-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HSg0ZsJPmEuvnQh4hH5bOL/L6OoRlDeaM9is4QilIOnLgMZScaOJuda+Kt7F437K BKnMsLVbJcquY8yCsM0i2A== 0000714655-98-000013.txt : 19980508 0000714655-98-000013.hdr.sgml : 19980508 ACCESSION NUMBER: 0000714655-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980507 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOGEN INC CENTRAL INDEX KEY: 0000714655 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 043002117 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-12042 FILM NUMBER: 98612776 BUSINESS ADDRESS: STREET 1: 14 CAMBRIDGE CTR CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6176792000 MAIL ADDRESS: STREET 1: 14 CAMBRIDGE CTR CITY: CAMBRIDGE STATE: MA ZIP: 02142 FORMER COMPANY: FORMER CONFORMED NAME: BIOGEN NV DATE OF NAME CHANGE: 19880622 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Total Pages- 15 WASHINGTON, D.C. 20549 Exhibit Index- 14 FORM 10-Q (Mark one) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1998 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 0-12042 BIOGEN, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-3002117 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 14 Cambridge Center, Cambridge, MA 02142 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 679-2000 Former name, former address and former fiscal year, if changed since last report: Not Applicable Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares outstanding of each of the issuer's classes of common stock, as of May 1, 1998: Common Stock, par value $0.01 73,707,924 (Title of each class) (Number of Shares) Page 2 B I O G E N , I N C . INDEX Page No. PART I - FINANCIAL INFORMATION Condensed Consolidated Statements of Income - Three months ended March 31, 1998 and 1997..............................3 Condensed Consolidated Balance Sheets - March 31, 1998 and December 31, 1997....................................4 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 1998 and 1997..............................5 Notes to Condensed Consolidated Financial Statements......................6 Management's Discussion and Analysis of Financial Condition and Results of Operations.....................................9 PART II - OTHER INFORMATION...................................................13 * * * * * * * * * * * * * * * * * * Note concerning trademark: AVONEX(R) is a trademark of Biogen, Inc. Page 3 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts)
Three months ended March 31, 1998 1997 REVENUES Product . . . . . . . . . . . . . . . . . . . . $ 76,100 $ 52,616 Royalties . . . . . . . . . . . . . . . . . . . 38,372 42,215 Interest. . . . . . . . . . . . . . . . . . . . 6,968 4,907 -------- -------- Total revenues. . . . . . . . . . . . . . . . . 121,440 99,738 -------- -------- EXPENSES Cost of sales . . . . . . . . . . . . . . . . . 14,873 11,744 Research and development. . . . . . . . . . . . 37,120 37,908 Selling, general and administrative . . . . . . 26,003 21,164 Other, net .. . . . . . . . . . . . . . . . . . 46 334 -------- -------- Total expenses. . . . . . . . . . . . . . . . . 78,042 71,150 -------- -------- INCOME BEFORE INCOME TAXES. . . . . . . . . . . . 43,398 28,588 Income taxes. . . . . . . . . . . . . . . . . . . 15,627 11,578 -------- -------- NET INCOME. . . . . . . . . . . . . . . . . . . . $ 27,771 $ 17,010 ======== ======== BASIC EARNINGS PER SHARE. . . . . . . . . . . . . $ 0.38 $ 0.23 ======== ======== DILUTED EARNINGS PER SHARE. . . . . . . . . . . . $ 0.36 $ 0.22 ======== ======== SHARES USED IN CALCULATING: BASIC EARNINGS PER SHARE. . . . . . . . . . . . 73,935 73,268 ======== ======== DILUTED EARNINGS PER SHARE. . . . . . . . . . . 76,854 76,843 ======== ======== See Notes to Condensed Consolidated Financial Statements.
Page 4 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31,1998 Dec. 31,1997 (unaudited) ASSETS Current assets Cash and cash equivalents . . . . . . . . . . $ 65,602 $ 70,358 Marketable securities. . . . . . . . . . . . 392,737 369,730 Accounts receivable, net . . . . . . . . . . 74,034 86,802 Deferred tax asset. . . . . . . . . . . . . . 27,951 37,203 Other current assets. . . . . . . . . . . . . 38,406 31,973 -------- -------- Total current assets. . . . . . . . . . . . . 598,730 596,066 -------- -------- Property, plant and equipment Cost. . . . . . . . . . . . . . . . . . . . . 245,065 240,513 Less accumulated depreciation . . . . . . . . 71,264 66,021 -------- -------- Property, plant and equipment, net. . . . . . 173,801 174,492 -------- -------- Other assets Patents, net. . . . . . . . . . . . . . . . . 15,629 14,935 Marketable securities . . . . . . . . . . . . 28,589 17,095 Other . . . . . . . . . . . . . . . . . . . . 7,042 11,237 -------- -------- Total other assets. . . . . . . . . . . . . . 51,260 43,267 -------- -------- $ 823,791 $ 813,825 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable . . . . . . . . . . . . . . $ 16,410 $ 15,820 Note payable . . . . . . . . . . . . . . . . 23,301 24,817 Current portion of long-term debt. . . . . . 4,888 4,888 Accrued expenses and other . . . . . . . . . 70,850 78,358 -------- -------- Total current liabilities. . . . . . . . . . 115,449 123,883 -------- -------- Long-term debt, less current portion. . . . .. 61,041 61,846 Other long term liabilities. . . . . . . . . . 15,497 15,132 Put options. . . . . . . . . . . . . . . . . . 56,670 76,671 Commitments and contingencies. . . . . . . . . Shareholders' equity: Common stock . . . . . . . . . . . . . . . . 741 741 Additional paid in capital . . . . . . . . . 512,475 516,880 Retained earnings . . . . . . . . . . . . . 73,099 25,327 Unrealized losses on marketable securities . . . . . . . . . . . (911) (2,233) Cumulative translation adjustment. . . . . . (114) (37) Treasury stock, at cost. . . . . . . . . . . (10,156) (4,385) -------- -------- Total shareholders' equity . . . . . . . . . 575,134 536,293 -------- -------- $ 823,791 $ 813,825 ======== ======== See Notes to Condensed Consolidated Financial Statements.
