Item 15. Exhibits and Financial Statement Schedules

a. (1) Consolidated Financial Statements:

The following financial statements are filed as part of this report:

Financial Statements		Page Number
Consolidated Statements of Income		F-2
Consolidated Statements of Comprehensive Income		F-3
Consolidated Balance Sheets		F-4
Consolidated Statements of Cash Flows		F-5
Consolidated Statements of Equity		F-6
Notes to Consolidated Financial Statements		F-9
Report of Independent Registered Public Accounting Firm		F-75

Certain totals may not sum due to rounding.

(2) Financial Statement Schedules

Schedules are omitted because they are not applicable, or are not required, or because the information is included in the consolidated financial statements and notes thereto.

(3) Exhibits

The exhibits listed on the Exhibit Index beginning on page A-1, which is incorporated herein by reference, are filed or furnished as part of this report or are incorporated into this report by reference.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIOGEN INC.
By:	/S/ MICHEL VOUNATSOS
	Michel Vounatsos
	Chief Executive Officer

Date: February 2, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name		Capacity		Date
/S/ MICHEL VOUNATSOS		Director and Chief Executive Officer (principal executive officer)		February 2, 2017
Michel Vounatsos
/S/ PAUL J. CLANCY		Executive Vice President, Finance and Chief Financial Officer (principal financial officer)		February 2, 2017
Paul J. Clancy
/S/ GREGORY F. COVINO		Vice President, Finance, Chief Accounting Officer (principal accounting officer)		February 2, 2017
Gregory F. Covino
/S/ STELIOS PAPADOPOULOS		Director and Chairman of the Board of Directors		February 2, 2017
Stelios Papadopoulos
/S/ ALEXANDER J. DENNER		Director		February 2, 2017
Alexander J. Denner
/S/ CAROLINE D. DORSA		Director		February 2, 2017
Caroline D. Dorsa
/S/ NANCY L. LEAMING		Director		February 2, 2017
Nancy L. Leaming
/S/ RICHARD C. MULLIGAN		Director		February 2, 2017
Richard C. Mulligan
/S/ ROBERT W. PANGIA		Director		February 2, 2017
Robert W. Pangia
/S/ BRIAN S. POSNER		Director		February 2, 2017
Brian S. Posner
/S/ ERIC K. ROWINSKY		Director		February 2, 2017
Eric K. Rowinsky
/S/ LYNN SCHENK		Director		February 2, 2017
Lynn Schenk
/S/ STEPHEN A. SHERWIN		Director		February 2, 2017
Stephen A. Sherwin

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

		Page Number
Consolidated Statements of Income		F-2
Consolidated Statements of Comprehensive Income		F-3
Consolidated Balance Sheets		F-4
Consolidated Statements of Cash Flows		F-5
Consolidated Statements of Equity		F-6
Notes to Consolidated Financial Statements		F-9
Report of Independent Registered Public Accounting Firm		F-75

F- 1

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

	For the Years Ended December 31,
	2016				2015				2014
Revenues:
Product, net	$	9,817.9			$	9,188.5			$	8,203.4
Revenues from anti-CD20 therapeutic programs	1,314.5				1,339.2				1,195.4
Other	316.4				236.1				304.5
Total revenues	11,448.8				10,763.8				9,703.3
Cost and expenses:
Cost of sales, excluding amortization of acquired intangible assets	1,478.7				1,240.4				1,171.0
Research and development	1,973.3				2,012.8				1,893.4
Selling, general and administrative	1,947.9				2,113.1				2,232.3
Amortization of acquired intangible assets	385.6				382.6				489.8
Restructuring charges	33.1				93.4				—
Loss (gain) on fair value remeasurement of contingent consideration	14.8				30.5				(38.9		)
Collaboration profit (loss) sharing	10.2				—				—
TECFIDERA litigation settlement and license charges	454.8				—				—
Total cost and expenses	6,298.4				5,872.8				5,747.7
Gain on sale of rights	—				—				16.8
Income from operations	5,150.4				4,891.0				3,972.4
Other income (expense), net	(217.4		)		(123.7		)		(25.8		)
Income before income tax expense and equity in loss of investee, net of tax	4,933.0				4,767.3				3,946.6
Income tax expense	1,237.3				1,161.6				989.9
Equity in loss of investee, net of tax	—				12.5				15.1
Net income	3,695.7				3,593.2				2,941.6
Net (loss) income attributable to noncontrolling interests, net of tax	(7.1		)		46.2				6.8
Net income attributable to Biogen Inc.	$	3,702.8			$	3,547.0			$	2,934.8
Net income per share:
Basic earnings per share attributable to Biogen Inc.	$	16.96			$	15.38			$	12.42
Diluted earnings per share attributable to Biogen Inc.	$	16.93			$	15.34			$	12.37
Weighted-average shares used in calculating:
Basic earnings per share attributable to Biogen Inc.	218.4				230.7				236.4
Diluted earnings per share attributable to Biogen Inc.	218.8				231.2				237.2

See accompanying notes to these consolidated financial statements.

F- 2

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

	For the Years Ended December 31,
	2016				2015				2014
Net income attributable to Biogen Inc.	$	3,702.8			$	3,547.0			$	2,934.8
Other comprehensive income:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) recognized during the period, net of tax	(10.6		)		(1.7		)		0.4
Less: reclassification adjustment for (gains) losses included in net income, net of tax	0.6				1.3				(6.4		)
Unrealized gains (losses) on securities available for sale, net of tax	(10.0		)		(0.4		)		(6.0		)
Unrealized gains (losses) on cash flow hedges:
Unrealized gains (losses) recognized during the period, net of tax	51.6				110.8				101.7
Less: reclassification adjustment for (gains) losses included in net income, net of tax	(4.0		)		(172.3		)		(6.3		)
Unrealized gains (losses) on cash flow hedges, net of tax	47.6				(61.5		)		95.4
Unrealized gains (losses) on pension benefit obligation	5.1				(6.2		)		(12.0		)
Currency translation adjustment	(138.6		)		(96.4		)		(109.2		)
Total other comprehensive income (loss), net of tax	(95.9		)		(164.5		)		(31.8		)
Comprehensive income attributable to Biogen Inc.	3,606.9				3,382.5				2,903.0
Comprehensive income (loss) attributable to noncontrolling interests, net of tax	(7.1		)		46.2				6.8
Comprehensive income	$	3,599.8			$	3,428.7			$	2,909.8

See accompanying notes to these consolidated financial statements.

F- 3

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts)

	As of December 31,
	2016				2015
ASSETS
Current assets:
Cash and cash equivalents	$	2,326.5			$	1,308.0
Marketable securities	2,568.6				2,120.5
Accounts receivable, net	1,441.6				1,227.0
Due from anti-CD20 therapeutic programs, net	300.6				314.5
Inventory	1,001.6				893.4
Other current assets	1,093.3				836.9
Total current assets	8,732.2				6,700.3
Marketable securities	2,829.4				2,760.4
Property, plant and equipment, net	2,501.8				2,187.6
Intangible assets, net	3,808.3				4,085.1
Goodwill	3,669.3				2,663.8
Investments and other assets	1,335.8				1,107.6
Total assets	$	22,876.8			$	19,504.8
LIABILITIES AND EQUITY
Current liabilities:
Current portion of notes payable and other financing arrangements	$	4.7			$	4.8
Taxes payable	231.9				208.7
Accounts payable	279.8				267.4
Accrued expenses and other	2,903.5				2,096.8
Total current liabilities	3,419.9				2,577.7
Notes payable and other financing arrangements	6,512.7				6,521.5
Deferred tax liability	93.1				124.9
Other long-term liabilities	722.5				905.8
Total liabilities	10,748.2				10,129.9
Commitments and contingencies
Equity:
Biogen Inc. shareholders’ equity
Preferred stock, par value $0.001 per share	—				—
Common stock, par value $0.0005 per share	0.1				0.1
Additional paid-in capital	—				—
Accumulated other comprehensive loss	(319.9		)		(224.0		)
Retained earnings	15,071.6				12,208.4
Treasury stock, at cost; 22.6 million shares, respectively	(2,611.7		)		(2,611.7		)
Total Biogen Inc. shareholders’ equity	12,140.1				9,372.8
Noncontrolling interests	(11.5		)		2.1
Total equity	12,128.6				9,374.9
Total liabilities and equity	$	22,876.8			$	19,504.8

See accompanying notes to these consolidated financial statements.

F- 4

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

	For the Years Ended December 31,
	2016				2015				2014
Cash flows from operating activities:
Net income	$	3,695.7			$	3,593.2			$	2,941.6
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	682.7				600.4				688.1
Share-based compensation	154.8				161.4				155.3
Deferred income taxes	(175.0		)		(145.6		)		(308.2		)
Other	91.2				82.2				(50.3		)
Changes in operating assets and liabilities, net:
Accounts receivable	(241.4		)		29.0				(512.4		)
Due from anti-CD20 therapeutic programs	13.9				(31.1		)		(30.7		)
Inventory	(165.6		)		(174.4		)		(185.9		)
Other assets	59.1				(127.0		)		(108.7		)
Accrued expenses and other current liabilities	570.1				74.2				244.3
Income tax assets and liabilities	(232.6		)		(429.4		)		40.3
Other liabilities	69.5				83.2				68.7
Net cash flows provided by operating activities	4,522.4				3,716.1				2,942.1
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities	7,378.9				4,063.0				2,718.9
Purchases of marketable securities	(7,913.2		)		(6,864.9		)		(3,583.1		)
Contingent consideration related to Fumapharm AG acquisition	(1,200.0		)		(850.0		)		(375.0		)
Acquisitions of businesses, net of cash acquired	—				(198.8		)		—
Purchases of property, plant and equipment	(616.1		)		(643.0		)		(287.8		)
Acquisitions of intangible assets	(111.6		)		(15.4		)		(28.2		)
Other	(22.8		)		(44.5		)		12.2
Net cash flows used in investing activities	(2,484.8		)		(4,553.6		)		(1,543.0		)
Cash flows from financing activities:
Purchases of treasury stock	(1,000.0		)		(5,000.0		)		(886.8		)
Proceeds from issuance of stock for share-based compensation arrangements	43.7				54.2				54.9
Proceeds from borrowings	—				5,930.5				—
Repayments of borrowings	(2.7		)		(2.1		)		(2.7		)
Excess tax benefit from share-based compensation	12.6				78.2				96.4
Contingent consideration payments	(38.6		)		(13.1		)		(20.5		)
Other	(2.8		)		(61.3		)		2.8
Net cash flows provided by (used in) financing activities	(987.8		)		986.4				(755.9		)
Net increase in cash and cash equivalents	1,049.8				148.9				643.2
Effect of exchange rate changes on cash and cash equivalents	(31.3		)		(45.8		)		(40.9		)
Cash and cash equivalents, beginning of the year	1,308.0				1,204.9				602.6
Cash and cash equivalents, end of the year	$	2,326.5			$	1,308.0			$	1,204.9

See accompanying notes to these consolidated financial statements.

F- 5

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(In millions)

	Preferred stock							Common stock							Additional paid-in capital				Accumulated other comprehensive loss				Retained earnings				Treasury stock							Total Biogen Inc. shareholders’ equity				Noncontrolling interests				Total equity
	Shares			Amount				Shares			Amount							Shares			Amount
Balance, December 31, 2015	—			$	—			241.2			$	0.1			$	—			$	(224.0	)		$	12,208.4			(22.6	)		$	(2,611.7	)		$	9,372.8			$	2.1			$	9,374.9
Net income																							3,702.8											3,702.8				(7.1		)		3,695.7
Other comprehensive income (loss), net of tax																			(95.9		)													(95.9		)		0.1				(95.8		)
Acquisition of noncontrolling interests																																		—				(0.6		)		(0.6		)
Capital contribution to noncontrolling interests																																		—				1.5				1.5
Deconsolidation of noncontrolling interests																																		—				(7.5		)		(7.5		)
Repurchase of common stock pursuant to the 2016 Share Repurchase Program, at cost																											(3.3	)		(1,000.0		)		(1,000.0		)						(1,000.0		)
Retirement of common stock pursuant to the 2016 Share Repurchase Program, at cost								(3.3	)		—				(164.9		)						(835.1		)		3.3			1,000.0				—								—
Issuance of common stock under stock option and stock purchase plans								0.2			—				43.7								—											43.7								43.7
Issuance of common stock under stock award plan								0.4			—				(47.6		)						(4.5		)									(52.1		)						(52.1		)
Compensation expense related to share-based payments															169.4																			169.4								169.4
Tax benefit from share-based payments															(0.6		)																	(0.6		)						(0.6		)
Balance, December 31, 2016	—			$	—			238.5			$	0.1			$	—			$	(319.9	)		$	15,071.6			(22.6	)		$	(2,611.7	)		$	12,140.1			$	(11.5	)		$	12,128.6

See accompanying notes to these consolidated financial statements.

F- 6

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY - (Continued)

(In millions)

	Preferred stock							Common stock							Additional paid-in capital				Accumulated other comprehensive loss				Retained earnings				Treasury stock							Total Biogen Inc. shareholders’ equity				Noncontrolling interests				Total equity
	Shares			Amount				Shares			Amount							Shares			Amount
Balance, December 31, 2014	—			$	—			257.1			$	0.1			$	4,196.2			$	(59.5	)		$	9,283.9			(22.6	)		$	(2,611.7	)		$	10,809.0			$	5.0			$	10,814.0
Net income																							3,547.0											3,547.0				46.2				3,593.2
Other comprehensive income (loss), net of tax																			(164.5		)													(164.5		)		—				(164.5		)
Distribution to noncontrolling interests																																		—				(60.0		)		(60.0		)
Acquisition of noncontrolling interests																																		—				10.9				10.9
Repurchase of common stock pursuant to the 2015 Share Repurchase Program, at cost																											(16.8	)		(5,000.0		)		(5,000.0		)						(5,000.0		)
Retirement of common stock pursuant to the 2015 Share Repurchase Program, at cost								(16.8	)		—				(4,377.5		)						(622.5		)		16.8			5,000.0				—								—
Issuance of common stock under stock option and stock purchase plans								0.3			—				54.2																			54.2								54.2
Issuance of common stock under stock award plan								0.6			—				(125.1		)																	(125.1		)						(125.1		)
Compensation expense related to share-based payments															183.2																			183.2								183.2
Tax benefit from share-based payments															69.0																			69.0								69.0
Balance, December 31, 2015	—			$	—			241.2			$	0.1			$	—			$	(224.0	)		$	12,208.4			(22.6	)		$	(2,611.7	)		$	9,372.8			$	2.1			$	9,374.9

See accompanying notes to these consolidated financial statements.

F- 7

BIOGEN INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY - (Continued)

(In millions)

	Preferred stock							Common stock							Additional paid-in capital				Accumulated other comprehensive loss				Retained earnings				Treasury stock							Total Biogen Inc. shareholders’ equity				Noncontrolling interests				Total equity
	Shares			Amount				Shares			Amount							Shares			Amount
Balance, December 31, 2013	—			$	—			256.0			$	0.1			$	4,023.6			$	(27.7	)		$	6,349.1			(19.7	)		$	(1,724.9	)		$	8,620.2			$	0.6			$	8,620.8
Net income																							2,934.8											2,934.8				6.8				2,941.6
Other comprehensive income (loss), net of tax																			(31.8		)													(31.8		)		—				(31.8		)
Distribution to noncontrolling interests																																		—				(9.1		)		(9.1		)
Other transactions with noncontrolling interests																																		—				6.7				6.7
Repurchase of common stock for Treasury pursuant to the 2011 Share Repurchase Program, at cost																											(2.9	)		(886.8		)		(886.8		)						(886.8		)
Issuance of common stock under stock option and stock purchase plans								0.3			—				54.9																			54.9								54.9
Issuance of common stock under stock award plan								0.8			—				(140.3		)																	(140.3		)						(140.3		)
Compensation expense related to share-based payments															165.0																			165.0								165.0
Tax benefit from share-based payments															93.0																			93.0								93.0
Balance, December 31, 2014	—			$	—			257.1			$	0.1			$	4,196.2			$	(59.5	)		$	9,283.9			(22.6	)		$	(2,611.7	)		$	10,809.0			$	5.0			$	10,814.0

See accompanying notes to these consolidated financial statements.

F- 8

BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Business Overview

Biogen is a global biopharmaceutical company focused on discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases.

Our marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for multiple sclerosis (MS), FUMADERM for the treatment of severe plaque psoriasis and SPINRAZA for the treatment of spinal muscular atrophy (SMA). 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 indicated for the treatment of CLL and follicular lymphoma, and other potential anti-CD20 therapies under a collaboration agreement with Genentech, Inc. (Genentech), a wholly-owned member of the Roche Group (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 areas of our scientific, manufacturing and technical capabilities. Our research is currently focused on additional improvements in the treatment of MS, solving some of the most challenging and complex diseases, including Alzheimer's disease, Parkinson's disease and amyotrophic lateral sclerosis (ALS), and employing innovative technologies to discover potential treatments for rare and genetic disorders, including new ways of treating diseases through gene therapy.

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 this agreement, we are currently manufacturing and commercializing BENEPALI, an etanercept biosimilar referencing ENBREL, and FLIXABI, an infliximab biosimilar referencing REMICADE, in the European Union (E.U.).

Hemophilia Spin-Off

In May 2016 we announced our intention to spin off our hemophilia business, Bioverativ Inc. (Bioverativ), as an independent, publicly traded company. Bioverativ, will focus on the discovery, development and commercialization of therapies for treatment of hemophilia and other blood disorders, including ELOCTATE for the treatment of hemophilia A and ALPROLIX for the treatment of hemophilia B. Bioverativ will also assume 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).

On February 1, 2017, we completed the distribution of all the then outstanding shares of common stock of Bioverativ to Biogen stockholders, who received one share of Bioverativ common stock for every two shares of Biogen common stock. As a result of the distribution, Bioverativ is now an independent public company whose shares of common stock are trading under the symbol "BIVV" on the Nasdaq Global Select Market.

The financial results of Bioverativ are reflected in our consolidated results of operations and financial position included in these audited consolidated financial statements for the periods presented in this Form 10-K. The financial results of Bioverativ will be excluded from our consolidated results of operations and financial position commencing February 1, 2017. For additional information regarding the separation of Bioverativ, please read Note 26, Subsequent Events 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)

F- 9

BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 to be 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 revenue 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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difference between what the wholesaler pays for the products and the ultimate selling price to the qualified healthcare providers. Rebate and chargeback reserves are established in the same period as the related revenue is recognized, resulting in a reduction in product revenue and accounts receivable. Chargeback amounts are generally determined at the time of resale to the qualified healthcare provider from the wholesaler, and we generally issue credits for such amounts within a few weeks of the wholesaler notifying us about the resale. Our reserves for VA, PHS and chargebacks consist of amounts that we expect to issue for inventory that exists at the wholesalers that we expect will be sold to qualified healthcare providers and chargebacks that wholesalers have claimed for which we have not issued a credit.

•

Managed care rebates represent our estimated obligations to third parties, primarily pharmacy benefit managers. 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 accrued expenses and other current liabilities. These rebates result from performance-based goals, formulary position and price increase limit allowances (price protection). The calculation of the accrual for these rebates is based on an estimate of the customer’s buying patterns and the resulting applicable contractual rebate rate(s) to be earned over a contractual period.

•	Copay assistance represents financial assistance to qualified patients, assisting them with prescription drug co-payments required by insurance. The calculation of the accrual for copay is based on an estimate of claims and the cost per claim that we expect to receive associated with inventory that exists in the distribution channel at period end.

•	Other governmental rebates or applicable allowances primarily relate to mandatory rebates and discounts in international markets where government-sponsored healthcare systems are the primary payors for healthcare.

Product returns are established for returns expected to be made by wholesalers and are recorded in the period the related revenue is recognized, resulting in a reduction to product sales. In accordance with contractual terms, wholesalers are permitted to return product for reasons such as damaged or expired product. The majority of wholesaler returns are due to product expiration. Expired product return reserves are estimated through a comparison of historical return data to their related sales on a production lot basis. Historical rates of return are determined for each product and are adjusted for known or expected changes in the marketplace specific to each product.

In addition to the discounts, rebates and product returns described above and classified as a reduction of revenue, we also maintain certain customer service contracts with distributors and other customers in the distribution channel that provide us with inventory management, data and distribution services, which are generally reflected as a reduction of revenue. To the extent we can demonstrate a separable benefit and fair value for these services, we classify these payments in selling, general and administrative expenses.

Revenues from Anti-CD20 Therapeutic Programs

Revenues from anti-CD20 therapeutic programs consist of:

(i)	our share of pre-tax profits and losses in the U.S. for RITUXAN and GAZYVA;

(ii)	reimbursement of our selling and development expenses in the U.S. for RITUXAN; and

(iii)	revenues on sales in the rest of world for RITUXAN, which consist of our share of pre-tax co-promotion profits on RITUXAN in Canada and royalty revenue on RITUXAN sales outside the U.S. and Canada by the Roche Group and its sublicensees.

Pre-tax co-promotion profits on RITUXAN and GAZYVA are calculated and paid to us by Genentech in the U.S. Pre-tax co-promotion profits on RITUXAN are calculated and paid to us by the Roche Group in Canada. Pre-tax co-promotion profits consist of U.S. and Canadian net sales to third-party customers less applicable costs to manufacture, third-party royalty expenses, distribution, selling and marketing expenses, and joint development expenses incurred by Genentech, the Roche Group and us. We record our share of the pre-tax co-promotion profits on RITUXAN in Canada and royalty revenues on RITUXAN sales outside the U.S. on a cash basis as we do not have the ability to estimate these profits or royalty revenue in the period incurred. Our share of the pre-tax profits on RITUXAN and GAZYVA in the U.S. includes estimates made by Genentech and those estimates are subject to change. Actual results may differ from our estimates. For additional information related to our collaboration with Genentech, please read Note 19, Collaborative and Other Relationships to these consolidated financial statements.

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Royalty Revenues

We receive royalty revenues on sales by our licensees of other products covered under patents that we own. We do not have future performance obligations under these license arrangements. We record these revenues based on estimates of the sales that occurred during the relevant period as a component of other revenues. The relevant period estimates of sales are based on interim data provided by licensees and analysis of historical royalties that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter. Historically, adjustments have not been material when compared to actual amounts paid by licensees. If we are unable to reasonably estimate royalty revenue or do not have access to the information, then we record royalty revenues on a cash basis.

Multiple-Element Revenue Arrangements

We may enter into transactions that involve the sale of products and related services under multiple element arrangements. In accounting for these transactions, we assess the elements of the contract and whether each element has standalone value and allocate revenue to the various elements based on their estimated selling price as a component of total revenues. The selling price of a revenue generating element can be based on current selling prices offered by us or another party for current products or management’s best estimate of a selling price. Revenue allocated to an individual element is recognized when all other revenue recognition criteria are met for that element.

Collaborative and Other Relationships

Our development and commercialization arrangements with Sobi and AbbVie Inc. (AbbVie) represent collaborative arrangements as each party is an active participant and exposed to significant risks and rewards of the arrangements. Where we are the principal on sales transactions with third parties, we recognize revenue, cost of sales and operating expenses on a gross basis in their respective lines in our consolidated statements of income. Where we are not the principal on sales transactions with third parties, we record our share of the revenues, cost of sales and operating expenses on a net basis in collaborative and other relationships included in other revenue in our consolidated statements of income.

For additional information related to our collaborations with Sobi and AbbVie, please read Note 19, Collaborative and Other Relationships, to these consolidated financial statements.

Fair Value Measurements

We have certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

•	Level 1 — Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access;

•	Level 2 — Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates; and

•	Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The majority of our financial assets have been classified as Level 2. Our financial assets (which include our cash equivalents, derivative contracts, marketable debt securities and plan assets for deferred compensation) have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data. The pricing services utilize industry standard valuation models, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

We validate the prices provided by our third-party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing sources and analyzing pricing data in certain instances. After completing our validation procedures, we did not adjust or override any fair value measurements provided by our pricing services as of December 31, 2016 and 2015, respectively.

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Other Assets and Liabilities

The carrying amounts reflected in the consolidated balance sheets for current accounts receivable, due from anti-CD20 therapeutic programs, other current assets, accounts payable and accrued expenses and other, approximate fair value due to their short-term maturities.

Cash and Cash Equivalents

We consider only those investments which are highly liquid, readily convertible to cash and that mature within three months from date of purchase to be cash equivalents. As of December 31, 2016 and 2015, cash equivalents were comprised of money market funds and commercial paper, overnight reverse repurchase agreements and other debt securities with maturities less than 90 days from the date of purchase.

