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Collaborative and Other Relationships | 3 Months Ended
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Mar. 31, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Collaborative and Other Relationships | Collaborative and Other Relationships Eisai Co., Ltd. BAN2401 and Elenbecestat Collaboration We have a collaboration agreement with Eisai Co., Ltd. (Eisai) to jointly develop and commercialize BAN2401, a monoclonal antibody that targets amyloid beta aggregates, and elenbecestat, the oral BACE (base amyloid cleaving enzyme) inhibitor, two Eisai product candidates for the potential treatment of AD (the BAN2401 and Elenbecestat Collaboration). In September 2019 we and Eisai discontinued the global Phase 3 studies of elenbecestat in early AD. Eisai serves as the global operational and regulatory lead for BAN2401 and all costs, including research, development, sales and marketing expenses, are shared equally between us and Eisai. If BAN2401 receives marketing approval we and Eisai will co-promote BAN2401 and share profits equally. In addition, the BAN2401 and Elenbecestat Collaboration provides both parties with certain rights and obligations in the event of a change in control of either party. The BAN2401 and Elenbecestat Collaboration also provided Eisai with an option to jointly develop and commercialize aducanumab, our anti-amyloid beta antibody candidate for early AD (Aducanumab Option), and an option to jointly develop and commercialize one of our anti-tau monoclonal antibodies (Anti-Tau Option). In October 2017 Eisai exercised its Aducanumab Option and we entered into a new collaboration agreement for the joint development and commercialization of aducanumab (Aducanumab Collaboration Agreement). Eisai has not yet exercised its Anti-Tau Option. Under the Aducanumab Collaboration Agreement, the two companies will continue to jointly develop BAN2401 in accordance with the BAN2401 and Elenbecestat Collaboration; however, we are no longer required to pay Eisai any milestone payments for products containing BAN2401 and we are no longer entitled to any potential development and commercial milestone payments from Eisai in relation to aducanumab. For additional information on our BAN2401 and Elenbecestat Collaboration, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in our 2019 Form 10-K. A summary of development and sales and marketing expenses for the three months ended March 31, 2020, related to the BAN2401 and Elenbecestat Collaboration is as follows:
(In millions) |  | For the Three Months Ended March 31, 2020
Total development expense incurred by the collaboration related to the advancement of BAN2401 and elenbecestat |  | $ | 43.5 |
Biogen's share of BAN2401 and elenbecestat development expense reflected in research and development expense in our condensed consolidated statements of income |  | $ | 21.8 |
Total sales and marketing expense incurred by the collaboration |  | $ | 4.9 |
Biogen's share of BAN2401 sales and marketing expense reflected in selling, general and administrative expense in our condensed consolidated statements of income |  | $ | 2.4 |
For the three months ended March 31, 2019, total development expense incurred by the two parties related to the BAN2401 and Elenbecestat Collaboration and our share of development expense reflected in research and development expense in our condensed consolidated statements of income were $68.0 million and $34.0 million, respectively. For the three months ended March 31, 2019, sales and marketing expense related to the BAN2401 and Elenbecestat Collaboration was immaterial. Aducanumab Collaboration Agreement Under the Aducanumab Collaboration Agreement, we and Eisai will co-promote aducanumab with a region-based profit split and we lead the ongoing development of aducanumab. Beginning January 1, 2019, Eisai is reimbursing us for 45% of development costs incurred by the collaboration for the advancement of aducanumab (aducanumab development expense). In March 2019, based on a pre-specified futility analysis, we discontinued the global Phase 3 trials, EMERGE and ENGAGE, designed to evaluate the efficacy and safety of aducanumab in patients with early AD. A new analysis of a larger dataset from these trials, conducted in consultation with the FDA, showed that the Phase 3 EMERGE study met its pre-specified primary and secondary endpoints. In October 2019 we and Eisai announced that we plan to pursue regulatory approval for aducanumab in the U.S. In the first quarter of 2019, as a result of the decision to discontinue the Phase 3 EMERGE and ENGAGE trials following the futility analysis, we accrued approximately $45.0 million related to the termination of various clinical trials and research and development contracts net of the 45% Eisai reimbursement of development costs incurred under the Aducanumab Collaboration Agreement. Sales and marketing expense are shared in proportion to the same region-based profit split that will be utilized to co-promote aducanumab. For additional information on the Aducanumab Collaboration Agreement, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in our 2019 Form 10-K. A summary of development and sales and marketing expenses related to the Aducanumab Collaboration Agreement is as follows:
|  | For the Three Months Ended March 31,
(In millions) |  | 2020 |  | 2019
Total aducanumab development expense |  | $ | 19.1 |  |  | $ | 162.5 |
Biogen's share of aducanumab development expense reflected in research and development expense in our condensed consolidated statements of income |  | $ | 10.5 |  |  | $ | 89.4 |
Total aducanumab sales and marketing expense |  | $ | 22.7 |  |  | $ | 20.9 |
Biogen's share of aducanumab sales and marketing expense reflected in selling, general and administrative expense in our condensed consolidated statements of income |  | $ | 12.3 |  |  | $ | 11.6 |
