Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements (condensed consolidated financial statements) and the accompanying notes beginning on page 7 of this quarterly report on Form 10-Q and our audited consolidated financial statements and the accompanying notes included in our 2022 Form 10-K.

EXECUTIVE SUMMARY

INTRODUCTION

Biogen is a global biopharmaceutical company focused on discovering, developing and delivering innovative therapies for people living with serious and complex diseases worldwide. We have a broad portfolio of medicines to treat MS, have introduced the first approved treatment for SMA and co-developed two treatments to address a defining pathology of Alzheimer's disease. We are focused on advancing our pipeline in neurology, neuropsychiatry, specialized immunology and rare diseases. We support our drug discovery and development efforts through internal research and development programs and external collaborations.

Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; QALSODY for ALS, which was granted accelerated approval by the FDA during the second quarter of 2023; ADUHELM for the treatment of Alzheimer's disease; and FUMADERM for the treatment of severe plaque psoriasis. We also collaborate with Eisai on the commercialization of LEQEMBI for the treatment of Alzheimer's disease, which was granted traditional approval by the FDA in July 2023. We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions; RITUXAN HYCELA for the treatment of non-Hodgkin's lymphoma and CLL; GAZYVA for the treatment of CLL and follicular lymphoma; OCREVUS for the treatment of PPMS and RMS; LUNSUMIO for the treatment of relapsed or refractory follicular lymphoma, which was granted accelerated approval by the FDA during the fourth quarter of 2022; COLUMVI, a bispecific antibody for the treatment of non-Hodgkin's lymphoma, which was granted accelerated approval by the FDA during the second quarter of 2023; and have the option to add other potential anti-CD20 therapies, pursuant to our collaboration arrangements with Genentech, a wholly-owned member of the Roche Group. For additional information on our collaboration arrangements with Genentech, please read Note 19, Collaborative and Other Relationships, to our audited consolidated financial statements included in our 2022 Form 10-K.

In addition to continuing to invest in new potential innovation in MS and SMA we are advancing our mid-to-late stage programs including zuranolone for MDD and PPD, BIIB080 for Alzheimer's disease and both litifilimab and dapirolizumab pegol for certain forms of lupus.

We also commercialize biosimilars of advanced biologics including BENEPALI, an etanercept biosimilar referencing ENBREL, IMRALDI, an adalimumab biosimilar referencing HUMIRA, and FLIXABI, an infliximab biosimilar referencing REMICADE, in certain countries in Europe, as well as BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS. We continue to develop potential biosimilar products including BIIB800, a proposed tocilizumab biosimilar referencing ACTEMRA, and SB15, a proposed aflibercept biosimilar referencing EYLEA. In February 2023 we announced that we are exploring strategic options for our biosimilars business.

For additional information on our collaboration arrangements, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

We seek to ensure an uninterrupted supply of medicines to patients around the world. To that end, we continually review our manufacturing capacity, capabilities, processes and facilities. In order to support our future growth and drug development pipeline, we are expanding our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland. In the second quarter of 2021 a portion of the facility (the first manufacturing suite) received a GMP multi-product license from the SWISSMEDIC and was placed into service. Solothurn has been approved for the manufacture of ADUHELM and LEQEMBI by the FDA. We estimate the second manufacturing suite will be operational by the end of 2023. We believe that the Solothurn facility will support our anticipated near to mid-term needs for the manufacturing of biologic assets, including the commercial launch of LEQEMBI. The plant represents a significant increase in our overall manufacturing capacity and is not yet being fully utilized, resulting in our recording of excess capacity charges. If we are unable to fully utilize our manufacturing facilities, we will incur additional excess capacity charges which would have a negative effect on our financial condition and results of operations.

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Our revenue depends upon continued sales of our products as well as the financial rights we have in our anti-CD20 therapeutic programs, and, unless we develop, acquire rights to and/or commercialize new products and technologies, we will be substantially dependent on sales from our products and our financial rights in our anti-CD20 therapeutic programs for many years.

In the longer term, our revenue growth will depend 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.

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 products, products of our collaborators and pipeline product candidates may negatively impact future sales of our existing products.

Our products and revenue streams continue to face increasing competition in many markets from generic versions, prodrugs and biosimilars of existing products as well as products approved under abbreviated regulatory pathways. Such products are likely to be sold at substantially lower prices than branded products. Accordingly, the introduction of such products as well as other lower-priced competing products may significantly reduce both the price that we are able to charge for our products and the volume of products we sell, which will negatively impact our revenue. In addition, in some markets, when a generic or biosimilar version of one of our products is commercialized, it may be automatically substituted for our product and significantly reduce our revenue in a short period of time.

Sales of our products depend, to a significant extent, on the availability and extent of adequate coverage, pricing and reimbursement from government health administration authorities, private health insurers and other organizations. When a new pharmaceutical product is approved, the availability of government and private reimbursement for that product may be uncertain, as is the pricing and amount for which that product will be reimbursed.

Drug prices are under significant scrutiny in the markets in which our products are prescribed, for example the IRA has certain provisions related to drug pricing. We expect drug pricing and other health care costs to continue to be subject to intense political and societal pressures on a global basis.

Our failure to obtain or maintain adequate coverage, pricing or reimbursement for our products could have an adverse effect on our business, reputation, revenue and results of operations, could curtail or eliminate our ability to adequately fund research and development programs for the discovery and commercialization of new products and/or could cause a decline or volatility in our stock price.

In addition to the impact of competition, pricing actions and other measures being taken worldwide designed to reduce healthcare costs and limit the overall level of government expenditures, our sales and operations could also be affected by other risks of doing business internationally, including the impact of public health epidemics, such as the COVID-19 pandemic, on employees, the global economy and the delivery of healthcare treatments, geopolitical events, supply chain disruptions, foreign currency exchange fluctuations, changes in intellectual property legal protections and changes in trade regulations and procedures.

For a detailed discussion on our business environment, please read Item 1. Business, in our 2022 Form 10-K. For additional information on our competition and pricing risks that could negatively impact our product sales, please read Item 1A. Risk Factors included in this report.

TECFIDERA

Multiple TECFIDERA generic entrants are now in North America, Brazil and certain E.U. countries and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and we expect that TECFIDERA revenue will continue to decline in the future.

In March 2023 the CJEU decided in favor of Biogen, the EMA and the EC in their appeal of a European General Court decision that had annulled the EMA's refusal to evaluate a generic version of TECFIDERA because of TECFIDERA's regulatory data and marketing protection. The CJEU set aside the General Court's judgment and dismissed the generic's action. On the basis of this favorable decision and the EC determination in May 2023 that TECFIDERA is entitled to an additional year of market protection for its pediatric indication, we believe that TECFIDERA is entitled to regulatory marketing protection in the E.U. until at least February 2, 2025, and are seeking to enforce this protection. As of June 30, 2023, some of the TECFIDERA generics have not yet fully exited some of the E.U. markets and some generic products remain in the channel. We expect removal of generics from the market will take

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additional time. We are closely monitoring this situation and working to enforce our legal right to market protection. In addition, we will continue to enforce our EP 2 653 873 patent related to TECFIDERA, which expires in 2028.

For additional information, please read Note 18, Litigation, to our condensed consolidated financial statements included in this report.

