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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.04pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.13pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
late+3
adversely+2
investigations+2
threat+2
adverse+1
Positive rising
collaborators+1
greater+1
adequately+1
collaborations+1
efficient+1
Risk Factors (Item 1A)
12,430 words
ITEM 1A. RISK FACTORS
Risks Related to Our Business
We are substantially dependent on revenue from our products.
Our revenue depends upon continued sales of our products as well as the financial rights we have in our anti-CD20 therapeutic programs. A significant portion of our revenue is concentrated on sales of our products in increasingly competitive markets. Any of the following negative developments relating to any of our products or any of our anti-CD20 therapeutic programs may adversely affect our revenue and results of operations or our stock price:
• the introduction, greater acceptance or more favorable reimbursement of competing products, including new originator therapies, generics, prodrugs and biosimilars of existing products and products approved under abbreviated regulatory pathways;
• safety or efficacy issues;
• limitations and additional pressures on product pricing or price increases, including those relating to inflation and those resulting from governmental or regulatory requirements, including those relating to any future potential drug price negotiation under the IRA or other legislative or executive acts; increased competition, including from generic or biosimilar versions of our products; or changes in, or implementation of, reimbursement policies and practices of payors and other third parties;
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairment+19
closing+9
litigation+9
decline+2
adversely+2
Positive rising
collaboration+9
collaborative+6
achieved+6
favorable+5
exclusive+4
MD&A (Item 7)
18,436 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes beginning on page F-1 of this report.
For our discussion of the year ended December 31, 2024, compared to the year ended December 31, 2023, please read Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations located in our Annual Report on Form 10-K for the year ended December 31, 2024.
EXECUTIVE SUMMARY
INTRODUCTION
Biogen is a global biopharmaceutical company focused on discovering, developing and delivering innovative therapies for people living with serious and complex diseases. We have a broad portfolio of medicines to treat MS, have introduced the first approved treatment for SMA, co-developed treatments to address a defining pathology of Alzheimer’s disease and launched the first approved treatment to target a genetic cause of ALS. We market the first and only drug approved in the U.S., the E.U. and certain international markets for the treatment of FA in adults and adolescents aged 16 years and older. We are focused on advancing our pipeline in neurology, specialized immunology and rare diseases. We support our drug discovery and development efforts through internal research and development programs, external and acquisitions.
• adverse legal, administrative, geopolitical, regulatory or legislative developments; and
• our ability to maintain a positive reputation among patients, healthcare providers and others, which may be impacted by our pricing and reimbursement decisions.
LEQEMBI is in the early stages of commercial launch in the U.S. and certain international markets and SKYCLARYS is in the early stages of commercial launch in certain European markets. In addition to risks associated with new product launches and the other factors described in these Risk Factors, Biogen’s and Eisai’s ability to successfully commercialize LEQEMBI and our ability to successfully commercialize SKYCLARYS may be adversely affected due to:
• Eisai’s ability to obtain and maintain adequate reimbursement for LEQEMBI;
• the effectiveness of Eisai's and Biogen’s commercial strategy for marketing LEQEMBI;
• requirements such as participation in a registry and the use of imaging or other diagnostics for LEQEMBI;
• our ability to obtain approval in other markets;
• the approval and/or greater acceptance of other new products for the same or similar indications;
• Eisai’s and Biogen’s ability to maintain a positive reputation among patients, healthcare providers and others in the Alzheimer’s disease community, which may be impacted by pricing and reimbursement decisions relating to LEQEMBI, which are made by Eisai and/or third parties;
• Biogen's ability to obtain and maintain adequate reimbursement for SKYCLARYS; and
• the effectiveness of Biogen's commercial strategy for marketing SKYCLARYS.
Our long-term success depends upon the successful development of new products and additional indications for our existing products.
Our long-term success depends upon the successful development of new products from our research and development activities or our licenses or acquisitions from third parties, as well as the development of additional indications for our existing products. Product development is very expensive and involves a high degree of uncertainty and risk and is not always successful. Only a small number of research and development programs result in the commercialization of a product. It is difficult to predict the success and the time and cost of product development of novel approaches for the treatment of diseases. The development of novel approaches for the treatment of diseases, including development efforts in new modalities such as those based on the ASO platform, presents additional challenges and risks, including obtaining approval from regulatory authorities that have limited experience with the development of such therapies. For example, we are currently seeking approval of a subcutaneous formulation of LEQEMBI as a starting dose in the U.S. and any delays or challenges may impact our ability to realize the anticipated benefits from LEQEMBI.
Clinical trial data are subject to differing interpretations and even if we view data as sufficient to support the safety, effectiveness and/or approval of a product candidate, regulatory authorities may disagree and may require additional data, limit the scope of the approval or deny approval altogether. Furthermore, the approval of a product candidate by one regulatory agency does not mean that other regulatory agencies will also approve such product candidate.
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Success in preclinical work or early stage clinical trials does not ensure that later stage or larger scale clinical trials will be successful. Clinical trials may indicate that our product candidates lack efficacy, have harmful side effects, result in unexpectedadverse events or raise other concerns that may significantly reduce or delay the likelihood of regulatory approval. This may result in terminated programs, significant restrictions on use, safety warnings in an approved label, adverse placement within the treatment paradigm or significant reduction in the commercial potential of the product candidate.
Even if we could successfully develop new products or additional indications for our existing products, we may make a strategic decision to discontinue development of a product candidate or an additional indication for our existing products if, for example, we believe commercialization will be difficult relative to the standard of care or we prioritize other opportunities in our pipeline.
If we fail to compete effectively, our business and market position would suffer.
The biopharmaceutical industry and the markets in which we operate are intensely competitive. We compete in the marketing and sale of our products, the development of new products and processes, the acquisition of rights to new products with commercial potential and the hiring and retention of personnel. We compete with companies that have a greater number of products on the market and in the product pipeline, substantially greater financial, marketing, research and development and other resources, and other technological or competitive advantages.
Our products continue to face increasing competition from the introduction of new originator therapies, generics, prodrugs and biosimilars of existing products and products approved under abbreviated regulatory pathways. Some of these products are likely to be sold at substantially lower prices than our branded products. The introduction of such products as well as other lower-priced competing products has in the past reduced, and may in the future significantly reduce, both the price that we are able to charge for our products and the volume of products we sell, which has and may continue to negatively impact our revenue. In addition, in some markets, when a generic or biosimilar version of one of our products is commercialized, it has in the past and may in the future be automatically substituted for our product and significantly reduce our revenue in a short period of time.
Our ability to compete, maintain and grow our business may be adversely affected by a number of factors, including:
• the introduction of other products, including products that may be more efficacious, safer, less expensive or more convenient alternatives to our products, including our own products and products of our collaborators;
• the off-label use by physicians of therapies indicated for other conditions to treat patients;
• patient dynamics, including the size of the patient population and our ability to identify, attract and maintain new and current patients to our therapies;
• the reluctance of physicians to prescribe, and patients to use, our products without additional data on the efficacy and safety of such products;
• damage to physician and patient confidence in any of our products, generic or biosimilars of our products or any other product from the same class as one of our products, or to our sales and reputation as a result of label changes, pricing and reimbursement decisions or adverse experiences or events that may occur with patients treated with our products or generic or biosimilars of our products;
• inability to obtain and maintain appropriate pricing and adequate reimbursement for our products compared to our competitors in key markets; and
• our ability to obtain and maintain patent, data or market exclusivity for our products.
Our business may be adversely affected if we do not successfully execute or realize the anticipated benefits of our strategic and growth initiatives.
The successful execution of our strategic and growth initiatives depends upon internal development projects, commercial initiatives and external opportunities, which may include the acquisition and in-licensing of products, technologies, companies, the entry into strategic alliances and collaborations, as well as our ability to execute on strategic decisions and initiatives.
While we believe we have a number of promising programs in our pipeline, failure or delay of internal development projects to advance or difficulties in executing on our commercial initiatives could impact our current and future growth, resulting in additional reliance on external development opportunities for growth.
Supporting the further development of our existing products and potential new products in our pipeline will require significant capital expenditures and management resources, including investments in research and development, sales and marketing, manufacturing capabilities and other areas of our business.
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We have made, and may continue to make, significant operating and capital expenditures for potential new products prior to regulatory approval with no assurance that such investment will be recouped, which may adversely affect our financial condition, business and operations.
The availability of high quality, fairly valued external product development is limited and the opportunity to acquire or in-license is highly competitive. As such, we are not certain that we will be able to identify suitable candidates for acquisition or in-licensing or if we will be able to reach agreement to make any such acquisition or in-license if suitable candidates are identified.
We may fail to initiate or complete transactions for many reasons, including failure to obtain regulatory or other approvals as well as a result of disputes or litigation. Furthermore, we may not be able to achieve the full strategic and financial benefits expected to result from transactions, collaborations or strategic decisions, such as the decision to retain the biosimilars business, or the benefits may be delayed or not occur at all. We may also face additional costs or liabilities in completed transactions that were not contemplated prior to completion.
Any failure in the execution of a transaction, in the integration of an acquired asset or business or in achieving expected synergies could result in slower growth, higher than expected costs, the recording of asset impairment charges and other actions which could adversely affect our business, financial condition and results of operations.
We face risks associated with our Fit for Growth program that may impair our ability to achieve anticipated savings and operational efficiencies or that may otherwise harm our business. These risks include delays in implementation of cost optimization actions, loss of workforce capabilities, higher than anticipated separation expenses, litigation and the failure to meet financial and operational targets. In addition, the calculation of the anticipated cost savings and other benefits resulting from our Fit for Growth program are subject to many estimates and assumptions. These estimates and assumptions are subject to significant business, economic, competitive and other uncertainties and contingencies, many of which are beyond our control. If these estimates and assumptions are incorrect or if we experience delays or unforeseen events, our business and financial results could be adversely affected.
Sales of our products depend, to a significant extent, on the availability and extent of adequate coverage, pricing and reimbursement from government health administration authorities, private health insurers and other organizations, which are subject to increasing and intense pressure from political, social, competitive and other sources. Our inability to obtain and maintain adequate coverage, or a reduction in pricing or reimbursement, could have an adverse effect on our business, reputation, revenue and results of operations.
Sales of our products depend, to a significant extent, on the availability and extent of adequate coverage, pricing and reimbursement from governmental health administration authorities, private health insurers and other organizations. When a new pharmaceutical product is approved, the availability of government and private reimbursement for that product, diagnosis of the condition it treats and the cost to administer it may be uncertain, as is the pricing and amount for which that product will be reimbursed.
Pricing and reimbursement for our products may be adversely affected by a number of factors, including:
• changes in, and implementation of, federal, state or foreign government regulations or private third-party payors’ reimbursement policies;
• pressure by employers on private health insurance plans to reduce costs;
• consolidation and increasing assertiveness of governmental health administration authorities, private health insurers and other organizations seeking price discounts or rebates in connection with the placement of our products on their formularies and, in some cases, the imposition of restrictions on access or coverage of particular drugs or pricing determined based on perceived value;
• our ability to receive reimbursement for our products or our ability to receive comparable reimbursement to that of competing products; and
• our value-based contracting program pursuant to which we aim to tie the pricing of our products to their clinical values by either aligning price to patient outcomes or adjusting price for patients who discontinue therapy for any reason, including efficacy or tolerability concerns.
Our ability to set the price for our products varies significantly from country to country and, as a result, so can the price of our products. Governments may use a variety of cost-containment measures to control the cost of products, including price cuts, mandatory rebates, value-based pricing and reference pricing (i.e., referencing prices in other countries and using those reference prices to set a price). Drug prices are under significant scrutiny in the markets in which our products are prescribed; for example the IRA has certain provisions related to drug pricing, including the ability for the U.S. government to set prices for certain drugs in Medicare. We expect drug pricing and other healthcare costs to continue to be subject to political or societal pressures on a global basis. Certain countries set prices by reference to the prices in other countries where our products are marketed. Our inability to obtain and
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maintain adequate prices in a particular country has limited, and may in the future limit, the revenue from our products within that country and has, and may in the future, also adversely affect our ability to secure acceptable prices in existing and potential new markets, which has limited, and may in the future limit, market growth and result in reductions in revenue. This has created, or may create, the opportunity for third-party cross-border trade or influence our decision to sell or not to sell a product, thus adversely affecting our geographic expansion plans and revenue. Additionally, in certain jurisdictions governmental health agencies are permitted to adjust, retroactively and/or prospectively, reimbursement rates for our products. Reimbursement for our products by governments, including the timing of any reimbursements, are also affected by budgetary or political constraints, particularly in challenging economic environments. Government agencies often do not set their own budgets and therefore, have limited control over the amount of money they can spend. In addition, these agencies experience political pressure that dictate the manner in which they spend money. There can be no assurance that the economic, budgeting or political issues will not worsen and adversely impact sales or reimbursements of our products.
Competition from current and future competitors has and may continue to negatively impact our ability to maintain pricing and our market share. New products marketed by our competitors have caused and could continue to cause our revenue to decrease due to potential price reductions and lower sales volumes. Additionally, the introduction of generic or biosimilar versions of our products, follow-on products, prodrugs or products approved under abbreviated regulatory pathways has and may continue to significantly reduce the price and the volume of products we sell.
Many third-party payors continue to adopt benefit plan changes that shift a greater portion of prescription costs to patients, including more limited benefit plan designs, higher patient co-pay or co-insurance obligations and limitations on patients' use of commercial manufacturer co-pay payment assistance programs (including through co-pay accumulator adjustment or maximization programs). Significant consolidation in the health insurance industry has resulted in a few large insurers and pharmacy benefit managers exerting greater pressure in pricing and usage negotiations with drug manufacturers, significantly increasing discounts and rebates required of manufacturers and limiting patient access and usage. Further consolidation among insurers, pharmacy benefit managers and other payors would increase the negotiating leverage such entities have over us and other drug manufacturers. Additional discounts, rebates, coverage or plan changes, restrictions or exclusions as described above could have a material adverse effect on sales of our affected products.
Our failure to obtain or maintain adequate coverage, pricing or reimbursement for our products could have an adverse effect on our business, reputation, revenue and results of operations, could curtail or eliminate our ability to adequately fund research and development programs and/or could cause a decline or volatility in our stock price.
We depend on relationships with collaborators and other third parties for revenue, and for the development, regulatory approval, commercialization and marketing of certain of our products and product candidates, which are outside of our full control, and if these relationships fail, our business may be adversely affected.
We rely on a number of collaborative and other third-party relationships for revenue and the development, regulatory approval, commercialization and marketing of certain of our products and product candidates. We also outsource certain aspects of our regulatory affairs and clinical development relating to our products and product candidates to third parties. Reliance on third parties subjects us to a number of risks, including:
• we may be unable to control the resources our collaborators or third parties devote to our programs, products or product candidates, which may affect our ability to achieve development goals or milestones;
• disputes may arise under an agreement, including with respect to the achievement and payment of milestones, payment of development or commercial costs, ownership of rights to technology developed, and the underlying agreement may fail to provide us with significant protection or may fail to be effectively enforced if the collaborators or third parties fail to perform;
• the interests of our collaborators or third parties may not always align with our interests, and such parties may not protect and enforce any intellectual property rights or pursue regulatory approvals or market a product in the same manner or to the same extent that we would, which could adversely affect our revenue, or may adopt tax strategies that could have an adverse effect on our business, results of operations or financial condition;
• the inability of the parties to cooperate effectively, which could adversely affect product sales or the clinical development or regulatory approvals of product candidates under joint control, could result in termination of the research, development or commercialization of product candidates or could result in litigation or arbitration;
• any failure on the part of our collaborators or third parties to comply with applicable laws, including tax laws, regulatory requirements and/or applicable contractual obligations or to fulfill any responsibilities they may have to protect and enforce any intellectual property rights underlying our products could have an adverse effect on our revenue or reputation as well as involve us in possible legal proceedings;
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• disruptions, turnover or changes in strategy, priorities or capabilities at our collaborators resulting from, for example, a change in control, may impact the commercialization or manufacturing of our shared products and may result in loss of revenue or higher operating expense; and
• any improper conduct or actions on the part of our collaborators or third parties could subject us to civil or criminalinvestigations and monetary and injunctive penalties, require management attention, impact the accuracy and timing of our financial reporting and/or adversely impact our business and our reputation.
Given these risks, there is considerable uncertainty regarding the success of our current and future collaborative efforts. If these efforts fail, our product development or commercialization of new products could be delayed, revenue from products could decline and/or we may not realize the anticipated benefits of these arrangements.
Our results of operations may be adversely affected by current and potential future healthcare reforms including those contained in the PPACA, IRA, OBBBA, MFN and executive orders.
In the U.S., federal and state legislatures, health agencies and third-party payors continue to focus on the cost of healthcare. Legislative and regulatory proposals, enactments to reform healthcare insurance programs (including those in the IRA and OBBBA) and increasing pressure from social sources could significantly influence the manner in which our products are prescribed, purchased and reimbursed. For example, provisions of the PPACA have resulted in changes in the way healthcare is paid for by both governmental and private insurers, including increased rebates owed by manufacturers under the Medicaid Drug Rebate Program, annual fees and taxes on manufacturers of certain branded prescription drugs, the requirement that manufacturers participate in a discount program for certain outpatient drugs under Medicare Part D and under Section 340B of the PHS Act and similar state legislation. These changes have had and are expected to continue to have a significant impact on our business.
In July 2025 the U.S. signed into law the OBBBA, which enacts significant potential changes to Medicaid funding and rescinds or does not continue elements of the PPACA. The OBBBA implements additional eligibility rules on government health plans, expands administrative procedures around enrollment, modifies how states can obtain federal funding for Medicaid and no longer extends ACA premium subsidies. Additional federal and state guidance is expected to be issued in order to implement these OBBBA provisions, most of which have effective dates in 2027 and 2028. At this time, we are unable to determine the overall impact that the OBBBA will have on our business, results of operations and financial condition, or the impact the OBBBA will have on the pharmaceutical industry as a whole because any such impact will depend upon developing interpretations of the OBBBA provisions and implementing regulations, which may be material.
