SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 JUNE 30, 1997
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 July 14, 1997:
Common Stock, par value $0.01 73,935,753
(Title of each class) (Number of Shares)
B I O G E N , I N C .
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Statements of Income -
Three months and six months ended June 30, 1997 and 1996 . . . . . 3
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996. . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1997 and 1996. . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . .15
* * * * * * * * * * * * * * * * * *
Note concerning trademarks: HIRULOG(R) and AVONEX(R) are
registered trademarks of Biogen, Inc.
BIOGEN, INC. AND SUBSIDIARIES Page 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
REVENUES
Product sales. . . . . . . . . . . $56,440 $ 6,125 $109,056 $ 6,125
Royalties. . . . . . . . . . . . . 36,007 35,032 78,222 69,410
Interest . . . . . . . . . . . . . 5,206 4,244 10,113 8,709
------- ------ ------- ------
Total revenues. . . . . . . . . . 97,653 45,401 197,391 84,244
------- ------ ------- ------
EXPENSES
Cost of sales. . . . . . . . . . . 11,444 3,836 23,188 7,989
Research and development . . . . . 32,014 29,302 69,922 53,713
Selling, general and
administrative. . . . . . . . . . 20,960 19,747 42,124 32,993
Other. . . . . . . . . . . . . . . (190) 809 144 1,318
------ ------ ------ ------
Total expenses. . . . . . . . . . 64,228 53,694 135,378 96,013
------ ------ ------- ------
INCOME BEFORE INCOME
TAXES . . . . . . . . . . . . . 33,425 (8,293) 62,013 (11,769)
Income taxes . . . . . . . . . . . 13,477 800 25,055 982
------ ------- ------- -------
NET INCOME . . . . . . . . . . . . $19,948 $(9,093) $36,958 $(12,751)
======= ======== ======= =========
NET INCOME PER SHARE . . . . . . . $ 0.26 $ (0.13) $ 0.48 $ (0.18)
======= ======== ======= =========
Average shares outstanding . . . . 76,248 71,416 76,546 71,308
====== ====== ====== ======
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 4
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30,1997 Dec.31,1996
(unaudited)
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . $ 73,250 $ 62,032
Marketable securities . . . . . . . . . . 282,611 259,349
Accounts receivable, less allowances of
$1,312 in 1997 and $1,480 in 1996. . . . 59,807 42,952
Deferred tax asset, net . . . . . . . . . 49,976 47,888
Other . . . . . . . . . . . . . . . . . . 32,778 23,533
-------- -------
Total current assets. . . . . . . . . . . 498,422 435,754
-------- --------
Property, plant and equipment
Total cost. . . . . . . . . . . . . . . . 224,970 217,926
Less accumulated depreciation . . . . . . 57,681 52,603
-------- --------
Property, plant and equipment, net. . . . 167,289 165,323
-------- --------
Other assets
Patents, net. . .. . . . . . . . . . . . . 12,586 10,458
Marketable securities . . . . . . . . . . 18,936 16,003
Other. . . . . . . . . . . . . . . . . . . 7,679 7,034
-------- --------
$704,912 $634,572
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable. . . . . . . . . . . . . $ 11,460 $ 15,722
Current portion long-term debt. . . . . . 4,888 4,017
Other current liabilities . . . . . . . . 65,342 68,209
-------- --------
Total current liabilities . . . . . . . . 81,690 87,948
-------- --------
Long-term debt . . . . . . . . . . . . . . 64,289 62,254
-------- --------
Shareholders' equity
Common stock. . . . . . . . . . . . . . . 739 725
Additional paid-in capital. . . . . . . . 512,916 471,623
Retained earnings . . . . . . . . . . . . 49,789 12,831
Unrealized loss on
marketable securities, net of tax . . . (4,579) (743)
Cumulative translation adjustment . . . . 68 (66)
-------- -------
Total shareholders' equity. . . . . . . . 558,933 484,370
-------- -------
$704,912 $634,572
======== ========
See Notes to Condensed Consolidated Financial Statements.
