Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and related notes beginning on page F-1 of this report. Certain totals may not sum due to rounding.

Executive Summary

Introduction

Biogen is a global biopharmaceutical company focused on discovering, developing and delivering worldwide innovative therapies for people living with serious neurological and neurodegenerative diseases, including in our core growth areas of MS and neuroimmunology, AD and dementia, movement disorders and neuromuscular disorders, including SMA and ALS. We also plan to invest in emerging growth areas such as pain, ophthalmology, neuropsychiatry and acute neurology. In addition, we are employing innovative technologies to discover potential treatments for rare and genetic disorders, including new ways of treating diseases through gene therapy in the previously mentioned areas. We also manufacture and commercialize biosimilars of advanced biologics.

Our marketed products include TECFIDERA, AVONEX, PLEGRIDY, TYSABRI, ZINBRYTA and FAMPYRA for the treatment of MS, SPINRAZA for the treatment of SMA and FUMADERM for the treatment of severe plaque psoriasis. We also have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions, GAZYVA for the treatment of CLL and follicular lymphoma, OCREVUS for the treatment of PPMS and RMS, and other potential anti-CD20 therapies under a collaboration agreement with Genentech.

Our current revenues depend upon continued sales of our principal products and, unless we develop, acquire rights to and/or commercialize new products and technologies, we may be substantially dependent on sales from our principal products for many years.

In the longer term, our revenue growth will be dependent upon the successful clinical development, regulatory approval and launch of new commercial products as well as additional indications for our existing products, our ability to obtain and maintain patents and other rights related to our marketed products, assets originating from our research and development efforts and/or successful execution of external business development opportunities.

Our innovative drug development and commercialization activities are complemented by our biosimilar therapies, which 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. Under our commercial agreement, we market and sell BENEPALI, an etanercept biosimilar referencing ENBREL, and FLIXABI, an infliximab biosimilar referencing REMICADE, in the E.U.

2017 Corporate Strategy

In July 2017 we announced an updated strategic framework to optimize the value of our MS business while investing for the future across our core growth areas of MS and neuroimmunology, AD and dementia, movement disorders, and neuromuscular diseases, including SMA and ALS. We also plan to invest in emerging growth areas such as pain, ophthalmology, neuropsychiatry, and acute neurology.

We expect the continued performance of our commercial assets and the expiration of the contingent payments related to TECFIDERA, discussed further in the “Contractual Obligations and Off-Balance Sheet Arrangements” section of this report, to enable us to invest in and build an industry leading neuroscience pipeline. We view investment in growth as our top priority, but also recognize the value of opportunistically returning excess capital to shareholders through share repurchases.

In order to deliver positive results in the near term while investing in the next stages of our growth, we will focus on the following strategic priorities:


•	maximizing the resilience of our MS core business;


•	accelerating efforts in SMA as a significant new growth opportunity;


•	developing and expanding our neuroscience portfolio;


•	focusing our capital allocation efforts to drive investment for future growth; and


•	creating a leaner and simpler operating model to streamline our operations and reallocate resources towards prioritized research and development and commercial value creation opportunities.

capital expenditures of up to $170.0 million, primarily in 2018, and our goal is to redirect resources of up to $400.0 million annually by 2020 to prioritized research and development and other value creation opportunities.

Tax Reform

The 2017 Tax Act has resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as GILTI. These changes are effective beginning in 2018.

The 2017 Tax Act also includes the Transition Toll Tax, which is a one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings.

Changes in tax rates and tax laws are accounted for in the period of enactment. Therefore, during the year ended December 31, 2017, we recorded a charge totaling $1,173.6 million related to our current estimate of the provisions of the 2017 Tax Act, including a $989.6 million expense under the Transition Toll Tax. The Transition Toll Tax will be paid over an eight-year period, starting in 2018, and will not accrue interest.

The 2017 Tax Act will provide us with flexibility in deploying our cash resources to advance our business interests. We expect that it will have a modest positive effect on our income tax rate in 2018 and a potential incremental benefit thereafter.

Hemophilia Spin-Off

On February 1, 2017, we completed the spin-off of our hemophilia business, Bioverativ, as an independent, publicly traded company trading under the symbol "BIVV" on the Nasdaq Global Select Market. The spin-off was accomplished through the distribution of all the then outstanding shares of common stock of Bioverativ to Biogen shareholders, who received one share of Bioverativ common stock for every two shares of Biogen common stock they owned. The separation and distribution was structured to be tax-free for shareholders for federal income tax purposes. Bioverativ assumed all of our rights and obligations under our collaboration agreement with Sobi and our collaboration and license agreement with Sangamo.

Our consolidated results of operations and financial position included in this report reflect the financial results of our hemophilia business for all periods through January 31, 2017.

For additional information on the spin-off of our hemophilia business, please read Note 3, Hemophilia Spin-Off, to our consolidated financial statements included in this report.

Financial Highlights

Diluted earnings per share attributable to Biogen Inc. were $11.92 for 2017, representing a decrease of 29.6% versus the same period in 2016.

As described below under “Results of Operations,” our income from operations for the year ended December 31, 2017 reflects the following:


•	Total revenues were $12,273.9 million for 2017, representing an increase of 7.2% over the same period in 2016.


•	Product revenues, net totaled $10,354.7 million for 2017, representing an increase of 5.5% over the same period in 2016. This increase was primarily driven by revenues from SPINRAZA, TECFIDERA and BENEPALI, partially offset by the elimination of worldwide ALPROLIX and ELOCTATE revenues resulting from the spin-off of our hemophilia business on February 1, 2017 and a net decrease in total Interferon sales.

•

Product revenues, net totaled $10,354.7 million for 2017, representing an increase of 5.5% over the same period in 2016. This increase was primarily driven by revenues from SPINRAZA, TECFIDERA and BENEPALI, partially offset by the elimination of worldwide ALPROLIX and ELOCTATE revenues resulting from the spin-off of our hemophilia business on February 1, 2017 and a net decrease in total Interferon sales.


•	Revenues from anti-CD20 therapeutic programs totaled $1,559.2 million for 2017, representing an increase of 18.6% over the same period in 2016. This increase was primarily driven by royalty revenues on sales of OCREVUS and Biogen's share of pre-tax profits on RITUXAN.


•	Other revenues totaled $360.0 million for 2017, representing an increase of 13.8% from the same period in 2016. This increase was primarily driven by an increase in other royalty and corporate revenues.


•	Total cost and expenses totaled $6,929.7 million for 2017, representing an increase of 10.0%, compared to the same period in 2016. This increase was primarily driven by $444.2 million of amortization and impairment charges related to our U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, a 14.2% increase in research and development primarily related to higher milestone and upfront expenses, a 10.2% increase in cost of goods sold, a $120.0 million pre-tax charge to acquired in-process research and development for an upfront payment made to Remedy upon the closing of the asset purchase transaction for BIIB093 and an increase in collaboration profit sharing. These increases were partially offset by a $454.8 million litigation settlement charge in the prior year.

•

Total cost and expenses totaled $6,929.7 million for 2017, representing an increase of 10.0%, compared to the same period in 2016. This increase was primarily driven by $444.2 million of amortization and impairment charges related to our U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, a 14.2% increase in research and development primarily related to higher milestone and upfront expenses, a 10.2% increase in cost of goods sold, a $120.0 million pre-tax charge to acquired in-process research and development for an upfront payment made to Remedy upon the closing of the asset purchase transaction for BIIB093 and an increase in collaboration profit sharing. These increases were partially offset by a $454.8 million litigation settlement charge in the prior year.

As described below under "Financial Condition, Liquidity and Capital Resources":


•	We generated $4,551.0 million of net cash flows from operations for 2017, which were primarily driven by earnings.


•	Cash, cash equivalents and marketable securities totaled approximately $6,746.3 million as of December 31, 2017.


•	We repurchased approximately 4.9 million shares of common stock at a cost of $1.4 billion during 2017 under our share repurchase programs.

Acquisitions

BIIB093 Acquisition

In May 2017 we completed an asset purchase of the Phase 3-ready candidate BIIB093 (intravenous glibencamide) (formerly known as CIRARA) from Remedy. The target indication for BIIB093 is LHI, a severe form of ischemic stroke where cerebral edema often leads to a disproportionately large share of stroke-related morbidity and mortality. The FDA recently granted BIIB093 Orphan Drug Designation for

severe cerebral edema in patients with acute ischemic stroke. The FDA has also granted BIIB093 Fast Track designation.

Under this agreement, we are responsible for the future development and commercialization of BIIB093. Remedy will share in the cost of development for the target indication for BIIB093 in LHI stroke.

For additional information on our transaction with Remedy, please read Note 2, Acquisitions, to our consolidated financial statements included in this report.

Collaborative and Other Relationships

BIIB092 License Agreement

In June 2017 we completed an exclusive license agreement with BMS for BIIB092 (formerly known as BMS-986168), a Phase 2-ready experimental medicine with potential in AD and PSP. BIIB092 is an antibody targeting tau, the protein that forms the deposits, or tangles, in the brain associated with AD and other neurodegenerative tauopathies such as PSP.

Under this agreement, we received worldwide rights to BIIB092 and are responsible for the full development and global commercialization of BIIB092 in AD and PSP.

For additional information on our collaboration arrangement with BMS, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Eisai Collaboration Agreement

In October 2017 we entered into a new collaboration agreement with Eisai for the joint development and commercialization of aducanumab (the Aducanumab Collaboration Agreement). Under the Aducanumab Collaboration Agreement, we will continue to lead the ongoing Phase 3 development of aducanumab and will remain responsible for 100% of development costs for aducanumab until April 2018. Eisai will then reimburse us for 15% of aducanumab development expenses for the period April 2018 through December 2018, and 45% thereafter. Upon commercialization, both companies will co-promote aducanumab with a region-based profit split.

In addition, we and Eisai will continue to jointly develop BAN2401 and E2609.

We and Eisai will co-promote AVONEX, TYSABRI and TECFIDERA in Japan in certain settings and Eisai will distribute AVONEX, TYSABRI, TECFIDERA and PLEGRIDY in India and other Asia-Pacific markets, excluding China.

For additional information on our collaboration arrangement with Eisai, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Neurimmune Collaboration Agreement

In October 2017 we amended the terms of our collaboration and license agreement with Neurimmune. Under the amended agreement, we made a $150.0 million payment to Neurimmune, which is reflected as a charge to noncontrolling interests, in exchange for a 15% reduction in royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab. Our royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab, will now range from the high single digits to low-teens.

