XML 28 R18.htm IDEA: XBRL DOCUMENT
v3.25.2

Financial Instruments and Risk Management | 6 Months Ended
--- | ---
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments and Risk Management | Financial Instruments and Risk Management The Company is exposed to certain financial risks relating to its ongoing business operations. The primary financial risks that are managed by using derivative instruments are foreign currency risk and interest rate risk. Foreign Currency Risk Management In order to manage certain foreign currency risks, the Company enters into foreign exchange forward contracts to mitigate risk associated with changes in spot exchange rates of mainly non-functional currency denominated assets or liabilities. The foreign exchange forward contracts are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any gains or losses on the foreign exchange forward contracts are recognized in earnings in the period incurred in the condensed consolidated statements of operations. The Company has also entered into forward contracts to hedge forecasted foreign currency denominated sales from certain international subsidiaries and a portion of forecasted intercompany inventory sales denominated in Euro, Japanese Yen, and Chinese Renminbi for up to eighteen months. These contracts are designated as cash flow hedges to manage foreign currency transaction risk and are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. Any changes in the fair value of designated cash flow hedges are deferred in AOCE and are reclassified into earnings when the hedged item impacts earnings. Net Investment Hedges The Company may hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries by either borrowing directly in foreign currencies and designating all or a portion of the foreign currency debt as a hedge of the applicable net investment position or entering into foreign currency swaps that are designated as hedges of net investments. The Company has designated certain Euro and Yen borrowings as a hedge of its investment in certain Euro-functional and Yen-functional currency subsidiaries in order to manage foreign currency translation risk. Borrowings designated as net investment hedges are marked-to-market using the current spot exchange rate as of the end of the period, with gains and losses included in the foreign currency translation component of AOCE until the sale or substantial liquidation of the underlying net investments. In addition, the Company manages the related foreign exchange risk of the Euro and Yen borrowings not designated as net investment hedges through certain Euro and Yen denominated financial assets and forward currency swaps. The following table summarizes the principal amounts of the Company’s outstanding Euro and Yen borrowings and the notional amounts of the Euro and Yen borrowings designated as net investment hedges:
|  |  |  | Notional Amount Designated as a Net Investment Hedge
(In millions) |  | Principal Amount |  | June 30, 2025 |  | December 31, 2024
1.362% Euro Senior Notes due 2027 |  | € | 850.0 |  |  | € | 850.0 |  |  | € | 850.0 |
3.125% Euro Senior Notes due 2028 |  | 750.0 |  |  | 750.0 |  |  | 750.0 |
1.908% Euro Senior Notes due 2032 |  | 1,250.0 |  |  | 1,250.0 |  |  | 1,250.0 |
Euro Total |  | € | 2,850.0 |  |  | € | 2,850.0 |  |  | € | 2,850.0 |
Yen |  |  |  |  |  |
YEN Term Loan |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |
Yen Total |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |  |  | ¥ | 40,000.0 |
____________ At June 30, 2025, the principal amount of the Company’s outstanding Yen borrowings and the notional amount of the Yen borrowings designated as net investment hedges was $277.7 million. During the third quarter of 2023, the Company executed fixed-rate cross-currency interest rate swaps with notional amounts totaling Japanese Yen 14.6 billion with settlement dates through 2026. During the second quarter of 2024, the Company executed fixed-rate cross-currency interest rate swaps with notional amounts totaling €500 million with settlement dates through 2026. The transactions hedge a portion of the Company’s net investment in certain Yen- and Euro-functional currency subsidiaries. All changes in the fair value of these derivative instruments, which are designated as net investment hedges, are