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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2021
or
Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
For the transition period from              to             
Commission file number: 0-27756
 https://cdn.kscope.io/3d352ce28ff4dab296585c59e1ad10dc-alxn-20210331_g1.jpg
ALEXION PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware13-3648318
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
121 Seaport Boulevard, Boston Massachusetts 02210
(Address of Principal Executive Offices) (Zip Code)
475-230-2596
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock $0.0001 par valueALXNNASDAQ Stock Market LLC
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x   Accelerated filer  Non-accelerated filer  
Smaller reporting company   Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
Common Stock $0.0001 par value221,019,230
ClassOutstanding as of April 28, 2021



 
Alexion Pharmaceuticals, Inc.
Table of Contents

 
Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.
SIGNATURES



Alexion Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(amounts in millions, except per share amounts)
 March 31,December 31,
 20212020
Assets
Current Assets:
Cash and cash equivalents$3,429.6 $2,964.5 
Marketable securities39.7 34.9 
Trade accounts receivable, net1,473.0 1,409.3 
Inventories803.9 775.7 
Prepaid expenses and other current assets706.4 648.6 
Total current assets6,452.6 5,833.0 
Property, plant and equipment, net1,244.8 1,238.8 
Intangible assets, net3,048.3 3,002.4 
Goodwill5,100.1 5,100.1 
Right of use operating assets216.8 223.1 
Deferred tax assets2,140.6 2,199.4 
Other assets447.0 506.2 
Total assets$18,650.2 $18,103.0 
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable$125.3 $118.6 
Accrued expenses910.7 1,084.7 
Current portion of long-term debt143.2 142.4 
Current portion of contingent consideration120.0 114.9 
Other current liabilities127.0 164.1 
Total current liabilities1,426.2 1,624.7 
Long-term debt, less current portion2,388.8 2,419.6 
Contingent consideration303.5 299.4 
Deferred tax liabilities1,639.1 1,632.2 
Noncurrent operating lease liabilities170.8 177.1 
Other liabilities290.8 298.8 
Total liabilities6,219.2 6,451.8 
Commitments and contingencies (Note 17)
Stockholders' Equity:
Common stock, $0.0001 par value; 290.0 shares authorized; 242.3 and 240.9 shares issued at March 31, 2021 and December 31, 2020, respectively
  
Additional paid-in capital9,243.3 9,152.9 
Treasury stock, at cost, 21.4 shares at March 31, 2021 and December 31, 2020
(2,620.5)(2,620.3)
Accumulated other comprehensive loss(85.2)(124.6)
Retained earnings5,879.2 5,243.2 
Total Alexion stockholders' equity12,416.8 11,651.2 
Noncontrolling interest14.2  
Total stockholders' equity12,431.0 11,651.2 
Total liabilities and stockholders' equity$18,650.2 $18,103.0 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2


Alexion Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(amounts in millions, except per share amounts)
 Three months ended March 31,
 20212020
Net product sales$1,635.7 $1,444.6 
Other revenue0.8 0.2 
Total revenues1,636.5 1,444.8 
Costs and expenses:
Cost of sales (exclusive of amortization of purchased intangible assets)125.4 111.7 
Research and development289.1 200.9 
Selling, general and administrative342.9 319.9 
Amortization of purchased intangible assets53.2 73.7 
Change in fair value of contingent consideration9.2 5.8 
Acquired in-process research and development193.3  
Acquisition-related costs13.2 38.1 
Restructuring expenses(0.7)(0.8)
Gain on sale of assets(25.3) 
Total costs and expenses1,000.3 749.3 
Operating income636.2 695.5 
Other income and expense:
Investment expense, net(7.0)(5.2)
Interest expense(27.1)(25.8)
Other income and (expense)0.5 (0.9)
Income before income taxes602.6 663.6 
Income tax expense113.4 106.0 
Net income489.2 557.6 
Net loss attributable to noncontrolling interest146.8  
Net income attributable to Alexion$636.0 $557.6 
Earnings per common share attributable to Alexion:
Basic$2.89 $2.52 
Diluted$2.86 $2.50 
Shares used in computing earnings per common share attributable to Alexion:
Basic220.1 221.6 
Diluted222.6 222.6 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Alexion Pharmaceuticals, Inc.
Condensed Consolidated Statements of Comprehensive Income
(unaudited)
(amounts in millions)
Three months ended March 31,
20212020
Net income$489.2 $557.6 
Other comprehensive income (loss), net of tax:
Foreign currency translation(13.1)(8.0)
Unrealized losses on debt securities (0.2)
Unrealized gains (losses) on hedging activities, net of tax expense (benefit) of $15.8 and $(8.2), respectively
52.5 (26.5)
Other comprehensive income (loss), net of tax39.4 (34.7)
Comprehensive income$528.6 $522.9 
Comprehensive loss attributable to noncontrolling interest146.8  
Comprehensive income attributable to Alexion$675.4 $522.9 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


Alexion Pharmaceuticals, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
(amounts in millions)
Three months ended March 31, 2021Common StockAdditional Paid-In CapitalTreasury Stock at CostAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Alexion Stockholders' EquityNoncontrolling InterestTotal Stockholders’ Equity
Shares IssuedAmountSharesAmount
Balances, December 31, 2020240.9 $ $9,152.9 21.4 $(2,620.3)$(124.6)$5,243.2 $11,651.2 $ $11,651.2 
VIE noncontrolling interest upon consolidation— — — — — — — — 161.0 161.0 
Issuance of common stock under stock option and stock purchase plans0.1 — 14.2 — — — — 14.2 — 14.2 
Issuance of restricted common stock1.3 — — — — — — — — — 
Share-based compensation expense— — 76.2 — (0.2)— — 76.0 — 76.0 
Net income (loss)— — — — — — 636.0 636.0 (146.8)489.2 
Other comprehensive income— — — — — 39.4 — 39.4 — 39.4 
Balances, March 31, 2021242.3 $ $9,243.3 21.4 $(2,620.5)$(85.2)$5,879.2 $12,416.8 $14.2 $12,431.0 

