Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combinations [Abstract]

Acquisitions

ACQUISITIONS

BIIB118 Acquisition

In March 2020 we acquired BIIB118 (CK1 inhibitor) for the potential treatment of patients with behavioral and neurological symptoms across various psychiatric and neurological diseases from Pfizer Inc. (Pfizer). We are developing BIIB118 for the potential treatment of irregular sleep wake rhythm disorder in Parkinson’s disease and plan to develop BIIB118 for the potential treatment of sundowning in Alzheimer's disease.

In connection with this acquisition, we made an upfront payment of $75.0 million to Pfizer, which was accounted for as an asset acquisition and recorded as acquired IPR&D in our consolidated statements of income as BIIB118 has not yet reached technological feasibility. We may also pay Pfizer up to $635.0 million in potential additional development and commercialization milestone payments as well as tiered royalties in the high single digits to sub-teens.

Acquisition of Nightstar Therapeutics plc

In June 2019 we completed our acquisition of all of the outstanding shares of Nightstar Therapeutics plc (NST), a clinical-stage gene therapy company focused on adeno-associated virus treatments for inherited retinal disorders. As a result of this acquisition, we added two mid- to late-stage clinical assets, as well as preclinical programs, in ophthalmology. These assets included BIIB111 (timrepigene emparvovec), for the potential treatment of choroideremia, and BIIB112 (cotoretigene toliparvovec), for the potential treatment of X-linked retinitis pigmentosa.

Under the terms of the acquisition, we paid NST shareholders $25.50 in cash for each issued and outstanding NST share, which totaled $847.6 million. In addition, we paid $4.6 million in cash for equity compensation, which was attributable to pre-combination services and was reflected as a component of the total purchase price paid. The fair value of equity compensation attributable to the post-combination service period was $26.2 million, of which $18.4 million was recognized as a charge to selling, general and administrative expense with the remaining $7.8 million as a charge to research and development expense in our consolidated statements of income. These amounts were associated with the accelerated vesting of stock options previously granted to NST employees and were fully paid in cash as of June 30, 2019. We funded this acquisition through available cash and accounted for it as an acquisition of a business. We finalized purchase accounting for this acquisition in the fourth quarter of 2019.

The fair value of the IPR&D programs acquired was determined through a probability adjusted discounted cash flow analysis utilizing a discount rate of 12.5%. We recorded IPR&D assets for BIIB111 and BIIB112 at their initial fair values of $480.0 million and $220.0 million, respectively. Some of the more significant assumptions utilized in our asset valuations included the estimated net cash flows for each year for each asset or product, including net revenue, cost of sales, research and development and other operating expense, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream as well as other factors. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements.

We recognized goodwill in relation to the fair value associated with NST workforce's expertise and early research in retinal disorders. We also recognized goodwill in relation to the establishment of a deferred tax liability for the acquired IPR&D intangible assets, which have no tax basis. This deferred tax liability is net of the related impacts on the deferred taxes for GILTI. Goodwill that is tax deductible for GILTI purposes was approximately $60.9 million.

There is no remaining book value associated with either BIIB111 or BIIB112 as of December 31, 2021, as we have fully impaired both of these IPR&D assets. For additional information, please read Note 6, Intangible Assets and Goodwill, to these consolidated financial statements.