marked-to-market using the current spot exchange rate as of the end of the period. The portion of these changes related to the excluded component will be amortized in interest expense over the life of the derivative while the remainder will be recorded in AOCE until the sale or substantial liquidation of the underlying net investments. The semiannual net interest payment received related to the fixed-rate component of the cross-currency interest rate swaps will be reflected in operating cash flows. Subsequent to June 30, 2025, the Company terminated its Yen fixed-rate cross-currency interest rate swaps in exchange for $3.4 million in cash proceeds, net of fees. During the fourth quarter of 2023, the Company executed foreign currency forward contracts with notional amounts totaling €500 million. During the second quarter of 2024, the Company executed additional foreign currency forward contracts with notional amounts totaling €600 million. The transactions hedged a portion of the Company’s net investment in certain Euro functional currency subsidiaries. The contracts were designated as a net investment hedge and matured in July 2024. In April 2025, the Company executed foreign currency forward contracts with notional amounts totaling Chinese Renminbi 1.42 billion (approximately $200 million) maturing in December 2026 and Chinese Renminbi 695 million (approximately $100 million) maturing in December 2027. The transactions hedge a portion of the Company’s net investment in certain Chinese Renminbi functional currency subsidiaries. The contracts were designated as net investment hedges. Interest Rate Risk Management The Company enters into interest rate swaps from time to time in order to manage interest rate risk associated with the Company’s fixed-rate and floating-rate debt. Interest rate swaps that meet specific accounting criteria are accounted for as fair value or cash flow hedges. All derivative instruments used to manage interest rate risk are measured at fair value and reported as current assets or current liabilities in the condensed consolidated balance sheets. For fair value hedges, the changes in the fair value of both the hedging instrument and the underlying debt obligations are included in interest expense. For cash flow hedges, the change in fair value of the hedging instrument is deferred through AOCE and is reclassified into earnings when the hedged item impacts earnings. Cash Flow Hedging Relationships The Company’s interest rate swaps designated as cash flow hedges fix the interest rate on a portion of the Company’s variable-rate debt or hedge part of the Company’s interest rate exposure associated with the variability in the future cash flows attributable to changes in interest rates. Any changes in fair value are included in earnings or deferred through AOCE, depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the condensed consolidated statements of operations. Credit Risk Management The Company regularly reviews the creditworthiness of its financial counterparties and does not expect to incur a significant loss from the failure of any counterparties to perform under any agreements. The Company is not subject to any obligations to post collateral under derivative instrument contracts. Certain derivative instrument contracts entered into by the Company are governed by master agreements, which contain credit-risk-related contingent features that would allow the counterparties to terminate the contracts early and request immediate payment should the Company trigger an event of default on other specified borrowings. The Company records all derivative instruments on a gross basis in the condensed consolidated balance sheets. Accordingly, there are no offsetting amounts that net assets against liabilities. The following table summarizes the classification and fair values of derivative instruments in our condensed consolidated balance sheets:
| Asset Derivatives |  | Liability Derivatives
(In millions) | Balance Sheet Location | June 30, 2025 Fair Value | December 31, 2024 Fair Value |  | Balance Sheet Location | June 30, 2025 Fair Value | December 31, 2024 Fair Value
Derivatives designated as hedges: |  |  |  |  |  |  |
Cross-currency interest rate swaps | Prepaid expenses & other current assets | $ | 0.1 |  | $ | 24.1 |  |  | Other current liabilities | $ | 52.7 |  | $ | — |
