SECURITIES AND EXCHANGE COMMISSION Total Pages- 15
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, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 0-12042
BIOGEN, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
14 Cambridge Center, Cambridge, MA 02142
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 679-2000
Former name, former address and former fiscal year, if changed since
last report: Not Applicable
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the issuer's classes of common
stock, as of May 5, 1995:
Common Stock, par value $0.01 33,336,450
(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, 1995 and December 31, 1994. . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Income -
Three months ended March 31, 1995 and 1994. . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three months ended March 31 1995 and 1994 . . . . . . . . . . . .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. Hirulog(TM) and AVONEX(TM) are
trademarks of Biogen, Inc.
BIOGEN, INC. AND SUBSIDIARIES Page 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31,1995 Dec. 31,1994
(unaudited)
ASSETS
Current assets
Cash and cash equivalents. . . . . . . . . $ 68,387 $ 54,682
Marketable securities. . . . . . . . . . . 218,238 213,120
Accounts receivable. . . . . . . . . . . . 12,518 18,502
Other. . . . . . . . . . . . . . . . . . . 9,642 8,480
-------- --------
Total current assets . . . . . . . . . . . 308,785 294,784
-------- --------
Property, plant and equipment
Total cost . . . . . . . . . . . . . . . . 114,621 104,651
Less accumulated depreciation. . . . . . . 33,166 31,489
-------- --------
Property, plant and equipment, net . . . . 81,455 73,162
-------- --------
Other assets
Patents, net . . . . . . . . . . . . . . . 8,199 8,116
Other. . . . . . . . . . . . . . . . . . . 1,819 1,800
-------- --------
Total other assets . . . . . . . . . . . . 10,018 9,916
-------- --------
$400,258 $377,862
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . $ 5,286 $ 9,991
Current portion long-term debt . . . . . . 833 --
Other current liabilities. . . . . . . . . 33,332 37,937
-------- --------
Total current liabilities. . . . . . . . . 39,451 47,928
-------- --------
Long-term debt . . . . . . . . . . . . . . 24,167 --
-------- --------
Shareholders' equity
Common stock . . . . . . . . . . . . . . . 332 331
Additional paid-in capital . . . . . . . . 369,603 368,784
Deficit. . . . . . . . . . . . . . . . . . (30,525) (33,359)
Unrealized losses on
marketable securities . . . . . . . . . . (2,814) (5,867)
Accumulated translation adjustment . . . . 44 45
-------- --------
Total shareholders' equity . . . . . . . . 336,640 329,934
-------- --------
$400,258 $377,862
======== ========
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,
1995 1994
REVENUES
Royalties and product sales . . . . . . . . $ 31,953 $ 41,167
Interest. . . . . . . . . . . . . . . . . . 4,017 3,613
-------- --------
Total revenues. . . . . . . . . . . . . . . 35,970 44,780
-------- --------
EXPENSES
Cost of sales . . . . . . . . . . . . . . . 2,504 2,471
Research and development. . . . . . . . . . 20,435 23,334
General and administrative. . . . . . . . . 7,521 5,963
Other . . . . . . . . . . . . . . . . . . . 2,461 103
-------- --------
Total expenses. . . . . . . . . . . . . . . 32,921 31,871
-------- --------
INCOME BEFORE INCOME TAXES. . . . . . . . . . 3,049 12,909
Income taxes. . . . . . . . . . . . . . . . . 215 1,680
-------- --------
NET INCOME. . . . . . . . . . . . . . . . . . $ 2,834 $ 11,229
======== ========
NET INCOME PER SHARE. . . . . . . . . . . . . $ 0.08 $ 0.31
======== ========
Average shares outstanding. . . . . . . . . . 35,477 35,741
======== ========
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,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . $ 2,834 $11,229
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization . . . . . . . . 2,276 1,764
Other . . . . . . . . . . . . . . . . . . . . 212 (152)
Changes in:
Accounts receivable . . . . . . . . . . . . 5,984 23,517
Other current assets. . . . . . . . . . . . (1,162) (104)
Other assets. . . . . . . . . . . . . . . . (19) (344)
Accounts payable and
other current liabilities. . . . . . . . . (9,310) (2,246)
-------- --------
Net cash provided from operating activities. . 815 33,664
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities . . . . . . (31,939) (136,511)
Proceeds from sales of marketable securities . 29,791 85,902
Acquisitions of property and equipment . . . . (9,970) (6,558)
Additions to patents . . . . . . . . . . . . . (682) (533)
-------- --------
Net cash used by investing activities. . . . . (12,800) (57,700)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt . . . 25,000 --
Issuance of common stock . . . . . . . . . . . 690 2,194
-------- --------
Net cash provided from financing activities. . 25,690 2,194
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . 13,705 (21,842)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD. . . . . . . . . . . . . . 54,682 74,546
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD. . . . . . . . . . . . . . . . . $ 68,387 $52,704
======== ========
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 1994 Annual
Report. Interim results are not necessarily indicative of the
operating results for the full year.
