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Item 7. Management’s Discussion and Analysis

2021-02-03 compared with 2020-02-06 · 447 added, 468 removed, 369 unchanged (71% of the section changed)

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For our discussion of the year ended December 31, 2019, compared to the year ended December 31, 2018, please read Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations located in our 2018 Form 10-K.

Management's Discussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the year ended December 31, 2019.

Executive Summary

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Our core growth areas include MS and neuroimmunology;

AD and dementia;

Alzheimer's disease and dementia;

neuromuscular disorders, including SMA and ALS;

movement disorders, including Parkinson's disease;

and ophthalmology.

ophthalmology;

and neuropsychiatry.

We are also focused on discovering, developing and delivering worldwide innovative therapies in our emerging growth areas of immunology;

neurocognitive disorders;

acute neurology;

and neuropathic pain.

In addition, we commercialize biosimilars of advanced biologics.

We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities.

Our marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, VUMERITY and FAMPYRA for the treatment of MS;

Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS;

SPINRAZA for the treatment of SMA;

and FUMADERM for the treatment of severe plaque psoriasis.

We also have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions;

We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions;

RITUXAN HYCELA for the treatment of non-Hodgkin's lymphoma and CLL;

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For additional information on our collaboration arrangements with Genentech, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

Our innovative drug development and commercialization activities are complemented by our biosimilar products that expand access to medicines

and reduce the cost burden for healthcare systems.

Through Samsung Bioepis, our joint venture with Samsung BioLogics Co., Ltd., we market and sell BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an adalimumab biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing REMICADE, in certain countries in Europe and have exclusive rights to commercialize these products in China.

Additionally, we have exclusive rights to commercialize two potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia.

Our innovative drug development and commercialization activities are complemented by our biosimilar business that expands access to medicines and reduces the cost burden for healthcare systems.

Through our agreements with Samsung Bioepis, our joint venture with Samsung BioLogics, we market and sell BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an adalimumab biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing REMICADE, in certain countries in Europe and have an option to acquire exclusive rights to commercialize these products in China.

Additionally, we have exclusive rights to commercialize two potential ophthalmology biosimilar products, SB11, a proposed ranibizumab biosimilar referencing LUCENTIS, and SB15, a proposed aflibercept biosimilar referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia.

For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

We seek to ensure an uninterrupted supply of medicines to our patients around the world.

To that end, we continually review our manufacturing capacity, capabilities, processes and facilities.

In order to support our future growth and drug development pipeline, we are expanding our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland, which we expect to be partially operational during the first half of 2021.

We believe that the Solothurn manufacturing facility will provide us with the ability to further expand if our future growth and drug development plans increase.

Our revenues depend upon continued sales of our products as well as the financial rights we have in our anti-CD20 therapeutic programs, and, unless we develop, acquire rights to and/or commercialize new products and technologies, we will be substantially dependent on sales from our products and our financial rights in our anti-CD20 therapeutic programs for many years.

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Business Environment

The biopharmaceutical industry and the markets in which we operate are intensely competitive.

Many of our competitors are working to develop or have commercialized products similar to those we market or are developing and have considerable experience in undertaking clinical trials and in obtaining regulatory approval to market pharmaceutical products.

In addition, the commercialization of certain of our own approved products, products of our collaborators and pipeline product candidates may negatively impact future sales of our existing products.

Our products continue to face increasing competitive pressures from the introduction of generic versions, prodrugs and biosimilars of existing products as well as products approved under abbreviated regulatory pathways.

Such products are likely to be sold at substantially lower prices than branded products, which may significantly reduce both the price that we are able to charge for our products and the volume of products we sell.

In addition, when

a generic version of one of our products is commercialized, it may, in some cases, be automatically substituted for our product and reduce our revenues in a short period of time.

Sales of our products depend, to a significant extent, on the availability and extent of adequate coverage, pricing and reimbursement from government health administration authorities, private health insurers and other organizations.

When a new pharmaceutical product is approved, the availability of government and private reimbursement for that product may be uncertain, as is the pricing and amount for which that product will be reimbursed.

Drug prices are under significant scrutiny in the markets in which our products are prescribed.

We expect drug pricing and other health care costs to continue to be subject to intense political and societal pressures on a global basis.

Our failure to obtain or maintain adequate coverage, pricing or reimbursement for our products could have an adverse effect on our business, reputation, revenues and results of operations, could curtail or eliminate our ability to adequately fund research and development programs for the discovery and commercialization of new products or could cause a decline or volatility in our stock price.

In addition to the impact of competition, pricing actions and other measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, our sales and operations could also be affected by other risks of doing business internationally, including the impact of foreign currency exchange fluctuations, changes in intellectual property legal protections and changes in trade regulations and procedures as well as the impact of the continued uncertainty of the credit and economic conditions in certain countries in Europe.

For a detailed discussion on our business environment, please read Item 1.

Business included in this report.

For additional information on our competition and pricing risks that could negatively impact our product sales, please read Item 1A.

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Quantitative and Qualitative Disclosures About Market Risk included in this report.

In June 2016 the U.K.

electorate voted in a referendum to voluntarily depart from the E.U., known as Brexit.

In March 2017 the U.K.

government formally notified the European Council of its intention to leave the E.U.

and began to negotiate the terms of its withdrawal and outline the future relationship between the U.K.

upon exit, which occurred on January 31, 2020.

Following the U.K.’s departure, there is now a transition period during which existing arrangements will remain in place until the end of 2020, allowing detailed discussions on the future relationship between the U.K.

to take place.

The potential impact on our results of operations and liquidity resulting from Brexit remains unclear.

The actual effects of Brexit will depend upon many factors and significant uncertainty remains with respect to the future relationship between the U.K.

The final outcome of the discussions during the transition period may impact certain of our research, commercial and general business operations in the U.K.

and the E.U., including the approval and supply of our products.

Compliance with any resulting regulatory mandates may prove challenging and the macroeconomic impact on our sales and consolidated results of operations from these developments remains unknown.

We do not, however, expect Brexit to have a material impact on our consolidated results of operations as approximately 3.5%, 3.3% and 3.2% of our total product revenues in 2019, 2018 and 2017, respectively, were derived from U.K.

We have implemented measures to meet E.U.

legal and regulatory requirements and to continue to modify our business operations to prepare for the finalization of the terms of the U.K.'s separation from the E.U.

In June 2020 and September 2020 judgments were entered in favor of the defendants in the patent infringement proceedings relating to TECFIDERA Orange-Book listed patents pursuant to the Hatch-Waxman Act in West Virginia and Delaware.

We have appealed the judgments in both actions.

For additional information, please read Note 20, Litigation, to our consolidated financial statements included in this report.

Multiple TECFIDERA generic entrants are now in the U.S.

market and have deeply discounted prices compared to TECFIDERA.

The generic competition for TECFIDERA significantly reduced our TECFIDERA revenues during the year ended December 31, 2020, and is expected to have a substantial negative impact on our TECFIDERA revenues for as long as there is generic competition.

For additional information, please read the discussion under Results of Operations - Product Revenues - Multiple Sclerosis (MS) - Fumarate below.

Business Update Regarding COVID-19

The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world.

The length of time and full extent to which the COVID-19 pandemic directly or indirectly impacts our business, results of operations and financial condition depends on future developments that are highly uncertain, subject to change and are difficult to predict, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19 as well as the economic impact on local, regional, national and international customers and markets.

We are monitoring the demand for our products, including the duration and degree to which we may see delays in starting new patients on a product due to hospitals diverting the resources that are necessary to administer certain of our products to care for COVID-19 patients, including products, such as TYSABRI and SPINRAZA, that are administered in a physician's office or hospital setting.

We may also see reduced demand for immunosuppressant therapies during the COVID-19 pandemic.

While we are currently continuing the clinical trials we have underway in sites across the globe,

COVID-19 precautions have impacted the timeline for some of our clinical trials and these precautions may, directly or indirectly, have a further impact on timing in the future.

For example, our Phase 3 study of BIIB093 for LHI, a severe form of ischemic stroke, has been delayed as this study involves administration of BIIB093 in an acute hospital setting.

To help mitigate the impact of the COVID-19 pandemic to our clinical trials, we are pursuing innovative approaches such as remote monitoring, remote patient visits and supporting home infusions.

These alternative measures have resulted in an immaterial increase to the cost of the clinical trials underway.

For additional information on the various risks posed by the COVID-19 pandemic, please read Item 7A.

Quantitative and Qualitative Disclosures About Market Risk and Item 1A.

Risk Factors included in this report.

Effective January 31, 2020, the U.K.

ceased to be a member state of the E.U., a process known as Brexit, and began a transition period, which expired on December 31, 2020.

In December 2020 the U.K.

agreed on a trade and cooperation agreement, under which the E.U.

will now form two separate markets governed by two distinct regulatory and legal regimes.

The trade and cooperation agreement covers the general objectives and framework of the relationship between the U.K.

and the E.U., including as it relates to trade, transport and visas.

Notably, under the trade and cooperation agreement, U.K.

service suppliers no longer benefit from automatic access to the entire E.U.

single market, U.K.

goods no longer benefit from the free movement of goods and there is no longer the free movement of people between the U.K.

Depending on the application of the terms of the trade and cooperation agreement, we could face new regulatory costs and challenges.

We do not expect Brexit to have a material impact on our consolidated results of operations as less than 4.0% of our total product revenues in 2020, 2019 and 2018 were derived from U.K.

However, we cannot predict the direction Brexit-related developments will take nor the impact of those developments on our European operations and the economies of the markets where we operate.

Therefore, we will continue to monitor for developments in this area and assess any potential impact on our business and results of operations.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

determines which E.U.

laws to replace or replicate, including U.K.

competition laws.

Therefore, we will continue to monitor for developments in this area and assess any potential impacts on our business and results of operations.

Financial Highlights

Diluted earnings per share attributable to Biogen Inc.

were $31.42 for 2019 , representing an increase of 45.6% over $21.58 in the same period in 2018 .

were $24.80 for 2020, representing a decrease of 21.1% as compared to $31.42 in the same period in 2019.

As described below under Results of Operations , our net income and diluted earnings per share attributable to Biogen Inc.

for the year ended December 31, 2020, compared to the year ended December 31, 2019, reflects the following:

Total revenues were $14,377.9 million for 2019 , representing an increase of 6.9% over $13,452.9 million in 2018 .

Product revenues, net totaled $11,379.8 million for 2019 , representing an increase of 4.5% over $10,886.8 million in 2018 .

This increase was primarily due to a 21.6% increase in revenues from SPINRAZA and a 35.4% increase in revenues from our biosimilar business.

• Total revenues were $13,444.6 million for 2020, representing a decrease of 6.5% as compared to $14,377.9 million in 2019.

• Product revenues, net totaled $10,692.2 million for 2020, representing a decrease of 6.0% as compared to $11,379.8 million in 2019.

This decrease was primarily due to a $697.2 million, or 8.2%, decrease in MS product revenues and a $44.9 million, or 2.1%, decrease in revenues from SPINRAZA, partially offset by a $57.5 million, or 7.8%, increase in revenues from our biosimilar business.

Product revenues, net, compared to the same period in 2019, further reflects the unfavorable impact of foreign currency exchange of $111.6 million.

Revenues from anti-CD20 therapeutic programs totaled $2,290.4 million for 2019 , representing an increase of 15.7% over $1,980.2 million in 2018 .

This increase was primarily due to an increase in royalty revenues on sales of OCREVUS.

◦ The decrease in MS product revenues was primarily due to a decrease in TECFIDERA demand and price as a result of multiple TECFIDERA generic entrants entering the U.S.

market during the year ended December 31, 2020.

• Revenues from anti-CD20 therapeutic programs totaled $1,977.8 million for 2020, representing a decrease of 13.6% as compared to $2,290.4 million in 2019.

This decrease was primarily due to a $490.7 million, or 31.7%, decrease in RITUXAN revenues, partially offset by a $157.9 million, or 23.0%, increase in royalty revenues on sales of OCREVUS.

Sales of RITUXAN have been adversely affected primarily by the onset of biosimilars competition in the U.S.

• Other revenues totaled $774.6 million for 2020, representing an increase of 9.5% over $707.7 million in 2019.

This increase was primarily due to higher revenues from our manufacturing and supply agreement with Bioverativ, partially offset by lower revenues from other contract manufacturing agreements.

Total cost and expenses totaled $7,335.3 million for 2019 , representing a decrease of 3.0% from $7,564.3 million in 2018 .

This decrease was primarily due to:

a 12.2% decrease in research and development expense, primarily due to the $482.6 million net charge recognized in 2018 upon the closing of the 2018 Ionis Agreement;

a 34.4% decrease in amortization and impairment of acquired intangible assets, primarily due to the $366.1 million impairment charges recognized in 2018, which lowered amortization expense in subsequent periods, partially offset by the $215.9 million impairment charges recognized in 2019;

a net change in (gain) loss on fair value remeasurement of contingent consideration, primarily due to the gain recognized on the remeasurement of our continent consideration obligation related to the Phase 2b study of BG00011 for the potential treatment of IPF.

This decrease was partially offset by:

a 12.7% increase in selling, general and administrative expenses, primarily due to increased commercial and medical investments as well as the timing of spend on selling, general and administrative expense;

a 7.7% increase in cost of sales, primarily due to our sales in 2019 to Bioverativ of hemophilia-related inventory on hand as of December 31, 2018, and an increase in sales of products within our biosimilar business.

Net income attributable to Biogen Inc.

was favorably impacted by a decrease in our effective tax rate to 16.3% for the year ended December 31, 2019 , from 24.2% for 2018 , due in part to an internal reorganization of certain intellectual property rights, the impact of Swiss Tax Reform and the 2018 unfavorable impacts of U.S.

This increase was due to higher contract manufacturing revenues, primarily resulting from $346.2 million in revenues related to the delivery of the license for certain of our manufacturing-related intellectual property to a contract manufacturing customer.

• Total cost and expenses were $8,894.5 million for 2020, representing an increase of 21.3% from $7,335.3 million in 2019.

