SECURITIES AND EXCHANGE COMMISSION Total Pages- 15
WASHINGTON, D.C. 20549 Exhibit Index- 14
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, 1996
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) 679-2000
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, 1996:
Common Stock, par value $0.01 35,763,461
(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, 1996 and December 31, 1995. . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -
Three months and six months ended June 30, 1996 and 1995 . . . 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995. . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . 8
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . 12
* * * * * * * * * * * * * * * * * *
Note concerning trademarks: Certain names mentioned in this report are
trademarks owned by Biogen, Inc. or its
affiliates. HIRULOG(R) and AVONEX(TM) are
trademarks of Biogen, Inc.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30,1996 Dec. 31,1995
(unaudited)
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . $ 50,058 $ 45,770
Marketable securities . . . . . . . . . . . 227,119 262,178
Accounts receivable, net. . . . . . . . . . 27,537 19,612
Inventory . . . . . . . . . . . . . . . . . 16,618 7,131
Other . . . . . . . . . . . . . . . . . . . 6,734 5,618
-------- --------
Total current assets. . . . . . . . . . . . 328,066 340,309
-------- --------
Property, plant and equipment
Total cost. . . . . . . . . . . . . . . . . 192,538 155,014
Less accumulated depreciation . . . . . . . 46,049 39,966
-------- --------
Property, plant and equipment, net. . . . . 146,489 115,048
-------- --------
Other assets
Patents, net. . . . . . . . . . . . . . . . 8,326 7,988
Other . . . . . . . . . . . . . . . . . . . 6,770 5,856
-------- --------
Total other assets. . . . . . . . . . . . . 15,096 13,844
-------- --------
$489,651 $469,201
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . . . $ 15,383 $ 12,512
Current portion long-term debt. . . . . . . 1,667 1,667
Other current liabilities . . . . . . . . . 47,341 39,216
-------- --------
Total current liabilities . . . . . . . . . 64,391 53,395
-------- --------
Long-term debt . . . . . . . . . . . . . . . 51,035 32,826
-------- --------
Shareholders' equity
Common stock. . . . . . . . . . . . . . . . 358 355
Additional paid-in capital. . . . . . . . . 415,987 409,148
Accumulated deficit . . . . . . . . . . . . (40,452) (27,699)
Unrealized gain (loss) on
marketable securities. . . . . . . . . . . (1,598) 1,245
Cumulative translation adjustment . . . . . (70) (69)
-------- --------
Total shareholders' equity. . . . . . . . . 374,225 382,980
-------- --------
$489,651 $469,201
======== ========
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,
1996 1995 1996 1995
REVENUES
Product. . . . . . . . . . . . . $ 6,125 $ -- $ 6,125 $ --
Royalties. . . . . . . . . . . . 35,032 32,717 69,410 64,670
Interest . . . . . . . . . . . . 4,244 4,179 8,709 8,196
------- ------- ------- -------
Total revenues . . . . . . . . . 45,401 36,896 84,244 72,866
------- ------- ------- -------
EXPENSES
Cost of sales. . . . . . . . . . 3,836 2,648 7,989 5,152
Research and development . . . . 29,302 21,270 53,713 41,705
Selling, general and
administrative . . . . . . . . 19,747 10,003 32,993 17,524
Other. . . . . . . . . . . . . . 809 2,056 1,318 4,517
------- ------- ------- -------
Total expenses . . . . . . . . . 53,694 35,977 96,013 68,898
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES . (8,293) 919 (11,769) 3,968
Income taxes. . . . . . . . . . . . 800 205 982 420
------- ------- ------- -------
NET INCOME (LOSS) . . . . . . . . . $(9,093) $ 714 $(12,751) $ 3,548
======= ======= ======= =======
NET INCOME (LOSS) PER SHARE . . . . $ (0.25) $ 0.02 $ (0.36) $ 0.10
======= ======= ======= =======
Average shares outstanding. . . . . 35,708 35,737 35,654 35,607
======= ======= ======= =======
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,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . $(12,751) $ 3,548
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization. . . . . . . . 7,334 5,001
Other. . . . . . . . . . . . . . . . . . . . (217) 302
Changes in:
Accounts receivable . . . . . . . . . . . . (7,925) 1,602
Other current assets. . . . . . . . . . . . (10,603) (2,130)
Other assets. . . . . . . . . . . . . . . . 87 (34)
Accounts payable and
other current liabilities. . . . . . . . . 8,064 (10,900)
-------- -------
Net cash used by operating activities . . . . (16,011) (2,611)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities. . . . . . (179,859) (117,587)
Proceeds from sales of marketable securities. 212,662 108,599
Acquisitions of property, plant and
equipment. . . . . . . . . . . . . . . . . . (35,565) (23,002)
Additions to patents. . . . . . . . . . . . . (1,589) (1,120)
-------- -------
Net cash used by investing activities . . . . (4,351) (33,110)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt. . . 19,042 25,000
Payments of long-term debt. . . . . . . . . . (833) --
Issuance of common stock. . . . . . . . . . . 6,441 2,777
-------- -------
Net cash provided from financing activities . 24,650 27,777
-------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . . 4,288 (7,944)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD . . . . . . . . . . . . . 45,770 54,682
-------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD . . . . . . . . . . . . . . . . $ 50,058 $ 46,738
======== =======
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
normal recurring accruals, considered 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 1995 Annual Report.