Foreign currency forward contracts | Prepaid expenses & other current assets | 3.9 |  | 39.2 |  |  | Other current liabilities | 23.3 |  | — |
Foreign currency forward contracts |  | — |  | — |  |  | Other long-term obligations | 5.9 |  | — |
Total derivatives designated as hedges |  | 4.0 |  | 63.3 |  |  |  | 81.9 |  | — |
Derivatives not designated as hedges: |  |  |  |  |  |  |
Foreign currency forward contracts | Prepaid expenses & other current assets | 138.4 |  | 198.3 |  |  | Other current liabilities | 301.0 |  | 125.8 |
Total derivatives not designated as hedges |  | 138.4 |  | 198.3 |  |  |  | 301.0 |  | 125.8 |
Total derivatives |  | $ | 142.4 |  | $ | 261.6 |  |  |  | $ | 382.9 |  | $ | 125.8 |
The following table summarizes information about the gains/(losses) incurred to hedge or offset operational foreign exchange or interest rate risk:
|  | Amount of Gains/(Losses) Recognized in Earnings |  | Amount of Gains/(Losses) Recognized in AOCE (Net of Tax) on Derivatives |  | Amount of Gains/(Losses) Reclassified from AOCE into Earnings
|  | Three months ended June 30,
(In millions) | Location of Gain/(Loss) | 2025 | 2024 |  | 2025 | 2024 |  | 2025 | 2024
Derivative Financial Instruments in Cash Flow Hedging Relationships (1) : |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Net sales (3) | $ | — |  | $ | — |  |  | $ | (21.6) |  | $ | 12.9 |  |  | $ | 0.7 |  | $ | 10.0 |
Interest rate swaps | Interest expense (3) | — |  | — |  |  | (1.0) |  | (1.3) |  |  | (1.2) |  | (1.6) |
Derivative Financial Instruments in Net Investment Hedging Relationships: |  |  |  |  |  |  |  |  |
Cross-currency interest rate swaps | Interest expense (2) | 3.4 |  | 2.6 |  |  | (40.3) |  | 5.1 |  |  | — |  | — |
Foreign currency forward contracts | Other expense (income), net (3) | — |  | — |  |  | (4.6) |  | 3.3 |  |  | 1.1 |  | — |
Non-derivative Financial Instruments in Net Investment Hedging Relationships: |  |  |  |  |  |  |  |  |
Foreign currency borrowings |  | — |  | — |  |  | (233.0) |  | 45.1 |  |  | — |  | — |
Derivative Financial Instruments Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Foreign currency option and forward contracts | Other income, net (2) | (125.3) |  | 68.9 |  |  | — |  | — |  |  | — |  | — |
Total |  | $ | (121.9) |  | $ | 71.5 |  |  | $ | (300.5) |  | $ | 65.1 |  |  | $ | 0.6 |  | $ | 8.4 |
|  | Amount of Gains/(Losses) Recognized in Earnings |  | Amount of Gains/(Losses) Recognized in AOCE (Net of Tax) on Derivatives |  | Amount of Gains/(Losses) Reclassified from AOCE into Earnings
|  | Six months ended June 30,
(In millions) | Location of Gain/(Loss) | 2025 | 2024 |  | 2025 | 2024 |  | 2025 | 2024
Derivative Financial Instruments in Cash Flow Hedging Relationships (1) : |  |  |  |  |  |  |  |  |
Foreign currency forward contracts | Net sales (3) | $ | — |  | $ | — |  |  | $ | (34.8) |  | $ | 37.7 |  |  | $ | 10.6 |  | $ | 16.6 |
Interest rate swaps | Interest expense (3) | — |  | — |  |  | (1.9) |  | (2.5) |  |  | (2.4) |  | (3.2) |
Derivative Financial Instruments in Net Investment Hedging Relationships: |  |  |  |  |  |  |  |  |
Cross-currency interest rate swaps | Interest expense (2) | 6.8 |  | 3.8 |  |  | (60.1) |  | 10.0 |  |  | — |  | — |
Foreign currency forward contracts | Other expense (income), net (3) | — |  | — |  |  | (4.6) |  | 14.0 |  |  | 1.1 |  | — |
Non-derivative Financial Instruments in Net Investment Hedging Relationships: |  |  |  |  |  |  |  |  |
Foreign currency borrowings |  | — |  | — |  |  | (349.4) |  | 162.1 |  |  | — |  | — |
Derivative Financial Instruments Not Designated as Hedging Instruments: |  |  |  |  |  |  |  |  |
Foreign currency option and forward contracts | Other expense (income), net (2) | (235.2) |  | 46.1 |  |  | — |  | — |  |  | — |  | — |
Total |  | $ | (228.4) |  | $ | 49.9 |  |  | $ | (450.8) |  | $ | 221.3 |  |  | $ | 9.3 |  | $ | 13.4 |
____________ (1)At June 30, 2025, the Company expects that approximately $32.0 million of pre-tax net losses on cash flow hedges will be reclassified from AOCE into earnings during the next twelve months. (2)Represents the location of the gain/(loss) recognized in earnings on derivatives. (3)Represents the location of the gain/(loss) reclassified from AOCE into earnings. Fair Value Measurement Fair value is based on the price that would be received from the sale of an identical asset or paid to transfer an identical liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy has been established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: •Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. •Level 2: Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities. •Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considers counterparty credit risk in its assessment of fair value. Financial assets and liabilities carried at fair value are classified in the tables below in one of the three categories described above:
| June 30, 2025 |  | December 31, 2024
(In millions) | Level 1 |  | Level 2 |  | Level 3 |  | Level 1 |  | Level 2 |  | Level 3
Recurring fair value measurements |  |  |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |  |  |
Cash equivalents: |  |  |  |  |  |  |  |  |  |  |
Money market funds | $ | 223.1 |  |  | $ | — |  |  | $ | — |  |  | $ | 387.7 |  |  | $ | — |  |  | $ | — |
Total cash equivalents | 223.1 |  |  | — |  |  | — |  |  | 387.7 |  |  | — |  |  | — |
Equity securities: |  |  |  |  |  |  |  |  |  |  |
Exchange traded funds | 58.3 |  |  | — |  |  | — |  |  | 54.8 |  |  | — |  |  | — |
Marketable securities | 1.8 |  |  | — |  |  | — |  |  | 0.7 |  |  | — |  |  | — |
Total equity securities | 60.1 |  |  | — |  |  | — |  |  | 55.5 |  |  | — |  |  | — |
CCPS in Biocon Biologics | — |  |  | — |  |  | 950.0 |  |  | — |  |  | — |  |  | 1,349.8 |
Available-for-sale fixed income investments: |  |  |  |  |  |  |  |  |  |  |
Corporate bonds | — |  |  | 13.7 |  |  | — |  |  | — |  |  | 12.9 |  |  | — |
U.S. Treasuries | — |  |  | 19.3 |  |  | — |  |  | — |  |  | 17.2 |  |  | — |
Agency mortgage-backed securities | — |  |  | 2.2 |  |  | — |  |  | — |  |  | 3.2 |  |  | — |
Asset backed securities | — |  |  | 4.2 |  |  | — |  |  | — |  |  | 4.4 |  |  | — |
Other | — |  |  | 0.3 |  |  | — |  |  | — |  |  | 0.3 |  |  | — |
Total available-for-sale fixed income investments | — |  |  | 39.7 |  |  | — |  |  | — |  |  | 38.0 |  |  | — |
Foreign exchange derivative assets | — |  |  | 142.3 |  |  | — |  |  | — |  |  | 237.5 |  |  | — |
Interest rate swap derivative assets | — |  |  | 0.1 |  |  | — |  |  | — |  |  | 24.1 |  |  | — |
Total assets at recurring fair value measurement | $ | 283.2 |  |  | $ | 182.1 |  |  | $ | 950.0 |  |  | $ | 443.2 |  |  | $ | 299.6 |  |  | $ | 1,349.8 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |
Foreign exchange derivative liabilities | $ | — |  |  | $ | 330.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 125.8 |  |  | $ | — |
Interest rate swap derivative liabilities | — |  |  | 52.7 |  |  | — |  |  | — |  |  | — |  |  | — |
Contingent consideration | — |  |  | — |  |  | 367.2 |  |  | — |  |  | — |  |  | 556.1 |
Total liabilities at recurring fair value measurement | $ | — |  |  | $ | 382.9 |  |  | $ | 367.2 |  |  | $ | — |  |  | $ | 125.8 |  |  | $ | 556.1 |
For financial assets and liabilities that utilize Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including interest rate yield curves, foreign exchange forward prices and bank price quotes. Below is a summary of valuation techniques for the Company’s financial assets and liabilities: •Cash equivalents — valued at observable net asset value prices. •Equity securities, exchange traded funds — valued at the active quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other Expense (Income), Net in the condensed consolidated statements of operations. •Equity securities, marketable securities — valued using quoted stock prices from public exchanges at the reporting date. Unrealized gains and losses attributable to changes in fair value are included in Other Expense (Income), Net in the condensed consolidated statements of operations. •CCPS in Biocon Biologics — The Company elected the fair value option for the CCPS under ASC 825. Through March 31, 2025, the CCPS were valued using a Monte Carlo simulation model using Level 3 inputs. The fair value of the CCPS is sensitive to changes in the forecasts of operating metrics, changes in volatility and discount rates, and share dilution. During the second quarter of 2025, there was an observable third-party transaction that indicated the fair value