1
EXHIBIT 13

SELECTED FINANCIAL DATA

(in thousands, except per share amounts)

Years Ended December 31, 1992 1993 1994 1995 1996
-------- -------- -------- -------- --------

Total revenues............. $135,114 $149,287 $156,344 $151,691 $277,090
Product revenue............ -- -- -- -- 78,202
Royalties revenue.......... 121,714 136,418 140,433 134,653 181,502
Total expenses and taxes... 96,803 116,870 161,241 146,031 236,560
Net income(loss)(a)....... 38,311 32,417 (4,897) 5,660 40,530
Earnings(loss) per common
share(b)................ 0.56 0.47 (0.07) 0.08 0.55
Cash and marketable
securities............... 227,888 270,351 267,802 307,948 321,381
Total assets............... 311,192 356,950 377,862 469,201 634,572
Long-term debt, less
current portion.......... -- -- -- 32,826 62,254
Shareholders' equity(b).... 284,953 325,174 329,934 382,980 484,370

Average shares outstanding(b) 68,396 69,440 65,548 72,890 73,221

<FN>

(a) Net loss for the year ended December 31, 1994 includes a pre-tax charge of
$25 million as a result of the Company's decision to discontinue its major
activities associated with the development of its HIRULOG[registered trademark]
thrombin inhibitor product.

(b) On October 22, 1996, the Board of Directors declared a two-for-one stock
split effected in the form of a stock dividend of one share of Common Stock for
each share outstanding to shareholders of record on November 4, 1996. The
distribution date of the stock dividend was November 15, 1996. All references to
the number of shares and per share amounts in the financial statements have been
restated to reflect the effect of the stock split.

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[trademark] 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 approval from the United States Food and Drug
Administration ("FDA") to market its new product AVONEX[trademark] 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. The successful launch of AVONEX[trademark] in the United
States resulted in product revenues of $76.5 million in 1996. In the last
quarter of 1996, the Company received regulatory approval to market and sell
AVONEX[trademark] in Israel. The Company also expects to receive regulatory
approval for AVONEX[trademark] in the European Union and Switzerland and to
begin selling AVONEX[trademark] in certain European markets in the first half of
1997. The Company is also seeking approval for AVONEX[trademark] in Canada and
several other countries.

The Company expects the percentage of product sales as a percentage of total
revenues to increase in the near term as the Company continues to market its new
product AVONEX[trademark]. The Company's revenues and profitability will be
significantly impacted by the level of sales from AVONEX[trademark]. The Company
also expects to face increasing competition in the MS marketplace from existing
and recently approved treatments for MS. Due to these factors, the Company
anticipates increasing expenditures to support AVONEX[trademark], including
product marketing efforts, investments in manufacturing facilities, distribution
arrangements and ongoing research.

The Company also continues to invest and devote resources to ongoing research
and development efforts related to other potential products in its pipeline. The
Company focuses on research programs it believes have the greatest competitive
advantages and viable commercial markets.

On October 22, 1996, the Board of Directors declared a two-for-one stock split
effected in the form of a stock dividend of one share of Common Stock for each
share outstanding to shareholders of record on November 4, 1996. The
distribution date of the stock dividend was November 15, 1996. All references to
the number of shares and per share amounts in the financial statements have been
restated to reflect the effect of the stock split.

RESULTS OF OPERATIONS

1996 AS COMPARED TO 1995

REVENUES Total revenues in 1996 were $277.1 million, as compared to $151.7
million in 1995, an increase of approximately 83%. The increase in total
revenues in 1996 was primarily due to the successful launch of the Company's
AVONEX[trademark] product in the United States in May 1996, which accounted for
$76.5 million of product revenues. Currently, AVONEX[trademark] competes in the
U.S. market against only one other product. The Company expects to face
additional competition in the United States when a third product, which was
recently approved by the FDA, enters the market as a treatment for MS. In the
fourth quarter of 1996, the Company received regulatory approval to market and
sell AVONEX[trademark] in Israel. The Company also expects to receive regulatory
approval in the European Union and Switzerland in the first half of 1997. The
Company expects product sales as of a percentage of total revenues to increase
in the near term as the Company continues to market its new product
AVONEX[trademark].

Revenues from royalties in 1996 were $181.5 million, an increase of $46.8
million or 34.8% as compared to 1995. Included in royalty revenue in 1996 is a
one-time royalty payment of $30 million received under a license agreement with
Pharmacia & Upjohn A.B. ("Pharmacia & Upjohn"). Under the terms of the license
agreement Biogen granted Pharmacia & Upjohn a sublicense under certain patents
related to proprietary protein secretion technology licensed exclusively to
Biogen by Harvard University. In addition to the one-time $30 million payment,
Pharmacia & Upjohn agreed to pay ongoing royalties on sales of Pharmacia &
Upjohn's product Genotropin in the United States, Canada and Japan. Excluding
the one-time royalty payment, royalty revenues increased 12.5%, primarily as a
result of an increase in ongoing royalties received from Schering-Plough
Corporation ("Schering-Plough"), the Company's licensee for alpha interferon.

In the near term, the Company expects overall sales of licensee products and
royalty revenues to grow. The level of anticipated royalty growth may fluctuate
depending on changes in sales volumes for specific products, patent expirations
or other developments and new licensing arrangements, if any. 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. Since the Company is not involved in the development or
sale of products by licensees, it is unable to predict the timing or potential
impact of factors which may affect licensee sales. In addition, licensee sales
levels may fluctuate from quarter to quarter due to the timing and extent of
major events such as new indication approvals or vaccination programs.

Interest income in 1996 was $17.4 million, an increase of $348,000 or 2% as
compared to 1995 and is primarily a result of increased funds invested.

EXPENSES
Total expenses in 1996 were $236.3 million as compared to $144.2 million in
1995. Cost of sales in 1996 was $28.5 million, an increase of $18 million or
171.6% as compared to 1995. Included in cost of sales in 1996 is $11.4 million
from product sales and $17.1 million relating to royalty revenue. The gross
margin in 1996 for product revenue was approximately $66.8 million or 85.4%.
Cost of sales relating to royalty revenue for 1996 increased $6.6 million, or
approximately 63%. Excluding the costs of sales relating to the one-time royalty
payment from Pharmacia & Upjohn, cost of sales relating to royalty revenue
increased $3.6 million or approximately 34% primarily due to the increased level
of royalty revenues and royalty obligations to third parties.