Three months ended March 31, 2020Common StockAdditional Paid-In CapitalTreasury Stock at CostAccumulated Other Comprehensive Income (Loss)Retained EarningsTotal Alexion Stockholders' EquityNoncontrolling InterestTotal Stockholders’ Equity
Shares IssuedAmountSharesAmount
Balances, December 31, 2019237.8 $ $8,804.7 16.5 $(2,105.9)$(66.8)$4,639.8 $11,271.8 $ $11,271.8 
Repurchase of common stock— — — 1.3 (107.1)— — (107.1)— (107.1)
Issuance of common stock under stock option and stock purchase plans0.1 — 2.8 — — — — 2.8 — 2.8 
Issuance of restricted common stock1.0 — — — — — — — — — 
Share-based compensation expense— — 57.4 — — — — 57.4 — 57.4 
Net income— — — — — — 557.6 557.6 — 557.6 
Other comprehensive loss— — — — — (34.7)— (34.7)— (34.7)
Balances, March 31, 2020238.9 $ $8,864.9 17.8 $(2,213.0)$(101.5)$5,197.4 $11,747.8 $ $11,747.8 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Alexion Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(amounts in millions)
 Three months ended March 31,
 20212020
Cash flows from operating activities:
Net income$489.2 $557.6 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization75.6 89.3 
Change in fair value of contingent consideration9.2 5.8 
Share-based compensation expense76.6 57.6 
Consolidation of Caelum, including non-cash expense for acquired IPR&D and cash acquired210.2  
Deferred taxes 52.9 49.0 
Unrealized foreign currency loss10.9 7.1 
Unrealized gain on forward contracts(19.3)(15.0)
Unrealized loss on strategic equity investments9.6 9.2 
Gain on sale of assets(25.3) 
Other2.8 13.7 
Changes in operating assets and liabilities, excluding the effect of acquisitions:
Accounts receivable(87.9)(120.9)
Inventories (inclusive of inventories reported in other assets)(59.5)37.3 
Prepaid expenses, right of use operating assets and other assets11.0 (72.9)
Accounts payable, accrued expenses, lease liabilities and other liabilities(118.4)(68.2)
Net cash provided by operating activities637.6 549.6 
Cash flows from investing activities:
Purchases of available-for-sale debt securities (19.4)
Proceeds from maturity or sale of available-for-sale debt securities 141.4 
Purchases of mutual funds related to nonqualified deferred compensation plan(7.0)(6.9)
Proceeds from sale of mutual funds related to nonqualified deferred compensation plan3.3 3.3 
Purchases of intangible assets(110.0) 
Purchases of property, plant and equipment(20.2)(12.2)
Payment for acquisition of businesses, net of cash and restricted cash acquired (837.7)
Purchases of strategic equity investments and options (34.5)
Net cash used in investing activities(133.9)(766.0)
Cash flows from financing activities:
Payments on term loan(32.6)(32.6)
Repurchases of common stock (107.1)
Net proceeds from issuance of common stock under share-based compensation arrangements15.2 2.8 
Other(1.3)(1.3)
Net cash used in financing activities(18.7)(138.2)
Effect of exchange rate changes on cash and cash equivalents and restricted cash(13.1)(13.2)
Net change in cash and cash equivalents and restricted cash471.9 (367.8)
Cash and cash equivalents and restricted cash at beginning of period3,034.6 2,723.6 
Cash and cash equivalents and restricted cash at end of period$3,506.5 $2,355.8 

6





 Three months ended March 31,
 20212020
Supplemental non-cash flow disclosures from investing and financing activities:
Contingent consideration issued in acquisitions$ $155.0 
Exchange of intellectual property rights for strategic equity investments$5.0 $ 
Operating ROU lease assets obtained in exchange for operating lease liabilities$1.5 $3.7 
Accounts payable and accrued expenses for purchases of property, plant and equipment and intangible assets$5.4 $13.0 
The following provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the total of such amounts shown in the condensed consolidated statements of cash flows:
 Three months ended March 31,
 20212020
Cash and cash equivalents$3,429.6 $2,315.0 
Restricted cash included in other current assets76.9 40.7 
Restricted cash included in other noncurrent assets 0.1 
Total cash and cash equivalents and restricted cash reported in the condensed consolidated statement of cash flows$3,506.5 $2,355.8 

Restricted cash included in other current assets and other noncurrent assets was $70.0 and $0.1, respectively, as of December 31, 2020. Amounts included in restricted cash primarily represent funds placed in escrow as a result of the judicial order issued by the Federal Court of Canada related to SOLIRIS pricing (refer to Note 17, Commitments and Contingencies).

The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)