We may face uncertainties as a result of efforts to repeal, substantially modify or invalidate some or all of the provisions of the PPACA. There is no assurance that the PPACA, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
There is substantial public attention on the costs of prescription drugs and we expect drug pricing and other healthcare costs to continue to be subject to political and societal pressures globally. In addition, there have been, and are expected to continue to be, legislative proposals to address prescription drug pricing. We face uncertainties regarding potential healthcare reforms, governmental policy and prioritization. The uncertainty about the future of the PPACA and healthcare laws may put downward pressure on drug pricing and increase our regulatory burdens and operating costs. For example, we expect the IRA's drug pricing controls and Medicare Part D redesign to have an adverse impact on sales, particularly for our products that are more substantially reliant on Medicare reimbursement.
Additionally, the current government administration has introduced various measures to address prescription drug pricing and access, including through issuance of an executive order aiming to establish an MFN drug pricing policy that would tie U.S. drug prices to the prices paid for drugs in other developed countries. If HHS sets MFN pricing targets for prescription drugs, including the use of international pricing reference to set drug prices in the U.S., or if legislation is passed enabling generic drug or biosimilar entry sooner than expected, our business could be materially harmed, including with respect to our ability to set adequate pricing for new drugs to recover our research and development costs. Additional proposals, regulations or initiatives related to drug pricing, such as the CMS-proposed MFN initiatives, the Global Benchmark for Efficient Drug Pricing for certain Medicare Part B drugs and the Guarding U.S. Medicare Against Rising Drug Costs for certain Medicare Part D drugs, continue to be debated, and additional executive orders or regulatory initiatives focused on drug pricing and competition may be adopted and implemented in some form. The timing and extent of implementation of any of the measures described above is uncertain and we cannot fully predict their impact on our product candidates and our business. The adoption of these and any other government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could exclude or limit our product candidates from coverage, limit payments for
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pharmaceuticals, limit our ability to launch products in certain markets and impact healthcare systems and drug markets in the U.S. and abroad, thereby negatively affecting our revenue and adversely impacting our business.
There is also significant economic pressure on state budgets, that may result in states increasingly seeking to achieve budget savings through mechanisms that limit coverage or payment for our drugs. Some states have considered legislation and ballot initiatives that would control the prices of drugs, including laws to allow importation of pharmaceutical products from lower cost jurisdictions outside the U.S. and laws intended to impose price controls on state drug purchases. State Medicaid programs are requesting manufacturers to pay supplemental rebates and requiring prior authorization by the state program for use of any drug for which supplemental rebates are not being paid. Government efforts to reduce Medicaid expense may lead to increased use of managed care organizations by Medicaid programs. This may result in managed care organizations influencing prescription decisions for a larger segment of the population and a corresponding limitation on prices and reimbursement for our products.
In the E.U. and some other international markets, the government provides healthcare at low cost to consumers and regulates pharmaceutical prices, patient eligibility or reimbursement levels to control costs for the government-sponsored healthcare system. Many countries have announced or implemented measures, and may in the future implement new or additional measures, to reduce healthcare costs to limit the overall level of government expenditures. These measures vary by country and may include, among other things, patient access restrictions, suspensions on price increases, prospective and possible retroactive price reductions and other recoupments and increased mandatory discounts or rebates, recoveries of past price increases and greater importation of drugs from lower-cost countries. These measures have negatively impacted our revenue and may continue to adversely affect our revenue and results of operations in the future.
Our success in commercializing biosimilars is subject to risks and uncertainties inherent in the development, manufacture and commercialization of biosimilars. If we are unsuccessful, our business may be adversely affected.
The development, manufacture and commercialization of biosimilars require specialized expertise and are costly and subject to complex regulation. Our success in commercializing biosimilars is subject to a number of risks, including:
• Reliance on Third Parties. We are dependent, in part, on the efforts of collaboration partners and other third parties for the development and manufacturing of biosimilars. These third parties are independent entities subject to their own unique operational, strategic and financial risks that are outside of our control and may be affected by events outside of our control. For example, one of our contract manufacturers for IMRALDI and BENEPALI was acquired by a third party in 2024 which may impact the contract manufacturer's operational, strategic or financial risk. If these third parties fail to perform, or reduce their third-party manufacturing production, our biosimilar product development or commercialization of biosimilars could be delayed, revenue from biosimilars could decline and/or we may not realize the anticipated benefits of these arrangements;
• Competitive Challenges. Biosimilar products face significant competition, including from innovator products and biosimilar products offered by other companies that may receive greater acceptance or more favorable reimbursement. Local tendering processes may restrict biosimilar products from being marketed and sold in some jurisdictions. The number of competitors in a jurisdiction, the timing of approval and the ability to market biosimilar products successfully in a timely and cost-effective manner are additional factors that may impact our success in this business area;
• Regulatory Compliance. Biosimilar products may face regulatory hurdles or delays due to the evolving and uncertain regulatory and commercial pathway of biosimilars products in certain jurisdictions;
• Ability to Provide Adequate Supply. Manufacturing biosimilars is complex. If we encounter any persistent manufacturing or supply chain difficulties we may be unable to meet demand. We are dependent on a third party for the manufacture of our biosimilar products and such third party may not perform its obligations in a timely and cost-effective manner or in compliance with applicable regulations and may be unable or unwilling to increase production capacity commensurate with demand for our existing or future biosimilar products;
• Intellectual Property and Regulatory Challenges. Biosimilar products may face extensive intellectual property clearances and infringementlitigation, injunctions or regulatory challenges, which could prevent the commercial launch of a product or delay it for many years or result in imposition of monetary damages, penalties or other civil sanctions and damage our reputation; and
• Failure to Gain Market and Patient Acceptance. Market success of biosimilar products will be adversely affected if patients, physicians and/or payors do not accept biosimilar products as safe and efficacious products offering a more competitive price or other benefit over existing therapies.
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Risks Related to Intellectual Property
If we are unable to obtain and maintain adequate protection for our data, intellectual property and other proprietary rights, our business may be harmed.
Our success, including our long-term viability and growth, depends, in part, on our ability to obtain and defend patent and other intellectual property rights, including certain regulatory forms of exclusivity, that are important to the commercialization of our products and product candidates. Patent protection and/or regulatory exclusivity in the U.S. and other important markets remains uncertain and depends, in part, upon decisions of the patent offices, courts, administrative bodies and lawmakers in these countries. We may fail to obtain, defend or preserve patent and other intellectual property rights, including certain regulatory forms of exclusivity, or the protection we obtain may not be of sufficient breadth and degree to protect our commercial interests in all countries where we conduct business, which could result in financial, business or reputational harm to us or could cause a decline or volatility in our stock price. In addition, settlements of such proceedings often result in reducing the period of exclusivity and other protections, resulting in a reduction in revenue from affected products.
In many markets, including the U.S., manufacturers may be allowed to rely on the safety and efficacy data of the innovator's product and do not need to conduct clinical trials before marketing a competing version of a product after there is no longer patent or regulatory exclusivity. In such cases, manufacturers often charge significantly lower prices and a major portion of the company's revenue may be reduced in a short period of time. In addition, manufacturers of generics and biosimilars may choose to launch or attempt to launch their products before the expiration of our patent or other intellectual property protections.
Furthermore, our products may be determined to infringe patents or other intellectual property rights held by third parties. Legal proceedings, administrative challenges or other types of proceedings are and may in the future be necessary to determine the validity, scope or non-infringement of certain patent rights claimed by third parties to be pertinent to the manufacture, use or sale of our products. Legal proceedings may also be necessary to determine the rights, obligations and payments claimed during and after the expiration of intellectual property license agreements we have entered with third parties. Such proceedings are unpredictable and are often protracted and expensive. Negative outcomes of such proceedings could hinder or prevent us from manufacturing and marketing our products, require us to seek a license for the infringed product or technology or result in the assessment of significant monetary damagesagainst us that may exceed amounts, if any, accrued in our financial statements. A failure to obtain necessary licenses for an infringed product or technology could prevent us from manufacturing or selling our products. Furthermore, payments under any licenses that we are able to obtain could reduce our profits from the covered products and services. Any of these circumstances could result in financial, business or reputational harm to us or could cause our stock price to decline or experience periods of volatility.
Risks Related to Development, Clinical Testing and Regulation of Our Products and Product Candidates
Successful preclinical work or early/late stage clinical trials does not ensure success in later stage trials, regulatory approval or commercial viability of a product.
Positive results in preclinical work or early/late stage clinical trials have in the past and may in the future fail to be replicated in subsequent or confirmatory trials. Additionally, success in preclinical work or early/late stage clinical trials does not ensure that later stage or larger scale clinical trials will be successful or that regulatory approval will be obtained. Even if later stage clinical trials are successful, regulatory authorities may delay or decline approval of our product candidates. Regulatory authorities may disagree with our view of the data, require additional studies, disagree with our trial design or endpoints. Regulatory authorities may also fail to approve the facilities or processes used to manufacture a product candidate, our dosing or delivery methods or companion devices. Regulatory authorities have in the past and may in the future grant marketing approval that is more restricted than anticipated, including limiting indications to narrow patient populations and the imposition of safety monitoring, educational requirements, requiring confirmatory trials and risk evaluation and mitigation strategies. The occurrence of any of these events could result in significant costs and expense, have an adverse effect on our business, financial condition and results of operations and/or cause our stock price to decline or experience periods of volatility.
Clinical trials and the development of biopharmaceutical products is a lengthy and complex process. If we fail to adequately manage our clinical activities, our clinical trials or potential regulatory approvals may be delayed or denied.
Conducting clinical trials is a complex, time-consuming and expensive process. Our ability to complete clinical trials in a timely fashion depends on a number of key factors, including protocol design, regulatory and institutional review board approval, patient enrollment rates and compliance with current Good Clinical Practices. If we or our third-party clinical trial providers or third-party CROs do not successfully carry out these clinical activities, our clinical trials or the potential regulatory approval of a product candidate may be delayed or denied.
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We have opened clinical trial sites and are enrolling patients in a number of countries where our experience is limited. In most cases, we use the services of third parties to carry out our clinical trial related activities and rely on such parties to accurately report their results. Our reliance on third parties for these activities may impact our ability to control the timing, conduct, expense and quality of our clinical trials. One CRO has responsibility for a substantial portion of our activities and reporting related to our clinical trials and if such CRO does not adequately perform, many of our trials may be significantly affected, including adversely affecting our expenses associated with such trials. We may need to replace our CROs, which may result in the delay of the affected trials or otherwise adversely affect our efforts to obtain regulatory approvals and commercialize our product candidates.
Adverse safety events or restrictions on use and safety warnings for our products can negatively affect our business, product sales and stock price.
Adverse safety events involving our products, generic or biosimilar versions of our products or products from the same class as one of our products may have a negative impact on our business. Discovery of safety issues with our products could create product liability and has and may in the future cause additional regulatory scrutiny and requirements for additional labeling or safety monitoring, withdrawal of products from the market and/or the imposition of fines or criminalpenalties. Adverse safety events may also damage physician, patient and/or investor confidence in our products and our reputation. Any of these could adversely impact our results of operations.
Regulatory authorities are making greater amounts of stand-alone safety information directly available to the public through periodic safety update reports, patient registries and other reporting requirements. The reporting of adverse safety events involving our products or products similar to ours and public rumors about such events may increase claimsagainst us and may also cause our product sales to decline or lead to periods of stock price volatility.
Restrictions on use or safety warnings that may be required to be included in the label of our products may significantly reduce expected revenue for those products or require significant expense or divert management time.
Risks Related to Our Operations
A breakdown or breach of our information systems could subject us to liability or interrupt our business operations.
We are increasingly dependent upon information systems and data to operate our business. Changes in how we operate have caused us to modify our business practices in ways that heighten this dependence, including changing the requirement that most of our office-based employees in the U.S. and our other key markets work from the office, with many of our employees now working in hybrid or full-remote positions. As a result, we are increasingly dependent upon our information systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our information systems and data, which includes use of cloud technologies, including Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). Breakdowns, invasions, corruptions, destructions and/or breaches, which may include impacts such as, but not limited to, comprising the capacity, reliability or security of our information systems or those of our business partners, including our cloud technologies, and/or unauthorized access to our data and information could subject us to significant liability, negatively impact our business operations, and/or require replacement of technology and/or sizeable ransom payments. Our information systems, including our cloud technologies, continue to increase in multitude and complexity, increasing our vulnerability when breakdowns, malicious intrusions and random attacks occur. Data privacy or security breaches also pose a risk that sensitive data, including intellectual property, trade secrets or personal information belonging to us, patients, customers or other business partners, may be exposed to unauthorized persons or to the public.
Cybersecurity threats and incidents are increasing in their frequency, sophistication and intensity, and are becoming increasingly difficult to detect, particularly when they impact vendors, customers or suppliers, and other companies in our supply chain. Cybersecurity threats and incidents are often carried out by motivated, well-resourced, skilled and persistentthreat actors, including nation states, organized crime groups, “hacktivists” and may include or target employees or contractors acting with careless or malicious intent. Recent developments in the threat landscape include use of adversarial AI techniques and machine learning, as well as an increased number of cyber extortion attacks, with higher financial ransom demand amounts and increasing sophistication and variety of ransomware techniques and methodology. Geopolitical instability may increase the risk of cybersecurity threats. Cybersecurity threats or incidents may include deployment of harmful malware and key loggers, ransomware, a denial-of-service attack, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our information systems and data. Cybersecurity threats and incidents also include manufacturing, hardware or software supply chain attacks, which could cause a delay in the manufacturing of products or products produced for contract manufacturing or lead to a data privacy or security breach. Our key business partners face similar risks and any security breach of their systems could adversely affect our security posture. In addition, our increased use of cloud technologies heightens these and other operational risks, and any failure by cloud or other
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technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption or loss of confidential or propriety information.
While we continue to build and improve our systems and infrastructure, including our business continuity plans, there can be no assurance that our efforts will detect and prevent cybersecurity threats or incidents in our systems and any such incidents could materially adversely affect our business and operations and/or result in the loss of critical or sensitive information, which could result in material financial, legal, operational or reputational harm to us, loss of competitive advantage or loss of consumer confidence. Our liability insurance may not be sufficient in type or amount to cover us againstclaims related to security breaches, cyber-attacks and other related breaches.
Regulations continue to change as regulators worldwide consider new rules. For example, the SEC has adopted additional disclosure rules regarding cyber security risk management, strategy, governance and incident reporting by public companies. These regulations or other regulations being considered in Europe and around the world may impact the manner in which we operate.
Regulators currently impose new data privacy and security requirements, including monetary fines for privacy violations. For example, the E.U.’s General Data Protection Regulation established regulations regarding the handling of personal data, and provides an enforcement authority and imposes large penalties for noncompliance. U.S. data privacy and security laws, such as the CCPA, and others that may be passed, similarly introduce requirements with respect to personal information, and non-compliance with the CCPA may result in liability through private actions (subject to statutorily defined damages in the event of certain data breaches) and enforcement. Failure to comply with these current and future laws, policies, industry standards or legal obligations or any security incident resulting in the unauthorized access to, or acquisition, release or transfer of personal information may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause patients, healthcare providers and the general public to lose trust in us, which could have a material adverse effect on our business.
The increasing use of AI-based software presents new risks and challenges and could adversely affect our business and reputation.
As with many developing technologies, AI-based software presents risks and challenges. For example, algorithms may be flawed, data sets may be insufficient, of poor quality or contain biased information; and inappropriate or controversial data practices could impair results. AI-based software is increasingly used in the biopharmaceutical industry, including by us, for research, marketing, manufacturing and commercialization, and we anticipate increasing our usage of technology that uses AI in the future. If the analyses that AI-based software assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability and brand or reputational harm. Use of AI-based software internally, by third parties or by threat actors may also lead to cybersecurity risks or the release of confidential proprietary information, including personal data, which may impact our ability to realize the benefit of our intellectual property or violate our internal policies, data protection laws or contractual requirements. The use of AI-based software may also result in unauthorized access of personal data or the intellectual property of third parties. Since the use of AI is subject to new or evolving laws and regulations, compliance may impose operational costs and limit our ability to use AI-based software, and failure to comply may result in potential government actions, litigation, fines, penalties or adverse publicity.
Manufacturing issues could substantially increase our costs, limit supply of our products and/or reduce our revenue.
The process of manufacturing our products is complex, highly regulated and subject to numerous risks, including:
• Risks of Reliance on Third Parties and Single Source Providers. We rely on third-party suppliers and manufacturers for many aspects of our manufacturing process for our products and product candidates. In some cases, due to the unique manner in which our products are manufactured, we rely on single source providers of raw materials and manufacturing supplies. These third parties are independent entities subject to their own unique operational, strategic and financial risks that are outside of our control and may be affected by events outside of our control. Additionally, these third parties may not perform their obligations in a timely and cost-effective manner or in compliance with applicable regulations, and they may be unable or unwilling to increase production capacity commensurate with demand for our existing or future products. Finding alternative providers could take a significant amount of time and involve significant expense due to the specialized nature of the services and the need to obtain regulatory approval of any significant changes to our suppliers or manufacturing methods. We cannot be certain that we could reach agreement with alternative providers or that the FDA or other regulatory authorities would approve our use of such alternatives.
