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

120K characters. Original on sec.gov · Markdown

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 8 of this quarterly report on Form 10-Q and our audited consolidated financial statements and the accompanying notes included in our 2023 Form 10-K.

The results of operations of Reata and HI-Bio, along with the estimated fair values of the assets acquired and liabilities assumed in the acquisitions, have been included in our condensed consolidated financial statements since the closing of the Reata and HI-Bio acquisitions on September 26, 2023 and July 2, 2024, respectively.

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, co-developed treatments to address a defining pathology of Alzheimer’s disease and launched the first approved treatment to target a genetic cause of ALS. Through our 2023 acquisition of Reata we market the first and only drug approved in the U.S. and the E.U. for the treatment of Friedreich's Ataxia in adults and adolescents aged 16 years and older. We are focused on advancing our pipeline in neurology, specialized immunology and rare diseases. We support our drug discovery and development efforts through internal research and development programs, external collaborations and acquisitions.

Our marketed products include TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA for the treatment of MS; SPINRAZA for the treatment of SMA; SKYCLARYS for the treatment of Friedreich's Ataxia; QALSODY for the treatment of ALS; and FUMADERM for the treatment of severe plaque psoriasis.

We also have collaborations with Eisai on the commercialization of LEQEMBI for the treatment of Alzheimer's disease and Sage on the commercialization of ZURZUVAE for the treatment of PPD. 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; COLUMVI, a bispecific antibody for the treatment of non-Hodgkin's lymphoma; 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.

On July 2, 2024, we completed the acquisition of HI-Bio. As a result of this transaction we acquired HI-Bio's lead asset, felzartamab, an anti-CD38 antibody currently being evaluated for three leading indications, AMR, PMN and IgAN. For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report.

We commercialize a portfolio of biosimilars of advanced biologics including BENEPALI, an etanercept biosimilar referencing ENBREL; IMRALDI, an adalimumab biosimilar referencing HUMIRA; FLIXABI, an infliximab biosimilar referencing REMICADE; and BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, in certain international markets, as well as TOFIDENCE, a tocilizumab biosimilar referencing ACTEMRA, in the U.S. and certain international markets. We also have commercialization rights related to OPUVIZ, an aflibercept biosimilar referencing EYLEA.

For additional information on our collaboration arrangements, please read Note 19, 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 expanded our large molecule production capacity and built a large-scale biologics manufacturing facility in Solothurn, Switzerland. In the second quarter of 2021 a portion of this facility (the first manufacturing suite) received a GMP multi-product license from SWISSMEDIC and was placed into service. The second manufacturing suite, which was also licensed to operate by SWISSMEDIC, became operational in the first quarter of 2024. Solothurn has been approved for the manufacture of LEQEMBI. We believe that the Solothurn facility will support our anticipated near to mid-term needs for the manufacturing of biologic assets. 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

Table of Contents

additional excess capacity charges which would have a negative effect on our financial condition and results of operations.

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 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 2023 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 European 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.

Following a favorable decision of the CJEU affirming TECFIDERA's right to regulatory data and marketing protection, the EC determined that TECFIDERA is entitled to an additional year of market protection, which extends through February 2, 2025. Our entitlement to this additional year of market protection is being challenged. As of September 30, 2024, some of the TECFIDERA generics have not yet fully exited some European markets. We are closely monitoring this situation and seeking to enforce our legal right to market protection. In addition, are continuing to defend and seek to enforce our EP 2 653 873 patent related to TECFIDERA, which expires in 2028.

For additional information, please read Note 21, Litigation, to our condensed consolidated financial statements included in this report.

Table of Contents

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 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.

CURRENT ECONOMIC CONDITIONS

Economic conditions remain vulnerable as markets continue to be impacted in part by elevated inflation, higher interest rates, extreme weather events, global supply chain uncertainties and risks associated with geopolitical conflicts.

ADVERSE WEATHER EVENTS

Adverse weather conditions, including hurricane, earthquake and natural disaster damage, may affect our ability to do business.

We currently have operations in RTP, North Carolina, which were not impacted by recent hurricanes.

GLOBAL SUPPLY CHAIN DISRUPTIONS

Global supply chain disruptions, such as strikes, work stoppages, port congestion, port closures and other logistical problems, may affect our ability to do business. For example, recent major port strikes on the East and Gulf Coasts of the U.S. resulted in delayed cargo movement for several days, with the potential for future port strikes as further contract negotiations are expected in January 2025.

As our primary shipping method for resources and finished goods is through air freight, the recent port strikes did not impact our business, however, we will continue to assess any future port disruptions and if necessary, secure alternative transportation.

GEOPOLITICAL TENSIONS

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 China and Taiwan and 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, with additional restrictive measures being proposed.

We, and the pharmaceutical industry, utilize China-based partners for certain raw materials, ingredients and components for our pharmaceutical products and their delivery devices. Engaging alternative suppliers may involve seeking additional regulatory approvals and be costly in terms of time and resources needed. For example, certain early processes related to our acquired SKYCLARYS product rely on a single supplier based in China. We are continuing to evaluate SKYCLARYS' supply chain and prioritizing actions to mitigate risks associated with its manufacturing and our ability to supply patients.

The ongoing geopolitical tensions related to Russia's invasion of Ukraine and the military conflict in the Middle East have resulted in global business disruptions and economic volatility.

For example, sanctions and other restrictions have been 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 between Russia and Ukraine, its impact on regional and global economic conditions and whether the conflict spreads or has effects on countries outside Ukraine and Russia.

We will continue to monitor the ongoing conflict between Russia and Ukraine as well as the military conflict in the Middle East 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. Revenue generated from sales in Russia and Ukraine represent less than 2.0% of total revenue for the three and nine months ended September 30, 2024 and 2023. Additionally, revenue generated from sales in the broader Middle East region represents less than 2.0% of total revenue for the three and nine months ended September 30, 2024 and 2023.

Table of Contents

CLIMATE-RELATED DISCLOSURES

In March 2024 the SEC adopted final rules designed to enhance disclosures related to the impacts of climate-related matters. The final rules require disclosures of material climate-related risks, activities to mitigate or adapt to such risks, information about our board of directors' oversight of climate-related risks and management’s role in managing material climate-related risks and information on any climate-related targets or goals that are material to our business, results of operations or financial condition. In addition, the E.U. and California have enacted similar legislation and regulations. The E.U.'s Corporate Sustainability Reporting Directive will require expansive disclosures on various ESG matters for companies whose business and assets exceed certain thresholds within E.U. countries. California's new environmental disclosure laws will impose additional climate-related reporting requirements on large companies conducting business in the state of California.

In April 2024 the SEC voluntarily stayed implementation of the new climate-related disclosure requirements pending judicial review. Once the litigation is resolved, and if the rule remains in effect, the SEC will announce a new effective date. We are currently evaluating the potential impact that these new rules and laws will have on our business.

Table of Contents

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 September 30, 2024, compared to the three months ended September 30, 2023, reflects the following:

TOTAL REVENUE

6

Decreased

$64.5 million or 2.5%

DILUTED EARNINGS (LOSS) PER SHARE

22

Increased

$3.13 or 666.0%

PRODUCT REVENUE, NET

6

Decreased

$35.8 million or 2.0%

  • MS revenue decreased $105.1 million, or 9.1%

  • Rare disease revenue increased $44.9 million, or 10.0%

  • The decrease in MS product revenue was primarily due to a decrease in Interferon demand due to competition as patients transition to higher efficacy therapies and a decrease in global TYSABRI revenue driven by increased competition, unfavorable channel dynamics in the U.S. and a decrease in pricing in certain international markets.

