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 March 31, 1998
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 1, 1998:
Common Stock, par value $0.01 73,707,924
(Title of each class) (Number of Shares)
<PAGE>
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B I O G E N , I N C .
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Statements of Income -
Three months ended March 31, 1998 and 1997..............................3
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997....................................4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31, 1998 and 1997..............................5
Notes to Condensed Consolidated Financial Statements......................6
Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................9
PART II - OTHER INFORMATION...................................................13
* * * * * * * * * * * * * * * * * *
Note concerning trademark: AVONEX(R) is a trademark of Biogen, Inc.
<PAGE>
Page 3
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
<CAPTION>
Three months ended
March 31,
1998 1997
<S> <C> <C>
REVENUES
Product . . . . . . . . . . . . . . . . . . . . $ 76,100 $ 52,616
Royalties . . . . . . . . . . . . . . . . . . . 38,372 42,215
Interest. . . . . . . . . . . . . . . . . . . . 6,968 4,907
-------- --------
Total revenues. . . . . . . . . . . . . . . . . 121,440 99,738
-------- --------
EXPENSES
Cost of sales . . . . . . . . . . . . . . . . . 14,873 11,744
Research and development. . . . . . . . . . . . 37,120 37,908
Selling, general and administrative . . . . . . 26,003 21,164
Other, net .. . . . . . . . . . . . . . . . . . 46 334
-------- --------
Total expenses. . . . . . . . . . . . . . . . . 78,042 71,150
-------- --------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . 43,398 28,588
Income taxes. . . . . . . . . . . . . . . . . . . 15,627 11,578
-------- --------
NET INCOME. . . . . . . . . . . . . . . . . . . . $ 27,771 $ 17,010
======== ========
BASIC EARNINGS PER SHARE. . . . . . . . . . . . . $ 0.38 $ 0.23
======== ========
DILUTED EARNINGS PER SHARE. . . . . . . . . . . . $ 0.36 $ 0.22
======== ========
SHARES USED IN CALCULATING:
BASIC EARNINGS PER SHARE. . . . . . . . . . . . 73,935 73,268
======== ========
DILUTED EARNINGS PER SHARE. . . . . . . . . . . 76,854 76,843
======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Page 4
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
March 31,1998 Dec. 31,1997
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . $ 65,602 $ 70,358
Marketable securities. . . . . . . . . . . . 392,737 369,730
Accounts receivable, net . . . . . . . . . . 74,034 86,802
Deferred tax asset. . . . . . . . . . . . . . 27,951 37,203
Other current assets. . . . . . . . . . . . . 38,406 31,973
-------- --------
Total current assets. . . . . . . . . . . . . 598,730 596,066
-------- --------
Property, plant and equipment
Cost. . . . . . . . . . . . . . . . . . . . . 245,065 240,513
Less accumulated depreciation . . . . . . . . 71,264 66,021
-------- --------
Property, plant and equipment, net. . . . . . 173,801 174,492
-------- --------
Other assets
Patents, net. . . . . . . . . . . . . . . . . 15,629 14,935
Marketable securities . . . . . . . . . . . . 28,589 17,095
Other . . . . . . . . . . . . . . . . . . . . 7,042 11,237
-------- --------
Total other assets. . . . . . . . . . . . . . 51,260 43,267
-------- --------
$ 823,791 $ 813,825
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . . $ 16,410 $ 15,820
Note payable . . . . . . . . . . . . . . . . 23,301 24,817
Current portion of long-term debt. . . . . . 4,888 4,888
Accrued expenses and other . . . . . . . . . 70,850 78,358
-------- --------
Total current liabilities. . . . . . . . . . 115,449 123,883
-------- --------
Long-term debt, less current portion. . . . .. 61,041 61,846
Other long term liabilities. . . . . . . . . . 15,497 15,132
Put options. . . . . . . . . . . . . . . . . . 56,670 76,671
Commitments and contingencies. . . . . . . . .