BUSINESS UPDATE REGARDING MACROECONOMIC CONDITIONS AND OTHER DISRUPTIONS

Significant portions of our business are conducted in Europe, Asia and other international geographies. Factors such as the COVID-19 pandemic and other global health outbreaks, adverse weather events, geopolitical events, inflation, labor or raw material shortages and other supply chain disruptions could result in product shortages or other difficulties and delays or increased costs in manufacturing our products. Additionally, global disputes and interruptions in international relationships, including tariffs, trade protection measures, import or export licensing requirements and the imposition of trade sanctions or similar restrictions by the U.S. or other governments, affect our ability to do business. For example, tensions between the U.S. and China have led to a series of tariffs and sanctions being imposed by the U.S. on imports from China mainland, as well as other business restrictions.

CURRENT ECONOMIC CONDITIONS

Economic conditions remain vulnerable as markets continue to be impacted in part by elevated inflation, rising interest rates, global supply chain constraints and recent bank failures.

Recently, concerns have arisen with respect to the financial condition of a number of banking institutions in the U.S., in particular those with exposure to certain types of depositors and large portfolios of investment securities. Additionally, in March 2023 SVB and Signature Bank were closed and taken over by the FDIC, which created significant market disruption and uncertainty with respect to the financial condition of a number of banking institutions in the U.S., in particular those with exposure to certain types of depositors and large portfolios of investment securities. While we do not have any direct exposure to SVB or Signature Bank, we do maintain our cash at financial institutions, often in balances that exceed the current FDIC insurance limits, and will continue to monitor our cash, cash equivalents and investments and take steps to identify any potential impact and minimize any disruptions on our business.

If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds, may be threatened and could have a material adverse effect on our business and financial condition.

GEOPOLITICAL TENSIONS

The ongoing geopolitical tensions related to Russia's invasion of Ukraine have resulted in global business disruptions and economic volatility, including sanctions and other restrictions levied on the government and businesses in Russia. Although we do not have affiliates or employees, in either Russia or Ukraine, we do provide various therapies to patients in Russia through a distributor. In addition, new government sanctions on the export of certain manufacturing materials to Russia may delay or limit our ability to get new products approved.

The impact of the conflict on our operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions and whether the conflict spreads or has effects on countries outside Ukraine and Russia. Revenue generated from sales in these regions represented less than 2.0% of total product revenue for the three and six months ended June 30, 2023 and the year ended December 31, 2022.

We will continue to monitor the ongoing conflict between Russia and Ukraine and assess any potential impacts on our business, supply chain, partners or customers, as well as any factors that could have an adverse effect on our results of operations.

COVID-19

The length of time and full extent to which the COVID-19 pandemic directly or indirectly impacts our business, results of operations and financial condition, including sales, expense, reserves and allowances, the supply chain, manufacturing, clinical trials, research and development costs and employee-related costs, depends on future developments that are highly uncertain, subject to change and are difficult to predict, including the economic impact on local, regional, national and international customers and markets.

For additional information on the various risks posed by the COVID-19 pandemic and the conflict in Ukraine, please read Item 1A. Risk Factors included in this report.

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INFLATION REDUCTION ACT OF 2022

In August 2022 the IRA was signed into law in the U.S. The IRA introduced new tax provisions, including a 15.0% corporate alternative minimum tax and a 1.0% excise tax on stock repurchases. The provisions of the IRA are effective for periods after December 31, 2022. The IRA did not result in any material adjustments to our income tax provision or other income tax balances as of June 30, 2023 and December 31, 2022. We expect additional guidance and regulations to be issued in future periods and will continue to assess its potential impact on our business and results of operations as further information becomes available.

The IRA also contains substantial drug pricing reforms that may have a significant impact on the pharmaceutical industry in the U.S. This includes allowing CMS to negotiate a maximum fair price for certain high-priced single source Medicare drugs, as well as redesigning Medicare Part D to reduce out-of-pocket prescription drug costs for beneficiaries, potentially resulting in higher contributions from plans and manufacturers. The IRA also establishes drug inflationary rebate requirements to penalize manufacturers from raising the prices of Medicare covered single-source drugs and biologics beyond the inflation-adjusted rate. Further, to incentivize biosimilar development, the IRA provides an 8.0% Medicare Part B add-on payment for qualifying biosimilar products for a five-year period.

The IRA's drug pricing controls and Medicare redesign may have an adverse impact on our sales (particularly for our products that are more substantially reliant on Medicare reimbursement), our business and our results of operations. However, the degree of impact from this legislation on our business depends on a number of implementation decisions. We will continue to assess as further information becomes available.

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FINANCIAL HIGHLIGHTS

As described below under Results of Operations, our net income and diluted earnings per share attributable to Biogen Inc. for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, reflects the following:

TOTAL REVENUE

Decreased

$133.1 million or 5.1%

DILUTED EARNINGS PER SHARE

Decreased

$3.17 or 43.8%

PRODUCT REVENUE

Decreased

$209.1 million or 10.2%

• MS revenue decreased $217.3 million, or 15.2%

• SMA revenue increased $6.0 million, or 1.4%

• The decrease in MS product revenue was primarily due to a decrease in TECFIDERA demand as a result of multiple TECFIDERA generic entrants in North America, Brazil and certain E.U. countries and a decrease in Interferon demand due to competition as patients transition to higher efficacy therapies.

• The increase in SMA revenue was primarily due to an increase in U.S. SPINRAZA revenue driven by higher sales volumes resulting from patient growth and an increase in pricing.

TOTAL COST AND EXPENSE

Increased

$428.3 million or 32.5%

• Cost of sales increased $108.7 million, or 22.5%

• R&D expense increased $55.6 million, or 10.5%

• Decrease in other income of $307.4 million

• The increase in cost of sales was primarily due to higher cost of sales associated with contract manufacturing revenue driven by increased production.

• The increase in research and development expense was partly due to increased spend on clinical trials and close out costs incurred during the second quarter of 2023 of approximately $20.1 million.

• The unfavorable change in other (income) expense, net was primarily due to a pre-tax gain recorded during the second quarter of 2022 of approximately $1.5 billion related to the sale of our 49.9% equity interest in Samsung Bioepis, partially offset by a pre-tax charge recorded during the second quarter of 2022 of approximately $900.0 million, related to a litigation settlement agreement.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

• We generated $942.3 million of net cash flow from operations for the six months ended June 30, 2023.

• Cash, cash equivalents and marketable securities totaled approximately $7.3 billion as of June 30, 2023.

• There were no share repurchases of our common stock during the second quarter of 2023 under our 2020 Share Repurchase Program. Approximately $2.1 billion remained available under our 2020 Share Repurchase Program as of June 30, 2023.

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RECENT DEVELOPMENTS

DEVELOPMENTS IN KEY COLLABORATIVE RELATIONSHIPS

LEQEMBI (lecanemab)

United States

In July 2023 the FDA granted traditional approval of LEQEMBI, an anti-amyloid antibody for the treatment of Alzheimer's disease, which was previously granted accelerated approval by the FDA in January 2023. Following the FDA's traditional approval of LEQEMBI, CMS confirmed broader coverage of LEQEMBI.

Additionally, in March 2023 Eisai announced that the U.S. Veteran's Health Administration will be providing coverage of LEQEMBI to veterans living with early stages of Alzheimer's disease.

Rest of World

Key developments related to lecanemab in rest of world markets during 2023 consisted of the following:

• In January 2023 the EMA accepted for review the MAA for lecanemab and Eisai completed the submission of a MAA to the PMDA in Japan for lecanemab, which was granted Priority Review by the Japanese Ministry of Health, Labor and Welfare.