Under the amended agreement, we also have an option that will expire in April 2018 to further reduce our royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab, by an additional 5% in exchange for a $50.0 million payment to Neurimmune.

For additional information on our collaboration arrangement with Neurimmune, please read Note 19, Investments in Variable Interest Entities, to our consolidated financial statements included in this report.

BIIB098 License Agreement

In November 2017 we entered into an exclusive license and collaboration agreement with Alkermes for BIIB098 (formerly known as ALKS 8700), an oral MMF prodrug in Phase 3 development for the treatment of relapsing forms of MS.

Under this agreement, we received an exclusive, worldwide license to develop and commercialize BIIB098 and will pay Alkermes a royalty on potential worldwide net sales of BIIB098. Beginning in 2018 we are responsible for all development expenses related to BIIB098. Alkermes will maintain responsibility for regulatory interactions with the FDA through the potential approval of the NDA for BIIB098 for the treatment of MS.

For additional information on our collaboration arrangement with Alkermes, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Ionis Collaboration Agreement

In December 2017 we entered into a new collaboration agreement with Ionis to identify new ASO drug candidates for the treatment of SMA. Under this agreement, we have the option to license therapies arising out of this collaboration and will be responsible for the development and commercialization of these therapies.

For additional information on our new collaboration arrangement with Ionis, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Business Environment

The biopharmaceutical industry and the markets in which we operate are intensely competitive. Many of our competitors are working to develop or have commercialized products similar to those we market or are developing and have considerable experience in undertaking clinical trials and in obtaining regulatory approval to market pharmaceutical products. In addition, the commercialization of certain of our own approved MS products, products of our collaborators and pipeline product candidates may negatively impact future sales of our existing MS products. Our products may also face increased competitive pressures from the introduction of generic versions, prodrugs of existing therapies or biosimilars of existing products and other technologies.

Sales of our products are dependent, in large part, on the availability and extent of coverage, pricing and reimbursement from government health administration authorities, private health insurers and other organizations. Drug prices are under significant scrutiny in the markets in which our products are prescribed. Drug pricing and other health care costs continue to be subject to intense political and societal pressures on a global basis.

In addition, our sales and operations are subject to the risks of doing business internationally. For example, the effects of the implementation of the U.K.’s decision to voluntarily depart from the E.U., known as Brexit, remain unclear; compliance with any resulting regulatory mandates may prove challenging and the macroeconomic impact on our sales and consolidated results of operations from these developments remains unknown.

For additional information on our competition and pricing risks that could negatively impact our product sales, please read Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in this report.

Results of Operations

Revenues

Revenues are summarized as follows:



	For the Years Ended December 31,							% Change
	2017 compared to 2016		2016 compared to 2015
(In millions, except percentages)	2017			2016		2015
Product Revenues:
United States	$	7,017.1		$	7,050.4	$	6,545.8	(0.5	)%	7.7	%
Rest of world	3,337.6			2,767.5		2,642.7		20.6	%	4.7	%
Total product revenues	10,354.7			9,817.9		9,188.5		5.5	%	6.8	%
Revenues from anti-CD20 therapeutic programs	1,559.2			1,314.5		1,339.2		18.6	%	(1.8	)%
Other revenues	360.0			316.4		236.1		13.8	%	34.0	%
Total revenues	$	12,273.9		$	11,448.8	$	10,763.8	7.2	%	6.4	%

Product Revenues

Product revenues are summarized as follows:



	For the Years Ended December 31,							% Change
	2017 compared to 2016		2016 compared to 2015
(In millions, except percentages)	2017			2016		2015
Multiple Sclerosis:
TECFIDERA	$	4,214.0		$	3,968.1	$	3,638.4	6.2	%	9.1	%
Interferon*	2,645.8			2,795.2		2,968.7		(5.3	)%	(5.8	)%
TYSABRI	1,973.1			1,963.8		1,886.1		0.5	%	4.1	%
FAMPYRA	91.6			84.9		89.7		7.9	%	(5.4	)%
ZINBRYTA	52.7			7.8		—		**		**
Spinal Muscular Atrophy:
SPINRAZA	883.7			4.6		—		**		**
Hemophilia:
ELOCTATE	48.4			513.2		319.7		(90.6	)%	60.5	%
ALPROLIX	26.0			333.7		234.5		(92.2	)%	42.3	%
Other product revenues:
FUMADERM	39.6			45.9		51.4		(13.7	)%	(10.7	)%
BENEPALI	370.8			100.6		—		**		**
FLIXABI	9.0			0.1		—		**		**
Total product revenues	$	10,354.7		$	9,817.9	$	9,188.5	5.5	%	6.8	%

Interferon includes AVONEX and PLEGRIDY.

** Percentage not meaningful.

Multiple Sclerosis (MS)

TECFIDERA

For 2017 compared to 2016, the increase in U.S. TECFIDERA revenues was primarily due to price increases, partially offset by higher discounts and allowances and a decrease in unit sales volume of 3%.

For 2016 compared to 2015, the increase in U.S. TECFIDERA revenues was primarily due to price increases, partially offset by higher discounts and allowances and a decrease in unit sales volume of 1%.

For 2017 compared to 2016, the increase in rest of world TECFIDERA revenues was primarily due to increases in unit sales volume of 19% primarily in the E.U., partially offset by pricing reductions in certain European countries.

For 2016 compared to 2015, the increase in rest of world TECFIDERA revenues was primarily due to increases in unit sales volume of 32% in existing markets and new markets where we continue to launch the product and expand our presence around the world. These increases were partially offset by pricing reductions in certain European countries. Rest of world TECFIDERA revenues for 2016, compared to 2015, were also negatively impacted by a $50.2 million decrease in hedge gains recognized under our foreign currency hedging program in the comparative period.

We anticipate a modest increase in TECFIDERA demand on a global basis in 2018, compared to 2017, with expected volume growth in our international markets partially offset by declines in the U.S., due to increased competition from additional treatments for MS, including OCREVUS.

Interferon

AVONEX and PLEGRIDY

For 2017 compared to 2016, the decrease in U.S. Interferon revenues was primarily due to an overall decrease in Interferon unit sales volumes of 12%, which was primarily attributable to patients transitioning to other MS therapies, partially offset by price increases.

For 2016 compared to 2015, the decrease in U.S. Interferon revenues was primarily due to an overall decrease in Interferon unit sales volume of 10%, which was attributable to a decrease in AVONEX unit sales volume primarily due to patients transitioning to other oral MS therapies, as well as higher discounts and allowances. These decreases were partially offset by price increases.

For 2017 compared to 2016, the decrease in rest of world Interferon revenues was primarily due to an overall decrease in AVONEX unit sales volume of 14% primarily due to patients transitioning to other MS therapies in the E.U.

For 2016 compared to 2015, the decrease in rest of world Interferon revenues was primarily due to pricing reductions in certain European countries and an overall decrease in AVONEX unit sales volume of 10% due primarily to patients transitioning to other oral MS therapies, including TECFIDERA. Rest of world Interferon revenues for 2016, compared to 2015, were also negatively impacted by a $66.1 million decrease in hedge gains recognized under our hedging program in the comparative period.

We expect that overall Interferon revenues will continue to decline compared to prior year periods as a result of increasing competition from our other products as well as other treatments for MS, including biosimilars.

AVONEX

For 2017, 2016 and 2015, U.S. AVONEX revenues totaled $1,593.6 million, $1,675.3 million and $1,790.2 million, respectively.

For 2017, 2016 and 2015 rest of world AVONEX revenues totaled $557.9 million, $638.2 million and $840.0 million, respectively.

PLEGRIDY

For 2017, 2016 and 2015, U.S. PLEGRIDY revenues totaled $295.5 million, $305.0 million and $227.1 million, respectively.

For 2017, 2016 and 2015, rest of world PLEGRIDY revenues totaled $198.8 million, $176.7 million and $111.4 million, respectively.

TYSABRI

For 2017 compared to 2016, the decrease in U.S. TYSABRI revenues was primarily due to higher discounts and allowances and a decrease in unit sales volume of 4%, partially offset by price increases.

For 2016 compared to 2015, the increase in U.S. TYSABRI revenues was primarily due to an increase in unit sales volume of 4% and increases in price, partially offset by higher discounts and allowances.

For 2017 compared to 2016, the increase in rest of world TYSABRI revenues was primarily due to the recognition of approximately $45.0 million of previously deferred revenue in Italy relating to the pricing agreement with AIFA and a 12% increase in unit sales volume primarily in our international partner markets, partially offset by a prior year favorable adjustment of approximately $20.0 million to previous reserves estimates related to a government price reimbursement program included in our discounts and allowances. For information on our agreement with AIFA relating to sales of TYSABRI in Italy, please read Note 18, Other Consolidated Financial Statement Detail, to our consolidated financial statements included in this report.

For 2016 compared to 2015, the decrease in rest of world TYSABRI revenues was primarily due to the impact of a $46.1 million decrease in hedge gains recognized under our hedging program in the comparative period. This decrease was partially offset by an increase in unit sales volume of 8%, primarily in Europe.

We anticipate a decline in TYSABRI demand on a global basis in 2018, compared to 2017, with expected volume declines in the U.S., due to increased competition from additional treatments for MS, including OCREVUS, offsetting volume growth in our international markets.

ZINBRYTA

Under our collaboration agreement with AbbVie, we began to recognize revenues on sales of ZINBRYTA to third parties in the E.U. in the third quarter of 2016.

For 2017 compared to 2016, the increase in ZINBRYTA revenues was primarily due to an increase in unit sales volume.

We expect that the future sales growth of ZINBRYTA will be negatively impacted as a result of the EC approved restrictions on the use of ZINBRYTA.

For additional information on our relationship with AbbVie, including information on the Article 20 Procedure of ZINBRYTA and resulting impairment of ZINBRYTA related assets, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Spinal Muscular Atrophy (SMA)

SPINRAZA

We began to recognize revenues on sales of SPINRAZA in the U.S. in the fourth quarter of 2016 and the rest of world in the first quarter of 2017.

We expect that the rate at which SPINRAZA revenues will grow will moderate over time due to the loading dynamics as patients transition to dosing once every four months.

For additional information on our relationship with Ionis, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Biosimilars

BENEPALI and FLIXABI

Under our commercial agreement with Samsung Bioepis, we began to recognize revenues on sales of BENEPALI and FLIXABI to third parties in the E.U. in the first and third quarters of 2016, respectively.

