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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
Summary of Significant Accounting Policies
Business Overview
Biogen is a global biopharmaceutical company focused on discovering, developing and delivering worldwide
innovative therapies for people living with serious neurological and neurodegenerative diseases, including in our core
growth areas of multiple sclerosis (MS) and neuroimmunology, Alzheimer’s disease (AD) and dementia, movement
disorders and neuromuscular disorders, including spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis
(ALS). We also plan to invest in emerging growth areas such as pain, ophthalmology, neuropsychiatry and acute
neurology. In addition, we are employing innovative technologies to discover potential treatments for rare and genetic
disorders, including new ways of treating diseases through gene therapy in the previously mentioned areas. We also
manufacture and commercialize biosimilars of advanced biologics.
Our marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA 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, chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA for the treatment of CLL and follicular
lymphoma, OCREVUS for the treatment of primary progressive MS and relapsing MS and other potential anti-CD20
therapies under a collaboration agreement with Genentech, Inc. (Genentech), a wholly-owned member of the Roche
Group.
We support our drug discovery and development efforts through the commitment of significant resources to
discovery, research and development programs and business development opportunities, particularly within our core
and emerging growth areas. For nearly two decades we have led in the research and development of new therapies
to treat MS, resulting in our leading portfolio of MS treatments. Now our research is focused on additional
improvements in the treatment of MS, such as the development of next generation therapies for MS, with a goal to
reverse or possibly repair damage caused by the disease. We are also applying our scientific expertise to solve some
of the most challenging and complex diseases, including AD, progressive supranuclear palsy (PSP), a rare condition
that affects movement, speech, vision and cognitive function, Parkinson's disease and ALS.
Our innovative drug development and commercialization activities are complemented by our biosimilar therapies
that expand access to medicines and reduce the cost burden for healthcare systems. We are leveraging our
manufacturing capabilities and know-how to develop, manufacture and market biosimilars through Samsung Bioepis,
our joint venture with Samsung BioLogics Co. Ltd. (Samsung Biologics). Under our commercial agreement, we market
and sell BENEPALI, an etanercept biosimilar referencing ENBREL, and FLIXABI, an infliximab biosimilar referencing
REMICADE in the European Union (E.U.).
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. Our consolidated results of operations and financial position included in these
audited consolidated financial statements 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 these consolidated financial statements.
Consolidation
Our consolidated financial statements reflect our financial statements, those of our wholly-owned subsidiaries
and those of certain variable interest entities where we are the primary beneficiary. For consolidated entities where
we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to
noncontrolling interests in our consolidated statements of income equal to the percentage of the economic or
ownership interest retained in such entities by the respective noncontrolling parties. Intercompany balances and
transactions are eliminated in consolidation.
In determining whether we are the primary beneficiary of an entity, we apply a qualitative approach that
determines whether we have both (1) the power to direct the economically significant activities of the entity and (2)
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant
to that entity. These considerations impact the way we account for our existing collaborative relationships and other
arrangements. We continuously assess whether we are the primary beneficiary of a variable interest entity as
changes to existing relationships or future transactions may result in us consolidating or deconsolidating one or
more of our collaborators or partners.
Use of Estimates
The preparation of our consolidated financial statements 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 on-going basis we evaluate our estimates, judgments and
methodologies. We base our estimates on historical experience and on various other assumptions that we believe
are reasonable, the results of which form the basis for making judgments about the carrying values of assets,
liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates
under different assumptions or conditions.
Revenue Recognition
We recognize revenues when all of the following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered; our price to the customer is fixed or determinable; and
collectability is reasonably assured.
Product Revenues
Revenues from product sales are recognized when title and risk of loss have passed to the customer, which is
typically upon delivery.
Reserves for Discounts and Allowances
Revenues from product sales are recorded net of reserves established for applicable discounts and
allowances, including those associated with the implementation of pricing actions in certain of the international
markets in which we operate. These reserves are based on estimates of the amounts earned or to be claimed on
the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer)
or a liability (if the amount is payable to a party other than our customer). Our estimates take into consideration our
historical experience, current contractual and statutory requirements, specific known market events and trends,
industry data and forecasted customer buying and payment patterns. Actual amounts may ultimately differ from our
estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of
adjustment.
Product revenue reserves are categorized as follows: discounts, contractual adjustments and returns.
Discounts include trade term discounts and wholesaler incentives. Trade term discounts and wholesaler
incentives primarily relate to estimated obligations for credits to be granted to wholesalers for remitting payment on
their purchases within established incentive periods and credits to be granted to wholesalers for compliance with
various contractually-defined inventory management practices, respectively. We determine these reserves based on
our historical experience, including the timing of customer payments.
Contractual adjustments primarily relate to Medicaid and managed care rebates, co-payment (copay)
assistance, Veterans Administration (VA) and Public Health Service (PHS) discounts, specialty pharmacy program
fees and other governmental rebates or applicable allowances.
• Medicaid rebates relate to our estimated obligations to states under established reimbursement arrangements.
Rebate accruals are recorded in the same period the related revenue is recognized, resulting in a reduction of
product revenue and the establishment of a liability which is included in other current liabilities. Our liability for
Medicaid rebates consists of estimates for claims that a state will make for the current quarter, claims for prior
quarters that have been estimated for which an invoice has not been received, invoices received for claims from
the prior quarters that have not been paid, and an estimate of potential claims that will be made for inventory
that exists in the distribution channel at period end.
• Governmental rebates or chargebacks, including VA and PHS discounts, represent our estimated obligations
resulting from contractual commitments to sell products to qualified healthcare providers at prices lower than
the list prices we charge to wholesalers which provide those products. The wholesaler charges us for the
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