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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F- 53
Included in the balance of unrecognized tax benefits as of December 31, 2017, 2016 and 2015 are $64.3
million, $26.9 million and $15.7 million (net of the federal benefit on state issues), respectively, of unrecognized tax
benefits that, if recognized, would affect the effective income tax rate in future periods.
We recognize potential interest and penalties accrued related to unrecognized tax benefits in income tax
expense. In 2017 we recognized a net interest expense of $4.8 million. In 2016 we recognized net interest expense
of $9.1 million. In 2015 we recognized a net interest expense of approximately $3.1 million. We have accrued
approximately $16.1 million and $25.2 million for the payment of interest and penalties as of December 31, 2017
and 2016, respectively.
International Uncertain Tax Positions
We have made payments totaling approximately $60.0 million to the Danish Tax Authority (SKAT) for
assessments received for fiscal 2009, 2011 and 2013 regarding withholding taxes
and the treatment of certain
intercompany transactions involving a Danish affiliate and another of our affiliates. We continue to dispute the
assessments for all of these periods and believe that the positions taken in our historical filings are valid.
It is reasonably possible that we will adjust the value of our uncertain tax positions related to Danish
withholding taxes based on potential European court decisions expected in 2018 on similar matters.
Federal and State Uncertain Tax Positions
It is reasonably possible that we will adjust the value of our uncertain tax positions related to our revenues
from anti-CD20 therapeutic programs and certain transfer pricing issues as we receive additional information from
various taxing authorities, including reaching settlements with the authorities. In addition, the
Internal Revenue
Service and other national tax authorities routinely examine our intercompany transfer pricing with respect to
intellectual property related transactions and it is possible that they may disagree with one or more positions we
have taken with respect to such valuations.
18. Other Consolidated Financial Statement Detail
Supplemental Cash Flow Information
Supplemental disclosure of cash flow information for the years ended December 31, 2017, 2016 and 2015, is
as follows:
For the Years Ended December 31,
(In millions)
2017
2016
2015
Cash paid during the year for:
Interest
$
281.7
$
281.2 $
39.1
Income taxes
$
1,066.4
$
1,642.2 $
1,674.8
Non-cash Operating, Investing and Financing Activity
In the fourth quarter of 2017 we accrued $600.0 million upon reaching $15.0 billion and $16.0 billion in total
cumulative sales of FUMADERM and TECFIDERA (together, the Fumapharm Products).
The amount, net of tax benefit,
was accounted for as an increase to goodwill in accordance with the accounting standard applicable to business
combinations when we acquired Fumapharm, and is expected to be paid in the first quarter of 2018. For additional
information on this transaction, please read Note 22, Commitments and Contingencies, to these consolidated
financial statements.
In connection with the construction of our large-scale biologics manufacturing
facility in Solothurn, Switzerland,
we accrued charges related to processing equipment and engineering services of approximately $150.0 million and
$100.0 million in our consolidated balance sheets as of December 31, 2017 and 2016, respectively. For additional
information on this matter, please read Note 11, Property, Plant and Equipment, to these consolidated financial
statements.
In December 2016 we accrued $454.8 million related to the settlement and license agreement with Forward
Pharma. For additional information on this transaction, please read Note 7, Intangible Assets
and Goodwill, to these
consolidated financial statements.
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BIOGEN INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F- 54
In February 2015 upon completion of our acquisition of Convergence, we recorded a contingent consideration
obligation of $274.5 million as part of the purchase price. For additional information on this transaction, please read
Note 2, Acquisitions, to these consolidated financial statements.
Other Income (Expense), Net
Components of other income (expense), net, are summarized as follows:
For the Years Ended December 31,
(In millions)
2017
2016
2015
Interest income
$
78.5
$
63.4 $
22.1
Interest expense
(250.8)
(260.0)
(95.5)
Gain (loss) on investments, net
(36.3)
6.0
(3.8)
Foreign exchange gains (losses), net
6.3
(9.8)
(32.7)
Other, net
(13.1)
(17.0)
(13.8)
Total other income (expense), net
$
(215.4)
$
(217.4) $
(123.7)
Interest expense for the year ended December 31, 2017, includes a $5.2
million charge recognized in
November 2017 upon the redemption of our 6.875% Senior Notes due March 1, 2018. For additional information on
the redemption of these notes, please read Note 12, Indebtedness, to these consolidated financial statements.
Gain (loss) on investments, net for the year ended December 31, 2017, includes other than temporary
impairments recorded on strategic investments and marketable debt securities during the year.
Other Current Assets
Other current assets include prepaid taxes totaling approximately $657.6 million and $817.0 million as of
December 31, 2017 and 2016, respectively.
As a result of the Article 20 Procedure of ZINBRYTA, we impaired prepaid tax balances totaling $142.6 million.
For additional information on the Article 20 Procedure of ZINBRYTA and resulting impairment
of ZINBRYTA related
assets, please read Note 20, Collaborative and Other Relationships, to these consolidated financial statements.
Accrued Expenses and Other
Accrued expenses and other consists of the following:
As of December 31,
(In millions)
2017
2016
Current portion of contingent consideration obligations
$
844.6
$
580.8
Revenue-related reserves for discounts and allowances
572.0
438.6
Employee compensation and benefits
297.7
282.9
Royalties and licensing fees
206.7
195.8
Collaboration expenses
183.7
130.9
Construction
in progress
159.7
134.0
Accrued TECFIDERA litigation settlement charge
—
454.8
Other
636.9
685.7
Total accrued expenses and other
$
2,901.3
$
2,903.5
Pricing of TYSABRI in Italy - AIFA
In the fourth quarter of 2011 Biogen Italia SRL, our Italian subsidiary, received a notice from the Italian
National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) that sales of TYSABRI after mid-February 2009
through mid-February 2011 exceeded by EUR30.7 million a reimbursement limit established pursuant to a Price
Determination Resolution granted by AIFA in December 2006. In January 2012 we filed
an appeal against AIFA in
administrative court in Rome, Italy seeking a ruling that the reimbursement limit in the Price Determination
Resolution should apply as written to only “the first 24 months” of TYSABRI sales, which ended in mid-February
2009. Since being notified in the fourth quarter of 2011 that AIFA believed a reimbursement limit was still in effect,
we deferred revenue on sales of TYSABRI as if the reimbursement limit were in effect for each biannual period