  • The increase in rare disease product revenue was primarily due to global SKYCLARYS revenue of $102.3 million in the third quarter of 2024, partially offset by a decrease in rest of world SPINRAZA revenue driven by the loss of an annual tender in Russia which resulted in an unfavorable impact of approximately $45.0 million. The decrease was also impacted by the timing of SPINRAZA shipments and the unfavorable impact of foreign currency exchange.

  • U.S. product revenue for ZURZUVAE was $22.0 million during the third quarter of 2024.

TOTAL COST AND EXPENSE

6

Decreased

$656.7 million or 24.6%

  • Cost of sales decreased $20.9 million, or 3.2%

  • R&D expense decreased $193.6 million, or 26.3%

  • SG&A expense decreased $199.8 million, or 25.3%

  • Amortization and impairment of acquired intangible assets increased $69.4 million, or 114.0%

  • The decrease in cost of sales was primarily due to favorable product mix from decreased contract manufacturing revenue and lower idle capacity charges.

  • The decrease in R&D expense was primarily driven by approximately $197.0 million of equity-based compensation expense recognized in 2023 related to the Reata acquisition, cost-reduction measures realized in 2024 in connection with our portfolio prioritization initiatives and our Fit for Growth program, as well as higher spend on clinical trials and close out costs incurred during 2023, partially offset by approximately $42.5 million of equity-based compensation expense recognized in 2024 related to the HI-Bio acquisition.

  • The decrease in SG&A expense was primarily due to cost-reduction measures realized in 2024 in connection with our Fit for Growth program and approximately $196.4 million of equity-based compensation expense recognized in 2023 related to the acquisition of Reata.

  • The increase in amortization and impairment of acquired intangible assets was primarily due to amortization for the Reata acquisition acquired intangible assets associated with SKYCLARYS, as well as impairment charges of $20.2 million related to commercialization rights terminated during the third quarter of 2024.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

  • Cash and cash equivalents totaled approximately $1.7 billion as of September 30, 2024, compared to approximately $1.0 billion as of December 31, 2023.

  • We generated approximately $2.1 billion of net cash flow from operations for the nine months ended September 30, 2024.

  • In July 2024 we completed the acquisition of HI-Bio for $1.15 billion, which was funded through available cash on hand.

Table of Contents

RECENT DEVELOPMENTS

ACQUISITIONS AND DIVESTITURES

HUMAN IMMUNOLOGY BIOSCIENCES

On July 2, 2024, we completed the acquisition of all of the issued and outstanding shares of HI-Bio, a privately-held clinical-stage biotechnology company focused on targeted therapies for patients with severe immune-mediated diseases. HI-Bio's lead asset, felzartamab, an anti-CD38 antibody, is currently being evaluated for three leading indications, Antibody-Mediated Rejection (AMR), Primary Membranous Nephropathy (PMN) and Immunoglobulin A Nephropathy (IgAN). Felzartamab has received Breakthrough Therapy Designation and ODD from the FDA for development in the treatment of PMN and AMR and has received ODD in the treatment of antibody-mediated rejection in kidney transplant recipients. The acquisition of HI-Bio is expected to augment our pipeline and build on our expertise in immunology.

Under the terms of this acquisition, we paid shareholders of HI-Bio approximately $1.15 billion, at closing and may pay up to an additional $650.0 million in potential future development and regulatory milestone payments. We funded this acquisition through available cash on hand and accounted for this acquisition as a business combination using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, and recorded assets acquired and liabilities assumed at their respective fair values as of the acquisition date.

In addition to the lead program felzartamab, the HI-Bio pipeline acquired includes izastobart/HIB210, an anti-C5aR1 antibody currently in a Phase 1 trial, and the potential for continued development in a range of complement-mediated diseases. For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report.

SALE OF PRIORITY REVIEW VOUCHER

In April 2024 we completed the sale of our rare pediatric disease PRV, generated by the development associated with SPINRAZA, to a third party. In consideration for the PRV we received a cash payment of $103.0 million upon the closing of the PRV purchase, of which approximately $14.4 million was paid to Ionis. Our net portion of approximately $88.6 million was recognized in gain on sale of priority review voucher, net within our condensed consolidated statements of income for the nine months ended September 30, 2024. For additional information on the sale of our PRV, please read Note 3, Dispositions, to our condensed consolidated financial statements included in this report.

DEVELOPMENTS IN KEY COLLABORATIVE RELATIONSHIPS

LEQEMBI (lecanemab)

United States

  • In July 2024 Eisai presented new clinical data from the CLARITY AD study open-label extension of LEQEMBI, demonstrating that three years of continuous LEQEMBI treatment reduced clinical decline, resulting in a clinically meaningful benefit for early Alzheimer's disease patients.

  • In June 2024 the FDA accepted for review the supplemental BLA for LEQEMBI monthly IV maintenance dosing for the treatment of early Alzheimer's disease, with a PDUFA action date set for January 25, 2025.

  • In May 2024 Eisai initiated the rolling submission of a BLA to the FDA for LEQEMBI subcutaneous autoinjector for weekly maintenance dosing after being granted Fast Track designation by the FDA in May 2024.

Rest of World

  • In October 2024 the Therapeutic Goods Administration of Australia issued a public statement about the initial decision not to register lecanemab. Eisai will request a reconsideration of this decision.

  • In August 2024 LEQEMBI was approved by the Medicines and Healthcare products Regulatory Agency in Great Britain and by the Ministry of Health and Prevention in the United Arab Emirates.

  • In July 2024 the CHMP of the EMA adopted a negative opinion on the MAA for LEQEMBI. Eisai will seek re-examination of the CHMP opinion.

  • In July 2024 LEQEMBI was approved in Hong Kong and Israel.

  • In June 2024 we and Eisai announced the launch of LEQEMBI in China, which had been approved by the NMPA in China in January 2024.

  • In May 2024 the Ministry of Food and Drug Safety approved LEQEMBI in South Korea.

Table of Contents

OTHER KEY DEVELOPMENTS

FELZARTAMAB

In October 2024 the FDA granted felzartamab Breakthrough Therapy Designation for the treatment of late AMR without T-cell mediated rejection in kidney transplant patients.

UCB

In September 2024 we and UCB announced positive topline data from the Phase 3 PHOENYCS GO study of dapirolizumab pegol, a novel Fc-free anti-CD40L drug candidate, in people living with moderate-to-severe SLE. The Phase 3 study met the primary endpoint demonstrating clinical improvement in moderate-to-severe SLE with clinical improvements observed among key secondary endpoints. Based on these results, UCB and Biogen will be initiating a second Phase 3 study in 2024.

SPINRAZA (nusinersen)

In September 2024 we announced positive topline data from the Phase 2/3 DEVOTE study of nusinersen, which evaluated the safety and efficacy of a higher dose regimen of nusinersen in treatment-naive symptomatic infants with SMA. Based on this data we will plan to submit for regulatory approval.