• In February 2023 the BLA for lecanemab was granted Priority Review by the NMPA of China.

• In May 2023 we and Eisai announced the submission of a MAA for lecanemab to the UK MHRA in Great Britain, which has been designated by the MHRA for the Innovative Licensing and Access Pathway. Additionally, in May 2023 Health Canada accepted for review the NDS for lecanemab.

• In June 2023 we and Eisai announced the submission of a MAA for lecanemab to the Ministry of Food and Drug Safety in South Korea.

Zuranolone

In February 2023 the FDA accepted the NDA and granted Priority Review for zuranolone.

OTHER KEY DEVELOPMENTS

FIT FOR GROWTH

In July 2023 we announced a new Fit for Growth program which is expected to generate approximately $1.0 billion in gross operating expense savings, of which approximately $300.0 million will be reinvested into product launches and research and development programs, resulting in approximately $700.0 million in net operating expense savings by 2025. The Fit for Growth program is currently estimated to include net headcount reduction of approximately 1,000.

QALSODY (tofersen)

In April 2023 the FDA approved QALSODY for the treatment of ALS in adults who have a mutation in the SOD1 gene. This indication is approved under accelerated approval based on reduction in plasma neurofilament light chain observed in patients treated with QALSODY. Continued approval for this indication may be contingent upon verification of clinical benefit in confirmatory trial(s).

COLUMVI (glofitamab)

In June 2023 the FDA approved COLUMVI for the treatment of adult patients with B-cell non-Hodgkin's lymphoma. This indication is approved under accelerated approval based on response rate and durability of response in the Phase 1/2 study. Continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trial.

TECFIDERA

In March 2023 the CJEU decided in favor of Biogen, the EMA and the EC in their appeal of a European General Court decision that had annulled the EMA's refusal to evaluate a generic version of TECFIDERA because of TECFIDERA's regulatory data and marketing protection. The CJEU set aside the General Court's judgment and dismissed the generic's action. On the basis of this favorable decision and the EC determination in May 2023 that TECFIDERA is entitled to an additional year of market protection for its pediatric indication, we believe that TECFIDERA is entitled to

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regulatory marketing protection in the E.U. until at least February 2, 2025, and are seeking to enforce this protection. As of June 30, 2023, some of the TECFIDERA generics have not yet fully exited some of the E.U. markets and some generic products remain in the channel. We expect removal of generics from the market will take additional time. We are closely monitoring this situation and working to enforce our legal right to market protection. In addition, we will continue to enforce our EP 2 653 873 patent related to TECFIDERA, which expires in 2028.

DENALI COLLABORATION

In June 2023 we and Denali announced plans to terminate the Phase 3 LIGHTHOUSE study for BIIB122, a small molecule inhibitor of LRRK2 in Parkinson's disease. The protocol for the Phase 2b LUMA study for BIIB122 in patients with early-stage Parkinson’s disease will be amended to now include eligible patients with a LRRK2 genetic mutation in addition to continuing to enroll eligible patients with early-stage idiopathic Parkinson’s disease.

BIIB093

In April 2023 we announced that we will be terminating the development of BIIB093 (glibenclamide IV), currently in a Phase 3 study for large hemispheric infarction and a Phase 2 study for brain contusion, due to operational challenges and other strategic considerations. In connection with this termination, we recorded close-out costs of approximately $13.2 million in research and development within our condensed consolidated statements of income for the three and six months ended June 30, 2023.

BIIB131

In April 2023 we announced that we will be pausing the initiation of a Phase 2b study for BIIB131 (TMS-007) for acute ischemic stroke and will continue to assess whether to initiate this study.

BIIB132

In April 2023 we announced that we will be discontinuing further development of BIIB132 in spinocerebellar ataxia type 3, as part of our ongoing research and development prioritization initiative.

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RESULTS OF OPERATIONS

REVENUE

The following revenue discussion should be read in conjunction with Note 4, Revenue, to our condensed consolidated financial statements included in this report.

Revenue is summarized as follows:

						For the Three Months Ended June 30,
(In millions, except percentages)						2023												2022												$ Change						% Change
Product revenue:
United States						$	801.0					32.6		%				$	894.1					34.5		%				$	(93.1)					(10.4)		%
Rest of world						1,044.8						42.5						1,160.8						44.8						(116.0)						(10.0)
Total product revenue						1,845.8						75.1						2,054.9						79.3						(209.1)						(10.2)
Revenue from LEQEMBI Collaboration						(20.7)						(0.8)						—						—						(20.7)						nm
Revenue from anti-CD20 therapeutic programs						433.4						17.7						436.3						16.9						(2.9)						(0.7)
Contract manufacturing, royalty and other revenue						197.5						8.0						97.9						3.8						99.6						101.7
Total revenue						$	2,456.0					100.0		%				$	2,589.1					100.0		%				$	(133.1)					(5.1)		%
						For the Six Months Ended June 30,
(In millions, except percentages)						2023												2022												$ Change						% Change
Product revenue:
United States						$	1,502.4					30.6		%				$	1,769.3					34.6		%				$	(266.9)					(15.1)		%
Rest of world						2,106.7						42.8						2,351.9						45.9						(245.2)						(10.4)
Total product revenue						3,609.1						73.4						4,121.2						80.5						(512.1)						(12.4)
Revenue from LEQEMBI Collaboration						(39.6)						(0.8)						—						—						(39.6)						nm
Revenue from anti-CD20 therapeutic programs						832.9						16.9						835.7						16.3						(2.8)						(0.3)
Contract manufacturing, royalty and other revenue						516.6						10.5						164.0						3.2						352.6						215.0
Total revenue						$	4,919.0					100.0		%				$	5,120.9					100.0		%				$	(201.9)					(3.9)		%

nm Not meaningful

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PRODUCT REVENUE

Product revenue is summarized as follows:

						For the Three Months Ended June 30,
						2023																								2022
(In millions)						United States						Rest of World						Total						% Total						United States						Rest of World						Total						% Total						$ Change						% Change
Multiple Sclerosis						$	636.7					$	572.6					$	1,209.3					65.5		%				$	753.7					$	672.9					$	1,426.6					69.4		%				$	(217.3)					(15.2)		%
Spinal Muscular Atrophy						155.8						281.3						437.1						23.7						139.8						291.3						431.1						21.0						6.0						1.4
Biosimilars						7.0						188.1						195.1						10.6						0.5						193.9						194.4						9.5						0.7						0.4
Other(1)						1.5						2.8						4.3						0.2						0.1						2.7						2.8						0.1						1.5						53.6
Total product revenue						$	801.0					$	1,044.8					$	1,845.8					100.0		%				$	894.1					$	1,160.8					$	2,054.9					100.0		%				$	(209.1)					(10.2)		%
						For the Six Months Ended June 30,
						2023																								2022
(In millions)						United States						Rest of World						Total						% Total						United States						Rest of World						Total						% Total						$ Change						% Change
Multiple Sclerosis						$	1,182.8					$	1,151.7					$	2,334.5					64.7		%				$	1,462.8					$	1,358.3					$	2,821.1					68.5		%				$	(486.6)					(17.2)		%
Spinal Muscular Atrophy						302.5						577.9						880.4						24.4						303.1						600.5						903.6						21.9						(23.2)						(2.6)
Biosimilars						15.2						372.3						387.5						10.7						0.5						388.2						388.7						9.4						(1.2)						(0.3)
Other(1)						1.9						4.8						6.7						0.2						2.9						4.9						7.8						0.2						(1.1)						(14.1)
Total product revenue						$	1,502.4					$	2,106.7					$	3,609.1					100.0		%				$	1,769.3					$	2,351.9					$	4,121.2					100.0		%				$	(512.1)					(12.4)		%

(1) Other includes FUMADERM, ADUHELM and QALSODY, which became commercially available in the U.S. during the second quarter of 2023.