Interim results are not necessarily indicative of the operating results
for any other interim period or for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2. On May 17, 1996, the Company received a license from the U.S. Food and
Drug Administration ("FDA") to market AVONEX(TM) (Interferon beta-1a), a
new drug for treatment of relapsing forms of multiple sclerosis.
Revenues from product sales are recognized when goods are shipped and
are net of third party contractual allowances.
3. In March 1995, the Company completed construction of its research
laboratory and office building in Cambridge, Massachusetts and
exercised its option to obtain a 7.5% secured term loan with a bank
for $25 million. The annual principal payable in each of the years
1996 through 1999 is $1.7 million with the balance due May 8, 2005.
In the second quarter of 1995, the Company began construction of its
biologics manufacturing facility in Research Triangle Park, North
Carolina. The estimated cost of construction, including land, of
this facility is $57 million. As of June 30, 1996, the Company had
paid or been invoiced approximately $42 million and had additional
commitments totaling approximately $14 million on this project. In
August 1995, the Company entered into a loan agreement with a bank
for financing of this project. Under the terms of the agreement, the
Company may advance funds during the construction period up to $50
million. As of June 30, 1996, funds advanced were approximately $29
million.
Terms of the loan agreements include various covenants, including
financial covenants which require the Company to maintain minimum net
worth, cash flow and various financial ratios. The loans are secured
by the underlying buildings.
<PAGE>
Page 7
4. Inventories are stated at the lower of cost or market with cost
determined under the first-in/first-out ("FIFO") method. Included in
inventory are raw materials used in the production of pre-clinical and
clinical products which are expensed as research and development costs
when consumed. Inventories, net of applicable reserves and allowances,
at June 30, 1996 and December 31, 1995 are as follows:
(In Thousands)
June 30, 1996 December 31, 1995
Raw materials $ 4,375 $ 3,051
Work in process 6,604 2,968
Finished goods 5,639 1,112
----------- -----------
$ 16,618 $ 7,131
=========== ===========
5. Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement with Ontogeny, Inc. ("Ontogeny"), a private
biotechnology company, for the development and commercialization of
three specific Hedgehog cell differentiation proteins. The Company
acquired a minority equity interest in Ontogeny as well as certain
exclusive, worldwide rights related to products based on the Hedgehog
proteins for most disease areas. The Company has agreed to fund
approximately $6 million in research and development costs at Ontogeny
over two years and to make license fees and milestone payments to
Ontogeny of up to $27 million per Hedgehog protein, depending on the
achievement of certain clinical, regulatory and commercial milestones.
6. On June 7, 1996, Berlex Laboratories, Inc. ("Berlex") filed an amended
complaint in its ongoing suit against the FDA. Biogen is an intervenor-
defendant in that litigation. Berlex alleges that the FDA violated its
own procedures and the Orphan Drug law in approving AVONEX(TM) and seeks
injunctive relief to rescind or suspend the FDA's approval. In July,
1996, the FDA and Biogen filed separate motions to dismiss Berlex's
amended complaint. Berlex has opposed the motions to dismiss and has
filed a motion for summary judgment on one count of the amended
complaint. A hearing on the motions to dismiss and the motion for
summary judgment has been set for September 5, 1996. No final decision
has yet been reached in this litigation.
