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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2017
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The tables below present information about our assets and liabilities that are regularly measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques we utilized to determine such fair value:
(In millions) | As of December 31, 2017 |  | Quoted Prices in Active Markets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Cash equivalents | $ | 1,229.4 |  |  | $ | — |  |  | $ | 1,229.4 |  |  | $ | — |
Marketable debt securities: |  |  |  |  |  |  |
Corporate debt securities | 2,609.8 |  |  | — |  |  | 2,609.8 |  |  | — |
Government securities | 1,919.3 |  |  | — |  |  | 1,919.3 |  |  | — |
Mortgage and other asset backed securities | 643.4 |  |  | — |  |  | 643.4 |  |  | — |
Marketable equity securities | 11.8 |  |  | 11.8 |  |  | — |  |  | — |
Derivative contracts | 2.7 |  |  | — |  |  | 2.7 |  |  | — |
Plan assets for deferred compensation | 28.5 |  |  | — |  |  | 28.5 |  |  | — |
Total | $ | 6,444.9 |  |  | $ | 11.8 |  |  | $ | 6,433.1 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Derivative contracts | $ | 111.3 |  |  | $ | — |  |  | $ | 111.3 |  |  | $ | — |
Contingent consideration obligations | 523.6 |  |  | — |  |  | — |  |  | 523.6 |
Total | $ | 634.9 |  |  | $ | — |  |  | $ | 111.3 |  |  | $ | 523.6 |
(In millions) | As of December 31, 2016 |  | Quoted Prices in Active Markets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Assets: |  |  |  |  |  |  |
Cash equivalents | $ | 2,039.6 |  |  | $ | — |  |  | $ | 2,039.6 |  |  | $ | — |
Marketable debt securities: |  |  |  |  |  |  |
Corporate debt securities | 2,663.8 |  |  | — |  |  | 2,663.8 |  |  | — |
Government securities | 2,172.5 |  |  | — |  |  | 2,172.5 |  |  | — |
Mortgage and other asset backed securities | 561.7 |  |  | — |  |  | 561.7 |  |  | — |
Marketable equity securities | 24.9 |  |  | 24.9 |  |  | — |  |  | — |
Derivative contracts | 61.0 |  |  | — |  |  | 61.0 |  |  | — |
Plan assets for deferred compensation | 34.5 |  |  | — |  |  | 34.5 |  |  | — |
Total | $ | 7,558.0 |  |  | $ | 24.9 |  |  | $ | 7,533.1 |  |  | $ | — |
Liabilities: |  |  |  |  |  |  |
Derivative contracts | $ | 13.6 |  |  | $ | — |  |  | $ | 13.6 |  |  | $ | — |
Contingent consideration obligations | 467.6 |  |  | — |  |  | — |  |  | 467.6 |
Total | $ | 481.2 |  |  | $ | — |  |  | $ | 13.6 |  |  | $ | 467.6 |
The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services. For a description of our validation procedures related to prices provided by third-party pricing services, please read Note 1, Summary of Significant Accounting Policies: Fair Value Measurements, to these consolidated financial statements. Debt Instruments The fair values of our debt instruments, which are Level 2 liabilities, are summarized as follows:
| As of December 31,
(In millions) | 2017 |  | 2016
Notes payable to Fumedica | $ | 3.2 |  |  | $ | 6.1 |
6.875% Senior Notes due March 1, 2018 | — |  |  | 583.7 |
2.900% Senior Notes due September 15, 2020 | 1,517.7 |  |  | 1,521.5 |
3.625% Senior Notes due September 15, 2022 | 1,032.9 |  |  | 1,026.6 |
4.050% Senior Notes due September 15, 2025 | 1,851.9 |  |  | 1,796.0 |
5.200% Senior Notes due September 15, 2045 | 2,077.6 |  |  | 1,874.5 |
Total | $ | 6,483.3 |  |  | $ | 6,808.4 |
In November 2017 we redeemed our 6.875% Senior Notes due March 1, 2018 with an aggregate principal amount of $550.0 million. For information on this redemption please read Note 12, Indebtedness, to these consolidated financial statements. The fair value of our notes payable to Fumedica was estimated using market observable inputs, including current interest and foreign currency exchange rates. The fair value of each series of our Senior Notes was determined through market, observable and corroborated sources. For additional information on our debt instruments, please read Note 12, Indebtedness, to these consolidated financial statements. Contingent Consideration Obligations In connection with our acquisitions of Convergence, Stromedix and BIN in 2015, 2012 and 2010, respectively, we agreed to make additional payments based upon the achievement of certain milestone events. The following table provides a roll forward of the fair values of our contingent consideration obligations, which includes Level 3 measurements:
| As of December 31,
(In millions) | 2017 |  | 2016
Fair value, beginning of year | $ | 467.6 |  |  | $ | 506.0 |
Changes in fair value | 62.7 |  |  | 14.8 |
Payments and other | (6.7 | ) |  | (53.2 | )
Fair value, end of year | $ | 523.6 |  |  | $ | 467.6 |