DISCONTINUED PROGRAMS AND STUDIES

SAGE COLLABORATION

In October 2024 we and Sage agreed to not pursue further development of zuranolone for the potential treatment of MDD. This decision was based on the significant new investment and time we expect would be needed to conduct the additional studies required to support approval of this indication. For additional information on our collaboration with Sage, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

SAMSUNG BIOEPIS 2019 DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

In October 2024 we notified Samsung Bioepis of our decision to terminate our 2019 Development and Commercialization Agreement (the DCA Agreement) solely within the U.S. and Canada. Biogen will transfer commercialization rights for BYOOVIZ and OPUVIZ in the U.S. and Canada back to Samsung Bioepis over a period of up to 18 months. During this transition period, we will continue to commercialize BYOOVIZ. The termination does not impact the other markets in the DCA Agreement. For additional information on our 2019 Development and Commercialization Agreement with Samsung Bioepis, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

ACORDA COLLABORATION

In January 2024 we notified Acorda of our decision to terminate our collaboration and license agreement, effective January 1, 2025. As a result of this termination, Acorda will regain global commercialization rights to FAMPYRA. On April 1, 2024, Acorda filed for bankruptcy protection and announced its intention to sell substantially all its assets to a third party. On July 10, 2024, Merz Therapeutics announced that it had completed the acquisition of FAMPYRA, and related assets from Acorda. We are now working with Merz Therapeutics on the transition of global commercialization rights of FAMPYRA.

BIIB105

In May 2024 we and Ionis announced that the Phase 1/2 ALSpire study of BIIB105, an investigational ASO for the potential treatment of ALS, did not meet its endpoints. Based on these results, we discontinued our further development of BIIB105.

BIIB121

In May 2024 we announced that we have elected not to exercise our option to license and lead development of BIIB121, an ASO for the potential treatment of Angelman syndrome.

BIIB124

In July 2024 we and Sage announced that the Phase 2 KINETIC 2 dose-range study of BIIB124 did not meet its endpoints. Based on these results, we discontinued our further development of BIIB124.

Table of Contents

RESULTS OF OPERATIONS

REVENUE

The following revenue discussion should be read in conjunction with Note 5, Revenue, to our condensed consolidated financial statements included in this report.

Revenue is summarized as follows:

For the Three Months Ended September 30,
(In millions, except percentages)20242023$ Change% Change
Product revenue:
United States$813.033.0%$790.931.3%$22.12.8%
Rest of world956.438.81,014.340.1(57.9)(5.7)
Total product revenue, net1,769.471.81,805.271.4(35.8)(2.0)
Revenue from anti-CD20 therapeutic programs446.218.1420.916.625.36.0
Contract manufacturing, royalty and other revenue250.210.1304.212.0(54.0)(17.8)
Total revenue$2,465.8100.0%$2,530.3100.0%$(64.5)(2.5)%
For the Nine Months Ended September 30,
(In millions, except percentages)20242023$ Change% Change
Product revenue:
United States$2,405.833.3%$2,293.330.8%$112.54.9%
Rest of world2,975.141.23,121.041.9(145.9)(4.7)
Total product revenue, net5,380.974.55,414.372.7(33.4)(0.6)
Revenue from anti-CD20 therapeutic programs1,284.717.81,253.816.830.92.5
Contract manufacturing, royalty and other revenue555.67.7781.210.5(225.6)(28.9)
Total revenue$7,221.2100.0%$7,449.3100.0%$(228.1)(3.1)%

PRODUCT REVENUE

Product revenue is summarized as follows:

For the Three Months Ended September 30,
20242023
(In millions, except percentages)United StatesRest of WorldTotal% TotalUnited StatesRest of WorldTotal% Total$ Change% Change
Multiple Sclerosis$546.0$507.9$1,053.959.6%$631.8$527.2$1,159.064.2%$(105.1)(9.1)%
Rare Disease240.4254.4494.828.0152.1297.8449.924.944.910.0
Biosimilars4.3192.3196.611.16.1188.2194.310.82.31.2
Other(1)22.31.824.11.30.91.12.00.122.1nm
Total product revenue, net$813.0$956.4$1,769.4100.0%$790.9$1,014.3$1,805.2100.0%$(35.8)(2.0)%
For the Nine Months Ended September 30,
20242023
(In millions, except percentages)United StatesRest of WorldTotal% TotalUnited StatesRest of WorldTotal% Total$ Change% Change
Multiple Sclerosis$1,631.6$1,648.0$3,279.660.9%$1,814.6$1,678.9$3,493.564.5%$(213.9)(6.1)%
Rare Disease703.8749.01,452.827.0455.5875.71,331.224.6121.69.1
Biosimilars19.1572.5591.611.021.3560.5581.810.89.81.7
Other(1)51.35.656.91.11.95.97.80.149.1nm
Total product revenue, net$2,405.8$2,975.1$5,380.9100.0%$2,293.3$3,121.0$5,414.3100.0%$(33.4)(0.6)%

nm Not meaningful

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

Table of Contents

MULTIPLE SCLEROSIS

6

  • Global TYSABRI revenue decreased $50.2 million, from $456.3 million in 2023 to $406.1 million in 2024, or 11.0%, primarily due to increased competition, unfavorable channel dynamics in the U.S. and a decrease in pricing in certain international markets.

  • Global TECFIDERA revenue decreased $6.7 million, from $239.5 million in 2023 to $232.8 million in 2024, or 2.8%, driven by a decrease in demand as a result of multiple TECFIDERA generic entrants in North America, Brazil and certain E.U. countries.

  • Global Interferon revenue decreased $40.2 million, from $277.7 million in 2023 to $237.5 million in 2024, or 14.5%, driven by a decrease in demand as patients transition to higher efficacy therapies.

  • Global VUMERITY revenue decreased $7.4 million, from $165.5 million in 2023 to $158.1 million in 2024, or 4.5%, primarily due to unfavorable channel dynamics in the U.S., partially offset by an increase in demand in rest of world VUMERITY.

4

  • Global TYSABRI revenue decreased $112.6 million, from $1,412.2 million in 2023 to $1,299.6 million in 2024, or 8.0%, primarily due to a decrease in U.S. TYSABRI revenue driven by increased competition, unfavorable channel dynamics and higher discounts and allowances, as well as a decrease in pricing in rest of world TYSABRI.

  • Global TECFIDERA revenue decreased $28.9 million, from $768.2 million in 2023 to $739.3 million in 2024, or 3.8%, driven by a decrease in demand as a result of multiple TECFIDERA generic entrants in North America, Brazil and certain E.U. countries.

  • Global Interferon revenue decreased $93.7 million, from $825.7 million in 2023 to $732.0 million in 2024, or 11.3%, driven by a decrease in demand as patients transition to higher efficacy therapies.

  • Global VUMERITY revenue increased $31.5 million, from $419.9 million in 2023 to $451.4 million in 2024, or 7.5%, primarily due to an increase in global demand and favorable channel dynamics.

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

In 2024 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. Additionally, a biosimilar entrant of TYSABRI was approved in the U.S. and the E.U. in 2023. We believe that future sales of TYSABRI may be adversely affected by the entrance of this biosimilar.

Table of Contents

RARE DISEASE

6

  • U.S. SPINRAZA revenue increased $2.6 million, from $150.5 million in 2023 to $153.1 million in 2024, or 1.7%, primarily due to favorable net pricing, offset in part by unfavorable channel dynamics and a decrease in demand.

  • Rest of world SPINRAZA revenue decreased $69.4 million, from $297.7 million in 2023 to $228.3 million in 2024, or 23.3%, driven by the loss of an annual tender in Russia which resulted in an unfavorable impact of approximately $45.0 million. The decrease was also impacted by the timing of shipments and the unfavorable impact of foreign currency exchange.

  • Global SKYCLARYS revenue was $102.3 million in 2024, including $81.8 million of U.S. SKYCLARYS revenue, which we began recognizing during the fourth quarter of 2023, subsequent to our acquisition of Reata, and $20.5 million of rest of world SKYCLARYS revenue, which was approved in the E.U. and became commercially available during the first quarter of 2024.