Accounts Receivable

The majority of our accounts receivable arise from product sales and primarily represent amounts due from our wholesale distributors, public hospitals and other government entities. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. We provide reserves against trade receivables for estimated losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written-off against the reserve. To date, our historical reserves and write-offs of accounts receivable have not been significant.

In countries where we have experienced a pattern of payments extending beyond our contractual payment term and we expect to collect receivables greater than one year from the time of sale, we have discounted our receivables and reduced related revenues over the period of time that we estimate those amounts will be paid using the country’s market-based borrowing rate for such period. The related receivables are classified at the time of sale as non-current assets. We accrete interest income on these receivables, which is recognized as a component of other income (expense), net in our consolidated statements of income.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk include cash and cash equivalents, investments, derivatives and accounts receivable. We attempt to minimize the risks related to cash and cash equivalents and investments by investing in a broad and diverse range of financial instruments as previously defined by us. We have established guidelines related to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. Our investment portfolio is maintained in accordance with our investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. We minimize credit risk resulting from derivative instruments by choosing only highly rated financial institutions as counterparties.

Concentrations of credit risk with respect to receivables, which are typically unsecured, are somewhat mitigated due to the wide variety of customers and markets using our products, as well as their dispersion across many different geographic areas. The majority of our accounts receivable arise from product sales in the U.S. and Europe and have standard payment terms which generally require payment within 30 to 90 days. We monitor the financial performance and creditworthiness of our customers so that we can properly assess and respond to changes in their credit profile. We continue to monitor these conditions and assess their possible impact on our business.

As of December 31, 2016 and 2015, two wholesale distributors individually accounted for approximately 37.2% and 19.2%, and 35.4% and 23.1%, of accounts receivable, net, respectively.

Marketable Securities and Other Investments

Marketable Debt Securities

Available-for-sale debt securities are recorded at fair market value and unrealized gains and losses are included in accumulated other comprehensive income (loss) in equity, net of related tax effects, unless the security has experienced a credit loss, we have determined that we have the intent to sell the security or we have determined that it is more likely than not that we will have to sell the security before its expected recovery. Realized gains and losses are reported in other income (expense), net, on a specific identification basis.

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Marketable Equity Securities

Our marketable equity securities represent investments in publicly traded equity securities and are included in investments and other assets in our consolidated balance sheet. When assessing whether a decline in the fair value of a marketable equity security is other-than-temporary, we consider the fair market value of the security, the duration of the security’s decline and prospects for the underlying business, including favorable or adverse clinical trial results, new product initiatives and new collaborative agreements with the companies in which we have invested.

Non-Marketable Equity Securities

We also invest in equity securities of companies whose securities are not publicly traded and where fair value is not readily available. These investments are recorded using either the cost method or the equity method of accounting, depending on our ownership percentage and other factors that suggest we have significant influence. We monitor these investments to evaluate whether any decline in their value has occurred that would be other-than-temporary, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions and are included in investments and other assets in our consolidated balance sheet.

Evaluating Investments for Other-than-Temporary Impairments

We conduct periodic reviews to identify and evaluate each investment that has an unrealized loss, in accordance with the meaning of other-than-temporary impairment and its application to certain investments. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses on available-for-sale securities that are determined to be temporary, and not related to credit loss, are recorded, net of tax, in accumulated other comprehensive income.

For available-for-sale debt securities with unrealized losses, management performs an analysis to assess whether we intend to sell or whether we would more likely than not be required to sell the security before the expected recovery of the amortized cost basis. Where we intend to sell a security, or may be required to do so, the security’s decline in fair value is deemed to be other-than-temporary and the full amount of the unrealized loss is reflected in earnings as an impairment loss.

Regardless of our intent to sell a security, we perform additional analysis on all securities with unrealized losses to evaluate losses associated with the creditworthiness of the security. Credit losses are identified where we do not expect to receive cash flows sufficient to recover the amortized cost basis of a security.

For equity securities, when assessing whether a decline in value is other-than-temporary, we consider the fair market value of the security, the duration of the security’s decline, and the financial condition of the issuer. We then consider our intent and ability to hold the equity security for a period of time sufficient to recover our carrying value. Where we have determined that we lack the intent and ability to hold an equity security to its expected recovery, the security’s decline in fair value is deemed to be other-than-temporary and is reflected in earnings as an impairment loss.

Equity Method of Accounting

In circumstances where we have the ability to exercise significant influence over the operating and financial policies of a company in which we have an investment, we utilize the equity method of accounting for recording investment activity. In assessing whether we exercise significant influence, we consider the nature and magnitude of our investment, the voting and protective rights we hold, any participation in the governance of the other company, and other relevant factors such as the presence of a collaboration or other business relationship. Under the equity method of accounting, we record in our results of operations our share of income or loss of the other company. If our share of losses exceeds the carrying value of our investment, we will suspend recognizing additional losses and will continue to do so unless we commit to providing additional funding.

Inventory

Inventories are stated at the lower of cost or market with cost based on the first-in, first-out (FIFO) method. We classify our inventory costs as long-term when we expect to utilize the inventory beyond our normal operating cycle and include these costs in investments and other assets in our consolidated balance sheets. Inventory that can be used in either the production of clinical or commercial products is expensed as research and development costs when identified for use in a clinical manufacturing campaign.

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Capitalization of Inventory Costs

We capitalize inventory costs associated with our products prior to regulatory approval, when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. We consider numerous attributes in evaluating whether the costs to manufacture a particular product should be capitalized as an asset. We assess the regulatory approval process and where the particular product stands in relation to that approval process, including any known safety or efficacy concerns, potential labeling restrictions and other impediments to approval. We evaluate our anticipated research and development initiatives and constraints relating to the product and the indication in which it will be used. We consider our manufacturing environment including our supply chain in determining logistical constraints that could hamper approval or commercialization. We consider the shelf life of the product in relation to the expected timeline for approval and we consider patent related or contract issues that may prevent or delay commercialization. We also base our judgment on the viability of commercialization, trends in the marketplace and market acceptance criteria. Finally, we consider the reimbursement strategies that may prevail with respect to the product and assess the economic benefit that we are likely to realize. We expense previously capitalized costs related to pre-approval inventory upon a change in such judgment, due to, among other potential factors, a denial or significant delay of approval by necessary regulatory bodies.

Obsolescence and Unmarketable Inventory

We periodically review our inventories for excess or obsolescence and write-down obsolete or otherwise unmarketable inventory to its estimated net realizable value. If the actual net realizable value is less than that estimated by us, or if it is determined that inventory utilization will further diminish based on estimates of demand, additional inventory write-downs may be required. Additionally, our products are subject to strict quality control and monitoring which we perform throughout the manufacturing process. In the event that certain batches or units of product no longer meet quality specifications, we will record a charge to cost of sales to write-down any unmarketable inventory to its estimated net realizable value. In all cases, product inventory is carried at the lower of cost or its estimated net realizable value. Amounts written-down due to unmarketable inventory are charged to cost of sales.

Property, Plant and Equipment

Property, plant and equipment are carried at cost, subject to review for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The cost of normal, recurring, or periodic repairs and maintenance activities related to property, plant and equipment are expensed as incurred. The cost for planned major maintenance activities, including the related acquisition or construction of assets, is capitalized if the repair will result in future economic benefits.

Interest costs incurred during the construction of major capital projects are capitalized until the underlying asset is ready for its intended use, at which point the interest costs are amortized as depreciation expense over the life of the underlying asset. We also capitalize certain direct and incremental costs associated with the validation effort required for licensing by regulatory agencies of new manufacturing equipment for the production of a commercially approved drug. These costs primarily include direct labor and material and are incurred in preparing the equipment for its intended use. The validation costs are either amortized over the life of the related equipment or expensed as cost of sales when the product produced in the validation process is sold.

In addition, we capitalize certain internal use computer software development costs. If the software is an integral part of production assets, these costs are included in machinery and equipment and are amortized on a straight-line basis over the estimated useful lives of the related software, which generally range from three to five years.

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We generally depreciate or amortize the cost of our property, plant and equipment using the straight-line method over the estimated useful lives of the respective assets, which are summarized as follows:

Asset Category	Useful Lives
Land	Not depreciated
Buildings	15 to 40 years
Leasehold Improvements	Lesser of the useful life or the term of the respective lease
Furniture and Fixtures	5 to 7 years
Machinery and Equipment	5 to 20 years
Computer Software and Hardware	3 to 5 years

When we dispose of property, plant and equipment, we remove the associated cost and accumulated depreciation from the related accounts on our consolidated balance sheet and include any resulting gain or loss in our consolidated statement of income.

Intangible Assets

Our intangible assets consist of acquired and in-licensed rights and patents, developed technology, out-licensed patents, in-process research and development acquired after January 1, 2009, trademarks and trade names. Our intangible assets are recorded at fair value at the time of their acquisition and are stated in our consolidated balance sheets net of accumulated amortization and impairments, if applicable.

Intangible assets related to acquired and in-licensed rights and patents, developed technology and out-licensed patents are amortized over their estimated useful lives using the economic consumption method if anticipated future revenues can be reasonably estimated. The straight-line method is used when revenues cannot be reasonably estimated. Amortization is recorded as amortization of acquired intangible assets in our consolidated statements of income.

Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from Elan Pharma International, Ltd (Elan), an affiliate of Elan Corporation, plc. Developed technology primarily relates to our AVONEX product, which was recorded in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. We amortize the intangible assets related to TYSABRI and AVONEX using the economic consumption method based on revenue generated from the products underlying the related intangible assets. An analysis of the anticipated lifetime revenues of TYSABRI and AVONEX is performed annually during our long range planning cycle, which is generally updated in the third quarter of each year, and whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of TYSABRI or AVONEX.

Intangible assets related to trademarks, trade names and in-process research and development prior to commercialization are not amortized because they have indefinite lives; however, they are subject to review for impairment. We review our intangible assets with indefinite lives for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Acquired In-process Research and Development (IPR&D)

Acquired IPR&D represents the fair value assigned to research and development assets that have not reached technological feasibility. The value assigned to acquired IPR&D is determined by estimating the costs to develop the acquired technology into commercially viable products, estimating the resulting revenue from the projects and discounting the net cash flows to present value. The revenue and costs projections used to value acquired IPR&D are, as applicable, reduced based on the probability of success of developing a new drug. Additionally, the projections consider the relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by us and our competitors. The rates utilized to discount the net cash flows to their present value are commensurate with the stage of development of the projects and uncertainties in the economic estimates used in the projections. Upon the acquisition of IPR&D, we complete an assessment of whether our acquisition constitutes the purchase of a single asset or a group of assets. We consider multiple factors in this assessment, including the nature of the technology acquired, the presence or absence of separate cash flows, the development process and stage of completion, quantitative significance and our rationale for entering into the transaction.

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If we acquire a business as defined under applicable accounting standards, then the acquired IPR&D is capitalized as an intangible asset. If we acquire an asset or group of assets that do not meet the definition of a business, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurred.

When performing our impairment assessment, we calculate the fair value using the same methodology as described above. If the carrying value of our acquired IPR&D exceeds its fair value, then the intangible asset is written-down to its fair value. Certain IPR&D programs have a fair value that is not significantly in excess of carrying value, including our program for the treatment of trigeminal neuralgia (TGN). Such programs could become impaired if assumptions used in determining the fair value change.

Goodwill

Goodwill represents the difference between the purchase price and the fair value of the identifiable tangible and intangible net assets when accounted for using the purchase method of accounting. Goodwill is not amortized, but reviewed for impairment. Goodwill is reviewed annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of the goodwill might not be recoverable.

We compare the fair value of our reporting unit to its carrying value. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of our reporting unit, then we would need to determine the implied fair value of our reporting unit’s goodwill. If the carrying value of our reporting unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference. As described in Note 24, Segment Information to these consolidated financial statements, we operate in one operating segment which we consider our only reporting unit.

Impairment of Long-Lived Assets

Long-lived assets to be held and used, including property, plant and equipment and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be recoverable.

Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written-down to their fair values. Long-lived assets to be disposed of are carried at fair value less costs to sell.

Contingent Consideration

The consideration for our acquisitions often includes future payments that are contingent upon the occurrence of a particular event. For acquisitions completed before January 1, 2009, we record contingent consideration resulting from a business combination when the contingency is resolved. For acquisitions that qualify as business combinations completed after January 1, 2009, we record an obligation for such contingent payments at fair value on the acquisition date. We estimate the fair value of contingent consideration obligations through valuation models that incorporate probability-adjusted assumptions related to the achievement of the milestones and thus likelihood of making related payments. We revalue these contingent consideration obligations each reporting period. Changes in the fair value of our contingent consideration obligations are recognized in our consolidated statements of income. Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to the discount rates, changes in the amount or timing of expected expenditures associated with product development, changes in the amount or timing of cash flows and reserves associated with products upon commercialization, changes in the assumed achievement or timing of any cumulative sales-based and development milestones, changes in the probability of certain clinical events and changes in the assumed probability associated with regulatory approval.

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Discount rates in our valuation models represent a measure of the credit risk associated with settling the liability. The period over which we discount our contingent obligations is based on the current development stage of the product candidates, our specific development plan for that product candidate adjusted for the probability of completing the development step, and when the contingent payments would be triggered. In estimating the probability of success, we utilize data regarding similar milestone events from several sources, including industry studies and our own experience. These fair value measurements are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions could have a material impact on the amount of contingent consideration expense we record in any given period.

Derivative Instruments and Hedging Activities

We recognize all derivative instruments as either assets or liabilities at fair value in our consolidated balance sheets. Changes in the fair value of derivatives are recorded each period in current earnings or accumulated other comprehensive income (loss), depending on whether a derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. We classify the cash flows from these instruments in the same category as the cash flows from the hedged items. We do not hold or issue derivative instruments for trading or speculative purposes.

We assess, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of the hedged items. We also assess hedge ineffectiveness on a quarterly basis and record the gain or loss related to the ineffective portion to current earnings. If we determine that a forecasted transaction is no longer probable of occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any related unrealized gain or loss on the contract is recognized in current earnings.

Translation of Foreign Currencies

The functional currency for most of our foreign subsidiaries is their local currency. For our non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign exchange rates for the period. Adjustments resulting from the translation of the financial statements of our foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income, a separate component of equity. For subsidiaries where the functional currency of the assets and liabilities differ from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect on the date assets were acquired while monetary assets and liabilities are translated at current rates of exchange as of the balance sheet date. Income and expense items are translated at the average foreign currency rates for the period. Translation adjustments of these subsidiaries are included in other income (expense), net, in our consolidated statements of income.

Royalty Cost of Sales

We make royalty payments to a number of third parties under license or purchase agreements associated with our acquisition of intellectual property. These royalty payments are typically calculated as a percentage (royalty rate) of the sales of our products in a particular year. That royalty rate may remain constant, increase or decrease within each year based on the total amount of sales during the annual period. Each quarterly period, we estimate our total royalty obligation for the full year and recognize the proportional amount as cost of sales based on actual quarterly sales as a percentage of full year estimated sales. For example, if the level of net sales in any calendar year increases the royalty rate within the year, we will record our cost of sales at an even rate over the year, based on the estimated blended royalty rate.

Accounting for Share-Based Compensation

Our share-based compensation programs grant awards that have included stock options, restricted stock units which vest based on stock performance known as market stock units (MSUs), performance-vested restricted stock units which settle in cash (CSPUs), time-vested restricted stock units (RSUs), performance-vested restricted stock units which can be settled in cash or shares of our common stock (PUs) at the sole discretion of the Compensation and Management Development Committee of the Board of Directors and shares issued under our employee stock purchase plan (ESPP). We charge the estimated fair value of awards against income over the requisite service period, which is generally the vesting period. Where awards are made with non-substantive vesting periods (for instance,

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where a portion of the award vests upon retirement eligibility), we estimate and recognize expense based on the period from the grant date to the date on which the employee is retirement eligible.

The fair values of our stock option grants are estimated as of the date of grant using a Black-Scholes option valuation model. The estimated fair values of the stock options are then expensed over the options’ vesting periods.

The fair values of our MSUs are estimated using a lattice model with a Monte Carlo simulation. We apply an accelerated attribution method to recognize share-based compensation expense over the applicable service period, net of estimated forfeitures, when accounting for our MSUs. The probability of actual shares expected to be earned is considered in the grant date valuation, therefore the expense is not adjusted to reflect the actual units earned.

The fair values of our RSUs are based on the market value of our stock on the date of grant. Compensation expense for RSUs is recognized straight-line over the applicable service period.

We apply an accelerated attribution method to recognize share-based compensation expense when accounting for our CSPUs and PUs and the fair value of the liability is remeasured at the end of each reporting period through expected settlement. Compensation expense associated with CSPUs and PUs are based upon the stock price and the number of units expected to be earned after assessing the probability that certain performance criteria will be met and the associated targeted payout level that is forecasted will be achieved, net of estimated forfeitures. Cumulative adjustments are recorded each quarter to reflect changes in the stock price and estimated outcome of the performance-related conditions until the date results are determined and settled.

The purchase price of common stock under our ESPP is equal to 85% of the lesser of (i) the fair market value per share of the common stock on the first business day of an offering period and (ii) the fair market value per share of the common stock on the purchase date. The fair value of the discounted purchases made under our ESPP is calculated using the Black-Scholes model. The fair value of the look-back provision plus the 15% discount is recognized as compensation expense over the 90 day purchase period.

Research and Development Expenses

Research and development expenses consist of upfront fees and milestones paid to collaborators and expenses incurred in performing research and development activities, which include compensation and benefits, facilities and overhead expenses, clinical trial expenses and fees paid to contract research organizations (CROs), clinical supply and manufacturing expenses, write-offs of inventory that was previously capitalized in anticipation of product launch and determined to no longer be realizable, and other outside expenses. Research and development expenses are expensed as incurred. Payments we make for research and development services prior to the services being rendered are recorded as prepaid assets on our consolidated balance sheets and are expensed as the services are provided. We also accrue the costs of ongoing clinical trials associated with programs that have been terminated or discontinued for which there is no future economic benefit at the time the decision is made to terminate or discontinue the program.

From time to time, we enter into development agreements in which we share expenses with a collaborative partner. We record payments received from our collaborative partners for their share of the development costs as a reduction of research and development expense, except as discussed in Note 19, Collaborative and Other Relationships to these consolidated financial statements. Because an initial indication has been approved for both RITUXAN and GAZYVA, expenses incurred by Genentech in the ongoing development of RITUXAN and GAZYVA are not recorded as research and development expense, but rather reduce our share of profits recorded as a component of revenues from anti-CD20 therapeutic programs.

For collaborations with commercialized products, if we are the principal, we record revenue and the corresponding operating costs in their respective line items in our consolidated statements of income. If we are not the principal, we record operating costs as a reduction of revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses are primarily comprised of compensation and benefits associated with sales and marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising and legal expenses and other general and administrative costs.

Advertising costs are expensed as incurred. For the years ended December 31, 2016, 2015 and 2014, advertising costs totaled $106.3 million, $108.6 million and $92.9 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Income Taxes

The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.

All tax effects associated with intercompany transfers of assets in our consolidated group, both current and deferred, are recorded as a prepaid tax or deferred charge and recognized through the consolidated statement of income when the asset transferred is sold to a third party or otherwise recovered through amortization of the asset's remaining economic life. If the asset transferred becomes impaired, for example through the discontinuation of a research program, we will expense any remaining deferred charge or prepaid tax.

We account for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions. We evaluate uncertain tax positions on a quarterly basis and consider various factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.

Contingencies

We are currently involved in various claims and legal proceedings. Loss contingency provisions are recorded if the potential loss from any claim, asserted or unasserted, or legal proceeding is considered probable and the amount can be reasonably estimated or a range of loss can be determined. These accruals represent management’s best estimate of probable loss. Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. On a quarterly basis, we review the status of each significant matter and assess its potential financial exposure. Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of uncertainties related to these matters, accruals are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may change our estimates. These changes in the estimates of the potential liabilities could have a material impact on our consolidated results of operations and financial position.

Earnings per Share

Basic earnings per share is computed by dividing undistributed net income attributable to Biogen Inc. by the weighted-average number of common shares outstanding during the period.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, we do not believe that the impact of recently issued standards that are not yet effective will have a material impact on our financial position or results of operations upon adoption.

In May 2014 the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The FASB has subsequently issued the following amendments to ASU 2014-09 which have the same effective date and transition date of January 1, 2018:

•	In August 2015 the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

•	In March 2016 the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations.

•	In April 2016 the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations and licensing implementation guidance.

•	In May 2016 the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on collectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers.

•

In December 2016 the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which amends certain narrow aspects of the guidance issued in ASU 2014-09 including guidance related to the disclosure of remaining performance obligations and prior-period performance obligations, as well as other amendments to the guidance on loan guarantee fees, contract costs, refund liabilities, advertising costs and the clarification of certain examples.

We are currently evaluating the method of adoption and the potential impact that Topic 606 may have on our financial position and results of operations.

In April 2015 the FASB issued ASU No. 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. Under this standard, if a cloud computing arrangement includes a software license, the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. We adopted this standard as of January 1, 2016, which did not have an impact on our financial position or results of operations.

In July 2015 the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. The new standard applies only to inventory for which cost is determined by methods other than last-in, first-out and the retail inventory method, which includes inventory that is measured using first-in, first-out or average cost. Inventory within the scope of this standard is required to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. We adopted this standard as of January 1, 2016, which did not have an impact on our financial position or results of operations.

In September 2015 the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The new standard requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined and sets forth new disclosure requirements related to the adjustments. We adopted this standard as of January 1, 2016, which did not have an impact on our financial position or results of operations.

In January 2016 the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This new standard amends certain aspects of accounting and disclosure requirements of financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in our results of operations. This new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. This new standard will be effective for us on January 1, 2018. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842). This new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. This new standard will be effective for us on January 1, 2019. The adoption of this standard is not expected to have a material impact on our net financial position, but will impact the amount of our assets and liabilities. We are currently evaluating the potential impact that this standard may have on our results of operations.

In March 2016 the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments. This new standard simplifies the embedded derivative analysis for debt instruments containing contingent call or put options by removing the requirement to assess whether a contingent event is related to interest rates or credit risks. This new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have an impact on our financial position or results of operations.

In March 2016 the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting. This new standard eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an adjustment must be made to the investment, results of operations and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment has been held. This new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

In March 2016 the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This new standard requires recognition of the income tax effects of vested or settled awards in the income statement and involves several other aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This new standard will be effective for us on January 1, 2017. The adoption of this standard is not expected to have a material impact on our financial position, results of operations or statements of cash flows upon adoption.

In June 2016 the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This new standard changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This new standard will be effective for us on January 1, 2020. The adoption of this standard is not expected to have a material impact on our financial position or results of operations.

In August 2016 the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This new standard clarifies certain aspects of the statement of cash flows, including the classification of debt prepayment or debt extinguishment costs or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, distributions received from equity method investees and beneficial interests in securitization transactions. This new standard also clarifies that an entity should determine each separately identifiable source of use within the cash receipts and payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, the appropriate classification should depend on the activity that is likely to be the predominant source or use of cash flows for the item. This new standard will be effective for us on January 1, 2018. The adoption of this standard is not expected to have a material impact on our statements of cash flows upon adoption.

In October 2016 the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. This new standard eliminates the exception for an intra-entity transfer of an asset other than inventory. Under the new standard, entities should recognize the income tax consequences on an intra-entity transfer of an asset other than inventory when the transfer occurs. This new standard will be effective for us on January 1, 2018 and will be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are currently evaluating the potential impact this standard may have on our financial position and results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In January 2017 the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This new standard clarifies the definition of a business and provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This new standard will be effective for us on January 1, 2018. However, we have adopted this standard as of January 1, 2017, with prospective application to any business development transaction.

2. Acquisitions

Convergence Pharmaceuticals

On February 12, 2015, we completed our acquisition of all of the outstanding stock of Convergence Pharmaceuticals (Convergence), a clinical-stage biopharmaceutical company with a focus on developing product candidates for neuropathic pain. Convergence’s lead candidate was a Phase 2 clinical candidate BIIB074 (CNV1014802), which had demonstrated clinical activity in proof-of-concept studies for TGN. Additionally, BIIB074 had potential applicability in several other neuropathic pain states, including lumbosacral radiculopathy and erythromelalgia.

The purchase price consisted of a $200.1 million cash payment at closing, plus contingent consideration in the form of development and approval milestones up to a maximum of $450.0 million, of which $350.0 million was associated with the development and approval of BIIB074 for the treatment of TGN. The acquisition was funded from our existing cash on hand and was accounted for as the acquisition of a business. In addition to obtaining the rights to BIIB074 and additional product candidates in preclinical development, we retained the services of key employees of Convergence.

