Biogen, Inc., Dr. Schneier was president of his own
management consulting firm in Princeton, NJ, where he provided
consulting services to over 70 of the Fortune
100 companies, as well as several of the largest European
and Asian firms. Dr. Schneier held a tenured professorship
at the University of Marylands Smith School of Business
and has held teaching positions at the business schools of the
University of Michigan, Columbia University, and at the Tuck
School of Business, Dartmouth College.
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We are
substantially dependent on revenues from our three principal
products.
Our current and future revenues depend upon continued sales of
our three principal products, AVONEX, RITUXAN and TYSABRI, which
represented substantially all of our total revenues during 2009.
Although we have developed and continue to develop additional
products for commercial introduction, we expect to be
substantially dependent on sales from these three products for
many years. Any negative developments relating to any of these
products, such as safety or efficacy issues, the introduction or
greater acceptance of competing products, including biosimilars,
or adverse regulatory or legislative developments may reduce our
revenues and adversely affect our results of operations.
Market
acceptance and sales growth of TYSABRI are important to our
success.
TYSABRI is expected to drive additional revenue growth over the
next several years. If we are not successful in growing sales of
TYSABRI, it would materially and adversely affect our growth and
plans for the future.
TYSABRIs sales growth will depend upon its acceptance by
the medical community and patients, which cannot be certain
given the significant restrictions on use and the significant
safety warnings in the label. Since we reintroduced TYSABRI to
the market in July 2006, some patients taking TYSABRI have been
diagnosed with progressive multifocal leukoencephalopathy (PML),
a rare but serious brain infection described in the TYSABRI
label. If the incidence of PML were to exceed the rate implied
by the TYSABRI label, it could prompt regulatory review and
result in significant changes to the label or market withdrawal.
The recently revised prescribing information for TYSABRI
indicates that the risk of developing PML increases with longer
treatment duration, with limited experience beyond 3 years
of treatment. This may cause prescribing physicians or patients
to suspend treatment with TYSABRI to mitigate the duration risk,
which could limit sales. Further increases in incidence rates at
various durations of exposure could harm acceptance or limit
sales growth. Additional regulatory restrictions on the use of
TYSABRI or safety-related label changes, including enhanced risk
management programs, whether as a result of additional cases of
PML or otherwise, may significantly reduce expected revenues and
require significant expense and management time to address the
associated legal and regulatory issues.
As a relatively new entrant to a maturing MS market, TYSABRI
sales may be more sensitive to additional new competing
products. A number of such products are expected to be approved
for use in MS beginning in 2010. If these products have a
similar or more attractive overall profile in terms of efficacy,
convenience and safety, future sales of TYSABRI could be
limited, which would reduce our revenues.
Our
long-term success depends upon the successful development and
commercialization of other product candidates.
Our long-term viability and growth will depend upon the
successful development and commercialization of other products
from our research and development activities. Product
development and commercialization are very expensive and involve
a high degree of risk. Only a small number of research and
development programs result in the commercialization of a
product. Success in preclinical work or early stage clinical
trials does not ensure that later stage or larger scale clinical
trials will be successful. Even if later stage clinical trials
are successful, regulatory authorities may disagree with our
view of the data or require additional studies.
Conducting clinical trials is a complex, time-consuming and
expensive process. Our ability to complete our clinical trials
in a timely fashion depends in large part on a number of key
factors including protocol design, regulatory and institutional
review board approval, the rate of patient enrollment in
clinical trials, and compliance with extensive current good
clinical practice requirements. We have opened clinical sites
and are enrolling patients in a number of new countries where
our experience is more limited, and we are in many cases using
the services of third-party clinical trial providers. If we fail
to adequately manage the design, execution and regulatory
aspects of our large, complex and diverse clinical trials, our
studies and ultimately our regulatory approvals may be delayed
or we may fail to gain approval for our product candidates
altogether.
Our product pipeline includes several small molecule drug
candidates. Our small molecule drug discovery platform is not as
well developed as our biologics platform, and we will have to
make a significant investment of
19
time and resources to expand our capabilities in this area.
Currently, third party manufacturers supply substantially all of
our clinical requirements for small molecules. If these
manufacturers fail to deliver sufficient quantities of such drug
candidates in a timely and cost-effective manner, it could
adversely affect our small molecule drug discovery efforts. If
we decide to manufacture clinical or commercial supplies of any
small molecule drugs in our own facilities, we will need to
invest substantial additional funds and recruit qualified
personnel to develop our small molecule manufacturing
capabilities.
Adverse
safety events can negatively affect our business and stock
price.
Adverse safety events involving our marketed products may have a
negative impact on our commercialization efforts. Later
discovery of safety issues with our products that were not known
at the time of their approval by the FDA could cause product
liability events, additional regulatory scrutiny and
requirements for additional labeling, withdrawal of products
from the market and the imposition of fines or criminal
penalties. Any of these actions could result in, among other
things, material write-offs of inventory and impairments of
intangible assets, goodwill and fixed assets. In addition, the
reporting of adverse safety events involving our products and
public rumors about such events could cause our stock price to
decline or experience periods of volatility.
If we
fail to compete effectively, our business and market position
would suffer.
The biotechnology and pharmaceutical industry is intensely
competitive. We compete in the marketing and sale of our
products, the development of new products and processes, the
acquisition of rights to new products with commercial potential
and the hiring and retention of personnel. We compete with
biotechnology and pharmaceutical companies that have a greater
number of products on the market and in the product pipeline,
greater financial and other resources and other technological or
competitive advantages. One or more of our competitors may
receive patent protection that dominates, blocks or adversely
affects our product development or business, may benefit from
significantly greater sales and marketing capabilities, and may
develop products that are accepted more widely than ours. The
introduction of more efficacious, safer, cheaper, or more
convenient alternatives to our products could reduce our
revenues and the value of our product development efforts.
Potential governmental action in the future could provide a
means for competition from developers of follow-on biologics,
which could compete on price and differentiation with products
that we now or could in the future market.
In addition to competing directly with products that are
marketed by substantial pharmaceutical competitors, AVONEX,
RITUXAN and TYSABRI also face competition from off-label uses of
drugs approved for other indications. Some of our current
competitors are also working to develop alternative formulations
for delivery of their products, which may in the future compete
with ours.
We
depend, to a significant extent, on reimbursement from third
party payors and a reduction in the extent of reimbursement
could reduce our product sales and revenue.
Sales of our products are dependent, in large part, on the
availability and extent of reimbursement from government health
administration authorities, private health insurers and other
organizations. Changes in government regulations or private
third-party payors reimbursement policies may reduce
reimbursement for our products and adversely affect our future
results.
In the U.S., there have been numerous proposals considered at
the federal and state levels for comprehensive reforms of health
care and its cost, and it is likely that federal and state
legislatures and health agencies will continue to focus on
health care reform in the future. Congress has considered
legislation to reform the U.S. health care system by
expanding health insurance coverage, reducing health care costs
and making other changes. While health care reform may increase
the number of patients who have insurance coverage for our
products, it may also include cost containment measures that
adversely affect reimbursement for our products. Congress has
also considered legislation to change the Medicare reimbursement
system for outpatient drugs, increase the amount of rebates that
manufacturers pay for coverage of their drugs by Medicaid
programs and facilitate the importation of lower-cost
prescription drugs that are marketed outside the U.S. Some
states are also considering legislation that would control the
prices of drugs, and state Medicaid programs are increasingly
requesting manufacturers to pay supplemental rebates and
requiring prior authorization by the state program for use of
any drug for which supplemental rebates are
20
not being paid. Managed care organizations continue to seek
price discounts and, in some cases, to impose restrictions on
the coverage of particular drugs. Government efforts to reduce
Medicaid expenses may lead to increased use of managed care
organizations by Medicaid programs. This may result in managed
care organizations influencing prescription decisions for a
larger segment of the population and a corresponding constraint
on prices and reimbursement for our products.
We encounter similar regulatory and legislative issues in most
other countries. In the European Union and some other
international markets, the government provides health care at
low cost to consumers and regulates pharmaceutical prices,
patient eligibility or reimbursement levels to control costs for
the government-sponsored health care system. This international
system of price regulations may lead to inconsistent prices.
Within the European Union and in other countries, the
availability of our products in some markets at lower prices
undermines our sales in some markets with higher prices.
Additionally, certain countries set prices by reference to the
prices in other countries where our products are marketed. Thus,
our inability to secure adequate prices in a particular country
may also impair our ability to obtain acceptable prices in
existing and potential new markets. This may create the
opportunity for third party cross border trade or influence our
decision to sell or not to sell a product, thus affecting our
geographic expansion plans.
When a new medical product is approved, the availability of
government and private reimbursement for that product is
uncertain, as is the amount for which that product will be
reimbursed. We cannot predict the availability or amount of
reimbursement for our product candidates.
We
depend on collaborators for both product and royalty revenue and
the clinical development of future collaboration products, which
are outside of our full control.
Collaborations between companies on products or programs are a
common business practice in the biotechnology industry.
Out-licensing typically allows a partner to collect up front
payments and future milestone payments, share the costs of
clinical development and risk of failure at various points, and
access sales and marketing infrastructure and expertise in
exchange for certain financial rights to the product or program
going to the in-licensing partner. In addition, the obligation
of in-licensees to pay royalties or share profits generally
terminates upon expiration of the related patents. We have a
number of collaborators and partners, and have both in-licensed
and out-licensed several products and programs. These
collaborations are subject to several risks:
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we are not fully in control of the royalty or profit sharing
revenues we receive from collaborators, which may be adversely
affected by patent expirations, pricing or health care reforms,
other legal and regulatory developments, the introduction of
competitive products, and new indication approvals which may
affect the sales of collaboration products;
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where we co-promote and co-market products with our
collaboration partners, any failure on their part to comply with
applicable laws and regulatory requirements in the sale and
marketing of our products could have an adverse effect on our
revenues as well as involve us in possible legal
proceedings; and
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collaborations often require the parties to cooperate, and
failure to do so effectively could have an adverse impact on
product sales by our collaborators and partners, and could
adversely affect the clinical development of products or
programs under joint control.
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In addition, under our collaboration agreement with Genentech,
the successful development and commercialization of the first
anti-CD20 product acquired or developed by Genentech will
decrease our percentage of the collaborations co-promotion
profits.
If we
do not successfully execute our growth initiatives through the
acquisition, partnering and in-licensing of products,
technologies or companies, our future performance could be
adversely affected.
We anticipate growing through internal development projects as
well as external opportunities, which include the acquisition,
partnering and in-licensing of products, technologies and
companies or the entry into strategic alliances and
collaborations. The availability of high quality opportunities
is limited and we are not certain that we will be able to
identify candidates that we and our shareholders consider
suitable or complete transactions on terms that are acceptable
to us and our shareholders. In order to pursue such
opportunities, we may require significant
21
additional financing, which may not be available to us on
favorable terms, if at all. Even if we are able to successfully
identify and complete acquisitions, we may not be able to
integrate them or take full advantage of them and therefore may
not realize the benefits that we expect. In addition, third
parties may be reluctant to partner with us due to the
uncertainty created by the presence on our Board of Directors of
two individuals nominated by an activist shareholder and the
possibility that activist shareholders may gain additional
representation on or control of our Board of Directors. If we
are unsuccessful in our external growth program, we may not be
able to grow our business significantly and we may incur asset
impairment charges as a result of acquisitions that are not
successful.
If we
fail to comply with the extensive legal and regulatory
requirements affecting the health care industry, we could face
increased costs, penalties and a loss of business.
Our activities, and the activities of our collaborators and
third party providers, are subject to extensive government
regulation and oversight both in the U.S. and in foreign
jurisdictions. The FDA and comparable agencies in other
jurisdictions directly regulate many of our most critical
business activities, including the conduct of preclinical and
clinical studies, product manufacturing, advertising and
promotion, product distribution, adverse event reporting and
product risk management. States increasingly have been placing
greater restrictions on the marketing practices of health care
companies. In addition, pharmaceutical and biotechnology
companies have been the target of lawsuits and investigations
alleging violations of government regulation, including claims
asserting submission of incorrect pricing information,
impermissible off-label promotion of pharmaceutical products,
payments intended to influence the referral of federal or state
health care business, submission of false claims for government
reimbursement, antitrust violations, or violations related to
environmental matters. Violations of governmental regulation may
be punishable by criminal and civil sanctions, including fines
and civil monetary penalties and exclusion from participation in
government programs, including Medicare and Medicaid. In
addition to penalties for violation of laws and regulations, we
could be required to repay amounts we received from government
payors, or pay additional rebates and interest if we are found
to have miscalculated the pricing information we have submitted
to the government. Whether or not we have complied with the law,
an investigation into alleged unlawful conduct could increase
our expenses, damage our reputation, divert management time and
attention and adversely affect our business.
If we
fail to meet the stringent requirements of governmental
regulation in the manufacture of our products, we could incur
substantial remedial costs and a reduction in
sales.
We and our third party providers are generally required to
maintain compliance with current Good Manufacturing Practice and
are subject to inspections by the FDA or comparable agencies in
other jurisdictions to confirm such compliance. In addition, the
FDA must approve any significant changes to our suppliers or
manufacturing methods. If we or our third party service
providers cannot demonstrate ongoing current Good Manufacturing
Practice compliance, we may be required to withdraw or recall
product and interrupt commercial supply of our products. Any
delay, interruption or other issues that arise in the
manufacture, fill-finish, packaging, or storage of our products
as a result of a failure of our facilities or the facilities or
operations of third parties to pass any regulatory agency
inspection could significantly impair our ability to develop and
commercialize our products. Significant noncompliance could also
result in the imposition of monetary penalties or other civil or
criminal sanctions. This non-compliance could increase our
costs, cause us to lose revenue or market share and damage our
reputation.
Changes
in laws affecting the health care industry could adversely
affect our revenues and profitability.
We and our collaborators and third party providers operate in a
highly regulated industry. As a result, governmental actions may
adversely affect our business, operations or financial
condition, including:
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new laws, regulations or judicial decisions, or new
interpretations of existing laws, regulations or decisions,
related to health care availability, method of delivery and
payment for health care products and services;
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changes in the FDA and foreign regulatory approval processes
that may delay or prevent the approval of new products and
result in lost market opportunity;
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changes in FDA and foreign regulations that may require
additional safety monitoring, labeling changes, restrictions on
product distribution or use, or other measures after the
introduction of our products to market, which could increase our
costs of doing business, adversely affect the future permitted
uses of approved products, or otherwise adversely affect the
market for our products;
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new laws, regulations and judicial decisions affecting pricing
or marketing practices; and
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changes in the tax laws relating to our operations.
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The enactment in the U.S. of health care reform, possible
legislation which could ease the entry of competing follow-on
biologics in the marketplace, new legislation or implementation
of existing statutory provisions on importation of lower-cost
competing drugs from other jurisdictions, and legislation on
comparative effectiveness research are examples of previously
enacted and possible future changes in laws that could adversely
affect our business. In addition, the Food and Drug
Administration Amendments Act of 2007 included new authorization
for the FDA to require post-market safety monitoring, along with
an expanded clinical trials registry and clinical trials results
database, and expanded authority for the FDA to impose civil
monetary penalties on companies that fail to meet certain
commitments.
Problems
with manufacturing or with inventory planning could result in
inventory shortages, product recalls and increased
costs.
Biologics manufacturing is extremely susceptible to product loss
due to contamination, equipment failure, or vendor or operator
error. In addition, we may need to close a manufacturing
facility for an extended period of time due to microbial, viral
or other contamination. Any of these events could result in
shipment delays or product recalls, impairing our ability to
supply products in existing markets or expand into new markets.
In the past, we have taken inventory write-offs and incurred
other charges and expenses for products that failed to meet
specifications, and we may incur similar charges in the future.
We rely solely on our manufacturing facility in Research
Triangle Park, North Carolina for the production of TYSABRI. Our
global bulk supply of TYSABRI depends on the uninterrupted and
efficient operation of this facility, which could be adversely
affected by equipment failures, labor shortages (whether as a
result of pandemic flu outbreak or otherwise), natural
disasters, power failures and numerous other factors. If we are
unable to meet demand for TYSABRI for any reason, we would need
to rely on a limited number of qualified third party contract
manufacturers. We cannot be certain that we could reach
agreement on reasonable terms, if at all, with those
manufacturers or that the FDA would approve our use of such
manufacturers on a timely basis, if at all. Moreover, the
transition of our manufacturing process to a third party could
take a significant amount of time and involve significant
expense.
Our
investments in properties, including our manufacturing
facilities, may not be fully realizable
We own or lease real estate primarily consisting of buildings
that contain research laboratories, office space, and biologic
manufacturing operations, some of which are located in markets
that are experiencing high vacancy rates and decreasing property
values. If we decide to consolidate or co-locate certain aspects
of our business operations, for strategic or other operational
reasons, we may dispose of one or more of our properties.
Due to reduced expectations of product demand, improved yields
on production and other factors, we may not fully utilize our
manufacturing facilities at normal levels resulting in idle time
at facilities or substantial excess manufacturing capacity. We
are always evaluating our current manufacturing strategy, and
may pursue alternatives that include delaying the completion of
our Denmark facility or disposing of manufacturing facilities.
If any of our owned properties are held for sale, or disposed
of, we may not realize the full investment in these properties
and incur significant impairment charges if the fair value of
the properties were determined to be lower than their book
value. In addition, if we decide to fully or partially vacate a
leased property, we may incur significant cost, including lease
termination fees, rent expense in excess of sublease income and
impairment of leasehold improvements.
23
We
rely on third parties to provide services in connection with the
manufacture of our products and, in some instances, manufacture
the product itself.
We rely on Genentech for all RITUXAN manufacturing. Genentech
relies on a third party to manufacture certain bulk RITUXAN
requirements. If Genentech or any third party upon which it
relies does not manufacture or fill-finish RITUXAN in sufficient
quantities and on a timely and cost-effective basis, or if
Genentech or any third party does not obtain and maintain all
required manufacturing approvals, our business could be harmed.
We also source all of our fill-finish and the majority of our
final product storage operations, along with a substantial
portion of our packaging operations, to a concentrated group of
third party contractors. Any third party we use to fill-finish,
package or store our products to be sold in the U.S. must
be licensed by the FDA. As a result, alternative third party
providers may not be readily available on a timely basis. The
manufacture of products and product components, fill-finish,
packaging and storage of our products require successful
coordination among us and multiple third party providers. Our
inability to coordinate these efforts, the lack of capacity
available at a third party contractor or any other problems with
the operations of these third party contractors could require us
to delay shipment of saleable products; recall products
previously shipped or impair our ability to supply products at
all. This could increase our costs, cause us to lose revenue or
market share, diminish our profitability or damage our
reputation.
Due to the unique manner in which our products are manufactured,
we rely on single source providers of several raw materials. We
make efforts to qualify new vendors and to develop contingency
plans so that production is not impacted by short-term issues
associated with single source providers. Nonetheless, our
business could be materially impacted by long-term or chronic
issues associated with single source providers.
Our
effective tax rate may fluctuate and we may incur obligations in
tax jurisdictions in excess of accrued amounts.
As a global biotechnology company, we are subject to taxation in
numerous countries, states and other jurisdictions. As a result,
our effective tax rate is derived from a combination of
applicable tax rates in the various places that we operate. In
preparing our financial statements, we estimate the amount of
tax that will become payable in each of such places. Our
effective tax rate, however, may be different than experienced
in the past due to numerous factors, including changes in the
mix of our profitability from country to country, the results of
audits of our tax filings, changes in accounting for income
taxes and changes in tax laws. Any of these factors could cause
us to experience an effective tax rate significantly different
from previous periods or our current expectations, which could
have an effect on our business and results of operations.
In addition, our inability to secure or sustain acceptable
arrangements with tax authorities and previously enacted or
future changes in the tax laws, among other things, may require
us to accrue for future tax payments in excess of amounts
accrued in our financial statements
The Obama administration announced several proposals to reform
U.S. tax rules, including proposals that may reduce or
eliminate the deferral of U.S. income tax on our
unrepatriated earnings, potentially requiring those earnings to
be taxed at the U.S. federal income tax rate, reduce or
eliminate our ability to claim foreign tax credits, and
eliminate various tax deductions until foreign earnings are
repatriated to the U.S. Our future reported financial
results may be adversely affected by tax rule changes which
restrict or eliminate our ability to claim foreign tax credits
or deduct expenses attributable to foreign earnings, or
otherwise affect the treatment of our unrepatriated earnings.
The
growth of our business depends on our ability to attract and
retain qualified personnel and key relationships.
The achievement of our commercial, research and development and
external growth objectives depends upon our ability to attract
and retain qualified scientific, manufacturing, sales and
marketing and executive personnel and develop and maintain
relationships with qualified clinical researchers and key
distributors. Competition for these people and relationships is
intense and comes from a variety of sources, including
pharmaceutical and biotechnology companies, universities and
non-profit research organizations. It may be more difficult for
us to attract and retain these people and relationships due to
the uncertainty created by the presence on our Board of
Directors of two
24
individuals nominated by an activist shareholder and the
possibility that activist shareholders may gain additional
representation on or control of our Board of Directors. Our
recruitment and retention efforts may also be adversely affected
by the announcement that our Chief Executive Officer will retire
from that position in June 2010 and the retirement of our
President, Research and Development in October 2009. We are
currently conducting searches for successors to our Chief
Executive Officer and President, Research and Development.
Our
sales and operations are subject to the risks of doing business
internationally.
We are increasing our presence in international markets, which
subjects us to many risks, such as:
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economic problems that disrupt foreign health care payment
systems;
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fluctuations in currency exchange rates;
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difficulties in staffing and managing international
operations;
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the imposition of governmental controls;
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less favorable intellectual property or other applicable laws;
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the inability to obtain any necessary foreign regulatory or
pricing approvals of products in a timely manner;
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restrictions on direct investments by foreign entities and trade
restrictions;
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changes in tax laws and tariffs; and
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longer payment cycles.
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In addition, our international operations are subject to
regulation under U.S. law. For example, the Foreign Corrupt
Practices Act prohibits U.S. companies and their
representatives from offering, promising, authorizing or making
payments to foreign officials for the purpose of obtaining or
retaining business abroad. In many countries, the health care
professionals we regularly interact with may meet the definition
of a foreign official for purposes of the Foreign Corrupt
Practices Act. Failure to comply with domestic or foreign laws
could result in various adverse consequences, including possible
delay in approval or refusal to approve a product, recalls,
seizures, withdrawal of an approved product from the market, and
the imposition of civil or criminal sanctions.
The
presence of directors nominated by an activist shareholder, and
the possibility that activist shareholders may gain additional
representation on or control of our Board of Directors could
cause uncertainty about the direction of our
business.
During 2008 and 2009, proxy contests commenced by entities
affiliated with Carl Icahn resulted in the 2009 election of two
of the Icahn nominees to our Board of Directors. In November
2009, another activist shareholder publicly advocated for
certain changes at our company. In January 2010, we received a
notice from Icahn Partners and certain of its affiliates
nominating three individuals for election to our Board of
Directors at the 2010 annual meeting and proposing to amend our
bylaws to set the number of directors at twelve. These and other
existing or potential shareholders may attempt to gain
additional representation on or control of our Board of
Directors, the possibility of which may create uncertainty
regarding the direction of our business. Perceived uncertainties
as to our future direction may result in the loss of potential
acquisitions, collaborations or in-licensing opportunities, and
may make it more difficult to attract and retain qualified
personnel and business partners. In addition, disagreement among
our directors about the direction of our business could impair
our ability to effectively execute our strategic plan.
Our 2008 and 2009 proxy contests were disruptive to our
operations and caused us to incur substantial costs. The SEC has
recently proposed to give shareholders the ability to include
their director nominees and their proposals relating to a
shareholder nomination process in company proxy materials, which
would make it easier for activists to nominate directors to our
Board of Directors. If the SEC implements its proxy access
proposal, we may face an increase in the number of shareholder
nominees for election to our Board of Directors. Future proxy
contests and the presence of additional activist shareholder
nominees on our Board of Directors could interfere with our
ability to execute our strategic plan, be costly and
time-consuming, disrupt our operations and divert the attention
of management and our employees.
25
If we
are unable to adequately protect and enforce our intellectual
property rights, our competitors may take advantage of our
development efforts or our acquired technology.
We have filed numerous patent applications in the U.S. and
various other countries seeking protection of the processes,
products and other inventions originating from our research and
development. Patents have been issued on many of these
applications. We have also obtained rights to various patents
and patent applications under licenses with third parties, which
provide for the payment of royalties by us. The ultimate degree
of patent protection that will be afforded to biotechnology
products and processes, including ours, in the U.S. and in
other important markets remains uncertain and is dependent upon
the scope of protection decided upon by the patent offices,
courts and lawmakers in these countries. Our patents may not
afford us substantial protection or commercial benefit.
Similarly, our pending patent applications or patent
applications licensed from third parties may not ultimately be
granted as patents and we may not prevail if patents that have
been issued to us are challenged in court. In addition, pending
legislation to reform the patent system and court decisions or
patent office regulations that place additional restrictions on
patent claims or that facilitate patent challenges could also
reduce our ability to protect our intellectual property rights.
If we cannot prevent others from exploiting our inventions, we
will not derive the benefit from them that we currently expect.
We also rely upon unpatented trade secrets and other proprietary
information, and we cannot assure that others will not
independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade
secrets or disclose such technology, or that we can meaningfully
protect such rights. We require our employees, consultants,
outside scientific collaborators, scientists whose research we
sponsor and other advisers to execute confidentiality agreements
upon the commencement of employment or consulting relationships
with us. These agreements may not provide meaningful protection
or adequate remedies for our unpatented proprietary information
in the event of use or disclosure of such information.
If our
products infringe the intellectual property rights of others, we
may incur damages and be required to incur the expense of
obtaining a license.
A substantial number of patents have already been issued to
other biotechnology and pharmaceutical companies. To the extent
that valid third party patent rights cover our products or
services, we or our strategic collaborators would be required to
seek licenses from the holders of these patents in order to
manufacture, use or sell these products and services, and
payments under them would reduce our profits from these products
and services. We are currently unable to predict the extent to
which we may wish or be required to acquire rights under such
patents and the availability and cost of acquiring such rights,
or whether a license to such patents will be available on
acceptable terms or at all. There may be patents in the
U.S. or in foreign countries or patents issued in the
future that are unavailable to license on acceptable terms. Our
inability to obtain such licenses may hinder our ability to
manufacture and market our products.
Uncertainty
over intellectual property in the biotechnology industry has
been the source of litigation, which is inherently costly and
unpredictable.
We are aware that others, including various universities and
companies working in the biotechnology field, have filed patent
applications and have been granted patents in the U.S. and
in other countries claiming subject matter potentially useful to
our business. Some of those patents and patent applications
claim only specific products or methods of making such products,
while others claim more general processes or techniques useful
or now used in the biotechnology industry. There is considerable
uncertainty within the biotechnology industry about the
validity, scope and enforceability of many issued patents in the
U.S. and elsewhere in the world, and, to date, there is no
consistent policy regarding the breadth of claims allowed in
biotechnology patents. We cannot currently determine the
ultimate scope and validity of patents which may be granted to
third parties in the future or which patents might be asserted
to be infringed by the manufacture, use and sale of our products.
There has been, and we expect that there may continue to be,
significant litigation in the industry regarding patents and
other intellectual property rights. Litigation and
administrative proceedings concerning patents and other
intellectual property rights may be protracted, expensive and
distracting to management. Competitors may sue us as a way of
delaying the introduction of our products. Any litigation,
including any interference proceedings to
26
determine priority of inventions, oppositions to patents in
foreign countries or litigation against our partners may be
costly and time consuming and could harm our business. We expect
that litigation may be necessary in some instances to determine
the validity and scope of certain of our proprietary rights.
Litigation may be necessary in other instances to determine the
validity, scope or non-infringement of certain patent rights
claimed by third parties to be pertinent to the manufacture, use
or sale of our products. Ultimately, the outcome of such
litigation could adversely affect the validity and scope of our
patent or other proprietary rights or hinder our ability to
manufacture and market our products.
Pending
and future product liability claims may adversely affect our
business and our reputation.
The administration of drugs in humans, whether in clinical
studies or commercially, carries the inherent risk of product
liability claims whether or not the drugs are actually the cause
of an injury. Our products or product candidates may cause, or
may appear to have caused, injury or dangerous drug
interactions, and we may not learn about or understand those
effects until the product or product candidate has been
administered to patients for a prolonged period of time.
We are subject from time to time to lawsuits based on product
liability and related claims. We cannot predict with certainty
the eventual outcome of any pending or future litigation. We may
not be successful in defending ourselves in the litigation and,
as a result, our business could be materially harmed. These
lawsuits may result in large judgments or settlements against
us, any of which could have a negative effect on our financial
condition and business if in excess of our insurance coverage.
Additionally, lawsuits can be expensive to defend, whether or
not they have merit, and the defense of these actions may divert
the attention of our management and other resources that would
otherwise be engaged in managing our business.
Our
operating results are subject to significant
fluctuations.
Our quarterly revenues, expenses and net income (loss) have
fluctuated in the past and are likely to fluctuate significantly
in the future due to the timing of charges and expenses that we
may take. In recent periods, for instance, we have recorded
charges that include:
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impairments that we are required to take with respect to
investments;
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impairments that we are required to take with respect to fixed
assets, including those that are recorded in connection with the
sale of fixed assets;
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inventory write-downs for failed quality specifications, charges
for excess or obsolete inventory and charges for inventory write
downs relating to product suspensions;
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milestone payments under license and collaboration agreements;
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payments in connection with acquisitions and other business
development activity; and
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the cost of restructurings.
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Our revenues are also subject to foreign exchange rate
fluctuations due to the global nature of our operations. We
recognize foreign currency gains or losses arising from our
operations in the period in which we incur those gains or
losses. Although we have foreign currency forward contracts to
hedge specific forecasted transactions denominated in foreign
currencies, our efforts to reduce currency exchange losses may
not be successful. As a result, currency fluctuations among our
reporting currency, the U.S. dollar, and the currencies in
which we do business will affect our operating results, often in
unpredictable ways. Additionally, our net income may fluctuate
due to the impact of charges we may be required to take with
respect to foreign currency hedge transactions. In particular,
we may incur higher charges from hedge ineffectiveness than we
expect or from the termination of a hedge relationship.
These examples are only illustrative and other risks, including
those discussed in these Risk Factors, could also
cause fluctuations in our reported earnings. In addition, our
operating results during any one period do not necessarily
suggest the anticipated results of future periods.
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Credit
and financial market conditions may exacerbate certain risks
affecting our business.
Sales of our products are dependent on reimbursement from
government health administration authorities, private health
insurers, distribution partners and other organizations. As a
result of credit and financial market conditions, these
organizations may be unable to satisfy their reimbursement
obligations or may delay payment. In addition, federal and state
health authorities may reduce Medicare and Medicaid
reimbursements, and private insurers may increase their scrutiny
of claims. A reduction in the availability or extent of
reimbursement could reduce our product sales and revenue.
We rely on third parties for several important aspects of our
business, including portions of our product manufacturing,
royalty revenue, clinical development of future collaboration
products, conduct of clinical trials, and raw materials. Such
third parties may be unable to satisfy their commitments to us
due to tightening of global credit from time to time, which
would adversely affect our business.
Our
portfolio of marketable securities is significant and subject to
market, interest and credit risk that may reduce its
value.
We maintain a significant portfolio of marketable securities.
Changes in the value of this portfolio could adversely affect
our earnings. In particular, the value of our investments may
decline due to increases in interest rates, downgrades in the
corporate bonds and other securities included in our portfolio,
instability in the global financial markets that reduces the
liquidity of securities included in our portfolio, declines in
the value of collateral underlying the mortgage and asset-backed
securities included in our portfolio, and other factors. Each of
these events may cause us to record charges to reduce the
carrying value of our investment portfolio or sell investments
for less than our acquisition cost. Although we attempt to
mitigate these risks by investing in high quality securities and
continuously monitoring our portfolios overall risk
profile, the value of our investments may nevertheless decline.
Our
level of indebtedness could adversely affect our business and
limit our ability to plan for or respond to changes in our
business.
As of December 31, 2009, we had $1.1 billion of
outstanding indebtedness, and we may incur additional debt in
the future. Our level of indebtedness could adversely affect our
business by, among other things:
|
|
|
|
|
requiring us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow for other purposes,
including business development efforts and research and
development;
|
|
|
|
limiting our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate,
thereby placing us at a competitive disadvantage compared to our
competitors that may have less debt; and
|
|
|
|
increasing our vulnerability to general adverse economic and
industry conditions.
|
Our
business involves environmental risks, which include the cost of
compliance and the risk of contamination or
injury.
Our business and the business of several of our strategic
partners, including Genentech and Elan, involves the controlled
use of hazardous materials, chemicals, biologics and radioactive
compounds. Although we believe that our safety procedures for
handling and disposing of such materials comply with state and
federal standards, there will always be the risk of accidental
contamination or injury. By law, radioactive materials may only
be disposed of at state-approved facilities. We currently store
radioactive materials from our California laboratory
on-site
because the approval of a disposal site in California for all
California-based companies has been delayed indefinitely. If and
when a disposal site is approved, we may incur substantial costs
related to the disposal of these materials. If we were to become
liable for an accident, or if we were to suffer an extended
facility shutdown, we could incur significant costs, damages and
penalties that could harm our business. Biologics manufacturing
also requires permits from government agencies for water supply
and wastewater discharge. If we do not obtain appropriate
permits, or permits for sufficient quantities of water and
wastewater, we could incur significant costs and limits on our
manufacturing volumes that could harm our business.
28
Several
aspects of our corporate governance and our collaboration
agreements may discourage a third party from attempting to
acquire us.
Several factors might discourage a takeover attempt that could
be viewed as beneficial to shareholders who wish to receive a
premium for their shares from a potential bidder. For example:
|
|
|
|
|
we are subject to Section 203 of the Delaware General
Corporation Law, which provides that we may not enter into a
business combination with an interested shareholder for a period
of three years after the date of the transaction in which the
person became an interested shareholder, unless the business
combination is approved in the manner prescribed in
Section 203;
|
|
|
|
our board of directors has the authority to issue, without a
vote or action of shareholders, shares of preferred stock and to
fix the price, rights, preferences and privileges of those
shares, each of which could be superior to the rights of holders
of common stock;
|
|
|
|
our collaboration agreement with Elan provides Elan with the
option to buy the rights to TYSABRI if we undergo a change of
control, which may limit our attractiveness to potential
acquirers;
|
|
|
|
our collaboration agreement with Genentech provides that, if we
undergo a change of control, within 90 days Genentech may
present an offer to us to purchase our rights to RITUXAN. If a
change of control were to occur in the future and Genentech were
to present an offer for the RITUXAN rights, 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 U.S. 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 directors are elected to staggered terms, which prevents the
entire board from being replaced in any single year; and
|
|
|
|
advance notice is required for nomination of candidates for
election as a director and for proposals to be brought before an
annual meeting of shareholders.
|
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
29
Massachusetts
Our principal executive offices are located in Cambridge,
Massachusetts. In Cambridge, we own approximately
525,000 square feet of real estate space, consisting of a
building that houses a research laboratory, office space and a
cogeneration plant which total approximately 280,000 square
feet and an approximately 245,000 square foot building that
contains research, development and quality laboratories.
We lease a total of approximately 450,000 square feet,
which includes a 70,000 square foot biologics manufacturing
facility and additional laboratory and office space of
125,000 square feet and 255,000 square feet,
respectively. In addition, we lease approximately
36,000 square feet of warehouse space in Somerville,
Massachusetts, approximately 105,000 square feet of office
space in Wellesley, Massachusetts, and approximately
25,000 square feet of office and laboratory space in
Waltham, Massachusetts.
In November 2008, we executed a fifteen year lease on a
356,000 square foot office building in Weston,
Massachusetts, which will serve as the future location of our
general and administrative offices with a planned occupancy
around mid-year 2010.
The expiration dates for our leased sites in Massachusetts range
from 2010 to 2025.
California
In San Diego, California, we own approximately
43 acres of land upon which we have our oncology research
and development campus. The campus, which totals approximately
355,000 square feet, primarily consists of five
interconnected buildings housing laboratory and office space.
North
Carolina
In Research Triangle Park, North Carolina, we own approximately
550,000 square feet of real estate space. This includes a
biologics manufacturing facility of approximately
105,000 square feet, a large scale manufacturing plant of
approximately 175,000 square feet, a warehouse comprising
approximately 60,000 square feet, a large-scale
purification facility of approximately 43,000 square feet,
as well as approximately 167,000 square feet of laboratory
and office space. We manufacture bulk AVONEX, TYSABRI and other
products in our pipeline at this facility. In addition, we lease
approximately 57,000 square feet of office space in Durham,
North Carolina.
Denmark
We own approximately 60 acres of land in Hillerød,
Denmark. We are in the final stages of constructing a
large-scale biologics manufacturing facility of approximately
215,000 square feet in Hillerød, Denmark to be used to
manufacture large molecule products. An administrative building
of approximately 50,000 square feet, label and packaging
facility of approximately 65,000 square feet, warehouse,
utilities and support space of approximately 135,000 square
feet, and laboratory facility of approximately
50,000 square feet are currently in use. Additional
information about this facility is set forth in the
Business Manufacturing and Raw Materials
section of this report.
Other
International
We lease office and laboratory space in Zug, Switzerland, our
international headquarters, the United Kingdom, Germany, France,
Denmark, and numerous other countries. The expiration dates for
our international leased sites range from 2010 to 2023.
|
|
Item 3.
|
Legal
Proceedings
|
Please refer to Note 19, Litigation to our
Consolidated Financial Statements of this report, which is
incorporated into this item by reference.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
30
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Market
Information
Our common stock trades on The NASDAQ Global Select Market under
the symbol BIIB. The following table shows the high
and low sales price for our common stock as reported by The
NASDAQ Global Select Market for each quarter in the years ended
December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Price
|
|
|
|
2009
|
|
|
2008
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
First Quarter
|
|
$
|
53.66
|
|
|
$
|
42.92
|
|
|
$
|
64.49
|
|
|
$
|
54.50
|
|
Second Quarter
|
|
$
|
55.34
|
|
|
$
|
44.56
|
|
|
$
|
67.45
|
|
|
$
|
55.68
|
|
Third Quarter
|
|
$
|
52.12
|
|
|
$
|
44.41
|
|
|
$
|
73.59
|
|
|
$
|
45.37
|
|
Fourth Quarter
|
|
$
|
54.00
|
|
|
$
|
41.75
|
|
|
$
|
52.36
|
|
|
$
|
37.21
|
|
Holders
As of February 5, 2010, there were approximately 1,097
stockholders of record of our common stock. In addition, as of
February 5, 2010, 270 stockholders of record of Biogen,
Inc. common stock have yet to exchange their shares of Biogen,
Inc. common stock for our common stock as contemplated by the
merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in
November 2003.
Dividends
We have not paid cash dividends since our inception. We do not
anticipate paying any cash dividends in the near term.
Issuer
Purchases of Equity Securities
The following table summarizes our common stock repurchase
activity during the fourth quarter of 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Value of Shares
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
That May Yet Be
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Part of Publicly
|
|
|
Purchased Under Our
|
|
|
|
Shares Purchased
|
|
|
Paid Per Share
|
|
|
Announced Programs
|
|
|
Programs
|
|
Period
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($ in millions)
|
|
|
2006 Repurchase Program(1)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov-09
|
|
|
6,000,000
|
|
|
|
45.17
|
|
|
|
6,000,000
|
|
|
|
|
|
2009 Repurchase Program(3)(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oct-09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,000.0
|
|
Nov-09
|
|
|
2,286,748
|
|
|
|
46.33
|
|
|
|
2,286,748
|
|
|
|
894.0
|
|
Dec-09
|
|
|
6,471,899
|
|
|
|
48.87
|
|
|
|
6,471,899
|
|
|
|
577.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,758,647
|
|
|
|
46.97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On October 31, 2006, we announced that our Board of
Directors authorized the repurchase of up to 20.0 million
shares of our common stock. Stock repurchased under this program
will provide us with authorized shares for general corporate
purposes, such as common stock to be issued under our employee
equity and stock purchase plans. This repurchase program did not
have an expiration date and was completed during the fourth
quarter of 2009. We have used this share repurchase program
principally for share stabilization. |
31
|
|
|
(2) |
|
During the first quarter of 2009 we repurchased approximately
1.2 million shares of our common stock at a total cost of
approximately $57.6 million under the 2006 Program. |
|
(3) |
|
On October 20, 2009, we announced that our Board of
Directors authorized the repurchase of up to $1.0 billion
of our common stock in addition to any shares remaining under
our 2006 repurchase program. This repurchase program is intended
to reduce our shares outstanding, with the objective of
returning excess cash to shareholders, and we intend to retire
repurchased shares. As of December 31, 2009 approximately
8.8 million shares, at a cost of $422.4 million, have
been repurchased under this program, all of which were retired.
The number of remaining shares that may yet be purchased under
this program is subject to price fluctuations of our common
stock. |
|
(4) |
|
From January 1, 2010 through February 5, 2010, we
repurchased approximately an additional 5.4 million shares
under this program at a total cost of approximately
$289.4 million, all of which were retired. Approximately
$288.2 million remains available for the repurchase of our
common stock under the 2009 program. |
Stock
Performance Graph
The graph below compares the five-year cumulative total
stockholder return on our common stock, the S&P 500 Index
and the Nasdaq Pharmaceutical Index, assuming the investment of
$100.00 on December 31, 2004 with dividends being
reinvested. The stock price performance in the graph below is
not necessarily indicative of future price performance.
32
|
|
Item 6.
|
Selected
Consolidated Financial Data
|
The following financial data should be read in conjunction with
our consolidated financial statements and related notes
beginning on
page F-1
of this report.
BIOGEN
IDEC INC. AND SUBSIDIARIES
SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(In millions, except per share amounts)
|
|
(7), (8), (9)
|
|
|
(6)
|
|
|
(4),(5)
|
|
|
(2),(3)
|
|
|
(1)
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
3,152.9
|
|
|
$
|
2,839.7
|
|
|
$
|
2,136.8
|
|
|
$
|
1,781.3
|
|
|
$
|
1,617.0
|
|
Revenues from unconsolidated joint business
|
|
|
1,094.9
|
|
|
|
1,128.2
|
|
|
|
926.1
|
|
|
|
810.9
|
|
|
|
708.9
|
|
Other revenues
|
|
|
129.5
|
|
|
|
129.6
|
|
|
|
108.7
|
|
|
|
90.8
|
|
|
|
96.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
4,377.3
|
|
|
|
4,097.5
|
|
|
|
3,171.6
|
|
|
|
2,683.0
|
|
|
|
2,422.5
|
|
Total costs and expenses
|
|
|
(3,081.9
|
)
|
|
|
(2,883.9
|
)
|
|
|
(2,391.8
|
)
|
|
|
(2,243.0
|
)
|
|
|
(2,186.5
|
)
|
Other income (expense), net
|
|
|
37.3
|
|
|
|
(57.7
|
)
|
|
|
72.4
|
|
|
|
58.9
|
|
|
|
20.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax expense and cumulative effect of
accounting change
|
|
|
1,332.7
|
|
|
|
1,155.9
|
|
|
|
852.2
|
|
|
|
498.9
|
|
|
|
256.2
|
|
Income tax expense
|
|
|
(355.6
|
)
|
|
|
(365.8
|
)
|
|
|
(272.4
|
)
|
|
|
(278.4
|
)
|
|
|
(95.5
|
)
|
Cumulative effect of accounting change, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
977.1
|
|
|
|
790.1
|
|
|
|
579.8
|
|
|
|
224.3
|
|
|
|
160.7
|
|
Net income (loss) attributable to noncontrolling interest, net
of tax
|
|
|
6.9
|
|
|
|
6.9
|
|
|
|
(58.4
|
)
|
|
|
6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
970.1
|
|
|
$
|
783.2
|
|
|
$
|
638.2
|
|
|
$
|
217.5
|
|
|
$
|
160.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change
|
|
$
|
3.35
|
|
|
$
|
2.65
|
|
|
$
|
1.99
|
|
|
$
|
0.62
|
|
|
$
|
0.47
|
|
Cumulative effect of accounting change, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
3.35
|
|
|
$
|
2.65
|
|
|
$
|
1.99
|
|
|
$
|
0.63
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating diluted earnings per share
|
|
|
289.5
|
|
|
|
295.0
|
|
|
|
320.2
|
|
|
|
345.3
|
|
|
|
346.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Condition
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and marketable securities
|
|
$
|
2,457.8
|
|
|
$
|
2,262.8
|
|
|
$
|
2,115.8
|
|
|
$
|
2,314.9
|
|
|
$
|
2,055.1
|
|
Total assets
|
|
$
|
8,551.9
|
|
|
$
|
8,479.0
|
|
|
$
|
8,628.8
|
|
|
$
|
8,552.8
|
|
|
$
|
8,381.7
|
|
Notes payable and line of credit, less current portion
|
|
$
|
1,080.2
|
|
|
$
|
1,085.4
|
|
|
$
|
51.8
|
|
|
$
|
96.7
|
|
|
$
|
43.4
|
|
Total Biogen Idec Inc. shareholders equity
|
|
$
|
6,221.5
|
|
|
$
|
5,806.1
|
|
|
$
|
5,534.3
|
|
|
$
|
7,149.8
|
|
|
$
|
6,905.9
|
|
|
|
|
(1) |
|
Included in costs and expenses in 2005 is a charge of
$118.1 million related to facility impairment charges. |
|
(2) |
|
Included in total costs and expenses in 2006 is a charge of
$207.4 million for in-process research and development from
the acquisition of Fumapharm AG, a net gain of $6.1 million
on the settlement of license agreements associated with
Fumapharm AG and Fumedica GmbH and a charge of
$123.1 million for in process research and development
related to the acquisition of Conforma Therapeutics, Inc. |
33
|
|
|
(3) |
|
Upon adoption of a new accounting standard, which provided
guidance for the accounting of our share-based compensation
programs, we recorded the cumulative effect of an accounting
change of $3.8 million, net, as of January 1, 2006. |
|
(4) |
|
Included in total costs and expenses in 2007 is a charge of
$18.4 million for in-process research and development
related to the acquisition of Syntonix Pharmaceuticals Inc. and
$64.3 million related to our collaborations with Cardiokine
Biopharma LLC and Neurimmune SubOne AG, which we consolidated in
accordance with the guidance provided by the Consolidation
Topic of the Codification. The $64.3 million was offset
by an equal amount of noncontrolling interest, resulting in no
net impact to the results of our operations. |
|
(5) |
|
In July 2007, we purchased 56,424,155 shares of our common
stock pursuant to a tender offer. We funded the transaction
through existing cash and cash equivalents of
$1,490.5 million and a short term loan of
$1,500.0 million. |
|
(6) |
|
Included in total cost and expenses in 2008 is
$25.0 million for in process research and development
related to a milestone payment made to the former shareholders
of Conforma Therapeutics pursuant to the terms of our
acquisition of Conforma Therapeutics in 2006. |
|
(7) |
|
Total costs and expenses in 2009 includes the
$110.0 million upfront payment made to Acorda Therapeutics,
Inc. pursuant to our June 30, 2009 collaboration and
license agreement to develop and commercialize products
containing fampridine in markets outside the U.S. |
|
(8) |
|
In 2009, we repurchased 16.0 million shares of our common
stock at a cost of $751.2 million under our 2006 and
2009 share repurchase programs. |
|
(9) |
|
Changes in tax law in certain state jurisdictions in which we
operate and the resolution of multiple federal, state and
foreign tax audits, including the effective settlement of
several uncertain tax positions resulted in a $58.3 million
reduction to our 2009 income tax expense. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion should be read in conjunction with our
consolidated financial statements and related notes beginning on
page F-1
of this report.
Executive
Summary
Introduction
Biogen Idec 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.
In the near term, we are dependent on continued sales of AVONEX,
RITUXAN and TYSABRI to drive our revenue growth. In the longer
term, our revenue growth is also dependent on the successful
clinical development, regulatory approval and launch of new
commercial products.
As part of our ongoing research and development efforts, we have
incurred significant expenditures related to conducting clinical
studies to develop new pharmaceutical products and explore the
utility of our existing products in treating disorders beyond
those currently approved in their labels. We continue to focus
our research and development efforts within our core and
emergent areas of neurology, oncology, immunology,
cardiopulmonary and hemophilia.
34
Financial
Highlights
The following table is a summary of financial results achieved:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
|
|
(In millions, except per share amounts and percentages)
|
|
2009
|
|
|
2008
|
|
|
to 2008
|
|
|
|
|
|
Total revenues
|
|
$
|
4,377.3
|
|
|
$
|
4,097.5
|
|
|
|
6.8
|
%
|
|
|
|
|
Income from operations
|
|
$
|
1,295.4
|
|
|
$
|
1,213.6
|
|
|
|
6.7
|
%
|
|
|
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
970.1
|
|
|
$
|
783.2
|
|
|
|
23.9
|
%
|
|
|
|
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
$
|
3.35
|
|
|
$
|
2.65
|
|
|
|
26.4
|
%
|
|
|
|
|
As described below under Results of Operations, our operating
results for the year ended December 31, 2009, were
primarily driven by:
|
|
|
|
|
Increased AVONEX worldwide revenue. Total
AVONEX revenues were $2,322.9 million in 2009, representing
a 5.5% increase over 2008.
|
|
|
|
Continued TYSABRI growth. Global in-market net
sales of TYSABRI totaled $1,059.2 million in 2009. Our
share of TYSABRI revenues totaled $776.0 million in 2009,
representing an increase of 31.8% over 2008.
|
|
|
|
U.S. in market net sales of RITUXAN totaled
$2,665.5 million in 2009, representing an increase of 3.0%
over 2008. Our share of RITUXAN revenues totaled
$1,094.9 million in 2009, which is inclusive of our share
of co-promotion profits in the U.S. totaling
$773.6 million, representing an increase of 5.5% over 2008.
This increase was offset by a $79.3 million decrease in our
share of revenue on sales of RITUXAN in the rest of world.
|
|
|
|
Total costs and expenses increased 6.9% as compared to 2008.
This increase was driven by a 19.7% increase in research and
development spending and a 58.8% increase in collaboration
profit sharing expense due to TYSABRI growth. These increases
were offset by a 5.0% decrease in costs of sales, a reduction in
selling, general and administrative expense of 1.5%, and a
decrease in amortization of acquired intangible assets of 12.9%.
|
In addition to the strong operating results achieved, we
generated $1,074.9 million of net cash flows from
operations during 2009, which were primarily driven by increases
in our earnings.
Cash and cash equivalents and marketable securities totaled
approximately $2,457.8 million as of December 31, 2009.
Business
Highlights
|
|
|
|
|
In October 2009, our Board of Directors authorized the
repurchase of up to $1.0 billion of our common stock, with
repurchased shares being retired. During 2009, approximately
16.0 million shares at a cost of $751.2 million were
repurchased under this and our 2006 share repurchase
programs.
|
|
|
|
In June 2009, we entered into a collaboration and license
agreement with Acorda Therapeutics, Inc. (Acorda) to develop and
commercialize products containing fampridine in markets outside
the U.S. In July 2009, we made a $110.0 million
upfront payment pursuant to this agreement.
|
35
Results
of Operations
Revenues
Revenues are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
For the Years Ended December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Product:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,638.0
|
|
|
$
|
1,472.9
|
|
|
$
|
1,203.6
|
|
|
|
11.2
|
%
|
|
|
22.4
|
%
|
Rest of world
|
|
|
1,514.9
|
|
|
|
1,366.8
|
|
|
|
933.2
|
|
|
|
10.8
|
%
|
|
|
46.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
|
3,152.9
|
|
|
|
2,839.7
|
|
|
|
2,136.8
|
|
|
|
11.0
|
%
|
|
|
32.9
|
%
|
Unconsolidated joint business
|
|
|
1,094.9
|
|
|
|
1,128.2
|
|
|
|
926.1
|
|
|
|
(3.0
|
)%
|
|
|
21.8
|
%
|
Other
|
|
|
129.5
|
|
|
|
129.6
|
|
|
|
108.7
|
|
|
|
(0.1
|
)%
|
|
|
19.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
4,377.3
|
|
|
$
|
4,097.5
|
|
|
$
|
3,171.6
|
|
|
|
6.8
|
%
|
|
|
29.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
Revenues
Product revenues are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
For the Years Ended December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
AVONEX
|
|
$
|
2,322.9
|
|
|
$
|
2,202.6
|
|
|
$
|
1,867.8
|
|
|
|
5.5
|
%
|
|
|
17.9
|
%
|
TYSABRI
|
|
|
776.0
|
|
|
|
588.6
|
|
|
|
229.9
|
|
|
|
31.8
|
%
|
|
|
156.0
|
%
|
Other
|
|
|
54.0
|
|
|
|
48.5
|
|
|
|
39.1
|
|
|
|
11.3
|
%
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
$
|
3,152.9
|
|
|
$
|
2,839.7
|
|
|
$
|
2,136.8
|
|
|
|
11.0
|
%
|
|
|
32.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVONEX
Revenues from AVONEX are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
For the Years Ended December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
United States
|
|
$
|
1,406.2
|
|
|
$
|
1,276.5
|
|
|
$
|
1,085.0
|
|
|
|
10.2
|
%
|
|
|
17.6
|
%
|
Rest of world
|
|
|
916.7
|
|
|
|
926.1
|
|
|
|
782.8
|
|
|
|
(1.0
|
)%
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total AVONEX revenues
|
|
$
|
2,322.9
|
|
|
$
|
2,202.6
|
|
|
$
|
1,867.8
|
|
|
|
5.5
|
%
|
|
|
17.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2009 compared to 2008, as well as for 2008 compared to 2007,
the increase in U.S. AVONEX revenue was due to price increases,
offset by decreased patient demand. Decreased commercial demand
resulted in a 7.6% and a 6.0% decline in U.S. AVONEX sales
volume in 2009 and 2008, respectively, over their prior year
comparative periods. In addition, during 2009, we experienced
higher participation in our Access Program, which provides free
product to eligible patients.
For 2009 compared to 2008, the decrease in rest of world AVONEX
revenue was primarily due to the negative impact of foreign
exchange rate changes resulting from the strengthening of the
U.S. dollar against relevant foreign currencies, primarily the
Euro, offset by increased patient demand and price increases in
some countries. For 2008 compared to 2007, rest of world sales
of AVONEX increased due to increased patient demand, the impact
of foreign exchange rate changes and the establishment of
additional direct market affiliates. Increased commercial demand
36
resulted in increases of 6.3% and 8.6% in rest of world AVONEX
sales volume in 2009 and 2008, respectively, over their prior
year comparative periods.
AVONEX rest of world revenues for 2009, 2008 and 2007 also
include losses of $39.5 million, $8.5 million and
$13.1 million, respectively, recognized in relation to the
settlement of certain cash flow hedge instruments.
Continued growth of AVONEX revenue is primarily dependent on
maintaining AVONEXs position as one of the most prescribed
MS therapies in the world. We expect to face increasing
competition in the MS marketplace in both the U.S. 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 as well as
increasing price pressure. We continue to generate data showing
AVONEX to be an effective and safe choice for MS patients and
physicians.
TYSABRI
We collaborate with Elan Pharma International, Ltd (Elan) an
affiliate of Elan Corporation, plc, on the development and
commercialization of TYSABRI. Please read Note 17,
Collaborations to our Consolidated Financial Statements
for a description of this collaboration.
In the U.S., we sell TYSABRI to Elan who sells the product to
third party distributors. Our sales price to Elan in the
U.S. is set prior to the beginning of each quarterly period
to effect an approximate equal sharing of the gross margin on
sales in the U.S. between Elan and us. We recognize revenue
for sales of TYSABRI in the U.S. 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 include (1) our share of net
U.S. sales of TYSABRI from Elan to third-party customers;
(2) revenue on sales of TYSABRI in rest of world markets;
(3) amortization of deferred revenue amounts related to
Elan milestone payments made to us; and (4) gains or losses
recognized in relation to the settlement of foreign currency
forward contracts that were entered into to hedge forecasted
revenues.
Revenues from TYSABRI are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
United States
|
|
$
|
231.8
|
|
|
$
|
196.4
|
|
|
$
|
104.4
|
|
|
|
18.0
|
%
|
|
|
88.1
|
%
|
Rest of world
|
|
|
544.2
|
|
|
|
392.2
|
|
|
|
125.5
|
|
|
|
38.8
|
%
|
|
|
212.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total TYSABRI revenues
|
|
$
|
776.0
|
|
|
$
|
588.6
|
|
|
$
|
229.9
|
|
|
|
31.8
|
%
|
|
|
156.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2009 compared to 2008, as well as for 2008 compared to 2007,
the increase in U.S. TYSABRI revenue was due to the continued
increase in the number of patients using TYSABRI in the U.S.
Increased commercial demand resulted in increases of 16.3% and
88.7% in U.S. TYSABRI sales volume for 2009 and 2008,
respectively, over their prior year comparative periods. Net
sales of TYSABRI from our collaboration partner, Elan, to
third-party customers in the U.S. for each of the years ended
December 31, 2009, 2008 and 2007 totaled $508.5
million, $421.6 million and $217.4 million,
respectively.
For 2009 compared to 2008, as well as for 2008 compared to 2007,
the increase in rest of world TYSABRI revenue was due to the
continued increase in the number of patients using TYSABRI in
our rest of world markets. Increased commercial demand resulted
in increases of 49.0% and 203.8% in U.S. TYSABRI sales volume
for 2009 and 2008, respectively, over their prior year
comparative periods. The increase in TYSABRI revenues in 2009
was offset by the negative impact of foreign currency exchange
rate changes resulting from the strengthening of the U.S. dollar
against foreign currencies, primarily the Euro.
37
TYSABRI rest of world revenues for 2009 also include losses of
$10.1 million recognized in relation to the settlement of
certain cash flow hedge instruments; no such losses were
recognized in 2008 or 2007 as we did not designate hedges
against TYSABRI rest of world revenues in those periods.
In 2009 and 2008, we recognized $7.1 million and $1.5 million
respectively of product revenue related to the amortization of
the Elan milestone payments.
Since we reintroduced TYSABRI to the market in July 2006, some
patients taking TYSABRI have been diagnosed with PML, a rare but
serious brain infection described in the TYSABRI label. In
November 2009, the U.S. prescribing information for TYSABRI
was revised to reflect that the risk of PML increases with
longer treatment duration, and for patients treated for 24 to
36 months is generally similar to the rates seen in
clinical trials. The revised label also reflects that there is
limited experience beyond three years of treatment. In
January 2010, the EMA recommended updating the TYSABRI
label in the E.U. to reflect that the risk of PML increases
after two years of therapy. The EMA also recommended that
patients have regular MRI scans and be reinformed of the risk of
PML after two years of therapy.
We continue to monitor the growth of TYSABRI unit sales, which
may be further impacted by the updated prescribing information.
We continue to research and develop protocols that may reduce
risk and improve outcomes of PML in patients being treated with
TYSABRI. We are working to identify patient or viral
characteristics which contribute to the risk of developing PML,
including the presence of asymptomatic JC virus infection with a
serological assay for antibodies against the JC virus. Our
efforts to improve management by physicians of PML and to
improve patient outcomes have included researching plasma
exchange to more rapidly remove TYSABRI from a patient, and drug
screening that identified mefloquine as an anti-JC virus drug
candidate.
Other
Product Revenues
Other product revenues represent revenues derived from FUMADERM,
ZEVALIN and AMEVIVE and are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
FUMADERM
|
|
$
|
49.6
|
|
|
$
|
43.4
|
|
|
$
|
21.5
|
|
|
|
14.3
|
%
|
|
|
101.9
|
%
|
ZEVALIN
|
|
$
|
4.4
|
|
|
$
|
4.8
|
|
|
$
|
16.9
|
|
|
|
(8.3
|
)%
|
|
|
(71.6
|
)%
|
AMEVIVE
|
|
$
|
|
|
|
$
|
0.3
|
|
|
$
|
0.7
|
|
|
|
(100.0
|
)%
|
|
|
(57.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other product revenues
|
|
$
|
54.0
|
|
|
$
|
48.5
|
|
|
$
|
39.1
|
|
|
|
11.3
|
%
|
|
|
24.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated
Joint Business Revenues
We collaborate with Genentech on the development and
commercialization of RITUXAN. Please read Note 17,
Collaborations to our Consolidated Financial Statements
for a description of this collaboration.
The majority of RITUXAN unit sales are for use in oncology as a
treatment for certain types of B-cell NHL. We believe there is
opportunity for RITUXAN unit sales growth in the immunology
setting, where RITUXAN is used as a treatment for certain types
of RA. Additional immunology indications for RITUXAN that we are
investigating include ANCA-associated vasculitis.
Revenues from unconsolidated joint business consist of
(1) our share of pretax co-promotion profits in the U.S.;
(2) reimbursement of our selling and development expense in
the U.S.; and (3) revenue on sales of RITUXAN in the rest
of world, which consist of our share of pretax co-promotion
profits in Canada and royalty revenue on sales of RITUXAN
outside the U.S. and Canada by F. Hoffmann-La Roche
Ltd. (Roche) and its sublicensees. Pre-tax co-promotion profits
are calculated and paid to us by Genentech in the U.S. and
by Roche in Canada. Pre-tax co-promotion profits consist of
U.S. 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.
38
The following table provides a summary of revenues from
unconsolidated joint business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Biogen Idecs share of co-promotion profits in the
U.S.
|
|
$
|
773.6
|
|
|
$
|
733.5
|
|
|
$
|
616.8
|
|
|
|
5.5
|
%
|
|
|
18.9
|
%
|
Reimbursement of selling and development expenses in the
U.S.
|
|
|
65.6
|
|
|
|
59.7
|
|
|
|
58.5
|
|
|
|
9.9
|
%
|
|
|
2.1
|
%
|
Revenue on sales of RITUXAN in the rest of world
|
|
|
255.7
|
|
|
|
335.0
|
|
|
|
250.8
|
|
|
|
(23.7
|
)%
|
|
|
33.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unconsolidated joint business revenues
|
|
$
|
1,094.9
|
|
|
$
|
1,128.2
|
|
|
$
|
926.1
|
|
|
|
(3.0
|
)%
|
|
|
21.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biogen
Idecs Share of Co-Promotion Profits in the
U.S.
The following table provides a summary of amounts comprising our
share of co-promotion profits in the U.S.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Product revenues, net
|
|
$
|
2,665.5
|
|
|
$
|
2,587.4
|
|
|
$
|
2,284.8
|
|
|
|
3.0
|
%
|
|
|
13.2
|
%
|
Costs and expenses
|
|
|
724.1
|
|
|
|
741.0
|
|
|
|
730.2
|
|
|
|
(2.3
|
)%
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Co-promotion profits in the United States
|
|
$
|
1,941.4
|
|
|
$
|
1,846.4
|
|
|
$
|
1,554.6
|
|
|
|
5.1
|
%
|
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.s share of co-promotion profits in the
United States
|
|
$
|
773.6
|
|
|
$
|
733.5
|
|
|
$
|
616.8
|
|
|
|
5.5
|
%
|
|
|
18.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2009 compared to 2008, the increase in U.S. RITUXAN
product revenue on sales recorded by Genentech resulted from
continued growth for treatment of B-cell NHL and RA, and price
increases. For 2008 compared to 2007 the increase in
U.S. RITUXAN product revenue was primarily due to increased
unit sales in treatments of B-cell NHL, CLL (an unapproved and
unpromoted use of RITUXAN) and RA, and price increases.
Collaboration costs and expenses for 2009 as compared to 2008
decreased primarily due to higher costs incurred in development
of RITUXAN for use in other indications during 2008.
Under our 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, 2008, and 2007, the 40% threshold
was met during the first quarter.
In addition, under our collaboration agreement, we 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 U.S. and our collaboration
rights for Third Party Anti-CD20 Products are dependent upon
Genentechs underlying license rights. 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. Please read Note 17, Collaborations
to our Consolidated Financial Statements for additional
information regarding 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.
39
Reimbursement
of Selling and Development Expense in the U.S.
As discussed within Note 17, Collaborations to our
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
U.S. and reimbursed by Genentech, increased in 2009 as
compared 2008 due to an increase in sales and marketing expense
associated with CLL and legal fees.
The increase in selling and development expenses in 2008
compared to 2007 was primarily due to development costs we
incurred related to the development of RITUXAN in RA.
Revenue
on Sales of RITUXAN in the Rest of World
We record our royalty revenue and co-promotion profit revenue on
sales of RITUXAN in the rest of world on a cash basis. Revenues
on sales of RITUXAN in the rest of world decreased in 2009
compared to 2008 primarily due to royalty expirations in certain
of these markets and the negative impact of foreign exchange
rate changes.
Revenues on sales of RITUXAN in the rest of world increased in
2008 compared to 2007 due to several factors, including
increased market penetration in NHL and increased use in RA.
The royalty period for sales in the rest of world 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.
Specifically, the royalty periods with respect to sales in
France, Spain, Germany and the United Kingdom expired in 2009.
The royalty period with respect to sales in Italy will expire in
2010. The royalty periods with respect to sales in other
countries will subsequently expire through 2012. As a result of
these expirations, we expect royalty revenues derived from sales
of RITUXAN in the rest of world to continue to decline in future
years.
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 supply agreement revenues based
on those products which are included in corporate partner
revenues. We also receive royalties on sales by our licensees of
a number of other products under patents that we own.
Other revenues are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Royalty revenues
|
|
$
|
124.4
|
|
|
$
|
116.2
|
|
|
$
|
102.1
|
|
|
|
7.1
|
%
|
|
|
13.8
|
%
|
Corporate partner revenues
|
|
|
5.1
|
|
|
|
13.4
|
|
|
|
6.6
|
|
|
|
(61.9
|
)%
|
|
|
103.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues
|
|
$
|
129.5
|
|
|
$
|
129.6
|
|
|
$
|
108.7
|
|
|
|
(0.1
|
)%
|
|
|
19.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalty
Revenues
We receive royalties on sales by our licensees of products
covered under patents that we own. Sales of licensed products
could vary significantly due to competition, manufacturing
difficulties and other factors that are not within our control.
In addition, the expiration or invalidation of any underlying
patents could reduce or eliminate the royalty revenues derived
from such patents.
The increase in royalty revenues in 2009 as compared to 2008, as
well as in 2008 as compared to 2007, was primarily due to
increased sales of ANGIOMAX (bivalirudin) licensed to The
Medicines Company (TMC) offset by a decline in royalties from
sales of other licensed product and the expiration of certain
contracts and license agreements.
40
Our most significant source of royalty revenue is derived from
sales of ANGIOMAX by TMC. TMC sells ANGIOMAX in the U.S.,
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 for that
tier under our agreement with TMC. The royalty rate increases
based upon which tier of total net sales are earned in any
calendar year. The increased royalty 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 later quarters.
Accordingly, an adjustment is recorded in the period in which an
increase in royalty rate has been achieved.
Under the terms of our 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 where sales have been reduced to
a certain volume-based market share. TMC began selling ANGIOMAX
in the U.S. in January 2001. The principal U.S. patent
that covers ANGIOMAX expires in March 2010. The FDA has granted
TMC an additional period of marketing exclusivity for ANGIOMAX
in order to investigate its use in pediatric patients. This
period expires in September 2010. In the event that third
parties sell products comparable to ANGIOMAX after the period of
marketing exclusivity expires, we would expect a significant
decrease in royalty revenues due to lower royalty rates and
increased competition.
Provisions
for Discounts and Allowances
Revenues from product sales are recorded net of applicable
allowances for trade term discounts, wholesaler incentives,
Medicaid rebates, Veterans Administration (VA) 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). For 2009 compared
to 2008, as well as 2008 compared to 2007, the increases in
total allowances were primarily due to price increases.
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.
Reserves for product returns are recorded in the period the
related revenue is recognized, resulting in a reduction to
product sales. The majority of wholesaler returns are due to
product expiration. Expired product return reserves are
estimated through a comparison of historical return data, as
adjusted, to their related sales on a production lot basis.
Historical rates of return are determined for each product and
are adjusted for known or expected changes in the marketplace
specific to each product.
Reserves for discounts, contractual adjustments and returns that
reduced gross product revenues were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Discounts
|
|
$
|
74.0
|
|
|
$
|
67.1
|
|
|
$
|
45.7
|
|
|
|
10.3
|
%
|
|
|
46.8
|
%
|
Contractual adjustments
|
|
|
192.5
|
|
|
|
149.0
|
|
|
|
105.2
|
|
|
|
29.2
|
%
|
|
|
41.6
|
%
|
Returns
|
|
|
16.6
|
|
|
|
12.2
|
|
|
|
22.1
|
|
|
|
36.1
|
%
|
|
|
(44.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowances
|
|
$
|
283.1
|
|
|
$
|
228.3
|
|
|
$
|
173.0
|
|
|
|
24.0
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross product revenues
|
|
$
|
3,436.0
|
|
|
$
|
3,068.0
|
|
|
$
|
2,309.8
|
|
|
|
12.0
|
%
|
|
|
32.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of gross product revenues
|
|
|
8.2
|
%
|
|
|
7.4
|
%
|
|
|
7.5
|
%
|
|
|
10.8
|
%
|
|
|
(1.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Discount reserves include trade term discounts and wholesaler
incentives. For 2009 compared to 2008, as well as for 2008
compared to 2007, the increase in discounts was primarily driven
by increases in trade term discounts and wholesaler incentives
as a result of price increases.
Contractual adjustment reserves relate to Medicaid, VA and
managed care rebates and other applicable allowances. For 2009
compared to 2008, as well as for 2008 compared to 2007,
contractual adjustments increased primarily due to the impact of
higher reserves for managed care (associated with higher level
of activity with respect to rebates and price increases in the
U.S.) and Medicaid and VA programs (associated with price
increases in the U.S.).
Product return reserves are established for returns made by
wholesalers. In accordance with contractual terms, wholesalers
are permitted to return product for reasons such as damaged or
expired product. We also accept returns from our patients for
various reasons. For 2009 compared to 2008, return reserves
remained relatively unchanged. For 2008 compared to 2007, return
reserves decreased primarily due to a decrease in estimated
product returns based on historical trends.
Costs and
Expenses
A summary of total costs and expenses is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Cost of sales, excluding amortization of acquired intangible
assets
|
|
$
|
382.1
|
|
|
$
|
402.0
|
|
|
$
|
335.2
|
|
|
|
(5.0
|
)%
|
|
|
19.9
|
%
|
Research and development
|
|
|
1,283.1
|
|
|
|
1,072.1
|
|
|
|
925.2
|
|
|
|
19.7
|
%
|
|
|
15.9
|
%
|
Selling, general and administrative
|
|
|
911.0
|
|
|
|
925.3
|
|
|
|
776.1
|
|
|
|
(1.5
|
)%
|
|
|
19.2
|
%
|
Collaboration profit sharing
|
|
|
215.9
|
|
|
|
136.0
|
|
|
|
14.0
|
|
|
|
58.8
|
%
|
|
|
871.4
|
%
|
Amortization of acquired intangible assets
|
|
|
289.8
|
|
|
|
332.7
|
|
|
|
257.5
|
|
|
|
(12.9
|
)%
|
|
|
29.2
|
%
|
Acquired in-process research and development
|
|
|
|
|
|
|
25.0
|
|
|
|
84.2
|
|
|
|
(100.0
|
)%
|
|
|
(70.3
|
)%
|
Facility impairments and (gain) loss on disposition, net
|
|
|
|
|
|
|
(9.2
|
)
|
|
|
(0.4
|
)
|
|
|
(100.0
|
)%
|
|
|
2200.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses
|
|
$
|
3,081.9
|
|
|
$
|
2,883.9
|
|
|
$
|
2,391.8
|
|
|
|
6.9
|
%
|
|
|
20.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales, Excluding Amortization of Acquired Intangible Assets
(Cost of Sales)
Components of cost of sales are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Cost of product revenues
|
|
$
|
378.1
|
|
|
$
|
397.0
|
|
|
$
|
330.5
|
|
|
|
(4.8
|
)%
|
|
|
20.1
|
%
|
Cost of royalty revenues
|
|
|
4.0
|
|
|
|
5.0
|
|
|
|
4.7
|
|
|
|
(20.0
|
)%
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
382.1
|
|
|
$
|
402.0
|
|
|
$
|
335.2
|
|
|
|
(5.0
|
)%
|
|
|
19.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For 2009 compared to 2008, the decrease in cost of sales was
primarily due to a decrease in write-downs from unmarketable
inventory of $12.9 million, decreased production costs of
approximately $10.9 million resulting from the
implementation of a new high-titer production process which
produces higher yields of TYSABRI and an $8.8 million
decrease in royalty payments on sales of licensed product due
mainly to the expiration of certain contracts and license
agreements. These decreases were offset by a $17.0 million
increase in costs associated with higher TYSABRI sales volume.
In addition, during 2008 we also incurred a $4.3 million
period expense related to the shutdown of our manufacturing
facility in Research Triangle Park, North Carolina for the
implementation of the high-titer production process upgrades.
42
For 2008 as compared to 2007, the overall increase in cost of
sales was primarily due to higher sales volume offset by
decreased write-downs from unmarketable inventory.
Write-downs
from Unmarketable Inventory
Our products are subject to strict quality control and
monitoring which we perform throughout the manufacturing
process. Periodically, certain batches or units of product may
no longer meet quality specifications or may expire. The shelf
life associated with our products is generally between 3 and
48 months, depending on the product. Obsolescence due to
expiration has historically been insignificant.
Amounts written down related to unmarketable inventory are
charged to cost of sales, and totaled $16.9 million,
$29.8 million and $21.6 million for the years ended
December 31, 2009, 2008 and 2007, respectively.
Research
and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
For the Years Ended
|
|
2009
|
|
2008
|
|
|
December 31,
|
|
Compared
|
|
Compared
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
2007
|
|
to 2008
|
|
to 2007
|
|
Research and development
|
|
$
|
1,283.1
|
|
|
$
|
1,072.1
|
|
|
$
|
925.2
|
|
|
|
19.7
|
%
|
|
|
15.9
|
%
|
We devote significant resources to research and development
programs focusing our efforts on finding novel therapeutics in
areas of high unmet medical need within our core and emergent
focus areas of neurology, oncology, immunology, cardiopulmonary
and hemophilia. 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 in addition to 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.
Research and development expenses consist of upfront fees and
milestones paid to collaborators and expenses incurred in
performing research and development activities, including
compensation and benefits, facilities expenses, overhead
expenses, clinical trial and related clinical manufacturing
expenses, fees paid to clinical research organizations (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.
For 2009 compared to 2008, research and development expenses
increased by $211.0 million, driven primarily by the
$110.0 million upfront payment made to Acorda, as well as a
net increase of $100.2 million related to the ramp up of
clinical trial activity for certain development stage product
candidates including lixivaptan, BG-12, humanized anti-CD20 and
ADENTRI. In addition, in 2009, we initiated registrational
trials in our PEGylated interferon program. The aforementioned
increases were offset by a reduction of spending across several
programs including baminercept in RA, lumiliximab and
volociximab.
For 2008 compared to 2007, research and development expenses
increased by $146.9 million, driven by an increase of
$56.4 million related to the continued advancement of our
pipeline into Phase 3 clinical trials. In 2008, we initiated a
registrational trial in our lixivaptan program, a Phase 2 trial
in our ADENTRI program, and continued to develop our BG-12,
anti-CD80 MAb (galiximab) and anti-CD23 MAb (lumiliximab)
programs. In 2008, we had 8 programs in Phase 3 clinical trials
as compared to 5 in 2007. We also increased spending in our
anti-CD20 programs in both Phase 2 and Phase 3 clinical trials
by $46.2 million primarily due to a $31.5 million
opt-in payment to participate in the Roche-led GA101 program.
The balance of the increase of $44.3 million was due to
other research and development investments, primarily in our pre
clinical and early stage pipeline programs including HSP90,
BIIB014, BART and LINGO programs.