1.Business
Business
Alexion Pharmaceuticals, Inc. (Alexion, the Company, we, our or us) is a global biopharmaceutical company focused on serving patients and families affected by rare diseases and devastating conditions through the discovery, development and commercialization of life-changing medicines.
As a leader in rare diseases for more than 25 years, Alexion has developed and commercializes two approved complement inhibitors to treat patients with paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS), as well as the first and only approved complement inhibitor to treat anti-acetylcholine receptor (AChR) antibody-positive generalized myasthenia gravis (gMG) and neuromyelitis optica spectrum disorder (NMOSD) in patients who are anti-aquaporin-4 (AQP4) antibody positive. Alexion also has two highly innovative enzyme replacement therapies and the first and only approved therapies for patients with life-threatening and ultra-rare metabolic disorders, hypophosphatasia (HPP) and lysosomal acid lipase deficiency (LAL-D) as well as the first and only approved Factor Xa inhibitor reversal agent for patients treated with rivaroxaban or apixaban when reversal of anticoagulation is needed due to life-threatening or uncontrolled bleeding.
In addition to our marketed therapies, we have a diverse pipeline resulting from internal innovation and business development. Alexion focuses its research efforts on novel molecules and targets in the complement cascade and its development efforts on the core therapeutic areas of hematology, nephrology, neurology, metabolic disorders, cardiology, ophthalmology and acute care. We were incorporated in 1992 under the laws of the State of Delaware.
Merger Agreement with AstraZeneca
On December 12, 2020, we entered into an Agreement and Plan of Merger (the Merger Agreement) with AstraZeneca PLC, a public limited company incorporated under the laws of England and Wales (AstraZeneca), Delta Omega Sub Holdings Inc., a Delaware corporation and a wholly owned subsidiary of AstraZeneca (Bidco), Delta Omega Sub Holdings Inc. 1, a Delaware corporation and a direct, wholly owned subsidiary of Bidco (Merger Sub I) and Delta Omega Sub Holdings LLC 2, a Delaware limited liability company and a direct, wholly owned subsidiary of Bidco (Merger Sub II). The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth therein (1) Merger Sub I will merge with and into Alexion (the “First Merger”), with Alexion surviving the First Merger as a wholly owned subsidiary of Bidco, and (2) immediately following the effective time of the First Merger (the Effective Time), Alexion will merge with and into Merger Sub II (the Second Merger and, together with the First Merger, the Mergers), with Merger Sub II surviving the Second Merger as a wholly owned subsidiary of Bidco and an indirect wholly owned subsidiary of AstraZeneca.
Under the Merger Agreement, at the Effective Time (as defined in the Merger Agreement), each share of common stock, par value $0.0001 per share, of Alexion issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be converted into the right to receive (1) 2.1243 American depositary shares of AstraZeneca (or, at the election of the holder thereof, a number of ordinary shares of AstraZeneca equal to the number of underlying ordinary shares represented by such American depositary shares) and (2) $60.00 in cash, without interest (collectively, the Merger Consideration).
The boards of directors of both companies have unanimously approved the acquisition.
The respective obligations of Alexion and AstraZeneca to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of a number of customary conditions, including: (1) the adoption of the Merger Agreement by Alexion’s stockholders; (2) approval of the transactions contemplated by the Merger Agreement by AstraZeneca’s shareholders; (3) the absence of any law or order prohibiting consummation of the Mergers; (4) AstraZeneca’s registration statement on Form F-4 having been declared effective by the Securities and Exchange Commission; (5) AstraZeneca’s shareholder circular (or, if required, prospectus) having been approved by the U.K. Financial Conduct Authority; (6) the American depository shares of AstraZeneca issuable in the Mergers (and the ordinary shares of AstraZeneca represented thereby) having been approved for listing on the Nasdaq; (7) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the approval of the Mergers under the antitrust and foreign investment laws of other specified jurisdictions; (8) accuracy of the other party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement and (9) compliance by the other party in all material respects with such other party’s obligations under the Merger Agreement.
8

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
Without limiting the generality of the foregoing, we are subject to a variety of specified restrictions under the Merger Agreement. Unless we obtain AstraZeneca’s prior written consent (which consent may not be unreasonably withheld, conditioned or delayed) and except (i) as required or expressly contemplated by the Merger Agreement, (ii) as required by applicable law or (iii) as set forth in the confidential disclosure schedule delivered by Alexion to AstraZeneca, we may not, among other things and subject to certain exceptions and aggregate limitations, incur additional indebtedness, issue additional shares of our common stock outside of our equity incentive plans, repurchase our common stock, pay dividends, acquire assets, securities or property, dispose of businesses or assets, enter into material contracts or make certain additional capital expenditures.
Under the Merger Agreement, Alexion will be required to make a payment to AstraZeneca equal to $1,180.0 if the Merger Agreement is terminated in certain circumstances, including because the Alexion board of directors has changed its recommendation in favor of the Mergers or we terminated the Merger Agreement in order to enter into an agreement providing for a Company Superior Proposal (as defined in the Merger Agreement), and Alexion will be required to make a payment to AstraZeneca equal to $270.0 if the Merger Agreement is terminated because Alexion’s stockholders fail to adopt the Merger Agreement. AstraZeneca will be required to make a payment to Alexion equal to $1,415.0 if the Merger Agreement is terminated in certain circumstances, including because the AstraZeneca board of directors has changed its recommendation in favor of the Mergers or because AstraZeneca’s shareholders fail to approve the transactions contemplated by the Merger Agreement.
The acquisition is expected to close during the third quarter 2021.
2.Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These accounting principles were applied on a basis consistent with those of the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of our financial statements for interim periods presented in accordance with accounting principles generally accepted in the United States. The condensed consolidated balance sheet as of December 31, 2020 was derived from audited annual financial statements but does not include all disclosures required by accounting principles generally accepted in the United States. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year or any other future periods.
Our significant accounting policies are described in Note 1 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 and updated, as necessary in this report.
The financial statements of our subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using period-end exchange rates for assets and liabilities, historical exchange rates for stockholders' equity and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income (loss), net of tax, in stockholders' equity. Foreign currency transaction gains and losses are included in the results of operations in other income and expense.
The accompanying unaudited condensed consolidated financial statements include the accounts of Alexion Pharmaceuticals, Inc. and its subsidiaries, including Caelum Biosciences (Caelum), a variable interest entity (VIE) for which we are the primary beneficiary, refer to Note 10, Caelum Biosciences. All intercompany balances and transactions have been eliminated in consolidation.
We assess whether we are the primary beneficiary of a VIE at the inception of the arrangement and at each reporting date. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. For the consolidation of Caelum, we record net income (loss) attributable to noncontrolling interest in our consolidated statements of operations based on the ownership interest retained by the respective noncontrolling parties.
9