4

  • U.S. SPINRAZA revenue increased $5.9 million, from $453.0 million in 2023 to $458.9 million in 2024, or 1.3%, primarily due to favorable net pricing, offset by a decrease in demand.

  • Rest of world SPINRAZA revenue decreased $182.7 million, from $875.6 million in 2023 to $692.9 million in 2024, or 20.9%, driven by the loss of an annual tender in Russia which resulted in an unfavorable impact of approximately $45.0 million. The decrease was also impacted by the timing of shipments and the unfavorable impact of foreign currency exchange.

  • Global SKYCLARYS revenue was $280.3 million in 2024, including $230.4 million of U.S. SKYCLARYS revenue, which we began recognizing during the fourth quarter of 2023, subsequent to our acquisition of Reata, and $49.9 million of rest of world SKYCLARYS revenue, which was approved in the E.U. and became commercially available during the first quarter of 2024.

Rare disease revenue includes sales from SPINRAZA, QALSODY, which became commercially available in the U.S. during the second quarter of 2023, and SKYCLARYS, which was obtained as part of our acquisition of Reata in September 2023.

SKYCLARYS became commercially available in the U.S. during the second quarter of 2023 and we began recognizing revenue from SKYCLARYS in the U.S. during the fourth quarter of 2023, subsequent to our acquisition of Reata. In February 2024 the EC approved SKYCLARYS in the E.U. for the treatment of FA in adults and adolescents aged 16 years and older, which became commercially available in the E.U. during the first quarter of 2024.

In 2024 we expect growth in rare disease revenue as we continue to launch SKYCLARYS in the U.S. and E.U. We expect global SPINRAZA revenue to decrease by high-single digits.

Table of Contents

BIOSIMILARS

6

  • For the three and nine months ended September 30, 2024, compared to the same periods of 2023, the increases in biosimilar revenue were primarily due to increases in sales volumes related to BENEPALI, offset by decreases in pricing due to competitive pressures.

Biosimilars revenue includes sales from BENEPALI, IMRALDI, FLIXABI, BYOOVIZ and TOFIDENCE. In 2023 BYOOVIZ became commercially available in certain international markets. During the third quarter of 2023 the FDA approved TOFIDENCE, a tocilizumab biosimilar referencing ACTEMRA, which became commercially available in the U.S. during the second quarter of 2024. TOFIDENCE was also approved in the E.U. during the second quarter of 2024.

We continue to work with our third-party contract manufacturers for IMRALDI and BENEPALI to address supply constraints. If not resolved these supply constraints could have an adverse impact on 2024 sales. In addition, one of our contract manufacturers for IMRALDI and BENEPALI entered into a proposed acquisition by a third party, which is expected to close at the end of 2024. We are currently evaluating the impact this will have on our biosimilars business and working to implement mitigation activities.

After evaluating our strategic options, we have made the decision to retain our biosimilars business.

Table of Contents

REVENUE FROM ANTI-CD20 THERAPEUTIC PROGRAMS

Our share of RITUXAN, including RITUXAN HYCELA, GAZYVA and LUNSUMIO collaboration operating profits in the U.S., royalty revenue on sales of OCREVUS and other revenue from anti-CD20 therapeutic programs are summarized in the table below. For purposes of this discussion, we refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN.

For the Three Months Ended September 30,For the Nine Months Ended September 30,
(In millions)2024202320242023
Royalty revenue on sales of OCREVUS$346.8$319.1$985.8$928.2
Biogen’s share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO94.898.9285.3315.0
Other revenue from anti-CD20 therapeutic programs4.62.913.610.6
Total revenue from anti-CD20 therapeutic programs$446.2$420.9$1,284.7$1,253.8

ROYALTY REVENUE ON SALES OF OCREVUS

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the increases in royalty revenue on sales of OCREVUS were primarily due to sales growth of OCREVUS in the U.S.

OCREVUS royalty revenue is 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 revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter.

BIOGEN'S SHARE OF PRE-TAX PROFITS IN THE U.S. FOR RITUXAN, GAZYVA AND LUNSUMIO

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, 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 of RITUXAN in the U.S. resulting from competition from multiple biosimilar products, partially offset by increases in sales of GAZYVA.

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.

OTHER REVENUE FROM ANTI-CD20 THERAPEUTIC PROGRAMS

Other revenue from anti-CD20 therapeutic programs consists of our share of pre-tax co-promotion profits from RITUXAN in Canada, royalty revenue on sales of LUNSUMIO outside the U.S. and royalty revenue on net sales of COLUMVI in the U.S., which became commercially available during the second quarter of 2023.

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 19, 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 is summarized as follows:

For the Three Months Ended September 30,For the Nine Months Ended September 30,
(In millions)2024202320242023
Contract manufacturing revenue$221.9$252.9$474.1$742.9
Royalty and other revenue28.351.381.538.3
Total contract manufacturing, royalty and other revenue$250.2$304.2$555.6$781.2

CONTRACT MANUFACTURING REVENUE

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the decreases in contract manufacturing revenue were primarily driven by higher volumes in 2023 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.

Table of Contents

In addition, as part of the 2020 sale of our Hillerød, Denmark manufacturing operations to FUJIFILM, we provided FUJIFILM with certain minimum batch production commitment guarantees, including batches related to our contract manufacturing arrangements. As of December 31, 2023, these batch commitments have been satisfied and we expect that our contract manufacturing revenue will be lower in 2024, compared to 2023, as we are no longer supplying contract manufacturing customers using Hillerød in this manner.

ROYALTY AND OTHER REVENUE

Royalty and other revenue primarily reflects royalty revenue on biosimilar products from our license arrangements with Samsung Bioepis and our 50.0% share of LEQEMBI product revenue, net and cost of sales, including royalties, as we are not the principal, as well as royalties we receive from net sales on products related to patents that we have out-licensed.

For additional information on our license arrangements with Samsung Bioepis and our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

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 September 30,For the Nine Months Ended September 30,
(In millions)2024202320242023
Contractual adjustments$643.2$654.0$1,971.1$1,959.1
Discounts207.8171.7612.7554.3
Returns5.420.128.734.1
Total discounts and allowances$856.4$845.8$2,612.5$2,547.5

For the three and nine months ended September 30, 2024, reserves for discounts and allowances as a percentage of gross product revenue were 32.6% and 32.4%, respectively, compared to 31.7% in both 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, VA, 340B discounts, specialty pharmacy program fees and other government rebates or applicable allowances.

For the three months ended September 30, 2024, compared to the same period in 2023, the decrease in contractual adjustments was primarily due to lower Medicaid rebates, partially offset by higher government rebates in the U.S.

For the nine months ended September 30, 2024, compared to the same period in 2023, the increase in contractual adjustments was primarily due to higher government rebates in the U.S. and higher other rebates in biosimilars, partially offset by lower government rebates in rest of world and lower Medicaid rebates in the U.S.

DISCOUNTS

Discounts include trade term discounts, wholesaler incentives and volume related discounts.

For the three months ended September 30, 2024, compared to the same period in 2023, the increase in discounts was primarily driven by higher purchase discounts in rest of world and the U.S.

For the nine months ended September 30, 2024, compared to the same period in 2023, the increase in discounts was primarily driven by higher purchase and volume discounts for biosimilars.

Table of Contents

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

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the decreases in returns were primarily driven by lower returns in the U.S.