• Global Bulk Supply Risks. We rely on our manufacturing facilities for the production of drug substance for our large molecule products and product candidates. Our global bulk supply of these products and product candidates depends on the uninterrupted and efficient operation of these facilities, which could be adversely affected by equipment failures, labor or raw material shortages, geopolitical instability, public health epidemics, natural disasters, adverse weather events, power failures, cyber-attacks and many other factors.
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• Risks Relating to Compliance with current GMP (cGMP). We and our third-party providers are required to maintain compliance with cGMP and other stringent requirements, as applicable, and are subject to inspections by the FDA and other regulatory authorities to confirm compliance. Any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging or storage of our products as a result of a failure of our facilities or operations or those of third parties to receive regulatory approval or pass any regulatory agency inspection could significantly impair our ability to develop and commercialize our products. Significant noncompliance could also result in the imposition of monetary penalties or other civil or criminal sanctions and damage our reputation.
• Risk of Product Loss. The manufacturing process for our products is extremely susceptible to product loss due to contamination, oxidation, equipment failure or improper installation or operation of equipment or vendor or operator error. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered in our products or manufacturing facilities, we may need to close our manufacturing facilities for an extended period of time to investigate and remediate the contaminant.
Any adverse developments affecting our manufacturing operations or the operations of our third-party suppliers and manufacturers may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the commercial supply of our products.
Furthermore, factors such as geopolitical instability, public health epidemics, natural disasters, adverse weather events, labor or raw material shortages, imposition of tariffs or trade restrictions, power failures, cyber-attacks and other supply chain disruptions could result in difficulties and delays in manufacturing our products, which could have an adverse impact on our results of operations or result in product shortages. We may also have to take inventory write-offs and incur other charges and expense for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Such developments could increase our manufacturing costs, cause us to lose revenue or market share as patients and physicians turn to competing therapeutics, diminish our profitability or damage our reputation.
In addition, although we have business continuity plans to reduce the potential for manufacturing disruptions or delays and reduce the severity of a disruptive event, there is no guarantee that these plans will be adequate, which could adversely affect our business and operations.
Management, personnel and other organizational changes may disrupt our operations, and we may have difficulty retaining personnel or attracting and retaining qualified replacements on a timely basis for the management and other personnel who may leave the Company, which could disrupt our business and adversely affect our operations.
Changes in management, other personnel and our overall retention rate may disrupt our business, and any such disruption could adversely affect our operations, programs, growth, financial condition or results of operations. New members of management may have different perspectives on programs and opportunities for our business, which may cause us to focus on new opportunities or reduce or change emphasis on our existing programs.
Our success is dependent upon our ability to attract and retain qualified management and other personnel in a highly competitive environment. Qualified individuals are in high demand, and we may incur significant costs to attract or retain them. We may face difficulty in attracting and retaining talent for a number of reasons, including management changes, integration related to the acquisition of HI-Bio, the underperformance or discontinuation of one or more marketed, preclinical or clinical programs, recruitment by competitors or changes in the overall labor market. Changes in our organizational structure or in our flexible working arrangements could also impact productivity and morale as well as our ability to attract, retain and motivate employees. We cannot ensure that we will be able to hire or retain the personnel necessary for our operations or that the loss of any personnel will not have a material impact on our financial condition and results of operations.
If we fail to comply with the extensive legal and regulatory requirements affecting the healthcare industry, we could face increased costs, penalties and a loss of business.
Our activities, and the activities of our collaborators, distributors and other third-party providers, are subject to extensive government regulation and oversight in the U.S. and in foreign jurisdictions, and are subject to change and evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our business practices. The FDA and comparable foreign agencies directly regulate many of our most critical business activities, including the conduct of preclinical and clinical studies, product manufacturing, advertising and promotion, product distribution, adverse event reporting, product risk management and our compliance with good practice quality guidelines and regulations. Our interactions with physicians and other healthcare providers that prescribe or purchase our products are also subject to laws and government regulation designed to prevent fraud and abuse in the sale and use of products and place significant restrictions on the marketing practices of healthcare companies. Healthcare companies are facing heightened scrutiny of their
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relationships with healthcare providers and have been the target of lawsuits and investigationsallegingviolations of laws and government regulation, including claims asserting submission of incorrect pricing information, impermissible off-label promotion of pharmaceutical products, payments intended to influence the referral of healthcare business, submission of falseclaims for government reimbursement, antitrustviolations or violations related to environmental matters. There is also enhancedscrutiny of company-sponsored patient assistance programs, including testing, insurance premium and co-pay assistance programs and donations to third-party charities that provide such assistance. The U.S. government has challenged some of our donations to third-party charities that provide patient assistance. If we, or our vendors or donation recipients, are found to fail to comply with relevant laws, regulations or government guidance in the operation of these or other patient assistance programs, we could be subject to significant fines or penalties. Risks relating to compliance with laws and regulations may be heightened as we continue to expand our global operations and enter new therapeutic areas with different patient populations, which may have different product distribution methods, marketing programs or patient assistance programs from those we currently utilize or support.
Conditions and regulations governing the healthcare industry are subject to change, with possible retroactive effect, including:
• new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or judicial decisions, related to healthcare availability, pricing or marketing practices, compliance with employment practices, method of delivery, payment for healthcare products and services, compliance with health information and data privacy and security laws and regulations, tracking and reporting payments and other transfers of value made to physicians and teaching hospitals, extensive anti-bribery and anti-corruption prohibitions, product serialization and labeling requirements and used product take-back requirements;
• changes and the potential imposition of new or changing standards in the FDA and foreign regulatory approval processes, staffing, resources or perspectives that may delay or prevent certain processes, including, but not limited to, the approval of new products, product labels and/or formulations and approvals required for manufacturing facilities and may result in lost market opportunity;
• government shutdowns, funding disputes, reorganizations, furloughs or reductions in staffing and/or resources or changes in priorities or focus may result in delays to the review and approval process, slowing the time necessary for new drug candidates and other regulatory matters to be reviewed and/or approved, which may adversely affect our business;
• requirements that provide for increased transparency of clinical trial results and quality data, such as the EMA's clinical transparency policy, which could impact our ability to protect trade secrets and competitively-sensitive information contained in approval applications or could be misinterpretedleading to reputational damage, misperception or legal action, which could harm our business; and
• changes in FDA and foreign regulations that may require additional safety monitoring, labeling changes, restrictions on product distribution or use or other measures after the introduction of our products to market, which could increase our costs of doing business, adversely affect the future permitted uses of approved products or otherwise adversely affect the market for our products.
Additionally, conditions and regulations governing the healthcare industry in the U.S. are subject to greater risk of change and uncertainty as a result of changes in legislative and regulatory priorities and personnel.
Violations of governmental regulation may be punishable by criminal and civil sanctions, including fines and civil monetary penalties and exclusion from participation in government programs, including Medicare and Medicaid, as well as against executives overseeing our business. We could also be required to repay amounts we received from government payors or pay additional rebates and interest if we are found to have miscalculated the pricing information we submitted to the government. In addition, legal proceedings and investigations are inherently unpredictable, and large judgments or settlements sometimes occur. While we believe that we have appropriate compliance controls, policies and procedures in place to comply with the laws or regulations of the jurisdictions in which we operate, there is a risk that acts committed by our employees, agents, distributors, collaborators or third-party providers might violate such laws or regulations. Whether or not we have complied with the law, an investigation or litigation related to allegedunlawful conduct could increase our expense, damage our reputation, divert management time and attention and adversely affect our business.
Our sales and operations are subject to the risks of doing business internationally.
We are increasing our presence in international markets, subjecting us to many risks that could adversely affect our business and revenue. There is no guarantee that our efforts and strategies to expand sales in international markets will succeed. Emerging market countries may be especially vulnerable to periods of global and local political, legal, regulatory and financial instability and may have a higher incidence of corruption and fraudulent business practices.
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Certain countries may require local clinical trial data as part of the drug registration process in addition to global clinical trials, which can add to overall drug development and registration timelines. We may also be required to increase our reliance on third-party agents or distributors and unfamiliar operations and arrangements previously utilized by companies we collaborate with or acquire in emerging markets.
Our sales and operations are subject to the risks of doing business internationally, including:
• the impact of public health epidemics on the global economy and the delivery of healthcare treatments;
• less favorable intellectual property or other applicable laws;
• the inability to obtain necessary foreign regulatory approvals of products in a timely manner;
• limitations and additional pressures on our ability to obtain and maintain product pricing, reimbursement or receive price increases, including those resulting from governmental or regulatory requirements;
• increased cost of goods due to factors such as inflation and supply chain disruptions;
• additional complexity in manufacturing or conducting clinical research internationally, including materials manufactured in China or working with CROs in China;
• delays in clinical trials relating to geopolitical instability related to Russia's invasion of Ukraine and the military conflict in the Middle East;
• the inability to successfully complete subsequent or confirmatory clinical trials in countries where our experience is limited;
• longer payment and reimbursement cycles and uncertainties regarding the collectability of accounts receivable;
• fluctuations in foreign currency exchange rates that may adversely impact our revenue, net income and value of certain of our investments;
• the imposition of governmental controls;
• diverse data privacy and protection requirements;
• increasingly complex standards for complying with foreign laws and regulations that may differ substantially from country to country and may conflict with corresponding U.S. laws and regulations;
• the anti-bribery and anti-corruption legislation across the globe, including the U.K. Bribery Act 2010, and elsewhere and escalation of investigations and prosecutions pursuant to such laws;
• compliance with complex import and export control laws;
• changes in tax laws; and
• the imposition of tariffs or reciprocal tariffs, trade protection measures, embargoes, import or export licensing requirements and the imposition of trade sanctions and other similar restrictions.
Our international operations are also subject to regulation under U.S. law. For example, the U.S. federal government has initiated Section 232 investigations including with respect to pharmaceutical imports into the U.S. The result of these Section 232 investigations and any subsequent rulemaking could result in the government taking actions such as trade protection measures, embargoes, import or export licensing requirements, the imposition of trade sanctions or similar restrictions, which could have adverse consequences to our business and operations.
Additionally, the U.S. FCPA prohibits U.S. companies and their representatives from paying, offering to pay, promising to pay or authorizing the payment of anything of value to any foreign government official, government staff member, political party or political candidate for the purpose of obtaining or retaining business or to otherwise obtain favorable treatment or influence a person working in an official capacity. In many countries, the healthcare professionals we regularly interact with may meet the FCPA's definition of a foreign government official. Failure to comply with domestic or foreign laws could result in various adverse consequences, including possible delay in approval or refusal to approve a product, recalls, seizures or withdrawal of an approved product from the market, disruption in the supply or availability of our products or suspension of export or import privileges, the imposition of civil or criminal sanctions, the prosecution of executives overseeing our international operations and damage to our reputation. Any significant impairment of our ability to sell products outside of the U.S. could adversely impact our business and financial results. In addition, while we believe that we have appropriate compliance controls, policies and procedures in place to comply with the FCPA, there is a risk that acts committed by our employees, agents, distributors, collaborators or third-party providers might violate the FCPA and we might be held responsible. If our employees, agents, distributors, collaborators or third-party providers are found to have engaged in such practices, we could sufferseverepenalties and may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.
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We built a large-scale biologics manufacturing facility and are building a clinical packaging and other manufacturing facility, which represent a significant investment with no assurance that such investment will be recouped.
In order to support our future growth and drug development pipeline, we have expanded our large molecule production capacity by building a large-scale biologics manufacturing facility in Solothurn, Switzerland with no assurance that the additional capacity will be required or this investment will be recouped. Although the Solothurn facility was approved by the FDA for LEQEMBI and TYSABRI, there can be no assurance that the regulatory authorities will approve the Solothurn facility for the manufacturing of other products.
Additionally, we are building a new clinical packaging and other manufacturing facility as well as modernizing and automating our existing manufacturing facilities in RTP with no assurance that these investments will be fully utilized.
If we are unable to fully utilize our manufacturing facilities, our business may be harmed. Charges resulting from excess capacity may occur and would have a negative effect on our financial condition and results of operations.
The illegal distribution and sale by third parties of counterfeit or unfit versions of our products or stolen products could have a negative impact on our reputation and business.
Third parties might illegally distribute and sell counterfeit or unfit versions of our products, which do not meet our rigorous manufacturing, distribution and testing standards. A patient who receives a counterfeit or unfit drug may be at risk for a number of dangerous health consequences. Our reputation and business could sufferharm as a result of counterfeit or unfit drugs sold under our brand name. Inventory that is stolen from warehouses, plants or while in-transit, and that is subsequently improperly stored and sold through unauthorized channels, could adversely impact patient safety, our reputation and our business.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our products and the diseases our therapies are designed to treat. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear and create uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media channels to comment on the effectiveness of a product or to report an allegedadverse event. When such disclosures occur, there is a risk that we may fail to monitor and comply with applicable adverse event reporting obligations or we may not be able to defend the company or the public's legitimate interests in the face of the political and market pressures generated by social media due to restrictions on what we may say about our products. There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on social media. We may also encounter criticism on social media regarding our company, management, product candidates or products. The immediacy of social media precludes us from having real-time control over postings made regarding us via social media, whether matters of fact or opinion. Our reputation could be damaged by the negative publicity generated from false or misleading social media posts concerning us, which we may not be able to reverse. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face restrictive regulatory actions or incur other harm to our business.
Risks Related to Holding Our Common Stock
Our operating results are subject to significant fluctuations.
Our quarterly revenue, expense and net income have fluctuated in the past and are likely to fluctuate significantly in the future due to the risks described in these Risk Factors as well as the timing of charges and expense that we may take. We have recorded, or may in the future be required to record, charges that include:
• the cost of restructurings or other initiatives to streamline our operations and reallocate resources;
• the costs associated with decisions to terminate research and development programs;
• impairments with respect to investments, fixed assets and long-lived assets, including IPR&D and other intangible assets;
• inventory write-downs for failed quality specifications, charges for excess capacity, charges for excess or obsolescence and charges for inventory write-downs relating to product suspensions, expirations or recalls;
• changes in the fair value of contingent consideration or our equity investments;
• bad debt expense and increased bad debt reserves;
• outcomes of litigation and other legal or administrative proceedings, regulatory matters and tax matters;
• payments in connection with acquisitions, divestitures and other business development activities and under license and collaboration agreements;
• failure to meet certain contractual commitments; and
• the impact of public health epidemics on employees, the global economy and the delivery of healthcare.
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Our revenue and certain assets and liabilities are also subject to foreign currency exchange rate fluctuations due to the global nature of our operations. Our efforts to mitigate the impact of fluctuating currency exchange rates may not be successful. As a result, currency fluctuations among our reporting currency, the U.S. dollar, and other currencies in which we do business will affect our operating results, often in unpredictable ways. Our net income may also fluctuate due to the impact of charges we may be required to take with respect to foreign currency hedge transactions. In particular, we may incur higher than expected charges from early termination of a hedge relationship.
Our operating results during any one period do not necessarily suggest the results of future periods.
Our investments in properties may not be fully realized.
We own or lease real estate primarily consisting of buildings that contain research laboratories, office space and manufacturing operations. We may decide to consolidate or co-locate certain aspects of our business operations or dispose of one or more of our properties, some of which may be located in markets that are experiencing high vacancy rates and decreasing property values. If we determine that the fair value of any of our owned properties is lower than their book value, we may not realize the full investment in these properties and incur significant impairment charges or additional depreciation when the expected useful lives of certain assets have been shortened due to the anticipated closing of facilities. If we decide to fully or partially vacate a property, we may incur significant cost, including facility closing costs, employee separation and retention expense, lease termination fees, rent expense in excess of sublease income and impairment of leasehold improvements and accelerated depreciation of assets. Any of these events may have an adverse impact on our results of operations.
We may not be able to access the capital and credit markets on favorable terms, which could increase financing costs.
We may seek access to the capital and credit markets to supplement our existing funds and cash generated from operations for working capital, capital expenditure, debt refinancing, debt service requirements and other business initiatives. The capital and credit markets are experiencing, and have in the past experienced, extreme volatility and disruption, which leads to uncertainty and liquidity issues for both borrowers and investors. In the event of adverse market conditions, we may be unable to obtain capital or credit market financing on favorable terms which could significantly increase our financing costs. Changes in credit ratings issued by nationally recognized credit rating agencies could also adversely affect our cost of financing and the market price of our securities.
Our indebtedness could adversely affect us and limit our ability to plan for or respond to changes in our business.
Our indebtedness, together with our significant contingent liabilities, including milestone and royalty payment obligations, could have important consequences to our business; for example, such obligations could:
• increase our vulnerability to general adverse economic and industry conditions;
• limit our ability to access capital markets and incur additional debt in the future;
• require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow for other purposes, including business development, research and development and mergers and acquisitions; and
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, thereby placing us at a disadvantage compared to our competitors that have less debt.
Our investment portfolio is subject to market, interest and credit risk that may reduce its value.
We maintain a portfolio of marketable securities for investment of our cash as well as investments in equity securities of certain biotechnology companies. Changes in the value of our investment portfolio has in the past and may in the future adversely affect our earnings. The value of our investments may decline due to, among other things, increases in interest rates, downgrades of the bonds and other securities in our portfolio, negative company-specific news, biotechnology market sentiment, instability in the global financial markets that reduces the liquidity of securities in our portfolio, declines in the value of collateral underlying the securities in our portfolio and other factors. Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost. Although we attempt to mitigate these risks through diversification of our investments and continuous monitoring of our portfolio's overall risk profile, the value of our investments may nevertheless decline.
There can be no assurance that we will repurchase shares or that we will repurchase shares at favorable prices, which may negatively affect our stock price.