We expect total research and development expense in 2010 to be
between 24% and 27% of total revenue.
43
Milestone
and Upfront Payments
Milestone and upfront payments made to our collaboration
partners and included within research and development expense
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
|
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
|
|
|
Total milestone and upfront payments reflected within research
and development expense
|
|
$
|
151.5
|
|
|
$
|
47.6
|
|
|
$
|
52.0
|
|
|
|
218.3
|
%
|
|
|
(8.5
|
)%
|
|
|
|
|
For 2009 as compared to 2008, the increase in milestone and
upfront payments was primarily the result of the
$110.0 million upfront payment made to Acorda.
Selling,
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
|
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
|
|
|
Selling, general and administrative
|
|
$
|
911.0
|
|
|
$
|
925.3
|
|
|
$
|
776.1
|
|
|
|
(1.5
|
)%
|
|
|
19.2
|
%
|
|
|
|
|
Selling, general and administrative expenses are primarily
comprised of compensation and benefits associated with sales and
marketing, finance, legal and other administrative personnel,
outside marketing and legal expenses and other general and
administrative costs.
For 2009 compared to 2008, the decrease in selling, general and
administrative expenses was primarily driven by the positive
impact of foreign currency exchange rate changes and a reduction
of expenses reimbursed to Elan for their marketing of TYSABRI
for Crohns disease in the U.S. These decreases were offset
by costs incurred associated with our geographic expansion into
new markets.
For 2008 compared to 2007, selling, general and administrative
expenses increased primarily due to a $90.0 million
increase in sales and marketing, of which $55.3 million
related to international sales and marketing activities
primarily for AVONEX and TYSABRI and $43.6 million related
to an increase in compensation and benefits for general and
administrative personnel as well as increases in fees and
services.
We expect that selling, general and administrative expenses will
increase in 2010 as compared to the total amount incurred in
2009 primarily due to increased sales and marketing activities
in support of AVONEX and TYSABRI. In addition, under the
transition agreement entered into with James C. Mullen, we will
incur approximately $21 million of expense in the first
half of 2010 all of which relates to the modification of his
existing equity based compensation awards. The substantial
portion of this charge is due to the incremental value
attributable to the extension of Mr. Mullens stock option
awards.
Collaboration
Profit Sharing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Collaboration profit sharing
|
|
$
|
215.9
|
|
|
$
|
136.0
|
|
|
$
|
14.1
|
|
|
|
58.7
|
%
|
|
|
866.3
|
%
|
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 in the
rest of world. These amounts are reflected in the collaboration
profit sharing line in our consolidated statements of income.
Our collaboration profit sharing expense increases as rest of
world sales of TYSABRI increase and is impacted by fluctuations
in currency exchange rates.
For 2009 as compared to 2008, as well as for 2008 as compared to
2007, the increases were due to the continued 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.
44
For the years ended December 31, 2009, 2008 and 2007, our
collaboration profit sharing expense included
$40.0 million, $28.4 million and $9.1 million,
respectively, related to the reimbursement of Elans
royalty payments.
Amortization
of Acquired Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Amortization of acquired intangible assets
|
|
$
|
289.8
|
|
|
$
|
332.7
|
|
|
$
|
257.5
|
|
|
|
(12.9
|
)%
|
|
|
29.2
|
%
|
Our most significant intangible asset is the core technology
related to our AVONEX product. Our amortization policy reflects
our belief that the economic benefit of our core technology is
consumed as revenue is generated from our AVONEX product. We
refer to this amortization methodology as the economic
consumption model, which involves calculating a ratio of actual
current period sales to total anticipated sales for the life of
the product and applying this ratio to the carrying amount of
the intangible asset. An analysis of the anticipated lifetime
revenue of AVONEX is performed at least annually during our long
range planning cycle, and this analysis serves as the basis for
the calculation of our economic consumption amortization model.
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 that amortization charges are not
unreasonably deferred to future periods, we compare the amount
of amortization determined under the economic consumption model
against the minimum amount of amortization recalculated each
year under the straight-line method. Amortization is then
recorded 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.
We completed our most recent long range planning cycle in the
third quarter of 2009. This analysis is based upon certain
assumptions that we evaluate on a periodic basis, such as the
anticipated product sales of AVONEX and expected impact of
competitor products and our own pipeline product candidates, as
well as the issuance of new patents or the extension of existing
patents. Based on this analysis, we have continued to amortize
this asset on the economic consumption model for the third and
fourth quarters of 2009, and expect to apply the same model for
the first two quarters in 2010. The results of our analysis were
most significantly impacted by the issuance in September 2009 of
a U.S. patent covering the treatment of MS with AVONEX, which
resulted in an increase in the total expected lifetime revenue
of AVONEX and an extension of the assumed remaining life of our
core intangible asset.
As a result of these changes in the total expected lifetime
revenues of AVONEX, amortization recorded for the third and
fourth quarters of 2009 decreased significantly over their
respective prior year comparative periods. Based upon this most
recent analysis, amortization of intangible assets, included
within our consolidated balance sheet as of December 31, 2009,
is expected to be in the range of approximately $160.0 million
to $220.0 million for each of the next five years.
For 2008 compared to 2007, the increase in amortization expense
was primarily due to the changes in the estimate of the future
total expected lifetime revenues of AVONEX that occurred as part
of the annual reassessment of amortization expense in the third
quarters of 2008 and 2007. The change in the estimate of the
future revenue of AVONEX was attributable to the expected impact
of competitor products, including the commercialization of our
own pipeline product candidates.
Acquired
In-Process Research and Development (IPR&D)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Acquired in-process research and development
|
|
$
|
|
|
|
$
|
25.0
|
|
|
$
|
84.2
|
|
|
|
(100.0
|
)%
|
|
|
(70.3
|
)%
|
Effective January 1, 2009, we adopted a new accounting
standard for business combinations, which changes the accounting
treatment of acquired IPR&D. For acquisitions occurring
prior to January 1, 2009, we measured
45
acquired IPR&D at fair value and expensed it on the
acquisition date, or capitalized it as intangible assets if
certain criteria were met. However, effective January 1,
2009, acquired IPR&D will be measured at fair value and
capitalized as intangible assets and amortized from the date of
completion over its estimated useful life. In addition, the
acquired IPR&D will be tested for impairment until
completion of the acquired programs.
In 2008, we recorded an IPR&D charge of $25.0 million
related to a HSP90-related milestone payment made to the former
shareholders of Conforma Therapeutics, Inc. (Conforma) pursuant
to the terms of our acquisition of Conforma in 2006.
During the year ended December 31, 2007, we recorded
IPR&D charges of $84.2 million. The principal
components of this amount are as follows:
|
|
|
|
|
$18.4 million related to the acquisition of Syntonix
Pharmaceuticals (Syntonix);
|
|
|
|
$30.0 million related to the collaboration with Cardiokine
Biopharma LLC (Cardiokine); and
|
|
|
|
$34.3 million related to the collaboration with Neurimmune
SubOne AG (Neurimmune).
|
Cardiokine and Neurimmune are variable interest entities as
defined under the guidance set forth within the Consolidation
Topic of the Codification. The consolidation of these
entities resulted in IPR&D charges which have been recorded
as a component of operating income. However, because the
IPR&D charges relate to the fair value of the underlying
technology retained by the parent companies of Cardiokine and
Neurimmune, these amounts were allocated to the respective
noncontrolling interests.
We use discounted cash flow models to determine the fair values
associated with acquired technologies. These models require the
use of significant estimates and assumptions, which include but
are not limited to an estimate of future cash flows from product
sales resulting from completed and in-process products and the
use of discount and probability rates on a project basis. Refer
to Valuation of Acquired Intangible Assets and In-process
Research and Development Expenses within Critical
Accounting Estimates for additional discussion.
We believe that the discount rates utilized in our valuations
are commensurate with the stage of development of these
compounds and uncertainties in the economic estimates associated
with each development relationship. The IPR&D charge
related to our collaboration with Neurimmune was determined
based upon an estimate of revenues expected to be recognized
beginning in 2018 related to the
Beta-Amyloid
antibody and a discount rate of 15%. The IPR&D charge
related to our collaboration with Cardiokine was determined
assuming a discount rate of 11% and an estimate of revenues
expected to be recognized beginning in 2012 for lixivaptan. The
amount allocated to IPR&D resulting from the acquisition of
Syntonix relates to the development of long-acting recombinant
Factor IX and long-acting recombinant Factor VIII assuming
estimated revenues expected to be recognized beginning in 2012
and 2013, respectively. A discount rate of 13% was used to value
these projects.
In addition, in connection with the acquisition of Syntonix in
January 2007, we agreed to make additional future consideration
payments contingent upon the achievement of certain milestone
events. In accordance with our acquisition agreement, we will
make a $40.0 million milestone payment to the former
shareholders of Syntonix during the first quarter of 2010. This
amount will be recorded as a charge to IPR&D in the first
quarter of 2010.
Refer to Note 2, Acquisitions and Dispositions and
Note 17, Collaborations to our Consolidated
Financial Statements for additional discussion.
Other
Income (Expense), Net
Components of other income (expense), net, are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Interest income
|
|
$
|
48.5
|
|
|
$
|
72.1
|
|
|
$
|
103.6
|
|
|
|
(32.7
|
)%
|
|
|
(30.4
|
)%
|
Interest expense
|
|
|
(35.8
|
)
|
|
|
(52.0
|
)
|
|
|
(40.5
|
)
|
|
|
31.2
|
%
|
|
|
(28.4
|
)%
|
Impairment on investments
|
|
|
(10.6
|
)
|
|
|
(60.3
|
)
|
|
|
(24.4
|
)
|
|
|
82.4
|
%
|
|
|
(147.1
|
)%
|
Gain (loss) on sales of investments, net
|
|
|
22.8
|
|
|
|
(1.1
|
)
|
|
|
16.7
|
|
|
|
2,172.7
|
%
|
|
|
(106.6
|
)%
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
For the Years Ended
|
|
|
2009
|
|
|
2008
|
|
|
|
December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Foreign exchange gains (losses), net
|
|
|
11.4
|
|
|
|
(9.8
|
)
|
|
|
3.0
|
|
|
|
216.3
|
%
|
|
|
(426.7
|
)%
|
Gain on the sale of property
|
|
|
|
|
|
|
|
|
|
|
7.1
|
|
|
|
0.0
|
%
|
|
|
(100.0
|
)%
|
Other, net
|
|
|
1.0
|
|
|
|
(6.6
|
)
|
|
|
6.9
|
|
|
|
114.9
|
%
|
|
|
(197.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
37.3
|
|
|
$
|
(57.7
|
)
|
|
$
|
72.4
|
|
|
|
164.5
|
%
|
|
|
(179.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Income
For 2009 as compared to 2008, interest income decreased
primarily due to lower yields on cash, cash equivalents, and
marketable securities, offset by higher average cash balances.
For 2008 compared to 2007, interest income decreased primarily
due to a reduction in cash and cash equivalents due to the
funding of our tender offer in July 2007, a net payment of
$525.5 million for our term loan facility and lower
investment yields.
Interest
Expense
For 2009 as compared to 2008, interest expense decreased
primarily due to decreased average debt balances. In addition in
2009, approximately $5.4 million was recorded as a
reduction of interest expense due to the amortization of the
deferred gain associated with the termination of an interest
rate swap in December 2008. This is further described in
Note 8, Derivative Instruments to our Consolidated
Financial Statements.
For 2008 compared to 2007, interest expense increased primarily
due to an increased average debt balance as well as
$8.9 million of expense incurred in 2008 due to the impact
of hedge ineffectiveness as discussed in Note 8,
Derivative Instruments to our Consolidated Financial
Statements.
We capitalized interest costs related to construction in
progress totaling approximately $28.5 million,
$23.2 million and $10.1 million in 2009, 2008 and
2007, respectively, which were primarily related to the
development of our large-scale biologic manufacturing facility
in Hillerød, Denmark, which as a result reduced our
interest expense by the same amount. We expect the amount of
interest capitalized in relation to this facility will decrease
in 2010.
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 this 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 marketable debt securities. The impairment
model for equity securities was not affected. Refer to
Note 7, Financial Instruments to our Consolidated
Financial Statements for additional information on the adoption
of this guidance.
In 2009, we recognized impairment losses of $7.0 million on
our publicly-held strategic investments and non-marketable
securities and an additional $3.6 million in charges for
the
other-than-temporary
impairment on our marketable debt securities primarily related
to mortgage and asset-backed securities.
In 2008, we recognized impairment losses of $18.6 million
on our publicly-held strategic investments and non-marketable
securities and an additional $41.7 million in impairment on
our marketable debt securities primarily related to mortgage,
asset-backed and corporate securities.
In 2007 we recognized impairment losses of $18.4 million on
our publicly-held strategic investments and non-marketable
securities and an additional $7.5 million in impairment on
our marketable debt securities primarily related to mortgage and
asset-backed securities.
We may incur additional impairment charges on these investments
in the future.
47
Impairment
on Property
We own or lease real estate primarily consisting of buildings
that contain research laboratories, office space, and biologic
manufacturing operations, some of which are located in markets
that are experiencing high vacancy rates and decreasing property
values. If we decide to consolidate, co-locate or dispose of
certain aspects of our business operations, for strategic or
other operational reasons, we may dispose of one or more of our
properties. Due to reduced expectations of product demand,
improved yields on production and other factors, we may not
fully utilize our manufacturing facilities at normal levels
resulting in idle time at facilities or substantial excess
manufacturing capacity. We are always evaluating our current
strategy, as well as other alternatives, including whether to
delay completion of the Denmark facility. If any of our owned
properties are held for sale, or disposed of, we may not realize
the full investment in these properties and incur significant
impairment charges if the fair value of the properties were
determined to be lower than their book value. In addition, if we
decide to fully or partially vacate a leased property, we may
incur significant cost, including lease termination fees, rent
expense in excess of sublease income and impairment of leasehold
improvements.
Income
Tax Provision
Tax
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
For the Years Ended
|
|
2009
|
|
2008
|
|
|
December 31,
|
|
Compared
|
|
Compared
|
(In millions, except percentages)
|
|
2009
|
|
2008
|
|
2007
|
|
to 2008
|
|
to 2007
|
|
Effective tax rate on pre-tax income
|
|
|
26.7
|
%
|
|
|
31.6
|
%
|
|
|
32.0
|
%
|
|
|
(15.5
|
)%
|
|
|
(1.3
|
)%
|
Income tax expense
|
|
$
|
355.6
|
|
|
$
|
365.8
|
|
|
$
|
272.4
|
|
|
|
(2.8
|
)%
|
|
|
34.3
|
%
|
Our effective tax rate fluctuates from year to year due to the
nature of our global operations. The factors that most
significantly impact our effective tax rate include variability
in the allocation of our taxable earnings between multiple
jurisdictions, changes in tax laws, acquisitions and licensing
transactions.
In 2009, our effective tax rate was impacted by the following
significant items:
|
|
|
|
|
Tax impact from licensing transaction During
2009, we entered into a collaboration and license agreement with
Acorda. As there is no income tax benefit associated with either
the $110.0 million upfront payment made to Acorda or our
development spending on fampridine outside the U.S., these
payments had a 2.1% unfavorable impact on our 2009 effective tax
rate.
|
|
|
|
Tax impact from changes in tax laws We
established deferred tax assets and adjusted certain deferred
tax liabilities, and adjusted our reserves for uncertain tax
positions, due to changes in tax laws in certain states in which
we operate. This had a favorable effect of 2.3% on our 2009
effective tax rate.
|
|
|
|
Tax impact from resolution of tax audits The
resolution of federal, state and foreign tax audits resulted in
reducing our reserves for several uncertain tax positions, which
had a favorable effect of 2.1% on our 2009 effective tax rate.
|
Our effective tax rate in 2009 was lower than in 2008 due to the
net effect of the three items noted above and a higher
percentage of our foreign earnings being subject to
U.S. income taxation in 2008. The effect of the allocation
of earnings was partially offset by certain tax credits and
deferred tax assets which will be realized as a result of our
2008 domestic reorganization.
Our effective tax rate in 2008 was higher than 2007 primarily
due to a reorganization of our international operations in 2008
and the allocation of our earnings subject to U.S. taxation
in each year.
The 2008 domestic and foreign reorganizations to our corporate
structure involved the movement of certain personnel, operations
and processes among our affiliates. Our effective tax rate will
continue to be dependent on the allocation of our profits among
jurisdictions and the percentage of our foreign earnings which
are subject to taxation in the U.S.
We expect our 2010 effective tax rate to be between 28% and 30%.
This rate does not consider the impact of a potential renewal of
the federal research and development tax credit.
48
Financial
Condition and Liquidity
Our financial condition is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
As of December 31,
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
to 2008
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
581.9
|
|
|
$
|
622.4
|
|
|
|
(6.5
|
)%
|
Marketable and loaned securities current
|
|
|
681.8
|
|
|
|
749.0
|
|
|
|
(9.0
|
)%
|
Marketable securities non-current
|
|
|
1,194.1
|
|
|
|
891.4
|
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets
|
|
$
|
2,457.8
|
|
|
$
|
2,262.8
|
|
|
|
8.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of notes payable and line of credit
|
|
$
|
19.8
|
|
|
$
|
27.7
|
|
|
|
(28.5
|
)%
|
Notes payable and line of credit
|
|
|
1,080.2
|
|
|
|
1085.4
|
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
1,100.0
|
|
|
$
|
1,113.1
|
|
|
|
(1.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
1,765.7
|
|
|
$
|
1,534.8
|
|
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year end December 31, 2009, certain significant
cash flows were as follows:
|
|
|
|
|
$1,074.9 million of cash flows generated from operations,
inclusive of the $110.0 million upfront payment made to
Acorda on July 1, 2009;
|
|
|
|
$751.2 million used for share repurchases;
|
|
|
|
$745.4 million in total payments for income taxes;
|
|
|
|
$229.1 million used for net purchases of marketable
securities; and
|
|
|
|
$165.6 million used for purchases of property, plant and
equipment.
|
Significant cash flow activities during 2008 included the net
repayment of approximately $525.5 million of indebtedness,
$738.9 million used to fund share repurchases, $222.8 used
for the net purchases of marketable securities, and
$276.0 million used to purchase property, plant and
equipment offset by cash generated from operations of
$1,562.4 million.
We have financed our operating and capital expenditures
principally through cash flows from our operations. We expect to
finance our current and planned operating requirements
principally through cash from operations, as well as existing
cash resources. We believe that existing funds, cash generated
from operations and existing sources of, and access to,
financing are adequate to satisfy our operating, working
capital, strategic alliance and acquisition, milestone payments,
capital expenditures and debt service requirements for the
foreseeable future. In addition, we plan to opportunistically
pursue our stock repurchase program and other business
initiatives, including acquisition and licensing activities. We
may, from time to time, seek additional funding through a
combination of new collaborative agreements, strategic alliances
and additional equity and debt financings or from other sources.
Please read the Risk Factors and Quantitative
and Qualitative Disclosures About Market Risk sections of
this report for items that could negatively impact our cash
position and ability to fund future operations.
Share
Repurchase Programs
In October 2009, our Board of Directors authorized the
repurchase of up to $1.0 billion of our common stock, with
repurchased shares being retired. This repurchase program does
not have an expiration date. As of December 31, 2009,
approximately 8.8 million shares at a cost of
$422.4 million were repurchased under this program, all of
which were retired. From January 1, 2010 through February
5, 2010, we repurchased approximately an additional
5.4 million shares under this program at a total cost of
approximately $289.4 million, all of which were also
retired. Approximately $288.2 million remains available for
the repurchase of our common stock under the 2009 program. The
remaining shares that may be purchased under this program is
subject to price fluctuations of our common stock.
49
In October 2006, our Board of Directors authorized the
repurchase of up to 20.0 million shares of our common
stock. This repurchase program was completed during the fourth
quarter of 2009. During 2009, approximately 7.2 million
shares of our common stock were repurchased for approximately
$328.8 million under this program. During 2008,
approximately 12.8 million shares of our common stock were
repurchased for approximately $738.9 million under this
program. We used the 2006 share repurchase program principally
for share stabilization.
Cash,
Cash Equivalents and Marketable Securities
Until required for use in the business, we invest our cash
reserves in bank deposits, certificates of deposit, commercial
paper, corporate notes, U.S. and foreign government
instruments and other interest bearing marketable debt
instruments in accordance with our investment policy. We attempt
to mitigate credit risk in our cash reserves and marketable
securities by maintaining a well diversified portfolio that
limits the amount of investment exposure as to institution,
maturity, and investment type. In particular, the value of our
investments may be adversely affected by increases in interest
rates, downgrades in the corporate bonds included in our
portfolio, instability in the global financial markets that
reduces the liquidity of securities included in our portfolio,
and by other factors which may result in other-than-temporary
declines in the value of the investments. Each of these events
may cause us to record charges to reduce the carrying value of
our investment portfolio or sell investments for less than our
acquisition cost which could adversely impact our financial
position and our overall liquidity.
The increase in cash and marketable securities as of
December 31, 2009 as compared to December 31, 2008 is
primarily due to an increase in cash from operations and
proceeds from the issuance of shares under our share-based
compensation programs offset by purchases of property, plant and
equipment, share repurchases, payments pursuant to our
collaboration agreement with Acorda and other collaboration
arrangements, and purchases of strategic investments.
Borrowings
There have been no significant changes in our borrowings since
December 31, 2008.
On March 4, 2008, we issued $450.0 million aggregate
principal amount of 6.0% Senior Notes due March 1,
2013 and $550.0 million aggregate principal amount of
6.875% Senior Notes due March 1, 2018 for proceeds of
$987.0 million, net of issuance costs. The credit rating on
these notes at December 31, 2009, was Baa3 with a stable
outlook by Moodys Investors Service and BBB+ with a stable
outlook by Standard & Poors. Additionally, in
connection with the issuance of these notes, we entered into
interest rate swaps, which were terminated in December 2008 and
are further described in Note 6, Fair Value Measurements
to our Consolidated Financial Statements. We used the
proceeds of this offering, along with cash and the proceeds from
the liquidation of marketable securities, to repay the
$1,500.0 million term loan facility we had entered into in
July 2007 in connection with the funding of our June 2007 stock
repurchase tender offer.
In June 2007, we entered into a five year $400.0 million
senior unsecured revolving credit facility, which we may use for
future working capital and general corporate purposes. The
bankruptcy of Lehman Brothers Holdings Inc. in 2008 resulted in
the elimination of their $40.0 million commitment, thereby
reducing the availability of the credit facility to
$360.0 million. The terms of this revolving credit facility
include various covenants, including financial covenants that
require us to not exceed a maximum leverage ratio and, under
certain circumstances, an interest coverage ratio. As of
December 31, 2009, and 2008 there were no borrowings under
this credit facility and we were in compliance with applicable
covenants.
Working
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
As of December 31,
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
to 2008
|
|
|
Current assets
|
|
$
|
2,480.6
|
|
|
$
|
2,458.0
|
|
|
|
0.9
|
%
|
Current liabilities
|
|
|
(714.9
|
)
|
|
|
(923.2
|
)
|
|
|
(22.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
1,765.7
|
|
|
$
|
1,534.8
|
|
|
|
15.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
We define working capital as current assets less current
liabilities. The increase in working capital primarily reflects
the overall reduction of current liabilities by
$208.3 million primarily driven by a $147.4 million
reduction in balances attributable to taxes payable. The change
in total current assets was negligible as increases in net
receivable balances, inventory and other current assets were
offset by decreases in cash and marketable and loaned securities.
Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
For the Years Ended December 31,
|
|
|
Compared
|
|
|
Compared
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
to 2008
|
|
|
to 2007
|
|
|
Net cash flows provided by operating activities
|
|
$
|
1,074.9
|
|
|
$
|
1,562.4
|
|
|
$
|
1,018.8
|
|
|
|
(31.2
|
)%
|
|
|
53.4
|
%
|
Net cash flows used in investing activities
|
|
$
|
(395.0
|
)
|
|
$
|
(365.9
|
)
|
|
$
|
(286.6
|
)
|
|
|
8.0
|
%
|
|
|
27.7
|
%
|
Net cash flows used in financing activities
|
|
$
|
(724.2
|
)
|
|
$
|
(1,234.6
|
)
|
|
$
|
(733.3
|
)
|
|
|
(41.3
|
)%
|
|
|
68.4
|
%
|
Operating
Activities
Cash flows from operating activities represent the cash receipts
and disbursements related to all of our activities other than
investing and financing activities. Cash provided by operating
activities is primarily driven by our earnings and changes in
working capital. We expect cash provided from operating
activities will continue to be our primary source of funds to
finance operating needs and capital expenditures for the
foreseeable future.
Operating cash flow is derived by adjusting net income for:
|
|
|
|
|
Non-cash operating items such as depreciation and amortization,
impairment charges and share-based compensation charges;
|
|
|
|
Changes in operating assets and liabilities which reflect timing
differences between the receipt and payment of cash associated
with transactions and when they are recognized in results of
operations.
|
The decrease in cash provided by operating activities for 2009
as compared to 2008 was primarily driven by change in other
liabilities and taxes payable, primarily due to an increase in
income tax payments of $373.4 million, primarily resulting
from increased earnings and the settlement of various audits in
2009, the $110.0 million upfront payment made to Acorda on
July 1, 2009 and the payment of certain accrued expenses
and other current liabilities.
The increase in cash from operating activities for 2008 as
compared to 2007 was primarily due to higher earnings net of a
higher investment in working capital and the proceeds received
from the termination of the interest rate swap.
Investing
Activities
The increase in net cash used in investing activities in 2009
compared to 2008 is primarily due to a decrease in collateral
received under our securities lending program offset primarily
by a decrease in net purchases of marketable securities and a
reduction in purchases of property, plant and equipment. The
decline in purchases of property, plant and equipment is
primarily attributable to our Hillerød, Denmark
manufacturing facility and certain other manufacturing upgrades
which are near completion.
The increase in cash used in investing activities in 2008
compared to 2007 is primarily due to an increase in net
purchases of marketable securities, offset by cash proceeds from
collateral received under securities lending.
In 2009, significant cash flows related to investing activities
consisted primarily of net purchases of marketable securities of
$229.1 million. Our other primary use of cash in investing
activities consisted of the purchases of property, plant and
equipment of $165.6 million.
In 2008, significant cash flows related to investing activities
consisted of net purchases of marketable securities of
$222.8 million and net purchases of property, plant and
equipment totaling $276.0 million.
51
In 2007, net proceeds from sales of marketable securities of
$209.0 million were used to partially fund our 2007 tender
offer. Purchases of property, plant and equipment totaled
$284.1 million in 2007. Payments made for acquisitions and
collaborations were $95.8 million in 2007, which primarily
related to our acquisition of Syntonix for $42.3 million
and our collaboration payments to Cardiokine for
$50.0 million and Neurimmune of $2.0 million. The
change in balance of collateral received under securities
lending is reflected as a use of cash in investing activities
offset by a source of cash from financing activities.
Additionally, in 2007 we sold our position in a strategic
investment for $99.5 million.
Financing
Activities
The decrease in cash used in financing activities in 2009
compared to 2008 is due, principally, to the repayment of our
term loan facility of $1,500.0 million in 2008, offset by
the issuance of our notes payable, a decrease in the amount of
stock options exercised, and a decrease in obligations under our
securities lending program.
The increase in cash used in financing activities in 2008 as
compared to 2007 is due principally to a reduction in the net
proceeds received from borrowings offset by an overall decrease
in the amount of common stock repurchased.
In 2009, we repurchased approximately 16.0 million shares
for $751.2 million under our 2009 and 2006 share
repurchase programs.
The primary use of cash in 2008 was for the repayment of our
term loan facility of $1,500.0 million and the repurchase
of our common stock for $738.9 million, offset in part by
the net proceeds of $987.0 million from the issuance of
long-term debt and proceeds of $178.5 million from the
issuance of shares under our share based compensation programs.
In 2007, the primary use of cash related to the repurchase of
our common stock for $2,990.5 million by means of a tender
offer. This repurchase was partially funded with cash proceeds
from a short-term note of $1,500.0 million. Additionally,
cash proceeds from the issuance of shares under our share based
compensation programs were $489.2 million, which was
attributable to the exercise of stock options and participation
in our employee stock purchase plan. The change in balance of
collateral received under securities lending is reflected as a
use of cash in investing activities offset by a source of cash
from financing activities.
Contractual
Obligations and Off-Balance Sheet Arrangements
Contractual
Obligations
The following summarizes our contractual obligations (excluding
funding commitments, contingent milestone payments and other
off-balance sheet arrangements as described below) as of
December 31, 2009, and the effects such obligations are
expected to have on our liquidity and cash flows in future
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1 to 3
|
|
|
4 to 5
|
|
|
After
|
|
(In millions)
|
|
Total
|
|
|
1 Year
|
|
|
Years
|
|
|
Years
|
|
|
5 Years
|
|
|
Non-cancellable operating leases(1)
|
|
$
|
381.8
|
|
|
$
|
33.0
|
|
|
$
|
63.0
|
|
|
$
|
58.5
|
|
|
$
|
227.3
|
|
Notes payable and line of credit(2)
|
|
|
1,442.0
|
|
|
|
84.9
|
|
|
|
143.8
|
|
|
|
535.1
|
|
|
|
678.2
|
|
Purchase obligations(3)
|
|
|
42.4
|
|
|
|
36.1
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
Defined benefit obligation
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual obligations
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$
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1,871.9
|
|
|
$
|
154.0
|
|
|
$
|
213.1
|
|
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$
|
593.6
|
|
|
$
|
911.2
|
|
|
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|
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(1) |
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Includes fifteen-year lease on a 356,000 square foot office
building in Weston, Massachusetts, which will serve as the
future location of our general and administrative offices with a
planned occupancy around mid-year 2010. The initial lease term
is from 2010 through 2025 under which the total minimum lease
payments are $258.6 million. |
|
(2) |
|
Notes payable and line of credit includes principal and interest
payments. |
52
|
|
|
(3) |
|
Purchase obligations include our obligations of approximately
$6.4 million pursuant to a dedicated resource agreement
whereby a laboratory will provide us with dedicated services
through 2010, $9.3 million related to the fair value of net
liabilities on derivative contracts due in less than one year,
approximately $12.0 million related to fixed obligations
for the purchase of natural gas and $3.4 million in
construction commitments related to our manufacturing facility
in Hillerød, Denmark. |
The table above excludes tax payments totaling approximately
$105.0 million to be made in the first half of 2010 related to
the settlement of certain federal and state tax audits in 2009,
and also excludes liabilities pertaining to uncertain tax
positions as we cannot make a reliable estimate of the period of
cash settlement with the respective taxing authorities. As of
December 31, 2009, we have approximately $52.6 million
of long-term liabilities associated with uncertain tax positions.
Funding
Commitments
As of December 31, 2009, we have funding commitments of up
to approximately $24.8 million as part of our investment in
biotechnology oriented venture capital funds.
As of December 31, 2009, we have several ongoing clinical
trials. Our most significant clinical trial expenditures are to
clinical research organizations (CROs). The contracts with CROs
are generally cancellable, with notice, at our option. We have
recorded accrued expenses of $31.7 million on our
consolidated balance sheet for work done by CROs as of
December 31, 2009. We have approximately
$460.0 million in cancellable future commitments based on
existing CRO contracts as of December 31, 2009 which are
not included in the contractual obligations table above as they
are cancellable.
Contingent
Milestone Payments
Based on our development plans as of December 31, 2009, we
have committed to make potential future milestone payments to
third parties of up to approximately $1,500.0 million as
part of our various collaborations, including licensing and
development programs. Payments under these agreements generally
become due and payable only upon achievement of certain
developmental, regulatory or commercial milestones. Because the
achievement of these milestones had not occurred as of
December 31, 2009, such contingencies have not been
recorded in our financial statements. We anticipate that we may
pay approximately $82.0 million of milestone payments in
2010, provided various developmental, regulatory or commercial
milestones are achieved.
Amounts related to contingent milestone payments are not
included in the contractual obligations table above as they are
contingent on the successful achievement of certain development,
regulatory approval and commercial milestones. These milestones
may not be achieved.
Other
Off-Balance Sheet Arrangements
We do not have any significant relationships with entities often
referred to as structured finance or special purpose entities
which would have been established for the purpose of
facilitating off-balance sheet arrangements. As such, we are not
exposed to any financing, liquidity, market or credit risk that
could arise if we had engaged in such relationships. We
consolidate entities if we are the primary beneficiary.
Legal
Matters
Please read Note 19, Litigation to our Consolidated
Financial Statements for a discussion of legal matters as of
December 31, 2009.
Critical
Accounting Estimates
The discussion and analysis of our financial position and
results of operations is based on our consolidated financial
statements, which have been prepared in accordance with
accounting principles generally accepted in the United States
(U.S. GAAP). The preparation of these consolidated
financial statements in accordance with U.S. GAAP requires
us to make estimates and judgments that may affect the reported
amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates and judgments,
including those related to revenue recognition and related
allowances, marketable
53
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 we believe are
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.
We believe the following critical accounting estimates affect
our more significant estimates and judgments used in the
preparation of our consolidated financial statements:
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Revenue recognition;
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Collaborative relationships;
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Clinical trial expenses;
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Consolidation of variable interest entities;
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Inventory;
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Investments;
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Impairment of financial instruments;
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Impairment of long-lived assets including goodwill;
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Valuation of acquired intangible assets and IPR&D;
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Share-based compensation;
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Income taxes; and
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Contingencies.
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Revenue
Recognition
We recognize revenue when all of the following criteria are met:
persuasive evidence of an arrangement exists; delivery of
product has occurred or services have been rendered; the
sellers price to the buyer is fixed or determinable; and
collectibility is reasonably assured.
Product
Revenues
Revenues from product sales are recognized when title and risk
of loss have passed to the customer, which is typically upon
delivery. However, sales of TYSABRI in the U.S. 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. The timing of distributor
orders and shipments can cause variability in earnings.
Reserves
for Discounts and Allowances
Revenues are recorded net of applicable reserves for trade term
discounts, wholesaler incentives, Medicaid rebates, VA rebates,
managed care rebates, product returns and other applicable
allowances. 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 and 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. The estimates we make with respect to
these allowances represent the most significant judgments with
regard to revenue recognition.
Royalty
Revenues
We receive royalty revenues under license agreements with a
number of third parties that sell products based on technology
we have developed or to which we own rights. The license
agreements provide for the payment of royalties to us based on
sales of these licensed products. There are no future
performance obligations on our part
54
under these license agreements. We record these revenues based
on estimates of the sales that occurred during the relevant
period. The relevant period estimates of sales are based on
interim data provided by licensees and analysis of historical
royalties that have been paid to us, adjusted for any changes in
facts and circumstances, as appropriate. We maintain regular
communication with our licensees in order to assess the
reasonableness of our estimates. Differences between actual
royalty revenues and estimated royalty revenues are adjusted for
in the period in which they become known, typically the
following quarter. Historically, adjustments have not been
material when compared to actual amounts paid by licensees. To
the extent we do not have sufficient ability to accurately
estimate revenues; we record such revenues on a cash basis.
Revenue
Arrangements with Multiple Deliverables
In October 2009 a new accounting standard for the recognition of
revenue arrangements with multiple deliverables was issued. This
standard provides accounting principles and application guidance
on whether multiple deliverables exist, how the arrangement
should be separated, and how the consideration should be
allocated. This new approach is effective prospectively for
revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. While we
do not expect the adoption of this standard to have a material
impact on our financial position and results of operations, this
standard may impact us in the event we complete future
transactions or modify existing collaborative relationships.
Refer to Note 23, New Accounting Pronouncements to
our Consolidated Financial Statements for additional discussion
of this standard and its impact on us.
Collaborative
Relationships
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. 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 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
Revenue Recognition Topic of the Codification 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.
As discussed within Note 17, Collaborations to our
Consolidated Financial Statements, Genentech incurs the majority
of continuing development cost 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.
Clinical
Trial Expenses
Clinical trial expenses include expenses associated with CROs.
The invoicing from CROs for services rendered can lag several
months. We accrue the cost of services rendered in connection
with CRO activities based on our estimate of site management,
monitoring costs, and project management costs. We maintain
regular communication with our CROs to gauge the reasonableness
of our estimates. Differences between actual clinical trial
expenses and estimated clinical trial expenses recorded have not
been material and are adjusted for in the period in which they
become known.
Consolidation
of Variable Interest Entities
We consolidate variable interest entities in which we are the
primary beneficiary. For such consolidated entities where we own
less than a 100% interest, we record noncontrolling interest in
our statement of income for the current results allocated to the
third party equity interests. In determining whether we are the
primary beneficiary, we consider a number of factors, including
determining the expected losses and residual returns of the
technologies being developed pursuant to collaborations and
other economic risk and reward of such collaborations.
55
Discounted cash flow models are typically used in these analyses
and these models require the use of significant estimates and
assumptions including but not limited to:
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assuming that the research and development efforts will result
in an approved commercial product;
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estimating the timing of and expected costs to complete the
in-process projects;
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projecting timing of regulatory approvals;
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estimating future cash inflows from product sales or funding
from partners resulting from completed products and in-process
projects; and
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developing appropriate discount rates and probability rates by
project.
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These factors affect the way we account for certain
collaborations. Future events may result in our consolidation of
companies or related entities with which we have a collaborative
arrangement. The consolidation of variable interest entities may
have a material effect on our financial condition and results of
operation in future periods.
Effective January 1, 2010, a new accounting standard will
amend previously issued accounting guidance for the
consolidation of variable interest entities and will affect how
an enterprise determines whether its variable interest or
interests give it a controlling financial interest in a variable
interest entity. This new standard 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, the
determination about whether an enterprise should consolidate a
variable interest entity is required to be evaluated
continuously. Refer to Note 23, New Accounting
Pronouncements to our Consolidated Financial Statements for
additional discussion of this standard and its impact on us.
Inventory
Inventories are stated at the lower of cost or market with cost
determined under the
first-in,
first-out (FIFO) method. Included in inventory are raw materials
used in the production of pre-clinical and clinical products,
which are expensed as research and development costs when
consumed.