For additional information on our revenue reserves, please read Note 5, Revenue, to our condensed consolidated financial statements included in this report.

Table of Contents

COST AND EXPENSE

A summary of total cost and expense is as follows:

For the Three Months Ended September 30,
(In millions, except percentages)20242023$ Change% Change
Cost of sales, excluding amortization and impairment of acquired intangible assets$638.7$659.6$(20.9)(3.2)%
Research and development542.7736.3(193.6)(26.3)
Selling, general and administrative588.4788.2(199.8)(25.3)
Amortization and impairment of acquired intangible assets130.360.969.4114.0
Collaboration profit sharing/(loss reimbursement)69.350.518.837.2
(Gain) loss on fair value remeasurement of contingent consideration23.8—23.8nm
Restructuring charges6.876.0(69.2)(91.1)
Gain on sale of priority review voucher, net———nm
Other (income) expense, net14.8300.0(285.2)(95.1)
Total cost and expense$2,014.8$2,671.5$(656.7)(24.6)%
For the Nine Months Ended September 30,
(In millions, except percentages)20242023$ Change% Change
Cost of sales, excluding amortization and impairment of acquired intangible assets$1,726.9$1,915.1$(188.2)(9.8)%
Research and development1,509.51,891.1(381.6)(20.2)
Selling, general and administrative1,723.71,941.2(217.5)(11.2)
Amortization and impairment of acquired intangible assets295.5164.0131.580.2
Collaboration profit sharing/(loss reimbursement)197.3164.532.819.9
(Gain) loss on fair value remeasurement of contingent consideration23.8—23.8nm
Restructuring charges24.9120.0(95.1)(79.3)
Gain on sale of priority review voucher, net(88.6)—(88.6)nm
Other (income) expense, net193.7248.2(54.5)(22.0)
Total cost and expense$5,606.7$6,444.1$(837.4)(13.0)%

nm Not meaningful

Table of Contents

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

For the Three Months Ended September 30,For the Nine Months Ended September 30,
(In millions)2024202320242023
Product$468.2$471.4$1,204.3$1,355.8
Royalty170.5188.2522.6559.3
Total cost of sales$638.7$659.6$1,726.9$1,915.1

PRODUCT COST OF SALES

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the decreases in product cost of sales were primarily due to favorable product mix from decreased contract manufacturing revenue and lower idle capacity charges, offset in part by $48.4 million and $136.6 million, respectively, in SKYCLARYS amortization costs. Contract manufacturing revenue includes LEQEMBI inventory produced for Eisai, beginning in the first quarter of 2023 upon the accelerated approval of LEQEMBI in the U.S. Cost of sales as a percentage of revenue was adversely affected by LEQEMBI batches due to minimal margins.

As a result of our acquisition of Reata in September 2023 we recorded a fair value step-up adjustment related to the acquired inventory of SKYCLARYS of approximately $1.3 billion. This fair value step-up adjustment is being amortized to cost of sales within our condensed consolidated statements of income as the inventory is sold, which is expected to be sold over a period of approximately 4 years from the acquisition date. For the three and nine months ended September 30, 2024, amortization from the fair value step-up adjustment, associated with SKYCLARYS, as a result of inventory sold was approximately $48.4 million and $136.6 million, respectively. For additional information on our acquisition of Reata, please read Note 2, Acquisitions**, to our condensed consolidated financial statements included in this report.**

ROYALTY COST OF SALES

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the decreases in royalty cost of sales were primarily due to lower royalties associated with sales of SPINRAZA and TYSABRI.

Write Downs and Other Charges

For the three and nine months ended September 30, 2023, we recorded approximately $35.0 million and $113.3 million, respectively, of aggregate gross idle capacity charges. We had no significant gross idle capacity charges for the three and nine months ended September 30, 2024.

For additional information on our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

Table of Contents

RESEARCH AND DEVELOPMENT

29

Research and development expense, as a percentage of total revenue, was 22.0% and 29.1% for the three months ended September 30, 2024 and 2023, respectively. For the three months ended September 30, 2024, compared to the same period in 2023, the decrease in research and development was primarily driven by approximately $197.0 million of equity-based compensation expense recognized in 2023 related to the Reata acquisition, cost-reduction measures realized in 2024 in connection with our portfolio prioritization initiatives and our Fit for Growth program, as well as higher spend on clinical trials and close out costs incurred during 2023. The decrease was partially offset by approximately $42.5 million of equity-based compensation expense recognized in 2024 related to the HI-Bio acquisition.

EARLY STAGE PROGRAMS

Q3 2024 vs. Q3 2023

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

  • advancement of BIIB059 for the treatment of CLE into late stage; and

  • discontinuation of BIIB121 for the treatment of Angelman syndrome.

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

  • development of BIIB080 for the treatment of Alzheimer's disease.

LATE STAGE PROGRAMS

Q3 2024 vs. Q3 2023

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

  • advancement of BIIB059 for the treatment of CLE into late stage; and

  • increased spend in BIIB059 for the treatment of SLE.

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

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

MARKETED PROGRAMS

Q3 2024 vs. Q3 2023

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

  • discontinuation of ADUHELM for the treatment of Alzheimer's disease; and

  • decreased spend on ZURZUVAE for MDD.

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

  • increased spend in SKYCLARYS as a result of our acquisition of Reata in September 2023; and

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

Table of Contents

4

Research and development expense, as a percentage of total revenue, was 20.9% and 25.4% for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024, compared to the same period in 2023, the decrease in research and development was primarily driven by approximately $197.0 million of equity-based compensation expense recognized in 2023 related to the Reata acquisition, cost-reduction measures realized in 2024 in connection with our portfolio prioritization initiatives and our Fit for Growth program, as well as higher spend on clinical trials and close out costs incurred during 2023, partially offset by approximately $48.5 million of step-up amortization related to SKYCLARYS inventory and approximately $42.5 million of equity-based compensation expense recognized in 2024 related to the HI-Bio acquisition.

EARLY STAGE PROGRAMS

YTD 2024 vs. YTD 2023

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

  • advancement of BIIB059 for the treatment of CLE into late stage;

  • discontinuation of BIIB121 for the treatment of Angelman syndrome; and

  • discontinuation of BIIB131 for the treatment of acute ischemic stroke.

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

  • development of BIIB080 for the treatment of Alzheimer's disease; and

  • development of cemdomespib for the treatment of diabetic neuropathic pain.

LATE STAGE PROGRAMS

YTD 2024 vs. YTD 2023

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

  • advancement of ZURZUVAE from late stage to marketed upon the approval of ZURZUVAE for PPD in the U.S.;

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

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

  • discontinuation of BIIB093 for LHI.

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

  • advancement of BIIB059 for the treatment of CLE into late stage.

MARKETED PROGRAMS

YTD 2024 vs. YTD 2023

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

  • discontinuation of ADUHELM for the treatment of Alzheimer's disease; and

  • decreased spend on ZURZUVAE for MDD.

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

  • increased spend in SKYCLARYS as a result of our acquisition of Reata in September 2023;

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

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

Table of Contents

Research and development expense is reported above based on the following classifications. The development stage reported is 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.

  • Research and discovery:** represents costs incurred to support our discovery research and translational science efforts.

  • Early stage programs:** are programs in Phase 1 or Phase 2 development.

  • Late stage programs:** are programs in Phase 3 development or in registration 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.

  • Other research and development costs:** 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.

