SECURITIES AND EXCHANGE COMMISSION Total Pages- 16
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 March 31, 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 May 6, 1996:
Common Stock, par value $0.01 35,695,744
(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 -
March 31, 1996 and December 31, 1995. . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Income -
Three months ended March 31, 1996 and 1995. . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31 1996 and 1995 . . . . . . . . . . . .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 . . . . . . . . . . . . . . . . 12
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 13
* * * * * * * * * * * * * * * * * *
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)
March 31,1996 Dec. 31,1995
(unaudited)
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . $ 32,489 $ 45,770
Marketable securities . . . . . . . . . . . . 260,943 262,178
Accounts receivable . . . . . . . . . . . . . 15,797 19,612
Inventory . . . . . . . . . . . . . . . . . . 11,895 7,131
Other . . . . . . . . . . . . . . . . . . . . 6,205 5,618
-------- --------
Total current assets. . . . . . . . . . . . . 327,329 340,309
-------- --------
Property, plant and equipment
Total cost. . . . . . . . . . . . . . . . . . 174,185 155,014
Less accumulated depreciation . . . . . . . . 42,984 39,966
-------- --------
Property, plant and equipment, net. . . . . . 131,201 115,048
-------- --------
Other assets
Patents, net. . . . . . . . . . . . . . . . . 7,421 7,988
Other . . . . . . . . . . . . . . . . . . . . 5,999 5,856
-------- --------
Total other assets. . . . . . . . . . . . . . 13,420 13,844
-------- --------
$ 471,950 $ 469,201
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . . $ 9,111 $ 12,512
Current portion long-term debt . . . . . . . 1,667 1,667
Other current liabilities. . . . . . . . . . 39,922 39,216
-------- --------
Total current liabilities. . . . . . . . . . 50,700 53,395
-------- --------
Long-term debt . . . . . . . . . . . . . . . 39,912 32,826
-------- --------
Shareholders' equity:
Common stock . . . . . . . . . . . . . . . . 357 355
Additional paid in capital . . . . . . . . . 413,517 409,148
Accumulated deficit. . . . . . . . . . . . . (31,357) (27,699)
Unrealized (gain)loss on
marketable securities . . . . . . . . . . . (1,083) 1,245
Cumulative translation adjustments . . . . . (96) (69)
-------- --------
Total shareholders' equity . . . . . . . . . 381,338 382,980
-------- --------
$ 471,950 $ 469,201
======== ========
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three months ended
March 31,
1996 1995
REVENUES
Royalties . . . . . . . . . . . . . . . . . . . $ 34,378 $ 31,953
Interest. . . . . . . . . . . . . . . . . . . . 4,465 4,017
-------- --------
Total revenues. . . . . . . . . . . . . . . . . 38,843 35,970
-------- --------
EXPENSES
Cost of sales . . . . . . . . . . . . . . . . . 4,153 2,504
Research and development. . . . . . . . . . . . 24,411 20,435
Selling, general and administrative . . . . . . 13,246 7,521
Other . . . . . . . . . . . . . . . . . . . . . 509 2,461
-------- --------
Total expenses. . . . . . . . . . . . . . . . . 42,319 32,921
-------- --------
INCOME(LOSS) BEFORE INCOME TAXES. . . . . . . . . (3,476) 3,049
Income taxes. . . . . . . . . . . . . . . . . . . 182 215
-------- --------
NET INCOME(LOSS). . . . . . . . . . . . . . . . . $ (3,658) $ 2,834
======== ========
NET INCOME(LOSS) PER SHARE. . . . . . . . . . . . $ (0.10) $ 0.08
======== ========
Average shares outstanding. . . . . . . . . . . . 35,600 35,477
======== ========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BIOGEN, INC. AND SUBSIDIARIES Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three months ended
March 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss). . . . . . . . . . . . . . . . . $ (3,658) $ 2,834
Adjustments to reconcile net income(loss) to net
cash provided from operating activities:
Depreciation and amortization. . . . . . . . . . 3,629 2,276
Other. . . . . . . . . . . . . . . . . . . . . . 401 212
Changes in:
Accounts receivable . . . . . . . . . . . . . . 3,815 5,984
Other current assets. . . . . . . . . . . . . . (5,351) (1,162)
Other assets. . . . . . . . . . . . . . . . . . (142) (19)
Accounts payable and
other current liabilities. . . . . . . . . . . (7,271) (9,310)
-------- --------
Net cash provided from (used by)
operating activities. . . . . . . . . . . . . . (8,577) 815
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities. . . . . . . . (119,091) (31,939)
Proceeds from sales of marketable securities. . . 118,088 29,791
Acquisitions of property and equipment. . . . . . (15,112) (9,970)
Additions to patents. . . . . . . . . . . . . . . (44) (682)
-------- --------
Net cash used by investing activities . . . . . . (16,159) (12,800)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt. . . . . 7,086 25,000
Issuance of common stock. . . . . . . . . . . . . 4,369 690
-------- --------
Net cash provided from financing activities . . . 11,455 25,690
-------- --------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . . . . (13,281) 13,705
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . 45,770 54,682
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD . . . . . . . . . . . . . . . . . . $ 32,489 $ 68,387
======== ========
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 1995 Annual
Report. Interim results are not necessarily indicative of the
operating results 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. 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 March 31, 1996, the Company had paid
or been invoiced approximately $32 million and had additional
commitments totaling approximately $24 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 March 31, 1996, funds advanced were approximately $21
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.