In connection with our acquisition of Convergence, we recorded a liability of $274.5 million representing the fair value of the contingent consideration. This amount was estimated through a valuation model that incorporated industry-based probability adjusted assumptions relating to the achievement of these milestones and thus the likelihood of making the contingent payments. This fair value measurement was based upon significant inputs not observable in the market and therefore represented a Level 3 measurement.

The purchase price, as adjusted, consisted of the following:

(In millions)
Cash portion of consideration	$	200.1
Contingent consideration	274.5
Total purchase price	$	474.6

During the second quarter of 2015 we adjusted our preliminary estimate of the fair value of the assets acquired and contingent consideration as of the date of acquisition as a result of finalizing the purchase price accounting. This resulted in an increase in the value of our estimated contingent consideration and goodwill by $36.0 million, respectively. Our revised purchase price allocation is reflected in the chart below. Our purchase price allocation is complete.

Subsequent changes in the fair value of the contingent consideration obligation will be recognized as adjustments to contingent consideration and reflected in our consolidated statements of income. In the fourth quarter of 2016 a $50.0 million milestone related to BIIB074 in an additional neuropathic pain indication was earned and paid, resulting in a reduction to the contingent consideration. For additional information related to the fair value of this obligation, please read Note 7, Fair Value Measurements to these consolidated financial statements.

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BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the estimated fair values of the separately identifiable assets acquired and liabilities assumed as of February 12, 2015, as adjusted:

(In millions)
In-process research and development	$	424.6
Other intangible assets	7.6
Goodwill	128.3
Deferred tax liability	(84.9		)
Other, net	(1.0		)
Total purchase price	$	474.6

Our estimate of the fair value of the IPR&D programs acquired was determined through a probability adjusted discounted cash flow analysis utilizing a discount rate of 11%. This valuation was primarily driven by the value associated with the lead candidate, BIIB074, which is in development for the treatment of TGN and was expected to be completed no earlier than 2020, at a remaining cost of approximately $145.0 million. The fair value associated with BIIB074 for the treatment of TGN was $200.0 million. We recorded additional IPR&D assets related to the use of BIIB074 in two additional neuropathic pain indications, with a total estimated value of $220.0 million. The remaining cost of development for these two indications was approximately $415.0 million, with an expected completion date of no earlier than 2021. These fair value measurements were based on significant inputs not observable in the market and thus represented Level 3 fair value measurements.

We attributed the goodwill recognized to the Convergence workforce's expertise in chronic pain research and clinical development and to establishing a deferred tax liability for the acquired IPR&D intangible assets which had no tax basis. The goodwill was not tax deductible.

Pro forma results of operations would not be materially different as a result of the acquisition of Convergence and therefore are not presented. Subsequent to the acquisition date, our results of operations include the results of operations of Convergence.

3. Restructuring, Business Transformation and Other Cost Saving Initiatives

2015 Cost Saving Initiatives

2015 Restructuring Charges

On October 21, 2015, we announced a corporate restructuring, which included the termination of certain pipeline programs and an 11% reduction in workforce. Under this restructuring, cash payments were estimated to total approximately $120.0 million, of which $15.9 million were related to previously accrued 2015 incentive compensation, resulting in net restructuring charges totaling approximately $102.0 million. These amounts were substantially paid by the end of 2016.

For the year ended December 31, 2016, we recognized total net restructuring charges of $8.0 million. We previously recognized $93.4 million of restructuring charges in our consolidated statements of income during the fourth quarter of 2015. Our restructuring reserve is included in accrued expenses and other in our consolidated balance sheets.

The following table summarizes the charges and spending related to our 2015 restructuring program during 2016:

(In millions)	Workforce Reduction				Pipeline Programs				Total
Restructuring reserve as of December 31, 2015	$	33.7			$	3.6			$	37.3
Expense	4.9				5.4				10.3
Payments	(31.2		)		(9.0		)		(40.2		)
Adjustments to previous estimates, net	(5.2		)		2.9				(2.3		)
Restructuring reserve as of December 31, 2016	$	2.2			$	2.9			$	5.1

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2016 Organizational Changes and Cost Saving Initiatives

2016 Restructuring Charges

During the third quarter of 2016 we initiated cost saving measures primarily intended to realign our organizational structure due to the changes in roles and workforce resulting from our decision to spin off our hemophilia business, and to achieve further targeted cost reductions. For the year ended December 31, 2016, we recognized charges totaling $17.7 million related to this effort, which are in addition to, and separate from, the 2015 corporate restructuring described above. These amounts, which were substantially incurred and paid by the end of 2016, are primarily related to severance and are reflected in restructuring charges in our consolidated statements of income.

Cambridge, MA Manufacturing Facility

In June 2016 following an evaluation of our current and future manufacturing capabilities and capacity needs, we determined that we intend to vacate and cease manufacturing in our 67,000 square foot small-scale biologics manufacturing facility in Cambridge, MA and also vacate our 46,000 square foot warehouse space in Somerville, MA.

In December 2016 we subleased our rights to the manufacturing facility in Cambridge, MA to Brammer Bio MA, LLC (Brammer). Brammer also purchased from us certain manufacturing equipment, leasehold improvements and other assets in exchange for shares of Brammer common LLC interests and assumed manufacturing operations effective January 1, 2017. In December 2016 we also closed and vacated our warehouse space in Somerville, MA.

Our departure from these facilities shortened the expected useful lives of certain leasehold improvements and other assets at these facilities. As a result, we recorded additional depreciation expense to reflect the assets' new shorter useful lives. For the year ended December 31, 2016, we recognized approximately $45.5 million of this additional depreciation, which was recorded as cost of sales in our consolidated statements of income.

Under the terms of the agreement, Brammer will also provide manufacturing and other transition and support services to us.

In the fourth quarter of 2016 we recognized charges totaling $7.4 million for severance costs related to certain employees separated from Biogen in connection with this transaction. These amounts will be substantially incurred and paid by the end of first quarter of 2017 and are reflected in restructuring charges in our consolidated statements of income.

4. Reserves for Discounts and Allowances

An analysis of the change in reserves for discounts and allowances is summarized as follows:

(In millions)	Discounts				Contractual Adjustments				Returns				Total
2016
Beginning balance	$	56.1			$	548.7			$	57.9			$	662.7
Current provisions relating to sales in current year	592.6				2,044.5				30.9				2,668.0
Adjustments relating to prior years	(1.4		)		1.5				(16.8		)		(16.7		)
Payments/returns relating to sales in current year	(522.5		)		(1,576.0		)		(1.0		)		(2,099.5		)
Payments/returns relating to sales in prior years	(53.2		)		(536.0		)		(19.8		)		(609.0		)
Ending balance	$	71.6			$	482.7			$	51.2			$	605.5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(In millions)	Discounts				Contractual Adjustments				Returns				Total
2015
Beginning balance	$	47.6			$	387.1			$	49.1			$	483.8
Current provisions relating to sales in current year	459.7				1,732.1				37.6				2,229.4
Adjustments relating to prior years	(1.3		)		(16.3		)		(14.7		)		(32.3		)
Payments/returns relating to sales in current year	(405.9		)		(1,258.1		)		(2.6		)		(1,666.6		)
Payments/returns relating to sales in prior years	(44.0		)		(296.1		)		(11.5		)		(351.6		)
Ending balance	$	56.1			$	548.7			$	57.9			$	662.7

(In millions)	Discounts				Contractual Adjustments				Returns				Total
2014
Beginning balance	$	47.0			$	345.5			$	33.7			$	426.2
Current provisions relating to sales in current year	347.3				1,265.4				39.1				1,651.8
Adjustments relating to prior years	(1.0		)		(28.5		)		13.5				(16.0		)
Payments/returns relating to sales in current year	(299.7		)		(933.4		)		(4.1		)		(1,237.2		)
Payments/returns relating to sales in prior years	(46.0		)		(261.9		)		(33.1		)		(341.0		)
Ending balance	$	47.6			$	387.1			$	49.1			$	483.8

The total revenue-related reserves above, included in our consolidated balance sheets, are summarized as follows:

	As of December 31,
(In millions)	2016				2015
Reduction of accounts receivable	$	166.9			$	144.6
Component of accrued expenses and other	438.6				518.1
Total revenue-related reserves	$	605.5			$	662.7

5. Inventory

The components of inventory are summarized as follows:

	As of December 31,
(In millions)	2016				2015
Raw materials	$	170.4			$	213.0
Work in process	698.7				577.6
Finished goods	170.3				143.0
Total inventory	$	1,039.4			$	933.6
Balance Sheet Classification:
Inventory	$	1,001.6			$	893.4
Investments and other assets	37.8				40.2
Total inventory	$	1,039.4			$	933.6

Long-term inventory, which primarily consists of work in process, is included in investments and other assets in our consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of December 31, 2015, our inventory included $24.7 million associated with our ZINBRYTA program, $24.2 million associated with our FLIXABI program and $18.4 million associated with our BENEPALI program, which had been capitalized in advance of regulatory approval. The European Commission (EC) approved the marketing authorization applications for BENEPALI and FLIXABI, two anti-tumor necrosis factor (TNF) biosimilars, for marketing in the E.U. in January 2016 and May 2016, respectively. In addition, ZINBRYTA was approved for the treatment of relapsing forms of MS in the U.S. in May 2016 and in the E.U. in July 2016. For information on our pre-approval inventory policy, please read Note 1, Summary of Significant Accounting Policies to these consolidated financial statements

Inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons are charged to cost of sales, and totaled $48.2 million, $41.9 million and $50.6 million for the years ended December 31, 2016, 2015 and 2014, respectively.

6. Intangible Assets and Goodwill

Intangible Assets

Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:

			As of December 31, 2016												As of December 31, 2015
(In millions)	Estimated Life		Cost				Accumulated Amortization				Net				Cost				Accumulated Amortization				Net
Out-licensed patents	13-23 years		$	543.3			$	(523.6	)		$	19.7			$	543.3			$	(506.0	)		$	37.3
Developed technology	15-23 years		3,005.3				(2,634.3		)		371.0				3,005.3				(2,552.9		)		452.4
In-process research and development	Indefinite until commercialization		648.0				—				648.0				730.5				—				730.5
Trademarks and trade names	Indefinite		64.0				—				64.0				64.0				—				64.0
Acquired and in-licensed rights and patents	6-18 years		3,481.7				(776.1		)		2,705.6				3,303.2				(502.3		)		2,800.9
Total intangible assets			$	7,742.3			$	(3,934.0	)		$	3,808.3			$	7,646.3			$	(3,561.2	)		$	4,085.1

Amortization of acquired intangible assets totaled $385.6 million, $382.6 million and $489.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Amortization of acquired intangible assets during 2016 included impairment charges of $12.2 million related to two of our IPR&D intangible assets. Amortization of acquired intangible assets during 2014 included impairment charges of $34.7 million related to one of our out-licensed patents and $16.2 million related to one of our IPR&D intangible assets.

Out-licensed Patents

Out-licensed patents to third-parties primarily relate to patents acquired in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. During 2014 we recorded a charge of $34.7 million related to the impairment of one of our out-licensed patents to reflect a change in its estimated fair value due to a change in the underlying competitive market for that product. The charge was included in amortization of acquired intangible assets in our consolidated statements of income. The fair value of the intangible asset was based on a discounted cash flow calculated using Level 3 fair value measurements and inputs including estimated revenues. There were no impairment charges related to our out-licensed patents during 2016 or 2015.

Developed Technology

Developed technology primarily relates to our AVONEX product, which was recorded in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. The net book value of this asset as of December 31, 2016, was $363.3 million.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

IPR&D

IPR&D represents the fair value assigned to research and development assets that we acquire and have not reached technological feasibility at the date of acquisition. Upon commercialization, we will determine the estimated useful life. In connection with our acquisition of Convergence in February 2015, we acquired IPR&D programs with an estimated fair value of $424.6 million. This amount has and will be adjusted for foreign exchange rate fluctuations. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.

An analysis of anticipated lifetime revenues and anticipated development costs is performed annually during our long- range planning cycle, which was updated in the third quarter of 2016. This analysis is based upon certain assumptions that we evaluate on a periodic basis, including anticipated future product sales, the expected impact of changes in the amount of development costs and the probabilities of our programs succeeding, the introduction of new products by our competitors and changes in our commercial and pipeline product candidates.

During the fourth quarter of 2016 we terminated our collaboration agreements with Rodin Therapeutics, Inc. and Ataxion Inc., resulting in impairment losses of $8.7 million and $3.5 million, respectively, reflecting the full value of the assets recorded upon entering into the collaboration agreements. These impairment losses are included in amortization of acquired intangible assets in our consolidated statements of income.

During the third quarter of 2014 we updated the probabilities of success related to the early stage programs acquired through our recent acquisitions. The change in probability of success, combined with a delay in one of the projects, resulted in an impairment loss of $16.2 million in one of our IPR&D assets during 2014. This impairment is included in amortization of acquired intangible assets in our consolidated statements of income.

Acquired and In-licensed Rights and Patents

Acquired and in-licensed rights and patents primarily relate to our acquisition of all remaining rights to TYSABRI from Elan Corporation plc (Elan). The net book value of this asset as of December 31, 2016, was $2,493.2 million.

The net change in acquired and in-licensed rights and patents during the year ended December 31, 2016, reflects:

•	$60.0 million milestone payment due to Ionis Pharmaceuticals, Inc. (Ionis) for the approval of SPINRAZA in the U.S. in December 2016;

$50.0 million in total milestone payments due to Samsung Bioepis, which became payable upon the approval of BENEPALI and FLIXABI in the E.U. in January 2016 and May 2016, respectively;

•	$32.0 million in total milestone payments due to AbbVie, Inc. (AbbVie), which became payable upon the approval of ZINBRYTA in the U.S. in May 2016 and the E.U. in July 2016; and

•	$26.5 million upon the approval of ALPROLIX in the E.U. in May 2016 which is comprised of a $20.0 million contingent payment due to the former owners of Syntonix Pharmaceuticals, Inc. (Syntonix) and $6.5 million related to the establishment of a corresponding deferred tax liability.

For additional information on our relationships with Samsung Bioepis, AbbVie and Ionis, please read Note 19, Collaborative and Other Relationships to these consolidated financial statements.

Estimated Future Amortization of Intangible Assets

Our amortization expense is based on the economic consumption of intangible assets. Our most significant intangible assets are related to our AVONEX and TYSABRI products. Annually, during our long-range planning cycle, we perform an analysis of anticipated lifetime revenues of AVONEX and TYSABRI. This analysis is also updated whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of either product.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our most recent long range planning cycle was completed in the third quarter of 2016. Based upon this analysis, the estimated future amortization of acquired intangible assets is expected to be as follows:

(In millions)	As of December 31, 2016
2017	$	334.8
2018	312.7
2019	295.2
2020	259.7
2021	242.8

Goodwill

The following table provides a roll forward of the changes in our goodwill balance:

	As of December 31,
(In millions)	2016				2015
Goodwill, beginning of year	$	2,663.8			$	1,760.2
Increase to goodwill	1,026.9				908.1
Other	(21.4		)		(4.5		)
Goodwill, end of year	$	3,669.3			$	2,663.8

The increase in goodwill during 2016 was related to $1.2 billion in contingent milestones achieved (exclusive of $173.1 million in tax benefits) and payable to the former shareholders of Fumapharm AG or holders of their rights. Other includes changes related to foreign exchange rate fluctuations. The increase in goodwill during 2015 was related to $900.0 million in contingent milestones achieved (exclusive of $120.2 million in tax benefits) and payable to the former shareholders of Fumapharm AG or holders of their rights and $128.3 million related to our acquisition of Convergence.

For additional information related to future contingent payments to the former shareholders of Fumapharm AG or holders of their rights, please read Note 21, Commitments and Contingencies to these consolidated financial statements. For additional information related to our acquisition of Convergence, please read Note 2, Acquisitions to these consolidated financial statements.

As of December 31, 2016, we had no accumulated impairment losses related to goodwill.

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BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7. Fair Value Measurements

The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:

(In millions)	As of December 31, 2016				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	2,039.6			$	—			$	2,039.6			$	—
Marketable debt securities:
Corporate debt securities	2,663.8				—				2,663.8				—
Government securities	2,172.5				—				2,172.5				—
Mortgage and other asset backed securities	561.7				—				561.7				—
Marketable equity securities	24.9				24.9				—				—
Derivative contracts	61.0				—				61.0				—
Plan assets for deferred compensation	34.5				—				34.5				—
Total	$	7,558.0			$	24.9			$	7,533.1			$	—
Liabilities:
Derivative contracts	$	13.6			$	—			$	13.6			$	—
Contingent consideration obligations	467.6				—				—				467.6
Total	$	481.2			$	—			$	13.6			$	467.6

(In millions)	As of December 31, 2015				Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	909.5			$	—			$	909.5			$	—
Marketable debt securities:
Corporate debt securities	1,510.9				—				1,510.9				—
Government securities	2,875.9				—				2,875.9				—
Mortgage and other asset backed securities	494.1				—				494.1				—
Marketable equity securities	37.5				37.5				—				—
Derivative contracts	27.2				—				27.2				—
Plan assets for deferred compensation	40.1				—				40.1				—
Total	$	5,895.2			$	37.5			$	5,857.7			$	—
Liabilities:
Derivative contracts	$	14.7			$	—			$	14.7			$	—
Contingent consideration obligations	506.0				—				—				506.0
Total	$	520.7			$	—			$	14.7			$	506.0

The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services. For a description of our validation procedures related to prices provided by third-party pricing services, refer to Note 1, Summary of Significant Accounting Policies: Fair Value Measurements, to these consolidated financial statements.

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BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Debt Instruments

The fair values of our debt instruments, which are Level 2 liabilities, are summarized as follows:

	As of December 31,
(In millions)	2016				2015
Notes payable to Fumedica	$	6.1			$	9.4
6.875% Senior Notes due March 1, 2018	583.7				602.6
2.900% Senior Notes due September 15, 2020	1,521.5				1,497.5
3.625% Senior Notes due September 15, 2022	1,026.6				1,014.2
4.050% Senior Notes due September 15, 2025	1,796.0				1,764.6
5.200% Senior Notes due September 15, 2045	1,874.5				1,757.6
Total	$	6,808.4			$	6,645.9

The fair value of our notes payable to Fumedica was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair values of each of our series of Senior Notes were determined through market, observable, and corroborated sources. For additional information related to our debt instruments, please read Note 11, Indebtedness to these consolidated financial statements.

Contingent Consideration Obligations

The following table provides a roll forward of the fair values of our contingent consideration obligations which includes Level 3 measurements:

	As of December 31,
(In millions)	2016				2015
Fair value, beginning of year	$	506.0			$	215.5
Additions	—				274.5
Changes in fair value	14.8				30.5
Payments and other	(53.2		)		(14.5		)
Fair value, end of year	$	467.6			$	506.0

As of December 31, 2016 and 2015, approximately $246.8 million and $301.3 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and other. Payments and other for 2016 includes $7.9 million of a Convergence milestone converted to a short-term obligation under the terms of the acquisition agreement.

There were no changes in valuation techniques or transfers between fair value measurement levels during the years ended December 31, 2016 and 2015. The fair values of the intangible assets and contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenues and probabilities of success. For additional information related to the valuation techniques and inputs utilized in valuation of our financial assets and liabilities, please read Note 1, Summary of Significant Accounting Policies to these consolidated financial statements.

Convergence

In connection with our acquisition of Convergence in February 2015 we recorded a contingent consideration obligation of $274.5 million. This valuation was based on probability weighted net cash outflow projections of $450.0 million, discounted using a rate of 2.0%, which was the estimated cost of debt financing for market participants. This liability reflected the revised estimate from the date of acquisition for our initial clinical development plans, resulting probabilities of success and the timing of certain milestone payments. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.

As of December 31, 2016 and 2015, the fair value of this contingent consideration obligation was $258.9 million and $297.5 million, respectively. Our most recent valuation was determined based upon probability weighted net cash flow projections of $400.0 million, discounted using a rate of 2.7%, which is a measure of the credit risk associated with settling the liability.

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BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For 2016 compared to 2015, the net decrease in the fair value of this obligation was primarily due to achievement of a $50.0 million milestone related to a second indication, partially offset by changes in the discount rate and an increase in the probability of success related to the achievement of certain developmental milestones. Approximately $148.4 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within one year.

Stromedix Inc.

In connection with our acquisition of Stromedix Inc. (Stromedix) in March 2012 we recorded a contingent consideration obligation of $122.2 million. As of December 31, 2016 and 2015, the fair value of this contingent consideration obligation was $133.2 million and $131.5 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $419.0 million, discounted using a rate of 2.2%, which is a measure of the credit risk associated with settling the liability.

For 2016 compared to 2015, the net increase in the fair value of this obligation was primarily due to changes in the discount rate, partially offset by changes in the expected timing related to the achievement of certain remaining developmental milestones. Approximately $56.9 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within one year.

Biogen Idec International Neuroscience GmbH

In connection with our acquisition of Biogen Idec International Neuroscience GmbH (BIN), formerly Panima Pharmaceuticals AG (Panima), in December 2010 we recorded a contingent consideration obligation of $81.2 million. As of December 31, 2016 and 2015, the fair value of this contingent consideration obligation was $75.5 million and $77.0 million, respectively. Our most recent valuation was determined based upon probability weighted net cash outflow projections of $361.7 million, discounted using a rate of 2.7%, which is a measure of the credit risk associated with settling the liability.

For 2016 compared to 2015, the net decrease in the fair value of this obligation was primarily due to payment of $3.3 million in developmental milestones, partially offset by changes in the discount rate. Approximately $15.5 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within one year.

Acquired IPR&D

In connection with our acquisition of Convergence, we also allocated $424.6 million of the total purchase price to acquired IPR&D, which was capitalized as an intangible asset. The amount allocated to acquired IPR&D was based on significant inputs not observable in the market and thus represented a Level 3 fair value measurement. This estimate was also adjusted from our preliminary estimate as of the date of acquisition to reflect revised estimates to our initial clinical development plans, resulting probabilities of success and the timing of certain milestone payments. These assets will be tested for impairment annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.

8. Financial Instruments

The following table summarizes our financial assets with maturities of less than 90 days from the date of purchase included in cash and cash equivalents on the accompanying consolidated balance sheet:

	As of December 31,
(In millions)	2016				2015
Commercial paper	$	31.0			$	21.9
Overnight reverse repurchase agreements	—				134.7
Money market funds	741.7				673.8
Short-term debt securities	1,266.9				79.1
Total	$	2,039.6			$	909.5

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying values of our commercial paper, including accrued interest, overnight reverse repurchase agreements, money market funds and our short-term debt securities approximate fair value due to their short term maturities. Our overnight reverse repurchase agreements were collateralized with agency-guaranteed mortgage-backed securities and represented approximately 0.7% of total assets as of December 31, 2015.

The following tables summarize our marketable debt and equity securities, classified as available for sale:

As of December 31, 2016 (In millions)	Fair Value				Gross Unrealized Gains				Gross Unrealized Losses				Amortized Cost
Corporate debt securities
Current	$	1,408.6			$	0.2			$	(0.6	)		$	1,409.0
Non-current	1,255.2				1.2				(4.7		)		1,258.7
Government securities
Current	1,156.0				0.2				(0.3		)		1,156.1
Non-current	1,016.5				0.5				(3.4		)		1,019.4
Mortgage and other asset backed securities
Current	4.0				—				—				4.0
Non-current	557.7				0.8				(2.2		)		559.1
Total marketable debt securities	$	5,398.0			$	2.9			$	(11.2	)		$	5,406.3
Marketable equity securities, non-current	$	24.9			$	0.7			$	(9.3	)		$	33.5

As of December 31, 2015 (In millions)	Fair Value				Gross Unrealized Gains				Gross Unrealized Losses				Amortized Cost
Corporate debt securities
Current	$	394.3			$	—			$	(0.5	)		$	394.8
Non-current	1,116.6				0.1				(4.1		)		1,120.6
Government securities
Current	1,723.4				0.1				(1.1		)		1,724.4
Non-current	1,152.5				—				(3.1		)		1,155.6
Mortgage and other asset backed securities
Current	2.8				—				—				2.8
Non-current	491.3				0.1				(1.8		)		493.0
Total marketable debt securities	$	4,880.9			$	0.3			$	(10.6	)		$	4,891.2
Marketable equity securities, non-current	$	37.5			$	9.2			$	—			$	28.3

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, 2016								As of December 31, 2015
(In millions)	Estimated Fair Value				Amortized Cost				Estimated Fair Value				Amortized Cost
Due in one year or less	$	2,568.6			$	2,569.1			$	2,120.5			$	2,122.0
Due after one year through five years	2,552.6				2,559.7				2,575.9				2,583.9
Due after five years	276.8				277.5				184.5				185.3
Total available-for-sale securities	$	5,398.0			$	5,406.3			$	4,880.9			$	4,891.2

The average maturity of our marketable debt securities available-for-sale as of December 31, 2016 and 2015 was 12 months and 16 months, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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)	2016				2015				2014
Proceeds from maturities and sales	$	7,378.9			$	4,063.0			$	2,718.9
Realized gains	$	3.3			$	1.5			$	0.7
Realized losses	$	4.3			$	3.5			$	0.5

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. Realized losses for the year ended December 31, 2014, primarily relate to sales of agency mortgage-backed securities and government securities.