From time to time our Board of Directors authorizes share repurchase programs. The amount and timing of share repurchases are subject to capital availability and our determination that share repurchases are in the best interest of our shareholders and are in compliance with all respective laws and our applicable agreements. Our ability to repurchase shares will depend upon, among other factors, our cash balances and potential future capital
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requirements for strategic transactions, our results of operations, our financial condition and other factors beyond our control that we may deem relevant. Additionally, the IRA includes an excise tax on share repurchases, which will increase the cost of share repurchases. A reduction in repurchases under, or the completion of, our share repurchase programs could have a negative effect on our stock price. We can provide no assurance that we will repurchase shares at favorable prices, if at all.
Some of our collaboration agreements contain change in control provisions that may discourage a third party from attempting to acquire us.
Some of our collaboration agreements include change in control provisions that could reduce the potential acquisition price an acquirer is willing to pay or discourage a takeover attempt that could be viewed as beneficial to shareholders. Upon a change in control, some of these provisions could result in reduced milestone, profit or royalty payments to us or give our collaboration partner rights to terminate our collaboration agreement, acquire operational control or force the purchase or sale of the programs that are the subject of the collaboration agreement.
General Risk Factors
Our effective tax rate fluctuates, and we may incur obligations in tax jurisdictions in excess of accrued amounts in our financial statements.
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. As a result, our effective tax rate is derived from a combination of applicable tax rates, including withholding taxes, in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Our effective tax rate may be different than experienced in the past or our current expectations due to many factors, including changes in the mix of our profitability from country to country, the results of examinations and audits of our tax filings, adjustments to the value of our uncertain tax positions, interpretations by tax authorities or other bodies with jurisdiction, the result of tax cases, changes in accounting for income taxes and changes in tax laws, especially in the U.S. (including the OBBBA) and Switzerland, and regulations either prospectively or retrospectively and the effects of the integrations of Reata and HI-Bio. Our estimates concerning the impact of the OBBBA remain subject to developing interpretations of the provisions of the OBBBA, which may require further adjustments and changes in our estimates, and could have a material adverse effect on our business.
Our inability to secure or sustain acceptable arrangements with tax authorities and future changes in the tax laws, among other things, may result in tax obligations in excess of amounts accrued in our financial statements.
The enactment of some or all of the recommendations set forth or that may be forthcoming in the OECD’s project on “Base Erosion and Profit Shifting” by tax authorities and economic blocs in the countries in which we operate, could unfavorably impact our effective tax rate. Many countries have or are in the process of enacting legislation intended to implement the OECD GloBE Model Rules. The impact on the Company will depend on the timing of implementation, the exact nature of each country's GloBE legislation, guidance and regulations (including the Pillar Two side-by-side package announced by the OECD in January 2026) thereon and their application by tax authorities either prospectively or retrospectively.
Our business involves environmental and operational risks, which include the cost of compliance and the risk of contamination or injury.
Our business and the business of several of our strategic partners involve the controlled use of hazardous materials, chemicals, biologics and radioactive compounds which make us subject to changing and evolving rules and interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our business practices. Although we believe that our safety procedures for handling and disposing of such materials comply with state, federal and foreign standards, there will always be the risk of accidental contamination or injury. If we were to become liable for an accident, or if we were to suffer an extended facility shutdown, we could incur significant costs, damages and penalties that could harm our business. Manufacturing of our products and product candidates also requires permits from government agencies for water supply and wastewater discharge. If we do not obtain appropriate permits, including permits for sufficient quantities of water and wastewater, we could incur significant costs and limits on our manufacturing volumes that could harm our business. Additionally, regulators have passed new environmental disclosure rules. For example, the E.U., California and certain other countries we do business in have promulgated climate disclosure rules that will generally require additional disclosure. These new rules collectively will impose additional disclosure requirements relating to climate-related risks and emissions disclosures. We expect to be subject to these new laws and regulations if or when they go into effect, which would impose extensive reporting obligations about greenhouse gas emissions and climate-related financial risks. These recently enacted and proposed regulations may require us to incur compliance and disclosure costs and will likely require substantial management attention.
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collaborations
Our marketed products include VUMERITY, TYSABRI, TECFIDERA, AVONEX and PLEGRIDY for the treatment of MS; SPINRAZA for the treatment of SMA; SKYCLARYS for the treatment of FA; and QALSODY for the treatment of ALS.
We also have collaborations with Eisai on the commercialization of LEQEMBI for the treatment of Alzheimer's disease and Supernus on the commercialization of ZURZUVAE for the treatment of PPD. We have certain business and financial rights with respect to RITUXAN for the treatment of non-Hodgkin's lymphoma, CLL and other conditions; RITUXAN HYCELA for the treatment of non-Hodgkin's lymphoma and CLL; GAZYVA for the treatment of CLL, follicular lymphoma and, following its approval in October 2025, lupus nephritis; OCREVUS for the treatment of PPMS and RMS; LUNSUMIO for the treatment of relapsed or refractory follicular lymphoma; COLUMVI, a bispecific antibody for the treatment of non-Hodgkin's lymphoma; and have the option to add other potential anti-CD20 therapies, pursuant to our collaboration arrangements with Genentech, a wholly owned member of the Roche Group.
We commercialize a portfolio of biosimilars of advanced biologics including: BENEPALI, an etanercept biosimilar referencing ENBREL; IMRALDI, an adalimumab biosimilar referencing HUMIRA; and FLIXABI, an infliximab biosimilar referencing REMICADE.
For additional information on our collaboration arrangements, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
We seek to ensure an uninterrupted supply of medicines to patients around the world. To that end, we regularly review our manufacturing capacity, capabilities, processes and facilities. In order to support our future growth and drug development pipeline, we expanded our large molecule production capacity and built a large-scale biologics manufacturing facility in Solothurn, Switzerland. The Solothurn facility is operational and has been approved for the manufacture of LEQEMBI and TYSABRI. We believe that the Solothurn facility will support our anticipated near to mid-term needs for the manufacturing of biologic assets. The plant represents a significant increase in our overall manufacturing capacity. Additionally, we continue to invest to modernize, automate and support the capacity requirements for our pipeline and existing products at our existing manufacturing facilities in RTP. If we are unable to fully utilize our manufacturing facilities, we will incur additional excess capacity charges which would have a negative effect on our financial condition and results of operations.
In the longer term, our revenue growth will depend upon the successful clinical development, regulatory approval and launch of new commercial products as well as additional indications for our existing products, our ability to obtain and maintain patents and other rights related to our marketed products, assets originating from our research and development efforts and/or successful execution of external business development opportunities.
BUSINESS ENVIRONMENT
For a detailed discussion on our business environment, please read Item 1. Business, included in this report. For additional information on our competition and pricing risks that could negatively impact our product sales, please read Item 1A. Risk Factors, included in this report.
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TECFIDERA
Multiple TECFIDERA generic entrants are now in North America, Brazil and certain European countries and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and we expect that TECFIDERA revenue will continue to decline. In November 2025 the Technical Boards of Appeal of the European Patent Office revoked our EP 2 653 873 patent related to TECFIDERA, after which we stopped enforcing this patent and its national counterparts.
For additional information, please read Note 21, Litigation , to our consolidated financial statements included in this report.
TYSABRI
A biosimilar entrant of TYSABRI was approved in the U.S. and the E.U. in 2023. We expect the future sales of TYSABRI will continue to be adversely affected by the entrance of this biosimilar.
GOODWILL
We review our goodwill for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable. As part of this analysis, we compare the fair value of our one reporting unit to its carrying value through the assessment of qualitative, and, if necessary, quantitative factors. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of our reporting unit, we will record an impairmentloss equal to the difference. As of our most recent annual impairment analysis, we had no accumulated impairmentlosses related to goodwill.
An interim goodwill impairment test based on quantitative factors may be required if adverse events indicate an impairment might be present. We monitor changes to our stock price between annual impairment tests, and we believe that general deterioration in macroeconomic and industry-specific conditions may not be indicators of a goodwill impairment, as such conditions may not represent a significant adverse change to our underlying operating performance, cash flows, financial condition or liquidity. Should our market capitalization decline below the carrying value of our net assets for a sustained period, we would consider the length and severity of the decline and the reason for the decline when assessing whether potential goodwill impairment exists.
For additional information on goodwill, please read Note 7, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.
INTERNATIONAL TRADE
Global disputes and interruptions in international relationships, including tariffs, trade protection measures, embargoes, import or export licensing requirements and the imposition of trade sanctions or similar restrictions, may affect our ability to do business and the costs that we incur in providing products to our patients.
The U.S. has imposed a baseline tariff on imports from all countries, subject to certain exceptions. Trade-related tensions between the U.S. and China have led to a series of tariffs and sanctions being imposed by the U.S. on imports from China and retaliatory tariffs imposed by China on U.S. imports.
The U.S. Secretary of Commerce has further initiated an investigation to determine the effects on the national security of imports of pharmaceuticals and pharmaceutical ingredients, including finished drug products, medical countermeasures, critical inputs such as active pharmaceutical ingredients, key starting materials and derivative products of those items, under Section 232 of the Trade Expansion Act of 1962.
There is a high degree of uncertainty concerning what future steps countries and economic blocs will take in response to changes in global trade rules and economics.
We have a significant manufacturing presence in the U.S. While our portfolio is evolving, approximately three quarters of our 2025 U.S. product revenue was attributable to products which were largely manufactured in the U.S. However, we, and the pharmaceutical industry, do utilize partners and production facilities located outside the U.S. for certain raw materials, ingredients, processes and components for our pharmaceutical products and their delivery devices. Engaging alternative suppliers may involve seeking additional regulatory approvals and incurring additional costs and risks associated with new suppliers. This may be costly in terms of time and resources needed or result in delays.
Key products that are currently manufactured mainly outside the U.S. are TECFIDERA, VUMERITY and LEQEMBI. In 2024 we initiated a technology transfer process to enable us to manufacture LEQEMBI in the U.S., which was approved in January 2026.
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Although certain starting materials for SKYCLARYS rely on a single supplier based in China, the manufacturing process, including active pharmaceutical ingredients and drug substance, is primarily conducted in the U.S.
We are working to mitigate potential exposure from tariffs across our network.
As of the date of this filing, we do not expect the tariffs currently applicable to our business to result in a material adverse effect on our operations in 2026. This is based on existing tariffs either in place or potential tariffs as previously announced by the U.S. Administration, our manufacturing footprint, and our inventory levels and positioning. Should significant additional tariffs be enacted, our business could be impacted in the future and differ materially from our current expectations. We will continue to monitor the current and future global tariff landscape as it evolves.
GEOPOLITICAL TENSIONS
The ongoing geopolitical tensions related to Russia's invasion of Ukraine and the military conflict in the Middle East and other global geopolitical developments have resulted in global business disruptions and economic volatility. For example, sanctions and other restrictions have been levied on the government and businesses in Russia. Although we do not have affiliates or employees in either Russia or Ukraine, we do provide various therapies to patients in Russia through a distributor. Government sanctions on the export of certain manufacturing materials to Russia may delay or limit our ability to get new products approved. The impact of the conflict on our operations and financial performance remains uncertain and will depend on future developments, including the severity and duration of the conflict between Russia and Ukraine, its impact on regional and global economic conditions and whether the conflict spreads or has effects on countries outside Ukraine and Russia.
We will continue to monitor the ongoing conflict between Russia and Ukraine as well as the military conflict in the Middle East and other global geopolitical developments and assess any potential impacts on our business, supply chain, partners or customers, as well as any factors that could have an adverse effect on our results of operations. Revenue generated from sales in Russia and Ukraine represent less than 2.0% of total revenue for the years ended December 31, 2025, 2024 and 2023. Additionally, revenue generated from sales in the broader Middle East region represents less than 2.0% of total revenue for the years ended December 31, 2025, 2024 and 2023.
FACTORS AFFECTING PHARMACEUTICAL PRICING AND OTHER DEVELOPMENTS
In August 2022 the IRA was signed into law in the U.S. The IRA introduced new tax provisions, including a 15.0% corporate alternative minimum tax and a 1.0% excise tax on stock repurchases. The provisions of the IRA are effective for periods after December 31, 2022. The IRA did not result in any material adjustments to our income tax provision or other income tax balances as of December 31, 2025 and 2024. Preliminary guidance has been issued by the IRS and we expect additional guidance and regulations to be issued in future periods. We will continue to assess its potential impact on our business and results of operations as further information becomes available.
The IRA also contains substantial drug pricing reforms that may have a significant impact on the pharmaceutical industry in the U.S. This includes the following:
(i) allowing CMS to negotiate prices for select high-cost Medicare Part D drugs (beginning in 2026) and Part B drugs (beginning in 2028) to reduce out-of-pocket prescription drug costs for beneficiaries, potentially resulting in higher contributions from plans and manufacturers;
(ii) drug inflationary rebate requirements to penalize manufacturers from raising the prices of Medicare covered single-source drugs and biologics beyond the inflation-adjusted rate, beginning in 2022 for Part D drugs and 2023 for Part B drugs;
(iii) to incentivize biosimilar development, the IRA provides an 8.0% Medicare Part B add-on payment for qualifying biosimilar products for a five-year period; and
(IV) Medicare Part D redesign which replaces the current coverage gap provisions and establishes a $2,000 cap for out-of-pocket costs for Medicare beneficiaries beginning in 2025, with manufacturers being responsible for up to 10.0% of costs up to the $2,000 cap and up to 20.0% after that cap is reached. Manufacturers that qualify as either specified or specified small manufacturers will phase-in the new manufacturer liability for prescription drug costs over a 7-year period from 2025 to 2031 for certain Medicare Part D drugs dispensed to certain beneficiaries. In April 2024 CMS informed us that we qualified for the specified manufacturer exception pertaining to the Medicare Part D redesign.
The IRA's drug pricing controls and Medicare Part D redesign had an adverse impact on our sales, particularly for our products that are more substantially reliant on Medicare reimbursement. The IRA Medicare Part D redesign had a
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modest net unfavorable impact to our 2025 revenue of approximately $90.0 million, concentrated in our SKYCLARYS and MS portfolio product revenue, approximately a quarter of which was associated with SKYCLARYS.
The degree of impact from this legislation on our business depends on a number of forthcoming implementation actions by regulatory authorities, which may be further impacted by other legislative acts that may modify or replace the IRA, such as the OBBBA, as discussed below. The full extent of the IRA's impacts on our sales and, in turn, our business, remains uncertain.
Additionally, in May 2025 the U.S. government issued an executive order aiming to establish an MFN drug pricing policy that would tie U.S. drug prices to the prices paid for drugs in other developed countries. If HHS sets MFN pricing targets for prescription drugs, including the use of international reference pricing to set drug prices in the U.S., it could result in reduced prices and reimbursement for certain of the Company's products in the U.S. We continue to evaluate the potential impact of this executive order. This executive order and any additional legislation, regulations or initiatives related to drug pricing, such as the CMS-proposed MFN initiatives, the Global Benchmark for Efficient Drug Pricing for certain Medicare Part B drugs and the Guarding U.S. Medicare Against Rising Drug Costs for certain Medicare Part D drugs, could create additional uncertainty around the timing and prioritization around worldwide commercial efforts and adversely impact our business and results of operations.
2025 LEGISLATION AND TAX REFORM
On July 4, 2025, the U.S. signed into law the H.R.1 legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14", commonly referred to as the OBBBA.
The OBBBA contains tax provisions, such as the permanent extension or revision of certain expiring provisions of the Tax Cuts and Jobs Act enacted in 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The provisions of the OBBBA have multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.
The OBBBA did not result in any material adjustments to our total income tax provision for the year ended December 31, 2025, and we have adjusted our deferred tax balances to reflect the impacts of the OBBBA enactment. However, given the complexity of tax laws, related regulations and interpretations, our current estimates may require revision as additional information becomes available regarding the application of the OBBBA provisions.
The OBBBA also enacts significant potential changes to Medicaid funding and rescinds or does not continue elements of the PPACA. The OBBBA implements additional eligibility rules on government health plans, expands administrative procedures around enrollment, modifies how states can obtain federal funding for Medicaid and no longer extends ACA premium subsidies. Additional federal and state guidance is expected to be issued in order to implement these OBBBA provisions, most of which have effective dates in 2027 and 2028.
At this time, we are unable to determine the overall impact that the OBBBA will have on our business, results of operations and financial condition, or the impact the OBBBA will have on the pharmaceutical industry as a whole because any such impact will depend upon developing interpretations of the OBBBA provisions and implementing regulations, which may be material.
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FINANCIAL HIGHLIGHTS
As described below under Results of Operations , our net income and diluted earnings per share attributable to Biogen Inc. for the year ended December 31, 2025, compared to the year ended December 31, 2024, reflects the following:
TOTAL REVENUE
Increased
$214.7 million or 2.2%
DILUTED EARNINGS PER SHARE
Decreased
PRODUCT REVENUE, NET
Decreased
$94.1 million or 1.3%
• MS revenue decreased $310.9 million, or 7.1%
• Rare disease revenue increased $166.1 million, or 8.4%
• The decrease in MS product revenue was primarily due to a decrease in global TECFIDERA and TYSABRI demand due to increased competition outside the U.S. from generic and biosimilar competition, respectively, partially offset by an increase in demand for U.S. VUMERITY. MS product revenue in the U.S. also benefited from favorable commercial mix and approximately $47.6 million of favorable changes in estimates from discounts and allowances.
• The increase in rare disease product revenue was primarily due to our new product launches, including global SKYCLARYS revenue of $520.5 million and global QALSODY revenue of $86.9 million in 2025.
• ZURZUVAE revenue of $195.1 million in 2025 was driven by the continued launch in the U.S.
TOTAL COST AND EXPENSE
Increased
$564.2 million or 7.3%
• Cost of sales increased $93.8 million, or 4.1%
• R&D expense decreased $201.7 million, or 10.2%
• SG&A expense increased $29.9 million, or 1.2%
• Acquired IPR&D, upfront and milestone expense increased $410.3 million
• Impairment of ROU asset of $52.9 million
• The increase in cost of sales was primarily due to a charge recorded during 2025 of approximately $104.9 million related to a litigation matter and product mix, including higher contract manufacturing revenue driven by the timing of batch releases.
