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Key Developments
During 2017 we had a number of key developments affecting our business.
Corporate Matters
2017 Corporate Strategy
In July 2017 we announced an updated strategic
framework to optimize the value of our MS business
while investing for the future across our core growth
areas of MS and neuroimmunology, AD and dementia,
movement disorders and neuromuscular diseases,
including SMA and ALS. We also plan to invest in
emerging growth areas such as pain, ophthalmology,
neuropsychiatry and acute neurology.
In order to deliver positive results in the near
term while investing in the next stages of our growth,
we will focus on the following strategic priorities:
• maximizing the resilience of our MS core
business;
• accelerating efforts in SMA as a significant new
growth opportunity;
• developing and
expanding our neuroscience
portfolio;
• focusing our capital allocation efforts to drive
investment for future growth; and
• creating a leaner and simpler operating model to
streamline our operations and reallocate
resources towards prioritized research and
development and commercial value creation
opportunities.
In October 2017, in connection with creating a
leaner and simpler operating model, we approved a
corporate restructuring program intended to
streamline our operations and reallocate resources.
We expect to make total non-recurring operating and
capital expenditures of up to $170.0 million, primarily
in 2018, and our goal is to redirect resources of up to
$400.0 million annually by 2020 to prioritized
research and development and other value creation
opportunities.
TECFIDERA Settlement and License Agreement
In January 2017 we entered into a settlement
and license agreement with Forward Pharma A/S
(Forward Pharma).
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. During the fourth quarter of 2016 we
recognized a pre-tax charge of $454.8 million and in
the first quarter of 2017 we recognized intangible
assets of $795.2 million related to this agreement.
We have two intellectual property disputes with
Forward Pharma, one in the U.S. and one in the E.U.,
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 and
the appeal is pending. We evaluated the recoverability
of the U.S. asset acquired from Forward Pharma and
recorded an 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. In January
2018 the European Patent Office (EPO)
announced its
decision revoking Forward Pharma’s European Patent
No. 2 801 355. Forward Pharma has stated that it
expects to file an appeal to the Technical Board of
Appeal of the EPO. Based upon our assessment of
these rulings, we continue to amortize the remaining
net book value of the U.S. and rest of world intangible
assets in our consolidated statements of income
utilizing an economic consumption model.
For additional information on our settlement and
license agreement with Forward Pharma and related
intangible assets, please read Note 7, Intangible
Assets and Goodwill, to our consolidated financial
statements included in this report. For additional
information on these disputes, please read Note 21,
Litigation, to our consolidated financial statements
included in this report.
Tax Reform
The Tax Cuts and Jobs Act of 2017 (the 2017
Tax Act), which was signed into law on December 22,
2017, has resulted in significant changes to the U.S.
corporate income tax system. These changes include
a federal statutory rate reduction from 35% to 21%,
the elimination or reduction of certain domestic
deductions and credits
and limitations on the
deductibility of interest expense and executive
compensation. The 2017 Tax Act also transitions
international taxation from a worldwide system to a
modified territorial system and includes base erosion
prevention measures on non-U.S. earnings, which has
the effect of subjecting certain earnings of our foreign
subsidiaries to U.S. taxation as global intangible low-
taxed income (GILTI). These changes are effective
beginning in 2018.
The 2017 Tax Act also includes a one-time
mandatory deemed repatriation tax on accumulated
foreign subsidiaries' previously untaxed foreign
earnings (the Transition Toll Tax).
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Changes in tax rates and tax laws are accounted
for in the period of enactment. Therefore, during the
year ended December 31, 2017, we recorded a
charge totaling $1,173.6 million related to our current
estimate of the provisions of the 2017 Tax Act,
including a $989.6
million expense under the
Transition Toll Tax. The Transition Toll Tax will be paid
over an eight-year period, starting in 2018, and will
not accrue interest.
The 2017 Tax Act will provide us with flexibility in
deploying our cash resources to advance our
business interests. We expect that it will have a
modest positive effect on our income tax rate in 2018
and a potential incremental benefit thereafter.