For 2017 compared to 2016, the increase in biosimilar revenues was primarily due to an increase in BENEPALI unit sales volume in new and existing markets.

For additional information on our relationship with Samsung Bioepis, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Revenues from Anti-CD20 Therapeutic Programs

Genentech (Roche Group)

Our share of RITUXAN and GAZYVA collaboration operating profits in the U.S. and other revenues on anti-CD20 therapeutic programs are summarized as follows:

Biogen’s Share of Pre-tax Profits in the U.S. for RITUXAN and GAZYVA

The following table provides a summary of amounts comprising our share of pre-tax profits on RITUXAN and GAZYVA in the U.S.:



	For the Years Ended December 31,

(In millions)	2017		2016		2015
Product revenues, net	$	4,206.9	$	3,941.8	$	3,847.9
Cost and expenses	755.2		744.5		673.7
Pre-tax profits in the U.S.	$	3,451.7	$	3,197.3	$	3,174.2
Biogen's share of pre-tax profits	$	1,316.4	$	1,249.5	$	1,269.8

Our share of RITUXAN annual pre-tax co-promotion profits in the U.S. in excess of $50.0 million decreased to 39% from 40% in February 2016 when GAZYVA was approved by the FDA as a new treatment for follicular lymphoma and further decreased to 37.5% in the third quarter of 2017 as gross sales of GAZYVA in the U.S. for the preceding 12-month period exceeded $150.0 million.

In November 2017 the FDA approved GAZYVA in combination with chemotherapy, followed by GAZYVA alone, for people with previously untreated advanced follicular lymphoma.

In June 2017 the FDA approved RITUXAN HYCELA for subcutaneous injection for the treatment of adults with previously untreated and relapsed or refractory follicular lymphoma, previously untreated diffuse large B-cell lymphoma and CLL. This new treatment includes the same monoclonal antibody as intravenous RITUXAN in combination with hyaluronidase human, an enzyme that helps to deliver rituximab under the skin.

For 2017 compared to 2016, the increase in U.S. product revenues was primarily due to selling price increases and an increase in RITUXAN and GAZYA unit sales volume of 2% and 6%, respectively, partially offset by higher discounts and allowances.

For 2016 compared to 2015, the increase in U.S. product revenues was primarily due to an increase in GAZYVA unit sales volume of 41%, an increase in RITUXAN unit sales of 1% and selling price increases, partially offset by higher RITUXAN discounts and allowances.

Collaboration costs and expenses for 2017, as depicted in the table above, excludes certain expenses charged to the collaboration by Genentech that we believe remain the responsibility of Genentech and that we are not obligated to pay under the terms of the collaboration agreement. Accordingly, we did not recognize the effect of those expenses in the determination of our share of pre-tax collaboration profits and Genentech has withheld approximately $120 million from amounts due to us in relation to collaboration activity for 2017, representing Genentech’s estimate of our share of these expenses. We remain in discussions with Genentech about a resolution relating to these amounts.

Excluding amounts under dispute, collaboration costs and expenses for 2017 compared to 2016 increased primarily due to higher branded pharmaceutical drug fees and an increase in RITUXAN selling and marketing costs, partially offset by a decrease in GAZYVA research and development costs.

Collaboration costs and expenses for 2016 compared to 2015 increased primarily due to an increase in RITUXAN product cost of sales.

Other Revenues from Anti-CD20 Therapeutic Programs

Other revenues from anti-CD20 therapeutic programs primarily consist of royalty revenues on sales of OCREVUS and our share of pre-tax co-promotion profits on RITUXAN in Canada.

For 2017 compared to 2016, other revenues from anti-CD20 therapeutic programs increased primarily due to the launch of OCREVUS in the second quarter of 2017.

For 2016 compared to 2015, other revenues from anti-CD20 therapeutic programs decreased as a result of lower pre-tax co-promotion profits on RITUXAN in Canada.

OCREVUS

In March 2017 the FDA approved OCREVUS, a humanized anti-CD20 monoclonal antibody, for the treatment of RMS and PPMS. Under our agreement with Genentech, we will receive a tiered royalty on U.S. net sales from 13.5% and increasing up to 24% if annual net sales exceed $900.0 million. 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. OCREVUS was approved for treatment of RMS and PPMS in Australia, Switzerland and the E.U. in July 2017, September 2017 and January 2018, respectively. Marketing applications for OCREVUS are currently under review in numerous markets worldwide, including in Latin America and the Middle East.

The commercialization of OCREVUS does not impact the percentage of the co-promotion profits we receive for RITUXAN or GAZYVA. Genentech is solely responsible for development and commercialization of OCREVUS and funding future costs. OCREVUS royalty revenues were based on our estimates from third party and market research data of OCREVUS sales occurring during the corresponding period. Differences between actual and estimated royalty revenues will be adjusted for in the period in which they become known, which is expected to be the following quarter.

For additional information on our collaboration with Genentech, including information regarding the pre-tax profit sharing formula and its impact on future revenues from anti-CD20 therapeutic programs, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Other Revenues

Other revenues are summarized as follows:



	For The Years Ended December 31,						% Change
		2017 compared to 2016	2016 compared to 2015
(In millions, except percentages)	2017		2016		2015
Revenues from collaborative and other relationships	$	36.5	$	39.3	$	69.1	(7.1	)%	(43.1	)%
Other royalty and corporate revenues	323.5		277.1		167.0		16.7	%	65.9	%
Total other revenues	$	360.0	$	316.4	$	236.1	13.8	%	34.0	%

Revenues from Collaborative and Other Relationships

Other revenues from collaborative and other relationships include revenues earned under our 50% share of the co-promotion profits or losses of ZINBRYTA in the U.S. with AbbVie and revenues from our technical development and manufacturing services agreements with Samsung Bioepis. Prior to the spin-off of our hemophilia business, other revenues from collaborative and other relationships also included revenues earned under our manufacturing services agreement with Sobi on shipments of ELOCTA and ALPROLIX to Sobi and royalties from Sobi on sales of ELOCTA and ALPROLIX in their territory, which included substantially all of Europe, Russia and certain markets in Northern Africa and the Middle East. Bioverativ assumed all of our rights and obligations under our agreement with Sobi on February 1, 2017.

For 2017 compared to 2016, the decrease in other revenues from collaborative and other relationships was primarily due to the impact of the spin-off of our hemophilia business on February 1, 2017, partially offset by higher revenues earned under our manufacturing services agreement with Samsung Bioepis.

For 2016 compared to 2015, the decrease in other revenues from collaborative and other relationships was primarily due to a net overall loss in the collaboration with AbbVie of $21.9 million within the U.S. and lower revenues earned under our manufacturing services agreement with Samsung Bioepis, partially offset by an increase in ELOCTA shipments made under our manufacturing services agreement with Sobi.

For additional information on our collaborative and other relationships, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Other Royalty and Corporate Revenues

We receive royalties from net sales on products related to patents that we have out-licensed and we record other corporate revenues primarily from amounts earned under contract manufacturing agreements.

For 2017 compared to 2016, the increase in royalty and other corporate revenues was primarily due to an increase in sales of the underlying products from which we receive royalties and higher contract manufacturing revenues related to the volume of shipments of drug substance production provided to our strategic partners, including Bioverativ.

For 2016 compared to 2015, the increase in royalty and other corporate revenues was primarily due to higher contract manufacturing revenues related to drug substance manufacturing provided to a strategic partner.

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 international markets where 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 will have an effect on earnings in the period of adjustment.

Reserves for discounts, contractual adjustments and returns that reduced gross product revenues are summarized as follows:

For the years ended December 31, 2017, 2016 and 2015, reserves for discounts and allowances as a percentage of gross product revenues were 22.0%, 21.3% and 19.3%, respectively.

Discounts

Discounts include trade term discounts and wholesaler incentives.

For 2017 compared to 2016, the decrease in discounts was primarily driven by the impact from the spin-off of our hemophilia business on February 1, 2017, partially offset by an increase in rest of world product revenues, due in part to an increase in biosimilar revenues, as well as an increase in gross selling prices.

For 2016 compared to 2015, the increase in discounts was primarily driven by increases in gross selling price, contractual discount rates and volume related to our hemophilia products.

Contractual Adjustments

Contractual adjustments primarily relate to Medicaid and managed care rebates, co-payment assistance (copay), VA and PHS discounts, specialty pharmacy program fees and other government rebates or applicable allowances.

For 2017 compared to 2016, the increase in contractual adjustments was primarily due to higher managed care rebates and Medicaid and other governmental rebates and allowances in the U.S., due in part to an increase in gross selling prices and the launch of SPINRAZA in the U.S. in the fourth quarter of 2016, partially offset by the impact from the spin-off of our hemophilia business on February 1, 2017.

For 2016 compared to 2015, the increase in contractual adjustments was primarily due to higher Medicaid and other governmental rebates and allowances in the U.S. and managed care rebates, due in part to an increase in gross selling prices.

Returns

Product return reserves are established for returns made by wholesalers. 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. Provisions for product returns are recorded in the period the related revenue is recognized, resulting in a reduction to product sales.

For 2017 compared to 2016, return provisions were relatively consistent.

For 2016 compared to 2015, return reserves decreased primarily due to a reduction in return rates based on recent experiences of returned products.

For additional information on our reserves, please read Note 5, Reserves for Discounts and Allowances, to our consolidated financial statements included in this report.

Cost and Expenses

A summary of total cost and expenses is as follows:



	For the Years Ended December 31,							% Change
	2017 compared to 2016		2016 compared to 2015
(In millions, except percentages)	2017			2016		2015
Cost of sales, excluding amortization of acquired intangible assets	$	1,630.0		$	1,478.7	$	1,240.4	10.2	%	19.2	%
Research and development	2,253.6			1,973.3		2,012.8		14.2	%	(2.0	)%
Selling, general and administrative	1,935.5			1,947.9		2,113.1		(0.6	)%	(7.8	)%
Amortization of acquired intangible assets	814.7			385.6		382.6		111.3	%	0.8	%
Acquired in-process research and development	120.0			—		—		**		**
Collaboration profit sharing	112.3			10.2		—		**		**
Loss (gain) on fair value remeasurement of contingent consideration	62.7			14.8		30.5		323.6	%	(51.5	)%
Restructuring charges	0.9			33.1		93.4		(97.3	)%	(64.6	)%
TECFIDERA litigation settlement charge	—			454.8		—		(100.0	)%	**
Total cost and expenses	$	6,929.7		$	6,298.4	$	5,872.8	10.0	%	7.2	%

** Percentage not meaningful.

Cost of Sales, Excluding Amortization of Acquired Intangible Assets (Cost of Sales)

Product Cost of Sales

For 2017 compared to 2016, the increase in product cost of sales was primarily driven by higher unit sales volume related to our biosimilar product shipments, higher contract manufacturing shipments of drug substance production provided to our strategic partners, including Bioverativ, and an increase in inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons. These increases were partially offset by the impact from the spin-off of our hemophilia business on February 1, 2017, and the accelerated depreciation recorded in the second, third and fourth quarters of 2016 as a result of our decision to cease manufacturing in Cambridge, MA.