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MULTIPLE SCLEROSIS

• Global TECFIDERA revenue decreased $143.7 million, from $397.9 million in 2022 to $254.2 million in 2023, or 36.1%, driven by a decrease in TECFIDERA demand as a result of multiple TECFIDERA generic entrants in North America, Brazil and certain E.U. countries.

• Global Interferon revenue decreased $47.8 million, from $350.2 million in 2022 to $302.4 million in 2023, or 13.6%, driven by a decrease in sales volumes as patients transition to higher efficacy therapies.

• Global VUMERITY revenue increased $9.4 million, from $136.8 million in 2022 to $146.2 million in 2023, or 6.9%, primarily due to an increase in rest of world VUMERITY driven by higher sales volumes.

• Global TYSABRI revenue decreased $33.1 million, from $516.2 million in 2022 to $483.1 million in 2023, or 6.4%, primarily due to a decrease in U.S. TYSABRI revenue driven by increased competition and higher discounts and allowances.

• Global TECFIDERA revenue decreased $279.1 million, from $807.8 million in 2022 to $528.7 million in 2023, or 34.6%, driven by a decrease in TECFIDERA demand as a result of multiple TECFIDERA generic entrants in North America, Brazil and certain E.U. countries.

• Global Interferon revenue decreased $111.8 million, from $659.8 million in 2022 to $548.0 million in 2023, or 16.9%, driven by a decrease in sales volumes as patients transition to higher efficacy therapies, as well as pricing pressure and the unfavorable impact of channel dynamics in the U.S.

• Global VUMERITY revenue decreased $10.4 million, from $264.8 million in 2022 to $254.4 million in 2023, or 3.9%, primarily due to a decrease in U.S. VUMERITY revenue driven by unfavorable channel dynamics and a favorable Medicaid-related sales adjustment in the first quarter of 2022 related to VUMERITY. The decrease was partially offset by an increase in rest of world VUMERITY revenue driven by higher sales volumes.

• Global TYSABRI revenue decreased $81.1 million, from $1,037.0 million in 2022 to $955.9 million in 2023, or 7.8%, primarily due to a decrease in U.S. TYSABRI revenue driven by higher discounts and allowances, increased competition and unfavorable channel dynamics.

MS revenue includes sales from TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA.

In 2023 we expect total MS revenue will continue to decline as a result of increasing competition for many of our MS products in both the U.S. and rest of world markets. We are also aware of a potential biosimilar entrant of TYSABRI that may enter the U.S. and European markets in 2023, which received a positive CHMP opinion in the E.U. in July 2023.

We believe that we have resolved previously reported manufacturing issues at our VUMERITY contract manufacturer. In addition, we are in the process of securing regulatory approval for a secondary source of supply. We do not anticipate a supply shortage in 2023 and are currently focused on rebuilding adequate inventory.

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SPINAL MUSCULAR ATROPHY

• U.S. SPINRAZA revenue increased $16.0 million, from $139.8 million in 2022 to $155.8 million in 2023, or 11.4%, primarily due to an increase in sales volumes resulting from patient growth and an increase in pricing.

• Rest of world SPINRAZA revenue decreased $10.0 million, from $291.3 million in 2022 to $281.3 million in 2023, or 3.4%, primarily due to unfavorable pricing and the unfavorable impact of foreign currency exchange. The decrease was partially offset by an increase in sales volume growth.

• U.S. SPINRAZA revenue decreased $0.6 million, from $303.1 million in 2022 to $302.5 million in 2023, or 0.2%, primarily due to a decrease in sales volumes resulting from unfavorable channel dynamics, partially offset by an increase in pricing.

• Rest of world SPINRAZA revenue decreased $22.6 million, from $600.5 million in 2022 to $577.9 million in 2023, or 3.8%, primarily due to the unfavorable impact of foreign currency exchange and a decrease in pricing, partially offset by sales volume growth in certain Asian markets.

SMA revenue includes sales from SPINRAZA.

Despite competition from a gene therapy product and an oral product, we anticipate SPINRAZA revenue to be relatively flat in 2023. Moderate growth in the U.S. as well as continued access expansion in emerging markets is expected to offset increased competition and the impact of loading dose dynamics.

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BIOSIMILARS

*•*For the three months ended June 30, 2023, compared to the same period of 2022, the increase in biosimilar revenue was primarily due to an increase in sales volumes related to the continued launch of BYOOVIZ in the U.S. and rest of world, offset by the unfavorable impact of foreign currency exchange and unfavorable pricing.

*•*For the six months ended June 30, 2023, compared to the same period in 2022, the decrease in biosimilar revenue was primarily due to the unfavorable impact of foreign currency exchange and unfavorable pricing, offset by an increase in sales volumes related to the continued launch of BYOOVIZ in the U.S. and rest of world.

Biosimilars revenue includes sales from BENEPALI, IMRALDI, FLIXABI and BYOOVIZ. BYOOVIZ launched in the U.S. in June 2022 and became commercially available in July 2022 through major distributors in the U.S. In 2023 BYOOVIZ became commercially available in Canada and certain countries in Europe.

In 2023 we anticipate modest growth in revenue from our biosimilars business driven by the continued launch of BYOOVIZ in the U.S. and rest of world, offset in part by continued price reductions in certain markets.

We are currently working with our contract manufacturer for IMRALDI to address facility regulatory inspection deficiencies at two filling locations, which could impact supply and have an adverse impact on 2023 IMRALDI sales, if not resolved. Manufacturing of BENEPALI also utilizes one of these facilities and therefore could have an adverse impact on 2023 BENEPALI sales. We are working with our existing secondary supplier for BENEPALI with the aim to secure additional capacity.

In February 2023 we announced that we are exploring strategic options for our biosimilars business.

REVENUE FROM LEQEMBI COLLABORATION

In July 2023 the FDA granted traditional approval of LEQEMBI. Prior to receiving traditional approval, LEQEMBI had been granted accelerated approval by the FDA in January 2023, at which time it became commercially available in the U.S. Upon commercialization of LEQEMBI, we began recognizing our portion of the profit share on a net basis as a separate component of total revenue within revenue from LEQEMBI collaboration in our condensed consolidated income statements, as we are not the principal.

For the three and six months ended June 30, 2023, we recognized reductions to revenue of approximately $20.7 million and $39.6 million, respectively, reflecting our net profit-share of the LEQEMBI Collaboration results in the U.S.

In 2023 we anticipate we will continue to recognize a loss on the profit share, with commercial expense exceeding initial revenue.

For additional information on our collaboration arrangements with Eisai, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

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REVENUE FROM ANTI-CD20 THERAPEUTIC PROGRAMS

For purposes of this discussion, we refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN.