This increase was primarily due to a $1,710.3 million, or 75.0%, increase in research and development expense.

◦ The increase in research and development expense was primarily due to $1,893.3 million in charges recognized in connection with upfront payments associated with entering into our collaborations with Sangamo, Denali and Sage.

This increase was partially offset by:

◦ a 5.1% decrease in amortization and impairment of acquired intangible assets;

◦ a $92.5 million gain recognized in 2020 associated with the divestiture of our Hillerød, Denmark manufacturing operations.

As described below under Financial Condition, Liquidity and Capital Resources :

We generated $7,078.6 million of net cash flows from operations for 2019 , which were primarily driven by earnings.

• We generated $4,229.8 million of net cash flows from operations for 2020.

• Cash, cash equivalents and marketable securities totaled approximately $3,382.2 million as of December 31, 2020.

We repurchased and retired approximately 23.6 million shares of our common stock at a cost of approximately $5.8 billion during 2019 under our March 2019 Share Repurchase Program and our 2018 Share Repurchase Program.

• We repurchased and retired approximately 22.4 million shares of our common stock at a cost of approximately $6.7 billion during 2020 under our 2020, December 2019 and March 2019 Share Repurchase Programs.

Acquisitions, Collaborative and Other Relationships

For additional information on our acquisitions, collaborative and other relationships discussed below, please read Note 2, Acquisitions , Note 3, Divestitures , Note 18, Collaborative and Other Relationships , and Note 19, Investments in Variable Interest Entities , to our consolidated financial statements included in this report.

Skyhawk Therapeutics, Inc.

In January 2019 we entered into a collaboration and research and development services agreement with Skyhawk pursuant to which the companies are leveraging Skyhawk's SkySTAR technology platform with the goal of discovering innovative small molecule treatments for patients with neurological diseases, including MS and SMA.

In connection with this agreement, we made an upfront payment of $74.0 million to Skyhawk.

We are responsible for the development and potential commercialization of any therapies resulting from this collaboration.

In October 2019 we amended this agreement to add an additional discovery program.

In connection with this amendment, we made a payment to Skyhawk of $15.0 million.

Acquisition of Nightstar Therapeutics plc

In June 2019 we completed our acquisition of all of the outstanding shares of NST, a clinical-stage gene therapy company focused on AAV treatments for inherited retinal disorders.

As a result of this acquisition, we added two mid- to late-stage clinical assets, as well as preclinical programs, in ophthalmology.

These assets include BIIB111, which is in Phase 3 development for the potential treatment of CHM, a rare, degenerative, X-linked inherited retinal disorder that leads to blindness and currently has no approved treatments, and BIIB112 (RPGR gene therapy), which is in Phase 2/3 development for the potential treatment of XLRP, which is a rare inherited retinal disease with no currently approved treatments.

Under the terms of the acquisition, we paid NST shareholders $25.50 in cash for each issued and outstanding NST share, which totaled $847.6 million.

Divestiture of Hillerød, Denmark Manufacturing Operations

In August 2019 we completed the sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM.

Upon the closing of this transaction, we received approximately $881.9 million in cash, which may be adjusted based on other contractual terms.

In addition, we sold to FUJIFILM $41.8 million of raw materials that were remaining at the Hillerød facility on the closing date of this transaction.

Samsung Bioepis

In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia.

We also acquired an option to extend our existing commercial agreement with Samsung Bioepis for BENEPALI, IMRALDI and FLIXABI in Europe and obtained exclusive rights to commercialize these products in China.

In connection with this transaction, we made an upfront payment of $100.0 million to Samsung Bioepis.

BIIB080 Option Exercise

In December 2019 we exercised our option with Ionis and obtained a worldwide, exclusive, royalty-bearing license to develop and commercialize BIIB080, an investigational treatment for AD.

In January 2020 we entered into an agreement to acquire PF-05251749, a novel CNS-penetrant small molecule inhibitor of CK1, for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases from Pfizer.

In particular, we plan to develop the Phase 1 asset for the treatment of sundowning in AD and ISWRD in Parkinson’s disease.

This transaction is subject to customary closing conditions, including the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S.

We expect this transaction to close in the first quarter of 2020.

For additional information on our acquisitions, collaborative and other relationships discussed below, please read Note 2, Acquisitions , Note 18, Collaborative and Other Relationships, and Note 19, Investments in Variable Interest Entities , to our consolidated financial statements included in this report.

BIIB118 Acquisition

In March 2020 we acquired BIIB118, a novel CNS-penetrant small molecule inhibitor of casein kinase 1, for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases from Pfizer.

We are developing BIIB118 for the potential treatment of ISWRD in Parkinson’s disease and plan to develop

BIIB118 for the potential treatment of sundowning in Alzheimer's disease.

For additional information on our acquisition of BIIB118, please read Note 2, Acquisitions, to our consolidated financial statements included in this report .

Sangamo Therapeutics, Inc.

In April 2020 we closed a collaboration and license agreement with Sangamo to develop and commercialize ST-501 for tauopathies, including Alzheimer's disease;

ST-502 for synucleinopathies, including Parkinson’s disease;

a third neuromuscular disease target;

and up to nine additional neurological disease targets to be identified and selected within a five-year period.

For additional information on our collaboration arrangement with Sangamo, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Denali Therapeutics Inc.

In October 2020 we closed a collaboration and license agreement with Denali to co-develop and co-commercialize Denali's small molecule inhibitors of LRRK2 for Parkinson's disease.

In addition to the LRRK2 program, we also have an exclusive option to license two preclinical programs from Denali’s Transport Vehicle platform, including its Antibody Transport Vehicle:

Abeta program and a second program utilizing its Transport Vehicle technology.

Further, we have a right of first negotiation on two additional Transport Vehicle-enabled therapeutics, should Denali decide to seek a collaboration for such programs.

For additional information on our collaboration arrangement with Denali, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Sage Therapeutics, Inc.

In December 2020 we closed a global collaboration and license agreement with Sage to jointly develop and commercialize zuranolone for the

potential treatment of major depressive disorder, postpartum depression and other psychiatric disorders and SAGE-324 for the potential treatment of essential tremor and other neurological disorders.

For additional information on our collaboration arrangement with Sage, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Other Key Developments

In October 2019 the FDA approved VUMERITY for the treatment of RMS.

Under the terms of the license and collaboration agreement with Alkermes, we made milestone payments totaling $155.0 million to Alkermes following the FDA's approval of VUMERITY.

In November 2019 VUMERITY became available in the U.S.

In October 2019 we and our collaboration partner Eisai announced that we plan to pursue regulatory approval for aducanumab in the U.S.

and that the Phase 3 EMERGE study met its primary endpoint showing a significant reduction in clinical decline.

We believe that results from a subset of patients in the Phase 3 ENGAGE study who received sufficient exposure to high dose aducanumab support findings from EMERGE.

The decision to file is based on a new analysis, conducted in consultation with the FDA, of a larger dataset from the Phase 3 EMERGE and ENGAGE trials that were discontinued in March 2019 following a futility analysis.

For additional information on our plans to file for regulatory approval for aducanumab, please read the

subsection entitled "Financial Condition, Liquidity and Capital Resources" included below.

In September 2019 we and our collaboration partner Eisai announced the decision to discontinue the global Phase 3 studies (MISSION AD1 and MISSION AD2) of the investigational oral BACE inhibitor elenbecestat in patients with early AD.

2019 Share Repurchase Programs

In March 2019 our Board of Directors authorized our March 2019 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our March 2019 Share Repurchase Program does not have an expiration date.

All share repurchases under our March 2019 Share Repurchase Program will be retired.

In December 2019 our Board of Directors authorized our December 2019 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our December 2019 Share Repurchase Program does not have an expiration date.

All share repurchases under our December 2019 Share Repurchase Program will be retired.

Aducanumab (AB mAb)

In July 2020 we completed the submission of a BLA for the approval of aducanumab to the FDA.

In August 2020 the FDA accepted the BLA and granted Priority Review with a PDUFA action date on March 7, 2021.

In November 2020 the FDA held a virtual meeting of the Advisory Committee to review data supporting the BLA for aducanumab and to vote on questions presented at the meeting.

A majority of the Advisory Committee members voted against each of the questions presented at the meeting.

In January 2021 the FDA extended the review period for the BLA for aducanumab by three months.

The updated PDUFA action date is June 7, 2021.

As part of the ongoing review, we submitted a response to an information request by the FDA, including additional analyses and clinical data, which the FDA considered a Major Amendment to the application that will require additional time for review.

In October 2020 the EMA accepted for review the MAA for aducanumab.

In December 2020 the Ministry of Health, Labor and Welfare accepted for review the Japanese New Drug Application for aducanumab.

2020 Share Repurchase Program

In October 2020 our Board of Directors authorized our 2020 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our 2020 Share Repurchase Program does not have an expiration date.

All share repurchases under our 2020 Share Repurchase Program will be retired.

Results of Operations

Revenues are summarized as follows:

For the Years Ended

2019 compared to 2018

2018 compared to 2017

For the Years Ended December 31, % Change $ Change

(In millions, except percentages) 2020 2019 2018

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Product revenues are summarized as follows:

For the Years Ended

2019 compared to 2018

2018 compared to 2017

For the Years Ended December 31, % Change $ Change

(In millions, except percentages) 2020 2019 2018

Multiple Sclerosis (MS):

Fumarate* $ 3,905.4 $ 4,438.2 $ 4,274.1 (12.0) % 3.8 % $ (532.8) $ 164.1

Interferon** 1,877.5 2,101.8 2,363.0 (10.7) (11.1) (224.3) (261.2)

TYSABRI 1,946.1 1,892.2 1,864.0 2.8 1.5 53.9 28.2

FAMPYRA 103.1 97.1 92.7 6.2 4.7 6.0 4.4

ZINBRYTA — — 1.4 — nm — (1.4)

MS product revenues 7,832.1 8,529.3 8,595.2 (8.2) (0.8) (697.2) (65.9)

Spinal Muscular Atrophy:

SPINRAZA 2,052.1 2,097.0 1,724.2 (2.1) 21.6 (44.9) 372.8

BENEPALI 481.6 486.2 485.2 (0.9) 0.2 (4.6) 1.0

IMRALDI 216.3 184.0 16.7 17.6 nm 32.3 167.3

FLIXABI 97.9 68.1 43.2 43.8 57.6 29.8 24.9

Biosimilar product revenues 795.8 738.3 545.1 7.8 35.4 57.5 193.2

Hemophilia product revenues

FUMADERM 12.2 15.2 22.3 (19.7) (31.8) (3.0) (7.1)

Total product revenues, net $ 10,692.2 $ 11,379.8 $ 10,886.8 (6.0) % 4.5 % $ (687.6) $ 493.0

*Fumarate includes TECFIDERA and VUMERITY.

VUMERITY became commercially available in the U.S.

in November 2019.

**Interferon includes AVONEX and PLEGRIDY.

** Percentage not meaningful.

Multiple Sclerosis

For 2019 compared to 2018 , the 1.6% increase in U.S.

TECFIDERA revenues was primarily due to a slight net price increase, offset by a small decrease in unit sales volume.

For 2019 compared to 2018 , the 10.3% increase in rest of world TECFIDERA revenues was primarily due to increases in unit sales volume of 14%, primarily related to our European and Japanese markets, and the favorable impact of foreign currency exchange of $16.5 million, partially offset by pricing reductions in certain European countries.

In February 2020 the U.S.

Patent Trial and Appeal Board (PTAB) decided that our U.S.

8,399,514 (the ‘514 Patent) is patentable.

The ‘514 Patent covers treatment of MS with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label.

This decision may be appealed.

The ‘514 Patent has also been challenged pursuant to the Hatch-Waxman Act in the U.S.

District Courts of Delaware (the Delaware action) and West Virginia (the West Virginia action).

We are awaiting a decision in the Delaware action and the trial in the West Virginia action is ongoing.

If we receive an adverse judgment in either U.S.

District Court action, we will appeal but we may face generic competition while our appeal is pending.

We will face TECFIDERA generic competition if an adverse PTAB or U.S.

District Court decision is reached on appeal.

In addition, we have entered into settlement agreements with some of the defendants in the Delaware action and we now anticipate TECFIDERA generic competition before the ‘514 Patent expires in February 2028.

Generic competition

is expected to have an adverse impact on our TECFIDERA sales and our results of operations.

nm Not meaningful.

Multiple Sclerosis (MS)

Fumarate revenues include sales from TECFIDERA and VUMERITY.

In October 2019 the FDA approved VUMERITY for the treatment of RMS and VUMERITY became commercially available in the U.S.

in November 2019.

For 2020 compared to 2019, the 17.2% decrease in U.S.

Fumarate revenues was primarily due to a decrease in TECFIDERA demand and price as a result of multiple TECFIDERA generic entrants entering the U.S.

market during the year ended December 31, 2020.

This decrease was partially offset by an increase of approximately $60.0 million in VUMERITY sales, which became commercially available in the U.S.

in November 2019.

For 2020 compared to 2019, the 3.3% increase in rest of world Fumarate revenues was primarily due to an increase in TECFIDERA sales volumes of 8.6%, partially offset by pricing reductions in certain European countries and the unfavorable impact of foreign currency exchange.

The increase in volumes was primarily due to continued strong patient growth in our E.U.

direct markets, including Italy, Spain and the U.K., as well as growth in Japan and Brazil.

We have appealed the judgments in both actions.

For additional information, please read Note 20, Litigation, to our consolidated financial statements included in this report.

We anticipate an increase in TECFIDERA demand in rest of world in 2020, compared to 2019, notwithstanding the increasing competition from additional treatments for MS.

We expect volume growth in our rest of world markets to offset volume declines in the U.S.

AVONEX and PLEGRIDY

Multiple TECFIDERA generic entrants are now in the U.S.

market and have deeply discounted prices

compared to TECFIDERA.

We anticipate an increase in TECFIDERA sales volume in rest of world in 2021, compared to 2020, notwithstanding the increasing competition from additional treatments for MS and potential disruptions due, directly or indirectly, to the COVID-19 pandemic.