• The decrease in R&D expense was primarily driven by continued cost reduction measures realized in connection with our portfolio prioritization initiatives and our Fit for Growth program, offset in part by higher spend on clinical trials, including litifilimab and felzartamab. Higher clinical trial spend related to litifilimab was offset by $200.0 million in R&D funding received from Royalty Pharma in 2025.
• The increase in SG&A expense was primarily due to an increase in operational spending on sales and marketing activities in support of LEQEMBI and SKYCLARYS as we continue to expand our U.S. and international product launches.
• The increase in acquired IPR&D, upfront and milestone expense was primarily due to higher upfront and milestone payments incurred during 2025 compared to 2024.
• OIE includes higher litigation related expense in 2025 compared to 2024. In 2025 we recorded $139.5 million related to various litigation matters, including our agreement in principle to resolve all claims relating to Biogen's acquisition of Convergence.
• Impairment of ROU asset reflects an impairment charge recorded in 2025 of approximately $52.9 million related to our Reata lease.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
• Cash, cash equivalents and marketable securities totaled approximately $4.2 billion as of December 31, 2025, compared to approximately $2.4 billion as of December 31, 2024.
• We generated approximately $2.2 billion of net cash flow from operations during 2025, compared to approximately $2.9 billion in 2024.
• The year-over-year reduction in net cash flow from operations was due in part to higher worldwide tax payments in 2025 of approximately $864.0 million driven by the timing of estimated payments.
• In May 2025 we issued our 2025 Senior Notes for an aggregate principal amount of $1.75 billion. In June 2025 we used the net proceeds to redeem our 4.050% Senior Notes due September 15, 2025.
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RECENT DEVELOPMENTS
ACQUISITIONS
ALCYONE THERAPEUTICS, INC.
In November 2025 we completed the acquisition of all of the issued and outstanding shares of Alcyone Therapeutics, Inc., a clinical-stage biotechnology company focused on pediatric care through precision CNS therapeutics and dosing platforms. Alcyone's lead asset is ThecaFlex DRx, an implantable subcutaneous port and catheter device being investigated for the intrathecal delivery of ASOs, including SPINRAZA, which is designed to provide an alternative to repeat lumbar punctures in chronic intrathecal administration of medicines.
Total consideration for this transaction, which was recorded in acquired in-process research and development, upfront and milestone expense in our consolidated statements of income for the year ended December 31, 2025, was approximately $85.0 million, comprising a $50.0 million payment made upon closing and a $35.0 million payment that was considered probable as of December 31, 2025, and made upon FDA approval of a supplemental application in January 2026.
We may pay additional development and regulatory milestone payments to the former shareholders of Alcyone of up to a total of $75.0 million if approval is received for ThecaFlex DRx administration of SPINRAZA or other additional pipeline products.
We accounted for this transaction as an asset acquisition as the value being acquired primarily relates to a single asset. U nder the terms of this acquisition, we will oversee the end-to-end development, manufacturing and commercialization of ThecaFlex DRx .
For additional information on our acquisition of Alcyone, please read Note 2, Acquisitions, to our consolidated financial statements included in this report.
COLLABORATIVE AND OTHER RELATIONSHIPS
DAYRA THERAPEUTICS, INC. COLLABORATION
In October 2025 we entered into a research collaboration with Dayra to discover and develop oral macrocyclic peptides for priority targets in immunological conditions.
Under the terms of this agreement, both companies will collaborate to identify, validate and optimize oral macrocycle candidates for high-priority immunological targets, with our company advancing the molecules through further development and potential commercialization, including manufacturing.
In connection with the closing of this transaction we made an upfront payment of $50.0 million to Dayra, which was recognized in acquired in-process research and development, upfront and milestone expense within our consolidated statements of income for the year ended December 31, 2025.
This agreement also provides us with the option to acquire the development candidates from Dayra, subject to additional payments per program. Dayra will also be eligible to receive potential preclinical and clinical development milestone payments per program.
For additional information on our research arrangement with Dayra, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
VANQUA BIO, INC. COLLABORATION
In October 2025 we entered into a license agreement with Vanqua granting us exclusive worldwide rights to further develop, manufacture and commercialize Vanqua's preclinical oral C5aR1 antagonist compound.
In connection with the closing of this transaction we made an upfront payment of $70.0 million to Vanqua, which was recognized in acquired in-process research and development, upfront and milestone expense within our consolidated statements of income for the year ended December 31, 2025.
We may pay Vanqua potential development, regulatory or commercial, and sales milestone payments of up to $135.0 million, $295.0 million and $560.0 million, respectively, if all the specified milestones set forth in this collaboration are achieved. In addition, we may pay Vanqua tiered royalties on potential net sales of any licensed product under this collaboration in the mid-single digit to low-double digit percentages.
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For additional information on our license agreement with Vanqua, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
CITY THERAPEUTICS, INC. COLLABORATION
In May 2025 we entered into a strategic research arrangement with City Therapeutics to develop select novel RNAi therapies. Through this arrangement, City Therapeutics will leverage its next-generation RNAi engineering technologies to develop an RNAi trigger molecule (or molecules) combined with our proprietary drug delivery technology. The collaboration will initially focus on a single target that mediates key CNS diseases, utilizing tissue enhanced delivery technologies with the aim of allowing for systemic administration of medicines. We will be responsible for IND-enabling studies and global clinical development along with any regulatory submissions and all activities related to commercialization, including manufacturing.
In connection with the closing of this transaction we made an upfront payment of $16.0 million to City Therapeutics, which was recognized in acquired in-process research and development, upfront and milestone expense within our consolidated statements of income for the year ended December 31, 2025 , and invested $30.0 million in exchange for a City Therapeutics convertible note, representing a minority equity interest in City Therapeutics, if converted. This convertible note was recorded as a component of investments and other assets within our consolidated balance sheets as of December 31, 2025.
For additional information on our strategic research arrangement with City Therapeutics, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
STOKE THERAPEUTICS, INC. COLLABORATION
In February 2025 we entered into a collaboration and license agreement with Stoke to co-develop and commercialize zorevunersen, an investigational ASO that targets the SCN1A gene for the potential treatment of Dravet syndrome, a rare form of genetic epilepsy associated with refractory seizures and neurodevelopmental impairments. Zorevunersen dosed its first patient in August 2025, advancing zorevunersen to a global Phase 3 trial.
Under the terms of this agreement, Stoke will continue to lead global development and retain exclusive development and commercialization rights for zorevunersen in the U.S., Canada and Mexico and we will have exclusive rights to commercialize zorevunersen in the rest of the world.
In connection with the closing of this transaction we made an upfront payment of $165.0 million to Stoke, which was recognized in acquired in-process research and development, upfront and milestone expense within our consolidated statements of income for the year ended December 31, 2025.
We also have an exclusive option to license certain future follow-on ASO products targeting the SCN1A gene in all territories worldwide other than the U.S., Canada and Mexico, in exchange for separate milestone, cost sharing and royalty considerations.
For additional information on our collaboration arrangement with Stoke, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
ROYALTY PHARMA FUNDING ARRANGEMENT
In February 2025 we entered into a funding agreement with Royalty Pharma under which we received $200.0 million in 2025 and will receive up to $50.0 million in 2026 to co-fund our development costs for the litifilimab program. As there is a substantive transfer of risk to the financial partner for the amount invested, the development funding will be recognized by us as an obligation to perform contractual services. This funding is being recognized as a reduction to research and development expense within our consolidated statements of income, proportionate to the related expense. For the year ended December 31, 2025 , we recorded a reduction to research and development e xpense of $200.0 million within our consolidated statements of income.
If the litifilimab clinical trials are successful for the indications based on the applicable clinical trials, upon regulatory approval in the U.S. or certain major markets in the world, Royalty Pharma will be eligible to receive approval-based fixed milestone payments of up to $250.0 million. The milestone payments due upon approval will be recorded as a component of other (income) expense, net within our consolidated statements of income, when incurred.
If litifilimab receives regulatory approval, Royalty Pharma will be eligible to receive royalties of a mid-single digit percentage of the applicable net sales. Royalties on net sales will be recorded as cost of sales within our consolidated statements of income.
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For additional information on our funding arrangement with Royalty Pharma, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
DEVELOPMENTS IN KEY COLLABORATIVE RELATIONSHIPS
LEQEMBI (lecanemab)
United States
Key developments related to LEQEMBI in the U.S. consisted of the following:
• In January 2026 the FDA accepted for review the supplemental BLA for LEQEMBI subcutaneous autoinjector, LEQEMBI IQLIK, for weekly starting dose, with a PDUFA action date of May 24, 2026.
• In August 2025 the FDA approved the BLA for LEQEMBI subcutaneous autoinjector, LEQEMBI IQLIK, for weekly maintenance dosing.
• In January 2025 the FDA approved LEQEMBI monthly IV maintenance dosing for the treatment of early Alzheimer's disease.
Rest of World
Key developments related to LEQEMBI (lecanemab) in rest of world markets consisted of the following:
• In January 2026 the BLA for LEQEMBI subcutaneous autoinjector was accepted for review by the NMPA in China.
• In November 2025 Eisai filed an NDA for LEQEMBI in Japan seeking approval for a subcutaneous autoinjector as a new route of administration to Japan's Pharmaceuticals and Medical Devices Agency.
• In November 2025 the MHRA in the UK approved LEQEMBI monthly IV maintenance dosing for the treatment of early Alzheimer's disease.
• In October 2025 Health Canada issued a Notice of Compliance with Conditions for LEQEMBI for the treatment of adult patients with a clinical diagnosis of mild cognitive impairment or mild dementia due to Alzheimer's disease who are either apolipoprotein E ε4 non-carriers or heterozygotes and who have confirmed amyloid pathology.
• In September 2025 the National Medical Products Administration in China approved LEQEMBI monthly IV maintenance dosing for the treatment of early Alzheimer's disease.
• In September 2025 the Therapeutic Goods Administration of Australia approved LEQEMBI for adults who are either apolipoprotein E ε4 non-carriers or heterozygous carriers.
• In June 2025 we filed a request for arbitration in the International Court of Arbitration of the International Chamber of Commerce seeking adoption of a budget and commercialization plan for the European Territory that allocates commercialization activities to Biogen and Eisai in an equitable fashion taking into account our respective capabilities and provides a meaningful role for each party.
• In April 2025 the EC approved LEQEMBI in the E.U. for the treatment of adult patients with a clinical diagnosis of mild cognitive impairment and mild dementia due to Alzheimer's disease who are apolipoprotein E ε4 non-carriers or heterozygotes with confirmed amyloid pathology.
ZURZUVAE (zuranolone)
• In September 2025 the EC approved ZURZUVAE in the E.U. for the treatment of PPD in adults following childbirth, offering the first and only treatment indicated for PPD in the E.U.
• In August 2025 the Medicines and Healthcare products Regulatory Agency in the U.K. granted marketing authorization for ZURZUVAE for moderate to severe PPD in the U.K.
SALANERSEN (BIIB115)
• In June 2025 we announced positive interim topline results from the Phase 1b study of salanersen, an ASO being developed for the treatment of SMA. Interim Phase 1b data shows children with SMA previously treated with gene therapy experienced a substantial slowing of neurodegeneration and clinically meaningful improvements in motor function following initiation of salanersen. Our Phase 3 registrational study of salanersen is expected to begin in 2026.
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OTHER KEY DEVELOPMENTS
FELZARTAMAB
• In June 2025 we announced the initiation of dosing in the global Phase 3 PREVAIL study. This study will evaluate the efficacy and safety of the investigational drug felzartamab compared to placebo on proteinuria and preservation of kidney function in adults diagnosed with IgAN. In connection with the initiation of this dosing we paid a $30.0 million milestone payment to MorphoSys in July 2025. Additionally, in June 2025 we announced the initiation of dosing in the global Phase 3 PROMINENT study. This study will evaluate the efficacy and safety of the investigational drug felzartamab compared to tacrolimus in adults diagnosed with PMN.
• In March 2025 we announced the initiation of dosing in the global Phase 3 TRANSCEND study. This study will evaluate the efficacy and safety of the investigational drug felzartamab compared to placebo in adult kidney transplant recipients diagnosed with AMR. In connection with the initiation of this dosing we paid a $35.0 million milestone payment to MorphoSys in April 2025.
SPINRAZA (nusinersen)
• In January 2026 the EC granted marketing authorization for a high dose regimen of SPINRAZA in the E.U. for the treatment of 5q SMA, which is the most common form of the disease and represents approximately 95% of all SMA cases. The high dose regimen is comprised of 50 mg/5 mL and 28 mg/5 mL doses and individuals transitioning from the 12 mg dose will receive one 50 mg dose in place of their next 12 mg dose, followed by 28 mg maintenance doses every four months thereafter.
• In September 2025 the high dose regimen of SPINRAZA was approved by the Ministry of Health, Labour and Welfare in Japan.
• In September 2025 the FDA issued a CRL for the supplemental NDA for a higher dose regimen of nusinersen for the treatment of SMA. The CRL requested an update to the technical information to be included in the Chemistry Manufacturing and Controls module of the supplemental NDA and did not cite any deficiencies in the clinical data of the high dose regimen. We resubmitted the supplemental NDA to the FDA, which has been accepted for review with a PDUFA action date of April 3, 2026.
SKYCLARYS (omaveloxolone)
• In June 2025 we announced the initiation of dosing in the global Phase 3 BRAVE study. This study will evaluate the efficacy and safety of omaveloxolone in children with FA between the ages of two and sixteen.
• In April 2025 SKYCLARYS was approved by the Medicines and Healthcare products Regulatory Agency in the U.K. and in Brazil. In March 2025 SKYCLARYS was approved by Health Canada.
QALSODY (tofersen)
• In July 2025 the Medicines and Healthcare products Regulatory Agency in the U.K. approved QALSODY for the treatment of ALS in adults who have a mutation in the SOD1 gene.
• In March 2025 Health Canada issued marketing authorization with conditions for QALSODY for the treatment of ALS in adults who have a mutation in the SOD1 gene. The authorization is conditional, pending the results of trials to verify its clinical benefit.
BIIB080
• In April 2025 the FDA granted Fast Track designation to BIIB080, an investigational ASO therapy targeting tau for the potential treatment of Alzheimer's disease.
CORPORATE MATTERS
2025 SENIOR NOTES
On May 12, 2025, we issued senior unsecured notes for an aggregate principal amount of $1.75 billion. In June 2025 we used the net proceeds from the sale of our 2025 Senior Notes to redeem our 4.050% Senior Notes due September 15, 2025, prior to maturity.
For additional information relating to our 2025 Senior Notes, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
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NEW CORPORATE HEADQUARTERS LEASE
In March 2025 we entered into a lease agreement with MIT Investment Management Company and BioMed Realty for the lease of approximately 580,000 square feet of office and research and development space located at 75 Broadway, Cambridge, Massachusetts, which will be used as our new global corporate headquarters, as well as integrating our research and development and technical operations teams alongside our North American commercial organization. As part of a multi-year real estate consolidation plan that is expected to result in a reduction of approximately 40% of our real estate footprint in Massachusetts, this new lease is intended to replace two existing leases, both in Cambridge, Massachusetts, including our current corporate headquarters. We expect the initial lease term of approximately 15.5 years to commence on May 31, 2028.
For additional information on our lease agreement, please read Note 12, Leases, to our consolidated financial statements included in this report.
DISCONTINUED PROGRAMS AND STUDIES
SALE OF TOFIDENCE
In March 2025 we completed the sale of our regulatory and commercial rights in the U.S. for TOFIDENCE, a tocilizumab biosimilar referencing ACTEMRA, to Organon. Under the terms of this transaction, we received a payment of approximately $51.0 million in July 2025 a nd recognized a de minimis loss within our consolidated statements of income for the year ended December 31, 2025.
For additional information on our sale of TOFIDENCE, please read Note 3, Dispositions , to our consolidated financial statements included in this report.
SALE OF BYOOVIZ AND OPUVIZ RIGHTS
In October 2025 we completed the sale of our remaining commercial rights to two ophthalmology assets in Europe: BYOOVIZ, a ranibizumab biosimilar referencing LUCENTIS, and OPUVIZ, an aflibercept biosimilar referencing EYLEA. Samsung Bioepis will have full responsibility for commercialization of BYOOVIZ upon the transfer of commercial rights from Biogen back to Samsung Bioepis, which became effective as of January 2026. Under the terms of this transaction, we received a payment of $28.0 million in November 2025 and recognized a minimal gain on disposal within our consolidated statements of income for the year ended December 31, 2025.
For additional information on our license arrangements with Samsung Bioepis, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
BIIB143 (cemdomespib)
In early 2025 we discontinued further development of BIIB143 (cemdomespib) for the treatment of DPN, as part of our ongoing pipeline prioritization efforts.
FELZARTAMAB - LUPUS NEPHRITIS
In November 2025 we discontinued the open label Phase 1b study of felzartamab for the treatment of lupus nephritis.
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RESULTS OF OPERATIONS
REVENUE
The following revenue discussion should be read in conjunction with Note 5, Revenue , to our consolidated financial statements included in this report.
Revenue is summarized as follows:
For the Years Ended December 31,
% Change
$ Change
(In millions, except percentages)
Product revenue, net:
United States
Rest of world
Total product revenue, net
Revenue from anti-CD20 therapeutic programs
Alzheimer's collaboration revenue (1)
Contract manufacturing, royalty and other revenue
Total revenue
nm Not meaningful
(1) Alzheimer's collaboration revenue consists of our 50.0% share of LEQEMBI product revenue, net and cost of sales, including royalties.