3. Inventories are stated at the lower of cost or market with cost
determined under the first-in/first-out ("FIFO") method. Raw
materials include inventory used in the production of pre-
clinical and clinical products and are expensed as research and
development costs when consumed. Inventories, net of applicable
reserves and allowances, at March 31, 1996 and December 31, 1995
are as follows:
(In Thousands)
March 31,1996 December 31, 1995
Raw materials $ 3,809 $ 3,051
Work in process 5,409 2,968
Finished goods 2,677 1,112
---------- ----------
$ 11,895 $ 7,131
========== ==========
Page 7
BIOGEN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
1996 QUARTER COMPARED TO 1995 QUARTER
For the first quarter ended March 31, 1996, the Company reported a net loss
of $3.7 million or $(.10) per share as compared to net income of $2.8
million or $0.08 per share in the first quarter of 1995.
Total revenues for the current quarter were $38.8 million as compared to
$36.0 million in the comparable 1995 quarter. The increase of $2.8 million
or 8% primarily relates to an increase in the royalties received from
Schering-Plough Corporation, the Company's licensee for alpha interferon,
while royalties received from licensee sales of hepatitis B vaccines, sold
by SmithKline Beecham plc ("SmithKline") and Merck & Co., Inc., remained
flat. In the near term, the Company expects overall sales of licensee
products to continue at or near current levels although royalty income may
fluctuate depending on changes in sales volumes for specific products.
These sales levels and the Company's royalties may fluctuate from quarter
to quarter due to the timing and extent of major events such as new
indication approvals, vaccination programs or licensing arrangements.
Interest income for the current quarter increased from the comparable 1995
quarter primarily due to an increase in invested funds.
Total expenses for the current quarter were $42.3 million as compared to
$32.9 million in the comparable 1995 quarter. Cost of sales increased
approximately $1.7 million or 66%, primarily due to additional royalty
obligations to third parties. Research and development expenses increased
$4.0 million, due primarily to research funding under an existing
collaboration agreement and payments made to acquire certain patent rights.
The Company expects that, in the long-term, research and development
expenses will increase as the Company expands its development efforts with
respect to new products and begins clinical trials of these products.
Selling, general and administrative expenses increased approximately $5.7
million or 76% in the 1996 quarter as compared to the 1995 quarter, due
primarily to higher costs from the start-up of a domestic sales
organization and market development efforts in the United States and Europe
related to AVONEX(TM). During the current quarter, the Company completed
most of the hiring of its domestic sales force and continued the ramp-up of
its corporate and administrative departments to support the Company's
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 status of regulatory approvals in the
United States and in Europe and, if approved, the overall sales levels
achieved by AVONEX(TM). In December 1995, an independent advisory
committee to the U.S. Food and Drug Administration (FDA) unanimously
recommended that the FDA approve the Company's product license applications
for AVONEX(TM) as a treatment for relapsing forms of multiple sclerosis.
The Company has also filed an application with the FDA for an establishment
license for its Cambridge, Massachusetts facility and an application for
marketing approval for AVONEX(TM) in several other jurisdictions, including
Canada and the European Union.