On July 3, 1996, Berlex filed suit against Biogen alleging that Biogen's
production of AVONEX(TM) infringes Berlex's "McCormick" patent in the
United States. Berlex seeks a judgment granting it unspecified damages,
a trebling of any damages awarded and a permanent injunction restraining
Biogen from alleged infringement. On May 3, 1996, Biogen filed suit
against Schering AG ("Schering"), Berlex and the Board of Trustees of
the Leland Stanford, Jr. University ("Stanford") seeking a judgment
which declares the McCormick patent invalid and not infringed by Biogen
and which enjoins Schering, Berlex and Stanford from asserting any
charge of infringement of the McCormick patent or asserting any civil
action against Biogen and its customers or users of AVONEX(TM).
The Company's management believes that it has meritorious defenses to
the preceding claims and given these defenses, believes the ultimate
outcome of these legal proceedings will not have a material adverse
effect on the results of operations or financial position of the
Company.
BIOGEN, INC. AND SUBSIDIARIES Page 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Biogen, Inc. (the "Company") is a biopharmaceutical company principally
engaged in developing and manufacturing drugs for human healthcare through
genetic engineering. On May 17, 1996, the Company received a license from
the U.S. Food and Drug Administration ("FDA") to market AVONEX(TM)
(Interferon beta-1a), the Company's first commercial product, as a
treatment for relapsing forms of multiple sclerosis. During the six-week
period following FDA approval, revenues from sales of AVONEX(TM) were $6.1
million. Revenues from the first six weeks of AVONEX(TM) sales are
included under product revenues in the three- and six-month periods ended
June 30, 1996.
Results of Operations
For the second quarter ended June 30, 1996, the Company reported a net loss
of $9.1 million or $0.25 per share as compared to net income of $0.7
million or $0.02 per share in the second quarter of 1995. For the six
months ended June 30, 1996, the Company recorded a net loss of $12.8
million or $0.36 per share as compared to net income of $3.5 million or
$0.10 per share for the comparable period of 1995.
Total revenues for the second quarter of 1996 were $45.4 million, including
$6.1 million from sales of AVONEX(TM), compared to $36.9 million in the
comparable quarter of 1995. Excluding sales of AVONEX(TM), revenues
increased 7% primarily as a result of an increase in ongoing royalties
received from Schering-Plough Corporation ("Schering-Plough"), the
Company's licensee for alpha interferon. The increase in royalties from
alpha interferon was partially offset by a decrease in royalties on sales
of Hepatitis B vaccines sold by SmithKline Beecham plc ("SmithKline") and
Merck & Co, Inc. ("Merck"). The market for Hepatitis B vaccines decreased
from the prior year quarter in the United States and in France, which had
instituted a vaccination program for infants and adolescents during 1994.
Total revenues for the six-month period ended June 30, 1996 were $84.2
million, including $6.1 million from sales of AVONEX(TM), as compared to
$72.9 million in the comparable period of 1995. Excluding sales of
AVONEX(TM), revenues increased approximately 7% primarily as a result of an
increase in royalties on alpha interferon sales by Schering-Plough
partially offset by a decrease in royalties on sales of Hepatitis B
vaccines sold by SmithKline and Merck. In the near term, the Company
expects overall sales of licensee products to continue at current levels
although royalty income may fluctuate depending on changes in sales volumes
for specific products. In addition, licensee product sales levels and the
Company's royalty levels may fluctuate from quarter to quarter as a result
of the timing and extent of major events such as new indication approvals,
vaccination programs and new licensing arrangements.
Interest income for the current quarter and six-month period increased
slightly from the comparable 1995 amounts due primarily to higher returns
on invested funds.
Total expenses for the second quarter of 1996 were $53.7 million as
compared to $36.0 million in the comparable quarter of 1995, a $17.7
Page 9
million or 49% increase over the 1995 quarter. Cost of sales includes $.9
million in the current quarter related to sales of AVONEX(TM). Research
and development expenses for the current quarter were $29.3 million as
compared to $21.3 million in the comparable 1995 quarter, an increase of
$8.0 million or 38%. This increase was primarily due to research funding
under existing and new collaboration agreements, payments made to acquire
certain patent rights and an increase in clinical trial costs in connection
with development efforts on new products. Selling, general and
administrative expenses for the current quarter were $19.7 million as
compared to $10.0 million in the comparable 1995 quarter, an increase of
$9.7 million, or 97%. This increase was primarily due to costs associated
with the commercial launch of AVONEX(TM) in the United States, including
the start-up of a domestic sales organization, and the market development
efforts in the United States and Europe related to AVONEX(TM). During the
current quarter, the Company substantially completed the hiring of its
domestic sales force and the build-up of its corporate and administrative
departments to support the Company's current and future commercial
operations.
For the six-month period ended June 30, 1996, total expenses were $96.0
million as compared to $68.9 million in the comparable period in 1995, a
$27.1 million or 39% increase. Cost of sales includes $.9 million in the
current six-month period related to sales of AVONEX(TM). Research and
development expenses for the current six-month period were $53.7 million as
compared to $41.7 million in the comparable 1995 period, an increase of
$12.0 million or 29%. This increase was primarily due to research funding
under existing and new collaboration agreements, payments made to acquire
certain patent rights and an increase in clinical trial costs in connection
with development efforts on new products. The Company expects that, in the
long-term, research and development expenses will increase as the Company
continues to expand its development efforts with respect to new products
and begins clinical trials of these products. Selling, general and
administrative expenses for the six-month period ended June 30, 1996 were
$33.0 million as compared to $17.5 million in the comparable period in
1995, an increase of $15.5 million or 89%. This increase was primarily due
to costs associated with the commercial launch of AVONEX(TM) in the United
States, including the start-up of a domestic sales organization, and the
market development efforts in the United States and Europe related to
AVONEX(TM). During the current six-month period, the Company substantially
completed the hiring of its domestic sales force and the build-up of its
corporate and administrative departments to support the Company's current
and future commercial operations. The Company expects that selling,
general and administrative expenses will continue to increase as the
Company continues to put in place the commercial infrastructure and sales
and marketing organizations necessary to sell AVONEX(TM). The anticipated
level of expense will depend on the overall sales levels achieved by
AVONEX(TM), the status of applications for marketing approvals for
AVONEX(TM) in the European Union and in several other jurisdictions,
including Canada.
Income tax expense for the 1996 and 1995 periods varied from the amount
computed at U.S. federal statutory rates primarily because of the impact of
net operating loss carry forwards. As of December 31, 1995, the Company
had a deferred tax asset of $57.1 million (before valuation allowance)
consisting of the future tax benefits from net operating loss carry
forwards and other tax credits. If fully realized through sufficient
future profitability, this deferred tax asset will reduce future income tax
expense by $21.3 million and increase paid-in capital by $35.8 million.
Page 10
The Company has recorded a 100% valuation allowance against the net
deferred tax asset.
Under Statement of Financial Accounting Standards No. 109 (SFAS 109), the
Company would be required to recognize all or a portion of its $57.1
million deferred tax asset, with corresponding increases to net income and
paid-in capital, if it believed that it was more likely than not, given the
weight of all available evidence, that all or a portion of the benefits of
the carry forward losses and tax credits would be realized. Given the
possibility of fluctuations in the Company's revenue stream, anticipated
increases in the Company's expenses, the uncertainties involved in
successfully commercializing AVONEX(TM) and the risks and uncertainties
associated with taking new products through the development pipeline, the
Company has concluded, based on the standard set forth in SFAS 109, that it
is more likely than not that the Company will not realize any benefits from
its net deferred tax asset, and it has therefore recorded a 100% reserve
against the asset. The Company will assess the need for the valuation
allowance at each balance sheet date based on all available evidence.
Realization of the net deferred tax asset and future reversals of the
valuation allowance in the near term will depend on the Company's success
in marketing and selling AVONEX(TM) in the United States. The Company
faces a number of hurdles if it is to be successful in commercializing
AVONEX(TM), including successfully overcoming legal and other challenges
presented by competitors and obtaining market acceptance for the product.
Management believes that, if the Company can profitably commercialize
AVONEX(TM), it is reasonably possible that all or a portion of the
valuation allowance will be reversed in the near term.
During 1995, the Financial Accounting Standards Board issued SFAS 123,
"Accounting for Stock-Based Compensation". Biogen intends to adopt SFAS
123 through disclosure only in 1996.
Financial Condition
At June 30, 1996, the Company had cash, cash equivalents and marketable
securities of $277.2 million, a $30.8 million decrease from the $307.9
million on hand at December 31, 1995. Working capital decreased $23.2
million to $263.7 million. Net cash used by operating activities for the
six months ended June 30, 1996 was $16.0 million. Other outflows of cash
included investments in property, plant and equipment and patents of $37.2
million. The Company's common stock option and purchase plans provided
$6.4 million in the first six months of 1996. The Company also received
$19.0 million under a secured term loan agreement with a bank.