Research and development expenses in 1996 were $132.4 million, an increase of
$44.9 million or 51.4% as compared to 1995. This increase was primarily due to
new research 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. In 1996, the Company entered into a
research collaboration and license 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 kidney diseases and disorders,
including acute and chronic renal failure. Included in research and development
expense in 1996 is $13.2 million relating to the research collaboration and
license agreement with CBM. Biogen currently has two early stage compounds in
clinical trials. They are LFA3TIP, a T-cell inhibiting protein being tested as a
potential treatment for severe psoriasis and Gelsolin, a mucolytic agent, that
is being studied for treatment of cystic fibrosis, chronic bronchitis and
several other pulmonary diseases. Biogen plans to move CD40, a ligand monoclonal
antibody, into the clinic in 1997. The drug will be studied for potential use in
the treatment of inflammatory and autoimmune diseases. The Company expects that,
in the long-term, research and development expenses will increase as the Company
expands its pipeline and related development efforts with respect to potential
new products and begins clinical trials on potential products.

Selling, general and administrative expenses in 1996 were $73.6 million, an
increase of $33.3 million or 82.7% as compared to 1995. This increase was
primarily due to the costs associated with the commercial launch of
AVONEX[trademark] in the United States, including the formation of a domestic
sales organization. In addition, the Company has invested resources in market
development efforts in Europe related to AVONEX [trademark]. During 1996, the
Company substantially completed the hiring of its domestic sales force and the
build-up of its corporate and administrative departments to support the
Company's ongoing commercial operations. The Company expects that selling,
general and administrative expenses will increase in the near and long-term as
compared to 1996 as the Company continues to put in place the commercial
infrastructure and sales and marketing organizations necessary to sell
AVONEX[trademark] worldwide. The anticipated level of expense will depend on the
overall sales levels achieved by AVONEX[trademark] and the status of
applications for marketing approvals for AVONEX[trademark] in the European Union
and in several other jurisdictions, including Canada.

Other expenses in 1996 were $1.7 million, a decrease of $4.3 million or 39.5% in
1996 as compared to 1995, primarily due to gains recorded on foreign exchange
related contracts.

Income tax expense for 1996 and 1995 varied from the amount computed at U.S.
federal statutory rates primarily because of the impact of net operating loss
carry forwards. As of December 31, 1995, the Company had a net deferred tax
asset of $57.1 million (before valuation allowance) consisting of the future tax
benefits from net operating loss carry forwards and other tax credits. Due to
the sustained growth during the third quarter of 1996 in sales and profitability
of the Company's first commercial product, AVONEX[trademark], the Company made
the determination that it is more likely than not that it will realize the
benefits of the net deferred tax assets, and it therefore reversed all of the
related valuation allowance. The Company's reversal of the valuation allowance
in the third quarter resulted in a realization of income tax benefit of
approximately $23 million representing the balance of net operating loss carry
forwards and tax credits that had not been recognized at the beginning of the
quarter as well as tax credits generated during the quarter. The reversal of the
valuation allowance in the third quarter also resulted in an increase in
additional paid-in capital of $38.6 million relating to deductions for
non-qualified stock options.

RESULTS OF OPERATIONS

1995 AS COMPARED TO 1994

Total revenues in 1995 were $151.7 million, as compared to $156.3 million in
1994, a decrease of 3%. Revenues from royalties for 1995 decreased approximately
$5.8 million or 4% as compared to 1994, primarily due to the inclusion in the
first quarter of 1994 of a one-time payment of approximately $10 million in
royalties from Eli Lilly & Co. ("Lilly") under a licensing agreement covering
certain patent rights for gene expression methods. This one-time payment related
to sales that occurred after issuance of the patent but before the licensing
agreement was signed. Licensee sales of products from which Biogen derives
royalties increased from approximately $1.7 billion in 1994 to approximately
$1.8 billion in 1995. Royalty revenue from these licensee sales increased
approximately $5 million primarily as a result of an increase in sales of
hepatitis B vaccines sold by SmithKline Beecham plc ("SmithKline") and Merck &
Co., Inc. ("Merck"). This increase was primarily attributable to a vaccination
program in France for infants and adolescents which began in late 1994.
Worldwide hepatitis B vaccine sales in 1995 reached the billion dollar level
with sales outside the United States increasing approximately 25% in 1995 as
compared to 1994. The increase in royalty revenue from hepatitis B vaccines was
partially offset by a slight decline in royalty revenue from sales of alpha
interferon by Schering Plough Corporation ("Schering Plough") in 1995 as
compared to 1994.

Interest income for 1995 increased by $1.1 million from 1994 due primarily to
higher returns on invested funds.

EXPENSES

Total expenses for 1995 were $144.2 million as compared to $158.3 million in
1994. Cost of sales increased $0.6 million, or 6% in 1995 as compared to 1994,
primarily due to increased royalty obligations to third parties. Research and
development expenses for 1995 were $87.4 million, a decrease of $3.8 million, or
4% in 1995 as compared to 1994. The decrease was primarily due to higher costs
in 1994 associated with the clinical development of HIRULOG[registered
trademark] thrombin inhibitor, partially offset by costs incurred in 1995 for
the production of clinical material by a contract manufacturer and an increase
in personnel costs.

General and administrative expenses increased by $15.6 million, or 63% in 1995
as compared to 1994, due primarily to higher costs for market development
efforts related to AVONEX[trademark], including costs related to the Company's
European headquarters, and legal and personnel-related costs.

Other expenses decreased by $26.4 million in 1995 as compared to 1994, primarily
due to a $25 million pre-tax charge in 1994 as a result of the Company's
decision to discontinue its major activities associated with the development of
its HIRULOG[Registered Trademark] thrombin inhibitor product.