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
New Accounting Pronouncements
ASU 2020-04, “Reference Rate Reform, Facilitation of the Effects of Reference Rate Reform on Financial Reporting": In response to concerns about structural risks of interbank offered rates, and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. In March 2020, the Financial Accounting Standards Board (FASB) issued a new standard that provides optional guidance for a limited time to ease the potential burden in accounting for the effects of reference rate reform, including optional expedients and exceptions for the accounting implications of contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.
The amendments in this new standard only apply to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the standard do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. We are currently reviewing our contracts impacted by reference rate reform and are assessing the impact of this standard on our financial condition and results of operations.
Recently Adopted Accounting Pronouncements
Accounting Standards Update (ASU) 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes”: In December 2019, the FASB issued a new standard intended to simplify the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. We adopted the new standard on January 1, 2021. The adoption of this standard did not have an impact on our financial condition and results of operations.
ASU 2020-01, “Investments - Equity Securities, Investments - Equity Method and Joint Ventures, and Derivatives and Hedging - Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815”: In January 2020, the FASB issued a new standard intended to clarify the interactions between Accounting Standards Codification (ASC) 321, ASC 323 and ASC 815. The new standard addresses accounting for the transition into and out of the equity method and measurement of certain purchased options and forward contracts to acquire investments. The standard is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted. Adoption of the standard requires changes to be made prospectively. We adopted the new standard on January 1, 2021. The adoption of this standard did not have an impact on our financial condition and results of operations.
3.Acquisitions
Business Combinations
Achillion Pharmaceuticals, Inc.
In October 2019, Alexion entered into a definitive agreement to acquire Achillion Pharmaceuticals, Inc. (Achillion), a clinical-stage biopharmaceutical company focused on the development of oral Factor D inhibitors. Achillion was developing oral small molecule Factor D inhibitors to treat people with complement alternative pathway-mediated rare diseases, such as PNH and C3 glomerulopathy (C3G). Achillion had two clinical stage medicines in development, including danicopan (ACH-4471/ALXN2040) and ACH-5228 (ALXN2050).
The acquisition of Achillion closed on January 28, 2020. Under the terms of the agreement, we acquired all outstanding common stock of Achillion for $6.30 per share, or an aggregate of $926.2, inclusive of the settlement of Achillion's outstanding equity awards. The acquisition was funded with cash on hand. The transaction includes the potential for additional consideration in the form of non-tradeable contingent value rights (CVRs), which will be paid to Achillion shareholders if certain clinical and regulatory milestones are achieved within specified periods. These include $1.00 per share for the U.S. Food and Drug Administration (FDA) approval of danicopan and $1.00 per share for the initiation of a Phase III clinical trial in ACH-5228.
10

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
The transaction was accounted for as a business combination. The following table summarizes the total consideration transferred to acquire Achillion and the estimated fair value of the identified assets acquired and liabilities assumed at the acquisition date:
Consideration
Upfront payment to shareholders and option holders$926.2 
Upfront payment, fair value of equity compensation attributable to the post-combination service period(20.0)
Upfront cash paid, net906.2 
Contingent consideration160.7 
Contingent consideration, fair value of equity compensation attributable to the post-combination service period(5.7)
Total consideration$1,061.2 
Assets Acquired and Liabilities Assumed
Cash and cash equivalents$68.5 
Marketable securities106.1 
In-process research & development assets (IPR&D)918.0 
Goodwill37.8 
Deferred tax liabilities, net(62.9)
Other assets and liabilities, net(6.3)
Total net assets acquired$1,061.2 

Our accounting for this acquisition was finalized during the second quarter of 2020. Measurement period adjustments increased goodwill by $3.1 during the second quarter of 2020 due to purchase price allocation increases to deferred tax liabilities, net. Measurement period adjustments were recorded as a result of studies completed during the second quarter of 2020 to determine the tax deductibility of certain acquisition-related costs and the valuation of historical net operating loss and income tax credit carryforwards.
The initial fair value estimate of the contingent consideration in the form of non-tradeable CVRs was $160.7, which was recorded as a noncurrent liability in our condensed consolidated balance sheets, including $5.7 related to compensation attributable to the post-combination service period. We determined the fair value of these milestone-related payment obligations using various estimates, including probabilities of success prior to expiration of the specified period, discount rates and the amount of time until the conditions of the milestone payments are expected to be met. This fair value measurement was based on significant inputs not observable in the market, representing Level 3 measurements within the fair value hierarchy. The resulting probability-weighted cash flows were discounted using a cost of debt rate ranging from 2.1% to 2.3%. The range of estimated milestone payments upon closing of the acquisition was from zero, if no milestones are achieved for any product, to $306.3 if certain development and regulatory milestones are achieved.
Subsequent to the acquisition date, we have adjusted the contingent consideration to fair value with changes in fair value recognized in operating earnings. Changes in fair values reflect new information about the probability and timing of meeting the conditions of the milestone payments. In the absence of new information, changes in fair value will only reflect the interest component of contingent consideration related to changes in the discount rates and the passage of time as development work progresses towards the potential achievement of the milestones. As of March 31, 2021, the fair value of the contingent consideration for the Achillion acquisition was $212.8 based on the probability-weighted cash flows, discounted using a cost of debt ranging from 2.5% to 3.0%. Changes in fair value of the contingent consideration associated with the Achillion acquisition for the three months ended March 31, 2021 and 2020, was $2.2 and $1.7, respectively.
The aggregate fair value of equity compensation attributable to the post-combination service period was $25.7. This amount was excluded from the total consideration transferred and was recognized as a charge to acquisition-related costs in our condensed consolidated statements of operations during the first quarter 2020. These amounts were associated with the accelerated vesting of stock options previously granted to Achillion employees. Excluding the $5.7 of contingent consideration related to equity compensation attributable to the post-combination service period, such amounts were paid during the first quarter 2020.
11

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
Intangible assets associated with IPR&D relate to two development-stage programs, ACH-4471 (ALXN2040) and ACH-5228 (ALXN2050). The estimated fair value of $918.0 was determined using the excess earnings valuation method, a variation of the income valuation approach. The excess earnings valuation method estimates the value of an intangible asset equal to the present value of the incremental after-tax cash flows attributable to that intangible asset. Some of the more significant assumptions utilized in our asset valuations included the estimated net cash flows for each asset, including net revenues, cost of sales, research and development and other operating expenses, the potential regulatory and commercial success rates, competitive trends impacting the assets, and tax rates. The fair value using the excess earnings valuation method was determined using an estimated weighted average cost of capital for Achillion of 11.5%, which represents a rate of return that a market participant would expect for these assets. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements. In the second quarter 2020, we recognized an impairment charge of $11.0 to write off our ACHN-4471 (ALXN2040) IPR&D asset due to clinical results received during the quarter.
The excess of purchase price over the fair value of the assets acquired and liabilities assumed represents the goodwill resulting from the acquisition. The goodwill, which is not tax-deductible, has been recorded as a noncurrent asset and is not amortized, but is subject to an annual review for impairment. The factors that contributed to the recognition of goodwill include the value of the acquired workforce, synergies that are specific to our business and not available to market participants, and early research in preclinical Factor D inhibitors, as well as the effects of the establishment of a deferred tax liability for the acquired IPR&D intangible assets, which has no tax basis.
We recorded a net deferred tax liability of $62.9, inclusive of measurement period adjustments recorded during the second quarter 2020. This amount was primarily comprised of $205.3 of deferred tax liabilities relating to the IPR&D acquired, offset by $142.4 of deferred tax assets related to net operating loss carryforwards (NOLs), income tax credits, and other temporary differences.
Achillion's results of operations are included in the condensed consolidated financial statements from the date of acquisition. For the three months ended March 31, 2020, we recorded $13.9 of pre-tax operating losses associated with the operations of Achillion in our condensed consolidated statements of operations. We also recorded acquisition-related costs in connection with the acquisition during the three months ended March 31, 2020 as presented below. No revenues were recorded in the results of operations for the three months ended March 31, 2020 as neither ALXN2040 nor ALXN2050 has been approved for commercial sale by any regulatory agency.
Portola Pharmaceuticals, Inc.
In May 2020, Alexion entered into a definitive merger agreement to acquire Portola Pharmaceuticals, Inc. (Portola), a commercial-stage biopharmaceutical company focused on life-threatening blood-related disorders. Portola’s commercialized medicine, ANDEXXA®, marketed as ONDEXXYA® in Europe, is the first and only approved Factor Xa inhibitor reversal agent, and has demonstrated transformative clinical value by rapidly reversing the anticoagulant effects of Factor Xa inhibitors rivaroxaban and apixaban in severe and uncontrolled bleeding. The acquisition provides the opportunity to grow Alexion's commercial portfolio and is a strategic fit with our existing expertise in acute care, hematology and neurology.
Alexion completed the acquisition through a tender offer and subsequent merger of Portola which closed on July 2, 2020. Under the terms of the tender offer and merger agreement, Alexion purchased all outstanding common stock of Portola for $18.00 per share, or an aggregate of approximately $1,380.8, including the settlement of certain of Portola's outstanding equity awards but excluding shares of Portola stock held by Alexion at closing. The acquisition was funded by cash on hand.
Prior to the acquisition of Portola, in March 2020 and April 2020, we purchased $14.5 and $3.6, respectively, of common stock of Portola, which we recorded at fair value. Upon the closing of the acquisition of Portola, the fair value of the equity investment of $47.8 was derecognized and included in the fair value of consideration transferred. For additional information on our Portola equity investment, refer to Note 11, Other Investments.
The aggregate fair value of equity compensation attributable to the post-combination service period was $11.1. This amount was excluded from the total consideration transferred and was recognized as a charge to acquisition-related costs in our condensed consolidated statements of operations during the third quarter of 2020. These amounts were primarily associated with the accelerated vesting of stock options previously granted to Portola employees and were paid during the third quarter 2020.
12

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
We issued $41.5 of equity compensation replacement awards, of which the portion attributable to services performed prior to the acquisition date, or $7.2, was allocated to purchase consideration. The remaining fair value is attributable to future services and will be expensed as share-based compensation over the remaining service periods. Expense associated with the accelerated-vesting of the replacement awards in connection with employee terminations will be recognized as acquisition-related employee separation costs.
In connection with the acquisition, Alexion also paid $196.9 to settle certain debt held by Portola that was subject to preexisting change of control provisions.
The transaction was accounted for as a business combination. The following table summarizes the total consideration transferred to acquire Portola and the estimated fair value of the identified assets acquired and liabilities assumed at the acquisition date:

Consideration
Upfront payment to shareholders and equity holders$1,380.8 
Upfront payment, fair value of equity compensation attributable to the post-combination service period(11.1)
Upfront cash paid, net1,369.7 
Fair value of equity shares held by Alexion at closing 47.8 
Fair value of replacement equity awards attributable to the pre-combination period7.2 
Total consideration to acquire outstanding equity, net1,424.7 
Total consideration to settle preexisting debt196.9
  Total consideration$1,621.6 
Assets Acquired and Liabilities Assumed
Cash and cash equivalents$288.5 
Marketable securities17.8 
Inventories, including noncurrent portion of $169.1 and validation batches of $60.9
362.5 
Intangible assets1,051.0 
Goodwill24.9 
Deferred tax assets, net116.6 
Other assets41.9 
Accounts payable and accrued expenses(75.6)
Long-term debt, including current portion of $7.7
(182.0)
Other liabilities(24.0)
Total net assets acquired$1,621.6 

Our accounting for this acquisition was finalized during the fourth quarter of 2020. Measurement period adjustments decreased goodwill by $0.6 during the fourth quarter of 2020 due to purchase price allocation increases to deferred tax assets, net. Measurement period adjustments were recorded as a result of studies completed during the fourth quarter of 2020 to determine the tax deductibility of certain acquisition-related costs and the valuation of historical net operating loss and income tax credit carryforwards.
We acquired $362.5 of ANDEXXA inventory, inclusive of $60.9 of validation batches manufactured under processes which are subject to regulatory approval and expected to be commercially saleable following approval. The estimated fair value of raw material inventory was valued at replacement cost, which is equal to the value a market participant would pay to acquire the inventory. The estimated fair value of work-in-process and finished goods inventory was based on the expected selling price of the inventory, adjusted for incremental costs to complete the
13

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
manufacturing process, for direct selling efforts, and for a normal profit on the remaining manufacturing and selling costs. Additionally, as the inventory acquired, inclusive of validation batches, is expected to be realized over a period of approximately 3 years, the fair value of the inventory was determined using a discount rate of 17.5%, representing the rate of return that a market participant would expect for the inventory, which shares risk that is similar to the underlying intellectual property. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements. The acquired inventory, inclusive of the acquisition-date fair value step-up, will be expensed within cost of sales as the inventory is sold to customers. We classified the ANDEXXA inventory that is expected to be utilized beyond our normal operating cycle as a long-term asset. The fair value of the non-current portion of inventory, in addition to the validation batches, are classified within other assets in our condensed consolidated balance sheets.
Intangible assets consist of purchased technology of $1,036.0 and IPR&D of $15.0. The purchased technology intangible asset relates to Portola's lead product ANDEXXA. The estimated fair value was determined using the excess earnings valuation method, a variation of the income valuation approach. The excess earnings valuation method estimates the value of an intangible asset equal to the present value of the incremental after-tax cash flows attributable to that intangible asset. Some of the more significant assumptions utilized in our asset valuation included the estimated net cash flows for ANDEXXA, including net revenues, cost of sales, research and development and other operating expenses, the potential regulatory and commercial success rates associated with ANDEXXA's current conditional approval status and planned extension into the urgent surgery setting, competitive trends impacting the assets, and tax rates. The fair value using the excess earnings valuation method was determined using a discount rate commensurate with the risks of ANDEXXA of 17.5%, which represents a rate of return that a market participant would expect for the asset. The acquired purchased technology intangible asset is being amortized over an estimated useful life of approximately 10 years. IPR&D relates to the cerdulatinib development-stage asset. The estimated fair value of the IPR&D asset was determined using a relief from royalty (RFR) method, a variation of the income approach that is based on the cost savings that accrue to the owner of an intangible asset who would otherwise have to pay royalties on revenues earned through the use of the asset. The RFR method was modified to reflect the cash flow forecast of Portola's pre-existing in-license of cerdulatinib from Astellas Pharma, Inc. The acquired fair value of $15.0 represents an increase in the value of the asset relative to when it was initially in-licensed by Portola. Some of the more significant assumptions utilized in the IPR&D asset valuation included the estimated net revenue, royalty rate, and tax rates. The fair value using the RFR method was determined using an estimated discount rate commensurate with the risks of cerdulatinib of 17.5%, which represents a rate of return that a market participant would expect for the asset. These fair value measurements were based on significant inputs not observable in the market and thus represent Level 3 fair value measurements.
In connection with the acquisition, we assumed royalty-based debt which requires repayment through tiered royalties on future net worldwide sales of ANDEXXA. Total potential royalty payments are capped at $290.6, of which $13.7 were paid by Portola prior to the acquisition. The fair value of the remaining $276.9 in royalty-based payments as of the date of acquisition was $182.0. The estimated fair value was measured using Level 3 inputs and was calculated using a real options method, which runs simulations using various estimates, including probability-weighted net sales of ANDEXXA and volatility. Using the simulation results, the fair value was calculated based on the expected probability-weighted risk-neutral royalties, discounted at our estimated cost of debt, ranging from 3.3% to 7.1%, commensurate with the cost of debt at each period in which the royalty-based payments are estimated to be made.
We recorded net deferred tax assets of $116.6, inclusive of measurement period adjustments recorded during the fourth quarter 2020. This amount was primarily comprised of $301.6, $41.8, $42.4 and $39.3 of deferred tax assets relating to net operating loss carryforwards (NOLs), income tax credits, royalty-based debt, and other temporary differences, respectively, offset by $245.1 and $63.4 of deferred tax liabilities relating to intangible assets acquired and inventory fair value adjustments, respectively.
The excess of purchase price over the fair value of the assets acquired and liabilities assumed represents the goodwill resulting from the acquisition. The goodwill, which is not tax-deductible, has been recorded as a noncurrent asset and is not amortized, but is subject to an annual review for impairment. The factors that contributed to the recognition of goodwill primarily include the value of the acquired workforce and the effects of the establishment of a deferred tax liability for the fair value step-up of acquired inventory and intangible assets which exceed the incremental book value of acquired deferred tax assets over their fair value.
14

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
Pro forma financial information (unaudited)
The following unaudited pro forma information presents the combined results of Alexion and Achillion as if the acquisition of Achillion had been completed on January 1, 2019, with adjustments to give effect to pro forma events that are directly attributable to the acquisition. The unaudited pro forma results do not reflect operating efficiencies or potential cost savings that may have resulted from the consolidation of operations. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations had we completed the transaction on January 1, 2019.

 Three months ended March 31,
 20202019
Pro forma revenue$1,444.8 $1,140.4 
Pro forma net income$574.9 $515.7 

The unaudited pro forma consolidated results include pro forma adjustments related to non-recurring activity. Alexion and Achillion acquisition-related costs of $53.3, net of tax, were excluded from income for the three months ended March 31, 2020. These expenses were included in net income for the three months ended March 31, 2019.
Acquisition-Related Costs
Acquisition-related costs recorded within the condensed consolidated statements of operations associated with our acquisitions of Achillion and Portola and our definitive merger agreement with AstraZeneca for the three months ended March 31, 2021 and 2020 include the following:
 Three months ended March 31
 20212020
Transaction costs (1)
$5.4 $1.4 
Integration costs4.1 0.1 
Fair value of equity compensation attributable to the post-combination service period 25.7 
Employee costs (2)
3.7 10.9 
$13.2 $38.1 

(1) Transaction costs primarily include legal fees. First quarter 2020 transaction costs also include costs to effectuate the settlement of the Achillion outstanding options
(2) Employee separation costs include severance payments and costs associated with one-time short-term retention awards

Acquisition-related costs attributable to the Merger Agreement with AstraZeneca for the three months ended March 31, 2021 were $8.2. Acquisition-related costs attributable to the Portola acquisition for the three months ended March 31, 2021 were $5.0. Acquisition-related costs attributable to the Achillion acquisition for the three months ended March 31, 2020 were $38.1.

15

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
4.Inventories
The components of inventory are as follows:
 March 31,December 31,
 20212020
Raw materials$97.8 $91.2 
Work-in-process324.7 260.8 
Finished goods489.6 510.3 
Total inventories$912.1 $862.3 
Balance Sheet Classification:
Inventories$803.9 $775.7 
Other assets$108.2 $86.6 

The acquired ANDEXXA inventory includes the acquisition-date fair value step-up, which is expensed within cost of sales as the inventory is sold to customers. For additional information on our acquisition of Portola, please refer to Note 3, Acquisitions.
We classify our inventory as long-term when we expect to utilize the inventory beyond our normal operating cycle and include these costs in other assets in our condensed consolidated balance sheets. Inventories classified as long-term relate to ULTOMIRIS 100mg/ml inventory and ANDEXXA inventory, including inventory acquired in connection with the Portola acquisition.
As of March 31, 2021 and December 31, 2020, the carrying value of capitalized inventory manufactured at production facilities and through manufacturing processes that have not yet received regulatory approval was $86.1 and $39.8, respectively. All such inventory as of March 31, 2021 received regulatory approval in April 2021.
5.Intangible Assets and Goodwill
The following table summarizes the carrying amount of our intangible assets and goodwill, net of accumulated amortization and impairment charges: 
March 31, 2021December 31, 2020
Estimated
Life (years)
CostAccumulated
Amortization
NetCostAccumulated
Amortization
Net
Licensing rights
3-8
$57.0 $(39.4)$17.6 $57.0 $(38.5)$18.5 
Patents710.5 (10.5) 10.5 (10.5) 
Purchased technology
6-16
5,746.5 (3,737.9)(a)2,008.6 5,746.5 (3,684.7)(a)2,061.8 
Other intangibles50.4 (0.3)0.1 0.4 (0.3)0.1 
Priority review voucherIndefinite100.0 — 100.0  —  
Acquired IPR&DIndefinite922.0 — 922.0 922.0 — 922.0 
Total$6,836.4 $(3,788.1)$3,048.3 $6,736.4 $(3,734.0)$3,002.4 
GoodwillIndefinite$5,103.0 $(2.9)$5,100.1 $5,103.0 $(2.9)$5,100.1 
(a) Includes an impairment charge of $2,042.3 recognized during the second quarter 2020 related to the KANUMA intangible asset
In January 2021, we entered into a definitive asset purchase agreement with Rhythm Pharmaceuticals, Inc. (“Rhythm”) to acquire its Rare Pediatric Disease Priority Review Voucher (PRV) for $100.0, inclusive of transaction costs. The acquisition of the PRV closed on February 17, 2021. As there is probable future economic benefit from the PRV, we capitalized the $100.0 payment as an indefinite-lived intangible asset.
Amortization expense for the three months ended March 31, 2021 and 2020 was $54.1 and $74.7, respectively. As of March 31, 2021, assuming no changes in the gross cost basis of intangible assets, the total estimated amortization expense for finite-lived intangible assets is $162.4 for the nine months ending December 31, 2021, and approximately $216.0 for each of the years ending December 31, 2022 through December 31, 2026.
16

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
6.Debt
Credit Agreement
On June 7, 2018, we entered into an Amended and Restated Credit Agreement (the Credit Agreement), with Bank of America, N.A. as Administrative Agent. The Credit Agreement amended and restated our credit agreement dated as of June 22, 2015 (the Prior Credit Agreement).
The Credit Agreement provides for a $1,000.0 revolving credit facility and a $2,612.5 term loan facility. The revolving credit facility and the term loan facility mature on June 7, 2023. Beginning with the quarter ended June 30, 2019, we are required to make payments of 5.0% of the original principal amount of the term loan facility annually, payable in equal quarterly installments.
In connection with entering into the Credit Agreement and the Prior Credit Agreement, we paid an aggregate of $53.1 in financing costs in 2018. Financing costs are amortized as interest expense over the life of the debt. Amortization expense associated with deferred financing costs for the three months ended March 31, 2021 and 2020 was $1.2. Remaining unamortized deferred financing costs as of March 31, 2021 and December 31, 2020 were $9.9 and $11.1, respectively.
We made principal payments of $32.6 on the term loan during the three months ended March 31, 2021, and as of March 31, 2021, we had $2,351.3 outstanding on the term loan. We had no outstanding borrowings under the revolving credit facility as of March 31, 2021. As of March 31, 2021, we had open letters of credit of $1.0 that offset our availability in the revolving facility.
The amount outstanding under the term loan of $2,351.3 as of March 31, 2021 is subject to variable interest rates, which are based on current market rates, and as such, the Company believes the carrying amount of the obligation approximates fair value.
We were in compliance with all applicable covenants under the Credit Agreement as of March 31, 2021. In connection with the planned merger with AstraZeneca, we evaluated the terms of the Credit Agreement and determined the agreement could require acceleration of payments upon a change of control.
Royalty-based Financing
In connection with our acquisition of Portola during the third quarter 2020, we assumed royalty-based debt relating to a royalty sales agreement Portola had entered into with HealthCare Royalty Partners (HCR) whereby HCR acquired a tiered royalty interest in future worldwide net sales of ANDEXXA. Portola received $50.0 upon closing of the agreement in February 2017 and an additional $100.0 following the U.S. regulatory approval of ANDEXXA in May 2018. Tiered royalties ranging from 4.2% to 8.5% are required to be paid to HCR based on net worldwide sales of ANDEXXA. The applicable rate decreases as worldwide net annual sales levels increase above defined thresholds. Total potential royalty payments are capped at 195.0% of the funding received less certain transaction expenses, or $290.6. As of the date of acquisition, the remaining due to HCR was $276.9 in royalty-based payments.
We recorded the HCR debt at its fair value of $182.0 upon closing of the acquisition, representing an initial debt discount of $94.9. We have also recognized a deferred tax asset of $42.4 related to the royalty-based debt as of the acquisition date. For additional information on our acquisition of Portola, please refer to Note 3, Acquisitions. Interest expense is recognized using the effective interest rate method over the estimated period the related debt will be paid. This requires estimation of the timing and amount of future royalty payments to be generated from future sales of ANDEXXA. We reassess the expected royalty payments each reporting period and account for any changes through an adjustment to the effective interest rate on a prospective basis. The assumptions used in determining the expected repayment term of the debt require that we make estimates that could impact the short and long term classification of the debt carrying values.
Each period, we amortize the initial debt discount using the effective interest rate implied from the projected timing of royalty payments to HCR. The effective interest rate for the HCR royalty-based debt as of March 31, 2021 was 11.4%. During the three months ended March 31, 2021, we recognized interest expense associated with the amortization of the debt discount of $5.0. We made royalty-based debt payments of $3.3 during the three months ended March 31, 2021. As of March 31, 2021, the carrying value of the royalty-based debt includes approximately $2.5 of royalty payments on first quarter sales of ANDEXXA which will be paid during the second quarter of 2021.
As of March 31, 2021, the carrying value of the HCR royalty-based debt was $188.7, of which $16.3 was recorded within current portion of long-term debt and $172.4 was recorded within long-term debt, less current portion on our condensed consolidated balance sheets. As of December 31, 2020, the carrying value of the HCR royalty-
17

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
based debt was $187.0, of which $15.5 was recorded within current portion of long-term debt and $171.5 was recorded within long-term debt, less current portion on our condensed consolidated balance sheets.
Our payment obligations for HCR royalty-based debt are as follows:
Three Months Ended March 31, 2021
Total repayment obligation as of December 31, 2020
$271.9 
Less: Interest to be accreted in future periods(79.9)
Less: Payments made(3.3)
Carrying value as of March 31, 2021
$188.7 

The carrying value of the royalty-based debt as of March 31, 2021 approximates fair value.
7.Earnings Per Common Share
Basic earnings per common share (EPS) is computed by dividing net income attributable to Alexion by the weighted-average number of shares of common stock outstanding attributable to Alexion. For purposes of calculating diluted EPS, the denominator reflects the potential dilution that could occur if stock options, unvested restricted stock units or other contracts to issue common stock were exercised or converted into common stock, using the treasury stock method.
The following table summarizes the calculation of basic and diluted EPS for the three months ended March 31, 2021 and 2020:
Three months ended
 March 31,
 20212020
Net income attributable to Alexion$636.0 $557.6 
Shares used in computing earnings per common share attributable to Alexion —basic220.1 221.6 
Weighted-average effect of dilutive securities:
Stock awards2.5 1.0 
Shares used in computing earnings per common share attributable to Alexion —diluted222.6 222.6 
Earnings per common share attributable to Alexion:
Basic$2.89 $2.52 
Diluted$2.86 $2.50 

We exclude from EPS the weighted-average number of securities whose effect is anti-dilutive. Excluded from the calculation of EPS for the three months ended March 31, 2021 and 2020 were 0.8 and 3.2 shares of Alexion common stock, respectively, because their effect is anti-dilutive.
8.Marketable Securities
The proceeds from maturities and sales of available-for-sale debt securities and resulting realized gains and losses are summarized below. In the second quarter of 2020 we liquidated all of our available-for-sale securities and in the third quarter of 2020 we liquidated all available-for-sale debt securities acquired in connection with the Portola acquisition.
18

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
Three months ended
March 31,
20212020
Proceeds from maturities and sales (1)
$ $812.5 
Realized gains$ $ 
Realized losses$ $ 
 (1) Proceeds from maturities and sales of available-for-sale debt securities include securities previously classified as cash and cash equivalents and marketable securities in the condensed consolidated balance sheets.
We utilize the specific identification method in computing realized gains and losses.
As a result of our liquidation of all available-for-sale debt securities during 2020, we have no remaining available-for-sale debt securities as of March 31, 2021 and December 31, 2020.
We sponsor a nonqualified deferred compensation plan which allows certain highly compensated employees to elect to defer income to future periods. Participants in the plan earn a return on their deferrals based on several investment options, which mirror returns on underlying mutual fund investments. We choose to invest in the underlying mutual fund investments to offset the liability associated with our nonqualified deferred compensation plan. These mutual fund investments are valued at net asset value per share and are carried at fair value with gains and losses included in investment income. The changes in the underlying liability to the employee are recorded in operating expenses. As of March 31, 2021 and December 31, 2020, the fair value of these investments was $39.7 and $34.9, respectively.
9.Derivative Instruments and Hedging Activities
We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates. The exposures result from portions of our revenues, as well as the related receivables, and expenses that are denominated in currencies other than the U.S. dollar, primarily the Euro and Japanese Yen. We are also exposed to fluctuations in interest rates on outstanding borrowings under our revolving credit facility, if any, and term loan facility. We manage these exposures within specified guidelines through the use of derivatives. All of our derivative instruments are utilized for risk management purposes, and we do not use derivatives for speculative trading purposes.
We enter into foreign exchange forward contracts to hedge exposures resulting from portions of our forecasted revenues, including intercompany revenues that are denominated in currencies other than the U.S. dollar. Revenue foreign exchange forward contracts in effect as of March 31, 2021 had durations of up to 23 months. The purpose of these hedges is to reduce the volatility of exchange rate fluctuations on our operating results. These hedges are designated as cash flow hedges upon contract inception. As of March 31, 2021, we had open revenue related foreign exchange forward contracts with notional amounts totaling $853.3 that qualified for hedge accounting with current contract maturities through June 2022.
To achieve a desired mix of floating and fixed interest rates on our term loan, we enter into interest rate swap agreements that qualify for and are designated as cash flow hedges. These contracts convert the floating interest rate on a portion of our debt to a fixed rate, plus a borrowing spread.
The following table summarizes the total interest rate swap contracts executed as of March 31, 2021:
Type of Interest Rate Swap ContractNotional AmountEffective DateTermination DateFixed Interest Rate or Rate Range
Floating to Fixed$450.0December 2018December 2022
2.60% - 2.79%
Floating to Fixed$1,300.0December 2019December 2022
2.37% - 2.83%

The amount of gains and (losses) recognized in the condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 from foreign exchange and interest rate swap contracts that qualified as cash flow hedges were as follows:
19

Alexion Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(amounts in millions, except per share amounts)
Three months endedThree months ended
 March 31, 2021March 31, 2020
Financial Statement Line Item in which the Effects of Cash Flow Hedges are RecordedNet Product Sales