We expect an increase in VUMERITY sales volume in the U.S., mostly driven by the continued launch of VUMERITY.

For additional information on our collaboration arrangement with Alkermes, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

For 2020 compared to 2019, the 10.7% decrease in U.S.

Interferon revenues was primarily due to a decrease in Interferon unit sales volumes of 13%, which was primarily attributable to patients transitioning to other MS therapies and a net price decrease.

For 2019 compared to 2018 , the 2.8% decrease in rest of world Interferon revenues was primarily due to pricing reductions in certain European countries.

Interferon revenues was primarily due to a decrease in Interferon sales volumes of 12.0%.

The net decline in sales volumes reflects the continued decline of the Interferon market as patients transition to other higher efficacy and oral MS therapies.

For 2020 compared to 2019, the 10.5% decrease in rest of world Interferon revenues was primarily due to a decrease in Interferon sales volumes of 7.1%, which negatively impacted comparative revenue of $48.1 million.

We expect that Interferon revenues will continue to decline in both the U.S.

and rest of world markets in 2020, compared to 2019, as a result of increasing competition from our other MS products as well as other treatments for MS, including biosimilars, and pricing reductions in certain European markets.

and rest of world markets in 2021, compared to 2020, as a result of increasing

competition from our other MS products as well as other treatments for MS, including biosimilars, and pricing reductions in certain European markets.

For 2020, 2019 and 2018 U.S.

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For 2020 compared to 2019, the 5.3% increase in U.S.

TYSABRI revenues was primarily due to price increases, partially offset by a decrease in unit sales volumes of 4%.

For 2019 compared to 2018 , the 1.4% increase in rest of world TYSABRI revenues was primarily due to an increase in unit sales volumes of 3%.

We anticipate TYSABRI demand to be stable on a global basis in 2020, compared to 2019, with expected volume declines in the U.S.

due to increasing competition from additional treatments for MS, including OCREVUS, offset by volume growth in our rest of world markets, net of price reductions in certain rest of world countries.

Spinal Muscular Atrophy

For 2019 compared to 2018 , the 9.3% increase in U.S.

SPINRAZA revenues was primarily due to increases in unit sales volume of 9%.

For 2019 compared to 2018 , the 33.7% increase in rest of world SPINRAZA revenues was primarily due to an increase in unit sales volumes of 69%, partially offset by the unfavorable impact of foreign currency exchange of $43.5 million.

We expect that the rate at which SPINRAZA revenues will grow will moderate in 2020, compared to 2019, primarily due to a lower rate of new patient starts combined with the impact of loading dose dynamics as patients transition to dosing once every four months.

We face competition from a new gene therapy product that was approved in the U.S.

in May 2019 for the treatment of SMA.

Additionally, we are aware of other products in development that, if successfully developed and approved, may compete with SPINRAZA in the SMA market, including potential oral products.

TYSABRI revenues was primarily due to an increase in TYSABRI sales volume of 1.0% and price increases, partially offset by higher discounts and allowance rates.

For 2020 compared to 2019, rest of world TYSABRI revenues remained flat, with stable volume and pricing.

We anticipate TYSABRI sales volume to modestly increase on a global basis in 2021, compared to 2020, despite increasing competition from additional treatments for MS, including OCREVUS.

We believe that some TYSABRI infusions may be delayed due, directly or indirectly, to the

COVID-19 pandemic.

We expect to continue to face price reductions in certain European markets.

Spinal Muscular Atrophy (SMA)

For 2020 compared to 2019, the 15.6% decrease in U.S.

SPINRAZA revenues was primarily due to a decrease in sales volumes of 15.0%, resulting from increased competition as well as lower loading and maintenance doses due to the impact of site of care closures as a result of the COVID-19 pandemic.

For 2020 compared to 2019, the 8.7% increase in rest of world SPINRAZA revenues was primarily due to a net increase in sales volumes of 16.8%, which was reflective of the impact of a shift from loading to maintenance doses and the impact of site of care closures as a result of the COVID-19 pandemic.

This increase was partially lower net prices and the unfavorable impact of foreign currency exchange.

In 2021 we expect that SPINRAZA revenues will be subject to increased competition resulting in higher discontinuations and a lower rate of new patient starts combined with the impact of loading dose dynamics as patients transition to dosing once every four months and lower prices in certain rest of world countries.

We believe that some SPINRAZA doses may continue to be delayed due, directly or indirectly, to the COVID-19 pandemic.

We face competition from a gene therapy product that was approved in the U.S.

and a new oral product that was approved in the U.S.

and has been accepted for review in the E.U.

We expect that we will experience competition from both products in additional jurisdictions in the future.

Additionally, we are aware of other products now in development that,

if launched, may also compete with SPINRAZA.

Future sales of SPINRAZA may be adversely affected by the commercialization of competing products.

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BENEPALI, IMRALDI and FLIXABI

For 2019 compared to 2018 , the 35.4% increase in biosimilar revenues was primarily due to the launch of IMRALDI in the fourth quarter of 2018, partially offset by the unfavorable impact of foreign currency exchange of $27.8 million.

In 2020 we expect strong revenue growth for our biosimilars business, primarily driven by the continued launch of IMRALDI in Europe, partially offset by price reductions in certain European countries.

In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two potential ophthalmology biosimilars, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia.

For 2020 compared to 2019, the 7.8% increase in biosimilar revenues was primarily due to higher sales volumes and a favorable foreign currency impact, partially offset by the unfavorable impact of price decreases.

In 2021 we expect modest to moderate revenue growth for our biosimilars business depending on the impact of the COVID-19 pandemic.

We expect growth to be primarily driven by the continued launch of IMRALDI in Europe, partially offset by price reductions in certain European countries.

In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two potential ophthalmology biosimilars, SB11, a proposed ranibizumab biosimilar referencing LUCENTIS, and SB15, a proposed aflibercept biosimilar referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia.

In October 2020 the EMA accepted for review the MAA for SB11 and in November 2020 the FDA accepted the BLA for SB11.

We also acquired an option to extend our existing commercial agreement with Samsung Bioepis for BENEPALI, IMRALDI and FLIXABI in certain countries in

Europe and obtained an option to acquire exclusive rights to commercialize these products in China.

For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Revenues from Anti-CD20 Therapeutic Programs

Genentech Inc.

(Roche Group)

Genentech (Roche Group)

Our share of RITUXAN, including RITUXAN HYCELA, and GAZYVA collaboration operating profits in the U.S.

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for RITUXAN and GAZYVA:

For the Years Ended

For the Years Ended December 31,

(In millions) 2020 2019 2018

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Pre-tax profits in the U.S.

$ 2,901.1 $ 4,124.7 $ 3,814.7

Biogen's share of pre-tax profits $ 1,080.2 $ 1,542.4 $ 1,431.9

Our share of RITUXAN annual pre-tax co-promotion profits in the U.S.

in excess of $50.0 million decreased to 37.5% from 39% in the third quarter of 2017 as gross sales of GAZYVA in the U.S.

for the preceding 12-month period exceeded $150.0 million .

For 2019 compared to 2018 , the increase in U.S.

product revenues, net was primarily due to increased net sales of RITUXAN in the U.S.

of 5.0%, which reflects an increase in unit sales volume of 3%, and selling price increases, partially offset by higher rates in discounts and allowances.

The increase in U.S.

product revenues, net over 2018 also reflects an increase in GAZYVA unit sales volume of 21%.

For 2019 compared to 2018 , the decrease in collaboration costs and expenses was primarily due to lower cost of sales and lower selling and marketing costs on RITUXAN and lower Branded Pharmaceutical Drug fee expenses for RITUXAN and GAZYVA.

We are aware of anti-CD20 molecules, including biosimilar products, in development that if successfully developed and approved, could compete with RITUXAN and GAZYVA in the oncology market.

The introduction of a biosimilar product can result in a significant reduction in net sales for the relevant product, as other manufacturers typically offer their versions at lower prices.

In November 2019 and January 2020 biosimilar products referencing RITUXAN were launched in the U.S.

and this could adversely affect the pre-tax profits of our collaboration arrangements with Genentech, which could, in turn, adversely affect our co-promotion profits in the U.S.

For 2020 compared to 2019, the decrease in U.S.

product revenues, net was primarily due to a decrease in sales volumes of RITUXAN in the U.S.

of 26.7%, due to the onset of competition from multiple biosimilars, and we believe RITUXAN was adversely impacted by the COVID-19 pandemic.

For 2020 compared to 2019, product revenues, net also reflects increases in GAZYVA sales volumes of 24.7%.

For 2020 compared to 2019, the decrease in collaboration costs and expenses was primarily due to lower cost of sales on RITUXAN.

We are aware of several other anti-CD20 molecules, including biosimilar products, that have recently been approved and are expected to compete with RITUXAN and GAZYVA in the oncology market.

In November 2019, January 2020 and January 2021 biosimilar products referencing RITUXAN were launched in the U.S.

and are being offered at lower prices.

This competition has adversely affected the pre-tax profits of our collaboration arrangements with Genentech and could have a significant adverse affect on our co-promotion profits in the U.S.

in future years.

Other Revenues from Anti-CD20 Therapeutic Programs

Other revenues from anti-CD20 therapeutic programs consist of royalty revenues on sales of OCREVUS and our share of pre-tax co-promotion profits from RITUXAN in Canada.

For 2019 compared to 2018 , the increase in other revenues from anti-CD20 therapeutic programs was primarily due to the sales growth of OCREVUS.

Other revenues from anti-CD20 therapeutic programs consist of royalty revenues on sales of

OCREVUS and our share of pre-tax co-promotion profits from RITUXAN in Canada.

For 2020 compared to 2019, the increase in other revenues from anti-CD20 therapeutic programs was primarily due to sales growth of OCREVUS.

Royalty revenues recognized on sales of OCREVUS for the years ended December 31, 2020, 2019 and 2018, totaled $845.4 million, $687.5 million and $478.3 million, respectively.

OCREVUS royalty revenues are based on our estimates from third party and market research data of OCREVUS sales occurring during the corresponding period.

Differences between actual and estimated royalty revenues will be adjusted for in the period in which they become known, which is expected to be the following quarter.

In March 2017 the FDA approved OCREVUS for the treatment of RMS and PPMS.

Pursuant to the terms of our collaboration arrangements with Genentech, we receive a tiered royalty on U.S.

net sales from 13.5% and increasing up to 24% if annual net sales exceed $900.0 million.

There will be a 50% reduction to these royalties if a biosimilar to OCREVUS is approved in the U.S.

In addition, we receive a gross 3% royalty on net sales of OCREVUS outside the U.S., with the royalty period lasting 11 years from the first commercial sale of OCREVUS on a country-by-country basis.

OCREVUS has been approved for the treatment of RMS and PPMS in the E.U.

and certain other countries.

The commercialization of OCREVUS does not impact the percentage of the co-promotion profits we receive for RITUXAN or GAZYVA.

Genentech is solely responsible for development and commercialization of OCREVUS and funding future costs.

Genentech cannot develop OCREVUS in CLL, non-Hodgkin's lymphoma or rheumatoid arthritis.

For additional information on our relationship with Genentech, including information regarding the pre-tax profit-sharing formula and its impact on future revenues from anti-CD20 therapeutic programs, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Differences between actual and estimated royalty revenues will be adjusted for in the period in which they become known, which is generally expected to be the following quarter.

For additional information on our collaboration arrangements with Genentech, including information regarding the pre-tax profit-sharing formula and its impact on future revenues from anti-CD20 therapeutic programs, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Other Revenues

Other revenues are summarized as follows:

For The Years

Ended December 31,

2019 compared to 2018

2018 compared to 2017

For the Years Ended December 31, % Change $ Change

(In millions, except percentages) 2020 2019 2018

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Revenues from collaborative and other relationships primarily include revenues from our technical development services and manufacturing agreements with Samsung Bioepis and royalty revenues on biosimilar products from Samsung Bioepis.

Following the divestiture of our Hillerød, Denmark manufacturing operations in August 2019, FUJIFILM assumed responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis.

We no longer recognize revenues for the manufacturing completed after the divestiture date under our technical development services and manufacturing agreements with Samsung Bioepis.

Following the divestiture of our Hillerød, Denmark manufacturing operations in August 2019, FUJIFILM Corporation (FUJIFILM) assumed responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis.

We no longer recognize revenues for the manufacturing

completed after the Hillerød, Denmark manufacturing operations divestiture date under our technical development services and manufacturing agreements with Samsung Bioepis.

For the years ended December 31, 2020 and 2019, we recognized $20.9 million and $106.2 million, respectively, related to the services described above provided to Samsung Bioepis.

For additional information on our collaborative and other relationships, including revenues recognized under our technical development services and manufacturing agreements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures , to our consolidated financial statements included in this report.

Other Royalty and Corporate Revenues

We receive royalties from net sales on products related to patents that we have out-licensed and we record other corporate revenues primarily from amounts earned under contract manufacturing agreements.

For 2019 compared to 2018 , the increase in other royalty and corporate revenues was primarily due to $383.2 million in revenues recognized in 2019 under the manufacturing and supply agreement with Bioverativ entered into in connection with the spin-off of our hemophilia business, compared to $206.7 million recognized in 2018.

The increase in Bioverativ revenues in 2019 over the prior year period was due to our sales in 2019 of hemophilia-related inventory on hand as of December 31, 2018.

The increase in corporate revenues was partially offset by the reduction in royalty revenues due to the expiration of certain of our patents and a reduction in revenues from contract manufacturing agreements, other than Bioverativ, as discussed above.

During the third quarter of 2019, we amended our agreement with a contract manufacturing customer pursuant to which we licensed certain of our manufacturing-related intellectual property to the customer.

In the second quarter of 2020, the customer received regulatory approval for its product that is being manufactured using certain of our manufacturing-related intellectual property.

As a result, we are entitled to $500.0 million in a series of three payments.

The first payment became due upon regulatory approval of such product and was received during the second quarter of 2020.