Page 5 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Three months ended March 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES Net income. . . . . . . . . . . . . . . . . . . . $ 27,771 $ 17,010 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization . . . . . . . . . 5,629 4,357 Deferred income taxes . . . . . . . . . . . . . 8,506 (10,617) Other . . . . . . . . . . . . . . . . . . . . . 756 2,217 Changes in: Accounts receivable . . . . . . . . . . . . . . 12,768 (851) Other current and other assets. . . . . . . . . (6,536) (2,831) Accounts payable, accrued expenses and other current and long term liabilities. . . . (6,553) (3,513) -------- -------- Net cash provided from operating activities.. . . 42,341 5,772 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities. . . . . . . . (222,523) (95,239) Proceeds from sales and maturities of marketable securities. . . . . . . . . . . . . . 198,931 106,518 Investment in collaborative partners. . . . . . (5,000) (10,000) Acquisitions of property and equipment. . . . . . (4,388) (8,525) Additions to patents. . . . . . . . . . . . . . . (1,505) (2,531) -------- -------- Net cash used by investing activities . . . . . . (34,485) (9,777) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Repayments of note payable. . . . . . . . . . . . (1,516) - Proceeds from issuance of long-term debt. . . . . - 4,545 Repayments of long-term debt. . . . . . . . . . . (805) - Purchases of treasury stock. . . . . . . . . . . (21,500) - Tax benefit related to stock options. . . . . . . 3,944 20,117 Issuance of common stock and option exercises . . 7,265 18,783 -------- -------- Net cash (used by) provided from financing activities. . . . . . . . . . . . . . (12,612) 43,445 -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . (4,756) 39,440 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . 70,358 62,032 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . $ 65,602 $101,472 ======== ======== See Notes to Condensed Consolidated Financial Statements.
Page 6 BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows of Biogen, Inc. and its subsidiaries (the "Company"). The Company's accounting policies are described in the Notes to Consolidated Financial Statements in the Company's 1997 Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results for the full year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards Number 130 "Reporting Comprehensive Income"("SFAS 130") and Statement of Financial Accounting Standards Number 131 "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). The Company adopted SFAS 130 and SFAS 131 on January 1, 1998. SFAS 130 establishes standards for reporting comprehensive income and its components in the consolidated financial statements. Comprehensive income for the three months ended March 31, 1998 was $29 million. SFAS 131 establishes standards for reporting information on operating segments in interim and annual financial statements. Below is a summary of the shares used in calculating basic and diluted earnings per share for the quarters ended March 31,:
(In Thousands) 1998 1997 Weighted average number of shares of common stock outstanding. . . . . . . 73,935 73,268 Dilutive stock options. . . . . . . . . 2,919 3,575 ------ ------ Shares used in calculating diluted earnings per share. . . . . . . . . . 76,854 76,843 ====== ======
2. As of March 31, 1998, the Company had $20.8 million outstanding under a term loan secured by a laboratory and office building in Cambridge, Massachusetts. Principal payments of $833,000 are due semi-annually through 2004 with the balance due on May 8, 2005. As of March 31, 1998, the Company had $45.1 million outstanding under a loan agreement with a bank for financing the construction of the Company's biological manufacturing facility in North Carolina (the "Construction Loan"). The Construction Loan is secured by the Page 7 facility. Payments of $805,000 million are due quarterly through 2006 with the balance due on March 31, 2007. Terms of the loan agreements include various covenants, including financial covenants which require the Company to maintain minimum net worth, cash flow and various financial ratios. 3. Inventories, which are included in other current assets, are stated at the lower of cost or market with cost determined under the first-in/first-out ("FIFO") method. Raw materials include inventory used in the production of pre-clinical and clinical products which are expensed as research and development costs when consumed. Inventories, net of applicable reserves and allowances, at March 31, 1998 and December 31, 1997 are as follows:
(In Thousands) March 31, 1998 Dec. 31, 1997 Raw materials $ 4,001 $ 4,957 Work in process 16,614 8,132 Finished goods 7,336 9,870 -------- -------- $27,951 $22,959 ======== ========