Strategic Investments

As of December 31, 2016 and 2015, our strategic investment portfolio was comprised of investments totaling $99.9 million and $96.0 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.

9. 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, 2016 and 2015, had durations of 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 revenue when the sale of product in the currency being hedged is recognized and, beginning in the fourth quarter of 2015, 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.

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)	2016				2015
Euro	$	871.7			$	945.5
Swiss francs	—				80.8
Canadian dollar	—				76.7
Total foreign currency forward contracts	$	871.7			$	1,103.0

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The 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 gains of $49.8 million, $1.8 million and $72.1 million for the years ended December 31, 2016, 2015 and 2014, respectively. We expect all contracts to be settled over the next 18 months and 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, 2016 and 2015, 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 on our consolidated statements of income:

For the Years Ended December 31,
Net Gains/(Losses) Reclassified from AOCI into Net Income (Effective Portion)														Net Gains/(Losses) Recognized into Net Income (Ineffective Portion)
Location		2016				2015				2014				Location		2016				2015				2014
Revenue		$	5.3			$	173.2			$	6.8			Other income (expense)		$	2.9			$	4.9			$	(1.5	)
Operating expenses		$	(1.5	)		$	—			$	—			Other income (expense)		$	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 11, Indebtedness, 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.

Interest Rate Swap Contracts

In connection with the issuance of our 2.90% Senior Notes, as described in Note 11, Indebtedness, we entered into interest rate swaps with an aggregate notional amount of $675.0 million, which expire on September 15, 2020. The interest rate swap contracts are designated as hedges of the fair value changes in the 2.90% Senior Notes attributable to changes in interest rates. Since the specific terms and notional amount of the swaps match the debt being hedged, it is assumed to be a highly effective hedge and all changes in the fair value of the swaps are recorded as a component of the 2.90% Senior Notes with no net impact recorded in income. Any net interest payments made or received on the interest rate swap contracts are recognized as a component of interest expense in our consolidated statements of income.

Foreign Currency Forward Contracts - Other Derivatives

We also enter into other foreign currency forward contracts, usually with durations of one month or less, to mitigate the foreign currency risk related to certain balance sheet positions. We have not elected hedge accounting for these transactions.

The aggregate notional amount of these outstanding foreign currency contracts was $902.1 million and $721.0 million as of December 31, 2016 and 2015, respectively. Net losses of $29.2 million, $23.8 million and $15.5 million related to these contracts were recognized as a component of other income (expense), net, for the years ended December 31, 2016, 2015 and 2014, respectively.

Summary of Derivatives

While certain of our derivatives are subject to netting arrangements with our counterparties, we do not offset derivative assets and liabilities in our consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the fair value and presentation in our consolidated balance sheets of our outstanding derivatives including those designated as hedging instruments:

(In millions)	Balance Sheet Location	Fair Value As of December 31, 2016
Hedging Instruments:
Asset derivatives	Other current assets	$	50.4
	Investments and other assets	$	6.6
Liability derivatives	Other long-term liabilities	$	4.6
Other Derivatives:
Asset derivatives	Other current assets	$	4.0
Liability derivatives	Accrued expenses and other	$	9.0

(In millions)	Balance Sheet Location	Fair Value As of December 31, 2015
Hedging Instruments:
Asset derivatives	Other current assets	$	16.6
	Investments and other assets	$	0.3
Liability derivatives	Accrued expenses and other	$	10.2
	Other long-term liabilities	$	2.5
Other Derivatives:
Asset derivatives	Other current assets	$	10.3
Liability derivatives	Accrued expenses and other	$	2.0

10. Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost, net of accumulated depreciation. Components of property, plant and equipment, net are summarized as follows:

	As of December 31,
(In millions)	2016				2015
Land	$	137.8			$	74.7
Buildings	1,107.8				1,035.6
Leasehold improvements	123.7				166.6
Machinery and equipment	1,105.8				1,079.6
Computer software and hardware	746.8				647.1
Furniture and fixtures	60.6				72.9
Construction in progress	658.6				441.2
Total cost	3,941.1				3,517.7
Less: accumulated depreciation	(1,439.3		)		(1,330.1		)
Total property, plant and equipment, net	$	2,501.8			$	2,187.6

Depreciation expense totaled $309.3 million, $217.9 million and $198.4 million for 2016, 2015 and 2014, respectively.

For 2016, 2015 and 2014, we capitalized interest costs related to construction in progress totaling approximately $12.9 million, $10.4 million and $6.4 million, respectively.

Solothurn, Switzerland Facility

During the first quarter of 2016 we closed on the purchase of land in Solothurn, Switzerland for 64.4 million Swiss Francs (approximately $62.5 million). We are building a biologics manufacturing facility on this land in the Commune of Luterbach over the next several years. As of December 31, 2016 and 2015, we had approximately $481.5 million and $99.0 million, respectively, capitalized as construction in progress related to the construction of this facility.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Research Triangle Park Facility Purchase

On August 24, 2015, we purchased from Eisai, Inc. (Eisai) its drug product manufacturing facility and supporting infrastructure in Research Triangle Park (RTP), North Carolina for $104.8 million. The purchase price consisted of $58.6 million for buildings, $25.9 million for machinery and equipment and $20.3 million for land.

On August 24, 2015, we also amended our existing 10-year lease related to Eisai's oral solid dose products manufacturing facility in RTP, North Carolina where we manufacture our and Eisai's oral solid dose products. As amended, the lease provides for a three-year term and our agreement to purchase the facility upon expiration of the lease term and Eisai's completion of certain activities. Accordingly, we recorded the assets along with a corresponding financing obligation on our consolidated balance sheet for $20.3 million, the net present value of the future minimum lease payments. The assets were recorded as a component of buildings and machinery and equipment. We expect to complete the purchase of the oral solid products manufacturing facility at the end of the lease term in the third quarter of 2018.

11. Indebtedness

Our indebtedness is summarized as follows:

	As of December 31,
(In millions)	2016				2015
Current portion:
Notes payable to Fumedica	$	3.0			$	3.1
Financing arrangement for the purchase of the RTP facility	1.7				1.7
Current portion of notes payable and other financing arrangements	$	4.7			$	4.8
Non-current portion:
6.875% Senior Notes due March 1, 2018	$	558.5			$	565.3
2.900% Senior Notes due September 15, 2020	1,485.3				1,485.5
3.625% Senior Notes due September 15, 2022	993.2				992.2
4.050% Senior Notes due September 15, 2025	1,734.8				1,733.4
5.200% Senior Notes due September 15, 2045	1,721.5				1,721.1
Notes payable to Fumedica	3.0				5.9
Financing arrangement for the purchase of the RTP facility	16.4				18.1
Non-current portion of notes payable and other financing arrangements	$	6,512.7			$	6,521.5

The following is a summary of our principal indebtedness as of December 31, 2016:

•	$550.0 million aggregate principal amount of 6.875% Senior Notes due March 1, 2018, valued at 99.184% of par;

•	$1.5 billion aggregate principal amount of 2.90% Senior Notes due September 15, 2020, valued at 99.792% of par;

•	$1.0 billion aggregate principal amount of 3.625% Senior Notes due September 15, 2022, valued at 99.920% of par;

•	$1.75 billion aggregate principal amount of 4.05% Senior Notes due September 15, 2025, valued at 99.764% of par; and

•	$1.75 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2045, valued at 99.294% of par.

The costs associated with these offerings of approximately $52.0 million have been recorded as a reduction to the carrying amount of the debt on our consolidated balance sheet. These costs along with the discounts will be amortized as additional interest expense using the effective interest rate method over the period from issuance through maturity.

These notes are senior unsecured obligations. The notes may be redeemed at our option at any time at 100% of the principal amount plus accrued interest and a specified make-whole amount. The 6.875% Senior Notes due in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2018 contain a change of control provision that may require us to purchase the notes under certain circumstances. There is also an interest rate adjustment feature that requires us to pay interest at an increased rate on the notes if the credit rating on the notes declines below investment grade. The remaining Senior Notes contain a change of control provision that may require us to purchase the notes at a price equal to 101% of the principal amount plus accrued and unpaid interest to the date of purchase under certain circumstances.

In connection with the 2.90% Senior Notes offering due in 2020, we entered into interest rate swap contracts. The carrying value of the 2.90% Senior Notes includes approximately $4.6 million related to changes in the fair value of these contracts. For additional information, please read Note 9, Derivative Instruments, to these consolidated financial statements.

In connection with the 6.875% Senior Notes due in 2018, we entered into interest rate swap contracts where we received a fixed rate and paid a variable rate. These contracts were terminated in December 2008. Upon termination of these swaps, the carrying amount of the 6.875% Senior Notes due in 2018 was increased by $62.8 million and is being amortized using the effective interest rate method over the remaining life of the Senior Notes and is being recognized as a reduction of interest expense. As of December 31, 2016, $9.9 million remains to be amortized.

Notes Payable to Fumedica

In connection with our 2006 distribution agreement with Fumedica, we issued notes totaling 61.4 million Swiss Francs which were payable to Fumedica in varying amounts from June 2008 through June 2018. Our remaining note payable to Fumedica had a carrying value of 6.2 million Swiss Francs ($6.0 million) and 8.9 million Swiss Francs ($9.0 million) as of December 31, 2016 and 2015, respectively.

Credit Facility

In August 2015 we entered into a $1.0 billion, five-year senior unsecured revolving credit facility under which we are permitted to draw funds for working capital and general corporate purposes. The terms of the revolving credit facility include a financial covenant that requires us not to exceed a maximum consolidated leverage ratio. As of December 31, 2016, we had no outstanding borrowings and were in compliance with all covenants under this facility.

Financing Arrangement

During 2015 we recorded a financing obligation in relation to the amendment of our lease agreement of Eisai's oral solid dose products manufacturing facility in RTP, North Carolina where we manufacture our and Eisai's oral solid dose products. As of December 31, 2016 and 2015, the financing obligation totaled approximately $18.1 million and $19.8 million, respectively. For additional information, please read Note 10, Property, Plant and Equipment to these consolidated financial statements.

Debt Maturity

The total gross payments, excluding our financing arrangement, due under our debt arrangements are as follows:

(In millions)	As of December 31, 2016
2017	$	3.1
2018	553.1
2019	—
2020	1,500.0
2021	—
2022 and thereafter	4,500.0
Total	$	6,556.2

The fair value of our debt is disclosed in Note 7, Fair Value Measurements to these consolidated financial statements.

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12. Equity

Preferred Stock

We have 8.0 million shares of Preferred Stock authorized, of which 1.75 million shares are authorized as Series A, 1.0 million shares are authorized as Series X junior participating and 5.25 million shares are undesignated. Shares may be issued without a vote or action of stockholders from time to time in classes or series with the designations, powers, preferences, and the relative, participating, optional or other special rights of the shares of each such class or series and any qualifications, limitations or restrictions thereon as set forth in the instruments governing such shares. Any such Preferred Stock may rank prior to common stock as to dividend rights, liquidation preference or both, and may have full or limited voting rights and may be convertible into shares of common stock. No shares of Preferred Stock were issued and outstanding during 2016, 2015 and 2014.

Common Stock

The following table describes the number of shares authorized, issued and outstanding of our common stock as of December 31, 2016 and 2015:

	As of December 31, 2016									As of December 31, 2015
(In millions)	Authorized			Issued			Outstanding			Authorized			Issued			Outstanding
Common stock	1,000.0			238.5			215.9			1,000.0			241.2			218.6

Share Repurchases

In July 2016 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2016 Share Repurchase Program). This authorization does not have an expiration date. Repurchased shares will be retired. As of December 31, 2016, we repurchased and retired 3.3 million shares of common stock at a cost of $1.0 billion under our 2016 Share Repurchase Program.

In May 2015 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock (2015 Share Repurchase Program), which was completed as of December 31, 2015. As of December 31, 2015, we repurchased and retired approximately 16.8 million shares of common stock at a cost of $5.0 billion under our 2015 Share Repurchase Program.

In February 2011 our Board of Directors authorized a program to repurchase up to 20.0 million shares of our common stock (2011 Share Repurchase Program), which has been used principally to offset common stock issuances under our share-based compensation plans. The 2011 Share Repurchase Program does not have an expiration date. We did not repurchase any shares of common stock under our 2011 Share Repurchase Program during the years ended December 31, 2016 and 2015. During 2014 we purchased approximately 2.9 million shares of common stock at a cost of $886.8 million under our 2011 Share Repurchase Program. We have approximately 1.3 million shares remaining available for repurchase under this authorization.

13. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax by component:

(In millions)	Unrealized Gains (Losses) on Securities Available for Sale				Unrealized Gains (Losses) on Cash Flow Hedges				Unfunded Status of Postretirement Benefit Plans				Translation Adjustments				Total
Balance, December 31, 2015	$	(0.8	)		$	10.2			$	(37.8	)		$	(195.6	)		$	(224.0	)
Other comprehensive income (loss) before reclassifications	(10.6		)		51.6				5.1				(138.6		)		(92.5		)
Amounts reclassified from accumulated other comprehensive income (loss)	0.6				(4.0		)		—				—				(3.4		)
Net current period other comprehensive income (loss)	(10.0		)		47.6				5.1				(138.6		)		(95.9		)
Balance, December 31, 2016	$	(10.8	)		$	57.8			$	(32.7	)		$	(334.2	)		$	(319.9	)

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(In millions)	Unrealized Gains (Losses) on Securities Available for Sale				Unrealized Gains (Losses) on Cash Flow Hedges				Unfunded Status of Postretirement Benefit Plans				Translation Adjustments				Total
Balance, December 31, 2014	$	(0.4	)		$	71.7			$	(31.6	)		$	(99.2	)		$	(59.5	)
Other comprehensive income (loss) before reclassifications	(1.7		)		110.8				(6.2		)		(96.4		)		6.5
Amounts reclassified from accumulated other comprehensive income (loss)	1.3				(172.3		)		—				—				(171.0		)
Net current period other comprehensive income (loss)	(0.4		)		(61.5		)		(6.2		)		(96.4		)		(164.5		)
Balance, December 31, 2015	$	(0.8	)		$	10.2			$	(37.8	)		$	(195.6	)		$	(224.0	)

(In millions)	Unrealized Gains (Losses) on Securities Available for Sale				Unrealized Gains (Losses) on Cash Flow Hedges				Unfunded Status of Postretirement Benefit Plans				Translation Adjustments				Total
Balance, December 31, 2013	$	5.6			$	(23.7	)		$	(19.6	)		$	10.0			$	(27.7	)
Other comprehensive income (loss) before reclassifications	0.4				101.7				(12.0		)		(109.2		)		(19.1		)
Amounts reclassified from accumulated other comprehensive income (loss)	(6.4		)		(6.3		)		—				—				(12.7		)
Net current period other comprehensive income (loss)	(6.0		)		95.4				(12.0		)		(109.2		)		(31.8		)
Balance, December 31, 2014	$	(0.4	)		$	71.7			$	(31.6	)		$	(99.2	)		$	(59.5	)

The following table summarizes the amounts reclassified from accumulated other comprehensive income:

(In millions)	Income Statement Location	Amounts Reclassified from Accumulated Other Comprehensive Income
For the Years Ended December 31,
2016				2015				2014
Gains (losses) on securities available for sale	Other income (expense)	$	(0.9	)		$	(2.0	)		$	9.9
	Income tax benefit (expense)	0.3				0.7				(3.5		)
Gains (losses) on cash flow hedges	Revenues	5.3				173.2				6.8
	Operating expenses	(1.5		)		—				—
	Other income (expense)	0.2				(0.1		)		—
	Income tax benefit (expense)	—				(0.8		)		(0.5		)
Total reclassifications, net of tax		$	3.4			$	171.0			$	12.7

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14. Earnings per Share

Basic and diluted earnings per share are calculated as follows:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Numerator:
Net income attributable to Biogen Inc.	$	3,702.8			$	3,547.0			$	2,934.8
Denominator:
Weighted average number of common shares outstanding	218.4				230.7				236.4
Effect of dilutive securities:
Stock options and employee stock purchase plan	0.1				0.1				0.1
Time-vested restricted stock units	0.2				0.3				0.5
Market stock units	0.1				0.1				0.2
Dilutive potential common shares	0.4				0.5				0.8
Shares used in calculating diluted earnings per share	218.8				231.2				237.2

Amounts excluded from the calculation of net income per diluted share because their effects were anti-dilutive were insignificant.

Earnings per share for the years ended December 31, 2016, 2015 and 2014, reflects, on a weighted average basis, the repurchase of 0.7 million shares, 4.6 million shares and 1.0 million shares, respectively, of our common stock under our share repurchase authorizations.

15. Share-based Payments

Share-based Compensation Expense

The following table summarizes share-based compensation expense included in our consolidated statements of income:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Research and development	$	84.5			$	88.6			$	102.1
Selling, general and administrative	121.7				127.3				150.3
Restructuring charges	(1.8		)		(8.6		)		—
Subtotal	204.4				207.3				252.4
Capitalized share-based compensation costs	(14.6		)		(11.0		)		(10.0		)
Share-based compensation expense included in total cost and expenses	189.8				196.3				242.4
Income tax effect	(54.0		)		(55.8		)		(72.2		)
Share-based compensation expense included in net income attributable to Biogen Inc.	$	135.8			$	140.5			$	170.2

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The following table summarizes share-based compensation expense associated with each of our share-based compensation programs:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Market stock units	$	38.4			$	38.1			$	37.4
Time-vested restricted stock units	120.0				119.0				115.4
Cash settled performance units	16.3				22.4				65.5
Performance units	18.6				13.9				21.9
Employee stock purchase plan	11.1				13.9				12.2
Subtotal	204.4				207.3				252.4
Capitalized share-based compensation costs	(14.6		)		(11.0		)		(10.0		)
Share-based compensation expense included in total cost and expenses	$	189.8			$	196.3			$	242.4

Windfall tax benefits from vesting of stock awards, exercises of stock options and ESPP participation were $12.6 million, $78.2 million and $96.4 million in 2016, 2015 and 2014, respectively. These amounts have been calculated under the alternative transition method.

As of December 31, 2016, unrecognized compensation cost related to unvested share-based compensation was approximately $189.8 million, net of estimated forfeitures. We expect to recognize the cost of these unvested awards over a weighted-average period of 1.9 years.

Share-Based Compensation Plans

We have three share-based compensation plans pursuant to which awards are currently being made: (i) the Biogen Inc. 2006 Non-Employee Directors Equity Plan (2006 Directors Plan); (ii) the Biogen Inc. 2008 Amended and Restated Omnibus Equity Plan (2008 Omnibus Plan); and (iii) the Biogen Inc. 2015 Employee Stock Purchase Plan (ESPP).

Directors Plan

In May 2006 our stockholders approved the 2006 Directors Plan for share-based awards to our directors. Awards granted from the 2006 Directors Plan may include stock options, shares of restricted stock, restricted stock units, stock appreciation rights and other awards in such amounts and with such terms and conditions as may be determined by a committee of our Board of Directors, subject to the provisions of the plan. We have reserved a total of 1.6 million shares of common stock for issuance under the 2006 Directors Plan. The 2006 Directors Plan provides that awards other than stock options and stock appreciation rights will be counted against the total number of shares reserved under the plan in a 1.5-to-1 ratio. In June 2015 our stockholders approved an amendment to extend the term of the 2006 Directors Plan until June 2025.

Omnibus Plans

In June 2008 our stockholders approved the 2008 Omnibus Plan for share-based awards to our employees. Awards granted from the 2008 Omnibus Plan may include stock options, shares of restricted stock, restricted stock units, performance shares, shares of phantom stock, stock appreciation rights and other awards in such amounts and with such terms and conditions as may be determined by a committee of our Board of Directors, subject to the provisions of the plan. Shares of common stock available for issuance under the 2008 Omnibus Plan consist of 15.0 million shares reserved for this purpose, plus shares of common stock that remained available for issuance under our 2005 Omnibus Equity Plan on the date that our stockholders approved the 2008 Omnibus Plan, plus shares that were subject to awards under the 2005 Omnibus Equity Plan that remain unissued upon the cancellation, surrender, exchange or termination of such awards. The 2008 Omnibus Equity Plan provides that awards other than stock options and stock appreciation rights will be counted against the total number of shares available under the plan in a 1.5-to-1 ratio.

We have not made any awards pursuant to the 2005 Omnibus Equity Plan since our stockholders approved the 2008 Omnibus Plan, and do not intend to make any awards pursuant to the 2005 Omnibus Equity Plan in the future, except that unused shares under the 2005 Omnibus Equity Plan have been carried over for use under the 2008 Omnibus Plan.

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Stock Options

We currently do not grant stock options to our employees or directors. Outstanding stock options previously granted to our employees and directors generally have a ten-year term and vest over a period of between one and four years, provided the individual continues to serve at Biogen through the vesting dates. Options granted under all plans are exercisable at a price per share not less than the fair market value of the underlying common stock on the date of grant. The estimated fair value of options, including the effect of estimated forfeitures, is recognized over the options’ vesting periods. The fair value of the stock options granted in 2010 was estimated as of the date of grant using a Black-Scholes option valuation model. There were no grants of stock options made in 2016, 2015 and 2014. As of December 31, 2016, all outstanding options were exercisable.

The expected life of options granted is derived using assumed exercise rates based on historical exercise patterns and represents the period of time that options granted are expected to be outstanding. Expected stock price volatility is based upon implied volatility for our exchange-traded options and other factors, including historical volatility. After assessing all available information on either historical volatility, implied volatility, or both, we have concluded that a combination of both historical and implied volatility provides the best estimate of expected volatility. The risk-free interest rate used is determined by the market yield curve based upon risk-free interest rates established by the Federal Reserve, or non-coupon bonds that have maturities equal to the expected term. The dividend yield of zero is based upon the fact that we have not historically granted cash dividends, and do not expect to issue dividends in the foreseeable future. Stock options granted prior to January 1, 2006 were valued based on the grant date fair value of those awards, using the Black-Scholes option pricing model, as previously calculated for pro-forma disclosures.

The following table summarizes our stock option activity:

	Shares			Weighted Average Exercise Price
Outstanding at December 31, 2015	107,000			$	53.94
Granted	—			$	—
Exercised	(41,000	)		$	53.75
Cancelled	—			$	—
Outstanding at December 31, 2016	66,000			$	54.06

The total intrinsic values of options exercised in 2016, 2015 and 2014 totaled $10.4 million, $38.0 million and $42.7 million, respectively. The aggregate intrinsic values of options outstanding as of December 31, 2016 totaled $15.0 million. The weighted average remaining contractual term for options outstanding as of December 31, 2016 was 2.0 years.

The following table summarizes the amount of tax benefit realized for stock options and cash received from the exercise of stock options:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Tax benefit realized for stock options	$	4.0			$	11.9			$	13.0
Cash received from the exercise of stock options	$	2.2			$	6.3			$	8.5

Market Stock Units (MSUs)

MSUs awarded to employees prior to 2014 vested in four equal annual increments beginning on the first anniversary of the grant date. Participants may ultimately earn between 0% and 150% of the target number of units granted based on actual stock performance.

MSUs awarded to employees in 2014, 2015 and 2016 vest in three equal annual increments beginning on the first anniversary of the grant date, and participants may ultimately earn between 0% and 200% of the target number of units granted based on actual stock performance.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The vesting of these awards is subject to the respective employee’s continued employment. The number of MSUs granted represents the target number of units that are eligible to be earned based on the attainment of certain market-based criteria involving our stock price. The number of MSUs earned is calculated at each annual anniversary from the date of grant over the respective vesting periods, resulting in multiple performance periods. Accordingly, additional MSUs may be issued or currently outstanding MSUs may be cancelled upon final determination of the number of awards earned. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

The following table summarizes our MSU activity:

	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	269,000			$	339.89
Granted (a)	168,000			$	328.03
Vested	(155,000	)		$	244.68
Forfeited	(52,000	)		$	371.62
Unvested at December 31, 2016	230,000			$	355.60

(a)

MSUs granted in 2016 include approximately 15,000 and 20,000 MSUs issued in 2016 based upon the attainment of performance criteria set for 2013 and 2012, respectively, in relation to awards granted in those years. The remainder of MSUs granted during 2016 include awards granted in conjunction with our annual awards made in February 2016 and MSUs granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to be earned at the time of grant.