Subsequent payments are due on the first and second anniversaries of the regulatory approval.

Other corporate revenues for the year ended December 31, 2020, reflect $346.2 million related to the delivery of the license for certain of our manufacturing-related intellectual property under the amended agreement discussed above and the performance of manufacturing product supply services for such customer.

We have allocated the remaining $153.8 million of the $500.0 million transaction price to the performance of manufacturing product supply services for the customer, which we expect to perform through 2026.

The value allocated to the manufacturing services was based on expected

demand for supply and the fair value of comparable manufacturing and development services.

For 2020 compared to 2019, the increase in other royalty and corporate revenues was due to higher contract manufacturing revenues, primarily resulting from $346.2 million in revenues related to the delivery of the license for certain of our manufacturing-related intellectual property to a contract manufacturing customer, as discussed above.

Reserves for Discounts and Allowances

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Reserves for discounts, contractual adjustments and returns that reduced gross product revenues are summarized as follows:

For the years ended December 31, 2019 , 2018 and 2017 , reserves for discounts and allowances as a percentage of gross product revenues were 24.3%, 23.7% and 22.0%, respectively.

For the years ended December 31, 2020, 2019 and 2018, reserves for discounts and allowances as

a percentage of gross product revenues were 27.1%, 24.3% and 23.7%, respectively.

Discounts include trade term discounts and wholesaler incentives.

For 2019 compared to 2018 , discounts were relatively consistent.

For 2020 compared to 2019, the increase in discounts was primarily driven by an increase in gross biosimilar sales in our international markets as well as increases in discount percentages in certain countries.

Contractual Adjustments

Contractual adjustments primarily relate to Medicaid and managed care rebates, co-payment assistance (copay), VA and PHS discounts, specialty pharmacy program fees and other government rebates or applicable allowances.

For 2019 compared to 2018 , the increase in contractual adjustments was primarily due to higher managed care rebates and governmental rebates in the U.S.

Contractual adjustments primarily relate to Medicaid and managed care rebates, pharmacy rebates, co-payment (copay) assistance, VA and PHS discounts, specialty pharmacy program fees and other government rebates or applicable allowances.

For 2020 compared to 2019, the increase in contractual adjustments was primarily due to higher pharmacy rebates and governmental rebates in the

as well as higher governmental rebates and allowances in the rest of world, due in part to an increase in SPINRAZA sales volumes worldwide.

Product return reserves are established for returns made by wholesalers.

Product return reserves are established for returns expected to be made by wholesalers.

In accordance with contractual terms, wholesalers are permitted to return product for reasons such as damaged or expired product.

The majority of wholesaler returns are due to product expiration.

Provisions for product returns are recognized in the period the related revenue is recognized, resulting in a reduction to product sales.

Provisions for product returns are recognized in the period the related revenues are recognized, resulting in a reduction to product sales.

For 2020 compared to 2019, return reserves were relatively consistent.

2 unchanged sentences

A summary of total cost and expenses is as follows:

For the Years Ended

2019 compared to 2018

2018 compared to 2017

For the Years Ended December 31, % Change $ Change

(In millions, except percentages) 2020 2019 2018

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Collaboration profit (loss) sharing 232.9 241.6 185.0 (3.6) 30.6 (8.7) 56.6

Loss on divestiture of Hillerød, Denmark manufacturing operations

(Gain) loss on divestiture of Hillerød, Denmark manufacturing operations (92.5) 55.3 — nm nm (147.8) 55.3

(Gain) loss on fair value remeasurement of contingent consideration (86.3) (63.7) (12.3) 35.5 417.9 (22.6) (51.4)

Acquired in-process research and development

Restructuring charges

Acquired in-process research and development 75.0 — 112.5 nm nm 75.0 (112.5)

Restructuring charges — 1.5 12.0 nm (87.5) (1.5) (10.5)

Total cost and expenses $ 8,894.5 $ 7,335.3 $ 7,564.3 21.3 % (3.0) % $ 1,559.2 $ (229.0)

** Percentage not meaningful.

Cost of Sales, Excluding Amortization and Impairment of Acquired Intangible Assets (Cost of Sales)

nm Not meaningful

Cost of Sales, Excluding Amortization and Impairment of Acquired Intangible Assets

Cost of sales, as a percentage of total revenues, were 13.4%, 13.6% and 13.5% for the years ended December 31, 2020, 2019 and 2018, respectively.

Product Cost of Sales

For 2019 compared to 2018 , the increase in product cost of sales was primarily due to our sale in 2019 to Bioverativ of hemophilia-related inventory on hand as of December 31, 2018, with a cost basis totaling $184.5 million pursuant to the terms of the manufacturing and supply agreement with Bioverativ

entered into in connection with the spin-off of our hemophilia business.

Additionally, the increase in product cost of sales was attributable to an increase in sales of products within our biosimilar business and an increase in inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons, partially offset by lower cost of sales from our contract manufacturing agreements, except Bioverativ, as discussed above.

For 2020 compared to 2019, the decrease in product cost of sales was primarily due to lower cost of sales from contract manufacturing agreements, primarily resulting from the sale of hemophilia inventory, with a cost basis of $173.5 million, to Bioverativ in the first quarter of 2019 and FUJIFILM assuming responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis during the third quarter of 2019.

Inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons totaled $26.6 million, $52.2 million and $41.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Royalty Cost of Sales

For 2019 compared to 2018 , the decrease in royalty cost of sales was primarily due to a decrease in royalties payable on sales of TYSABRI resulting from the expiration of certain third party royalties, partially offset by increased royalties payable on higher sales of SPINRAZA and IMRALDI.

For 2020 compared to 2019, the decrease in royalty cost of sales was primarily due to lower royalties payable on lower sales of AVONEX and SPINRAZA.

Research and Development

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A significant amount of our research and development costs consist of indirect costs incurred in support of overall research and development activities and non-specific programs, including activities that benefit multiple programs, such as management costs, as well as depreciation, information technology and facility-based expenses.

These costs are considered other research and development costs in the table above and are not allocated to a specific program or stage.

These costs are considered other research and

development costs in the table above and are not allocated to a specific program or stage.

Research and development expense incurred in support of our marketed products includes costs associated with product lifecycle management activities including, if applicable, costs associated with the development of new indications for existing products.

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Our costs reflect our share of the total costs incurred.

For 2019 compared to 2018 , the decrease in research and development expense was primarily due to a decrease in milestone and upfront expenses and a decrease in other research and development costs.

These decreases were partially offset by increases in costs incurred in connection with our early stage programs and marketed products.

For 2020 compared to 2019, the increase in research and development expense was primarily due to approximately $1,084.0 million, $601.3 million and $208.0 million of upfront payments made in connection with entering into our collaborations with Sage, Denali and Sangamo, respectively.

In 2020 we recorded significant upfront payments related to our new collaborations as part of research and development expense.

Excluding upfront payments, we expect our core research and development expense to increase in 2021, driven by continued investment in our pipeline, including significant investments related to the new assets in the Sage collaboration.

We intend to continue committing significant resources to targeted research and development opportunities where there is a significant unmet need and where a drug candidate has the potential to be highly differentiated.

At December 31, 2020, we capitalized approximately $93.8 million of pre-launch inventory for aducanumab.

If aducanumab does not receive regulatory approval in the U.S., we would expense this inventory as research and development expense and, under the terms of the Aducanumab Collaboration Agreement, Eisai would reimburse us for 45.0% of the costs.

Milestone and Upfront Expenses

Research and development expense for 2020 includes:

$63.0 million charge to research and development expense upon the completion of a transaction with Samsung Bioepis to secure the exclusive rights to commercialize two potential ophthalmology biosimilar products;

$45.0 million charge to research and development expense upon the exercise of our option to obtain a worldwide, exclusive, royalty-bearing license from Ionis to develop and commercialize BIIB080;

$46.5 million charge to research and development expense consisting of a $38.5 million charge upon the entering into a collaboration and research and development services agreement with Skyhawk and an approximately $8.0 million charge upon entering into an amendment to this agreement to add an additional discovery program.

• $1,084.0 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Sage in the fourth quarter of 2020;

• $601.3 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Denali in the third quarter of 2020;

• $208.0 million charge to research and development expense in connection with the upfront payment associated with entering into our collaboration with Sangamo in the second quarter of 2020.

Research and development expense for 2019 includes:

$486.2 million net charge to research and development expense upon the closing of the 2018 Ionis Agreement;

$35.0 million charge to research and development expense upon the exercise of our option to obtain a worldwide, exclusive, royalty-bearing license from Ionis to develop and commercialize tofersen in ALS.

These payments are classified as research and development expense as the programs they relate to had not achieved regulatory approval as of the payment date.

• $63.0 million charge to research and development expense in connection with our agreement with Samsung Bioepis to secure the exclusive rights to commercialize two potential ophthalmology biosimilar products;

• $45.0 million charge to research and development expense upon the exercise of our option to obtain a worldwide, exclusive, royalty-bearing license from Ionis to develop and commercialize BIIB080 (tau ASO) for the potential treatment of Alzheimer's disease.

The upfront payments associated with these collaborations are classified as research and development expense as the programs they relate to had not achieved regulatory approval as of the payment date.

For additional information about these collaboration arrangements, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Early Stage Programs

For 2019 compared to 2018 , the increase in spending related to our early stage programs was primarily due to an increase in costs associated with:

gosuranemab in PSP and AD pursuant to our license agreement with BMS;

cinpanemab in Parkinson's disease;

BIIB112 in XLRP;

BIIB104 in CIAS;

BIIB078 (IONIS-C9 Rx ) in ALS;

BIIB091 in MS;

BIIB110 (ActRIIA/B ligand trap) in SMA;

our decision in September 2019 to discontinue the Phase 2b study of BG00011 for the potential treatment of IPF, for which we incurred a one-time close out charge of approximately $10.0 million.

These increases were partially offset by a decrease in costs associated with:

the development of vixotrigine (BIIB074) in trigeminal neuralgia (TGN);

tofersen in ALS, which was advanced to a late stage program in the first quarter of 2019;

our decision in December 2018 to discontinue development of BIIB087, an investigational AAV-based gene therapy for the potential treatment of X-linked retinoschisis, and BIIB088, an investigational AAV-based gene therapy for the potential treatment of XLRP, upon the termination of our collaboration agreement with Applied Genetic Technologies Corporation;

BIIB093 in LHI, which was advanced to a late stage program in the third quarter of 2018.

For 2020 compared to 2019, the decrease in spending related to our early stage programs was primarily due to a decrease in costs associated with:

• the discontinuation of gosuranemab in progressive supraneuclear palsy;

• the advancement of toferson in ALS into late stage;

• the discontinuation of the Phase 2b study of BG00011 for the potential treatment of idiopathic pulmonary fibrosis (IPF).

These decreases were partially offset by an increase in costs associated with:

• spending in the development of BIIB112 (RPGR gene therapy) in XLRP;

• spending in the development of BIIB080 in Alzheimer's disease;

• spending in the development of gosuranemab in Alzheimer's disease.

Late Stage Programs

For 2019 compared to 2018 , the decrease in spending associated with our late stage programs was primarily due to a decrease in spending related to the discontinuation of the global Phase 3 trials, ENGAGE and EMERGE, of aducanumab, net of Eisai reimbursement.

This decrease was partially offset by increases in spending related to:

our share of the termination costs of approximately $48.0 million resulting from the decision to discontinue the global Phase 3 studies of elenbecestat in AD;

BAN2401 in early AD pursuant to our collaboration arrangement with Eisai, which was advanced to a late stage program in the first quarter of 2019;

tofersen in ALS, which was advanced to a late stage program in the first quarter of 2019;

BIIB093 in LHI, which was advanced to a late stage program in the third quarter of 2018;

BIIB111 in CHM.

For 2020 compared to 2019, the decrease in spending associated with our late stage programs was primarily due to:

• a decrease in spending related to the discontinuation of the global Phase 3 trials of aducanumab, net of reimbursement from our collaboration partner Eisai in the first quarter of 2019;

• a decrease in spending related to the discontinuation of the global Phase 3 trials, MISSION AD1 and MISSION AD2, of elenbecestat (development code:

E2609) in patients with early Alzheimer's disease in the third quarter of 2019;

• a decrease in spending related to VUMERITY, which was approved by the FDA in the fourth quarter of 2019.

These decreases were partially offset by an increase in spending due to the advancement of toferson in ALS into late stage, an increase in spending related to BAN2401 in early Alzheimer's disease, our EMBARK redosing study for aducanumab and BIIB111 (timrepigene emparvovec) in CHM.

In the first quarter of 2019, as a result of the decision to discontinue the Phase 3 EMERGE and ENGAGE trials following a futility analysis, we accrued approximately $45.0 million related to the termination of clinical trials and research and development contracts net of the expected 45.0% Eisai reimbursement of development costs incurred by the collaboration for the advancement of aducanumab.

In July 2020 we completed the submission of a BLA for the approval of aducanumab to the FDA.

In August 2020 the FDA accepted the BLA and granted Priority Review with a PDUFA action date on March 7, 2021.

In January 2021 the FDA extended the review period for the BLA for aducanumab by three months.

The updated PDUFA action date is June 7, 2021.

In March 2019 Eisai initiated a global Phase 3 trial for the development of BAN2401 in early Alzheimer's disease.

Under our collaboration arrangement, Eisai serves as the global operational and regulatory lead for BAN2401 and all costs, including research, development, sales and marketing expenses, are shared equally between us and Eisai.

For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships, to our

consolidated financial statements included in this report.

Selling, General and Administrative

For 2019 compared to 2018 , the increase in selling, general and administrative expenses was primarily due to increased commercial and medical investments as well as the timing of spend on selling, general and administrative expense.

In 2020 we expect selling, general and administrative costs, including increases in headcount and other commercial infrastructure, to significantly increase as we support pre-launch activities associated with the potential regulatory approval of aducanumab.

For 2020 compared to 2019, the increase in selling, general and administrative expenses was primarily due to increased commercial and medical investments in support of pre-launch activities associated with the potential regulatory approval of aducanumab.

