1
EXHIBIT 13

SELECTED FINANCIAL DATA
(in thousands, except per share amounts)

Year Ended December 31, 1993 1994 1995 1996 1997

Product sales .............................................. $ -- $ -- $ -- $ 78,202 $239,988
Royalty revenue ............................................ 136,418 140,433 134,653 181,502 171,921
Total revenues ............................................. 149,287 156,344 151,691 277,090 434,044
Total expenses and taxes ................................... 116,870 161,241 146,031 236,560 344,877
Net income (loss)(a) ....................................... 32,417 (4,897) 5,660 40,530 89,167
Basic earnings (loss) per share (b) ........................ 0.51 (0.07) 0.08 0.57 1.21
Diluted earnings (loss) per share (b) ...................... 0.47 (0.07) 0.08 0.55 1.17
Cash and cash equivalents and short-term marketable
securities .............................................. 270,351 267,802 307,948 321,381 440,088
Total assets ............................................... 356,950 377,862 469,201 634,572 813,825
Long-term debt, less current portion ....................... -- -- 32,826 62,254 61,846
Shareholders' equity ....................................... 325,174 329,934 382,980 484,370 536,293
Shares used in calculating diluted earnings per share(b).... 69,440 65,548 72,890 73,221 76,500

(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 the HIRULOG(R) thrombin
inhibitor product. Net income for the year ended December 31, 1996 includes
an income tax benefit of approximately $23 million resulting from the
reversal of a deferred tax asset valuation allowance.

(b) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings per Share"
("SFAS 128"), which changed the method of calculating earnings per share.
SFAS 128 requires the presentation of "basic" earnings per share and
"diluted" earnings per share. Basic earnings per share is computed by
dividing the net income available to common shareholders by the weighted
average number of shares of common stock outstanding. For purposes of
calculating diluted earnings per share the denominator includes both the
weighted average number of shares of common stock outstanding and the
number of dilutive common stock equivalents such as stock options and
warrants. The Company adopted SFAS 128 in the fourth quarter of 1997. All
prior period per share amounts have been restated to comply with the
standard.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

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)(Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis ("MS")and from royalties on worldwide sales by the Company's
licensees of a number of products covered under patents controlled by the
Company, including alpha interferon and hepatitis B vaccines and diagnostic
products.

RESULTS OF OPERATIONS

1997 AS COMPARED TO 1996

REVENUES

Total revenues in 1997 were $434 million, as compared to $277.1 million in 1996,
an increase of approximately 57%.

Product sales in 1997 were $240 million as compared to $78.2 million in 1996, an
increase of approximately 207%. The Company began selling AVONEX(R) in the
United States in May 1996. In March 1997, the Company received regulatory
approval to market AVONEX(R) in the fifteen member countries of the European
Union("EU"). By the end of 1997, AVONEX(R) had received reimbursement approval
and was on the market in all of the EU countries. AVONEX(R) sales outside of the
United States were approximately $19.1 million in 1997 as compared to $593,000
in 1996. The Company expects product sales as a percentage of total revenues to
increase in the near term as the Company continues to market AVONEX(R)
worldwide. The Company also expects sales from AVONEX(R) in Europe to increase
as a percentage of total product sales. The Company, however, faces increasing
competition worldwide. See "Outlook - Competition".

Revenues from royalties in 1997 were $171.9 million, a decrease of $9.6 million
or 5% as compared to $181.5 million of royalty revenue in 1996. Included in
royalty revenue in 1997 is a one-time non-refundable licensing payment of $15
million from Merck & Co., Inc.("Merck") paid under a collaborative research,
development and license agreement (the "Merck Agreement"). Merck paid the
$15 million license fee to Biogen for the transfer of technology, rights granted
and the research and development previously performed by Biogen. Under the Merck
Agreement, Merck will have rights to develop and market small molecule VLA-4
inhibitors in all therapeutic areas other than certain small indications such as
multiple sclerosis and kidney diseases and disorders, which Biogen will continue
to work on itself. The Merck Agreement also provides for payments to be made by
either party upon the achievement of certain development milestones by the other
party. In addition, if a product is successfully developed by either party, the
other party will receive royalties on sales of the product. Included in royalty
revenue in 1996 is a one-time royalty payment of $30 million for sales which
occurred prior to 1996 received under a license agreement with Pharmacia &
Upjohn A.B. ("Pharmacia & Upjohn"). Under the terms of this license agreement
Biogen granted Pharmacia & Upjohn a sublicense under certain patents related to
a proprietary protein secretion technology licensed exclusively to Biogen by
Harvard University. Excluding the one-time payments from Merck in 1997 and
Pharmacia & Upjohn in 1996, royalty revenue increased 3.6% from 1996 to 1997. 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, if any, or other developments. See
"Outlook - Royalty Revenue" and "Outlook - Patents and Other Proprietary
Rights".

Interest income in 1997 was $22.1 million, an increase of $4.7 million or 27% as
compared to 1996. This increase is a result of increased funds invested and
higher average yields. The Company expects interest income to vary based on
changes in the amount of funds invested and fluctuations in interest rates.

EXPENSES

Total expenses in 1997 were $285.1 million as compared to $236.3 million in
1996, an increase of approximately 21%.

Cost of sales in 1997 totaled $50.2 million, an increase of $21.7 million or 76%
as compared to 1996. This increase was due to the higher sales volume of
AVONEX(R). Included in cost of sales in 1997 and 1996 is $37.1 million and
$11.4 million, respectively, from product sales and $13.1 million and
$17.1 million, respectively, relating to royalty revenue. Gross margins for
product sales remained flat at 85% in both 1997 and 1996. Cost of sales relating
to royalty revenue for 1997 decreased $4 million, or approximately 23% as
compared to 1996, due to a lower percentage of royalty revenue with associated
royalty costs. The Company expects that gross margins on royalty revenue will
fluctuate in the future based on the impact of one-time royalty and milestone
payments.

Research and development expenses in 1997 were $145.5 million, an increase of
$13.1 million or 10% as compared to 1996. This increase was primarily due to the
costs associated with funding of collaboration agreements, an increase in
clinical trial costs and an increase in the Company's other development efforts
related to its ongoing research and development programs. In 1997, the Company
completed Phase 2 trials of several of its drug candidates, including LFA3TIP, a
T-cell inhibiting protein being tested as a potential treatment for moderate to
severe psoriasis and CVT-124, which is being developed for treatment of edema
associated with congestive heart failure. Additional Phase 2 studies of LFA3TIP
and CVT-124 are underway or planned. Biogen also plans to initiate in 1998
Phase 2 trials of humanized 5c8 anti-CD40, a monoclonal antibody for potential
use in the treatment of several inflammatory and autoimmune diseases, such as
lupus. In addition, the Company is working on ongoing studies of AVONEX(R) to
support a broader label and additional indications. The Company expects that, in
the near and long-term, research and development expenses will increase as the
Company expands its pipeline and related development efforts with respect to
potential new product candidates and continues clinical trials of AVONEX(R).

Selling, general and administrative expenses in 1997 were $90.1 million, an
increase of $16.5 million or 22% as compared to 1996. This increase was
primarily due to the selling and marketing expenses related to the sale of
AVONEX(R), principally in support of the European launch. The Company expects
that selling, general, and administrative expenses will continue to increase in
the near term as the Company continues to expand the sales and marketing
organizations necessary to sell AVONEX(R) in additional European markets.

Other income, net in 1997 was $711,000 compared to other expense of $1.7 million
in 1996. The increase is principally due to an increase in foreign currency
gains of $6.3 million resulting from notes payable denominated in foreign
currencies offset by an increase in interest expense of $2.9 million.

The Company's effective tax rate in 1997 was 40.1%. Income tax expense for 1997
varied from the amount computed at U.S. federal 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 expects its effective tax rate to decline as sales in Europe increase.
During the third quarter of 1996, the Company determined it was more likely than
not that it would realize the benefits of its net deferred tax assets, and
reversed the related valuation allowance. The reversal of the valuation
allowance resulted in a realization of income tax benefit of approximately
$23 million and an increase in additional paid-in capital of $38.6 million which
related to deductions for non-qualified stock options.