PRODUCT REVENUE
Product revenue is summarized as follows:
For the Years Ended December 31,
% Change
$ Change
(In millions, except percentages)
Multiple Sclerosis
Rare disease
Biosimilars
Other (1)
Total product revenue, net
nm Not meaningful
(1) Other includes ZURZUVAE, FUMADERM and ADUHELM.
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MULTIPLE SCLEROSIS
• Global VUMERITY revenue increased $118.8 million, from $628.0 million in 2024 to $746.8 million in 2025, or 18.9%, primarily due to an increase in global demand and a favorable change in estimate of approximately $20.3 million related to rebates and discounts in the U.S., partially offset by charges related to the IRA redesign.
• Global TYSABRI revenue decreased $49.6 million, from $1,715.0 million in 2024 to $1,665.4 million in 2025, or 2.9%, primarily due to increased competition in rest of world, including the impacts from a biosimilar entrant of TYSABRI in Europe.
• Global Interferon revenue decreased $22.4 million, from $968.0 million in 2024 to $945.6 million in 2025, or 2.3%, driven by a decrease in demand as patients transition to higher efficacy therapies, offset in part by a favorable change in estimate of approximately $19.3 million related to rebates and discounts in the U.S.
• Global TECFIDERA revenue decreased $287.4 million, from $967.1 million in 2024 to $679.7 million in 2025, or 29.7%, driven by a decrease in global demand as a result of multiple TECFIDERA generic entrants.
MS revenue includes sales from TECFIDERA, VUMERITY, AVONEX, PLEGRIDY, TYSABRI and FAMPYRA. Effective January 1, 2025, our collaboration and license agreement for FAMPYRA global commercialization rights was terminated.
In 2026 we expect total MS revenue will continue to decline as a result of increasing competition for many of our MS products in both the U.S. and rest of world markets. We expect TECFIDERA revenue will be adversely impacted by accelerating generic competition in certain markets in the E.U. Additionally, a biosimilar entrant of TYSABRI was approved in the U.S. and the E.U. in 2023. We expect that future sales of TYSABRI will continue to be adversely affected by the entrance of this biosimilar worldwide. We expect the decline to be partially offset by continued increasing demand for VUMERITY.
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RARE DISEASE
• U.S. SPINRAZA revenue decreased $0.2 million, from $625.7 million in 2024 to $625.5 million in 2025 as lower demand was mostly offset by an increase in pricing and timing of shipments.
• Rest of world SPINRAZA revenue decreased $26.2 million, from $947.5 million in 2024 to $921.3 million in 2025, or 2.8%, primarily due to lower demand and the unfavorable impact of foreign currency exchange, partially offset by a one-time VAT refund received in 2025 of approximately $18.1 million and the timing of shipments in certain rest of world markets.
• Global SKYCLARYS revenue increased $138.0 million, from $382.5 million in 2024 to $520.5 million in 2025, or 36.1%, primarily related to an increase in rest of world sales volumes driven by the continued launch in Europe and certain markets in the Middle East.
• Global QALSODY revenue increased $54.5 million, from $32.4 million in 2024 to $86.9 million in 2025, or 168.2%, primarily related to an increase in rest of world sales volumes driven by the continued launch in international markets as well as patient growth in the U.S.
Rare disease revenue includes sales from SPINRAZA, QALSODY, which became commercially available in the E.U. during the second quarter of 2024, and SKYCLARYS which became commercially available in the E.U. during the first quarter of 2024.
In 2026 we expect growth in rare disease revenue due to the continued launch of SKYCLARYS in the U.S., Europe and other international markets as well as the continued launch of QALSODY in Europe. We anticipate global SPINRAZA revenue growth to be relatively flat in 2026.
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BIOSIMILARS
• For 2025 compared to 2024, the decrease in biosimilar revenue was primarily due to a decrease in sales volumes, decreases in pricing due to competitive pressures in Europe and the unfavorable impact of foreign currency exchange.
Biosimilars revenue includes sales from BENEPALI, IMRALDI, FLIXABI, BYOOVIZ and TOFIDENCE. In 2025 we completed the sale of our rights to TOFIDENCE and BYOOVIZ.
OTHER PRODUCT REVENUE
ZURZUVAE
U.S. ZURZUVAE revenue increased $122.9 million, from $72.2 million in 2024 to $195.1 million in 2025, or 170.2%, primarily due to higher demand resulting from an increase in total patients in the U.S. We anticipate growth in U.S. ZURZUVAE revenue as we expect total patients to continue to increase in 2026.
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REVENUE FROM ANTI-CD20 THERAPEUTIC PROGRAMS
Our share of RITUXAN, including RITUXAN HYCELA, GAZYVA and LUNSUMIO collaboration operating profits in the U.S., royalty revenue on sales of OCREVUS and other revenue from anti-CD20 therapeutic programs are summarized in the table below. For purposes of this discussion, we refer to RITUXAN and RITUXAN HYCELA collectively as RITUXAN.
For the Years Ended December 31,
(In millions)
Royalty revenue on sales of OCREVUS
Biogen’s share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO
Other revenue from anti-CD20 therapeutic programs
Total revenue from anti-CD20 therapeutic programs
ROYALTY REVENUE ON SALES OF OCREVUS
For 2025 compared to 2024, the increase in royalty revenue on sales of OCREVUS was primarily due to sales growth of OCREVUS in the U.S.
OCREVUS royalty revenue is based on our estimates from third party and market research data of OCREVUS sales occurring during the corresponding period. Differences between actual and estimated royalty revenue will be adjusted for in the period in which they become known, which is generally expected to be the following quarter.
BIOGEN'S SHARE OF PRE-TAX PROFITS IN THE U.S. FOR RITUXAN, GAZYVA AND LUNSUMIO
The following table provides a summary of amounts comprising our share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO:
For the Years Ended December 31,
(In millions)
Product revenue, net
Cost and expense
Pre-tax profits in the U.S.
Biogen's share of pre-tax profits
For 2025 compared to 2024, the increase in our share of pre-tax profits in the U.S. for RITUXAN, GAZYVA and LUNSUMIO was primarily due to an increase in sales volumes of GAZYVA of approximately 14.4%, partially offset by a decrease in sales volumes of RITUXAN of approximately 4.1%, resulting from competition from multiple biosimilar products.
For 2025 compared to 2024, the increase in collaboration cost and expense was primarily due to higher selling and marketing expense related to GAZYVA.
Prior to regulatory approval, we record our share of the expense incurred by the collaboration for the development of anti-CD20 products in research and development expense and pre-commercialization costs within selling, general and administrative expense in our consolidated statements of income. After an anti-CD20 product is approved, we record our share of the development and sales and marketing expense related to that product as a reduction of our share of pre-tax profits in revenue from anti-CD20 therapeutic programs.
We are aware of several other anti-CD20 molecules, including biosimilar products, that have been approved and are competing with RITUXAN and GAZYVA in the oncology and other markets. B i osimilar products referencing RITUXAN are available in the U.S and are being offered at lower prices. This competition has had a significant adverse impact on the pre-tax profits of our collaboration arrangements with Genentech, as the sales of RITUXAN have decreased substantially compared to prior periods and we expect sales to continue to decrease.
OTHER REVENUE FROM ANTI-CD20 THERAPEUTIC PROGRAMS
Other revenue from anti-CD20 therapeutic programs consists of our share of pre-tax co-promotion profits from RITUXAN in Canada, royalty revenue on sales of LUNSUMIO outside the U.S. and royalty revenue on net sales of COLUMVI in the U.S.
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For additional information on our collaboration arrangements with Genentech, including information regarding the pre-tax profit-sharing formula and its impact on future revenue from anti-CD20 therapeutic programs, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
ALZHEIMER'S COLLABORATION REVENUE
Alzheimer's collaboration revenue consists of our 50.0% share of LEQEMBI product revenue, net and cost of sales, including royalties, as we are not the principal. We began recognizing Alzheimer's collaboration revenue upon the accelerated approval of LEQEMBI in the U.S. during the first quarter of 2023.
For the years ended December 31, 2025 and 2024, we recognized Alzheimer's collaboration revenue of approximately $177.7 million and $59.9 million, respectively. The increase was primarily due to higher sales volumes driven by the continued launch of LEQEMBI in the U.S. and international markets and the favorable impact from the timing of shipments to China during the second quarter of 2025 as we optimized our global inventory positions.
For additional information on our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
CONTRACT MANUFACTURING, ROYALTY AND OTHER REVENUE
Contract manufacturing, royalty and other revenue is summarized as follows:
For the Years Ended December 31,
(In millions)
Contract manufacturing revenue
Royalty and other revenue
Total contract manufacturing, royalty and other revenue
CONTRACT MANUFACTURING REVENUE
Contract manufacturing revenue primarily reflects amounts earned under contract manufacturing agreements with our strategic customers and batches of LEQEMBI related to our collaboration with Eisai.
For 2025 compared to 2024, the increase in contract manufacturing revenue was primarily driven by higher volumes due to the timing of batch production.
ROYALTY AND OTHER REVENUE
Royalty and other revenue primarily reflects royalty revenue on biosimilar products from our license arrangements with Samsung Bioepis and royalties we receive from net sales on products related to patents that we have out-licensed.
For additional information on our license arrangements with Samsung Bioepis and our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
RESERVES FOR DISCOUNTS AND ALLOWANCES
Revenue from product sales is recorded net of reserves established for applicable discounts and allowances, including those associated with the implementation of pricing actions in certain international markets where we operate.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer). These estimates reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.
The IRA's drug pricing controls and Medicare Part D redesign had an adverse impact on our sales, particularly for our products that are more substantially reliant on Medicare reimbursement. The IRA Medicare Part D redesign had a
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modest net unfavorable impact to our 2025 revenue of approximately $90.0 million, concentrated in our SKYCLARYS and MS portfolio product revenue, approximately a quarter of which was associated with SKYCLARYS.
The degree of impact from this legislation on our business depends on a number of forthcoming implementation actions by regulatory authorities, which may be further impacted by other legislative acts that may modify or replace the IRA, such as the OBBBA. The full extent of the IRA's impacts on our sales and, in turn, our business, remains uncertain.
Reserves for discounts, contractual adjustments and returns that reduced gross product revenue are summarized as follows:
For the Years Ended December 31,
(In millions)
Contractual adjustments
Discounts
Returns
Total discounts and allowances
For the years ended December 31, 2025, 2024 and 2023, reserves for discounts and allowances as a percentage of gross product revenue were 33.0%, 32.6% and 32.0%, respectively.
CONTRACTUAL ADJUSTMENTS
Contractual adjustments primarily relate to Medicaid and managed care rebates in the U.S., pharmacy rebates, co-payment (copay) assistance, VA, 340B discounts, specialty pharmacy program fees and other government rebates or applicable allowances.
For 2025 compared to 2024, the increase in contractual adjustments was primarily due to higher Medicare manufacturer reserves in the U.S. driven by the IRA Medicare Part D redesign and higher government rebates in rest of world, offset in part by favorable changes in estimates of approximately $64.7 million primarily due to lower managed care rebates, as well as lower co-pay assistance and Medicaid rebates in the U.S.
DISCOUNTS
Discounts include trade term discounts, wholesaler incentives and volume related discounts.
For 2025 compared to 2024, the increase in discounts was primarily driven by higher volume discounts in the U.S. for TYSABRI, offset by lower purchase discounts in rest of world and lower volume discounts for U.S. biosimilars.
RETURNS
Product return reserves are established for returns made by wholesalers. In accordance with contractual terms, wholesalers are permitted to return product for reasons such as damaged or expired product. The majority of wholesaler returns are due to product expiration. Provisions for estimated product returns are recognized in the period the related revenue is recognized, resulting in a reduction to product sales.
For 2025 compared to 2024, the decrease in returns was primarily driven by lower returns in the U.S., partially offset by higher returns in rest of world.
For additional information on our revenue reserves, please read Note 5, Revenue, to our consolidated financial statements included in this report.
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COST AND EXPENSE
A summary of total cost and expense is as follows:
For the Years Ended December 31,
% Change
$ Change
(In millions, except percentages)
Cost of sales, excluding amortization and impairment of acquired intangible assets
Research and development
Acquired in-process research and development, upfront and milestone expense
Selling, general and administrative
Amortization and impairment of acquired intangible assets
Collaboration profit sharing/(loss reimbursement)
(Gain) loss on fair value remeasurement of contingent consideration
Impairment of ROU asset
Restructuring charges
Gain on sale of priority review voucher, net
Other (income) expense, net
Total cost and expense
nm Not meaningful
COST OF SALES, EXCLUDING AMORTIZATION AND IMPAIRMENT OF ACQUIRED INTANGIBLE ASSETS
For the Years Ended December 31,
(In millions)
Product
Royalty
Total cost of sales
Cost of sales, as a percentage of total revenue, were 24.3%, 23.9% and 25.8% for the years ended December 31, 2025, 2024 and 2023, respectively.
PRODUCT COST OF SALES
For 2025 compared to 2024, the decrease in product cost of sales was primarily due to lower inventory write-offs, partially offset by product mix, including higher contract manufacturing revenue driven by the timing of batch releases and higher SKYCLARYS inventory step-up amortization costs.
Contract manufacturing revenue includes LEQEMBI inventory produced for Eisai. Cost of sales as a percentage of revenue was adversely affected by LEQEMBI batches due to lower margins associated with this business.
As a result of our acquisition of Reata in September 2023 we recorded a fair value step-up adjustment related to the acquired inventory of SKYCLARYS of approximately $1.3 billion. This fair value step-up adjustment is being amortized to cost of sales as the inventory is sold. We expect this amount to be fully amortized by the end of 2028. For the years ended December 31, 2025 and 2024, amortization from the fair value step-up adjustment was approximately $216.9 million and $181.5 million, respectively.
For additional information on our collaboration arrangements with Eisai, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report. For additional information on our acquisition of Reata, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
Write Downs and Other Charges
Inventory amounts written down as a result of excess, obsolescence or unmarketability totaled $29.2 million, $101.9 million and $124.4 million for the years ended December 31, 2025, 2024 and 2023, respectively.
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ROYALTY COST OF SALES
For 2025 compared to 2024 , the increase in royalty cost of sales was primarily due to a charge recorded during 2025 of approximately $104.9 million related to a litigation matter. For additional information on our litigation matters, please read Note 21, Litigation , to our consolidated financial statements included in this report.
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RESEARCH AND DEVELOPMENT
Research and development expense, as a percentage of total revenue, was 18.0%, 20.5% and 24.9% for the years ended December 31, 2025, 2024 and 2023, respectively.
For 2025 compared to 2024, the decrease in research and development was primarily driven by continued cost-reduction measures realized in connection with our portfolio prioritization initiatives and our Fit for Growth program, approximately $23.9 million of step-up amortization related to SKYCLARYS inventory recorded in 2025, compared to $48.5 million in 2024, and approximately $42.5 million of equity-based compensation expense recognized in 2024 related to our acquisition of HI-Bio. The decrease was offset in part by higher spend on clinical trials, including litifilimab and felzartamab. Higher clinical trial spend related to litifilimab was offset by $200.0 million in research and development funding received from Royalty Pharma.
EARLY STAGE PROGRAMS
The decrease in early stage programs was driven by a decrease in costs associated with:
• discontinuation of BIIB143 for the treatment of diabetic neuropathic pain;
• discontinuation of BIIB121 for the treatment of Angelman syndrome;
• advancement of litifilimab for the treatment of CLE into late stage; and
• discontinuation of BIIB105 for the treatment of ALS.
The decrease was partially offset by an increase in costs associated with:
• development of salanersen for the treatment of SMA; and
• development of BIIB080 for the treatment of Alzheimer's disease.
LATE STAGE PROGRAMS
The increase in late stage programs was driven by an increase in costs associated with:
• development of felzartamab for AMR, IgAN and PMN;
• increased spend on zorevunersen for the treatment of Dravet syndrome; and
• development of litifilimab for the treatment of CLE and SLE, offset by Royalty Pharma funding of $200.0 million.
MARKETED PROGRAMS
The decrease in marketed programs was driven by a decrease in costs associated with:
• decreased spend on LEQEMBI for the treatment of Alzheimer's disease; and
• $23.9 million of step-up amortization related to SKYCLARYS inventory recorded in 2025, compared to $48.5 million in 2024.
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Research and development expense is reported above based on the following classifications. The development stage reported is based upon the program status when incurred. Therefore, the same program could be reflected in different development stages in the same year. For several of our programs, the research and development activities are part of our collaborative and other relationships. Our costs reflect our share of the total costs incurred.
• Research and discovery: represents costs incurred to support our discovery research and translational science efforts.
• Early stage programs: are programs in Phase 1 or Phase 2 development.
• Late stage programs: are programs in Phase 3 development or in registration stage.
• Marketed products: includes costs associated with product lifecycle management activities including, if applicable, costs associated with the development of new indications for existing products.
• Other research and development costs: A significant amount of our research and development costs consist of indirect costs incurred in support of overall research and development activities and non-specific programs, including activities that benefit multiple programs, such as management costs, as well as depreciation, information technology and facility-based expenses. These costs are considered other research and development costs in the table above and are not allocated to a specific program or stage.
We expect our core research and development expense to increase slightly in 2026 with most investments in our late-stage programs. We intend to continue committing significant resources to targeted research and development opportunities while continuing to invest in our pipeline, where there is a significant unmet need and where a drug candidate has the potential to be highly differentiated.
For additional information on our acquisitions of Reata and HI-Bio, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT, UPFRONT AND MILESTONE EXPENSE
During the first quarter of 2025 we began presenting acquired in-process research and development, upfront and milestone expense as a separate line item in our consolidated statements of income. Acquired in-process research and development, upfront and milestone expense includes costs incurred in connection with collaboration and license agreements such as upfront and milestone payments and, when applicable, premiums on equity securities and asset acquisitions of acquired in-process research and development, which were previously included in research and development expense.