Income tax expense for 1995 and 1994 varied from the amount computed at U.S.
federal statutory rates, primarily as a result of the impact of net operating
loss carryforwards. As of December 31, 1995, the Company had a net deferred tax
asset of $57.1 million (before valuation allowance) consisting primarily of the
future tax benefits from net operating loss carryforwards and other tax credits.
At December 31, 1995, the Company had a 100% valuation allowance against the net
deferred tax asset. The valuation allowance was reversed in the third quarter of
1996.

FINANCIAL CONDITION

At December 31, 1996, cash, cash equivalents and marketable securities were
$321.4 million compared with $307.9 million at December 31, 1995, an increase of
$13.5 million. Working capital increased $60.9 million to $347.8 million. The
increase in working capital is primarily due to the reversal of the deferred tax
asset valuation allowance in the third quarter. Net cash provided by operating
activities for the year ended December 31, 1996 was $46.5 million compared with
$9.4 million in 1995. Cash outflows included investments in property and
equipment and patents of $65.6 million and $16.8 million for equity investments
in companies with which Biogen has signed research collaboration agreements.
Cash inflows included $33.4 million from loan agreements with banks and $20
million from common stock option and purchase plans activity.

In March 1995, the Company completed construction of its research laboratory and
office building in Cambridge, Massachusetts and entered into a $25 million loan
with a bank (the "Term Loan"), secured by the building. As of December 31, 1996
there was $22.5 million outstanding under the Term Loan.

In the second quarter of 1995, the Company began construction of its biologics
manufacturing facility in Research Triangle Park, North Carolina. The Company
plans to manufacture AVONEX[trademark] at the facility upon the facility's
licensing by the FDA. Until the facility is licensed, the Company will continue
to manufacture AVONEX[trademark] in its Cambridge, Massachusetts facility. The
estimated cost of construction, including land, of the Research Triangle Park
facility is $59 million. As of December 31, 1996, the Company had paid or been
invoiced approximately $57 million and had additional commitments totaling
approximately $2 million on this project. In August 1995, the Company entered
into a loan agreement with a bank for financing of this project (the
"Construction Loan"). Under the terms of the Construction Loan, the Company may
be advanced funds during the construction period up to $50 million. As of
December 31, 1996 there was $43.8 million outstanding under the Construction
Loan. The Company limits its exposure to fluctuations in interest rates with
interest rate swap agreements which fixes its interest rates on the loans
outstanding between 6.39% and 7.75%.

The Company has several research programs and collaborations underway. Under the
research collaboration and license agreement with CBM, Biogen paid a license fee
of $10 million and purchased 1.5 million shares of CBM common stock for $18
million. The Company also has agreed to fund $10.5 million of research
activities over the next three years assuming continuation of the collaboration.

Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement with Ontogeny, Inc. ("Ontogeny"), a private
biotechnology company, for the development and commercialization of three
specific Hedgehog cell differentiation proteins. The Company acquired a minority
equity interest in Ontogeny as well as certain exclusive, worldwide rights
related to products based on the Hedgehog proteins for most disease areas. The
Company has agreed to fund approximately $6 million in research and development
costs of Ontogeny over two years and to make license fees and milestone payments
to Ontogeny of up to $27 million per Hedgehog protein, depending on the
achievement of certain clinical, regulatory and commercial milestones over the
life of the agreement.

In August 1995, the Company signed a collaborative research agreement for the
development of human gene therapy treatments with Genovo, Inc. ("Genovo"), a
gene therapy research company. The Company acquired a minority equity interest
in Genovo as well as certain licensing rights. The Company has agreed to fund
research and development costs to Genovo up to approximately $37 million over
the life of the agreement, depending on achievement of scientific milestones.

memorandum and Order (dated January 22, 1996) dismissing most of the claims
asserted in the plaintiffs' Second Amended Complaint, including all claims
against the Company's outside directors. The only two claims remaining in the
case pertain to statements concerning the results of the HIRULOG[registered
trademark] TIMI-7 clinical trials in unstable angina. The Court did not reach a
decision on the merits of these claims. On October 11, 1996, the Company filed a
motion for summary judgment in the case. The plaintiffs have opposed the motion.

On October 7, 1996, a judge dismissed the lawsuit filed by Berlex Laboratories,
Inc. against the FDA in the U.S. District Court for the District of Columbia in
which Berlex claimed that the FDA's approval of Biogen's AVONEX[trademark] was
improper. Biogen was an intervenor-defendant in the litigation. In dismissing
the suit, the judge held that the FDA acted lawfully in approving
AVONEX[trademark]. Berlex chose not to appeal this decision.

On July 3, 1996, 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[trademark].
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. Prior
to the date of the suit filed by Berlex on the McCormick patents, 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[trademark], 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 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 licence is still in
force, and, in the alternative, seeks approximately $5 million in damages. The
territories included in the 1989 license were Austria, Belgium, Denmark,
Finland, France, Greece, Iceland, Ireland, Luxembourg, The Netherlands, Norway,
Portugal, Sweden, Switzerland and the United Kingdom. The arbitration will take
place in Zurich under Swiss law.

The Company's management believes that it has meritorious defenses to the

preceding claims and given these defenses, believes the ultimate outcome of
these legal proceedings will not have a material adverse effect on the results
of operations or financial position of the Company.

OUTLOOK

SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

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 royalty revenues, product sales,
expenses and profits and predictions as to the anticipated outcome of regulatory
approval applications and 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 operation are discussed below and elsewhere in
this Management's Discussion and Analysis of Financial Condition and Results of
Operation.

DEPENDENCE ON AVONEX[trademark] 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[trademark] sales. The Company's
ability to achieve profitability from sales of AVONEX[trademark] will depend on
a number of factors, including: continued market acceptance of AVONEX[trademark]
in the United States; the Company's ability to maintain a high level of patient
satisfaction with AVONEX[trademark] in treating the relapsing form of multiple
sclerosis, a disease which is characterized by an uneven pattern of disease
progression; receipt of timely regulatory approval for AVONEX[trademark] in the
European Union, which is subject to the discretion of regulatory authorities;
the nature of regulatory and pricing decisions related to AVONEX[trademark]
worldwide and the extent to which AVONEX[trademark] receives reimbursement
coverage; market acceptance of AVONEX[trademark] 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[trademark] in light of the introduction of competitive products for the
treatment of multiple sclerosis, such as Teva Pharmaceuticals'
Copaxone[registered trademark] glatiramer acetate, which was recently approved
in the United States, and Ares-Serono's Rebif[registered trademark], an
interferon beta-1a product, which is the subject of a pending application in the
European Union; the success of ongoing development work related to
AVONEX[trademark] in expanded multiple sclerosis indications and the continued
accessibility of third parties to vial, label, and distribute AVONEX[trademark]
on acceptable terms. The Company's ability to increase 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 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[trademark](interferon beta 1a)", "Business -
Regulation" and "Legal Proceedings."