RESULTS OF OPERATIONS

1996 AS COMPARED TO 1995

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(R) product in
the United States in May 1996, which accounted for $76.5 million of product
sales.

Revenues from royalties in 1996 were $181.5 million, an increase of
$46.8 million or 35% as compared to 1995. Included in royalty revenue in 1996
was a one-time royalty payment of $30 million, relating to sales occurring prior
to 1996, received under a license agreement with Pharmacia & Upjohn. Under the
terms of this 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% in 1996 as compared to 1995, primarily as a result of an increase in
ongoing royalties received from Schering-Plough Corporation ("Schering-Plough"),
the Company's licensee for alpha interferon.

Interest income in 1996 was $17.4 million, an increase of $348,000 or 2% as
compared to 1995. The increase was 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
172% as compared to 1995. Included in cost of sales in 1996 was $11.4 million
from product sales and $17.1 million relating to royalty revenue. The gross
margin in 1996 for product sales was approximately $66.8 million or 85%. Cost of
sales relating to royalty revenue for 1996 increased $6.6 million, or
approximately 63%. Excluding the cost 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.

Research and development expenses in 1996 were $132.4 million, an increase of
$44.9 million or 51% 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 was $13.2 million relating to the research
collaboration and license agreement with CBM. In 1996, Biogen had two early
stage compounds in clinical trials, LFA3TIP, a T-cell inhibiting protein tested
as a potential treatment for severe psoriasis and Gelsolin, a mucolytic agent,
that was being studied for treatment of cystic fibrosis, chronic bronchitis and
several other pulmonary diseases.

Selling, general and administrative expenses in 1996 were $73.6 million, an
increase of $33.3 million or 83% as compared to 1995. This increase was
primarily due to the costs associated with the commercial launch of AVONEX(R) in
the United States, including the formation of a domestic sales organization. In
addition, the Company invested resources in market development efforts in Europe
related to AVONEX(R). 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.

Other expenses, net in 1996 were $1.7 million, a decrease of $4.3 million
compared to 1995. The decrease was 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 and the reversal of the deferred tax asset valuation allowance in
1996. 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. During the third
quarter of 1996, the Company determined it was more likely than not that it
would realize the benefits of its net deferred tax assets, and reversed the
related valuation allowance. The reversal of the valuation allowance resulted in
realization of income tax benefit of approximately $23 million and an increase
in additional paid-in capital of $38.6 million which related to deductions for
non-qualified stock options.

FINANCIAL CONDITION

At December 31, 1997, cash, cash equivalents and short-term marketable
securities were $440.1 million compared with $321.4 million at December 31,
1996, an increase of $118.2 million. Working capital increased $124.3 million to
$472.2 million. Net cash provided by operating activities for the year ended
December 31, 1997 was $97.6 million compared with $42.3 million in 1996. Cash
outflows during 1997 included investments in property and equipment and patents
of $35.6 million and $11 million related to investments under collaborative
agreements. Significant cash inflows included $29.3 million from loan and notes
payable agreements with banks and $24.5 million from common stock option and
purchase plan activity.

In August 1995, the Company entered into a loan agreement with a bank for
financing the construction of its biological manufacturing facility in North
Carolina (the "Construction Loan"). During 1997, the Company completed
construction of the facility and the funds advanced under the Construction Loan
were converted to a floating rate ten year term loan with principal and interest
payable quarterly. As of December 31, 1997, the Company had $45.9 million
outstanding under the Construction Loan. The loan is secured by the underlying
building. The Company also entered an interest rate swap agreement with the same
bank, fixing its interest rate on the Construction Loan at 7.75% during the
remaining term of the loan with interest payable quarterly. As of December 31,
1997, the Company had $20.8 million outstanding under a floating rate loan with
a bank (the "Term Loan"). The Term loan is secured by

the Company's laboratory and office building in Cambridge, Massachusetts. The
Company has fixed its interest rate on the Term Loan at 7.5% under the terms of
a swap agreement.

Terms of the Company's loan agreements include various covenants, including
financial covenants which require the Company to maintain minimum net worth,
cash flow and various financial ratios.

On October 6, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 2.5 million shares of the Company's common
stock. The repurchased stock will provide the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. Stock purchases are expected to occur from time
to time over the next two years. The stock repurchase program may be
discontinued at any time. In 1997, the Company repurchased 200,000 shares of its
common stock at a cost of $7.0 million. To minimize the cost of the repurchase
program, the Company sold put options and purchased call options covering a
large portion of the shares intended to be repurchased.

The Company has several research programs and collaborations underway. In
December 1997, the Company entered into a collaborative research, development
and license agreement (the "Merck Agreement") with Merck & Co., Inc. ("Merck").
Under the Merck Agreement, Merck paid a non-refundable license fee of
$15 million to Biogen for the transfer of technology, rights granted and
research and development previously performed by Biogen. Under the Merck
Agreement, Merck will have rights to develop and market small molecule VLA-4
inhibitors in all therapeutic areas other than certain small indications such as
multiple sclerosis and kidney diseases and disorders, which Biogen will continue
to work on itself. The Merck Agreement also provides for payments to be made by
each party upon the achievement of certain development milestones by the other
party. The payments could total approximately $130 million paid by Merck to
Biogen and approximately $21 million paid by Biogen to Merck if all milestones
are met. In addition, if a product is successfully developed by a party, the
other party will receive royalties on sales of the product.

In June 1997, the Company purchased 100,000 shares of Series E Preferred Stock
of CuraGen Corporation ("CuraGen") for $1 million. In October 1997, the Company
signed a research and option agreement (the "CuraGen Agreement") with CuraGen
under which the Company and CuraGen will collaborate in the discovery of novel
genes using CuraGen's functional genomics technologies. The Company has an
option to acquire an exclusive license to certain discoveries arising out of the
collaborative effort. Under the terms of the CuraGen Agreement, the Company has
agreed to purchase CuraGen common stock totaling $5 million in the event of
CuraGen's initial public offering and to establish a $10 million line of credit
with a maximum drawdown limit of $5 million in the first year. The Company has
also agreed to fund research activities of CuraGen related to the collaboration
up to a maximum of $7.5 million over the next five years. At December 31, 1997,
CuraGen had not completed its initial public offering and there were no
borrowings outstanding under the line of credit.

In March 1997, the Company signed a research collaboration and license agreement
(the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which Biogen
obtained rights to develop and market CVT's therapeutic CVT-124 for the
treatment of edema associated with congestive heart failure. Under the terms of
the CVT 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 CVT Agreement, the Company established a
$12 million line of credit that CVT may use for operating purposes. At
December 31, 1997, the Company had advanced $3 million under the line of credit
to CVT.

Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement(the "Ontogeny Agreement") with Ontogeny, Inc.
("Ontogeny"), a private biotechnology company, for the development and
commercialization of three specific hedgehog cell differentiation proteins. The
Company acquired an equity interest in Ontogeny totaling $1 million as well as
certain exclusive, worldwide rights related to products based on the hedgehog
proteins for most disease areas. Under the Ontogeny Agreement, the Company
committed to fund a total of $4 million of research and development work at
Ontogeny through the end of the research phase. The Company has funded
$3 million through December 31, 1997. In 1998, the Company has the option to
proceed with commercialization of one or more of the hedgehog proteins. If the
Company exercises its option, it will be committed to fund an additional
$4 million of research at Ontogeny through mid 2001 and would be committed to
additional funding of up to $23.8 million per hedgehog protein selected in a
combination of license fees, additional equity investments, a line of credit,
and potential milestone payments. The Company would also pay royalties if
products are successfully developed.

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, of
which $18.1 million of the funding has been paid through December 31, 1997.