Excluding any milestone and upfront payments, we expect our core research and development expense to decrease in 2024, while continuing to invest in our pipeline, such as our acquisition of HI-Bio in July 2024. This is primarily due to the continued realization of our cost savings initiatives. 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 nine months ended September 30, 2024, compared to the same periods in 2023, selling, general and administrative expense decreased by approximately 25.3% and 11.2%, respectively, primarily due to cost-reduction measures realized in 2024 in connection with our Fit for Growth program and approximately $196.4 million of equity-based compensation expense recognized in 2023 related to the acquisition of Reata. The decrease was partially offset by an increase in operational spending on sales and marketing activities in support of LEQEMBI and SKYCLARYS as we continue to expand our U.S. and international product launches.

For the three and nine months ended September 30, 2024, selling, general and administrative expense included the recognition of approximately $13.9 million in equity-based compensation expense related to our acquisition of HI-Bio that was associated with the accelerated vesting of stock options and RSUs previously granted to HI-Bio employees and required no future services to vest. Additionally, the three and nine months ended September 30, 2024, include transaction and integration-related expense incurred of approximately $2.4 million and $3.2 million, respectively, related to the acquisition of HI-Bio.

For the three and nine months ended September 30, 2023, selling, general and administrative expense included the recognition of approximately $196.4 million in equity-based compensation expense related to our acquisition of Reata that was associated with the accelerated vesting of stock options and RSUs previously granted to Reata employees and required no future services to vest. Additionally, the three and nine months ended September 30, 2023, includes transaction and integration-related expense incurred of approximately $29.6 million related to the acquisition of Reata.

For the nine months ended September 30, 2023, selling, general and administrative expense also included a $31.0 million obligation to Eisai related to the termination of the co-promotion agreement for our MS products in Japan during the first quarter of 2023 and accelerated depreciation recognized during the second quarter of 2023 of approximately $11.5 million.

GENERAL AND ADMINISTRATIVE EXPENSE

For the three and nine months ended September 30, 2024, general and administrative expense decreased by approximately $178.1 million, or 48.9%, and $183.3 million, or 26.2%, respectively, compared to the same periods in 2023, due to the recognition of approximately $196.4 million in equity-based compensation expense in 2023 related to our acquisition of Reata.

For additional information on our acquisitions of Reata and HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report. For additional information on our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

Table of Contents

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 TYSABRI, AVONEX, SPINRAZA, VUMERITY and SKYCLARYS, which was obtained as part of our acquisition of Reata in September 2023. For additional information on our acquisition of Reata, please read Note 2, Acquisitions**, to our condensed consolidated financial statements included in this report.**

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the increases in amortization and impairment of acquired intangible assets were primarily due to amortization for the Reata acquisition acquired intangible assets associated with SKYCLARYS.

For the three and nine months ended September 30, 2024, amortization and impairment of acquired intangible assets reflects impairment charges of $20.2 million, related to intangible assets associated with Samsung Bioepis commercialization rights terminated during the third quarter of 2024. For the three and nine months ended September 30, 2023, we had no impairment charges.

For additional information on the amortization and impairment of our acquired intangible assets, please read Note 7, Intangible Assets and Goodwill, to our condensed consolidated financial statements included in this report. For additional information on our 2019 Development and Commercialization Agreement with Samsung Bioepis, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

COLLABORATION PROFIT SHARING/(LOSS REIMBURSEMENT)

Collaboration profit sharing/(loss reimbursement) includes Samsung Bioepis' 50.0% share of the profit or loss related to our biosimilars 2013 commercial agreement with Samsung Bioepis and, beginning in the third quarter of 2023, collaboration profit sharing/(loss reimbursement) related to Sage's 50.0% share of income and expense in the U.S. related to ZURZUVAE for PPD.

For the three and nine months ended September 30, 2024, we recognized net profit-sharing expense of approximately $60.3 million and $176.8 million, respectively, to reflect Samsung Bioepis' 50.0% share of the net collaboration profits, compared to net profit-sharing expense of approximately $56.4 million and $170.4 million, respectively, in the prior year comparative periods.

For the three and nine months ended September 30, 2024, we recognized net profit-sharing expense of approximately $9.0 million and $20.5 million, respectively, to reflect Sage's 50.0% share of net collaboration results in the U.S. for ZURZUVAE for PPD, compared to net loss reimbursement of approximately $5.9 million in both prior year comparative periods.

For additional information on our collaboration and license arrangements with Samsung Bioepis and Sage, please read Note 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report.

(GAIN) LOSS ON FAIR VALUE REMEASUREMENT OF CONTINGENT CONSIDERATION

Consideration payable for certain of our business combinations include 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 condensed consolidated statements of income. In connection with our acquisition of HI-Bio in July 2024 we recorded contingent consideration obligations related to potential milestone payments.

For the three and nine months ended September 30, 2024, the changes in the fair value of our contingent consideration obligations were primarily due to changes in interest rates used to revalue our contingent consideration liabilities, the passage of time and updates to the expected timing of achieving certain milestones which will trigger contingent consideration payments.

For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions**, to our condensed consolidated financial statements included in this report.**

Table of Contents

RESTRUCTURING CHARGES

2023 FIT FOR GROWTH RESTRUCTURING PROGRAM

In July 2023 we initiated additional cost saving measures as part of our Fit for Growth program to reduce operating costs, while improving operating efficiency and effectiveness. The Fit for Growth program is expected to generate approximately $1.0 billion in gross operating expense savings by the end of 2025, some of which will be reinvested in various initiatives. The Fit for Growth program is currently estimated to include net headcount reductions of approximately 1,000 employees and we expect to incur restructuring charges ranging from approximately $260.0 million to $280.0 million.

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

For the Three Months Ended September 30,
20242023
(In millions)Severance CostsAccelerated Depreciation and Other CostsTotalSeverance CostsAccumulated Depreciation and Other CostsTotal
Selling, general and administrative$—$9.1$9.1$—$5.9$5.9
Research and development—3.53.5—0.20.2
Restructuring charges4.6—4.637.717.355.0
Total charges$4.6$12.6$17.2$37.7$23.4$61.1
For the Nine Months Ended September 30,
20242023
(In millions)Severance CostsAccelerated Depreciation and Other CostsTotalSeverance CostsAccumulated Depreciation and Other CostsTotal
Selling, general and administrative$—$12.5$12.5$—$17.4$17.4
Research and development—10.610.6—0.70.7
Restructuring charges20.2—20.262.633.896.4
Total charges$20.2$23.1$43.3$62.6$51.9$114.5

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.

REATA INTEGRATION

Following the close of our Reata acquisition in September 2023, we implemented an integration plan designed to realize operating synergies through cost savings and avoidance. Under this initiative, we estimate we will incur total integration charges ranging from approximately $35.0 million to $40.0 million, related to severance and employment costs, which are expected to be paid by the end of 2024. These amounts were substantially incurred during 2023.

Table of Contents

Total charges incurred from our Reata integration are summarized as follows:

For the Three Months Ended September 30,
20242023
(In millions)Severance CostsAccelerated Depreciation and Other CostsTotalSeverance CostsAccumulated Depreciation and Other CostsTotal
Selling, general and administrative$—$1.6$1.6$—$—$—
Research and development—2.92.9———
Restructuring charges0.7—0.721.0—21.0
Total charges$0.7$4.5$5.2$21.0$—$21.0
For the Nine Months Ended September 30,
20242023
(In millions)Severance CostsAccelerated Depreciation and Other CostsTotalSeverance CostsAccumulated Depreciation and Other CostsTotal
Selling, general and administrative$—$4.9$4.9$—$—$—
Research and development—8.98.9———
Restructuring charges3.2—3.221.0—21.0
Total charges$3.2$13.8$17.0$21.0$—$21.0

In connection with our acquisition of Reata we assumed responsibility for a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space located in Plano, Texas, with an initial lease term of 16 years. We do not intend to occupy this building and are evaluating opportunities to sublease the property.