In 2021 we expect selling, general and administrative costs, including headcount and commercial infrastructure, to significantly increase as we support activities associated with the potential regulatory approvals of aducanumab in the U.S.

and rest of world markets.

Amortization and Impairment of Acquired Intangible Assets

Our amortization expense is based on the economic consumption and impairment of intangible assets.

Our most significant intangible assets are related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products

and other programs acquired through business combinations.

Amortization and impairment of acquired intangible assets for the year ended December 31, 2019, was impacted by the 2019 impairment charges of $215.9 million related to certain IPR&D assets associated with the Phase 2b study of BG00011 for the potential treatment of IPF, which was discontinued in the third quarter of 2019.

Amortization and impairment of acquired intangible assets for the year ended December 31, 2018, was impacted by the 2018 impairment charges of $189.3 million related to certain IPR&D assets associated with our vixotrigine program and $176.8 million related to our intangible assets associated with our U.S.

license to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA.

Our most significant amortizable intangible assets are related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products and other programs acquired through business combinations.

For the year ended December 31, 2020, amortization and impairment of acquired intangible assets reflects the impact of a $115.0 million impairment charge related to BIIB111, which was obtained as part of our acquisition of Nightstar Therapeutics plc (NST), a $75.4 million impairment charge related to BIIB054 and a $19.3 million impairment charge related to one of our other IPR&D intangible assets.

For the year ended December 31, 2019, amortization and impairment of acquired intangible assets reflects the impact of a $215.9 million impairment charge related to certain IPR&D assets associated with the Phase 2b study of BG00011 for the potential treatment of IPF, which was discontinued in the third quarter of 2019.

Amortization of acquired intangible assets, excluding impairment charges, totaled $255.1 million, $274.0 million and $381.2 million for the years ended December 31, 2020, 2019 and 2018, respectively.

For 2019 compared to 2018 , the decrease in amortization of acquired intangible assets, excluding impairment charges, was primarily due to a lower rate of amortization for acquired intangible assets, primarily due to prior year impairments.

For 2020 compared to 2019, the decrease in amortization of acquired intangible assets, excluding impairment charges, was primarily due to a lower rate of amortization for acquired intangible assets.

We monitor events and expectations regarding product performance.

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We review amounts capitalized as acquired IPR&D for impairment annually, as of October 31, and whenever events or changes in circumstances indicate to us that the carrying value of the assets might not be recoverable.

During the third quarter of 2019 we discontinued the Phase 2b study of BG00011 for the potential treatment of IPF due to safety concerns.

As a result, we recognized an impairment charge of approximately $215.9 million during the third quarter of 2019 to reduce the fair value of the IPR&D intangible asset to zero.

We also adjusted the value of our contingent consideration obligations related to this asset resulting in a gain of $61.2 million in the third quarter of 2019.

During the third quarter of 2018 we completed a Phase 2b study of vixotrigine for the potential treatment of painful lumbosacral radiculopathy (PLSR).

The study did not meet its primary or secondary efficacy endpoints and we discontinued development of vixotrigine for the potential treatment of PLSR.

As a result, we recognized an impairment charge of approximately $60.0 million during the third quarter of 2018 to reduce the fair value of the related IPR&D intangible asset to zero.

In addition, we delayed the initiation of the Phase 3 studies of vixotrigine for the potential treatment of TGN as we awaited the outcome of ongoing interactions with the FDA regarding the design of the Phase 3 studies, a more detailed review of the data from the Phase 2b study of vixotrigine for the potential treatment of PLSR and insights from the Phase 2 study of vixotrigine for the potential treatment of small fiber neuropathy.

We reassessed the fair value of the TGN program using reduced expected lifetime revenues, higher expected clinical development costs and lower cumulative probability of success.

As a result of that reassessment, we recognized an impairment charge of $129.3 million during the third quarter of 2018 to reduce the fair value of the TGN IPR&D intangible asset to $41.8 million.

The TGN program has experienced numerous delays in development in the periods since we acquired the program and the fair value of this asset is not significantly in excess of carrying value.

In addition, we are currently testing vixotrigine in another mid-stage clinical trial, in a different neuropathic pain indication, for which we also have an IPR&D asset.

Data from that trial is expected in the first half of 2020.

This data may affect the economic value of vixotrigine and the IPR&D assets for one or both programs could be impaired if assumptions used in determining their fair value change.

Overall, the value of our acquired IPR&D assets is dependent upon several variables, including estimates of future revenues and the effects of competition, our ability to secure sufficient pricing in a competitive market, our ability to confirm safety and

efficacy based on data from clinical trials and regulatory feedback, the level of anticipated development costs and the probability and timing of successfully advancing a particular research program from one clinical trial phase to the next.

regulatory feedback, the level of anticipated development costs and the probability and timing of successfully advancing a particular research program from one clinical trial phase to the next.

We are continually reevaluating our estimates concerning these and other variables, including our life cycle management strategies, research and development priorities and development risk, changes in program and portfolio economics and related impact of foreign currency exchange rates and economic trends and evaluating industry and company data regarding the productivity of clinical research and the development process.

Changes in our estimates and prioritization of these programs may result in a significant change to our valuation of our IPR&D assets.

TECFIDERA License Rights

In January 2017 we entered into a settlement and license agreement among Biogen Swiss Manufacturing GmbH, Biogen International Holding Ltd., Forward Pharma and certain related parties, which was effective as of February 1, 2017.

Pursuant to this agreement, we obtained U.S.

and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA.

In exchange, we paid Forward Pharma $1.25 billion in cash, of which $795.2 million was recorded within intangible assets in the first quarter of 2017.

We had an intellectual property dispute with Forward Pharma in the U.S.

concerning intellectual property related to TECFIDERA.

In March 2017 the U.S.

intellectual property dispute was decided in our favor.

Forward Pharma appealed to the U.S.

Court of Appeals for the Federal Circuit.

We evaluated the recoverability of the U.S.

asset acquired from Forward Pharma and recorded a $328.2 million impairment charge in the first quarter of 2017 to adjust the carrying value of the acquired U.S.

asset to fair value reflecting the impact of the developments in the U.S.

legal dispute and continued to amortize the remaining net book value of the U.S.

intangible asset in our consolidated statements of income utilizing an economic consumption model.

Court of Appeals for the Federal Circuit upheld the USPTO's March 2017 ruling and in January 2019 denied Forward Pharma’s petition for rehearing.

We evaluated the recoverability of the U.S.

asset based upon these most recent developments and recorded a $176.8 million impairment charge in the fourth quarter of 2018 to reduce the remaining net book value of the U.S.

asset to zero.

We have an intellectual property dispute with Forward Pharma in the E.U.

concerning intellectual property related to TECFIDERA.

In March 2018 the European Patent Office (EPO) revoked Forward Pharma’s European Patent No.

Forward Pharma has filed an appeal to the Technical Boards of Appeal of the EPO and a hearing has been set for June 2020.

Based upon our assessment of this ruling, we continue to amortize the remaining net book value of the rest of world intangible asset in our consolidated statements of income utilizing an economic consumption model.

The remaining net book value of the TECFIDERA rest of world intangible asset as of December 31, 2019, was $36.1 million .

For additional information on the dispute with Forward Pharma in the E.U., please read Note 20, Litigation , to our consolidated financial statements included in this report.

For additional information on the amortization and impairment of acquired intangible assets, please read Note 6, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.

Changes in our estimates may result in a significant change to our valuation of our IPR&D assets.

During the fourth quarter of 2020 we began experiencing third-party manufacturing delays that may impact our timeline for a potential filing of a BLA for BIIB111 for regulatory approval by up to one year.

In addition, we determined that forecasted costs associated with advancing the BIIB111 program through Phase 3 development and potential commercialization will exceed our original estimates.

We reassessed the fair value of the program based on these changes in assumptions and determined that the program was partially impaired.

We recognized an impairment charge of $115.0 million during the fourth quarter of 2020, which resulted in a reduction of the IPR&D asset from $480.0 million to $365.0 million.

In February 2021 we announced that we discontinued development of BIIB054 as a potential treatment of Parkinson's disease as our Phase 2 SPARK study did not meet its primary or secondary endpoints.

Although we made this determination in February 2021, it was based on conditions that existed as of December 31, 2020.

As a result, we recognized an impairment charge of approximately $75.4 million during the fourth quarter of 2020 to reduce the fair value of the related IPR&D intangible asset to zero.

In the periods since we acquired vixotrigine (BIIB074), there have been numerous delays in the initiation of Phase 3 studies for the potential treatment of trigeminal neuralgia (TGN) as we engaged with the FDA regarding the design of the Phase 3 studies and awaited data and insights from mid-stage clinical trials of vixotrigine in other indications that have since been completed.

The fair value of the TGN asset is not significantly in excess of carrying value.

As of December 31, 2020, the carrying value associated with our vixotrigine IPR&D assets was $177.5 million.

For additional information on the amortization and impairment of our acquired intangible assets, please read Note 6, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.

Collaboration Profit (Loss) Sharing

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For 2020, 2019 and 2018 we recognized a net profit-sharing expense of $266.5 million, $241.6 million and $187.4 million, respectively, to reflect Samsung Bioepis’ 50.0% sharing of the net collaboration profits.

The increases in profit-sharing expense for the comparative periods were primarily due to increased collaboration profits resulting from increased biosimilar sales.

Loss on Divestiture of Hillerød, Denmark Manufacturing Operations

Divestiture of Hillerød, Denmark Manufacturing Operations

In August 2019 we completed the sale of all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark to FUJIFILM.

Upon the closing of this transaction, we received approximately $881.9 million in cash, which may be adjusted based on other contractual terms, which are discussed below.

We determined that the operations disposed of in this transaction did not meet the criteria to be classified as discontinued operations under the applicable guidance.

As part of this transaction, we have provided FUJIFILM with certain minimum batch production commitment guarantees.

There is a risk that the minimum contractual batch production commitments will not be met.

Based upon current estimates we expect to incur an adverse commitment obligation of approximately $74.0 million associated with such guarantees and have accrued for this obligation.

We may adjust this estimate based upon changes in business conditions, which may result in the increase or reduction of this adverse commitment obligation in subsequent periods.

We also may be obligated to indemnify FUJIFILM for liabilities that existed relating to certain business activities incurred prior to the closing of this transaction.

In addition, we may earn certain contingent payments based on future manufacturing activities at the Hillerød facility.

For the disposition of a business, our policy is to recognize contingent consideration when the consideration is realizable.

We currently believe the probability of earning these payments is remote and therefore we did not include these contingent payments in our calculation of the fair value of the operations.

As part of this transaction, we entered into certain manufacturing services agreements with FUJIFILM pursuant to which FUJIFILM will use the Hillerød facility to produce commercial products for us, such as TYSABRI, as well as other third-party products.

In connection with this transaction, we recognized a total net loss of approximately $164.4 million in our consolidated statements of income.

For the year ended 2020, we also recognized net profit-sharing income of $33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone expense related to the completed submission of the BLA for the approval of aducanumab to the FDA.

For additional information on our collaboration arrangements with Samsung Bioepis and Eisai, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

(Gain) Loss on Divestiture of Hillerød, Denmark Manufacturing Operations

In March 2019 we entered into a share purchase agreement with FUJIFILM to sell all of the outstanding shares of our subsidiary that owned our biologics manufacturing operations in Hillerød, Denmark.

The transaction closed in August 2019.

For the year ended December 31, 2019, we recognized a total net loss of approximately $124.2 million related to the transaction in our consolidated statements of income.

This loss included a pre-tax loss of $55.3 million, which was recorded in loss on divestiture of Hillerød, Denmark manufacturing operations.

The loss recognized was based on exchange rates and business conditions on the closing date of this transaction, and included costs to sell our Hillerød, Denmark manufacturing operations of approximately $11.2 million and our estimate of the fair value of an adverse commitment of approximately $114.0 million associated with the guarantee of future minimum batch production at the Hillerød facility.

The value of this adverse commitment was determined using a probability-weighted estimate of future manufacturing activity.

The loss recognized was based on exchange rates and business conditions on the closing date of this transaction, and included costs to sell our Hillerød, Denmark manufacturing operations of approximately $11.2 million and our estimate of the fair value of adverse commitments of approximately $74.0 million, primarily associated with the guarantee of future minimum batch production at the Hillerød facility.

We also recorded a tax expense of $68.9 million related to this transaction.

During the fourth quarter of 2019 we recorded a $40.2 million reduction in our estimate of the future minimum batch commitment utilizing our current manufacturing forecast, which reflects the impact of forecasted aducanumab batches, resulting in a reduction in the pre-tax loss on divestiture from $95.5 million to $55.3 million .

Our estimate of the fair value of the adverse commitment is a Level 3 measurement and is based on forecasted batch production at the Hillerød facility.

During the year ended December 31, 2020, we reduced our estimate of the fair value of the adverse commitment associated with the guarantee of future batch production by approximately $62.0 million based on our current manufacturing forecasts.

Additionally, we recorded a reduction to our pre-tax loss of approximately $30.5 million due to a refund of interest paid associated with a tax matter.

For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures , to our consolidated financial statements included in this report.

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Changes in the fair value of our contingent consideration obligations, other than changes due to payments, are recognized as a (gain) loss on fair value remeasurement of contingent consideration in our consolidated statements of income.

The gain on fair value remeasurement of contingent consideration for 2019 was primarily due to the discontinuation of the Phase 2b study of BG00011 for the potential treatment of IPF, partially offset by changes in the probability and expected timing of achievement of certain developmental milestones, a decrease in interest rates used to revalue our contingent consideration liabilities and the passage of time.

The gain on fair value remeasurement of contingent consideration for 2018 was primarily due to delays in the expected timing of achievement of milestones related to our vixotrigine program for the potential treatment of TGN and an increase in discount rates used to revalue our contingent consideration liabilities, partially offset by the passage of time.

The loss on fair value remeasurement of contingent consideration for 2017 was primarily due to the increase in the probability of achieving certain developmental milestones based upon the progression of the underlying clinical programs.

