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81
amounts due in connection with anti-CD20
therapeutic programs.
Net income was lower in 2017, primarily due to
the Transition Toll Tax under the 2017 Tax Act and
higher depreciation and amortization.
For 2016 compared to 2015, the increase in
cash provided by operating activities was primarily
driven by higher net income, non-cash charges for
depreciation and amortization, a comparative increase
in accrued expenses and other liabilities, partially
offset by a comparative increase in accounts
receivable.
Investing Activities
For 2017 compared to 2016, the increase in net
cash flows used in investing activities was primarily
due to:
•
the
$795.2 million payment made to Forward
Pharma to license Forward Pharma's intellectual
property, including Forward Pharma's intellectual
property related to TECFIDERA;
• an increase in purchases of property, plant and
equipment primarily related to the construction
of our Solothurn, Switzerland facility;
•
$175.0 million in milestone payments made to
Ionis and Samsung Bioepis; and
• the $120.0 million payment made to Remedy for
the purchase of BIIB093.
These increases were partially offset by an
increase in net proceeds of marketable securities.
For 2016 compared to 2015, the decrease in
net cash flows used in investing activities was
primarily due to a decrease in net purchases of
marketable securities and cash paid for the
acquisition of Convergence Pharmaceuticals
(Convergence) in February 2015, partially offset by an
increase in the contingent consideration related to the
Fumapharm AG acquisition.
Financing Activities
For 2017 compared to 2016, the increase in net
cash flows used in financing activities was primarily
due to an increase in cash used for share
repurchases, the payment made for the redemption of
our 6.875% Senior Notes due March 1, 2018 prior to
their maturity, the $302.7 million net cash
contribution made in connection with the spin-off of
our hemophilia business on February 1, 2017, and
the net distributions to noncontrolling interest,
including the payment made to Neurimmune in
exchange for a 15% reduction in royalty rates payable
on products developed under the agreement, including
on potential commercial sales of aducanumab.
For 2016 compared to 2015, the decrease in
net cash flows provided by financing activities was
primarily due to the issuance of our senior unsecured
notes issued in the third quarter of 2015, partially
offset by a decrease in the purchases of common
stock.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2017, excluding amounts
related to uncertain tax positions, funding commitments, contingent development, regulatory and commercial
milestone payments, TYSABRI contingent payments and contingent consideration related to our business
combinations, as described below.
Payments Due by Period
(In millions)
Total
Less than
1 Year
1 to 3
Years
3 to 5
Years
After
5 Years
Non-cancellable operating leases (1), (2)
$
428.5 $
48.3 $
92.1 $
88.3 $
199.8
Long-term debt obligations (3)
9,430.0
244.8
1,983.3
1,396.3
5,805.6
Purchase and other obligations (4)
1,657.1
637.3
344.9
234.6
440.3
Defined benefit obligation
91.8
—
—
—
91.8
Total contractual obligations
$ 11,607.4 $
930.4 $
2,420.3 $
1,719.2 $
6,537.5
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(1) We lease properties and equipment for use in
our operations. Amounts reflected within the
table above detail future minimum rental
commitments under non-cancelable operating
leases as of December 31 for each of the
periods presented. In addition to the minimum
rental commitments, these leases may require
us to pay additional amounts for taxes,
insurance, maintenance and other operating
expenses.
(2) 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.
(3) Long-term debt obligations are primarily related
to our Senior Notes, including principal and
interest payments.
(4) Purchase and other obligations primarily includes
our obligations to purchase direct materials,
$989.6 million related to our current estimate of
the impact of the 2017 Tax Act, $270.0 million
in contractual commitments for the construction
of our large-scale biologics manufacturing facility
in Solothurn, Switzerland and $111.3 million
related to the fair value of net liabilities on
derivative contracts.
TYSABRI Contingent Payments
In 2013 we acquired from Elan 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 sales up to $2.0 billion
and 25% 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.
Contingent Consideration related to Business
Combinations
In connection with our acquisitions of
Convergence, Stromedix, Inc. (Stromedix) 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, Stromedix
and BIN occurred after January 1, 2009, we recorded
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
$1.1 billion in remaining milestones related to these
acquisitions. For additional information on our
acquisition of Convergence please read Note 2,
Acquisitions, to our consolidated financial statements
included in this report.
Fumapharm AG
In 2006 we acquired Fumapharm AG. As part of
this acquisition we acquired FUMADERM and
TECFIDERA (together, Fumapharm Products). We are
required to make contingent payments to the former
shareholders of Fumapharm AG or holders of their
rights based on the attainment of certain cumulative
sales levels of Fumapharm Products and the level of
total net sales of Fumapharm Products in the prior 12-
month period, as defined in the acquisition
agreement.
During 2017 we paid $1.2 billion in contingent
payments as we reached the $11.0 billion, $12.0
billion, $13.0 billion and $14.0 billion cumulative
sales levels related to the Fumapharm Products in the
fourth quarter of 2016 and the first, second and third
quarters of 2017, respectively, and accrued $600.0
million upon reaching $15.0 billion and $16.0 billion
in total cumulative sales of Fumapharm Products in
the fourth quarter of 2017.
We will owe an additional $300.0 million
contingent payment for every additional $1.0 billion in
cumulative sales level of Fumapharm Products
reached if the prior 12 months sales of the
Fumapharm Products exceed $3.0 billion, until such
time as the cumulative sales level reaches $20.0
billion, at which time no further contingent payments
shall be due. If the prior 12 months sales of
Fumapharm Products are less than $3.0 billion,
contingent payments remain payable on a decreasing
tiered basis. These payments will be accounted for as
an increase to goodwill as incurred, in accordance
with the accounting standard applicable to business
combinations when we acquired Fumapharm. Any
portion of the payment that is tax deductible will be
recorded as a reduction to goodwill. Payments are due
within 60 days following the end of the quarter in
which the applicable cumulative sales level has been
reached.
Contingent Development, Regulatory and
Commercial Milestone Payments
Based on our development plans as of
December 31, 2017, we could make potential future
milestone payments to third parties of up to
approximately $4.2 billion, including approximately
$0.7 billion in development milestones, approximately
$1.5 billion in regulatory milestones and
approximately $2.0 billion in commercial milestones
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