BIOGEN, INC. AND SUBSIDIARIES Page 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss). . . . . . . . . . . . . . . . . . $ 36,958 $(12,751)
Adjustments to reconcile net income (loss)
to net cash provided from (used by)
operating activities:
Depreciation and amortization. . . . . . . . . . . 9,071 7,334
Deferred income taxes. . . . . . . . . . . . . . . 20,683 (217)
Other. . . . . . . . . . . . . . . . . . . . . . . 2,550 --
Changes in:
Accounts receivable . . . . . . . . . . . . . . . (16,855) (7,925)
Other current assets. . . . . . . . . . . . . . . (9,245) (10,603)
Other assets. . . . . . . . . . . . . . . . . . . (345) 87
Accounts payable and
other current liabilities. . . . . . . . . . . . (3,571) 8,064
-------- -------
Net cash provided from (used by) operating
activities. . . . . . . . . . . . . . . . . . . . . 39,246 (16,011)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities. . . . . . . . . (217,012) (179,859)
Proceeds from sales of marketable securities. . . . 192,804 212,662
Investments in research collaborations . . . . . . . (11,000) --
Acquisitions of property and equipment. . . . . . . (13,461) (35,565)
Additions to patents. . . . . . . . . . . . . . . . (3,562) (1,589)
------- -------
Net cash used by investing activities . . . . . . . (52,231) (4,351)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt. . . . . . 4,545 19,042
Payments of long-term debt. . . . . . . . . . . . . (1,639) (833)
Issuance of common stock . . . . . . . . . . . . . . 21,297 6,441
------- -------
Net cash provided from financing activities . . . . 24,203 24,650
------- -------
NET INCREASE IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . 11,218 4,288
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD . . . . . . . . . . . . . . . . 62,032 45,770
------- -------
CASH AND CASH EQUIVALENTS,
END OF PERIOD . . . . . . . . . . . . . . . . . . . $ 73,250 $ 50,058
======== ========
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 1996 Annual
Report. Interim results are not necessarily indicative of the
operating results for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 128 "Earnings per
Share" ("SFAS 128") which changes the method of calculating earnings
per share. SFAS 128 requires the presentation of "basic" earnings per
share and "diluted" earnings per share on the face of the income
statement. Basic earnings per share is computed by dividing the net
income available to common shareholders by the weighted average shares
of outstanding common stock. The calculation of diluted earnings per
share is similar to basic earnings per share except that the denominator
includes dilutive common stock equivalents such as stock
options and warrants. The Company will adopt SFAS 128 in the fourth
quarter of 1997, as early adoption is not permitted. The Company does
not expect the adoption of SFAS 128 to have a material impact on its
earnings per share calculation.
2. As of June 30, 1997, the Company had $21.7 million outstanding under a
term loan secured by a laboratory and office building in Cambridge,
Massachusetts. Principal payments of $.8 million are due semi-
annually through 2004 with the balance due May 8, 2005.
As of June 30, 1997 the Company had $47.5 million outstanding under the
a 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
$.8 million are due quarterly through 2006 with the balance due on
March 31, 2007.
Terms of the loan agreements include various covenants, including
financial covenants which require the Company to maintain minimum net
worth, cash flow and various financial ratios. The loans are secured
by the underlying buildings.
3. Inventories are stated at the lower of cost or market with cost
determined under the first-in/first-out ("FIFO") method. Raw
materials include inventory used in the production of pre-clinical
and clinical products and are expensed as research and development
costs when consumed. Inventories, net of applicable reserves and
allowances, at June 30, 1997 and December 31, 1996 are as follows:
(In Thousands)
June 30, 1997 Dec. 31, 1996
Raw materials $ 4,236 $ 3,262
Work in process 9,738 7,801
Finished goods 9,957 5,495
---------- ----------
$ 23,931 $ 16,558
========== ==========
4. On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit
against Biogen in the United States District Court for the District of
New Jersey alleging infringement by Biogen of Berlex's "McCormick"
patent in the United States in the production of Biogen's
AVONEX(R)(Interferon beta-1a). Berlex seeks a judgment granting it
unspecified 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
claim; however, the ultimate outcome is not determinable at this time.
Prior to the date of the suit filed by Berlex, Biogen had filed a suit
against Schering AG ("Schering"), Berlex and the Board of Trustees of
the Leland Stanford Jr. University ("Stanford") in the United States
District Court for the District of Massachusetts for a declaratory
judgment of non-infringement and invalidity of the McCormick patent
contending that AVONEX(R), its manufacturing process and intermediates
used in that process do not infringe the McCormick patent and that such
patent is not valid. In November 1996, the U.S. District Court in
Massachusetts ruled that it had jurisdiction and Berlex's New Jersey
action was transferred to Massachusetts. Biogen and Stanford
subsequently entered into an agreement voluntarily dismissing Stanford
from the suit. A trial is not expected before the latter part of 1998.