As of December 31, 2017 and 2016, approximately $279.0 million and $246.8 million, respectively, of the fair value of our total contingent consideration obligations was reflected as a component of other long-term liabilities in our consolidated balance sheets with the remaining balance reflected as a component of accrued expenses and other. Changes in the fair value of our contingent consideration obligations are primarily due to changes in the expected timing and probabilities of success related to the achievement of certain developmental milestones and changes in the discount rate. Payments and other for 2016 includes $7.9 million of a Convergence milestone converted to a short-term obligation under the acquisition agreement. There were no changes in valuation techniques or transfers between fair value measurement levels during the years ended December 31, 2017 and 2016. The fair values of the intangible assets and contingent consideration liabilities were based on a probability-adjusted discounted cash flow calculation using Level 3 fair value measurements and inputs including estimated revenues and probabilities of success. For additional information on the valuation techniques and inputs utilized in the valuation of our financial assets and liabilities, please read Note 1, Summary of Significant Accounting Policies, to these consolidated financial statements. Convergence In connection with our acquisition of Convergence in February 2015 we recorded a contingent consideration obligation of $274.5 million. This valuation was based on probability weighted net cash outflow projections of $450.0 million, discounted using a rate of 2.0%, which was the estimated cost of debt financing for market participants. This liability reflected the revised estimate from the date of acquisition for our initial clinical development plans, resulting probabilities of success and the timing of certain milestone payments. For additional information on this transaction, please read Note 2, Acquisitions, to these consolidated financial statements. As of December 31, 2017 and 2016, the fair value of this contingent consideration obligation was $259.0 million and $258.9 million, respectively. Our most recent valuation was determined based upon net cash flow projections of $400.0 million, probability weighted and discounted using a rate of 2.4%, which is a measure of the credit risk associated with settling the liability. For 2017 compared to 2016, the net increase in the fair value of this obligation was primarily due to changes in the discount rate, partially offset by changes in the expected timing related to the achievement of certain remaining developmental milestones. Approximately $147.9 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within one year. Stromedix Inc. In connection with our acquisition of Stromedix in March 2012 we recorded a contingent consideration obligation of $122.2 million. As of December 31, 2017 and 2016, the fair value of this contingent consideration obligation was $162.4 million and $133.2 million, respectively. Our most recent valuation was determined based upon net cash outflow projections of $344.0 million, probability weighted and discounted using a rate of 2.4%, which is a measure of the credit risk associated with settling the liability. For 2017 compared to 2016, the net increase in the fair value of this obligation was primarily due to an increase in the probability of success related to the achievement of certain remaining developmental milestones, partially offset by changes in the discount rate. Approximately $76.7 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we expect to make the payment within one year. Biogen Idec International Neuroscience GmbH In connection with our acquisition of BIN in December 2010 we recorded a contingent consideration obligation of $81.2 million. As of December 31, 2017 and 2016, the fair value of this contingent consideration obligation was $102.2 million and $75.5 million, respectively. Our most recent valuation was determined based upon net cash outflow projections of $355.0 million, probability weighted and discounted using a rate of 2.8%, which is a measure of the credit risk associated with settling the liability. For 2017 compared to 2016, the net increase in the fair value of this obligation was primarily due to an increase in the probability of success related to the achievement of certain remaining developmental milestones, partially offset by a $6.7 million developmental milestone payment. Approximately $20.0 million is reflected as a component of accrued expenses and other in our consolidated balance sheets as we achieved the developmental milestone of dosing our first patient in our Phase 2 SPARK study of BIIB054 in Parkinson's disease in January 2018. Acquired IPR&D In connection with our acquisition of Convergence, we also allocated $424.6 million of the total purchase price to acquired IPR&D, which was capitalized as an intangible asset. The amount allocated to acquired IPR&D was based on significant inputs not observable in the market and thus represented a Level 3 fair value measurement. These assets will be tested for impairment annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life using the economic consumption method. For additional information on this transaction, please read Note 2, Acquisitions, to these consolidated financial statements.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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