For additional information on our IPR&D intangible assets related to our discontinued BG00011 program for the potential treatment of IPF and our vixotrigine program for the potential treatment of TGN, please read Note 6, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.

The gain on fair value remeasurement of contingent consideration for 2020 was primarily due to the remeasurement of the contingent consideration associated with our BIIB054 program as well as changes in the probability and the expected timing of the achievement of certain remaining developmental milestones, changes in the interest rates used to revalue our contingent consideration liabilities and the passage of time.

The gain on fair value remeasurement of contingent consideration for 2019 was primarily due to the discontinuation of the Phase 2b study of BG00011 for the potential treatment of IPF as well as changes in the probability and expected timing of achievement of certain developmental milestones, a decrease in interest rates used to revalue our contingent consideration liabilities and the passage of time.

For additional information on our IPR&D intangible assets, please read Note 6, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.

Acquired In-Process Research and Development

BIIB118 Acquisition

In July 2018 we acquired BIIB110 and ALG-802 from AliveGen Inc.

BIIB110 and ALG-802 represent novel ways of targeting the myostatin pathway.

In connection with the closing of this transaction, we made an upfront payment of $27.5 million to AliveGen, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB110 has not yet reached technological feasibility.

BIIB104 Acquisition

In April 2018 we acquired BIIB104 from Pfizer.

BIIB104 is a first-in-class, Phase 2b AMPA receptor potentiator for CIAS.

In connection with the closing of this transaction, we made an upfront payment of $75.0 million to Pfizer, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB104 has not yet reached technological feasibility.

BIIB100 Acquisition

In January 2018 we acquired BIIB100 from Kayropharm Therapeutics Inc.

(Karyopharm).

BIIB100 is a Phase 1 investigational oral compound for the treatment of certain neurological and neurodegenerative diseases, primarily in ALS.

In connection with the closing of this transaction, we made an upfront payment of $10.0 million to Karyopharm, which was recorded as acquired IPR&D in our consolidated statements of income as BIIB100 has not yet reached technological feasibility.

BIIB093 Acquisition

In May 2017 we acquired BIIB093 from Remedy Pharmaceuticals Inc.

In connection with the closing of this transaction, we made an upfront payment of $120.0 million to Remedy, which was

recorded as acquired IPR&D in our consolidated statements of income as BIIB093 had not yet reached technological feasibility.

For additional information on our acquisitions of BIIB110, BIIB104, BIIB100 and BIIB093, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.

In March 2020 we acquired BIIB118 from Pfizer for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases.

In connection with this acquisition, we made an upfront payment of $75.0 million to Pfizer, which was accounted for as an asset acquisition and recorded as acquired IPR&D in our consolidated statements of income as BIIB118 has not yet reached technological feasibility.

For additional information on our acquisition of BIIB118, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.

Other Income (Expense), Net

Effective January 1, 2018, other income (expense) reflects the recognition of net gains (losses) recorded in relation to changes in the fair value of our strategic investments following our adoption of Accounting Standards Update (ASU) No.

2016-01, Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities .

Prior to the adoption of this standard, we recognized changes in fair value of our strategic investment in accumulated other comprehensive income (loss), net.

Changes in the fair value of our strategic investments could have a significant impact on our results of operations in any given period.

For 2019 compared to 2018 , the change in other income (expense), net primarily reflects net gains totaling $204.7 million recognized on our investments related to our holdings in equity and debt securities, compared to net gains totaling $119.5 million in 2018.

The net gains recognized during the year ended December 31, 2019 , primarily reflect an increase in the fair value in our investment in Ionis common stock from December 31, 2018, partially offset by the net loss recognized on our sale of a portion of our investment in Ionis common stock during the second and third quarters of 2019 reflecting the decrease in the fair value of the shares sold from March 31, 2019.

Proceeds from our sale of a portion of our investment in Ionis common stock during the year ended December 31, 2019 , totaled approximately

$382.0 million.

The original cost basis upon acquisition in June 2018 for the shares sold during the year ended December 31, 2019 , totaled approximately $312.5 million.

Net gains recognized on our investments related to our holdings in equity and debt securities for the year ended December 31, 2019 , also reflects an increase in the fair value of an investment in a non-marketable equity security from December 31, 2018 , that was realized for a net gain of approximately $87.7 million upon sale in the second quarter of 2019.

For 2020 compared to 2019, the change in other income (expense), net primarily reflects an increase in our net unrealized gains on our holdings in equity securities, partially offset by higher interest expense.

For the year ended December 31, 2020, net unrealized and realized gains on our holdings in equity securities were approximately $681.8 million and $12.1 million, respectively, compared to net unrealized and realized gains of $150.1 million and $50.0 million in 2019.

The net unrealized gains recognized during the year ended December 31, 2020, primarily reflects an increase in the fair value of Denali and Sangamo common stock of approximately $703.9 million.

For the year ended December 31, 2020, net interest expense was $180.5 million as compared to $67.4 million in 2019.

This increase was primarily due to additional borrowings in 2020 and lower interest income earned on our investments in 2020 as compared to 2019.

On April 30, 2020, we issued our senior unsecured notes for an aggregate principal amount of $3.0 billion (2020 Senior Notes).

We expect interest expense will increase in 2021, as our 2020 Senior Notes will be outstanding for the entire year.

For additional information on our 2020 Senior Notes, please read Note 12, Indebtedness , to our consolidated financial statements included in this report.

Income Tax Provision

Our effective tax rate fluctuates from year to year due to the global nature of our operations.

The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, acquisitions and licensing transactions.

For the year ended December 31, 2019 , as compared to 2018 , the decrease in our effective tax rate was primarily due to the combination of the internal reorganization of certain intellectual property rights and the impact of Swiss Tax Reform.

This decrease was partially offset by a $68.9 million tax expense related to the divestiture of our subsidiary that owned our Hillerød, Denmark manufacturing operations.

We also had a higher effective tax rate in 2018 resulting from the unfavorable effects of the 2017 Tax Act and our sale of inventory, the tax effect of which had been included within prepaid taxes at

January 1, 2018, at a higher effective tax rate than the 2018 statutory tax rate.

certain deductions and credits, acquisitions and licensing transactions.

For the year ended December 31, 2020, as compared to 2019, the increase in our effective tax rate was primarily due to the income tax expense related to the establishment of a valuation allowance against certain net deferred tax assets, the realization of which is dependent on future sales of TECFIDERA in the U.S., partially offset by the benefit recognized on the effective settlement of certain tax matters.

Additionally, our 2019 effective tax rate benefited from an internal reorganization of certain intellectual property rights and the enactment of a new taxing regime in the country and certain cantons of Switzerland, partially offset by tax expense related to the divestiture of our Hillerød, Denmark manufacturing operations.

Although we recognized a loss on the divestiture of our Hillerød, Denmark manufacturing operations, the divestiture required us to write-off certain deferred tax assets and resulted in a taxable gain in certain jurisdictions.

For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures , to our consolidated financial statements included in this report.

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For additional information on our uncertain tax positions and income tax rate reconciliation for 2020, 2019 and 2018, please read Note 16, Income Taxes, to our consolidated financial statements included in this report.

Equity in Loss of Investee, Net of Tax

Equity in (Income) Loss of Investee, Net of Tax

In February 2012 we entered into a joint venture agreement with Samsung BioLogics establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar products.

In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%.

The share purchase transaction was completed in November 2018 and, upon closing, we paid 759.5 billion South Korean won ($676.6 million) to Samsung BioLogics.

In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately

5.0% to approximately 49.9%.

The share purchase transaction was completed in November 2018.

As of December 31, 2020, our ownership percentage remained at approximately 49.9%.

We recognize our share of the results of operations related to our investment in Samsung Bioepis under the equity method of accounting one quarter in arrears when the results of the entity become available, which is reflected as equity in (income) loss of investee, net of tax in our consolidated statements of income.

During 2015, as our share of losses exceeded the carrying value of our investment, we suspended recognizing additional losses.

In the first quarter of 2019 we restarted recognizing our share of Samsung Bioepis' income (losses), and we began recognizing amortization on

certain basis differences resulting from our November 2018 investment.

Our joint venture partner, Samsung BioLogics, is currently subject to an ongoing criminal investigation that we continue to monitor.

While this investigation could impact the operations of Samsung Bioepis and its business, we have assessed the value of our investment in Samsung Bioepis and continue to believe that the fair value of the investment is in excess of its net book value.

For the year ended December 31, 2019, equity in loss of investee, net of tax reflects our share of losses totaling $1.2 million and amortization of basis differences totaling $78.2 million .

We recognize amortization on certain basis differences resulting from our November 2018 investment.

The former chief executive officer (the incumbent chairman of the board) and the chief financial officer of our joint venture partner, Samsung BioLogics, are currently subject to ongoing criminal proceedings that we continue to monitor.

While these proceedings could impact the operations of Samsung Bioepis and its business, we have assessed the value of our investment in Samsung Bioepis and continue to believe that the fair value of the investment is in excess of its net book value.

For the year ended December 31, 2020, equity in (income) loss of investee, net of tax reflects our share of income totaling $45.3 million and amortization of basis differences totaling $40.0 million.

For the year ended December 31, 2019, equity in (income) loss of investee, net of tax reflects our share of losses totaling $1.2 million and amortization of basis differences totaling $78.2 million.

For additional information on our collaboration arrangements with Samsung Bioepis, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Noncontrolling Interests, Net of Tax

For 2018 net income attributable to noncontrolling interests, net of tax, was primarily related to a $50.0 million pre-tax payment made to Neurimmune to reduce the previously negotiated royalty rates payable on products developed under the Neurimmune Agreement, including royalties payable on potential commercial sales of aducanumab, by 5%.

For 2017 net income attributable to noncontrolling interests, net of tax, was primarily related to a $150.0 million pre-tax payment made to Neurimmune to reduce the previously negotiated royalty rates payable on products developed under the Neurimmune Agreement, including royalties payable on potential commercial sales of aducanumab, by 15%.

For 2020 net income (loss) attributable to noncontrolling interests, net of tax, was primarily due to the $75.0 million milestone payment related to the completed submission of the BLA for the approval of aducanumab to the FDA.

For additional information on our collaboration arrangement with Neurimmune, please read Note 19, Investments in Variable Interest Entities, to our consolidated financial statements included in this report.

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Our financial condition is summarized as follows:

As of December 31,

As of December 31, % Change

(In millions, except percentages) 2020 2019 2020

2019 compared to 2018

Financial assets:

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Total cash, cash equivalents and marketable securities $ 3,382.2 $ 5,884.0 (42.5) %

Current portion of notes payable

Current portion of notes payable $ — $ 1,495.8 nm

Notes payable 7,426.2 4,459.0 66.5

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Total working capital $ 3,144.9 $ 3,518.0 (10.6) %

** Percentage not meaningful.

nm Not meaningful

For the year ended December 31, 2020, certain significant cash flows were as follows:

$7.1 billion in net cash flows provided by operating activities, net of:

$1.1 billion in total net payments for income taxes;

$74.0 million upfront payment made to Skyhawk upon entering into a collaboration and research and development services agreement;

• $4.2 billion in net cash flows provided by operating activities, which reflected $1.9 billion of upfront payments and the premium on stock purchases made in connection with entering into our collaborations with Sage, Denali and Sangamo and recognized as research and development expenses;

• $6.7 billion used for share repurchases;

• $3.0 billion in proceeds received from the issuance of our 2020 Senior Notes;

• $1.5 billion payment made for the redemption of our 2.90% Senior Notes due September 15, 2020, prior to their maturity;

• $906.7 million in total net payments for income taxes;

• $441.0 million used to purchase Sage common stock;

• $423.7 million used to purchase Denali common stock;

• $141.8 million used to purchase Sangamo common stock;

• $424.8 million used for purchases of property, plant and equipment.

For the year ended December 31, 2019, certain significant cash flows were as follows:

• $7.1 billion in net cash flows provided by operating activities;

• $5.9 billion used for share repurchases;

• $1.1 billion in total net payments for income taxes;

• $923.7 million in proceeds received on the divestiture of our Hillerød, Denmark manufacturing operations, including the sale of raw materials that were remaining at the Hillerød facility on the closing date of this transaction;

• $744.4 million payment made for our acquisition of NST, net of cash acquired;

$479.3 million in proceeds received on sales of strategic investments;

• $514.5 million used for purchases of property, plant and equipment;

• $479.3 million in proceeds received on sales of strategic investments;

• $300.0 million for the final contingent payment made to former shareholders of Fumapharm AG and holders of their rights;

• $155.0 million in payments made to Alkermes following the FDA's approval of VUMERITY.

For the year ended December 31, 2018 , certain significant cash flows were as follows:

$6.2 billion in net cash flows provided by operating activities, net of:

$1.0 billion in total net payments for income taxes;

$375.0 million in an upfront payment made to Ionis upon the closing of the 2018 Ionis Agreement and a $162.1 million expense reflecting the premium paid for the purchase of Ionis common stock;

$4.4 billion used for share repurchases;

$1.5 billion in contingent payments made to former shareholders of Fumapharm AG and holders of their rights;

$770.6 million used for purchases of property, plant and equipment;

$676.6 million payment made to Samsung BioLogics upon the closing of the share purchase transaction increasing our ownership percentage in Samsung Bioepis to approximately 49.9%;

$462.9 million payment made to Ionis reflecting the fair value of the Ionis common stock purchased upon the closing the 2018 Ionis Agreement;

$112.5 million in payments made for the acquisitions of BIIB100, BIIB104 and BIIB110.

We have historically financed our operating and capital expenditures primarily through cash flows earned through our operations.

On April 30, 2020, we issued our 2020 Senior Notes for an aggregate principal amount of $3.0 billion.

We expect our operating expenditures, particularly those related to research and development, clinical trials, commercialization of new products and international expansion to continue to grow.

However, we expect to continue funding our current and planned operating requirements principally through our cash flows from operations, as well as our existing cash resources.

We believe that our existing funds, when combined with cash generated from operations and our access to additional financing resources, if needed, are sufficient to satisfy our operating, working capital, strategic alliance, milestone payment, capital expenditure and debt service requirements for the foreseeable future.