We value grants of MSUs using a lattice model with a Monte Carlo simulation. This valuation methodology utilizes several key assumptions, including the 60 calendar day average closing stock price on grant date for MSUs awarded prior to 2014, the 30 calendar day average closing stock price on the date of grant for MSUs awarded in 2014, 2015 and 2016, expected volatility of our stock price, risk-free rates of return and expected dividend yield.

The assumptions used in our valuation are summarized as follows:

	For the Years Ended December 31,
	2016		2015		2014
Expected dividend yield	—%		—%		—%
Range of expected stock price volatility	38.2% - 40.7%		31.0% - 33.2%		31.7% - 35.1%
Range of risk-free interest rates	0.6% - 0.9%		0.2% - 1.0%		0.1% - 0.7%
30 calendar day average stock price on grant date	$260.67 - $304.86		$277.35 - $426.27		$280.88 - $335.65
Weighted-average per share grant date fair value	$328.03		$493.43		$395.22

The total fair values of MSUs vested in 2016, 2015 and 2014 totaled $39.3 million, $109.0 million and $117.4 million, respectively.

Cash Settled Performance Units (CSPUs)

CSPUs awarded to employees vest in three equal annual increments beginning on the first anniversary of the grant date. The vesting of these awards is subject to the respective employee’s continued employment with such awards settled in cash. The number of CSPUs granted represents the target number of units that are eligible to be earned based on the attainment of certain performance measures established at the beginning of the performance period, which ends on December 31 of each year. Participants may ultimately earn between 0% and 200% of the target number of units granted based on the degree of actual performance metric achievement. Accordingly, additional CSPUs may be issued or currently outstanding CSPUs may be cancelled upon final determination of the number of units earned. CSPUs awarded prior to 2014 are settled in cash based on the 60 calendar day average closing stock price through each vesting date once the actual vested and earned number of units is known. CSPUs awarded in 2014, 2015 and 2016 will be settled in cash based on the 30 calendar day average closing stock price through each vesting date, once the actual vested and earned number of units is known. Since no shares are issued, these awards do not dilute equity. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

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The following table summarizes our CSPU activity:

	Shares
Unvested at December 31, 2015	192,000
Granted (a)	86,000
Vested	(117,000	)
Forfeited	(39,000	)
Unvested at December 31, 2016	122,000

(a)	CSPUs granted in 2016 include awards granted in conjunction with our annual awards made in February 2016 and CSPUs granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to be earned at the time of grant.

The total cash paid in settlement of CSPUs vested in 2016, 2015 and 2014 totaled $31.9 million, $79.8 million and $92.8 million, respectively.

Performance-vested Restricted Stock Units (PUs)

In 2014 we revised our long term incentive program to include a new type of award granted to certain employees in the form of restricted stock units that may be settled in cash or shares of our common stock at the sole discretion of the Compensation and Management Development Committee of our Board of Directors. These awards are structured and accounted for the same way as the cash settled performance units, and vest in three equal annual increments beginning on the first anniversary of the grant date. The number of PUs granted represents the target number of units that are eligible to be earned based on the attainment of certain performance measures established at the beginning of the performance period, which ends on December 31 of each year. Participants may ultimately earn between 0% and 200% of the target number of units granted based on the degree of actual performance metric achievement. Accordingly, additional PUs may be issued or currently outstanding PUs may be cancelled upon final determination of the number of units earned. PUs settling in cash are based on the 30 calendar day average closing stock price through each vesting date once the actual vested and earned number of units is known. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

The following table summarizes our PU activity:

	Shares
Unvested at December 31, 2015	103,000
Granted (a)	55,000
Vested	(31,000	)
Forfeited	(17,000	)
Unvested at December 31, 2016	110,000

(a)	PUs granted in 2016 include awards granted in conjunction with our annual awards made in February 2016 and PUs granted in conjunction with the hiring of employees. These grants reflect the target number of shares eligible to be earned at the time of grant.

During 2015 32,000 PU were converted to share settlements, of which approximately 11,000 shares were vested and issued. All other PUs that vested in 2015 were settled in cash totaling $12.4 million.

All PUs that vested in 2016 were settled in cash totaling $8.1 million.

Time-Vested Restricted Stock Units (RSUs)

RSUs awarded to employees generally vest no sooner than one-third per year over three years on the anniversary of the date of grant, or upon the third anniversary of the date of the grant, provided the employee remains continuously employed with us, except as otherwise provided in the plan. Shares of our common stock will be delivered to the employee upon vesting, subject to payment of applicable withholding taxes. RSUs awarded to directors for service on our Board of Directors vest on the first anniversary of the date of grant, provided in each case that the director continues to serve on our Board of Directors through the vesting date. Shares of our common stock will be delivered to the director upon vesting and are not subject to any withholding taxes. The fair value of all RSUs is based on the market value of our stock on the date of grant. Compensation expense, including the effect of forfeitures, is recognized over the applicable service period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes our RSU activity:

	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	810,000			$	323.87
Granted (a)	649,000			$	268.52
Vested	(406,000	)		$	285.13
Forfeited	(165,000	)		$	310.30
Unvested at December 31, 2016	888,000			$	303.49

(a)	RSUs granted in 2016 primarily represent RSUs granted in conjunction with our annual awards made in February 2016 and awards made in conjunction with the hiring of new employees. RSUs granted in 2016 also include approximately 11,000 RSUs granted to our Board of Directors.

RSUs granted in 2015 and 2014 had weighted average grant date fair values of $388.88 and $321.72, respectively.

The total fair values of RSUs vested in 2016, 2015 and 2014 totaled $104.6 million, $239.7 million and $281.1 million, respectively.

Employee Stock Purchase Plan (ESPP)

In June 2015 our stockholders approved the Biogen Inc. 2015 ESPP (2015 ESPP). The 2015 ESPP, which became effective on July 1, 2015, replaced the Biogen Idec Inc. 1995 ESPP (1995 ESPP), which expired on June 30, 2015. The maximum aggregate number of shares of our common stock that may be purchased under the 2015 ESPP is 6.2 million.

The following table summarizes our ESPP activity:

	For the Years Ended December 31,
(In millions, except share amounts)	2016				2015				2014
Shares issued under the 2015 ESPP	190,000				78,000				**
Shares issued under the 1995 ESPP	—				98,000				180,000
Cash received under the 2015 ESPP	$	41.5			$	19.3			**
Cash received under the 1995 ESPP	$	—			$	30.0			$	46.4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. Income Taxes

Income Tax Expense

Income before income tax provision and the income tax expense consist of the following:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Income before income taxes (benefit):
Domestic	$	3,655.4			$	3,386.7			$	2,557.4
Foreign	1,277.6				1,380.6				1,389.2
Total	$	4,933.0			$	4,767.3			$	3,946.6
Income tax expense (benefit):
Current:
Federal	$	1,304.3			$	1,214.1			$	1,159.5
State	55.1				38.6				65.2
Foreign	52.9				54.5				73.4
Total	1,412.3				1,307.2				1,298.1
Deferred:
Federal	$	(125.6	)		$	(129.6	)		$	(280.9	)
State	(3.8		)		(1.9		)		(21.0		)
Foreign	(45.6		)		(14.1		)		(6.3		)
Total	(175.0		)		(145.6		)		(308.2		)
Total income tax expense	$	1,237.3			$	1,161.6			$	989.9

Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities are summarized as follows:

	As of December 31,
(In millions)	2016				2015
Deferred tax assets:
Tax credits	$	201.1			$	189.3
Inventory, other reserves and accruals	250.6				243.9
Intangibles, net	459.8				328.3
Net operating loss	65.9				24.7
Share-based compensation	61.5				63.8
Other	49.0				35.8
Valuation allowance	(16.1		)		(14.1		)
Total deferred tax assets	$	1,071.8			$	871.7
Deferred tax liabilities:
Purchased intangible assets	$	(376.6	)		$	(440.1	)
Depreciation, amortization and other	(113.5		)		(102.7		)
Total deferred tax liabilities	$	(490.1	)		$	(542.8	)

In addition to deferred tax assets and liabilities, we have recorded prepaid tax and deferred charges related to intercompany transactions. As of December 31, 2016 and 2015, the total deferred charges and prepaid taxes were $989.8 million and $697.9 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Tax Rate

A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:

	For the Years Ended December 31,
	2016			2015			2014
Statutory rate	35.0	%		35.0	%		35.0	%
State taxes	0.9			0.5			1.2
Taxes on foreign earnings	(9.6	)		(10.0	)		(9.5	)
Credits and net operating loss utilization	(1.4	)		(1.3	)		(1.1	)
Purchased intangible assets	1.2			1.0			1.2
Manufacturing deduction	(1.9	)		(1.8	)		(1.8	)
Other permanent items	0.5			0.7			0.5
Other	0.4			0.3			(0.4	)
Effective tax rate	25.1	%		24.4	%		25.1	%

Our effective tax rate for 2016 compared to 2015 increased primarily due to a net state tax benefit in 2015 resulting from the remeasurement of one of our uncertain tax positions, described below, and a higher relative percentage of our earnings being attributed to the U.S., a higher tax jurisdiction.

Our effective tax rate for 2015 compared to 2014 benefited from lower taxes on foreign earnings and reflects a $27.0 million benefit from the 2015 remeasurement of one of our uncertain tax positions.

As of December 31, 2016, we had net operating losses and general business credit carry forwards for federal income tax purposes of approximately $22.5 million and $140.0 million, respectively, which begin to expire in 2020. Additionally, for state income tax purposes, we had net operating loss carry forwards of approximately $86.4 million, which begin to expire in 2017. For state income tax purposes, we also had research and investment credit carry forwards of approximately $126.6 million, which begin to expire in 2017. For foreign income tax purposes, we had $489.4 million of net operating loss carryforwards, which begin to expire in 2021.

In assessing the realizability of our deferred tax assets, we have considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial reporting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Our estimates of future taxable income take into consideration, among other items, our estimates of future income tax deductions related to the exercise of stock options. Based upon the level of historical taxable income and income tax liability and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries. In the event that actual results differ from our estimates or we adjust our estimates in future periods, we may need to establish a valuation allowance, which could materially impact our financial position and results of operations.

As of December 31, 2016, undistributed foreign earnings of non-U.S. subsidiaries included in consolidated retained earnings and other basis differences aggregated approximately $7.6 billion. We intend to reinvest these earnings indefinitely in operations outside the U.S. The residual U.S. tax liability, if cumulative amounts were repatriated, would be between $1.8 billion to $2.3 billion as of December 31, 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounting for Uncertainty in Income Taxes

A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:

(In millions)	2016				2015				2014
Balance at January 1,	$	67.9			$	131.5			$	110.1
Additions based on tax positions related to the current period	7.2				10.5				20.8
Additions for tax positions of prior periods	36.3				19.5				86.1
Reductions for tax positions of prior periods	(13.3		)		(49.9		)		(23.4		)
Statute expirations	(1.4		)		(1.2		)		(1.6		)
Settlements	(64.3		)		(42.5		)		(60.5		)
Balance at December 31,	$	32.4			$	67.9			$	131.5

We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. With few exceptions, including the proposed disallowance we discuss below, we are no longer subject to U.S. federal tax examination for years before 2013 or state, local, or non-U.S. income tax examinations for years before 2005.

Included in the balance of unrecognized tax benefits as of December 31, 2016, 2015 and 2014 are $26.9 million, $15.7 million and $53.6 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 2016 we recognized a net interest expense of $9.1 million. In 2015 we recognized net interest expense of $3.1 million. In 2014 we recognized a net interest expense of approximately $4.1 million. We have accrued approximately $25.2 million and $12.5 million for the payment of interest as of December 31, 2016 and 2015, respectively.

In March 2015 we received a final assessment from the Danish Tax Authority (SKAT) for fiscal 2009 regarding withholding taxes and the treatment of certain intercompany transactions involving a Danish affiliate and another of our affiliates. In April 2016 we received final assessments from the SKAT for 2011 and 2013 regarding withholding taxes for similar intercompany transactions. The total amount assessed for 2009, 2011 and 2013 is estimated to be $58.3 million, including interest. For the assessments related to 2011 and 2013 we have made payments to SKAT totaling $12.2 million. We continue to dispute the assessments for all of these periods and believe that the positions taken in our historical filings are valid.

Federal Uncertain Tax Positions

During the year ended December 31, 2015, the net effect of adjustments to one of our uncertain tax positions was a net benefit of approximately $27.0 million, primarily related to the state impact of a federal uncertain tax item.

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 IRS 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

17. Other Consolidated Financial Statement Detail

Supplemental Cash Flow Information

Supplemental disclosure of cash flow information for the years ended December 31, 2016, 2015 and 2014, is as follows:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Cash paid during the year for:
Interest	$	281.2			$	39.1			$	41.2
Income taxes	$	1,642.2			$	1,674.8			$	1,163.2

Non-cash Operating, Investing and Financing Activity

In December 2016 we accrued $454.8 million related to the recent settlement and license agreement with Forward Pharma A/S (Forward Pharma). For additional information related to this transaction, please read Note 21, Commitment and Contingencies to these consolidated financial statements.

In the fourth quarter of 2016 we accrued $300.0 million upon reaching $11.0 billion in total cumulative sales of 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 2017. For additional information related to this transaction, please read Note 21, Commitments and Contingencies to these consolidated financial statements.

In connection with the construction of our manufacturing facility in Solothurn, Switzerland, we accrued charges related to processing equipment and engineering services of approximately $100.0 million in our consolidated balance sheet. For additional information related to this transaction, please read Note 10, Property, Plant and Equipment to these consolidated financial statements.

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 related to 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)	2016				2015				2014
Interest income	$	63.4			$	22.1			$	12.2
Interest expense	(260.0		)		(95.5		)		(29.5		)
Gain (loss) on investments, net	6.0				(3.8		)		11.8
Foreign exchange gains (losses), net	(9.8		)		(32.7		)		(11.6		)
Other, net	(17.0		)		(13.8		)		(8.7		)
Total other income (expense), net	$	(217.4	)		$	(123.7	)		$	(25.8	)

Other Current Assets

Other current assets include prepaid taxes totaling approximately $817.0 million and $550.6 million as of December 31, 2016 and 2015, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accrued Expenses and Other

Accrued expenses and other consists of the following:

	As of December 31,
(In millions)	2016				2015
Current portion of contingent consideration obligations	$	580.8			$	504.7
Accrued TECFIDERA litigation settlement and license charges	454.8				—
Revenue-related reserves for discounts and allowances	438.6				518.1
Employee compensation and benefits	282.9				270.8
Royalties and licensing fees	195.8				167.9
Construction in progress	134.0				87.9
Collaboration expenses	130.9				31.2
Other	685.7				516.2
Total accrued expenses and other	$	2,903.5			$	2,096.8

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. That appeal is still pending. 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 beginning in mid-February 2009.

In July 2013 we negotiated an agreement in principle with AIFA's Price and Reimbursement Committee that would have resolved all of AIFA's claims relating to sales of TYSABRI in excess of the reimbursement limit for the periods from February 2009 through January 2013 for an aggregate repayment of EUR33.3 million. As a result of this agreement in principle, we recorded a liability and reduction to revenue of EUR15.4 million at June 30, 2013, which approximated 50% of the claim related to the period from mid-February 2009 through mid-February 2011. As of December 31, 2016, we have approximately EUR79 million recorded as accrued expenses and other in our consolidated balance sheets for the periods mid-February 2009 through January 2013, respectively.

In June 2014 AIFA approved a resolution affirming that there is no reimbursement limit from and after February 2013. As a result, we recognized $53.5 million of TYSABRI revenues related to the periods February 2013 through June 2014 that were previously deferred.

In January 2017 we negotiated an agreement in principle with AIFA's Price and Reimbursement Committee to settle all of AIFA's existing claims relating to sales of TYSABRI in excess of the reimbursement limit for the periods from February 2009 through January 2013 for an aggregate repayment of EUR37.4 million. The agreement is subject to ratification by AIFA. If this most recent settlement agreement is accepted, we will recognize approximately EUR42 million in revenue upon final resolution of this matter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

18. Investments in Variable Interest Entities

Consolidated Variable Interest Entities

Our consolidated financial statements include the financial results of variable interest entities in which we are the primary beneficiary. The following are our significant variable interest entities.

Neurimmune SubOne AG

In 2007 we entered into a collaboration agreement with Neurimmune SubOne AG (Neurimmune), a subsidiary of Neurimmune AG, for the development and commercialization of antibodies for the treatment of Alzheimer’s disease. Neurimmune conducts research to identify potential therapeutic antibodies and we are responsible for the development, manufacturing and commercialization of all products. Our anti-amyloid beta antibody, aducanumab, for the treatment of Alzheimer’s disease resulted from this collaboration. In September 2015 we announced that the first patient had been enrolled in a Phase 3 trial for aducanumab, which triggered a $60.0 million milestone payment due to Neurimmune. As we consolidate the financial results of Neurimmune, we recognized this payment as a charge to noncontrolling interest in the third quarter of 2015. Based upon our current development plans for aducanumab, we may pay Neurimmune up to $275.0 million in remaining milestone payments. We may also pay royalties in the low-to-mid-teens on sales of any resulting commercial products.

We determined that we are the primary beneficiary of Neurimmune because we have the power through the collaboration to direct the activities that most significantly impact the entity’s economic performance and are required to fund 100% of the research and development costs incurred in support of the collaboration agreement. Accordingly, we consolidate the results of Neurimmune.

We are required to reimburse Neurimmune for amounts that are incurred by Neurimmune for research and development expenses in support of the collaboration. Amounts reimbursed are reflected in research and development expense in our consolidated statements of income. During the years ending December 31, 2016, 2015 and 2014, these amounts were immaterial. Future milestone payments and royalties, if any, will be reflected in our consolidated statements of income as a charge to noncontrolling interest, net of tax, when such milestones are achieved.

The assets and liabilities of Neurimmune are not significant to our financial position or results of operations as it is a research and development organization. We have provided no financing to Neurimmune other than previously contractually required amounts.

Rodin Therapeutics, Inc.

In December 2015 we paid $8.0 million for preferred stock in Rodin Therapeutics, Inc. (Rodin) and entered into an option and collaboration agreement which gave us the right to purchase all remaining outstanding shares of Rodin at any time until 35 days after acceptance of an Investigational New Drug (IND) application by the FDA. As we determined that we were the primary beneficiary of Rodin, we consolidated the results of Rodin and recorded an IPR&D intangible asset of approximately $8.7 million and assigned approximately $10.9 million to noncontrolling interest.

During the fourth quarter of 2016 we terminated our collaboration agreement with Rodin. Upon termination of the collaboration agreement, we deconsolidated the results of Rodin and impaired the IPR&D asset, resulting in an impairment loss of $8.7 million related to the IPR&D asset recorded upon entering into the collaboration agreement.

The assets and liabilities of Rodin were not significant to our financial position or results of operations as Rodin is a research and development organization. We had provided no financing to Rodin other than the contractually required amounts disclosed above.

Ataxion Inc.

In February 2014 we paid $1.6 million for preferred stock in Ataxion, Inc. (Ataxion) and entered into an option and collaboration agreement which gave us the right to purchase all outstanding shares of Ataxion at any time until 30 days after delivery of a Phase 1 clinical trial study report. As we determined that we were the primary beneficiary of Ataxion, we consolidated the results of Ataxion and recorded an IPR&D intangible asset of $3.5 million and assigned that amount to noncontrolling interest.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the fourth quarter of 2016 we terminated our option agreement with Ataxion. Upon termination of the collaboration agreement, we deconsolidated the results of Ataxion and impaired the IPR&D asset, resulting in an impairment loss of $3.5 million related to the IPR&D asset recorded upon entering into the collaboration agreement.

The assets and liabilities of Ataxion were not significant to our financial position or results of operations as Ataxion is a research and development organization. We had provided no financing to Ataxion other than the contractually required amounts disclosed above.

Unconsolidated Variable Interest Entities

We have relationships with other variable interest entities that we do not consolidate as we lack the power to direct the activities that significantly impact the economic success of these entities. These relationships include investments in certain biotechnology companies and research collaboration agreements.

As of December 31, 2016 and 2015, the total carrying value of our investments in biotechnology companies totaled $47.4 million and $29.2 million, respectively. Our maximum exposure to loss related to these variable interest entities is limited to the carrying value of our investments.

We have also entered into research collaboration agreements with certain variable interest entities where we are required to fund certain development activities. These development activities are included in research and development expense in our consolidated statements of income, as they are incurred. We have provided no financing to these variable interest entities other than previously contractually required amounts.

19. Collaborative and Other Relationships

In connection with our business strategy, we have entered into various collaboration agreements which provide us with rights to develop, produce and market products using certain know-how, technology and patent rights maintained by our collaborative partners. Terms of the various collaboration agreements may require us to make milestone payments upon the achievement of certain product research and development objectives and pay royalties on future sales, if any, of commercial products resulting from the collaboration.

Depending on the collaborative arrangement, we may record funding receivable or payable balances with our partners, based on the nature of the cost-sharing mechanism and activity within the collaboration. Our significant collaboration arrangements are discussed below.

Genentech (Roche Group)

We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma (NHL), chronic lymphocytic leukemia (CLL) and other conditions, GAZYVA indicated for the treatment of CLL and follicular lymphoma, and other potential anti-CD20 therapies under a collaboration agreement with Genentech, Inc. (Genentech), a wholly-owned member of the Roche Group. The Roche Group and its sub-licensees maintain sole responsibility for the development, manufacturing and commercialization of GAZYVA in the U.S.

Our collaboration agreement will continue in effect until we mutually agree to terminate the collaboration, except that if we undergo a change in control, as defined in the collaboration agreement, Genentech has the right to present an offer to buy the rights to RITUXAN and we must either accept Genentech’s offer or purchase Genentech’s rights on the same terms as its offer. Genentech will also be deemed concurrently to have purchased our rights to any other anti-CD20 products in development in exchange for a royalty and our rights to GAZYVA in exchange for the compensation described in the table below. Our collaboration with Genentech was created through a contractual arrangement and not through a joint venture or other legal entity.

RITUXAN

Genentech is responsible for the worldwide manufacturing of RITUXAN. Development and commercialization rights and responsibilities under this collaboration are divided as follows:

U.S.

We share with Genentech co-exclusive rights to develop, commercialize and market RITUXAN in the U.S.

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Canada

We and Genentech have assigned our rights under our collaboration agreement with respect to Canada to the Roche Group.

GAZYVA

We recognize our share of the development and commercialization expenses of GAZYVA as a reduction of our share of pre-tax profits in revenues from anti-CD20 therapeutic programs.

Commercialization of GAZYVA impacts our percentage of the co-promotion profits for RITUXAN, as summarized in the table below.

OCREVUS (Ocrelizumab)

Genentech is solely responsible for development and commercialization of OCREVUS, a humanized anti-CD20 monoclonal antibody currently in development for MS, and funding future costs. Genentech cannot develop OCREVUS in CLL, NHL or Rheumatoid Arthritis (RA). We will receive tiered royalties between 13.5% and 24% on U.S. net sales of OCREVUS if approved for commercial sale by the FDA. The FDA has accepted for review the Biologics License Application for OCREVUS for the treatment of relapsing multiple sclerosis (RMS) and primary-progressive multiple sclerosis (PPMS), and has granted the application Priority Review Designation. There will be a 50% reduction to these royalties if a biosimilar to OCREVUS is approved in the U.S. In addition, we will receive a 3% royalty on net sales of OCREVUS outside the U.S., with the royalty period lasting 11 years from the first commercial sale of OCREVUS on a country-by-country basis. In June 2016 the European Medicines Agency (EMA) validated its marketing authorization application (MAA) of OCREVUS for the treatment of RMS and PPMS in the E.U.

Commercialization of OCREVUS will not impact the percentage of the co-promotion profits we receive for RITUXAN or GAZYVA.

Profit-sharing Formulas

RITUXAN Profit Share

Our current pretax co-promotion profit-sharing formula for RITUXAN provides for a 30% share on the first $50.0 million of co-promotion operating profits earned each calendar year. Our share of annual co-promotion profits in excess of $50.0 million varies, as summarized in the table below, upon the following events:

Until GAZYVA First Non-CLL FDA Approval	40.0	%
After GAZYVA First Non-CLL FDA Approval until First GAZYVA Threshold Date	39.0	%
After First GAZYVA Threshold Date until Second GAZYVA Threshold Date	37.5	%
After Second GAZYVA Threshold Date	35.0	%

First Non-CLL GAZYVA FDA Approval means the FDA’s first approval of GAZYVA in an indication other than CLL.