The Company believes that existing funds and cash generated from operations are
adequate to satisfy its working capital and capital expenditure requirements in
the foreseeable future. However, the Company may raise additional capital to
take advantage of favorable conditions in the market or in connection with the
Company's development activities. The Company believes that "Year 2000" costs
will be minimal. Most of the Company's business and operating computer systems
were installed in early 1996, in connection with the launch of its product
AVONEX(R). The Company believes the Year 2000 conversion requirements will be
achieved though routine upgrades to these software systems. The Company expects
to complete these upgrades by the end of 1998.

LEGAL MATTERS

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 claims remaining in the case pertain to a statement
concerning the results of the HIRULOG(R) 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. On September 4, 1997, the Court denied the motion
but narrowed the plaintiff class. A trial is scheduled for April 1998.

On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen
in the United States District Court for the District of New Jersey alleging
infringement by Biogen of Berlex's "McCormick" patent in the United States in
the production of AVONEX(R). 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 on the McCormick
patent, 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 and
consolidated for pre-trial purposes with the Massachusetts case. In February
1997, the U.S. District Court in Massachusetts dismissed Biogen's declaratory
judgment action as to Schering without prejudice if such dismissal is later
shown to result in an injustice to Biogen. Biogen and Stanford subsequently
entered into an agreement voluntarily dismissing Stanford from the suit. The
suit involving Berlex is still pending. A trial is not expected before the early
part of 1999.

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 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. Arbitration proceedings
were held in late 1997 in Zurich under Swiss law. The parties expect a decision
in the first half of 1998.

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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
establishes standards for reporting comprehensive income and its components in
the consolidated financial statements. SFAS 131 establishes standards for
reporting information on operating segments in interim and annual financial
statements. SFAS 130 and SFAS 131 will become effective for the Company
beginning in 1998. SFAS 130 and SFAS 131 require

disclosure only and will have no impact on the Company's consolidated financial
position and results of operations.

In November 1997, the Emerging Issues Task Force("EITF") issued EITF 97-13
"Accounting for Costs Incurred in Connection with a Consulting Contract or an
Internal Project That Combines Business Process Reengineering and Information
Technology Transformation"("EITF 97-13"). EITF 97-13 requires that costs
associated with business process reengineering activities be expensed as
incurred, and that any amounts previously capitalized be charged to expense
beginning in 1997. EITF 97-13 did not have a significant impact on the Company's
financial position or results of operations.

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 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.
Basic earnings per share is computed by dividing the net income available to
common shareholders by the weighted average number of shares of common stock
outstanding. For purposes of calculating diluted earnings per share the
denominator includes both the weighted average number of shares of common stock
outstanding and dilutive common stock equivalents such as stock options and
warrants. The Company adopted SFAS 128 in the fourth quarter of 1997. All per
share amounts have been restated to comply with the standard.

OUTLOOK

Safe Harbor Statement under Private Securities Litigation Reform Act of 1996

In addition to historical information, this annual report contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those reflected in such forward-looking
statements. Reference is made in particular to forward-looking statements
regarding the anticipated level of future product sales, royalty revenues,
expenses and profits, statements regarding the timing of clinical trials and
predictions as to the anticipated outcome of pending litigation. These and all
other forward-looking statements are made based on the Company's current belief
as to the outcome and timing of such future events. Factors which could cause
actual results to differ from the Company's expectations and which could
negatively impact the Company's financial condition and results of operations
are discussed below.

Dependence on AVONEX(R) Sales

The Company's ability to sustain increases in revenues and profitability will be
primarily dependent on the level of revenues and profitability from AVONEX(R)
sales. The Company's ability to sustain profitability from sales of AVONEX(R)
will depend on a number of factors, including: continued market acceptance of
AVONEX(R) worldwide; the Company's ability to maintain a high level of patient
satisfaction with AVONEX(R); the nature of regulatory and pricing decisions
related to AVONEX(R) worldwide; the extent to which AVONEX(R) receives
reimbursement coverage; and the impact of competitive products. The
profitability from AVONEX(R) sales is also dependent on the successful
resolution of the Berlex suit and the Asta arbitration, both of which are
described above under "Legal Matters".

Competition

The Company faces increasing competition from other products for the treatment
of relapsing forms of multiple sclerosis. AVONEX(R) competes with interferon
beta-1b which is sold in the United States under the brand name Betaseron(R) by
Berlex Laboratories, Inc., a United States affiliate of

10
Schering AG, Germany ("Schering AG"), and is sold in Europe under the brandname
Betaferon(R) by Schering AG. AVONEX(R) also faces competition from Copaxone(R)
glatiramer acetate(also known as copolymer-1). In the United States Copaxone(R)
is marketed by a partnership between Teva Pharmaceuticals and Hoechst Marion
Roussel, Inc. In addition, Ares Serono S.A. ("Serono") is seeking approval to
market another interferon beta-1a product in Europe. Serono is also seeking
approval to market its interferon beta-1a product in the United States but to be
approved for relapsing forms of multiple sclerosis would have to overcome the
orphan drug status afforded AVONEX(R) and Betaseron(R) by the FDA. There can be
no assurance that the Company will be able to sustain market share of AVONEX(R)
in light of competition from other products for the treatment of multiple
sclerosis.

Royalty Revenue

The Company receives royalty revenues which contribute a significant amount to
its overall profitability. 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, if any, or other developments. There are a number of other factors
which could also cause the actual level of royalty revenue to differ from the
Company's expectations. For example, pricing reforms, health care reform
initiatives, other legal and regulatory developments and the introduction of
competitive products may have an impact on product sales by the Company's
licensees. In addition, licensee sales levels may fluctuate from quarter to
quarter due to the timing and extent of major events such as new indication
approvals or government sponsored vaccination programs. Since the Company is not
involved in the development or sale of products by its licensees, the Company is
unable to predict the timing or potential impact of factors which may affect
licensee sales. In the long term, the Company expects its royalty revenue to be
affected most significantly by patent expirations. See "Outlook - Patents and
Other Proprietary Rights."

Patents and Other Proprietary Rights

The Company has numerous issued patents and patent applications pending on a
number of its processes and products. The Company has also obtained rights to
certain patents under licenses with third parties which provide for the payment
of royalties. There can be no assurances that Biogen's existing patents or
others, if obtained, will be of substantial protection or commercial benefit to
Biogen. In addition, it is not known to what extent Biogen's pending patent
applications or patent applications licensed from third parties will be granted
or whether any of the Company's patents will prevail if they are challenged in
litigation. There is also no assurance that third parties will not be granted
patents claiming subject matter necessary to Biogen's business.

Biogen has granted an exclusive worldwide license to Schering Plough Corporation
under Biogen's alpha interferon patents, and receives royalties from Schering
Plough on sales of its Intron(R) A brand of alpha interferon. In the event
Biogen does not prevail in an action it has taken against Genentech Inc. and F.
Hoffman La Roche, Inc. to overturn a priority of invention decision made against
Biogen in connection with a Biogen alpha interferon patent application or does
not resolve the matter in another manner satisfactory to Biogen, Schering
Plough's royalty obligation to Biogen on sales of Intron(R) A in the United
States will terminate upon expiration of Biogen's existing U.S. alpha interferon
patent in 2002. The parties are discussing possible alternative resolutions of
the dispute. Schering Plough's royalty obligation to Biogen on sales of
Intron(R) A in Europe will terminate upon expiration of Biogen's European alpha
interferon patent in 2001.

Biogen has licensed its recombinant hepatitis B antigen patent rights to
manufacturers and marketers of hepatitis B vaccines and diagnostic test kits,
and receives royalties on sales of the vaccines and test kits by its licensees.
The obligation of SmithKline and Merck to pay royalties on sales of hepatitis B
vaccines and the obligation of Biogen's other licensees under its hepatitis B
patents to pay royalties on sales of diagnostic products will terminate upon
expiration of Biogen's existing hepatitis B patents. Biogen's existing United
States hepatitis B patents will expire in 2004. Biogen's European hepatitis B
patents will expire at the end of 1999, except in those countries in which
Biogen has or is able to obtain supplemental protection certificates. To date,
Biogen has received supplemental protection certificates in France, Italy,
Luxembourg, The Netherlands, and Sweden, and has a number of additional
applications pending. The additional coverage afforded by supplemental
protection certificates ranges from two to six years. There can be no assurance
as to the extent of coverage available under the supplemental protection
certificates, or that protection will be available in additional countries.