						For the Three Months Ended June 30,												For the Six Months Ended June 30,
(In millions)						2023						2022						2023						2022
Royalty revenue on sales of OCREVUS						$	325.5					$	291.8					$	609.1					$	544.1
Biogen’s share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO(1)						103.6						139.9						216.1						283.1
Other revenue from anti-CD20 therapeutic programs						4.3						4.6						7.7						8.5
Total revenue from anti-CD20 therapeutic programs						$	433.4					$	436.3					$	832.9					$	835.7

(1) LUNSUMIO became commercially available in the U.S. during the first quarter of 2023.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the increases in royalty revenue on sales of OCREVUS were primarily due to sales growth of OCREVUS in the U.S.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the decreases in our share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO were primarily due to decreases in sales volumes of RITUXAN in the U.S. resulting from competition from multiple biosimilar products. In April 2023 the pre-tax profit share for RITUXAN, GAZYVA and LUNSUMIO decreased from 37.5% to 35.0%.

Prior to regulatory approval, we record our share of the expense incurred by the collaboration for the development of anti-CD20 products in research and development expense and pre-commercialization costs within selling, general and administrative expense in our condensed consolidated statements of income. After an anti-CD20 product is approved, we record our share of the development and sales and marketing expense related to that product as a reduction of our share of pre-tax profits in revenue from anti-CD20 therapeutic programs.

For additional information on our collaboration arrangements with Genentech, including information regarding the pre-tax profit-sharing formula and its impact on future revenue from anti-CD20 therapeutic programs, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

CONTRACT MANUFACTURING, ROYALTY AND OTHER REVENUE

Contract manufacturing, royalty and other revenue and is summarized as follows:

						For the Three Months Ended June 30,												For the Six Months Ended June 30,
(In millions)						2023						2022						2023						2022
Contract manufacturing revenue						$	183.1					$	81.2					$	490.0					$	128.7
Royalty and other revenue						14.4						16.7						26.6						35.3
Total contract manufacturing, royalty and other revenue						$	197.5					$	97.9					$	516.6					$	164.0

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the increases in contract manufacturing revenue were primarily driven by higher volumes due to the timing of batch production, which includes batches related to LEQEMBI that we began recognizing in the first quarter of 2023 upon the accelerated approval of LEQEMBI in the U.S.

For additional information on our collaboration arrangements with Eisai, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

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RESERVES FOR DISCOUNTS AND ALLOWANCES

Revenue from product sales is 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.

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

						For the Three Months Ended June 30,												For the Six Months Ended June 30,
(In millions)						2023						2022						2023						2022
Contractual adjustments						$	675.2					$	668.1					$	1,305.1					$	1,287.4
Discounts						201.4						171.4						382.6						336.6
Returns						9.5						0.3						14.0						1.8
Total discounts and allowances						$	886.1					$	839.8					$	1,701.7					$	1,625.8

For the three and six months ended June 30, 2023, reserves for discounts and allowances as a percentage of gross product revenue were 32.1% and 31.8%, respectively, compared to 29.2% and 28.1%, respectively, in the prior year comparative periods.

CONTRACTUAL ADJUSTMENTS

Contractual adjustments primarily relate to Medicaid and managed care rebates in the U.S., pharmacy rebates, co-payment (copay) assistance, Veterans Administration, 340B discounts, specialty pharmacy program fees and other government rebates or applicable allowances.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the increases in contractual adjustments were primarily due to higher government rebates in rest of world as well as higher medicaid and managed care rebates in the U.S., partially offset by lower government rebates in the U.S. as a result of a contract pharmacy change made during the first quarter of 2023 related to our Interferons.

DISCOUNTS

Discounts include trade term discounts and wholesaler incentives.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the increases in discounts were primarily driven by higher purchase and volume discounts, partially offset by decreases in gross sales of TECFIDERA.

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 recognized in the period the related revenue is recognized, resulting in a reduction to product sales.

For additional information on our revenue reserves, please read Note 4, Revenue, to our condensed consolidated financial statements included in this report.

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COST AND EXPENSE

A summary of total cost and expense is as follows:

						For the Three Months Ended June 30,
(In millions, except percentages)						2023						2022						$ Change						% Change
Cost of sales, excluding amortization and impairment of acquired intangible assets						$	592.7					$	484.0					$	108.7					22.5		%
Research and development						584.2						528.6						55.6						10.5
Selling, general and administrative						548.0						572.6						(24.6)						(4.3)
Amortization and impairment of acquired intangible assets						52.9						67.5						(14.6)						(21.6)
Collaboration profit sharing/(loss reimbursement)						56.9						29.4						27.5						93.5
(Gain) loss on fair value remeasurement of contingent consideration						—						(4.5)						4.5						nm
Restructuring charges						34.4						70.6						(36.2)						(51.3)
Other (income) expense, net						(121.2)						(428.6)						307.4						(71.7)
Total cost and expense						$	1,747.9					$	1,319.6					$	428.3					32.5		%
						For the Six Months Ended June 30,
(In millions, except percentages)						2023						2022						$ Change						% Change
Cost of sales, excluding amortization and impairment of acquired intangible assets						$	1,255.5					$	1,237.9					$	17.6					1.4		%
Research and development						1,154.8						1,080.3						74.5						6.9
Selling, general and administrative						1,153.0						1,207.5						(54.5)						(4.5)
Amortization and impairment of acquired intangible assets						103.1						134.4						(31.3)						(23.3)
Collaboration profit sharing/(loss reimbursement)						114.0						(87.9)						201.9						(229.7)
(Gain) loss on fair value remeasurement of contingent consideration						—						(11.6)						11.6						nm
Restructuring charges						44.0						108.7						(64.7)						(59.5)
Other (income) expense, net						(51.8)						(165.3)						113.5						(68.7)
Total cost and expense						$	3,772.6					$	3,504.0					$	268.6					7.7		%

nm Not meaningful

COST OF SALES, EXCLUDING AMORTIZATION AND IMPAIRMENT OF ACQUIRED INTANGIBLE ASSETS

						For the Three Months Ended June 30,												For the Six Months Ended June 30,
(In millions)						2023						2022						2023						2022
Product						$	403.0					$	290.6					$	884.4					$	841.9
Royalty						189.7						193.4						371.1						396.0
Total cost of sales						$	592.7					$	484.0					$	1,255.5					$	1,237.9

For the three months ended June 30, 2023, compared to the same period in 2022, product cost of sales increased primarily due to higher cost of sales associated with contract manufacturing revenue driven by increased production and product mix.

For the six months ended June 30, 2023, compared to the same period in 2022, product cost of sales increased primarily due to higher cost of sales associated with contract manufacturing revenue, in part related to Eisai for LEQEMBI, which we began recognizing in the first quarter of 2023 upon the accelerated approval of LEQEMBI in the U.S. as well as increased production. Cost of sales as a percentage of revenue was adversely affected by LEQEMBI batches due to minimal margins. The increase was partially offset by a write-off of approximately $275.0 million during the first quarter of 2022 of excess inventory and purchase commitments related to ADUHELM.

Additionally, for the three and six months ended June 30, 2023, we recorded approximately $33.5 million and $78.3 million, respectively, of aggregate gross idle capacity charges, compared to approximately $27.0 million and $72.0 million, respectively, in the prior year comparative periods.

For additional information on our collaboration arrangements with Eisai, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

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RESEARCH AND DEVELOPMENT

Research and development expense, as a percentage of total revenue, was 23.8% and 20.4% for the three months ended June 30, 2023 and 2022, respectively. For the three months ended June 30, 2023, compared to the same period in 2022, the increase in research and development was primarily due to the increase in spending in the development of LEQEMBI for the treatment of Alzheimer's disease, litifilimab for the treatment of CLE and SLE, and BIIB800, a proposed tocilizumab biosimilar referencing ACTEMRA, as well as close out costs incurred during the second quarter of 2023 of approximately $20.1 million. These increases were partially offset by lower milestone payments during the second quarter of 2023.