However, we expect to continue funding our current and planned operating requirements primarily through our cash flows earned from our operations as well as our existing cash resources and proceeds received from the issuance of our 2020 Senior Notes.

Generic competition for TECFIDERA in the U.S.

has begun and we believe that this competition will reduce our cash flow from operations in 2021 and will have a significant adverse impact on our future cash flows from operations.

We believe that our existing funds, when combined with

cash generated from operations and our access to additional financing resources, if needed, are sufficient to satisfy our operating, working capital, strategic alliance, milestone payment, capital expenditure and debt service requirements for the foreseeable future.

In addition, we may choose to opportunistically return cash to shareholders and pursue other business initiatives, including acquisition and licensing activities.

We may, from time to time, also seek additional funding through a combination of new collaborative agreements, strategic alliances and additional equity and debt financings or from other sources should we identify a significant new opportunity .

In October 2019 we and our collaboration partner Eisai announced that we plan to pursue regulatory approval for aducanumab in the U.S.

We plan to actively commit funds to developing our commercialization program for aducanumab so that we would be in a position to launch aducanumab if we receive regulatory approval.

In July 2020 we completed the submission of a BLA for the approval of aducanumab to the FDA.

In August 2020 the FDA accepted the BLA and granted Priority Review with a PDUFA action date on March 7, 2021.

In January 2021 the FDA extended the review period for the BLA for aducanumab by three months.

The updated PDUFA action date is June 7, 2021.

If we do not receive regulatory approval or are unable to successfully commercialize aducanumab, our financial condition, business and operations may be adversely affected.

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It is our policy to mitigate credit risk in our cash reserves and marketable securities by maintaining a well-diversified portfolio that limits the amount of exposure as to institution, maturity and investment type.

In March 2020 there was a severe liquidity crisis in the capital markets, particularly with respect to securities with maturities of less than one year, due to the COVID-19 pandemic.

This issue impacted pricing of securities in our portfolio as we attempted to decrease our marketable securities level and increase cash, leading to approximately $8.2 million in realized losses for the year ended December 31, 2020.

We believe that actions taken by the U.S.

Federal Reserve to enhance liquidity have stabilized the capital markets for the time being.

As of December 31, 2020, we had cash, cash equivalents and marketable securities totaling approximately $3.4 billion compared to approximately $5.9 billion as of December 31, 2019.

The net increase in cash, cash equivalents and marketable securities at December 31, 2019 , from December 31, 2018 , was primarily due to cash flows from operations, cash received upon the divestiture of our Hillerød, Denmark manufacturing operations, net proceeds from marketable securities and proceeds from sales of strategic investments, partially offset by cash used for share repurchases, cash used for our acquisition of NST, net purchases of property, plant and equipment, contingent payments made to former shareholders of Fumapharm AG and holders of their rights and upfront and milestone payments made to Alkermes and Skyhawk.

Investments and other assets in our consolidated balance sheet as of December 31, 2019 and 2018 , includes the carrying value of our investment in Samsung Bioepis of $580.2 million and $680.6 million, respectively.

The net decrease in cash, cash equivalents and marketable securities at December 31, 2020, from December 31, 2019, was primarily due to cash used for share repurchases, the redemption of our 2.90% Senior Notes due September 15, 2020, upfront payments and stock purchases totaling $2.9 billion made in connection with entering into our collaborations with Sage, Denali and Sangamo and net purchases of property, plant and equipment, partially offset by cash flows from operations and net proceeds from the issuance of our 2020 Senior Notes.

Investments and other assets in our consolidated balance sheet as of December 31, 2020 and 2019, include the carrying value of our investment in Samsung Bioepis of $620.2 million and $580.2 million, respectively.

As Samsung Bioepis is a privately-held entity, our ability to liquidate our investment in Samsung Bioepis may be limited and we may realize significantly less than the value of such investment.

Investments in other assets, as of December 31, 2019 and 2018, also includes the fair value of our investment in Ionis common stock of $329.6 million and $563.8 million, respectively, which is subject to certain holding period restrictions.

For additional information on our acquisition of NST, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.

For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to our consolidated financial statements included in this report.

For additional information on our collaboration arrangements with Ionis, Samsung Bioepis, Alkermes and Skyhawk, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

The following is a summary of our principal indebtedness as of December 31, 2019 :

$1.5 billion aggregate principal amount of 2.90% Senior Notes due September 15, 2020;

The investment is also subject to foreign currency exchange fluctuations.

In connection with our collaboration with Sangamo, we purchased approximately 24 million shares of Sangamo common stock in April 2020.

As of December 31, 2020, the fair value of this investment was $333.7 million.

In connection with our collaboration with Denali, we purchased approximately 13 million shares of Denali common stock in September 2020.

As of December 31, 2020, the fair value of this investment was $935.7 million.

In connection with our collaboration with Sage, we purchased approximately 6.2 million shares of Sage common stock in December 2020.

As of December 31, 2020, the fair value of this investment was $433.9 million.

Our investment in Ionis common stock had a fair value of $249.1 million and $329.6 million as of December 31, 2020 and 2019, respectively.

For additional information on our collaboration arrangements with Ionis, Samsung Bioepis, Sangamo, Denali and Sage, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

In April 2020 we issued our 2020 Senior Notes for an aggregate principal amount of $3.0 billion, consisting of the following:

• $1.5 billion aggregate principal amount of 2.25% Senior Notes due May 1, 2030;

• $1.5 billion aggregate principal amount of 3.15% Senior Notes due May 1, 2050.

The following is a summary of our currently outstanding senior secured notes issued in 2015 (2015 Senior Notes):

• $1.0 billion aggregate principal amount of 3.625% Senior Notes due September 15, 2022;

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• $1.75 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2045.

These Senior Notes were issued at discount and are amortized as additional interest expense over the period from issuance through maturity.

Our 2020 Senior Notes and our 2015 Senior Notes were issued at a discount and are amortized as additional interest expense over the period from issuance through maturity.

In May 2020 we redeemed our 2.90% Senior Notes due September 15, 2020, with an aggregate principal amount of $1.5 billion.

For a summary of the fair values of our outstanding borrowings as of December 31, 2020 and 2019, please read Note 7, Fair Value Measurements, to our consolidated financial statements included in this report.

2020 Credit Facility

In August 2015 we entered into a $1.0 billion , five -year senior unsecured revolving credit facility under which we were permitted to draw funds for working capital and general corporate purposes.

The terms of the revolving credit facility included a financial covenant that required us not to exceed a maximum consolidated leverage ratio.

As of December 31, 2019 , we had no outstanding borrowings and were in compliance with all covenants under this facility.

This credit facility was replaced with the new revolving credit facility entered into in January 2020, as discussed below.

2020 Credit Facility

In January 2020 we entered into a $1.0 billion, five-year senior unsecured revolving credit facility under which we are permitted to draw funds for working capital and general corporate purposes.

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This revolving credit facility replaced the revolving credit facility entered into in August 2015.

As of December 31, 2020, we had no outstanding borrowings and were in compliance with all covenants under this facility.

Working Capital

Working capital is defined as current assets less current liabilities.

The change in working capital at December 31, 2019 , from December 31, 2018 , reflects an increase in total current assets of $740.9 million and an increase in total current liabilities of $1,568.6 million.

The net increase in total current assets was primarily driven by an increase in net cash, cash equivalents and marketable securities, as described above, offset by a decrease in inventory resulting from our sale of hemophilia-related inventory to Bioverativ.

The net increase in total current liabilities was primarily due to the reclassification of $1.5 billion of our Senior Notes to current liabilities from notes payable, as these Senior Notes are due within one year.

This increase was partially offset by a reduction in accrued expenses and other.

The net decrease in accrued expenses and other was primarily related to a decrease in the accrual of contingent payments related to FUMADERM and TECFIDERA and a decrease in the accrual for construction in progress, partially offset by the accrual of the $100.0 million upfront payment to Samsung Bioepis, which was paid in January 2020.

Working capital was $3.1 billion and $3.5 billion as of December 31, 2020 and December 31, 2019, respectively.

The change in working capital reflects a decrease in total current assets of approximately $1.5 billion and a decrease in total current liabilities of approximately $1.1 billion.

The decrease in total current assets was primarily driven by a decrease in net cash, cash equivalents and marketable securities due to cash used for share repurchases, the redemption of our 2.90% Senior Notes due September 15, 2020, upfront payments and stock purchases totaling $2.9 billion made in connection with entering into our collaborations with Sage, Denali and Sangamo and net purchases of property, plant and equipment, partially offset by cash flows from operations and net proceeds from the issuance of our 2020 Senior Notes.

The net decrease in current liabilities was primarily due to the redemption of our 2.90% Senior Notes due September 15, 2020, which were classified within current liabilities as of December 31, 2019, partially offset by an increase in accrued expenses and other.

Share Repurchase Programs

In December 2019 our Board of Directors authorized our December 2019 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our December 2019 Share Repurchase Program does not have an expiration date.

All share repurchases under our December 2019 Share Repurchase Program will be retired.

We did not repurchase shares of our common stock under our December 2019 Share Repurchase Program during the year ended December 31, 2019 .

In March 2019 our Board of Directors authorized our March 2019 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our March 2019 Share Repurchase Program does not have an expiration date.

All share repurchases under our March 2019 Share Repurchase Program will be retired.

Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 14.7 million shares of our common stock at a cost of approximately $3.7 billion during the year ended December 31, 2019 .

In August 2018 our Board of Directors authorized our 2018 Share Repurchase Program, which was a program to repurchase up to $3.5 billion of our common stock.

Our 2018 Share Repurchase Program was completed as of June 30, 2019.

All share repurchases under our 2018 Share Repurchase Program were retired.

Under our 2018 Share Repurchase Program, we repurchased and retired approximately 8.9 million and 4.3 million shares of our common stock at a cost of approximately $2.1 billion and $1.4 billion during the years ended December 31, 2019 and 2018 , respectively.

In July 2016 our Board of Directors authorized our 2016 Share Repurchase Program, which was a program to repurchase up to $5.0 billion of our common stock.

Our 2016 Share Repurchase Program was completed as of June 30, 2018.

In October 2020 our Board of Directors authorized our 2020 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock.

Our 2020 Share Repurchase Program does not have an expiration date.

All share repurchases under our 2020 Share Repurchase Program will be retired.

Under our 2020 Share Repurchase Program, we repurchased and retired approximately 1.6 million shares of our common stock at a cost of approximately $400.0 million during the year ended December 31, 2020.

In December 2019 our Board of Directors authorized our December 2019 Share Repurchase Program, which was a program to repurchase up to

$5.0 billion of our common stock that was completed as of September 30, 2020.

All shares repurchased under our December 2019 Share Repurchase Program were retired.

Under our December 2019 Share Repurchase Program, we repurchased and retired approximately 16.7 million shares of our common stock at a cost of approximately $5.0 billion during the year ended December 31, 2020.

In March 2019 our Board of Directors authorized our March 2019 Share Repurchase Program, which was a program to repurchase up to $5.0 billion of our common stock that was completed as of March 31, 2020.

All shares repurchased under our March 2019 Share Repurchase Program were retired.

Under our March 2019 Share Repurchase Program, we repurchased and retired approximately 4.1 million and 14.7 million shares of our common stock at a cost of approximately $1.3 billion and $3.7 billion during the years ended December 31, 2020 and 2019, respectively.

In August 2018 our Board of Directors authorized our 2018 Share Repurchase Program, which was a program to repurchase up to $3.5 billion of our common stock that was completed as of June 30, 2019.

All share repurchases under our 2018 Share Repurchase Program were retired.

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The following table summarizes our cash flow activity:

For the Years Ended

2019 compared to 2018

2018 compared to 2017

For the Years Ended December 31, % Change

(In millions, except percentages) 2020 2019 2018

Net cash flows provided by operating activities $ 4,229.8 $ 7,078.6 $ 6,187.7 (40.2) % 14.4 %

Net cash flows provided by (used in) investing activities

Net cash flows provided by (used in) investing activities (608.6) 470.5 (2,046.3) (229.4) % nm

Net cash flows used in financing activities (5,272.7) (5,860.4) (4,472.0) 10.0 (31.0)

nm Not meaningful

Operating Activities

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• non-cash operating items such as depreciation and amortization, impairment charges, unrealized gain (loss) on strategic investments, acquired IPR&D and share-based compensation;

changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations;

• 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;

• changes in the fair value of contingent payments associated with our acquisitions of businesses and payments related to collaborations.

For 2019 compared to 2018 , net cash flows provided by operating activities increased primarily due to higher net income.

For 2020 compared to 2019, the decrease in net cash flows provided by operating activities was primarily due to lower net income as well as increases in certain working capital asset balances.

Net income in 2020 reflected approximately $1,084.0 million, $601.3 million and $208.0 million of upfront payments made in connection with entering into our collaborations with Sage, Denali and Sangamo, respectively.

Investing Activities

For 2019 compared to 2018 , the increase in net cash flows provided by investing activities was primarily due to a decrease in contingent payments made to former shareholders of Fumapharm AG and holders of their rights, the proceeds received upon the divestiture of our Hillerød, Denmark manufacturing operations, the proceeds received on our sales of strategic investments and the $462.9 million payment made to Ionis reflecting the fair value of the Ionis common stock purchased upon the closing of the 2018 Ionis Agreement in the prior year comparative period.

This increase was partially offset by a decrease in net proceeds related to marketable securities, the cash used for our acquisition of NST and $155.0 million in milestone payments made to Alkermes following the FDA's approval of VUMERITY, which was recorded as an intangible asset during the fourth quarter of 2019.

For 2020 compared to 2019, the increase in net cash flows used in investing activities was primarily

due to the purchases of the common stock of Sangamo, Denali and Sage totaling $1.0 billion during 2020 and proceeds of $923.7 million received in 2019 related to the divestiture of our Hillerød, Denmark manufacturing operations, partially offset by higher proceeds received from the sale of investments as compared to the prior year.

