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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-12042
BIOGEN, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14 Cambridge Center, Cambridge, Massachusetts 02142
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (617) 679-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of Common Stock held by nonaffiliates of the
Registrant at March 16, 2000 (excludes shares held by directors):
$12,913,220,996. Exclusion of shares held by any person should not be construed
to indicate that such person possesses the power, direct or indirect, to direct
or cause the direction of management or policies of the Registrant, or that such
person is controlled by or under common control with the Registrant. Common
Stock outstanding at March 16, 2000: 150,926,556 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
Report, and portions of the Registrant's 1999 Annual Report to Shareholders are
incorporated by reference into Parts II and IV of this Report.
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PART I
ITEM 1 - BUSINESS
OVERVIEW
Biogen, Inc. ("Biogen" or the "Company") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human health care. Biogen, which was founded in 1978 and recently
added by Standard & Poor's to the benchmark S&P 500 Index, currently derives
revenues from sales of its AVONEX(R) (Interferon beta-1a) product for the
treatment of relapsing forms of multiple sclerosis and from royalties on
worldwide sales by the Company's licensees of a number of products covered under
patents controlled by the Company. Such products include certain forms of alpha
interferon, hepatitis B vaccines and hepatitis B diagnostic test kits, among
others. The Company's revenues from sales of AVONEX(R) in 1999 were
approximately $620.6 million, making AVONEX(R) the worldwide market leader among
multiple sclerosis therapies. The Company's royalty revenues in 1999 were
approximately $173.8 million.
Biogen continues to have an active development program related to
AVONEX(R), and is conducting several important clinical trials of the product.
In 1999, Biogen completed a clinical study of AVONEX(R) in patients who had
experienced only one confirmed demyelinating event (multiple sclerosis-type
exacerbation). The study showed a highly statistically significant beneficial
effect of AVONEX(R) in delaying the development of clinically definite multiple
sclerosis. The study was stopped early following positive results. The Company
intends to file an application for a broadened prescribing label for AVONEX(R)
with regulatory agencies worldwide.
Biogen also continues to devote significant resources to its ongoing
research and development efforts. The Company focuses its efforts on areas where
it has particular scientific strengths such as: multiple sclerosis, inflammatory
diseases, cardiovascular diseases, developmental biology and gene therapy. In
1999, the Company completed a Phase 2b clinical study of its AMEVIVE(TM) (Human
LFA-3/IgG1 fusion protein) product, also known as LFA3TIP, in patients with
moderate to severe chronic plaque psoriasis. Based on the encouraging Phase 2b
data, the Company began a Phase 3 clinical trial in North America, and is
moving forward with planning for a Phase 3 clinical trial in
Europe. Biogen anticipates beginning Phase 2 clinical trials of AMEVIVE(TM) in a
second indication during 2000. The Company also recently announced that it had
successfully completed an early-stage Phase 2 study of an adenosine A(1)
antagonist small molecule product being studied as a treatment for congestive
heart failure. Additional studies using the lead back-up molecule for this
pathway are planned. A third Biogen product candidate in clinical trials
experienced a set back in 1999. In November 1999, the Company announced that it
had halted all ongoing clinical trials of ANTOVA(TM) (Humanized anti-CD40 ligand
monoclonal antibody), also known as humanized 5c8, until it has completed a
review of issues relating to adverse incidents involving thrombo-embolic events.
Work to identify the reasons for the adverse events is ongoing.
Biogen also has many earlier-stage research programs. These include: a
program directed toward developing a novel inhibitor of a particular immune
response pathway as a potential therapy for several autoimmune diseases; a
program focused on finding oral small molecule drug candidates to inhibit the
migration of white blood cells into tissue as a potential treatment for multiple
sclerosis and
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certain chronic inflammatory diseases; a program in which the Company is
exploring ways to treat certain central nervous system disorders through use of
proteins involved in inducing the formation and regeneration of tissue; and a
program directed at developing products based on human gene therapy technology.
The Company is also exploring the use of functional genomics technology to find
novel therapeutics.
AVONEX(R) (INTERFERON BETA-1A)
Biogen currently markets and sells AVONEX(R) (Interferon beta-1a) for the
treatment of relapsing forms of multiple sclerosis. Multiple sclerosis is a
progressive neurological disease in which the body loses the ability to transmit
messages among nerve cells, leading to a loss of muscle control, paralysis and,
in some cases, death. Patients with active relapsing multiple sclerosis
experience an uneven pattern of disease progression characterized by periods of
stability interrupted by flareups of the disease after which the patient returns
to a new baseline of functioning. AVONEX(R) is a recombinant form of a protein
produced by fibroblast cells in response to viral infection. AVONEX(R) has been
shown in a pivotal clinical trial both to slow the accumulation of disability
and to reduce the frequency of exacerbations in patients with relapsing forms of
multiple sclerosis.
Biogen began selling AVONEX(R) in the United States in 1996, and in the
European Union ("EU") in 1997. AVONEX(R) is on the market in over 50 countries,
including Argentina, Australia, Brazil, Canada, Chile, Columbia, Cyprus, the
Czech Republic, the countries of the EU, Hungary, Israel, Mexico, Norway,
Slovakia, South Africa, Switzerland, Turkey and the United States.
In the United States, Canada and most of the major countries of the EU,
Biogen uses its own sales force to market AVONEX(R). In those countries, Biogen
distributes AVONEX(R) principally through wholesale distributors of
pharmaceutical products, mail order, specialty distributors or shipping service
providers. In other countries, Biogen sells AVONEX(R) to distribution partners
who are then responsible for most marketing and distribution activities. The
Company has entered into distribution agreements covering Australia, Eastern
Europe, Greece, Israel, Italy, Japan, Latin America, the Middle East, New
Zealand, Portugal, South Africa, Spain and Turkey. Under most of these
agreements, the distribution partners are responsible for marketing and
distributing AVONEX(R).
Biogen is currently conducting several clinical studies of AVONEX(R). These
include: a dose comparison study, initiated in 1996, comparing the approved
dosage of AVONEX(R) with a higher dose; an open-label follow-up study initiated
in 1995 to obtain long-term safety and antigenicity data; a clinical study of
AVONEX(R) in patients with secondary progressive multiple sclerosis, initiated
in 1998; and a Phase 2 clinical study of AVONEX(R) in the treatment of
idiopathic pulmonary fibrosis which also commenced in 1998.
Biogen also recently completed a clinical study of AVONEX(R) in patients
who had experienced only one confirmed demyelinating event (multiple
sclerosis-type exacerbation). The study, which was initiated in 1996, showed a
highly statistically significant beneficial effect of AVONEX(R) in delaying the
development of clinically definite multiple sclerosis. Clinically definite
multiple sclerosis is identified by the presence of at least two demyelinating
events, separated by time and location in the central nervous system. The study
was stopped early following positive results. The Company intends to file an
application for a broadened prescribing label for AVONEX(R) with regulatory
agencies worldwide.
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Biogen is also exploring new ways to improve the formulation and delivery
of AVONEX(R). In February 1999, Biogen entered into a collaborative agreement
with Inhale Therapeutic Systems, Inc. under which the parties are working
towards development of a dry powder formulation of AVONEX(R) for pulmonary
delivery using Inhale's deep-lung delivery system. Biogen is also continuing to
work towards development of a pre-filled syringe formulation of AVONEX(R).
Revenues from sales of AVONEX(R) in 1999 were $620.6 million or
approximately 78% of total revenues. Revenues from sales of AVONEX(R) in 1998
and 1997 were $394.9 million and $240.0 million, respectively, or approximately
71% and 58% of total revenues, respectively. Approximately 71% of AVONEX(R)
sales in 1999, 77% of AVONEX(R) sales in 1998, and 92% of AVONEX(R) sales in
1997, were generated in the United States. Sales to three major wholesale
distributors and a specialty distributor in the United States accounted for 13%,
11%, 11% and 15%, respectively, of total revenues in 1999.
MAJOR RESEARCH AND DEVELOPMENT PROGRAMS
Biogen's research is focused on biological systems and processes where its
scientific expertise in molecular biology, cell biology, immunology and protein
chemistry can lead to a greater understanding of disease processes and, as a
result, to the creation of new pharmaceuticals. Biogen selects product
candidates from its research programs to test in clinical trials, focusing its
efforts on those agents which it believes have the greatest potential
competitive advantages and large commercial markets. Described below are
Biogen's major research programs.
AMEVIVE(TM) (LFA3TIP)
Inflammation is the result of the body's immune response to infection and
injury. In many autoimmune diseases, the inflammation process is directed
inappropriately against the body's own tissues, causing temporary or permanent
damage. Biogen has focused the efforts of its inflammation programs on
developing drugs to inhibit specific cellular interactions critical to the
inflammation process. Central to inflammation is the activation of T-cells,
specialized white blood cells which initiate and control the immune response.
One of the cellular pathways which is important for the activation of T-cells is
the LFA-3/CD2 pathway. AMEVIVE(TM) (LFA3TIP) is a recombinantly engineered
protein designed to modulate immune responses by binding to the CD2 receptor.
Biogen is developing AMEVIVE(TM) as a treatment for certain autoimmune diseases.
In 1999, the Company completed a Phase 2b clinical study of AMEVIVE(TM) in
patients with moderate to severe chronic plaque psoriasis. Based on positive
data from the Phase 2b study, the Company began a Phase 3 study in North America
and is moving forward with planning for a Phase 3 study in Europe. Psoriasis is
a chronic autoimmune disease that is characterized by inflammation and
thickening of the skin. An estimated 500,000 psoriasis patients in the United
States have a severe enough form of the disease to need systemic therapies.
Biogen anticipates beginning Phase 2 clinical trials of AMEVIVE(TM) in a second
indication during 2000.
ADENOSINE A(1) ANTAGONISTS
In March 1997, Biogen entered into a research collaboration and license
agreement with CV Therapeutics, Inc. ("CVT") pursuant to which the Company
obtained rights under CVT's patents and know-how to develop and market molecules
that act as highly selective antagonists of the adenosine A(1)
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receptor. The adenosine A(1) receptor is expressed principally in the heart,
brain and kidney, and in the kidney mediates vasoconstriction, renal function
and reabsorption of fluids. Biogen is developing small molecule adenosine A(1)
antagonists as a treatment for congestive heart failure. Congestive heart
failure is a chronic progressive disease that affects four to five million
people in the United States. Patients with the disease experience both a chronic
course as well as acute episodes of heart failure that usually require
hospitalization. Reduction in kidney function and the formation of edema, or
fluid retention, in lungs and extremities are significant symptoms of chronic
heart failure, leading to increased morbidity, hospitalization and death. In
1999, Biogen successfully completed an early-stage Phase 2 study comparing
CVT-124, a particular small molecule product, with existing therapies in the
acute treatment of congestive heart failure. Additional studies using the lead
back-up molecule for this pathway are planned.
ANTOVA(TM) (HUMANIZED 5C8)
The human immune system generates two types of responses: humoral (also
known as antibody) responses and cell-mediated responses. When CD40 ligand
("CD40L") on the surface of an activated T-cell binds to CD40 on the surface of
a B-cell, the production of antibodies is triggered. When CD40L on the surface
of an activated T-cell binds to CD40 on the surface of a variety of other cells,
such as macrophages and dendritic cells, the cells become activated, triggering
an inflammatory response. The inhibition of the CD40-CD40L pathway offers a
unique target for modulating both types of immune responses.
Biogen is developing ANTOVA(TM), a humanized monoclonal antibody that binds
to CD40L, as a treatment for a variety of autoimmune diseases and as a therapy
for preventing organ and cellular transplant rejection. During 1999, the Company
was involved in an ongoing Phase 2 safety study of ANTOVA(TM) in patients with
immune thrombocytopenic purpura, as well as Phase 2 studies of ANTOVA(TM) in
lupus nephritis, renal transplantation, pancreatic islet cell transplantation,
Factor VIII inhibitor syndrome and multiple sclerosis. In November 1999, the
Company announced that it had halted all existing clinical trials of ANTOVA(TM)
until it has completed a review of issues relating to adverse incidents
involving thrombo-embolic events. Work to identify the reasons for the adverse
events is ongoing.
LT-BETA RECEPTOR
The lymphotoxin-beta receptor ("LT-Beta Receptor") pathway is involved in
controlling the maintenance of proper immune interactions and the correct
positioning of key cell types in the immune system. Both elements are crucial
for the immune system to function properly. The LT-Beta Receptor pathway serves
as a novel access point to modulate autoimmune disease. Biogen is developing its
LT-Beta Receptor as a potential treatment for certain autoimmune diseases and
expects to start Phase 1 safety studies in 2001.
VLA-4 INHIBITORS
VLA-4 (Very Late Antigen-4) is a receptor that appears on the surface of
white blood cells and binds to VCAM-1, a protein found on the surface of
vascular endothelial cells, as well as extracellular matrix proteins,
fibronectin and osteopontin. The VLA-4 pathway facilitates migration of white
blood cells into tissue as part of the body's normal response during
inflammation. This inflammatory response
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can be severely damaging or even life threatening when it is directed against
the body's own tissue in autoimmune diseases and may cause serious collateral
injury in chronic immune inflammatory diseases such as asthma. Biogen scientists
have developed VLA-4-specific small molecule inhibitors designed to interrupt
the cell adhesion activity of VLA-4 as a means of blocking the inflammation
process in a highly specific manner.
In December 1997, Biogen entered into a collaborative research, development
and license agreement with Merck & Co., Inc. ("Merck") under which Biogen and
Merck are collaborating on developing small molecule inhibitors of VLA-4. Under
the agreement with Merck, Biogen has rights to develop, market and sell small
molecule inhibitors of VLA-4 for the treatment of multiple sclerosis, kidney
diseases and disorders, inflammatory bowel disease and most diseases with small
patient populations. Merck has rights to develop, market and sell small molecule
inhibitors of VLA-4 in all other indications, including asthma. Early in 1999,
Merck completed a Phase 2a study in asthmatic patients using an aerosolized
small molecule inhibitor of VLA-4, known as BIO-1211. Merck subsequently
determined that the results of the trial did not support continued development
of that particular compound. Collaborative efforts to identify a suitable oral
small molecule inhibitor drug candidate continue at Merck and Biogen.
HEDGEHOG PROTEINS
Hedgehog proteins are a class of novel human proteins that are responsible
for inducing the formation or regeneration of tissue. In 1996, the Company
entered into a research collaboration and license agreement with Ontogeny, Inc.
("Ontogeny") for the development of three specific "hedgehog" proteins. Under
its agreement with Ontogeny, Biogen has access to exclusive worldwide rights to
develop therapeutics directly based on Ontogeny's proprietary family of sonic,
indian and desert hedgehogs for most disease indications. In 1998, Biogen and
Ontogeny extended the hedgehog research program and broadened the collaboration
to include gene therapy. The Company's current focus is the study of the
hedgehog proteins for the treatment of certain central nervous system disorders.
GENE THERAPY
In 1995, the Company entered into a collaborative research agreement with
Genovo, Inc. ("Genovo") for the development of certain human gene therapy
treatments. Under this agreement, Biogen received rights related to certain
diseases of the liver and lung. Genovo has also granted to Biogen rights under
Genovo's gene therapy technology for development of certain gene therapy
products in connection with the treatment of cancer.
OTHER RESEARCH PROGRAMS
As part of its further research efforts, Biogen is exploring the use of
growth factors to prevent or treat the degeneration of organs following damage.
The Company is also investigating new ways to modify immune responses more
specifically in order to treat diseases of the immune system. In addition,
through its collaborations with CuraGen Corporation, Incyte Pharmaceuticals,
Inc. and Genetica Incorporated, Biogen is exploring the use of functional
genomics technology to find novel therapeutics.
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RESEARCH AND DEVELOPMENT COSTS
For the years ended December 31, 1999, 1998 and 1997, Biogen's research and
development costs were approximately $221.2 million, $177.2 million and $145.5
million, respectively.
RISKS ASSOCIATED WITH DRUG DEVELOPMENT AND COMMERCIALIZATION
Certain of the statements set forth above regarding the Company's research
and development programs, such as statements regarding the anticipated
commencement of clinical trials of drugs in development, are forward-looking,
and are based upon the Company's current belief as to the outcome and timing of
such future events. These events are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. Many important factors affect the
Company's ability to successfully develop and commercialize drugs, including the
need to demonstrate the safety and efficacy of drug candidates at each stage of
the clinical trial process, to overcome technical hurdles that may arise, to
meet applicable regulatory standards, to receive required regulatory approvals,
to be capable of producing drug candidates in commercial quantities at
reasonable costs, to obtain and maintain all necessary patents or licenses, to
compete successfully against other products, and to market products
successfully. There can be no assurance that any of the products described in
this section or resulting from Biogen's research and development programs will
be successfully developed, prove to be safe and efficacious at each stage of
clinical trials, meet applicable regulatory standards, be capable of being
produced in commercial quantities at reasonable costs, be successfully marketed
or successfully meet challenges from competitive products.
For a detailed discussion of the risks associated with the Company's drug
development and commercialization program, see the Company's 1999 Annual Report
to Shareholders --- "Management's Discussion and Analysis of Financial Condition
and Results of Operations --- Outlook," which is incorporated herein by
reference under Item 7 hereof.
PRINCIPAL PRODUCTS BEING MARKETED OR DEVELOPED BY BIOGEN'S LICENSEES
ALPHA INTERFERON
Alpha interferon is a naturally occurring protein produced by normal white
blood cells. Biogen has been granted patents covering the production of alpha
interferon through recombinant DNA techniques. See "Patents and Other
Proprietary Rights." Biogen's worldwide licensee for recombinant alpha
interferon, Schering-Plough Corporation ("Schering-Plough"), first began
commercial sales of its Intron(R) A brand of alpha interferon in the United
States in 1986 for hairy-cell leukemia. Schering-Plough now sells Intron(R) A
worldwide for as many as 16 indications. The United States Food and Drug
Administration (the "FDA") has approved Intron(R) A for the treatment of chronic
hepatitis B and hepatitis C, hairy-cell leukemia, AIDS-related Kaposi's sarcoma,
condylomata acuminata, for injection as an adjuvant treatment to surgery in
patients at high risk for systemic recurrence of malignant melanoma, and for use
in conjunction with anthracycline-containing combination chemotherapy for the
initial treatment of patients with clinically aggressive non-Hodgkin's lymphoma.
In late 1998, Biogen filed for arbitration against Schering-Plough in a
dispute over the amount of royalties payable to Biogen on sales of REBETRON(R),
a combination product containing the Intron(R) A injection product and
REBETOL(R) (ribavirin, USP capsules). Schering-Plough sells REBETRON(R) in the
United States as a treatment for
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chronic hepatitis C. A hearing in connection with the arbitration was conducted
in January 2000. In March 2000, the arbitration panel found in favor of
Schering-Plough, and rejected Biogen's claim that royalty payments should be
based on the higher rate for combination products called for under the 1979
agreement between the parties, and not on the Intron(R) A component alone.
Biogen does not expect to suffer any financial impact as a result of the
arbitration panel's decision since Schering-Plough is presently paying royalties
only on the Intron(R) A component, and the decision will have no effect on those
royalties.
Royalties from Schering-Plough on sales of Intron(R)A accounted for
approximately 13%, 16% and 19% of Biogen's revenues in 1999, 1998 and 1997,
respectively.
For a discussion of the length of Schering-Plough's royalty obligation to
Biogen on sales of alpha interferon products, see "Patents and Other Proprietary
Rights - Recombinant Alpha Interferon."
HEPATITIS B VACCINES AND DIAGNOSTICS
Hepatitis B is a blood-borne disease which causes a serious infection of
the liver and substantially increases the risk of liver cancer. More than 250
million people worldwide have chronic hepatitis B virus infections. Biogen holds
several important patents related to hepatitis B antigens produced by genetic
engineering techniques. See "Patents and Other Proprietary Rights - Recombinant
Hepatitis B Antigens." These antigens are used in recombinant hepatitis B
vaccines and in diagnostic test kits used to detect hepatitis B infection.
Hepatitis B Vaccines
Approximately 100 countries around the world, including the United States,
have added the vaccination against hepatitis B to their routine immunization
programs for all children. The United States Centers for Disease Control and the
American Academy of Pediatrics have also recommended universal immunization of
ten-year-old children and at-risk adolescents. The United States Occupational
Safety and Health Administration has recommended that all persons with an
occupational exposure to blood and other infectious material receive the
hepatitis B vaccine.
SmithKline Beecham Biologicals s.a. ("SmithKline") and Merck are the two
major worldwide marketers of hepatitis B vaccines. Biogen has licensed to
SmithKline exclusive rights under Biogen's hepatitis B patents to market
hepatitis B vaccines in the major countries of the world, excluding Japan.
SmithKline currently pays Biogen royalties based on sales of SmithKline's
vaccine in the United States and in over 15 other countries. In 1990, SmithKline
and Biogen entered into a sublicense arrangement with Merck under which Biogen
currently receives royalties. Biogen has also licensed rights relating to
hepatitis B vaccines under its hepatitis B patents to Merck and The Green Cross
Corporation on a non-exclusive basis in Japan. Royalties from SmithKline and
Merck together accounted for approximately 6%, 9% and 14% of Biogen's revenues
in 1999, 1998 and 1997, respectively.
Hepatitis B Diagnostics
Biogen has licensed its proprietary hepatitis B rights, on an
antigen-by-antigen and nonexclusive basis, to diagnostic kit manufacturers.
Biogen currently has hepatitis B license or license and supply agreements for
diagnostic use with more than 15 companies, including Abbott Laboratories, the
major worldwide marketer of hepatitis B diagnostic kits, Ortho-Clinical
Diagnostics, Organon Teknika B.V. and Roche Diagnostic Systems, Inc.
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For a discussion of the length of the royalty obligation of SmithKline and
Merck on sales of hepatitis B vaccines and the obligation of Biogen's other
licensees on sales of hepatitis B-related diagnostic products, see "Patents and
Other Proprietary Rights - Recombinant Hepatitis B Antigens."
OTHER PRODUCTS
Under a license agreement with Eli Lilly and Company ("Lilly"), Biogen has
granted Lilly rights under certain of Biogen's patents related to gene
expression. Lilly uses the patented vectors and methods in several products that
are on the market or in development. Under the license agreement, Biogen
receives royalties on sales of these products. See "Patents and Other
Proprietary Rights - Other Patents".
In 1996, Biogen granted a sublicense to Pharmacia & Upjohn AB ("Pharmacia &
Upjohn") under certain patent rights to proprietary protein secretion technology
exclusively licensed to Biogen by Harvard University. Under the terms of the
license agreement, Biogen receives ongoing royalties on sales of Pharmacia &
Upjohn's recombinant human growth hormone product, Genotropin(R), in the United
States, Canada and Japan.
In March 1997, Biogen granted to The Medicines Company ("TMC") exclusive
worldwide rights to develop and market Biogen's bivalirudin product, a direct
thrombin inhibitor now known as ANGIOMAX(TM). Biogen will receive milestone and
royalty payments from TMC if TMC is successful in its efforts to develop and
commercialize the drug. In October 1999, TMC received marketing clearance for
ANGIOMAX(TM) in New Zealand for use as an anticoagulant in patients undergoing
coronary angioplasty. In the United States and Europe, bivalirudin is an
investigational drug currently under regulatory review for marketing approval by
both the FDA and the European Agency for the Evaluation of Medicinal Products.
Financial information about foreign operations and export sales is included
in the Company's 1999 Annual Report to Shareholders --- Notes to Consolidated
Financial Statements --- Note 11, incorporated herein by reference under Item 8
hereof.
PATENTS AND OTHER PROPRIETARY RIGHTS
Biogen has filed numerous patent applications in the United States and
various other countries seeking protection of a number of its processes and
products. Patents have been issued on many of these applications. The Company
has also obtained rights to various patents and patent applications under
licenses with third parties which provide for the payment of royalties by the
Company. The ultimate degree of patent protection that will be afforded to
biotechnology products and processes, including those of Biogen, in the United
States and in other important markets remains uncertain and is dependent upon
the scope of protection decided upon by the patent offices, courts and lawmakers
in these countries. There is no certainty that Biogen's existing patents or
others, if obtained, will afford substantial protection or commercial benefit to
Biogen. Similarly, there is no assurance that the Company's pending patent
applications or patent applications licensed from third parties will ultimately
be granted as patents or that those patents that have been issued or are issued
in the future will prevail if they are challenged in court. There has been, and
Biogen expects that there may continue to be, significant litigation in the
industry regarding patents and other intellectual property rights. Intellectual
property litigation could therefore create uncertainty and consume substantial
resources.
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RECOMBINANT ALPHA INTERFERON
Biogen has approximately 67 patents in countries around the world,
including the United States and numerous other countries, covering the
production of recombinant alpha interferons. Biogen has granted an exclusive
worldwide license to Schering-Plough under Biogen's alpha interferon patents,
and receives royalties from Schering-Plough on sales of its brand of alpha
interferon. See "Principal Products Being Marketed or Developed by Biogen's
Licensees - Alpha Interferon".
Schering-Plough's royalty obligation to Biogen on sales of alpha interferon
in Japan and Europe will terminate upon expiration of Biogen's alpha interferon
patent in such territories in January 2001, except in France and Italy where
Biogen has obtained supplemental protection certificates extending the coverage
in France until 2003 and in Italy until 2007.
In consideration of assignment to Schering-Plough by Biogen of a Biogen
patent application claiming recombinant mature human alpha interferon,
Schering-Plough has agreed to pay to Biogen certain sums on sales by
Schering-Plough of alpha interferon products in the United States from July 2002
(when Biogen's existing United States alpha interferon patent expires) until
expiration of an alpha interferon patent expected to be issued to
Hoffman-LaRoche Inc. ("Roche") and Genentech, Inc. ("Genentech"). The
Roche/Genentech patent was the subject of a lawsuit brought by Biogen which was
ultimately settled. Schering-Plough entered into an agreement with Roche as part
of the settlement of the matter.
In December 1996, Schering-Plough filed suit in its own name, as Biogen's
exclusive licensee, against Amgen, Inc. ("Amgen") to enforce Biogen's United
States alpha interferon patent claiming it to be infringed by Amgen's consensus
interferon product known as Infergen(R). In July 1998, the federal judge in the
case issued a narrow pre-trial interpretation of the claims of the Biogen
patent. This decision was appealed. A hearing in connection with the appeal was
held in December 1999. A decision is expected in the first half of 2000.
During the arbitration proceedings between Biogen and Schering-Plough
related to REBETRON(R) royalties, Schering-Plough alleged that the federal
judge's decision in the Amgen case narrowed the scope of the claims in Biogen's
United States alpha interferon patent such that the patent no longer covers
Schering-Plough's Intron(R) A product. If the Amgen appeal is unsuccessful,
Schering-Plough might argue that royalties on sales of Intron(R) A are not
payable during the period commencing after expiration of the EU patent in
January 2001 (which currently covers all product manufactured in the EU,
including all product sold in the United States) until commencement in July 2002
of the royalty obligation tied to the term of the Roche/Genentech patent. Biogen
intends to vigorously oppose any attempt by Schering-Plough to discontinue
payment of royalties during any period.
RECOMBINANT HEPATITIS B ANTIGENS
Biogen has obtained numerous patents in countries around the world,
including in the United States and in European countries, covering the
recombinant production of hepatitis B surface, core and "e" antigens. Biogen has
licensed its recombinant hepatitis B antigen patent rights to manufacturers and
marketers of hepatitis B vaccines and diagnostic test kits, and receives
royalties on sales of the vaccines
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and test kits by its licensees. See "Principal Products Being Marketed or
Developed by Biogen's Licensees - Hepatitis B Vaccines and Diagnostics." The
obligation of SmithKline and Merck to pay royalties on sales of hepatitis B
vaccines and the obligation of Biogen's other licensees under its hepatitis B
patents to pay royalties on sales of diagnostic products will terminate upon
expiration of Biogen's hepatitis B patents in each licensed country. Biogen's
existing United States hepatitis B patent will expire in 2004. Biogen's European
hepatitis B patents expired at the end of 1999, except in those countries in
which Biogen has or is able to obtain supplemental protection certificates. To
date, Biogen has received supplemental protection certificates in Austria,
Belgium, France, Ireland, Italy, Luxembourg, The Netherlands, Sweden and
Switzerland, and has a number of additional applications pending. The additional
coverage afforded by the supplemental protection certificates ranges from two to
six years.
RECOMBINANT BETA INTERFERON
In 1997, the Technical Board of Appeal of the European Patent Office
revoked Biogen's European patent covering the production of recombinant beta
interferon. Although no formal appeal procedure exists, Biogen asked the
European Patent Office to overturn the revocation. A recent decision in another
case denied that such a right of appeal exists. Consequently, Biogen's appeal
will be dismissed and the patent will stand revoked. Biogen also has a patent
with similar claims in Israel. In July 1997, Biogen sued InterPharm Laboratories
Ltd. ("InterPharm"), an affiliate of Ares Serono, S.A. ("Serono"), and related
defendants, claiming that the manufacture by InterPharm of Serono's Rebif(R)
(Interferon Beta-1a) infringes Biogen's Israeli patent. In Germany, a patent
with similar claims was the subject of a nullity proceeding instituted by
Schering AG in the German Federal Patent Court. In March 1998, the German
Federal Patent Court upheld the German patent but with substantially narrower
claims. Biogen has appealed the decision.
Other parties have pending patent applications or issued patents in the
United States, Europe and other countries with claims to key intermediates in
the production of beta interferon (the "Taniguchi patents") and to beta
interferon itself (the "Roche patents"). Biogen has obtained non-exclusive
rights in various countries of the world, including the United States, Japan and
most European countries, to manufacture, use and sell AVONEX(R) under the
Taniguchi patents and has obtained worldwide, non-exclusive rights under the
Roche patents.
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 AVONEX(R). In November 1996, Berlex's New Jersey
action was transferred to the United States District Court in Massachusetts and
consolidated for pretrial purposes with a related declaratory judgment action
previously filed by Biogen. In August 1998, Berlex filed a second suit against
Biogen alleging infringement by Biogen of a patent which was issued to Berlex in
August 1998 and which is related to the McCormick patent. In September 1998, the
cases were consolidated for pretrial and trial purposes. Berlex seeks a judgment
granting it damages, a trebling of any damages awarded and a permanent
injunction restraining Biogen from alleged infringement. A hearing on the
parties' summary judgment motions was completed in March 2000. No decisions have
been rendered to date. The Company expects a trial to occur in the second half
of 2000. For a further discussion, see Item 3 hereof - Legal Proceedings, and
the Company's 1999 Annual Report to Shareholders --- Notes to Consolidated
Financial Statements --- Note 9, incorporated herein by reference under Item 8
hereof.
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<PAGE> 12
In 1995, the Company filed an opposition with the Opposition Division of
the European Patent Office to oppose a European patent (the "Rentschler I
Patent") issued to Dr. Rentschler Biotechnologie GmbH ("Rentschler") relating to
compositions of matter of beta interferon. In 1997, the European Patent Office
issued a decision to revoke the Rentschler I Patent. Rentschler has appealed
that decision and the appeal is still pending. On October 13, 1998, the Company
filed another opposition with the Opposition Division of the European Patent
Office to oppose a second European patent issued to Rentschler (the "Rentschler
II Patent") with certain claims regarding compositions of matter of beta
interferon with specific regard to the structure of the glycosylated molecule. A
decision on the Rentschler II Patent has not been issued to date. For a more
detailed discussion, see the Company's 1999 Annual Report to Shareholders ---
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Legal Matters" incorporated herein by reference under Item 7
hereof.
OTHER PATENTS
Biogen has granted Lilly a non-exclusive license under certain of Biogen's
patents for gene expression. Lilly uses the patented vectors and methods in
certain products that are on the market or in development. Biogen's European
patent relating to gene expression was opposed by Biotechnology General Corp. in
December 1993. A hearing was held by the Opposition Division of the European
Patent Office in March 1996. In March 1997, the Opposition Division decided to
revoke Biogen's patent. Biogen has appealed the decision.
In March 1995, Biogen filed suit in the U.S. District Court for the
District of Massachusetts seeking to enjoin Amgen from manufacturing and selling
its Neupogen(R) human granulocyte colony stimulating factor in the United States
and asking for damages for infringing activities. Biogen believes that to make
Neupogen(R) Amgen uses technology claimed in certain of Biogen's gene expression
patents. In 1998, the court made a decision as to interpretation of the claims
of the Biogen patent in such a way as to preclude Amgen's literal infringement
of the patent. Amgen has filed a motion for summary judgment based on the
court's decision. The parties filed briefs on whether Amgen is entitled to
summary judgment on its claim that its vector is not an infringing equivalent.
The matter was argued to the court in November 1999. A decision on this motion
is expected in the first half of 2000.
In July 1997, Biogen filed suit in the U.S. District Court for the District
of Massachusetts to enjoin Amgen from manufacturing and selling its Infergen(R)
consensus interferon in the United States and asking for damages for infringing
activities. Biogen believes that to make Infergen(R) Amgen uses technology
claimed in certain of Biogen's gene expression patents. Biogen's request to have
the case consolidated with the Neupogen(R) suit was denied by the court.
In March 1999, Biogen was added as a plaintiff in a lawsuit filed by Plant
Genetic Systems, N.V. ("PGS") against Dekalb Genetics Corporation ("Dekalb") in
the United States District Court in Connecticut. PGS, the licensee of certain
Biogen plant gene patents, is claiming that DeKalb infringes the patents in its
production of genetically-engineered seeds.
THIRD-PARTY PATENTS
Biogen is aware that others, including various universities and companies
working in the biotechnology field, have also filed patent applications and have
been granted patents in the United
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<PAGE> 13
States and in other countries claiming subject matter potentially useful or
necessary to Biogen's business. Some of those patents and patent applications
claim only specific products or methods of making such products, while others
claim more general processes or techniques useful or now used in the
biotechnology industry. For example, Genentech has been granted patents and is
prosecuting other patent applications in the United States and certain other
countries which it may allege are currently used by Biogen and the rest of the
biotechnology industry to produce recombinant proteins in microbial hosts.
Genentech has offered to Biogen and others in the industry non-exclusive
licenses under those patents and patent applications for various proteins and in
various fields of use, but not for others. Schering-Plough, Biogen's exclusive
licensee for recombinant alpha interferon, is licensed under certain of
Genentech's patents for the manufacture, use and sale of recombinant alpha
interferon. The ultimate scope and validity of Genentech's patents, of other
existing patents, or of patents which may be granted to third parties in the
future, and the extent to which Biogen may wish or be required to acquire rights
under such patents and the availability and cost of acquiring such rights,
currently cannot be determined by Biogen.
TRADE SECRETS AND CONFIDENTIAL KNOW-HOW
Trade secrets and confidential know-how are important to Biogen's
scientific and commercial success. Although Biogen seeks to protect its
proprietary information by generally requiring its employees, consultants,
advisors and corporate partners to sign confidentiality agreements, there can be
no assurance that third parties will not either independently develop the same
or similar information or obtain access to Biogen's proprietary information.
COMPETITION AND MARKETING
IN GENERAL
Competition in the biotechnology and pharmaceutical industries is intense
and comes from many and varied sources. Biogen does not believe that it or any
of the other industry leaders can be considered dominant in view of the rapid
technological change in the industry. Biogen experiences significant competition
from specialized biotechnology firms in the United States, Europe and elsewhere
and from many large pharmaceutical, chemical and other companies. Certain of
these companies have substantially greater financial, marketing, research and
development and human resources than Biogen. Most pharmaceutical companies have
considerable experience in undertaking clinical trials and in obtaining
regulatory approval to market pharmaceutical products.
Much competition is directed towards establishing proprietary positions
through research and development. A key aspect of such competition is recruiting
and retaining qualified scientists and technicians. Biogen believes that it has
been successful in attracting skilled and experienced scientific personnel.
Biogen believes that leadership in the industry will be based on managerial and
technological superiority and may be influenced significantly by patents and
other forms of protection of proprietary information. See "Patents and Other
Proprietary Rights". The achievement of a leadership position depends largely
upon Biogen's continued ability to attract and retain skilled and experienced
personnel, its ability to identify and exploit commercially the products
resulting from research and the availability of adequate financial resources to
fund facilities, equipment, personnel, clinical testing, manufacturing and
marketing.
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<PAGE> 14
Many of Biogen's competitors are working to develop products similar to
those under development by Biogen. The timing of the entry of a new
pharmaceutical product into the market can be an important factor in determining
the product's eventual success and profitability. Early entry may have important
advantages in gaining product acceptance and market share. Moreover, for certain
diseases with limited patient populations, the FDA is prevented under the Orphan
Drug Act, for a period of seven years, from approving more than one application
for the "same" product for a single orphan drug designation, unless a later
product is considered clinically superior. The EU and other jurisdictions have
or are considering similar laws. Accordingly, the relative speed with which
Biogen can develop products, complete the testing and approval process and
supply commercial quantities of the product to the market will have an important
impact on Biogen's competitive position. In addition, competition among products
approved for sale may be based, among other things, on patent position, product
efficacy, safety, reliability, availability and price.
AVONEX(R) (INTERFERON BETA - 1A)
As a treatment for multiple sclerosis, AVONEX(R) competes with interferon
beta-1b which is sold in the United States under the brand name Betaseron(R) by
Berlex, a United States affiliate of Schering AG, and is sold in Europe under
the brand name Betaferon(R) by Schering AG. AVONEX(R) also faces competition
from Copaxone(R) glatiramer acetate (also known as copolymer-1). In the United
States, Copaxone(R) is marketed by a partnership between Teva Pharmaceutical
Industries, Ltd. and Hoechst Marion Roussel, Inc. In most other countries,
AVONEX(R) also competes with Rebif(R), a recombinant interferon beta 1a product
sold by Serono. In response to an application from Serono for approval of
Rebif(R) in the United States for relapsing multiple sclerosis, the FDA, in
March 1999, upheld its earlier ruling that, based on the data from existing
clinical trials, Serono cannot market Rebif(R) in the United States for
relapsing multiple sclerosis while the orphan drug status afforded to AVONEX(R)
and Betaseron(R) for that indication is still in effect. AVONEX(R)'s orphan drug
status for relapsing forms of the disease expires in 2003. The ruling by the FDA
prompted Serono to recently initiate a 12-month head-to-head study of Rebif(R)
and AVONEX(R) to determine if Serono can show whether Rebif(R) is clinically
superior to AVONEX(R). The results of this study may help Serono in its attempts
to get the orphan drug status of AVONEX(R) removed. Biogen expects Serono
to release the results of the study in the first quarter of 2001.
A number of other companies are working to develop products to treat
multiple sclerosis which may in the future compete with AVONEX(R), the worldwide
market leader among multiple sclerosis therapies. For example, Immunex
Corporation, a majority-owned subsidiary of American Home Products Corporation,
recently received a non-binding recommendation for approval of Novantrone(R) in
the United States from an advisory panel of the FDA. Novantrone(R) was
recommended for approval to slow the worsening of neurologic disability and to
reduce the relapse rate in patients with clinically worsening forms of
relapsing-remitting and secondary progressive multiple sclerosis. The FDA will
consider the recommendation in its final review of the Novantrone(R) new drug
application. AVONEX(R) may also in the future face competition from off-label
uses of drugs approved for other indications. Biogen believes that competition
among treatments for multiple sclerosis will be based on product performance,
service and price.
REGULATION
Biogen's current and contemplated activities and the products and processes
that will result from such activities are, and will be, subject to substantial
government regulation.
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<PAGE> 15
Before new pharmaceutical products may be sold in the United States and
other countries, clinical trials of the products must be conducted and the
results submitted to appropriate regulatory agencies for approval. These
clinical trial programs generally involve a three-phase process. Typically, in
Phase 1, trials are conducted in volunteers or patients to determine the early
side effect profile and, perhaps, the pattern of drug distribution and
metabolism. In Phase 2, trials are conducted in groups of patients with a
specific disease in order to determine appropriate dosages, expand evidence of
the safety profile and, perhaps, determine preliminary efficacy. In Phase 3,
large scale, comparative trials are conducted on patients with a target disease
in order to generate enough data to provide the statistical proof of efficacy
and safety required by national regulatory agencies. The receipt of regulatory
approvals often takes a number of years, involving the expenditure of
substantial resources and depends on a number of factors, including the severity
of the disease in question, the availability of alternative treatments and the
risks and benefits demonstrated in clinical trials. On occasion, regulatory
authorities may require larger or additional studies, leading to unanticipated
delay or expense.
In connection with the commercialization of products resulting from
Biogen's research and development projects, it is necessary, in a number of
countries, to comply with certain regulations relating to the manufacturing and
marketing of such products and to the products themselves. For example, the
commercial manufacturing, marketing and exporting of pharmaceutical products
require the approval of the FDA in the United States and of comparable agencies
in other countries. The FDA has established mandatory procedures and safety
standards which apply to the manufacture, clinical testing and marketing of
pharmaceutical products in the United States. The regulatory requirements and
approval processes for new products in the EU operate under similar principles
as those applied in the United States. The process of seeking and obtaining
approval of the FDA or regulatory authorities in the EU or other regulatory
authorities worldwide for a new product and licensing of the facilities in which
the product is produced takes a number of years and involves the expenditure of
substantial resources. In addition, the regulatory approval processes for
products in the United States, the countries of the EU and other countries
around the world are undergoing or may undergo changes. Biogen cannot determine
what effect any changes in regulatory approval processes may have on its
business.
In the United States, the federal government regularly considers reforming
health care coverage and costs. Resulting legislation or regulatory actions may
have a significant effect on the Company's business. Biogen's ability to
successfully commercialize human pharmaceutical products also may depend in part
on the extent to which reimbursement for the costs of such products and related
treatments will be available worldwide from government health administration
authorities, private health insurers and other organizations. Currently,
substantial uncertainty exists as to the reimbursement status of newly approved
health care products by third-party payors.
Biogen conducts relevant research in compliance with the current United
States National Institutes of Health Guidelines for Research Involving
Recombinant DNA Molecules (the "NIH Guidelines") and all other applicable
federal and state regulations. By local ordinance, Biogen is required, among
other things, to comply with the NIH Guidelines in relation to its facilities in
Cambridge, Massachusetts, and is required to operate pursuant to certain
permits.
Various laws, regulations and recommendations relating to safe working
conditions, laboratory practices, the experimental use of animals, and the
purchase, storage, movement, import and export and use and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with Biogen's research work are or
may be applicable to its
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<PAGE> 16
activities. The extent of government regulation which might result from future
legislation or administrative action cannot accurately be predicted. Certain
agreements entered into by Biogen involving exclusive license rights may be
subject to national or supranational antitrust regulatory control, the effect of
which also cannot be predicted.
EMPLOYEES
At December 31, 1999, Biogen employed 1,351 full-time employees worldwide,
of whom 1,150 were located in the United States. Of the 1,351 employees, 344
were engaged in, or directly supported, research and process development, 474
were involved in, or directly supported, manufacturing, quality
assurance/quality control, regulatory, medical operations and preclinical and
clinical development, and 306 were involved in sales and marketing. In addition,
Biogen maintains consulting arrangements with a number of scientists at various
universities and other research institutions in Europe and the United States,
including the nine outside members of its Scientific Board.
ITEM 2 - PROPERTIES
Biogen's principal executive offices and a majority of its administrative,
manufacturing and research and development facilities are located in Cambridge,
Massachusetts. The Company owns a 150,000 square foot building in Cambridge that
houses laboratories and office space. The Company also leases a total of
approximately 301,002 square feet of additional office, manufacturing, and
research and development space in all or part of four other buildings in
Cambridge, consisting of a 67,362 square foot building housing manufacturing
facilities, laboratories and office space, a building with 65,792 square feet of
space containing laboratories, purification and aseptic bottling facilities, and
office space, a multi-tenant building where the Company leases approximately
150,848 square feet of office space, and a 17,000 square foot building housing
office space and distribution facilities. The lease expiration dates for the
leased sites range from 2000 to 2015. The Company has also leased additional
space in Cambridge that it is not currently utilizing, but plans to use in the
near term. In addition, in 1999, Biogen commenced construction of a new 224,000
square foot facility in Cambridge primarily to house process development
operations. The Company also has development options for additional property in
Cambridge.
In addition to its Cambridge facilities, the Company has a 100,000 square
foot biologics manufacturing facility in Research Triangle Park, North Carolina.
The Company uses the Research Triangle Park facility as an additional site for
the manufacture of AVONEX(R). In 1999, the Company commenced construction of a
250,000 square foot addition to the Research Triangle Park facility to add large
scale cell culture manufacturing capacity.
Biogen financed construction of the buildings which it owns in Cambridge,
Massachusetts and Research Triangle Park, North Carolina with term loans. The
loans are secured by the buildings. See the Company's 1999 Annual Report to
Shareholders --- "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated herein by reference under Item 7 hereof.
The Company's European headquarters consists of 4,150 square meters of
office space in a multi-tenant building in Nanterre, France. The lease for this
space terminates in 2008 with Biogen having the right to terminate the lease
earlier under specified circumstances. The Company also leases 2,250 square
meters of office and manufacturing space in The Netherlands, 950 square meters
of office
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<PAGE> 17
space in Germany, and small offices in Austria, Canada, Denmark, England,
Finland, Norway and Sweden. In addition, Dompe-Biogen AG, a minority-owned
subsidiary of Biogen, leases a small office in Switzerland.
The Company believes that its production plants in Cambridge, Massachusetts
and Research Triangle Park, North Carolina and existing outside sources will
allow it to meet, in the near term, its production needs for products in
clinical trials and AVONEX(R). Biogen believes that its existing facilities are
in compliance with applicable regulatory standards. The Company expects that
additional facilities and outside sources will be required to meet the Company's
future research, development and commercial production needs.
ITEM 3 - LEGAL PROCEEDINGS
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 AVONEX(R). In November 1996, Berlex's New Jersey
action was transferred to the United States District Court in Massachusetts and
consolidated for pretrial purposes with a related declaratory judgment action
previously filed by Biogen. In August 1998, Berlex filed a second suit against
Biogen alleging infringement by Biogen of a patent which was issued to Berlex in
August 1998 and which is related to the McCormick patent. In September 1998, the
cases were consolidated for pretrial and trial purposes. Berlex seeks a judgment
granting it damages, a trebling of any damages awarded and a permanent
injunction restraining Biogen from 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 claims, but the ultimate outcome is not
currently determinable. A hearing on the parties' summary judgment motions was
completed in March 2000. No decisions have been rendered to date. The Company
expects a trial to occur in the second half of 2000.
For a description of legal proceedings relating to certain patent rights,
see Item 1 hereof, "Business - Patents and Other Proprietary Rights."
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of each executive officer of the Company, their
respective age as of December 31, 1999 and their principal positions with the
Company. Officers are elected and may be removed by the Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions
- ---- --- ---------
<S> <C> <C>
James L. Vincent........... 60 Chairman of the Board of Directors and Chief Executive Officer
James C. Mullen............ 41 President, Chief Operating Officer and Director
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C>
Burt A. Adelman............ 47 Vice President - Medical Research
Cornelis "Kees" Been....... 41 Vice President - Business and Market Development
Michael W. Bonney.......... 41 Vice President - Sales and Marketing
Thomas J. Bucknum.......... 53 Vice President - General Counsel, Secretary and Clerk
Frank A. Burke, Jr......... 56 Vice President - Human Resources
Joseph M. Davie ........... 60 Senior Vice President - Research
Sylvie L. Gregoire......... 38 Vice President - Regulatory Affairs
Robert A. Hamm............. 48 Vice President - Manufacturing
Timothy M. Kish ........... 48 Vice President - Finance and Chief Financial Officer
Mark W. Leuchtenberger..... 43 Vice President - International
David D. Pendergast........ 51 Vice President - Product Development and Quality Assurance
</TABLE>
The background of these officers is as follows:
James L. Vincent has been Chairman of the Board of Directors since October
1985. Mr. Vincent's current term as Chief Executive Officer began in December
1998. He previously served as Chief Executive Officer of the Company from
October 1985 until February 1997. He served in the additional capacities of
Chief Operating Officer and President from April 1988 until February 1994.
Before joining Biogen, Mr. Vincent served as Group Vice President, Allied
Corporation and as President, Allied Health & Scientific Products Company, a
subsidiary of Allied Corporation. Before joining Allied Corporation, Mr. Vincent
was with Abbott Laboratories, Inc. where he served in various capacities,
including Executive Vice President, Chief Operating Officer and Director of the
parent corporation.
James C. Mullen was appointed President and Chief Operating Officer in
January 1999, after serving as Vice President - International since August 1996.
Mr. Mullen was appointed a Director of the Company in April 1999. Mr. Mullen was
the Company's Vice President - Operations from December 1991 until August 1996
and served as Senior Director - Operations from February 1991 to December 1991.
Mr. Mullen joined the Company in 1989. Before coming to Biogen, Mr. Mullen held
various positions of responsibility from 1984 through 1988 at SmithKline-Beckman
Corporation (now SmithKline Beecham Corporation), most recently as Director,
Engineering, SmithKline and French Laboratories, Worldwide.
Burt A. Adelman, M.D. was appointed Vice President - Medical Research in
January 1999 after serving as Vice President - Development Operations since
August 1996. Dr. Adelman served as Vice President - Regulatory Affairs of the
Company from May 1995 until August 1996. From 1991 until May
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<PAGE> 19
1995, Dr. Adelman was Director of Medical Research at Biogen. Dr. Adelman has
served as Lecturer of Medicine at Harvard Medical School and Brigham and Women's
Hospital since 1992.
Cornelis "Kees" Been was appointed Vice President - Business and Market
Development in August 1999. Prior to joining the Company, Mr. Been held a
variety of management positions from 1996 until April 1999 with Monsanto Life
Sciences, most recently as Vice President - Global Strategy. From 1988 through
1995, Mr. Been worked at Gemini Consulting, where in the most recent years he
was a Vice President, responsible for building Gemini's pharmaceuticals
practice. Mr. Been began his career in 1983 as a Trade and Licensing Manager
with Biogen, based in Geneva, Switzerland.
Michael W. Bonney was appointed Vice President - Sales and Marketing in
January 1999, after serving as Vice President - Sales since September 1995.
Prior to joining the Company, Mr. Bonney served as National Business Director
for the United States pharmaceutical business of Zeneca Inc. from October 1994
to September 1995 and as Director of Core Business Systems and Re-engineering of
Zeneca Inc.'s United States pharmaceutical business from January 1993 until
January 1995.
Thomas J. Bucknum was appointed Vice President - General Counsel, Secretary
and Clerk in July 1999, after serving as the Company's Chief Corporate Counsel
since 1996. Prior to joining the Company, Mr. Bucknum was Senior Vice President
and General Counsel of DuPont Merck Pharmaceutical Company from 1990 to 1995
with responsibility for legal, government and public affairs matters. Prior to
that, Mr. Bucknum held a number of domestic and international positions with
E.I. DuPont de Nemours & Company, Inc in the legal, marketing and regulatory
affairs departments.
Frank A. Burke, Jr., was appointed Vice President - Human Resources in May
1986 after serving for 12 years in various human resource management positions
at Allied-Signal, Inc., most recently as Director of Compensation and Employee
Benefits of the Engineered Materials Sector.
Joseph M. Davie, M.D., Ph.D. was appointed Senior Vice President - Research
in January 1999 after serving as Vice President - Research since April 1993.
Prior to joining the Company, Dr. Davie was employed by Searle Corporation where
he served as Senior Vice President - Science and Technology from January 1993 to
April 1993, President - Research and Development from July 1987 to January 1993
and Senior Vice President - Discovery Research from January 1987 to July 1987.
Dr. Davie is a director of Genovo, Inc.
Sylvie L. Gregoire, Pharm.D. was appointed Vice President - Regulatory
Affairs in January 1999. From July 1998 to January 1999, Dr. Gregoire was the
Program Executive for the Company's LT-Beta Receptor program. From 1995 until
July 1998, Dr. Gregoire served as Director, European Regulatory Affairs of the
Company. Prior to joining Biogen, Dr. Gregoire was Associate Director of
European Regulatory Affairs for Merck Sharp and Dohme (Europe) Inc. from 1991
until the end of 1994.
Robert A. Hamm was appointed Vice President - Manufacturing in June 1999
after serving as Director, Northern Europe and Distributors since November 1996.
Mr. Hamm served as the Company's Associate Director, Logistics from April 1994
until November 1996. From 1987 until April 1994, Mr. Hamm held a variety of
management positions at Syntex Laboratories Corporation, including Director of
Operations and New Product Planning, and Manager of Materials, Logistics and
Contract Manufacturing.
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<PAGE> 20
Timothy M. Kish was appointed Vice President - Finance and Chief Financial
Officer in August 1993 after serving as Corporate Controller of the Company
since 1986. Prior to joining Biogen, Mr. Kish was Director of Finance for Allied
Health & Scientific Products Company, a subsidiary of Allied Corporation. Before
joining Allied, Mr. Kish served in various capacities at Bendix Corp., most
recently as Executive Assistant to the President. In February 2000, Mr. Kish
announced his intention to resign from Biogen to become involved in an
earlier-stage technology-based organization. Mr. Kish will remain with the
Company to assist it in the transition to a successor.
Mark W. Leuchtenberger was appointed Vice President - International in
January 1999 after serving as Vice President - Sales, Marketing and Business
Development since January 1998. Mr. Leuchtenberger was the Company's Vice
President - Marketing and Sales from October 1996 until January 1998, Director
of Distributor Operations, Europe from September 1996 until October 1996,
Director of Marketing and the Program Executive for AVONEX(R) from 1993 until
September 1996, a Product Manager from 1992 to 1993, and a Market Development
Manager from 1990 to 1992. Prior to joining Biogen, Mr. Leuchtenberger worked
for the consulting firm of Bain & Company from 1987 to 1990.
David D. Pendergast, Ph.D. was appointed Vice President - Product
Development and Quality Assurance in January 1998 after serving as Vice
President - Quality Assurance and Quality Control of the Company since April
1996. Dr. Pendergast joined Biogen from Fisons Pharmaceuticals, Manchester U.K.
where he served as Director, Quality Assurance/Quality Control of Fisons PLC
from 1992 to 1996. Prior to joining Fisons, Dr. Pendergast served, over a
twenty-year period, in various capacities at The Upjohn Company, including Vice
President - Quality Assurance from 1989 to 1992.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The section entitled "Market for Securities" in the Company's 1999 Annual
Report to Shareholders is hereby incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" in the Company's 1999 Annual
Report to Shareholders is hereby incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1999 Annual Report to
Shareholders is hereby incorporated herein by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Outlook - Market Risk" in the Company's
1999 Annual Report to Shareholders is hereby incorporated herein by reference.
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<PAGE> 21
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The sections entitled "Consolidated Statements of Income," "Consolidated
Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Shareholders' Equity," "Notes to Consolidated Financial
Statements" and "Report of Independent Accountants" in the Company's 1999 Annual
Report to Shareholders are hereby incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
its 2000 Annual Meeting of Stockholders, which the Company intends to file with
the Commission no later than April 29, 2000, are hereby incorporated herein by
reference.
Information concerning the Company's Executive Officers is set forth in
Item 4 of Part I of this Annual Report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION
The sections entitled "Election of Directors" and "Executive Compensation",
in the Company's definitive proxy statement for its 2000 Annual Meeting of
Stockholders, which the Company intends to file with the Commission no later
than April 29, 2000, are hereby incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Share Ownership" in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 29, 2000, is hereby
incorporated herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Executive Compensation - Employment Arrangements with
the Company and Certain Transactions" in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 29, 2000, is hereby incorporated
herein by reference.
21
<PAGE> 22
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(1) The Company's Financial Statements are incorporated herein by
reference from the Company's 1999 Annual Report to Shareholders attached
hereto as Exhibit 13. The specific items and the locations of such items
are set forth below:
<TABLE>
<CAPTION>
Item Location
- ---- --------
<S> <C>
Consolidated Statements of Income Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of Income."
Consolidated Balance Sheets Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Balance Sheets."
Consolidated Statements of Cash Flows Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of Cash Flows."
Consolidated Statements of Shareholders' Equity Annual Report under the caption "Biogen, Inc. and
Subsidiaries Consolidated Statements of Shareholders'
Equity."
Notes to Consolidated Financial Statements Annual Report under the caption "Biogen, Inc. and
Subsidiaries Notes to Consolidated Financial
Statements."
Report of Independent Accountants Annual Report under the caption "Report of
Independent Accountants."
</TABLE>
With the exception of the portions of the Company's 1999 Annual Report to
Shareholders specifically incorporated herein by reference, such report shall
not be deemed filed as part of this Annual Report on Form 10-K.
(2) The Company's Financial Statement Schedules, as required by Item 8 of
this Form 10-K, are incorporated herein by reference from the Company's 1999
Annual Report to Shareholders attached hereto as Exhibit 13. A list of such
Financial Statement Schedules is set forth below:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts and Reserves
22
<PAGE> 23
(3) Exhibits
Exhibit No. Description
- ----------- -----------
(3.1) Articles of Organization, as amended (m)
(3.2) By-Laws, as amended (f)
(4.1) Form of Common Stock Share Certificate (h)
(4.2) Certificate of Designation of Series A Junior Participating
Preferred Stock (d)
(4.3) Rights Agreement dated as of May 8, 1989 between the
Registrant and The First National Bank of Boston, as Rights
Agent (d)
(10.1) Independent Consulting and Project Agreement dated as of
June 29, 1979 between the Registrant and Kenneth Murray
(a)**
(10.2) Letter Agreement dated September 11, 1998 with Kenneth
Murray related to renewal of Independent Consulting
Agreement (q) **
(10.3) Minute of Agreement dated February 5, 1981 among the
Registrant, The University Court of the University of
Edinburgh and Kenneth Murray (a)**
(10.4) Independent Consulting Agreement dated as of June 29, 1979
between the Registrant and Phillip A. Sharp (a)**
(10.5) Letter Agreement dated December 11, 1998 with Phillip A.
Sharp related to chairmanship of Scientific Board and
renewal of Independent Consulting Agreement (q)**
(10.6) Project Agreement dated as of December 15, 1979 between the
Registrant and Phillip A. Sharp (a)**
(10.7) Share Restriction and Repurchase Agreement dated as of
December 15, 1979 between the Registrant and Phillip A.
Sharp (a)**
(10.8) Consulting Agreement dated as of April 1, 1991, as amended,
between the Registrant and Alexander G. Bearn (e)**
(10.9) Letter Agreement dated March 24, 1998 with Alexander G.
Bearn relating to renewal of Independent Consulting
Agreement (q)**
(10.10) Form of Amendment dated July 1, 1988 to Independent
Consulting Agreement between the Registrant and Scientific
Board Members (c)**
(10.11) Letter regarding employment of James L. Vincent dated
September 23, 1985 (b)**
23
<PAGE> 24
(10.12) Letter agreement amending employment arrangement between the
Registrant and James L. Vincent dated as of November 21,
1996 (n)**
(10.13) Form of Stock Option Agreement with James L. Vincent under
1985 Non-Qualified Stock Option Plan (f)**
(10.14) Form of Stock Option Agreement with James L. Vincent under
1985 Non-Qualified Stock Option Plan (1995) (l)**
(10.15) Form of Stock Option Agreement with James L. Vincent under
1985 Non-Qualified Stock Option Plan (1997) (o)**
(10.16) Letter dated April 7, 1993 regarding employment of Dr.
Joseph M. Davie (g)**
(10.17) Form of Indemnification Agreement between the Registrant and
each Director and Executive Officer (c)**
(10.18) Cambridge Center Lease dated October 4, 1982 between
Mortimer Zuckerman, Edward H. Linde and David Barrett, as
Trustees of Fourteen Cambridge Center Trust, and B. Leasing,
Inc. (a)
(10.19) First Amendment to Lease dated January 19, 1989, amending
Cambridge Center Lease dated October 4, 1982 (f)
(10.20) Second Amendment to Lease dated March 8, 1990, amending
Cambridge Center Lease dated October 4, 1982 (f)
(10.21) Third Amendment to Lease dated September 25, 1991, amending
Cambridge Center Lease dated October 4, 1982 (f)
(10.22) Fourth Amendment to Lease dated October 6, 1993, amending
Cambridge Center Lease dated October 4, 1982 (o)
(10.23) Fifth Amendment to Lease dated October 9, 1997, amending
Cambridge Center Lease dated October 4, 1982 (o)
(10.24) Lease dated October 6, 1993 between North Parcel Limited
Partnership and Biogen Realty Limited Partnership (i)
(10.25) 1983 Employee Stock Purchase Plan, as amended and restated
through September 12, 1997 (o)**
(10.26) 1982 Incentive Stock Option Plan, as amended through June
20, 1998 and restated, with form of Option Agreement (p)**
24
<PAGE> 25
(10.27) 1985 Non-Qualified Stock Option Plan, as amended through
June 10, 1999 and restated and updated on June 25, 1999 to
reflect stock split *, **
(10.28) 1987 Scientific Board Stock Option Plan, as amended through
September 12, 1997 (o)**
(10.29) Voluntary Executive Supplemental Savings Plan (k)**
(10.30) Amendment No. 1 dated April 25, 1997 to Voluntary Executive
Supplemental Savings Plan (o)**
(10.31) Amendment No. 2 dated March 11, 1998 to Voluntary Executive
Supplemental Savings Plan (q)**
(10.32) Amendment No. 3 dated September 27, 1999 to Voluntary
Executive Supplemental Savings Plan *, **
(10.33) Amendment No. 4 dated December 13, 1999 to Voluntary
Executive Supplemental Savings Plan *, **
(10.34) Amended and Restated Supplemental Executive Retirement Plan
(o)**
(10.35) Amendment No. 1 dated September 27, 1999 to Amended and
Restated Supplemental Executive Retirement Plan *, **
(10.36) Voluntary Board of Directors Savings Plan (k)**
(10.37) Amendment No. 1 dated April 25, 1997 to Voluntary Board of
Directors Savings Plan (o)**
(10.38) Amendment No. 2 dated March 11, 1998 to Voluntary Board of
Directors Savings Plan (q)**
(10.39) Amendment No. 3 dated September 27, 1999 to Voluntary Board
of Directors Savings Plan *, **
(10.40) Amendment No. 4 dated December 13, 1999 to Voluntary Board
of Directors Savings Plan *, **
(10.41) Exclusive License and Development Agreement dated December
8, 1979 between the Registrant and Schering Corporation (a)
(10.42) Amendatory Agreement dated May 14, 1985 to Exclusive License
and Development Agreement dated December 8, 1979 between the
Registrant and Schering Corporation (b)
25
<PAGE> 26
(10.43) Amendment and Settlement Agreement dated September 29, 1988
to Exclusive License and Development Agreement dated
December 8, 1979 between the Registrant and Schering
Corporation (f)
(10.44) Amendment dated March 20, 1989 to Exclusive License and
Development Agreement dated December 8, 1979 between the
Registrant and Schering Corporation (f)
(10.45) License Agreement (United States) dated March 28, 1988
between the Registrant and SmithKline Beecham Biologicals,
s.a. (as successor to Smith Kline-R.I.T, s.a.) (f)
(10.46) License Agreement (International) dated March 28, 1988
between the Registrant and SmithKline Beecham Biologicals,
s.a. (as successor to Smith Kline-R.I.T., s.a.) (f)
(10.47) Sublicense Agreement dated as of February 15, 1990 among the
Registrant, SmithKline Beecham Biologicals, s.a (as
successor to SmithKline Biologicals, s.a.) and Merck and
Co., Inc. (f)
(10.48) Supplemental Amendment and Agreement dated as of March 1,
1994 between the Registrant and Schering Corporation (j)
(10.49) Agreement and Amendment between the Registrant and Schering
Corporation dated May 1, 1998 (p)
(10.50) Letter agreement amending employment arrangement between the
Registrant and James L. Vincent dated March 10, 2000 *, **
(10.51) Letter regarding employment of James C. Mullen dated March
18, 1993 *, **
(10.52) Letter amending employment arrangement between the
Registrant and James C. Mullen dated January 7, 1999 *, **
(10.53) Letter regarding employment of Burt Adelman, M.D. dated
April 2, 1996 *, **
(10.54) Letter regarding employment of Mark Leuchtenberger dated
November 14, 1996 *, **
(10.55) Letter agreement amending employment arrangement between the
Registrant and Mark Leuchtenberger dated May 12, 1999 *, **
(13) Incorporated portions of the Registrant's Financial
Statements from its 1999 Annual Report to Shareholders *
(21) Subsidiaries of the Registrant *
(23) Consent of PricewaterhouseCoopers LLP *
(27) Financial Data Schedule *
- -------------
26
<PAGE> 27
(a) Previously filed with the Commission as an exhibit to the Registrant's
Registration Statement on Form S-1, File No. 2-81689, and incorporated
herein by reference.
(b) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1985, as amended, File No. 0-12042, and incorporated herein by
reference.
(c) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1988, File No. 0-12042, and incorporated herein by reference.
(d) Previously filed with the Commission as an exhibit to the Registrant's
Registration Statement on Form 8-A, File No. 0-12042, filed May 26,
1989, and incorporated herein by reference.
(e) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, File No. 0-12042, and incorporated herein by reference.
(f) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992, File No. 0-12042, and incorporated herein by reference.
(g) Previously filed with the Commission as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993,
File No. 0-12042, and incorporated herein by reference.
(h) Previously filed with the Commission as an exhibit to the Registrant's
Registration Statement on Form S-3, File No. 33-51639 filed December
21, 1993, and incorporated herein by reference.
(i) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1993, File No. 0-12042, and incorporated herein by reference.
(j) Previously filed with the Commission as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994,
File No. 0-12042, and incorporated herein by reference.
(k) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994, File No. 0-12042, and incorporated herein by reference.
(l) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, File No. 0-12042, and incorporated herein by reference.
27
<PAGE> 28
(m) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1996, File No. 0-12042, and incorporated herein by reference.
(n) Previously filed with the Commission as an exhibit to an amendment to
the Registrant's Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1996, File No. 0-12042, and incorporated herein by
reference.
(o) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File No. 0-12042, and incorporated herein by reference.
(p) Previously filed with the Commission as an exhibit to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
File No. 0-12042, and incorporated herein by reference.
(q) Previously filed with the Commission as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998, File No. 0-12042, and incorporated herein by reference.
* Filed herewith
** Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the fourth quarter
of 1999.
28
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ James L. Vincent
------------------------------------------
James L. Vincent, Chairman of the Board and
Chief Executive Officer
Dated March 29, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ James L. Vincent Chairman of the Board and March 29, 2000
- --------------------- Chief Executive Officer
James L. Vincent (principal executive officer)
/s/ James C. Mullen President, Chief Operating March 29, 2000
- ------------------- Officer and Director
James C. Mullen
/s/ Timothy M. Kish Vice President - Finance and Chief March 29, 2000
- ------------------- Financial Officer (principal
Timothy M. Kish financial and accounting officer)
/s/ Alexander G. Bearn Director March 29, 2000
- -----------------------
Alexander G. Bearn
/s/ Alan Belzer Director March 29, 2000
- -----------------
Alan Belzer
/s/ Harold W. Buirkle Director March 29, 2000
- ---------------------
Harold W. Buirkle
/s/ Mary L. Good Director March 29, 2000
- -----------------
Mary L. Good
/s/ Thomas F. Keller Director March 29, 2000
- ---------------------
Thomas F. Keller
/s/ Roger H. Morley Director March 29, 2000
- --------------------
Roger H. Morley
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Kenneth Murray Director March 29, 2000
- -------------------
Kenneth Murray
/s/ Phillip A. Sharp Director March 29, 2000
- ---------------------
Phillip A. Sharp
/s/ Alan K. Simpson Director March 29, 2000
- --------------------
Alan K. Simpson
/s/ James W. Stevens Director March 29, 2000
- ---------------------
James W. Stevens
</TABLE>
30
<PAGE> 31
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
(10.27) 1985 Non-Qualified Stock Option Plan, as amended through
June 10, 1999 and restated and updated on June 25, 1999 to
reflect stock split
(10.32) Amendment No. 3 dated September 27, 1999 to Voluntary
Executive Supplemental Savings Plan
(10.33) Amendment No. 4 dated December 13, 1999 to Voluntary
Executive Supplemental Savings Plan
(10.35) Amendment No. 1 dated September 27, 1999 to Amended and
Restated Supplemental Executive Retirement Plan
(10.39) Amendment No. 3 dated September 27, 1999 to Voluntary Board
of Directors Savings Plan
(10.40) Amendment No. 4 dated December 13, 1999 to Voluntary Board
of Directors Savings Plan
(10.50) Letter agreement amending employment arrangement between the
Registrant and James L. Vincent dated March 10, 2000
(10.51) Letter regarding employment of James C. Mullen dated March
18, 1993
(10.52) Letter amending employment arrangement between the
Registrant and James C. Mullen dated January 7, 1999
(10.53) Letter regarding employment of Burt Adelman, M.D. dated
April 2, 1996
(10.54) Letter regarding employment of Mark Leuchtenberger dated
November 14, 1996
(10.55) Letter agreement amending employment arrangement between the
Registrant and Mark Leuchtenberger dated May 12, 1999
(13) Incorporated portions of the Registrant's Financial
Statements from its 1999 Annual Report to Shareholders
(21) Subsidiaries of the Registrant
(23) Consent of PricewaterhouseCoopers LLP
(27) Financial Data Schedule
<PAGE> 1
EXHIBIT 10.27
BIOGEN, INC.
1985 NON-QUALIFIED STOCK OPTION PLAN
(AS AMENDED THROUGH JUNE 10, 1999 AND RESTATED AND UPDATED ON JUNE
25, 1999 TO REFLECT STOCK SPLIT)
I. PURPOSE OF THE PLAN
The Plan is intended to encourage ownership of shares of Common Stock of
the Company by certain employees and Directors of the Company and its Affiliates
and to provide an additional incentive to those employees and Directors to
promote the success of the Company and its Affiliates.
II. DEFINITIONS
1. "Company" means Biogen, Inc., a Massachusetts corporation.
2. "Affiliate" means a corporation in respect of which the Company owns
directly or indirectly fifty percent (50%) or more of the voting shares thereof
or which is otherwise controlled by the Company.
3. "Committee" means the Stock and Option Plan Administration Committee of
the Board of Directors of the Company.
4. "Option" means a stock option granted under this Plan.
III. SHARES SUBJECT TO THE PLAN
The aggregate number of shares as to which Options may be granted from time
to time shall be 40,908,000 of the shares of Common Stock of the Company (par
value $.01); provided, however that such aggregate number shall be reduced by
the number of shares which has been sold under, or may be sold pursuant to
options granted from time to time under, the Company's 1982 Incentive Stock
Option Plan (the "ISO Plan"), to the same extent as if such sales had been made
or options granted pursuant to this Plan.
If any option granted under this Plan or the ISO Plan ceases to be
"outstanding", in whole or in part, other than by reason of the exercise of such
option, the shares which were subject to such option shall be available for the
granting of other Options. Any option shall be treated as "outstanding" until
such option is exercised in full, terminates under the provisions of this Plan
or the ISO Plan, as the case may be, or expires by reason of lapse of time.
The aggregate number of shares as to which Options may be granted shall be
subject to change only by means of an amendment adopted in accordance with
Article XI below, subject to the provisions of Article VIII.
<PAGE> 2
IV. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The membership of the
Committee shall be determined, and shall be subject to change without cause and
without notice from time to time, by the Board of Directors of the Company.
The Committee is authorized to interpret the provisions of the Plan or of
any Option and to make all rules and determinations necessary or advisable for
the administration of the Plan. Subject to the provisions of the Plan, Options
may be granted upon such terms and conditions as the Committee may prescribe.
This Plan is intended to comply in all respects with Rule 16b-3 or its
successors promulgated under the Securities Exchange Act of 1934 ("1934 Act")
with respect to participants who are subject to Section 16 of the 1934 Act, and
any provision in this Plan with respect to such persons contrary to Rule 16b-3
shall be deemed null and void to the extent permissible by law and deemed
appropriate by the Committee.
V. ELIGIBILITY FOR PARTICIPATION
The Committee shall determine which employees and Directors shall be
eligible to participate in the Plan. Without limiting the generality of the
foregoing, Options may be awarded for reasons of performance, merit, promotion,
bonus or upon new employees joining the Company or any Affiliate.
The Committee may grant to one or more such employees or Directors one or
more Options, and shall designate the number of shares to be optioned under each
Option so granted; provided, however, that no Options shall be granted after
December 31, 2002. In no event shall any employee be granted in any calendar
year options to purchase or receive more than 2,400,000 shares of the Company's
Common Stock pursuant to this Plan.
VI. TERMS AND CONDITIONS OF OPTIONS
No Option issued pursuant to this Plan shall be an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended. Each Option
shall be set forth in writing in an Option agreement, duly executed on behalf of
the Company and by the person to whom such Option is granted. No Option shall be
deemed to have been granted and no purported grant of any Option shall be
effective until such Option shall have been approved by the Committee. The
Committee may provide that Options be granted subject to such conditions as the
Committee may deem appropriate, including without limitation, subsequent
approval by the shareholders of the Company of this Plan or any amendments
thereto. Each such Option agreement shall be subject to at least the following
terms and conditions:
2
<PAGE> 3
A. Option Price: Except as otherwise determined by the Committee, the
Option price per share for Options granted under the Plan shall be equal to the
fair market value per share of Common Stock on the date of grant of the Option;
provided, however, that in no event shall the Option price be less than the par
value per share of Common Stock. Fair market value shall be the average of the
"high" and "low" sale prices as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of grant
of the Option or, if none, for the most recent trading date thirty (30) days or
less prior to the date of grant of the Option on which the Common Stock was
traded.
B. Term of Option: Each Option shall terminate not more than ten (10) years
from the date of the grant thereof, or at such earlier or later time as the
Committee shall expressly resolve.
C. Date of Exercise: The Committee may prescribe the date or dates on which
the Option becomes exercisable, and may provide that the Option rights accrue or
become exercisable in installments over a period of months or years, or upon the
attainment of stated goals.
D. Cancellation and Repurchase Rights: The Committee may stipulate that any
Option which becomes exercisable shall be subject to cancellation or that shares
purchased upon the exercise of such Option shall be subject to repurchase rights
in favor of the Company. In such event the Committee shall determine the date or
dates, or event or events, upon which such cancellation or repurchase rights
shall become effective or shall lapse, as the case may be.
E. Medium of Payment: The Option price shall be payable upon the exercise
of the Option. It shall be payable in cash, or, if permitted by the Committee,
in shares or other consideration.
F. Termination of Employment: An Option holder who ceases (for any reason
other than death or total and permanent disability or termination of employment
for cause) to be an employee or Director of the Company or of an Affiliate may
exercise any Option granted to the extent that the right to purchase shares
thereunder has accrued on the date of such termination. Such Option shall be
exercisable only within three (3) months after such date of termination, or, if
earlier, within the originally prescribed term of the Option, unless the
Committee shall authorize a different period. Employment shall not be deemed
terminated by reason of a transfer to another employer which is the Company or
an Affiliate.
An Option holder whose employment with the Company or an Affiliate is
terminated by his/her employer for cause or a Director who is removed from the
Board of Directors for cause shall forthwith upon such termination cease to have
any right to exercise any Option. For purposes of this paragraph, "cause" shall
be deemed to include dishonesty with respect to the employer, insubordination,
substantial malfeasance or non-feasance of duty, unauthorized disclosure of
confidential information, and conduct substantially prejudicial to the business
of the Company or any Affiliate. The determination of the Committee as to the
existence of cause shall be conclusive.
3
<PAGE> 4
An Option holder to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of temporary
disability, or who is on a permitted leave of absence for any purpose, shall
not, during the period of any such absence, be deemed by virtue of such absence
alone, to have terminated his employment with the Company or with an Affiliate
except as the Committee may otherwise expressly provide.
G. Total and Permanent Disability: If an Option holder ceases to be an
employee or Director of the Company or of an Affiliate by reason of total and
permanent disability, as determined by the Committee, any Option held by him or
her on the date of disability shall be exercisable as to all or any part of the
shares subject to the Option, all of which shares shall be fully vested as of
the date of such disability. A disabled Option holder may exercise such Option
only within a period of one (1) year after the date as of which the Committee
determines that he or she became disabled or within such different period as may
be determined by the Committee, or, if earlier, within the originally prescribed
term of the Option.
H. Death: If an Option holder dies while the Option holder is an employee
or Director of the Company or of an Affiliate, any Option held by him or her at
the date of death shall be exercisable as to all or any part of the shares
subject to the Option, all of which shares shall be fully vested as of the date
of the Option holder's death. A deceased Option holder's legal representatives
or one who acquires the Option by will or by the laws of descent and
distribution may exercise such Option only within a period of one (1) year after
the date of death or within such different period as may be determined by the
Committee, or, if earlier, within the originally prescribed term of the Option.
I. Exercise of Option and Issue of Shares: Options shall be exercised by
giving written notice to the Company, addressed to the Company at the address
specified in the Option agreement, with which the Option holder shall tender the
Option price. Such written notice shall be signed by the person exercising the
Option, shall state the number of shares with respect to which the Option is
being exercised, and shall contain any warranty required by Article VII of the
Plan. The issuance of the Option shares may be delayed by the Company if any law
or regulation requires the Company to take any action with respect to the Option
shares prior to the issuance thereof. Without limiting the generality of the
foregoing, nothing contained herein shall be deemed to require the Company to
issue any Option shares if prohibited by law or applicable regulation.
The shares shall, upon issuance, be evidenced by an appropriate certificate
or certificates in respect of paid-up, non-assessable shares.
J. Assignability and Transferability of Option: By its terms, an Option
granted to an Option holder shall not be transferable by such Option holder
other than (i) by will or by the laws of descent and distribution or (ii)
pursuant to a qualified domestic relations order, as defined by the Code or
Title 1 of the Employee Retirement Income Security Act or the rules thereunder,
or (iii) as otherwise determined by the Committee and set forth in the
applicable Option agreement. The designation of a beneficiary of an Option by an
Option holder shall not be deemed a transfer prohibited by this paragraph.
Except as provided in the preceding sentence, an Option shall be
4
<PAGE> 5
exercisable, during an Option holder's lifetime, only by the Option holder (or
by his or her legal representative) and shall not be assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process. Any attempted transfer,
assignment, pledge, hypothecation, or other disposition of any Option or of any
rights granted thereunder contrary to the provisions of this Paragraph, or the
levy of any attachment or similar process upon an Option or other such rights,
shall be null and void.
K. Other Provisions: The Option agreements authorized under the Plan shall
be subject to such other terms and conditions, including, without limitation,
restrictions upon the exercise of the Option, as the Committee shall deem
advisable.
L. Non-Employee, Non-Scientific Board Directors' Options: Each Director who
is not (i) an employee of the Company or any of its Affiliates, or (ii) a member
of the Scientific Board of the Company, or (iii) elected pursuant to an
agreement or arrangement between shareholders of the Company or between the
Company and its shareholders, upon first being appointed or elected to the Board
of Directors, and upon every third anniversary thereof, shall be granted an
Option to purchase 30,000 shares of Common Stock. Each such Option shall have an
exercise price equal to the fair market value per share of Common Stock on the
date of grant, as determined under Section VI.A. above, and a term of ten (10)
years, and shall be exercisable as to one-third (1/3) of the shares subject
thereto upon completion of one full year of service on the Board of Directors
after the date of grant, and as to an additional one-third (1/3) upon completion
of each full year of service thereafter. For any such Director serving in office
on December 6, 1991, the first such Option shall be granted on the date on which
the most recent Option previously granted to him, the vesting of which is
contingent upon continued service on the Board of Directors, becomes fully
vested, and subsequent Options under this Paragraph shall be granted on every
third anniversary of such date. Notwithstanding the provision of Section XI
concerning amendment of the Plan, the provisions of this Section VI.L. shall not
be amended more than once every six months, other than to comport with changes
in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act, or the rules thereunder. The grants of options under this
Paragraph L are intended to be non-discretionary formula awards within the
meaning of Rule 16b-3(c)(2)(ii). Paragraph F of Article VI, which cancels the
Options of any Participant determined by the Committee to have been terminated
for cause, shall not apply to the awards under this Paragraph L.
M. Tax Withholding: In the event that any federal, state, or local income
taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.")
withholdings or other amounts are required by applicable law or governmental
regulation to be withheld from the Option holder's salary in connection with the
exercise of an Option, the Option holder shall advance in cash to the Company,
or to any Affiliate of the Company which employs or employed the Option holder,
the amount of such withholdings unless a different withholding arrangement,
including the use of shares of the Company's Common Stock, is authorized by the
Committee (and permitted by law), provided, however, that with respect to
persons subject to Section 16 of the 1934 Act, any such withholding arrangement
shall be in compliance with any applicable provisions of Rule 16b-3 promulgated
under Section 16 of the 1934 Act. For purposes hereof, the fair market value of
the
5
<PAGE> 6
shares withheld for purposes of payroll withholding shall be determined in the
manner provided in Section VI.A. above, as of the date of exercise. If the fair
market value of the shares withheld is less than the amount of payroll
withholdings required, the Option holder may be required to advance the
difference in cash to the Company or the Affiliate employer.
N. Reload Options: The Committee may authorize reload options ("Reload
Options") to purchase for cash or shares a number of shares of Common Stock. The
number of Reload Options shall equal (i) the number of shares of Common Stock
used to exercise the underlying Options and (ii) to the extent authorized by the
Committee, the number of shares of Common Stock used to satisfy any tax
withholding requirement incident to the exercise of the underlying Options. The
grant of a Reload Option will become effective upon the exercise of underlying
Options through the use of shares of Common Stock held by the optionee for at
least 6 months. Reload Options must be evidenced in Option agreements or
amendments to those agreements. The Option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the fair market value
of a share of Common Stock on the date the grant of the Reload Option becomes
effective. The term of each Reload Option shall be equal to the remaining option
term of the underlying Option. No additional Reload Options shall be granted to
Option holders when Options and/or Reload Options are exercised pursuant to the
terms of this Plan following termination of the Option holder's employment or on
account of death or total and permanent disability. All other provisions of this
Plan with respect to Options shall apply equally to Reload Options.
O. Rights as a Shareholder: No Option holder shall have rights as a
shareholder with respect to any shares covered by such Option except as to such
shares as have been registered in the Company's share register in the name of
such person upon the due exercise of the Option.
VII. PURCHASE FOR INVESTMENT
If and to the extent that the issuance of shares pursuant to the exercise
of Options is deemed by the Company to be subject to the United States
Securities Act of 1933, as now in force or hereafter amended ("1933 Act"), or to
the securities law of any other jurisdiction, the Company shall be under no
obligation to issue shares covered by such exercise unless the person or persons
who exercises or who exercise such Option shall make such warranty or take such
action as may be required by any applicable securities law of any applicable
jurisdiction and shall, in the case of the applicability of the 1933 Act, in the
absence of an effective registration under such Act with respect to such shares,
warrant to the Company, at the time of such exercise, that such person is or
that they are acquiring the shares to be issued to such person or to them,
pursuant to such exercise of the Option, for investment and not with a view to,
or for sale in connection with, the distribution of any such shares; and in such
events the person or persons acquiring such shares shall be bound by the
provisions of a legend endorsed upon any share certificates expressing the
requirements of any applicable non-United States securities law, or, in cases
deemed governed by the 1933 Act, substantially the following legend, which shall
be endorsed upon the certificate or certificates evidencing the shares issued by
the Company pursuant to such exercise:
6
<PAGE> 7
"The shares have not been registered under the securities laws of any
country, including the United States Securities Act of 1933, as amended, and the
Company may refuse to permit the sale or transfer of all or any of the shares
until (1) the Company has received an opinion of Counsel satisfactory to the
Company that any such transfer is exempt from registration under all applicable
securities laws or (2) in the case of sales or transfers to which the United
States Securities Act of 1933 is applicable, unless a registration statement
with respect to such shares shall be effective under such Act, as amended."
Without limiting the generality of the foregoing, the Company may delay
issuance of the shares until completion of any action or obtaining of any
consent which the Company deems necessary under any applicable law (including
without limitation state securities or "blue sky" laws).
VIII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event that the outstanding Common Stock, $.01 par value, of the
Company is changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification,
change in par value, stock split-up, combination of shares or dividend payable
in capital stock, or the like, appropriate adjustment shall be made in the
number and kind of shares for the purchase of which Options may be granted under
the Plan, including Options to be granted pursuant to Article VI L hereof, and,
in addition, appropriate adjustment shall be made in the number and kind of
shares and in the Option price per share subject to outstanding Options so that
each Option holder shall be in a position equivalent to the position the Option
holder would have been in had the Option holder exercised the Options
immediately prior to the applicable event.
IX. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in connection
with transactions to which the preceding Article VIII is applicable, all Options
granted hereunder shall terminate and become null and void; provided, however,
that if the rights hereunder of an Option holder or one who acquired an Option
by will or by the laws of descent and distribution have not otherwise terminated
and expired, the Option holder or such person shall have the right immediately
prior to such dissolution or liquidation to exercise any Option granted
hereunder to the extent that the right to purchase shares thereunder has accrued
as of the date of exercise immediately prior to such dissolution or liquidation.
X. TERMINATION OF THE PLAN
Unless the Committee shall decide to reduce or, subject to shareholder
approval, if required under Article XI, to extend the duration of the Plan, the
Plan shall terminate on December 31, 2002. Termination of the Plan shall not
affect any Options granted or any Option agreements executed prior to the
effective date of termination.
7
<PAGE> 8
XI. AMENDMENT OF THE PLAN
The Plan may be amended by the Committee or the Board of Directors of the
Company provided, however, that if the scope of any amendment is such as to
require shareholder approval in order to comply with Rule 16b-3 under the 1934
Act such amendment shall require approval by the shareholders. Any amendment
shall not affect any Options theretofore granted and any Option agreements
theretofore executed by the Company and any Option holder unless such amendment
shall expressly so provide. No amendment shall adversely affect any Option
holder with respect to an outstanding Option without the written consent of such
Option holder. With the consent of the Option holder affected, the Committee may
amend any outstanding Option agreement in a manner not inconsistent with the
Plan, including, without limitation, to accelerate the date of exercise of any
installment of any Option.
XII. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of any employee, nor to prevent any
employee from terminating his/her employment with the Company or an Affiliate.
XIII. EFFECTIVE DATE
This Plan first became effective on January 2, 1985.
8
<PAGE> 1
EXHIBIT 10.32
BIOGEN, INC. VOLUNTARY EXECUTIVE SUPPLEMENTAL SAVINGS PLAN
THIRD AMENDMENT
The Biogen, Inc. Voluntary Executive Supplemental Savings Plan, as
heretofore amended ("Plan"), is hereby further amended as follows:
Section 3.1 is amended by inserting the following new sentence at the end of the
Section:
An individual will not be considered an employee for purposes of this plan
if the individual is classified as a consultant or contractor under
Biogen's (or a subsidiary's) regular personnel classifications and
practices, or he is a party to an agreement to provide services to Biogen
(or a subsidiary) without participating in this plan, notwithstanding that
such individual may be treated as a common law employee for payroll tax or
other legal purposes.
Section 6.5 is amended in its entirety to read as follows:
6.5 Installment Distributions in Certain Cases.
(a) PARTICIPANT. Notwithstanding the provisions of Section 6.2, 6.3
and 6.4, a participant may, at the time of filing an enrollment form under
Section 4.1(b), designate that the amount payable to him hereunder will be
paid in a number (minimum of two and maximum of ten) of annual installment
payments, as specified by the participant.
(b) BENEFICIARY. A participant may designate that, if the participant
dies before receiving the entire amount payable to him hereunder, the
beneficiary will receive either:
(i) A number of annual installment payments equal to
(A) the number the participant elected for himself under
subsection (a) above (if the participant dies before
receiving any installment payments), or
(B) the number of remaining installment payments due to the
participant under subsection (a) above (if the
participant dies after receiving one or more
installment payments); or
(ii) a single payment.
Page 1 of 2
<PAGE> 2
Payment to the beneficiary will commence as provided herein as soon as
practicable after the committee's receipt of satisfactory evidence of the
death of the participant.
If the participant fails to designate the form of payment to the
beneficiary, the default form will be installments under (i) above. If
installment payments are payable to the beneficiary, with the consent of
the committee, a participant may subsequently change the form of payment to
his beneficiary (but not the form of payment to himself under Section 6.2
or 6.4) to a single payment by filing a written instrument so specifying
with the committee.
(c) INSTALLMENT PAYMENTS. Where installment payments are due, the
first annual installment payment will be paid out on the date specified in
Section 6.2, 6.3 or 6.4 (whichever is applicable) and subsequent annual
installments will be paid on succeeding anniversaries of the first payment
date. The amount of each annual installment payment will be determined by
multiplying the vested amount in the participant's account by a fraction
whose numerator is one and whose denominator is the number of remaining
annual installment payments.
(d) DEATH OF BENEFICIARY. If a participant's designated beneficiary
is receiving installment payments and dies before receiving payment of all
the annual installments, the designated beneficiary's estate will receive a
lump-sum payment of the amount remaining to be distributed to such deceased
beneficiary. Such payment will be made as soon as practicable after the
committee's receipt of satisfactory evidence of the death of the designated
beneficiary.
Section 6.3(b) is amended by inserting the following new sentence at the end of
the Section:
In the event that a participant does not participate in the Savings Plan,
the participant may designate one or more beneficiaries to receive a
distribution payable under subsection (a) above and may revoke or change
such a designation at any time. If the participant names two or more
beneficiaries, distribution to them will be in such proportions as the
participant designates or, if the participant does not so designate, in
equal shares. Any designation of beneficiary will be in writing on such
form as the committee may prescribe or deem acceptable, and will be
effective upon filing with the committee.
BIOGEN, INC.
Date: September 27, 1999 By: /s/ Frank A. Burke, Jr.
--------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
Page 2 of 2
<PAGE> 1
EXHIBIT 10.33
Biogen, Inc. Voluntary Executive Supplemental Savings Plan
FOURTH AMENDMENT
The Biogen, Inc. Voluntary Executive Supplemental Savings Plan ("Plan"), as
heretofore amended, is hereby further amended as follows:
1. Section 4.2 is amended in it entirety to read as follows:
4.2 EMPLOYER CREDITS.
(a) AMOUNT OF MATCHING EMPLOYER CREDITS. For each calendar quarter
(or a shorter period of time specified by the committee) during a plan
year, each employer will credit a matching contribution amount to the
account of each participant employed by such employer who makes matchable
savings deposits during such calendar quarter (or such shorter period of
time). The employer's matching contribution credits will be equal to 25% of
the participant's matchable savings deposits during the calendar quarter
(or such shorter period of time).
(b) TIME FOR MAKING EMPLOYER MATCHING CREDITS. The employer's
matching amounts under subsection (a) will be credited to participants'
accounts as soon as practicable after each calendar quarter (or such
shorter period of time specified by the committee).
2. Section 5.1(c) is amended by inserting at the end of the first paragraph the
parenthetical phrase "(other than the Biogen stock fund)", thereby not
allowing participants to chose the Biogen stock fund as an investment option.
3. Section 5.1(c) is further amended by inserting at the end of the third
paragraph and immediately after the phrase "calendar quarter" in the fourth
paragraph the parenthetical phrase "(or such shorter period of time specified
by the committee)".
4. Section 5.2(b) is amended in its entirety to read as follows: "A participant
will have a fully vested interest in his employer matching credits account at
all times."
5. Section 6.2 is amended in its entirety to read as follows: "Upon retirement
from his employer, the participant will receive a single sum payment equal to
his account balance, payable as soon as practicable after the committee's
receipt of satisfactory evidence of the occurrence of his retirement."
6. Section 6.3(a) is amended by deleting the word "vested" each time it appears
in the second sentence of said Section and by deleting the phrase "the end of
the calendar quarter in which" in the third sentence of said Section.
Page 1 of 2
<PAGE> 2
7. Section 6.4 is amended in its entirety to read as follows: "Upon a
participant's termination of employment for any reason other than retirement
or death, the participant will receive a single sum payment equal to his
account balance as soon as practicable after the committee's receipt of
satisfactory evidence of the termination of the participant's employment."
8. Except as expressly set forth herein, the Plan shall remain in full force and
effect.
BIOGEN, INC.
Date: December 13, 1999 By: /s/ Frank A. Burke, Jr.
---------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
Page 2 of 2
<PAGE> 1
EXHIBIT 10.35
BIOGEN, INC.
Supplemental Executive Retirement Plan
FIRST AMENDMENT TO THE 4/1/96 RESTATEMENT
The Biogen, Inc. Supplemental Executive Retirement Plan ("Plan"), as
heretofore amended, is hereby further amended as follows:
Section 3.4 is inserted and shall state:
"An individual is not considered a Participant for purposes of this Plan if
the individual is classified as a consultant or contractor under the
Company's or the Company's affiliate's regular personnel classifications
and practices, or he is a party to an agreement to provide services to the
Company or the Company's affiliate without participating in the Plan,
notwithstanding that such individual may be treated as a common law
employee for payroll tax or other legal purposes."
Date: September 27, 1999 BIOGEN, INC.
By: /s/ Frank A. Burke, Jr.
---------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
<PAGE> 1
EXHIBIT 10.39
Biogen, Inc. Voluntary Board of Directors Savings Plan
THIRD AMENDMENT
The Biogen, Inc. Voluntary Board of Directors Savings Plan, as heretofore
amended (the "Plan"), is hereby further amended as follows:
Section 6.4 is amended in its entirety to read as follows:
6.4 INSTALLMENT DISTRIBUTIONS IN CERTAIN CASES.
(a) PARTICIPANT. Notwithstanding the provisions of Section 6.2, 6.3
and 6.4, a participant may, at the time of filing an enrollment form under
Section 4.1(b), designate that the amount payable to him hereunder will be
paid in a number (minimum of two and maximum of ten) of annual installment
payments, as specified by the participant.
(b) BENEFICIARY. A participant may designate that, if the participant
dies before receiving the entire amount payable to him hereunder, the
beneficiary will receive either:
(i) a number of annual installment payments equal to
(A) the number the participant elected for himself under
subsection (a) above (if the participant dies before
receiving any installment payments), or
(B) the number of remaining installment payments due to the
participant under subsection (a) above (if the
participant dies after receiving one or more
installment payments); or
(ii) a single payment.
Payment to the beneficiary will commence as provided herein as soon as
practicable after the committee's receipt of satisfactory evidence of the
death of the participant.
If the participant fails to designate the form of payment to the
beneficiary, the default form will be installments under (i) above. If
installment payments are payable to the beneficiary, with the consent of
the committee, a participant may subsequently change the form of payment to
his beneficiary (but not the form of
Page 1 of 2
<PAGE> 2
payment to himself under Section 6.2 or 6.4) to a single payment by filing
a written instrument so specifying with the committee.
(c) INSTALLMENT PAYMENTS. Where installment payments are due, the
first annual installment payment will be paid out on the date specified in
Section 6.2, 6.3 or 6.4 (whichever is applicable) and subsequent annual
installments will be paid on succeeding anniversaries of the first payment
date. The amount of each annual installment payment will be determined by
multiplying the vested amount in the participant's account by a fraction
whose numerator is one and whose denominator is the number of remaining
annual installment payments.
(d) DEATH OF BENEFICIARY. If a participant's designated beneficiary
is receiving installment payments and dies before receiving payment of all
the annual installments, the designated beneficiary's estate will receive a
lump-sum payment of the amount remaining to be distributed to such deceased
beneficiary. Such payment will be made as soon as practicable after the
committee's receipt of satisfactory evidence of the death of the designated
beneficiary.
BIOGEN, INC.
Date: September 27, 1999 By: /s/ Frank A. Burke, Jr.
---------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
Page 2 of 2
<PAGE> 1
EXHIBIT 10.40
Biogen, Inc. Voluntary Board of Directors Savings Plan
FOURTH AMENDMENT
The Biogen, Inc. Voluntary Board of Directors Savings Plan ("Plan"), as
heretofore amended, is hereby further amended as follows:
1. Section 5.1(b) is amended by inserting at the end of the first paragraph
the parenthetical phrase "(other than the Biogen stock fund)", thereby not
allowing participants to chose the Biogen stock fund as an investment
option.
2. Section 6.2(a) is amended by deleting the phrase "the end of the calendar
quarter in which" in the second sentence of said Section.
3. Section 6.3 is amended by deleting the second sentence of said Section in
its entirety and substituting in place thereof the following sentence:
"Distribution will be made in a single lump sum payment as soon as
practicable after the committee's receipt of satisfactory evidence of the
occurrence of the event causing distribution."
4. Except as expressly set forth herein, the Plan shall remain in full force
and effect.
BIOGEN, INC.
Date: December 13, 1999 By: /s/ Frank A. Burke, Jr.
---------------------------------
Frank A. Burke, Jr.
Vice President - Human Resources
<PAGE> 1
[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.50
March 10, 2000
Mr. James L. Vincent
7 Audubon Road
Weston, MA 02193
Dear Jim:
This letter will serve as notice that Biogen, Inc. would like to extend
your chairmanship of the Board of Directors under the terms of the letter
agreement dated November 21, 1996 (the "Letter Agreement") amending your
Employment Agreement dated as of September 23, 1985 (the "Employment
Agreement"), provided, that, notwithstanding the extension term specified in the
Letter Agreement, your chairmanship will continue after the end of the Initial
Chairmanship Term on February 14, 2001 until the Annual Meeting to be held in
2004 (the "Extended Term"), unless earlier terminated by your resignation or
earlier removal.
During the Extended Term, after appointment of a successor Chief Executive
Officer, your duties as Chairman will once again consist of those activities
specified under Section 1 of the Letter Agreement.
All other terms of the Letter Agreement and the Employment Agreement, as
amended by the Letter Agreement and this letter, shall apply during the Extended
Term.
If you agree with extension of your chairmanship on the above terms, please
execute this letter and the enclosed copy in the space provided below.
Sincerely,
Biogen, Inc.
Date: March 10, 2000 By: /s/ Roger H. Morley
------------------ -------------------------------
Roger H. Morley
Chairman, Compensation and
Management Resources Committee
Date: March 10, 2000 By: /s/ Harold W. Buirkle
------------------ ---------------------------
Harold W. Buirkle
Member, Compensation and
Management Resources Committee
<PAGE> 2
Date: March 10, 2000 By: /s/ Phillip A. Sharp
------------------ -------------------------------
Phillip A. Sharp
Member, Compensation and
Management Resources Committee
Date: March 10, 2000 By: /s/ Mary L. Good
------------------ -------------------------------
Mary L. Good
Member, Compensation and
Management Resources Committee
Acknowledged and agreed
/s/ James L. Vincent
- --------------------------
James L. Vincent
Date: March 10, 2000
---------------------
<PAGE> 1
[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.51
March 18, 1993
Mr. James C. Mullen
Vice President, Operations
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
Dear Jim:
To confirm our recent discussions, your employment letter is hereby amended to
include the following additional provisions, in recognition of your position as
Vice President, Operations and an executive officer of Biogen:
1. LIFE INSURANCE: You will be provided with Biogen's Executive Life Insurance
coverage of $1,000,000, which combines the existing group term insurance
provisions with the provisions of an individual term insurance policy.
2. TAX REVIEW/PREPARATION: You are entitled to the preparation and/or review,
including review of estimated taxes of your annual Federal and State tax
returns, which is currently administered through Price Waterhouse. The cost
of this service is covered by Biogen.
3. INVOLUNTARY TERMINATION: If you are involuntarily terminated from
employment with Biogen (other than for cause), Biogen will protect you by
paying you a supplementary amount (the "Supplementary Amount") equal to
your then present BASE salary for a period (the "Extra Period") ending on
the earlier of (i) the date twelve months from your termination and (ii)
the date you start another job. During such period, Biogen will also pay to
continue your health benefits (i.e., health and dental plan coverage),
provided such benefits are accorded employees generally and Biogen can
obtain the relevant coverage. If you need continued coverage to prevent a
gap in health coverage between your Biogen coverage and that at your new
job, Biogen will extend such coverage for up to 30 days (to the extent that
the Extra Period is less than 12 months) after you start your new job. The
Supplementary Amount will be paid on the same schedule as your salary would
have been paid. You will not be an employee of Biogen during the time of
such payments and will not accrue any benefits or other rights (such as,
but not limited to, pension plan vesting or accrual, stock option vesting,
vacation pay, etc.) during such period except health benefits as described
above. You agree to notify us when you accept a new job.
Sincerely,
/s/ Frank A. Burke, Jr.
Frank A. Burke, Jr.
Vice President, Human Resources
<PAGE> 1
[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.52
PERSONAL AND CONFIDENTIAL
January 7, 1999
Mr. James C. Mullen
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142
Dear Jim:
This confirms your discussion with Jim Vincent related to your new role in the
organization. Effective January 1, 1999, your new title is President and Chief
Operating Officer with a base salary of $400,000 and a target bonus of 60%.
Additionally, you have been granted 175,000 stock options as of January 4, 1999
with a grant value of $14,525,000 (175,000 shares at $83.00).
Sincerely,
/s/ Frank A. Burke, Jr.
Frank A. Burke, Jr.
Vice President, Human Resources
cc: Personnel File
<PAGE> 1
[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.53
PERSONAL AND CONFIDENTIAL
April 2, 1996
Burt Adelman, M.D.
Vice President, Regulatory Affairs
Biogen Inc.
14 Cambridge Center
Cambridge, MA 02142
Dear Burt:
To confirm our recent discussions, your employment letter is hereby amended to
include the following additional provisions, in recognition of your position as
Vice President, Regulatory Affairs and an executive officer of Biogen.
1. PERFORMANCE BONUS: Your performance bonus target is 25%.
2. SUPPLEMENTAL SAVINGS PLAN: You are eligible to participate in the Voluntary
Executive Supplemental Savings Plan.
3. LIFE INSURANCE: You will be provided Biogen's Executive Term Life Insurance
coverage for a total of $1,000,000. This coverage is based on your
successfully meeting the medical standards as stated in the Executive Term
insurance policy.
4. TAX REVIEW/PREPARATION: You are entitled to the preparation and/or review,
including review of estimated taxes of your annual Federal and State tax
returns, which is currently administered through Price Waterhouse. The cost
of this service is covered by Biogen.
5. INVOLUNTARY TERMINATION: If you are involuntarily terminated from
employment with Biogen (other than for cause), Biogen will protect you by
paying you a supplementary amount (the "Supplementary Amount") equal to
your then present BASE salary for a period (the "Extra Period") ending on
the earlier of (i) the date twelve months from your termination and (ii)
the date you start another job. During such period, Biogen will also pay to
continue your health benefits (i.e.,
<PAGE> 2
April 2, 1996
Burt Adelman, M.D.
Page 2
health and dental plan coverage), provided such benefits are accorded
employees generally and Biogen can obtain the relevant coverage. If you
need continued coverage to prevent a gap in health coverage between your
Biogen coverage and that at your new job, Biogen will extend such coverage
for up to 30 days (to the extent that the Extra Period is less than 12
months) after you start your new job. The Supplementary Amount will be paid
on the same schedule as your salary would have been paid. You will not be
an employee of Biogen during the time of such payments and will not accrue
any benefits or other rights (such as, but not limited to, pension plan
vesting or accrual, stock option vesting, vacation pay, etc.) during such
period except health benefits as described above. You agree to notify us
when you accept a new job.
Sincerely,
/s/ Frank A. Burke, Jr.
Frank A. Burke, Jr.
Vice President, Human Resources
cc: Personnel File
<PAGE> 1
[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.54
PERSONAL AND CONFIDENTIAL
November 14, 1996
Mr. M. W. Leuchtenberger
Vice President, Marketing and Sales
Biogen Inc.
14 Cambridge Center
Cambridge, MA 02142
Dear Mark:
To confirm our recent discussions, your employment letter is hereby amended to
include the following additional provisions, in recognition of your position as
Vice President, Marketing and Sales and an executive officer of Biogen.
1. BASE SALARY: Your base salary will be $200,000 (through 1997), and will be
reviewed at year-end 1997.
2. PERFORMANCE BONUS: Your performance bonus target is 30% (effective January
1, 1997).
3. SUPPLEMENTAL SAVINGS PLAN: You are eligible to participate in the Voluntary
Executive Supplemental Savings Plan.
4. LIFE INSURANCE: You will be provided Biogen's Executive Term Life Insurance
coverage for a total of $1,000,000. This coverage is based on your
successfully meeting the medical standards as stated in the Executive Term
insurance policy.
5. TAX REVIEW/PREPARATION: You are entitled to the preparation and/or review,
including review of estimated taxes of your annual Federal and State tax
returns, which is currently administered through Price Waterhouse. The cost
of this service is covered by Biogen.
6. INVOLUNTARY TERMINATION: If you are involuntarily terminated from
employment with Biogen (other than for cause), Biogen will protect you by
paying you a
<PAGE> 2
November 14, 1996
Mr. M. W. Leuchtenberger
Page 2
supplementary amount (the "Supplementary Amount") equal to your then
present BASE salary for a period ending on the earlier of (i) the date
twelve months from your termination and (ii) the date you start another
job. During such period, Biogen will also pay to continue your health
benefits (i.e., health and dental plan coverage), provided such benefits
are accorded employees generally and Biogen can obtain the relevant
coverage. In the event you have not obtained alternative medical and dental
insurance coverage at the earlier of twelve months from your termination or
the commencement of your new job, you shall have the right to continue your
medical and dental coverages at your sole expense to the extent required by
the provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA"). The COBRA period shall be deemed to have commenced on the
date of your involuntary termination from employment with Biogen.
The Supplementary Amount will be paid on the same schedule as your salary
would have been paid. You will not be an employee of Biogen during the time
of such payments and will not accrue any benefits or other rights (such as,
but not limited to, pension plan vesting or accrual, stock option vesting,
vacation pay, etc.) during such period except health benefits as described
above. You agree to notify us when you accept a new job.
Sincerely,
/s/ Frank A. Burke, Jr.
Frank A. Burke, Jr.
Vice President, Human Resources
/bk
cc: Personnel File
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[BIOGEN, INC. LETTERHEAD]
EXHIBIT 10.55
May 12, 1999
Mr. Mark Leuchtenberger
20 Old Farm Road
Newton, MA 02459
Dear Mark:
On behalf of Biogen, I am pleased to outline the details of a proposed
secondment to the Paris office, whereby you will assume the position of Vice
President - International. This secondment is intended to be a minimum of two
years in duration, after which you will be repatriated back to Boston,
Massachusetts. At the end of the two-year period, an option to extend for
additional time will be by mutual agreement only.
As this is an international secondment, your employment is subject to foreign
government entry documents and work visas and your acceptance of the terms and
conditions outlined in this letter. Your foreign secondment will begin as soon
as the appropriate documentation can be completed and approved. Your point of
origin will be Boston, Massachusetts.
Your compensation and benefits package is designed to provide you with a level
of income and benefits that is comparable with individuals at the same level and
experience as yourself working in the United States. We have also taken into
consideration the additional costs you may reasonably anticipate as a result of
living in France.
The terms and conditions outlined in this letter will be in effect for the
period of your secondment. At the conclusion of this secondment and upon your
return to the United States, the provisions of the letters will cease and you
will return to United States compensation and benefits programs.
COMPENSATION:
Your base salary for this position will be increased to $ 245,000 (paid in US
dollars) effective May 17, 1999. Typically, we can arrange to have your salary
paid in local currency and/or in US dollars, for your convenience.
You will continue to participate in the Executive Bonus Plan with a maximum
bonus payment of 30% of base pay. The plan payments are determined by a
combination of corporate and individual results.
GOODS AND SERVICES ALLOWANCE
In addition to your base salary, you will receive a goods and services allowance
in addition to base salary if the cost of living at the location is in excess of
comparable United States costs. Such cost relationships are measured by indices
established by an independent consulting firm engaged by Biogen. Human Resources
will establish the allowance with data provided by the consulting firm. This
allowance is tied to income level and family size. Your 1999 allowance will be
$3,250 per month.
<PAGE> 2
Mr. Mark Leuchtenberger
May 12, 1999
This allowance is paid on a monthly basis along with base salary and will be
reviewed and possibly adjusted annually (or more frequently, in the event of a
significant change) due to changes in host country costs and /or currency
values.
HOUSING
Based upon our conversations, it was decided that it is in the best interest of
Biogen and yourself for you to retain ownership of your US residence during your
period of expatriation. You will be expected to maintain your current residence
here in the US while on foreign assignment. You will be using your Newton
residence and your personal vehicle during trips to Cambridge. The company will
provide an apartment for you while you are in Paris. The company agrees to
provide a management firm to watch over your Newton home while you are on
foreign assignment. This will include mail forwarding, bill paying, and walk
throughs. If repairs are to be made to your home, you will be financial
responsible for such repairs.
TAX EQUALIZATION
Our philosophy is such that the Company will provide you with an after-tax
income equivalent to that which you would have received had you remained in the
US. This is done by hypothetical US Federal and actual state tax deductions from
your total salary. Your withholding tax may also fluctuate according to changes
in compensation or tax rates.
A tax advisor from a well-respected accounting firm selected by the Company will
be made available to help you prepare your U.S. and foreign income tax returns;
the fees for these services will be borne by the Company. Filings of tax returns
and payment of tax owed in the US or abroad is entirely your responsibility and
the Company assumes no responsibility for your taxes.
Additionally, appropriate and reasonable tax consulting sessions with the
accounting firm selected by the Company will be provided before and after your
secondment.
DOCUMENT ASSISTANCE:
The Company will advise you on appropriate documentation and will pay for those
and other associated costs incurred in obtaining papers for travel to, or
establishing residence in the France and/or countries to which you will be
travelling in conjunction with the secondment abroad.
CULTURAL ORIENTATION
We will engage our relocation firm to provide you both a preview of the new
country that you will visit as well as a cultural orientation.
TRANSFER ALLOWANCE:
Upon leaving the United States, you will be paid a one-time payment of $5,000 to
pay for such things as appliance purchases, telephone installation, auto
registration, driver's license, and other personal and miscellaneous expenses
not specifically mentioned in this letter.
2
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Mr. Mark Leuchtenberger
May 12, 1999
SHIPMENT OF PERSONAL HOUSEHOLD GOODS:
We will move personal goods and furniture up to 5,000 pounds to France.
Additional items can be stored at the company's expense. All items to be moved
would be fully insured by the Company. You will also be entitled to store
personal and household goods.
Biogen will also pay for any import duties and other expenses necessary for
actual delivery of these goods. This does not include certain unusual or special
items such as automobiles, antiques, trailers, campers, boats, etc. The
selection of the storage company and the carrier will be at the discretion of
the Company.
AUTO SALES AND LEASE:
Biogen will not pay for shipment of automobiles to the foreign location. If you
decide to sell your present vehicle(s), we will reimburse you for the costs
associated with the sale.
While on foreign secondment, the Company will provide a leased automobile for
you. Due to your unique situation, you will be provided a Mercedes E320. The
costs of the leased vehicle and insurance will be at the company expense; the
cost of fuel and repairs will be your expense. Should you choose to want to
lease a second automobile, the company will arrange for the vehicle to be leased
through the company, at your expense.
VACATION:
You will be eligible for vacation under the U.S. policy.
HOLIDAYS:
You will be eligible to observe the local policy for holidays in France.
EMPLOYEE BENEFITS:
You shall continue to be eligible to receive benefits that, in general, are
substantially similar to those that US employees receive. For your medical
coverage, you will be in the Tufts out of area plan. Your children in the US
will continue to be covered locally through COBRA insurance.
To the extent you are required by local laws and regulations to participate in
Foreign benefit plans which are in addition to those you would have normally
received in the US, the Company will pay for your contributions. Where possible
the Company will help you obtain a waiver from participation in such local
benefit plans programs.
LANGUAGE INSTRUCTION:
If required, the Company will pay for reasonable language instruction to be
arranged upon your arrival in France.
EMERGENCY LEAVE:
The Company will grant up to seven days off plus travel time for personal
emergencies such as serious illness or death of an immediate family member.
Round trip air transportation will be granted.
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Mr. Mark Leuchtenberger
May 12, 1999
HOME LEAVE:
Biogen encourages you and your family to return to the United States to renew
business, professional, personal, and family contacts on an annual basis. For
that purpose, the Company will provide the following home leave back to the
United States during each twelve-month period of the secondment:
- - A period of time above and beyond eligible vacation time, not to exceed
fourteen calendar days or ten working days will be granted.
- - Actual living expenses will be your responsibility.
- - Expenses for the rental of a car in the United States will be reimbursed
for a maximum period of fourteen days.
- - Pay in any form will not be granted in lieu of home leave, nor will payment
be authorized if travel is not to the point of origin.
Additionally, based upon your unique situation, you and Jim have agreed that
your children will be entitled to 5 visits to Paris during the year. In order to
manage the expenses related to these trips, these trips will be reimbursed at a
30-day advanced nonrefundable coach rate. Additionally, it is expected that with
the extensive travel you and the children have, you will use frequent flyer
miles accumulated toward these trips, before requesting reimbursement from
Biogen. Additionally, you, Tracey and Sara Grace will be reimbursed for 1
roundtrip for each 12-month period. Also, there is an expectation that certain
business functions (such as the year end holiday party) will require the
attendance of your and Tracey. The company agrees to reimburse you for such
trips.
TERMINATION:
In the event of involuntary termination, the Company will arrange to return you
to the United States. This will also include your household and personal
effects, limited to the same weight and size of your shipment at the beginning
of your secondment. The expenses will be borne by the Company only if the move
out of France occurs within thirty days of termination.
You agree that all rights and obligations in the event of an involuntary
termination shall be determined based on the laws of the US and the Commonwealth
of Massachusetts, and you hereby waive any rights you may have under the laws
and regulations of France and the European Union.
REPATRIATION:
Although an expected secondment duration of approximately two years has been
planned, further extensions may be negotiated. However, after two years, should
you remain in the France, your overall compensation situation will be reviewed.
If it is determined that your status will not remain that of an expatriate, you
will be considered a local national and specifically, the following
allowance/benefits may be discontinued:
- - Commodities and Service Allowance
- - Company arranged housing
- - Company paid home leave
- - Tax equalization
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Mr. Mark Leuchtenberger
May 12, 1999
Approximately six months before conclusion of your secondment, discussions will
begin regarding your repatriation and a suitable position back in the United
States upon successful completion of the foreign secondment. Every attempt will
be made to find a position within the Company which suitably utilizes your
skills and experience and which fits your career interests. At that point, I
will generate a letter that will detail all terms and conditions of your
repatriation.
On behalf of Jim Mullen, it is with great pleasure that I present the terms and
conditions of your appointment. I trust that you will find your experiences in
your new capacity in Paris to be professionally rewarding, and that all the
daily experiences of living in France will be personally fulfilling for you.
Please countersign and date your acceptance below.
Sincerely,
/s/ Richard W. Fisher
Richard W. Fisher
Director - Human Resources
Accepted: /s/ Mark Leuchtenberger Date: 9/10/99
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Name
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FINANCIALS
Biogen, Inc. and Subsidiaries
20 Selected Financial Data
21 Management's Discussion and Analysis of Financial
Condition and Results of Operations
32 Consolidated Statements of Income
33 Consolidated Balance Sheets
34 Consolidated Statements of Cash Flows
35 Consolidated Statements of Shareholders' Equity
36 Notes to Consolidated Financial Statements
52 Report of Independent Accountants
53 Senior Executives and Board Members
54 Shareholder Information
<PAGE> 2
SELECTED FINANCIAL DATA
Biogen, Inc. and Subsidiaries
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Product revenue $ 620,636 $ 394,863 $ 239,988 $ 78,202 $ --
Royalty revenue 173,799 162,724 171,921 181,502 134,653
Total revenues 794,435 557,587 411,909 259,704 134,653
Total costs and expenses 478,184 366,948 285,787 234,541 138,245
Income before income taxes 329,016 210,193 148,968 40,829 7,445
Net income 220,450 138,697 89,167 40,530 5,660
Diluted earnings per share 1.40 0.90 0.58 0.28 0.04
Cash, cash equivalents and short-
term marketable securities 654,539 516,914 440,088 321,381 307,948
Total assets 1,277,973 924,715 813,825 634,572 469,201
Long-term debt, less current
portion 52,073 56,960 61,846 62,254 32,826
Shareholders' equity 979,530 718,613 536,293 484,370 382,980
Shares used in calculating diluted
earnings per share 157,788 154,270 152,999 146,442 145,780
</TABLE>
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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 its AVONEX(R) (Interferon beta-1a) product for the treatment of relapsing
forms of multiple sclerosis ("MS"). The Company also derives revenue 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 1999 AS COMPARED TO 1998
REVENUES
Total revenues in 1999 were $794.4 million, as compared to $557.6 million in
1998, an increase of $236.8 million or approximately 42%.
Product sales in 1999 were $620.6 million as compared to $394.9 million in 1998,
an increase of $225.7 million or approximately 57%. Product sales from AVONEX(R)
represent approximately 78% of the Company's total revenues in 1999 as compared
to 71% in 1998. The growth in 1999 was primarily attributable to an increase in
the sales volume of AVONEX(R) in the United States and in the fifteen member
countries of the European Union ("EU"). AVONEX(R) sales outside of the United
States were approximately $178.4 million in 1999 as compared to $92 million in
1998.
Revenues from royalties in 1999 were $173.8 million, an increase of $11.1
million or approximately 7% as compared to $162.7 million of royalty revenue in
1998. Revenues from royalties represented approximately 22% of total revenues in
1999 as compared to 29% in 1998. The increase in royalty revenues in 1999 over
the comparable period in 1998 is primarily the result of royalties received on
increased sales of alpha interferon.
The Company expects product sales as a percentage of total revenues to continue
to increase in the near term as the Company continues to market AVONEX(R)
worldwide, and expects sales from AVONEX(R) outside the United States to
continue to increase as a percentage of total product sales. The Company,
however, expects to face increasing competition in the MS marketplace from
existing and new MS treatments that may impact sales of AVONEX(R). Commencing in
2000, the Company expects to experience declining royalty revenues as a result
of patent expirations. In 2000, the Company expects the decline in royalty
revenues to be partially offset by increasing overall sales of licensed
products. In addition, sales levels of products sold by the Company's licensees
may also fluctuate from quarter to quarter due to the timing and extent of major
events such as new indication approvals or government sponsored programs. For a
discussion of some of the factors that may affect royalty revenues in the
future, see "Outlook - Competition", "Outlook - Royalty Revenue" and "Outlook -
Patents and Other Proprietary Rights".
COSTS AND EXPENSES
Total costs and expenses in 1999 were $478.2 million as compared to $366.9
million in 1998, an increase of approximately 30%.
Cost of revenues in 1999 totaled $111 million, an increase of $36.5 million or
49% as compared to 1998. The increase in cost of revenues was attributable to
the higher sales volume of AVONEX(R). Included in cost of revenues in 1999 and
1998 is $96.9 million and $62.1 million, respectively, from product sales and
$14.1 million and $12.4 million, respectively, relating to royalty revenue.
Gross margins on product sales remained constant at approximately 84% for the
period ended December 31, 1999 compared to the same
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period in 1998. Gross margins on royalty revenue remained constant at
approximately 92% for the period ended December 31, 1999 compared to the same
period in 1998. The Company expects that gross margins on royalty revenue will
fluctuate in the future based on changes in sales volumes for specific products.
Research and development expenses in 1999 were $221.2 million, an increase of
$44 million or 25% as compared to $177.2 million in 1998. The increase was
primarily due to an increase in clinical trial costs, the costs associated with
an increase in the Company's other development efforts related to its ongoing
research and development programs and the funding of collaboration agreements.
The Company expects that, in the near and long-term, research and development
expenses will increase as the Company continues to expand its development
efforts with respect to new products, conducts clinical trials of these products
and continues work on new formulations and delivery methods for AVONEX(R).
Selling, general and administrative expenses in 1999 were $146 million, an
increase of $30.8 million or 27% as compared to 1998. This increase was
primarily due to an increase in selling and marketing expenses related to the
sale of AVONEX(R). The Company expects that selling, general and administrative
expenses will continue to increase in the near term as the Company continues to
expand its sales and marketing organizations necessary to sell AVONEX(R)
worldwide.
OTHER INCOME, NET
Other income, net consists primarily of interest income, partially offset by
interest expenses and other non-operating income and expenses. Other income, net
in 1999 was $12.8 million as compared to $19.6 million in 1998, a decrease of
$6.8 million or approximately 35%. Interest income in 1999 was $35.4 million
compared $28.3 million in 1998, an increase of $7.1 million or 25% due to an
increase in funds invested. Interest expense decreased $1.3 million or 22% in
1999 from 1998. Other expense increased by $15.2 million in 1999 from 1998, due
primarily to a $15 million write-down related to certain non-current marketable
securities in the second quarter of 1999. The Company expects interest income to
vary based on changes in the amount of funds invested and fluctuations in
interest rates.
As part of its strategic product development efforts, the Company invests in
equity securities of certain biotechnology companies with which it has
collaborative agreements. In December of 1996, Biogen purchased approximately
1.5 million shares of Creative BioMolecules, Inc. common stock for $18 million.
In March of 1997, Biogen purchased approximately 670,000 shares of CV
Therapeutics, Inc. common stock for $7 million. In March of 1998, the Company
purchased approximately 435,000 shares of CuraGen common stock for $5 million
and converted 100,000 shares of CuraGen Series E Preferred Stock valued at $1
million to CuraGen common stock. Each of these small emerging companies is
principally engaged in researching, developing or manufacturing drugs for human
health care.
As a matter of policy, Biogen determines on a quarterly basis whether a decline
in the fair value of a marketable security is other than temporary. Unrealized
gains and losses on marketable securities are included in other comprehensive
income in shareholders' equity, net of related tax effects. If a decline in the
fair value of a marketable security below the Company's cost basis is determined
to be other than temporary, such marketable security is written down to its
estimated fair value with a charge to current earnings.
Up through and including the assessment at June 30, 1999, the Company concluded
that substantial evidence existed suggesting that the value of the investments
described above would recover to at least the Company's purchase price. Such
evidence included the prospects for favorable clinical trial results, new
product initiatives and new collaborative agreements. However, given the lack of
any substantial price recovery during the quarter ended June 30, 1999, and the
amount of time elapsed since the decline in value began, the Company concluded
that it had become unclear over what period such price recovery would take
place. As a result, it was determined that the positive evidence suggesting that
the investments would recover to at least the Company's purchase price was not
sufficient to overcome the presumption that the current market price of the
investments was the best indicator of value at June 30, 1999. Accordingly, the
related unrealized losses of approximately $15 million were recognized as other
expense in the second quarter of 1999.
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INCOME TAXES
The Company's effective tax rate in 1999 was 33%. Income tax expense for 1999
varied from the amount computed at the U.S. federal statutory rates primarily
due to increased European sales and to the utilization of research and
development tax credits. The Company's effective tax rate outside the U.S. is
lower than the U.S. tax rate, and the Company expects that the U.S. tax rate
will decline as a percentage of its total tax rate as international sales
increase.
RESULTS OF OPERATIONS 1998 AS COMPARED TO 1997
REVENUES
Total revenues in 1998 were $557.6 million, as compared to $411.9 million in
1997, an increase of $145.7 million or approximately 35%.
Product sales in 1998 were $394.9 million as compared to $240 million in 1997,
an increase of $154.9 million or approximately 65%. Product sales from AVONEX(R)
represented approximately 71% of the Company's total revenues in 1998 as
compared to 58% in 1997. AVONEX(R) sales outside of the United States were
approximately $92 million in 1998 as compared to $19.1 million in 1997. The
Company began selling AVONEX(R) in the United States in May 1996. In March 1997,
the Company received regulatory approval to market AVONEX(R) in the EU. By the
end of 1997, AVONEX(R) had received reimbursement approval and was on the market
in all of the EU countries. In April of 1998, the Company received approval and
began marketing AVONEX(R) in Canada.
Revenues from royalties in 1998 were $162.7 million, a decrease of $9.2 million
or 5% as compared to $171.9 million of royalty revenue in 1997. Revenues from
royalties represented approximately 29% of total revenues in 1998 as compared to
42% in 1997. In May 1998, the Company and Schering Corporation, a subsidiary of
Schering-Plough Corporation ("Schering-Plough"), amended the terms of the
license agreement under which Schering-Plough pays the Company royalties on
worldwide sales of Schering-Plough's alpha interferon product, Intron(R) A.
Under the terms of the amendment, Schering-Plough acquired the Biogen alpha
interferon patent application which was the subject of a lawsuit filed by the
Company against Hoffman-LaRoche Inc. and Genentech Inc. related to an
interference involving the Biogen patent application and a patent application
jointly-owned by the two defendants. The lawsuit has since been settled. As
consideration for the acquisition of the Biogen patent application,
Schering-Plough agreed to pay certain sums on U.S. sales of alpha interferon
products from July 2002 until the expiration of the alpha interferon patent
expected to be issued to Hoffman-LaRoche Inc. and Genentech Inc. as a result of
the settlement. See "Outlook - Royalty Revenue".
COSTS AND EXPENSES
Total costs and expenses in 1998 were $366.9 million as compared to $285.8
million in 1997, an increase of approximately 28%.
Cost of revenues in 1998 totaled $74.5 million, an increase of $24.3 million or
48% as compared to 1997. The increase in cost of revenues was attributable to
the higher sales volume of AVONEX(R). Included in cost of revenues in 1998 and
1997 is $62.1 million and $37.1 million, respectively, from product sales and
$12.4 million and $13.1 million, respectively, relating to royalty revenue.
Research and development expenses in 1998 were $177.2 million, an increase of
$31.7 million or 22% as compared to $145.5 million in 1997. The increase was
primarily due to the costs associated with the funding of collaboration
agreements, an increase in clinical trial costs and an increase in the Company's
other development efforts related to its ongoing research and development
programs.
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Selling, general and administrative expenses in 1998 were $115.2 million, an
increase of $25.1 million or 28% as compared to 1997. This increase was
primarily due to a rise in selling and marketing expenses related to the sale of
AVONEX(R) and an increase in legal fees.
OTHER INCOME, NET
Other income, net consists primarily of interest income, partially offset by
interest and other financing expenses, and other non-operating income and
expenses. Interest income increased $6.2 million from $22.1 million in 1997 to
$28.3 million 1998. This increase was offset by increases in financing related
and other non-operating expenses. The increase in interest income was a result
of increased funds invested.
INCOME TAXES
The Company's effective tax rate in 1998 was 34%. Income tax expense for 1998
varied from the amount computed at the U.S. federal statutory rates primarily
due to the benefit of research and development and investment tax credits. The
Company's effective tax rate outside the U.S. is lower than the U.S. tax rate.
FINANCIAL CONDITION
At December 31, 1999, cash, cash equivalents and short-term marketable
securities were $654.5 million compared with $516.9 million at December 31,
1998, an increase of $137.6 million. Working capital increased $156.5 million to
$720 million. Net cash from operating activities for the year ended December 31,
1999 was $272.3 million compared with $167.8 million in 1998. Cash outflows
during 1999 included investments in property and equipment and patents of $86.3
million and investments in collaborative partners of $10 million. Significant
cash outflows from financing activities included $197.7 million for purchases of
the Company's common stock under its stock repurchase program and $4.9 million
for repayments on loan agreements with banks. Cash inflows included $149.8
million from common stock option exercises and related tax benefits and employee
stock purchase plan activity and $22.1 million in proceeds from written put
warrants.
In August 1995, the Company entered into a loan agreement with a bank for
financing the construction of its biological manufacturing facility in North
Carolina (the "Construction Loan"). During 1997, the Company completed
construction of the facility and the funds advanced under the Construction Loan
were converted to a floating rate ten-year term loan with principal and interest
payable quarterly. As of December 31, 1999, the Company had $39.5 million
outstanding under the Construction Loan. The Construction Loan is secured by the
underlying building. The Company also entered into an interest rate swap
agreement with the same bank, fixing its interest rate on the Construction Loan
at 7.75% during the remaining term of the loan with interest payable quarterly.
In addition, as of December 31, 1999, the Company also had $17.5 million
outstanding under a floating rate loan with a bank (the "Term Loan"). The Term
Loan is secured by the Company's laboratory and office building in Cambridge,
Massachusetts. The Company has fixed its interest rate on the Term Loan at 7.5%
under the terms of an interest rate swap agreement. Terms of the Company's loan
agreements include various covenants, including financial covenants which
require the Company to maintain minimum net worth, cash flow and various
financial ratios.
On February 22, 1999, the Company announced that its Board of Directors had
authorized the repurchase of up to 8 million shares of the Company's common
stock. The repurchased stock will provide the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. Stock purchases are expected to occur from time
to time through 2000. The stock repurchase program may be discontinued at any
time. During 1999, the Company repurchased approximately 3.4 million shares of
its common stock at a cost of $197.7 million. Under a previous stock repurchase
program, the Company in 1998 repurchased 1.8 million shares of its common stock
at a cost of $65.6 million.
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To enhance the 1999 stock repurchase program, the Company sold put warrants to
and purchased call options from independent third parties for a total of 4
million shares of which 2.2 million shares were outstanding at December 31,
1999, at a strike price of $49.47. Additionally, during 1999 in a separate put
warrant program to facilitate its purchase of common stock, the Company sold
put warrants for total proceeds of $22.1 million. The Company had put warrants
to purchase 1.6 million shares outstanding at December 31, 1999, at an average
strike price of $68.99 relating to this put warrant program. All of the
Company's put warrants outstanding are exercisable only at the date of
expiration, with expiration dates ranging from January through November of
2000. The outstanding put warrants permit a net-share settlement at the
Company's option and, therefore, did not result in a put obligation liability
on the Company's Consolidated Balance Sheets. The put warrants sold in
connection with the Company's stock repurchase program did not have a
significant additional dilutive effect.
On October 4, 1999, the Company began construction of its new research and
development center in Cambridge, Massachusetts. The new 224,000 square foot
building is expected to be completed in the spring of 2001 at a total cost of
approximately $95 million, of which $35 million had been committed at December
31, 1999. Additionally, the Company is completing plans to build a large scale
manufacturing plant in Raleigh, North Carolina. The Company expects that
construction will be completed at the end of 2001 at a total cost of
approximately $175 million of which $67 million had been committed at December
31, 1999.
In October 1997, the Company signed a research and option agreement (the
"CuraGen Agreement") with CuraGen Corporation ("CuraGen") under which the
Company and CuraGen collaborate in the discovery of novel genes using CuraGen's
functional genomics technologies. In March of 1998, under the terms of the
CuraGen Agreement, the Company purchased approximately 435,000 shares of
CuraGen common stock at the then fair value for a total of $5 million.
Additionally, 100,000 shares of CuraGen Series E Preferred Stock purchased by
Biogen in 1997 for $1 million were automatically converted into 100,000 shares
of CuraGen common stock. In October 1999, CuraGen drew down $10 million on a
line of credit, previously extended to CuraGen pursuant to the terms of the
CuraGen Agreement and simultaneously converted the borrowings into
approximately 611,000 shares of Curagen common stock at the then fair value of
$16.37 per share. The investment in CuraGen common stock is classified as
available-for-sale and is included in long-term marketable securities as of
December 31, 1999. The Company provided CuraGen with research and development
funding of $1.1 million and $1.9 million in 1999 and 1998, respectively. The
Company expects to fund research activities of CuraGen related to the
collaboration of up to $750,000 in 2000, and in return, has an option to
acquire an exclusive license to certain discoveries arising out of the
collaborative efforts. During the first quarter of 2000, the Company partially
liquidated its holdings in CuraGen common stock generating proceeds of $70.5
million.
In March 1997, the Company signed a research collaboration and license
agreement (the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which
Biogen obtained rights under CVT's patents and know-how to develop and market
molecules that act as highly selective antagonists of the adenosine A1
receptor, for the treatment of congestive heart failure. Under the terms of the
CVT Agreement, the Company purchased approximately 670,000 shares of CVT common
stock at the then fair value for $7 million and paid a one-time license fee of
$5 million, which was charged to research and development expense. The
investment in CVT is classified as available-for-sale and is included in
long-term marketable securities. In addition, pursuant to the terms of the CVT
Agreement, the Company established a $12 million line of credit that CVT may
use for operating purposes. At December 31, 1999, the Company had advanced $8
million under the line of credit to CVT.
In December 1996, the Company signed a research collaboration and license
agreement (the "CBM Agreement") with Creative BioMolecules, Inc. ("CBM") under
which Biogen obtained rights to develop and market CBM's morphogenic protein,
OP-1, for the treatment of renal disorders. Under the CBM Agreement, the Company
purchased 1.5 million shares of CBM common stock for $18 million. The payment
for the common stock included a $1.2 million premium over the fair value of the
common stock which was charged to research and development expense. As of
December 31, 1999, the investment is classified as available-for-sale and is
25
<PAGE> 8
included in long term marketable securities. The Company provided $10 million
in research and development funding, which was charged to expense as provided
in 1998. The CBM Agreement terminated at the end of 1999. During the first
quarter of 2000 the Company liquidated its holdings of CBM common stock,
generating proceeds of $7.5 million.
In July 1996, the Company signed a collaborative research and commercialization
agreement (the "Ontogeny Agreement") with Ontogeny, Inc. ("Ontogeny"), a
private biotechnology company, for the development and commercialization of
three specific hedgehog cell proteins, a class of novel human proteins, that
are responsible for reducing the formation or regeneration of tissue. Under the
Ontogeny Agreement, the Company purchased 400,000 shares of preferred stock of
Ontogeny for $1 million and acquired certain exclusive, worldwide rights
related to products based on the hedgehog proteins for most disease areas. The
Company accounts for its investment in Ontogeny, which is included in other
assets, using the cost method of accounting. In November 1998, the Company
extended and expanded its collaboration with Ontogeny and provided to Ontogeny
a $4 million convertible loan. In June 1999, the loan was converted into
800,000 shares of Ontogeny Convertible Preferred Stock. The Company provided
$2.8 million and $3.6 million of research funding to Ontogeny in 1999 and 1998,
respectively. The Company has agreed to fund up to an additional $6 million in
research funding over the next two years unless the agreement is terminated. If
the Company exercises its option to proceed with development and
commercialization of a hedgehog protein, the Company would be committed to
additional funding in the form of license fees, equity investments and lines of
credit.
In August 1995, the Company signed a collaborative research agreement (the
"Genovo Agreement") for the development of human gene therapy treatments with
Genovo, Inc. ("Genovo"), a gene therapy research company. Under the Genovo
Agreement, the Company acquired 380,000 shares of Genovo Series A Preferred
stock for $4.5 million and acquired certain licensing rights. The Company
accounts for this investment, which is included in other assets, using the
equity method of accounting. The Company recorded its proportion of Genovo's net
losses as research and development expense in the amounts of $7.6 million, $9
million, and $7.7 million in 1999, 1998 and 1997, respectively. At December 31,
1999, the Company had remaining research funding commitments to Genovo of
approximately $2.4 million.
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 raise additional capital to
take advantage of favorable conditions in the market or in connection with the
Company's development activities.
LEGAL MATTERS
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 (U.S. Patent No.
5,376,567) in the United States in the production of Biogen's AVONEX(R)
(Interferon beta-1a). In November 1996, Berlex's New Jersey action was
transferred to the United States District Court in Massachusetts and
consolidated for pre-trial purposes with a related declaratory judgment action
previously filed by Biogen. On August 18, 1998, Berlex filed a second suit
against Biogen alleging infringement by Biogen of a patent which was issued to
Berlex in August 1998 and which is related to the McCormick patent (U.S. Patent
No. 5,795,779). On September 23, 1998, the cases were consolidated for pre-trial
and trial purposes. 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
claims, but the ultimate outcome is not currently determinable. As a result, an
estimate of any potential loss or range of loss cannot be made at this time. A
hearing on the parties' summary judgment motions was completed in March 2000.
Biogen moved for summary judgement of non-infringement of certain claims of
the `567 patent, non-infringement of the `779 patent, as well as a determination
of the invalidity of certain claims of the `567 patent and all of the claims of
the `779 patent. Berlex moved to dismiss Biogen's inequitable conduct defenses
and counterclaims. Berlex also moved for a declaration of literal infringement
of certain
26
<PAGE> 9
claims of the `567 and the `779 patents. No decisions have been rendered to
date. The Company expects a trial to occur in the second half of 2000.
In 1995, the Company filed an opposition with the Opposition Division of the
European Patent Office to oppose a European patent (the "Rentschler I Patent")
issued to Dr. Rentschler Biotechnologie GmbH ("Rentschler") relating to
compositions of matter of beta interferon. In 1997, the European Patent Office
issued a decision to revoke the Rentschler I Patent. Rentschler has appealed
that decision and the appeal is still pending. On October 13, 1998, the Company
filed another opposition with the Opposition Division of the European Patent
Office to oppose a second European patent issued to Rentschler (the "Rentschler
II Patent") with certain claims regarding compositions of matter of beta
interferon with specific regard to the structure of the glycosylated molecule.
While Biogen believes that the Rentschler II Patent will be revoked and that the
revocation of the Rentschler I Patent will be upheld on appeal, if either the
Rentschler I Patent or the Rentschler II Patent were to be upheld and if
Rentschler were to obtain, through legal proceedings, a determination that the
Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such
result could have a material adverse effect on the Company's results of
operation and financial position.
NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the United States Securities and Exchange Commission issued
Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 provides the staff's views in applying generally accepted
accounting principles to selected revenue recognition issues, as well as
examples of how the staff applies revenue recognition guidance to specific
circumstances. The Company is currently assessing the impact, if any, however,
the Company does not currently anticipate that SAB 101 will have a material
effect on the Company's financial position and results of operations.
OUTLOOK
SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996
In addition to historical information, this annual report 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 product sales, royalty revenues,
expenses and profits, statements regarding the timing of clinical trials and
predictions as to the anticipated outcome of pending litigation and
patent-related proceedings and the Company's expectations as to the value of its
investments in certain marketable securities. 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 financial condition and results of operations are discussed
below.
DEPENDENCE ON AVONEX(R) SALES
The Company's ability to sustain increases in revenues and profitability for
the next several years 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; the
extent to which AVONEX(R) receives reimbursement coverage; the impact of
competitive products; and the impact of adverse decisions in patent-related
proceedings. The extent of the profitability from AVONEX(R) sales is also
dependent on the successful resolution of the Berlex suit, which is described
above under "Legal Matters".
27
<PAGE> 10
COMPETITION
The Company faces increasing competition from other products for the treatment
of relapsing forms of MS. AVONEX(R) competes with interferon beta-1b which is
sold in the United States under the brand name Betaseron(R) by Berlex
Laboratories, Inc., a United States affiliate of Schering AG, Germany
("Schering AG"), and is sold in Europe under the brand name Betaferon(R) by
Schering AG. AVONEX(R) also faces competition from Copaxone(R) glatiramer
acetate (also known as copolymer-1). In the United States Copaxone(R) is
marketed by a partnership between Teva Pharmaceutical Industries, Ltd. and
Hoechst Marion Roussel, Inc. In addition, in most other countries, AVONEX(R)
also competes with Rebif(R), a recombinant interferon beta-1a product sold by
Ares Serono S.A. ("Serono"). In response to an application from Serono for
approval of Rebif(R) in the United States for relapsing multiple sclerosis, the
FDA, in March 1999, upheld its earlier ruling that, based on the data from
existing clinical trials, Serono cannot market Rebif(R) in the United States
for relapsing multiple sclerosis while the orphan drug status afforded to
AVONEX(R) and Betaseron(R) for that indication is still in effect. AVONEX(R)'s
orphan drug status for relapsing forms of the disease expires in 2003. The
ruling by the FDA prompted Serono to recently initate a 12-month head-to-head
study of Rebif(R) and AVONEX(R) to determine if Serono can show whether
Rebif(R) is clinically superior to AVONEX(R). The results of this study may
help Serono in its attempts to get the orphan drug status of AVONEX(R) removed.
Biogen expects Serono to release the results of the study in the first quarter
of 2001.
ROYALTY REVENUE
The Company receives royalty revenues which contribute a significant amount to
its overall profitability. Commencing in 2000, the Company expects to experience
declining royalty revenues as a result of patent expirations. In 2000, the
Company expects the decline in royalty revenues to be partially offset by
increasing overall sales of licensed products. There are a number of other
factors which could also cause the actual level of royalty revenue to differ
from the Company's expectations. For example, pricing reforms, health care
reform initiatives, other legal and regulatory developments and the introduction
of competitive products may have an impact on product sales by the Company's
licensees. In addition, sales levels of products sold by the Company's licensees
may fluctuate from quarter to quarter due to the timing and extent of major
events such as new indication approvals or government sponsored programs. Since
the Company is not involved in the development or sale of products by its
licensees, the Company can not be certain of the timing or potential impact of
factors which may affect sales by the Company's licensees. In the long term, the
Company expects its royalty revenue to be affected most significantly by patent
expirations. See "Outlook - Patents and Other Proprietary Rights".
In 1998, Schering-Plough received marketing clearance in the United States from
the FDA for REBETRON(R) for the treatment of chronic hepatitis C. REBETRON(R)
is a combination product containing the Intron(R) A injection product and
REBETOL(R) (ribavirin, USP capsules). In late 1998, Biogen filed for
arbitration against Schering-Plough in a dispute over the amount of royalties
payable to Biogen on sales of REBETRON(R). A hearing in connection with the
arbitration was conducted in January 2000. In March 2000, the arbitration panel
found in favor of Schering-Plough, and rejected Biogen's claim that royalty
payments should be based on the higher rate for combination products called for
under the 1979 agreement between the parties, and not on the Intron(R) A
component alone. Biogen does not expect to suffer any financial impact as a
result of the arbitration panel's decision since Schering-Plough is presently
paying royalties only on the Intron(R) A component, and the decision will have
no effect on those royalties.
In December 1996, Schering-Plough filed suit in its own name, as Biogen's
exclusive licensee, against Amgen, Inc. ("Amgen") to enforce Biogen's United
States alpha inteferon patent claiming it to be infringed by Amgen's consensus
interferon product known as Infergen(R). In July 1998, the federal judge in the
case issued a narrow pre-trial interpretation of the claims of the Biogen
patent. This decision was appealed. A hearing in connection with the appeal was
held in December 1999. A decision is expected in the first half of 2000.
During the arbitration proceedings between Biogen and Schering-Plough related to
REBETRON(R) royalties, Schering-Plough alleged that the federal judge's decision
in the Amgen case narrowed the scope of the claims in Biogen's United States
alpha interferon patent such that the patent no longer covers Schering-Plough's
Intron(R) A product. If the Amgen appeal is unsuccessful, Schering-Plough might
argue that royalties on sales of Intron(R) A are not payable during the period
commencing after expiration of the EU patent in January 2001 (which currently
covers all product manufactured in the EU, including all product sold in the
United States) until commencement in July 2002 of the royalty obligation tied to
the term of the Roche/Genetech alpha interferon patent rights. See "Outlook -
Patents and Other Proprietary Rights". Biogen intends to vigorously oppose any
attempt by Schering-Plough to discontinue payment of royalties during any
period.
PATENTS AND OTHER PROPRIETARY RIGHTS
The Company has numerous issued patents and patent applications pending on a
number of its processes and products. The Company has also obtained rights to
certain patents under licenses with third parties which provide for the payment
of royalties. There can be no assurances that Biogen's existing patents or
others, if obtained, will be of substantial protection or commercial benefit to
Biogen. In addition, it is not known to what extent Biogen's pending patent
applications or patent applications licensed from third parties will be granted
or whether any of the Company's patents will prevail if they are challenged in
litigation. There is also no assurance that third parties will not be granted
patents claiming subject matter necessary to Biogen's business.
Biogen has granted an exclusive worldwide license to Schering-Plough under
Biogen's alpha interferon patents, and receives royalties from Schering-Plough
on sales of its Intron(R) A brand of alpha interferon.
28
<PAGE> 11
Schering-Plough's royalty obligation to Biogen on sales of alpha interferon in
Japan and Europe will terminate upon expiration of Biogen's alpha interferon
patent in such territories in 2001, except in France and Italy where Biogen has
obtained supplemental protection certificates extending the coverage in France
until 2003 and in Italy until 2007. In consideration of assignment to
Schering-Plough by Biogen of a Biogen patent application claiming recombinant
mature human alpha interferon, Schering-Plough has agreed to pay to Biogen
certain sums on sales by Schering-Plough of alpha interferon products in the
United States from July 2002 (when Biogen's existing United States alpha
interferon patent expires) until expiration of an alpha interferon patent
expected to be issued to Hoffman-LaRoche Inc. ("Roche") and Genentech, Inc.
("Genentech"). The Roche/Genentech patent was the subject of a lawsuit brought
by Biogen which was ultimately settled. Schering-Plough entered into an
agreement with Roche as part of the settlement matter.
Biogen has licensed its recombinant hepatitis B antigen patent rights to
manufacturers and marketers of hepatitis B vaccines and diagnostic test kits,
and receives royalties on sales of the vaccines and test kits by its licensees.
The obligation of SmithKline Beecham plc and Merck & Co., Inc. to pay royalties
on sales of hepatitis B vaccines and the obligation of Biogen's other licensees
under its hepatitis B patents to pay royalties on sales of diagnostic products
will terminate upon expiration of Biogen's existing hepatitis B patents.
Biogen's existing United States hepatitis B patents will expire in 2004.
Biogen's European hepatitis B patents expired at the end of 1999, except in
those countries in which Biogen has or is able to obtain supplemental
protection certificates. To date, Biogen has received supplemental protection
certificates in Austria, Belgium, France, Ireland, Italy, Luxembourg, The
Netherlands, Sweden, and Switzerland, and has a number of additional
applications pending. The additional coverage afforded by supplemental
protection certificates ranges from two to six years. There can be no assurance
as to the extent of coverage available under the supplemental protection
certificates, or that protection will be available in additional countries.
There has been, and Biogen expects that there may continue to be significant
litigation in the industry regarding patents and other intellectual property
rights. Such litigation could create uncertainty and consume substantial
resources. See also "Legal Matters".
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 continues 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. Only a small number of research and
development programs result in the commercialization of a product. Success in
preclinical and early clinical trials does not ensure that later stage or large
scale clinical trials will be successful. 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 overcome technical hurdles that may arise, to meet applicable
regulatory standards and to 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.
MARKET RISK
The Company has exposure to financial risk in several areas including changes in
foreign exchange rates and interest rates. The Company attempts to minimize its
exposures by using certain financial instruments, for purposes other than
trading, in accordance with the Company's overall risk management guidelines.
Further information regarding the Company's accounting policies for financial
instruments and disclosures of financial instruments can be found in Notes 1, 2
and 3 to the Company's Consolidated Financial Statements.
29
<PAGE> 12
FOREIGN EXCHANGE
The Company has operations in several European countries in connection with the
sale of its product AVONEX(R). The Company also receives royalty revenues based
on worldwide product sales by its licensees. As a result, the Company's
financial position, results of operations and cash flows can be affected by
fluctuations in foreign currency exchange rates (primarily the Euro, British
pound, Japanese yen and Canadian dollar).
The Company uses foreign currency forward contracts to manage foreign currency
risk and does not engage in currency speculation. The Company uses these forward
contracts to hedge certain forecasted transactions denominated in foreign
currencies. A hypothetical adverse 10% movement in foreign exchange rates
compared to the U.S. dollar across all maturities would result in a hypothetical
loss in fair value of approximately $13 million. The Company's use of this
methodology to quantify the market risk of such instruments should not be
construed as an endorsement of its accuracy or the accuracy of the related
assumptions. The quantitative information about market risk is necessarily
limited because it does not take into account operating transactions.
INTEREST RATES
The Company is exposed to risk of interest rate fluctuations in connection with
its variable rate long-term debt. The Term Loan requires annual principal
payments of $1.7 million through 2004, with the balance due in 2005. The
Construction Loan requires annual principal payments of $3.2 million through
2006, with the balance due in 2007. At December 31, 1999, the carrying values of
the Term Loan and the Construction Loan approximated fair value.
The Company has fixed its interest rates on the Term Loan and Construction Loan
by entering interest rate swap agreements under which the Company exchanges the
difference between 7.5% and 7.75%, respectively, and a floating rate. The
notional principal balances on the interest rate swap agreements is exactly
equal to the principal on the underlying debt agreements. All other relevant
terms of the interest rate swap agreements ( including the index rate, reset
period, etc.) exactly match the underlying loan agreements. The fair value of
the interest rate swap agreements at December 31, 1999, representing the cash
the Company would receive to settle the agreements, was approximately $366,000.
Terms of the Company's loan agreements include various covenants, including
financial covenants which require the Company to maintain minimum net worth,
cash flow and various financial ratios.
The fair value of the Company's long-term debt and interest rate swap agreements
are subject to change as a result of potential changes in market interest rates.
The potential change in fair value for interest rate sensitive instruments has
been assessed on a hypothetical 100 basis point adverse movement across all
maturities. The Company estimates that such hypothetical adverse 100 basis point
movement would not have materially impacted net income.
STOCK PRICE
The stock prices of biotechnology companies are subject to significant
fluctuations. The stock price may be affected by a number of factors including,
but not limited to clinical trial results and other product development events,
the outcome of litigation, the financial impact of changes in the value of
investments, including investments in other biotechnology companies, the
decisions relating to intellectual property rights and the entrance of
competitive products into the market, changes in reimbursement policies or other
practices related to the pharmaceutical industry or other industry and market
changes or trends. In addition, if revenues or earnings in any quarter fail to
meet the investment community's expectations, there could be an immediate
adverse impact on the Company's stock price.
YEAR 2000 ISSUES
The Year 2000 problem resulted from the use of a two-digit date field to
identify the year in computer software. Consequently, there was concern that
certain computer programs would not accurately reflect the appropriate date
after December 31, 1999, confusing
30
<PAGE> 13
"00" as the year 1900 rather than the year 2000. The Year 2000 problem was a
pervasive issue affecting many information technology systems and embedded
technologies (e.g. microprocessors in communications systems) in all companies,
in all industries.
The Company developed a plan to address the Year 2000 issues. The plan was
segregated into four phases:
1. Information Collection - Identify all Year 2000 risk areas and assign
accountability.
2. Assess Risk - Assign each item a category of risk:
- Commercial Risk - Has a significant impact on sale, delivery and support
of AVONEX(R) or a significant impact on the Company's financial position
or results of operations.
- Operational Risk - Has a significant impact on productivity but does not
materially impact the Company's financial position or results of
operations.
- Convenience Risk - Has a minor impact on productivity.
3. Remediate - Fix or replace, test and implement changes required for Year 2000
compliance.
4. Contingency Plan - Define procedures to be implemented should a
disruption due to Year 2000 occur.
The Company completed all phases of the project by December 31, 1999, including
the testing and upgrading of all individual software applications and equipment
that fell within the Commercial Risk category. Additionally, approximately 100%
of the software applications and equipment in the Operational and Convenience
Risk categories had been remediated. All of the Company's major software
applications have been purchased from major software vendors and the Company
performs only minor customizations to those applications. The Company's major
software providers have attested to Year 2000 compliance. Subsequent to
December 31, 1999, the Company has not experienced any significant problems
related to the Year 2000 issue. The Company therefore believes that its
principal information technology systems correctly define the Year 2000. The
Company's Year 2000 costs were immaterial and the Company believes that future
costs will also be immaterial.
31
<PAGE> 14
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Biogen, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
- ---------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Product $ 620,636 $ 394,863 $ 239,988
Royalty 173,799 162,724 171,921
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenues 794,435 557,587 411,909
- ---------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of revenues 111,005 74,509 50,188
Research and development 221,153 177,228 145,501
Selling, general & administrative 146,026 115,211 90,098
- ---------------------------------------------------------------------------------------------------------------------------
Total costs and expenses 478,184 366,948 285,787
- ---------------------------------------------------------------------------------------------------------------------------
Income from operations 316,251 190,639 126,122
Other income, net 12,765 19,554 22,846
- ---------------------------------------------------------------------------------------------------------------------------
Income before income taxes 329,016 210,193 148,968
Income taxes 108,566 71,496 59,801
- ---------------------------------------------------------------------------------------------------------------------------
Net Income $ 220,450 $ 138,697 $ 89,167
- ---------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1.47 $ 0.94 $ 0.60
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.40 $ 0.90 $ 0.58
- ---------------------------------------------------------------------------------------------------------------------------
Shares used in calculating:
Basic earnings per share 149,921 147,537 147,624
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share 157,788 154,270 152,999
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
Biogen, Inc. and Subsidiaries
(in thousands, except share amounts)
<TABLE>
<CAPTION>
As of December 31, 1999 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 56,920 $ 25,445
Marketable securities 597,619 491,469
Accounts receivable, less allowances of
$1,642 137,363 101,281
Deferred tax asset 50,565 26,584
Other current assets 67,759 49,365
- --------------------------------------------------------------------------------------------------------------------
Total current assets 910,226 694,144
- --------------------------------------------------------------------------------------------------------------------
Property and equipment 239,777 182,551
Patents 13,871 15,869
Marketable securities 98,017 12,668
Other assets 16,082 19,483
- --------------------------------------------------------------------------------------------------------------------
$ 1,277,973 $ 924,715
- --------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 30,125 $ 24,896
Current portion of long-term debt 4,888 4,888
Accrued expenses and other 155,257 100,879
- --------------------------------------------------------------------------------------------------------------------
Total current liabilities 190,270 130,663
- --------------------------------------------------------------------------------------------------------------------
Long-term debt, less current portion 52,073 56,960
Other long-term liabilities 56,100 18,479
Commitments and contingencies -- --
Shareholders' equity
Common stock, par value $0.01 per share (375,000,000
shares authorized; 150,684,586 and 148,298,782
shares issued in 1999 and 1998, respectively) 1,507 1,483
Additional paid-in capital 676,673 538,105
Retained earnings 352,016 213,507
Accumulated other comprehensive income 45,618 (13,165)
Treasury stock, at cost, 669,651 and 579,931
shares in 1999 and 1998, respectively (96,284) (21,317)
- --------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 979,530 718,613
- --------------------------------------------------------------------------------------------------------------------
$ 1,277,973 $ 924,715
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
Biogen, Inc. and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
For the years ended December 31, 1999 1998 1997
-----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 220,450 $ 138,697 $ 89,167
Adjustments to reconcile net income to net
cash provided from operating activities
Depreciation and amortization 31,099 24,590 19,296
Other 5,162 (888) 2,695
Deferred income taxes (23,981) 7,486 22,462
Write-down of non-current marketable securities 15,287 -- --
Changes in:
Accounts receivable (36,082) (14,479) (43,850)
Other current and other assets (41,372) (25,638) (8,643)
Accounts payable, accrued expenses and
other current and long-term liabilities 101,725 38,077 16,505
-----------------------------------------------
Net cash flows from operating activities 272,288 167,845 97,632
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities (1,120,218) (574,021) (481,783)
Proceeds from sales and maturities of
marketable securities 1,006,465 453,952 373,130
Investment in collaborative partners (10,000) (5,000) (11,000)
Acquisitions of property and equipment (82,528) (29,049) (28,896)
Additions to patents (3,799) (4,562) (6,654)
-----------------------------------------------
Net cash flows from investing activities (210,080) (158,680) (155,203)
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable -- -- 24,817
Repayments on note payable -- (24,817) --
Proceeds from issuance of long-term debt -- -- 4,545
Repayments on long-term debt (4,887) (4,886) (4,082)
Purchases of treasury stock (197,717) (65,550) (7,000)
Proceeds from put warrants 22,086 -- --
Issuance of common stock, and option
exercises and related tax benefits 149,785 41,175 47,617
-----------------------------------------------
Net cash flows from financing activities (30,733) (54,078) 65,897
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents 31,475 (44,913) 8,326
Cash and cash equivalents, beginning of the year 25,445 70,358 62,032
-----------------------------------------------
Cash and cash equivalents, end of the year $ 56,920 $ 25,445 $ 70,358
===============================================
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest $ 4,598 $ 5,909 $ 5,940
Income taxes $ 4,787 $ 35,828 $ 3,783
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 17
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Biogen, Inc. and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN TREASURY RETAINED COMPREHENSIVE SHAREHOLDERS'
STOCK CAPITAL STOCK EARNINGS INCOME EQUITY
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 1,451 $ 470,897 $ -- $ 12,831 $ (809) $ 484,370
------------------------------------------------------------------------------------------
Net income 89,167 89,167
Unrealized losses on
marketable securities, net
of tax of $ 942 (1,490) (1,490)
Translation adjustment 29 29
----------
Total comprehensive income 87,706
----------
Reclassification of put
option obligation (76,671) (76,671)
Treasury stock purchased (7,000) (7,000)
Exercise of options and
related tax benefits 32 43,989 2,548 46,569
Issuance of common stock 981 67 1,048
Compensation expense related
to stock options 271 271
------------------------------------------------------------------------------------------
Balance, December 31, 1997 $ 1,483 $ 516,138 $ (4,385) $ 25,327 $ (2,270) $ 536,293
------------------------------------------------------------------------------------------
Net income 138,697 138,697
Unrealized losses on marketable
securities, net of tax of $4,476 (7,072) (7,072)
Unrealized losses on interest
rate swaps, net of transition
adjustment (see Note 1) (4,132) (4,132)
Translation adjustment 309 309
-----------
Total comprehensive income 127,802
-----------
Exercise of options and
related tax benefits 19,745 48,618 (27,188) 41,175
Reclassification of put option
obligation 76,671 76,671
Treasury stock purchased (65,550) (65,550)
Compensation expense related to
stock options 2,222 2,222
------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 $ 1,483 $ 538,105 $(21,317) $213,507 $ (13,165) $ 718,613
------------------------------------------------------------------------------------------
NET INCOME 220,450 220,450
UNREALIZED GAINS ON MARKETABLE
SECURITIES, NET OF TAX OF
$25,013 48,555 48,555
UNREALIZED GAINS ON FOREIGN
CURRENCY FORWARD CONTRACTS,
NET OF TAX OF $2,490 6,654 6,654
UNREALIZED GAINS ON INTEREST
RATE SWAPS, NET OF TAX OF
$137 4,501 4,501
TRANSLATION ADJUSTMENT (927) (927)
------------
TOTAL COMPREHENSIVE INCOME 279,233
------------
EXERCISE OF OPTIONS AND
RELATED TAX BENEFITS 24 108,952 122,750 (81,941) 149,785
PROCEEDS FROM SALE OF PUT
WARRANTS 22,086 22,086
TREASURY STOCK PURCHASED (197,717) (197,717)
COMPENSATION EXPENSE RELATED
TO STOCK OPTIONS 7,530 7,530
------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 1,507 $ 676,673 $(96,284) $352,016 $ 45,618 $ 979,530
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Biogen, Inc. and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
Biogen, Inc. ("Biogen" or the "Company") 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 its AVONEX(R) (Interferon beta-la) product for the treatment of relapsing
forms of multiple sclerosis 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.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated. Certain items in prior years' financial
statements have been reclassified to conform with the current year's
presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and use assumptions
that affect certain reported amounts and disclosures; actual amounts may differ.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency for most of the Company's foreign subsidiaries is the
local currency. Assets and liabilities are translated at current rates of
exchange. Income and expense items are translated at the average exchange rates
for the year. Adjustments resulting from the translation of the financial
statements of the Company's foreign operations into U.S. dollars are excluded
from the determination of net income and are accumulated in a separate component
of shareholders' equity. The U.S. dollar is the functional currency for certain
foreign subsidiaries. The Company's subsidiaries which have the U.S. dollar as
the functional currency are remeasured into U.S. dollars using current rates of
exchange for monetary assets and liabilities and historical rates of exchange
for nonmonetary assets. Foreign exchange transaction gains and losses are
included in the results of operations in other income, net. Foreign exchange
gains totaled $2.5 million, $2.5 million and $8.2 million in 1999, 1998 and
1997, respectively.
CASH AND CASH EQUIVALENTS
The Company considers only those investments which are highly liquid, readily
convertible to cash and which mature within three months from date of purchase
to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance sheets for cash and
cash equivalents, accounts receivable, other current assets, accounts payable,
and accrued expenses and other approximate fair value due to the short-term
maturities of these instruments. Marketable securities are carried at fair value
based on quoted market prices, consistent with the requirements of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". The fair values of trading securities, interest
rate swaps, foreign currency forward contracts and options on non-marketable
instruments are based on quoted market prices or pricing models using current
market rates. The Company's long-term debt approximates fair value based on
dealer quotes.
36
<PAGE> 19
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined under
the first-in/first-out ("FIFO") method and are included in other current assets.
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. The components of inventories for the periods ending December 31, are
as follows:
(in thousands) 1999 1998
-------------- ------------
Raw materials $ 5,679 $ 4,878
Work in process 15,110 17,585
Finished goods 19,242 13,402
-------------- ------------
$ 40,031 $ 35,865
============== ============
MARKETABLE SECURITIES
The Company invests its excess cash balances in short-term marketable
securities, principally corporate notes and government securities. At December
31, 1999, substantially all of the Company's securities were classified as
"available-for-sale". All available-for-sale securities are recorded at fair
market value and unrealized gains and losses are included in accumulated other
comprehensive income in shareholders' equity, net of related tax effects.
Realized gains and losses and declines in value, if any, judged to be other than
temporary on available-for-sale securities are reported in other income or
expense.
As part of its strategic product development efforts, the Company also invests
in equity securities of certain biotechnology companies with which it has
collaborative agreements. Such investments, which are included in long-term
marketable securities and other assets, are classified as available-for-sale if
a readily determinable market value exists. These investments are accounted for
under the cost or equity method, depending on the facts and circumstances of the
investment, and are reviewed regularly for impairment.
On a quarterly basis, as of the end of the quarter, the Company determines
whether a decline in fair value of a marketable security is other than
temporary. Unrealized gains and losses on marketable securities are included in
other comprehensive income in shareholders' equity, net of related tax effects.
If a decline in the fair value of a marketable security below the Company's cost
basis is determined to be other than temporary, such marketable security is
written down to its estimated fair value with a charge to current earnings. The
Company has concluded that all unrealized losses on marketable securities at
December 31, 1999 are temporary in nature. The Company expects that the market
value of such investments will recover to at least the Company's cost basis
within a reasonable period of time. Should any portion of these unrealized
losses subsequently be determined to be other than temporary, the Company would
be required to record the related amount as a charge to current earnings.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, subject to review of impairment for
significant assets whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Depreciation is calculated
on the straight-line basis over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of the useful life or the
term of the respective lease. Maintenance of computer systems, including
maintenance to make software Year 2000 compliant, is expensed as incurred.
Buildings and equipment are depreciated over estimated useful lives ranging from
30 to 40 and 3 to 10 years, respectively. The Company capitalizes certain
incremental costs associated with the validation effort required for licensing
by the FDA of manufacturing equipment for the production of a commercially
approved drug. These costs include primarily direct labor and material and are
incurred in preparing the equipment for its intended use. Net capitalized
validation costs were $4.7 million and $5 million at December 31, 1999 and
1998, respectively. The validation costs are amortized over the life of the
related equipment.
37
<PAGE> 20
PATENTS
The costs associated with successful patent defenses and patent applications are
capitalized and amortized on a straight-line basis over estimated useful lives
up to 15 years. Accumulated amortization of patent costs was $20.1 million and
$15.5 million as of December 31, 1999 and 1998, respectively. The carrying value
of patents is regularly reviewed by the Company and impairments are recognized
when the expected future operating cash flows derived from the patent are less
than their carrying value.
DERIVATIVES AND HEDGING ACTIVITIES
On June 15, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", ("SFAS 133"). The Company elected to adopt SFAS 133 in
the fourth quarter of 1998. All derivatives are recognized on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. The Company assesses, both at its inception and on an
on-going basis, whether the derivatives that are used in hedging transactions
are highly effective in offsetting the changes in cash flows of hedged items.
The Company assesses hedge ineffectiveness on a quarterly basis and records the
gain or loss related to the ineffective portion to current earnings to the
extent significant. If the Company determines that a cash flow hedge is no
longer probable of occurring, the Company discontinues hedge accounting for the
affected portion of the forecasted transaction, and any unrealized gain or loss
on the contract is recognized in current earnings.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", ("SFAS 130") requires the display of comprehensive income and its
components as part of the Company's full set of financial statements.
Comprehensive income is comprised of net income and other comprehensive income.
Other comprehensive income includes certain changes in equity that are excluded
from net income, such as translation adjustments and unrealized holding gains
and losses on available-for-sale marketable securities and certain derivative
instruments. The Consolidated Statements of Shareholders' Equity reflect
comprehensive income for years ended December 31, 1999, 1998 and 1997 which were
$279.2 million, $127.8 million and $87.7 million, respectively.
Upon adoption of SFAS 133, on October 1, 1998, the Company recorded an
adjustment to other comprehensive income to recognize at fair value all
derivatives that were designated as cash flow hedging instruments, which
comprised unrealized losses related to the Company's interest rate swaps of $5.4
million. This unrealized loss decreased by $1.3 million during the fourth
quarter of 1998 and as of December 31, 1998, the cumulative unrealized losses on
the Company's interest rate swaps were $4.1 million. During 1999, the Company
recorded $4.5 million of unrealized gains to other comprehensive income
reflecting the increase in the fair value of the interest rate swaps and at
December 31, 1999 had a cumulative unrealized gain of $366,000.
The Company entered into foreign currency forward contracts in October 1998. At
December 31, 1998, these contracts had unrealized gains of $3,000, which were
aggregated with the unrealized losses associated with the Company's interest
rate swaps in comprehensive income. During 1999, the fair value of the Company's
foreign currency forward contracts increased by $6.7 million in unrealized
gains. At December 31, 1999, the Company had cumulative unrealized gains of $6.7
million on its foreign currency forward contracts.
SEGMENT INFORMATION
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information", ("SFAS 131") establishes standards
for reporting information on operating segments in interim and annual financial
statements.
38
<PAGE> 21
The Company's chief operating decision makers review the profit and loss of the
Company on an aggregate basis and manage the operations of the Company as a
single operating segment. Accordingly, the Company operates in one segment,
which is the business of developing, manufacturing and marketing drugs for human
health care.
REVENUES
Revenues from product sales are recognized when product is shipped and are net
of applicable allowances for returns, rebates and other applicable discounts and
allowances. The Company prepares its estimates for sales returns and allowances,
discounts and rebates quarterly based primarily on historical experience updated
for changes in facts and circumstances, as appropriate.
The Company receives royalty revenues under license agreements with a number of
third parties that sell products based on technology developed by the Company or
to which the Company has rights. The license agreements provide for the payment
of royalties to the Company based on sales of the licensed product. The Company
records these revenues based on estimates of the sales that occurred during the
relevant period. The relevant period estimates of sales are based on interim
data provided by licensees and analysis of historical royalties paid to the
Company (adjusted for any changes in facts and circumstances, as appropriate).
The Company maintains regular communication with its licensees in order to gauge
the reasonableness of its estimates. Differences between actual royalty revenues
and estimated royalty revenues are reconciled and adjusted for in the following
quarter. Historically, adjustments have not been material based on actual
amounts paid by licensees. There are no future performance obligations on the
part of the Company under these license agreements.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs, including amounts funded in research
collaborations, are expensed as incurred.
EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS
128 requires the presentation of "basic" earnings per share and "diluted"
earnings per share. Basic earnings per share is computed by dividing the net
income available to common shareholders by the weighted average number of shares
of common stock outstanding. For purposes of calculating diluted earnings per
share the denominator includes both the weighted average number of shares of
common stock outstanding and the number of dilutive common stock equivalents
such as stock options and warrants.
Dilutive securities include outstanding options under the Company's stock option
plans. Options to purchase 276,000 shares were outstanding at December 31, 1999
but not included in the computation of diluted earnings per share because the
options' exercise prices were greater than the average market price during the
period. The put warrants sold in connection with the Company's stock repurchase
program in 1999 did not have a significant additional dilutive effect. Shares
used in calculating basic and diluted earnings per share for the periods ending
December 31, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
--------------------- ---------------- -----------------
<S> <C> <C> <C>
Weighted average number of shares
of common stock outstanding 149,921 147,537 147,624
Dilutive stock options 7,867 6,733 5,375
--------------------- ---------------- -----------------
Shares used in calculating diluted
earnings per share 157,788 154,270 152,999
===================== ================ =================
</TABLE>
On June 11, 1999, the Board of Directors declared a two-for-one stock split to
be effected in the form of a stock dividend of one share of common stock for
each share outstanding. The stock dividend was payable on June 25, 1999 to
shareholders of record at the close of business on June 11, 1999. All references
to number of shares and per share amounts in the financial statements have been
restated to give effect to the stock split for all periods presented.
39
<PAGE> 22
2. FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to concentrations of
credit risk are accounts receivable and marketable securities. Wholesale
distributors and large pharmaceutical companies account for the majority of the
accounts receivable and collateral is generally not required. To mitigate the
risk, the Company monitors the financial performance and credit worthiness of
its customers. The Company invests its excess cash balances in marketable debt
securities, primarily U.S. government securities and corporate bonds and notes,
with strong credit ratings. The Company limits the amount of investment exposure
as to institution, maturity and investment type.
The average maturity of the Company's marketable securities as of December 31,
1999 and 1998 was 24 months and 21 months, respectively. Proceeds from
maturities and other sales of marketable securities, which were primarily
reinvested, for the years ended December 31, 1999, 1998 and 1997 were
approximately $1,007 million, $454 million and $373 million, respectively. The
cost of securities sold is determined based on the specific identification
method. Realized gains and (losses) on these sales for the years ended December
31, 1999, 1998 and 1997 were $(1,442,000), $645,000 and $(510,000),
respectively.
The following is a summary of marketable securities:
<TABLE>
<CAPTION>
Unrealized
-------------------------------- Amortized
(in thousands) Fair Value Gains Losses Cost
-------------- -------------- ---------- ------------
December 31, 1999:
<S> <C> <C> <C> <C>
U.S. Government securities $ 295,046 $ -- $ 4,656 $ 299,702
Corporate debt securities 302,573 -- 3,717 306,290
-----------------------------------------------------------------------------
$ 597,619 $ -- $ 8,373 $ 605,992
=============================================================================
Marketable securities,
noncurrent $ 98,017 $ 75,263 $ -- $ 22,754
=============================================================================
December 31, 1998:
U.S. Government securities $ 259,411 $ 627 $ 57 $ 258,841
Corporate debt securities 232,058 3,810 -- 228,248
-----------------------------------------------------------------------------
$ 491,469 $ 4,437 $ 57 $ 487,089
=============================================================================
Marketable securities,
noncurrent $ 12,668 $ -- $ 16,192 $ 28,860
=============================================================================
</TABLE>
The Company uses interest rate swap agreements to mitigate the risk associated
with its floating rate debt. The fair value of the interest rate swap agreements
at December 31, 1999, representing the cash the Company would receive to settle
the agreements, was approximately $366,000. The fair value of the interest rate
swap agreements at December 31, 1998, representing the cash requirements of the
Company to settle the agreements, approximated $4.1 million. The Company has
designated the interest rate swaps as cash flow hedges. There were no amounts of
hedge ineffectiveness related to the Company's interest rate swaps during 1999
and 1998, and no gains or losses were excluded from the assessment of hedge
effectiveness. The Company records the differential to be paid or received on
the interest rate swaps as incremental interest expense. The Company expects
approximately $376,000 in losses related to its interest rate swaps to affect
earnings in 2000.
The Company has foreign currency forward contracts to hedge specific
transactions denominated in foreign currencies. All foreign currency forward
contracts have durations of ninety days to 21 months. These contracts have been
designated as cash flow hedges and accordingly, to the extent effective, any
unrealized gains or losses on these foreign currency forward contracts are
reported in other comprehensive income. Realized gains and losses for the
effective portion are recognized with the underlying hedge transaction. The
Company assesses hedge ineffectiveness on a quarterly basis and records the gain
or loss related to the ineffective portion to current earnings to the extent
significant. If the Company determines that a cash flow hedge is no longer
probable of occurring, the Company discontinues hedge accounting for the
affected portion of the forecasted transaction and any unrealized gain or loss
on the contract is recognized in current earnings. The notional settlement
amount of the foreign currency forward contracts outstanding at December 31,
1999 was approximately $181.3 million. These contracts had a fair value of
approximately
40
<PAGE> 23
$6.7 million, representing an unrealized gain, and were included in other
current assets at December 31, 1999.
In 1999, there were no significant amounts recognized in earnings due to hedge
ineffectiveness or as a result of the discontinuance of cash flow hedge
accounting because it was probable that the original transaction would not
occur. The Company recognized $7.4 million of gains in product revenue and $2.7
million of gains in royalty revenue for the settlement of certain effective cash
flow hedge instruments during the year ended December 31, 1999. These
settlements were recorded in the same period as the related forecasted
transactions affecting earnings. The Company expects approximately $5.3 million
of unrealized gains at December 31, 1999 to affect earnings in 2000 related to
its foreign currency forward contracts.
During 1998, the Company recognized $686,000 in other expense as a result of the
discontinuance of cash flow hedges upon determining that it was no longer
probable that the original forecasted transaction would occur. The Company also
recognized a $322,000 gain in product revenue and a $485,000 loss in royalty
revenue for the settlement of certain cash flow hedge instruments during the
period. These settlements were recorded in the same period as the related
forecasted transactions affecting earnings.
3. BORROWINGS
As of December 31, 1999, the Company had $17.5 million outstanding under a
floating rate loan with a bank (the "Term Loan"). The Term Loan is secured by
the Company's laboratory and office building in Cambridge, Massachusetts. The
Term Loan provides for annual principal payments of $1.7 million in each of the
years 1996 through 2004 with the balance due May 8, 2005. The Company also
entered into an interest rate swap agreement, with the same bank, fixing its
interest rate at 7.5% during the remaining term of the loan, payable
semi-annually.
As of December 31, 1999, the Company had $39.5 million outstanding under a
floating rate loan agreement with a bank for financing the construction of its
biological manufacturing facility in North Carolina (the "Construction Loan").
The Construction Loan is secured by the facility. Payments of $805,000 are due
quarterly through 2006 with the balance due in 2007. The Company also entered
into an interest rate swap agreement, with the same bank, fixing its interest
rate at 7.75% during the remaining term of the loan, payable quarterly.
The Term Loan and Construction Loan agreements include various covenants,
including financial covenants, which require the Company to maintain minimum net
worth, cash flow and various financial ratios. The Company's long-term debt
obligations are carried at face value, which approximates fair market value.
Long-term debt at December 31, consists of the following:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
- -------------------------------------------------------------- ------------------- ------------------
<S> <C> <C>
Term Loan due 2005 $ 17,501 $ 19,167
Construction Loan due 2007 39,460 42,681
------------------- ------------------
56,961 61,848
Current portion (4,888) (4,888)
------------------- ------------------
$ 52,073 $ 56,960
=================== ==================
</TABLE>
4. CONSOLIDATED BALANCE SHEETS DETAILS
<TABLE>
<CAPTION>
Property and equipment:
December 31 (in thousands) 1999 1998
- -------------------------------------------------------------- ------------------- ------------------
<S> <C> <C>
Land $ 12,349 $ 8,359
Buildings 92,462 87,190
Leasehold improvements 54,946 52,602
Equipment 191,809 120,887
------------------- ------------------
Total cost 351,566 269,038
Less accumulated depreciation 111,789 86,487
------------------- ------------------
$ 239,777 $ 182,551
=================== ==================
</TABLE>
41
<PAGE> 24
Depreciation expense was $25.9 million, $21.4 million and $15.9 million for
1999, 1998 and 1997, respectively.
Accrued expenses and other:
<TABLE>
<CAPTION>
December 31 (in thousands) 1999 1998
- ---------------------------------------------------------- --------------------- ------------------
<S> <C> <C>
Royalties and licensing fees $ 34,914 $ 23,029
Income taxes 64,545 28,056
Other 55,798 49,794
--------------------- ------------------
$ 155,257 $ 100,879
===================== ==================
</TABLE>
5. PENSIONS
The Company has a defined benefit pension plan which provides benefits to
substantially all of its employees. The Company also has a supplemental
retirement benefit plan which covers certain employees. The pension plans are
noncontributory with benefit formulas based on employee earnings and credited
years of service. The Company's funding policy for its pension plans is to
contribute amounts deductible for federal income tax purposes. Funds contributed
to the plans are invested in fixed income and equity securities.
The components of net periodic pension cost for each of the three years ended
December 31 are summarized below:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
----------------- ----------------- --------------
<S> <C> <C> <C>
Service cost $ 2,923 $ 2,225 $ 1,873
Interest cost 1,307 1,041 876
Expected return on plan assets (994) (722) (497)
Amortization of transition asset -- (21) (21)
Amortization of prior service cost 43 43 43
Amortization of net actuarial loss 22 -- 40
----------------- ----------------- --------------
Net pension cost $ 3,301 $ 2,566 $ 2,314
================= ================= ==============
</TABLE>
42
<PAGE> 25
Reconciliations of projected benefit obligations, fair value of plan assets and
the funded status of the plans as of December 31, are presented below:
<TABLE>
<CAPTION>
Change in projected benefit obligation (in thousands) 1999 1998
- ---------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Net projected benefit obligation at the beginning of the year $ (16,003) $ (12,727)
Service cost (2,923) (2,225)
Interest cost (1,307) (1,041)
Actuarial gain (loss) 697 (341)
Gross benefits paid 159 331
------------------ ------------------
Net projected benefit obligation at the end of the year (19,377) (16,003)
------------------ ------------------
Change in plan assets (in thousands)
- ----------------------------------------------------------------
Fair value of plan assets at the beginning of the year 11,773 8,393
Actual return on plan assets 2,021 2,142
Employer contributions 1,500 1,557
Gross benefits paid (43) (213)
Administrative expenses (190) (106)
------------------ ------------------
Fair value of plan assets at the end of the year
15,061 11,773
------------------ ------------------
Funded status at the end of the year (in thousands)
- ----------------------------------------------------------------
Funded status at the end of the year (4,316) (4,230)
Unrecognized net actuarial (gain) loss (1,833) (173)
Unrecognized prior service cost 315 358
Unrecognized net transition asset 0 0
------------------ ------------------
Net amount recognized at the end of the year $ (5,834) $ (4,045)
================== ==================
Weighted average assumptions at the end of the year
- ----------------------------------------------------------------
Discount rate 7.50% 6.75%
Expected return on plan assets 8.00% 8.00%
Rates of compensation increase 5.00% 5.00%
</TABLE>
The Company has an unfunded supplemental retirement plan. As of December 31,
1999 the projected benefit and the accumulated benefit obligations was $3.8
million and $2.8 million, respectively. As of December 31, 1998 the projected
benefit and the accumulated benefit obligations was $3.2 million and $2.3
million, respectively.
6. OTHER INCOME, NET
Other income, net consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------
1999 1998 1997
------------------ ---------------- ---------------
<S> <C> <C> <C>
Interest income $ 35,407 $ 28,339 $ 22,135
Interest expense (4,639) (5,944) (5,309)
Other income (expense) (18,003) (2,841) 6,020
------------------ ---------------- ---------------
Total other income, net $ 12,765 $ 19,554 $ 22,846
================== ================ ===============
</TABLE>
Other income (expense) for the period ended December 31, 1999 included a $15
million write-down of certain non-current marketable securities.
As part of its strategic product development efforts, the Company invests in
equity securities of certain biotechnology companies with which it has
collaborative agreements. In December of 1996, Biogen purchased approximately
1.5 million shares of Creative BioMolecules, Inc. common stock for $18 million.
In March of 1997, Biogen purchased approximately 670,000 shares of CV
Therapeutics, Inc. common
43
<PAGE> 26
stock for $7 million. In March of 1998, the Company purchased approximately
435,000 shares of CuraGen common stock for $5 million and converted 100,000
shares of CuraGen Series E Preferred Stock valued at $1 million into CuraGen
common stock. Each of these small emerging companies is principally engaged in
researching, developing or manufacturing drugs for human health care.
As a matter of policy, Biogen determines on a quarterly basis whether a decline
in the fair value of a marketable security is other than temporary. Unrealized
gains and losses on marketable securities are included in other comprehensive
income in shareholders' equity, net of related tax effects. If a decline in the
fair value of a marketable security below the Company's cost basis is determined
to be other than temporary, such marketable security is written down to its
estimated fair value with a charge to current earnings.
Up through and including the assessment at June 30, 1999, the Company concluded
that substantial evidence existed suggesting that the value of the investments
described above would recover to at least the Company's purchase price. Such
evidence included the prospects for favorable clinical trial results, new
product initiatives and new collaborative agreements. However, given the lack of
any substantial price recovery during the quarter ended June 30, 1999 and the
amount of time elapsed since the decline in value began, the Company concluded
that it had become unclear over what period such price recovery would take
place. As a result, it was determined that the positive evidence suggesting that
the investments would recover to at least the Company's purchase price was not
sufficient to overcome the presumption that the current market price of the
investments was the best indicator of value at June 30, 1999. Accordingly, the
related unrealized losses of approximately $15 million were recognized as other
expense in the second quarter of 1999.
7. INCOME TAXES
The components of income (loss) before income taxes and of income tax expense
(benefit) for each of the three years ended December 31, are as follows:
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
------------------ ---------------- ----------------
Income (loss) before income taxes:
<S> <C> <C> <C>
Domestic $ 253,303 $ 200,181 $ 172,973
Foreign 75,713 10,012 (24,005)
------------------ ---------------- ----------------
$ 329,016 $ 210,193 $ 148,968
================== ================ ================
Income tax expense:
Current
Federal $ 112,499 $ 58,152 $ 33,688
State 15,587 3,937 2,735
Foreign 4,206 887 916
------------------ ---------------- ----------------
$ 132,292 $ 62,976 $ 37,339
------------------ ---------------- ----------------
Deferred
Federal $ (20,863) $ 8,314 $ 21,416
State (2,863) 206 1,046
------------------ ---------------- ----------------
(23,726) 8,520 22,462
------------------ ---------------- ----------------
Total income tax expense $ 108,566 $ 71,496 $ 59,801
================== ================ ================
</TABLE>
The Company's foreign subsidiaries generated operating losses in 1997 reflecting
the costs of building a commercial infrastructure in Europe and the foreign
subsidiaries' investment in the Company's research and development efforts.
44
<PAGE> 27
Deferred tax assets (liabilities) are comprised of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1999 1998
--------------------- --------------------
<S> <C> <C>
Tax credits $ 35,089 $ 13,454
Inventory and other reserves 14,927 10,762
Other 549 2,368
--------------------- --------------------
Deferred tax asset 50,565 26,584
--------------------- --------------------
Depreciation, amortization and other (9,943) (7,095)
Unrealized gain on investments (27,640) --
--------------------- --------------------
Deferred tax liabilities (37,583) (7,095)
--------------------- --------------------
$ 12,982 $ 19,489
===================== ====================
</TABLE>
A reconciliation of the U.S. federal statutory tax rate to the effective tax
rate for the periods ending December 31 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ---------------- -------------
<S> <C> <C> <C>
Statutory rate 35.0 % 35.0 % 35.0 %
State taxes 3.3 3.0 2.7
Foreign taxes (2.6) -- 6.3
Credits and net operating loss utilization (2.6) (4.2) (3.8)
Other (0.1) 0.2 (0.1)
-------------- ---------------- -------------
Effective tax rate 33.0 % 34.0 % 40.1 %
============== ================ =============
</TABLE>
At December 31, 1999, the Company had tax credits of $35.1 million, most of
which expire at various dates through 2014.
As of December 31, 1999, undistributed foreign earnings of non-U.S. subsidiaries
included in consolidated retained earnings aggregated $113 million, exclusive of
earnings that would result in little or no tax under current U.S. tax law. The
Company intends to reinvest these earnings indefinitely in operations outside
the United States. It is not practicable to estimate the amount of additional
tax that might be payable if such earnings were remitted to the United States.
8. RESEARCH COLLABORATIONS
In October 1997, the Company signed a research and option agreement (the
"CuraGen Agreement") with CuraGen Corporation ("CuraGen") under which the
Company and CuraGen collaborate in the discovery of novel genes using
CuraGen's functional genomics technologies. In March of 1998, under the terms of
the CuraGen Agreement, the Company purchased approximately 435,000 shares of
CuraGen common stock at the then fair value for a total of $5 million.
Additionally, 100,000 shares of CuraGen Series E Preferred Stock purchased by
Biogen in 1997 for $1 million were automatically converted into 100,000 shares
of CuraGen common stock. In October 1999, CuraGen drew down $10 million on a
line of credit, previously extended to CuraGen pursuant to the terms of the
CuraGen Agreement and simultaneously converted the borrowings into approximately
611,000 shares of Curagen common stock at the then fair value of $16.37 per
share. The investment in CuraGen common stock is classified as
available-for-sale and is included in long-term marketable securities as of
December 31, 1999. The Company provided CuraGen with research and development
funding of $1.1 million and $1.9 million in 1999 and 1998, respectively. The
Company expects to fund research activities of CuraGen related to the
45
<PAGE> 28
collaboration of up to $750,000 in 2000, and in return, has an option to acquire
an exclusive license to certain discoveries arising out of the collaborative
efforts.
In March 1997, the Company signed a research collaboration and license agreement
(the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which Biogen
obtained rights under CVT's patents and know-how to develop and market molecules
that act as highly selective antagonists of the adenosine A1 receptor, for the
treatment of congestive heart failure. Under the terms of
the CVT Agreement, the Company purchased approximately 670,000 shares of CVT
common stock at the then fair value for $7 million and paid a one-time license
fee of $5 million, which was charged to research and development expense. The
investment in CVT is classified as available-for-sale and is included in
long-term marketable securities. In addition, pursuant to the terms of the CVT
Agreement, the Company established a $12 million line of credit that CVT may use
for operating purposes. At December 31, 1999, the Company had advanced $8
million under the line of credit to CVT.
In December 1996, the Company signed a research collaboration and license
agreement (the "CBM Agreement") with Creative BioMolecules, Inc. ("CBM") under
which Biogen obtained rights to develop and market CBM's morphogenic protein,
OP-1, for the treatment of renal disorders. Under the CBM Agreement the Company
purchased 1.5 million shares of CBM common stock for $18 million. The payment
for the common stock included a $1.2 million premium over the fair value of the
common stock which was charged to research and development expense. As of
December 31, 1999, the investment is classified as available-for-sale and is
included in long term marketable securities. The Company provided $10 million in
research and development funding, which was charged to expense as provided in
1998. The CBM Agreement terminated at the end of 1999.
In July 1996, the Company signed a collaborative research and commercialization
agreement (the "Ontogeny Agreement") with Ontogeny, Inc. ("Ontogeny"), a private
biotechnology company, for the development and commercialization of three
specific hedgehog cell proteins, a class of novel human proteins, that are
responsible for reducing the formation or regeneration of tissue. Under the
Ontogeny Agreement, the Company purchased 400,000 shares of preferred stock of
Ontogeny for $1 million and acquired certain exclusive, worldwide rights related
to products based on the hedgehog proteins for most disease areas. The Company
accounts for its investment in Ontogeny, which is included in other assets,
using the cost method of accounting. In November 1998, the Company extended and
expanded its collaboration with Ontogeny and provided to Ontogeny a $4 million
convertible loan. In June 1999, the loan was converted into 800,000 shares of
Ontogeny Convertible Preferred Stock. The Company provided $2.8 million and $3.6
million of research funding to Ontogeny in 1999 and 1998, respectively. The
Company has agreed to fund up to an additional $6 million in research funding
over the next two years unless the agreement is terminated. If the Company
exercises its option to proceed with development and commercialization of a
hedgehog protein, the Company would be committed to additional funding in the
form of license fees, equity investments and lines of credit.
In August 1995, the Company signed a collaborative research agreement (the
"Genovo Agreement") for the development of human gene therapy treatments with
Genovo, Inc. ("Genovo"), a gene therapy research company. Under the Genovo
Agreement, the Company acquired 380,000 shares of Genovo Series A Preferred
stock for $4.5 million and acquired certain licensing rights. The Company
accounts for this investment, which is included in other assets, using the
equity method of accounting. The Company recorded its proportion of Genovo's net
losses as research and development expense in the amounts of $7.6 million, $9
million, and $7.7 million in 1999, 1998 and 1997, respectively. At December 31,
1999, the Company had remaining research funding commitments to Genovo of
approximately $2.4 million.
9. COMMITMENTS AND CONTINGENCIES
The Company rents laboratory and office space and certain equipment under
noncancellable operating leases. The rental expense under these leases, which
terminate at various dates through 2015, amounted to $11.9 million in 1999, $9.4
million in 1998 and $7.5 million in 1997. The lease agreements contain various
clauses for renewal at the option of the Company and, in certain cases,
escalation clauses linked generally to rates of inflation.
46
<PAGE> 29
At December 31, 1999, minimum annual rental commitments under noncancellable
leases were as follows:
<TABLE>
<CAPTION>
Year (in thousands)
----------------------------------------------------------------------
<S> <C>
2000 $ 12,984
2001 10,245
2002 10,009
2003 8,447
2004 7,910
Thereafter 66,657
--------------------
Total minimum lease payments $ 116,252
====================
</TABLE>
On October 4, 1999 the Company began construction of its new research and
development center in Cambridge, Massachusetts. The new 224,000 square foot
building is expected to be completed in the spring of 2001. At December 31,
1999, $35 million had been committed for construction costs. Additionally, the
Company is completing plans to build a large scale manufacturing plant in
Raleigh, North Carolina. The Company expects that construction will be completed
at the end of 2001. At December 31, 1999, $67 million had been committed for
construction costs.
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 (U.S. Patent No.
5,376,567) in the United States in the production of Biogen's AVONEX(R)
(Interferon beta-1a). In November 1996, Berlex's New Jersey action was
transferred to the United States District Court in Massachusetts and
consolidated for pre-trial purposes with a related declaratory judgment action
previously filed by Biogen. On August 18, 1998, Berlex filed a second suit
against Biogen alleging infringement by Biogen of a patent which was issued to
Berlex in August 1998 and which is related to the McCormick patent (U.S. Patent
No. 5,795,779). On September 23, 1998, the cases were consolidated for pre-trial
and trial purposes. 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
claims, but the ultimate outcome is not currently determinable. As a result, an
estimate of any potential loss or range of loss cannot be made at this time. A
hearing on the parties' summary judgment motions was completed in March 2000.
Biogen moved for summary judgment of non-infringement of certain claims of the
`567 patent, non-infringement of the `779 patent, as well as a determination of
the invalidity of certain claims of the `567 patent and all of the claims of the
`779 patent. Berlex moved to dismiss Biogen's inequitable conduct defenses and
counterclaims. Berlex also moved for a declaration of literal infringement of
certain claims of the `567 and the `779 patents. No decisions have been rendered
to date. The Company expects a trial to occur in the second half of 2000.
In 1995, the Company filed an opposition with the Opposition Division of the
European Patent Office to oppose a European patent (the "Rentschler I Patent")
issued to Dr. Rentschler Biotechnologie GmbH ("Rentschler") relating to
compositions of matter of beta interferon. In 1997, the European Patent Office
issued a decision to revoke the Rentschler I Patent. Rentschler has appealed
that decision and the appeal is still pending. On October 13, 1998, the Company
filed another opposition with the Opposition Division of the European Patent
Office to oppose a second European patent issued to Rentschler (the "Rentschler
II Patent") with certain claims regarding compositions of matter of beta
interferon with specific regard to the structure of the glycosylated molecule.
While Biogen believes that the Rentschler II Patent will be revoked and that the
revocation of the Rentschler I Patent will be upheld on appeal, if either the
Rentschler I Patent or the Rentschler II Patent were to be upheld and if
Rentschler were to obtain, through legal proceedings, a determination that the
Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such
result could have a material adverse effect on the Company's results of
operation and financial position.
10. SHAREHOLDERS' EQUITY
CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
The Company has authority to issue 20,000,000 shares of $.01 par value preferred
stock.
47
<PAGE> 30
SHAREHOLDER RIGHTS PLAN
In 1989, the Company's Board of Directors declared a dividend to holders of the
Company's common stock of rights (the "Old Rights") to purchase shares of Series
A Junior Participating Preferred Stock (the "Old Preferred Stock"). Each Old
Right entitled the registered holder to purchase from the Company one
one-hundredth of a share of Old Preferred Stock upon the terms and subject to
the conditions set forth in a Rights Agreement, dated as of May 8, 1989, between
the Company and The First National Bank of Boston (the "Old Plan"). The Old Plan
and the Old Rights expired on May 8, 1999. Consequently, on April 16, 1999, the
Board of Directors declared a dividend to holders of the Company's common stock
of one new preferred share purchase right (a "New Right") for each outstanding
share of common stock. The New Rights were granted on May 8, 1999 pursuant to a
new Rights Agreement, dated May 8, 1999, between the Company and State Street
Bank and Trust Company, as Rights Agent (the "New Plan"). Each New Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of Series A-1 Junior Participating Preferred Stock, par value $.01
per share ("New Preferred Stock"), at a price of $850 per one one-thousandth of
a share of New Preferred Stock, subject to adjustment. Each one one-thousandth
of a share of New Preferred Stock has rights, privileges and preferences which
make its value approximately equal to the value of one share of the Company's
common stock. The New Rights are exercisable only if a person or group acquires
20% or more of the outstanding common stock of the Company or commences a tender
or exchange offer, the consummation of which would result in the ownership of
20% or more of the outstanding common stock of the Company. Once the New Rights
become exercisable, and in some circumstances if additional conditions are met,
each New Right will entitle the Company's shareholders (other than the acquiror)
to, among other things, purchase common stock at a substantial discount. Unless
earlier redeemed or exchanged by the Company, the New Rights expire on May 8,
2009. The Company is entitled to redeem the New Rights at a price of $.001 per
New Right.
The Old Preferred Stock has been eliminated and replaced with the New Preferred
Stock. At December 31, 1999, the Company had 250,000 shares of New Preferred
Stock authorized for use in connection with the New Plan.
SHARE OPTION AND PURCHASE PLANS
The Company has several stock-based compensation plans. The Company applies APB
Opinion No. 25 "Accounting for Stock Issued to Employees" in accounting for its
plans and applies Statement of Financial Accounting Standards No. 123
"Accounting for Stock Issued to Employees" ("SFAS 123") for disclosure purposes
only. The SFAS 123 disclosures include pro forma net income and earnings per
share as if the fair value-based method of accounting had been used. Stock
issued to non-employees is accounted for in accordance with SFAS 123 and related
interpretations. Included in compensation expense for the periods ending
December 31, 1999, 1998 and 1997 were approximately $7.5 million, $2.2 million
and $271,000, respectively, related to stock based compensation plans.
The Company has several plans and arrangements under which it may grant options
to employees, Directors and Scientific Board members to purchase common stock.
Under the terms of the Company's stock-based compensation plans, aproximately 47
million optons may be granted. Option grants are typically made under the 1985
Non-Qualified Stock Option Plan and the 1987 Scientific Board Stock Option Plan
(the "Plans"). Options under the Plans are granted at no less than 100% of the
fair market value on the date of grant. Options generally become exercisable
over various periods, typically 5 to 7 years for employees and 3 years for
Directors and Scientific Board members, and have a maximum term of 10 years.
48
<PAGE> 31
Activity under these plans for the periods ending December 31, is as follows
(shares are in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- ------------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, Jan. 1 22,376 $ 15.97 22,304 $ 11.98 23,496 $ 10.39
Granted 3,099 60.24 3,618 33.88 3,112 18.83
Exercised (5,435) 10.45 (2,612) 7.65 (3,304) 7.04
Canceled (2,102) 22.41 (934) 13.33 (1,000) 12.20
---------- ------------- ----------- --------------- ------------ ------------
Outstanding, Dec. 31 17,938 $ 24.53 22,376 $ 15.97 22,304 $ 11.98
========== ============= =========== =============== ============ ============
Options exercisable 9,384 10,998 10,416
Available for grant 2,828 3,824
2,270
Weighted average fair
value of options
granted $ 26.23 $ 14.63 $ 8.39
</TABLE>
The table below summarizes options outstanding and exercisable at December 31,
1999 (shares are in thousands):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
- --------------------------- --------------- --------------- -------------- -------------- ---------------
<C> <C> <C> <C> <C> <C>
$0.00-$10.00 3,809 3.53 $ 7.77 3,359 $ 7.72
$10.01-$20.00 8,163 6.15 15.51 4,586 14.76
$20.01-$30.00 976 8.00 22.93 180 22.38
$30.01-$40.00 281 8.77 33.85 69 33.52
$40.01-$50.00 2,703 8.98 41.25 890 41.12
$50.01-$60.00 352 9.39 54.27 -- --
$60.01-$70.00 17 9.63 66.14 -- --
$70.01-$80.00 1,485 9.91 72.27 300 71.63
Over $80.00 152 9.72 85.37 -- --
--------------- -------------- --------------
Total 17,938 $ 24.53 9,384
=============== ============== ==============
</TABLE>
The Company also has two employee stock purchase plans covering substantially
all of its employees. The plans allow employees to purchase common stock at 85%
of the lower of the fair market value at either the date of the beginning of the
plan period or the purchase date. Purchases under the plans are subject to
certain limitations and may not exceed an aggregate of 1,120,000 shares during
the term of the plans; no shares may be issued after December 31, 2007. Through
December 31, 1999, 365,690 shares have been issued under the stock purchase
plans.
If compensation cost for the Company's 1999, 1998 and 1997 grants under the
stock-based compensation plans had been determined based on SFAS 123, the
Company's pro forma net income, and pro forma diluted earnings per share for the
years ending December 31, would have been as follows (in thousands except per
share data):
<TABLE>
<CAPTION>
1999 1998 1997
----------------- -------------- --------------
<S> <C> <C> <C>
Pro forma net income $ 196,965 $ 122,342 $ 83,244
Pro forma diluted earnings per share $ 1.25 $ 0.79 $ 0.54
</TABLE>
49
<PAGE> 32
The fair value of options granted is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ------------- ------------
<S> <C> <C> <C>
Expected dividend yield 0 % 0 % 0 %
Expected stock price volatility 36 % 36 % 36 %
Risk-free interest rate 5.5 % 5.5 % 5.5-5.9 %
Expected option term in years 5.6 5.6 5.8
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 did not apply to awards prior to 1995, and
additional awards in future years are anticipated.
STOCK REPURCHASE PROGRAM
On February 22, 1999, the Company announced that its Board of Directors had
authorized the repurchase of up to 8 million shares of the Company's common
stock. The repurchased stock will provide the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. Stock purchases are expected to occur from time
to time through 2000. The stock repurchase program may be discontinued at any
time. During 1999, the Company repurchased approximately 3.4 million shares of
its common stock at a cost of $197.7 million. Under a previous stock repurchase
program, the Company in 1998 repurchased 1.8 million shares of its common stock
at a cost of $65.6 million.
To enhance the 1999 stock repurchase program, the Company sold put warrants to
and purchased call options from independent third parties for a total of 4
million shares of which 2.2 million shares were outstanding at December 31,
1999, at a strike price of $49.47. Additionally, during 1999 in a separate put
warrant program to facilitate its purchase of common stock, the Company sold put
warrants for total proceeds of $22.1 million. The Company had put warrants to
purchase 1.6 million shares outstanding at December 31, 1999, at an average
strike price of $68.99 relating to this put warrant program. All of the
Company's put warrants outstanding are exercisable only at the date of
expiration, with expiration dates ranging from January through November of 2000.
The outstanding put warrants permit a net-share settlement at the Company's
option and, therefore, did not result in a put obligation liability on the
Company's Consolidated Balance Sheets. The put warrants sold in connection with
the Company's stock repurchase program did not have a significant additional
dilutive effect.
11. SEGMENT INFORMATION
The Company operates in one segment, which is the business of developing,
manufacturing and marketing drugs for human health care. The chief operating
decision makers review the profit and loss of the Company on an aggregate basis
and manage the operations of the Company as a single operating segment. The
Company currently derives product revenues from sales of its AVONEX(R)
(Interferon beta-1a) product for the treatment of relapsing forms of multiple
sclerosis. The Company also derives revenue 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. Revenues are primarily attributed from external customers
to individual countries where earned based on location of the customer or
licensee. As of December 31, 1999, 1998, and 1997, respectively, no material
amounts of product or royalty revenue could be attributable to an individual
foreign country.
50
<PAGE> 33
The Company's geographic information is as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1999: US EUROPE ASIA OTHER TOTAL
- ----------------------------------- ------------ ----------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
Product revenue from external
customers $ 442,278 $ 173,640 $ -- $ 4,718 $ 620,636
Royalty revenue from external
customers 117,182 38,391 15,871 2,355 173,799
Long-lived assets 270,179 20,910 -- 131 291,220
December 31, 1998: US EUROPE ASIA OTHER TOTAL
- ----------------------------------- ------------ ----------- ------------ ---------------- -----------
Product revenue from external
customers $ 303,591 $ 91,237 $ -- $ 35 $ 394,863
Royalty revenue from external
customers 108,177 37,573 13,940 3,034 162,724
Long-lived assets 213,053 15,912 -- 105 229,070
December 31, 1997: US EUROPE ASIA OTHER TOTAL
- ----------------------------------- ------------ ----------- ------------ ---------------- -----------
Product revenue from external
customers $ 220,385 $ 17,885 $ -- $ 1,718 $ 239,988
Royalty revenue from external
customers 88,424 50,279 15,362 17,856 171,921
Long-lived assets 204,800 11,888 -- -- 216,688
</TABLE>
The Company received revenue from five unrelated parties in 1999 accounting for
a total of 15%, 13%, 13%, 11% and 11% of total product and royalty revenue. The
Company received revenue from five unrelated parties in 1998 accounting for a
total of 16%, 13%, 11%, 11% and 10% of total product and royalty revenue. The
Company received revenue from four unrelated parties in 1997 accounting for a
total of 19%, 11%, 11% and 10% of total product and royalty revenue.
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(in thousands, except per share amounts)
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
1999
<S> <C> <C> <C> <C> <C>
Total revenues $ 171,720 $ 188,929 $ 208,431 $ 225,355 $ 794,435
Product revenue 131,320 145,852 163,448 180,016 620,636
Royalties revenue 40,400 43,077 44,983 45,339 173,799
Total expenses and taxes 132,220 136,271 154,494 163,765 586,750
Other income, net 6,184 (9,270) 8,092 7,759 12,765
Net income 45,684 43,388 62,029 69,349 220,450
Basic earnings per share 0.31 0.29 0.41 0.46 1.47
Diluted earnings per share 0.29 0.28 0.39 0.44 1.40
1998
Total revenues $ 114,472 $ 128,812 $ 145,904 $ 168,399 $ 557,587
Product revenue 76,100 87,073 107,492 124,198 394,863
Royalties revenue 38,372 41,739 38,412 44,201 162,724
Total expenses and taxes 93,623 103,602 114,024 127,195 438,444
Other income, net 6,922 6,239 5,685 708 19,554
Net income 27,771 31,449 37,565 41,912 138,697
Basic earnings per share 0.19 0.21 0.25 0.28 0.94
Diluted earnings per share 0.18 0.20 0.24 0.27 0.90
</TABLE>
51
<PAGE> 34
52
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Biogen, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Biogen, Inc.
and its subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 14, 2000
52
<PAGE> 35
SENIOR EXECUTIVES AND BOARD MEMBERS
Biogen, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Senior Biogen Executives Board of Directors Scientific Board
<S> <C> <C>
James L. Vincent James L. Vincent 2,3,5 Phillip A. Sharp, Ph.D.
Chairman of the Board and Chairman of the Board and Chairman of the Scientific Board
Chief Executive Officer Chief Executive Officer Institute Professor and Director of the
Biogen, Inc. McGovern Institute for Brain Research,
Massachusetts Institute of Technology;
James C. Mullen Nobel Laureate
President and Alexander G. Bearn, M.D. 5
Chief Operating Officer Executive Officer, American Philosophical
Society
Adjunct Professor, The Rockefeller University Sir Kenneth Murray, Ph.D.
Burt A. Adelman, M.D. Professor Emeritus, Vice Chairman of the Scientific Board
Vice-President - Medical Research Cornell University Medical College Biogen Professor of Molecular Biology,
Emeritus
University of Edinburgh;
Cornelis "Kees" Been Alan Belzer 1, 5 Fellow of The Royal Society
Vice President - Business and President, Chief Operating Officer and Director,
Market Development Allied-Signal, Inc. (retired)
Alexander G. Bearn, M.D.
Executive Officer, American Philosophical
Michael W. Bonney Harold W. Buirkle 1,2,4 Society
Vice President - Sales and Marketing Managing Director, Adjunct Professor, The Rockefeller
The Henley Group, Inc. (retired) University
Professor Emeritus,
Thomas J. Bucknum, Esq. Cornell University Medical College
Vice President - General Counsel, Mary L. Good, Ph.D. 2
Secretary and Clerk Former Undersecretary for Technology,
U.S. Department of Commerce Max D. Cooper, M.D.
Management Member, Investigator,
Frank A. Burke, Jr. Venture Capital Investors, LLC, Howard Hughes Medical Institute;
Vice President - Human Resources Donaghey University Professor at University of Professor of Medicine, Pediatrics,
Arkansas at Little Rock Microbiology and Pathology,
University of Alabama at Birmingham
Joseph M. Davie, M.D., Ph.D.
Senior Vice President - Research Thomas F. Keller, Ph.D. 1
R.J. Reynolds Professor and Dean, Joseph M. Davie, M.D., Ph.D.
Sylvie L. Gregoire, Pharm. D. Fuqua School of Business Europe, Senior Vice President - Research,
Vice President - Regulatory Affairs Duke University Biogen, Inc.
Robert A. Hamm
Vice President - Manufacturing Roger H. Morley 2,4 Richard A. Flavell, Ph.D.
Vice President, Schiller International Professor and Chairman,
University Immunobiology Section,
Timothy M. Kish Co-Managing Director, R&R Inventions Ltd.; Howard Hughes Medical Institute,
Vice President - Finance and Former President, American Express Co. Yale University School of Medicine;
Chief Financial Officer Fellow of The Royal Society
Mark W. Leuchtenberger James C. Mullen 1
Vice President - International President and Chief Operating Officer, Daniel H. Rich, Ph.D.
Biogen, Inc. Professor of Medicinal Chemistry
David D. Pendergast, Ph.D. and Organic Chemistry,
Vice President - Product Development University of Wisconsin - Madison
and Quality Assurance Sir Kenneth Murray, Ph.D. 3,5
Biogen Professor of Molecular Biology, Emeritus
University of Edinburgh; Kai L. Simons, M.D., Ph.D.
Fellow of The Royal Society Professor of Cell Biology
European Molecular Biology Lab,
Heidelberg, Germany
Phillip A. Sharp, Ph.D. 2, 3
Institute Professor and Director of the
McGovern Institute Thomas P. Stossel, M.D.
for Brain Research, Co-Director,
1 Member of the Finance and Audit Massachusetts Institute of Technology; Nobel Division of Hematology,
Committee Laureate Brigham and Women's Hospital
2 Member of the Compensation and
Management Resources Committee
3 Member of the Project Share Committee Alan K. Simpson 5 Daniel I.C. Wang, Ph.D.
4 Member of the Stock and Option Plan Director of the Institute of Politics and Institute Professor of Chemical
Administration Committee Visiting Lecturer, Engineering
5 Member of the Nominating Committee John F. Kennedy School of Government Massachusetts Institute of Technology
Harvard University; Former U.S. Senator
James W. Stevens 1, 5
Former Chairman, Prudential Asset
Management Group
</TABLE>
53
<PAGE> 36
SHAREHOLDER INFORMATION
Biogen, Inc. and Subsidiaries
<TABLE>
<CAPTION>
<S> <C>
Corporate Headquarters: SEC Form 10-K
Biogen, Inc. A copy of the Company's annual report to the
14 Cambridge Center Securities and Exchange Commission on
Cambridge, MA 02142 Form 10-K is available upon written request to the:
Telephone: (617) 679-2000 Corporate Communications Department
Fax: (617) 679-2617 Biogen, Inc.
14 Cambridge Center
Annual Meeting Cambridge, MA 02142.
Friday, June 16, 2000 at 10:00 a.m.
at the Company's offices at 12 Cambridge Center Transfer Agent
All shareholders are welcome. For shareholder questions regarding lost certificates,
address changes and changes of ownership or name
Market for Securities in which the shares are held, direct inquiries to:
Biogen's securities are quoted on the State Street Bank and Trust Company
NASDAQ National Market System. P.O. Box 8200
Common stock symbol: BGEN. Boston, MA 02266-8200
Telephone: (800) 426-5523
As of March 20, 2000 there were approximately
2,667 holders of record of the Company's Common Independent Accountants
Stock. The Company has not paid any cash dividends PricewaterhouseCoopers LLP
on its Common Stock since its inception, and does not 160 Federal Street
intend to pay any dividends in the foreseeable future. Boston, MA 02110
On June 25, 1999, the Company effected a two-for-one
stock split of its Common Stock. The quarterly high U.S. Legal Counsel
and low closing prices (adjusted to reflect the stock Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
split) of the Company's Common Stock on the One Financial Center
NASDAQ National Market System for 1999 and 1998 Boston, MA 02111
are as follows:
News Releases
High Low As a service to our shareholders and prospective
Fiscal 1999 investors, copies of Biogen news releases issued in the
- --------------------- last 12 months are now available almost immediately
First Quarter 58 19/32 39 19/32 24 hours a day, seven days a week, on the Internet's
Second Quarter 64 5/16 46 3/16 World Wide Web at http://www.prnewswire.com and
Third Quarter 89 3/16 63 1/16 via automated fax by calling "Company News On Call"
Fourth Quarter 88 1/16 64 3/8 at 1-800-758-5804, ext. 101550. Biogen news
releases are usually posted on both systems within one
Fiscal 1998 hour of being issued are available at no cost.
First Quarter 24 27/32 16 5/8
Second Quarter 24 27/32 20 17/32
Third Quarter 34 23 1/8
Fourth Quarter 43 7/16 31
The Biogen logo and AVONEX(R)are registered
Trademarks of Biogen, Inc. AMEVIVE(TM) and ANTOVA(TM)
are trademarks of Biogen, Inc. Intron(R)A, REBETOL(R) and
REBETRON(R) are registered trademarks of Schering-Plough
Corporation. Betaseron(R) is a registered trademark of Berlex
Laboratories, Inc. Betaferon(R) is a registered trademark of
Schering AG, Germany. Copaxone(R)is a registered trademark
Of Teva Pharmaceutical Industries, Ltd. Infergen(R) is a
registered trademark of Amgen.
</TABLE>
54
<PAGE> 37
Biogen, Inc. and Subsidiaries
Offices Worldwide
<TABLE>
<CAPTION>
<S> <C> <C>
Biogen, Inc. Biogen GmbH Biogen Limited
14 Cambridge Center Effingergasse 21 5d Roxborough Way
Cambridge, MA 02142 1160 Vienna Foundation Park
United States Austria Maidenhead, Berkshire SL6 2UD
Tel 617 679-2000 Tel 43 1 48 44 61 3 United Kingdom
Fax 617 679-2617 Fax 43 1 48 44 61 311 Tel 44 1628 501000
Fax 44 1628 501010
Biogen Europe Biogen Belgium S.A.
Le Capitole Avenue de Tyras 111
55 avenue des Champs Pierreux 1120 Neder-Over-Heembeek
92012 Nanterre Belgium
France
Tel 33 1 41 37 95 95 Biogen Canada, Inc.
Fax 33 1 41 37 24 00 3-Robert Speck Parkway
Mississauga, Ontario L4Z2G5
RTP - Biogen, Inc. Canada
P.O. Box 14627 Tel 1 888 456-2263
5000 Davis Drive
Research Triangle Park Biogen France S.A.
NC 27709-4627 Le Capitole
Tel 919 941-1100 55 avenue des Champs Pierreux
Fax 919 941-1112 92012 Nanterre
France
Biogen (Denmark) A/S Tel 33 1 41 37 95 95
Lyngbyvej 28 Fax 33 1 40 97 00 53
2100 Copenhagen
Denmark Biogen GmbH
Tel 45 39 16 91 91 Carl-Zeiss Ring 6
Fax 45 39 16 91 99 85737 Ismaning
Germany
Biogen Sweden AB Tel 49 89 99 61 70
Kanalvagen 10C/12 Fax 49 89 99 61 71 99
S-194 61 Upplands Vasby
Stockholm, Sweden Biogen International B.V.
Tel 46 8 590 041 70 Robijnlaan 8
Fax 46 8 590 042 02 2132 WX Hoofddorp
The Netherlands
Biogen Norway AS Tel 31 23 566 81 81
Karenslyst Alle 8b Fax 31 23 566 81 82
N-0277 oslo
Norway Biogen Finland Oy
Tel 47 23 12 06 38 Pakkalankuja 6
Fax 47 23 12 05 98 SF-0150 Vantaa
Finland
Tel 358 9 77 43 700
Fax 358 9 77 43 70 40
</TABLE>
55
<PAGE> 38
Biogen, Inc.
Schedule II
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1999, 1998, 1997
(in thousands)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END
DESCRIPTION PERIOD EXPENSES DEDUCTIONS OF PERIOD
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended December 31, 1999 $ 1,642 $ -- $ -- $ 1,642
------------------- ------------------- ------------------- -------------------
Year Ended December 31, 1998 $ 1,645 $ -- $ 3 $ 1,642
------------------- ------------------- ------------------- -------------------
Year Ended December 31, 1997 $ 1,480 $ 1,196 $ 1,031 $ 1,645
------------------- ------------------- ------------------- -------------------
Sales Returns & Allowances,
Discounts and Rebates
Year Ended December 31, 1999 $ 5,592 $ 42,090 $ 39,028 $ 8,654
------------------- ------------------- ------------------- -------------------
Year Ended December 31, 1998 $ 3,789 $ 26,172 $ 24,369 $ 5,592
------------------- ------------------- ------------------- -------------------
Year Ended December 31, 1997 $ 1,350 $ 18,387 $ 15,948 $ 3,789
------------------- ------------------- ------------------- -------------------
</TABLE>
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Biogen, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 14, 2000 appearing in the 1999 Annual Report to Shareholders of
Biogen, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 14, 2000
<PAGE> 1
EXHIBIT 21
BIOGEN, INC.
Subsidiaries
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
Biogen Canada, Inc. Delaware
Bio Holding I, Inc. Delaware
Bio Holding II, Inc. Delaware
Biogen Realty Corporation Massachusetts
Biogen Realty Limited Partnership Massachusetts
Biogen Technologies, Inc. Delaware
Biogen Belgium S.A./NV Belgium
Biogen B.V. The Netherlands
Biogen France S.A. France
Biogen GmbH Austria
Biogen GmbH Germany
Biogen International B.V. The Netherlands
Biogen Limited United Kingdom
Biotech Manufacturing CV The Netherlands
Biotech Manufacturing Limited Channel Islands
Biogen Norway AS Norway
Biogen Sweden AB Sweden
Biogen (Denmark) A/S Denmark
Biogen Finland Oy Finland
Biogen Foreign Sales Company, Ltd. Barbados
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3, as amended (Nos. 33-14741, 33-14743, 33-20183, 33-51639,
and 333-71695) 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, 33-63015, 333-42887, and 333-70701) of Biogen, Inc. and its
subsidiaries of our report dated January 14, 2000 appearing in the 1999 Annual
Report to Shareholders which is incorporated in this Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BIOGEN, INC. AND SUBSIDIARIES FOR THE YEAR
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH ANNUAL REPORT
ON FORM 10K FOR THE PERIOD ENDED DECEMBER 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 56,920
<SECURITIES> 597,619
<RECEIVABLES> 139,005
<ALLOWANCES> 1,642
<INVENTORY> 40,031
<CURRENT-ASSETS> 910,226
<PP&E> 351,566
<DEPRECIATION> 111,789
<TOTAL-ASSETS> 1,277,973
<CURRENT-LIABILITIES> 190,270
<BONDS> 52,073
0
0
<COMMON> 1,507
<OTHER-SE> 978,023
<TOTAL-LIABILITY-AND-EQUITY> 1,277,973
<SALES> 620,636
<TOTAL-REVENUES> 794,435
<CGS> 96,903
<TOTAL-COSTS> 111,005
<OTHER-EXPENSES> 367,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,639
<INCOME-PRETAX> 329,016
<INCOME-TAX> 108,566
<INCOME-CONTINUING> 220,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,450
<EPS-BASIC> 1.47
<EPS-DILUTED> 1.40
</TABLE>