Shareholders' equity:
Common stock . . . . . . . . . . . . . . . . 741 741
Additional paid in capital . . . . . . . . . 512,475 516,880
Retained earnings . . . . . . . . . . . . . 73,099 25,327
Unrealized losses on
marketable securities . . . . . . . . . . . (911) (2,233)
Cumulative translation adjustment. . . . . . (114) (37)
Treasury stock, at cost. . . . . . . . . . . (10,156) (4,385)
-------- --------
Total shareholders' equity . . . . . . . . . 575,134 536,293
-------- --------
$ 823,791 $ 813,825
======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
Page 5
<TABLE>
BIOGEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
<CAPTION>
Three months ended
March 31,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . $ 27,771 $ 17,010
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization . . . . . . . . . 5,629 4,357
Deferred income taxes . . . . . . . . . . . . . 8,506 (10,617)
Other . . . . . . . . . . . . . . . . . . . . . 756 2,217
Changes in:
Accounts receivable . . . . . . . . . . . . . . 12,768 (851)
Other current and other assets. . . . . . . . . (6,536) (2,831)
Accounts payable, accrued expenses and
other current and long term liabilities. . . . (6,553) (3,513)
-------- --------
Net cash provided from operating activities.. . . 42,341 5,772
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities. . . . . . . . (222,523) (95,239)
Proceeds from sales and maturities of
marketable securities. . . . . . . . . . . . . . 198,931 106,518
Investment in collaborative partners. . . . . . (5,000) (10,000)
Acquisitions of property and equipment. . . . . . (4,388) (8,525)
Additions to patents. . . . . . . . . . . . . . . (1,505) (2,531)
-------- --------
Net cash used by investing activities . . . . . . (34,485) (9,777)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable. . . . . . . . . . . . (1,516) -
Proceeds from issuance of long-term debt. . . . . - 4,545
Repayments of long-term debt. . . . . . . . . . . (805) -
Purchases of treasury stock. . . . . . . . . . . (21,500) -
Tax benefit related to stock options. . . . . . . 3,944 20,117
Issuance of common stock and option exercises . . 7,265 18,783
-------- --------
Net cash (used by) provided from
financing activities. . . . . . . . . . . . . . (12,612) 43,445
-------- --------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS. . . . . . . . . . . . . . . (4,756) 39,440
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . 70,358 62,032
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD . . . . . . . . . . . . . . . . . . $ 65,602 $101,472
======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
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BIOGEN, INC. AND SUBSIDIARIES
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 Biogen,
Inc. and its subsidiaries (the "Company"). The Company's accounting
policies are described in the Notes to Consolidated Financial
Statements in the Company's 1997 Annual Report on Form 10-K. 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.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards Number 130 "Reporting Comprehensive
Income"("SFAS 130") and Statement of Financial Accounting Standards
Number 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). The Company adopted SFAS 130 and SFAS 131 on
January 1, 1998. SFAS 130 establishes standards for reporting
comprehensive income and its components in the consolidated financial
statements. Comprehensive income for the three months ended March 31,
1998 was $29 million. SFAS 131 establishes standards for reporting
information on operating segments in interim and annual financial
statements.
Below is a summary of the shares used in calculating basic and diluted
earnings per share for the quarters ended March 31,:
<TABLE>
<CAPTION>
(In Thousands)
1998 1997
<S> <C> <C>
Weighted average number of shares of
common stock outstanding. . . . . . . 73,935 73,268
Dilutive stock options. . . . . . . . . 2,919 3,575
------ ------
Shares used in calculating diluted
earnings per share. . . . . . . . . . 76,854 76,843
====== ======
</TABLE>
2. As of March 31, 1998, the Company had $20.8 million outstanding under a
term loan secured by a laboratory and office building in Cambridge,
Massachusetts. Principal payments of $833,000 are due semi-annually
through 2004 with the balance due on May 8, 2005.
As of March 31, 1998, the Company had $45.1 million outstanding under a
loan agreement with a bank for financing the construction of the
Company's biological manufacturing facility in North Carolina (the
"Construction Loan"). The Construction Loan is secured by the
<PAGE>
Page 7
facility. Payments of $805,000 million are due quarterly through
2006 with the balance due on March 31, 2007.
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.
3. Inventories, which are included in other current assets, 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 which are
expensed as research and development costs when consumed. Inventories,
net of applicable reserves and allowances, at March 31, 1998 and
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(In Thousands)
March 31, 1998 Dec. 31, 1997
<S> <C> <C>
Raw materials $ 4,001 $ 4,957
Work in process 16,614 8,132
Finished goods 7,336 9,870
-------- --------
$27,951 $22,959
======== ========
</TABLE>
4. On July 3, 1996, Berlex Laboratories, Inc. ("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 Biogen's AVONEX(R)
(Interferon beta-1a). Berlex seeks a judgment granting it damages, a
trebling of any damages awarded and a permanent injunction restraining
Biogen from the alleged infringement. An unfavorable ruling in the
Berlex suit could have a material adverse effect on the Company's
results of operations and financial position. The Company believes
that it has meritorious defenses to the Berlex claim; however, the
ultimate outcome is not determinable at this time. Prior to the date of
the suit filed by Berlex on the McCormick patent, Biogen had filed a
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(R), its manufacturing process and intermediates
used in that process do not infringe the McCormick patent and that such
patent is not valid. In November 1996, the U.S. District Court in
Massachusetts ruled that it had jurisdiction and Berlex's New Jersey
action was transferred to Massachusetts and consolidated for pre-trial
purposes with the Massachusetts case. In February 1997, the U.S.
District Court in Massachusetts dismissed Biogen's declaratory judgment
action as to Schering without prejudice if such dismissal is later
shown to result in an injustice to Biogen. Biogen and Stanford
subsequently entered into an agreement voluntarily dismissing Stanford
from the suit. The suit involving Berlex is still pending. A trial is
not expected before the early part of 1999.
In June 1996, ASTA Medica Aktiengesellschaft ("ASTA") filed for
arbitration against Biogen with the International Chamber of Commerce
("ICC") in connection with a dispute with Biogen regarding a License,
Development and Supply Agreement, dated May 30, 1989 (the "1989
<PAGE>
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Agreement"), among Biogen, ASTA and Bioferon Biochemische Substanzen
GmbH & Co ("Bioferon"). Bioferon was a joint venture between Biogen and
Rentschler Arzneimittel GmbH & Co. of Laupheim, Germany, which entered
bankruptcy in 1993. In the proceeding, ASTA had asked for a
determination that Biogen could not terminate the 1989 Agreement as to
ASTA solely as a result of Bioferon's bankruptcy and a further
determination that Biogen was required to supply ASTA with recombinant
beta interferon. On March 13, 1998, the ICC arbitration panel ruled
that, as between Biogen and ASTA, the 1989 Agreement was not terminated
as a result of the bankruptcy of Bioferon, but that Biogen was not
required to perform Bioferon's obligations under the 1989 Agreement
and, as a result, had no obligation to supply recombinant beta
interferon to ASTA. Under the 1989 Agreement, ASTA was granted an
exclusive license for a number of European countries to certain
intellectual property relating to recombinant beta interferon,
including Biogen's European Fiers patent which has since been revoked
by the European Patent Office. In light of the panel's decision, Biogen
has notified ASTA that it has terminated the 1989 Agreement based on
ASTA's conduct and failure to perform. On March 19, 1998, ASTA notified
Biogen that it deemed Biogen's termination of the 1989 Agreement to be
invalid.
During the fourth quarter of 1994, a total of six class action lawsuits
were initiated against Biogen and several of its directors and
officers. On March 3, 1995, these cases were consolidated into a single
proceeding in the United States District Court for the District of
Massachusetts. On January 23, 1996, in response to motions to dismiss
the entire case filed by Biogen and the named officer and director
defendants, the District Court issued a Memorandum and Order, dated
January 22, 1996, dismissing most of the claims asserted in the
plaintiffs' Second Amended Complaint, including all claims against
Biogen's outside directors. The only claims remaining in the case
pertain to a statement concerning the results of the HIRULOG(R) TIMI-7
clinical trials in unstable angina. The Court did not reach a decision
on the merits of these claims. On October 11, 1996, Biogen filed a
motion for summary judgment in the case. On September 4, 1997, the
Court denied the motion but narrowed the plaintiff class. On May 6,
1998 a jury found in favor of Biogen -- rejecting all claims against
the company.
5. Income tax expense as a percent of pre-tax income for the quarters
ended March 31, 1998 and 1997 was 36% and 40.5%, respectively. The
effective tax rate varied from the U.S. statutory rates in the current
quarter primarily due to an increase in European sales and the
utilization of research and development credits. The effective rate in
the first quarter of 1997 varied from U.S. statutory rates primarily
due to the benefit of research and development and investment tax
credits partially offset by foreign losses for which the Company
received no tax benefit.
<PAGE>
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BIOGEN, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Biogen, Inc. (the "Company" or "Biogen") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human health care. The Company currently derives revenues from sales
of AVONEX(R) (Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis ("MS") and from royalties on worldwide sales by the Company's
licensees of a number of products covered under patents controlled by the
Company, including alpha interferon and hepatitis B vaccines and diagnostic
products.
Results of Operations
For the quarter ended March 31, 1998, the Company reported net income of $27.8
million or $0.36 per diluted share as compared to $17 million or $0.22 per
diluted share for the comparable period of 1997.
Total revenues for the current quarter were $121.4 million, as compared to $99.7
million in the quarter ended March 31, 1997, an increase of $21.7 million or
22%. The increase in total revenues was primarily due to increased sales of the
Company's product AVONEX(R). Product sales for the current quarter were $76.1
million as compared to $52.6 million for the comparable period of 1997, an
increase of $23.5 million or 45%. The growth in 1998 was due to an increase in
the sales volume of AVONEX(R)in the United States as well as expansion into
several new countries in the European Union ("EU"). In March 1997, the Company
received regulatory approval to market AVONEX(R) in the fifteen member countries
of the EU. By the end of 1997, AVONEX(R) had received reimbursement approval and
was on the market in all of the EU countries. AVONEX(R) sales outside of the
United States were approximately $13 million in the current quarter as compared
to $3 million in the comparable period of 1997. Revenues from royalties for the
current quarter were $38.4 million as compared to $42.2 million for the
comparable quarter of 1997, a decrease of $3.8 million or 9%. Royalty revenue in
1997 included a $2 million one-time license payment from The Medicines Company.
The Company expects product sales as a percentage of total revenues to increase
in the near term as the Company continues to market AVONEX(R) worldwide. The
Company expects sales from AVONEX(R) in Europe to increase as a percentage of
total product sales. The Company also received approval to market AVONEX(R) in
Canada on April 6, 1998. The Company, however, expects to face increasing
competition in the MS marketplace from other current and expected MS treatments.
In the near term, the Company expects overall sales of licensee products and
royalty revenues to fluctuate depending on changes in sales volumes for specific
products, patent expirations, new licensing arrangements, if any, or other
developments. Licensee sales levels may also fluctuate from quarter to quarter
due to the timing and extent of major events such as new indication approvals or
vaccination programs.
Interest income for the current quarter was $7 million, an increase of $2.1
million or 43% as compared to $4.9 million in the comparable period of
<PAGE>
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1997. The increase in interest income is primarily a result of increased levels
of invested funds.
Total expenses for the current quarter were $78 million as compared to $71.2
million in the quarter ended March 31, 1997, an increase of $6.8 million or 10%.
Cost of sales for the current quarter was $14.9 million as compared to $11.7
million in the comparable period of 1997, an increase of $3.2 million or 27%.
Cost of sales for the current quarter includes product costs of $12.1 million as
compared to $7.7 million in the comparable period of 1997. Gross margins for
product sales remained relatively flat at 84% for the current quarter compared
to 85% in the comparable period of 1997. Cost of sales relating to royalty
revenue for the current quarter was $2.8 million as compared to $4 million in
the comparable period of 1997, a decrease of $1.2 million, due to a higher
proportion of royalty revenue with lower associated royalty costs. The Company
expects that gross margins on royalty revenue will fluctuate in the future based
on the impact of one-time royalty and milestone payments.
Research and development expenses for the current quarter were $37.1 million, a
decrease of $0.8 million or 2% as compared to the quarter ended March 31, 1997.
Included in research and development expenses in the quarter ended March 31,
1997 was a one-time license fee of $5 million to CV Therapeutics, Inc. Excluding
the one-time license fee, research and development expenses increased $4.2
million, primarily due to an increase in clinical trial costs. The Company
expects that, in the long-term, research and development expenses will increase
as the Company expands its pipeline and related development efforts and clinical
trials with respect to potential new product candidates and continues clinical
trials of AVONEX(R). Selling, general and administrative expenses for the
current quarter were $26 million, an increase of $4.8 million or 23% as compared
to the quarter ended March 31, 1997. This increase was primarily due to the
selling and marketing expenses related to sales of AVONEX(R), principally in
support of the ongoing European launch. The Company expects that selling,
general and administrative expenses will continue to increase in the near and
long-term as the Company continues to expand the sales and marketing
organizations and activities necessary to sell AVONEX(R)in additional European
markets.
Income tax expense as a percent of pre-tax income for the quarters ended March
31, 1998 and 1997 was 36% and 40.5%, respectively. The effective tax rate varied
from U.S. statutory rates in the current quarter primarily due to an increase in
European sales and to the utilization of research and development credits. The
effective rate in the first quarter of 1997 varied from U.S. statutory rates
primarily due to the benefit of research and development and investment tax
credits partially offset by foreign losses for which the Company received no tax
benefit.
Financial Condition
At March 31, 1998, cash, cash equivalents and short term marketable securities
were $65.6 million compared with $70.4 million at December 31, 1997, a decrease
of $4.8 million. Working capital increased $11.1 million to $483.3 million from
December 31, 1997 to March 31, 1998. Net cash provided from operating activities
for the current quarter was $42.3 million compared with $5.8 million for the
first quarter of 1997. Cash outflows for the current quarter included
investments in property and equipment and patents of $5.9 million and $5 million
under collaborative research agreements. Cash outflows from financing activities
included note
<PAGE>
Page 11
payable and loan repayments of $2.3 million, and repurchases of the Company's
common stock at a total cost of $21.5 million. Cash inflows from financing
activities included $7.3 million from common stock option and purchase plan
activity.
Several legal proceedings were pending during the current quarter which involve
the Company. See Note 4 of the Notes to the Condensed Consolidated Financial
Statements and Part II Item 1 - Legal Proceedings. See also Item 1 Business,
"Patents and Other Proprietary Rights" of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 for discussions of these legal
proceedings.
The Company believes that existing funds and cash generated from operations are
adequate to satisfy its working capital and capital expenditure requirements in
the foreseeable future. However, the Company may seek to raise additional
capital to take advantage of favorable conditions in the market or in connection
with the Company's development activities.
Outlook
Safe Harbor Statement under Private Securities Litigation Reform Act of 1995
In addition to historical information, this quarterly report on Form 10-Q
contains forward-looking statements that involve risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements. Reference is made in particular to forward-looking
statements regarding the anticipated level of future royalty revenues, product
sales, expenses and profits and anticipated pricing approvals and predictions as
to the anticipated outcome of pending litigation. These and all other
forward-looking statements are made based on the Company's current belief as to
the outcome and timing of such future events. Factors which could cause actual
results to differ from the Company's expectations and which could negatively
impact the Company's results of operations are discussed below and elsewhere in
this Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Dependence on AVONEX(R) Sales and Royalty Revenue
The Company's ability to sustain increases in revenues and profitability will be
primarily dependent on the level of revenues and profitability from AVONEX(R)
sales. The Company's ability to sustain profitability from sales of AVONEX(R)
will depend on a number of factors, including: continued market acceptance of
AVONEX(R) worldwide; the Company's ability to maintain a high level of patient
satisfaction with AVONEX(R); the nature of regulatory and pricing decisions
related to AVONEX(R) worldwide and the extent to which AVONEX(R) receives
reimbursement coverage; market acceptance of AVONEX(R) outside the United
States; successful resolution of the lawsuit with Berlex related to the
"McCormick" patent, which if decided in Berlex's favor could have a material
adverse effect on the Company's operations; the Company's ability to sustain
market share of AVONEX(R) in light of the introduction of competitive products
for the treatment of multiple sclerosis; the success of ongoing development work
related to AVONEX(R) in expanded multiple sclerosis indications and the
continued accessibility of third parties to vial, label, and distribute
<PAGE>
Page 12
AVONEX(R) on acceptable terms. The Company also receives royalty revenues which
contributes significantly to its overall profitability. The Company's ability to
maintain the level of its royalty revenues will depend on: sustaining the scope
and validity of existing patents; the efforts of licensees in the clinical
testing and marketing of products from which the Company derives revenue; and
the timing and extent of royalties from additional licensing opportunities. In
addition, licensee sales levels may fluctuate from quarter to quarter due to the
timing and extent of major events such as new indication approvals or government
sponsored vaccination programs. There can be no assurance that the Company will
achieve a positive outcome with respect to any of the factors discussed in this
Section 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 sustained
increases in revenues or profitability or the sustained profitability of the
Company. For a further discussion of risks regarding drug development, patent
matters, including the Berlex lawsuit on the "McCormick" patent, competition in
the multiple sclerosis market and regulatory matters, see the Company's Annual
Report on Form 10-K for the period ended December 31, 1997 under the headings
"Business - Risks Associated with Drug Development", "Business - Patents and
Other Proprietary Rights", "Business Competition and Marketing
- -AVONEX(R)(interferon beta 1a)", "Business - Regulation", "Legal Proceedings"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations Outlook."