Hemophilia Spin-Off
On February 1, 2017, we completed the spin-off
of our hemophilia business, Bioverativ Inc.
(Bioverativ), as an independent, publicly traded
company trading under the symbol "BIVV" on the
Nasdaq Global Select Market. The spin-off was
accomplished through the distribution of all the then
outstanding shares of common stock of Bioverativ to
Biogen shareholders, who received one share of
Bioverativ common stock
for every two shares of
Biogen common stock they owned. The separation
and distribution was structured to be tax-free for
shareholders for federal income tax purposes.
Bioverativ assumed all of our rights and obligations
under our collaboration agreement with Swedish
Orphan Biovitrum AB (Sobi) and our collaboration and
license agreement with Sangamo Biosciences Inc.
(Sangamo).
Our consolidated results of operations and
financial position included in this report reflect the
financial results of our hemophilia business for all
periods through January 31, 2017.
For additional information on the spin-off of our
hemophilia business, please read Note 3, Hemophilia
Spin-Off, to our consolidated financial statements
included in this report.
BIIB093 Acquisition
In May 2017 we completed an asset purchase of
the Phase 3-ready candidate BIIB093 (intravenous
glibencamide) (formerly known as CIRARA) from
Remedy Pharmaceuticals Inc. (Remedy). The target
indication for BIIB093 is large hemispheric infarction
(LHI), a severe form of ischemic stroke where brain
swelling (cerebral edema) often leads to a
disproportionately large
share of stroke-related
morbidity and mortality. The U.S. Food and Drug
Administration (FDA) recently granted BIIB093 Orphan
Drug Designation for severe cerebral edema in
patients with acute ischemic (AI) stroke. The FDA has
also granted BIIB093 Fast Track designation.
Under
this agreement, we are responsible for the
future development and commercialization of
BIIB093. Remedy will share in the cost of
development for the target indication for BIIB093 in
LHI stroke.
For additional information on our transaction with
Remedy, please read Note 2, Acquisitions, to our
consolidated financial statements included in this
report.
BIIB092 License Agreement
In June 2017 we completed an exclusive license
agreement with Bristol-Myers Squibb Company (BMS)
for BIIB092 (formerly known as BMS-986168), a
Phase 2-ready experimental medicine with potential in
AD and PSP. BIIB092 is an antibody targeting tau, the
protein that forms the deposits, or tangles, in the
brain associated with AD and other neurodegenerative
tauopathies such as PSP.
Under this agreement, we received worldwide
rights to BIIB092 and are responsible for the full
development and global commercialization of BIIB092
in AD and PSP.
For additional information on our collaboration
arrangement with BMS, please read Note 20,
Collaborative and Other Relationships, to our
consolidated financial statements included in this
report.
Eisai Collaboration Agreement
In October 2017 we entered into a new
collaboration agreement with Eisai Co. Ltd. (Eisai) for
the joint development and commercialization of
aducanumab, our anti-amyloid beta antibody
candidate for AD (Aducanumab Collaboration
Agreement). Under the Aducanumab Collaboration
Agreement, we will continue to lead the ongoing
Phase 3 development of aducanumab and will remain
responsible for 100% of development costs for
aducanumab until April 2018. Eisai will then
reimburse us for 15%
of aducanumab development
expenses for the period April 2018 through December
2018, and 45% thereafter. Upon commercialization,
both companies will co-promote aducanumab with a
region-based profit split.
In addition, we and Eisai will continue to jointly
develop two product candidates for AD, BAN2401, a
monoclonal antibody that targets amyloid beta
aggregates, and E2609, a BACE inhibitor.
We and Eisai will co-promote AVONEX, TYSABRI
and TECFIDERA in Japan in certain settings and Eisai
will distribute AVONEX, TYSABRI, TECFIDERA and
PLEGRIDY in India and other Asia-Pacific markets,
excluding China.