Capitalization
of Inventory Costs
Our policy is to capitalize inventory costs associated with our
products prior to regulatory approval, when, based on
managements judgment, future commercialization is
considered probable and the future economic benefit is expected
to be realized. We consider numerous attributes in evaluating
whether the costs to manufacture a particular product should be
capitalized as an asset. We assess the regulatory approval
process and where the particular product stands in relation to
that approval process, including any known constraints and
impediments to approval, including safety, efficacy and
potential labeling restrictions. We evaluate our anticipated
research and development initiatives and constraints relating to
the product and the indication in which it will be used. We
consider our manufacturing environment including our supply
chain in determining logistical constraints that could hamper
approval or commercialization. We consider the shelf life of the
product in relation to the expected timeline for approval and we
consider patent related or contract issues that may prevent or
cause delay in commercialization. We are sensitive to the
significant commitment of capital to scale up production and to
launch commercialization strategies. We also base our judgment
on the viability of commercialization, trends in the marketplace
and market acceptance criteria. Finally, we consider the
reimbursement strategies that may prevail with respect to the
product and assess the economic benefit that we are likely to
realize.
We expense previously capitalized costs related to pre-approval
inventory upon a change in such judgment, due to, among other
potential factors, a denial or delay of approval by necessary
regulatory bodies. As of December 31, 2009 and 2008, the
carrying value of our inventory did not include any costs
associated with products that had not yet received regulatory
approval.
There is a risk inherent in these judgments and any changes we
make in these judgments may have a material impact on our
results in future periods.
56
Obsolescence
and Unmarketable Inventory
We periodically review our inventories for excess or obsolete
inventory and write-down obsolete or otherwise unmarketable
inventory to its estimated net realizable value. If the actual
net realizable value is less than that estimated by us, or if it
is determined that inventory utilization will further diminish
based on estimates of demand, additional inventory write-downs
may be required. Additionally, our products are subject to
strict quality control and monitoring which we perform
throughout the manufacturing process. In the event that certain
batches or units of product no longer meet quality
specifications or become obsolete due to expiration, we will
record a charge to cost of sales to write-down any obsolete or
otherwise unmarketable inventory to its estimated net realizable
value. In all cases product inventory is carried at the lower of
cost or its estimated net realizable value.
Investments
We invest in various types of securities, including:
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short-term and long-term marketable securities, principally
corporate notes, government securities including government
sponsored enterprise mortgage-backed securities and credit card
and auto loan asset-backed securities, in which our excess cash
balances are invested;
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equity securities in certain publicly-traded biotechnology
companies, some of which have collaborative agreements with us;
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equity securities of certain companies whose securities are not
publicly traded and where fair value is not readily
available; and
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investment in biotechnology oriented venture capital funds where
fair value is not readily available.
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These investments are accounted for in accordance with
accounting standards for certain investments in debt and equity
securities.
We monitor the financial performance of our portfolio of
investments which are subject to concentration limits set within
our investment policy to help mitigate and limit the amount of
investment exposure as to institution, maturity and investment
type. The objectives of this policy are safety of principal,
liquidity and yield.
In accordance with the accounting standard for fair value
measurements we have classified our financial assets and
liabilities as Level 1, 2 or 3 within the fair value
hierarchy. Fair values determined by Level 1 inputs utilize
quoted prices (unadjusted) in active markets for identical
assets or liabilities that we have the ability to access. 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.
As noted in Note 6, Fair Value Measurements to our
Consolidated Financial Statements, 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 utilizing third party
pricing services. The pricing services use many observable
market inputs to determine value, including reportable trades,
benchmark yields, credit spreads, broker/dealer quotes, bids,
offers, current spot rates and other industry and economic
events. We validate the prices provided by our third party
pricing services by understanding the models used, obtaining
market values from other pricing sources, analyzing pricing data
in certain instances and confirming those securities trade in
active markets.
We also have some investments classified as Level 3 whose
fair value is 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. We apply judgments and estimates when we
validate the prices provided by third parties. While we believe
the valuation methodologies are appropriate, the use of
valuation methodologies is highly judgmental and changes in
methodologies can have a material impact on our results of
operations.
57
Impairment
of Financial Instruments
Other-than-Temporary
Impairments
In April 2009, we implemented newly issued accounting standards
which provide guidance for the recognition, measurement and
presentation of
other-than-temporary
impairments. This newly issued standard 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 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 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.
Impairment
of Long-lived Assets including Goodwill
Long-lived
Assets Other than Goodwill
We periodically evaluate whether current facts or circumstances
indicate that the carrying value of our long-lived assets to be
held and used, including property plant and equipment, as well
as intangible assets, whenever events or changes in
circumstances indicate that the carrying amount of the assets
may not be recoverable. Factors we consider that could indicate
a change in circumstances include, but are not limited to:
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a significant decline in the observable market value of an asset;
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58
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a significant adverse change in the extent or manner in which an
asset is used;
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a significant adverse change or development in strategy or
operations that negatively impact the utilization of our
long-lived assets;
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a significant change in industry or economic trends;
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significant underperformance of the asset in relation to
historical or projected future operating results;
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If such circumstances are determined to exist, an estimate of
undiscounted future cash flows produced by the long-lived asset,
including its eventual residual value, is compared to the
carrying value to determine whether impairment exists. In the
event that such cash flows are not expected to be sufficient to
recover the carrying amount of the assets, the assets are
written-down to their estimated fair values.
Determining whether impairment has occurred typically requires
various estimates and assumptions, including determining which
undiscounted cash flows are directly related to the potentially
impaired asset, the useful life over which cash flows will
occur, their amount, and the assets residual value, if
any. We derive the required undiscounted cash flow estimates
from our historical experience and our internal business plans.
We did not recognize an impairment charge related to our
long-lived assets, other than goodwill, during 2009, 2008 and
2007.
Goodwill
We assess our goodwill balance within our single reporting unit
annually and whenever events or changes in circumstances
indicate the carrying value of goodwill may not be recoverable
in accordance with the Intangibles-Goodwill and Other
Topic of the Codification to determine whether any
impairment in this asset may exist and, if so, the extent of
such impairment. The provisions of this guidance require that we
perform a two-step impairment test. In the first step, we
compare the fair value of our reporting unit to its carrying
value. If the carrying value of the net assets assigned to our
reporting unit exceeds the fair value of our reporting unit,
then the second step of the impairment test is performed in
order to determine the implied fair value of our reporting
units goodwill. If the carrying value of our reporting
units goodwill exceeds its implied fair value, then the
company records an impairment loss equal to the difference.
We calculate the fair value of our reporting unit utilizing both
an income approach and a market approach. The income approach
utilizes a discounted cash flow model with multiple scenarios
for future growth. The discount is calculated based on our cost
of capital rate. The market approach utilizes revenue and other
metrics from similar publicly traded companies. The results of
both fair value calculations are then compared to our reporting
units carrying value. We completed our required annual
impairment test in the fourth quarter of 2009, 2008 and 2007 and
determined in each of those periods that the carrying value of
goodwill was not impaired. In each year, the fair value of our
reporting unit, which includes goodwill, was significantly in
excess of the carry value of our reporting unit.
The determination of the fair value of a reporting unit is
judgmental in nature and involves the use of significant
estimates and assumptions. The estimates and assumptions used in
calculating fair value include identifying future cash flows,
which requires that we make a number of critical legal,
economic, market and business assumptions that reflect our best
estimates as of the testing date. We believe the methods we use
to determine these underlying assumptions and estimates are
reasonable. Our assumptions and estimates may differ
significantly from actual results, or circumstances could change
that would cause us to conclude that an impairment now exists or
that we previously understated the extent of impairment.
Valuation
of Acquired Intangible Assets and In-process Research and
Development Expenses
We have acquired, and expect to continue to acquire, intangible
assets primarily through the acquisition of biotechnology
companies. These intangible assets primarily consist of
technology associated with human therapeutic products and
in-process product candidates. When significant identifiable
intangible assets are acquired, we generally engage an
independent third-party valuation firm to assist in determining
the fair values of these assets as of the acquisition date.
Management will determine the fair value of less significant
identifiable intangible assets
59
acquired. Discounted cash flow models are typically used in
these valuations, and these models require the use of
significant estimates and assumptions including but not limited
to:
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estimating the timing of and expected costs to complete the
in-process projects;
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projecting regulatory approvals;
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estimating future cash flows from product sales resulting from
completed products and in-process projects; and
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developing appropriate discount rates and probability rates by
project.
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We believe the fair values assigned to the intangible assets
acquired are based upon reasonable estimates and assumptions
given available facts and circumstances as of the acquisition
dates.
If these projects are not successfully developed, the sales and
profitability of the company may be adversely affected in future
periods. Additionally, the value of the acquired intangible
assets may become impaired. We believe that the foregoing
assumptions used in the IPR&D analysis were reasonable at
the time of the respective acquisition. No assurance can be
given, however, that the underlying assumptions used to estimate
expected project sales, development costs or profitability, or
the events associated with such projects, will transpire as
estimated.
We account for business combinations completed on or after
January 1, 2009 in accordance with the revised guidance for
accounting for business combinations, which modifies the
criteria that must be met to qualify as a business combination
and prescribes new accounting requirements, including the
accounting treatment associated with acquired IPR&D. Before
January 1, 2009 we measured acquired IPR&D at fair
value and expensed it on the acquisition date, or capitalized it
as intangible assets if certain criteria were met. Effective
January 1, 2009, acquired IPR&D is measured at fair
value and capitalized as intangible assets and tested for
impairment until completion of programs and amortized from the
date of completion over its estimated useful life.
Share-based
Compensation
We make certain assumptions in order to value and expense our
share-based compensation. In connection with valuing stock
options and our employee stock purchase plan, we use the
Black-Scholes model, which requires us to estimate certain
subjective assumptions. The key assumptions we make are: the
expected volatility of our stock; the expected term of the
award; and the expected forfeiture rate. In connection with our
restricted stock programs, we make assumptions principally
related to the forfeiture rate. In addition, for our
performance-vested restricted stock programs, we estimate the
performance factor each period end in order to estimate the
actual number of shares that will be earned. For example,
performance-vested restricted stock programs are usually based
on company performance metrics such as annual revenue and
earnings per share. Thus, during the performance period, we
estimate our full year revenue and earnings per share and then
adjust the performance factor after the completion of the full
year.
We review our valuation assumptions periodically and, as a
result, we may change our valuation assumptions used to value
share-based awards granted in future periods. Such changes may
lead to a significant change in the expense we recognize in
connection with share-based payments.
New forms of equity awards are expected to be granted to certain
employees beginning in 2010: restricted stock units which will
vest based on market conditions and performance-vested
restricted stock units which will be settled in cash. The market
based awards require the use of a binomial model or Monte Carlo
simulation for valuation at grant date and include key
assumptions such as the expected market price of the
companys stock on the vest date and the expected number of
vested shares. The cash settled awards will be marked to market
at each period end with fluctuations in value reported through
earnings. We will apply forfeiture rate assumptions similar to
those utilized by us when accounting for our other share-based
compensation programs.
Income
Taxes
In preparing our consolidated financial statements, we estimate
our income tax liability in each of the jurisdictions in which
we operate by estimating our actual current tax expense together
with assessing temporary differences resulting from differing
treatment of items for tax and financial reporting purposes.
These differences
60
result in deferred tax assets and liabilities, which are
included in our consolidated balance sheets. Significant
management judgment is required in assessing the realizability
of our deferred tax assets. In performing this assessment, we
consider whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in
which those temporary differences become deductible. In making
this determination, under the applicable financial accounting
standards, we are allowed to consider the scheduled reversal of
deferred tax liabilities, projected future taxable income, and
the effects of tax planning strategies. Our estimates of future
taxable income include, among other items, our estimates of
future income tax deductions related to the exercise of stock
options. In the event that actual results differ from our
estimates, we adjust our estimates in future periods and we may
need to establish a valuation allowance, which could materially
impact our financial position and results of operations.
We account for uncertain tax positions using a
more-likely-than-not threshold for recognizing and
resolving uncertain tax positions. The evaluation of uncertain
tax positions is based on factors that include, but are not
limited to, changes in tax law, the measurement of tax positions
taken or expected to be taken in tax returns, the effective
settlement of matters subject to audit, new audit activity and
changes in facts or circumstances related to a tax position. We
evaluate uncertain tax positions on a quarterly basis and adjust
the level of the liability to reflect any subsequent changes in
the relevant facts surrounding the uncertain positions. Our
liabilities for uncertain tax positions can be relieved only if
the contingency becomes legally extinguished through either
payment to the taxing authority or the expiration of the statute
of limitations, the recognition of the benefits associated with
the position meet the more-likely-than-not threshold
or the liability becomes effectively settled through the
examination process. We consider matters to be effectively
settled once the taxing authority has completed all of its
required or expected examination procedures, including all
appeals and administrative reviews; we have no plans to appeal
or litigate any aspect of the tax position; and we believe that
it is highly unlikely that the taxing authority would examine or
re-examine the related tax position. We also accrue for
potential interest and penalties, related to unrecognized tax
benefits in income tax expense.
Contingencies
We are currently involved in various claims and legal
proceedings. On a quarterly basis, we review the status of each
significant matter and assess its potential financial exposure.
If the potential loss from any claim or legal proceeding is
considered probable and the amount can be reasonably estimated,
we accrue a liability for the estimated loss. Significant
judgment is required in both the determination of probability
and the determination as to whether an exposure is reasonably
estimable. Because of uncertainties related to these matters,
accruals are based only on the best information available at the
time. As additional information becomes available, we reassess
the potential liability related to pending claims and litigation
and may revise our estimates. These revisions in the estimates
of the potential liabilities could have a material impact on our
consolidated results of operations and financial position.
New
Accounting Standards
Please read Note 23, New Accounting Pronouncements
to our Consolidated Financial Statements for a discussion of
new accounting standards.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
We have operations in Canada, Brazil, Argentina, Australia, New
Zealand, Japan, China, and India and throughout Europe in
connection with the sale of AVONEX and TYSABRI and in Germany in
connection with the sale of FUMADERM. We also receive royalty
revenues based on worldwide product sales by our licensees and
through Genentech on sales of RITUXAN in the rest of world. As a
result, our financial position, results of operations and cash
flows can be affected by market fluctuations in foreign exchange
rates, primarily with respect to the Euro, Danish kroner,
Swedish krona, British pound, Japanese yen, Canadian dollar and
Swiss franc.
We use foreign currency forward contracts to manage foreign
currency risk but do not engage in currency speculation. The
majority of our forward contracts are used to hedge certain
forecasted revenue transactions
61
denominated in foreign currencies. We also use forward contracts
to mitigate the foreign currency exposure related to certain
balance sheet items. We have not elected hedge accounting for
the balance sheet related items.
The following quantitative information includes the impact of
currency movements on forward contracts used in both programs.
As of December 31, 2009 and 2008, a hypothetical adverse
10% movement in foreign exchange rates compared to the
U.S. dollar across all maturities (for example, a
strengthening of the Euro) would result in a hypothetical
decrease in the fair value of forward contracts of approximately
$64.4 million and $52.4 million, respectively. Our use
of this methodology to quantify the market risk of such
instruments should not be construed as an endorsement of its
accuracy or the accuracy of the related assumptions. The
quantitative information about market risk is limited because it
does not take into account all foreign currency operating
transactions.
Certain of our debt instruments are variable rate instruments
and our interest expense associated with these instruments is,
therefore, subject to changes in market interest rates. As of
December 31, 2009 and 2008, a 100 basis-point adverse
movement (increase in LIBOR) would increase annual interest
expense by approximately $0.2 million in each period.
In addition, the fair value of our marketable securities is
subject to change as a result of potential changes in market
interest rates. The potential change in fair value for interest
rate sensitive instruments has been assessed on a hypothetical
100 basis point adverse movement across all maturities. As
of December 31, 2009 and 2008, we estimate that such
hypothetical adverse 100 basis point movement would result
in a hypothetical loss in fair value of approximately
$16.9 million and $12.2 million, respectively, to our
interest rate sensitive instruments.
The returns from cash, cash equivalents and marketable
securities will vary as short-term interest rates change. A 100
basis-point adverse movement (decrease) in short-term interest
rates would decrease interest income by approximately
$12.5 million and $11.9 million as of
December 31, 2009 and 2008, respectively.
We are exposed to equity price risks on the marketable portion
of equity securities included in our portfolio of investments
entered into for the promotion of business and strategic
objectives. These investments are generally in small
capitalization stocks in the biotechnology industry sector. We
regularly review the market prices of these investments for
impairment purposes. A hypothetical adverse 10% movement in
market values would result in a hypothetical loss in fair value
of approximately $1.0 million and $0.9 million as of
December 31, 2009 and 2008, respectively.
|
|
Item 8.
|
Consolidated
Financial Statements and Supplementary Data
|
The information required by this Item 8 is contained on
pages F-1 through F-65 of this report and is incorporated herein
by reference.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures and Internal Control over Financial
Reporting
Controls
and Procedures
We have carried out an evaluation, under the supervision and
with the participation of our management, including our
principal executive officer and principal financial officer, of
the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended), as of
December 31, 2009. Based upon that evaluation, our
principal executive officer and principal financial officer
concluded that, as of the end of the period covered by this
report, our disclosure controls and procedures are effective in
ensuring that (a) the information required to be disclosed
by us in the reports that we file or submit under the Securities
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and
forms, and (b) such information is accumulated and
communicated to our management, including our principal
executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required
disclosure. In designing and evaluating our disclosure
62
controls and procedures, our management recognized that any
controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management necessarily was
required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Changes
in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting during the quarter ended December 31, 2009 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
Managements
Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over our financial reporting. Internal
control over financial reporting is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Securities Exchange Act as a process designed by, or
under the supervision of, a companys principal executive
and principal financial officers and effected by a
companys board of directors, management and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles in the
U.S. (U.S. GAAP). Our internal control over financial
reporting includes those policies and procedures that:
|
|
|
|
|
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect our transactions and
dispositions of our assets;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with U.S. GAAP, and that our receipts and
expenditures are being made only in accordance with
authorizations of our management and directors; and
|
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on our financial
statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2009.
In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control
Integrated Framework.
Based on our assessment, our management has concluded that, as
of December 31, 2009, our internal control over financial
reporting is effective based on those criteria.
The effectiveness of our internal control over financial
reporting as of December 31, 2009 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report, which is included
herein.
|
|
Item 9B.
|
Other
Information
|
None.
63
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
The information concerning our executive officers is set forth
under the heading Our Executive Officers in
Part I of this report. The text of our code of business
conduct, which includes the code of ethics that applies to our
principal executive officer, principal financial officer,
principal accounting officer or controller, and persons
performing similar functions, is posted on our website,
www.biogenidec.com, under the Board of
Directors Corporate Governance subsection of
the About Us section of the site. Disclosure
regarding any amendments to, or waivers from, provisions of our
code of business conduct, if required, will be included in a
Current Report on
Form 8-K
within four business days following the date of the amendment or
waiver, unless website posting of such amendments or waivers is
permitted by the rules of The NASDAQ Stock Market, Inc. Our
corporate governance principles (also posted on
www.biogenidec.com) prohibit our Board of Directors from
granting any waiver of the code of ethics for any of our
directors or executive officers. We include our website address
in this report only as an inactive textual reference and do not
intend it to be an active link to our website.
The response to the remainder of this item is incorporated by
reference from the discussion responsive thereto in the sections
entitled Proposal 1, Election of Directors,
Stock Ownership Section 16(a)
Beneficial Ownership Reporting Compliance and
Miscellaneous Stockholder Proposals
contained in the proxy statement for our 2010 annual meeting of
stockholders.
|
|
Item 11.
|
Executive
Compensation
|
The response to this item is incorporated by reference from the
discussion responsive thereto in the sections entitled
Executive Compensation and Related Information and
Proposal 1, Election of Directors
Compensation Committee Interlocks and Insider
Participation contained in the proxy statement for our
2010 annual meeting of stockholders.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The response to this item is incorporated by reference from the
discussion responsive thereto in the sections entitled
Stock Ownership and Disclosure with Respect to
our Equity Compensation Plans contained in the proxy
statement for our 2010 annual meeting of stockholders.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The response to this item is incorporated by reference from the
discussion responsive thereto in the sections entitled
Certain Relationships and Related Person
Transactions and Proposal 1, Election of
Directors Director Independence contained in
the proxy statement for our 2010 annual meeting of stockholders.
|
|
Item 14.
|
Principal
Accountant Fees and Services
|
The response to this item is incorporated by reference from the
discussion responsive thereto in the section entitled
Proposal 2, Ratification of the Selection of our
Independent Registered Public Accounting Firm contained in
the proxy statement for our 2010 annual meeting of stockholders.
64
PART IV
|
|
Item 15.
|
Exhibits,
Financial Statement Schedules
|
a. (1) Consolidated Financial Statements:
The financial statements required to be filed by Item 8 of
this report and filed in this Item 15, are as follows:
|
|
|
|
|
Financial Statements
|
|
Page Number
|
|
Consolidated Statements of Income
|
|
|
F-2
|
|
Consolidated Balance Sheets
|
|
|
F-3
|
|
Consolidated Statements of Cash Flows
|
|
|
F-4
|
|
Consolidated Statements of Shareholders Equity
|
|
|
F-5
|
|
Notes to Consolidated Financial Statements
|
|
|
F-7
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
F-64
|
|
(2) Financial Statement Schedules
Schedules are omitted because they are not applicable, or are
not required, or because the information is included in the
consolidated financial statements and notes thereto.
(3) Exhibits:
The exhibits which are filed or furnished with this report or
which are incorporated herein by reference are set forth in the
Exhibit Index beginning on
page A-1,
which is incorporated herein by reference.
65
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIOGEN IDEC INC.
James C. Mullen
Chief Executive Officer and President
Date: February 9, 2010
Pursuant to the requirements the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Name
|
|
Capacity
|
|
Date
|
|
|
|
|
|
|
/s/ James
C. Mullen
James
C. Mullen
|
|
Director, Chief Executive Officer and President (principal
executive officer)
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Paul
J. Clancy
Paul
J. Clancy
|
|
Executive Vice President, Finance and Chief Financial Officer
(principal financial officer)
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Michael
F. MacLean
Michael
F. MacLean
|
|
Senior Vice President and Chief Accounting Officer (principal
accounting officer)
|
|
February 9, 2010
|
|
|
|
|
|
/s/ William
D. Young
William
D. Young
|
|
Director and Chairman of the Board of Directors
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Alexander
J. Denner
Alexander
J. Denner
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Caroline
D. Dorsa
Caroline
D. Dorsa
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Nancy
L. Leaming
Nancy
L. Leaming
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
Richard
C. Mulligan
|
|
Director
|
|
|
|
|
|
|
|
/s/ Robert
W. Pangia
Robert
W. Pangia
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Stelios
Papadopoulos
Stelios
Papadopoulos
|
|
Director
|
|
February 9, 2010
|
66
|
|
|
|
|
|
|
Name
|
|
Capacity
|
|
Date
|
|
|
|
|
|
|
/s/ Brian
S. Posner
Brian
S. Posner
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Bruce
R. Ross
Bruce
R. Ross
|
|
Director
|
|
February 9, 2010
|
|
|
|
|
|
/s/ Lynn
Schenk
Lynn
Schenk
|
|
Director
|
|
February 9, 2010
|
67
BIOGEN
IDEC INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
3,152,941
|
|
|
$
|
2,839,651
|
|
|
$
|
2,136,821
|
|
Unconsolidated joint business
|
|
|
1,094,863
|
|
|
|
1,128,238
|
|
|
|
926,098
|
|
Other
|
|
|
129,544
|
|
|
|
129,618
|
|
|
|
108,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
4,377,348
|
|
|
|
4,097,507
|
|
|
|
3,171,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales, excluding amortization of acquired intangible
assets
|
|
|
382,104
|
|
|
|
401,989
|
|
|
|
335,192
|
|
Research and development
|
|
|
1,283,068
|
|
|
|
1,072,058
|
|
|
|
925,164
|
|
Selling, general and administrative
|
|
|
911,034
|
|
|
|
925,305
|
|
|
|
776,103
|
|
Collaboration profit sharing
|
|
|
215,904
|
|
|
|
136,041
|
|
|
|
14,079
|
|
Amortization of acquired intangible assets
|
|
|
289,811
|
|
|
|
332,745
|
|
|
|
257,495
|
|
Acquired in-process research and development
|
|
|
|
|
|
|
25,000
|
|
|
|
84,172
|
|
Gain on dispositions, net
|
|
|
|
|
|
|
(9,242
|
)
|
|
|
(360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
3,081,921
|
|
|
|
2,883,896
|
|
|
|
2,391,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
1,295,427
|
|
|
|
1,213,611
|
|
|
|
779,772
|
|
Other income (expense), net
|
|
|
37,252
|
|
|
|
(57,728
|
)
|
|
|
72,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
1,332,679
|
|
|
|
1,155,883
|
|
|
|
852,168
|
|
Income tax expense
|
|
|
355,617
|
|
|
|
365,776
|
|
|
|
272,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
977,062
|
|
|
|
790,107
|
|
|
|
579,745
|
|
Net income (loss) attributable to noncontrolling interest, net
of tax
|
|
|
6,930
|
|
|
|
6,940
|
|
|
|
(58,427
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
970,132
|
|
|
$
|
783,167
|
|
|
$
|
638,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Biogen Idec Inc.
|
|
$
|
3.37
|
|
|
$
|
2.67
|
|
|
$
|
2.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
$
|
3.35
|
|
|
$
|
2.65
|
|
|
$
|
1.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in calculating:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Biogen Idec Inc.
|
|
|
287,356
|
|
|
|
292,332
|
|
|
|
315,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
|
289,476
|
|
|
|
294,984
|
|
|
|
320,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
F-2
BIOGEN
IDEC INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
581,889
|
|
|
$
|
622,385
|
|
Marketable securities
|
|
|
681,835
|
|
|
|
719,586
|
|
Collateral received for loaned securities
|
|
|
|
|
|
|
29,991
|
|
Accounts receivable, net of allowances of $43,818 and $32,047 at
December 31, 2009 and 2008, respectively
|
|
|
551,208
|
|
|
|
446,665
|
|
Due from unconsolidated joint business
|
|
|
193,789
|
|
|
|
206,925
|
|
Loaned securities
|
|
|
|
|
|
|
29,446
|
|
Inventory
|
|
|
293,950
|
|
|
|
263,602
|
|
Other current assets
|
|
|
177,924
|
|
|
|
139,400
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,480,595
|
|
|
|
2,458,000
|
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
|
|
1,194,080
|
|
|
|
891,406
|
|
Property, plant and equipment, net
|
|
|
1,637,083
|
|
|
|
1,594,754
|
|
Intangible assets, net
|
|
|
1,871,078
|
|
|
|
2,161,058
|
|
Goodwill
|
|
|
1,138,621
|
|
|
|
1,138,621
|
|
Investments and other assets
|
|
|
230,397
|
|
|
|
235,152
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
8,551,854
|
|
|
$
|
8,478,991
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Collateral payable on loaned securities
|
|
$
|
|
|
|
$
|
29,991
|
|
Accounts payable
|
|
|
118,534
|
|
|
|
107,417
|
|
Taxes payable
|
|
|
75,891
|
|
|
|
223,260
|
|
Accrued expenses and other
|
|
|
500,755
|
|
|
|
534,887
|
|
Current portion of notes payable and line of credit
|
|
|
19,762
|
|
|
|
27,667
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
714,942
|
|
|
|
923,222
|
|
|
|
|
|
|
|
|
|
|
Notes payable and line of credit
|
|
|
1,080,207
|
|
|
|
1,085,431
|
|
Long-term deferred tax liability
|
|
|
240,618
|
|
|
|
356,017
|
|
Other long-term liabilities
|
|
|
254,205
|
|
|
|
280,369
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,289,972
|
|
|
|
2,645,039
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Notes 16,17,18 and 19)
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, par value $0.001 per share (8,000 shares
authorized, of which 1,750 are designated Series A and
1,000 are designated Series X Junior Participating;
8 shares of Series A issued and outstanding with a
$551 liquidation value at December 31, 2009 and 2008)
|
|
|
|
|
|
|
|
|
Common stock, par value $0.0005 per share (1,000,000 shares
authorized; 288,494 shares issued and 274,855 shares
outstanding at December 31, 2009; 297,253 shares
issued and 288,046 shares outstanding at December 31, 2008)
|
|
|
144
|
|
|
|
149
|
|
Additional paid-in capital
|
|
|
5,781,920
|
|
|
|
6,073,957
|
|
Accumulated other comprehensive income (loss)
|
|
|
50,496
|
|
|
|
(11,106
|
)
|
Retained earnings
|
|
|
1,068,890
|
|
|
|
270,180
|
|
Treasury stock, at cost; 13,639 and 9,207 shares at
December 31, 2009 and 2008, respectively
|
|
|
(679,920
|
)
|
|
|
(527,097
|
)
|
|
|
|
|
|
|
|
|
|
Total Biogen Idec Inc. shareholders equity
|
|
|
6,221,530
|
|
|
|
5,806,083
|
|
Noncontrolling interest
|
|
|
40,352
|
|
|
|
27,869
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
6,261,882
|
|
|
|
5,833,952
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
8,551,854
|
|
|
$
|
8,478,991
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
F-3
BIOGEN
IDEC INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
977,062
|
|
|
$
|
790,107
|
|
|
$
|
579,745
|
|
Adjustments to reconcile net income to net cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of property, plant and equipment
and intangible assets
|
|
|
427,961
|
|
|
|
462,059
|
|
|
|
380,293
|
|
Acquired in process research and development and license
|
|
|
|
|
|
|
25,000
|
|
|
|
136,172
|
|
Share-based compensation
|
|
|
160,902
|
|
|
|
146,207
|
|
|
|
123,129
|
|
Cash received upon termination of interest rate swap
|
|
|
|
|
|
|
53,873
|
|
|
|
|
|
Non-cash interest (income) expense and foreign exchange
remeasurement, net
|
|
|
(7,892
|
)
|
|
|
(4,934
|
)
|
|
|
1,444
|
|
Deferred income taxes
|
|
|
(137,351
|
)
|
|
|
(139,549
|
)
|
|
|
(81,555
|
)
|
Realized (gain) loss on sale of marketable securities and
strategic investments
|
|
|
(23,974
|
)
|
|
|
1,078
|
|
|
|
(16,732
|
)
|
Write-down of inventory to net realizable value
|
|
|
16,924
|
|
|
|
29,850
|
|
|
|
21,599
|
|
Gain on sale of property, plant and equipment, net
|
|
|
|
|
|
|
(9,242
|
)
|
|
|
(360
|
)
|
Impairment of marketable securities, investments and other assets
|
|
|
16,184
|
|
|
|
61,644
|
|
|
|
24,445
|
|
Excess tax benefit from stock options
|
|
|
(3,436
|
)
|
|
|
(27,990
|
)
|
|
|
(69,666
|
)
|
Changes in operating assets and liabilities, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(100,442
|
)
|
|
|
(57,565
|
)
|
|
|
(70,701
|
)
|
Due from unconsolidated joint business
|
|
|
13,136
|
|
|
|
(40,239
|
)
|
|
|
2,022
|
|
Inventory
|
|
|
(42,772
|
)
|
|
|
(54,204
|
)
|
|
|
(83,192
|
)
|
Other assets
|
|
|
22,271
|
|
|
|
3,711
|
|
|
|
238
|
|
Accrued expenses and other current liabilities
|
|
|
(48,942
|
)
|
|
|
146,420
|
|
|
|
30,579
|
|
Other liabilities and taxes payable
|
|
|
(194,733
|
)
|
|
|
176,219
|
|
|
|
41,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by operating activities
|
|
|
1,074,898
|
|
|
|
1,562,445
|
|
|
|
1,018,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of marketable securities
|
|
|
(3,548,119
|
)
|
|
|
(3,163,824
|
)
|
|
|
(2,945,244
|
)
|
Proceeds from sales and maturities of marketable securities
|
|
|
3,319,007
|
|
|
|
2,941,060
|
|
|
|
3,154,290
|
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(25,000
|
)
|
|
|
(95,789
|
)
|
Purchases of property, plant and equipment
|
|
|
(165,646
|
)
|
|
|
(275,954
|
)
|
|
|
(284,106
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
16,669
|
|
Purchases of other investments
|
|
|
(44,086
|
)
|
|
|
(20,373
|
)
|
|
|
(23,672
|
)
|
Proceeds from the sale of strategic investments
|
|
|
13,822
|
|
|
|
|
|
|
|
99,489
|
|
Collateral received under securities lending
|
|
|
29,991
|
|
|
|
178,218
|
|
|
|
(208,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(395,031
|
)
|
|
|
(365,873
|
)
|
|
|
(286,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
(751,170
|
)
|
|
|
(738,938
|
)
|
|
|
(2,991,184
|
)
|
Proceeds from issuance of stock for share-based compensation
arrangements
|
|
|
47,810
|
|
|
|
178,486
|
|
|
|
489,180
|
|
Change in cash overdraft
|
|
|
12,275
|
|
|
|
(498
|
)
|
|
|
(5,399
|
)
|
Excess tax benefit from stock options
|
|
|
3,436
|
|
|
|
27,990
|
|
|
|
69,666
|
|
Proceeds from borrowings
|
|
|
|
|
|
|
986,980
|
|
|
|
1,512,913
|
|
Repayments of borrowings
|
|
|
(10,867
|
)
|
|
|
(1,512,474
|
)
|
|
|
(12,042
|
)
|
Repayments of long-term debt
|
|
|
|
|
|
|
|
|
|
|
(6,563
|
)
|
Net capital contribution from noncontrolling interest
|
|
|
4,356
|
|
|
|
2,047
|
|
|
|
1,881
|
|
Obligation under securities lending
|
|
|
(29,991
|
)
|
|
|
(178,218
|
)
|
|
|
208,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(724,151
|
)
|
|
|
(1,234,625
|
)
|
|
|
(733,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(44,284
|
)
|
|
|
(38,053
|
)
|
|
|
(1,157
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
3,788
|
|
|
|
776
|
|
|
|
(558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of the year
|
|
|
622,385
|
|
|
|
659,662
|
|
|
|
661,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of the year
|
|
$
|
581,889
|
|
|
$
|
622,385
|
|
|
$
|
659,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
68,094
|
|
|
$
|
40,026
|
|
|
$
|
35,439
|
|
Income taxes
|
|
$
|
745,402
|
|
|
$
|
371,978
|
|
|
$
|
251,928
|
|
Non-cash financing activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of subordinated notes to common and treasury stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
38,986
|
|
See Note 1, Summary of Significant Accounting Policies
to our Consolidated Financial Statements for a discussion of
non-cash securities lending activities that occurred during the
period.
See Note 14, Other Consolidated Financial Statement
Detail to our Consolidated Financial Statements for
discussion of a non monetary transaction under which we sold the
development rights on a parcel of land in Cambridge, MA during
2008.
See accompanying notes to these consolidated financial
statements.
F-4
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
Earnings/
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
(Accumulated
|
|
|
Treasury Stock
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit)
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
Balance, December 31, 2006
|
|
|
8
|
|
|
$
|
|
|
|
|
345,637
|
|
|
$
|
173
|
|
|
$
|
8,308,232
|
|
|
$
|
21,855
|
|
|
$
|
(860,827
|
)
|
|
|
(7,463
|
)
|
|
$
|
(319,655
|
)
|
|
$
|
7,149,778
|
|
|
$
|
9,839
|
|
|
$
|
7,159,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
638,172
|
|
|
|
|
|
|
|
|
|
|
|
638,172
|
|
|
|
(58,427
|
)
|
|
|
579,745
|
|
Unrealized gains on securities available for sale, net of tax of
($3,984)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,124
|
|
|
|
|
|
|
|
9,124
|
|
Unrealized loss on foreign currency forward contracts, net of
tax of $2,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,962
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,962
|
)
|
|
|
|
|
|
|
(3,962
|
)
|
Unrealized gains on pension benefit obligation, net of tax of
($370)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,421
|
|
|
|
|
|
|
|
2,421
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,808
|
|
|
|
1,397
|
|
|
|
51,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
695,563
|
|
|
|
(57,030
|
)
|
|
|
638,533
|
|
Fair value of assets and liabilities acquired and assigned to
noncontrolling interest due to the adoption of a new accounting
standard for the consolidation of variable interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,038
|
|
|
|
65,038
|
|
Capital contribution from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,881
|
|
|
|
1,881
|
|
Repurchase and retirement of common stock pursuant to tender
offer
|
|
|
|
|
|
|
|
|
|
|
(56,424
|
)
|
|
|
(29
|
)
|
|
|
(2,991,155
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,991,184
|
)
|
|
|
|
|
|
|
(2,991,184
|
)
|
Issuance of treasury stock from conversion of subordinated notes
payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,682
|
)
|
|
|
2,850
|
|
|
|
119,795
|
|
|
|
36,113
|
|
|
|
|
|
|
|
36,113
|
|
Issuance of common stock from conversion of subordinated notes
payable
|
|
|
|
|
|
|
|
|
|
|
182
|
|
|
|
|
|
|
|
2,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,371
|
|
|
|
|
|
|
|
2,371
|
|
Issuance of treasury stock under stock option and stock purchase
plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,824
|
)
|
|
|
2,994
|
|
|
|
135,720
|
|
|
|
101,896
|
|
|
|
|
|
|
|
101,896
|
|
Issuance of common stock under stock option and stock purchase
plans
|
|
|
|
|
|
|
|
|
|
|
8,017
|
|
|
|
4
|
|
|
|
386,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
386,932
|
|
|
|
|
|
|
|
386,932
|
|
Issuance of treasury stock under stock award plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,292
|
)
|
|
|
|
|
|
|
135
|
|
|
|
465
|
|
|
|
18,076
|
|
|
|
(30,081
|
)
|
|
|
|
|
|
|
(30,081
|
)
|
Issuance of common stock under stock award plans
|
|
|
|
|
|
|
|
|
|
|
45
|
|
|
|
|
|
|
|
(2,744
|
)
|
|
|
|
|
|
|
(676
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,420
|
)
|
|
|
|
|
|
|
(3,420
|
)
|
Forfeiture of common stock under restricted stock plan
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,378
|
|
|
|
(50
|
)
|
|
|
(2,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,101
|
|
|
|
|
|
|
|
128,101
|
|
Tax benefit from share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,227
|
|
|
|
|
|
|
|
67,227
|
|
Adjustment for adoption for accounting of uncertain tax positions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,583
|
)
|
|
|
|
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
(8,998
|
)
|
|
|
|
|
|
|
(8,998
|
)
|
Treasury stock reclassifications
|
|
|
|
|
|
|
|
|
|
|
(1,743
|
)
|
|
|
(1
|
)
|
|
|
(33,014
|
)
|
|
|
|
|
|
|
(15,430
|
)
|
|
|
1,204
|
|
|
|
48,442
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
8
|
|
|
$
|
|
|
|
|
295,698
|
|
|
$
|
147
|
|
|
$
|
5,807,071
|
|
|
$
|
79,246
|
|
|
$
|
(352,169
|
)
|
|
|
|
|
|
$
|
|
|
|
$
|
5,534,295
|
|
|
$
|
19,728
|
|
|
$
|
5,554,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
783,167
|
|
|
|
|
|
|
|
|
|
|
|
783,167
|
|
|
|
6,940
|
|
|
|
790,107
|
|
Unrealized loss on securities available for sale, net of tax of
($1,123)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(67
|
)
|
|
|
|
|
|
|
(67
|
)
|
Unrealized loss on foreign currency forward contracts, net of
tax of $1,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,140
|
)
|
|
|
|
|
|
|
(36,140
|
)
|
Unrealized loss on pension benefit obligation, net of tax of $0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
(43
|
)
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,102
|
)
|
|
|
(846
|
)
|
|
|
(54,948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692,815
|
|
|
|
6,094
|
|
|
|
698,909
|
|
Distribution to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,817
|
)
|
|
|
(2,817
|
)
|
Capital contribution from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,864
|
|
|
|
4,864
|
|
Repurchase of common stock for Treasury, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,778
|
)
|
|
|
(738,938
|
)
|
|
|
(738,938
|
)
|
|
|
|
|
|
|
(738,938
|
)
|
Issuance of common stock from conversion of subordinated notes
payable
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
227
|
|
Issuance of common stock under stock option and stock purchase
plans
|
|
|
|
|
|
|
|
|
|
|
852
|
|
|
|
1
|
|
|
|
34,297
|
|
|
|
|
|
|
|
(56,223
|
)
|
|
|
3,380
|
|
|
|
200,411
|
|
|
|
178,486
|
|
|
|
|
|
|
|
178,486
|
|
Issuance of common stock under stock award plans
|
|
|
|
|
|
|
|
|
|
|
688
|
|
|
|
1
|
|
|
|
(29,800
|
)
|
|
|
|
|
|
|
(26,026
|
)
|
|
|
191
|
|
|
|
11,430
|
|
|
|
(44,395
|
)
|
|
|
|
|
|
|
(44,395
|
)
|
Forfeiture of common stock under restricted stock plan
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense related to share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153,748
|
|
|
|
|
|
|
|
153,748
|
|
Tax benefit from share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,845
|
|
|
|
|
|
|
|
29,845
|
|
Treasury stock reclassifications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,569
|
|
|
|
|
|
|
|
(78,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008
|
|
|
8
|
|
|
$
|
|
|
|
|
297,253
|
|
|
$
|
149
|
|
|
$
|
6,073,957
|
|
|
$
|
(11,106
|
)
|
|
$
|
270,180
|
|
|
|
(9,207
|
)
|
|
$
|
(527,097
|
)
|
|
$
|
5,806,083
|
|
|
$
|
27,869
|
|
|
$
|
5,833,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
F-5
BIOGEN
IDEC INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY (Continued)
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
Earnings/
|
|
|
|
|
|
|
|
|
Biogen Idec Inc.
|
|
|
|
|
|
Total
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
(Accumulated
|
|
|
Treasury Stock
|
|
|
Shareholders
|
|
|
Noncontrolling
|
|
|
Shareholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income
|
|
|
Deficit)
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
Interest
|
|
|
Equity
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
970,132
|
|
|
|
|
|
|
|
|
|
|
|
970,132
|
|
|
|
6,930
|
|
|
|
977,062
|
|
Unrealized gains on securities available for sale, net of tax of
$(379)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
795
|
|
|
|
|
|
|
|
795
|
|
Unrealized gains on foreign currency forward contracts, net of
tax of $(3,582)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,668
|
|
|
|
|
|
|
|
41,668
|
|
Unrealized gains on pension benefit obligation, net of tax of
$(67)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501
|
|
|
|
|
|
|
|
501
|
|
Translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,638
|
|
|
|
1,197
|
|
|
|
19,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,031,734
|
|
|
|
8,127
|
|
|
|
1,039,861
|
|
Distrbution to noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,832
|
)
|
|
|
(2,832
|
)
|
Capital contribution from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,188
|
|
|
|
7,188
|
|
Repurchase of common stock for Treasury, at cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,982
|
)
|
|
|
(751,170
|
)
|
|
|
(751,170
|
)
|
|
|
|
|
|
|
(751,170
|
)
|
Retirement of common stock pursuant to 2009 stock repurchase plan
|
|
|
|
|
|
|
|
|
|
|
(8,759
|
)
|
|
|
(5
|
)
|
|
|
(422,415
|
)
|
|
|
|
|
|
|
|
|
|
|
8,759
|
|
|
|
422,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of treasury stock under stock option and stock purchase
plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,191
|
)
|
|
|
1,181
|
|
|
|
75,001
|
|
|
|
47,810
|
|
|
|
|
|
|
|
47,810
|
|
Issuance of treasury stock under stock award plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(144,231
|
)
|
|
|
1,610
|
|
|
|
100,926
|
|
|
|
(43,305
|
)
|
|
|
|
|
|
|
(43,305
|
)
|
Compensation expense related to share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,207
|
|
|
|
|
|
|
|
167,207
|
|
Tax benefit from share-based payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,829
|
)
|
|
|
|
|
|
|
(36,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009
|
|
|
8
|
|
|
$
|
|
|
|
|
288,494
|
|
|
$
|
144
|
|
|
$
|
5,781,920
|
|
|
$
|
50,496
|
|
|
$
|
1,068,890
|
|
|
|
(13,639
|
)
|
|
$
|
(679,920
|
)
|
|
$
|
6,221,530
|
|
|
$
|
40,352
|
|
|
$
|
6,261,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these consolidated financial
statements.
BIOGEN
IDEC INC. AND SUBSIDIARIES
|
|
1.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
Consolidation
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
consolidated financial statements reflect our financial
statements, those of our wholly-owned subsidiaries, certain
variable interest entities in which we are the primary
beneficiary and those of our joint ventures in Italy and
Switzerland, Biogen Dompé SRL and Biogen Dompé
Switzerland GmbH, respectively. For such consolidated entities
in which we own less than a 100% interest, we record net income
(loss) attributable to noncontrolling interest in our
consolidated statements of income equal to the percentage of the
interest retained in the collaborative arrangement by the
respective noncontrolling parties. All material intercompany
balances and transactions have been eliminated in consolidation.
In determining whether we are the primary beneficiary, we
consider a number of factors, including determining the expected
losses and residual returns of the technologies being developed
pursuant to collaborations and other economic risk and reward of
such collaborations; these considerations impact the way we
account for our existing collaborative relationships and may
result in the future consolidation of companies or entities with
which we have a collaborative arrangement.
Use of
Estimates
The preparation of consolidated financial statements in
accordance with U.S. GAAP requires our management to make
estimates and judgments that may affect the reported amounts of
assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing
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.
Reclassifications
Where specified, certain prior-year amounts have been
reclassified to conform to the current years presentation.
Subsequent
Events
We evaluated all events and transactions through
February 9, 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:
|
|
|
|
|
In January 2010, Syntonix Pharmaceuticals, Inc. (Syntonix)
achieved a significant development milestone obligating us to
pay $40.0 million to its former shareholders. As the
milestone occurred after December 31, 2009, the obligation
is not reflected within our consolidated balance sheet as of
that date. Such obligations are recorded when the milestone has
been achieved due to the uncertainty surrounding triggering
events. Refer to Note 2, Acquisitions and Dispositions
to our Consolidated Financial Statements for additional
discussion.
|
F-7
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue
Recognition
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.
Product
Revenues
Revenues from product sales are recognized when title and risk
of loss have passed to the customer, which is typically upon
delivery. However, sales of TYSABRI in the U.S. are
recognized on the sell-through model, that is, upon
shipment of the product by Elan Pharma International, Ltd.
(Elan), an affiliate of Elan Corporation, plc, Elan to its third
party distributor rather than upon shipment to Elan.
Product revenues are recorded net of applicable reserves for
trade term discounts, wholesaler incentives, Medicaid rebates,
Veterans Administration (VA) rebates, managed care rebates,
product returns and other applicable allowances.
Revenues
from Unconsolidated Joint Business
We collaborate with the Roche Group, through its wholly-owned
member Genentech, Inc., on the development and commercialization
of RITUXAN. Revenues from unconsolidated joint business consist
of (1) our share of pre-tax co-promotion profits in the
U.S.; (2) reimbursement of our selling and development
expense in the U.S.; and (3) revenue on sales of RITUXAN in
the rest of world, which consist of our share of pretax
co-promotion profits in Canada and royalty revenue on sales of
RITUXAN outside the U.S. and Canada by F. Hoffmann-La Roche
Ltd. (Roche) and its sublicensees. Pre-tax co-promotion profits
are calculated and paid to us by Genentech in the U.S. and by
Roche in Canada. Pre-tax co-promotion profits consist of U.S.
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. We
record our royalty and co-promotion profits revenue on sales of
RITUXAN in the rest of world on a cash basis.
Royalty
Revenues
We receive royalty revenues on sales by our licensees of other
products covered under patents that we own. There are no future
performance obligations on our part under these license
arrangements. We record these revenues based on estimates of the
sales that occurred during the relevant period. The relevant
period estimates of sales are based on interim data provided by
licensees and analysis of historical royalties that have been
paid to us, adjusted for any changes in facts and circumstances,
as appropriate. We maintain regular communication with our
licensees in order to assess the reasonableness of our
estimates. Differences between actual royalty revenues and
estimated royalty revenues are adjusted for in the period in
which they become known, typically the following quarter.
Historically, adjustments have not been material when compared
to actual amounts paid by licensees. To the extent we do not
have sufficient ability to accurately estimate revenue, we
record revenues on a cash basis.
Milestone
Revenues
Under the terms of our collaboration agreement with Elan was
required to make milestone payments to us in order to continue
sharing equally in the collaborations results. These
amounts, recorded as deferred revenue upon receipt, are
recognized 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.
F-8
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reserves
for Discounts and Allowances
We establish reserves for trade term discounts, wholesaler
incentives, Medicaid rebates, Veterans Administration (VA)
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).
In addition, we distribute no-charge product to qualifying
patients under our patient assistance and patient replacement
goods programs. This program is administered through one of our
distribution partners, who ships product for qualifying patients
from their own inventory purchased from us. Gross revenue and
the related reserves are not recorded on product shipped under
this program and cost of sales is recorded when the product is
shipped.
Product revenue reserves are categorized as follows: discounts,
contractual adjustments, and returns.
Discount reserves include trade term discounts and wholesaler
incentives. Trade term discounts and wholesaler incentive
reserves primarily relate to estimated obligations for credits
to be granted to wholesalers for remitting payment on their
purchases within established incentive periods and credits to be
granted to wholesalers for compliance with various
contractually-defined inventory management practices,
respectively. We determine these reserves based on our
experience, including the timing of customer payments.
Contractual adjustment reserves primarily relate to Medicaid, VA
and managed care rebates.
|
|
|
|
|
Medicaid rebate reserves relate to our estimated obligations to
states under established reimbursement arrangements. Rebate
accruals are recorded in the same period the related revenue is
recognized resulting in a reduction of product revenue and the
establishment of a liability which is included in accrued
expenses and other current liabilities. Rebate amounts are
generally determined at the time of claim by the state, and we
generally make cash payments for such amounts within a few weeks
of receiving billings from the state.
|
|
|
|
VA rebates or chargeback reserves represent our estimated
obligations resulting from contractual commitments to sell
products to qualified healthcare providers at prices lower than
the list prices we charge to wholesalers which provide those
products. The wholesaler charges us for the difference between
what the wholesaler pays for the products and the ultimate
selling price to the qualified healthcare providers. Rebate
accruals are established in the same period as the related
revenue is recognized resulting in a reduction in product
revenue and accounts receivable. Chargeback amounts are
generally determined at the time of resale to the qualified
healthcare provider from the wholesaler, and we generally issue
credits for such amounts within a few weeks of receiving
notification from the wholesaler.
|
|
|
|
Managed care rebates reserves represent our estimated
obligations to third parties, primarily pharmacy benefit
managers. Rebate accruals are recorded in the same period the
related revenue is recognized resulting in a reduction to
product revenue and the establishment of a liability which is
included in accrued expenses and other current liabilities.
These rebates result from performance-based offers that are
primarily based on attaining contractually specified sales
volumes and growth. The calculation of the accrual for these
rebates is based on an estimate of the customers buying
patterns and the resulting applicable contractual rebate rate(s)
to be earned over a contractual period.
|
Allowances for product returns are established for returns made
by wholesalers and patients and are recorded in the period the
related revenue is recognized, resulting in a reduction to
product revenue. In accordance with contractual terms,
wholesalers are permitted to return product for reasons such as
damaged or expired product. We also accept returns from our
patients for various reasons.
Expired product return reserves are estimated through a
comparison of historical return data to their related sales on a
production lot basis. Historical rates of return are determined
for each product and are adjusted for known or expected changes
in the marketplace specific to each product.
F-9
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
In addition to the discounts and rebates described above and
classified as a reduction of revenue, we also maintain certain
customer service contracts with distributors and other customers
in the distribution channel that provide us with inventory
management and distribution services. We have established the
fair value of these services and classified these customer
service contracts as sales and marketing expense. If we had
concluded that we did not receive a separate identifiable
benefit or have sufficient evidence that the fair value did not
exist for these services, we would have been required to
classify these costs as a reduction of revenue.
Cash
and Cash Equivalents
We consider only those investments which are highly liquid,
readily convertible to cash and that mature within three months
from date of purchase to be cash equivalents. As of
December 31, 2009, cash equivalents were comprised of money
market funds and commercial paper.
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.
In the second quarter of 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.
Effective January 1, 2008, we adopted a standard for fair
value measurements for our financial assets and liabilities that
are re-measured and reported at fair value at each reporting
period, and non-financial assets and liabilities that are
re-measured and reported at fair value at least annually. The
adoption of this guidance did not have an impact on our
consolidated financial position or results of operations.
We have certain financial assets and liabilities recorded at
fair value which have been classified as Level 1, 2 or 3
within the fair value hierarchy as described in the accounting
standards for fair value measurements.
|
|
|
|
|
Level 1 Fair values are determined
utilizing quoted prices (unadjusted) in active markets for
identical assets or liabilities that we have the ability to
access;
|
|
|
|
Level 2 Fair values are determined by
utilizing quoted prices for identical or similar assets and
liabilities in active markets or other market observable inputs
such as interest rates, yield curves and foreign currency spot
rates; and
|
F-10
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Level 3 Prices or valuations that
require inputs that are both significant to the fair value
measurement and unobservable.
|
The carrying amounts reflected in the consolidated balance
sheets for cash, accounts receivable, due from unconsolidated
joint business, other current assets, accounts payable, and
accrued expenses and other, approximate fair value due to their
short-term maturities.
Concentration
of Credit Risks
Our primary exposure to credit risk derives from our cash, cash
equivalents, marketable securities, and receivables from
customers and collaborative partners.
Until required for use in the business, we invest our cash in
bank deposits, certificates of deposit, commercial paper,
corporate notes, foreign and U.S. government instruments,
including government sponsored enterprise mortgage-backed
securities, credit card and auto loan asset-backed securities
and other marketable debt instruments in accordance with our
investment policy. We mitigate credit risk by maintaining a well
diversified portfolio and limiting the amount of investment
exposure as to institution, maturity and investment type.
Concentrations of credit risk with respect to receivables, which
are typically unsecured, are generally limited due to the wide
variety of customers and markets using our products, as well as
their dispersion across many different geographic areas. Our
accounts receivable are payable by wholesale distributors, large
pharmaceutical companies and public hospitals. 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 historical write-offs of accounts
receivable have not been significant. As of December 31,
2009 and 2008, one wholesale distributor accounted for
approximately 8.1% and 11.0% of consolidated receivables,
respectively.
Marketable
Securities and Other Investments
Marketable
Debt Securities
Available-for-sale
debt securities are recorded at fair market value and unrealized
gains and losses are included in accumulated other comprehensive
income in shareholders equity, net of related tax effects,
unless the security has experienced a credit loss, we have
determined that we have the intent to sell the security or we
have determined that it is more likely than not that we will
have to sell the security before its expected recovery. Realized
gains and losses are reported in other income (expense), net, on
a specific identification basis.
Strategic
Investments
As part of our strategic product development efforts, we invest
in equity securities of certain biotechnology companies. These
investments are known as strategic investments and are
classified as
available-for-sale
and accounted for as marketable equity investments or as cost
investments based upon our percentage ownership interest and
other factors which may indicate the presumption of significant
influence. When assessing whether a decline in the fair value of
a strategic investment below our cost basis is
other-than-temporary,
we consider the fair market value of the security, the duration
of the securitys decline, and prospects for the underlying
business, including favorable clinical trial results, new
product initiatives and new collaborative agreements with the
companies in which we have invested.
Non-Marketable
Equity Securities
We also invest in equity securities of companies whose
securities are not publicly traded and where fair value is not
readily available. These investments are recorded using either
the cost method or the equity method of accounting, depending on
our percentage ownership interest and other factors which may
indicate the presence of significant influence. We monitor these
investments to evaluate whether any decline in their value has
occurred that
F-11
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
would be
other-than-temporary,
based on the implied value from any recent rounds of financing
completed by the company, public market prices of comparable
companies, and general market conditions.
Securities
Lending
We are able to loan certain securities from our portfolio to
other institutions. Such securities are classified as loaned
securities on the accompanying consolidated balance sheets.
Collateral for the loaned securities, consisting of cash or
other securities, is maintained at a rate of approximately 102%
of the market value of each loaned security. We previously
loaned certain securities from our portfolio to other
institutions and held collateral in the amount of
$30.0 million as of December 31, 2008 in relation to
such loans. The cash collateral was recorded as collateral
received for loaned securities on the accompanying consolidated
balance sheet. No such loans were outstanding as of
December 31, 2009; accordingly, no collateral was held as
of December 31, 2009.
Other-than-Temporary
Impairments
In April 2009, we implemented a newly issued accounting standard
which provides guidance for the recognition, measurement and
presentation of
other-than-temporary
impairments. This newly issued standard 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
other-than-temporarily
impaired. The impairment model for equity securities was not
affected.
Prior to our adoption of this new accounting standard, 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.
Inventory
Inventories are stated at the lower of cost or market with cost
determined under the
first-in,
first-out (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.
We capitalize inventory costs associated with our products prior
to regulatory approval when, based on managements
judgment, future commercialization is considered probable and
the future economic benefit is expected to be realized.
Inventory
Write-Offs
We periodically review our inventories for excess or obsolete
inventory and write-down obsolete or otherwise unmarketable
inventory to its estimated net realizable value.
Property,
Plant and Equipment
Property, plant and equipment are carried at cost, subject to
review for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may
not be recoverable. Interest costs incurred during the
construction of major capital projects are capitalized until the
underlying asset is ready for its intended
F-12
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
use, at which point the interest costs are amortized as
depreciation expense over the life of the underlying asset. We
also capitalize certain direct and incremental costs associated
with the validation effort required for licensing by regulatory
agencies of manufacturing equipment for the production of a
commercially approved drug. These costs include primarily direct
labor and material and are incurred in preparing the equipment
for its intended use. The validation costs are amortized over
the life of the related equipment. Maintenance costs are
expensed as incurred.
We generally depreciate or amortize the cost of our property,
plant and equipment using the straight-line method over the
estimated useful lives of the respective assets, which are
summarized as follows:
|
|
|
Asset Category
|
|
Useful Lives
|
|
Land
|
|
Not depreciated
|
Buildings
|
|
15 to 40 years
|
Leasehold Improvements
|
|
Lesser of the useful life or the term of the respective lease
|
Machinery and Equipment
|
|
6 to 15 years
|
Furniture and Fixtures
|
|
7 years
|
Computer Software and Hardware
|
|
3 to 5 years
|
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 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. These intangible assets were
recorded at fair value and are stated net of accumulated
amortization and impairments.
The useful lives of our intangible 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 generally accepted 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 of Biogen, Inc. and IDEC Pharmaceuticals
Corporation. The net book value of this asset as of
December 31, 2009 was $1,516.7 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 asset. 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
F-13
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 (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.
Impairment
of Long-Lived Assets
Long-lived assets to be held and used, including property, plant
and equipment as well as intangible assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable.
Conditions that would necessitate an impairment assessment
include a significant decline in the observable market value of
an asset, a significant change in the extent or manner in which
an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets
is not recoverable. Determination of recoverability is based on
an estimate of undiscounted future cash flows resulting from the
use of the asset and its eventual disposition. In the event that
such cash flows are not expected to be sufficient to recover the
carrying amount of the assets, the assets are written-down to
their estimated fair values. Long-lived assets to be disposed of
are carried at fair value less costs to sell.
Goodwill
Goodwill relates largely to amounts that arose in connection
with the merger of Biogen, Inc. and IDEC Pharmaceuticals
Corporation and represents the difference between the purchase
price and the fair value of the identifiable tangible and
intangible net assets when accounted for using the purchase
method of accounting. Goodwill is not amortized, but is subject
to periodic review for impairment. Goodwill is reviewed
annually, as of October 31, and whenever events or changes
in circumstances indicate that the carrying amount of the
goodwill might not be recoverable.
We perform a two-step impairment test. In the first step, we
compare the fair value of the reporting unit to its carrying
value. If the carrying value of the net assets assigned to the
reporting unit exceeds the fair value of the reporting unit,
then the second step of the impairment test is performed in
order to determine the implied fair value of the reporting
units goodwill. If the carrying value of a reporting
units goodwill exceeds its implied fair value, then the
company records an impairment loss equal to the difference. As
described in Note 20, Segment Information to our
Consolidated Financial Statements, we operate in one business
segment which we consider our only reporting unit.
Research
and Development Expenses
Research and development expenses consist of upfront fees and
milestones paid to collaborators and expenses incurred in
performing research and development activities. Research and
development expenses are expensed as incurred. Payments we make
for research and development services prior to the services
being rendered are recorded as prepaid assets on our
consolidated balance sheets and are expensed as the services are
provided.
From time to time, we enter into development agreements in which
we share expenses with a collaborative partner. We record
payments received from our collaborative partners for their
share of the development costs as a reduction of research and
development expense.
Acquired
In-Process Research and Development (IPR&D)
Acquired IPR&D represents the fair value assigned to
research and development projects that we acquire that have not
been completed at the date of acquisition and which have no
future alternative use. The value assigned to acquired
IPR&D is determined by estimating the costs to develop the
acquired technology into commercially viable products,
estimating the resulting net cash flows from the projects, and
discounting the net cash flows to present
F-14
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value. The revenue and costs projections used to value acquired
IPR&D were, as applicable, reduced based on the probability
of developing a new drug. Additionally, the projections
considered the relevant market sizes and growth factors,
expected trends in technology, and the nature and expected
timing of new product introductions by us and our competitors.
The resulting net cash flows from such projects are based on
managements estimates of cost of sales, operating
expenses, and income taxes from such projects. The rates
utilized to discount the net cash flows to their present value
were commensurate with the stage of development of the projects
and uncertainties in the economic estimates used in the
projections described above.
Effective January 1, 2009, we account for business
combinations completed on or after January 1, 2009 in
accordance with the revised guidance for accounting for business
combinations, which modifies the criteria that must be met to
qualify as a business combination and prescribes new accounting
requirements, including the accounting treatment associated with
acquired IPR&D. Prior to January 1, 2009, we measured
acquired IPR&D at fair value and expensed it on acquisition
date, or capitalized as an intangible assets if certain criteria
were met; however, effective January 1, 2009, acquired
IPR&D will be measured at fair value and capitalized as an
intangible assets and tested for impairment until completion of
the programs and amortized from the date of completion over the
estimated useful life.
Accounting
for Share-based Compensation
Our share-based compensation programs grant awards which have
included stock options, time-vested restricted stock units,
performance-vested restricted stock units, restricted stock
awards and shares issued under our employee stock purchase plan
(ESPP). We charge the estimated fair value of awards against
income over the requisite service period, which is generally the
vesting period. Where awards are made with non-substantive
vesting periods (for instance, where a portion of the award
vests upon retirement eligibility), we estimate and recognize
expense based on the period from the grant date to the date on
which the employee is retirement eligible.
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. The fair values of our
time-vested restricted units and restricted stock awards are
based on the market value of our stock on the date of grant.
Compensation expense for restricted stock units and restricted
stock awards are recognized over the applicable service period,
adjusted for the effect of estimated forfeitures.
We apply a graded vesting expense methodology when accounting
for our performance-vested restricted stock units. The number of
units 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
vesting of these awards is also subject to the respective
employees continued employment. Compensation expense
associated with these units 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.
The purchase price of common stock under the 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 is
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.
F-15
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Earnings
per Share
We calculate earnings per share in accordance with the
Earning Per Share Topic of the Codification which
requires the presentation of basic earnings per
share and diluted earnings per share.
Basic earnings per share is computed using the two-class method.
Under the two-class method, undistributed net income is
allocated to common stock and participating securities based on
their respective rights to share in dividends. We have
determined that our preferred shares meet the definition of
participating securities, and have allocated a portion of net
income to our preferred shares on a pro rata basis. Net income
allocated to preferred shares is excluded from the calculation
of basic earnings per share. For basic earnings per share, net
income available to holders of common stock is divided by the
weighted average number of shares of common stock outstanding.
For purposes of calculating diluted earnings per share, net
income is adjusted for the after-tax amount of interest
associated with convertible debt and net income allocable to
preferred shares, and the denominator includes both the weighted
average number of shares of common stock outstanding and
potential dilutive shares of common stock from stock options,
unvested restricted stock awards, restricted stock units and
other convertible securities, to the extent they are dilutive.
Income
Taxes
The provision for income taxes includes federal, state, local
and foreign taxes. Income taxes are accounted for under the
liability method. Deferred tax assets and liabilities are
recognized for the estimated future tax consequences of
temporary differences between the financial statement carrying
amounts and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in the year in which the temporary
differences are expected to be recovered or settled. We evaluate
the realizability of our deferred tax assets and establish a
valuation allowance when it is more likely than not that all or
a portion of deferred tax assets will not be realized.
We account for uncertain tax positions using a
more-likely-than-not threshold for recognizing and
resolving uncertain tax positions. The evaluation of uncertain
tax positions is based on factors including, but not limited to,
changes in tax law, the measurement of tax positions taken or
expected to be taken in tax returns, the effective settlement of
matters subject to audit, new audit activity and changes in
facts or circumstances related to a tax position. We evaluate
this tax position on a quarterly basis. We also accrue for
potential interest and penalties, related to unrecognized tax
benefits in income tax expense.
Derivatives
and Hedging Activities
Accounting standards require that all derivatives be recognized
on the balance sheets at their fair value. Changes in the fair
value of derivatives are recorded each period in current
earnings or accumulated other comprehensive income (loss),
depending on whether a derivative is designated as part of a
hedge transaction and, if it is, the type of hedge transaction.
We assess, both at inception and on an ongoing basis, whether
the derivatives that are used in hedging transactions are highly
effective in offsetting the changes in cash flows or fair values
of the hedged items. We also assess hedge ineffectiveness on a
quarterly basis and record the gain or loss related to the
ineffective portion to current earnings to the extent
significant. If we determine that a forecasted transaction is no
longer probable of occurring, we discontinue hedge accounting
for the affected portion of the hedge instrument, and any
related unrealized gain or loss on the contract is recognized in
current earnings.
Translation
of Foreign Currencies
The functional currency for most of our foreign subsidiaries is
their local currency. Assets and liabilities are translated at
current rates of exchange at the balance sheet date. Income and
expense items are translated at the average foreign exchange
rates for the period. Adjustments resulting from the translation
of the financial statements of our foreign operations into
U.S. dollars are excluded from the determination of net
income and are recorded in accumulated other comprehensive
income, a separate component of shareholders equity.
F-16
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Foreign exchange transaction gains and losses are included in
the results of operations in other income (expense), net. We had
net foreign exchange gains (losses) of $11.4 million,
$(9.8) million, and $3.0 million in 2009, 2008, and
2007, respectively.
Assets
Held for Sale
We consider certain real property and certain other
miscellaneous assets as held for sale when they meet the
criteria set out in the accounting standard for impairment or
disposal of long-lived assets.
As of December 31, 2009 and 2008, there were no assets held
for sale on the accompanying consolidated balance sheets.
|
|
2.
|
Acquisitions
and Dispositions
|
Syntonix
Pharmaceuticals, Inc.
In January 2007, we acquired 100% of the stock of Syntonix.
Syntonix focuses on discovering and developing long-acting
therapeutic products to improve treatment regimens for chronic
diseases, and is engaged in multiple programs in hemophilia. The
purchase price was $44.4 million, including transaction
costs, and could increase to as much as $124.4 million if
certain development milestones with respect to Syntonixs
lead product, long-acting recombinant Factor IX, a proprietary
long-acting Factor IX product for the treatment of hemophilia B,
are achieved. Under the acquisition agreement we also agreed to
make additional future consideration payments upon the
achievement of certain milestone events. Future contingent
consideration payments, if any, will be recorded as IPR&D.
Due to the uncertainty surrounding triggering events related to
the attainment of milestones, such charges and related
obligations are generally recorded when the milestone has been
achieved. The acquisition was funded from our existing cash on
hand and was accounted for as an asset acquisition as Syntonix
was a development-stage company.
The purpose of the acquisition was to enhance our pipeline and
to expand into additional specialized markets and as a result of
the acquisition we obtained the rights to the in-process
technology of the Fc-fusion technology platform. Syntonix has
two programs in development using the Fc-fusion platform,
long-acting recombinant Factor IX and long-acting recombinant
Factor VIII. Syntonixs lead product, long-acting
recombinant Factor IX, is a proprietary long-acting Factor IX
product for the treatment of hemophilia B. Long-acting
recombinant Factor VIII is a product being developed for the
treatment of hemophilia A and is the subject of a Phase 1 study
in hemophilia A.
In January 2010, we initiated patient enrollment in a
registrational study for long-acting recombinant Factor IX in
hemophilia B. The initiation of this study resulted in the
achievement of a significant milestone, obligating us to pay
$40.0 million to the former shareholders of Syntonix. As
the milestone occurred subsequent to December 31, 2009, the
obligation is not reflected in our consolidated balance sheet as
of that date and will be reflected as IPR&D expense in the
first quarter of 2010.
The results of operations of Syntonix are included in our
consolidated results of operations from the date of acquisition.
We have completed our purchase price allocation for the
acquisition as set out below:
|
|
|
|
|
(In millions)
|
|
Total
|
|
|
Current assets
|
|
$
|
0.3
|
|
Fixed assets
|
|
|
0.2
|
|
Deferred tax asset
|
|
|
27.8
|
|
Assembled workforce
|
|
|
0.7
|
|
In-process research and development
|
|
|
18.4
|
|
Current liabilities
|
|
|
(3.0
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
44.4
|
|
|
|
|
|
|
F-17
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The purchase price included $2.0 million in loan
forgiveness and $0.7 million in transaction fees. In
addition, $0.3 million of severance charges were accrued as
a result of the acquisition. The amount allocated to IPR&D
relates to the development of long-acting recombinant Factor IX
and long-acting recombinant Factor VIII. At the date of
acquisition, these compounds were in development stage, had not
reached technological feasibility and had no alternative future
use. Accordingly, $18.4 million in IPR&D was expensed
upon acquisition.
Upon acquisition, we recognized a deferred tax asset of
$27.8 million. The deferred tax asset included
approximately $12.8 million of net operating loss and
research credit carryovers that will be utilized prior to
applicable expiration dates, as well as approximately
$15.3 million of other deferred tax assets primarily
related to
start-up and
research expenditures that have been capitalized for tax
purposes and are being amortized over the next several years.
The pro forma impact on total revenue, operating income (loss)
and net income (loss) of the acquisition was not material for
the year ended December 31, 2007.
We collaborate with Swedish Orphan Biovitrum AB (Biovitrum) on
the development and commercialization of long-acting recombinant
Factor VIII and Factor IX. Please read Note 17,
Collaborations to our Consolidated Financial Statements
for a description and summary of activities related to this
collaboration.
ZEVALIN
Our product line previously included ZEVALIN (ibritumomab
tiuxetan), which is part of a treatment regimen for certain
B-cell NHL. In December 2007, we sold the rights to market,
sell, manufacture and develop ZEVALIN in the U.S. to Cell
Therapeutics, Inc. (CTI), for an upfront payment of
$10.0 million and agreed to supply ZEVALIN product to CTI
through 2014. In the European Union, we continue to sell ZEVALIN
to Bayer Schering Pharma AG (Schering), our licensee for sales
of ZEVALIN outside the U.S.
Under the terms of our agreement with CTI, we are further
entitled to receive additional payments contingent upon the
achievement of certain milestone events. In September 2009, the
FDA approved an expansion of ZEVALINs label as part of the
first line therapy in the treatment of follicular
non-Hodgkins lymphoma. This approval triggered a
$5.5 million payment to us in October 2009. We may receive
up to an additional $10.0 million in milestone payments.
In addition, during December 2008 we received an additional
$2.2 million payment from CTI pursuant to an amendment to
our agreement with CTI as well as a $0.8 million consent
fee received from CTI upon assigning their rights under the
agreement to a third party in March 2009.
We recognize our sales of ZEVALIN to Schering for distribution
in the European Union as product revenue, and we recognize sales
related to our supply of ZEVALIN to CTI as corporate partner
revenue. We continue to recognize royalties received from
Schering on their sales of ZEVALIN in the European Union within
the royalty revenue component of other revenues. The
$10.0 million upfront and $7.7 million milestone
payments received to date are being recognized in our results of
operations over the term of our supply agreement with CTI.
Reserves
for Discounts and Allowances
Revenues are recorded net of applicable reserves for trade term
discounts, wholesaler incentives, Medicaid rebates, VA 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).
F-18
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 and statutory requirements,
specific known market events and trends and forecasted customer
buying patterns. If actual future 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
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
|
(In millions)
|
|
Discounts
|
|
|
Adjustments
|
|
|
Returns
|
|
|
Total
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
9.2
|
|
|
$
|
48.1
|
|
|
$
|
18.1
|
|
|
$
|
75.4
|
|
Current provisions relating to sales in current year
|
|
|
74.0
|
|
|
|
192.5
|
|
|
|
15.8
|
|
|
|
282.3
|
|
Adjustments relating to prior years
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
0.8
|
|
Payments/returns relating to sales in current year
|
|
|
(60.8
|
)
|
|
|
(124.4
|
)
|
|
|
(0.6
|
)
|
|
|
(185.8
|
)
|
Payments/returns relating to sales in prior years
|
|
|
(8.5
|
)
|
|
|
(45.9
|
)
|
|
|
(15.2
|
)
|
|
|
(69.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
13.9
|
|
|
$
|
70.3
|
|
|
$
|
18.9
|
|
|
$
|
103.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
6.4
|
|
|
$
|
33.1
|
|
|
$
|
20.4
|
|
|
$
|
59.9
|
|
Current provisions relating to sales in current year
|
|
|
67.1
|
|
|
|
150.6
|
|
|
|
14.7
|
|
|
|
232.4
|
|
Adjustments relating to prior years
|
|
|
|
|
|
|
(1.6
|
)
|
|
|
(2.5
|
)
|
|
|
(4.1
|
)
|
Payments/returns relating to sales in current year
|
|
|
(57.8
|
)
|
|
|
(101.2
|
)
|
|
|
(0.1
|
)
|
|
|
(159.1
|
)
|
Payments/returns relating to sales in prior years
|
|
|
(6.5
|
)
|
|
|
(32.8
|
)
|
|
|
(14.4
|
)
|
|
|
(53.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
9.2
|
|
|
$
|
48.1
|
|
|
$
|
18.1
|
|
|
$
|
75.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
12.7
|
|
|
$
|
30.5
|
|
|
$
|
17.8
|
|
|
$
|
61.0
|
|
Current provisions relating to sales in current year
|
|
|
45.7
|
|
|
|
113.1
|
|
|
|
17.1
|
|
|
|
175.9
|
|
Adjustments relating to prior years
|
|
|
|
|
|
|
(7.9
|
)
|
|
|
5.0
|
|
|
|
(2.9
|
)
|
Payments/returns relating to sales in current year
|
|
|
(39.4
|
)
|
|
|
(72.3
|
)
|
|
|
(0.4
|
)
|
|
|
(112.1
|
)
|
Payments/returns relating to sales in prior years
|
|
|
(12.6
|
)
|
|
|
(30.3
|
)
|
|
|
(19.1
|
)
|
|
|
(62.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
6.4
|
|
|
$
|
33.1
|
|
|
$
|
20.4
|
|
|
$
|
59.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total reserves above, included in our consolidated balance
sheets, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Reduction of accounts receivable
|
|
$
|
43.3
|
|
|
$
|
31.6
|
|
Current liability
|
|
|
59.8
|
|
|
|
43.8
|
|
|
|
|
|
|
|
|
|
|
Total reserves
|
|
$
|
103.1
|
|
|
$
|
75.4
|
|
|
|
|
|
|
|
|
|
|
F-19
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reserves for discounts, contractual adjustments and returns that
reduced gross product revenues are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions, except percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Discounts
|
|
$
|
74.0
|
|
|
$
|
67.1
|
|
|
$
|
45.7
|
|
Contractual adjustments
|
|
|
192.5
|
|
|
|
149.0
|
|
|
|
105.2
|
|
Returns
|
|
|
16.6
|
|
|
|
12.2
|
|
|
|
22.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reserves
|
|
$
|
283.1
|
|
|
$
|
228.3
|
|
|
$
|
173.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross product revenues
|
|
$
|
3,436.0
|
|
|
$
|
3,068.0
|
|
|
$
|
2,309.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of gross product revenues
|
|
|
8.2
|
%
|
|
|
7.4
|
%
|
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Raw materials
|
|
$
|
49.2
|
|
|
$
|
29.8
|
|
Work in process
|
|
|
174.0
|
|
|
|
180.0
|
|
Finished goods
|
|
|
70.8
|
|
|
|
53.8
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
294.0
|
|
|
$
|
263.6
|
|
|
|
|
|
|
|
|
|
|
The following table provides a summary of work in process and
finished goods by product:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
AVONEX
|
|
$
|
76.8
|
|
|
$
|
79.2
|
|
TYSABRI
|
|
|
144.0
|
|
|
|
126.2
|
|
Other
|
|
|
24.0
|
|
|
|
28.4
|
|
|
|
|
|
|
|
|
|
|
Total finished goods and work in process
|
|
$
|
244.8
|
|
|
$
|
233.8
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
49.2
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
Total inventory
|
|
$
|
294.0
|
|
|
$
|
263.6
|
|
|
|
|
|
|
|
|
|
|
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 during 2009, 2008, and
2007 totaled $16.9 million, $29.8 million and
$21.6 million, respectively.