For 2016 compared to 2015, the increase in product cost of sales was primarily driven by costs noted below as well as increased contract manufacturing shipments and higher unit sales volume related to our biosimilars and hemophilia products, partially offset by favorable production costs and mix of products.

Product cost of sales for 2016 reflects the recognition of $45.5 million of accelerated depreciation as a result of the determination to cease manufacturing in Cambridge, MA and vacate our small-scale biologics manufacturing facility in Cambridge, MA and warehouse space in Somerville, MA.

Inventory amounts written down as a result of excess, obsolescence, unmarketability or other reasons totaled $76.9 million, $48.2 million and $41.9 million for the years ended December 31, 2017, 2016 and 2015, respectively. Amounts written down during the year ended December 31, 2017, includes the impairment of $14.4 million related to the EC approved restrictions on the use of ZINBRYTA.

For additional information on the Article 20 Procedure of ZINBRYTA and resulting impairment of ZINBRYTA related assets, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Royalty Cost of Sales

For 2017 compared to 2016, the increase in royalty cost of sales was primarily driven by the recognition of royalties payable to Ionis on sales of SPINRAZA and higher royalties on sales of AVONEX and PLEGRIDY in the U.S., as described below. These increases were partially offset by the elimination of royalties payable on sales of hemophilia product resulting from the spin-off of our hemophilia business on February 1, 2017 and lower royalties on sales of TYSABRI resulting from the expiration of certain third-party royalties.

For 2016 compared to 2015, the increase in royalty cost of sales was primarily driven by the increase in royalty rates payable to Sobi, increased sales of our hemophilia products and higher royalties on sales of AVONEX and PLEGRIDY in the U.S., partially offset by a decrease in TYSABRI royalties due to the expiration of certain third-party royalties.

On June 28, 2016, the U.S. Patent and Trademark Office issued to the Japanese Foundation for Cancer Research (JFCR) a patent related to recombinant interferon-beta protein. This patent, U.S. Patent No. 9,376,478, expires in June 2033. This patent was issued following an interference proceeding between JFCR and us. This patent is relevant to AVONEX and PLEGRIDY, and we will pay royalties in the mid-single digits in relation to this patent during the life of the patent.

Research and Development

We support our drug discovery and development efforts through the commitment of significant resources to discovery, research and development programs and business development opportunities, particularly within our core and emerging growth areas.

A significant amount of our research and development costs consist of indirect costs incurred in support of overall research and development activities and non-specific programs, including activities that benefit multiple programs, such as management costs, as well as depreciation, information technology and facility-based expenses. These costs are considered other research and development costs in the table above and are not allocated to a specific program or stage.

Research and development expense incurred in support of our marketed products includes costs associated with product lifecycle management activities including, if applicable, costs associated with the development of new indications for existing products. Late stage programs are programs in Phase 3 development or in registration stage. Early stage programs are programs in Phase 1 or Phase 2 development. Research and discovery represents costs incurred to support our discovery research and translational science efforts. Costs are reflected in the development stage based upon the program status when incurred. Therefore, the same program could be reflected in different development stages in the same year. For several of our programs, the research and development activities are part of our collaborative and other relationships. Our costs reflect our share of the total costs incurred.

For 2017 compared to 2016, the increase in research and development expense was primarily related to milestone and upfront expenses and costs incurred in connection with our early stage and late stage programs, partially offset by decreased costs incurred in connection with our marketed products.

For 2016 compared to 2015, the decrease in research and development expense was primarily related to a decrease in costs incurred in connection with our early stage programs, marketed products and other research and development costs. These decreases were partially offset by increased costs incurred in connection with our late stage and research and discovery programs.

We intend to continue committing significant resources to targeted research and development opportunities where there is a significant unmet need and where a drug candidate has the potential to be highly differentiated.

Milestone and Upfront Expenses included in Research and Development Expense

Research and development expense for 2017 includes:


•	$300.0 million upfront payment made to BMS upon entering into our agreement to exclusively license BIIB092;


•	$60.0 million developmental milestone payment due to the former shareholders of iPierian, Inc. (iPierian), which became payable upon dosing of the first patient in the Phase 2 PSP study for BIIB092;


•	$28.0 million upfront payment made to Alkermes upon entering into our agreement to exclusively license BIIB098, representing our share of BIIB098 development costs already incurred in 2017;


•	$50.0 million accrual based upon the expected continuation of our agreement with Alkermes to develop and exclusively license BIIB098; and


•	$25.0 million upfront payment recognized upon entering into a new collaboration agreement with Ionis to identify new ASO drug candidates for the treatment of SMA.

Research and development expense for 2016 includes:


•	$75.0 million license fee paid to Ionis as we exercised our option to develop and commercialize SPINRAZA from Ionis;


•	$50.0 million milestone payment to Eisai related to the initiation of a Phase 3 trial for E2609; and


•	$20.0 million upfront payment recognized upon entering into a collaboration and alliance agreement with UPenn.

Research and development expense for 2015 includes:


•	$60.0 million recognized upon entering into our collaboration with Mitsubishi Tanabe Pharma Corporation;


•	$48.1 million recognized upon entering into our collaboration with AGTC;


•	$30.0 million in milestones recognized in relation to our collaboration agreements with Ionis; and


•	$16.0 million paid to AbbVie related to milestones for the development of ZINBRYTA as a result of filing with the FDA and EMA during 2015.

These payments are classified as research and development expense as the programs they relate to had not achieved regulatory approval as of the payment date.

For additional information about these collaborations, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Early Stage Programs

The increase in spending associated with our early stage programs for 2017 compared to 2016 was primarily related to spending associated with the development of BIIB092 in AD and PSP pursuant to our license agreement with BMS, BIIB074 in trigeminal neuralgia (TGN) and BIIB076 in AD. These increases were partially offset by a reduction in costs resulting from our discontinuance of development of amiselimod in the third quarter of 2016.

The decrease in spending associated with our early stage programs for 2016 compared to 2015 was primarily due to the advancement of our aducanumab program in AD to a late stage program in the third quarter of 2015, decreased costs incurred in connection with opicinumab in MS and the discontinuance of development of anti-TWEAK in lupus nephritis. These decreases were partially offset by increased costs of BIIB074 in TGN and increased costs associated with our discontinuance of development of amiselimod in the third quarter of 2016.

Late Stage Programs

The increase in spending associated with our late stage programs for 2017 compared to 2016 was primarily related the increased costs associated with the development of aducanumab in AD and costs incurred associated with the development of E2609, a BACE inhibitor that was advanced to a late stage program in the fourth quarter of 2016. These increases were partially offset by advancement of SPINRAZA to marketed products following its approval in the U.S. in the fourth quarter of 2016.

The increase in spending associated with our late stage programs for 2016 compared to 2015 was primarily driven by costs incurred to advance our aducanumab program in AD, the increased costs incurred to advance our SPINRAZA program and the advancement of E2609 to a late stage program in the fourth quarter of 2016, partially offset by the approval of ZINBRYTA in the third quarter of 2016.

Marketed Products

The decrease in spending associated with our marketed products for 2017 compared to 2016 was primarily due to a reduction in spending resulting from the spin-off of our hemophilia business on February 1, 2017 and a reduction in spending related to TECFIDERA. These decreases were partially offset by increased spending related to SPINRAZA following its approval in the U.S. in the fourth quarter of 2016.

The decrease in spending associated with our marketed products for 2016 compared to 2015 was primarily due to the discontinuance of development of TYSABRI and TECFIDERA in secondary primary MS in the third and fourth quarters of 2015, respectively, and decreased costs incurred in connection with our hemophilia products. These decreases were partially offset by the approvals of ZINBRYTA and SPINRAZA in the third and fourth quarters of 2016, respectively.

Selling, General and Administrative

For 2017 compared to 2016, the decrease in selling, general and administrative expenses was primarily due to a reduction in operational spending resulting from the spin-off of our hemophilia business on February 1, 2017, the execution of targeted cost reduction initiatives and a reduction in costs resulting from the discontinuance of our TECFIDERA television advertising campaign in the second quarter of 2016. These decreases were offset by an increase in SPINRAZA commercialization costs and an increase in corporate giving.

For 2016 compared to 2015, the decrease in selling, general and administrative expenses reflect cost savings in connection with our corporate restructuring, which are described below under the heading "Restructuring, Business Transformation and Other Cost Savings Initiatives," partially offset by an increase in costs associated with developing commercial capabilities for ZINBRYTA and SPINRAZA.

Amortization of Acquired Intangible Assets

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

Our most recent long-range planning cycle was completed in the third quarter of 2017. The results of our TECFIDERA, AVONEX and TYSABRI analyses were impacted by changes in the estimated timing of the impact of other alternative MS formulations, including OCREVUS, which may compete with TYSABRI, TECFIDERA and AVONEX. The outcome of this most recent analysis did not result in a significant net change in our expected rate of amortization for acquired intangible assets.

Based upon this most recent analysis, the estimated future amortization of acquired intangible assets for the next five years is expected to be as follows:



(In millions)	As of December 31, 2017
2018	$	423.5
2019	401.8
2020	381.6
2021	254.3
2022	242.3

We monitor events and expectations regarding product performance. If new information indicates that the assumptions underlying our most recent analysis are substantially different than those utilized in our current estimates, our analysis would be updated and may result in a significant change in the anticipated lifetime revenues of the relevant products. The occurrence of an adverse event could substantially increase the amount of amortization expense associated with our acquired intangible assets as compared to previous periods or our current expectations, which may result in a significant negative impact on our future results of operations.

For 2017 compared to 2016, the increase in amortization of acquired intangible assets was primarily due to $444.2 million of amortization and impairment charges associated with our U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, acquired in the first quarter of 2017, as discussed further below. Amortization of acquired intangible assets for 2017 also reflects the $31.2 million impairment of our acquired and in-licensed rights and patents intangible asset related to the Article 20 Procedure of ZINBRYTA.

For 2016 compared to 2015, amortization of acquired intangible assets was relatively consistent as our most recent analysis completed during the third quarter of 2016 resulted in no significant net change in our expected rate of amortization for acquired intangible assets. Amortization of acquired intangible assets for 2016 also reflects impairment charges recognized upon the termination of our collaboration agreements with Rodin Therapeutics, Inc. and Ataxion Inc., which resulted in impairment losses of $8.7 million and $3.5 million, respectively, related to the IPR&D assets recorded upon entering into the collaboration agreements.

Impairment charges related to intangible assets during 2015 were insignificant.

TECFIDERA License Rights

In January 2017 we entered into a settlement and license agreement with Forward Pharma. Pursuant to this agreement, we obtained U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA. In exchange, we paid Forward Pharma $1.25 billion in cash. During the fourth quarter of 2016, we recognized a pre-tax charge of $454.8 million and in the first quarter of 2017 we recognized an intangible asset of $795.2 million related to this agreement. The pre-tax charge recognized in the fourth quarter of 2016 represented the fair value of our licenses to Forward Pharma’s intellectual property for the period April 2014, when we started selling TECFIDERA, through December 31, 2016. The intangible asset represented the fair value of the U.S. and rest of world licenses to Forward Pharma’s intellectual property related to TECFIDERA revenues for the period January 2017, the month in which we entered into this agreement, through December 2020, the last month before royalty payments could first commence pursuant to this agreement.

We have two intellectual property disputes with Forward Pharma, one in the U.S. and one in the E.U., concerning intellectual property related to TECFIDERA. In March 2017 the U.S. intellectual property dispute was decided in our favor. Forward Pharma appealed to the U.S. Court of Appeals for the Federal Circuit and the appeal is pending. We evaluated the recoverability of the U.S. asset acquired from Forward Pharma and recorded an impairment charge in the first quarter of 2017 to adjust the carrying value of the acquired U.S. asset to fair value reflecting the impact of the developments in the U.S. legal dispute. In January 2018 the EPO announced its decision revoking Forward Pharma’s European Patent No. 2 801 355. Forward Pharma has stated that it expects to file an appeal to the Technical Board of Appeal of the EPO. Based upon our assessment of these rulings, we continue to amortize the remaining net book value of the U.S. and rest of world intangible assets in our consolidated statements of income utilizing an economic consumption model.

For additional information on our settlement and license agreement with Forward Pharma and related intangible assets, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in this report. For additional information on these disputes, please read Note 21, Litigation, to our consolidated financial statements included in this report.

In Process Research & Development (IPR&D) related to Business Combinations

Overall, the value of our acquired IPR&D assets is dependent upon a number of variables, including estimates of future revenues and the effects of competition, the level of anticipated development costs and the probability and timing of successfully advancing a particular research program from a clinical trial phase to the next. We are continually reevaluating our estimates concerning these variables and evaluating industry data regarding the productivity of clinical research and the development process. Changes in our estimates of items may result in a significant change to our valuation of these assets.

We review amounts capitalized as acquired IPR&D for impairment at least annually, as of October 31, and whenever events or changes in circumstances indicate to us that the carrying value of the assets might not be recoverable. Our most recent impairment assessment as of October 31, 2017, resulted in no impairments. Changes to clinical development plans, regulatory feedback received, life cycle management strategies and changes in program economics, including foreign currency exchange rates, are evaluated regularly. The field of developing treatments for forms of neuropathic pain, such as TGN, is highly competitive and can be affected by changes to expected market candidates and changes in timing and the clinical development of our product candidates. There can be no assurance that we will be able to successfully develop BIIB074 for the treatment of TGN or other indications, including our ability to confirm safety and efficacy based on data from clinical trials, or that a successfully developed therapy will be able to secure sufficient pricing in a competitive market. Changes in events and circumstances for these programs may have a material impact on the value of our related IPR&D.

For additional information on the impairment and amortization of acquired intangible assets, including our TECFIDERA settlement and license agreement, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.

Acquired In-Process Research and Development

In May 2017 we completed an asset purchase of the Phase 3-ready candidate, BIIB093, from Remedy. In connection with the closing of this transaction, we made an upfront $120.0 million payment to Remedy, which was recorded as acquired in-process research and development in our consolidated statements of income as BIIB093 had not yet reached technological feasibility. For additional information on our transaction with Remedy, please read Note 2, Acquisitions, to our consolidated financial statements included in this report.

Collaboration Profit (Loss) Sharing

Collaboration profit (loss) sharing includes our partner's 50% share of the profit or loss related to our biosimilars commercial agreement with Samsung Bioepis and our partner's 50% share of the co-promotion profits or losses in the E.U. and Canada related to our collaboration agreement with AbbVie on the commercialization of ZINBRYTA.

We began to recognize revenues on sales of biosimilars in the first quarter of 2016. For 2017 we shared collaboration profits and therefore recognized net expense of $111.0 million as compared to net expense of $15.1 million in the prior year comparative period. The increase in profit sharing expense for the comparative period was primarily due to increased collaboration profits resulting from increased biosimilar product sales.

We began to recognize revenues on sales of ZINBRYTA in the E.U. in the third quarter of 2016. For 2017 we recognized net expense of $1.3 million to reflect AbbVie's 50% sharing of the net collaboration profits in the E.U. and Canada as compared to net income recognized of $4.9 million in the prior year comparative period, to reflect AbbVie's 50% sharing of the net collaboration losses in the E.U. and Canada. The increase in profit sharing expense for the comparative period was primarily due to increased collaboration profits resulting from increased ZINBRYTA product sales.

We expect that the future sales growth of ZINBRYTA will be negatively impacted as a result of the EC approved restrictions on the use of ZINBRYTA. For additional information on our relationship with AbbVie, including information on the Article 20 Procedure of ZINBRYTA and resulting impairment of ZINBRYTA related assets, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Loss (Gain) on Fair Value Remeasurement of Contingent Consideration

Consideration payable for certain of our business combinations includes future payments that are contingent upon the occurrence of a particular event or events. We record an obligation for such contingent consideration payments at fair value on the acquisition date. We then revalue our contingent consideration obligations each reporting period. Changes in the fair value of our contingent consideration obligations, other than changes due to payments, are recognized as a (gain) loss on fair value remeasurement of contingent consideration in our consolidated statements of income.

The loss on fair value remeasurement of contingent consideration for 2017 was primarily due to the increase in the probability of achieving certain developmental milestones based upon the progression of the underlying clinical programs.

The loss on fair value remeasurement of contingent consideration for 2016 was primarily due to changes in the probability of achieving certain developmental milestones based upon the progression of the underlying clinical programs and changes in the discount rate.

The loss on fair value remeasurement of contingent consideration for 2015 was primarily due to changes in the expected timing and probabilities of success related to the achievement of certain developmental milestones and in the discount rate.

Restructuring, Business Transformation and Other Cost Saving Initiatives

2017 Corporate Strategy

In July 2017 we announced an updated strategic framework to optimize the value of our MS business while investing for the future across our core growth areas of MS and neuroimmunology, AD and dementia, Parkinson’s disease and movement disorders and neuromuscular diseases including SMA and ALS. We also plan to invest in emerging growth areas such as pain, ophthalmology, neuropsychiatry and acute neurology.

In order to deliver positive results in the near term while investing in the next stages of our growth, we will focus on the following strategic priorities:


•	maximizing the resilience of our MS core business;


•	accelerating efforts in SMA as a significant new growth opportunity;


•	developing and expanding our neuroscience portfolio;


•	focusing our capital allocation efforts to drive investment for future growth; and


•	creating a leaner and simpler operating model to streamline our operations and reallocate resources towards prioritized research and development and commercial value creation opportunities.

In October 2017, in connection with creating a leaner and simpler operating model, we approved a corporate restructuring program intended to streamline our operations and reallocate resources. We expect to make total non-recurring operating and capital expenditures of up to $170.0 million, primarily in 2018, and our goal is to redirect resources of up to $400.0 million annually by 2020 to prioritized research and development and other value creation opportunities.

For the year ended December 31, 2017, we recognized charges in our consolidated statements of income totaling $19.4 million related to this effort, of which $18.5 million is included in selling, general and administrative expense and $0.9 million is reflected as restructuring charges. These restructuring charges, which were substantially incurred and paid in 2017, were primarily related to severance.

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 restructuring charges described below. These amounts, which were substantially incurred and paid by the end of 2016, were 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 intended to cease manufacturing and vacate our 67,000 square foot small-scale biologics manufacturing facility in Cambridge, MA and close and vacate our 46,000 square foot warehouse space in Somerville, MA.

In December 2016 we subleased our rights to the Cambridge, MA manufacturing facility 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 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.

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

2015 Cost Saving Initiatives

2015 Restructuring Charges

In October 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.

During the years ended December 31, 2016 and 2015, we recognized $8.0 million and $93.4 million, respectively, of restructuring charges related to our 2015 restructuring program in our consolidated statements of income. 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:



(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
Payment	(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
Payment	(1.7		)	(2.9		)	(4.6		)
Restructuring reserve as of December 31, 2017	$	0.5		$	—		$	0.5

TECFIDERA Litigation Settlement Charge

As described above under "Amortization of Acquired Intangible Assets - TECFIDERA License Rights,” in January 2017 we entered into a settlement and license agreement with Forward Pharma pursuant to which we obtained U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA. In exchange, we paid Forward Pharma $1.25 billion in cash. During the fourth quarter of 2016, we recognized a pre-tax charge of $454.8 million and in the first quarter of 2017 we recognized an intangible asset of $795.2 million related to this agreement. The pre-tax charge recognized in the fourth quarter of 2016 represented the fair value of our licenses to Forward Pharma’s intellectual property for the period April 2014, when we started selling TECFIDERA, through December 31, 2016.

For additional information on our TECFIDERA settlement and license agreement, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.

Other Income (Expense), Net

For 2017 compared to 2016, the change in other income (expense), net was primarily due to an increase in foreign currency exchange gains, an increase in interest income and a decrease in interest expense, partially offset by other than temporary impairments recorded on strategic investments and marketable debt securities during the year.

Interest expense for the year ended December 31, 2017, includes a net $5.2 million debt extinguishment charge recognized in November 2017 upon redemption of our 6.875% Senior Notes due March 1, 2018.