In June 1996, ASTA Medica Aktiengesselschaft ("ASTA") filed for
arbitration against Biogen with the International Chamber of Commerce
(ICC) in Paris, France. In its complaint, ASTA alleges that Biogen's
1993 termination of a 1989 agreement licensing ASTA to market
recombinant interferon beta in certain European territories was
ineffective. The agreement at issue also included as a party Bioferon,
a Biogen joint venture that declared bankruptcy in 1993. The ASTA
complaint asks that an ICC panel declare that the 1989 license is still
in force, and, in the alternative, seeks approximately $5 million in
damages. The territories in the 1989 license included most of Western
Europe except Germany. The arbitration will take place in Zurich under
Swiss law. The Company's management believes that it has meritorious
defenses to this claim and given the defenses, believes the ultimate
outcome of this legal proceeding will not have a material adverse
effect on the results of operations or financial position of the
Company.
Page 8
The Company is also a party to a class action lawsuit in connection
with disclosures related to Biogen's Hirulog(R) product. The Company's
management believes that it has meritorious defenses to the claims in
this lawsuit and given the defenses, believes the ultimate outcome of
this legal proceeding will not have a material adverse effect on the
results of operations or financial position of the Company.
5. In March 1997, the Company and its wholly-owned subsidiary, Biotech
Manufacturing Limited, signed a research collaboration and license
agreement (the "Agreement") with CV Therapeutics, Inc. ("CVT") under
which Biogen obtained rights to develop and market CVT's therapeutic
CVT-124 for the treatment of edema associated with congestive heart
failure. Under the terms of the Agreement, the Company purchased
approximately 670,000 shares of CVT common stock for $7 million and
paid a one-time license fee of $5 million. In addition, pursuant to the
terms of the Agreement, the Company established a $12 million line of
credit that CVT may use for operating purposes. At June 30, 1997, the
Company had advanced $3 million under the line of credit to CVT.
6. Income tax expense for June 30, 1997 varied from the amount computed at
U.S. statutory rates primarily due to the benefit of research and
development and investment tax credits partially offset by foreign
losses for which the Company will receive no current tax benefit. The
exercise of nonqualified stock options results in a reduction of
taxable income of the Company equal to the difference between the
option price and the fair market value on the date of the exercise.
During the three and six months ended June 30, 1997, $883,000 and $21
million, respectively, was credited to additional paid-in capital
relating to this tax benefit from stock option exercises.
BIOGEN, INC. AND SUBSIDIARIES Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
Biogen, Inc. (the "Company" or "Biogen") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and
marketing drugs for human health care. The Company currently derives
revenues from sales of AVONEX(R) which is sold under the Biogen name 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 products. In May 1996, the Company
received a license from the United States Food and Drug Administration
("FDA") to market Biogen's new product AVONEX(R) as a treatment for
relapsing forms of multiple sclerosis ("MS"). MS is a chronic
inflammatory disease of the central nervous system that affects over one
million people worldwide. In March 1997, the Company received regulatory
approval to market AVONEX(R) for the treatment of relapsing MS in the 15
member countries of the European Union. During the first quarter of 1997,
the Company began marketing AVONEX(R) in the United Kingdom, Germany,
Sweden, Finland and Switzerland. Final pricing and reimbursement
approvals are anticipated in certain other countries of the European Union
during 1998. AVONEX(R) is also on the market in Israel and Cyprus. The
Company is also seeking approval for AVONEX(R) in Canada and several other
countries.
Results of Operations
For the quarter ended June 30, 1997, the Company reported net income of
$19.9 million or $0.26 per share as compared to a net loss of $9.1 million
or $(0.13) per share for the comparable period of 1996. For the six
months ended June 30, 1997, the Company recorded net income of $37 million
or $0.48 per share as compared to a net loss of $12.8 million or $0.18 per
share for the comparable period of 1996.
Total revenues for the current quarter were $97.7 million, as compared to
$45.4 million in the quarter ended June 30, 1996, an increase of $52.3
million or 115%. The increase in total revenues was primarily due to sales
of the Company's product AVONEX(R) which was introduced in May 1996.