NEW PRODUCTS

AVONEX[trademark] 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.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

As of December 31, 1996 1995
-------- --------

ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................... $ 62,032 $ 45,770
Marketable securities ............................... 259,349 262,178
Accounts receivable, less allowances of $1,480
in 1996; none in 1995 ............................. 42,952 19,612
Deferred tax asset, net ............................. 47,888 --
Other ............................................... 23,533 12,749
-------- --------
Total current assets .............................. 435,754 340,309
-------- --------
PROPERTY AND EQUIPMENT, NET ........................... 165,323 115,048
-------- --------
OTHER ASSETS
Patents, net ........................................ 10,458 7,988
Marketable securities ............................... 16,003 --
Other ............................................... 7,034 5,856
-------- --------
Total other assets ................................ 33,495 13,844
-------- --------
$634,572 $469,201
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .................................... $ 15,722 $ 12,512
Current portion of long-term debt ................... 4,017 1,667
Accrued expenses and other .......................... 68,209 39,216
-------- --------
Total current liabilities ......................... 87,948 53,395
-------- --------
LONG-TERM DEBT, LESS CURRENT PORTION .................. 62,254 32,826
-------- --------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Common stock, par value $0.01 per share
(110,000,000 shares authorized; issued:
1996 - 72,526,009; 1995 - 71,011,002) ............. 725 710
Additional paid-in capital .......................... 471,623 408,793
Retained earnings (deficit) ......................... 12,831 (27,699)
Unrealized gains(losses) on
marketable securities .............................. (743) 1,245
Cumulative translation adjustment ................... (66) (69)
-------- --------
Total shareholders' equity ........................ 484,370 382,980
-------- --------
$634,572 $469,201
======== ========

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

Years Ended December 31, 1996 1995 1994
-------- -------- --------

REVENUES:
Product .......................... $ 78,202 $ -- $ --

Royalties ........................ 181,502 134,653 140,433

Interest ......................... 17,386 17,038 15,911
-------- -------- --------
Total revenues ................. 277,090 151,691 156,344
-------- -------- --------
EXPENSES:
Cost of sales .................... 28,525 10,504 9,948

Research and development ......... 132,384 87,448 91,213

Selling general and administrative 73,632 40,293 24,686

Other,net ........................ 1,720 6,001 32,404
-------- -------- --------
Total expenses ................. 236,261 144,246 158,251
-------- -------- --------
Income(loss) before income
taxes ....................... 40,829 7,445 (1,907)

INCOME TAXES ....................... 299 1,785 2,990
-------- -------- --------
Net income(loss) ............. $ 40,530 $ 5,660 $ (4,897)
======== ======== ========
EARNINGS (LOSS) PER SHARE OF
COMMON STOCK ....................... $ 0.55 $ 0.08 $ (0.07)
======== ======== ========
Average number of shares
outstanding ....................... 73,221 72,890 65,548
======== ======== ========

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31, 1996 1995 1994
--------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) .................. $ 40,530 $ 5,660 $ (4,897)
Adjustments to reconcile net income
(loss) to net cash provided from
operating activities:
Depreciation and amortization ...... 15,264 10,916 8,056
Other .............................. 682 (3,177) 3,484
Deferred income taxes .............. (5,541) -- --
Changes in:
Accounts receivable .............. (23,340) (1,110) 13,193
Other current assets ............. (7,727) (4,269) (1,102)
Accounts payable, accrued
expenses and other liabilities . 26,671 1,429 16,152
--------- --------- ---------
Net cash provided from operating
activities ....................... 46,539 9,449 34,886
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable
securities ........................ (369,893) (349,025) (312,057)
Proceeds from sales of marketable
securities ........................ 370,252 307,021 285,432
Investment in research collaboration (16,774) -- --
Acquisitions of property
and equipment ..................... (62,030) (47,998) (40,540)
Additions to patents ............... (3,606) (2,311) (3,130)
--------- --------- ---------
Net cash used by investing
activities ........................ (82,051) (92,313) (70,295)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt .................... 33,444 35,326 --
Repayments on long-term debt ....... (1,666) (833) --

Issuance of common stock and warrant
and option exercises .............. 19,996 39,459 15,545
--------- --------- ---------
Net cash provided from financing
activities ........................ 51,774 73,952 15,545
--------- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS ................... 16,262 (8,912) (19,864)
--------- --------- ---------

CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR............................. 45,770 54,682 74,546
--------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR......................... $ 62,032 $ 45,770 $ 54,682
========= ========= =========

SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the year for:

Interest .......................... 4,038 2,000 400
Income Taxes ...................... 1,516 591 170

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands)
Years Ended December 31, 1996, 1995 and 1994

Unrealized
Gains
Additional Retained (Losses) on Cumulative
Common Paid-in Earnings Marketable Translation Shareholders'
Stock Capital (Deficit) Securities Adjustment Equity
------- -------- -------- ------- ---- --------

December 31, 1993 ........ $ 646 $352,924 $(28,462) $ -- $ 66 $325,174

Conversion of warrants ... 11 10,883 10,894
Issuance of common stock . 457 457
Exercise of options ...... 6 4,188 4,194
Unrealized losses on
marketable securities ... (5,867) (5,867)
Net loss ................. (4,897) (4,897)
Translation adjustment ... (21) (21)
------- -------- -------- ------- ---- --------
Balance, December 31, 1994 $ 663 $368,452 $(33,359) $(5,867) $ 45 $329,934