In addition, we and Eisai co-promote AVONEX, TYSABRI and TECFIDERA in Japan in certain settings and Eisai distributes AVONEX, TYSABRI, TECFIDERA and PLEGRIDY in India and other Asia-Pacific markets, excluding China. UCB Pharma S.A. We have a collaboration agreement with UCB Pharma S.A. (UCB) to jointly develop and commercialize dapirolizumab pegol, an anti-CD40L pegylated Fab, for the potential treatment of systemic lupus erythematosus and other future agreed indications. Either we or UCB may propose development of dapirolizumab pegol in additional indications. If the parties do not agree to add an indication as an agreed indication to the collaboration, we or UCB may, at the sole expense of the applicable party, pursue development in such excluded indication(s), subject to an opt-in right of the non-pursuing party after proof of clinical activity. All costs incurred for agreed indications, including research, development, sales and marketing expenses, are shared equally between us and UCB. Upon marketing approval, we and UCB will co-promote dapirolizumab pegol and share profits equally. For the three months ended March 31, 2020, total development expense incurred by the collaboration was $19.0 million. Our share of the development expense was $9.5 million and was reflected in research and development expense in our condensed consolidated statements of income. For the three months ended March 31, 2019, operating expenses related to the collaboration were immaterial. Other Research and Discovery Arrangements These arrangements may include the potential for future milestone payments based on the achievement of certain clinical and commercial development payable over a period of several years. Sangamo Therapeutics, Inc. In February 2020 we entered into a global licensing collaboration agreement with Sangamo Therapeutics, Inc. (Sangamo), which closed in April 2020, to develop and commercialize ST-501 for tauopathies, including AD; ST-502 for synucleinopathies, including Parkinson’s disease; a third neuromuscular disease target; and up to nine additional neurological disease targets to be identified and selected within a five-year period. The companies will leverage Sangamo’s proprietary zinc finger protein technology delivered via AAV to modulate the expression of key genes involved in neurological diseases. In connection with the closing of this transaction in April 2020, we purchased $225.0 million of Sangamo common stock, or approximately 24 million shares at $9.21 per share, which are subject to transfer restrictions. During the second quarter of 2020 we plan to record an asset in investments and other assets in our condensed consolidated balance sheets to reflect the initial fair value of the Sangamo common stock acquired and a charge of approximately $85.0 million to research and development expense in our condensed consolidated statements of income to reflect the premium paid for the Sangamo common stock. We will also make an upfront payment of $125.0 million that will be recorded as research and development expense in the second quarter of 2020. We may also pay research, development, regulatory and commercial milestone payments that could total up to approximately $2.4 billion if we select all of the targets allowed under this agreement and all the specified milestones set forth in this agreement are achieved. Of this amount, up to $80.0 million relates to the selection of targets, $1.9 billion relates to the achievement of specified research, clinical development, regulatory and first commercial sale milestones and $380.0 million relates to the achievement of specified sales-based milestones if annual worldwide net sales of licensed products reach specified levels. In addition, we may pay tiered royalties on potential net commercial sales of any products developed under this collaboration in the high single digit to double digit sub-teen percentages. Skyhawk Therapeutics, Inc. In January 2019 we entered into a collaboration and research and development services agreement with Skyhawk Therapeutics, Inc. (Skyhawk) pursuant to which the companies are leveraging Skyhawk's SkySTAR technology platform with the goal of discovering innovative small molecule treatments for patients with neurological diseases, including MS and SMA. We are responsible for the development and potential commercialization of any therapies resulting from this collaboration and we may also pay Skyhawk up to a total of approximately $2.4 billion in additional milestone payments as well as potential royalties on net commercial sales. In connection with this agreement, we made an upfront payment of $74.0 million to Skyhawk, of which $38.5 million was recorded as research and development expense in our condensed consolidated statements of income and $35.5 million was recorded as prepaid research and development expenditures within investments and other assets in our condensed consolidated balance sheets and will be expensed as the services are provided. In October 2019 we amended this agreement to add an additional discovery program. In connection with this amendment, we made a payment to Skyhawk of $15.0 million. Samsung Bioepis Joint Venture Agreement In February 2012 we entered into a joint venture agreement with Samsung BioLogics, establishing an entity, Samsung Bioepis, to develop, manufacture and market biosimilar products. In June 2018 we exercised our option under our joint venture agreement to increase our ownership percentage in Samsung Bioepis from approximately 5% to approximately 49.9%. The share purchase transaction was completed in November 2018 and, upon closing, we paid 759.5 billion South Korean won ($676.6 million) to Samsung BioLogics. As of March 31, 2020, our ownership percentage remained at approximately 49.9%. We recognize our share of the results of operations related to our investment in Samsung Bioepis under the equity method of accounting one quarter in arrears when the results of the entity become available, which is reflected as equity in income (loss) of investee, net of tax in our condensed consolidated statements of income. During 2015, as our share of losses exceeded the carrying value of our initial investment, we suspended recognizing additional losses. In the first quarter of 2019 we restarted recognizing our share of Samsung Bioepis' income (losses), and we began recognizing amortization on certain basis differences resulting from our November 2018 investment. Upon investment, the equity method of accounting requires us to identify and allocate differences between the fair value of our investment and the carrying value of our interest in the underlying net assets of the investee. These basis differences are amortized over their economic life. The total basis difference was approximately $675 million, consisting of approximately $115 million attributed to inventory, approximately $615 million attributed to developed technology and approximately $170 million attributed to IPR&D. A deferred tax liability of $225 million was established for the acquired assets that had no tax basis. The basis differences related to inventory and developed technology will be amortized, net of tax, over their estimated useful lives of 1.5 years and 15 years, respectively, one quarter in arrears. Our joint venture partner, Samsung BioLogics, is currently subject to an ongoing criminal investigation that we continue to monitor. While this investigation could impact the operations of Samsung Bioepis and its business, we have assessed the value of our investment in Samsung Bioepis and continue to believe that the fair value of the investment is in excess of its net book value. For the three months ended March 31, 2020, we recognized losses on our investment of $14.8 million. These losses reflect our share of income totaling $6.1 million and amortization of basis differences totaling $20.9 million. As of March 31, 2020 and December 31, 2019, the carrying value of our investment in Samsung Bioepis totaled 651.1 billion South Korean won ($531.6 million) and 670.8 billion South Korean won ($580.2 million), respectively, which is classified as a component of investments and other assets in our condensed consolidated balance sheets. 2019 Transaction In December 2019 we completed a transaction with Samsung Bioepis and secured the exclusive rights to commercialize two potential ophthalmology biosimilar products, SB11 referencing LUCENTIS and SB15 referencing EYLEA, in major markets worldwide, including the U.S., Canada, Europe, Japan and Australia. Samsung Bioepis will be responsible for development and will supply both products to us. In connection with this transaction, we made an upfront payment of $100.0 million to Samsung Bioepis in January 2020, of which $63.0 million was recorded as research and development expense in 2019 and $37.0 million was recorded as an intangible asset in 2019. Additionally, we may pay Samsung Bioepis up to $210.0 million in additional development, regulatory and sales-based milestones, including a $15.0 million development milestone that we may pay in 2020. We also acquired an option to extend the term of our current European commercial agreement for BENEPALI, IMRALDI and FLIXABI by an additional five years, subject to payment of an option exercise fee of $60.0 million, and obtained exclusive rights to commercialize these products in China. 2013 Commercial Agreement We reflect revenues on sales of BENEPALI, IMRALDI and FLIXABI to third parties in product revenues, net in our condensed consolidated statements of income and record the related cost of revenues and sales and marketing expenses in our condensed consolidated statements of income to their respective line items when these costs are incurred. We share 50% of the profit or loss related to our commercial agreement with Samsung Bioepis, which is recognized in collaboration profit (loss) sharing in our condensed consolidated statements of income. For the three months ended March 31, 2020, we recognized net profit-sharing expense of $71.8 million to reflect Samsung Bioepis' 50% sharing of the net collaboration profits, compared to $58.1 million in the prior year comparative period. As discussed above, we have an option to extend this agreement by an additional five years, subject to the payment of an option exercise fee of $60.0 million. Other Services Simultaneous with the formation of Samsung Bioepis, we also entered into a technical development services agreement, a manufacturing agreement and a license agreement with Samsung Bioepis. For the three months ended March 31, 2020 and 2019, we recognized $3.7 million and $24.8 million, respectively, in revenues related to these services, which is reflected in collaborative and other relationships revenues as a component of other revenues in our condensed consolidated statements of income. Following the divestiture of our Hillerød, Denmark manufacturing operations in August 2019, FUJIFILM assumed responsibility for the manufacture of clinical and commercial quantities of bulk drug substance of biosimilar products for Samsung Bioepis. We no longer recognize revenues for the manufacturing completed after the divestiture date under our technical development services and manufacturing agreements with Samsung Bioepis. For additional information on the divestiture of our Hillerød, Denmark manufacturing operations, please read Note 3, Divestitures, to these condensed consolidated financial statements. Amounts receivable from Samsung Bioepis related to the agreements discussed above were $3.8 million and $85.0 million as of March 31, 2020 and December 31, 2019, respectively. Amounts payable to Samsung Bioepis as of March 31, 2020, were $19.8 million. Amounts payable to Samsung Bioepis as of December 31, 2019, consisted of the $100.0 million upfront payment related to the 2019 transaction, as discussed above. For additional information on our collaboration arrangements with Samsung Bioepis and our other significant collaboration arrangements, please read Note 18, Collaborative and Other Relationships, to our consolidated financial statements included in our 2019 Form 10-K.

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- Definition The entire disclosure for collaborative arrangements in which the entity is a participant, including a) information about the nature and purpose of such arrangements; b) its rights and obligations thereunder; c) the accounting policy for collaborative arrangements; and d) the income statement classification and amounts attributable to transactions arising from the collaborative arrangement between participants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -SubTopic 10 -Section 50 -Paragraph 1 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6931272&loc=SL5834143-161434 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 808 -URI http://asc.fasb.org/topic&trid=5833765 + Details
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