Sales of AVONEX(R) accounted for $56.4 million of total revenues in the
second quarter of 1997 compared to $6.1 million for the comparable period
in 1996. Revenues from royalties for the current quarter were $36 million,
an increase of $1 million or 2.9% as compared to the quarter ended June
30, 1996. The Company expects product sales as a percentage of total
revenue to increase over the course of the fiscal year as the Company
continues its introduction of AVONEX(R) in new markets. The Company,
however, expects to face increasing competition in the MS marketplace from
other treatments for MS.
Total revenues for the six months ended June 30, 1997 were $197.4 million,
including $109.1 million from sales of AVONEX(R), as compared to $84.2
million in the comparable period of 1996. Royalties during the six months
ended June 30, 1997 increased $8.8 million, or 12.7% from the comparable
period in 1996, primarily as a result of an increase in alpha interferon
sales by Schering-Plough, which were partially offset by a decrease in
royalties on sales of Hepatitis B vaccines sold by SmithKline and Merck.
Page 10
In the near term, the Company expects overall sales of licensee products
and royalty revenues to fluctuate depending on changes in sales volumes
for specific products, patent expirations, new licensing arrangements or
other developments. Licensee sales levels may also fluctuate from quarter
to quarter due to the timing and extent of major events such as new
indication approvals or vaccination programs.
Interest income for the current quarter was $5.2 million, an increase of
$1 million or 23.8% as compared to $4.2 million in the comparable period
in 1996. For the six months ended June 30, 1997, interest income was
$10.1 million compared to $8.7 million in the six months ended June 30,
1996, an increase of $1.4 million or 16.1%. The increase in interest
income is primarily a result of increased funds invested.
Total expenses for the current quarter were $64.2 million as compared to
$53.7 million in the quarter ended June 30, 1996, an increase of $10.5
million or 19.6%. Cost of sales in the current quarter totaled $11.4
million an increase of $7.6 million from the quarter ended June 30, 1996.
Cost of sales in the current quarter includes product costs of $8.8
million compared to $1 million in the quarter ended June 30, 1996,
relating to sales of AVONEX(R). Research and development expenses for the
current quarter were $32 million, an increase of $2.7 million or 9.3% as
compared to the quarter ended June 30, 1996. This increase was primarily
due to research funding under existing collaboration agreements, an
increase in clinical trial costs and an increase in the Company's
development efforts related to other research and development programs in
its pipeline. The Company expects that, in the long-term, research and
development expenses will increase as the Company continues to expand its
development efforts with respect to new products and begins clinical
trials of these products. Selling, general and administrative expenses
for the current quarter were $21 million, an increase of $1.3 million or
6.6% as compared to the quarter ended June 30, 1996. This increase was
primarily due to the selling and marketing expenses related to sales of
AVONEX(R). The Company expects that selling, general and administrative
expenses will increase in the near and long-term as the Company continues
to put in place the commercial infrastructure and sales and marketing
organizations necessary to sell AVONEX(R) worldwide. The anticipated
level of expense will depend on the overall sales levels achieved by
AVONEX(R).
Total expenses for the six-month period ended June 30, 1997 were $135.4
million as compared to $96 million in the comparable period in 1996, an
increase of $39.4 million or 41%. Cost of sales for the six months ended
June 30, 1997 were $23.2 million as compared to $8 million in the
comparable period of 1996, an increase of $15.2 million or 190%. Cost of
sales for the six months ended June 30, 1997 and 1996 included $16.6
million and $1 million of product costs, respectively, related to the
sales of AVONEX(R). Cost of sales relating to royalty revenue decreased
$.5 million from $7.1 million to $6.6 million. Research and development
expenses for the current six-month period were $69.9 million as compared
to $53.7 million in the comparable 1996 period, an increase of $16.2
million or 30.2%. This increase was primarily due to the research
collaboration with CV Therapeutics, Inc. ("CVT"), an increase in clinical
trial costs and an increase in the Company's development efforts related
to other research and development programs in its pipeline. In March
1997, the Company entered into a research collaboration and license
agreement with CVT under which Biogen obtained rights to develop and
Page 11
market CVT's therapeutic CVT-124 for treatment of edema associated with
congestive heart failure. In addition to CVT, Biogen currently has three
early stage compounds in clinical trials. They are LFA3TIP, a T-cell
inhibiting protein being tested as a potential treatment for severe
psoriasis, Gelsolin, a mucolytic agent, that is being studied for
treatment of cystic fibrosis, chronic bronchitis and several other
pulmonary diseases, and CD40 ligand antibody, which is being studied as a
potential treatment for certain autoimmune diseases. The Company continues
to add additional internal resources in the area of research and
development. Selling, general and administrative expenses for the six-month
period ended June 30, 1997 were $42.1 million as compared to $33
million in the comparable period in 1996, an increase of $9.1 million or
27.6%. This increase was primarily due to the selling and marketing
expenses related to sales of AVONEX(R).