Conversion of warrants ... 36 30,564 30,600
Issuance of common stock . 470 470
Exercise of options,
including tax benefits .. 11 9,307 9,318
Unrealized gain on
marketable securities ... 7,112 7,112
Net income ............... 5,660 5,660
Translation adjustment ... (114) (114)
------- -------- -------- ------- ---- --------
Balance, December 31, 1995 $ 710 $408,793 $(27,699) $ 1,245 $(69) $382,980

Exercise of option ....... 15 19,288 19,303
Issuance of common stock . 693 693
Tax benefit related to
stock options ........... 42,849 42,849
Unrealized losses on
marketable securities,
net of taxes ............ (1,988) (1,988)
Net income ............... 40,530 40,530
Translation adjustment ... 3 3
------- -------- -------- ------- ---- --------
Balance, December 31, 1996 $ 725 $471,623 $ 12,831 $ (743) $(66) $484,370
======= ======== ======== ======= ==== ========

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Biogen, Inc. (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
AVONEX[trademark] under the Biogen name and from worldwide sales of 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 approval from the United States Food and Drug
Administration ("FDA") to market its new product AVONEX [trademark] as a
treatment for relapsing forms of multiple sclerosis ("MS").

Consolidation Principles

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.

Translation of Foreign Currencies

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. Foreign exchange translation gains and losses are included
in the results of operations. Such amounts for the years presented were
insignificant.

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.

Inventories

Inventories are stated at the lower of cost or market with cost determined under
the first-in/first-out ("FIFO") method and are classified as 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, net of
applicable reserves and allowances, as of December 31, are as follows:

(in thousands) 1996 1995
------- ------

Raw materials $ 3,262 $3,051
Work in process 7,801 2,968
Finished goods 5,495 1,112
------- ------
$16,558 $7,131
======= ======

Marketable Securities

As of January 1, 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" which had no effect on net income. In accordance with SFAS 115, the
Company classified its marketable securities as "available for sale" with the
securities recorded at fair market value and unrealized gains and losses
included in shareholders' equity, net of related tax effects.

Accounts Receivable

During the first quarter of 1994, the Company entered into an agreement with a
bank to sell certain foreign based accounts receivable, with recourse. At
December 31, 1996, the Company had approximately $14.9 million of foreign based
accounts receivable outstanding under the agreement. The exposure to credit risk
under the recourse provision is minimal since the debtors are highly rated
companies. The selling price is partially determined by foreign exchange rates
at the end of each quarter. Resulting gains and losses are recorded in other
expenses when the receivables are sold.

Property and Equipment

Property and equipment is carried at cost and 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. The Company capitalizes, to construction in progress, the
incremental costs associated with the validation effort required for licensing
by the FDA of a manufacturing facility for the production of a commercially
approved drug. These costs include direct labor and material. Buildings and
equipment are depreciated over estimated useful lives ranging from 30 to 40 and
5 to 10 years, respectively.

Patents

The costs of patents and patent applications are capitalized and amortized on
the straight-line basis over estimated useful lives up to 15 years. Accumulated
amortization of patent costs was $11.3 million and $9.3 million as of December
31, 1996 and 1995, respectively. The carrying value of patents is 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.

Revenues

Revenues from product sales are recognized when product is shipped and are net
of applicable allowances. The Company receives revenues under license agreements
with a number of third parties that sell products based on technology developed
by the Company. All of 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. Many of the license agreements also provide for the payment of
one-time, non-refundable fees when the agreement is signed or when commercial
goals are achieved. These fees are recorded as revenue in accordance with the
terms of the particular agreement.

Research and Development Expenses

Research and development costs are expensed as incurred.

Per Share Data

Earnings (loss) per share is based upon the weighted average number of common
shares and, if dilutive, common stock equivalents outstanding, which include
options and warrants.

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.

Stock Based Compensation

In 1996, the Company adopted, through disclosure only, Statement of Financial
Accounting Standards Number 123 "Accounting for Stock Issued to Employees"("SFAS
123"). The 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.

2. FINANCIAL INSTRUMENTS

The following is a summary of marketable securities as of December 31,:

Unrealized
Fair ---------- Amortized
(In thousands) Value Gains Losses Cost
-------- ------ ---- --------

December 31, 1996:
- -----------------

U.S. Government securities $146,707 $ 111 $718 $147,314
Corporate debt securities 112,642 350 184 112,476
-------- ------ ---- --------
$259,349 $ 461 $902 $259,790
======== ====== ==== ========

Marketable securities, noncurrent $ 16,003 $ -- $771 $ 16,774
======== ====== ==== ========

December 31, 1995:
- -----------------
U.S. Government securities $136,218 $1,021 $535 $135,732
Corporate debt securities 125,960 758 -- 125,202
-------- ------ ---- --------
$262,178 $1,779 $535 $260,934
======== ====== ==== ========

The average maturity of the Company's marketable securities as of December 31,
1996 was 15 months. Proceeds from maturities and other sales of marketable
securities, which were primarily reinvested, for the year ended December 31,
1996, were $370.3 million. Realized losses on these sales for the years ended
December 31, 1996, 1995 and 1994 were $783,000, $58,000 and $3.4 million,
respectively.

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 Company uses the swap
agreements to manage interest costs and risk associated with the floating rate
debt and, accordingly, accounts for the swap agreements under the accrual basis,
recording the differential to be paid or received as interest expense. The fair
value of the swap agreements at December 31, 1996 and 1995, representing the
cash requirements of the Company to settle the agreements, approximated $580,000
and $3.2 million, respectively.

3. LONG-TERM DEBT

Long-term debt consists of the following as of December 31,(in thousands):

1996 1995
------- -------

Term Loan due 2005............................. $22,499 $24,167

Construction Loan due 2007...................... 43,772 10,326
------- -------
66,271 34,493
Current portion (4,017) (1,667)
------- -------
$62,254 $32,826
======= =======

In March 1995, the Company completed construction of its research and office

building in Cambridge, Massachusetts and entered into a $25 million floating
rate loan with a bank (the Term loan). The Term loan provides for annual
principal payments of $1.7 million in each of the years 1996 through 1999 with
the balance due May 8, 2005. The Company has fixed its interest rate on the Term
loan at 7.5% under the terms of a swap agreement under which the Company agrees
to exchange with the bank semi-annually the difference between 7.5% and a
floating rate computed on a notional amount beginning at $25 million and
amortizing according to the same terms of the loan agreement.

In the second quarter of 1995, the Company began construction of its biologics
manufacturing facility in Research Triangle Park, North Carolina. The estimated
cost of construction, including land, is $59 million. In August 1995, the
Company entered into a floating rate loan agreement with a bank for financing of
this project (the "Construction Loan"). Under the terms of the Construction
Loan, the Company may be advanced funds during the construction period up to $50
million. Beginning upon the earlier of 90 days after completion of the project
or August 1997, the outstanding principal balance will be payable in 39
consecutive quarterly installments of $800,000, assuming the full $50 million is
advanced, with the balance due in 2007. The Company also entered into two
interest rate swap agreements fixing its interest rate at 6.39% during the
construction period and 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 loans are secured by certain
assets of the Company.

4. CONSOLIDATED BALANCE SHEET DETAILS

(in thousands) 1996 1995
-------- --------

Property and equipment:
Land............................................ $ 3,470 $ 3,301
Buildings....................................... 26,417 23,960
Construction in progress........................ 65,079 20,184
Leasehold improvements.......................... 50,739 45,663
Equipment....................................... 72,221 61,906
-------- --------
Total cost...................................... 217,926 155,014
-------- --------
Less accumulated depreciation................... 52,603 39,966
-------- --------
$165,323 $115,048
======== ========

Depreciation expense was $12.7 million and $8.5 million for 1996 and 1995
respectively. The Company capitalized interest costs of $1.7 million and
$143,000, respectively, in 1996 and 1995 with respect to qualifying construction
projects.

(in thousands) 1996 1995
------- -------

Accrued expenses and other:
Royalties and licensing fees.................... $22,784 $ 9,431
Clinical trial costs............................ 3,385 2,105
Accrued compensation, benefits and related costs 7,797 5,508
Income taxes.................................... 6,634 5,654
Other........................................... 27,609 16,518
------- -------
$68,209 $39,216
======= =======

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 primarily in fixed income and equity securities.
Pension cost for each of the three years ended December 31 are summarized below:

(in thousands) 1996 1995 1994
------ ------ -----

Service cost........................ $1,381 $ 847 $ 791
Interest cost....................... 659 371 313
Actual return on plan assets........ (532) (622) 9
Net amortization and deferral....... 312 420 (149)
------ ------ -----
Net pension cost.................... $1,820 $1,016 $ 964
====== ====== =====

The funded status of the defined benefit plans at December 31, is as follows:

(in thousands) 1996 1995
------ -------

Actuarial present value of:
Vested benefits obligation ....... $5,497 $ 4,513
Non-vested benefits .............. 1,348 501
------ -------
Accumulated benefit obligation ... 6,845 5,014
====== =======
Projected benefit obligation ....... 9,466 7,267
Plan assets at fair value .......... 5,579 3,385
------ -------
Projected benefit obligation in
excess of plan assets ............. 3,887 3,882

Unrecognized net asset ............. 42 63
Unrecognized net loss .............. (985) (1,407)
Unrecognized prior service cost .... (444) (165)
------ -------
Accrued pension cost ............... $2,500 $ 2,373
====== =======

The projected benefit obligation was determined using an assumed discount rate
of 7.5% for 1996 and 7.25% for 1995. The assumed long-term compensation increase
rate was 5% and the assumed long-term rate of return on plan assets was 8% for
1996 and 1995, respectively.

6. 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, is as follows:

(in thousands) 1996 1995 1994
-------- -------- -------

Income (loss) before income taxes:
Domestic ....................... $ 65,250 $ 28,845 $(1,533)
Foreign ........................ (24,421) (21,400) (374)
-------- -------- -------
$ 40,829 7,445 (1,907)
======== ======== =======

Income tax expense (benefit):

Current
Federal ........................ $ 4,636 $ 1,264 $ 2,540
State .......................... 789 211 415
Foreign ........................ 415 310 35
-------- -------- -------
$ 5,840 1,785 2,990
======== ======== =======

Deferred
Federal ........................ $ (4,082) -- --
State .......................... (1,459) -- --
Foreign ........................ -- -- --
-------- -------- -------
$ (5,541) -- --
======== ======== =======
Total income tax expense ........ $ 299 $ 1,785 $ 2,990
======== ======== =======

The Company's foreign subsidiaries generated operating losses in 1996 reflecting
the costs of building a commercial infrastructure in Europe and the foreign
subsidiaries' investment in the Company's consolidated research and development
efforts.

Deferred tax assets (liabilities) are comprised of the following at December 31:

(in thousands) 1996 1995
------- --------

Tax credits................................................. $26,079 $ 20,648
Loss carryforwards.......................................... 17,006 30,625
Discontinuance of HIRULOG[registered trademark] program..... - 5,984
Inventory and other reserves................................ 5,304 2,401
Other....................................................... 4,510 2,178
Deferred tax assets valuation allowance..................... - (57,091)
------- --------
Deferred tax assets, net................................... 52,899 4,745
------- --------
Depreciation and amortization............................... (7,496) (4,745)
------- --------
Deferred tax liabilities................................... (7,496) (4,745)
------- --------
$45,403 $ --
======= ========

Due to the sustained growth during the third quarter of 1996 in sales and
profitability of the Company's first commercial product, AVONEX[trademark], the
Company made the determination that it is more likely than not that it will
realize the benefits of the net deferred tax assets and it has therefore
released all of the related valuation allowance. The Company's reversal of the
valuation allowance resulted in a realization of income tax benefits of
approximately $23 million representing the balance of tax-loss carryforwards and
tax credits that had not been recognized at the beginning of the third quarter
as well as tax credits generated during the quarter. The reversal of the
valuation allowance also resulted in an increase in additional paid-in capital
of $38.6 million relating to deductions for non-qualified stock options.

A reconciliation between the amounts of reported income tax expense and the
amounts computed using the U.S. federal statutory rate of 35% are as follows:

(in thousands) 1996 1995 1994
-------- ------- ------

Income tax expense (benefit) at
statutory rates.................... $ 14,350 $ 2,606 $ (667)
State taxes, net of federal income
tax benefit........................ 509 138 270
Foreign losses without tax benefit
and foreign rate differential...... 8,887 7,812 391
Effects of losses not currently
utilizable......................... -- -- 2,962
Change in valuation allowance and
current utilization of net

operating loss carryforwards and
deferred tax assets................ (23,000) (9,485) --

Other, net........................... (447) 714 34
-------- ------- ------
Reported income tax expense......... $ 299 $ 1,785 $2,990
======== ======= ======

At December 31, 1996, the Company had net operating loss carry forwards
available in the United States for federal income tax return purposes of $47
million and tax credits of $15 million, most of which expire at various dates
through 2010. The Company also has approximately $1.0 million of foreign loss
carry forwards at December 31, 1996 which do not expire.

7. RESEARCH COLLABORATIONS

In December, 1996, the Company signed a research collaboration and license
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 terms of the agreement the Company purchased
approximately 1.5 million shares of CBM common stock for $18 million and paid a
one-time license fee of $10 million. The payment for the common stock included a
$1.2 million premium which was charged to research and development expense. The
Company also agreed to fund approximately $10.5 million in research activities
over the next three years, of which $2 million was included in research and
development expense in 1996.

In August 1995, the Company signed a collaborative research agreement for the
development of human gene therapy treatments with Genovo, Inc. ("Genovo"), a
gene therapy research company. The Company acquired a minority equity interest
in Genovo as well as certain licensing rights. The Company accounts for the
investment in Genovo on the equity method of accounting. The Company has agreed
to fund research and development costs to Genovo up to approximately $37 million
over the remaining life of the agreement, depending on achievement of scientific
milestones, which will be recorded as research and development expense as
incurred.

8. 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 2004, amounted to $6.6 million in 1996, $5.1
million in 1995 and $4.7 million in 1994. 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. At December 31, 1996,
minimum annual rental commitments under noncancellable leases were as follows:

(in thousands)

Year
- ----

1997.................................................. $ 6,540
1998.................................................. 5,050
1999.................................................. 4,302
2000.................................................. 3,231
2001.................................................. 829
Thereafter............................................ 2,196
-------
Total minimum lease payments.......................... $22,148
=======

During the fourth quarter of 1994, a total of six class action lawsuits were
initiated against the Company and several of its directors and officers. On
March 3, 1995, these cases were consolidated into a single proceeding in the
United States District Court for the District of Massachusetts. On January 23,
1996, in response to motions to dismiss the entire case filed by Biogen and the
named officer and director defendants, the District Court issued a memorandum
and Order (dated January 22, 1996) dismissing most of the claims asserted in the
plaintiffs' Second Amended Complaint, including all claims against the Company's
outside directors. The only two claims remaining in the case pertain to
statements concerning the results of the HIRULOG[registered trademark] TIMI-7
clinical trials in unstable angina. The Court did not reach a decision on the
merits of these claims. On October 11, 1996, the Company filed a motion for
summary judgment in the case. The plaintiffs have opposed the motion. The
Company will continue to defend vigorously the claims that remain in the case.

AVONEX[trademark]. 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. Prior to the date of the suit filed by Berlex on the McCormick patents,
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[trademark], 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 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 licence 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 the
preceding claims and given these defenses, believes the ultimate outcome of
these legal proceedings will not have a material adverse effect on the results
of operations or financial position of the Company.

9. SHAREHOLDERS' EQUITY

On October 22, 1996, 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 November 15, 1996 to
shareholders of record at the close of business on November 4, 1996. All
references to the number of shares and per share amounts in the financial
statements have been restated to reflect the effect of the stock split.

Convertible Exchangeable Preferred Stock

The Company has authority to issue 20,000,000 shares of $.01 par value preferred
stock.

Shareholder Rights Plan

In 1989, the Company's Board of Directors declared a dividend of one preferred
share purchase right (a "right") for each share of common stock outstanding.
Each right entitles the holder to purchase from the Company one two-hundredth of
a share of $0.01 par value Series A junior participating preferred stock at a
price of $34.00 per two-hundredth of a share (post split basis), subject to
certain adjustments. The 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 offer which would result in the ownership of 20% or more of the
outstanding common stock of the Company; or if 10% of the Company's common stock
is acquired and the acquirer is determined by the Board of Directors to be an
adverse person (as defined in the rights plan). Once a right becomes
exercisable, the plan allows the Company's shareholders to purchase common stock
at a substantial discount. Unless earlier redeemed, the rights expire on May 8,
1999 (adjusted to reflect stock split). The Company is entitled to redeem the
rights at $.005 per right, subject to adjustment for any future stock split,
stock dividend or similar transaction.

As of December 31, 1996, the Company has authorized the issuance of 400,000
shares of Series A junior participating preferred stock for use in connection
with the shareholder rights plan.

Share Option and Purchase Plans

The Company has several plans and arrangements under which it may grant options
to employees, Directors, Scientific Board members and consultants to purchase
common stock. Options are granted for periods of up to 10 years and become
exercisable in installments over periods of up to 7 years or upon the
achievement of scientific or other goals. Activity under these plans follows
(shares are in thousands):

1996 1995 1994
--------------- --------------- ---------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ ------ ------ ------ ------ ------

Outstanding, Jan. 1..... 11,772 $17.59 10,764 $14.71 9,511 $12.65
Granted................ 1,935 34.46 2,465 25.81 2,423 20.18
Exercised.............. (1,478) 12.89 (1,117) 7.13 (537) 7.86
Canceled............... (481) 20.92 (340) 21.38 (633) 10.58
------ ------ ------ ------ ------ ------
Outstanding, Dec. 31.... 11,748 20.77 11,772 17.59 10,764 14.71
====== ====== ====== ====== ====== ======

Options exercisable .... 5,692 5,925 5,188

Available for grant .... 2,310 3,764 1,889

Weighted average fair
value of options
granted during year ... $16.59 $12.63

Options were exercised during the three years ended December 31, 1996 at prices
ranging from $2.13 to $29.38 per share. The exercise price of options
outstanding at December 31, 1995, 1994, 1993 ranged from $2.13 to $41.31 per
share.

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 560,000 shares during the
term of the plans; no shares may be issued after December 31, 2004. Through
December 31, 1996, 253,230 shares have been issued under the plans.

Had compensation cost for the Company's 1996 and 1995 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's pro
forma net income, and pro forma earning per share for the years ending December
31, would be as follows (in thousands except per share data):

1996 1995
------- ------

Pro forma net income $36,679 $3,711

Pro forma earnings per share $ 0.50 $ 0.05

The fair value of the option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:

1996 1995
------ -----

Expected dividend yield 0% 0%
Expected stock price volatility 36% 40%
Risk-free interest rate 5.5%-5.9% 5.6%-7.7%
Expected option term 2.5 YEARS 2.5 Years

The effects of applying SFAS 123 in this pro forma disclosure are not indicative
of future amounts. SFAS 123 does not apply to awards prior to 1995, and
additional awards in future years are anticipated.

Common Stock Warrants

During 1995, the Company received $30.6 million from the exercise of 3.6 million
common stock warrants issued in 1989 in connection with a research agreement
with an insurance company. During 1994, the Company received $10.9 million from
the exercise of 1.1 million common stock warrants issued in connection with the
original sale of limited partnership interests in Biogen Medical Products
Limited Partnership. As of December 31, 1996, no common stock warrants were
outstanding.

10. GEOGRAPHIC DATA

Revenues, excluding interest, were derived in the following geographic areas for
the years ended December 31:

(in thousands) 1996 1995 1994
-------- -------- --------

United States............... $131,756 44,764 $ 44,083

Japan....................... 50,342 16,082 27,216

Europe...................... 62,459 60,523 56,881

Other....................... 15,147 13,284 12,253
-------- -------- --------
$259,704 $134,653 $140,433
======== ======== ========

The Company received revenue from three unrelated parties in 1996 accounting for
a total of 27%, 17% and 13% of total product and royalty revenues; two unrelated
parties in 1995 accounting for 40% and 39% of total royalty revenues; and three
unrelated parties in 1994 accounting for 40%, 34% and 11% of total royalty
revenues.

11. OTHER EXPENSES

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[registered trademark] development. The charge
related entirely to third-party expenses associated with the manufacture of drug
supplies and wind-down of clinical trial activities.

12. QUARTERLY FINANCIAL DATA (UNAUDITED)

(in thousands, except per share amounts)

First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
------- ------- -------- ------- --------

1996
- ----
Total revenues ........ $38,843 $45,401 $100,859 $91,987 $277,090
Product revenue ....... -- 6,125 27,517 44,560 78,202
Royalties revenue ..... 34,378 35,032 69,236 42,856 181,502
Total expenses and
taxes ................ 42,501 54,494 55,807 83,758 236,560
Net income(loss) ...... (3,658) (9,093) 45,052 8,229 40,530
Earnings (loss) per
share of common stock (0.05) (0.13) 0.60 0.11 0.55

1995
- ----
Total revenues ........ $35,970 $36,896 $ 38,177 $40,648 $151,691
Royalties revenue ..... 31,953 32,717 33,884 36,099 134,653
Total expenses and
taxes ................ 33,136 36,182 37,049 39,664 146,031
Net income ............ 2,834 714 1,128 984 5,660
Earnings per share of
common stock ......... 0.04 0.01 0.02 0.01 0.08

EXHIBIT 15

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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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.

Price Waterhouse LLP
Boston, Massachusetts
January 14, 1997

31
SHAREHOLDER INFORMATION
BIOGEN, INC. AND SUBSIDIARIES

CORPORATE HEADQUARTERS:
Biogen, Inc.
14 Cambridge Center
Cambridge, MA 02142

Telephone: (617) 679-2000
Fax: (617) 679-2617

ANNUAL MEETING:
Friday, June 6, 1997 at 10:00 a.m.
at the Company's offices at 12 Cambridge Center
All shareholders are welcome.

MARKET FOR SECURITIES:
Biogen's securities are quoted on the
NASDAQ National Market System.
Common stock symbol: BGEN

As of February 14, 1997, there were approximately 2,759 holders of record of the
Company's Common Stock. The Company has not paid any cash dividends on its
Common Stock since its inception, and does not intend to pay any dividends in
the foreseeable future. On November 15, 1996, the Company effected a two-for-one
stock split of its Common Stock. The quarterly high and low closing sales price
(adjusted for all periods to reflect the stock split) of the Common Stock on the
NASDAQ National Market System for 1996 and 1995 are as follows:

HIGH LOW
FISCAL 1996

First Quarter 38 1/4 28 3/4
Second Quarter 33 7/8 25 13/16
Third Quarter 38 1/16 26 3/8
Fourth Quarter 43 36 3/16

FISCAL 1995
First Quarter 21 3/16 16 1/8
Second Quarter 23 3/8 18 11/16
Third Quarter 30 1/2 20 3/4
Fourth Quarter 32 1/8 25

SEC FORM 10-K:
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge upon written request to the Corporate
Communications Department, Biogen, Inc., 14 Cambridge Center, Cambridge, MA
02142

TRANSFER AGENT:
For shareholder questions regarding lost certificates, address changes and
changes of ownership or name in which the shares are held, direct inquiries to:

State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
Telephone: (800)426-5523

INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110

U.S. LEGAL COUNSEL:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111

ANNUAL REPORT ANNOUNCEMENT
As a service to our shareholders and prospective investors, copies of Biogen
news releases issued in the last 12 months are now available almost immediately
24 hours a day, seven days a week on the Internet's World Wide Web at
http://www.prnewswire.com and via automated fax by calling "Company News On
Call" at 1 800 758-5804, ext. 101550. Biogen news releases are usually posted on
both systems within one hour of being issued and are available at no cost.

THE BIOGEN LOGO IS A REGISTERED TRADEMARK OF BIOGEN, INC. AVONEX[TRADEMARK] IS A
TRADEMARK OF BIOGEN, INC. HIRULOG[REGISTERED TRADEMARK] IS A REGISTERED
TRADEMARK OF BIOGEN, INC. INTRON[REGISTERED TRADEMARK] A IS A REGISTERED
TRADEMARK OF SCHERING-PLOUGH CORPORATION.