Page 8
Income tax expense for 1996 and 1995 varied from the amount computed at
U.S. federal statutory rates, primarily as a result of the impact of net
operating loss carryforwards. As of December 31, 1995, the Company had a
net deferred tax asset of $57.1 million (before valuation allowance)
consisting primarily of the future tax benefits from net operating loss
carryforwards and other tax credits. At December 31, 1995, the Company had
a 100% valuation allowance against the net deferred tax asset. If this net
deferred tax asset is fully realized through sufficient future
profitability, future reversals of the valuation allowance will, on a
cumulative basis, reduce future income tax expense by approximately $21.3
million and increase paid-in capital by approximately $35.8 million.
Realization of the net deferred tax asset and future reversals of the
valuation allowance depend on the Company's ability to achieve future
profitability through earnings from existing sources and from sales of
AVONEX(TM) or other proprietary products. The timing and amount of future
earnings will depend on the Company's success in obtaining regulatory
approval for and in marketing and selling AVONEX(TM), as well as the
results of development, clinical trials and commercialization of other
products under development. The Company will assess the need for the
valuation allowance at each balance sheet date based on all available
evidence.
Under Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes", the Company would be required to recognize
all or a portion of its $57.1 million net 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 carryforward 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 obtaining regulatory approval for
AVONEX(TM) and in successfully commercializing the product 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. In making its
determination under SFAS 109, the Company considered its positive earnings
history in 1992, 1993, and 1995, although the weight given to this past
history was partially offset by the Company's loss in 1994 and in the
current quarter, the increases in expenses since 1992 and the short-term
nature of some of the events leading to the revenue growth in 1992 and
1993. Since the Company is not involved in the development or sale of
products by licensees, the Company is unable to accurately predict the
timing or potential impact of all of the events or trends which may affect
licensee sales or when and for how long these events or trends are likely
to affect the Company's royalty income. The Company also considered
whether to take into account potential profits that the Company may earn on
sales of AVONEX(TM), if the product is approved and successfully marketed.
The Company recognized, however, that it has never marketed or sold its own
proprietary drug and faces a number of hurdles if it is to be successful in
commercializing AVONEX(TM), including obtaining regulatory approval for the
product, establishing customer service, marketing and sales organizations,
successively overcoming legal and other challenges presented by competitors
and obtaining market acceptance for the product. The Company viewed its
lack of operating history as a fully integrated biopharmaceutical company,
the number of hurdles it faces to successfully commercialize AVONEX(TM) and
the uncertainties related to the Company's revenue stream as support for
recording a 100% reserve against its net deferred tax asset under SFAS 109.
Page 9
The Company finally considered as support for the reserve the Company's
current expectation that, as a result of commercialization ramp-up and
pipeline expansion activities, expenses will exceed revenues until such
time as the Company has profitably marketed AVONEX(TM). The Company will
assess the need for the valuation allowance at each balance sheet date
based on all available evidence.
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 March 31, 1996, the Company had cash, cash equivalents and marketable
securities of $293.4 million, a $14.5 million decrease from the $307.9
million on hand at December 31, 1995. Working capital decreased $10.3
million to $276.6 million. Net cash used by operating activities for the
three months ended March 31, 1996 was $8.6 million while the Company's
common stock option and purchase plans provided $4.4 million. The Company
also received $7.1 million under a secured term loan agreement with a bank.
Outflows of cash included investments in property and equipment and patents
of $15.2 million.
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 March
31, 1996, the Company had paid or been invoiced approximately $32 million
and had commitments totaling approximately $24 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 March 31, 1996, funds advanced were approximately $21 million.
In the first quarter of 1993, SmithKline initiated arbitration in the
United States regarding the rate of royalties payable from sales of
hepatitis B vaccines by SmithKline in the United States. The amount paid
by SmithKline and in dispute as of March 31, 1996 was approximately $24
million. In April 1995, an arbitration panel ruled in Biogen's favor. On
June 30, 1995, SmithKline made a motion to vacate this decision in the
Federal District Court for the Southern District of New York. On May 2,
1996, the Federal District Court upheld the arbitration panel's ruling. An
appeal by SmithKline of this ruling is possible. However, the Company
believes that, in the event of such appeal, an adverse ruling is not
probable and, therefore no amount has been accrued.
During the fourth quarter of 1994, a total of six class action lawsuits
were initiated against the Company and several of its directors and
officers. These cases have been consolidated into a single proceeding in
the United States District Court for the District of Massachusetts. The
lawsuits generally allege that the Company and the named directors and
officers violated federal securities laws in connection with the Company's
public disclosures, including disclosures relating to HIRULOG(R) and other
disclosures made in connection with patent matters related to AVONEX(TM).
Page 10
The plaintiffs seek damages in unspecified amounts. On January 23, 1996,
the Federal District Court dismissed all claims against the Company's
outside directors, all claims related to AVONEX(TM) and most of the claims
relating to statements concerning the Company's HIRULOG(R) thrombin
inhibitor. The only claims remaining in the case pertain to statements
concerning the results of the HIRULOG(R) TIMI-7 clinical trial. The Court
did not reach a decision on the merits of these claims. Proceedings with
respect to the remaining claims are in the preliminary stages and
accordingly, no estimate can be made as to the amount or range of any
potential loss which could result from the final outcome of this matter.
The Company believes that an adverse ruling is not probable, and no amount
has been accrued.
On April 26, 1996, Berlex Laboratories, Inc. ("Berlex"), the U.S.
subsidiary of Schering A.G., headquartered in Berlin, Germany, filed a
lawsuit in the Federal District Court for the District of Colombia against
the United States Food and Drug Administration ("FDA") seeking a temporary
restraining order, preliminary and permanent injunctive relief and a
declaratory judgment to prevent the FDA from approving the product license
application (PLA) and establishment license application (ELA) for Biogen's
AVONEX(TM) interferon beta 1a. On April 30, 1996, the Company intervened
in the proceeding. Berlex claims that the FDA's grant to Biogen of a
license to market AVONEX(TM) would violate the orphan drug status of
Berlex's Betaseron(R) product and that the FDA would violate its own
procedures if it licenses AVONEX(TM). On April 30, 1996, the U.S. District
Court denied Berlex's motion for a temporary restraining order in the
lawsuit. The Company anticipates that Berlex will continue to pursue its
lawsuit. The Company believes, however, based on information currently
available, that it is not probable that Berlex will prevail in its efforts
to prevent the FDA from approving the license for AVONEX(TM) or, if the
license is approved, in efforts to compel the FDA to subsequently revoke
the license.
The Company currently believes that the financial resources available to
it, including its current working capital 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, competitive and
technological developments, 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 majority of the development effort for AVONEX(TM), 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 the Company
does not currently market any drugs directly, the Company is in the process
of building a commercial infrastructure both in North America and in Europe
to market and sell AVONEX(TM). The timing, nature and scope of the
activities related to the building of a commercial infrastructure will
continue to depend on the status of the Company's regulatory filings and
Page 11
approval activities. As development efforts expand and as AVONEX(TM) ramp-
up activities evolve, the Company anticipates that expenses will exceed
revenues until such time as the Company has successfully marketed
AVONEX(TM). As a result, the Company does not expect past operating
results to be indicative of future operating results.
Certain of the statements set forth above and elsewhere in the financial
statements, including statements regarding the anticipated AVONEX(TM)
approval, rate of the Company's royalties in the future, the Company's
future expenses, and predictions as to the anticipated outcome of pending
litigation, are forward-looking and are based upon the Company's current
belief of the outcome and timing of such future events. Important factors
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 below.
While the Company's ability to achieve profitability in prior years has
been dependent mainly on the level of royalty revenues as compared to
expenses, the Company's future profitability will be dependent on the
outcome of a number of factors. These include: the level of royalties
from existing licensee product sales; the timing and extent of royalties
from additional licensing opportunities; successful completion of
development activities related to AVONEX(TM); receipt of timely FDA and
European regulatory approval for AVONEX(TM); the level of revenues and
profitability from AVONEX(TM) sales, provided that the product is approved;
the cost and success of developing and commercializing other products the
Company is developing; 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.
Page 12
With respect to the unaudited condensed consolidated financial information
of Biogen, Inc. and its subsidiaries at March 31, 1996 and for the three
month periods ended March 31, 1996 and 1995, Price Waterhouse LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report
dated April 12, 1996 appearing herein, states that they did not audit and
they do not express an opinion on that unaudited condensed consolidated
financial information. Price Waterhouse LLP 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 LLP 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 LLP 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 March 31, 1996, and the related
condensed consolidated statements of income and of cash flows for the three
month periods ended March 31, 1996 and 1995. 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 auditing
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, 1995, 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 23, 1996 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, 1995, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ Price Waterhouse LLP
- ------------------------
Boston, Massachusetts
April 12, 1996
<PAGE>
PART II - OTHER INFORMATION Page 13
Item 1 - Legal Proceedings
On April 26, 1996, Berlex Laboratories, Inc. ("Berlex"), the U.S.
subsidiary of Schering A.G., headquartered in Berlin, Germany, filed a
lawsuit in the Federal District Court for the District of Colombia
against the United States Food and Drug Administration ("FDA") seeking
a temporary restraining order, preliminary and permanent injunctive
relief and a declaratory judgment to prevent the FDA from approving
the product license application (PLA) and establishment license
application (ELA) for Biogen's AVONEX(TM) interferon beta 1a. On
April 30, 1996, the Company intervened in the proceeding. Berlex
claims that the FDA's grant to Biogen of a license to market
AVONEX(TM) would violate the orphan drug status of Berlex's
Betaseron(R) product and that the FDA would violate its own procedures
if it licenses AVONEX(TM). On April 30, 1996, the U.S. District Court
denied Berlex's motion for a temporary restraining order in the
lawsuit. The Company anticipates that Berlex will continue to pursue
its lawsuit. The Company believes, however, based on information
currently available, that it is not probable that Berlex will prevail
in its efforts to prevent the FDA from approving the license for
AVONEX(TM) or, if the license is approved, in efforts to compel the
FDA to subsequently revoke the license.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse LLP.
(b) There were no reports on Form 8-K filed for the quarter ended March
31, 1996.
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: May 8, 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.
No. 15 Letter from Price Waterhouse LLP.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 32,489
<SECURITIES> 260,943
<RECEIVABLES> 15,797
<ALLOWANCES> 0
<INVENTORY> 11,895
<CURRENT-ASSETS> 327,329
<PP&E> 174,185
<DEPRECIATION> 42,984
<TOTAL-ASSETS> 471,950
<CURRENT-LIABILITIES> 50,700
<BONDS> 39,912
0
0
<COMMON> 357
<OTHER-SE> 380,981
<TOTAL-LIABILITY-AND-EQUITY> 471,950
<SALES> 34,378
<TOTAL-REVENUES> 38,843
<CGS> 4,153
<TOTAL-COSTS> 41,810
<OTHER-EXPENSES> (6)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 515
<INCOME-PRETAX> (3,476)
<INCOME-TAX> 182
<INCOME-CONTINUING> (3,658)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,658)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
EXHIBIT 11
BIOGEN, INC. and SUBSIDIARIES
Computation of Earnings Per Share
(unaudited)
(in thousands, except per share amounts)
Three months ended
March 31,
1996 1995
Primary earnings per share
Weighted average number of
shares outstanding. . . . . . . . . . . . . . . 35,600 33,166
Shares deemed outstanding from
the assumed exercise of stock
options and warrants. . . . . . . . . . . . . . -- 2,311
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . 35,600 35,477
======== ========
Net income(loss). . . . . . . . . . . . . . . . . $ (3,658) $ 2,834
======== ========
Primary earnings per
share of common stock . . . . . . . . . . . . . $ (0.10) $ 0.08
======== ========
Fully diluted earnings per share (a)
Weighted average number of
shares outstanding. . . . . . . . . . . . . . . 35,600 33,166
Shares deemed outstanding from
the assumed exercise of stock
options and warrants. . . . . . . . . . . . . . -- 2,406
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . 35,600 35,572
======== ========
Net income(loss). . . . . . . . . . . . . . . . . $ (3,658) $ 2,834
======== ========
Fully diluted earnings
per share of common stock . . . . . . . . . . . $ (0.10) $ 0.08
======== ========
(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
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We are aware that our report dated April 12, 1996 (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
March 31, 1996, and the related condensed consolidated statements of income
and of cash flows for the three month period then ended, is incorporated by
reference in the Prospectuses constituting part of its Registration
Statements on Form S-3, as amended (Nos. 33-14741, 33-14743, 33-20183 and
33-51639) and in the Registration Statements on Form S-8 as amended (Nos.
2-87550, 2-96157, 33-9827, 33-14742, 33-37312, 33-22378, 33-41077, 33-
69174, 33-63013 and 33-63015). We are also aware of our responsibilities
under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
- ------------------------
Boston, Massachusetts
May 10, 1996