Income tax expense for June 30, 1997 varied from the amount computed at
U.S. statutory rates primarily due to the benefit of research and
development and investment tax credits offset by foreign losses for which
the Company will receive no current tax benefit. The Company's effective
tax rate in 1997 is 40.5% and it is expected to continue at or near this
level for the remainder of 1997.
In February 1997, the Financial Accounting Standards Board issued SFAS
128, "Earnings per Share" ("SFAS 128") which changes the method of
calculating earnings per share. SFAS 128 requires the presentation of
basic earnings per share and diluted earnings per share on the face of the
income statement. Basic earnings per share is computed by dividing the net
income available to common shareholders by the weighted average shares of
outstanding common stock. The calculation of diluted earnings per share
is similar to basic earnings per share except that the denominator
includes dilutive common stock equivalents such as stock options and
warrants. See Note 1 to the Condensed Consolidated Financial Statements.
Page 12
Financial Condition
At June 30, 1997, cash, cash equivalents and short term marketable
securities were $355.9 million compared with $321.4 million at December
31, 1996, an increase of $34.5 million. Working capital increased $68.9
million to $416.7 million between December 31, 1996 and June 30, 1997. Net
cash provided from operating activities for the current quarter was $39.2
million, compared with $16.0 million used by operating activities in 1996.
Cash outflows for the six months ended June 30, 1997, included investments
in property and equipment and patents of $17.0 million and $11 million
related to research collaboration agreements. Cash inflows included $4.5
million from loan agreements with banks and $21.3 million from common
stock option exercises and stock purchase plan activity.
The Company has several research programs and collaborations underway. In
March 1997, the Company and its wholly-owned subsidiary, Biotech
Manufacturing Limited, signed a research collaboration and license
agreement (the "Agreement") with CVT under which Biogen obtained rights to
develop and market CVT's therapeutic CVT-124 for the treatment of edema
associated with congestive heart failure. Under the terms of the
Agreement, the Company purchased approximately 670,000 shares of CVT
common stock for $7 million and paid a one-time license fee of $5 million.
In addition, pursuant to the terms of the Agreement, the Company
established a $12 million line of credit that CVT may use for operating
purposes. At June 30, 1997, the Company had advanced $3 million under the
line of credit to CVT.
Several legal proceedings were pending during the current quarter which
involve the Company. See Note 4 to the Condensed Consolidated Financial
Statement and Item 1 - Business, "Patents and Other Proprietary Rights" of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 for discussions of these legal proceedings.
The Company currently believes that the financial resources available to
it, including its current working capital, revenues from product sales 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 financing, sales of
equity or debt securities and other financing arrangements.
Page 13
Outlook
Safe Harbor Statement under Private Securities Litigation Reform Act of
1995
In addition to historical information, this quarterly report on Form 10-Q
contains forward-looking statements that involve risks and uncertainties
that could cause actual results to differ materially from those reflected
in such forward-looking statements. Reference is made in particular to
forward-looking statements regarding the anticipated level of future
royalty revenues, product sales, expenses and profits and predictions as
to the anticipated outcome of pending litigation. These and all other
forward-looking statements are made based on the Company's current belief
as to the outcome and timing of such future events. Factors which could
cause actual results to differ from the Company's expectations and which
could negatively impact the Company's results of operations are discussed
below and elsewhere in this Management's Discussion and Analysis of
Financial Condition and Results of Operation.