First GAZYVA Threshold Date means the earlier of (1) the date of the First Non-CLL GAZYVA FDA approval if U.S. gross sales of GAZYVA for the preceding consecutive 12 month period were at least $150.0 million or (2) the first day of the calendar quarter after the date of the First Non-CLL GAZYVA FDA Approval that U.S. gross sales of GAZYVA within any consecutive 12 month period have reached $150.0 million.

Second GAZYVA Threshold Date means the first day of the calendar quarter after U.S. gross sales of GAZYVA within any consecutive 12 month period have reached $500.0 million. The Second GAZYVA Threshold Date can be achieved regardless of whether GAZYVA has been approved in a non-CLL indication.

Our share of RITUXAN pre-tax profits in the U.S. decreased to 39% from 40% as GAZYVA was approved by the FDA in follicular lymphoma in February 2016.

In addition, should the FDA approve an anti-CD20 product other than OCREVUS or GAZYVA that is acquired or developed by Genentech and subject to the collaboration agreement, our share of the co-promotion operating profits would be between 30% and 38% based on certain events.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GAZYVA Profit Share

Our current pretax profit-sharing formula for GAZYVA provides for a 35% share on the first $50.0 million of operating profits earned each calendar year. Our share of annual profits in excess of $50.0 million varies, as summarized in the table below, upon the following events:

Until First GAZYVA Threshold Date	39.0	%
After First GAZYVA Threshold Date until Second GAZYVA Threshold Date	37.5	%
After Second GAZYVA Threshold Date	35.0	%

In 2016, 2015 and 2014, our share of operating losses on GAZYVA was 35%.

Revenues from Anti-CD20 Therapeutic Programs

Revenues from anti-CD20 therapeutic programs are summarized as follows:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Biogen's share of pre-tax profits in the U.S. for RITUXAN and GAZYVA, including the reimbursement of selling and development expenses	$	1,249.5			$	1,269.8			$	1,117.1
Revenue on sales in the rest of world for RITUXAN	65.0				69.4				78.3
Total revenues from anti-CD20 therapeutic programs	$	1,314.5			$	1,339.2			$	1,195.4

In 2016 the 39% profit-sharing threshold was met during the first quarter. In 2015 and 2014, the 40% profit-sharing threshold was met during the first quarter.

Prior to regulatory approval, we record our share of the expenses incurred by the collaboration for the development of anti-CD20 products in research and development expense in our consolidated statements of income. After an anti-CD20 product is approved, we record our share of the development expenses related to that product as a reduction of our share of pre-tax profits in revenues from anti-CD20 therapeutic programs.

Acorda

In 2009 we entered into a collaboration and license agreement with Acorda Therapeutics, Inc. (Acorda) to develop and commercialize products containing fampridine in markets outside the U.S, including FAMPYRA. We also have responsibility for regulatory activities and the future clinical development of related products in those markets.

Under the terms of the collaboration and license agreement, we pay Acorda tiered royalties based on the level of ex-U.S. net sales. We may pay up to $375.0 million of additional milestone payments to Acorda based on the successful achievement of certain regulatory and commercial milestones. The next expected milestone would be $15.0 million, due if ex-U.S. net sales reach $100.0 million over a period of four consecutive quarters. We will capitalize these additional milestones as intangible assets upon achievement of the milestone which will then be amortized utilizing an economic consumption model and recognized as amortization of acquired intangible assets. Royalty payments are recognized as a cost of goods sold.

In connection with the collaboration and license agreement, we have also entered into a supply agreement with Acorda for the commercial supply of FAMPYRA. This agreement is a sublicense arrangement of an existing agreement between Acorda and Alkermes, who acquired Elan Drug Technologies, the original party to the license with Acorda. During the years ending December 31, 2016, 2015 and 2014, total cost of sales related to royalties and commercial supply of FAMPRYA reflected in our consolidated statements of income were $31.5 million, $30.6 million and $29.2 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

AbbVie

We have a collaboration agreement with AbbVie aimed at advancing the development and commercialization of ZINBRYTA in MS, which was approved for the treatment of relapsing forms of MS in the U.S. in May 2016 and the E.U. in July 2016. We made milestone payments totaling $32.0 million related to these approvals, which were capitalized as intangible assets, net in our consolidated balance sheets.

Under the agreement, we and AbbVie conduct ZINBRYTA co-promotion activities in the U.S., E.U. and Canadian territories (Collaboration Territory), where development and commercialization costs and profits are shared equally. Outside of the Collaboration Territory, we are solely responsible for development and commercialization of ZINBRYTA and will pay a tiered royalty to AbbVie as a percentage of net sales in the low to high teens.

We are responsible for manufacturing and research and development activities in both the Collaboration Territory and outside the Collaboration Territory and will record these activities within their respective lines in our consolidated statements of income, net of any reimbursement of research and development expenditures received from AbbVie. For the years ended December 31, 2016, 2015 and 2014, the collaboration incurred $48.6 million, $113.8 million and $117.8 million for research and development activities, for which we recognized $24.3 million, $60.8 million and $67.4 million, respectively, in our consolidated statements of income. During 2015 we made milestone payments of $16.0 million for the development of ZINBRYTA as a result of filing for regulatory approval in the U.S. and E.U. during the year. These payments were recorded as research and development expense in our consolidated statements of income.

Prior to regulatory approval, we also recognized $22.0 million of pre-commercialization expenses within our selling, general and administrative expense, which represents 50% of the collaboration's pre-commercialization costs for 2016. After ZINBRYTA was approved by the FDA and EMA in 2016, we began to recognize our share of the collaboration activities within the U.S., E.U. and Canadian territories as described below.

Co-promotion Profits and Losses

In the U.S., AbbVie recognizes revenues on sales to third parties and we recognize our 50% share of the co-promotion profits or losses as a component of total revenues in our consolidated statements of income. The collaboration began selling ZINBRYTA in the U.S. in the third quarter of 2016. For the year ended December 31, 2016, we recognized a net reduction in revenue of $21.9 million to reflect our share of an overall net loss within the collaboration.

The following table provides a summary of the U.S. collaboration and our share of the co-promotion losses on ZINBRYTA in the U.S.:

	For the Year Ended December 31,
(In millions)	2016
Product revenues, net	$	6.1
Costs and expenses	50.0
Co-promotion losses in the U.S.	$	43.9
Biogen's share of co-promotion losses in the U.S.	$	21.9

In the E.U. and Canada, we recognize revenues on sales to third parties in product revenues, net in our consolidated statements of income. We also record the related cost of revenues and sales and marketing expenses to their respective line items in our consolidated statements of income as these costs are incurred. We reimburse AbbVie for their 50% share of the co-promotion profits or losses in the E.U. and Canada. This reimbursement is recognized in collaboration profit (loss) sharing in our consolidated statements of income. We began to recognize product revenues on sales of ZINBRYTA in the E.U. in the third quarter of 2016. For the year ended December 31, 2016, we recognized income of $4.9 million to reflect AbbVie's 50% sharing of the net collaboration losses in the E.U. and Canada.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Swedish Orphan Biovitrum AB (publ)

In January 2007 we acquired 100% of the stock of Syntonix. Syntonix, now known as Bioverativ Therapeutics Inc. (formerly Biogen Hemophilia Inc.), had previously entered into a collaboration agreement with Swedish Orphan Biovitrum AB (publ) (Sobi) to jointly develop and commercialize Factor VIII and Factor IX hemophilia products, including ELOCTATE and ALPROLIX. Under an amended and restated collaboration agreement, we have commercial rights for North America (the Biogen North America Territory) and for rest of the world markets outside of the Sobi Territory, as defined below (the Biogen Direct Territory). Subject to the exercise of an option right that Sobi controls, Sobi has commercial rights in substantially all of Europe, Russia and certain countries in Northern Africa and the Middle East (the Sobi Territory). The collaboration agreement was amended and restated in April 2014. (References to the collaboration agreement refer to the amended and restated collaboration agreement).

In November 2014 Sobi exercised its option to assume final development and commercialization activities in the Sobi Territory for ELOCTA (the trade name for ELOCTATE in the E.U.). In July 2015 Sobi exercised its option to assume final development and commercialization of ALPROLIX in the Sobi Territory. Upon each exercise of opt-in right under the terms of the collaboration agreement, Sobi made a $10.0 million payment in escrow.

ELOCTA was approved by the EC in November 2015 and Sobi had its first commercial sale of ELOCTA in January 2016. In March 2016 the EC approved the transfer of the marketing authorization for ELOCTA in the E.U. from Biogen to Sobi, making Sobi the marketing authorization holder of ELOCTA in the E.U. As the marketing authorization holder, Sobi assumes full legal responsibility for ELOCTA, from a regulatory perspective, during its entire life cycle in the E.U. As of December 31, 2016, approximately $144.0 million in expenditures for ELOCTA, net of the $10.0 million escrow payment and other royalty adjustments as described in the table and its footnote (3) below, are reimbursable by Sobi under the collaboration agreement due to its election to assume final development and commercialization of ELOCTA within the Sobi Territory, which is the Opt-In Consideration for ELOCTA. This reimbursement will be recognized by us as royalty revenue in proportion to collaboration revenues, over a ten-year period, consistent with the initial patent term of the product.

ALPROLIX was approved in the E.U. by the EC in May 2016 and Sobi had its first commercial sale in June 2016. In September 2016 the EC approved the transfer of the marketing authorization for ALPROLIX in the E.U. from Biogen to Sobi, making Sobi the marketing authorization holder of ALPROLIX in the E.U. As the marketing authorization holder, Sobi assumes full legal responsibility for ALPROLIX, from a regulatory perspective, during its entire life cycle in the E.U. As of December 31, 2016, approximately $123.0 million in expenditures for ALPROLIX, net of the $10.0 million escrow payment and other royalty adjustments as described in the table and its footnote (3) below, are reimbursable to us by Sobi under the collaboration agreement due to Sobi's election to assume final development and commercialization of ALPROLIX in the Sobi Territory, which is the Opt-In Consideration for ALPROLIX. This reimbursement will be recognized by us as royalty revenue in proportion to collaboration revenues, over a ten-year period, consistent with the initial patent term of the product.

The Opt-In Consideration for each product will be paid by Sobi using a cross-royalty cash payment structure for sales in each company’s respective territories as an adjustment to the Base Rate in the table below. Under the collaboration agreement, cash payments are as follows:

			Rates post Sobi Opt-In(3)
Royalty and Net Revenue Share Rates:	Method		Base Rate following 1st commercial sale in the Sobi Territory:		Rate during the Reimbursement Period:
Sobi rate to Biogen on net sales in the Sobi Territory	Royalty		12%		Base Rate plus 5%
Biogen rate to Sobi on net sales in the Biogen North America Territory	Royalty		12%		Base Rate less 5%
Biogen rate to Sobi on net sales in the Biogen Direct Territory	Royalty		17%		Base Rate less 5%
Biogen rate to Sobi on net revenue(1) from the Biogen Distributor Territory(2)	Net Revenue Share		50%		Base Rate less 15%

(1)	Net revenue represents Biogen’s pre-tax receipts from third-party distributors, less expenses incurred by Biogen in the conduct of commercialization activities supporting the distributor activities.

(2)	The Biogen Distributor Territory represents Biogen territories where sales are derived utilizing a third-party distributor.

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(3)	A credit will be issued to Sobi against its reimbursement of the Opt-in Consideration for each product in an amount equal to the difference in the rate paid by Biogen to Sobi on sales in the Biogen territories for certain periods prior to the first commercial sale in the Sobi Territory versus the rate that otherwise would have been payable on such sales.

We are recording revenue at the effective royalty rate expected over the term of the agreement of approximately 14% and recording cost of sales at the effective royalty rate expected over the term of the agreement of approximately 11%.

If the reimbursement of the Opt-in Consideration has not been achieved within six years of the first commercial sale of such product, we maintain the right to require Sobi to pay any remaining balances due to us within 90 days of the six-year anniversary date of the first commercial sale.

Following the spin-off of our hemophilia business, this collaboration agreement with Sobi will continue with Bioverativ, an independent public company. For additional information about the spin-off, please see Note 1, Summary of Significant Accounting Policies and Note 26, Subsequent Events to these consolidated financial statements.

Ionis Pharmaceuticals, Inc.

Long-Term Strategic Research Collaboration

In September 2013 we entered into a six-year research collaboration with Ionis, formerly known as Isis Pharmaceuticals Inc. under which both companies collaborate to perform discovery level research and then develop and commercialize antisense or other therapeutics for the treatment of neurological disorders. Under the collaboration, Ionis will perform research on a set of neurological targets identified within the agreement. Once the research has reached a specific stage of development, we will make the determination whether antisense is the preferred approach to develop a therapeutic candidate or whether another modality is preferred. If antisense is selected, Ionis will continue development and identify a product candidate. If another modality is used, we will assume the responsibility for identifying a product candidate and developing it.

Under the terms of this agreement, we paid Ionis an upfront amount of $100.0 million. Of this payment, we recorded prepaid research and discovery services of approximately $25.0 million, representing the value of the Ionis full time equivalent employee resources which are required by the collaboration to provide research and discovery services to us over the term. The remaining $75.0 million of the upfront payment was recorded as research and development expense as it represented the purchase of intellectual property that had not reached technological feasibility.

Ionis is also eligible to receive milestone payments, license fees and royalty payments for all product candidates developed through this collaboration, with the specific amount dependent upon the modality of the product candidate advanced by us. During the years ending December 31, 2016, 2015 and 2014, we triggered milestones of $5.5 million, $20.0 million and $20.0 million, respectively, related to the advancement of IONIS-SOD1Rx for the treatment of ALS and other neurological targets identified.

For non-ALS antisense product candidates, Ionis will be responsible for global development through the completion of a Phase 2 trial and we will provide advice on the clinical trial design and regulatory strategy. For ALS antisense product candidates, we are responsible for global development, clinical trial design and regulatory strategy. We have an option to license a product candidate until completion of the Phase 2 trial. If we exercise our option, we will pay Ionis up to a $70.0 million license fee and assume global development, regulatory and commercialization responsibilities. Ionis could receive additional milestone payments upon the achievement of certain regulatory milestones of up to $130.0 million, plus additional amounts related to the cost of clinical trials conducted by Ionis under the collaboration, and royalties on future sales if we successfully develop the product candidate after option exercise.

For product candidates using a different modality, we will be responsible for global development through all stages and will pay Ionis up to $90.0 million upon the achievement of certain regulatory milestones and royalties on future sales if we successfully develop the product candidate.

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Product Collaborations

In 2012 we entered into three separate exclusive worldwide option and collaboration agreements with Ionis under which both companies will develop and commercialize SPINRAZA (nusinersen) for the treatment of SMA, antisense therapeutics for up to three gene targets and IONIS-DMPKRX for the treatment of myotonic dystrophy type 1 (DM1), respectively.

SPINRAZA (nusinersen)

In January 2012 we entered into an exclusive worldwide option and collaboration agreement with Ionis under which both companies will develop and commercialize the antisense investigational drug candidate, SPINRAZA, for the treatment of SMA. Under the terms of this agreement, we paid Ionis $29.0 million as an upfront payment. During 2014 we amended the agreement to adjust the amount of potential additional payments and terms of the exercise of our opt-in right to license SPINRAZA, which included providing for additional opt-in scenarios, based on the filing or acceptance of a new drug application (NDA) or marketing authorization application with the FDA or EMA. Consistent with the initial agreement, Ionis remained responsible for conducting the pivotal/Phase 3 trials and we provided input on the clinical trial design and regulatory strategy for the development of SPINRAZA.

During 2016, 2015 and 2014, we triggered clinical trial payments of $35.3 million, $42.8 million and $57.3 million, respectively, related to the advancement of the program.

In August 2016 we and Ionis announced that SPINRAZA met the primary endpoint for the interim analysis of the Phase 3 trial evaluating SPINRAZA in infantile-onset SMA. In November 2016 we and Ionis announced that SPINRAZA met the primary endpoint for the interim analysis of the Phase 3 trial evaluating SPINRAZA in later-onset SMA. During the third quarter of 2016 we exercised our option to develop and commercialize SPINRAZA and paid Ionis a $75.0 million license fee in connection with the option exercise. This amount was recognized as research and development expense in our consolidated statements of income. In December 2016 SPINRAZA was approved by the FDA for the treatment of SMA in pediatric and adult patients in the U.S. During the fourth quarter of 2016 we accrued a $60.0 million milestone payment due to Ionis for the approval of SPINRAZA in the U.S. This amount was capitalized in intangible assets, net in our consolidated balance sheets.

During the years ending December 31, 2016, 2015 and 2014, $257.8 million, $74.9 million and $27.7 million, respectively, were reflected in research and development expense in our consolidated statements of income related to the advancement of the program.

We may pay Ionis up to approximately $90.0 million in additional milestone payments upon the achievement of certain regulatory milestones as well as a royalty rate in the mid-teens on future sales of SPINRAZA.

Antisense Therapeutics

Under the terms of the December 2012 agreement relating to the development and commercialization of up to three gene targets we provided Ionis with an upfront payment of $30.0 million and agreed to make potential additional payments, prior to licensing, of up to $10.0 million based on the development of the selected product candidate as well as a mark-up of the cost estimate of the Phase 1 and Phase 2 trials. During 2015 we triggered a $10.0 million milestone payment. Ionis will be responsible for global development of any product candidate through the completion of a Phase 2 trial and we will provide advice on the clinical trial design and regulatory strategy. We have an option to license the product candidate until completion of the Phase 2 trial. If we exercise our option, we will pay Ionis up to a $70.0 million license fee and assume global development, regulatory and commercialization responsibilities. Ionis could receive up to another $130.0 million in milestone payments upon the achievement of certain regulatory milestones as well as royalties on future sales if we successfully develop the product candidate after option exercise.

IONIS-DMPKRx

Under the terms of the June 2012 agreement for the DM1 candidate, we provided Ionis with an upfront payment of $12.0 million and agreed to make potential additional payments, prior to licensing, of up to $59.0 million based on the development of the selected product candidate. During 2015 we amended the agreement to adjust the amount of potential additional payments by an additional $4.2 million due to changes in the clinical trial design.

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During 2016 we terminated the development of the IONIS-DMPKRx product candidate to treat DM1 and returned the product to Ionis. During the years ending December 31, 2016, 2015 and 2014, $3.1 million, $9.0 million and $10.9 million, respectively, were reflected in research and development expense in our consolidated statements of income.

Eisai Co., Ltd.

BAN2401 and E2609 Collaboration

In March 2014 we entered into a collaboration agreement with Eisai Co., Ltd. (Eisai) (Eisai Collaboration Agreement) to jointly develop and commercialize two Eisai product candidates for the treatment of Alzheimer’s disease, BAN2401, a monoclonal antibody that targets amyloid-beta aggregates, and E2609, a BACE inhibitor. Under the Eisai Collaboration Agreement, Eisai serves as the global operational and regulatory lead for both compounds and all costs, including research, development, sales and marketing expenses, will be shared equally by us and Eisai. Following marketing approval in major markets, such as the U.S., the E.U. and Japan, we will co-promote BAN2401 and E2609 with Eisai and share profits equally. In smaller markets, Eisai will distribute these products and pay us a royalty. The Eisai Collaboration Agreement also provides the parties with certain rights and obligations in the event of a change in control of either party.

The Eisai Collaboration Agreement also provides Eisai an option to jointly develop and commercialize aducanumab, our anti-amyloid beta antibody candidate for Alzheimer’s disease (Aducanumab Option) and an option to jointly develop and commercialize one of our anti-tau monoclonal antibodies (Anti-Tau Option). Upon exercise of each of the Aducanumab Option and the Anti-Tau Option, we will execute a separate collaboration agreement with Eisai on terms and conditions that mirror the Eisai Collaboration Agreement.

Aducanumab Option

Eisai may exercise the Aducanumab Option after either (i) the Phase 1b clinical trial for aducanumab and the Phase 2 clinical trial for BAN2401 (Post-Phase 2 Aducanumab Option), or (ii) completion of the Phase 3 clinical trial for aducanumab (Post-Phase 3 Aducanumab Option) under certain conditions.

The consideration we will receive if Eisai exercises the Post-Phase 2 Aducanumab Option depends on the development status of BAN2401. If BAN2401 is then determined to advance to Phase 3, we will be entitled to receive a single payment from Eisai upon regulatory approval of aducanumab and we will no longer be required to pay Eisai any milestone payments for products containing BAN2401 under the Eisai Collaboration Agreement. If the development of BAN2401 has instead been terminated, we will receive development and commercial milestone payments from Eisai (Post-Phase 2 Aducanumab Milestone Payments). If Eisai does not exercise its Post-Phase 2 Aducanumab Option, we may elect to terminate the Eisai Collaboration Agreement with respect to BAN2401 but, under certain conditions, will have the option to reinstate the Eisai Collaboration Agreement after completion of a BAN2401 Phase 3 clinical trial.

If Eisai exercises its Post-Phase 3 Aducanumab Option, Eisai will be required to pay us all Phase 3 development and commercialization costs plus a mark-up and an amount equal to any unpaid Post-Phase 2 Aducanumab Milestone Payments that would have been payable if Eisai had exercised its Post-Phase 2 Aducanumab Option.

Anti-Tau Option

Eisai may exercise the Anti-Tau Option after completion of the Phase 1 clinical trial of such anti-tau monoclonal antibody. If Eisai exercises its Anti-Tau Option, we will receive an upfront payment from Eisai and will be entitled to additional development and commercial milestone payments.

Upon the effective date of the Eisai Collaboration Agreement, we paid Eisai $100.0 million and recorded $17.7 million, reflecting the fair value of the options granted under the Eisai Collaboration Agreement, both of which were classified as research and development expense in our consolidated statements of income. During the second quarter of 2014 Eisai exercised its option under the Eisai Collaboration Agreement to expand the joint development and commercialization activities to include Japan. Upon such exercise, we paid Eisai an additional $35.0 million, and recorded $21.6 million as research and development expense in our consolidated statements of income, which represented the difference between the payment made upon exercise of the option and the fair value of that option recorded as research and development expense upon closing of the agreement in the first quarter of 2014. During the fourth quarter of 2016 we recognized a $50.0 million milestone payment related to the initiation of a phase 3

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trial for E2609, which is included in research and development expense in our consolidated statements of income. We could pay Eisai up to an additional $1.0 billion under the Eisai Collaboration Agreement based on the future achievement of certain development, regulatory and commercial milestones.

In addition to our arrangements with Eisai, Neurimmune is entitled to milestone and royalty payments related to the development and commercialization of aducanumab and certain anti-tau antibodies. For additional information regarding our agreement with Neurimmune, please see Note 18, Investments in Variable Interest Entities to these consolidated financial statements.

A summary of activity related to our collaboration with Eisai is as follows:

	For the Years Ended December 31,
(In millions)	2016				2015				2014
Total development expense incurred by the collaboration	$	95.1			$	84.1			$	57.5
Biogen’s share of development expense, excluding upfront and milestone payments, reflected in our consolidated statements of income	$	50.5			$	40.4			$	29.1

Applied Genetic Technologies Corporation

In July 2015 we announced a collaboration and license agreement to develop gene-based therapies for multiple ophthalmic diseases with Applied Genetic Technologies Corporation (AGTC). The collaboration will focus on the development of a portfolio of AGTC’s therapeutic programs, including both a clinical-stage candidate for X-linked Retinoschisis (XLRS) and a pre-clinical candidate for the treatment of X-Linked Retinitis Pigmentosa (XLRP). The agreement also includes options for early stage discovery programs in two ophthalmic diseases and one non-ophthalmic condition, as well as an equity investment in AGTC.

During the third quarter of 2015 we made an upfront payment of $124.0 million, which included a $30.0 million equity investment in AGTC, prepaid research and development expenditures of $58.4 million and total licensing and other fees of $35.6 million. The $58.4 million of prepaid research and development expenditures were recorded in investments and other assets in our consolidated balance sheets and will be expensed as the services are provided. During 2015 we recorded $54.5 million as research and development expense associated with AGTC in our consolidated statements of income, including the $35.6 million total licensing and other fees, $6.5 million in research and development services, a $7.5 million premium on our equity investment and a $5.0 million clinical development milestone related to XLRS. During 2016 we recorded $26.5 million in research and development services in research and development expense in our consolidated statements of income.

AGTC is eligible to receive development, regulatory and commercial milestone payments aggregating in excess of $1.1 billion, which includes up to $472.5 million collectively for the two lead programs and up to $592.5 million across the discovery programs. AGTC is also eligible to receive royalties in the mid-single digit to mid-teen percentages of annual net sales.