2. During the third quarter of 1994, the Company incurred a pre-tax
charge to other expenses of $25 million as a result of its decision to
discontinue its major activities associated with Hirulog(TM)
development. The charge consists of cash payments to a third-party
manufacturer for product manufactured for clinical trials and to cover
a portion of other costs incurred by the manufacturer in anticipation
of ongoing Hirulog(TM) related activities, and cash payments for
clinical research organizations, clinical investigators and
institutions involved in clinical trials to cover noncancellable costs
incurred by them in conducting clinical trials and in connection with
wind-down activities. Discontinuance of the Hirulog(TM) program did
not result in any termination of employees or internal restructuring
costs. As of March 31, 1995, $6.1 million remained in reserve and is
expected to be settled by the end of 1995.
3. In March 1995, the Company completed construction of its research
laboratory and office building in Cambridge, Massachusetts and
exercised its option to obtain a 7.5% secured term loan with a bank
for $25 million. The annual principal payable in each of the years
1996 through 1999 is $1.7 million with the balance due May 8, 2005.
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, 1995, the Company reported net income
of $2.8 million or $0.08 per share as compared to net income of $11.2
million or $0.31 per share in the first quarter of 1994.
Total revenues for the first quarter of 1995 were $36.0 million, as
compared to $44.8 million in the first quarter of 1994. Revenues from
royalties and product sales for the current quarter were lower than the
comparable 1994 quarter, primarily because of the inclusion in the 1994
quarter of a one-time payment of approximately $10 million from Eli Lilly &
Co. ("Lilly") under a licensing agreement covering certain patent rights
for gene expression methods. Under this agreement, Lilly paid the Company
in the first quarter of 1994 approximately $10 million in royalties that
related to sales occurring before 1994. Ongoing royalties received from
licensee sales of hepatitis B vaccines, sold by SmithKline Beecham plc
("SmithKline") and Merck & Co., Inc. ("Merck"), increased and more than
offset the decrease in royalties received from Schering-Plough Corporation
("Schering-Plough"), the Company's licensee for alpha interferon. Sales of
hepatitis B vaccines outside the United States increased 83% from the prior
year quarter. The market for hepatitis B vaccines increased significantly
in Europe, primarily in France, where a vaccination program for infants and
adolescents was instituted during 1994. Alpha interferon sales by
Schering-Plough declined in the current quarter, due primarily to lower
sales in Japan, which was driven by a 17% government-mandated decrease in
the price of alpha interferon, effective on April 1, 1994, and restrictions
on off-label usage. In the near term, the Company expects overall sales of
licensee products to continue at current levels although royalty income may
fluctuate depending on changes in sales volumes for specific products.
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,
vaccination programs or licensing arrangements.
Interest income for the current quarter increased from the comparable 1994
amount primarily due to higher interest rates.
Total expenses for the current quarter were $32.9 million as compared to
$31.9 million in the 1994 quarter. Research and development expense
decreased $2.9 million, due to the Company's decision in the third quarter
of 1994 to discontinue its major activities associated with Hirulog(TM)
development. Current quarter costs included increased regulatory and
development costs for AVONEX(TM) recombinant interferon beta while the 1994
quarter had higher costs, primarily for Hirulog(TM) clinical development.