Dependence on AVONEX(TM) Sales and Royalty Revenue
While in the past the Company's ability to achieve profitability has been
dependent mainly on the level of royalty revenues as compared to expenses,
in the future, continued profitability will also be highly 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) in the United States; the Company's ability to maintain a high
level of patient satisfaction with AVONEX(R) in treating the relapsing
form of multiple sclerosis, a disease which is characterized by an uneven
pattern of disease progression; the nature of regulatory and pricing
decisions related to AVONEX(R) worldwide and the extent to which AVONEX(R)
receives reimbursement coverage; market acceptance of AVONEX(R) outside
the United States; successful resolution of the lawsuit with Berlex
related to the "McCormick" patent, which if decided in Berlex's favor
could have a material adverse effect on the Company's operations; the
Company's ability to sustain market share of AVONEX(R) in light of the
introduction of competitive products for the treatment of multiple
sclerosis, such as Teva Pharmaceuticals' Copaxone(R) glatiramer acetate,
which was recently launched in the United States, and Ares-Serono's
Rebif(R), an interferon beta-1a product, which is the subject of a pending
application in the European Union, and also in light of the recent
decision of the European Patent Office to revoke the Company's European
patent covering the expression of recombinant beta interferon; the success
of ongoing development work related to AVONEX(R) in expanded multiple
sclerosis indications and the continued accessibility of third parties to
vial, label, and distribute AVONEX(R) on acceptable terms. The Company's
ability to maintain the level of its royalty revenues will depend on:
sustaining the scope and validity of existing patents; the efforts of
licensees in the clinical testing and marketing of products from which the
Company derives revenue; and the timing and extent of royalties from
additional licensing opportunities. There can be no assurance that the
Company will achieve a positive outcome with respect to any of the factors
discussed in this Section or that the timing and extent of the Company's
success with respect to any combination of these factors will be
sufficient to result in the sustained profitability of the Company. For a
further discussion of risks regarding drug development, patent matters,
including the Berlex lawsuit on the "McCormick" patent, competition in the
Page 14
multiple sclerosis market and regulatory matters, see the Company's Annual
Report on Form 10-K for the period ended December 31, 1996 under the
headings "Business - Risks Associated with Drug Development", "Business -
Patents and Other Proprietary Rights", "Business - Competition and
Marketing -AVONEX(TM)(interferon beta 1a)", "Business - Regulation" and
"Legal Proceedings."
New Products
AVONEX(R) is currently the only product sold by the Company. The
Company's long-term viability and growth will depend on the successful
development and commercialization of other products from its research
activities and collaborations. The Company has begun to expand its
development efforts related to other potential products in its pipeline.
The expansion of the pipeline may include increases in spending on
internal projects, the acquisition of third party technologies or products
or other types of investments. Product development involves a high degree
of risk. Many important factors affect the Company's ability to
successfully develop and commercialize drugs, including the ability to
obtain and maintain necessary patents and licenses, to demonstrate safety
and efficacy of drug candidates at each stage of the clinical trial
process, to meet applicable regulatory standards and receive required
regulatory approvals, to be capable of producing drug candidates in
commercial quantities at reasonable costs, to compete successfully against
other products and to market products successfully. There can be no
assurance that the Company will be successful in its efforts to develop
and commercialize new products.
Page 15
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The information set forth in this Item 4 relates to matters
submitted to a vote at the Annual Meeting of Stockholders of Biogen,
Inc. on June 6, 1997.
(b) Not applicable.
(c) A proposal to elect Harold W. Buirkle, Dr. Alexander G. Bearn and
James L. Vincent to serve for three year terms ending in 2000 and
until their successors are duly elected and qualified was approved
with the following vote:
Nominee For Authority Withheld
Harold W. Buirkle 58,446,168 324,067
Alexander G. Bearn 58,457,629 312,606
James L. Vincent 58,472,579 297,656
A proposal to ratify the selection of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December
31, 1997 was approved with 55,588,299 affirmative votes, 44,860
negative votes, 137,067 abstentions and 0 broker non-votes.
(d) Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
No. 11 Computation of Earnings per Share.
(b) There were no reports on Form 8-K filed for the
quarter ended June 30, 1997.
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: July 24, 1997 /s/Timothy M. Kish
----------------------------------
Timothy M. Kish
Vice President-Finance and
Chief Financial Officer
Page 16
PART II - OTHER INFORMATION
EXHIBITS
Index to Exhibits.
No. 10.1 1985 Non-qualified Stock Option Plan (as amended
through December 6, 1996).
No. 10.2 1987 Scientific Board Stock Option Plan (as amended
through December 6, 1996)
No. 11 Computation of Earnings per Share.