F-20
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Intangible
Assets and Goodwill
|
Intangible assets, net of accumulated amortization, impairment
charges and adjustments, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Estimated
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(In millions)
|
|
Life
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Out-licensed patents
|
|
12 years
|
|
$
|
578.0
|
|
|
$
|
(306.0
|
)
|
|
$
|
272.0
|
|
|
$
|
578.0
|
|
|
$
|
(250.3
|
)
|
|
$
|
327.7
|
|
Core developed technology
|
|
15-23 years
|
|
|
3,005.3
|
|
|
|
(1,472.4
|
)
|
|
|
1,532.9
|
|
|
|
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
|
|
|
|
(1.8
|
)
|
|
|
0.3
|
|
|
|
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
|
|
|
$
|
(1,794.0
|
)
|
|
$
|
1,871.1
|
|
|
$
|
3,665.1
|
|
|
$
|
(1,504.0
|
)
|
|
$
|
2,161.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
Assets
Intangible assets were unchanged as of December 31, 2009 as
compared to December 31, 2008 exclusive of the impact of
foreign exchange and amortization.
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 and extends the expected remaining life of the
related core intangible asset.
Amortization
of Acquired Intangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Amortization of acquired intangible assets
|
|
$
|
289.8
|
|
|
$
|
332.7
|
|
|
$
|
257.5
|
|
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 of AVONEX is performed annually during our long
range planning cycle each year. This analysis serves as the
basis for the calculation of economic consumption for the core
technology intangible asset.
We completed our most recent long range planning cycle in the
third quarter of 2009, which includes an analysis of the
anticipated product sales of AVONEX. Based upon our most recent
analysis, amortization of intangible assets included within our
consolidated balance sheet as of December 31, 2009 is
expected to be in the range of approximately $160.0 million
to $220.0 million for each of the next five years.
F-21
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill
The following table summarizes changes to goodwill:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Balance as of January 1
|
|
$
|
1,138.6
|
|
|
$
|
1,137.4
|
|
Foreign currency translation
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31
|
|
$
|
1,138.6
|
|
|
$
|
1,138.6
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 we had no accumulated impairment
losses.
|
|
6.
|
Fair
Value Measurements
|
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 December 31, 2009 and 2008 and indicate the fair
value hierarchy of the valuation techniques we utilized to
determine such fair value, which is described further within
Note 1, Summary of Significant Accounting Policies
to our Consolidated Financial Statements.
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 observable market inputs to determine
value, including reportable trades, benchmark yields, credit
spreads, broker/dealer quotes, bids, offers, current spot rates
and other industry and economic events. We validate the prices
provided by our third party pricing services by understanding
the models used, obtaining market values from other pricing
sources, analyzing pricing data in certain instances and
confirming those securities trade in active markets. After
completing our validation procedures, we did not adjust or
override any fair value measurements provided by our pricing
services as of December 31, 2009 and 2008.
Our strategic investments in publicly traded equity securities
are classified as Level 1 assets as their fair values are
readily determinable and based on quoted market prices.
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 December 31, 2009 and 2008. We have funding
commitments of up to approximately $24.8 million as part of
our investment in these funds. These funds primarily invest in
small privately-owned, ventured-backed, biotechnology companies.
The fair value of funds has been estimated using the net asset
value of our ownership interest in partners capital. The
investments cannot be redeemed within the funds. Distributions
from each will be received as the underlying investments of the
fund are liquidated. The funds and therefore a majority of the
underlying assets of the funds will not be liquidated in the
near future. 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.
F-22
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following tables set forth our financial assets and
liabilities that were recorded at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices
|
|
|
Other
|
|
|
Significant
|
|
|
|
As of
|
|
|
in Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
Inputs
|
|
|
Inputs
|
|
(In millions)
|
|
2009
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
476.4
|
|
|
$
|
|
|
|
$
|
476.4
|
|
|
$
|
|
|
Marketable debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
504.1
|
|
|
|
|
|
|
|
504.1
|
|
|
|
|
|
Government securities
|
|
|
1,133.5
|
|
|
|
|
|
|
|
1,133.5
|
|
|
|
|
|
Mortgage and other asset backed securities
|
|
|
238.3
|
|
|
|
|
|
|
|
238.3
|
|
|
|
|
|
Strategic investments
|
|
|
5.9
|
|
|
|
5.9
|
|
|
|
|
|
|
|
|
|
Venture capital investments
|
|
|
21.9
|
|
|
|
|
|
|
|
|
|
|
|
21.9
|
|
Derivative contracts
|
|
|
15.8
|
|
|
|
|
|
|
|
15.8
|
|
|
|
|
|
Plan assets for deferred compensation
|
|
|
13.6
|
|
|
|
|
|
|
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,409.5
|
|
|
$
|
5.9
|
|
|
$
|
2,381.7
|
|
|
$
|
21.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
$
|
11.1
|
|
|
$
|
|
|
|
$
|
11.1
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11.1
|
|
|
$
|
|
|
|
$
|
11.1
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Prices
|
|
|
Other
|
|
|
Significant
|
|
|
|
As of
|
|
|
in Active
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
December 31,
|
|
|
Markets
|
|
|
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
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of our cash equivalents, marketable debt
securities, derivative contracts and plan assets for deferred
compensation are determined through market and observable
sources.
F-23
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (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:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Beginning balance
|
|
$
|
23.9
|
|
|
$
|
28.1
|
|
Total net unrealized gains (losses) included in earnings
|
|
|
(3.6
|
)
|
|
|
(7.6
|
)
|
Purchases, issuances, and settlements
|
|
|
1.6
|
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
21.9
|
|
|
$
|
23.9
|
|
|
|
|
|
|
|
|
|
|
The fair values of our debt instruments are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Credit line from Dompé
|
|
$
|
17.2
|
|
|
$
|
16.4
|
|
Notes payable to Fumedica
|
|
|
31.3
|
|
|
|
37.5
|
|
6.0% Senior Notes due 2013
|
|
|
475.7
|
|
|
|
429.8
|
|
6.875% Senior Notes due 2018
|
|
|
589.1
|
|
|
|
562.4
|
|
|
|
|
|
|
|
|
|
|
Total fair value
|
|
$
|
1,113.3
|
|
|
$
|
1,046.1
|
|
|
|
|
|
|
|
|
|
|
The fair values of our credit line from Dompe and our note
payable to Fumedica were estimated using market observable
inputs. The fair value of our Senior Notes was determined
through market, observable and corroborated sources. Within the
hierarchy of fair value measurements, these are Level 2
fair values.
Marketable
Securities, including Strategic Investments
The following tables summarize our marketable securities and
strategic investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Amortized
|
|
As of December 31, 2009 (In millions):
|
|
Value
|
|
|
Gains
|
|
|
Losses
|
|
|
Cost
|
|
|
Available-for-Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
177.2
|
|
|
$
|
1.5
|
|
|
$
|
|
|
|
$
|
175.7
|
|
Non-current
|
|
|
326.9
|
|
|
|
5.7
|
|
|
|
(0.3
|
)
|
|
|
321.5
|
|
Government securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
501.6
|
|
|
|
1.2
|
|
|
|
|
|
|
|
500.4
|
|
Non-current
|
|
|
631.9
|
|
|
|
4.1
|
|
|
|
(0.5
|
)
|
|
|
628.3
|
|
Mortgage and other asset backed securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
3.0
|
|
|
|
0.1
|
|
|
|
|
|
|
|
2.9
|
|
Non-current
|
|
|
235.3
|
|
|
|
4.1
|
|
|
|
(0.5
|
)
|
|
|
231.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
available-for-sale
securities
|
|
$
|
1,875.9
|
|
|
$
|
16.7
|
|
|
$
|
(1.3
|
)
|
|
$
|
1,860.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic investments, non-current
|
|
$
|
5.9
|
|
|
$
|
2.7
|
|
|
$
|
(0.3
|
)
|
|
$
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2009 and 2008,
government securities included $298.8 million and
$139.1 million, respectively, of Federal Deposit Insurance
Corporation (FDIC) guaranteed senior notes issued by financial
institutions under the Temporary Liquidity Guarantee Programs.
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 in the tables above. As of
December 31, 2009 and 2008, such commercial paper,
including accrued interest, had fair and carrying values of
$76.9 million and $42.7 million, respectively, and
short-term debt securities had fair and carrying values of
$399.5 million and $458.2 million, respectively.
In addition, the balances as of December 31, 2008 include
amounts related to loaned securities under our securities
lending program.
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 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
(In millions)
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Due in one year or less
|
|
$
|
522.0
|
|
|
$
|
519.5
|
|
|
$
|
714.9
|
|
|
$
|
713.0
|
|
Due after one year through five years
|
|
|
1,143.7
|
|
|
|
1,133.4
|
|
|
|
733.7
|
|
|
|
722.0
|
|
Due after five years
|
|
|
210.2
|
|
|
|
207.6
|
|
|
|
191.8
|
|
|
|
189.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,875.9
|
|
|
$
|
1,860.5
|
|
|
$
|
1,640.4
|
|
|
$
|
1,624.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average maturity of our marketable securities as of
December 31, 2009 and 2008 was 15 months and
13 months, respectively.
F-25
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Proceeds
from Maturities and Sales of 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, are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Proceeds from maturities and sales
|
|
$
|
3,319.0
|
|
|
$
|
2,941.1
|
|
|
$
|
3,154.3
|
|
Realized gains
|
|
$
|
19.8
|
|
|
$
|
15.9
|
|
|
$
|
4.5
|
|
Realized losses
|
|
$
|
4.0
|
|
|
$
|
17.0
|
|
|
$
|
4.9
|
|
The realized losses for the year ended December 31, 2009
and 2008 primarily relate to losses on the sale of corporate
debt securities and non-agency mortgage-backed securities.
Strategic
Investments
In 2009 we sold two strategic investments for $5.9 million,
which resulted in a $3.0 million gain. In 2008, we did not
sell any portion of our strategic investments. In 2007, we sold
our share in one strategic investment for $99.5 million,
which resulted in a $17.2 million gain. Strategic
investments are included in investments and other assets on the
accompanying consolidated balance sheets.
In addition to the strategic investments and venture capital
investments noted in Note 6, Fair Value
Measurements, to our Consolidated Financial Statements, we
hold other investments in equity securities of certain privately
held biotechnology companies and biotechnology oriented venture
capital funds accounted for using the cost method. The cost
basis of these securities as of December 31, 2009 and 2008
is $73.9 million and $40.8 million, respectively.
These securities are also included in investments and other
assets on the accompanying consolidated balance sheets.
Impairments
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 U.S. GAAP. An unrealized loss exists when the
current fair value of an individual security is less 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.
F-26
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Recognition
and Measurement of
Other-than-Temporary
Impairment
Prior to the adoption of new accounting standards for the
recognition, measurement and presentation of
other-than-temporary
impairments in April 2009, we recognized all
other-than-temporary
impairment amounts related to our marketable 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.
In 2009, 2008, and 2007, we recognized $3.8 million,
$16.3 million, and $17.6 million in charges,
respectively, for the impairment of publicly-held strategic
investments and for declines in value of funds that were
determined to be
other-than-temporary.
In 2009, 2008, and 2007, we recorded $3.2 million,
$2.3 million, and $0.8 million, respectively, in
charges for the impairment for certain investments in
privately-held companies and declines in value of funds recorded
under the cost method that were determined to be
other-than-temporary.
In 2009, we recognized $3.6 million in charges for the
other-than-temporary
impairment on marketable debt securities. For 2008 and 2007, we
recognized $41.7 million and $7.5 million,
respectively, in charges for the
other-than-temporary
impairment of marketable debt securities primarily related to
mortgage and asset-backed securities.
|
|
8.
|
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 foreign exchange rates and
interest rates. We use certain derivative instruments to help
manage these exposures. We execute these instruments with
financial institutions we judge to be creditworthy and the
majority of these instruments 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 foreign exchange rates. In order to mitigate these
changes we use forward contracts to lock in foreign exchange
rates. We do not engage in currency speculation.
All foreign currency forward contracts in effect as of
December 31, 2009 and 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.
F-27
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Foreign currency forward contracts that were entered into to
hedge forecasted revenue are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
|
As of December 31,
|
|
Foreign Currency: (In millions)
|
|
2009
|
|
|
2008
|
|
|
Euro
|
|
$
|
495.9
|
|
|
$
|
489.4
|
|
Canadian Dollar
|
|
|
22.3
|
|
|
|
34.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
518.2
|
|
|
$
|
523.5
|
|
|
|
|
|
|
|
|
|
|
The portion of the fair value of these contracts that was
included in accumulated other comprehensive income (loss) within
total equity reflected gains of $1.2 million and losses of
$44.1 million as of December 31, 2009 and 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 of December 31, 2009 and
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 years ended December 31, 2009,
2008 and 2007 we recognized net losses of $1.1 million,
$0.2 million, and $2.6 million, respectively. In
addition, we recognized $49.7 million, $8.5 million,
and $13.1 million, respectively, of losses in product
revenue for the settlement of certain effective cash flow hedge
instruments for the years ended December 31, 2009, 2008 and
2007, respectively. These settlements were recorded in the same
period as the related forecasted revenue.
Interest
Rate Swaps
In connection with the issuance of our 6.875% Senior Notes
in March 2008, we entered into interest rate swap contracts with
an aggregate notional amount of $550.0 million. These
contracts 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
year ended December 31, 2009. In the year ended
December 31, 2008, we recognized a net loss of
$8.9 million 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. In 2009, approximately
$5.4 million 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
(In millions)
|
|
Balance Sheet Location
|
|
|
Fair Value
|
|
|
Balance Sheet Location
|
|
|
Fair Value
|
|
|
December 31, 2009
|
|
|
Other Current Assets
|
|
|
$
|
10.8
|
|
|
|
Accrued Expenses and Other
|
|
|
$
|
9.8
|
|
December 31, 2008
|
|
|
Other Current Assets
|
|
|
$
|
1.9
|
|
|
|
Accrued Expenses and Other
|
|
|
$
|
46.0
|
|
As noted above, the interest rate swap contracts were settled in
December 2008.
F-28
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the effect of derivatives
designated as hedging instruments on the consolidated statements
of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
|
|
|
|
|
|
|
Recognized in
|
|
|
|
|
|
Reclassified from
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
Income
|
|
|
|
|
Amount of
|
|
|
|
on Derivative
|
|
|
Income Statement
|
|
|
into Income
|
|
|
Income Statement
|
|
Gain/(Loss)
|
|
|
|
Gain/(Loss)
|
|
|
Location
|
|
|
Gain/(Loss)
|
|
|
Location
|
|
Recorded
|
|
For the Years Ended (In millions)
|
|
(Effective Portion)
|
|
|
(Effective Portion)
|
|
|
(Effective Portion)
|
|
|
(Ineffective Portion)
|
|
(Ineffective Portion)
|
|
|
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
1.2
|
|
|
|
Revenue
|
|
|
$
|
(49.7
|
)
|
|
Other income
(expense)
|
|
$
|
(1.1
|
)
|
December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(44.1
|
)
|
|
|
Revenue
|
|
|
$
|
(8.5
|
)
|
|
Other income
(expense)
|
|
$
|
0.2
|
|
Interest rate swap
|
|
$
|
|
|
|
|
Interest Expense
|
|
|
$
|
|
|
|
Interest Expense
|
|
$
|
(8.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
$
|
(6.4
|
)
|
|
|
Revenue
|
|
|
$
|
(13.1
|
)
|
|
Other income
(expense)
|
|
$
|
(2.6
|
)
|
Other
Derivatives
In 2009, we entered into several foreign currency forward
contracts to mitigate the foreign currency risk related to
certain balance sheet items. We have not elected hedge
accounting for these items. As of December 31, 2009, the
aggregate notional amount of our outstanding foreign currency
contracts was $188.0 million. The fair value of these
contracts was a net asset of $3.8 million. Net gains of
$2.5 million were recognized as a component of other income
(expense), net related to these contracts in the year ended
December 31, 2009.
Our indebtedness is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Current portion:
|
|
|
|
|
|
|
|
|
Notes payable to Fumedica
|
|
$
|
11.2
|
|
|
$
|
10.9
|
|
Credit line from Dompé
|
|
|
8.6
|
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
Current portion of notes payable and line of credit
|
|
$
|
19.8
|
|
|
$
|
27.7
|
|
|
|
|
|
|
|
|
|
|
Non-current portion:
|
|
|
|
|
|
|
|
|
6.0% Senior notes due 2013
|
|
$
|
449.6
|
|
|
$
|
449.6
|
|
6.875% Senior notes due 2018
|
|
|
603.2
|
|
|
|
608.2
|
|
Notes payable to Fumedica
|
|
|
18.8
|
|
|
|
27.6
|
|
Credit line from Dompé
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable and line of credit
|
|
$
|
1,080.2
|
|
|
$
|
1,085.4
|
|
|
|
|
|
|
|
|
|
|
The following is a summary description of our principal
indebtedness as of December 31, 2009.
Senior
Notes
On March 4, 2008, we issued $450.0 million aggregate
principal amount of 6.0% Senior Notes due March 1,
2013 and $550.0 million aggregate principal amount of
6.875% Senior Notes due March 1, 2018 at 99.886% and
F-29
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
99.184% of par, respectively. The discount is amortized as
additional interest expense over the period from issuance
through maturity. These notes are senior unsecured obligations.
Interest on the notes is payable March 1 and September 1 of each
year. The notes may be redeemed at our option at any time at
100% of the principal amount plus accrued interest and a
specified make-whole amount. The notes contain a change of
control provision that may require us to purchase the notes
under certain circumstances. There is also an interest rate
adjustment feature that requires us to pay interest at an
increased interest rate on the notes if the credit rating on the
notes declines below investment grade. Offering costs of
approximately $8.0 million have been recorded as debt
issuance costs on our consolidated balance sheet and are
amortized as additional interest expense using the effective
interest rate method over the period from issuance through
maturity.
Upon the issuance of the debt we entered into interest rate swap
contracts where we received a fixed rate and paid a variable
rate, as further described in Note 8, Derivative
Instruments to our Consolidated Financial Statements. These
contracts have been subsequently terminated. Upon termination of
these swaps, the carrying amount of the 6.875% Senior Notes
due in 2018 was increased by $62.8 million. This increase
is amortized using the effective interest rate method over the
remaining life of the Senior Notes and is being recognized as a
reduction of interest expense.
We used the proceeds of this borrowing, along with cash and the
proceeds from the liquidation of marketable securities, to repay
the full $1,500.0 million outstanding under the term loan
facility we had entered into in July 2007 in connection with the
funding of our June 2007 common stock tender offer. This term
loan facility expired upon repayment.
Revolving
Credit Facility
We have a $360.0 million senior unsecured revolving credit
facility, which may be used for future working capital and
general corporate purposes. The facility terminates in June
2012. As of December 31, 2009 and 2008, there were no
borrowings under this credit facility and we were in compliance
with applicable covenants.
Biogen-Dompé
As of December 31, 2009 and 2008, Biogen-Dompé SRL, a
consolidated joint venture, has a loan balance of
12.0 million Euros ($17.2 million) and
12.0 million Euros ($16.7 million), respectively.
These balances represent a line of credit from us and Dompé
Farmaceutici SpA of 24.0 million Euros, half of which has
been eliminated for purposes of presenting our consolidated
financial position as it is an intercompany loan. Borrowings
under this line of credit are to be made equally between the
partners, with any repayments paid in a similar manner. The loan
was originally due June 1, 2009; however, a new loan was
subsequently executed with a maturity date of December 1,
2011. The interest rate on the line of credit under the new
agreements is determined at a rate of three month Euro LIBOR
plus 150 basis points and was 2.2% as of December 31,
2009. The interest rate is reset quarterly and payable quarterly
in arrears.
Notes
Payable to Fumedica
As of December 31, 2009 and 2008, the notes payable to
Fumedica have a present value of 31.2 million Swiss Francs
($30.0 million) and 41.2 million Swiss Francs
($38.6 million), respectively. The notes, which were
entered into in connection with the settlement of various
agreements associated with Fumedica, are non-interest bearing,
have been discounted for financial statement presentation
purposes and are being accreted at a rate of 5.75% and are
payable in a series of payments through June 2018.
F-30
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Debt
Maturity
Our total debt matures as follows:
|
|
|
|
|
(In millions)
|
|
As of December 31, 2009
|
|
2010
|
|
$
|
20.1
|
|
2011
|
|
|
11.6
|
|
2012
|
|
|
3.1
|
|
2013
|
|
|
453.1
|
|
2014
|
|
|
3.1
|
|
2015 and thereafter
|
|
|
562.3
|
|
|
|
|
|
|
Total
|
|
$
|
1,053.3
|
|
|
|
|
|
|
The fair value of our debt is disclosed in Note 6, Fair
Value Measurements to our Consolidated Financial Statements.
Preferred
Stock
Preferred stock was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
As of December 31, 2007
|
|
(In thousands)
|
|
Authorized
|
|
|
Issued
|
|
|
Outstanding
|
|
|
Authorized
|
|
|
Issued
|
|
|
Outstanding
|
|
|
Authorized
|
|
|
Issued
|
|
|
Outstanding
|
|
|
Series A Preferred Stock
|
|
|
1,750
|
|
|
|
8
|
|
|
|
8
|
|
|
|
1,750
|
|
|
|
8
|
|
|
|
8
|
|
|
|
1,750
|
|
|
|
8
|
|
|
|
8
|
|
Series X Junior Participating Preferred Stock
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
Undesignated
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
5,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
8
|
|
|
|
8
|
|
|
|
8,000
|
|
|
|
8
|
|
|
|
8
|
|
|
|
8,000
|
|
|
|
8
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have 8,000,000 shares of Preferred Stock authorized, of
which 1,750,000 shares have been designated as
Series A Preferred Stock and 1,000,000 shares have
been designated as Series X Junior Participating Preferred
Stock. The balance may be issued without a vote or action of
stockholders from time to time in classes or series with the
designations, powers, preferences, and the relative,
participating, optional or other special rights of the shares of
each such class or series and any qualifications, limitations or
restrictions thereon as set forth in the stock certificate. Any
such Preferred Stock may rank prior to common stock as to
dividend rights, liquidation preference or both, and may have
full or limited voting rights and may be convertible into shares
of common stock. As of December 31, 2009, 2008 and 2007,
there were 8,221 shares of Series A Preferred Stock
issued and outstanding. These shares carry a liquidation
preference of $67 and are convertible into 60 shares of
common stock per share of Preferred Stock. No other shares of
Preferred Stock are issued and outstanding as of
December 31, 2009, 2008 and 2007.
Stockholder
Rights Plan
In January 2009, our Board of Directors voted to terminate our
stockholders rights plan effective as of January 30, 2009.
The plan was scheduled to expire on July 26, 2011 and was
originally adopted by the Board of Directors in 1997. Under the
rights plan, each share of our common stock had one
right attached to it that entitled the holder to
purchase our Series X Junior Participating Preferred Stock
under the circumstances specified in the rights plan. As a
result of our Board of Directors action, no rights are
outstanding or exercisable.
Stock
Repurchase Programs
In October 2009, our Board of Directors authorized the
repurchase of up to $1.0 billion of our common stock with
repurchased shares being retired. This repurchase program does
not have an expiration date. As of December 31, 2009,
approximately 8.8 million shares at a cost of
$422.4 million were repurchased under this
F-31
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
authorization, all of which were retired. From January 1,
2010 through February 5, 2010, we repurchased approximately
an additional 5.4 million shares under this program at a
total cost of approximately $289.4 million, all of which
were also retired. Approximately $288.2 million remains
available for the repurchase of our common stock under the 2009
program.
In October 2006, our Board of Directors authorized the
repurchase of up to 20.0 million shares of our common
stock. As of December 31, 2009, all shares under this
program have been repurchased as approximately 7.2 million
shares of our common stock were repurchased in 2009 for
approximately $328.8 million. In 2008, approximately
12.8 million shares of our common stock were repurchased
under this program for approximately $738.9 million.
Reclassifications
The adoption of a newly issued accounting standard for
noncontrolling interests on January 1, 2009, changed the
accounting and reporting for our minority interests by
recharacterizing them as noncontrolling interests and
classifying them as a separate component of total
shareholders equity in our accompanying consolidated
balance sheets and consolidated statements of shareholders
equity. Additionally, net income attributable to noncontrolling
interest is now shown separately from net income in the
consolidated statements of income. As a result, prior year
amounts related to noncontrolling interest have been
reclassified to conform to the current year presentation. This
reclassification had no effect on our previously reported
financial position or results of operations.
In the year ended December 31, 2008, we reclassified
amounts within our consolidated statement of shareholders
equity, resulting in an approximately $78.6 million
correction in Additional Paid-in Capital and Retained Earnings
(Accumulated Deficit) balances in connection with the
re-issuance of treasury stock at a loss.
In the year ended December 31, 2007 we reclassified amounts
within our consolidated statements of equity, resulting in an
approximately $48.0 million correction in the treasury
stock and common stock balances.
Basic and diluted earnings per share are calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
970.1
|
|
|
$
|
783.2
|
|
|
$
|
638.2
|
|
Adjustment for net income allocable to preferred shares
|
|
|
(1.7
|
)
|
|
|
(1.3
|
)
|
|
|
(1.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income used in calculating basic and diluted earnings per
share
|
|
$
|
968.4
|
|
|
$
|
781.9
|
|
|
$
|
637.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
|
|
|
287.4
|
|
|
|
292.3
|
|
|
|
315.8
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and employee stock purchase plan
|
|
|
0.6
|
|
|
|
1.3
|
|
|
|
2.6
|
|
Restricted stock awards
|
|
|
|
|
|
|
0.1
|
|
|
|
0.5
|
|
Time-vested restricted stock units
|
|
|
1.4
|
|
|
|
1.3
|
|
|
|
1.1
|
|
Performance-vested restricted stock units
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
Convertible promissory notes due 2019
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
Convertible promissory notes due 2032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive potential common shares
|
|
|
2.1
|
|
|
|
2.7
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in calculating diluted earnings per share
|
|
|
289.5
|
|
|
|
295.0
|
|
|
|
320.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following amounts were not included in the calculation of
net income per basic and diluted share because their effects
were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to preferred stock
|
|
$
|
1.7
|
|
|
$
|
1.3
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
8.5
|
|
|
|
6.9
|
|
|
|
8.2
|
|
Time-vested restricted stock units
|
|
|
2.1
|
|
|
|
1.5
|
|
|
|
0.1
|
|
Performance-vested restricted stock units
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11.3
|
|
|
|
8.9
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share for the year ended December 31, 2009
reflects, on a weighted average basis, the repurchase of
16.0 million shares of our common stock under our 2009
and 2006 share repurchase programs.
As a result of our 2007 tender offer, earnings per share for the
year ended December 31, 2007 reflects, on a weighted
average basis, the repurchase of 56.4 million shares
as of June 27, 2007, the date the obligation was incurred,
in accordance with accounting standards for earning per share.
Share-based
Compensation Expense
The following table summarizes share-based compensation expense
included within our consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Research and development
|
|
$
|
60.8
|
|
|
$
|
59.9
|
|
|
$
|
51.7
|
|
Selling, general and administrative
|
|
|
106.4
|
|
|
|
93.8
|
|
|
|
76.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
167.2
|
|
|
$
|
153.7
|
|
|
$
|
127.8
|
|
Capitalized share-based compensation costs
|
|
|
(6.3
|
)
|
|
|
(7.5
|
)
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in total costs and
expenses
|
|
$
|
160.9
|
|
|
$
|
146.2
|
|
|
$
|
123.1
|
|
Income tax effect
|
|
|
(49.4
|
)
|
|
|
(45.4
|
)
|
|
|
(37.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in net income
attributable to Biogen Idec Inc.
|
|
$
|
111.5
|
|
|
$
|
100.8
|
|
|
$
|
85.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Our share-based compensation programs include stock options,
time-vested restricted stock units, performance-vested
restricted stock units, restricted stock and shares issued under
our ESPP. The following table summarizes share-based
compensation expense associated with each of these programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Stock options
|
|
$
|
21.6
|
|
|
$
|
20.0
|
|
|
$
|
30.7
|
|
Time-vested restricted stock units
|
|
|
133.7
|
|
|
|
125.6
|
|
|
|
75.2
|
|
Performance-vested restricted stock units
|
|
|
4.6
|
|
|
|
1.1
|
|
|
|
5.0
|
|
Restricted stock awards
|
|
|
|
|
|
|
0.5
|
|
|
|
11.7
|
|
Employee stock purchase plan
|
|
|
7.3
|
|
|
|
6.5
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
167.2
|
|
|
$
|
153.7
|
|
|
$
|
127.8
|
|
Capitalized share-based compensation costs
|
|
|
(6.3
|
)
|
|
|
(7.5
|
)
|
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense included in total costs and
expenses
|
|
$
|
160.9
|
|
|
$
|
146.2
|
|
|
$
|
123.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Windfall tax benefits from vesting of stock awards, exercises of
stock options and ESPP participation were $3.4 million,
$28.0 million, and $69.7 million in 2009, 2008, and
2007, respectively. These amounts have been calculated under the
alternative transition method in accordance with U.S. GAAP.
As of December 31, 2009, unrecognized compensation cost
related to unvested share-based compensation was approximately
$178.1 million, net of estimated forfeitures. We expect to
recognize the cost of these unvested awards over a
weighted-average period of 1.4 years.
Share-based
Compensation Plans
We have three share-based compensation plans pursuant to which
awards are currently being made: (1) the Biogen Idec Inc.
2006 Non-Employee Directors Equity Plan (2006 Directors
Plan); (2) the Biogen Idec Inc. 2008 Omnibus Equity Plan
(2008 Omnibus Plan); and (3) the Biogen Idec Inc. 1995
Employee Stock Purchase Plan (ESPP). We have six share-based
compensation plans pursuant to which outstanding awards have
been made, but from which no further awards can or will be made:
(i) the IDEC Pharmaceuticals Corporation 1993 Non-Employee
Directors Stock Option Plan; (ii) the IDEC Pharmaceuticals
Corporation 1988 Stock Option Plan; (iii) the Biogen, Inc.
1985 Non-Qualified Stock Option Plan; (iv) the Biogen, Inc.
1987 Scientific Board Stock Option Plan; (v) the Biogen
Idec Inc. 2003 Omnibus Equity Plan (2003 Omnibus Plan); and
(vi) the Biogen Idec Inc. 2005 Omnibus Equity Plan (2005
Omnibus Plan). We have not made any awards pursuant to the 2005
Omnibus Plan since our stockholders approved the 2008 Omnibus
Plan and do not intend to make any awards pursuant to the 2005
Omnibus Plan in the future, except that unused shares under the
2005 Omnibus Plan have been carried over for use under the 2008
Omnibus Plan.
Directors
Plan
In May 2006, our stockholders approved the 2006 Directors
Plan for share-based awards to our directors. Awards granted
from the 2006 Directors Plan may include options, shares of
restricted stock awards, restricted stock units, stock
appreciation rights and other awards in such amounts and with
such terms and conditions as may be determined by a committee of
our Board of Directors, subject to the provisions of the plan.
We have reserved a total of 850,000 shares of common stock
for issuance under the 2006 Directors Plan. The
2006 Directors Plan provides that awards other than stock
options and stock appreciation rights will be counted against
the total number of shares reserved under the plan in a 1.5-to-1
ratio.
F-34
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Omnibus
Plans
In June 2008, our stockholders approved the 2008 Omnibus Plan
for share-based awards to our employees. Awards granted from the
2008 Omnibus Plan may include options, shares of restricted
stock awards, restricted stock units, performance shares, shares
of phantom stock, stock appreciation rights and other awards in
such amounts and with such terms and conditions as may be
determined by a committee of our Board of Directors, subject to
the provisions of the plan. Shares of common stock available for
issuance under the 2008 Omnibus Plan consist of
15.0 million shares reserved for this purpose, plus shares
of common stock that remained available for issuance under the
2005 Omnibus Plan on the date that our stockholders approved the
2008 Omnibus Plan, plus shares that are subject to awards under
the 2005 Omnibus Plan which remain unissued upon the
cancellation, surrender, exchange or termination of such awards.
The 2008 Omnibus Equity Plan provides that awards other than
stock options and stock appreciation rights will be counted
against the total number of shares available under the plan in a
1.5-to-1 ratio.
Stock
Options
All stock option grants to employees are for a ten-year term and
generally vest one-fourth per year over four years on the
anniversary of the date of grant, provided the employee remains
continuously employed with us. Stock option grants to directors
are for ten-year terms and generally vest as follows:
(1) grants made on the date of a directors initial
election to our Board of Directors vest one-third per year over
three years on the anniversary of the date of grant, and
(2) grants made for service on our Board of Directors vest
on the first anniversary of the date of grant, provided in each
case that the director continues to serve on our Board of
Directors through the vesting date. Options granted under all
plans are exercisable at a price per share not less than the
fair market value of the underlying common stock on the date of
grant. The estimated fair value of options, including the effect
of estimated forfeitures, is recognized over the options
vesting periods. The fair value of the stock option grants
awarded in 2009, 2008, and 2007 was estimated as of the date of
grant using a Black-Scholes option valuation model that uses the
following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expected option life (in years)
|
|
|
4.7
|
|
|
|
5.1
|
|
|
|
4.9
|
|
Expected stock price volatility
|
|
|
39.3
|
%
|
|
|
34.4
|
%
|
|
|
33.6
|
%
|
Risk-free interest rate
|
|
|
1.9
|
%
|
|
|
2.4
|
%
|
|
|
4.4
|
%
|
Expected dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Per share grant-date fair value
|
|
$
|
18.00
|
|
|
$
|
20.85
|
|
|
$
|
18.78
|
|
The expected life of options granted is derived using assumed
exercise rates based on historical exercise patterns and
represents the period of time that options granted are expected
to be outstanding. Expected stock price volatility is based upon
implied volatility for our exchange-traded options and other
factors, including historical volatility. After assessing all
available information on either historical volatility, implied
volatility, or both, we have concluded that a combination of
both historical and implied volatility provides the best
estimate of expected volatility. The risk-free interest rate
used is determined by the market yield curve based upon
risk-free interest rates established by the Federal Reserve, or
non-coupon bonds that have maturities equal to the expected
term. The dividend yield of zero is based upon the fact that we
have not historically granted cash dividends, and do not expect
to issue dividends in the foreseeable future. Stock options
granted prior to January 1, 2006 were valued based on the
grant date fair value of those awards, using the Black-Scholes
option pricing model, as previously calculated for pro-forma
disclosures.
F-35
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of stock option activity is presented in the following
table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Exercise
|
|
(In thousands, except weighted average exercise price)
|
|
Shares
|
|
|
Price
|
|
|
Outstanding at December 31, 2006
|
|
|
25,106
|
|
|
$
|
47.96
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,470
|
|
|
$
|
51.23
|
|
Exercised
|
|
|
(10,524
|
)
|
|
$
|
44.84
|
|
Cancelled
|
|
|
(1,152
|
)
|
|
$
|
53.97
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2007
|
|
|
14,900
|
|
|
$
|
50.03
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,475
|
|
|
$
|
60.23
|
|
Exercised
|
|
|
(3,769
|
)
|
|
$
|
41.99
|
|
Cancelled
|
|
|
(506
|
)
|
|
$
|
55.70
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2008
|
|
|
12,100
|
|
|
$
|
53.53
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,031
|
|
|
$
|
49.96
|
|
Exercised
|
|
|
(637
|
)
|
|
$
|
40.16
|
|
Cancelled
|
|
|
(1,664
|
)
|
|
$
|
60.74
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009
|
|
|
10,830
|
|
|
$
|
52.88
|
|
|
|
|
|
|
|
|
|
|
Of the options outstanding, 8.3 million were exercisable as
of December 31, 2009. The exercisable options had a
weighted-average exercise price of $52.80. The aggregate
intrinsic value of options exercisable as of December 31,
2009 was $45.2 million. The weighted average remaining
contractual term for options exercisable as of December 31,
2009 was 3.8 years.
A total of 10.3 million vested and expected to vest options
were outstanding as of December 31, 2009. These vested and
expected to vest options had a weighted average exercise price
of $52.87 and an aggregated intrinsic value of
$51.0 million. The weighted average remaining contractual
term of vested and expected to vest options as of
December 31, 2009 was 4.6 years.
The total intrinsic values of options exercised in 2009, 2008,
and 2007, were $6.7 million, $85.1 million, and
$226.7 million, respectively. The aggregate intrinsic
values of options outstanding as of December 31, 2009 was
$52.8 million. The weighted average remaining
contractual term for options outstanding as of December 31,
2009 was 4.8 years.