Financing Activities

For 2019 compared to 2018 , the increase in net cash flows used in financing activities was primarily due to an increase in cash used for share repurchases.

For 2020 compared to 2019, the decrease in net cash flows used in financing activities was primarily due to the net proceeds received from the issuance of our 2020 Senior Notes offset by a higher amount spent on shares repurchased in 2020 as compared to the comparative period in 2019 and the redemption of our 2.90% Senior Notes due September 15, 2020.

Contractual Obligations and Off-Balance Sheet Arrangements

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Payments Due by Period

(In millions)

(In millions) Total Less than

1 Year 1 to 3

Non-cancellable operating leases (1)(2)

$ 387.8 $ 70.3 $ 123.6 $ 89.6 $ 104.3

Long-term debt obligations (3)

11,853.0 279.1 1,512.9 2,218.0 7,843.0

Purchase and other obligations (4)

1,248.0 398.3 420.0 424.6 5.1

Defined benefit obligation 151.2 — — — 151.2

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In addition to the minimum rental commitments, these leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.

Obligations are presented net of sublease income expected to be received for the vacated small-scale biologics manufacturing facility in Cambridge, MA, the vacated portion of our Weston, MA facility and other facilities throughout the world.

Long-term debt obligations are related to our Senior Notes, including principal and interest payments.

Purchase and other obligations primarily include $697.0 million related to the remaining payments on the Transition Toll Tax, contractual commitments to our suppliers, $52.0 million in contractual commitments for the construction of our large-scale biologics manufacturing facility in Solothurn, Switzerland and $8.3 million related to the fair value of net liabilities on derivative contracts.

(2) Obligations are presented net of sublease income expected to be received for our vacated small-scale biologics manufacturing facility in Cambridge, MA, the vacated portion of our Weston, MA facility and other facilities throughout the world.

(3) Long-term debt obligations are related to our 2015 Senior Notes and our 2020 Senior Notes, including principal and interest payments.

(4) Purchase and other obligations include $697.0 million related to the remaining payments on a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings (the Transition Toll Tax) and $217.2 million related to the fair value of net liabilities on derivative contracts.

Royalty Payments

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(Elan), an affiliate of Elan Corporation plc, full ownership of all remaining rights to TYSABRI that we did not already own or control.

Under the acquisition agreement, we are obligated to make contingent payments to Elan of 18% on annual worldwide net commercial sales up to $2.0 billion and

25% on annual worldwide net commercial sales that exceed $2.0 billion .

Royalty payments to Elan and other third parties are recognized as cost of sales in our consolidated statements of income.

Under the acquisition agreement, we are obligated to make contingent payments to Elan of 18.0% on annual worldwide net sales up to $2.0 billion and 25.0% on annual worldwide net sales that exceed $2.0 billion.

Royalty payments to Elan and other third

parties are recognized as cost of sales in our consolidated statements of income.

Elan was acquired by Perrigo Company plc (Perrigo) in December 2013 and Perrigo subsequently sold its rights to these payments to a third-party effective January 2017.

In 2016 we exercised our option to develop and commercialize SPINRAZA from Ionis.

Under our agreement with Ionis, we make royalty payments to Ionis on annual worldwide net commercial sales of SPINRAZA using a tiered royalty rate between 11% and 15%, which are recorded as cost of sales in our consolidated statements of income.

Under our agreement with Ionis, we make royalty payments to Ionis on annual worldwide net sales of SPINRAZA

using a tiered royalty rate between 11.0% and 15.0%, which are recognized as cost of sales in our consolidated statements of income.

For additional information on our collaboration arrangements with Ionis, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

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Contingent Consideration related to Business Combinations

In connection with our acquisitions of Convergence Pharmaceuticals Holdings Limited (Convergence) and Biogen International Neuroscience GmbH (BIN), we agreed to make additional payments based upon the achievement of certain milestone events.

As the acquisitions of Convergence and BIN occurred after January 1, 2009, we recognized the contingent consideration liabilities associated with these transactions at their fair value on the acquisition date and revalue the remaining obligations each reporting period.

In connection with our acquisition of Convergence Pharmaceuticals Ltd.

we agreed to make additional payments based upon the achievement of certain milestone events.

We recognized the contingent consideration liabilities associated with these transactions at their fair value on the acquisition date and revalue these obligations each reporting period.

We may pay up to approximately $400.0 million in remaining milestones related to these acquisitions.

In 2006 we acquired Fumapharm AG.

As part of this acquisition we acquired FUMADERM and TECFIDERA (together, the Fumapharm Products).

We were required to make contingent payments to former shareholders of Fumapharm AG and holders of their rights based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales of Fumapharm Products in the prior 12-month period, as defined in the acquisition agreement, until such time as the cumulative sales level reached $20.0 billion , at which time no further contingent payments were due.

During the first quarter of 2019 we paid the final $300.0 million contingent payment as we achieved the $20.0 billion cumulative sales level related to the Fumapharm Products in the fourth quarter of 2018.

Contingent Development, Regulatory and Commercial Milestone Payments

Based on our development plans as of December 31, 2019 , we could make potential future milestone payments to third parties of up to approximately $6.8 billion , including approximately $1.2 billion in development milestones, approximately $1.4 billion in regulatory milestones and approximately $4.2 billion in commercial milestones, as part of our various collaborations, including licensing and development programs.

Based on our development plans as of December 31, 2020, we could trigger potential future milestone payments to third parties of up to approximately $10.2 billion, including approximately $1.9 billion in development milestones, approximately $1.3 billion in regulatory milestones and approximately $7.0 billion in commercial milestones, as part of our various collaborations, including licensing and development programs.

Payments under these agreements generally become due and payable upon achievement of certain development, regulatory or commercial milestones.

Because the achievement of these milestones was not considered probable as of December 31, 2020, such contingencies have not been recorded in our financial statements.

Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.

Provided various development, regulatory or commercial milestones are achieved, we anticipate that we may pay approximately $430.0 million of milestone payments in 2020 , including $75.0 million upon the regulatory filing with the FDA for approval of aducanumab and $100.0 million if aducanumab is launched in the U.S.

Amounts related to contingent milestone payments are not considered contractual obligations as they are

contingent on the successful achievement of certain development, regulatory or commercial milestones.

If certain clinical and commercial milestones are met, we may pay up to $86.2 million in milestones in 2021 under our current agreements.

Additionally, if aducanumab receives regulatory approval in the jurisdictions where we have submitted filings, we may pay up to $200.0 million in milestones to Neurimmune in 2021, which includes $100.0 million if launched in the U.S., $50.0 million if launched in three or more countries within the E.U.

and $50.0 million if launched in Japan.

Milestones payable to Neurimmune are shared expenses under the Aducanumab Collaboration Agreement with Eisai.

During the second quarter of 2020, we paid Neurimmune $75.0 million upon the completed submission of the BLA for the approval of aducanumab to the FDA, which was recognized as a charge to noncontrolling interests for the year ended December 31, 2020.

In addition, for the year ended December 31, 2020, we recognized net profit-sharing income of $33.8 million to reflect Eisai's 45.0% share of the $75.0 million milestone expense.

For additional information on our collaboration arrangements with Eisai, please read Note 18, Collaborative and Other Relationships , to our consolidated financial statements included in this report.

For additional information on our collaboration arrangement with Neurimmune, please read Note 19, Investments in Variable Interest Entities , to our consolidated financial statements included in this report.

Other Funding Commitments

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We have approximately $593.0 million in cancellable future commitments based on existing CRO contracts as of December 31, 2020.

As part of the sale of our Hillerød, Denmark manufacturing operations to FUJIFILM, we have provided FUJIFILM with certain minimum batch production commitment guarantees.

As part of the sale of our Hillerød, Denmark manufacturing operations to FUJIFILM, we provided FUJIFILM with certain minimum batch production commitment guarantees.

There is a risk that the minimum contractual batch production commitments will not be met.

Based upon current estimates we expect to incur an adverse commitment obligation of approximately $74.0 million associated with such guarantees and have accrued for this obligation.

We may adjust this estimate based upon changes in business conditions, which may result in the increase or reduction of this adverse commitment obligation in subsequent periods.

Based upon current estimates we do not expect to incur an adverse commitment obligation associated with such guarantees.

We developed this estimate using a probability-weighted estimate of

future manufacturing activity and may further adjust this estimate based upon changes in business conditions, which may result in the increase or reduction of this adverse commitment obligation in subsequent periods.

Tax Related Obligations

We exclude liabilities pertaining to uncertain tax positions from our summary of contractual obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities.

As of December 31, 2019 , we have $136.9 million of net liabilities associated with uncertain tax positions.

As of December 31, 2019 and 2018 , we have accrued income tax liabilities of $697.0 million under the Transition Toll Tax.

Of the amounts accrued as of December 31, 2019 , no amounts are expected to be paid within one year due to an approximately $87.0 million carryforward of taxes paid in relation to the company's 2017 tax return.

The Transition Toll Tax will be paid over an eight-year period, which started in 2018, and will not accrue interest.

For additional information on the Transition Toll Tax, please read Note 16, Income Taxes , to our consolidated financial statements included in this report.

As of December 31, 2020, we have approximately $79.6 million of liabilities associated with uncertain tax positions.

As of December 31, 2020 and 2019, included in other long-term liabilities we have accrued approximately $697.0 million, respectively, under a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings (the Transition Toll Tax).

Of the amounts accrued as of December 31, 2020, $62.0 million is expected to be paid within one year.

The Transition Toll Tax will be paid over an eight--year period, which started in 2018, and does not accrue interest.

Other Off-Balance Sheet Arrangements

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New Accounting Standards

For a discussion of new accounting standards and their expected impact on our consolidated financial statements or disclosures, please read Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.

For a discussion of new accounting standards please read Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.

Legal Matters

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The preparation of our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S.

GAAP), requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.

GAAP), requires us to make estimates, judgments and assumptions that may affect the

reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.

On an ongoing basis we evaluate our estimates, judgments and methodologies.

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We recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

We recognize revenues following the five-step model prescribed under Financial Accounting Standards Board (FASB) Accounting Standards Codification 606, Revenue from Contracts with

We recognize revenues following the five-step model prescribed under Financial Accounting Standards Board (FASB) Accounting Standards Codification 606, Revenue from Contracts with Customers :

(i) identify contract(s) with a customer;

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Reserves for Discounts and Allowances

Product revenues are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, health care providers or payors, including those associated with the implementation of pricing actions in certain of the international markets in which we operate.

associated with the implementation of pricing actions in certain of the international markets in which we operate.

Our process for estimating reserves established for these variable consideration components do not differ materially from our historical practices.

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These estimates reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns.

The transaction price, which includes

variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of cumulative revenues recognized will not occur in a future period.

The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of cumulative revenues recognized will not occur in a future period.

Actual amounts may ultimately differ from our estimates.

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When we purchase a business, the acquired IPR&D is measured at fair value, capitalized as an intangible asset and tested for impairment at least annually, as of October 31, until commercialization, after which time the IPR&D is amortized over its estimated useful life.

If we acquire an asset or group of assets that do not meet the definition of a business under applicable accounting standards, the acquired IPR&D is expensed on its acquisition date.

If we acquire an asset or group of assets that do not meet the definition of a

business under applicable accounting standards, the acquired IPR&D is expensed on its acquisition date.

Future costs to develop these assets are recorded to research and development expense as they are incurred.

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Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

We review our intangible assets with indefinite lives for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We review our intangible assets

with indefinite lives for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

When performing our impairment assessment, we calculate the fair value using the same methodology as described above under Acquired Intangible Assets, including IPR&D .

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Impairments are recorded within amortization and impairment of acquired intangible assets in our consolidated statements of income.

Assets that have previously been impaired, including our vixotrigine program for the treatment of neuropathic pain, such as TGN, could become further impaired in the future.

Assets that have previously been impaired, including our vixotrigine program for the potential treatment of neuropathic pain, such as TGN, could become further impaired in the future.

Our most significant intangible assets are our acquired and in-licensed rights and patents.

Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from

Elan and obtaining the fair value of the U.S.

and rest of world licenses to Forward Pharma’s intellectual property, including Forward Pharma’s intellectual property related to TECFIDERA.

Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from Elan.

We amortize the intangible assets related to our TYSABRI, AVONEX, SPINRAZA, VUMERITY and TECFIDERA (rest of world) products using the economic consumption method based on revenues generated from the products underlying the related intangible assets.

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Our goodwill balances represent 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.

We assess our goodwill balance within our single reporting unit annually, as of October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable to determine whether any impairment in this asset may exist and, if so, the extent of such impairment.

We assess our goodwill balance within our single reporting unit annually, as of October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be

recoverable to determine whether any impairment in this asset may exist and, if so, the extent of such impairment.

We compare the fair value of our reporting unit to its carrying value.

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We record contingent consideration resulting from a business combination at its fair value on the acquisition date.

Each reporting period thereafter, we

revalue the remaining obligations and record increases or decreases in their fair value as an adjustment to contingent consideration expense in our consolidated statements of income.

Each reporting period thereafter, we revalue the remaining obligations and record increases or decreases in their fair value as an adjustment to contingent consideration expense in our consolidated statements of income.

Changes in the fair value of our contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to the discount rates and achievement and timing of any cumulative sales-based and development milestones or changes in the probability of certain clinical events and changes in the assumed probability associated with regulatory approval.

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These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets.

Upon our election in the fourth quarter of 2018 to record deferred taxes for GILTI, we have included amounts related to U.S.

GILTI taxes within temporary difference.

Significant management judgment is required in assessing the realizability of our deferred tax assets.

Upon our election in the fourth quarter of 2018 to record deferred taxes for global intangible low-taxed income (GILTI), we have included amounts related to GILTI taxes within temporary difference.

Significant management

judgment is required in assessing the realizability of our deferred tax assets.

In performing this assessment, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.

We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and

resolving uncertain tax positions.

We account for uncertain tax positions using a “more likely than not” threshold for recognizing and resolving uncertain tax positions.

We evaluate uncertain tax positions on a quarterly basis and consider various factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis