SECURITIES AND EXCHANGE COMMISSION Total Pages- 19
WASHINGTON, D.C. 20549 Exhibit Index- 11
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-12042
BIOGEN, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Cambridge Center, Cambridge, MA 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 252-9200
Former name, former address and former fiscal year, if changed since
last report: Not Applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the issuer's classes of common
stock, as of April 15, 1994:
Common Stock, par value $0.01 32,418,602
(Title of each class) (Number of Shares)
B I O G E N , I N C . Page 2
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
March 31, 1994 and December 31, 1993. . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Income -
Three months ended March 31, 1994 and 1993. . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31 1994 and 1993 . . . . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements. . . . . . . .6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . .7
Report of Independent Accountants . . . . . . . . . . . . . . . . .9
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 10
* * * * * * * * * * * * * * * * * *
Note concerning trademarks: Certain names mentioned in this report are
trademarks owned by Biogen, Inc. or its
affiliates or licensees. Hirulog(TM) is a
trademark of Biogen, Inc.
BIOGEN, INC. AND SUBSIDIARIES Page 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,1994 Dec. 31,1993
(unaudited)
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . $ 52,704 $ 74,546
Marketable securities. . . . . . . . . . . 243,433 195,805
Accounts receivable. . . . . . . . . . . . 8,178 31,695
Other. . . . . . . . . . . . . . . . . . . 7,482 7,378
-------- --------
Total current assets . . . . . . . . . . . 311,797 309,424
-------- --------
Property and equipment
Total cost . . . . . . . . . . . . . . . . 70,669 64,111
Less accumulated depreciation. . . . . . . 26,863 25,611
-------- --------
Property and equipment, net. . . . . . . . 43,806 38,500
-------- --------
Other assets
Patents, net . . . . . . . . . . . . . . . 7,184 7,164
Other. . . . . . . . . . . . . . . . . . . 2,206 1,862
-------- --------
Total other assets . . . . . . . . . . . . 9,390 9,026
-------- --------
$364,993 $356,950
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . $ 4,052 $ 2,916
Other current liabilities. . . . . . . . . 25,478 28,860
-------- --------
Total current liabilities. . . . . . . . . 29,530 31,776
-------- --------
Shareholders' equity
Common stock . . . . . . . . . . . . . . . 324 323
Additional paid-in capital . . . . . . . . 352,314 353,247
Deficit. . . . . . . . . . . . . . . . . . (17,234) (28,462)
Accumulated translation adjustment . . . . 59 66
-------- --------
Total shareholders' equity . . . . . . . . 335,463 325,174
-------- --------
$364,993 $356,950
======== ========
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three months ended
March 31,1994 March 31,1993
REVENUES
Royalties and product sales. . . . . . $ 41,167 $ 32,540
Interest . . . . . . . . . . . . . . . 3,613 2,881
-------- --------
Total revenues . . . . . . . . . . . . 44,780 35,421
-------- --------
EXPENSES
Cost of sales. . . . . . . . . . . . . 2,471 2,819
Research and development . . . . . . . 23,334 14,965
General and administrative . . . . . . 5,963 3,953
Other. . . . . . . . . . . . . . . . . 103 1,344
-------- --------
Total expenses . . . . . . . . . . . . 31,871 23,081
-------- --------
INCOME BEFORE INCOME TAXES. . . . . . . 12,909 12,340
Income taxes. . . . . . . . . . . . . . 1,680 1,080
-------- --------
NET INCOME. . . . . . . . . . . . . . . $ 11,229 $ 11,260
======== ========
NET INCOME PER SHARE. . . . . . . . . . $ 0.31 $ 0.32
======== ========
Average shares outstanding. . . . . . . 35,741 34,766
======== ========
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three months ended
March 31,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . $ 11,229 $11,260
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization . . . . . . . . 1,764 1,840
Write-off of investment in joint venture. . . -- 1,803
Other . . . . . . . . . . . . . . . . . . . . (152) (462)
Changes in:
Accounts receivable . . . . . . . . . . . . 23,517 6,013
Other current assets. . . . . . . . . . . . (104) (400)
Other assets. . . . . . . . . . . . . . . . (344) 375
Accounts payable and
other current liabilities. . . . . . . . . (2,246) (3,693)
-------- --------
Net cash provided from operating activities. . 33,664 16,736
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities, net. . . . (50,609) (53,993)
Acquisitions of property and equipment . . . . (6,558) (1,489)
Additions to patents . . . . . . . . . . . . . (533) (863)
-------- --------
Net cash used by investing activities. . . . . (57,700) (56,345)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . 2,194 1,142
-------- --------
Net cash provided from financing activities. . 2,194 1,142
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . (21,842) (38,467)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD. . . . . . . . . . . . . . 74,546 85,863
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD. . . . . . . . . . . . . . . . . $ 52,704 $47,396
======== ========
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments, consisting
of only normal recurring accruals, necessary to present fairly the
financial position, results of operations and cash flows of the
Company. The Company's accounting policies are described in the Notes
to Consolidated Financial Statements in the Company's 1993 Annual
Report. Interim results are not necessarily indicative of the
operating results for the full year.