In March 1995, the Company completed construction of its research
laboratory and office building in Cambridge, Massachusetts and exercised
its option to obtain a 7.5% secured loan with a bank for $25 million. The
annual principal payable in each of the years 1996 through 1999 is $1.7
million with the balance due May 8, 2005. In the second quarter of 1995,
the Company began construction of its biologics manufacturing facility in
Research Triangle Park, North Carolina. The estimated cost of
construction, including land, is $57 million. As of June 30, 1996, the
Company had been invoiced approximately $42 million and had commitments
totaling approximately $14 million on this project. In August 1995, the
Company entered into a loan agreement with a bank for financing of this
project. Under the terms of the agreement, the Company may be advanced
funds during the construction period up to $50 million. As of June 30,
1996, funds advanced were approximately $29 million.
Page 11
Several legal proceedings were filed during the current quarter which
involve the Company. See Note 6 of Notes to Condensed Consolidated
Financial Statements for discussion of these legal proceedings.
The Company currently believes that the financial resources available to
it, including its current working capital, revenues from product sales and
its existing and anticipated contractual relationships, will be sufficient
to finance its planned operations and capital expenditures for the near
term. However, the Company 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 or mortgage financings, sales of
equity or debt securities and other financing arrangements.
Outlook
Having completed the development effort and launch of AVONEX(TM) in the
United States, the Company has begun to expand its development efforts
related to other products in its pipeline. The expansion of the pipeline
may include increases in spending on internal projects, the acquisition of
third party technologies or products or other types of investments. Since
AVONEX(TM) is the first drug the Company markets directly, the Company
continues to build a commercial infrastructure both in the United States
and in Europe to market and sell AVONEX(TM).
While in the past the Company's ability to achieve profitability has been
dependent mainly on the level of royalty revenues as compared to expenses,
in the future, profitability will be dependent on the outcome of a number
of factors. These include: the level of royalties from existing
licensees' product sales, the timing and extent of royalties from
additional licensing opportunities, successful marketing and sales of
AVONEX(TM), the level of revenues and profitability from AVONEX(TM) sales,
the cost and success of developing and commercializing other products and
the cost and success of other business opportunities that may arise from
time to time. There can be no assurance that the Company will achieve a
positive outcome with respect to any of these factors, or that the timing
and extent of the Company's success with respect to any combination of
these factors will be sufficient to result in the profitability of the
Company.
Certain of the statements set forth above and elsewhere in the financial
statements, including statements regarding the rate of the Company's
royalties in the future, the Company's future expenses, the reversal of the
valuation allowance in the near term, and the predictions as to the
anticipated outcome of pending litigation, are forward-looking statements
within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, and are based upon the Company's
current belief as to the outcome and timing of future events. Important
factors which could cause actual results to differ materially from those
described in the forward-looking statements and which could negatively
impact the Company's results of operations going forward are set forth
under "Risks Associated with Drug Development" in the Company's Form 10-K
and under Results of Operations and Financial Condition in this Form 10-Q
and above.
<PAGE>
PART II - OTHER INFORMATION Page 12
Item 1 - Legal Proceedings
On June 7, 1996, Berlex Laboratories, Inc. ("Berlex") filed an amended
complaint with the United States District Court for the District of
Columbia in its ongoing suit against the FDA. Biogen is an intervenor-
defendant in that litigation. Berlex alleges that the FDA violated its own
procedures and the Orphan Drug law in approving Biogen's AVONEX(TM)
interferon beta-1a and seeks injunctive relief to rescind or suspend the
FDA's approval. On July 3, 1996, the FDA filed a motion to dismiss
Berlex's amended complaint. Biogen filed a similar motion to dismiss on
July 12, 1996. Berlex has opposed the motions to dismiss and has filed a
motion for summary judgment on one count of the amended complaint. A
hearing on the motions to dismiss and the motion for summary judgment has
been set for September 5, 1996. No final decision has yet been reached in
this litigation.
On July 3, 1996, Berlex filed suit against Biogen in the United States
District Court for the District of New Jersey alleging infringement by
Biogen of Berlex's "McCormick" patent in the United States in the
production of AVONEX(TM). Berlex seeks a judgment granting it unspecified
damages, a trebling of damages awarded and a permanent injunction
restraining Biogen from alleged infringement. On May 3, 1996, Biogen filed
suit against Schering AG ("Schering"), Berlex and the Board of Trustees of
the Leland Stanford, Jr. University ("Stanford") in the United States
District Court for the District of Massachusetts for a declaratory judgment
of non-infringement and invalidity of the McCormick patent contending that
AVONEX(TM), its manufacturing process and intermediates used in that
process do not infringe the McCormick patent and that such patent is
invalid. Biogen seeks a judgment which declares the McCormick patent
invalid and not infringed by Biogen and which enjoins Schering, Berlex and
Stanford from asserting any charge of infringement of the McCormick patent
or asserting any civil action against Biogen and its customers or users of
AVONEX(TM).