EARLY STAGE PROGRAMS

Q2 2023 vs. Q2 2022

The increase in early stage programs was driven by an increase in costs associated with:

• development of litifilimab for the treatment of CLE; and

• development of BIIB121 for the treatment of Angelman syndrome.

LATE STAGE PROGRAMS

Q2 2023 vs. Q2 2022

The decrease in late stage programs was driven by a decrease in costs associated with:

• advancement of LEQEMBI from late stage to marketed upon the accelerated approval of LEQEMBI in the U.S.; and

• advancement of LUNSUMIO from late stage to marketed upon the accelerated approval of LUNSUMIO in the U.S.

The decrease was partially offset by an increase in costs associated with:

• development of litifilimab for the treatment of SLE;

• development of BIIB800, a proposed tocilizumab biosimilar referencing ACTEMRA; and

• discontinuation of BIIB093 for large hemispheric infarction.

MARKETED PROGRAMS

Q2 2023 vs. Q2 2022

The increase in marketed programs was driven by an increase in costs associated with:

• advancement of LEQEMBI from late stage to marketed upon the accelerated approval of LEQEMBI in the U.S.; and

• increased spend in ADUHELM primarily due to change in our cost sharing arrangement with Eisai.

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Research and development expense, as a percentage of total revenue, was 23.5% and 21.1% for the six months ended June 30, 2023 and 2022, respectively. For the six months ended June 30, 2023, compared to the same period in 2022, the increase in research and development was primarily due to the increase in spending in the development of LEQEMBI for the treatment of Alzheimer's disease, litifilimab for the treatment of CLE and SLE, and BIIB800, a proposed tocilizumab biosimilar referencing ACTEMRA, partially offset by lower milestone payments during 2023.

EARLY STAGE PROGRAMS

YTD 2023 vs. YTD 2022

The increase in early stage programs was driven by an increase in costs associated with:

• development of litifilimab for the treatment of CLE;

• development of BIIB121 for the treatment of Angelman syndrome;

• development of BIIB115 for the treatment of SMA; and

• development of BIIB091 for the treatment of MS.

The increase was partially offset by a decrease in costs associated with:

• discontinuation of BIIB104 for the treatment of cognitive impairment associated with schizophrenia; and

• discontinuation of BIIB078 for the treatment of Alzheimer's disease.

LATE STAGE PROGRAMS

YTD 2023 vs. YTD 2022

The decrease in late stage programs was driven by a decrease in costs associated with:

• advancement of LEQEMBI from late stage to marketed upon the accelerated approval of LEQEMBI in the U.S.; and

• advancement of LUNSUMIO from late stage to marketed upon the accelerated approval of LUNSUMIO in the U.S.

The decrease was partially offset by an increase in costs associated with:

• development of litifilimab for the treatment of SLE into late stage; and

• development of BIIB800, a proposed tocilizumab biosimilar referencing ACTEMRA.

MARKETED PROGRAMS

YTD 2023 vs. YTD 2022

The increase in marketed programs was driven by an increase in costs associated with:

• advancement of LEQEMBI from late stage to marketed upon the accelerated approval of LEQEMBI in the U.S.; and

• increased spend in ADUHELM primarily due to change in our cost sharing arrangement with Eisai.

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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.

• 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.

• Development stage:** based upon the program status when incurred. Therefore, the same program could be reflected in different development stages in the same year.

• Other research and development costs:** 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.

Excluding upfront payments, we expect our core research and development expense to modestly increase in 2023, as we continue to invest in our pipeline. 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.

SELLING, GENERAL AND ADMINISTRATIVE

For the three and six months ended June 30, 2023, compared to the same periods in 2022, selling, general and administrative expense decreased by approximately 4.3% and 4.5%, respectively, primarily due to cost-reduction measures realized during 2023, partially offset by investments to support new product launches and accelerated depreciation recognized during the second quarter of 2023 of approximately $11.5 million.

For the six months ended June 30, 2023, selling, general and administrative expense also includes a $31.0 million obligation to Eisai related to the termination of the co-promotion agreement for our MS products in Japan.

We expect selling, general and administrative costs to continue to decline in 2023 due to the implementation of our cost saving initiatives.

For additional information on our collaboration arrangements with Eisai, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

AMORTIZATION AND IMPAIRMENT OF ACQUIRED INTANGIBLE ASSETS

Our amortization expense is based on the economic consumption and impairment of intangible assets. Our most significant amortizable intangible assets are related to our TYSABRI, AVONEX, SPINRAZA and VUMERITY products and other programs acquired through business combinations.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the decreases in amortization and impairment of acquired intangible assets were primarily due to lower rates of amortization for acquired intangible assets. For the three and six months ended June 30, 2023 and 2022, we had no impairment charges.

For additional information on the amortization and impairment of our acquired intangible assets, please read Note 6, Intangible Assets and Goodwill, to our condensed consolidated financial statements included in this report.

COLLABORATION PROFIT SHARING/(LOSS REIMBURSEMENT)

Collaboration profit sharing/(loss reimbursement) primarily includes Samsung Bioepis' 50.0% share of the profit or loss related to our biosimilars 2013 commercial agreement with Samsung Bioepis and Eisai's 45.0% share of income and expense in the U.S. related to the ADUHELM Collaboration Agreement. Beginning January 1, 2023, Eisai receives only a tiered royalty based on net sales of ADUHELM, and will no longer share global profits and losses.

For the three and six months ended June 30, 2023, we recognized net profit-sharing expense of $56.9 million and $114.0 million, respectively, to reflect Samsung Bioepis' 50.0% sharing of the net collaboration profits, compared to a net profit-sharing expense of $58.3 million and $122.7 million, respectively, in the prior year comparative periods.

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For the three and six months ended June 30, 2022, we recognized net reductions to our operating expense of approximately $28.9 million and $210.6 million, respectively, to reflect Eisai's 45.0% share of net collaboration losses in the U.S.

For additional information on our collaboration and license arrangements with Eisai and Samsung Bioepis, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

RESTRUCTURING CHARGES

2023 COST SAVING INITIATIVES

In 2023 we initiated additional cost saving measures as part of our Fit for Growth initiative to reduce operating costs, while improving efficiency and effectiveness.

Total charges incurred from our 2023 cost saving initiatives are summarized as follows:

						For the Three Months Ended June 30, 2023																		For the Six Months Ended June 30, 2023
(In millions)						Severance Costs						Accelerated Depreciation and Other Costs												Total						Severance Costs						Accumulated Depreciation and Other Costs												Total
Selling, general and administrative						$	—					$	11.5											$	11.5					$	—					$	11.5											$	11.5
Research and development						—						0.5												0.5						—						0.5												0.5
Restructuring charges						17.8						16.5												34.3						24.9						16.5												41.4
Total charges						$	17.8					$	28.5											$	46.3					$	24.9					$	28.5											$	53.4

Other Costs: includes costs associated with items such as asset abandonment and write-offs, facility closure costs, pretax gains and losses resulting from the termination of certain leases, employee non-severance expense, consulting fees and other costs.

