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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies TYSABRI Contingent Payments In 2013 we acquired from Elan full ownership of all remaining rights to TYSABRI that we did not already own or control. Under the acquisition agreement, we are obligated to make contingent payments to Elan of 18% on annual worldwide net sales up to $2.0 billion and 25% on annual worldwide net sales that exceed $2.0 billion. Royalty payments to Elan and other third parties are recognized as cost of sales in our consolidated statements of income. Elan was acquired by Perrigo Company plc (Perrigo) in December 2013, and Perrigo subsequently sold its rights to these payments to a third party effective January 2017. Contingent Consideration related to Business Combinations In connection with our acquisitions of Convergence, Stromedix and BIN, we agreed to make additional payments based upon the achievement of certain milestone events. As the acquisitions of Convergence, Stromedix and BIN, occurred after January 1, 2009, we recorded the contingent consideration liabilities associated with these transactions at their fair value on the acquisition date and revalue these obligations each reporting period. We may pay up to approximately $1.1 billion in remaining milestones related to these acquisitions. For additional information on our acquisition of Convergence please read Note 2, Acquisitions, to these consolidated financial statements. Fumapharm AG In 2006 we acquired Fumapharm AG. As part of this acquisition we acquired FUMADERM and TECFIDERA (together, Fumapharm Products). We paid $220.0 million upon closing of the transaction and agreed to pay an additional $15.0 million if a Fumapharm Product was approved for MS in the U.S. or E.U. In the second quarter of 2013 we paid this $15.0 million contingent payment as TECFIDERA was approved in the U.S. for MS by the FDA. We are also required to make additional contingent payments to former shareholders of Fumapharm AG or holders of their rights based on the attainment of certain cumulative sales levels of Fumapharm Products and the level of total net sales of Fumapharm Products in the prior 12-month period, as defined in the acquisition agreement. During 2017 we paid $1.2 billion in contingent payments as we reached the $11.0 billion, $12.0 billion, $13.0 billion and $14.0 billion cumulative sales levels related to the Fumapharm Products in the fourth quarter of 2016 and the first, second and third quarters of 2017, respectively, and accrued $600.0 million upon reaching $15.0 billion and $16.0 billion in total cumulative sales of Fumapharm Products in the fourth quarter of 2017. We will owe an additional $300.0 million contingent payment for every additional $1.0 billion in cumulative sales level of Fumapharm Products reached if the prior 12 months sales of the Fumapharm Products exceed $3.0 billion, until such time as the cumulative sales level reaches $20.0 billion, at which time no further contingent payments shall be due. If the prior 12 months sales of Fumapharm Products are less than $3.0 billion, contingent payments remain payable on a decreasing tiered basis. These payments will be accounted for as an increase to goodwill as incurred, in accordance with the accounting standard applicable to business combinations when we acquired Fumapharm. Any portion of the payment which is tax deductible will be recorded as a reduction to goodwill. Payments are due within 60 days following the end of the quarter in which the applicable cumulative sales level has been reached. Contingent Development, Regulatory and Commercial Milestone Payments Based on our development plans as of December 31, 2017, we could make potential future milestone payments to third parties of up to approximately $4.2 billion, including approximately $0.7 billion in development milestones, approximately $1.5 billion in regulatory milestones and approximately $2.0 billion in commercial milestones as part of our various collaborations, including licensing and development programs. Payments under these agreements generally become due and payable upon achievement of certain development, regulatory or commercial milestones. Because the achievement of these milestones was not considered probable as of December 31, 2017, such contingencies have not been recorded in our financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones. Other Funding Commitments As of December 31, 2017, we have several on-going clinical studies in various clinical trial stages. Our most significant clinical trial expenditures are to CROs. The contracts with CROs are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $40.0 million in our consolidated balance sheet for expenditures incurred by CROs as of December 31, 2017. We have approximately $460.0 million in cancellable future commitments based on existing CRO contracts as of December 31, 2017. Tax Related Obligations We exclude liabilities pertaining to uncertain tax positions from our summary of contractual obligations as we cannot make a reliable estimate of the period of cash settlement with the respective taxing authorities. As of December 31, 2017, we have approximately $77.3 million of net liabilities associated with uncertain tax positions. As of December 31, 2017, we have accrued income tax liabilities of $989.6 million under the Transition Toll Tax, of which $78.3 million is expected to be paid within one year. The Transition Toll Tax will be paid over an eight-year period, starting in 2018, and will not accrue interest. Solothurn, Switzerland Facility In December 2015, we purchased land in Solothurn, Switzerland and are building a large-scale biologics manufacturing facility at this site. We expect this facility to be operational by the end of the decade. As of December 31, 2017, we had contractual commitments of $270.0 million for the construction of this facility. Leases We rent laboratory and office space and certain equipment under non-cancelable operating leases. These lease agreements contain various clauses for renewal at our option and, in certain cases, escalation clauses typically linked to rates of inflation. Rental expense, net of sublease income under these leases, which terminate at various dates through 2028, amounted to $65.3 million, $68.7 million and $68.6 million in 2017, 2016 and 2015, respectively. In addition to rent, the leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expenses. As of December 31, 2017, minimum rental commitments under non-cancelable leases, net of income from subleases, for each of the next five years and total thereafter were as follows:
(In millions) | 2018 |  | 2019 |  | 2020 |  | 2021 |  | 2022 |  | Thereafter |  | Total
Minimum lease payments | $ | 72.6 |  |  | $ | 72.3 |  |  | $ | 68.4 |  |  | $ | 66.9 |  |  | $ | 65.7 |  |  | $ | 271.1 |  |  | $ | 617.0 |
Less: income from subleases (1) | (24.3 | ) |  | (24.7 | ) |  | (23.9 | ) |  | (22.3 | ) |  | (22.0 | ) |  | (71.3 | ) |  | (188.5 | )
Net minimum lease payments | $ | 48.3 |  |  | $ | 47.6 |  |  | $ | 44.5 |  |  | $ | 44.6 |  |  | $ | 43.7 |  |  | $ | 199.8 |  |  | $ | 428.5 |
(1) | Represents sublease income expected to be received for the vacated manufacturing facility in Cambridge, MA, the vacated portion of our Weston, MA facility and other facilities throughout the world.
Under certain of our lease agreements, we are contractually obligated to return leased space to its original condition upon termination of the lease agreement. At the inception of a lease with such conditions, we record an asset retirement obligation liability and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, for each such lease, we record interest expense to accrete the asset retirement obligation liability to full value and depreciate each capitalized asset retirement obligation asset, both over the term of the associated lease agreement. Our asset retirement obligations were not significant as of December 31, 2017 or 2016.

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- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
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