The Company is also a party to a class action lawsuit in connection with
disclosures related to its HIRULOG(R) product, as reported in previous
reports.
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 at the Annual Meeting of Stockholders of
Biogen, Inc. held on May 31, 1996.
(b) Not applicable.
(c) A proposal to elect Dr. Phillip A. Sharp, Roger H. Morley and
James R. Tobin to serve for three year terms ending in 1999 and
until their successors are duly elected and qualified was
approved with the following vote:
Nominee For Authority Withheld
Dr. Phillip A. Sharp 30,551,148 344,111
Roger H. Morley 30,549,700 345,559
James R. Tobin 30,552,402 342,857
Page 13
A proposal to ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending
December 31, 1996 was approved with 30,577,600 affirmative votes
and 97,535 negative votes, 219,924 abstentions and 200 broker
non-votes.
A proposal to approve an amendment to the Company's Articles of
Organization to increase the number of authorized shares of
Common Stock from 55,000,000 shares to 110,000,000 shares was
approved with 28,797,384 affirmative votes, 1,865,982 negative
votes, 231,693 abstentions and 200 broker non-votes.
(d) Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 11 Computation of Earnings per Share.
(b) During the quarter ended June 30, 1996, the Company filed the
following reports on Form 8-K:
On April 29, 1996, the Company filed a report on Form 8-K to
disclose a lawsuit filed by Berlex Laboratories against the FDA
seeking to prevent the FDA from approving Biogen's product
license application and establishment license application for its
AVONEX(TM) beta interferon-1a.
On May 1, 1996, the Company filed a report on Form 8-K to
disclose the denial of Berlex's motion for a temporary
restraining order in the Berlex lawsuit against the FDA
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 12, 1996 /s/Timothy M. Kish
----------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer
EXHIBITS Page 14
Index to Exhibits.
No. 11 Computation of Earnings per Share.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 50,058
<SECURITIES> 227,119
<RECEIVABLES> 27,537
<ALLOWANCES> 0
<INVENTORY> 16,618
<CURRENT-ASSETS> 328,066
<PP&E> 192,538
<DEPRECIATION> 46,049
<TOTAL-ASSETS> 489,651
<CURRENT-LIABILITIES> 64,391
<BONDS> 51,035
0
0
<COMMON> 358
<OTHER-SE> 373,867
<TOTAL-LIABILITY-AND-EQUITY> 489,651
<SALES> 75,535
<TOTAL-REVENUES> 84,244
<CGS> 7,989
<TOTAL-COSTS> 94,695
<OTHER-EXPENSES> 1,318
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (11,769)
<INCOME-TAX> 982
<INCOME-CONTINUING> (12,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,751)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
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,
1996 1995 1996 1995
Primary earnings per share
Weighted average number of
shares outstanding. . . . . . . . . 35,708 33,302 35,654 33,234
Shares deemed outstanding from
the assumed exercise of stock
options and warrants. . . . . . . . -- 2,435 -- 2,373
------- ------- ------- -------
Total . . . . . . . . . . . . . . . 35,708 35,737 35,654 35,607
======= ======= ======= =======
Net income (loss) . . . . . . . . . . $(9,093) $ 714 $(12,751) $ 3,548
======= ======= ======= =======
Primary earnings (loss) per
share of common stock . . . . . . . $ (0.25) $ 0.02 $ (0.36) $ 0.10
======= ======= ======= =======
Fully diluted earnings per share (a)
Weighted average number of
shares outstanding. . . . . . . . . 35,708 33,302 35,654 33,234
Shares deemed outstanding from
the assumed exercise of stock
options and warrants. . . . . . . . -- 2,827 -- 2,827
------- ------- ------- -------
Total . . . . . . . . . . . . . . . . 35,708 36,129 35,654 36,061
======= ======= ======= =======
Net income (loss) . . . . . . . . . . $(9,093) $ 714 $(12,751) $ 3,548
======= ======= ======= =======
Fully diluted earnings (loss)
per share of common stock . . . . . $ (0.25) $ 0.02 $ (0.36) $ 0.10
======= ======= ======= =======
(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%.