HI-BIO INTEGRATION

Additionally, following the close of our HI-Bio acquisition in July 2024, we implemented an integration plan designed to realize operating synergies through cost savings and avoidance. Under this initiative, we incurred approximately $1.5 million of severance and employment costs, which are reflected in restructuring charges within our condensed consolidated statements of income for the three and nine months ended September 30, 2024.

For additional information on our cost saving initiatives, please read Note 4, Restructuring, to our condensed consolidated financial statements included in this report.

OTHER (INCOME) EXPENSE, NET

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, the changes in other (income) expense, net primarily reflect lower interest income driven by lower cash balances in 2024, compared to the same periods in 2023, as well as higher net losses on our holdings in equity securities in 2023.

NET (GAINS) LOSSES IN EQUITY SECURITIES

For the three months ended September 30, 2024, net unrealized and realized gains on our holdings in equity securities were approximately $28.2 million and $10.9 million, respectively, compared to net unrealized and realized losses of approximately $297.6 million and $4.4 million, respectively, in the prior year comparative period.

  • The net unrealized gains recognized during the three months ended September 30, 2024, primarily reflect an increase in the aggregate fair value of our investments in Denali and Sangamo common stock of approximately $53.3 million, partially offset by a decrease in the fair value of Sage common stock of approximately $22.7 million.

  • The net unrealized losses recognized during the three months ended September 30, 2023, primarily reflect a decrease in the aggregate fair value of our investments in Sage, Denali and Sangamo common stock of approximately $295.6 million.

For the nine months ended September 30, 2024, net unrealized losses and realized gains on our holdings in equity securities were approximately $27.3 million and $5.4 million, respectively, compared to net unrealized and realized losses of approximately $268.3 million and $5.3 million, respectively, in the prior year comparative period.

Table of Contents

  • The net unrealized losses recognized during the nine months ended September 30, 2024, primarily reflect a decrease in the aggregate fair value of our investments in Sage common stock of approximately $90.2 million, partially offset by an increase in the fair value of Denali and Sangamo common stock of approximately $70.1 million.

  • The net unrealized losses recognized during the nine months ended September 30, 2023, primarily reflect a decrease in the aggregate fair value of our investments in Sage, Denali, Sangamo and Ionis common stock of approximately $265.0 million.

INCOME TAX PROVISION

For the Three Months Ended September 30,For the Nine Months Ended September 30,
(In millions, except percentages)2024202320242023
Income (loss) before income tax (benefit) expense$451.0$(141.2)$1,614.5$1,005.2
Income tax (benefit) expense62.5(72.9)249.092.6
Effective tax rate13.9%51.6%15.4%9.2%

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 nine months ended September 30, 2024, compared to the same periods in 2023, our effective tax rate includes a decrease in our valuation allowance related to changes in projected future foreign taxable income, partially offset by the impact of certain foreign uncertain tax positions.

The effective tax rate for the three months ended September 30, 2023, reflects a tax benefit of $72.9 million recognized as a result of a pretax loss from operations of $141.2 million recorded during the third quarter of 2023, which was driven, in part, by the impact of the non-cash changes in the value of our equity investments and Reata acquisition-related expenses. For all other periods presented, the effective tax rates reflect tax expense on pretax income from operations in the respective periods.

The nine months ended September 30, 2023, was also impacted by the resolution of an uncertain tax matter related to tax credits.

For additional information on our acquisition of Reata, please read Note 2, Acquisitions**, to our condensed consolidated financial statements included in this report.**

PILLAR TWO

The OECD has issued model rules, which generally provide for a jurisdictional minimum effective tax rate of 15.0%. Various countries have or are in the process of enacting legislation intended to implement the principles effective January 1, 2024. Our income tax provision for the three and nine months ended September 30, 2024, reflects currently enacted legislation and guidance related to the OECD model rules.

For additional information on our income taxes, please read Note 17, Income Taxes, to our condensed consolidated financial statements included in this report.

Table of Contents

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our financial condition is summarized as follows:

(In millions, except percentages)As of September 30, 2024As of December 31, 2023$ Change% Change
Financial assets:
Cash and cash equivalents$1,699.2$1,049.9$649.361.8%
Total cash and cash equivalents$1,699.2$1,049.9$649.361.8%
Borrowings:
Current portion notes payable and term loan$1,748.1$150.0$1,598.11,065.4%
Notes payable and term loan4,545.86,788.2(2,242.4)(33.0)
Total borrowings$6,293.9$6,938.2$(644.3)(9.3)%
Working capital:
Current assets$6,830.5$6,859.3$(28.8)(0.4)%
Current liabilities(5,425.0)(3,434.3)(1,990.7)58.0
Total working capital$1,405.5$3,425.0$(2,019.5)(59.0)%

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 that generic and biosimilar competition for many of our key products, the continued overall decline of our MS business and our investments in the launch of key new products and the development of our pipeline 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.

On July 2, 2024, we completed the acquisition of all of the issued and outstanding shares of HI-Bio. Under the terms of this acquisition, we paid shareholders of HI-Bio approximately $1.15 billion, as well as an additional $43.7 million related to working capital adjustments as of the transaction close date. These amounts were funded through available cash on hand. For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report.

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 $1.4 billion and $3.4 billion as of September 30, 2024 and December 31, 2023, respectively. The change in working capital reflects a decrease in total current assets of approximately $28.8 million and an increase in total current liabilities of approximately $2.0 billion. The changes in total current assets and total current liabilities were primarily driven by the following:

CURRENT ASSETS

  • $649.3 million increase in cash and cash equivalents;

  • $127.9 million decrease in accounts receivable, net related to our ongoing operations; and

  • $508.0 million decrease in other current assets primarily due to the receipt of $437.5 million from Samsung BioLogics related to the sale of our 49.9% equity interest in Samsung Bioepis.

Table of Contents

CURRENT LIABILITIES

•$131.5 million increase in accrued expense and other primarily due to $287.1 million of short-term contingent consideration recognized from our acquisition of HI-Bio, offset in part by the timing of our annual incentive compensation payment and other benefits-related payments; and

•$1.6 billion increase in current portion of debt primarily due to the reclassification of our $1.75 billion aggregate principal amount of 5.20% Senior Notes due September 15, 2025, from long-term to short--term and the repayment of our 2023 Term Loan.

For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report. For additional information on the sale of our equity interest in Samsung Bioepis and the sale of our PRV, please read Note 3, Dispositions, to our condensed consolidated financial statements included in this report. For additional information on our 2023 Term Loan, please read Note 13, Indebtedness, to our condensed consolidated financial statements included in this report.

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

As of September 30, 2024, we had cash, cash equivalents and marketable securities totaling approximately $1.7 billion compared to approximately $1.0 billion as of December 31, 2023. The increase in the balance was primarily due to cash generated by our operations, the receipt of $437.5 million in April 2024 from Samsung BioLogics related to the sale of our 49.9% equity interest in Samsung Bioepis and the net cash receipt of $88.6 million from the sale of one of our two PRV's. The increase was offset in part by $1.15 billion of cash and cash equivalents used to fund our acquisition of HI-Bio in July 2024 and $650.0 million of cash used for the repayment of our 2023 Term Loan.