We were granted worldwide commercialization rights for the XLRS and XLRP programs. AGTC has an option to share development costs and profits after the initial clinical trial data are available, and an option to co-promote the second of these products to be approved in the U.S. AGTC will lead the clinical development programs of XLRS through product approval and of XLRP through the completion of first-in-human trials. We will support the clinical development costs, subject to certain conditions, following the first-in-human study for XLRS and IND-enabling studies for XLRP. Under the manufacturing license, we have received an exclusive license to use AGTC’s proprietary technology platform to make AAV vectors for up to six genes, three of which are in AGTC’s discretion, in exchange for payment of milestones and royalties.

University of Pennsylvania

In May 2016 we entered into a collaboration and alliance with the University of Pennsylvania (UPenn) to advance gene therapy and gene editing technologies. The collaboration will primarily focus on the development of therapeutic approaches that target the eye, skeletal muscle and the central nervous system. The alliance is also expected to focus on the research and validation of next-generation gene transfer technology using adeno-associated virus gene delivery vectors and exploring the expanded use of genome editing technology as a potential therapeutic platform.

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During the second quarter of 2016 we paid Penn an upfront fee of $20.0 million, which was recorded as research and development expense in our consolidated statements of income, and prepaid research and development expenditures of $15.0 million, which was recorded in investments and other assets in our consolidated balance sheets. We also expect to fund an additional $47.5 million in the aggregate in research and development costs extending over the next three to five years in seven preclinical research and development programs, as well as the exploration of genome-editing technology.

If all of the collaborations programs are successful and we exercise all of our options under the Penn collaboration and alliance, we may be required to make future payments of over $2.0 billion in research funding, options and milestone payments, in addition to royalties payable on net sales of products.

Sangamo BioSciences, Inc.

In February 2014 we completed an exclusive worldwide research, development and commercialization collaboration and license agreement with Sangamo under which both companies will develop and commercialize product candidates for the treatment of two inherited blood disorders, sickle cell disease and beta-thalassemia. The collaboration is currently in the research stage of development.

Under the terms of the agreement, we paid Sangamo an upfront payment of $20.0 million in cash, with additional payments of up to approximately $300.0 million based on the achievement of certain development, regulatory and commercial milestones, plus royalties based on sales. We recorded the $20.0 million upfront payment as research and development expense in our consolidated statements of income. Under this arrangement, Sangamo will be responsible for identifying a product candidate for the treatment of beta-thalassemia and advancing that candidate through a completed Phase 1 human clinical trial, at which point we would assume responsibility for development. We will jointly develop a sickle cell disease candidate through the potential filing of an investigative new drug application, after which we would assume clinical responsibilities. We will lead the global development and commercialization efforts and Sangamo will have the option to assume co-promotion responsibilities in the U.S.

During the years ending December 31, 2016, 2015 and 2014, $13.4 million, $13.6 million and $28.9 million, respectively, of expense was reflected in our consolidated statements of income.

Following the spin-off of our hemophilia business, this collaboration and license agreement with Sangamo will continue with Bioverativ, an independent public company. For additional information about the spin-off, please see Note 1, Summary of Significant Accounting Policies and Note 26, Subsequent Events to these consolidated financial statements.

Mitsubishi Tanabe Pharma Corporation

In September 2015 we announced an agreement with Mitsubishi Tanabe Pharma Corporation (MTPC) to exclusively license amiselimod (MT-1303), a late stage experimental medicine with potential in multiple autoimmune indications. Amiselimod is an oral compound that targets the sphingosine 1-phosphate receptor. During the fourth quarter of 2015 the agreement became effective and we made an upfront payment of $60.0 million, which was recorded as research and development expense in our consolidated statements of income.

During the third quarter of 2016 we discontinued our development of amiselimod. We expect to formally terminate the agreement and return the program to MTPC in the first quarter of 2017. We will have no further license to or continuing involvement in the development of this compound. For the year ended December 31, 2016, $22.8 million was reflected in research and development expense in our consolidated statements of income.

Other Research and Discovery Arrangements

During the years ended December 31, 2016, 2015 and 2014, we entered into several research, discovery and other related arrangements that resulted in $10.3 million, $9.7 million and $40.0 million, respectively, recorded as research and development expense in our consolidated statements of income.

These additional arrangements include the potential for future milestone payments based on clinical and commercial development over a period of several years.

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Samsung Bioepis

Joint Venture Agreement

In February 2012 we entered into a joint venture agreement with Samsung BioLogics Co. Ltd. (Samsung Biologics), establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar pharmaceuticals. Samsung Biologics contributed 280.5 billion South Korean won (approximately $250.0 million) for an 85% stake in Samsung Bioepis and we contributed approximately 49.5 billion South Korean won (approximately $45.0 million) for the remaining 15% ownership interest. Under the joint venture agreement, we have no obligation to provide any additional funding and our ownership interest may be diluted due to financings in which we do not participate. As of December 31, 2016, our ownership interest is approximately 6.5%, which reflects the effect of additional equity financings in which we did not participate. We maintain an option to purchase additional stock in Samsung Bioepis that would allow us to increase our ownership percentage up to 49.9%. The exercise of this option is within our control and is based on paying for 49.9% of the total investment made by Samsung Biologics into Samsung Bioepis in excess of what we have already contributed under the agreement plus a rate that will represent their return on capital. If we do not exercise this option by a date in 2018 determined pursuant to the joint venture agreement, this option will expire and Samsung Biologics will have the right to purchase all of Samsung Bioepis’ shares then held by us.

Samsung Biologics has the power to direct the activities of Samsung Bioepis which will most significantly and directly impact its economic performance. We account for this investment under the equity method of accounting as we maintain the ability to exercise significant influence over Samsung Bioepis through a presence on the entity’s Board of Directors and our contractual relationship. Under the equity method, we recorded our original investment at cost and subsequently adjust the carrying value of our investment for our share of equity in the entity’s income or losses according to our percentage of ownership. We recognize our share of the results of operations related to our investment in Samsung Bioepis one quarter in arrears when the results of the entity become available, which is reflected as equity in loss of investee, net of tax in our consolidated statements of income. During the years ended December 31, 2015 and 2014, we recognized a loss on our investment of $12.5 million and $15.1 million, respectively. During 2015, as our share of losses exceeded the carrying value of our investment, we suspended recognizing additional losses and will continue to do so unless we commit to providing additional funding.

Commercial Agreement

In December 2013 pursuant to our rights under the joint venture agreement with Samsung Biologics, we entered into an agreement with Samsung Bioepis to commercialize, over a 10-year term, three anti-tumor necrosis factor (TNF) biosimilar product candidates in Europe and in the case of one anti-TNF biosimilar, Japan. Under the terms of this agreement, we have made total upfront and clinical development milestone payments of $46.0 million, all of which have been recorded as research and development expense in our consolidated statements of income as the programs they relate to had not achieved regulatory approval. We also agreed to make additional milestone payments of $25.0 million upon regulatory approval in the E.U. for each of the three anti-TNF biosimilar product candidates. During the year ended December 31, 2016, we paid $50.0 million in milestone payments, which have been capitalized in intangible assets, net in our consolidated balance sheets as BENEPALI received regulatory approval in the E.U. in January 2016 and FLIXABI received regulatory approval in the E.U. in May 2016. In July 2016 the EMA accepted Samsung Bioepis' MAA for SB5, an adalimumab biosimilar candidate referencing HUMIRA.

We began to recognize revenue on sales of BENEPALI in the E.U. in the first quarter of 2016 and FLIXABI in the E.U. in the third quarter of 2016. We reflect revenues on sales of BENEPALI and FLIXABI to third parties in product revenues, net in our consolidated statements of income and record the related cost of revenues and sales and marketing expenses in our consolidated statements of income to their respective line items when these costs are incurred. We share 50% of the profit or loss related to our commercial agreement with Samsung Bioepis. This profit sharing with Samsung Bioepis is recognized in collaboration profit (loss) sharing in our consolidated statements of income. For the year ended December 31, 2016, we recognized a net expense of $15.1 million related to the collaboration profit share.

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Other Services

Simultaneous with the formation of Samsung Bioepis, we also entered into a license agreement, a technical development services agreement and a manufacturing agreement with Samsung Bioepis. Under the terms of the license agreement, we granted Samsung Bioepis an exclusive license to use, develop, manufacture and commercialize biosimilar products created by Samsung Bioepis using Biogen product-specific technology. In exchange, we will receive single digit royalties on all biosimilar products developed and commercialized by Samsung Bioepis. Under the terms of the technical development services agreement, we provide Samsung Bioepis technical development and technology transfer services, which include, but are not limited to, cell culture development, purification process development, formulation development and analytical development. Under the terms of our manufacturing agreement, we manufacture clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis pursuant to contractual terms. Under limited circumstances, we may also supply Samsung Bioepis with quantities of drug product of biosimilar products for use in clinical trials through arrangements with third-party contract manufacturers.

For the years ended December 31, 2016, 2015 and 2014, we recognized $20.2 million, $62.9 million and $58.5 million, respectively, in revenues in relation to these services, which is reflected as a component of other revenues in our consolidated statements of income.

20. Litigation

We are currently involved in various claims and legal proceedings, including the matters described below. For information as to our accounting policies relating to claims and legal proceedings, including use of estimates and contingencies, please read Note 1, Summary of Significant Accounting Policies to these consolidated financial statements.

With respect to some loss contingencies, an estimate of the possible loss or range of loss cannot be made until management has further information, including, for example, (i) which claims, if any, will survive dispositive motion practice; (ii) information to be obtained through discovery; (iii) information as to the parties' damages claims and supporting evidence; (iv) the parties’ legal theories; and (v) the parties' settlement positions.

The claims and legal proceedings in which we are involved also include challenges to the scope, validity or enforceability of the patents relating to our products, pipeline or processes, and challenges to the scope, validity or enforceability of the patents held by others. These include claims by third parties that we infringe their patents. An adverse outcome in any of these proceedings could result in one or more of the following and have a material impact on our business or consolidated results of operations and financial position: (i) loss of patent protection; (ii) inability to continue to engage in certain activities; and (iii) payment of significant damages, royalties, penalties and/or license fees to third parties.

Loss Contingencies

Forward Pharma German Patent Litigation

On November 18, 2014, Forward Pharma A/S (Forward Pharma) filed suit against us in the Regional Court of Düsseldorf, Germany (the German Infringement Litigation) alleging that TECFIDERA infringes German Utility Model DE 20 2005 022 112 U1 (the utility model), which was issued in April 2014 and expired in October 2015. Forward Pharma subsequently extended its allegations to assert that TECFIDERA infringes Forward Pharma's European Patent No. 2,801,355 (the '355 patent), which was issued in May 2015 and expires in October 2025. We have entered a settlement and license agreement with Forward Pharma that will provide us an irrevocable license to all intellectual property owned by Forward Pharma and result in the termination of the German Infringement Litigation. For more information on the settlement and license agreement please read Note 21, Commitments and Contingencies to these consolidated financial statements.

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Italian National Medicines Agency

In the fourth quarter of 2011 Biogen Italia SRL received notice from the Italian National Medicines Agency (Agenzia Italiana del Farmaco or AIFA) that sales of TYSABRI after mid-February 2009 exceeded a reimbursement limit established pursuant to a Price Determination Resolution (Price Resolution) granted by AIFA in December 2006. On January 12, 2012, we filed an appeal in the Regional Administrative Tribunal of Lazio (Il Tribunale Amministrativo Regionale per il Lazio) in Rome, Italy seeking a ruling that the reimbursement limit in the Price Resolution should apply as written to only “the first 24 months” of TYSABRI sales, which ended in mid-February 2009. The appeal is still pending. In June 2014 AIFA approved a resolution affirming that there is no reimbursement limit from and after February 2013. In January 2017 we negotiated an agreement in principle with AIFA's Price and Reimbursement Committee to settle all of AIFA's existing claims relating to sales of TYSABRI in excess of the reimbursement limit for the periods from February 2009 through January 2013 for an aggregate repayment of EUR37.4 million. The agreement is subject to ratification by AIFA.

For additional information regarding this matter, please read Note 17, Other Consolidated Financial Statement Detail to these consolidated financial statements.

Qui Tam Litigation

On July 6, 2015, a qui tam action filed on behalf of the United States and certain states were unsealed by the U.S. District Court for the District of Massachusetts. The action alleges sales and promotional activities in violation of the federal False Claims Act and state law counterparts, and seeks single and treble damages, civil penalties, interest, attorneys’ fees and costs. Our motion to dismiss is pending. The United States has not made an intervention decision. An estimate of the possible loss or range of loss cannot be made at this time.

Securities Litigation

We and certain current and former officers are defendants in In re Biogen Inc. Securities Litigation, filed by a shareholder on August 18, 2015 in the U.S. District Court for the District of Massachusetts. The amended complaint alleges violations of federal securities laws under 15 U.S.C. §78j(b) and §78t(a) and 17 C.F.R. §240.10b-5. The lead plaintiff sought a declaration of the action as a class action, certification as a representative of the class and its counsel as class counsel, and an award of damages, interest and attorneys' fees. On July 1, 2016, the U.S. District Court dismissed the case and in September 2016 denied the plaintiff's motion to vacate the order of dismissal. The plaintiff has appealed. An estimate of the possible loss or range of loss cannot be made at this time.

We and certain current and former officers are also defendants in an action filed by another shareholder on October 20, 2016 in the U.S. District Court for the District of Massachusetts, related to the matter described above. The complaint alleges violations of federal securities laws under 15 U.S.C. §78j(b) and §78t(a) and 17 C.F.R. §240.10b-5 and seeks a declaration of the action as a class action and an award of damages, interest and attorney's fees. An estimate of the possible loss or range of loss cannot be made at this time.

Other Matters

Interference Proceeding with Forward Pharma

In April 2015 the U.S. Patent and Trademark Office (USPTO) declared an interference between Forward Pharma’s pending U.S. Patent Application No. 11/576,871 and our U.S. Patent No. 8,399,514 (the '514 patent). The '514 patent includes claims covering the treatment of multiple sclerosis with 480 mg of dimethyl fumarate as provided for in our TECFIDERA label. We are awaiting a decision in this matter.

Inter Partes Review Proceeding

On March 22, 2016, the USPTO instituted inter partes review of the '514 patent on the petition of the Coalition for Affordable Drugs V LLC, an entity associated with a hedge fund. We are awaiting a decision in this matter.

On April 18, 2016, Swiss Pharma International AG filed petitions in the USPTO for inter partes review of U.S. Patent Nos. 8,349,321 and 8,900,577, relating to specific formulations of natalizumab (TYSABRI), and U.S. Patent No. 8,815,236, relating to methods for treating MS and Crohn's disease using specific formulations of natalizumab (TYSABRI). In October 2016 the USPTO declined to institute proceedings under all three petitions. Swiss Pharma filed requests for rehearing, which are pending.

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European Patent Office Oppositions

In June 2016 the European Patent Office issued a written decision confirming its earlier revocation of our European patent number 2 137 537 (the '537 patent), which we have appealed. The '537 patent includes claims covering the treatment of MS with 480 mg of dimethyl fumarate as provided for in our TECFIDERA label.

Patent Revocation Matter

In December 2015 Swiss Pharma International AG brought an action in the Patents Court of the United Kingdom to revoke the UK counterpart of our European Patent Number 1 485 127 (“Administration of agents to treat inflammation”) (the '127 patent), which was issued in June 2011 and concerns administration of natalizumab (TYSABRI) to treat MS. The patent expires in February 2023. Subsequently, the same entity brought an actions in the District Court of The Hague (on January 11, 2016) and the German Patents Court (on March 3, 2016) to invalidate the Dutch and German counterparts of the '127 patent. In September 2016 we resolved the UK action by agreeing to revocation of the UK patent. A hearing has been scheduled in the Dutch action for early 2017 and the German action for early 2018.

'755 Patent Litigation

On May 28, 2010, Biogen MA Inc. (formerly Biogen Idec MA Inc.) filed a complaint in the U.S. District Court for the District of New Jersey alleging infringement by Bayer Healthcare Pharmaceuticals Inc. (Bayer) (manufacturer, marketer and seller of BETASERON and manufacturer of EXTAVIA), EMD Serono, Inc. (EMD Serono) (manufacturer, marketer and seller of REBIF), Pfizer Inc. (co-marketer of REBIF) and Novartis Pharmaceuticals Corp. (Novartis) (marketer and seller of EXTAVIA) of our U.S. Patent No. 7,588,755 ('755 Patent), which claims the use of interferon beta for immunomodulation or treating a viral condition, viral disease, cancers or tumors. The complaint seeks monetary damages, including lost profits and royalties. Bayer had previously filed a complaint against us in the same court, on May 27, 2010, seeking a declaratory judgment that it does not infringe the '755 Patent and that the patent is invalid, and seeking monetary relief in the form of attorneys' fees, costs and expenses. The court has consolidated the two lawsuits, and we refer to the two actions as the “Consolidated '755 Patent Actions.”

Bayer, Pfizer, Novartis and EMD Serono have all filed counterclaims in the Consolidated '755 Patent Actions seeking declaratory judgments of patent invalidity and non-infringement, and seeking monetary relief in the form of costs and attorneys' fees, and EMD Serono and Bayer have each filed a counterclaim seeking a declaratory judgment that the '755 Patent is unenforceable based on alleged inequitable conduct. Bayer has also amended its complaint to seek such a declaration. Trial has been set for September 2017.

Government Matters

We have learned that state and federal governmental authorities are investigating our sales and promotional practices and have received related subpoenas. We are cooperating with the government.

On March 4, 2016, we received a subpoena from the federal government for documents relating to our relationship with non-profit organizations that provide assistance to patients taking drugs sold by Biogen. We are cooperating with the government.

On July 1, 2016, we received a civil investigative demand from the federal government for documents and information relating to our treatment of certain service agreements with wholesalers when calculating and reporting Average Manufacturer Prices in connection with the Medicaid Drug Rebate Program. We are cooperating with the government.

On December 5, 2016, we received a subpoena from the federal government for documents relating to government price reporting, rebate payments and Biogen's co-pay assistance programs for AVONEX, TECFIDERA, TYSABRI and PLEGRIDY. We are cooperating with the government.

On December 29, 2016, we received a civil investigative demand from the federal government for documents and information relating to our relationships with entities providing clinical education and reimbursement support services. We are cooperating with the government.

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Product Liability and Other Legal Proceedings

We are also involved in product liability claims and other legal proceedings generally incidental to our normal business activities. While the outcome of any of these proceedings cannot be accurately predicted, we do not believe the ultimate resolution of any of these existing matters would have a material adverse effect on our business or financial condition.

21. Commitments and Contingencies

TECFIDERA Litigation Settlement and License Agreement

In January 2017 we agreed to enter into a settlement and license agreement with Forward Pharma that will provide us an irrevocable license to all intellectual property owned by Forward Pharma and results in the termination of the German Infringement Litigation. Under the terms of the settlement and license agreement with Forward Pharma, we have agreed to pay Forward Pharma $1.25 billion in cash. Under certain circumstances outlined in the agreement, we will pay Forward Pharma royalties on net sales of our products for the treatment of multiple sclerosis that are covered by a Forward Pharma patent and have dimethyl fumarate (“DMF”) as an active pharmaceutical ingredient.

During the fourth quarter of 2016 we recognized a pre-tax charge of $454.8 million related to this matter. This amount represents the fair value of estimated royalties on our sales of TECFIDERA during the period April 2014 through December 31, 2016. When the cash payment is made following approval of the settlement and license agreement, we will recognize assets of $656.3 million and $138.9 million, reflecting the estimated fair value of the license acquired that is attributable to the U.S. and E.U., respectively. If Forward Pharma does not receive a patent in either the Interference Proceeding pending in the U.S. or the pending European Opposition Proceeding (which proceedings are defined in the settlement and license agreement), we would likely recognize an immediate impairment charge equal to the value of the license that is attributable to that jurisdiction as additional litigation expense and we would not be obligated to pay Forward Pharma royalties in such jurisdiction. If Forward Pharma receives a patent in either the U.S. Interference Proceeding or the E.U. Opposition Proceeding, we would amortize the assets related to a license of intellectual property in the related jurisdiction utilizing an economic consumption model and we may be obligated to royalties on a country by country basis in Europe and other ex-U.S. markets.

For additional information with respect to the terms of this agreement, including potential royalties payable, please read the Settlement and License Agreement dated January 17, 2017, between Biogen Swiss Manufacturing GmbH, Biogen International Holding Ltd, Forward Pharma A/S and the other parties thereto which is filed as Exhibit 10.41 to this 2016 Form 10-K. For additional information related to the ongoing Interference Proceeding with Forward Pharma in the U.S. or the European Office Opposition in the E.U., please read Note 20, Litigation to these consolidated financial statements.

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 terms of 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. Following that acquisition, we began making these royalty payments to Perrigo.

Contingent Consideration related to Business Combinations

In connection with our acquisitions of Convergence, 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, formerly Panima Pharmaceuticals AG, occurred after January 1, 2009, we record contingent consideration liabilities at their fair value on the acquisition date and revalue these obligations each reporting period. We may pay up to approximately $1.2 billion in remaining milestones related to these acquisitions. For additional information related to our acquisition of Convergence please read Note 2, Acquisitions, to these consolidated financial statements.

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Fumapharm AG

In 2006 we acquired Fumapharm AG. As part of this acquisition we acquired FUMADERM and TECFIDERA (together, Fumapharm Products). We paid $220.0 million upon closing of the transaction and agreed to pay an additional $15.0 million if a Fumapharm Product was approved for MS in the U.S. or E.U. In the second quarter of 2013 we paid this $15.0 million contingent payment as TECFIDERA was approved in the U.S. for MS by the FDA. We are also required to make additional contingent payments to 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 twelve month period, as defined in the acquisition agreement.

During 2016 we paid $1.2 billion in contingent payments as we reached the $7.0 billion, $8.0 billion, $9.0 billion and $10.0 billion cumulative sales levels related to the Fumapharm Products in the fourth quarter of 2015 and the first, second and third quarters of 2016, respectively, and accrued $300.0 million upon reaching $11.0 billion in total cumulative sales of Fumapharm Products in the fourth quarter of 2016.

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 which 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, 2016, we could make potential future milestone payments to third parties of up to approximately $3.1 billion, including approximately $0.5 billion in development milestones, approximately $0.8 billion in regulatory milestones and approximately $1.8 billion in commercial milestones as part of our various collaborations, including licensing and development programs. Payments under these agreements generally become due and payable upon achievement of certain development, regulatory or commercial milestones. Because the achievement of these milestones had not occurred as of December 31, 2016, such contingencies have not been recorded in our financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones.

Other Funding Commitments

As of December 31, 2016, we have several on-going clinical studies in various clinical trial stages. Our most significant clinical trial expenditures are to contract research organizations (CROs). The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $21.0 million on our consolidated balance sheet for expenditures incurred by CROs as of December 31, 2016. We have approximately $500.0 million in cancellable future commitments based on existing CRO contracts as of December 31, 2016.

Tax Related Obligations

We exclude liabilities pertaining to uncertain tax positions from our summary of contractual obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of December 31, 2016, we have approximately $47.8 million of net liabilities associated with uncertain tax positions.

Solothurn, Switzerland Facility

On December 1, 2015, we purchased land in Solothurn, Switzerland where we are building a biologics manufacturing facility over the next several years. As of December 31, 2016, we had contractual commitments of $176.3 million for the construction of this facility.

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Leases

We rent laboratory and office space and certain equipment under non-cancelable operating leases. These lease agreements contain various clauses for renewal at our option and, in certain cases, escalation clauses typically linked to rates of inflation. Rental expense under these leases, net of amounts recognized in relation to exiting our manufacturing facility in Cambridge, Massachusetts and our Weston, Massachusetts facility, which terminate at various dates through 2028, amounted to $68.7 million, $68.6 million and $62.4 million in 2016, 2015 and 2014, respectively. In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.

As of December 31, 2016, minimum rental commitments under non-cancelable leases, net of income from subleases, for each of the next five years and total thereafter were as follows:

(In millions)	2017				2018				2019				2020				2021				Thereafter				Total
Minimum lease payments	$	75.3			$	69.8			$	69.1			$	65.7			$	64.6			$	331.9			$	676.4
Less: income from subleases (1)	(8.9		)		(15.2		)		(15.5		)		(15.7		)		(16.2		)		(55.4		)		(126.9		)
Net minimum lease payments	$	66.4			$	54.6			$	53.6			$	50.0			$	48.4			$	276.5			$	549.5

(1)

Represents sublease income expected to be received for the vacated manufacturing facility in Cambridge, MA, the vacated portion of our Weston, Massachusetts facility and other facilities throughout the world. For additional information related to the sublease of the vacated manufacturing facility in Cambridge, MA, please read Note 3, Restructuring, Business Transformation and Other Cost Savings Initiatives to these consolidated financial statements.

Under certain of our lease agreements, we are contractually obligated to return leased space to its original condition upon termination of the lease agreement. At the inception of a lease with such conditions, we record an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, for each such lease, we record interest expense to accrete the asset retirement obligation liability to full value and depreciate each capitalized asset retirement obligation asset, both over the term of the associated lease agreement. Our asset retirement obligations were not significant as of December 31, 2016 or 2015.

Eisai Financing Arrangement

During 2015 we amended our existing lease related to Eisai's oral solid dose products manufacturing facility in RTP, North Carolina where we manufacture our and Eisai's oral solid dose products. For additional information, please read Note 10, Property, Plant and Equipment to these consolidated financial statements. As of December 31, 2016, the net present values of the future minimum lease payments were as follows:

(In millions)	As of December 31, 2016
2017	$	2.0
2018	16.7
Total	18.7
Less: interest	(0.6		)
Net present value of the future minimum lease payments	$	18.1

22. Guarantees

As of December 31, 2016 and 2015, we did not have significant liabilities recorded for guarantees.

We enter into indemnification provisions under our agreements with other companies in the ordinary course of business, typically with business partners, contractors, clinical sites and customers. Under these provisions, we generally indemnify and hold harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of our activities. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. However, to date we have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of these agreements is minimal. Accordingly, we have no liabilities recorded for these agreements as of December 31, 2016 and 2015.

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23. Employee Benefit Plans

We sponsor various retirement and pension plans. Our estimates of liabilities and expenses for these plans incorporate a number of assumptions, including expected rates of return on plan assets and interest rates used to discount future benefits.

401(k) Savings Plan

We maintain a 401(k) Savings Plan, which is available to substantially all regular employees in the U.S. over the age of 21. Participants may make voluntary contributions. We make matching contributions according to the 401(k) Savings Plan’s matching formula. All matching contributions and participant contributions vest immediately. The 401(k) Savings Plan also holds certain transition contributions on behalf of participants who previously participated in the Biogen, Inc. Retirement Plan. The expense related to our 401(k) Savings Plan primarily consists of our matching contributions.

Expense related to our 401(k) Savings Plan totaled $45.2 million, $51.8 million and $49.3 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Deferred Compensation Plan

We maintain a non-qualified deferred compensation plan, known as the Supplemental Savings Plan (SSP), which allows a select group of management employees in the U.S. to defer a portion of their compensation. The SSP also provides certain credits to highly compensated U.S. employees, which are paid by the company. These credits are known as the Restoration Match. The deferred compensation amounts are accrued when earned. Such deferred compensation is distributable in cash in accordance with the rules of the SSP. Deferred compensation amounts under such plan as of December 31, 2016 and 2015, totaled approximately $128.5 million and $126.9 million, respectively, and are included in other long-term liabilities in our consolidated balance sheets. The SSP also holds certain transition contributions on behalf of participants who previously participated in the Biogen, Inc. Retirement Plan. The Restoration Match and participant contributions vest immediately. Distributions to participants can be either in one lump sum payment or annual installments as elected by the participants.

Pension Plans

Our retiree benefit plans include defined benefit plans for employees in our affiliates in Switzerland and Germany as well as other insignificant defined benefit plans in certain other countries in which we maintain an operating presence.

Our Swiss plan is a government-mandated retirement fund that provides employees with a minimum investment return. The minimum investment return is determined annually by the Swiss government and was 1.25% in 2016 and 1.75% in 2015 and 2014, respectively. Under the Swiss plan, both we and certain of our employees with annual earnings in excess of government determined amounts are required to make contributions into a fund managed by an independent investment fiduciary. Employer contributions must be in an amount at least equal to the employee’s contribution. Minimum employee contributions are based on the respective employee’s age, salary and gender. As of December 31, 2016 and 2015, the Swiss plan had an unfunded net pension obligation of approximately $39.1 million and $42.4 million, respectively, and plan assets which totaled approximately $68.6 million and $63.9 million, respectively. In 2016, 2015 and 2014, we recognized expense totaling $15.3 million, $12.9 million and $9.8 million, respectively, related to our Swiss plan.

The obligations under the German plans are unfunded and totaled $35.4 million and $27.6 million as of December 31, 2016 and 2015, respectively. Net periodic pension cost related to the German plans totaled $4.2 million, $4.0 million and $3.5 million for the years ended December 31, 2016, 2015 and 2014, respectively.

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24. Segment Information

We operate as one operating segment, which is discovering, developing, manufacturing and delivering therapies to people living with serious neurological, rare and autoimmune diseases. Our Chief Executive Officer (CEO), as the chief operating decision-maker, manages and allocates resources to the operations of our company on a total company basis. Our research and development organization is responsible for the research and discovery of new product candidates and supports development and registration efforts for potential future products. Our pharmaceutical, operations and technology organization manages the development of the manufacturing processes, clinical trial supply, commercial product supply, distribution, buildings and facilities. Our commercial organization is responsible for U.S. and international development of our commercial products. The company is also supported by corporate staff functions. Managing and allocating resources on a total company basis enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions, therapeutic areas, and research and development projects that are in line with our long-term company-wide strategic goals. Consistent with this decision-making process, our CEO uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.

Enterprise-wide disclosures about product revenues, other revenues and long-lived assets by geographic area and information relating to major customers are presented below. Revenues are primarily attributed to individual countries based on location of the customer or licensee.

Revenue by product is summarized as follows:

	For the Years Ended December 31,
	2016												2015												2014
(In millions)	United States				Rest of World				Total				United States				Rest of World				Total				United States				Rest of World				Total
Multiple Sclerosis (MS):
TECFIDERA	$	3,169.4			$	798.7			$	3,968.1			$	2,908.2			$	730.2			$	3,638.4			$	2,426.6			$	482.6			$	2,909.2
AVONEX	1,675.3				638.2				2,313.5				1,790.2				840.0				2,630.2				1,956.7				1,056.4				3,013.1
PLEGRIDY	305.0				176.7				481.7				227.1				111.4				338.5				27.8				16.7				44.5
TYSABRI	1,182.9				780.9				1,963.8				1,103.1				783.0				1,886.1				1,025.1				934.4				1,959.5
FAMPYRA	—				84.9				84.9				—				89.7				89.7				—				80.2				80.2
ZINBRYTA	—				7.8				7.8				—				—				—				—				—				—
Hemophilia:
ELOCTATE	445.2				68.0				513.2				308.3				11.4				319.7				58.4				—				58.4
ALPROLIX	268.0				65.7				333.7				208.9				25.6				234.5				72.1				3.9				76.0
Other product revenues:
FUMADERM	—				45.9				45.9				—				51.4				51.4				—				62.5				62.5
SPINRAZA	4.6				—				4.6				—				—				—				—				—				—
BENEPALI	—				100.6				100.6				—				—				—				—				—				—
FLIXABI	—				0.1				0.1				—				—				—				—				—				—
Total product revenues	$	7,050.4			$	2,767.5			$	9,817.9			$	6,545.8			$	2,642.7			$	9,188.5			$	5,566.7			$	2,636.7			$	8,203.4

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Geographic Information

The following tables contain certain financial information by geographic area:

December 31, 2016 (In millions)	U.S.				Europe(1)				Germany				Asia				Other				Total
Product revenues from external customers	$	7,050.4			$	1,533.5			$	703.7			$	217.3			$	313.0			$	9,817.9
Revenues from anti-CD20 therapeutic programs	$	1,249.5			$	1.9			$	—			$	—			$	63.1			$	1,314.5
Other revenues from external customers	$	224.7			$	70.0			$	1.5			$	20.2			$	—			$	316.4
Long-lived assets	$	1,272.3			$	1,219.3			$	1.8			$	7.0			$	1.4			$	2,501.8
December 31, 2015 (In millions)	U.S.				Europe(1)				Germany				Asia				Other				Total
Product revenues from external customers	$	6,545.8			$	1,497.6			$	668.1			$	143.7			$	333.3			$	9,188.5
Revenues from anti-CD20 therapeutic programs	$	1,269.8			$	3.5			$	—			$	—			$	65.9			$	1,339.2
Other revenues from external customers	$	142.0			$	29.6			$	1.6			$	62.9			$	—			$	236.1
Long-lived assets	$	1,296.5			$	879.4			$	2.3			$	7.7			$	1.7			$	2,187.6
December 31, 2014 (In millions)	U.S.				Europe(1)				Germany				Asia				Other				Total
Product revenues from external customers	$	5,566.7			$	1,383.9			$	811.8			$	112.8			$	328.2			$	8,203.4
Revenues from anti-CD20 therapeutic programs	$	1,117.1			$	7.7			$	—			$	—			$	70.6			$	1,195.4
Other revenues from external customers	$	212.6			$	31.6			$	1.8			$	58.5			$	—			$	304.5
Long-lived assets	$	1,055.5			$	701.9			$	2.5			$	2.6			$	3.2			$	1,765.7

(1)	Represents amounts related to Europe less those attributable to Germany.

Revenues from Anti-CD20 Therapeutic Programs

Approximately 11%, 12% and 12% of our total revenues in 2016, 2015 and 2014, respectively, are derived from our collaboration agreement with Genentech. For additional information related to our collaboration with Genentech, please read Note 19, Collaborative and Other Relationships to these consolidated financial statements.

Significant Customers

We recorded revenue from two wholesalers accounting for 35% and 22% of gross product revenues in 2016, 34% and 26% of gross product revenues in 2015, and 33% and 27% of gross product revenues in 2014, respectively.

Other

As of December 31, 2016, 2015 and 2014, approximately $643.6 million, $684.9 million and $676.0 million, respectively, of our long-lived assets were related to our manufacturing facilities in Denmark.

As of December 31, 2016 and 2015, approximately $545.5 million and $161.5 million, respectively, of our long-lived assets were related to the construction of a biologics manufacturing facility in Solothurn, Switzerland.

For additional information related to our manufacturing facility in Solothurn, Switzerland, please read Note 10, Property, plant and equipment to these consolidated financial statements.

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25. Quarterly Financial Data (Unaudited)

(In millions, except per share amounts)	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Total Year
2016	(a)				(b)				(b) (c)				(b) (d) (e)
Product revenues, net	$	2,309.4			$	2,466.0			$	2,539.6			$	2,502.9			$	9,817.9
Revenues from anti-CD20 therapeutic programs	$	329.5			$	349.2			$	317.6			$	318.2			$	1,314.5
Other revenues	$	87.9			$	79.0			$	98.6			$	50.9			$	316.4
Total revenues	$	2,726.8			$	2,894.2			$	2,955.8			$	2,872.0			$	11,448.8
Gross profit (1)	$	2,413.8			$	2,523.9			$	2,538.9			$	2,493.5			$	9,970.1
Net income	$	969.2			$	1,048.4			$	1,030.2			$	647.9			$	3,695.7
Net income attributable to Biogen Inc.	$	970.9			$	1,049.8			$	1,032.9			$	649.2			$	3,702.8
Net income per share:
Basic earnings per share attributable to Biogen Inc.	$	4.44			$	4.79			$	4.72			$	3.00			$	16.96
Diluted earnings per share attributable to Biogen Inc.	$	4.43			$	4.79			$	4.71			$	2.99			$	16.93
Weighted-average shares used in calculating:
Basic earnings per share attributable to Biogen Inc.	218.9				219.1				218.9				216.6				218.4
Diluted earnings per share attributable to Biogen Inc.	219.3				219.4				219.4				217.0				218.8

(In millions, except per share amounts)	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Total Year
2015									(f) (g)				(a) (h)
Product revenues, net	$	2,172.3			$	2,198.6			$	2,391.7			$	2,425.9			$	9,188.5
Revenues from anti-CD20 therapeutic programs	$	330.6			$	337.5			$	337.2			$	333.9			$	1,339.2
Other revenues	$	52.0			$	55.6			$	49.0			$	79.5			$	236.1
Total revenues	$	2,555.0			$	2,591.6			$	2,777.9			$	2,839.3			$	10,763.8
Gross profit (1)	$	2,242.6			$	2,305.5			$	2,467.9			$	2,507.5			$	9,523.4
Net income	$	820.2			$	924.8			$	1,019.5			$	828.7			$	3,593.2
Net income attributable to Biogen Inc.	$	822.5			$	927.3			$	965.6			$	831.6			$	3,547.0
Net income per share:
Basic earnings per share attributable to Biogen Inc.	$	3.50			$	3.94			$	4.16			$	3.77			$	15.38
Diluted earnings per share attributable to Biogen Inc.	$	3.49			$	3.93			$	4.15			$	3.77			$	15.34
Weighted-average shares used in calculating:
Basic earnings per share attributable to Biogen Inc.	235.0				235.3				232.2				220.4				230.7
Diluted earnings per share attributable to Biogen Inc.	235.6				235.7				232.6				220.8				231.2

(1) Gross profit is calculated as total revenues less cost of sales, excluding amortization of acquired intangible assets.

(a)	Net income and net income attributable to Biogen Inc., for the first quarter of 2016 and the fourth quarter of 2015, includes pre-tax restructuring charges totaling $9.7 million and $93.4 million, respectively related to the 2015 corporate restructuring program.

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BIOGEN INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(b)

Net income and net income attributable to Biogen Inc. for the second, third and fourth quarters of 2016 includes pre-tax additional depreciation expense totaling $15.8 million, $15.7 million and $14.0 million, respectively, as part of our determination to cease manufacturing in our small-scale biologics manufacturing facility in Cambridge, MA as well as vacate our warehouse space in Somerville, MA. Our departure from these facilities has shortened the expected useful lives of certain leasehold improvements and other assets at these facilities.

(c)	Net income and net income attributable to Biogen Inc. for the third quarter of 2016 includes a pre-tax charge to research and development expense of $75.0 million for a license fee paid to Ionis as we exercised our option to develop and commercialize SPINRAZA.

(d)	Net income and net income attributable to Biogen Inc. for the fourth quarter of 2016 includes a pre-tax charge to research and development expense of $50.0 million for a milestone payment due to Eisai related to the initiation of a phase 3 trial for E2609.

(e)	Net income and net income attributable to Biogen Inc. for the fourth quarter of 2016 includes a pre-tax charge of $454.8 million related to the January 2017 settlement and license agreement with Forward Pharma.

(f)	Net income and net income attributable to Biogen Inc. for the third quarter of 2015 includes a pre-tax charge to research and development expense of $48.1 million recorded upon entering into the collaboration agreement with AGTC.

(g)	Net income attributable to Biogen Inc. for the third quarter of 2015 reflects the attribution of a $60.0 million charge to noncontrolling interests, net of tax, related to a milestone payment due Neurimmune upon the enrollment of the first patient in a Phase 3 trial for aducanumab.

(h)	Net income and net income attributable to Biogen Inc. for the fourth quarter of 2015 includes a pre-tax charge to research and development expense of $60.0 million recorded upon entering into the collaboration agreement with MTPC.

26. Subsequent Events

On February 1, 2017, we completed the distribution of the issued and outstanding common stock of Bioverativ to Biogen stockholders. For additional information related to the distribution of Bioverativ, please read Note 1, Summary of Significant Accounting Policies, to these consolidated financial statements.

In connection with the distribution, we entered into a separation and distribution agreement and various other agreements (including a transition services agreement, a tax matters agreement, a manufacturing and supply agreement, an employee matters agreement, an intellectual property matters agreement and certain other commercial agreements). These agreements govern the separation and distribution and the relationship between the two companies going forward. They also provide for the performance of services by each company for the benefit of the other for a period of time (including under the manufacturing and supply agreement pursuant to which we will manufacture and supply certain products and materials to Bioverativ).

F- 74

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Biogen Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, equity and cash flows present fairly, in all material respects, the financial position of Biogen Inc. and its subsidiaries at December 31, 2016 and December 31, 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting under item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

February 2, 2017

F- 75

EXHIBIT INDEX

Exhibit No.		Description
2.1†		Asset Purchase Agreement among Biogen Idec International Holding Ltd., Elan Pharma International Limited and Elan Pharmaceuticals, Inc., dated as of February 5, 2013. Filed as Exhibit 2.1 to our Current Report on Form 8-K/A filed on February 12, 2013.
2.2		Separation Agreement between Biogen Inc. and Bioverativ Inc. Filed as Exhibit 2.1 to our Current Report on Form 8-K filed on February 2, 2017.
3.1		Amended and Restated Certificate of Incorporation, as amended. Filed as Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
3.2		Certificate of Amendment to the Certificate of Incorporation. Filed as Exhibit 3.1 to our Current Report on Form 8-K filed on March 27, 2015.
3.3		Third Amended and Restated Bylaws. Filed as Exhibit 3.2 to our Current Report on Form 8-K filed on March 27, 2015.
4.1		Reference is made to Exhibit 3.1 for a description of the rights, preferences and privileges of our Series A Preferred Stock and Series X Junior Participating Preferred Stock.
4.2		Indenture between Biogen Idec and The Bank of New York Trust Company, N.A. dated as of February 26, 2008. Filed as Exhibit 4.1 to our Registration Statement on Form S-3 (File No. 333-149379).
4.3		First Supplemental Indenture between Biogen Idec and The Bank of New York Trust Company, N.A. dated as of March 4, 2008. Filed as Exhibit 4.1 to our Current Report on Form 8-K filed on March 4, 2008.
4.4		Indenture, dated September 15, 2015, between Biogen Inc. and U.S. Bank National Association. Filed as Exhibit 4.1 to our Current Report on Form 8-K filed on September 16, 2015.
4.5		First Supplemental Indenture, dated September 15, 2015, between Biogen Inc. and U.S. Bank National Association. Filed as Exhibit 4.2 to our Current Report on Form 8-K filed on September 16, 2015.
10.1		Credit Agreement, dated August 28, 2015, between Biogen Inc., Bank of America, N.A., as administrative agent, swing line lender and an L/C issuer, and the other lenders party thereto. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on September 1, 2015.
10.2†		Expression Technology Agreement between Biogen Idec and Genentech. Inc. dated March 16, 1995. Filed as an exhibit to Biogen Idec’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
10.3		Letter Agreement between Biogen Idec and Genentech, Inc. dated May 21, 1996. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on June 6, 1996.
10.4†		Second Amended and Restated Collaboration Agreement between Biogen Idec and Genentech, Inc. dated as of October 18, 2010. Filed as Exhibit 10.5 to our Annual Report on Form 10-K for the year ended December 31, 2010.
10.5†		Letter agreement regarding GA101 financial terms between Biogen Idec and Genentech, Inc. dated October 18, 2010. Filed as Exhibit 10.6 to our Annual Report on Form 10-K for the year ended December 31, 2010.
10.6*		Biogen Idec Inc. 2008 Amended and Restated Omnibus Equity Plan. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.
10.7*		Form of performance unit award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.
10.8*		Form of market stock unit award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.
10.9*		Form of restricted stock unit award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on August 1, 2008.
10.10*		Form of nonqualified stock option award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.2 to our Current Report on Form 8-K filed on August 1, 2008.

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Exhibit No.		Description
10.11*		Form of cash-settled performance shares award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
10.12*		Form of performance shares award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.12 to our Annual Report on Form 10-K for the year ended December 31, 2013.
10.13*		Form of market stock unit award agreement under the Biogen Idec Inc. 2008 Omnibus Equity Plan. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.
10.14*		Biogen Inc. 2006 Non-Employee Directors Equity Plan, as amended. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015.
10.15*		Biogen Idec Inc. 2005 Omnibus Equity Plan. Filed as Appendix A to our Definitive Proxy Statement on Schedule 14A filed on April 15, 2005.
10.16*		Amendment No. 1 to the Biogen Idec Inc. 2005 Omnibus Equity Plan dated April 4, 2006. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
10.17*		Amendment No. 2 to the Biogen Idec Inc. 2005 Omnibus Equity Plan dated February 12, 2007. Filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.
10.18*		Amendment to the Biogen Idec Inc. 2005 Omnibus Equity Plan dated April 18, 2008. Filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
10.19*		Amendment to Biogen Idec Inc. 2005 Omnibus Equity Plan dated October 13, 2008. Filed as Exhibit 10.30 to our Annual Report on Form 10-K for the year ended December 31, 2008.
10.20*		Biogen Inc. 2015 Employee Stock Purchase Plan. Filed as Appendix A to Biogen's Definitive Proxy Statement on Schedule 14A filed on April 30, 2015.
10.21*		Biogen Idec Inc. 2008 Performance-Based Management Incentive Plan. Filed as Appendix B to Biogen Idec’s Definitive Proxy Statement on Schedule 14A filed on May 8, 2008.
10.22*		Voluntary Executive Supplemental Savings Plan, as amended and restated effective January 1, 2004. Filed as Exhibit 10.13 to our Annual Report on Form 10-K for the year ended December 31, 2003.
10.23*		Supplemental Savings Plan, as amended. Filed as Exhibit 10.23 to our Annual Report on Form 10-K for the year ended December 31, 2015.
10.24*		Voluntary Board of Directors Savings Plan, as amended. Filed as Exhibit 10.24 to our Annual Report on Form 10-K for the year ended December 31, 2015.
10.25*		Biogen Idec Inc. Executive Severance Policy — U.S. Executive Vice President, as amended effective January 1, 2014. Filed as Exhibit 10.39 to our Annual Report on Form 10-K for the year ended December 31, 2013.
10.26*		Biogen Idec Inc. Executive Severance Policy — International Executive Vice President, as amended effective January 1, 2014. Filed as Exhibit 10.40 Annual Report on Form 10-K for the year ended December 31, 2013.
10.27*		Biogen Idec Inc. Executive Severance Policy — U.S. Senior Vice President, as amended effective October 13, 2008. Filed as Exhibit 10.53 to our Annual Report on Form 10-K for the year ended December 31, 2008.
10.28*		Biogen Idec Inc. Executive Severance Policy — International Senior Vice President, as amended effective October 13, 2008. Filed as Exhibit 10.54 to our Annual Report on Form 10-K for the year ended December 31, 2008.
10.29*		Annual Retainer Summary for Board of Directors. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.
10.30*		Form of indemnification agreement for directors and executive officers. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on June 7, 2011.
10.31*		Employment Agreement between Biogen Idec and George A. Scangos amended as of August 23, 2013. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on August 26, 2013.
10.32*		Letter regarding employment arrangement of Paul J. Clancy dated August 17, 2007. Filed as Exhibit 10.49 to our Annual Report on Form 10-K for the year ended December 31, 2007.

A- 2

Exhibit No.		Description
10.33*		Employment Agreement between Biogen Inc. and Michel Vounatsos dated December 18, 2016. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on December 19, 2016.
10.34*		Letter regarding employment arrangement of Kenneth DiPietro dated December 12, 2011. Filed as Exhibit 10.49 to our Annual Report on Form 10-K for the year ended December 31, 2012.
10.35*		Letter regarding employment arrangement of Alfred Sandrock dated May 7, 2013. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
10.36*		Letter regarding employment arrangement of Alfred Sandrock dated October 19, 2015. Filed as Exhibit 10.37 to our Annual Report on Form 10-K for the year ended December 31, 2015.
10.37*		Letter regarding employment arrangement of Susan Alexander dated December 13, 2005. Filed as Exhibit 10.58 to our Annual Report on Form 10-K for the year ended December 31, 2009.
10.38*		Letter regarding employment arrangement of Adriana Karaboutis dated August 7, 2014. Filed as Exhibit 10.44 to our Annual Report on Form 10-K for the year ended December 31, 2014.
10.39*		Letter regarding employment arrangement of John Cox dated May 19, 2016. Filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.
10.40*		Letter regarding separation arrangement of Tony Kingsley dated November 12, 2015. Filed as Exhibit 10.42 to our Annual Report on Form 10-K for the year ended December 31, 2015.
10.41		Settlement and License Agreement, dated January 17, 2017, between Biogen Swiss Manufacturing GmbH, Biogen International Holding Ltd, Forward Pharma A/S and the other parties thereto. Filed as Exhibit 10.1 to our Current Report on Form 8-K filed on February 1, 2017.
21+		Subsidiaries.
23+		Consent of PricewaterhouseCoopers LLP, an Independent Registered Public Accounting Firm.
31.1+		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1++		Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101++		The following materials from Biogen Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Equity and (vi) Notes to Consolidated Financial Statements.

^	References to “our” filings mean filings made by Biogen Inc. and filings made by IDEC Pharmaceuticals Corporation prior to the merger with Biogen, Inc. Unless otherwise indicated exhibits were previously filed with the Securities and Exchange Commission under Commission File Number 0-19311 and are incorporated herein by reference.

*	Management contract or compensatory plan or arrangement.

†	Confidential treatment has been granted or requested with respect to portions of this exhibit.

+	Filed herewith.

+	+	Furnished herewith.

A- 3