For additional information on this redemption and our outstanding indebtedness, please read Note 12, Indebtedness, to our consolidated financial statements included in this report.

For 2016 compared to 2015, the change in other income (expense), net was primarily due to an increase in interest expense as a result of the issuance of our senior unsecured notes in the third quarter of 2015. This increase was partially offset by an increase in interest income on higher yields and cash, cash equivalents and marketable securities balances as well as a decrease in foreign exchange losses recognized during the year ended December 31, 2016, compared to the prior year comparative period.

Income Tax Provision

Our effective tax rate fluctuates from year to year due to the global nature of our operations. The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, acquisitions and licensing transactions.

Our effective tax rate for 2017 compared to 2016 increased primarily due to the effect of the 2017 Tax Act and the impairment of prepaid tax assets related to our ZINBRYTA program.

On December 22, 2017, the 2017 Tax Act was signed into law and has resulted in significant changes to the U.S. corporate income tax system. The 2017 Tax Act includes a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits, the Transition Toll Tax and other changes to taxation of foreign subsidiaries.

Article 20 Procedure of ZINBRYTA

As a result of the CHMP's recommendation of restrictions on the use of ZINBRYTA, we impaired prepaid tax balances totaling $142.6 million. Offsetting these amounts was an unrecorded tax benefit related to certain ZINBRYTA related assets totaling approximately $93.8 million. For additional information on the Article 20 Procedure of ZINBRYTA and resulting impairment of ZINBRYTA related assets, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Excluding the effect of the 2017 Tax Act and the ZINBRTYA impairments, our income tax rate would have decreased due to a lower percentage of our earnings being recognized in the U.S., a higher tax jurisdiction. The geographic split of our earnings was affected by milestone and upfront payments in the current year and the spin-off of our hemophilia business, partially offset by growth from the U.S. launch of SPINRAZA and increases in our revenues from anti-CD20 therapeutic programs in the U.S. In addition, in 2017 we earned a lower benefit from the orphan drug credit due to the FDA's approval of SPINRAZA.

Our effective tax rate for 2016 compared to 2015 increased primarily due to a net state tax benefit in 2015 of $27.0 million resulting from the remeasurement of one of our uncertain tax positions and a higher relative percentage of our earnings being attributed to the U.S., a higher tax jurisdiction.

Accounting for Uncertainty in Income Taxes

For additional information on our uncertain tax positions and income tax rate reconciliation for 2017, 2016 and 2015, please read Note 17, Income Taxes, to our consolidated financial statements included in this report.

Equity in Loss of Investee, Net of Tax

In February 2012 we entered into an agreement with Samsung Biologics, establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar pharmaceuticals. We account for this investment under the equity method of accounting. We recognize our share of the results of operations related to our investment in Samsung Bioepis one quarter in arrears.

During 2015 our share of losses exceeded the carrying value of our investment. We therefore suspended recognizing additional losses and will continue to do so unless we commit to providing additional funding.

For additional information on this transaction, please read Note 20, Collaborative and Other Relationships, to our consolidated financial statements included in this report.

Noncontrolling Interest

For 2017 compared to 2016, the change in net income (loss) attributable to noncontrolling interests, net of tax, was primarily related to a $150.0 million pre-tax upfront payment made to Neurimmune in exchange for a 15% reduction in royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab.

For 2016 compared to 2015, the change in net income (loss) attributable to noncontrolling interests, net of tax, was primarily related to a $60.0 million pre-tax milestone payment made to Neurimmune in 2015.

Financial Condition, Liquidity and Capital Resources

Our financial condition is summarized as follows:



	As of December 31,						% Change
(In millions, except percentages)	2017			2016			2017 compared to 2016
Financial assets:
Cash and cash equivalents	$	1,573.8		$	2,326.5		(32.4	)%
Marketable securities — current	2,115.2			2,568.6			(17.7	)%
Marketable securities — non-current	3,057.3			2,829.4			8.1	%
Total cash, cash equivalents and marketable securities	$	6,746.3		$	7,724.5		(12.7	)%
Borrowings:
Current portion of notes payable and other financing arrangements	$	3.2		$	4.7		(31.9	)%
Notes payable and other financing arrangements	5,935.0			6,512.7			(8.9	)%
Total borrowings	$	5,938.2		$	6,517.4		(8.9	)%
Working Capital:
Current assets	$	7,873.3		$	8,732.2		(9.8	)%
Current liabilities	(3,368.2		)	(3,419.9		)	(1.5	)%
Total working capital	$	4,505.1		$	5,312.3		(15.2	)%

For the year ended December 31, 2017, certain significant cash flows were as follows:


•	$4.6 billion in net cash flows provided by operating activities, net of:


◦	$1.1 billion in total net payments for income taxes;


◦	$463.0 million in upfront and milestone payments to BMS, iPierian, Eisai, Alkermes and Ionis; and


◦	$454.8 million payment made to Forward Pharma for the litigation settlement charge that was accrued as of December 31, 2016;


•	$1.4 billion used for share repurchases;


•	$1.2 billion in contingent payments made to former shareholders of Fumapharm AG and holders of their rights;


•	$867.4 million used for purchases of property, plant and equipment;


•	$795.2 million payment made to Forward Pharma to license Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA;


•	$557.7 million payment made for the redemption of our 6.875% Senior Notes due March 1, 2018 prior to their maturity;


•	$302.7 million net cash contribution made in connection with the spin-off of our hemophilia business;


•	$295.0 million in upfront and milestone payments made to Remedy, Ionis and Samsung Bioepis; and


•	$132.4 million payment, net of tax, made to Neurimmune in exchange for a 15% reduction in royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab.

For the year ended December 31, 2016, certain significant cash flows were as follows:


•	$4.6 billion in net cash flows provided by operating activities, net of:


◦	$1.6 billion in total net payments for income taxes;


◦	$75.0 million license fee payment made to Ionis; and


◦	$20.0 million upfront payment to UPenn;


•	$1.2 billion in contingent payments made to former shareholders of Fumapharm AG and holders of their rights;


•	$1.0 billion used for share repurchases;


•	$616.1 million used for purchases of property, plant and equipment; and


•	$82.0 million in milestone payments made to Samsung Bioepis and AbbVie.

Overview

We have historically financed our operating and capital expenditures primarily through cash flows earned through our operations. We expect to continue funding our current and planned operating requirements principally through our cash flows from operations, as well as our existing cash resources. We believe that our existing funds, when combined with cash generated from operations and our access to additional financing resources, if needed, are sufficient to satisfy our operating, working capital, strategic alliance, milestone payment, capital expenditure and debt service requirements for the foreseeable future. In addition, we may choose to opportunistically return cash to shareholders and pursue other business initiatives, including acquisition and licensing activities. We may, from time to time, also seek additional funding through a combination of new collaborative agreements, strategic alliances and additional equity and debt financings or from other sources should we identify a significant new opportunity.

Tax Reform

On December 22, 2017, the 2017 Tax Act was signed into law and has resulted in significant changes to the U.S. corporate income tax system.

The 2017 Tax Act eliminates the deferral of U.S. income tax on the historical unrepatriated earnings by imposing the Transition Toll Tax, which is a one-time mandatory deemed repatriation tax on undistributed foreign earnings. The Transition Toll Tax is assessed on the U.S. shareholder's share of the foreign corporation's accumulated foreign earnings that have not previously been taxed. Earnings in the form of cash and cash equivalents will be taxed at a rate of 15.5% and all other earnings will be taxed at a rate of 8.0%. As of December 31, 2017, we have accrued income tax liabilities of $989.6 million under the Transition Toll Tax, of which $78.3 million is expected to be paid within one year. The Transition Toll Tax will be paid over an eight-year period, starting in 2018, and will not accrue interest.

Of the total cash, cash equivalents and marketable securities at December 31, 2017, approximately $4.0 billion was generated in foreign

jurisdictions and may now be deployed with greater flexibility to advance our business interests.

For additional information on certain risks that could negatively impact our consolidated financial position or future results of operations, please read Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in this report.

Share Repurchase Programs

In July 2016 our Board of Directors authorized our 2016 Share Repurchase Program to repurchase up to $5.0 billion of our common stock. This authorization does not have an expiration date. All share repurchases under this authorization will be retired. Under this authorization, we repurchased and retired 3.7 million and 3.3 million shares of our common stock during the years ended December 31, 2017 and 2016, respectively, at a cost of $1.0 billion for each year. As of December 31, 2017, approximately $3.0 billion remains available for share repurchases under this authorization.

In May 2015 our Board of Directors authorized our 2015 Share Repurchase Program to repurchase up to $5.0 billion of our common stock. All share repurchases under this authorization were retired. Our 2015 Share Repurchase Program was completed as of December 31, 2015. Under this authorization, we repurchased and retired 16.8 million shares of our common stock at a cost of $5.0 billion during the year ended December 31, 2015.

In February 2011 our Board of Directors authorized our 2011 Share Repurchase Program to repurchase up to 20.0 million shares of our common stock. Shares repurchased under this authorization have been principally used to offset common stock issuances under our share-based compensation plans. Our 2011 Share Repurchase Program was completed as of March 31, 2017. Under this authorization, we repurchased 1.2 million shares of our common stock at a cost of $365.4 million during the year ended December 31, 2017. We did not repurchase any shares of our common stock under this authorization during the years ended December 31, 2016 and 2015.

Cash, Cash Equivalents and Marketable Securities

Until required for another use in our business, we typically invest our cash reserves in bank deposits, certificates of deposit, commercial paper, corporate notes, U.S. and foreign government instruments and other interest bearing marketable debt instruments in accordance with our investment policy. It is our policy to mitigate credit risk in our cash reserves and marketable securities by maintaining a well-diversified

portfolio that limits the amount of exposure as to institution, maturity and investment type.

The net decrease in cash, cash equivalents and marketable securities at December 31, 2017, from December 31, 2016, was primarily due to the payment made to Forward Pharma in connection with our January 2017 settlement and license agreement, the payment made for the redemption of our 6.875% Senior Notes due March 1, 2018 prior to their maturity in November 2017, cash used for share repurchases, the net cash contribution made in connection with the spin-off of our hemophilia business in February 2017, net purchases of property, plant and equipment, upfront and milestone payments made to Remedy, Ionis and Samsung Bioepis and the payment to Neurimmune in exchange for a 15% reduction in royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab.

Borrowings

The following is a summary of our principal indebtedness as of December 31, 2017:


•	$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.

These senior unsecured notes were issued at a discount and are amortized as additional interest expense over the period from issuance through maturity.

In November 2017 we redeemed our 6.875% Senior Notes due March 1, 2018, with an aggregate principal amount of $550.0 million. For additional information on this redemption please read Note 12, Indebtedness, to our consolidated financial statements included in this report.

During the third quarter of 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, 2017, we had no outstanding borrowings and were in compliance with all covenants under this facility.

In connection with our 2006 distribution agreement with Fumedica, we issued notes totaling 61.4 million Swiss Francs that are payable to Fumedica in varying amounts from June 2008 through June 2018. Our remaining note payable to Fumedica, payable in June 2018, had a carrying value of 3.1 million Swiss Francs ($3.2 million) and 6.2 million Swiss Francs ($6.0 million) as of December 31, 2017 and 2016, respectively.

For a summary of the fair values of our outstanding borrowings as of December 31, 2017 and 2016, please read Note 8, Fair Value Measurements, to our consolidated financial statements included in this report.

Working Capital

We define working capital as current assets less current liabilities. The change in working capital at December 31, 2017, from December 31, 2016, reflects a decrease in total current assets of $858.9 million, partially offset by a decrease in current liabilities of $51.7 million.

The decrease in total current assets was driven by a decrease in net cash, cash equivalents and marketable securities, as described above, partially offset by an increase in accounts receivable due to an increase in revenues and the timing of customer payments, including amounts due in connection with anti-CD20 therapeutic programs.

The decrease in total current liabilities primarily resulted from a reduction in taxes payable and accrued expenses primarily due to the payment of the $454.8 million charge that was accrued as of December 31, 2016, in relation to our settlement and license agreement with Forward Pharma, offset by an increase in the accrual of contingent payments related to FUMADERM and TECFIDERA (together, the Fumapharm Products) upon reaching $15.0 billion and $16.0 billion in total cumulative sales of Fumapharm Products in the fourth quarter of 2017.

Cash Flows

The following table summarizes our cash flow activity:



	For the Years Ended December 31,										% Change
	2017 compared to 2016			2016 compared to 2015
(In millions, except percentages)	2017				2016			2015
Net cash flows provided by operating activities	$	4,551.0			$	4,587.2		$	3,919.4		(0.8	)%	17.0	%
Net cash flows used in by investing activities	$	(2,963.1	)		$	(2,484.8	)	$	(4,553.6	)	19.2	%	(45.4	)%
Net cash flows (used in) provided by financing activities	$	(2,380.0	)		$	(1,052.6	)	$	783.1		126.1	%	(234.4	)%

Operating Activities

Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. We expect cash provided from operating activities will continue to be our primary source of funds to finance operating needs and capital expenditures for the foreseeable future.

Operating cash flow is derived by adjusting our net income for:


•	Non-cash operating items such as depreciation and amortization, impairment charges, acquired in-process research and development and share-based compensation;


•	Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations; and


•	Changes associated with the fair value of contingent payments associated with our acquisitions of businesses and payments related to collaborations.

For 2017 compared to 2016, net cash flows provided by operations were relatively consistent. Higher sales and lower income tax payments were offset by the $454.8 million payment related to our settlement and license agreement with Forward Pharma, which had been accrued as of December 31, 2016, and the timing of customer payments, including

amounts due in connection with anti-CD20 therapeutic programs.

Net income was lower in 2017, primarily due to the Transition Toll Tax under the 2017 Tax Act and higher depreciation and amortization.

For 2016 compared to 2015, the increase in cash provided by operating activities was primarily driven by higher net income, non-cash charges for depreciation and amortization, a comparative increase in accrued expenses and other liabilities, partially offset by a comparative increase in accounts receivable.

Investing Activities

For 2017 compared to 2016, the increase in net cash flows used in investing activities was primarily due to:


•	the $795.2 million payment made to Forward Pharma to license Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA;


•	an increase in purchases of property, plant and equipment primarily related to the construction of our Solothurn, Switzerland facility;


•	$175.0 million in milestone payments made to Ionis and Samsung Bioepis; and


•	the $120.0 million payment made to Remedy for the purchase of BIIB093.

These increases were partially offset by an increase in net proceeds of marketable securities.

For 2016 compared to 2015, the decrease in net cash flows used in investing activities was primarily due to a decrease in net purchases of marketable securities and cash paid for the acquisition of Convergence Pharmaceuticals (Convergence) in February 2015, partially offset by an increase in the contingent consideration related to the Fumapharm AG acquisition.

Financing Activities

For 2017 compared to 2016, the increase in net cash flows used in financing activities was primarily due to an increase in cash used for share repurchases, the payment made for the redemption of our 6.875% Senior Notes due March 1, 2018 prior to their maturity, the $302.7 million net cash contribution made in connection with the spin-off of our hemophilia business on February 1, 2017, and the net distributions to noncontrolling interest, including the payment made to Neurimmune in exchange for a 15% reduction in royalty rates payable on products developed under the agreement, including on potential commercial sales of aducanumab.

For 2016 compared to 2015, the decrease in net cash flows provided by financing activities was primarily due to the issuance of our senior unsecured notes issued in the third quarter of 2015, partially offset by a decrease in the purchases of common stock.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2017, excluding amounts related to uncertain tax positions, funding commitments, contingent development, regulatory and commercial milestone payments, TYSABRI contingent payments and contingent consideration related to our business combinations, as described below.



	Payments Due by Period
(In millions)	Total		Less than 1 Year		1 to 3 Years		3 to 5 Years		After 5 Years
Non-cancellable operating leases (1), (2)	$	428.5	$	48.3	$	92.1	$	88.3	$	199.8
Long-term debt obligations (3)	9,430.0		244.8		1,983.3		1,396.3		5,805.6
Purchase and other obligations (4)	1,657.1		637.3		344.9		234.6		440.3
Defined benefit obligation	91.8		—		—		—		91.8
Total contractual obligations	$	11,607.4	$	930.4	$	2,420.3	$	1,719.2	$	6,537.5


(1)	We lease properties and equipment for use in our operations. Amounts reflected within the table above detail future minimum rental commitments under non-cancelable operating leases as of December 31 for each of the periods presented. In addition to the minimum rental commitments, these leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses.


(2)	Obligations are presented net of sublease income expected to be received for the vacated small-scale biologics manufacturing facility in Cambridge, MA, the vacated portion of our Weston, MA facility and other facilities throughout the world.


(3)	Long-term debt obligations are primarily related to our Senior Notes, including principal and interest payments.

(4)

Purchase and other obligations primarily includes our obligations to purchase direct materials, $989.6 million related to our current estimate of the impact of the 2017 Tax Act, $270.0 million in contractual commitments for the construction of our large-scale biologics manufacturing facility in Solothurn, Switzerland and $111.3 million related to the fair value of net liabilities on derivative contracts.

TYSABRI Contingent Payments

In 2013 we acquired from Elan full ownership of all remaining rights to TYSABRI that we did not already own or control. Under the acquisition agreement, we are obligated to make contingent payments to Elan of 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales that exceed $2.0 billion. Royalty payments to Elan and other third parties are recognized as cost of sales in our consolidated statements of income. Elan was acquired by Perrigo Company plc (Perrigo) in December 2013, and Perrigo subsequently sold its rights to these payments to a third party effective January 2017.

Contingent Consideration related to Business Combinations

In connection with our acquisitions of Convergence, Stromedix, Inc. (Stromedix) and Biogen International Neuroscience GmbH (BIN), we agreed to make additional payments based upon the achievement of certain milestone events.

As the acquisitions of Convergence, Stromedix and BIN occurred after January 1, 2009, we recorded the contingent consideration liabilities associated with these transactions at their fair value on the

acquisition date and revalue these obligations each reporting period. We may pay up to approximately $1.1 billion in remaining milestones related to these acquisitions. For additional information on our acquisition of Convergence please read Note 2, Acquisitions, to our consolidated financial statements included in this report.

Fumapharm AG

In 2006 we acquired Fumapharm AG. As part of this acquisition we acquired FUMADERM and TECFIDERA (together, Fumapharm Products). We are required to make contingent payments to the former shareholders of Fumapharm AG or holders of their rights based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales of Fumapharm Products in the prior 12-month period, as defined in the acquisition agreement.

During 2017 we paid $1.2 billion in contingent payments as we reached the $11.0 billion, $12.0 billion, $13.0 billion and $14.0 billion cumulative sales levels related to the Fumapharm Products in the fourth quarter of 2016 and the first, second and third quarters of 2017, respectively, and accrued $600.0 million upon reaching $15.0 billion and $16.0 billion in total cumulative sales of Fumapharm Products in the fourth quarter of 2017.

We will owe an additional $300.0 million contingent payment for every additional $1.0 billion in cumulative sales level of Fumapharm Products reached if the prior 12 months sales of the Fumapharm Products exceed $3.0 billion, until such time as the cumulative sales level reaches $20.0 billion, at which time no further contingent payments shall be due. If the prior 12 months sales of Fumapharm Products are less than $3.0 billion, contingent payments remain payable on a decreasing tiered basis. These payments will be accounted for as an increase to goodwill as incurred, in accordance with the accounting standard applicable to business combinations when we acquired Fumapharm. Any portion of the payment that is tax deductible will be recorded as a reduction to goodwill. Payments are due within 60 days following the end of the quarter in which the applicable cumulative sales level has been reached.

Contingent Development, Regulatory and Commercial Milestone Payments

Based on our development plans as of December 31, 2017, we could make potential future milestone payments to third parties of up to approximately $4.2 billion, including approximately $0.7 billion in development milestones, approximately $1.5 billion in regulatory milestones and approximately $2.0 billion in commercial milestones

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 was not considered probable as of December 31, 2017, 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.

Provided various development, regulatory or commercial milestones are achieved, we anticipate that we may pay approximately $110.0 million of milestone payments in 2018.

Other Funding Commitments

As of December 31, 2017, we have several on-going clinical studies in various clinical trial stages. Our most significant clinical trial expenditures are to CROs. The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $40.0 million in our consolidated balance sheet for expenditures incurred by CROs as of December 31, 2017. We have approximately $460.0 million in cancellable future commitments based on existing CRO contracts as of December 31, 2017.

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, 2017, we have approximately $77.3 million of net liabilities associated with uncertain tax positions.

As of December 31, 2017, we have accrued income tax liabilities of $989.6 million under the Transition Toll Tax, of which $78.3 million is expected to be paid within one year. The Transition Toll Tax will be paid over an eight-year period, starting in 2018, and will not accrue interest.