On May 4, 1995, the Company announced that it has filed with the European
Medicines Evaluation Agency for European market approval of AVONEX(TM) for
treatment of multiple sclerosis. The Company also said it will file within
the next several weeks for U.S. Food and Drug Administration approval to
market the drug in the United States. General and administrative expenses
increased by $1.6 million due mostly to higher costs related to market
development efforts, continued development of the Company's European
headquarters in Paris and legal and personnel related costs. Other
Page 8
expenses included the effect of foreign exchange movements associated with
the sale of certain accounts receivable, losses from the sale of certain
marketable securities and interest on debt obligations.
Income tax expense for the current quarter was substantially less than the
amount computed at U.S. federal statutory rates because of the utilization
of net operating loss carryforwards.
Financial Condition
At March 31, 1995, cash, cash equivalents and marketable securities
amounted to $286.6 million, an $18.8 million increase from the $267.8
million on hand at the end of 1994. Working capital increased $22.5
million to $269.3 million. Net cash provided from operating activities for
the three months ended March 31, 1995 was $0.8 million while the Company's
common stock option and purchase plans provided $0.7 million. The Company
also received $25.0 million under a secured term loan agreement with a
bank. Outflows of cash included investments in property and equipment and
patents of $10.7 million.
In March 1995, the Company completed construction of its research
laboratory and office building in Cambridge, Massachusetts and exercised
its option to obtain a 7.5% secured term loan with a bank for $25 million.
The annual principal payable in each of the years 1996 through 1999 is $1.7
million with the balance due May 8, 2005.
In the first quarter of 1993, SmithKline initiated arbitration in the
United States regarding the rate of royalties payable from sales of
hepatitis B vaccines by SmithKline in the United States. The amount paid
by SmithKline and in dispute as of December 31, 1994, was approximately $18
million. In April 1995, an arbitration panel ruled in Biogen's favor. An
appeal by SmithKline of this decision is possible. However, the Company
believes that, in the event of such appeal, an adverse ruling is not
probable and, therefore no amount has been accrued.
During 1995, the Company expects to begin construction on a biologics
manufacturing facility in Research Triangle Park, North Carolina. The
estimated cost of construction, including land, is $57 million.
The Company currently believes that the financial resources available to
it, including its current working capital and its existing and anticipated
contractual relationships, will be sufficient to finance its planned
operations and capital expenditures for the near term. However, the
Company may have additional funding needs, the extent of which will depend
upon the level of royalties and product sales, the outcome of clinical
trial programs, the receipt and timing of required regulatory approvals for
products, the results of research and development efforts and business
expansion opportunities. Accordingly, from time to time, the Company may
obtain funding through various means which could include collaborative
agreements, lease or mortgage financings, sales of equity or debt
securities and other financing arrangements.
Page 9
With respect to the unaudited condensed consolidated financial information
of Biogen, Inc. and its subsidiaries at March 31, 1995 and for the three
month periods ended March 31, 1995 and 1994, Price Waterhouse LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate report
dated April 27, 1995 appearing herein, states that they did not audit and
they do not express an opinion on that unaudited condensed consolidated
financial information. Price Waterhouse LLP has not carried out any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, the degree
of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. Price
Waterhouse LLP is not subject to the liability provisions of Section 11 of
the Securities Act of 1933 for their report on the unaudited condensed
consolidated financial information because that report is not a "report" or
a "part" of the registration statement prepared or certified by Price
Waterhouse LLP within the meaning of sections 7 and 11 of the Act.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Biogen, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Biogen, Inc. and its subsidiaries as of March 31, 1995, and the related
condensed consolidated statements of income and of cash flows for the three
month periods ended March 31, 1995 and 1994. 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, 1994, 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 February 7, 1995 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, 1994, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/s/ Price Waterhouse LLP
- ------------------------
Boston, Massachusetts
April 27, 1995
PART II - OTHER INFORMATION Page 10
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse LLP.
(b) There were no reports on Form 8-K filed for the quarter ended
March 31, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOGEN, INC.
Dated: May 8, 1995 /s/Timothy M. Kish
----------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer
EXHIBITS Page 11
Index to Exhibits.
No. 11 Computation of Earnings per Share.
No. 15 Letter from Price Waterhouse LLP.