For 2025 acquired in-process research and development, upfront and milestone expense primarily consists of the following activity:
• Upfront payment of $165.0 million made to Stoke in connection with the closing of our collaboration and license agreement;
• Total consideration, including upfront payment, of approximately $85.0 million in connection with the closing of our acquisition of Alcyone;
• Upfront payment of $70.0 million made to Vanqua in connection with the closing of our license agreement;
• Upfront payment of $50.0 million made to Dayra in connection with the closing of our research collaboration;
• Milestone payments of $35.0 million and $30.0 million to MorphoSys in connection with the first patient dosed in a Phase 3 clinical trial of felzartamab for the treatment of AMR and IgAN, respectively; and
• Upfront payment of $16.0 million made to City Therapeutics in connection with the closing of our strategic research arrangement.
For additional information on our collaboration arrangements, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report. For additional information on our acquisition of Alcyone, please read Note 2, Acquisitions, to our consolidated financial statements included in this report.
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SELLING, GENERAL AND ADMINISTRATIVE
For 2025 compared to 2024, selling, general and administrative expense increased by approximately 1.2% primarily due to an increase in operational spending on sales and marketing activities in support of LEQEMBI and SKYCLARYS as we continue to expand our U.S. and international product launches. The increase was partially offset by the realization of our cost-reduction measures in connection with our Fit for Growth program.
In 2026 we expect selling, general and administrative expense to be relatively flat as compared to 2025. We anticipate increases in spend related to product launches and pre-launch activities will be offset by reduced spending within our mature products.
AMORTIZATION AND IMPAIRMENT OF ACQUIRED INTANGIBLE ASSETS
Our amortization expense is based on the economic consumption and impairment of intangible assets. Our most significant amortizable intangible assets are related to TYSABRI, AVONEX, SPINRAZA, VUMERITY and SKYCLARYS.
Amortization of acquired intangible assets, excluding impairment charges, totaled $507.1 million, $386.5 million and $240.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. The increase in amortization of acquired intangible assets, excluding impairment charges, was primarily due to amortization for the acquired intangible assets associated with SKYCLARYS and TYSABRI.
For the year ended December 31, 2025, amortization and impairment of acquired intangible assets reflects the impact of $7.9 million in impairment charges related to compounds acquired from HI-Bio.
For the year ended December 31, 2024, amortization and impairment of acquired intangible assets reflects the impact of a $40.0 million impairment charge related to intangible assets from other clinical programs we acquired from Reata, reducing the remaining book value of these IPR&D intangible assets to zero, and a $20.2 million impairment charge related to intangible assets associated with the termination of Samsung Bioepis' commercialization rights during the third quarter of 2024.
For additional information on the amortization and impairment of our acquired intangible assets, please read Note 7, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.
COLLABORATION PROFIT SHARING/(LOSS REIMBURSEMENT)
Collaboration profit sharing/(loss reimbursement) includes Samsung Bioepis' 50.0% share of the profit or loss related to our biosimilars 2013 commercial agreement with Samsung Bioepis and collaboration profit sharing/(loss reimbursement) related to Supernus' 50.0% share of the profit or loss in the U.S. related to ZURZUVAE for PPD.
For the years ended December 31, 2025, 2024 and 2023, we recognized net profit-sharing expense of approximately $219.2 million, $227.4 million and $223.5 million, respectively, to reflect Samsung Bioepis' 50.0% sharing of the net collaboration profits.
For the years ended December 31, 2025, 2024 and 2023, we recognized net profit-sharing expense of approximately $71.0 million and $27.0 million, and net loss reimbursement of approximately $4.7 million, respectively, to reflect Supernus' 50.0% share of net collaboration results in the U.S.
For additional information on our collaboration and license arrangements with Samsung Bioepis and Supernus, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report.
(GAIN) LOSS ON FAIR VALUE REMEASUREMENT OF CONTINGENT CONSIDERATION
Consideration payable for certain of our business combinations include future payments that are contingent upon the occurrence of a particular event or events. We record an obligation for such contingent consideration payments at fair value on the acquisition date. We then revalue our contingent consideration obligations each reporting period. Changes in the fair values of our contingent consideration obligations, other than changes due to payments, are recognized as a (gain) loss on fair value remeasurement of contingent consideration within our consolidated statements of income. In connection with our acquisition of HI-Bio in July 2024 we recorded contingent consideration obligations related to potential milestone payments.
For the year ended December 31, 2025, changes in the fair value of our contingent consideration obligations were primarily due to changes in interest rates used to revalue our contingent consideration liabilities and the passage of time.
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During the second quarter of 2025 the first milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for AMR was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the third quarter of 2025. In October 2025 the second milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for IgAN was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the fourth quarter of 2025.
For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
IMPAIRMENT OF RIGHT-OF-USE ASSET
As part of our acquisition of Reata, we assumed responsibility for a single-tenant, build-to-suit building of approximately 327,400 square feet of office and laboratory space located in Plano, Texas, with an initial lease term of 16 years. We recorded a lease liability of approximately $151.8 million, with a corresponding right-of-use asset of approximately $121.2 million. We are continuing to evaluate opportunities to sublease the property.
During the fourth quarter of 2025 we performed an impairment assessment for this right-of use asset. This assessment involved estimating undiscounted future cash flows, including potential sublease income and remaining lease obligations. As a result of this impairment assessment, we recorded an impairment charge of approximately $52.9 million related to this Reata lease, which is included in impairment of ROU asset within our consolidated statements of income for the year ended December 31, 2025.
For additional information on our leases, please read Note 12, Leases , to our consolidated financial statements included in this report.
RESTRUCTURING CHARGES
2023 FIT FOR GROWTH RESTRUCTURING PROGRAM
In 2023 we initiated cost saving measures as part of our Fit for Growth program to reduce operating costs, while improving operating efficiency and effectiveness. The Fit for Growth program generated approximately $1.0 billion in gross operating expense savings by the end of 2025, some of which has been reinvested in various initiatives. The Fit for Growth program included net headcount reductions of approximately 1,400 employees and we incurred total restructuring charges of approximately $320.0 million by the end of 2025.
Total charges incurred from our 2023 Fit for Growth program are summarized as follows:
For the Years Ended December 31,
(In millions)
Severance Costs
Accelerated Depreciation and Other
Total
Severance Costs
Accelerated Depreciation and Other
Total
Severance Costs
Accelerated Depreciation and Other
Total
Selling, general and administrative
Research and development
Restructuring charges
Total charges
Other Costs: Includes costs associated with items such as asset abandonment and write-offs, facility closure costs, pre-tax gains and losses resulting from the termination of certain leases, employee non-severance expense, consulting fees and other costs.
For additional information on our cost saving initiatives, please read Note 4, Restructuring, to our consolidated financial statements included in this report.
OTHER (INCOME) EXPENSE, NET
For 2025 compared to 2024, the change in other (income) expense, net primarily reflects higher interest income in 2025 driven by higher cash balances as well as higher litigation related expense in 2025 compared to 2024. In 2025 we recorded $139.5 million related to various litigation matters, including our agreement in principle to resolve all claims relating to Biogen's acquisition of Convergence, partially offset by higher net losses on our holdings in equity securities in 2024.
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For additional information on our legal matters, please read Note 21, Litigation , to our consolidated financial statements included in this report.
INTEREST INCOME AND EXPENSE
For the year ended December 31, 2025, net interest expense was approximately $142.5 million, compared to net interest expense of $182.7 million in 2024. The change was primarily due to higher interest income driven by higher cash balances in 2025.
For 2026 compared to 2025, we anticipate lower net interest expense as a result of higher interest income driven by higher cash balances, partially offset by higher interest expense as a result of the issuance of our 2025 Senior Notes.
For additional information on our Senior Notes, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
NET (GAINS) LOSSES IN EQUITY SECURITIES
For the year ended December 31, 2025, net unrealized and realized losses on our holdings in equity securities were approximately $18.2 million and $1.5 million, respectively, compared to net unrealized losses and realized gains of approximately $102.4 million and $2.0 million, respectively, in 2024.
• The net unrealized losses recognized during the year ended December 31, 2025, primarily reflect a decrease in the aggregate fair value of our investment in Denali common stock of approximately $27.7 million, partially offset by an increase in the fair value of Sage common stock of approximately $23.0 million.
• The net unrealized losses recognized during the year ended December 31, 2024, primarily reflect a decrease in the aggregate fair value of our investment in Sage common stock of approximately $101.4 million, partially offset by an increase in the fair value of Denali and Sangamo common stock of approximately $7.5 million.
INCOME TAX PROVISION
For the Years Ended December 31,
(In millions, except percentages)
Income before income tax (benefit) expense
Income tax (benefit) expense
Effective tax rate
Our effective tax rate fluctuates from year to year due to the global nature of our operations. The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expense, the levels of certain deductions and credits, acquisitions and licensing transactions.
For 2025 compared to 2024, the increase in our effective tax rate was partially driven by changes in the territorial mix of our profitability and the impact of certain share-based compensation awards that vested during the first quarter of 2025, partially offset by the impact of the elimination of Italian withholding tax.
PILLAR TWO
The OECD has issued model rules, which generally provide for a jurisdictional minimum effective tax rate of 15.0% as defined in those rules. Various countries have or are in the process of enacting legislation intended to implement the principles. Our income tax provision for the years ended December 31, 2025 and 2024, reflects currently enacted legislation and guidance related to the OECD model rules including the Pillar Two side-by-side package announced by the OECD in January 2026. This enacted legislation and guidance related to the OECD model rules did not result in any material adjustments to our income tax provision or income tax balances as of December 31, 2025 and 2024. At this stage, we do not believe the side-by-side package impacts our financial results as of December 31, 2025.
2025 OBBBA TAX PROVISIONS
On July 4, 2025, the U.S. signed into law the OBBBA. The OBBBA contains tax provisions, such as the permanent extension or revision of certain expiring provisions of the Tax Cuts and Jobs Act enacted in 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The provisions of the OBBBA have multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.
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The OBBBA did not result in any material adjustments to our total income tax provision for the year ended December 31, 2025, and we have adjusted our deferred tax balances to reflect the impacts of the OBBBA enactment. However, given the complexity of tax laws, related regulations and interpretations, our current estimates may require revision as additional information becomes available regarding the application of the OBBBA provisions.
For additional information on our income taxes, uncertain tax positions and income tax rate reconciliation, please read Note 17, Income Taxes , to our consolidated financial statements included in this report.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our financial condition is summarized as follows:
As of December 31,
(In millions, except percentages)
% Change
$ Change
Financial assets:
Cash and cash equivalents
Marketable securities — current
Marketable securities — non-current
Total cash, cash equivalents and marketable securities
Borrowings:
Current portion of notes payable
Notes payable
Total borrowings
Working Capital:
Current assets
Current liabilities
Total working capital
nm Not meaningful
OVERVIEW
We have historically financed and expect to continue to fund our operating and capital expenditures primarily through cash flow earned through our operations and borrowings, as well as our existing cash resources. We believe that generic and biosimilar competition for many of our key products, the continued overall decline of our MS business and our investments in the launch of key new products and the development of our pipeline will have a significant adverse impact on our future cash flow from operations.
We believe that our existing funds, when combined with cash generated from operations and our access to additional financing resources, if needed, are sufficient to satisfy our operating, working capital, strategic alliance, milestone payment, capital expenditure and debt service requirements for the foreseeable future. In addition, we may choose to opportunistically return cash to shareholders and pursue other business initiatives, including acquisition and licensing activities. We may also seek additional funding through a combination of new collaborative agreements, strategic alliances and additional equity and debt financings or from other sources should we identify a significant new opportunity.
During the second quarter of 2025 the first milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for AMR was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the third quarter of 2025. In October 2025 the second milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for IgAN was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the fourth quarter of 2025.
For additional information on certain risks that could negatively impact our financial position or future results of operations, please read Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk included in this report.
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LIQUIDITY
WORKING CAPITAL
Working capital is defined as current assets less current liabilities. Our working capital was $5.6 billion as of December 31, 2025, compared to $1.9 billion as of December 31, 2024. The change in working capital reflects an increase in total current assets of approximately $1.5 billion and a decrease in total current liabilities of approximately $2.2 billion. The changes in total current assets and total current liabilities were primarily driven by the following:
CURRENT ASSETS
• $1.4 billion increase in cash, cash equivalents and current marketable securities ;
• $62.4 million decrease in accounts receivable, net related to our ongoing operations; and
• $292.4 million decrease in inventory primarily due to timing of production.
CURRENT LIABILITIES
• $1.7 billion decrease in the current portion of notes payable due to the redemption of our 4.050% Senior Notes due September 15, 2025, during the second quarter of 2025; and
• $433.5 million decrease in taxes payable primarily due to the timing of tax payments.
For additional information on our Senior Notes, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
As of December 31, 2025, we had cash, cash equivalents and marketable securities totaling approximately $4.2 billion compared to approximately $2.4 billion as of December 31, 2024. The increase in the balance was primarily due to cash generated by our operations, which includes $200.0 million of research and development funding received from Royalty Pharma, partially offset by worldwide tax payments of approximately $864.0 million, an upfront payment made to Stoke of $165.0 million in connection with the closing of our collaboration and license agreement, milestone payments made to the former shareholders of HI-Bio totaling $300.0 million, a payment of $50.0 million in connection with our acquisition of Alcyone and total payments of $166.0 million in connection with our agreements with City Therapeutics, Dayra and Vanqua. During the second quarter of 2025 we received $1.75 billion in net proceeds from the issuance of our 2025 Senior Notes, which was offset by a $1.75 billion payment made for the redemption of our 4.050% Senior Notes due September 15, 2025.
Until required for another use in our business, we typically invest our cash reserves in bank deposits, certificates of deposit, commercial paper, corporate notes, U.S. and foreign government instruments, overnight reverse repurchase agreements and other interest-bearing marketable debt instruments in accordance with our investment policy. It is our policy to mitigate credit risk in our cash reserves and marketable securities by maintaining a well-diversified portfolio that limits the amount of exposure as to institution, maturity and investment type. We have experienced no significant limitations in our liquidity resulting from uncertainties in the banking sector.
The following table summarizes the fair value of our significant common stock investments in our strategic investment portfolio:
As of December 31,
(In millions)
Denali
Sage (1)
Total
(1) In July 2025 Sage was acquired by Supernus. Prior to this acquisition, we disposed of all of our shares of Sage common stock in a block trade.
For additional information on our collaboration arrangements, please read Note 19, Collaborative and Other Relationships, to our consolidated financial statements included in this report . For additional information on our 2025 Senior Notes, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
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CASH FLOW
The following table summarizes our cash flow activity:
% Change
For the Years Ended December 31,
(In millions, except percentages)
Net cash flow provided by (used in) operating activities
Net cash flow provided by (used in) investing activities
Net cash flow provided by (used in) financing activities
OPERATING ACTIVITIES
Operating cash flow is derived by adjusting our net income for:
• non-cash operating items such as depreciation and amortization, impairment charges, unrealized (gain) loss on strategic investments and share-based compensation;
• changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations; and
• (gains) losses on the disposal of assets, deferred income taxes, changes in the fair value of contingent payments associated with our acquisitions of businesses and acquired IPR&D.
For 2025 compared to 2024, the decrease in net cash flow provided by operating activities was primarily due to lower net income in 2025, which included higher acquired in-process research and development, upfront and milestone payments in 2025, higher worldwide tax payments in 2025, compared to 2024, of approximately $864.0 million and $355.1 million, respectively, driven by the timing of estimated tax payments, the timing of customer payments and higher employee-benefit payments made during the first quarter of 2025, compared to the same period in 2024. The decrease was offset in part by lower inventory levels and $200.0 million of research and development funding received from Royalty Pharma in 2025.
INVESTING ACTIVITIES
For 2025 compared to 2024, the change in net cash flow in investing activities was primarily due to purchases of marketable securities in 2025 of $1.3 billion. In 2024, net cash flow in investing activities included the acquisition of HI-Bio for $1.15 billion, partially offset by the receipt of $437.5 million from Samsung BioLogics related to the sale of our 49.9% equity interest in Samsung Bioepis and the net cash receipt of $88.6 million from the sale of one of our two PRVs.
FINANCING ACTIVITIES
For 2025 compared to 2024, the change in net cash flow in financing activities was primarily due to $1.75 billion in net proceeds received from the issuance of our 2025 Senior Notes, which was offset by a $1.75 billion payment made for the redemption of our 4.050% Senior Notes due September 15, 2025, as well as $300.0 million of milestone payments made to the former shareholders of HI-Bio, of which approximately $280.0 million was reflected within financing activities. Additionally, net cash flow used in financing activities during 2024 included the repayment of our 2023 Term Loan for $650.0 million.
For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions , to our consolidated financial statements included in this report. For additional information on our Senior Notes and 2023 Term Loan, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
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CAPITAL RESOURCES
DEBT AND CREDIT FACILITIES
LONG-TERM DEBT AND TERM LOAN CREDIT AGREEMENTS
Our long-term obligations primarily consist of long-term debt related to our Senior Notes with final maturity dates ranging between 2030 and 2055. As of December 31, 2025, our outstanding balance related to long-term debt was $6.3 billion, net of discounts and debt offering costs.
2025 SENIOR NOTES
On May 12, 2025, we issued our 2025 Senior Notes for an aggregate principal amount of $1.75 billion. In June 2025 we used the net proceeds from the sale of our 2025 Senior Notes to redeem our 4.050% Senior Notes due September 15, 2025, prior to maturity.