There has been, and Biogen expects that there may continue to be significant
litigation in the industry regarding patents and other intellectual property
rights. Such litigation could create uncertainty and consume substantial
resources. See also "Legal Matters".

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 continues to expand its development efforts related
to other potential products in its pipeline. The expansion of the pipeline may
include increases in spending on internal projects, the acquisition of third
party technologies or products or other types of investments. Product
development involves a high degree of risk. Only a small number of research and
development programs result in the commercialization of a product. Success in
preclinical and early clinical trials does not ensure that later stage or large
scale clinical trials will be successful. Many important factors affect the
Company's ability to successfully develop and commercialize drugs, including the
ability to obtain and maintain necessary patents and licenses, to demonstrate
safety and efficacy of drug candidates at each stage of the clinical trial
process, to meet applicable regulatory standards and to receive required
regulatory approvals, to be capable of producing drug candidates in commercial
quantities at reasonable costs, to compete successfully against other products
and to market products successfully. There can be no assurance that the Company
will be successful in its efforts to develop and commercialize new products.

Market Risk

The Company has exposure to financial risk in several areas including changes in
foreign exchange rates, interest rates and in the price of the Company's common
stock. The Company attempts to minimize its exposures by using certain financial
instruments, for purposes other than trading, in accordance with the Company's
overall risk management guidelines. Further information regarding the Company's
accounting policies for financial instruments and disclosures of financial
instruments can be found in Notes 1,2 and 3 to the Company's consolidated
financial statements.

Foreign Exchange

The Company has operations in several European countries in connection with the
sale of its product AVONEX(R). The Company also receives royalty revenues

based on worldwide product sales by its licensees. As a result, the Company's
financial position, results of operations and cash flows can be affected by
fluctuations in foreign currency exchange rates (primarily the British pound,
French franc, German mark, and Japanese yen).

During 1997, the Company entered into a $30 million variable rate multicurrency
line of credit agreement with a bank ("Multicurrency Line"). Under the
Multicurrency Line, the Company may borrow or enter into commitments to borrow
amounts in various currencies, at which time the exchange rate for these
commitments is set. Any amounts outstanding under the Multicurrency Line are
revalued using exchange rates at each balance sheet date. At December 31, 1997
there was $24.8 million outstanding under the Multicurrency Line of which
$14.4 million was denominated in U.S. dollars. The carrying value of the amounts
outstanding under the variable rate Multicurrency Line approximates fair value.

The Company uses foreign currency forward contracts("Forward Contracts") to
manage specifically identifiable foreign currency risk but does not engage in
currency speculation. The Company uses these Forward Contracts to hedge certain
transactions denominated in foreign currencies, including amounts outstanding
under the Multicurrency Line. The contract amount of the forwards outstanding at
December 31, 1997 was $10.4 million.

The potential gain or loss for a hypothetical 10% beneficial or adverse change
in foreign currency exchange rates on the Multicurrency Line and Forward
Contracts outstanding at December 31, 1997 would not materially affect Biogen's
financial position, results of operations or cash flows.

Interest Rates

The Company is exposed to risk of interest rate fluctuations in connection with
its variable rate long term debt, which at December 31, 1997 included a
$20.8 million term loan (the "Term Loan"), and a $45.9 million construction term
loan (the "Construction Loan"). The Term Loan requires annual principal payments
of $1.7 million through 2004, with the balance due in 2005. The Construction
Loan requires principal payments of $805,000 quarterly through 2006, with the
balance due in 2007. At December 31, 1997, the carrying values of the Term Loan
and the Construction Loan approximated fair value.

The Company has fixed its interest rates on the Term Loan and Construction Loan
by entering swap agreements under which the Company exchanges the difference
between 7.5% and 7.75%, respectively, and a floating rate. The notional
principal balance on the swap agreements approximates the principal on the
underlying debt agreements. The fair value of the swap agreements at December
31, 1997, representing the cash requirements of the Company to settle the
agreements, was approximately $2.1 million.

Stock Price

The stock prices of biotechnology companies are subject to significant
fluctuations. The stock price may be affected by a number of factors including,
but not limited to clinical trial results and other product development events,
the outcome of litigation, the decisions relating to intellectual property
rights and the entrance of competitive products into the market, changes in
reimbursement policies or other practices related to the pharmaceutical industry
or other industry and market changes or trends. In addition, if revenues or
earnings in any quarter fail to meet the investment community's expectations,
there could be an immediate adverse impact on the Company's stock price.

To minimize the cost of the Company's stock repurchase program, the Company sold
put options and purchased call options covering a large portion of

the shares intended to be repurchased. Below is a summary of the contract
amounts, weighted average strike price and fair value of these instruments at
December 31, 1997.

Contract Amount Weighted Average Fair Value
(In millions) Strike Price (In millions)
---------------------------------------------------

Put Options Sold......... $76.7 $33.34 $(4.9)
Call Options Purchased... 65.6 36.42 7.9

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)

Years Ended December 31, 1997 1996 1995
----------------------------------

REVENUES:
Product sales ................................ $239,988 $ 78,202 $ --
Royalties .................................... 171,921 181,502 134,653
Interest ..................................... 22,135 17,386 17,038
-------- -------- --------

Total revenues ........................... 434,044 277,090 151,691
-------- -------- --------

EXPENSES:
Cost of sales ................................ 50,188 28,525 10,504
Research and development ..................... 145,501 132,384 87,448
Selling,general and administrative ........... 90,098 73,632 40,293
Other(income)expense, net .................... (711) 1,720 6,001
-------- -------- --------

Total expenses ........................... 285,076 236,261 144,246
-------- -------- --------
INCOME BEFORE INCOME TAXES ..................... 148,968 40,829 7,445
INCOME TAXES ................................... 59,801 299 1,785
-------- -------- --------
NET INCOME ..................................... $ 89,167 $ 40,530 $ 5,660
======== ======== ========

BASIC EARNINGS PER SHARE ....................... $ 1.21 $ 0.57 $ 0.08
======== ======== ========
DILUTED EARNINGS PER SHARE ..................... $ 1.17 $ 0.55 $ 0.08
======== ======== ========

SHARES USED IN CALCULATING:
BASIC EARNINGS PER SHARE ..................... 73,812 71,595 67,951
======== ======== ========
DILUTED EARNINGS PER SHARE ................... 76,500 73,221 72,890
======== ======== ========

See accompanying notes to consolidated financial statements.

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

As of December 31, 1997 1996
--------- ---------

ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 70,358 $ 62,032
Marketable securities .............................. 369,730 259,349
Accounts receivable, less allowances of $1,645
in 1997; $1,480 in 1996 ........................... 86,802 42,952
Deferred tax asset ................................. 37,203 47,888
Other current assets ............................... 31,973 23,533
-------- --------
Total current assets ........................... 596,066 435,754
-------- --------
PROPERTY AND EQUIPMENT, NET .......................... 174,492 165,323
-------- --------

OTHER ASSETS
Patents, net ....................................... 14,935 10,458
Marketable securities .............................. 17,095 16,003
Other .............................................. 11,237 7,034
-------- --------
Total other assets ............................. 43,267 33,495
-------- --------
$813,825 $634,572
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................... $ 15,820 $ 15,722
Note payable ....................................... 24,817 --
Current portion of long-term debt .................. 4,888 4,017
Accrued expenses and other ......................... 78,358 62,071
-------- --------
Total current liabilities ...................... 123,883 81,810
-------- --------