Other Off-Balance Sheet Arrangements

We do not have any relationships with entities often referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. We consolidate variable interest entities if we are the primary beneficiary.

Legal Matters

For a discussion of legal matters as of December 31, 2017, please read Note 21, Litigation, to our consolidated financial statements included in this report.

Critical Accounting Estimates

The preparation of our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP), requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis we evaluate our estimates, judgments and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. Other significant accounting policies are outlined in Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.

Revenue Recognition and Related Allowances

We recognize revenues when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; our price to the customer is fixed or determinable; and collectability is reasonably assured. For additional information on the new accounting standard for revenues from contracts with customers please read Note 1, Summary of Significant Accounting Policies: New Accounting Pronouncements, to our consolidated financial statements included in this report.

Product Revenues

Revenues from product sales are recognized when title and risk of loss have passed to the customer, which is typically upon delivery. Product revenues are recorded net of applicable reserves for discounts and allowances. The timing of distributor orders and shipments can cause variability in earnings.

Reserves for Discounts and Allowances

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.

In addition to the discounts and rebates 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 within selling, general and administrative expenses.

Concentrations of Credit Risk

The majority of our accounts receivable arise from product sales in the U.S. and Europe and are primarily due from 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 continue to monitor these conditions, including the volatility associated with international economies and the relevant financial markets, and assess their possible impact on our business. Credit and economic conditions in the E.U. continue to remain uncertain, which has, from time to time, led to longer collection periods for our accounts receivable and greater collection risk in certain countries.

Where our collections continue to be subject to significant payment delays due to government funding and reimbursement practices and a portion of these receivables are routinely being collected beyond our contractual payment terms and over periods in excess of one year, we have discounted our receivables and reduced related revenues based on the period of time that we estimate those amounts will be paid, to the extent such period exceeds one year, 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.

To date, we have not experienced any significant losses with respect to the collection of our accounts receivable. If economic conditions worsen and/or the financial condition of our customers were to further

deteriorate, our risk of collectability may increase, which may result in additional allowances and/or significant bad debts.

For additional information on our concentration of credit risk associated with our accounts receivable balances, please read the subsection entitled “Credit Risk” in Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in this report.

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. All changes in judgment in relation to pre-approval inventory have historically been insignificant.

Acquired Intangible Assets, including In-process Research and Development (IPR&D)

When we purchase a business, the acquired IPR&D is measured at fair value, capitalized as an intangible asset and tested for impairment at least annually, as of October 31, until commercialization, after which time the IPR&D is amortized over its estimated useful life. If we acquire an asset or group of assets that do not meet the definition of a business under applicable accounting standards, the acquired IPR&D is expensed upon its acquisition date. Future costs to develop these assets are recorded to research and development expense as they are incurred.

We have acquired, and expect to continue to acquire, intangible assets through the acquisition of biotechnology companies or through the consolidation of variable interest entities. These intangible assets primarily consist of technology associated with human therapeutic products and IPR&D product candidates. When significant identifiable intangible assets are acquired, we generally engage an independent third-party valuation firm to assist in determining the fair values of these assets as of the acquisition date. Management will determine the fair value of less significant identifiable intangible assets acquired. Discounted cash flow models are typically used in these valuations, and these models require the use of significant estimates and assumptions including but not limited to:


•	estimating the timing of and expected costs to complete the in-process projects;


•	projecting regulatory approvals;


•	estimating future cash flows from product sales resulting from completed products and in process projects; and


•	developing appropriate discount rates and probability rates by project.

We believe the fair values assigned to the intangible assets acquired are based upon reasonable estimates and assumptions given available facts and circumstances as of the acquisition dates.

If these projects are not successfully developed, the sales and profitability of the company may be adversely affected in future periods. Additionally, the value of the acquired intangible assets may become impaired. We believe that the foregoing assumptions used in the IPR&D analysis were reasonable. No assurance can be given that the underlying assumptions used to estimate expected project sales, development costs or profitability, or the events associated with such projects, will transpire as estimated.

Certain IPR&D programs have a fair value that is not significantly in excess of carrying value, including our program for the treatment of TGN. Such programs could become impaired if assumptions used in determining the fair value change.

Impairment and Amortization of Long-lived Assets and Accounting for Goodwill

Long-lived Assets Other than Goodwill

Long-lived assets to be held and used include property, plant and equipment as well as intangible assets, including IPR&D and trademarks. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. 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.

When performing our impairment assessment, we calculate the fair value using the same methodology as described above under "Acquired Intangible Assets, including In-process Research and Development (IPR&D)". 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 treatments for forms of neuropathic pain, such as TGN. Such programs could become impaired if assumptions used in determining the fair value change.

Our most significant intangible assets are our acquired and in-licensed rights and patents and developed technology. Acquired and in-licensed rights and patents primarily relate to obtaining the fair value of the U.S. and rest of world licenses to Forward Pharma's intellectual property, including Forward Pharma's intellectual property related to TECFIDERA, and our acquisition of all remaining rights to TYSABRI from Elan. 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 TECFIDERA, TYSABRI and AVONEX using the economic consumption method based on revenues generated from the products underlying the related intangible assets. An analysis of the anticipated lifetime revenues of TECFIDERA, 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 TECFIDERA, TYSABRI or AVONEX.

For additional information on the impairment charges related to our long-lived assets during 2017 and 2016, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in this report. Impairment charges related to our long-lived assets during 2015 were insignificant.

Goodwill

Goodwill relates largely to amounts that arose in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003 and amounts that are being paid in connection with the acquisition of Fumapharm AG. Our goodwill balances represent 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.

We assess our goodwill balance within our single reporting unit annually, as of October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable to determine whether any impairment in this asset may exist and, if so, the extent of such impairment. 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, we would record an impairment loss equal to the difference.

We completed our required annual impairment test in the fourth quarters of 2017, 2016 and 2015, respectively, and determined in each of those periods that the carrying value of goodwill was not impaired. In each year, the fair value of our reporting unit, which includes goodwill, was significantly in excess of the carrying value of our reporting unit.

Investments, including Fair Value Measures and Impairments

We invest in various types of securities, including short-term and long-term marketable securities, principally corporate notes, government securities including government sponsored enterprise mortgage-backed securities and credit card and auto loan asset-backed securities, in which our excess cash balances are invested.

In accordance with the accounting standard for fair value measurements, we have classified our financial assets as Level 1, 2 or 3 within the fair value hierarchy. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets that we have the ability to access. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates, yield curves and foreign currency spot rates. Fair values determined by Level 3 inputs utilize unobservable data points for the asset.

As noted in Note 8, Fair Value Measurements, to our consolidated financial statements included in this report, a majority of our financial assets have been classified as Level 2. These assets have been initially valued at the transaction price and subsequently valued utilizing third-party pricing services. The pricing services use many observable market inputs to determine value, including 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 understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

Impairment

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 debt 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 within 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 and are reflected within earnings as an impairment loss.

Share-Based Compensation

We make certain assumptions in order to value and record expense associated with awards made under our share-based compensation arrangements. Changes in these assumptions may lead to variability with respect to the amount of expense we recognize in connection with share-based payments.

Determining the appropriate valuation model and related assumptions requires judgment, and includes estimating the expected market price of our stock on vesting date and stock price volatility as well as the term of the expected awards. Determining the appropriate amount to expense based on the anticipated achievement of performance targets requires judgment, including forecasting the achievement of future financial targets. The estimate of expense is revised periodically based on the probability of achieving the required performance targets and adjustments are made throughout the term as appropriate. The cumulative impact of any revision is reflected in the period of change.

We also estimate forfeitures over the requisite service period when recognizing share-based compensation expense based on historical rates and forward-looking factors. These estimates are adjusted to the extent that actual forfeitures differ, or are expected to materially differ, from our estimates.

Contingent Consideration

For acquisitions completed before January 1, 2009, we record contingent consideration resulting from a business combination when the contingency is resolved. For acquisitions completed after January 1, 2009, we record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value as an adjustment to contingent consideration expense 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 and achievement and timing of any cumulative sales-based and development milestones, or changes in the probability of certain clinical events and changes in the assumed probability associated with regulatory approval. These fair value measurements represent Level 3 measurements as they 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 described above, could have a material impact on the amount of contingent consideration expense we record in any given period.

Restructuring Charges

We have made estimates and judgments regarding the amount and timing of our restructuring expense and liability, including current and future period termination benefits, pipeline program termination costs and other exit costs to be incurred when related actions take place. Severance and other related costs are reflected in our consolidated statements of income as a component of total restructuring charges incurred. Actual results may differ from these estimates.

Income Taxes

We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations. In preparing our consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment, we consider 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 accounting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and the effects of tax planning strategies. Our estimates of future taxable income include, among other items, our estimates of future income tax deductions related to the exercise of stock options. In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.

All tax effects associated with intercompany transfers of assets within our consolidated group, both current and deferred, are recorded as a prepaid tax or deferred charge and recognized through our consolidated statements 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 obsolescence of inventory or the discontinuation of a research program, we will expense any remaining deferred charge or prepaid tax. As of December 31,

2017, total deferred charges and prepaid taxes were $617.7 million. For additional information on the new accounting standard related to tax effects associated with intercompany transfers of assets within our consolidated group, please read Note 1, Summary of Significant Accounting Policies: New Accounting Pronouncements, to our consolidated financial statements included in this report.

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 that include, but are 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 adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Our liabilities for uncertain tax positions can be relieved only if the contingency becomes legally extinguished, through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associated with the position meet the “more-likely-than-not” threshold or the liability becomes effectively settled through the examination process. We consider matters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews, we have no plans to appeal or litigate any aspect of the tax position, and we believe that it is highly unlikely that the taxing authority would examine or re-examine the related tax position. We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax expense.

We earn a significant amount of our operating income outside the U.S. As a result, a portion of our cash, cash equivalents and marketable securities are held by foreign subsidiaries.

On December 22, 2017, the 2017 Tax Act was signed into law and has resulted in significant changes to the U.S. corporate income tax system.

income tax liabilities of $989.6 million under the Transition Toll Tax, of which $78.3 million is expected to be paid within one year. The Transition Toll Tax will be paid over an eight-year period, starting in 2018, and will not accrue interest.

New Accounting Standards

For a discussion of new accounting standards and their expected impact on our consolidated financial statements or disclosures, please read Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.

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