2023 TERM LOAN
In connection with our acquisition of Reata in September 2023 we entered into a $1.5 billion term loan credit agreement. On the closing date of the Reata acquisition we drew $1.0 billion from the 2023 Term Loan, comprised of a $500.0 million floating rate 364-day tranche and a $500.0 million floating rate three-year tranche. The remaining unused commitment of $500.0 million was terminated. As of December 31, 2023, we repaid $350.0 million of the 364-day tranche. The remaining $150.0 million portion of the 364-day tranche was repaid during the first quarter of 2024.
Additionally, during the first quarter of 2024 we repaid $250.0 million of the three-year tranche, with the remaining $250.0 million portion being subsequently repaid in full during the second quarter of 2024.
2024 REVOLVING CREDIT FACILITY
In August 2024 we entered into a $1.5 billion, five-year senior unsecured revolving credit facility under which we are permitted to draw funds for working capital and general corporate purposes. The terms of the revolving credit facility include a financial covenant that requires us not to exceed a maximum consolidated leverage ratio. This revolving credit facility replaced the revolving credit facility that we entered into in January 2020. As of December 31, 2025, we had no outstanding borrowings and were in compliance with all covenants under this facility.
For a summary of the fair values of our outstanding borrowings as of December 31, 2025 and 2024, please read Note 8, Fair Value Measurements, to our consolidated financial statements included in this report.
For additional information on our Senior Notes, 2023 Term Loan and credit facility please read, Note 13, Indebtedness , to our consolidated financial statements included in this report.
SHARE REPURCHASE PROGRAMS
In October 2020 our Board of Directors authorized our 2020 Share Repurchase Program, which is a program to repurchase up to $5.0 billion of our common stock. Our 2020 Share Repurchase Program does not have an expiration date. All shares repurchased under our 2020 Share Repurc hase Program were retired. There were no repurchases of our common stock during the years ended December 31, 2025 and 2024. Approximately $2.1 billion remained available under our 2020 Share Repurchase Program as of December 31, 2025.
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CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations as of December 31, 2025, excluding amounts related to uncertain tax positions, funding commitments, contingent development, regulatory and commercial milestone payments, contingent payments and contingent consideration related to our business combinations, as described below.
Payments Due by Period
(In millions)
Total
Less than
1 Year
Years
Years
After
5 Years
Non-cancelable operating leases (1)(2)(3)
Long-term debt obligations (4)
Purchase and other obligations (5)
Defined benefit obligation
Total contractual obligations
(1) We lease properties and equipment for use in our operations. Amounts reflected within the table above detail future minimum rental commitments under non-cancelable operating leases as of December 31 for each of the periods presented. In addition to the minimum rental commitments, these leases may require us to pay additional amounts for taxes, insurance, maintenance and other operating expense.
(2) Obligations are presented net of sublease income expected to be received for our vacated portions of various facilities throughout the world.
(3) In connection with our acquisition of Reata in September 2023 we assumed operating lease commitments, including the responsibility for a single-tenant, built-to-suit building. For additional information on our acquisition of Reata, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
(4) Long-term debt obligations are related to our 2025 Senior Notes, our 2021 Exchange Offer Senior Notes, our 2020 Senior Notes and our 2015 Senior Notes, including principal and interest payments. For additional information on our long-term debt obligations, please read Note 13, Indebtedness , to our consolidated financial statements included in this report.
(5) Purchase and other obligations includes approximately $58.9 million related to the fair value of net liabilities on derivative contracts.
ROYALTY PAYMENTS
TYSABRI
We are obligated to make contingent payments of 18.0% on annual worldwide net sales of TYSABRI up to $2.0 billion and 25.0% on annual worldwide net sales of TYSABRI that exceed $2.0 billion. Royalty payments are recognized as cost of sales in our consolidated statements of income.
SPINRAZA
We make royalty payments to Ionis on annual worldwide net sales of SPINRAZA using a tiered royalty rate between 11.0% and 15.0%, which are recognized in cost of sales within our consolidated statements of income.
For additional information on our collaboration arrangements with Ionis, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
QALSODY
We make royalty payments to Ionis on annual worldwide net sales of QALSODY using a tiered royalty rate between 11.0% and 15.0%, which are recognized in cost of sales within our consolidated statements of income.
For additional information on our collaboration arrangements with Ionis, please read Note 19, Collaborative and Other Relationships , to our consolidated financial statements included in this report.
VUMERITY
We make royalty payments to Alkermes on worldwide net sales of VUMERITY using a royalty rate of 15.0% on product that Alkermes has manufactured and 16.0% on product manufactured by us or a third-party designee, which are recognized as cost of sales in our consolidated statements of income.
SKYCLARYS
In connection with our acquisition of Reata in September 2023 we assumed additional contractual obligations related to royalty payments. Reata entered into agreements to pay royalties on annual worldwide net sales of
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SKYCLARYS, which will cumulatively range in the low to mid-single digit percentages. Royalty payments are recognized as cost of sales in our consolidated statements of income.
For additional information on our acquisition of Reata, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
LEASE COMMITMENTS
In March 2025 we entered into a lease agreement with MIT Investment Management Company and BioMed Realty for the lease of approximately 580,000 square feet of office and research and development space located at 75 Broadway, Cambridge, Massachusetts, which will be used as our new global corporate headquarters, as well as integrating our research and development and technical operations teams alongside our North American commercial organization. As part of a multi-year real estate consolidation plan that is expected to result in a reduction of approximately 40% of our real estate footprint in Massachusetts, this new lease is intended to replace two existing leases, both in Cambridge, Massachusetts, including our current corporate headquarters. We expect the initial lease term of approximately 15.5 years to commence on May 31, 2028. The estimated minimum lease payments as a result of the new lease total approximately $1.5 billion over the initial lease term.
For additional information on our leases, please read Note 12, Leases , to our consolidated financial statements included in this report.
CONTINGENT CONSIDERATION RELATED TO BUSINESS COMBINATIONS
In connection with our acquisition of HI-Bio in July 2024 we may make additional payments based upon the achievement of certain milestone events. We recognized the contingent consideration obligations associated with this acquisition at its fair value on the acquisition date and we revalue this obligation each reporting period. We may pay up to a total of $650.0 million in contingent development and regulatory milestone payments. The acquisition-date fair value of these milestones was approximately $485.1 million.
During the second quarter of 2025 the first milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for AMR was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the third quarter of 2025. In October 2025 the second milestone related to the fourth patient dosed in a Phase 3 clinical trial of felzartamab for IgAN was achieved, resulting in a $150.0 million milestone payment made to the former shareholders of HI-Bio, which was paid during the fourth quarter of 2025.
For additional information on our acquisition of HI-Bio, please read Note 2, Acquisitions , to our consolidated financial statements included in this report.
CONTINGENT DEVELOPMENT, REGULATORY AND COMMERCIAL MILESTONE PAYMENTS
Based on our development plans as of December 31, 2025, we could make potential future milestone payments to third parties of up to approximately $5.3 billion, including approximately $0.7 billion in development milestones, approximately $0.8 billion in regulatory milestones and approximately $3.8 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, 2025, 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 successfulachievement of certain development, regulatory or commercial milestones.
If certain research milestones are met, we may pay up to approximately $67.5 million in additional milestones in 2026 under our current agreements, excluding opt-in payments. This amount includes a $45.0 million milestone payment due upon the initiation of a Phase 3 trial of salanersen.
OTHER FUNDING COMMITMENTS
As of December 31, 2025, we have several ongoing 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 recorded accrued expense of approximately $39.3 million in our consolidated balance sheets for expenditures incurred by CROs as of December 31, 2025. We have approximately $524.9 million in cancellable future commitments based on existing CRO contracts as of December 31, 2025.
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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, 2025, we have approximately $166.8 million of liabilities associated with uncertain tax positions.
As of December 31, 2024, we accrued income tax liabilities of approximately $234.0 million under the Transition Toll Tax, which was subsequently paid in full in April 2025.
OTHER OFF-BALANCE SHEET ARRANGEMENTS
We do not have any relationships with entities often referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. We consolidate variable interest entities if we are the primary beneficiary.
NEW ACCOUNTING STANDARDS
For a discussion of new accounting standards please read Note 1, Summary of Significant Accounting Policies, to our consolidated financial statements included in this report.
LEGAL MATTERS
For a discussion of legal matters as of December 31, 2025, please read Note 21, Litigation, to our consolidated financial statements included in this report.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements, which have been prepared in accordance with U.S. GAAP, requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenue and expense and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments and assumptions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expense. Actual results may differ from these estimates. Other significant accounting policies are outlined in Note 1, Summary of Significant Accounting Policies , to our consolidated financial statements included in this report.
REVENUE RECOGNITION
We recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenue following the five-step model prescribed under FASB ASC 606, Revenue from Contracts with Customers : (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performance obligations.
PRODUCT REVENUE
In the U.S., we sell our products primarily to wholesale and specialty distributors and specialty pharmacies. In other countries, we sell our products primarily to wholesale distributors, hospitals, pharmacies and other third-party distribution partners. These customers subsequently resell our products to health care providers and patients. In addition, we enter into arrangements with health care providers and payors that provide for government-mandated or privately-negotiated discounts and allowances related to our products.
Product revenue is recognized when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial.
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RESERVES FOR DISCOUNTS AND ALLOWANCES
Product revenue is recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, health care providers or payors, including those associated with the implementation of pricing actions in certain of the international markets in which we operate. Our process for estimating reserves established for these variable consideration components do not differ materially from our historical practices.
Product revenue reserves, which are classified as a reduction in product revenue, are generally characterized in the following categories: discounts, contractual adjustments and returns.
These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer). Our estimates of reserves established for variable consideration are calculated based upon a consistent application of our methodology utilizing the expected value method. These estimates reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.
As of December 31, 2025 and 2024, a 10.0% change in our discounts, contractual adjustments and reserves would have resulted in a decrease of our pre-tax earnings by approximately $355.7 million and $351.9 million, respectively.
In addition to discounts, rebates and product returns, we also maintain certain customer service contracts with distributors and other customers in the distribution channel that provide us with inventory management, data and distribution services, which are generally reflected as a reduction of revenue. To the extent we can demonstrate a separable benefit and fair value for these services we classify these payments in selling, general and administrative expense in our consolidated statements of income.
For additional information on our revenue, please read Note 5, Revenue , to our consolidated financial statements included in this report.
ACQUIRED INTANGIBLE ASSETS, INCLUDING IPR&D
When we purchase a business, the acquired IPR&D is measured at fair value, capitalized as an intangible asset and tested for impairment at least annually, as of October 31, until commercialization, after which time the IPR&D is amortized over its estimated useful life. If we acquire an asset or group of assets with no alternative future use that do not meet the definition of a business under applicable accounting standards, then the acquired IPR&D is expensed on its acquisition date. Future costs to develop these assets are recorded to research and development expense within our consolidated statements of income as they are incurred.
We have acquired, and expect to continue to acquire, intangible assets through the acquisition of biotechnology companies or through the consolidation of variable interest entities. These intangible assets primarily consist of technology associated with human therapeutic products, IPR&D product candidates and priority review vouchers. When significant identifiable intangible assets are acquired, we generally engage an independent third-party valuation firm to assist in determining the fair values of these assets as of the acquisition date. Management will determine the fair value of less significant identifiable intangible assets acquired. Discounted cash flow models are typically used in these valuations, and these models require the use of significant estimates and assumptions including but not limited to:
• estimating the timing of and expected costs to complete the in-process projects;
• projecting the timing and likelihood of regulatory approvals;
• estimating future cash flow from product sales resulting from completed products and in process projects; and
• developing appropriate discount rates and probability rates by project.
We believe the fair values assigned to the intangible assets acquired are based upon reasonable estimates and assumptions given available facts and circumstances as of the acquisition dates.
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If these projects are not successfully developed, the sales and profitability of the company may be adversely affected in future periods. Additionally, the value of the acquired intangible assets may become impaired. No assurance can be given that the underlying assumptions used to estimate expected project sales, development costs or profitability, or the events associated with such projects, will transpire as estimated.
INVENTORY
At each reporting period we review our inventories for excess or obsolescence and write-down obsolete or otherwise unmarketable inventory to its estimated net realizable value. The determination of obsolete or excess inventory requires management to make estimates based on assumptions about the future demand of our products, product expiration dates, estimated future sales and our general future plans. If customer demand subsequently differs from our forecasts, we may be required to record additional charges for excess inventory.
Although we believe that the assumptions we use in estimating inventory write-downs are reasonable, no assurance can be given that significant future changes in these assumptions or changes in future events and market conditions could result in different estimates.
IMPAIRMENT AND AMORTIZATION OF LONG-LIVED ASSETS
Long-lived assets to be held and used include property, plant and equipment as well as intangible assets, including IPR&D and trademarks. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable based on an estimate of undiscounted future cash flow resulting from the use of the assets and eventual disposition.
We review our intangible assets with indefinite lives for impairment annually, as of October 31, and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. When performing our impairment assessment, we assess qualitative, and, if necessary, quantitative factors, and calculate the fair value using the same methodology as described above under Acquired Intangible Assets, including IPR&D . If the carrying value of our acquired IPR&D exceeds its fair value, then the intangible asset is written down to its fair value. Changes in estimates and assumptions used in determining the fair value of our acquired IPR&D could result in an impairment. Acquired IPR&D impairments are recorded within amortization and impairment of acquired intangible assets in our consolidated statements of income.
Based on our most recent impairment assessment we incurred impairment charges of approximately $7.9 million for the year ended December 31, 2025, related to the impairment of compounds acquired from HI-Bio. For the year ended December 31, 2024, we incurred impairment charges of approximately $60.2 million related to the impairment of other clinical programs we acquired from Reata and the termination of Samsung Bioepis' commercialization rights. For additional information on our impairments, please read Note 7, Intangible Assets and Goodwill , to our consolidated financial statements included in this report.
Our most significant intangible assets relate to SKYCLARYS and TYSABRI. We amortize the intangible assets related to our marketed products using the economic consumption method, which is based on revenue generated from the products underlying the related intangible assets. An analysis of the anticipated lifetime revenue of our marketed products is performed annually during our long-range planning cycle and whenever events or changes in circumstances would significantly affect anticipated lifetime revenue of the relevant products.
For additional information on the impairment charges related to our long-lived assets during 2025, 2024 and 2023, please read Note 7, Intangible Assets and Goodwill, to our consolidated financial statements included in this report.
CONTINGENT CONSIDERATION
We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period thereafter, we revalue the remaining obligations and record changes in the fair value as an adjustment to (gain) loss on fair value remeasurement of contingent consideration in our consolidated statements of income. Changes in the fair value of the contingent consideration obligations can result from changes to one or multiple inputs, including adjustments to the discount rates, changes in the amount or timing of expected expenditures associated with product development, changes in the amount or timing of cash flow and reserves associated with products upon commercialization, changes in the assumed achievement or timing of any cumulative sales-based and development milestones, changes in the probability of certain clinical events and changes in the assumed probability associated with regulatory approval. These fair value measurements represent Level 3 measurements as they are based on significant inputs that are not observable in the market.
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Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period. Accordingly, changes in assumptions described above, could have a material impact on the amount of contingent consideration expense we record in any given period.
INCOME TAXES
We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations. In preparing our consolidated financial statements, we estimate our income tax liability in each of the jurisdictions in which we operate by estimating our actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. Upon our election in the fourth quarter of 2018 to record deferred taxes for GILTI, we have included amounts related to GILTI taxes within temporary difference.
Significant management judgment is required in assessing the realizability of our deferred tax assets. In performing this assessment, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial accounting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and the effects of tax planning strategies. In the event that actual results differ from our estimates, we adjust our estimates in future periods and we may need to establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.
We account for uncertain tax positions using a “more likely than not” threshold for recognizing and resolving uncertain tax positions. We evaluate uncertain tax positions on a quarterly basis and consider various factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained during in process audit activities and changes in facts or circumstances related to a tax position. We adjust the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. Our liabilities for uncertain tax positions can be relieved only if the contingency becomes legally extinguished, through either payment to the taxing authority or the expiration of the statute of limitations, the recognition of the benefits associated with the position meet the “more likely than not” threshold or the liability becomes effectively settled through the examination process. We consider matters to be effectively settled once the taxing authority has completed all of its required or expected examination procedures, including all appeals and administrative reviews, we have no plans to appeal or litigate any aspect of the tax position and we believe that it is highly unlikely that the taxing authority would examine or re-examine the related tax position. We also accrue for potential interest and penalties related to unrecognized tax benefits in income tax (benefit) expense in our consolidated statements of income.
BUSINESS COMBINATIONS
Business combinations are recorded using the acquisition method of accounting. The results of operations of the acquired company are included in our results of operations beginning on the acquisition date, and assets acquired and liabilities assumed are recognized on the acquisition date at their respective fair values. Any excess of consideration transferred over the net carrying value of the assets acquired and liabilities assumed as of the acquisition date is recognized as goodwill.
We use the multi-period excess earnings method, which is a form of the income approach, utilizing post-tax cash flow and discount rates in estimating the fair value of identifiable intangible assets acquired when allocating the purchase consideration paid for the acquisition. The estimates of the fair value of identifiable intangible assets involve significant judgment by management and include assumptions with measurement uncertainty, such as the amount and timing of projected cash flow, long-term sales forecasts, discount rates and additionally for IPR&D intangible assets, the timing and probability of regulatory and commercial success.
We use the net realizable value method in estimating the fair value of acquired finished goods and work-in-process inventory. Raw materials acquired are valued using the replacement cost method.
Transaction and restructuring costs related to business combinations are expensed as incurred. The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date. If we determine the assets acquired do not meet the definition of a business, the transaction will be accounted for as an asset acquisition rather than a business combination.
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For additional information on our acquisitions, please read Note 2, Acquisitions, to our consolidated financial statements included in this report.