2. During the first quarter of 1994, the Company entered into an
agreement with a bank to sell certain foreign based accounts
receivable up to $14 million, which approximated the proceeds for the
current quarter. The selling price is partially determined by foreign
exchange rates at the end of each quarter.
3. As of January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities. Under this standard, the Company is
required to classify its marketable securities (all of which are debt
securities) into one or more of the following categories: held-to-
maturity, trading or available-for-sale. At March 31, 1994, all of
the Company's marketable securities are classified as available-for
sale. Under this statement, these securities are recorded at fair
market value and unrealized gains and losses are recorded as part of
shareholders' equity. Following is a summary of marketable securities
as of March 31, 1994:
Unrealized Amortized
(dollars in thousands) Value Gains Losses Cost
U.S. Government securities $196,614 $444 $2,366 $198,536
(average maturity of 24 months)
Corporate debt securities 87,862 212 1,415 89,065
(average maturity of 24 months)
Proceeds from maturities and other sales of securities, which were
reinvested, during the quarter ended March 31, 1994 were $247.7
million. Gross realized gains and losses on these sales were
immaterial.
BIOGEN, INC. AND SUBSIDIARIES Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the first quarter ended March 31, 1994, the Company reported net income
of $11.2 million or $0.31 per share as compared to net income of $11.3
million or $0.32 per share in the first quarter of 1993.
Total revenues for the first quarter of 1994 were $44.8 million, as
compared to $35.4 million in the first quarter of 1993. Revenues for the
current quarter were higher than the comparable 1993 quarter due mostly to
higher royalty income. During the first quarter, the Company signed a
licensing agreement with Eli Lilly & Co. ("Lilly") covering certain patent
rights for gene expression methods. Under this agreement, Lilly paid the
Company approximately $10M in royalties that related to sales occurring
before 1994. Royalties from alpha interferon sales by Schering-Plough
Corporation declined in the current quarter as compared to 1993, due
primarily to lower sales in Japan. Sales in Japan declined in anticipation
of a 17 percent decrease in the price of alpha interferon, which became
effective on April 1. The Company, in general, expects continued increases
in sales of licensed products but at lower growth rates than had been
experienced during 1992 and 1993. However, there are numerous health care
reform initiatives currently underway in the United States and other major
pharmaceutical markets and it is not yet clear what effect, if any, these
initiatives or other developments may have on product sales by the
Company's licensees. In addition, these sales levels may fluctuate from
quarter to quarter due to the timing and extent of major events such as new
indication approvals or licensing arrangements.
Interest income for the current quarter increased from the comparable 1993
amount due primarily to the increase in invested funds generated from
higher revenue and profit levels.
Total expenses for the current quarter were $31.9 million as compared to
$23.1 million in the 1993 quarter. Research and development expense
increased $8.4 million, due to the expanded clinical development of the
Company's lead drug candidates, Hirulog(TM) thrombin inhibitor and
recombinant beta interferon. Both drug candidates are in Phase II and
Phase III clinical trials for a variety of indications. The Company
expects its research and development costs to continue to increase as it
expands the clinical programs for Hirulog(TM), recombinant beta interferon
and other therapeutics. General and administrative expenses increased by
$2.0 million due mostly to higher costs related to market development
efforts, legal and personnel related costs. Other expenses decreased
primarily due to a charge in the prior year's quarter for the write-off of
the Company's remaining interest in a European joint venture.
Income tax expense for the current quarter was $1.7 million which is
substantially less than the amount computed at U.S. federal statutory rates
because of the utilization of net operating loss carryforwards.
Financial Condition Page 8
At March 31, 1994, cash, cash equivalents and marketable securities
amounted to $296.1 million, a $25.7 million increase from the $270.4
million on hand at the end of 1993. Working capital increased $4.6 million
to $282.3 million. Net cash provided from operating activities for the
three months ended March 31, 1994 was $33.7 million while the Company's
common stock option and purchase plans provided $2.2 million. Outflows of
cash included investments in property and equipment and patents of $7.1
million. The decrease in accounts receivable is primarily attributed to an
agreement the Company entered into with a bank in the first quarter of 1994
to sell certain accounts receivable.
The Company is the general partner of Biogen Medical Products Limited
Partnership ("BMPLP"). BMPLP was formed for the continued development of
commercial products based on gamma interferon and interleukin-2 (the
"partnership products"). The Company agreed to extend the term of the
development contract with BMPLP until December 31, 1994. The Company has
not incurred any significant costs with respect to BMPLP in 1994 but has
the option to provide up to $9.2 million to BMPLP to continue development
of the partnership products.
During the fourth quarter of 1993, the Company commenced construction of a
150,000 square foot building in Cambridge, Massachusetts to house research
laboratories and offices. The anticipated cost of construction, including
land, is approximately $40 million. Upon completion of the building in
1995, the Company has the option, subject to certain conditions, to obtain
a secured term loan with a bank for up to $25 million for a period of up to
10 years.
The Company believes that the financial resources available to it,
including its current working capital and its existing and anticipated
contractual relationships, may be sufficient to finance its planned
operations and capital expenditures for the near term. However, the
Company expects that it may have additional funding needs, the extent of
which will depend upon the level of royalties and product sales, the
outcome of clinical trial programs, the receipt and timing of required
regulatory approvals for products, the results of research and development
efforts and business expansion opportunities. Accordingly, from time to
time, the Company may obtain funding through various means which could
include collaborative agreements, lease financings, sales of equity or debt
securities and other financing arrangements.
Page 9
With respect to the unaudited condensed consolidated financial information
of Biogen, Inc. and its subsidiaries at March 31, 1994 and for the three
month periods ended March 31, 1994 and 1993, Price Waterhouse reported that
they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report
dated April 15, 1994 appearing herein, states that they did not audit and
they do not express an opinion on that unaudited condensed consolidated
financial information. Price Waterhouse has not carried out any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, the degree
of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. Price
Waterhouse is not subject to the liability provisions of Section 11 of the
Securities Act of 1933 for their report on the unaudited condensed
consolidated financial information because that report is not a "report" or
a "part" of the registration statement prepared or certified by Price
Waterhouse within the meaning of sections 7 and 11 of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Biogen, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Biogen, Inc. and its subsidiaries as of March 31, 1994, and the related
condensed consolidated statements of income and of cash flows for the three
month periods ended March 31, 1994 and 1993. This financial information is
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
information for it to be in conformity with generally accepted accounting
principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of income, of cash flows and of
shareholders' equity for the year then ended (not presented herein), and in
our report dated January 20, 1994 we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
December 31, 1993, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ Price Waterhouse
- ---------------------
Boston, Massachusetts
April 15, 1994
PART II - OTHER INFORMATION Page 10
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 10 Supplemental Amendment and Agreement dated as of
March 1, 1994 between Schering Corporation and the
Company.*
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse.
* Confidential treatment requested.
(b) There were no reports on Form 8-K filed for the quarter ended
March 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOGEN, INC.
Dated: April 20, 1994 /s/Timothy M. Kish
----------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer
EXHIBITS Page 11
Index to Exhibits.
No. 10 Supplemental Amendment and Agreement dated as of March
1,1994 between Schering Corporation and the Company.*
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse.
* Confidential treatment requested.