A summary of the amount of tax benefit realized for stock
options and cash received from the exercise of stock options is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Tax benefit realized for stock options
|
|
$
|
1.5
|
|
|
$
|
28.0
|
|
|
$
|
72.4
|
|
Cash received from the exercise of stock options
|
|
$
|
25.2
|
|
|
$
|
158.3
|
|
|
$
|
471.0
|
|
F-36
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Time-Vested
Restricted Stock Units
Time-vested restricted stock units (RSUs) awarded to employees
generally vest no sooner than one-third per year over three
years on the anniversary of the date of grant, or upon the third
anniversary of the date of the grant, provided the employee
remains continuously employed with us, except as otherwise
provided in the plan. Shares of our common stock will be
delivered to the employee upon vesting, subject to payment of
applicable withholding taxes. RSUs awarded to directors for
service on our Board of Directors vest on the first anniversary
of the date of grant, provided in each case that the director
continues to serve on our Board of Directors through the vesting
date. Shares of our common stock will be delivered to the
director upon vesting and are not subject to any withholding
taxes. The fair value of all RSUs is based on the market value
of our stock on the date of grant. Compensation expense,
including the effect of forfeitures, is recognized over the
applicable service period.
A summary of RSU activity is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
(In thousands, except weighted average grant date fair
value)
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2006
|
|
|
2,508
|
|
|
$
|
44.48
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,387
|
|
|
$
|
51.19
|
|
Vested
|
|
|
(845
|
)
|
|
$
|
44.58
|
|
Forfeited
|
|
|
(458
|
)
|
|
$
|
47.38
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2007
|
|
|
4,592
|
|
|
$
|
49.12
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,129
|
|
|
$
|
58.42
|
|
Vested
|
|
|
(1,645
|
)
|
|
$
|
47.93
|
|
Forfeited
|
|
|
(499
|
)
|
|
$
|
53.95
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
5,577
|
|
|
$
|
54.26
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,674
|
|
|
$
|
48.93
|
|
Vested
|
|
|
(2,421
|
)
|
|
$
|
52.08
|
|
Forfeited
|
|
|
(445
|
)
|
|
$
|
53.02
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2009
|
|
|
5,385
|
|
|
$
|
52.72
|
|
|
|
|
|
|
|
|
|
|
F-37
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Performance-Vested
Restricted Stock Units
A summary of performance-vested restricted stock units (PVRSUs)
activity is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
(In thousands, except weighted average grant date fair
value)
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2006
|
|
|
411
|
|
|
$
|
41.62
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
120
|
|
|
$
|
51.55
|
|
Vested
|
|
|
(357
|
)
|
|
$
|
41.76
|
|
Forfeited
|
|
|
(54
|
)
|
|
$
|
40.67
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2007
|
|
|
120
|
|
|
$
|
51.55
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
(27
|
)
|
|
$
|
49.33
|
|
Forfeited
|
|
|
(3
|
)
|
|
$
|
49.33
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
90
|
|
|
$
|
52.29
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
325
|
|
|
$
|
49.42
|
|
Vested
|
|
|
(30
|
)
|
|
$
|
52.29
|
|
Forfeited
|
|
|
(97
|
)
|
|
$
|
51.30
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2009
|
|
|
288
|
|
|
$
|
49.39
|
|
|
|
|
|
|
|
|
|
|
2009
Grant Activity
We apply a graded vesting expense methodology when accounting
for the PVRSUs issued in 2009. In 2009, approximately 325,000
PVRSUs were granted with a weighted average grant date fair
value of $49.42 per share.
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,
which ended 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.
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
In 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
F-38
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 in 2009, 2008 and 2007.
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 in 2009.
Prior
Period Grant Activity
In the first quarter of 2006, our Board of Directors awarded
100,000 PVRSUs to our CEO, under the 2005 Omnibus Plan, subject
to certain 2006 financial performance criteria. In February
2007, our Board of Directors determined that the performance
criteria had been attained and that 100,000 PVRSUs would convert
into shares of our common stock. A total of 58,250 shares
were issued, reflecting the fact that certain shares were
withheld for income tax purposes.
In the third quarter of 2005, we granted 1.2 million
PVRSUs, to be settled in shares of our common stock, to a group
of approximately 200 senior employees excluding our CEO. On
September 14, 2006, 758,262 shares vested for which
510,859 shares were issued, reflecting the fact that
certain shares were withheld for income tax purposes. On
March 14, 2007, 258,387 shares vested based on the
level of performance versus the pre-established goals, for which
a total of 172,054 shares were issued, reflecting the fact
that certain shares were withheld for income tax purposes. No
other shares vested in relation to this 2005 grant.
Restricted
Stock Awards
In 2005, we awarded restricted common stock to our employees
under the 2005 Omnibus Plan and the 2003 Omnibus Plan. The
restricted stock awards (RSAs) granted under the 2003 Omnibus
Plan vested in full on the third anniversary of the date of
grant for employees that remained continuously employed with us
through the vesting dates. The RSAs granted under the 2005
Omnibus Plan vested at a rate of approximately one-third per
year over three years on the anniversary of the date of grant
for employees that remained continuously employed with us
through the vesting dates.
The fair value of all time-vested RSAs is based on the market
value of our stock on the date of grant. Compensation expense,
including the effect of forfeitures, is recognized over the
applicable service period. All awards of restricted stock were
fully vested as of December 31, 2008.
A summary of RSA activity is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
(In thousands, except weighted average grant date fair
value)
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2006
|
|
|
1,247
|
|
|
$
|
53.64
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
(713
|
)
|
|
$
|
44.10
|
|
Forfeited
|
|
|
(79
|
)
|
|
$
|
59.64
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2007
|
|
|
455
|
|
|
$
|
67.54
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
|
|
|
$
|
|
|
Vested
|
|
|
(454
|
)
|
|
$
|
67.54
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1
|
)
|
|
$
|
67.57
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
F-39
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ESPP
The purchase price of common stock under the ESPP is equal to
85% of the lower of (1) the market value per share of the
common stock on the participants entry date into an
offering period or (2) 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 2009, 2008 and 2007, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Shares issued under ESPP
|
|
|
0.6
|
|
|
|
0.5
|
|
|
|
0.5
|
|
Cash received under ESPP
|
|
$
|
22.6
|
|
|
$
|
21.3
|
|
|
$
|
18.2
|
|
|
|
13.
|
Accumulated
Other Comprehensive Income (Loss)
|
Accumulated other comprehensive income (loss) consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Translation adjustments
|
|
$
|
35.6
|
|
|
$
|
17.0
|
|
Unrealized gains on securites available for sale
|
|
|
11.3
|
|
|
|
10.5
|
|
Unrealized gains (losses) on foreign currency forward contracts
|
|
|
1.5
|
|
|
|
(40.2
|
)
|
Unfunded status of pension and postretirement benefit plans
|
|
|
2.1
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
50.5
|
|
|
$
|
(11.1
|
)
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains on securities available for sale is
shown net of tax of $(6.6) million and $(6.2) million
as of December 31, 2009 and 2008, respectively. Unrealized
gains (losses) on foreign currency forward contracts is shown
net of tax of $0.3 million, and $3.9 million as of
December 31, 2009 and 2008, respectively. The unfunded
status of pension and retirement benefit plans is shown net of
tax as of December 31, 2009 and 2008. Tax amounts in both
years were immaterial. See Note 15, Employee Benefit
Plans to our Consolidated Financial Statements for
discussion of unfunded status of pension and retirement benefit
plans.
Amounts comprising noncontrolling interests, as reported in our
consolidated statements of equity as of December 31, 2009
and 2008 included accumulated translation adjustments of
$2.4 million and $1.2 million, respectively.
Comprehensive income (loss) and its components are presented in
the consolidated statements of shareholders equity.
F-40
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
14.
|
Other
Consolidated Financial Statement Detail
|
Other
Income (Expense), Net
Components of other income (expense), net, are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest income
|
|
$
|
48.5
|
|
|
$
|
72.1
|
|
|
$
|
103.6
|
|
Interest expense
|
|
|
(35.8
|
)
|
|
|
(52.0
|
)
|
|
|
(40.5
|
)
|
Impairment on investments
|
|
|
(10.6
|
)
|
|
|
(60.3
|
)
|
|
|
(24.4
|
)
|
Gain (loss) on sales of investments, net
|
|
|
22.8
|
|
|
|
(1.1
|
)
|
|
|
16.7
|
|
Foreign exchange gains (losses), net
|
|
|
11.4
|
|
|
|
(9.8
|
)
|
|
|
3.0
|
|
Gain on the sale of property
|
|
|
|
|
|
|
|
|
|
|
7.1
|
|
Other, net
|
|
|
1.0
|
|
|
|
(6.6
|
)
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
$
|
37.3
|
|
|
$
|
(57.7
|
)
|
|
$
|
72.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Expense
In 2009, we incurred interest costs of $69.7 million. This
amount was reduced by $28.5 million because we capitalized
interest related to the construction of our large scale
manufacturing facility in Hillerød, Denmark. In addition,
in 2009, approximately $5.4 million was recorded as a
reduction due to the amortization of the deferred gain
associated with the termination of an interest rate swap in
December 2008.
In 2008, we incurred interest costs of $66.3 million. This
amount was reduced by $23.2 million of capitalized interest
on the manufacturing facility in Hillerød, Denmark. In
addition, we incurred approximately $8.9 million of
expenses related to hedge ineffectiveness on interest rate swaps
executed in March 2008.
In 2007, we incurred interest costs of $50.6 million, which
were reduced by $10.1 million of capitalized interest on
the manufacturing facility in Hillerød, Denmark.
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 marketable debt securities. The impairment
model for equity securities was not affected. Refer to
Note 7, Financial Instruments to our Consolidated
Financial Statements for additional information on the adoption
of this guidance.
In 2009, we recognized impairment losses of $7.0 million on
our strategic investments and non-marketable securities. In
addition, during 2008 and 2007, we recognized $18.6 million
and $18.4 million, respectively, in charges for the
impairment of strategic investments and non-marketable
securities that were determined to be
other-than-temporary.
In 2009, we recognized $3.6 million in charges for the
other-than-temporary
impairment on marketable debt securities. For 2008 and 2007, we
recognized $41.7 million and $7.5 million,
respectively, in charges for the
other-than-temporary
impairment of marketable debt securities primarily related to
mortgage and asset-backed securities.
F-41
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reclassification
The adoption of a new issued accounting standard for
noncontrolling interests on January 1, 2009, 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 $6.9 million,
$6.9 million, and $(58.4) million for the years ended
December 31, 2009, 2008 and 2007, respectively. This
reclassification had no effect on our previously reported
financial position or results of operations. Refer to
Note 10, Shareholders Equity to our
Consolidated Financial Statements for additional information on
the adoption of this guidance.
Other
Current Assets
Other current assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Deferred tax assets
|
|
$
|
88.8
|
|
|
$
|
70.8
|
|
Receivable from collaborations
|
|
|
5.3
|
|
|
|
1.7
|
|
Prepaid expenses
|
|
|
52.6
|
|
|
|
46.4
|
|
Interest receivable
|
|
|
10.6
|
|
|
|
11.8
|
|
Other
|
|
|
20.6
|
|
|
|
8.7
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
177.9
|
|
|
$
|
139.4
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment, net
Property, plant and equipment are recorded at historical cost,
net of accumulated depreciation. Components of property, plant
and equipment, net are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Land
|
|
$
|
111.2
|
|
|
$
|
108.8
|
|
Buildings
|
|
|
669.7
|
|
|
|
676.1
|
|
Leasehold improvements
|
|
|
73.1
|
|
|
|
80.1
|
|
Furniture and fixtures
|
|
|
50.7
|
|
|
|
48.1
|
|
Machinery and equipment
|
|
|
868.2
|
|
|
|
798.5
|
|
Construction in progress
|
|
|
506.7
|
|
|
|
420.2
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
$
|
2,279.6
|
|
|
$
|
2,131.8
|
|
|
|
|
|
|
|
|
|
|
Less: accumulated depreciation
|
|
|
(642.5
|
)
|
|
|
(537.0
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
1,637.1
|
|
|
$
|
1,594.8
|
|
|
|
|
|
|
|
|
|
|
In 2009, 2008, and 2007, we capitalized to construction in
progress approximately $28.4 million, $23.2 million
and $10.1 million, respectively, of interest costs
primarily related to the development of our large-scale biologic
manufacturing facility in Hillerød, Denmark.
As of December 31, 2009 and 2008, the construction in
progress balance related to the construction of our large-scale
biologic manufacturing facility in Hillerød, Denmark
totaled $441.2 million and $388.4 million,
respectively.
F-42
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Depreciation expense is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Depreciation expense
|
|
$
|
137.9
|
|
|
$
|
129.1
|
|
|
$
|
122.6
|
|
Accrued
Expenses and Other
Accrued expenses and other consists of the following:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Employee compensation and benefits
|
|
$
|
123.7
|
|
|
$
|
156.0
|
|
Royalties and licensing fees
|
|
|
41.8
|
|
|
|
40.6
|
|
Collaboration expenses
|
|
|
35.7
|
|
|
|
29.6
|
|
Clinical development expenses
|
|
|
43.2
|
|
|
|
41.5
|
|
Revenue-related rebates
|
|
|
52.0
|
|
|
|
37.7
|
|
Construction in progress accrual
|
|
|
12.8
|
|
|
|
18.6
|
|
Other
|
|
|
191.6
|
|
|
|
210.9
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses and other
|
|
$
|
500.8
|
|
|
$
|
534.9
|
|
|
|
|
|
|
|
|
|
|
Gain
on Sale of Property, Plant and Equipment, net
In 2008, as part of the lease agreement described in
Note 18, Commitments and Contingencies to our
Consolidated Financial Statements, we sold the development
rights on a parcel of land in Cambridge, MA for
$11.4 million in a non-monetary transaction and we recorded
a pre-tax gain of approximately $9.2 million on the sale.
|
|
15.
|
Employee
Benefit Plans
|
401(k)
Savings Plan
We maintain a 401(k) Savings Plan which is available to
substantially all regular employees in the U.S. over the
age of 21. Participants may make voluntary contributions. We
make matching contributions according to the 401(k) Savings
Plans matching formula. Beginning in January 2008, all
past and current matching contributions will vest immediately.
Previously, the matching contributions vested over four years of
service by the employee. Participant contributions vest
immediately. The 401(k) Savings Plan also holds certain
transition contributions on behalf of participants who
previously participated in the Biogen, Inc. Retirement Plan. The
expense related to our 401(k) Savings Plan primarily consists of
our matching contributions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expense related to our 401(k) Savings Plan
|
|
$
|
27.9
|
|
|
$
|
22.8
|
|
|
$
|
20.2
|
|
Deferred
Compensation Plan
We maintain a non-qualified deferred compensation plan, known as
the Supplemental Savings Plan (SSP), that allows a select group
of management employees in the U.S. to defer a portion of
their compensation. The SSP also provides certain credits to
highly compensated U.S. employees, which are paid by the
company. These credits are known as the Restoration Match. The
deferred compensation amounts are accrued when earned. Such
deferred compensation is distributable in cash in accordance
with the rules of the SSP. Deferred compensation amounts
F-43
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
under such plan as of December 31, 2009 and 2008 totaled
approximately $63.6 million and $48.5 million,
respectively, and are included in other long-term liabilities in
the accompanying consolidated balance sheets. The SSP also holds
certain transition contributions on behalf of participants who
previously participated in the Biogen, Inc. Retirement Plan.
Beginning in 2008, the Restoration Match vests immediately.
Previously, the Restoration Match and transition contributions
vested over four and seven years of service, respectively, by
the employee. Participant contributions vest immediately.
Distributions to participants can be either in one lump sum
payment or annual installments as elected by the participants.
Pension
Plan
We currently maintain retiree benefit plans which include, a
defined benefit plan for employees in our German affiliate and
other insignificant defined benefit plans in certain other
countries in which we have an operating presence.
The obligations under the German plan totaled $5.7 million
and $4.8 million as of December 31, 2009 and 2008,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net periodic pension cost related to the German plan
|
|
$
|
1.1
|
|
|
$
|
1.0
|
|
|
$
|
1.3
|
|
Income
Tax Expense
Income before income tax provision and the income tax expense
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income before income taxes (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
1,073.8
|
|
|
$
|
829.2
|
|
|
$
|
664.9
|
|
Foreign
|
|
|
258.9
|
|
|
|
326.7
|
|
|
|
187.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,332.7
|
|
|
$
|
1,155.9
|
|
|
$
|
852.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
439.9
|
|
|
$
|
431.2
|
|
|
$
|
305.9
|
|
State
|
|
|
3.1
|
|
|
|
24.3
|
|
|
|
25.8
|
|
Foreign
|
|
|
50.0
|
|
|
|
49.8
|
|
|
|
22.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
493.0
|
|
|
$
|
505.3
|
|
|
$
|
354.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(94.8
|
)
|
|
$
|
(119.2
|
)
|
|
$
|
(76.7
|
)
|
State
|
|
|
(39.0
|
)
|
|
|
(20.0
|
)
|
|
|
(4.4
|
)
|
Foreign
|
|
|
(3.6
|
)
|
|
|
(0.3
|
)
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(137.4
|
)
|
|
$
|
(139.5
|
)
|
|
$
|
(81.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
355.6
|
|
|
$
|
365.8
|
|
|
$
|
272.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-44
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
Tax Assets and Liabilities
Significant components of our deferred tax assets and
liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
Tax credits
|
|
$
|
35.2
|
|
|
$
|
11.0
|
|
Inventory, deferred revenue and other reserves
|
|
|
166.4
|
|
|
|
90.4
|
|
Capitalized costs
|
|
|
8.7
|
|
|
|
36.6
|
|
Intangibles, net
|
|
|
83.2
|
|
|
|
89.6
|
|
Net operating loss
|
|
|
30.5
|
|
|
|
33.1
|
|
Share-based compensation
|
|
|
60.8
|
|
|
|
59.9
|
|
Other
|
|
|
60.6
|
|
|
|
57.9
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets
|
|
$
|
445.4
|
|
|
$
|
378.5
|
|
|
|
|
|
|
|
|
|
|
Purchased intangible assets
|
|
$
|
(475.4
|
)
|
|
$
|
(552.7
|
)
|
Unrealized gain on investments and cumulative translation
adjustment
|
|
|
(6.3
|
)
|
|
|
(2.3
|
)
|
Depreciation, amortization and other
|
|
|
(115.6
|
)
|
|
|
(108.7
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
$
|
(597.3
|
)
|
|
$
|
(663.7
|
)
|
|
|
|
|
|
|
|
|
|
Tax
Rate
Reconciliation between the U.S. federal statutory tax rate
and our effective tax rate is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In percentages)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes
|
|
|
(0.1
|
)
|
|
|
1.6
|
|
|
|
3.2
|
|
Taxes on foreign earnings
|
|
|
(5.0
|
)
|
|
|
(5.8
|
)
|
|
|
(8.1
|
)
|
Credits and net operating loss utilization
|
|
|
(3.8
|
)
|
|
|
(2.9
|
)
|
|
|
(3.3
|
)
|
Purchased intangible assets
|
|
|
2.0
|
|
|
|
3.7
|
|
|
|
3.7
|
|
IPR&D
|
|
|
|
|
|
|
0.8
|
|
|
|
0.8
|
|
Permanent items
|
|
|
(1.3
|
)
|
|
|
(0.9
|
)
|
|
|
(0.6
|
)
|
Other
|
|
|
(0.1
|
)
|
|
|
0.1
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
26.7
|
%
|
|
|
31.6
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009, we had net operating losses and
general business credit carry forwards for federal income tax
purposes of approximately $59.3 million and
$3.2 million, respectively, which begin to expire in 2020.
Additionally, for state income tax purposes, we had net
operating loss carry forwards of approximately
$195.8 million, which begin to expire in 2010. For state
income tax purposes, we also had research and investment credit
carry forwards of approximately $49.2 million, of which
approximately $46.9 million begin to expire in 2010, with
the remainder having no prescribed expiration date.
In assessing the realizability of our deferred tax assets, we
have considered whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during the periods
in which those temporary differences become deductible. In
making this determination, under the applicable financial
reporting standards, we are allowed to consider the scheduled
reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies. Our estimates of future
taxable income take into consideration, among other items, our
estimates of future income tax deductions related to the
exercise of stock options. Based upon the level of historical
F-45
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
taxable income and income tax liability and projections for
future taxable income over the periods in which the deferred tax
assets are utilizable, we believe it is more likely than not
that we will realize the benefits of our entire deferred tax
assets. In the event that actual results differ from our
estimates or we adjust our estimates in future periods, we may
need to establish a valuation allowance, which could materially
impact our financial position and results of operations.
As of December 31, 2009, undistributed foreign earnings of
non-U.S. subsidiaries
included in consolidated retained earnings aggregated
approximately $2.2 billion. We intend to reinvest these
earnings indefinitely in operations outside the U.S. It is
not practicable to estimate the amount of additional tax that
might be payable if such earnings were remitted to the U.S.
Accounting
for Uncertainty in Income Taxes
Effective January 1, 2007, we adopted a new accounting
standard concerning the accounting for income tax contingencies.
This standard clarified the accounting for uncertainty in income
taxes recognized in an enterprises financial statements.
As a result of the adoption, we recognized a reduction in the
liability for unrecognized tax benefits of $14.2 million,
which was recorded as a $1.8 million reduction to the
January 1, 2007 balance of our accumulated deficit, a
$9.1 million reduction in goodwill and a $3.3 million
increase in our deferred tax liability.
A reconciliation of the beginning and ending amount of our
unrecognized tax benefits is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Balance at January 1
|
|
$
|
249.6
|
|
|
$
|
221.1
|
|
|
$
|
196.8
|
|
Additions based on tax positions related to the current period
|
|
|
14.4
|
|
|
|
21.8
|
|
|
|
29.7
|
|
Additions for tax positions of prior periods
|
|
|
77.4
|
|
|
|
20.4
|
|
|
|
83.5
|
|
Reductions for tax positions of prior periods
|
|
|
(88.7
|
)
|
|
|
(13.7
|
)
|
|
|
(70.2
|
)
|
Settlements
|
|
|
(105.6
|
)
|
|
|
|
|
|
|
(18.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
|
$
|
147.1
|
|
|
$
|
249.6
|
|
|
$
|
221.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We and our subsidiaries are routinely examined by various taxing
authorities. We file income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions. With
few exceptions, we are no longer subject to U.S. federal
tax examination for years before 2007 or state, local, or
non-U.S. income
tax examinations by tax authorities for years before 2001.
Included in the balance of unrecognized tax benefits as of
December 31, 2009, 2008, and 2007 are $42.8 million,
$155.1 million, and $110.5 million (net of the federal
benefit on state issues), respectively, of unrecognized tax
benefits that, if recognized, would affect the effective income
tax rate in future periods.
We do not anticipate any significant changes in our positions in
the next twelve months other than expected settlements which
have been classified as current liabilities within the
accompanying balance sheet.
We recognize potential interest and penalties accrued related to
unrecognized tax benefits in income tax expense. During 2009 we
recognized a net interest benefit of approximately
$3.1 million. During 2008 and 2007, we recognized
approximately $16.1 million and $14.5 million in
interest expense, respectively. We have accrued approximately
$33.1 million and $47.7 million for the payment of
interest as of December 31, 2009 and 2008, respectively.
Contingency
In September 2006, the Massachusetts Department of Revenue (DOR)
issued a Notice of Assessment against Biogen Idec MA, Inc. for
$38.9 million of corporate excise tax for 2002, which
includes associated interest and penalties. The assessment
asserts that the portion of sales attributable to Massachusetts,
the computation of our
F-46
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
research and development credits, and the availability of
certain deductions were not appropriate, resulting in unpaid
taxes for those years. In December 2006, we filed an abatement
application with the DOR seeking abatements for
2001-2003,
which was denied. In July 2007, we filed a petition with the
Massachusetts Appellate Tax Board seeking abatements of
corporate excise tax for
2001-2003
and adjustments in certain credits and credit carryforwards for
2001-2003.
We anticipate that the trial will take place in 2010. In the
fourth quarter of 2009, the DOR completed its audit fieldwork of
our 2004, 2005 and 2006 tax filings. We believe that the DOR may
make an assessment for taxes, interest and penalties claiming
that our computation and deductions for these periods were also
inappropriate. We believe that positions taken in our tax
filings are valid and we have meritorious defenses to the
assessment. We will vigorously oppose the assessment through the
appeals and litigation process.
Our tax filings for 2007 and 2008 have not yet been audited by
the DOR but have been prepared in a manner consistent with prior
filings which may result in an assessment for those years. Due
to tax law changes effective January 1, 2009, the
computations and deductions at issue in previous tax filings
will not be part of our tax filings starting in 2009.
There is a possibility that we may not prevail in defending all
of our assertions with the DOR. If these matters are resolved
unfavorably in the future, the resolution could have a material
adverse impact on our future effective tax rate and our results
of operations.
Settlements
During 2007, the IRS completed its examination of our
consolidated federal income tax returns for our fiscal years
2003 and 2004. We subsequently paid amounts related to issues
agreed to with the IRS, appealed several other issues and
adjusted our income tax contingencies based on the result of the
examination.
During 2009, the IRS completed its examination of our
consolidated income tax returns for our fiscal years 2005 and
2006. We then reached an agreement to pay an amount to settle
all matters related to the 2005 and 2006 years and resolve
those matters under appeal related to 2003 and 2004. There are
no remaining U.S. federal income tax contingencies for the
periods prior to tax year 2007.
During 2009, the California Franchise Tax Board completed its
examination of our worldwide income tax returns for fiscal years
2003 through 2007 and issued assessments for each period. We
agreed to these assessments and will make payments to settle all
matters related to these audits. There are no remaining
California income tax contingencies related to the periods prior
to tax year 2008.
We have also reached agreement with Arizona concerning our
outstanding matters in that state and completed an audit of our
transfer pricing in Denmark.
As a result of these 2009 domestic settlements, and completion
of the related audits, we have made payments totaling
approximately $118.0 million during 2009 and will make
payments of approximately $105.0 million in the first half
of 2010, which have been accrued as of December 31, 2009.
We have also reduced our net unrecognized tax benefits by
approximately $123.5 million, of which approximately
$28.0 million was recorded as a benefit in our consolidated
statement of income in 2009.
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
F-47
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Roche
Group Genentech
We collaborate with the Roche Group, through its wholly-owned
member Genentech, Inc., 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 U.S. and our
collaboration rights for Third Party Anti-CD20 Products are
dependent upon Genentechs underlying license rights. A
joint development committee (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 implementing 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 U.S. 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.
While Genentech is responsible for the worldwide manufacturing
of RITUXAN, development and commercialization rights and
responsibilities under this collaboration are divided as follows:
U.S.
We share with Genentech co-exclusive rights to develop,
commercialize and market RITUXAN and New Anti-CD20 Products
in the U.S. 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 U.S. 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 Roche.
F-48
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Outside
the U.S. and Canada
We have granted Genentech exclusive rights to develop,
commercialize and market RITUXAN outside the U.S. and
Canada. Under the terms of separate sublicense agreements
between Genentech and Roche, development and commercialization
of RITUXAN outside the U.S. and Canada is the
responsibility of Roche and its sublicensees. We do not have any
direct contractual arrangements with Roche or it sublicensees.
Revenues from unconsolidated joint business consists of
(1) our share of pretax co-promotion profits in the
U.S. (2) reimbursement of our selling and development
expenses in the U.S.; and (3) revenue on sales of RITUXAN
in the rest of world, which consist of our share of pretax
co-promotion profits in Canada and royalty revenue on sales of
RITUXAN outside the U.S. and Canada by Roche, and its
sublicensees. Pre-tax co-promotion profits are calculated and
paid to us by Genentech in the U.S. and by Roche in Canada.
Pre-tax co-promotion profits consist of U.S. 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 in the rest of world on a cash basis.
Revenues from unconsolidated joint business consist of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Biogen Idecs share of co-promotion profits in the
U.S.
|
|
$
|
773.6
|
|
|
$
|
733.5
|
|
|
$
|
616.8
|
|
Reimbursement of selling and development expenses in the
U.S.
|
|
|
65.6
|
|
|
|
59.7
|
|
|
|
58.5
|
|
Revenue on sales of RITUXAN in the rest of world
|
|
|
255.7
|
|
|
|
335.0
|
|
|
|
250.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unconsolidated joint business revenues
|
|
$
|
1,094.9
|
|
|
$
|
1,128.2
|
|
|
$
|
926.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2008, and 2007, the 40% threshold
was met during the first quarter.
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:
|
|
|
|
|
|
|
|
|
First New Anti-CD20 Product
|
|
Biogen Idecs Share
|
Co-promotion Operating Profits
|
|
U.S. Gross Product Sales
|
|
of Co-promotion 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
|
%
|
F-49
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(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%. |
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 and
Third Party Anti-CD20 Products in research and development
expense in our consolidated statements of income. We incurred
$62.5 million, $43.6 million, and $26.1 million
in development expense related to New Anti-CD20 Products and
Third Party Anti-CD20 Products for the years ended
December 31, 2009, 2008, and 2007, respectively.
Reimbursement to Genentech for our share of these costs occurs
through the net amount of co-promotion profits in the
U.S. remitted to us. After a New Anti-CD20 Product or Third
Party 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.
Elan
We collaborate with Elan on the development, manufacture and
commercialization of TYSABRI. Under the terms of our
collaboration agreement, we manufacture TYSABRI and collaborate
with Elan on the products marketing, commercial
distribution and ongoing development activities. The agreement
is designed to effect an equal sharing of profits and losses
generated by the activities of our collaboration. 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 December 31, 2009, Elan has made milestone
payments to us 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 provides Elan or us with the
option to buy the rights to TYSABRI in the event that the other
company undergoes a change of control (as defined in the
collaboration agreement).
In the U.S., we sell TYSABRI to Elan who sells the product to
third party distributors. Our sales price to Elan in the
U.S. 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
U.S. of TYSABRI upon Elans shipment of the
F-50
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
product to the third party distributors, at which time all
revenue recognition criteria have been met. As of
December 31, 2009 and 2008, we had deferred revenue of
$23.6 million and $6.2 million, respectively, for
shipments to Elan that remained in Elans ending inventory
pending 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 years ended
December 31, 2009, 2008 and 2007, we recorded
$25.3 million, $23.6 million, and $21.5 million,
respectively, as reductions of research and development expense
for reimbursements from Elan. In addition, for the years ended
December 31, 2009, 2008 and 2007, we recorded
$62.5 million, $33.7 million, and $37.9 million,
respectively, as reductions of selling, general and
administrative expense for reimbursements from Elan.
In the 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 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 years ended December 31, 2009, 2008 and
2007, $215.9 million, $136.0 million, and
$14.1 million, respectively, was reflected in the
collaboration profit sharing line for our collaboration with
Elan. 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 Therapeutics, Inc. (Acorda) to
develop and commercialize products containing fampridine in
markets outside the U.S. 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 to Acorda was recorded as research and
development expense during the second quarter 2009 as the
product candidate had not received regulatory approval.
Fampridine was approved in the U.S. on January 22, 2010
under the trade name AMPYRA (dalfampridine). AMPYRA is indicated
to improve walking in patients with MS. This was demonstrated by
an increase in walking speed. Acorda is developing and marketing
AMPYRA in the U.S.
Under the terms of the agreement, we will commercialize
fampridine and any aminopyridine products developed in our
territory and will also have responsibility for regulatory
activities and future clinical development of fampridine 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
U.S. The consideration that we pay for products will
reflect all amounts due from Acorda to Elan for sales in markets
outside the U.S., 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 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.
F-51
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
|
December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Upfront and milestones payments made to Acorda
|
|
$
|
110.0
|
|
|
$
|
|
|
|
$
|
|
|
Total expense incurred by Biogen Idec Inc. excluding upfront and
milestone payments
|
|
$
|
4.7
|
|
|
$
|
|
|
|
$
|
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
114.7
|
|
|
$
|
|
|
|
$
|
|
|
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
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Acorda
|
|
$
|
110.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
4.7
|
|
Estimate of additional amounts to be incurred by us in
development of fampridine
|
|
$
|
45.0
|
|
Neurimmune
We have a collaboration agreement with Neurimmune SubOne AG
(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 because we
control the activities of the collaboration and are required to
fund 100% of the research and development costs incurred in
support of the collaboration agreement. As such, we consolidate
the results of Neurimmune and recorded an IPR&D charge of
$34.3 million in 2007 upon signing of the collaboration
agreement. The amount allocated to IPR&D relates to the
development of the
Beta-Amyloid
antibody compound which, as of the effective date of the
agreement, had not reached technological feasibility and had no
alternative future use. We allocated the IPR&D charge to
noncontrolling interest, as the IPR&D charge represents the
fair value of the underlying technology retained by the parent.
The assets and liabilities of Neurimmune are not significant as
it is a research and development organization. Amounts that we
reimburse Neurimmune for research and development expenses
incurred in support of the collaboration are reflected in
research and development expense in our statements of income.
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Upfront and milestone payments made to Neurimumune
|
|
$
|
7.5
|
|
|
$
|
10.5
|
|
|
$
|
2.0
|
|
Total expense incurred by Biogen Idec Inc. excluding upfront and
milestone payments
|
|
$
|
9.0
|
|
|
$
|
5.9
|
|
|
$
|
0.6
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
16.5
|
|
|
$
|
16.4
|
|
|
$
|
2.6
|
|
F-52
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (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
|
|
|
December 31,
|
(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
|
|
$
|
15.5
|
|
Estimate of additional amounts to be incurred by us in
development of the lead compound
|
|
$
|
530.0
|
|
Cardiokine
We collaborate with Cardiokine Biopharma LLC (Cardiokine), a
subsidiary of Cardiokine Inc., on the joint development of
lixivaptan, an oral compound for the potential treatment of
hyponatremia in patients with congestive heart failure. The
royalty term under our collaboration 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 U.S. Based upon our current development plans, we
may pay up to $125.0 million in remaining development
milestone payments as well as royalties on commercial sales
under the terms of our collaboration agreement.
We have determined that we are the primary beneficiary of
Cardiokine in accordance with the guidance provided by the
Consolidation Topic of the Codification because we
control the activities of the collaboration and are required to
fund 90% of the development costs under the collaboration
agreement. As such, we consolidate the results of Cardiokine and
recorded an IPR&D charge of $30.0 million in 2007 upon
signing the collaboration agreement. The amount allocated to
IPR&D relates to the development of the lixivaptan compound
which, as of the effective date of the agreement, had not
reached technological feasibility and had no alternative future
use. We allocated the IPR&D charge to noncontrolling
interest, as the IPR&D charge represents the fair value of
the underlying technology retained by the parent. The assets and
liabilities of Cardiokine are not significant as it is a
research and development organization.
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
(In millions)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Upfront and milestone payments made to Cardiokine
|
|
$
|
20.0
|
|
|
$
|
|
|
|
$
|
50.0
|
|
Total expense incurred by collaboration
|
|
$
|
66.5
|
|
|
$
|
50.5
|
|
|
$
|
17.2
|
|
Biogen Idec Inc.s share of expense reflected within our
consolidated statements of income
|
|
$
|
79.8
|
|
|
$
|
45.5
|
|
|
$
|
65.5
|
|
Collaboration expense allocated to noncontrolling interests, net
of tax
|
|
$
|
6.7
|
|
|
$
|
5.0
|
|
|
$
|
1.7
|
|
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
|
|
|
December 31,
|
(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
|
|
$
|
122.8
|
|
Estimate of additional amounts to be incurred by us in
development of lixivaptan (all indications)
|
|
$
|
430.0
|
|
F-53
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Biovitrum
We have a collaboration agreement with Biovitrum to jointly
develop and commercialize long-acting recombinant 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 long-acting
recombinant Factor VIII and Factor IX are reflected as research
and development expense in our consolidated statements of
income, reduced by amounts due from Biovitrum. A summary of
collective activity related to these programs is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Total expense incurred by collaboration
|
|
$
|
44.9
|
|
|
$
|
37.7
|
|
|
$
|
26.7
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
22.5
|
|
|
$
|
18.8
|
|
|
$
|
13.3
|
|
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
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments received from Biovitrum
|
|
$
|
5.0
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
54.6
|
|
Estimate of additional amounts to be incurred by us in
development of Factors XIII and IX
|
|
$
|
135.0
|
|
Under the agreement, Biovitrum may pay us an additional
$18.0 million in milestone payments.
MondoBiotech
In December 2009, pursuant to our agreement with mondoBIOTECH AG
and certain of its subsidiaries (Mondobiotech), we notified
Mondobiotech that we would terminate our interest in continuing
to fund, develop and commercialize Aviptadil, the
collaborations only product, and have retained the right
to receive a percentage of future milestones and royalties
received by Mondobiotech from third parties related to the
Aviptadil program. In accordance with the terms of the
agreement, we made a final payment of $1.25 million in
December 2009, bringing total 2009 payments to Mondobiotech
to $13.3 million.
We had previously determined that we were the primary
beneficiary of Mondobiotech because we were required to
fund 100% of the development costs under the terms agreed.
As such, we consolidated the results of Mondobiotech. Upon
terminating our development interest, we ceased to consolidate
the results of Mondobiotech because we no longer were
responsible for funding development costs. Therefore, our
consolidated financial statements as of December 31, 2009
no longer include the assets and liabilities of Mondobiotech.
The assets and liabilities of Mondobiotech previously
consolidated within our financial statements were not
significant as Mondobiotech is a research and development
organization. Expenses incurred by the collaboration were
previously reflected in research and development expense in our
consolidated statements of income.
F-54
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Total expense incurred by collaboration
|
|
$
|
12.1
|
|
|
$
|
14.4
|
|
|
$
|
13.7
|
|
Total expense reflected within our consolidated statements of
income
|
|
$
|
12.1
|
|
|
$
|
14.4
|
|
|
$
|
13.7
|
|
A summary of activity related to this collaboration since
inception is as follows:
|
|
|
|
|
|
|
As of
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
Total upfront and milestone payments made to Mondobiotech
|
|
$
|
7.5
|
|
Total development expense incurred by Biogen Idec Inc.,
excluding upfront and milestone payments
|
|
$
|
42.0
|
|
UCB
In June 2009, UCB, S.A., (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
$101.0 million in research and development expenses for the
development and commercialization of an oral alpha4 integrin
antagonist for the treatment of relapsing remitting MS.
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Total expense incurred by collaboration
|
|
$
|
31.8
|
|
|
$
|
33.6
|
|
|
$
|
34.2
|
|
Biogen Idec Inc., share of expense reflected within our
consolidated statements of income
|
|
$
|
21.0
|
|
|
$
|
21.9
|
|
|
$
|
24.2
|
|
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
|
|
|
|
December 31,
|
|
(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
|
|
$
|
71.0
|
|
Estimate of additional amounts to be incurred by us in
development of the compound in this indication
|
|
$
|
2.0
|
|
Facet
Biotech
We have a collaboration agreement with Facet Biotech Corporation
(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. Under
the agreement, development and commercialization costs and
profits are shared equally. We may incur up to an additional
$210.0 million of payments upon achievement of development
and commercial milestones.
In January 2010, we agreed with our collaborator, Facet, to
assume the manufacture of declizumab and began the process of
transferring from Facet the manufacturing technology necessary
for us to manufacture declizumab.
F-55
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of activity related to this collaboration is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Total expense incurred by collaboration
|
|
$
|
40.8
|
|
|
$
|
65.7
|
|
|
$
|
41.3
|
|
Biogen Idec Inc. share of expense reflected within our
consolidated statements of income
|
|
$
|
20.4
|
|
|
$
|
32.8
|
|
|
$
|
20.7
|
|
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
|
|
|
December 31,
|
(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
|
|
$
|
122.5
|
|
Estimate of additional amounts to be incurred by us in
development of current indications of daclizumab and volociximab
|
|
$
|
475.0
|
|
Vernalis
We have a collaboration agreement with Vernalis plc (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 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
(In millions)
|
|
2009
|
|
2008
|
|
2007
|
|
Total expense incurred by collaboration and reflected within our
consolidated statements of income
|
|
$
|
14.8
|
|
|
$
|
16.9
|
|
|
$
|
9.6
|
|
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
|
|
|
December 31,
|
(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
|
|
$
|
69.7
|
|
Estimate of additional amounts to be incurred by Biogen Idec
Inc. in development of the compound in this indication
|
|
$
|
225.0
|
|
F-56
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of December 31, 2008, we held a total of approximately
7.6 million shares of Vernalis. During 2009, due to a
reverse stock split, we received one new share for every twenty
shares previously owned. As a result, as of December 31,
2009, we held a total of approximately 0.4 million shares
of Vernalis. As of December 31, 2009 and 2008, our
investment in Vernalis had a fair value of approximately
$0.5 million and $0.3 million, respectively.
Our investment in Vernalis, which is included within investments
and other assets, is subject to periodic review of impairment.
In 2008 and 2007, we recorded an impairment charge of
$0.5 million and $6.3 million, respectively,
representing an
other-than-temporary
impairment in the stock we own. No impairment was recognized
related to this investment during 2009.
|
|
18.
|
Commitments
and Contingencies
|
Leases
We rent laboratory and office space and certain equipment under
noncancellable operating leases. These lease agreements contain
various clauses for renewal at our option and, in certain cases,
escalation clauses typically linked to rates of inflation.
Rental expense under these leases, which terminate at various
dates through 2025, amounted to $36.4 million in 2009,
$36.0 million in 2008, and $33.1 million in 2007.
As of December 31, 2009, minimum rental commitments under
noncancellable leases for each of the next five years and total
thereafter were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
Thereafter
|
|
|
Total
|
|
|
Minimum lease payments(1)
|
|
$
|
33.0
|
|
|
$
|
33.1
|
|
|
$
|
29.9
|
|
|
$
|
29.8
|
|
|
$
|
28.7
|
|
|
$
|
227.3
|
|
|
$
|
381.8
|
|
Income from subleases
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net minimum lease payments
|
|
$
|
32.3
|
|
|
$
|
33.1
|
|
|
$
|
29.9
|
|
|
$
|
29.8
|
|
|
$
|
28.7
|
|
|
$
|
227.3
|
|
|
$
|
381.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes fifteen-year lease on a 356,000 square foot office
building in Weston, Massachusetts, which will serve as the
future location of our general and administrative offices with a
planned occupancy around mid-year 2010. The initial lease term
is from 2010 through 2025 under which the total minimum lease
payments are $258.6 million. |
Other
Funding Commitments
As of December 31, 2009, we have funding commitments of up
to approximately $24.8 million in biotechnology oriented
venture capital funds.
As of December 31, 2009, we have accrued expenses totaling
approximately $31.7 million on our consolidated balance
sheet related to clinical research organizations for
expenditures incurred in relation to ongoing clinical trials.
Contingent
Milestone Payments
Based on our development plans as of December 31, 2009, we
have committed to make potential future milestone payments to
third parties of up to approximately $1,500.0 million as
part of our various collaborations, including licensing and
development programs. Payments under these agreements generally
become due and payable only upon achievement of certain
developmental, regulatory or commercial milestones. Because the
achievement of these milestones had not occurred as of
December 31, 2009, such contingencies have not been
recorded in our financial statements.
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
F-57
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
cases filed by the County of Erie, County of Oswego and County
of Schenectady (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 (MDL proceedings). The complaints allege that the
defendants (i) fraudulently reported (or caused others to
report incorrectly) the Average Wholesale Price for certain
drugs for which Medicaid provides reimbursement (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.
In 2006, the Massachusetts Department of Revenue (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 carry forwards 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 with Genentech. We cooperated in
the governments investigation. It is our understanding
that the government has not taken any action against Genentech
as a result of the investigation. We therefore do not expect to
report further on this matter.
On October 27, 2008, Sanofi-Aventis Deutschland GmbH
(Sanofi) filed suit against Genentech and Biogen Idec in federal
court in Texas (E.D. Tex.) (Texas Action) claiming that RITUXAN
and certain other Genentech products infringe U.S. Patents
5,849,522 (522 patent) and 6,218,140
(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.) (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.
(Sanofi-Aventis U.S. LLC and Sanofi-Aventis U.S., Inc. were
later dismissed voluntarily.) 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. The Texas Action has been consolidated
with the California Action and we refer to the two actions
together as the Consolidated Actions. We have not formed an
opinion that an unfavorable outcome in the Consolidated Actions
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.
F-58
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 license
agreement between Hoechsts predecessor and Genentech that
pertained to the above-referenced patents and related patents
outside the U.S. The license was entered as of January 1,
1991 and was terminated by Genentech on October 27, 2008.
We understand that Hoechst seeks payment of royalties on sales
of Genentech products, including RITUXAN, damages for breach of
contract, and other relief. Although we are not a party to the
arbitration, any damages awarded to Hoescht based on sales of
RITUXAN may be a cost allocable to our collaboration with
Genentech. Under the collaboration agreement, we may be
responsible for a portion of any such damages. We have not
formed an opinion that an unfavorable outcome in the arbitration
is either probable or remote, and do not
express an opinion at this time as to the likely outcome of the
matter or as to the magnitude or range of any potential loss.
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 healthcare and, therefore, our chief
operating decision-maker manages the operations of our Company
as a single operating segment. Enterprise-wide disclosures about
product revenues, other revenues and long-lived assets by
geographic area and information relating to major customers are
presented below. Revenues are primarily attributed to individual
countries based on location of the customer or licensee.
Revenue by product is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
United
|
|
|
Rest of
|
|
|
|
|
|
United
|
|
|
Rest of
|
|
|
|
|
|
United
|
|
|
Rest of
|
|
|
|
|
(In millions)
|
|
States
|
|
|
World
|
|
|
Total
|
|
|
States
|
|
|
World
|
|
|
Total
|
|
|
States
|
|
|
World
|
|
|
Total
|
|
|
AVONEX
|
|
$
|
1,406.2
|
|
|
$
|
916.7
|
|
|
$
|
2,322.9
|
|
|
$
|
1,276.5
|
|
|
$
|
926.1
|
|
|
$
|
2,202.6
|
|
|
$
|
1,085.0
|
|
|
$
|
782.8
|
|
|
$
|
1,867.8
|
|
TYSABRI
|
|
|
231.8
|
|
|
|
544.2
|
|
|
|
776.0
|
|
|
|
196.4
|
|
|
|
392.2
|
|
|
|
588.6
|
|
|
|
104.4
|
|
|
|
125.5
|
|
|
|
229.9
|
|
Other
|
|
|
|
|
|
|
54.0
|
|
|
|
54.0
|
|
|
|
|
|
|
|
48.5
|
|
|
|
48.5
|
|
|
|
14.2
|
|
|
|
24.9
|
|
|
|
39.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
$
|
1,638.0
|
|
|
$
|
1,514.9
|
|
|
$
|
3,152.9
|
|
|
$
|
1,472.9
|
|
|
$
|
1,366.8
|
|
|
$
|
2,839.7
|
|
|
$
|
1,203.6
|
|
|
$
|
933.2
|
|
|
$
|
2,136.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our geographic information is summarized as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
U.S.
|
|
|
Europe
|
|
|
Germany
|
|
|
Asia
|
|
|
Other
|
|
|
Total
|
|
|
Product revenues from external customers
|
|
$
|
1,638.0
|
|
|
$
|
913.7
|
|
|
$
|
374.8
|
|
|
$
|
47.9
|
|
|
$
|
178.5
|
|
|
$
|
3,152.9
|
|
Revenues from unconsolidated joint business
|
|
$
|
839.2
|
|
|
$
|
190.2
|
|
|
$
|
|
|
|
$
|
24.1
|
|
|
$
|
41.4
|
|
|
$
|
1,094.9
|
|
Other revenues from external customers
|
|
$
|
102.8
|
|
|
$
|
26.2
|
|
|
$
|
0.5
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
129.5
|
|
Long-lived assets
|
|
$
|
1,092.7
|
|
|
$
|
705.6
|
|
|
$
|
1.4
|
|
|
$
|
3.6
|
|
|
$
|
2.1
|
|
|
$
|
1,805.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
U.S.
|
|
|
Europe
|
|
|
Germany
|
|
|
Asia
|
|
|
Other
|
|
|
Total
|
|
|
Product revenues from external customers
|
|
$
|
1,472.9
|
|
|
$
|
822.6
|
|
|
$
|
354.5
|
|
|
$
|
36.5
|
|
|
$
|
153.2
|
|
|
$
|
2,839.7
|
|
Revenues from unconsolidated joint business
|
|
$
|
793.2
|
|
|
$
|
272.3
|
|
|
$
|
|
|
|
$
|
21.7
|
|
|
$
|
41.0
|
|
|
$
|
1,128.2
|
|
Other revenues from external customers
|
|
$
|
96.5
|
|
|
$
|
32.8
|
|
|
$
|
0.3
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
129.6
|
|
Long-lived assets
|
|
$
|
1,111.2
|
|
|
$
|
658.8
|
|
|
$
|
2.5
|
|
|
$
|
4.2
|
|
|
$
|
1.2
|
|
|
$
|
1,777.9
|
|
F-59
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
U.S.
|
|
|
Europe
|
|
|
Germany
|
|
|
Asia
|
|
|
Other
|
|
|
Total
|
|
|
Product revenues from external customers
|
|
$
|
1,203.6
|
|
|
$
|
565.9
|
|
|
$
|
231.1
|
|
|
$
|
4.2
|
|
|
$
|
132.0
|
|
|
$
|
2,136.8
|
|
Revenues from unconsolidated joint business
|
|
$
|
675.3
|
|
|
$
|
200.2
|
|
|
$
|
|
|
|
$
|
18.1
|
|
|
$
|
32.5
|
|
|
$
|
926.1
|
|
Other revenues from external customers
|
|
$
|
78.1
|
|
|
$
|
27.0
|
|
|
$
|
0.4
|
|
|
$
|
3.2
|
|
|
$
|
|
|
|
$
|
108.7
|
|
Long-lived assets
|
|
$
|
1,145.7
|
|
|
$
|
494.9
|
|
|
$
|
2.6
|
|
|
$
|
3.5
|
|
|
$
|
2.0
|
|
|
$
|
1,648.7
|
|
Revenues
from Unconsolidated Joint Business
Approximately 25%, 28%, and 29% of our total revenues in 2009,
2008, and 2007, respectively, are derived from our joint
business arrangement with Genentech (see Note 17,
Collaborations to our Consolidated Financial Statements).
Significant
Customers
We recorded revenue from two wholesale distributors accounting
for 17.7% and 12.3% of gross product revenues in 2009, 16.2% and
13.1% of gross product revenues in 2008 and 19.4% and 15.2% of
gross product revenues in 2007.
Other
Included in long-lived assets in Europe as of December 31,
2009, 2008 and 2007 is approximately $665.8 million,
$611.5 million and $480.5 million, respectively,
related to our operations in Denmark.
As of December 31, 2009 and 2008, we did not have
significant liabilities recorded for guarantees.
We enter into indemnification provisions under our agreements
with other companies in the ordinary course of business,
typically with business partners, contractors, clinical sites
and customers. Under these provisions, we generally indemnify
and hold harmless the indemnified party for losses suffered or
incurred by the indemnified party as a result of our activities.
These indemnification provisions generally survive termination
of the underlying agreement. The maximum potential amount of
future payments we could be required to make under these
indemnification provisions is unlimited. However, to date we
have not incurred material costs to defend lawsuits or settle
claims related to these indemnification provisions. As a result,
the estimated fair value of these agreements is minimal.
Accordingly, we have no liabilities recorded for these
agreements as of December 31, 2009 and 2008, respectively.
F-60
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
22.
|
Quarterly
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
(In millions, except per share amounts)
|
|
Quarter(b)
|
|
|
Quarter(c)
|
|
|
Quarter
|
|
|
Quarter(d)(e)
|
|
|
Year
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
733.4
|
|
|
$
|
791.0
|
|
|
$
|
801.7
|
|
|
$
|
826.8
|
|
|
$
|
3,152.9
|
|
Unconsolidated joint business revenues
|
|
$
|
278.8
|
|
|
$
|
275.6
|
|
|
$
|
283.9
|
|
|
$
|
256.6
|
|
|
$
|
1,094.9
|
|
Other revenues
|
|
$
|
24.3
|
|
|
$
|
26.7
|
|
|
$
|
34.9
|
|
|
$
|
43.6
|
|
|
$
|
129.5
|
|
Total revenues
|
|
$
|
1,036.5
|
|
|
$
|
1,093.3
|
|
|
$
|
1,120.5
|
|
|
$
|
1,127.0
|
|
|
$
|
4,377.3
|
|
Total costs and expenses and income tax expense
|
|
$
|
796.8
|
|
|
$
|
963.1
|
|
|
$
|
850.3
|
|
|
$
|
827.3
|
|
|
$
|
3,437.5
|
|
Other income (expense), net
|
|
$
|
6.8
|
|
|
$
|
14.7
|
|
|
$
|
9.4
|
|
|
$
|
6.4
|
|
|
$
|
37.3
|
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
244.0
|
|
|
$
|
142.8
|
|
|
$
|
277.7
|
|
|
$
|
305.6
|
|
|
$
|
970.1
|
|
Basic earnings per share attributable to Biogen Idec Inc.
|
|
$
|
0.85
|
|
|
$
|
0.49
|
|
|
$
|
0.96
|
|
|
$
|
1.07
|
|
|
$
|
3.37
|
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
$
|
0.84
|
|
|
$
|
0.49
|
|
|
$
|
0.95
|
|
|
$
|
1.06
|
|
|
$
|
3.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
(In millions, except per share amounts)
|
|
Quarter(a)
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Year
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues
|
|
$
|
665.1
|
|
|
$
|
684.5
|
|
|
$
|
758.3
|
|
|
$
|
731.8
|
|
|
$
|
2,839.7
|
|
Unconsolidated joint business revenues
|
|
$
|
247.2
|
|
|
$
|
278.8
|
|
|
$
|
299.0
|
|
|
$
|
303.2
|
|
|
$
|
1,128.2
|
|
Other revenues
|
|
$
|
29.9
|
|
|
$
|
30.1
|
|
|
$
|
35.7
|
|
|
$
|
33.9
|
|
|
$
|
129.6
|
|
Total revenues
|
|
$
|
942.2
|
|
|
$
|
993.4
|
|
|
$
|
1,093.0
|
|
|
$
|
1,068.9
|
|
|
$
|
4,097.5
|
|
Total costs and expenses and income tax expense
|
|
$
|
779.5
|
|
|
$
|
781.4
|
|
|
$
|
861.5
|
|
|
$
|
827.3
|
|
|
$
|
3,249.7
|
|
Other income (expense), net
|
|
$
|
3.1
|
|
|
$
|
(4.0
|
)
|
|
$
|
(23.7
|
)
|
|
$
|
(33.1
|
)
|
|
$
|
(57.7
|
)
|
Net income attributable to Biogen Idec Inc.
|
|
$
|
163.1
|
|
|
$
|
206.6
|
|
|
$
|
206.8
|
|
|
$
|
206.7
|
|
|
$
|
783.2
|
|
Basic earnings per share attributable to Biogen Idec Inc.
|
|
$
|
0.55
|
|
|
$
|
0.71
|
|
|
$
|
0.71
|
|
|
$
|
0.71
|
|
|
$
|
2.67
|
|
Diluted earnings per share attributable to Biogen Idec Inc.
|
|
$
|
0.54
|
|
|
$
|
0.70
|
|
|
$
|
0.70
|
|
|
$
|
0.70
|
|
|
$
|
2.65
|
|
|
|
|
(a) |
|
Total costs and expenses and income tax expense for the first
quarter of 2008 includes $25.0 million of
in-process
research and development expense related to a milestone payment
made to the former shareholders of Conforma Therapeutics Inc.
pursuant to the terms of our acquisition of Conforma
Therapeutics Inc. in 2006. |
|
(b) |
|
Changes in tax law in certain state jurisdictions in which we
operate during the first quarter of 2009 resulted in a
$30.2 million reduction to our first quarter 2009 income
tax expense. |
|
(c) |
|
Total costs and expenses and income tax expense for the second
quarter of 2009 includes the $110.0 million upfront payment
made to Acorda Therapeutics, Inc. pursuant to our June 30,
2009 collaboration and license agreement to develop and
commercialize products containing fampridine in markets outside
the U.S. |
|
(d) |
|
During the fourth quarter of 2009, we repurchased
8.8 million shares of our common stock at a cost of
approximately $422.4 million under our $1.0 billion
share repurchase program authorized in October 2009. In
addition, we also purchased an additional 6.0 million
shares of our common stock at a cost of approximately
$271.1 million during the fourth quarter of 2009 under our
2006 share repurchase program. |
|
(e) |
|
Resolution of federal, state and foreign tax audits, including
the effective settlement of several uncertain tax positions
during the fourth quarter of 2009 resulted in a
$34.0 million reduction to our fourth quarter 2009 income
tax expense. |
F-61
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
23.
|
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, we believe that the impact of recently issued
standards that are not yet effective will not have a material
impact on our financial position or results of operations upon
adoption.
Recently
Issued Accounting Standards
In October 2009, the FASB issued Accounting Standards Update
(ASU)
No. 2009-13,
Multiple-Deliverable Revenue Arrangements (ASU
No. 2009-13).
ASU
No. 2009-13,
which amends existing revenue recognition accounting
pronouncements and 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. Previous accounting
principles 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. 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, which for Biogen Idec means no later than
January 1, 2011. Early adoption is permitted; however,
adoption of this guidance as of a date other than
January 1, 2011, will require us to apply this guidance
retrospectively effective as of January 1, 2010 and will
require disclosure of the effect of this guidance as applied to
all previously reported interim periods in the fiscal year of
adoption. While we do not expect the adoption of this standard
to have a material impact on our financial position and results
of operations, this standard may impact us in the event we
complete future transactions or modify existing collaborative
relationships.
In June 2009, the FASB issued the following two new accounting
standards, which were integrated into the Codification in
December 2009:
|
|
|
|
|
ASU
No. 2009-16,
Accounting for Transfers of Financial Assets (ASU
No. 2009-16); and
|
|
|
|
ASU
No. 2009-17,
Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities (ASU
No. 2009-17).
|
ASU
No. 2009-16
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 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. The adoption of this standard will
not have an impact on our financial position or results of
operations.
ASU
No. 2009-17
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
F-62
BIOGEN
IDEC INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
receive benefits from the entity that could potentially be
significant to the variable interest entity. This new standard
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 whether an enterprise should consolidate a variable
interest entity is required to be evaluated continuously. This
standard is effective for us for interim and annual periods
beginning after January 1, 2010. We have completed our
evaluation of the impact of adopting this standard and
determined that the adoption will not have an impact on our
financial position or results of operations. However, changes to
existing relationships or future transactions may result in us
consolidating or deconsolidating our partner(s) to
collaborations and other arrangements. Refer to Note 17,
Collaborations to our Consolidated Financial Statements
for information about our relationships with significant
variable interest entities.
Recently
Adopted Accounting Standards
In September 2009, the FASB issued ASU
No. 2009-12,
Fair Value Measurements and Disclosure (ASU
No. 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. As of
December 31, 2009, our only investments falling within the
scope of this guidance are our venture capital investments. For
these investments we use the net asset value to assess fair
value. Refer to Note 6, Fair Value Measurements to
our Consolidated Financial Statements for additional disclosure
related to our venture capital investments. 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 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 during 2009, the adoption of this standard did not
impact our financial position or results of operations.
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 during 2009, the adoption of this
standard did not impact our financial position or results of
operations. The standard also amended accounting for uncertainty
in income taxes. 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.
F-63
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Biogen Idec
Inc.
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income,
shareholders equity and cash flows present fairly, in all
material respects, the financial position of Biogen Idec Inc.
and its subsidiaries as of December 31, 2009 and 2008, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2009 in
conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2009 based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). The Companys management is
responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Annual Report
on Internal Control over Financial Reporting. Our responsibility
is to express opinions on these financial statements and on the
Companys internal control over financial reporting based
on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and
whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial
statements included examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2010
F-64
EXHIBIT INDEX
|
|
|
Exhibit No.
|
|
Descriptionˆ
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation. Filed as
Exhibit 3.1 to our Annual Report on Form 10-K for the year ended
December 31, 2003.
|
3.2
|
|
Certificate of Amendment to the Amended and Restated Certificate
of Incorporation dated May 21, 2001. Filed as Exhibit 3.2 to our
Annual Report on Form 10-K for the year ended December 31, 2003.
|
3.3
|
|
Certificate Increasing the Number of Authorized Shares of Series
X Junior Participating Preferred Stock dated July 26, 2001.
Filed as Exhibit 3.3 to our Annual Report on Form 10-K for the
year ended December 31, 2003.
|
3.4
|
|
Certificate of Amendment to the Amended and Restated Certificate
of Incorporation dated November 12, 2003. Filed as Exhibit 3.4
to our Annual Report on Form 10-K for the year ended December
31, 2003.
|
3.5
|
|
Second Amended and Restated Bylaws, as amended. Filed as Exhibit
3.1 to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2009.
|
4.1
|
|
Reference is made to Exhibits 3.1 through 3.4 for a description
of the rights, preferences and privileges of our Series A
Preferred Stock and Series X Junior Participating Preferred Stock
|
4.2
|
|
Amended and Restated Rights Agreement between Biogen Idec and
Mellon Investor Services LLC dated as of July 26, 2001.
Filed as Exhibit 4.1 to an amendment to our Registration
Statement on
Form 8-A
filed on July 27, 2001.
|
4.3
|
|
Amendment No. 1 to Amended and Restated Rights Agreement
between Biogen Idec and Mellon Investor Services LLC dated as of
June 20, 2003. Filed as Exhibit 4.1 to our Current
Report on
Form 8-K
filed on June 23, 2003.
|
4.4
|
|
Amendment No. 2 to Amended and Restated Rights Agreement
between Biogen Idec and Mellon Investor Services LLC dated as of
January 22, 2009. Filed as Exhibit 4.4 to our Annual
Report on
Form 10-K
for the year ended December 31, 2008.
|
4.5
|
|
Indenture between Biogen Idec and The Bank of New York Trust
Company, N.A. dated as of February 26, 2008. Filed as
Exhibit 4.1 to our Registration Statement on Form S-3 (File No.
333-149379).
|
4.6
|
|
First Supplemental Indenture between Biogen Idec and The Bank of
New York Trust Company, N.A. dated as of March 4, 2008. Filed as
Exhibit 4.1 to our Current Report on Form 8-K filed on March 4,
2008.
|
10.1
|
|
Credit Agreement among Biogen Idec, Bank of America, N.A. as
administrative agent, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Goldman Sachs Credit Partners L.P. as
co-syndication agents, and the other lenders party thereto dated
June 29, 2007. Filed as Exhibit 99.2 to our Current Report on
Form 8-K filed on July 2, 2007.
|
10.2
|
|
Amendment No. 1 to Credit Agreement among Biogen Idec, Bank of
America, N.A. as administrative agent, and the other lenders
party thereto dated as of March 5, 2009. Filed as Exhibit 10.1
to our Quarterly Report on Form 10-Q for the quarter ended March
31, 2009.
|
10.3
|
|
Expression Technology Agreement between Biogen Idec and
Genentech. Inc. dated March 16, 1995. Filed as an exhibit to
Biogen Idecs Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995.
|
10.4
|
|
Letter Agreement between Biogen Idec and Genentech, Inc. dated
May 21, 1996. Filed as Exhibit 10.1 to our Current Report on
Form 8-K filed on June 6, 1996.
|
10.5
|
|
Amended and Restated Collaboration Agreement between Biogen Idec
and Genentech, Inc. dated June 19, 2003. Filed as Exhibit 99.1
to our Current Report on Form 8-K filed on July 31, 2003.
|
10.6
|
|
Purchase and Sale Agreement and Joint Escrow Instructions
between Biogen Idec and Genentech, Inc. dated as of June 16,
2005. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q
for the quarter ended June 30, 2005.
|
10.7
|
|
ANTEGREN (now TYSABRI) Development and Marketing Collaboration
Agreement between Biogen Idec and Elan Pharma International
Limited dated August 15, 2000. Filed as Exhibit 10.48 to Biogen,
Inc.s Annual Report on Form 10-K for the year ended
December 31, 2002 (File No. 0-12042) and incorporated herein by
reference.
|
A-1
|
|
|
Exhibit No.
|
|
Descriptionˆ
|
|
10.8*
|
|
Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Appendix A
to our Definitive Proxy Statement on Schedule 14A filed on May
8, 2008.
|
10.9*
|
|
Amendment to Biogen Idec Inc. 2008 Omnibus Equity Plan dated
October 13, 2008. Filed as Exhibit 10.19 to our Annual Report on
Form 10-K for the year ended December 31, 2008.
|
10.10*
|
|
Form of restricted stock unit award agreement under the Biogen
Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.1 to our
Current Report on Form 8-K filed on August 1, 2008.
|
10.11*
|
|
Form of nonqualified stock option award agreement under the
Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.2
to our Current Report on Form 8-K filed on August 1, 2008.
|
10.12*
|
|
Biogen Idec Inc. 2006 Non-Employee Directors Equity Plan. Filed
as Appendix A to our Definitive Proxy Statement on Schedule 14A
filed on April 14, 2006.
|
10.13*
|
|
Amendment to the Biogen Idec Inc. 2006 Non-Employee Directors
Equity Plan dated October 11, 2006. Filed as Exhibit 10.45 to
our Annual Report on Form 10-K for the year ended December 31,
2007.
|
10.14*
|
|
Amendment to Biogen Idec Inc. 2006 Non-Employee Directors Equity
Plan dated April 18, 2008. Filed as Exhibit 10.8 to our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2008.
|
10.15*
|
|
Amendment to Biogen Idec Inc. 2006 Non-Employee Directors Equity
Plan dated October 13, 2008. Filed as Exhibit 10.25 to our
Annual Report on Form 10-K for the year ended December 31, 2008.
|
10.16*
|
|
Biogen Idec Inc. 2005 Omnibus Equity Plan. Filed as Appendix A
to our Definitive Proxy Statement on Schedule 14A filed on April
15, 2005.
|
10.17*
|
|
Amendment No. 1 to the Biogen Idec Inc. 2005 Omnibus Equity Plan
dated April 4, 2006. Filed as Exhibit 10.1 to our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007.
|
10.18*
|
|
Amendment No. 2 to the Biogen Idec Inc. 2005 Omnibus Equity Plan
dated February 12, 2007. Filed as Exhibit 10.2 to our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2007.
|
10.19*
|
|
Amendment to the Biogen Idec Inc. 2005 Omnibus Equity Plan dated
April 18, 2008. Filed as Exhibit 10.7 to our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008.
|
10.20*
|
|
Amendment to Biogen Idec Inc. 2005 Omnibus Equity Plan dated
October 13, 2008. Filed as Exhibit 10.30 to our Annual Report
on Form 10-K for the year ended December 31, 2008.
|
10.21*
|
|
Biogen Idec Inc. 2003 Omnibus Equity Plan. Filed as Exhibit
10.73 to our Current Report on Form 8-K filed on November 12,
2003.
|
1022*
|
|
Amendment to Biogen Idec Inc. 2003 Omnibus Equity Plan. Filed as
Exhibit 10.1 to our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
|
10.23*
|
|
Amendment to Biogen Idec Inc. 2003 Omnibus Equity Plan dated
April 18, 2008. Filed as Exhibit 10.6 to our Quarterly Report on
Form 10-Q for the quarter ended June 30, 2008.
|
10.24*
|
|
Amendment to Biogen Idec Inc. 2003 Omnibus Equity Plan dated
October 13, 2008. Filed as Exhibit 10.34 to our Annual Report
on Form 10-K for the year ended December 31, 2008.
|
10.25*
|
|
Biogen Idec Inc. 1995 Employee Stock Purchase Plan as amended
and restated effective April 6, 2005. Filed as Appendix B to our
Definitive Proxy Statement on Schedule 14A filed on April 15,
2005.
|
10.26*
|
|
IDEC Pharmaceuticals Corporation 1993 Non-Employee Directors
Stock Option Plan, as amended and restated through February 19,
2003. Filed as Appendix B to our Definitive Proxy Statement on
Schedule 14A filed on April 11, 2003.
|
10.27*
|
|
Amendment to IDEC Pharmaceuticals Corporation 1993 Non-Employee
Directors Stock Option Plan dated April 18, 2008. Filed as
Exhibit 10.5 to our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008.
|
10.28*
|
|
IDEC Pharmaceuticals Corporation 1988 Stock Option Plan, as
amended and restated through February 19, 2003. Filed as
Appendix A to our Definitive Proxy Statement on Schedule 14A
filed on April 11, 2003.
|
10.29*
|
|
Amendment to the IDEC Pharmaceuticals Corporation 1988 Stock
Option Plan dated April 16, 2004. Filed as Exhibit 10.1 to our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2004.
|
10.30*
|
|
Amendment to IDEC Pharmaceuticals Corporation 1988 Stock Option
Plan dated April 18, 2008. Filed as Exhibit 10.4 to our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2008.
|
A-2
|
|
|
Exhibit No.
|
|
Descriptionˆ
|
|
10.31*
|
|
Biogen, Inc. 1987 Scientific Board Stock Option Plan (as amended
and restated through February 7, 2003). Filed as Exhibit 10.22
to Biogen, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2002 (File No. 0-12042) and incorporated
herein by reference.
|
10.32*
|
|
Amendment to Biogen, Inc. 1987 Scientific Board Stock Option
Plan dated April 18, 2008. Filed as Exhibit 10.3 to our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2008.
|
10.33*
|
|
Biogen, Inc. 1985 Non-Qualified Stock Option Plan, as amended
and restated through April 11, 2003. Filed as Exhibit 10.22 to
our Annual Report on Form 10-K for the year ended December 31,
2007.
|
10.34*
|
|
Amendment to Biogen, Inc. 1985 Non-Qualified Stock Option Plan
dated April 18, 2008. Filed as Exhibit 10.2 to our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2008.
|
10.35*
|
|
Amendment to Biogen, Inc. 1985 Non-Qualified Stock Option Plan
dated October 13, 2008. Filed as Exhibit 10.45 to our Annual
Report on Form 10-K for the year ended December 31, 2008.
|
10.36*
|
|
Biogen Idec Inc. 2008 Performance-Based Management Incentive
Plan. Filed as Appendix B to Biogen Idecs Definitive Proxy
Statement on Schedule 14A filed on May 8, 2008.
|
10.37*
|
|
Biogen Idec Inc. 2003 Performance-Based Management Incentive
Plan. Filed as Exhibit 10.74 to our Current Report on Form 8-K
filed on November 12, 2003.
|
10.38*
|
|
Voluntary Executive Supplemental Savings Plan, as amended and
restated effective January 1, 2004. Filed as Exhibit 10.13 to
our Annual Report on Form 10-K for the year ended December 31,
2003.
|
10.39*
|
|
Supplemental Savings Plan, as amended and restated effective
January 1, 2008. Filed as Exhibit 10.55 to our Annual Report on
Form 10-K for the year ended December 31, 2007.
|
10.40*
|
|
Voluntary Board of Directors Savings Plan, as amended and
restated effective January 1, 2008. Filed as Exhibit 10.56 to
our Annual Report on Form 10-K for the year ended December 31,
2007.
|
10.41*
|
|
Biogen Idec Inc. Executive Severance Policy -- U.S. Executive
Vice President, as amended effective October 13, 2008. Filed as
Exhibit 10.51 to our Annual Report on Form 10-K for the year
ended December 31, 2008.
|
10.42*
|
|
Biogen Idec Inc. Executive Severance Policy -- International
Executive Vice President, as amended effective October 13,
2008. Filed as Exhibit 10.52 to our Annual Report on Form 10-K
for the year ended December 31, 2008.
|
10.43*
|
|
Biogen Idec Inc. Executive Severance Policy -- U.S. Senior Vice
President, as amended effective October 13, 2008. Filed as
Exhibit 10.53 to our Annual Report on Form 10-K for the year
ended December 31, 2008.
|
10.44*
|
|
Biogen Idec Inc. Executive Severance Policy -- International
Senior Vice President, as amended effective October 13, 2008.
Filed as Exhibit 10.54 to our Annual Report on Form 10-K for the
year ended December 31, 2008.
|
10.45*
|
|
Annual Retainer Summary for Board of Directors. Filed as Exhibit
10.3 to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2009.
|
10.46*
|
|
Form of indemnification agreement for directors. Filed as
Exhibit 10.1 to our Current Report on Form 8-K filed on October
17, 2008.
|
10.47*
|
|
Employment Agreement between Biogen Idec and James C Mullen
dated as of June 20, 2003. Filed as Exhibit 10.2 to our
Registration Statement on Form S-4 (File No. 333-107098).
|
10.48*
|
|
First Amendment to Employment Agreement between Biogen Idec and
James C. Mullen dated February 7, 2006. Filed as Exhibit 10.1 to
our Current Report on Form 8-K filed on February 10, 2006.
|
10.49*
|
|
Second Amendment to Employment Agreement between Biogen Idec and
James C. Mullen dated as of December 4, 2008. Filed as Exhibit
10.59 to our Annual Report on Form 10-K for the year ended
December 31, 2008.
|
10.50*+
|
|
Transition Agreement between Biogen Idec and James C.
Mullen dated as of January 4, 2010.
|
10.51*
|
|
Letter regarding employment arrangement of Paul J. Clancy dated
August 17, 2007. Filed as Exhibit 10.49 to our Annual Report on
Form 10-K for the year ended December 31, 2007.
|
10.52*+
|
|
Letter regarding employment arrangement of Robert Hamm dated
April 1, 2009.
|
A-3
|
|
|
Exhibit No.
|
|
Descriptionˆ
|
|
10.53*
|
|
Letter regarding employment arrangement of Craig E. Schneier
dated October 8, 2001. Filed as Exhibit 10.53 to our Annual
Report on Form 10-K for the year ended December 31, 2005.
|
10.54*
|
|
First Amendment to Employment Agreement between Biogen Idec and
Craig E. Schneier dated October 8, 2008. Filed as Exhibit 10.66
to our Annual Report on Form 10-K for the year ended December
31, 2008.
|
10.55*
|
|
Employment Agreement between Biogen Idec Management Services
GmbH and Hans Peter Hasler dated October 15, 2008. Filed as
Exhibit 10.61 to our Annual Report on
Form 10-K
for the year ended December 31, 2008.
|
10.56*
|
|
Consulting Agreement between Eidetica Biopharma GmBH and Hans
Peter Hasler dated April 30, 2009. Filed as
Exhibit 10.1 to our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009.
|
10.57*
|
|
Director Agreement between Biogen Idec International B.V. and
Hans Peter Hasler dated April 30, 2009. Filed as
Exhibit 10.2 to our Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009.
|
10.58*+
|
|
Letter regarding employment arrangement of Susan Alexander dated
December 13, 2005.
|
21+
|
|
Subsidiaries.
|
23+
|
|
Consent of PricewaterhouseCoopers LLP, an Independent Registered
Public Accounting Firm.
|
31.1+
|
|
Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
31.2+
|
|
Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
32.1++
|
|
Certification of the Chief Executive Officer and the Chief
Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
101++
|
|
The following materials from Biogen Idec Inc.s Annual
Report on Form 10-K for the year ended December 31, 2009,
formatted in XBRL (Extensible Business Reporting Language): (i)
the Consolidated Statements of Income, (ii) the Consolidated
Balance Sheets, (iii) the Consolidated Statements of Cash Flows,
(iv) the Consolidated Statement of Shareholders Equity and
(v) Notes to Consolidated Financial Statements, tagged as blocks
of text.
|
|
|
|
ˆ |
|
Reference to our filings mean filings made by Biogen
Idec Inc. and filings made by IDEC Pharmaceuticals Corporation
prior to the merger with Biogen, Inc. Unless otherwise
indicated, exhibits were previously filed with the Securities
and Exchange Commission under Commission File Number 0-19311 and
are incorporated herein by reference. |
|
* |
|
Management contract or compensatory plan or arrangement. |
|
|
|
Confidential Treatment has been granted with respect to portions
of this agreement. |
|
+ |
|
Filed herewith. |
|
++ |
|
Furnished herewith. |
A-4