New Products
AVONEX(R) is currently the only product sold by the Company. The Company's
long-term viability and growth will depend on the successful development and
commercialization of other products from its research activities and
collaborations. The Company has begun to expand its development efforts related
to other potential 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. Product
development involves a high degree of risk. Many important factors affect the
Company's ability to successfully develop and commercialize drugs, including the
ability to obtain and maintain necessary patents and licenses, to demonstrate
safety and efficacy of drug candidates at each stage of the clinical trial
process, to meet applicable regulatory standards and receive required regulatory
approvals, to be capable of producing drug candidates in commercial quantities
at reasonable costs, to compete successfully against other products and to
market products successfully. There can be no assurance that the Company will be
successful in its efforts to develop and commercialize new products.
<PAGE>
Page 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
During the fourth quarter of 1994, a total of six class action lawsuits were
initiated against Biogen and several of its directors and officers. On March
3, 1995, these cases were consolidated into a single proceeding in the United
States District Court for the District of Massachusetts. On January 23, 1996,
in response to motions to dismiss the entire case filed by Biogen and the
named officer and director defendants, the District Court issued a Memorandum
and Order, dated January 22, 1996, dismissing most of the claims asserted in
the plaintiffs' Second Amended Complaint, including all claims against
Biogen's outside directors. The only claims remaining in the case pertain to a
statement concerning the results of the HIRULOG(R) TIMI-7 clinical trials in
unstable angina. The Court did not reach a decision on the merits of these
claims. On October 11, 1996, Biogen filed a motion for summary judgment in the
case. On September 4, 1997, the Court denied the motion but narrowed the
plaintiff class. On May 6, 1998 a jury found in favor of Biogen -- rejecting
all claims against the company.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit
No. 27 Financial Data Schedule(for EDGAR filing purposes
only).
(b) On March 16, 1998, the Company filed a report on Form 8-K to
disclose that it has received a decision from an
International Chamber of Commerce arbitration panel in its
dispute with ASTA Medica Aktiengesellschaft of Berlin,
Germany regarding a 1989 agreement among Biogen, ASTA, and
Bioferon Biochemische Substanzen GmbH & Co. Bioferon was a
joint venture between Biogen and Rentschler Arzneimittel GmbH &
Co. of Laupheim, Germany, which entered bankruptcy in 1993.
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 7, 1998 /s/Timothy M. Kish
----------------
-------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer
<PAGE>
Page 14
EXHIBITS
Index to Exhibit.
No. 27 Financial Data Schedule(for EDGAR filing purposes
only).
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 65,602
<SECURITIES> 392,737
<RECEIVABLES> 75,679
<ALLOWANCES> 1,645
<INVENTORY> 27,951
<CURRENT-ASSETS> 598,730
<PP&E> 245,065
<DEPRECIATION> 71,264
<TOTAL-ASSETS> 823,791
<CURRENT-LIABILITIES> 115,449
<BONDS> 61,041
0
0
<COMMON> 741
<OTHER-SE> 574,393
<TOTAL-LIABILITY-AND-EQUITY> 823,791
<SALES> 76,100
<TOTAL-REVENUES> 121,440
<CGS> 14,873
<TOTAL-COSTS> 78,042
<OTHER-EXPENSES> 46
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,635
<INCOME-PRETAX> 43,398
<INCOME-TAX> 15,627
<INCOME-CONTINUING> 27,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,771
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.36
</TABLE>