LONG-TERM DEBT, LESS CURRENT PORTION ................. 61,846 62,254
OTHER LONG TERM LIABILITIES .......................... 15,132 6,138
PUT OPTIONS .......................................... 76,671 --
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Common stock, par value $0.01
per share (110,000,000 shares authorized;
issued: 1997 - 74,149,391; 1996 - 72,526,009) ...... 741 725
Additional paid-in capital ......................... 516,880 471,623
Retained earnings .................................. 25,327 12,831
Unrealized losses on marketable securities ......... (2,233) (743)
Cumulative translation adjustment .................. (37) (66)
Treasury stock, at cost, 125,534 shares in 1997 .... (4,385) --
-------- --------
Total shareholders' equity ..................... 536,293 484,370
-------- --------
$813,825 $634,572
======== ========

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Years Ended December 31, 1997 1996 1995
------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 89,167 $ 40,530 $ 5,660
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization ................................ 19,296 15,264 10,916
Other ........................................................ 2,695 682 (3,177)
Deferred income taxes ........................................ 22,462 (5,541) --
Changes in:
Accounts receivable ....................................... (43,850) (23,340) (1,110)
Other current and other assets ............................ (8,643) (7,727) (4,269)
Accounts payable, accrued expenses and other
current and long-term liabilities ......................... 16,505 22,413 1,429
--------- --------- ---------
Net cash provided from operating activities .................. 97,632 42,281 9,449
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities ........................... (481,783) (369,893) (349,025)
Proceeds from sales and maturities of
marketable securities ...................................... 373,130 370,252 307,021
Investment in collaborative partners ......................... (11,000) (16,774) --
Acquisitions of property and equipment ....................... (28,896) (62,030) (47,998)
Additions to patents ......................................... (6,654) (3,606) (2,311)
--------- --------- ---------
Net cash used by investing activities ........................ (155,203) (82,051) (92,313)
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable ................................... 24,817 -- --
Proceeds from issuance of long-term debt ..................... 4,545 33,444 35,326
Repayments on long-term debt ................................. (4,082) (1,666) (833)
Purchases of treasury stock .................................. (7,000) -- --
Tax benefit related to stock options ......................... 23,164 4,258 --
Issuance of common stock and warrant and
option exercises ........................................... 24,453 19,996 39,459
--------- --------- ---------
Net cash provided from financing activities .................. 65,897 56,032 73,952
--------- --------- ---------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS .............. 8,326 16,262 (8,912)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ..................... 62,032 45,770 54,682
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ........................... $ 70,358 $ 62,032 $ 45,770
========= ========= =========

SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest .................................................. $ 5,940 $ 4,038 $ 2,000
Income Taxes .............................................. $ 3,783 $ 1,516 $ 591

See accompanying notes to consolidated financial statements.

BIOGEN, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1997, 1996, and 1995 (in thousands)

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

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 gains 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 options .............. 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
Exercise of options .............. 16 20,841 2,548 23,405
Issuance of common stock ......... 981 67 1,048
Compensation expense
related to stock options ......... 271 271
Tax benefit related to
stock options .................... 23,164 23,164
Unrealized losses on
marketable securities, net
of taxes ......................... (1,490) (1,490)
Treasury stock purchased ......... (7,000) (7,000)
Reclassification of put
option obligation ................ (76,671) (76,671)
Net income ....................... 89,167 89,167
Translation adjustment ........... 29 29
---- -------- ------- -------- ------- ----- --------
Balance, December 31, 1997 ....... $741 $516,880 $(4,385) $ 25,327 $(2,233) $ (37) $536,293
==== ======== ======= ======== ======= ===== ========

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. ("Biogen" or the "Company") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human health care. The Company currently derives revenues from sales
of AVONEX(R) (Interferon beta-la) for the treatment of relapsing forms of
multiple sclerosis and from royalties on worldwide sales by the Company's
licensees of a number of products covered under patents controlled by the
Company, including alpha interferon and hepatitis B vaccines and diagnostic
products.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated. Certain items in prior years' financial
statements have been reclassified to conform with the current year's
presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and use assumptions
that affect certain reported amounts and disclosures; actual amounts may differ.

Translation of Foreign Currencies

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 transaction gains and losses are included
in the results of operations. Foreign exchange gains(losses) totaled
$8.2 million, $1.9 million and ($3.2) million in 1997, 1996 and 1995,
respectively.

Cash and Cash Equivalents

The Company considers only those investments which are highly liquid, readily
convertible to cash and which mature within three months from date of purchase
to be cash equivalents.

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 in other current
assets. Included in inventory are raw materials used in the production of
pre-clinical and clinical products which are expensed as research and
development costs when consumed. The components of inventories, net of
applicable reserves and allowances, as of December 31, are as follows:

(in thousands) 1997 1996
------- -------

Raw materials $ 4,957 $ 3,262
Work in process 8,132 7,801
Finished goods 9,870 5,495
------- -------
$22,959 $16,558
======= =======

Marketable Securities

The Company invests its excess cash balances in short-term marketable
securities, principally corporate notes and government securities. The Company
classifies these securities as "available for sale". All available for sale
securities are recorded at fair market value and unrealized gains and losses are
included in shareholders' equity, net of related tax effects. Realized gains and
losses and declines in value, if any, judged to be other than temporary on
available for sale securities are reported in other income or expense.

As part of its strategic product development efforts, the Company also invests
in equity securities of certain biotechnology companies with which it has
collaborative agreements. Such investments, which are included in long term
marketable securities and other assets, are classified as available for sale if
a readily determinable market value exists. These investments are accounted for
under the cost or equity method depending on the facts and circumstances of the
investment and are reviewed regularly for impairment.

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. The
Agreement was terminated in early 1997. There were no amounts outstanding at
December 31, 1997 under the agreement. At December 31, 1996, the Company had
approximately $14.9 million of foreign based accounts receivable outstanding
under the agreement. All amounts were collected by the end of the first quarter
in 1997. Resulting gains and losses on the sales of the foreign based accounts
receivable were recorded in other expenses when the receivables were 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. Maintenance of computer systems, including maintenance to make
its software Year 2000 compliant, is expensed as incurred. The Company
capitalizes certain 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 associated with successful patent defenses 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 $11.8 million and
$11.3 million as of December 31, 1997 and 1996, respectively. The carrying value
of patents is regularly reviewed by the Company and impairments are recognized
when the expected future operating cash flows derived from the patent are less
than their carrying value.

Revenues

Revenues from product sales are recognized when product is shipped and are net
of applicable allowances for returns, rebates and other applicable

discounts and allowances. The Company 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, including amounts funded in research
collaborations, are expensed as incurred.

Earnings per Share

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"), which
changed the method of calculating earnings per share. SFAS 128 requires the
presentation of "basic" earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing the net income available to
common shareholders by the weighted average number of shares of common stock
outstanding. For purposes of calculating diluted earnings per share the
denominator includes both the weighted average number of shares of common stock
outstanding and the number of dilutive common stock equivalents such as stock
options and warrants. The Company adopted SFAS 128 in the fourth quarter of
1997. All prior period per share amounts have been restated to comply with the
standard.

Dilutive securities include outstanding options under the Company's stock option
plans. The put options sold in connection with the Company's stock repurchase
program may have an additional dilutive effect. Below is a summary of the shares
used in calculating basic and diluted earnings per share for the years ended
December 31,:

(in thousands) 1997 1996 1995
------ ------ ------

Weighted average number of shares of
common stock outstanding ................. 73,812 71,595 67,951
Dilutive stock options ..................... 2,688 1,626 4,939
------ ------ ------
Shares used in calculating diluted
earnings per share ....................... 76,500 73,221 72,890
====== ====== ======

New Accounting Pronouncements

In November 1997, the Emerging Issues Task Force("EITF") issued EITF 97-13
"Accounting for Costs Incurred in Connection with a Consulting Contract or an

Internal Project That Combines Business Process Reengineering and Information
Technology Transformation"("EITF 97-13") which is effective for the Company in
1997. EITF 97-13 requires costs associated with business process reengineering
activities to be expensed as incurred and any amounts previously capitalized be
charged to expense. EITF 97-13 did not have an impact on the Company's financial
position and results of operations.

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, 1997:
U.S. Government securities $197,375 $ 250 $ 207 $197,332
Corporate debt securities 172,355 1,751 -- 170,604
-------- ------ ------ --------
$369,730 $2,001 $ 207 $367,936
======== ====== ====== ========

Marketable securities, noncurrent $ 17,095 $ 228 $5,974 $ 22,841
======== ====== ====== ========

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
======== ====== ====== ========

The average maturity of the Company's marketable securities as of December 31,
1997 and 1996 was 16 months and 15 months, respectively. Proceeds from
maturities and other sales of marketable securities, which were primarily
reinvested, for the years ended December 31, 1997, 1996 and 1995 were
$373.1 million, $370.3 million and $307 million, respectively. The cost of
securities sold is determined based on the specific identification method.
Realized losses on these sales for the years ended December 31, 1997, 1996 and
1995 were $510,000, $783,000 and $58,000, 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's long-term debt and note payable are carried at face value, which
approximates fair market value. The Company uses interest rate swaps and foreign
currency agreements to manage specifically identifiable risks. The Company uses
swap agreements to mitigate the risk associated with its 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, 1997 and 1996, representing the cash
requirements of the Company to settle the agreements, approximated $2.1 million
and $580,000, respectively. The Company has foreign currency forward contracts
to hedge specific transactions denominated in foreign currencies. All foreign

currency forward contracts have a duration of ninety days. These contracts are
designated as effective hedges and accordingly, any gains or losses on these
contracts are recognized as part of the hedged transaction. The contract amount
of the forwards at December 31, 1997 was $10.4 million which approximated fair
value.

To minimize the cost of the Company's stock repurchase program, the Company sold
put options and purchased call options covering a large portion of the shares to
be repurchased. Below is a summary of the contract amounts, weighted average
strike price and fair value of these instruments at December 31, 1997.

Contract Amount Weighted Average Fair Value
(In millions) Strike Price (In millions)
--------------- ---------------- -------------

Put Options Sold .................... $76.7 $33.34 $(4.9)
Call Options Purchased .............. 65.6 36.42 7.9

3. BORROWINGS

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

1997 1996
-------- --------

Term Loan due 2005 .................. $20,834 $22,499
Construction Loan due 2007 .......... 45,900 43,772
------- -------
66,734 66,271
Current portion ............... (4,888) (4,017)
------- -------
$61,846 $62,254
======= =======

As of December 31, 1997, the Company had $20.8 million outstanding under a
floating rate loan with a bank (the "Term Loan"). The Term Loan is secured by
the Company's laboratory and office building in Cambridge, Massachusetts. The
Term Loan provides for annual principal payments of $1.7 million in each of the
years 1996 through 2004 with the balance due May 8, 2005. The Company has fixed
its interest rate on the Term Loan at 7.5% under the terms of a swap agreement
with the same bank, 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 as the Term Loan agreement.

As of December 31, 1997, the Company had $45.9 million outstanding under a
floating rate loan agreement with a bank for financing the construction of its
biological manufacturing facility in North Carolina (the "Construction Loan").
The Construction Loan is secured by the facility. Payments of $805,000 are due
quarterly through 2006 with the balance due in 2007. The Company also entered
into an interest rate swap agreement, with the same bank, fixing its interest
rate at 7.75% during the remaining term of the loan, payable quarterly.

The Term Loan and Construction Loan agreements include various covenants,
including financial covenants, which require the Company to maintain minimum net
worth, cash flow and various financial ratios.

During 1997, the Company entered into a $30 million variable rate multicurrency
line of credit agreement with a bank. Under the agreement, the Company may
borrow or enter into commitments to borrow amounts in various currencies, at
which time the exchange rate for these commitments is set. The agreement expires
on March 31, 2000, is secured by certain assets of the Company and requires

compliance with certain financial ratios. Any amounts outstanding under the
Agreement are revalued using exchange rates at each balance sheet date. At
December 31, 1997 there was $24.8 million outstanding under this agreement, of
which $14.4 million was denominated in U.S. dollars.

4. CONSOLIDATED BALANCE SHEET DETAILS

(in thousands) 1997 1996
-------- --------

Property and equipment:
Land ........................................ $ 8,359 $ 3,470
Buildings ................................... 83,565 26,417
Construction in progress .................... -- 65,079
Leasehold improvements ...................... 49,795 50,739
Equipment ................................... 98,794 72,221
-------- --------
Total cost .................................. 240,513 217,926
Less accumulated depreciation ............... 66,021 52,603
-------- --------
$174,492 $165,323
======== ========

Depreciation expense was $15.9 million, $12.7 million and $8.5 million for 1997,
1996 and 1995, respectively. The Company capitalized interest costs of $685,000,
$1.7 million and $143,000 in 1997, 1996 and 1995, respectively with respect to
qualifying construction projects. The Company completed construction of its
biological manufacturing facility in North Carolina in 1997. As of December 31,
1997, the Company had capitalized $65.5 million relating to the North Carolina
facility of which $4.9 million relates to costs associated with the validation
effort required for licensing by the FDA.

(in thousands) 1997 1996
------- -------

Accrued expenses and other:
Royalties and licensing fees ................ $17,676 $22,784
Income taxes ................................ 20,196 6,634
Other ....................................... 40,486 32,653
------- -------

$78,358 $62,071
======= =======

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:

1997 1996 1995
------- ------- ------

Service cost .............................. $1,873 $1,381 $ 847
Interest cost ............................. 876 659 371
Actual return on plan assets .............. (1,407) (532) (622)
Net amortization and deferral ............. 972 312 420
------ ------ ------
Net pension cost .......................... $2,314 $1,820 $1,016
====== ====== ======

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

(in thousands) 1997 1996
-------- -------

Actuarial present value of:
Vested benefits obligation ..................... $ 7,398 $5,497
Non-vested benefits ............................ 1,493 1,348
------- ------
Accumulated benefit obligation ................. 8,891 6,845
Effect of future salary increase ............... 3,836 2,621
------- ------
Projected benefit obligation ................... 12,727 9,466
Plan assets at fair value ...................... 8,393 5,579
------- ------
Projected benefit obligation in
excess of plan assets ...................... 4,334 3,887
Unrecognized net asset ......................... 21 42
Unrecognized net loss .......................... (905) (985)
Unrecognized prior service cost ................ (401) (444)
------- ------
Accrued pension cost ........................... $ 3,049 $2,500
======= ======

The projected benefit obligation was determined using an assumed discount rate
of 7.5% for 1997 and 1996. The assumed long-term compensation increase rate was
5% and the assumed long-term rate of return on plan assets was 8% for 1997 and
1996.

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:

1997 1996 1995
(in thousands) --------- --------- ---------

Income (loss) before income taxes:
Domestic ............................. $172,973 $ 65,250 $ 28,845
Foreign .............................. (24,005) (24,421) (21,400)
-------- -------- --------
$148,968 $ 40,829 $ 7,445
======== ======== ========

Income tax expense (benefit):
Current
Federal .............................. $ 33,688 $ 4,636 $ 1,264
State ................................ 2,735 789 211
Foreign .............................. 916 415 310
-------- -------- --------
$ 37,339 $ 5,840 $ 1,785
-------- -------- --------

Deferred
Federal .............................. $ 21,416 $ (4,082) $ --
State ................................ 1,046 (1,459) --
-------- -------- --------
22,462 $ (5,541) $ --
-------- -------- --------
Total income tax expense ............... $ 59,801 $ 299 $ 1,785
======== ======== ========

The Company's foreign subsidiaries generated operating losses in 1997, 1996 and
1995 reflecting the costs of building a commercial infrastructure in Europe and
the foreign subsidiaries' investment in the Company's research and development
efforts.

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

(in thousands) 1997 1996
--------- --------

Tax credits ...................................... $ 32,273 $26,079
Loss carryforwards ............................... -- 17,006
Inventory and other reserves ..................... 3,810 5,304
Other ............................................ 5,297 4,510
-------- -------
Deferred tax assets .............................. 41,380 52,899
-------- -------

Depreciation and amortization .................... (14,405) (7,496)
-------- -------
Deferred tax liabilities ......................... (14,405) (7,496)
-------- -------
$ 26,975 $45,403
======== =======

During the third quarter of 1996, the Company determined that it was more likely
than not that it would realize the benefits of its net deferred tax assets and
therefore released the related valuation allowance. The reversal of the
valuation allowance resulted in a realization of income tax benefits of
approximately $23 million. The income tax benefit represented the balance of
tax-loss carryforwards and tax credits that had not been recognized through the
third quarter in 1996 and 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) 1997 1996 1995
-------- --------- --------

Income tax expense at statutory rates ..... $52,115 $ 14,350 $ 2,606
States taxes, net of federal income
tax benefit ............................... 4,090 509 138
Foreign losses without tax benefit and
foreign rate differential ................. 9,394 8,887 7,812
Current utilization of net operating
loss carryforwards, reversal of
valuation allowance, investment tax
and research and development credits ...... (5,700) (23,000) (9,485)
Other, net ................................ (98) (447) 714
------- -------- -------
Reported income tax expense ............... $59,801 $ 299 $ 1,785
======= ======== =======

At December 31, 1997, the Company had tax credits of $32 million, most of which
expire at various dates through 2010.

7. RESEARCH COLLABORATIONS

therapeutic areas other than certain small indications such as multiple
sclerosis and kidney diseases and disorders, which Biogen will continue to work
on itself. The Merck Agreement also provides for payments to be made by either
party upon the achievement of certain development milestones by the other party.
In addition, if a product is successfully developed by a party, the other party
will receive royalties on sales of the product.

In June 1997, the Company purchased 100,000 shares of Series E Preferred Stock
of CuraGen Corporation ("CuraGen") for $1 million. The Company accounts for this
investment, which is included in other assets, using the cost method of
accounting. In October 1997, the Company signed a research and option agreement
(the "CuraGen Agreement") with CuraGen under which the Company and CuraGen will
collaborate in the discovery of novel genes using CuraGen's functional genomics
technologies. The Company has an option to acquire an exclusive license to
certain discoveries arising out of the collaborative effort. Under the terms of
the CuraGen Agreement, the Company has agreed to purchase CuraGen common stock
totaling $5 million in the event of CuraGen's initial public offering and to
establish a $10 million line of credit with a maximum drawdown limit of $5
million in the first year. The Company has also agreed to fund research
activities of CuraGen related to the collaboration up to a maximum of $7.5
million over the next five years. At December 31, 1997, CuraGen had not
completed an initial public offering and there were no borrowings outstanding
under the line of credit.

In March 1997, the Company signed a research collaboration and license agreement
(the "CVT Agreement") with CV Therapeutics, Inc. ("CVT") under which Biogen
obtained rights to develop and market CVT's therapeutic CVT-124 for the
treatment of edema associated with congestive heart failure. Under the terms of
the CVT 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 CVT Agreement, the Company established a
$12 million line of credit that CVT may use for operating purposes. The
investment in CVT is classified as available-for-sale and is included in non
current marketable securities. At December 31, 1997, the Company had advanced $3
million under the line of credit to CVT.

In December 1996, the Company signed a research collaboration and license
agreement (the "CBM Agreement") with Creative BioMolecules, Inc. ("CBM") under
which Biogen obtained rights to develop and market CBM's morphogenic protein,
OP-1, for the treatment of renal disorders. Under the CBM Agreement, Biogen paid
a license fee of $10 million, which was charged to research and development
expense, and purchased 1.5 million shares of CBM common stock for $18 million.
The payment for the common stock included a $1.2 million premium over the fair
value of the common stock which was charged to research and development expense.
The investment is classified as available-for-sale and is included in long term
marketable securities. The Company also has agreed to fund research and
development of a maximum of up to $10.5 million through 1999 of which $4 million
was funded in 1997.

Effective July 1, 1996, the Company signed a collaborative research and
commercialization agreement (the "Ontogeny Agreement") with Ontogeny, Inc.
("Ontogeny"), a private biotechnology company, for the development and
commercialization of three specific hedgehog cell differentiation proteins. The
Company purchased 400,000 shares of preferred stock of Ontogeny for $1 million
and acquired certain exclusive, worldwide rights related to products based on
the hedgehog proteins for most disease areas. The Company accounts for this
investment, which is included in other assets, using the cost method of
accounting. Under the Ontogeny Agreement, the Company committed to fund a total
of $4 million of research and development work at Ontogeny through the end of
the research phase. The Company has funded $3 million through December 31, 1997.
In 1998, the Company has the option to proceed with commercialization of one or
more of the hedgehog proteins. If the Company

exercises its option, the Company will be committed to fund an additional $4
million of research at Ontogeny through mid 2001 and would be committed to
additional funding of up to $23.8 million per hedgehog selected in a combination
of license fees, additional equity investments, a line of credit, and potential
milestone payments. The Company would also pay royalties if products are
successfully developed.

In August 1995, the Company signed a collaborative research agreement (the
"Genovo Agreement") for the development of human gene therapy treatments with
Genovo, Inc. ("Genovo"), a gene therapy research company. Under the Genovo
Agreement, the Company acquired 380,000 shares of Genovo Series A Preferred
stock for $4.5 million and acquired certain licensing rights. The Company
accounts for this investment, which is included in other assets, using the
equity method of accounting. The Company recorded its proportion of Genovo's net
losses as research and development which totaled $7.7 million, $5.6 million and
$1 million in 1997, 1996 and 1995, respectively. The Company has agreed to fund
research and development costs to Genovo up to approximately $37 million,
including the initial equity investment, over the life of the agreement,
depending on achievement of scientific milestones. The Company has paid $18.1
million through December 31, 1997.

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 2012, amounted to $7.5 million in 1997, $6.6
million in 1996 and $5.1 million in 1995. 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, 1997,
minimum annual rental commitments under noncancellable leases were as follows:
(in thousands)

YEAR

1998 ................................................... $ 8,131
1999 ................................................... 7,972
2000 ................................................... 7,052
2001 ................................................... 4,513
2002 ................................................... 4,544
Thereafter ............................................. 17,276
-------

Total minimum lease payments ........................... $49,488
=======

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 a
statement concerning the results of the HIRULOG(R) 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. On September 4, 1997, the Court denied the motion but narrowed the
plaintiffs class. A trial is scheduled for April 1998.

On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen
in the United States District Court for the District of New Jersey

alleging infringement by Biogen of Berlex's "McCormick" patent in the United
States in the production of AVONEX(R). 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 on the
McCormick patent, 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 and consolidated for pre-trial purposes with the
Massachusetts case. In February 1997, the U.S. District Court in Massachusetts
dismissed Biogen's declaratory judgment action as to Schering without prejudice
if such dismissal is later shown to result in an injustice to Biogen. Biogen and
Stanford subsequently entered into an agreement voluntarily dismissing Stanford
from the suit. The suit involving Berlex is still pending. A trial is not
expected before the early part of 1999.

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 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. Arbitration proceedings
were held in late 1997 in Zurich under Swiss law. The parties expect a decision
in the first half of 1998.

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

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, 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. 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, 1997, 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 stock-based compensation plans. The Company applies APB
Opinion No. 25 "Accounting for Stock Issued to Employees" in accounting for its
plans. In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123 "Accounting for Stock Issued to Employees"("SFAS 123") for disclosure
purposes only. The SFAS 123 disclosures include pro forma net income and
earnings per share as if the fair value-based method of accounting had been
used. Stock issued to non-employees is accounted for in accordance with
SFAS 123. Included in compensation expense in 1997 was $271,000 related to stock
based compensation plans. There were no such compensation costs in 1996 and
1995.

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. Option grants are typically made under the 1985 Non-Qualified
Stock Option Plan and the 1987 Scientific Board Stock Option Plan (the "Plans").
Options under the Plans are granted at no less than 100% of the fair market
value on the date of grant. Options generally become exercisable over various
periods, typically 5 to 7 years for employees and 3 years for Directors and
Scientific Board members and have a maximum term of 10 years. Activity under
these plans is as follows (shares are in thousands):

1997 1996 1995
------------------- ------------------ -------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------- -------- ------- -------- ------- --------

Outstanding, Jan. 1.......... 11,748 $20.77 11,772 $17.59 10,764 $14.71
Granted..................... 1,556 37.65 1,935 34.46 2,465 25.81
Exercised................... (1,652) 14.08 (1,478) 12.89 (1,117) 7.13
Canceled.................... (500) 24.39 (481) 20.92 (340) 21.38
------ ------ ------ ------ ------ ------

Outstanding, Dec. 31 11,152 23.95 11,748 20.77 11,772 17.59
====== ====== ====== ====== ====== ======

Options exercisable 5,208 5,692 5,925

Available for grant 1,135 2,310 3,764
Weighted average fair
value of options granted $16.78 $16.59 $12.63

The table below summarizes options outstanding and exercisable at December 31,
1997 (shares are in thousands):

Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
- ---------------------------------------------------------------------------------------

$ 0.00-$10.00 970 2.58 $ 7.59 759 $ 7.44

$10.01-$20.00 3,273 5.39 15.92 2,236 15.59

$20.01-$30.00 3,852 6.76 25.02 2,013 24.42

$30.01-$40.00 2,749 9.09 35.31 195 34.48

Over $40.00 308 9.10 46.09 5 40.86
------- ------ -----
Total 11,152 $23.95 5,208
======= ====== =====

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, 2007. Through
December 31, 1997, 289,450 shares have been issued under the stock purchase
plans.

Had compensation cost for the Company's 1997, 1996 and 1995 grants under the
stock-based compensation plans been determined based on SFAS 123, the Company's
pro forma net income, and pro forma diluted earnings per share for the years
ending December 31, would be as follows (in thousands except per share data):

1997 1996 1995
------- ------- ------

Pro forma net income $83,244 $36,679 $3,711

Pro forma diluted earnings per share $ 1.09 $ 0.50 $ 0.05

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

1997 1996 1995
-------------------------------------------

Expected dividend yield 0% 0% 0%
Expected stock price volatility 36% 36% 40%
Risk-free interest rate 5.5% - 5.9% 5.5% - 5.9% 5.6% - 7.7%
Expected option term 5.8 Years 6.3 Years 6.3 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.

Stock Repurchase Program

On October 6, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 2.5 million shares of its common stock. The
repurchased stock will provide the Company with treasury shares for general
corporate purposes, such as stock to be issued under employee stock option and
stock purchase plans. Stock purchases may occur from time to time over the
period ending two years from the date of the Board of Directors authorization.
The stock repurchase program may be discontinued at any time. In 1997, the
Company repurchased 200,000 shares of its common stock at a cost of $7.0
million.

To minimize the cost of the repurchase program, the Company sold put options and
bought call options covering a large portion of the shares to be repurchased. At
December 31, 1997, the Company had outstanding put options covering 2.3 million
shares at $33.34 expiring at various dates from January 1998 through November
1998. The Company may elect to pay a net cash settlement or physical settlement,
if the put options are exercised. Accordingly, the maximum potential repurchase
option obligation of $76.7 million was reclassified from shareholders equity to
put option. At December 31, 1997, the Company had call options outstanding which
entitled the Company to buy 1.8 million shares of Biogen stock at prices ranging
from $35.00 to $36.75 per share. The call options expire at various dates from
January 1998 through November 1998. In the event the call options are exercised,
the Company may elect to receive cash for the difference between the exercise
price and the market price of the Company's shares, in lieu of repurchasing the
stock. The premiums received from the sale of the put options offset in full the
cost of the call options.

10. GEOGRAPHIC DATA

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

(in thousands) 1997 1996 1995
-------- -------- --------

United States .......................... $308,660 $131,756 $ 44,764
Japan .................................. 15,362 50,342 16,082
Europe ................................. 68,164 62,459 60,523
Other .................................. 19,723 15,147 13,284
-------- -------- --------

$411,909 $259,704 $134,653
======== ======== ========

The Company received revenue from four unrelated parties in 1997 accounting for
a total of 19%, 11%, 11% and 10% of total product and royalty revenues; three
unrelated parties in 1996 accounting for 27%, 17% and 13% of total royalty
revenues; and two unrelated parties in 1995 accounting for 40% and 39% of total
royalty revenue.

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

(in thousands, except per share amounts)

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

1997

Total revenues ......................... $99,738 $97,653 $106,201 $130,452 $434,044
Product revenue ........................ 52,616 56,440 60,413 70,519 239,988
Royalties revenue ...................... 42,215 36,007 40,200 53,499 171,921
Total expenses and taxes ............... 82,728 77,705 85,716 98,728 344,877
Net income ............................. 17,010 19,948 20,485 31,724 89,167
Basic earnings per share ............... 0.23 0.27 0.28 0.43 1.21
Diluted earnings per share ............. 0.22 0.26 0.27 0.42 1.17

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
Basic earnings (loss) per share ........ (0.05) (0.13) 0.64 0.11 0.57
Diluted earnings (loss) per share ...... (0.05) (0.13) 0.60 0.11 0.55
- ---------------------------------------------------------------------------------------------------

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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, 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 13, 1998

EXHIBIT 13

SHAREHOLDER INFORMATION without charge upon written request to the
BIOGEN, INC. AND SUBSIDIARIES Corporate Communications Department, Biogen, Inc.,
14 Cambridge Center, Cambridge, MA 02142

CORPORATE HEADQUARTERS: TRANSFER AGENT:
Biogen, Inc. For shareholder questions regarding lost
14 Cambridge Center certificates, address changes and changes of
Cambridge, MA 02142 ownership or name in which the shares are held,
direct inquiries to:
Telephone: (617) 679-2000
Fax: (617) 679-2617 State Street Bank and Trust Company
P.O. Box 8200
ANNUAL MEETING: Boston, MA 02266-8200
Friday, June 19, 1998 at 10:00 a.m. Telephone: (800) 426-5523
at the Company's offices at 12 Cambridge Center
All shareholders are welcome. INDEPENDENT ACCOUNTANTS:
Price Waterhouse LLP
MARKET FOR SECURITIES: 160 Federal Street
Biogen's securities are quoted on the Boston, MA 02110
NASDAQ National Market System.
Common stock symbol: BGEN U.S. LEGAL COUNSEL:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
As of February 18, 1998, there were approximately One Financial Center
2,770 holders of record of the Company's Common Boston, MA 02111
Stock. The Company has not paid any cash dividends
on its Common Stock since its inception, and does ANNUAL REPORT ANNOUNCEMENT
not intend to pay any dividends in the foreseeable As a service to our shareholders and prospective
future. On November 15, 1996, the Company effected investors, copies of Biogen news releases issued
a two-for-one stock split of its Common Stock. The in the last 12 months are now available almost
quarterly high and low closing sales price immediately 24 hours a day, seven days a week on
(adjusted for all periods to reflect the stock the Internet's World Wide Web at
split) of the Common Stock on the NASDAQ National http://www.prnewswire.com and via automated fax by
Market System for 1997 and 1996 are as follows: calling "Company News On Call" at 1 800 758-5804,
ext. 101550. Biogen news releases are usually
HIGH LOW posted on both systems within one hour of being
issued and are available at no cost.
FISCAL 1997
First Quarter 51 7/8 37 3/8
Second Quarter 39 1/4 30 THE BIOGEN LOGO IS A REGISTERED TRADEMARK OF
Third Quarter 41 3/16 31 7/8 BIOGEN, INC. AVONEX(R) IS A TRADEMARK OF BIOGEN,
Fourth Quarter 37 5/16 31 5/8 INC. HIRULOG(R) IS A REGISTERED TRADEMARK OF THE
MEDICINES COMPANY. INTRON(R) A IS A REGISTERED
FISCAL 1996 TRADEMARK OF SCHERING-PLOUGH CORPORATION.
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

SEC FORM 10-K:
A copy of the Company's annual report to the
Securities and Exchange Commission on Form 10-K is
available