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)September 30, 2024December 31, 2023
Denali$257.9$273.6
Sage45.1135.3
Sangamo1.77.9
Total$304.7$416.8

Our ability to liquidate our investments in Denali, Sage and Sangamo may be limited by the size of our interest, the volume of market related activity, our concentrated level of ownership and 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 19, Collaborative and Other Relationships, to our condensed consolidated financial statements included in this report*.*

Table of Contents

CASH FLOW

The following table summarizes our cash flow activity:

For the Nine Months Ended September 30,
(In millions, except percentages)20242023% Change
Net cash flow provided by (used in) operating activities$2,114.6$1,534.737.8%
Net cash flow provided by (used in) investing activities(780.6)(3,448.7)(77.4)
Net cash flow provided by (used in) financing activities(691.4)795.4186.9

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 nine months ended September 30, 2024, compared to the same period in 2023, the increase in net cash flow provided by operating activities was primarily due to higher net income, lower employee-benefit payments made during the first quarter of 2024, as compared to the same period in 2023, lower estimated federal tax payments made during the third quarter of 2024, as compared to the same period in 2023, and changes in non-cash adjustments to net income. The increase was partially offset by the timing of working capital, which includes higher inventory levels, primarily associated with our contract manufacturing for LEQEMBI.

INVESTING ACTIVITIES

For the nine months ended September 30, 2024, compared to the same period in 2023, the change in net cash flow in investing activities was primarily due to cash payments made associated with our acquisition of HI-Bio in 2024 and with our acquisition of Reata in 2023. Additionally, cash outlay in 2023 was partially offset by net proceeds received from the sale of our marketable securities.

FINANCING ACTIVITIES

For the nine months ended September 30, 2024, compared to the same period in 2023, the change in net cash flow in financing activities was primarily due to the repayment of our 2023 Term Loan for $650.0 million during 2024 compared to the issuance of term loans totaling $1.0 billion under our 2023 Term Loan which were used to partially fund our acquisition of Reata in 2023.

For additional information on the sale of our equity interest in Samsung Bioepis and the sale of our PRV, please read Note 3, Dispositions, to our condensed consolidated financial statements included in this report. For additional information on our 2023 Term Loan, please read Note 13, Indebtedness, to our condensed consolidated financial statements included in this report.

CAPITAL RESOURCES

DEBT AND CREDIT FACILITIES

LONG-TERM DEBT AND TERM LOAN CREDIT AGREEMENTS

Our long-term obligations primarily consist of long-term debt related to our Senior Notes with final maturity dates ranging between 2025 and 2051. As of September 30, 2024, our outstanding balance related to long-term debt was $4.5 billion.

In connection with our acquisition of Reata in September 2023 we entered into a $1.5 billion term loan credit agreement. On the closing date of the Reata acquisition we drew $1.0 billion from the 2023 Term Loan, comprised of a $500.0 million floating rate 364-day tranche and a $500.0 million floating rate three-year tranche. The remaining unused commitment of $500.0 million was terminated. As of December 31, 2023, we repaid

Table of Contents

$350.0 million of the 364--day tranche. The remaining $150.0 million portion of the 364-day tranche was repaid during the first quarter of 2024.

Additionally, during the first quarter of 2024 we repaid $250.0 million of the three-year tranche, with the remaining $250.0 million portion of the three-year tranche being subsequently repaid in full during the second quarter of 2024.

2024 REVOLVING CREDIT FACILITY

In August 2024 we entered into a $1.5 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. This revolving credit facility replaced the revolving credit facility entered into in January 2020, as discussed below.

2020 REVOLVING CREDIT FACILITY

In January 2020 we entered into a $1.0 billion, five-year senior unsecured revolving credit facility under which we were permitted to draw funds for working capital and general corporate purposes. The terms of the revolving credit facility included a financial covenant that required us not to exceed a maximum consolidated leverage ratio. This credit facility was terminated in August 2024.

As of September 30, 2024 and December 31, 2023, we had no outstanding borrowings and were in compliance with all covenants under both facilities.

For a summary of the fair and carrying values of our outstanding borrowings as of September 30, 2024 and December 31, 2023, please read Note 8, 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 2023 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 shares repurchased under our 2020 Share Repurchase Program were retired. There were no share repurchases of our common stock during the three and nine months ended September 30, 2024 and 2023. Approximately $2.1 billion remained available under our 2020 Share Repurchase Program as of September 30, 2024.

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 22, Commitments and Contingencies, to our consolidated financial statements included in our 2023 Form 10-K.

There have been no material changes in our contractual obligations since December 31, 2023.

CONTINGENT CONSIDERATION RELATED TO BUSINESS COMBINATIONS

In connection with our acquisition of HI-Bio in July 2024 we may make additional payments based upon the achievement of certain milestone events. We recognized the contingent consideration obligations associated with this acquisition at its fair value on the acquisition date and we revalue this obligation each reporting period. We may pay up to an additional $650.0 million in potential future development and regulatory milestone payments. The acquisition-date fair value of these milestones was approximately $485.1 million. We anticipate that we may trigger the first milestone payment of approximately $150.0 million within the next six months.

For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions, to our condensed consolidated financial statements included in this report.

Table of Contents

CONTINGENT DEVELOPMENT, REGULATORY AND COMMERCIAL MILESTONE PAYMENTS

Based on our development plans as of September 30, 2024, we could trigger potential future milestone payments to third parties of up to approximately $5.4 billion, including approximately $0.9 billion in development milestones, approximately $0.6 billion in regulatory milestones and approximately $3.9 billion in commercial milestones, as part of our various collaborations, including licensing and development programs and HI-Bio's pre-existing commitments, as discussed below. 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 September 30, 2024, 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 $15.0 million in milestones in 2024 under our current agreements, excluding opt-in payments.

We acquired HI-Bio's pre-existing in-license commitments under third-party agreements, which include tiered royalties on potential future sales of felzartamab and izastobart/HIB210, ranging from high-single digit to mid-teen percentages, as well as potential future development, regulatory and commercial milestone payments related to felzartamab and izastobart/HIB210 of up to $130.0 million, $230.0 million and $640.0 million, respectively. This amount includes potential milestone payments due upon the first patient dosed in a phase 3 clinical trial of felzartamab in a first and second indication of $35.0 million and $30.0 million, respectively. We anticipate that we may trigger the first milestone payment of $35.0 million within the next six months.

OTHER FUNDING COMMITMENTS

As of September 30, 2024, 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 $31.4 million in our condensed consolidated balance sheets for expenditures incurred by CROs as of September 30, 2024. We have approximately $576.6 million in cancellable future commitments based on existing CRO contracts as of September 30, 2024.

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 September 30, 2024, we have approximately $186.3 million of liabilities associated with uncertain tax positions.

As of September 30, 2024 and December 31, 2023, we have accrued income tax liabilities of approximately $234.0 million and $419.5 million, respectively, under the Transition Toll Tax. The amount accrued as of September 30, 2024, 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.

CONTINGENT CONSIDERATION

We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period thereafter, we revalue the remaining obligations and record increases or decreases in their fair value as an adjustment to contingent consideration expense in our condensed consolidated statements of income. Changes in the fair value of our 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

Table of Contents

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.

Except for Contingent Consideration, as discussed above, there have been no material changes to our critical accounting estimates since our 2023 Form 10-K. For a discussion of our other critical accounting estimates, please read Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K.

Previous: Cover and table of contents · Next: Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK