**This conforming paper format document is begin submitted pursuant to rule
901(d) of regulation S-T.
SECURITIES AND EXCHANGE COMMISSION Total Pages- 16
WASHINGTON, D.C. 20549 Exhibit Index- 11
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1994
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 0-12042
BIOGEN, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Cambridge Center, Cambridge, MA 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 252-9200
Former name, former address and former fiscal year, if changed since
last report: Not Applicable
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
Number of shares outstanding of each of the issuer's classes of common
stock, as of August 5, 1994:
Common Stock, par value $0.01 33,036,315
(Title of each class) (Number of Shares)
<PAGE>
B I O G E N , I N C . Page 2
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993 . . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Income -
Three months and six months ended June 30, 1994 and 1993. . . . .4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1994 and 1993 . . . . . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements. . . . . . . .6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . .7
Report of Independent Accountants . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 11
* * * * * * * * * * * * * * * * * *
Note concerning trademarks: Certain names mentioned in this report are
trademarks owned by Biogen, Inc. or its
affiliates or licensees. Hirulog(TM) is a
trademark of Biogen, Inc.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30,1994 Dec. 31,1993
(unaudited)
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . $ 39,053 $ 74,546
Marketable securities. . . . . . . . . . . 250,862 195,805
Accounts receivable. . . . . . . . . . . . 16,604 31,695
Other. . . . . . . . . . . . . . . . . . . 8,188 7,378
-------- --------
Total current assets . . . . . . . . . . . 314,707 309,424
-------- --------
Property and equipment
Total cost . . . . . . . . . . . . . . . . 78,954 64,111
Less accumulated depreciation. . . . . . . 28,211 25,611
-------- --------
Property and equipment, net. . . . . . . . 50,743 38,500
-------- --------
Other assets
Patents, net . . . . . . . . . . . . . . . 7,322 7,164
Other. . . . . . . . . . . . . . . . . . . 2,025 1,862
-------- --------
Total other assets . . . . . . . . . . . . 9,347 9,026
-------- --------
$374,797 $356,950
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . $ 4,481 $ 2,916
Other current liabilities. . . . . . . . . 28,270 28,860
-------- --------
Total current liabilities. . . . . . . . . 32,751 31,776
-------- --------
Shareholders' equity
Common stock . . . . . . . . . . . . . . . 328 323
Additional paid-in capital . . . . . . . . 358,262 353,247
Deficit. . . . . . . . . . . . . . . . . . (16,622) (28,462)
Accumulated translation adjustment . . . . 78 66
-------- --------
Total shareholders' equity . . . . . . . . 342,046 325,174
-------- --------
$374,797 $356,950
======== ========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
REVENUES
Royalties and product sales. . . $32,793 $34,714 $73,960 $67,254
Interest . . . . . . . . . . . . 3,986 3,140 7,599 6,021
------- ------- ------- -------
Total revenues . . . . . . . . . 36,779 37,854 81,559 73,275
------- ------- ------- -------
EXPENSES
Cost of sales. . . . . . . . . . 2,146 3,621 4,617 6,440
Research and development . . . . 26,268 17,140 49,602 32,105
General and administrative . . . 5,607 4,851 11,570 8,804
Other. . . . . . . . . . . . . . 1,947 6,088 2,050 7,432
--------- ------- ------- -------
Total expenses . . . . . . . . . 35,968 31,700 67,839 54,781
------- ------- ------- -------
INCOME BEFORE INCOME TAXES. . . . 811 6,154 13,720 18,494
Income taxes. . . . . . . . . . . 200 510 1,880 1,590
------- ------- ------- -------
NET INCOME. . . . . . . . . . . . $ 611 $ 5,644 $11,840 $16,904
======= ======= ======= =======
NET INCOME PER SHARE. . . . . . . $ 0.02 $ 0.17 $ 0.34 $ $0.49
======= ======= ======= =======
Average shares outstanding. . . . 34,427 34,540 35,084 34,653
======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . $ 11,840 $16,904
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization . . . . . . . . 3,646 3,411
Write-off of investment in joint venture. . . -- 1,803
Other . . . . . . . . . . . . . . . . . . . . 1,345 (472)
Changes in:
Accounts receivable . . . . . . . . . . . . 15,091 (37)
Other current assets. . . . . . . . . . . . (810) (422)
Other assets. . . . . . . . . . . . . . . . (163) (196)
Accounts payable and
other current liabilities. . . . . . . . . 975 9,750
-------- -------
Net cash provided from operating activities. . 31,924 30,741
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities, net. . . . (61,308) (36,259)
Acquisitions of property and equipment . . . . (14,844) (4,072)
Additions to patents . . . . . . . . . . . . . (1,204) (1,745)
-------- -------
Net cash used by investing activities. . . . . (77,356) (42,076)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . 9,939 2,640
-------- -------
Net cash provided from financing activities. . 9,939 2,640
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . (35,493) (8,695)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD. . . . . . . . . . . . . . 74,546 85,863
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD. . . . . . . . . . . . . . . . . $ 39,053 $77,168
======== =======
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments, consisting
of only normal recurring accruals, necessary to present fairly the
financial position, results of operations and cash flows of the
Company. The Company's accounting policies are described in the Notes
to Consolidated Financial Statements in the Company's 1993 Annual
Report. Interim results are not necessarily indicative of the
operating results for the full year.
2. During the first quarter of 1994, the Company entered into an
agreement with a bank to sell certain foreign based accounts
receivable, with recourse, up to $14 million per quarter, which
approximated the proceeds for the current quarter. The selling price
is partially determined by foreign exchange rates at the end of each
quarter.
3. During the second quarter of 1994, the Company received $7.1 million
from the exercise of 353,600 common stock warrants issued in
connection with the research and development arrangement with Biogen
Medical Products Limited Partnership ("BMPLP"). Each BMPLP warrant
entitled the holder to purchase one share of the Company's common
stock and was exercisable at $20 per share. The BMPLP warrants
expired on June 30, 1994 with the settlement period extending through
July 8, 1994. BMPLP warrants for the purchase of an additional 92,200
shares were exercised during the settlement period.
4. As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Under this standard, the Company is
required to classify its marketable securities (all of which are debt
securities) into one or more of the following categories: held-to-
maturity, trading or available-for-sale. All of the Company's
marketable securities are classified as available-for sale. Under
this statement, these securities are recorded at fair market value and
unrealized gains and losses are recorded as part of shareholders'
equity. Following is a summary of marketable securities as of
June 30, 1994:
Fair Unrealized Amortized
(dollars in thousands) Value Gains Losses Cost
U.S. Government securities $196,297 $ 30 $3,341 $199,608
(average maturity of 24 months)
Corporate debt securities 74,065 - 1,608 75,673
(average maturity of 24 months)
Proceeds from maturities and other sales of securities, which were
reinvested, for the quarter and six months ended June 30, 1994 were
$211.5 million and $459.2 million, respectively. Gross realized gains
and losses on these sales were not significant.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the second quarter ended June 30, 1994, the Company reported net income
of $0.6 million or $0.02 per share as compared to net income of $5.6
million or $0.17 per share in the second quarter of 1993. For the six
months ended June 30, 1994, the Company had net income of $11.8 million or
$0.34 per share as compared to net income of $16.9 million or $0.49 per
share for the comparable period of 1993.
Total revenues for the second quarter of 1994 were $36.8 million, as
compared to $37.9 million in the comparable quarter of 1993. For the
current six-month period, total revenues were $81.6 million as compared to
$73.3 million in 1993. Revenues for the current quarter were lower than
the second quarter of 1993 due mostly to a decrease in royalties received
from Schering-Plough Corporation ("Schering-Plough"), the Company's
licensee for alpha interferon. Royalties from alpha interferon sales by
Schering-Plough declined in the current quarter as compared to the second
quarter in 1993, due primarily to lower sales in Japan. Sales in Japan
declined due mostly to a 17 percent government-mandated decrease in the
price of alpha interferon, effective on April 1, together with a softer
overall market for the product in that country. Revenues for the current
six-month period increased over the 1993 period primarily due to royalties
received from Eli Lilly and Co. ("Lilly") partially offset by a decrease in
royalties received from Schering-Plough. During the first quarter of 1994,
the Company signed a licensing agreement with Lilly covering certain patent
rights for gene expression methods. Under this agreement, Lilly paid the
Company approximately $10 million in royalties that related to sales
occurring before 1994. The Company, in general, expects continued
increases in sales of licensed products but at lower growth rates than had
been experienced during 1992 and 1993. However, there are numerous health
care reform initiatives currently underway in the United States and other
major pharmaceutical markets and it is not yet clear what effect, if any,
these initiatives or other developments may have on product sales by the
Company's licensees. In addition, these sales levels may fluctuate from
quarter to quarter due to the timing and extent of major events such as new
indication approvals or licensing arrangements.
Interest income for the current quarter and six-month period increased from
the comparable 1993 amounts due primarily to the higher level of invested
funds.
Total expenses for the second quarter of 1994 were $36.0 million as
compared to $31.7 million in the 1993 quarter. Research and development
expense increased $9.1 million, due to the expanded clinical development of
the Company's lead drug candidates, Hirulog (TM) thrombin inhibitor and
recombinant beta interferon. Both drug candidates are in Phase II and
Phase III clinical trials for a variety of indications. The Company
expects its research and development costs to continue to increase as it
expands the clinical programs for Hirulog (TM), recombinant beta interferon
and other therapeutics. On July 26, 1994, the Company announced results of
its Phase III trial of recombinant beta interferon in patients with active
relapsing and relapsing remitting multiple sclerosis. The Company intends
to seek licensure in the United States and market approval in Europe in the
first half of 1995 and
Page 8
will begin incurring significant additional expenses for this
commercialization stage. General and administrative expenses increased by
$0.8 million due mostly to higher costs related to market development
efforts, legal and personnel related costs. Other expenses decreased
primarily due to a charge in the prior year's quarter for a patent
settlement between Schering-Plough and Genentech, Inc. ("Genentech")
relating to the production of alpha interferon by Schering-Plough.
For the six-month period ended June 30, 1994, total expenses were $67.8
million as compared to $54.8 million in 1993. Research and development
expenses increased $17.5 million, due to the expanded clinical development
of the Company's lead drug candidates, Hirulog (TM) thrombin inhibitor and
recombinant beta interferon. General and administrative expenses increased
$2.8 million due mostly to higher costs related to market development
efforts, legal and personnel related costs. Other expenses decreased $5.4
million primarily due to the charge related to the Genentech/Schering-
Plough settlement in the second quarter of 1993.
Income tax expense for the 1994 and 1993 periods were substantially less
than the amount computed at U.S. federal statutory rates because of the
utilization of net operating loss carryforwards.
Financial Condition
At June 30, 1994, cash, cash equivalents and marketable securities amounted
to $289.9 million, a $19.6 million increase from the $270.4 million on hand
at the end of 1993. Working capital increased $4.3 million to $282.0
million. Net cash provided from operating activities for the six months
ended June 30, 1994 was $31.9 million while the Company's common stock
option and purchase plans provided $2.8 million. The Company also received
$7.1 million in the second quarter of 1994 from the exercise of 353,600
common stock warrants issued in connection with the research and
development arrangement with Biogen Medical Products Limited Partnership
("BMPLP"). Each BMPLP warrant entitled the holder to purchase one share of
the Company's common stock and was exercisable at $20 per share. The BMPLP
warrants expired on June 30, 1994 with the settlement period extending
through July 8, 1994. BMPLP warrants for the purchase of an additional
92,200 shares were exercised during the settlement period. Outflows of
cash included investments in property and equipment and patents of $16.0
million. The decrease in accounts receivable is primarily attributed to an
agreement the Company entered into with a bank in the first quarter of 1994
to sell certain accounts receivable.
The Company is the general partner of BMPLP. BMPLP was formed for the
development of commercial products based on gamma interferon and
interleukin-2 (the "partnership products"). The Company agreed to extend
the term of the development contract with BMPLP until December 31, 1994.
The Company has not incurred any significant costs with respect to BMPLP in
1994 but has the option to provide up to $9.2 million to BMPLP to continue
development of the partnership products.
During the fourth quarter of 1993, the Company commenced construction of a
150,000 square foot building in Cambridge, Massachusetts to house research
laboratories and offices. The anticipated cost of construction, including
land, is approximately $40 million. As of June 30, 1994 the Company had
commitments totaling approximately $5 million on this project. Upon
completion of the building in 1995, the Company has the option, subject to
certain conditions, to obtain a secured term loan with a bank for up to $25
million for a period of up to ten years.
Page 9
In the second quarter of 1994 the Company made a payment of $2.6 million to
SmithKline Beecham plc ("SmithKline"), which amount had been previously
reserved, in settlement of the dispute between the Company and SmithKline
regarding the rate of royalties payable from international sales of
hepatitis B vaccines by SmithKline. In the first quarter of 1993,
SmithKline initiated arbitration in the United States regarding similar
royalty provisions in a separate agreement governing sales of hepatitis B
vaccines by SmithKline in the United States. The amount in dispute as of
June 30, 1994 was approximately $16 million. The Company believes that an
adverse ruling in the United States is not probable.
The Company believes that the financial resources available to it,
including its current working capital and its existing and anticipated
contractual relationships, may be sufficient to finance its planned
operations and capital expenditures for the near term. However, the
Company expects that it may have additional funding needs, the extent of
which will depend upon the level of royalties and product sales, the
outcome of clinical trial programs, the receipt and timing of required
regulatory approvals for products, the results of research and development
efforts and business expansion opportunities. Accordingly, from time to
time, the Company may obtain funding through various means which could
include collaborative agreements, lease financings, sales of equity or debt
securities and other financing arrangements.
<PAGE>
Page 10
With respect to the unaudited condensed consolidated financial information
of Biogen, Inc. and its subsidiaries at June 30, 1994 and for the three
month and six month periods ended June 30, 1994 and 1993, Price Waterhouse
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report dated July 18, 1994 appearing herein, states that they did
not audit and they do not express an opinion on that unaudited condensed
consolidated financial information. Price Waterhouse has not carried out
any significant or additional audit tests beyond those which would have
been necessary if their report had not been included. Accordingly, the
degree of reliance on their report on such information should be restricted
in light of the limited nature of the review procedures applied. Price
Waterhouse is not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited condensed
consolidated financial information because that report is not a "report" or
a "part" of the registration statement prepared or certified by Price
Waterhouse within the meaning of sections 7 and 11 of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Biogen, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Biogen, Inc. and its subsidiaries as of June 30, 1994, and the related
condensed consolidated statements of income for the three month and six
month periods ended June 30, 1994 and 1993 and of cash flows for the six
month periods ended June 30, 1994 and 1993. This financial information is
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted audit
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
information for it to be in conformity with generally accepted accounting
principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of income, of cash flows and of
shareholders' equity for the year then ended (not presented herein), and in
our report dated January 20, 1994 we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1993, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ Price Waterhouse
- - ---------------------
Boston, Massachusetts
July 18, 1994<PAGE>
PART II - OTHER INFORMATION Page 11
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The information set forth in this Item 4 relates to matters
submitted to a vote of the holders of Common Stock held at the
Annual Meeting of Stockholders of Biogen, Inc. on June 3, 1994.
(b) Not Applicable
(c) A proposal (i) to elect Alexander G. Bearn, Harold W. Buirkle and
James L. Vincent to serve for three year terms ending in 1997 and
until their successors are duly elected and qualified and (ii) to
elect Phillip A. Sharp to serve for a two-year term ending in
1996 and until his successor is duly elected and qualified was
approved with the following vote:
Nominee For Against
Alexander G. Bearn 28,819,501 464,555
Harold W. Buirkle 28,812,585 471,471
James L. Vincent 28,829,792 454,264
Phillip A. Sharp 28,861,387 422,669
A proposal to ratify the selection of Price Waterhouse as the
Company's independent accountants for the fiscal year ending
December 31, 1994 was approved with 29,186,540 affirmative votes
and 19,976 negative votes cast along with 77,540 abstentions.
(d) Not applicable
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse.
(b) There were no reports on Form 8-K filed for the quarter ended
June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOGEN, INC.
Dated: August 11, 1994 /s/Timothy M. Kish
----------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer<PAGE>
EXHIBITS
Index to Exhibits.
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse.
<PAGE>
EXHIBIT 11
<PAGE>
EXHIBIT 11
BIOGEN, INC. and SUBSIDIARIES
Computation of Earnings Per Share
(unaudited)
(in thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
1994 1993 1994 1993
Primary earnings per share
Weighted average number of
shares outstanding . . . . . . . 32,556 31,901 32,479 31,848
Shares deemed outstanding from
the assumed exercise of stock
options and warrants . . . . . . 1,871 2,639 2,605 2,805
------- ------- ------- -------
Total . . . . . . . . . . . . . . 34,427 34,540 35,084 34,653
======= ======= ======= =======
Net income. . . . . . . . . . . . $ 611 $ 5,644 $11,840 $16,904
======= ======= ======= =======
Primary earnings per
share of common stock. . . . . . $ 0.02 $ 0.17 $ 0.34 $ 0.49
======= ======= ======= =======
Fully diluted earnings per share (a)
Weighted average number of
shares outstanding . . . . . . . 32,556 31,901 32,479 31,848
Shares deemed outstanding from
the assumed exercise of stock
options and warrants . . . . . . 1,871 2,639 2,605 2,805
------- ------- ------- -------
Total . . . . . . . . . . . . . . 34,427 34,540 35,084 34,653
======= ======= ======= =======
Net income . . . . . . . . . . . $ 611 $ 5,644 $11,840 $16,904
======= ======= ======= =======
Fully diluted earnings
per share of common stock. . . . $ 0.02 $ 0.17 $ 0.34 $ 0.49
======= ======= ======= =======
(a) This calculation is submitted in accordance with Regulation S-K item
601 (b) (11) although not required by Footnote 2 to Paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
EXHIBIT 15
<PAGE>
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that our report dated July 18, 1994 (issued pursuant to the
provisions of Statement on Auditing Standards No. 71) on the unaudited
condensed consolidated balance sheet of Biogen, Inc. and subsidiaries at
June 30, 1994, and the related condensed consolidated statements of income
for the three month and six month periods then ended and of cash flows for
the six month period then ended, is incorporated by reference in the
Prospectuses constituting part of its Registration Statements on Form S-8,
as amended (Nos. 2-87550, 2-96157, 33-9827, 33-14742, 33-37312, 33-22378
and 33-41077 and as filed on September 21, 1993) and on Form S-3, as
amended (Nos. 33-14741, 33-14743, 33-20183 and 33-51639). We are also
aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse
- - --------------------
Boston, Massachusetts
July 18, 1994
