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| Intangible Assets and Goodwill |
Intangible Assets
Intangible assets, net of accumulated amortization, impairment charges and adjustments, are summarized as follows:
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of December 31, 2013 | | As of December 31, 2012 |
(In millions) | Estimated Life | | Cost | | Accumulated Amortization | | Net | | Cost | | Accumulated Amortization | | Net |
Out-licensed patents | 13-23 years | | $ | 578.0 |
| | $ | (450.8 | ) | | $ | 127.2 |
| | $ | 578.0 |
| | $ | (421.0 | ) | | $ | 157.0 |
|
Developed technology | 15-23 years | | 3,005.3 |
| | (2,165.4 | ) | | 839.9 |
| | 3,005.3 |
| | (1,965.7 | ) | | 1,039.6 |
|
In-process research and development | Indefinite until commercialization | | 327.4 |
| | — |
| | 327.4 |
| | 330.1 |
| | — |
| | 330.1 |
|
Trademarks and tradenames | Indefinite | | 64.0 |
| | — |
| | 64.0 |
| | 64.0 |
| | — |
| | 64.0 |
|
Acquired and in-licensed rights and patents | 6-17 years | | 3,240.0 |
| | (123.8 | ) | | 3,116.2 |
| | 53.7 |
| | (12.9 | ) | | 40.8 |
|
Total intangible assets | | | $ | 7,214.7 |
| | $ | (2,740.0 | ) | | $ | 4,474.7 |
| | $ | 4,031.1 |
| | $ | (2,399.6 | ) | | $ | 1,631.5 |
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Amortization of acquired intangible assets totaled $342.9 million, $202.2 million, and $208.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. The increase in amortization for the year ended December 31, 2013 was primarily driven by amortization recorded in relation to the intangible asset recorded upon our acquisition of the TYSABRI rights and an increase in the amount of amortization recorded in relation to our AVONEX intangible asset. Amortization of acquired intangible assets for the year ended December 31, 2013, includes a charge of $2.6 million related to a write down in carrying value of one of our in-process research and development assets to reflect a change in its estimated fair value.
Developed Technology
Developed technology primarily relates to our AVONEX product, which was recorded in connection with the merger of Biogen, Inc. and IDEC Pharmaceuticals Corporation in 2003. The net book value of this asset as of December 31, 2013, was $829.7 million. We amortize this intangible asset using the economic consumption method based on revenue generated from our AVONEX product. An analysis of the anticipated lifetime revenues of AVONEX is performed annually during our long range planning cycle, which is generally updated in the third quarter of each year, and whenever events or changes in circumstances would significantly affect the anticipated lifetime revenues of AVONEX. This analysis serves as the basis for the calculation of our economic consumption models used for the AVONEX product.
In-process Research and Development (IPR&D)
In-process research and development represents the fair value assigned to research and development assets that we acquire that have not reached technological feasibility at the date of acquisition. Upon commercialization, we determine the estimated useful life. In connection with our acquisition of Stromedix in March 2012, we acquired IPR&D programs with an estimated fair value of $219.2 million. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.
Acquired and In-licensed Rights and Patents
Acquired and in-licensed rights and patents primarily relates to our acquisition of the TYSABRI rights from Elan. The net intangible asset capitalized related to this acquisition was $3,178.3 million. In the second quarter of 2013, we began amortizing this intangible asset over the estimated useful life using an economic consumption method based on actual and expected revenues generated from the sales of our TYSABRI product. For a more detailed description of this transaction, please read Note 2, Acquisitions to these consolidated financial statements.
Estimated Future Amortization of Intangible Assets
Our most recent long range planning cycle was updated in the third quarter of 2013, and included the impact of our acquisition of TYSABRI rights from Elan and a decrease in the expected future product revenues of AVONEX, resulting in an increase in amortization expense as compared to prior quarters. The results of our analysis were impacted by changes in the estimated impact of TECFIDERA, as well as other existing and potential oral and alternative MS formulations, including PLEGRIDY, that may compete with AVONEX and TYSABRI. Based upon this more recent analysis, the estimated future amortization for acquired intangible assets is expected to be as follows:
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| | | |
(In millions) | As of December 31, 2013 |
2014 | $ | 426.3 |
|
2015 | 336.4 |
|
2016 | 322.7 |
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2017 | 327.5 |
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2018 | 330.2 |
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Total | $ | 1,743.1 |
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Goodwill
The following table provides a roll forward of the changes in our goodwill balance:
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| | | | | | | |
| As of December 31, |
(In millions) | 2013 | | 2012 |
Goodwill, beginning of year | $ | 1,201.3 |
| | $ | 1,146.3 |
|
Increase to goodwill | 35.7 |
| | 48.2 |
|
Other | (4.1 | ) | | 6.8 |
|
Goodwill, end of year | $ | 1,232.9 |
| | $ | 1,201.3 |
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The increase in goodwill during the year ended December 31, 2013, was primarily related to the $15.0 million contingent payment (exclusive of a $1.5 million tax benefit), which became payable upon the approval of TECFIDERA in the U.S. and the $25.0 million contingent payment (exclusive of a $2.8 million tax benefit), which became payable as we reached the $1.0 billion cumulative sales level related to the Fumapharm Products, both made to former shareholders of Fumapharm AG and holders of their rights. For additional information related to future contingent payments, please read Note 22, Commitments and Contingencies to these consolidated financial statements.
For the year ended December 31, 2013, we also adjusted goodwill to establish a deferred tax asset related to our Stromedix transaction. For additional information related to our transaction with Stromedix, please read Note 2, Acquisitions to these consolidated financial statements.
As of December 31, 2013, we had no accumulated impairment losses related to goodwill.