2022 COST SAVING INITIATIVES

In December 2021 and May 2022 we announced our plans to implement a series of cost-reduction measures during 2022. These savings are being achieved through a number of initiatives, including reductions to our workforce, the substantial elimination of our commercial ADUHELM infrastructure, deprioritization of certain research and development programs, the consolidation of certain real estate locations and operating efficiencies across our selling, general and administrative and research and development functions. Charges related to our 2022 cost saving initiatives were substantially incurred during 2022 with remaining payments expected to be made through 2026.

Total charges incurred from our 2022 cost saving initiatives are summarized as follows:

						For the Three Months Ended June 30,
						2023																		2022
(In millions)						Severance Costs						Accelerated Depreciation and Other Costs						Total						Severance Costs						Accumulated Depreciation and Other Costs						Total
Restructuring charges						$	—					$	0.1					$	0.1					$	60.9					$	9.7					$	70.6
Total charges						$	—					$	0.1					$	0.1					$	60.9					$	9.7					$	70.6
						For the Six Months Ended June 30,
						2023																		2022
(In millions)						Severance Costs						Accelerated Depreciation and Other Costs						Total						Severance Costs						Accumulated Depreciation and Other Costs						Total
Restructuring charges						$	—					$	2.6					$	2.6					$	88.6					$	20.1					$	108.7
Total charges						$	—					$	2.6					$	2.6					$	88.6					$	20.1					$	108.7

For additional information on our cost saving initiatives, please read Note 3, Restructuring, to our condensed consolidated financial statements included in this report.

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OTHER (INCOME) EXPENSE, NET

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the changes in other (income) expense, net primarily reflect a pre-tax gain recorded during the second quarter of 2022 of approximately $1.5 billion related to the sale of our 49.9% equity interest in Samsung Bioepis, partially offset by a pre-tax charge recorded during the second quarter of 2022 of approximately $900.0 million, plus settlement fees and expenses, related to a litigation settlement agreement to resolve a qui tam litigation relating to conduct prior to 2015.

For the three months ended June 30, 2023, net unrealized gains and realized gains on our holdings in equity securities were approximately $105.8 million and $0.7 million, respectively, compared to net unrealized losses and realized losses of approximately $76.5 million and $0.7 million, respectively, in the prior year comparative period.

• The net unrealized gains recognized during the three months ended June 30, 2023, primarily reflect an increase in the aggregate fair value of our investments in Denali and Sage common stock of approximately $117.7 million, partially offset by a decrease in the fair value of Sangamo common stock of approximately $10.9 million.

• The net unrealized losses recognized during the three months ended June 30, 2022, primarily reflect a decrease in the aggregate fair value of our investments in Sangamo, Denali and Ionis common stock of approximately $75.3 million, partially offset by an increase in the fair value of Sage common stock of approximately $3.4 million.

For the six months ended June 30, 2023, net unrealized gains and realized losses on our holdings in equity securities were approximately $29.3 million and $0.9 million, respectively, compared to net unrealized losses and realized losses of $267.4 million and $0.5 million, respectively, in the prior year comparative period.

• The net unrealized gains recognized during the six months ended June 30, 2023, primarily reflect an increase in the aggregate fair value of our investments in Denali and Sage common stock of approximately $78.0 million, partially offset by a decrease in the fair value of Sangamo and Ionis common stock of approximately $47.4 million.

• The net unrealized losses recognized during the six months ended June 30, 2022, primarily reflect a decrease in the aggregate fair value of our investments in Denali, Sangamo and Sage common stock of approximately $277.1 million, partially offset by an increase in the fair value of Ionis common stock of approximately $19.0 million.

For additional information on the sale of our equity interest in Samsung Bioepis, please read Note 2, Dispositions, to our condensed consolidated financial statements included in this report.

INCOME TAX PROVISION

						For the Three Months Ended June 30,												For the Six Months Ended June 30,
(In millions, except percentages)						2023						2022						2023						2022
Income before income tax (benefit) expense						$	708.1					$	1,269.5					$	1,146.4					$	1,616.9
Income tax (benefit) expense						114.8						216.7						165.5						342.3
Effective tax rate						16.2		%				17.1		%				14.4		%				21.2		%

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 expense, the levels of certain deductions and credits, acquisitions and licensing transactions.

For the three and six months ended June 30, 2023, compared to the same periods in 2022, the decreases in our effective tax rates were primarily due to the combined net unfavorable tax rate impacts during the second quarter of 2022 related to a litigation settlement agreement, the sale of our equity interest in Samsung Bioepis, the non-cash tax effects of changes in the value of our equity investments and an international reorganization to align with global tax developments.

The decrease in our effective tax rate for the six months ended June 30, 2023, also reflects the resolution of an uncertain tax matter during the first quarter of 2023 related to tax credits as well as the impact of the Neurimmune valuation allowance recorded in the first quarter of 2022.

For additional information on our income taxes, please read Note 14, Income Taxes, to our condensed consolidated financial statements included in this report.

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NONCONTROLLING INTERESTS, NET OF TAX

Our condensed consolidated financial statements include the financial results of our variable interest entity, Neurimmune, as we determined that we are the primary beneficiary.

For the six months ended June 30, 2023, compared to the same period in 2022, the change in net income (loss) attributable to noncontrolling interests, net of tax, was primarily due to an increase in a valuation allowance of approximately $85.0 million recorded in the first quarter of 2022.

For additional information on the valuation allowance and our collaboration agreement with Neurimmune, please read Note 17, Investments in Variable Interest Entities, to our condensed consolidated financial statements included in this report.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our financial condition is summarized as follows:

(In millions, except percentages)						As of June 30, 2023						As of December 31, 2022						$ Change						% Change
Financial assets:
Cash and cash equivalents						$	2,617.8					$	3,419.3					$	(801.5)					(23.4)		%
Marketable securities — current						3,460.5						1,473.5						1,987.0						134.8
Marketable securities — non-current						1,208.0						705.7						502.3						71.2
Total cash, cash equivalents and marketable securities						$	7,286.3					$	5,598.5					$	1,687.8					30.1		%
Borrowings:
Notes payable						$	6,284.6					$	6,281.0					$	3.6					0.1		%
Total borrowings						$	6,284.6					$	6,281.0					$	3.6					0.1		%
Working capital:
Current assets						$	10,431.7					$	9,791.2					$	640.5					6.5		%
Current liabilities						(3,186.5)						(3,272.8)						86.3						(2.6)
Total working capital						$	7,245.2					$	6,518.4					$	726.8					11.1		%

OVERVIEW

We have historically financed and expect to continue to fund our operating and capital expenditures primarily through cash flow earned through our operations, as well as our existing cash resources. We believe generic competition for TECFIDERA in the U.S. and other key markets, continued decline in the Interferon product class and investments in the development and launch of potential new products will continue to reduce our cash flow from operations in 2023 and will have a significant adverse impact on our future cash flow from operations.

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 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.

For additional information on certain risks that could negatively impact our financial position or future results of operations, please read Item 1A. Risk Factors and Item 3. Quantitative and Qualitative Disclosures About Market Risk included in this report.

LIQUIDITY

WORKING CAPITAL

Working capital is defined as current assets less current liabilities. Our working capital was $7.2 billion and $6.5 billion as of June 30, 2023 and December 31, 2022, respectively. The change in working capital reflects an increase in total current assets of approximately $640.5 million and a decrease in total current liabilities of approximately $86.3 million. The changes in current assets and current liabilities were primarily driven by the following:

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CURRENT ASSETS

• $1,185.5 million increase in cash, cash equivalents and current marketable securities; and

• $521.7 million decrease in other current assets primarily due to the receipt of $812.5 million from Samsung BioLogics related to the sale of Samsung Bioepis.

CURRENT LIABILITIES

• $46.1 million decrease in accounts payable primarily due to timing of payments; and

• $40.3 million decrease in accrued expense and other primarily reflecting the timing of payment for our annual incentive compensation.

For additional information on the sale of our equity interest in Samsung Bioepis, please read Note 2, Dispositions, to our condensed consolidated financial statements included in this report.

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

As of June 30, 2023, we had cash, cash equivalents and marketable securities totaling approximately $7.3 billion compared to approximately $5.6 billion as of December 31, 2022. 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, overnight reverse repurchase agreements 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. We have experienced no significant limitations in our liquidity resulting from uncertainties in the banking sector.

The following table summarizes the fair value of our significant common stock investments in our strategic investment portfolio:

(In millions)						June 30, 2023						December 31, 2022
Denali						$	392.8					$	370.2
Sage						293.5						238.0
Sangamo						30.7						74.3
Ionis(1)						—						108.6
Total						$	717.0					$	791.1

(1) During the second quarter of 2023 we sold our remaining shares of Ionis common stock.

Although the contractual holding period restrictions on our investments in Denali, Sage and Sangamo have expired, our ability to liquidate these investments may be limited by the size of our interest, the volume of market related activity, our concentrated level of ownership and other potential restrictions resulting from our status as a collaborator. Therefore, we may realize significantly less than the current value of such investments.

For additional information on our collaboration arrangements, please read Note 16, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report*.*

CASH FLOW

The following table summarizes our cash flow activity:

						For the Six Months Ended June 30,
(In millions, except percentages)						2023						2022						% Change
Net cash flow provided by (used in) operating activities						$	942.3					$	898.3					4.9		%
Net cash flow provided by (used in) investing activities						(1,706.5)						45.5						nm
Net cash flow provided by (used in) financing activities						(53.2)						(488.0)						(89.1)

nm Not meaningful

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OPERATING ACTIVITIES

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

• non-cash operating items such as depreciation and amortization, impairment charges, unrealized (gain) loss on strategic investments 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

• (gains) losses on the disposal of assets, deferred income taxes, changes in the fair value of contingent payments associated with our acquisitions of businesses and acquired IPR&D.

For the six months ended June 30, 2023, compared to the same period in 2022, the increase in net cash flow provided by operating activities was primarily due to the timing of customer payments of accounts receivable and inventory levels, partially offset by the change in our accounts payable and accrued expense balances in the second quarter of 2023.

INVESTING ACTIVITIES

For the six months ended June 30, 2023, compared to the same period in 2022, the decrease in net cash flow provided by investing activities was primarily due to higher net purchases of marketable securities in the current period, driven by the investment of our increased cash flow from operations. The current year effect of the increased purchases of marketable securities was partially offset by the receipt of $812.5 million from Samsung BioLogics during the second quarter of 2023 related to the sale of Samsung Bioepis, of which $788.1 million is reflected within investing activities.

FINANCING ACTIVITIES

For the six months ended June 30, 2023, compared to the same period in 2022, the decrease in net cash flow used in financing activities was primarily due to no share repurchases in 2023, partially offset by an increase in payments for payroll tax withholdings related to our equity awards.

CAPITAL RESOURCES

DEBT AND CREDIT FACILITIES

Our long-term obligations primarily consist of long-term debt with final maturity dates ranging between 2025 and 2051. As of June 30, 2023, our outstanding balance related to long-term debt was $6,284.6 million.

We maintain 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 June 30, 2023 and December 31, 2022, we had no outstanding borrowings and were in compliance with all covenants under this facility.

For a summary of the fair and carrying values of our outstanding borrowings as of June 30, 2023 and December 31, 2022, please read Note 7, Fair Value Measurements, to our condensed consolidated financial statements included in this report.

For additional information on our Senior Notes and credit facility please read, Note 13, Indebtedness, to our consolidated financial statements included in our 2022 Form 10-K.

SHARE REPURCHASE PROGRAMS

In October 2020 our Board of Directors authorized our 2020 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock. Our 2020 Share Repurchase Program does not have an expiration date. All share repurchases under our 2020 Share Repurchase Program will be retired. Under our 2020 Share Repurchase Program, we repurchased and retired approximately 2.4 million shares of our common stock at a cost of approximately $500.0 million during the three and six months ended June 30, 2022. There were no share

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repurchases of our common stock during the three and six months ended June 30, 2023. Approximately $2.1 billion remained available under our 2020 Share Repurchase Program as of June 30, 2023.

CAPITAL EXPENDITURES

In the fourth quarter of 2021 we began construction of a new gene therapy manufacturing facility in RTP, North Carolina to support our gene therapy pipeline across multiple therapeutic areas. The new manufacturing facility will be approximately 197,000 square feet with an estimated total investment of approximately $195.0 million. As we continue to advance our research and development prioritization efforts, which includes refocusing our investment in gene therapy, we are evaluating several alternative uses for this facility.

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

CONTRACTUAL OBLIGATIONS

Our contractual obligations primarily consist of our obligations under non-cancellable operating leases, long-term debt obligations and defined benefit and other purchase obligations, excluding amounts related to uncertain tax positions, funding commitments, contingent development, regulatory and commercial milestone payments and contingent payments, as described below.

In addition, certain of our collaboration and licensing arrangements include royalty payment obligations. For additional information on our royalty payments please read, Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in our 2022 Form 10-K.

There have been no material changes in our contractual obligations since December 31, 2022.

CONTINGENT DEVELOPMENT, REGULATORY AND COMMERCIAL MILESTONE PAYMENTS

Based on our development plans as of June 30, 2023, we could trigger potential future milestone payments to third parties of up to approximately $7.2 billion, including approximately $1.4 billion in development milestones, approximately $0.5 billion in regulatory milestones and approximately $5.3 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 June 30, 2023, 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 or commercial milestones.

If certain clinical and commercial milestones are met, we may pay up to approximately $242.2 million in milestones in 2023 under our current agreements. This includes milestones totaling $225.0 million due to Sage upon the first commercial sale of zuranolone, for the potential treatment of MDD and PPD, in the U.S.

OTHER FUNDING COMMITMENTS

As of June 30, 2023, we have several ongoing 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 recorded accrued expense of approximately $25.6 million in our condensed consolidated balance sheets for expenditures incurred by CROs as of June 30, 2023. We have approximately $839.8 million in cancellable future commitments based on existing CRO contracts as of June 30, 2023.

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 June 30, 2023, we have approximately $152.7 million of liabilities associated with uncertain tax positions.

As of June 30, 2023 and December 31, 2022, we have accrued income tax liabilities of approximately $419.3 million and $558.0 million, respectively, under the Transition Toll Tax. Of the amounts accrued as of June 30, 2023, approximately $185.2 million is expected to be paid within one year. The Transition Toll Tax is being paid in installments over an eight-year period, which started in 2018, and will not accrue interest.

NEW ACCOUNTING STANDARDS

For a discussion of new accounting standards please read Note 1, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this report.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenue and expense and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and assumptions. 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 revenue and expense. Actual results may differ from these estimates.

For a discussion of our critical accounting estimates, please read Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K. There have been no material changes to our critical accounting estimates since our 2022 Form 10-K.