of the CCPS was lower than the amount calculated utilizing the Monte Carlo simulation model. Accordingly, the Company recognized a reduction in the fair value of $284.0 million during the second quarter of 2025 based upon this third-party transaction. The fair value is reassessed quarterly and any change in the fair value estimate is recorded in Other Expense (Income), Net in the condensed consolidated statements of operations for that period. During the three months ended June 30, 2025 and 2024, the Company recorded a loss (gain) of $284.0 million and $(282.4) million, respectively, and during the six months ended June 30, 2025 and 2024, the Company recorded a loss (gain) of $399.8 million and $(329.3) million, respectively, as a result of remeasuring the CCPS in Biocon Biologics to fair value. The Company’s CCPS in Biocon Biologics are classified as equity securities and are included in Other Assets in the condensed consolidated balance sheets. •Available-for-sale fixed income investments — valued at the quoted market prices from broker or dealer quotations or transparent pricing sources at the reporting date. Unrealized gains and losses attributable to changes in fair value, net of income taxes, are included in accumulated other comprehensive loss as a component of shareholders’ equity. •Foreign exchange derivative assets and liabilities — valued using quoted forward foreign exchange prices and spot rates at the reporting date. Counterparties to these contracts are highly rated financial institutions. Contingent Consideration As of June 30, 2025 and December 31, 2024, the Company had a contingent consideration liability of $288.0 million and $378.0 million, respectively, related to the Idorsia Transaction. During the six months ended June 30, 2025, the Company recorded a fair value adjustment gain related to the Idorsia Transaction contingent consideration liability, primarily as a result of the February 25, 2025 letter agreement entered into that amended certain terms of the original development agreement for selatogrel and cenerimod. Refer to Note 4 Acquisitions and Other Transactions for additional information. As of June 30, 2025 and December 31, 2024, the Company had a contingent consideration liability of $77.5 million and $176.3 million, respectively, related to the Respiratory Delivery Platform. The measurement of these contingent consideration liabilities is calculated using unobservable Level 3 inputs based on the Company’s own assumptions primarily related to the probability and timing of future events, including the timing of additional potential competition, and payments which are discounted using a market rate of return. At June 30, 2025, discount rates ranging from 8.5% to 18.0%, and at December 31, 2024, discount rates ranging from 9.0% and 19.0% were utilized in the valuations. Significant changes in unobservable inputs could result in material changes to the contingent consideration liabilities. A rollforward of the activity in the Company’s fair value of contingent consideration from December 31, 2024 to June 30, 2025 is as follows:
(In millions) | Current Portion (1) |  | Long-Term Portion (2) |  | Total Contingent Consideration
Balance at December 31, 2024 | $ | 59.5 |  |  | $ | 496.6 |  |  | $ | 556.1 |
Payments | (19.9) |  |  | — |  |  | (19.9) |
Reclassifications | (2.5) |  |  | 2.5 |  |  | — |
Accretion | — |  |  | 2.4 |  |  | 2.4 |
Fair value gain (3) | — |  |  | (171.4) |  |  | (171.4) |
Balance at June 30, 2025 | $ | 37.1 |  |  | $ | 330.1 |  |  | $ | 367.2 |
____________ (1)Included in other current liabilities in the condensed consolidated balance sheets. (2)Included in other long-term obligations in the condensed consolidated balance sheets. (3)Included in litigation settlements and other contingencies, net in the condensed consolidated statements of operations. Although the Company has not elected the fair value option for financial assets and liabilities other than the CCPS, any future transacted financial asset or liability will be evaluated for the fair value election.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 825 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/825/tableOfContent + Details
Name: | us-gaap_FinancialInstrumentsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration