Table
of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F- 35
Summary of Contractual Maturities: Available-for-Sale Securities
The estimated fair value and amortized cost of our marketable debt securities available-for-sale by contractual
maturity are summarized as follows:
As of December 31, 2017
As of December 31, 2016
(In millions)
Estimated
Fair Value
Amortized
Cost
Estimated
Fair Value
Amortized
Cost
Due in one year or less
$
2,115.2 $
2,116.0
$
2,568.6 $
2,569.1
Due after one year through five years
2,730.0
2,730.0
2,552.6
2,559.7
Due after five years
327.3
327.0
276.8
277.5
Total
available-for-sale securities
$
5,172.5 $
5,173.0
$
5,398.0 $
5,406.3
The average maturity of our marketable debt securities available-for-sale as of December 31, 2017 and 2016
was 17 months and 12 months, respectively.
Proceeds from Marketable Debt Securities
The proceeds from maturities and sales of marketable debt securities and resulting realized gains and losses
are summarized as follows:
For the Years Ended December 31,
(In millions)
2017
2016
2015
Proceeds from maturities and sales
$
5,565.9
$
7,378.9 $
4,063.0
Realized gains
$
3.0
$
3.3 $
1.5
Realized losses
$
22.4
$
4.3 $
3.5
Realized losses for the year ended December 31, 2017 primarily relate to impairments recognized on certain of
our available-for-sale marketable debt securities as we intend to sell these securities as a result of the Tax Cuts and
Jobs Act of 2017 (the 2017 Tax Act), sales of agency mortgage-backed securities, corporate
bonds and government
securities. Realized losses for the year ended December 31, 2016 primarily relate to sales of corporate bonds,
agency mortgage-backed securities and other asset-backed securities. Realized losses for the year ended
December 31, 2015 primarily relate to sales of corporate bonds, agency mortgage-backed securities and other
asset-backed securities.
Strategic Investments
As of December 31, 2017 and 2016, our strategic investment portfolio was comprised of investments totaling
$85.8 million and $99.9 million, respectively, which are included in investments
and other assets in our
consolidated balance sheets. Our strategic investment portfolio includes investments in equity securities of certain
biotechnology companies and investments in venture capital funds where the underlying investments are in equity
securities of biotechnology companies.
10.
Derivative Instruments
Foreign Currency Forward Contracts - Hedging Instruments
Due to the global nature of our operations, portions of our revenues and operating expenses are recorded in
currencies other than the U.S. dollar. The value of revenues and operating expenses measured in U.S.
dollars is
therefore subject to changes in foreign currency exchange rates. In order to mitigate these changes we use foreign
currency forward contracts to lock in exchange rates associated with a portion of our forecasted international
revenues and operating expenses.
Foreign currency forward contracts in effect as of December 31, 2017 and 2016 had durations of 1 to 21
months and 1 to 18 months, respectively. These contracts have been designated as cash flow hedges and
accordingly, to the extent effective, any unrealized gains or losses on these foreign currency forward contracts are
reported in accumulated other comprehensive income (loss) (referred to as AOCI in the tables below). Realized gains
and losses for the effective portion of such contracts are recognized in revenues when
the sale of product in the
currency being hedged is recognized and in operating expenses when the expense in the currency being hedged is
recorded. To the extent ineffective, hedge transaction gains and losses are reported in other income (expense), net.
Table of Contents
BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F- 36
The notional value of foreign currency forward contracts that were entered into to hedge forecasted revenues
and operating expenses is summarized as follows:
Notional Amount
As of December 31,
Foreign Currency: (In millions)
2017
2016
Euro
$
1,875.6
$
871.7
British pound sterling
150.9
—
Swiss francs
88.7
—
Canadian dollar
83.5
—
Total foreign
currency forward contracts
$
2,198.7
$
871.7
The pre-tax portion of the fair value of these foreign currency forward contracts that was included in
accumulated other comprehensive income (loss) in total equity reflected net losses of $113.0 million for the year
ended December 31, 2017, and net gains of $49.8 million and $1.8 million for the years ended December 31, 2016
and 2015, respectively. We expect the net losses of $113.0 million to be settled over the next 21 months, of which
$98.5 million is expected to be settled over the next 12 months, with any amounts in accumulated other
comprehensive income (loss) to be reported as an adjustment to revenue or operating expense. We consider the
impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party
to execute its contractual obligations. As of December 31, 2017 and 2016, credit risk did not change the fair value
of our foreign currency forward contracts.
The following table summarizes the effect of foreign currency forward contracts
designated as hedging
instruments in our consolidated statements of income:
For the Years Ended December 31,
Net Gains/(Losses)
Reclassified from AOCI into Operating Income
(Effective Portion) (in millions)
Net Gains/(Losses)
Recognized into Net Income
(Ineffective Portion) (in millions)
Location
2017
2016
2015
Location
2017
2016
2015
Revenues
$
(32.5)
$
5.3 $
173.2
Other
income
(expense)
$
8.9
$
2.9 $
4.9
Operating
expenses
$
0.6
$
(1.5) $
—
Other
income
(expense)
$
(0.2)
$
0.1 $
—
Interest Rate Contracts - Hedging Instruments
We have entered into interest rate lock contracts or interest rate swap contracts on certain borrowing
transactions to manage our exposure to interest rate changes and to reduce our overall cost of borrowing.
Interest Rate Lock Contracts
During 2015 we entered into treasury rate locks, with an aggregated notional amount of $1.1 billion, which
were designated as cash flow hedges to hedge against changes in the 10-year and 30-year U.S.
treasury interest
rates that could have impacted our anticipated debt offering. In connection with the issuance of our 4.05% and
5.20% Senior Notes, as described in Note 12, Indebtedness, to these consolidated financial statements, we settled
the treasury rate locks and realized an $8.5 million gain. As the hedging relationship was effective, the gain was
recorded in AOCI and will be recognized in other income (expense), net over the life of the 4.05% and 5.20% Senior
Notes.