4. On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen in the United States District Court for the District of New Jersey alleging infringement by Biogen of Berlex's "McCormick" patent in the United States in the production of Biogen's AVONEX(R) (Interferon beta-1a). Berlex seeks a judgment granting it damages, a trebling of any damages awarded and a permanent injunction restraining Biogen from the 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 Aktiengesellschaft ("ASTA") filed for arbitration against Biogen with the International Chamber of Commerce ("ICC") in connection with a dispute with Biogen regarding a License, Development and Supply Agreement, dated May 30, 1989 (the "1989 Page 8 Agreement"), among Biogen, ASTA and Bioferon Biochemische Substanzen GmbH & Co ("Bioferon"). Bioferon was a joint venture between Biogen and Rentschler Arzneimittel GmbH & Co. of Laupheim, Germany, which entered bankruptcy in 1993. In the proceeding, ASTA had asked for a determination that Biogen could not terminate the 1989 Agreement as to ASTA solely as a result of Bioferon's bankruptcy and a further determination that Biogen was required to supply ASTA with recombinant beta interferon. On March 13, 1998, the ICC arbitration panel ruled that, as between Biogen and ASTA, the 1989 Agreement was not terminated as a result of the bankruptcy of Bioferon, but that Biogen was not required to perform Bioferon's obligations under the 1989 Agreement and, as a result, had no obligation to supply recombinant beta interferon to ASTA. Under the 1989 Agreement, ASTA was granted an exclusive license for a number of European countries to certain intellectual property relating to recombinant beta interferon, including Biogen's European Fiers patent which has since been revoked by the European Patent Office. In light of the panel's decision, Biogen has notified ASTA that it has terminated the 1989 Agreement based on ASTA's conduct and failure to perform. On March 19, 1998, ASTA notified Biogen that it deemed Biogen's termination of the 1989 Agreement to be invalid. During the fourth quarter of 1994, a total of six class action lawsuits were initiated against Biogen 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 Biogen'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, Biogen filed a motion for summary judgment in the case. On September 4, 1997, the Court denied the motion but narrowed the plaintiff class. On May 6, 1998 a jury found in favor of Biogen -- rejecting all claims against the company. 5. Income tax expense as a percent of pre-tax income for the quarters ended March 31, 1998 and 1997 was 36% and 40.5%, respectively. The effective tax rate varied from the U.S. statutory rates in the current quarter primarily due to an increase in European sales and the utilization of research and development credits. The effective rate in the first quarter of 1997 varied from U.S. statutory rates primarily due to the benefit of research and development and investment tax credits partially offset by foreign losses for which the Company received no tax benefit. Page 9 BIOGEN, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Biogen, Inc. (the "Company" or "Biogen") is a biopharmaceutical company principally engaged in the business of developing, manufacturing and marketing drugs for human health care. The Company currently derives revenues from sales of AVONEX(R) (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 For the quarter ended March 31, 1998, the Company reported net income of $27.8 million or $0.36 per diluted share as compared to $17 million or $0.22 per diluted share for the comparable period of 1997. Total revenues for the current quarter were $121.4 million, as compared to $99.7 million in the quarter ended March 31, 1997, an increase of $21.7 million or 22%. The increase in total revenues was primarily due to increased sales of the Company's product AVONEX(R). Product sales for the current quarter were $76.1 million as compared to $52.6 million for the comparable period of 1997, an increase of $23.5 million or 45%. The growth in 1998 was due to an increase in the sales volume of AVONEX(R)in the United States as well as expansion into several new countries in the European Union ("EU"). In March 1997, the Company received regulatory approval to market AVONEX(R) in the fifteen member countries of the 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 $13 million in the current quarter as compared to $3 million in the comparable period of 1997. Revenues from royalties for the current quarter were $38.4 million as compared to $42.2 million for the comparable quarter of 1997, a decrease of $3.8 million or 9%. Royalty revenue in 1997 included a $2 million one-time license payment from The Medicines Company. 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 expects sales from AVONEX(R) in Europe to increase as a percentage of total product sales. The Company also received approval to market AVONEX(R) in Canada on April 6, 1998. The Company, however, expects to face increasing competition in the MS marketplace from other current and expected MS treatments. 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. Licensee sales levels may also fluctuate from quarter to quarter due to the timing and extent of major events such as new indication approvals or vaccination programs. Interest income for the current quarter was $7 million, an increase of $2.1 million or 43% as compared to $4.9 million in the comparable period of Page 10 1997. The increase in interest income is primarily a result of increased levels of invested funds. Total expenses for the current quarter were $78 million as compared to $71.2 million in the quarter ended March 31, 1997, an increase of $6.8 million or 10%. Cost of sales for the current quarter was $14.9 million as compared to $11.7 million in the comparable period of 1997, an increase of $3.2 million or 27%. Cost of sales for the current quarter includes product costs of $12.1 million as compared to $7.7 million in the comparable period of 1997. Gross margins for product sales remained relatively flat at 84% for the current quarter compared to 85% in the comparable period of 1997. Cost of sales relating to royalty revenue for the current quarter was $2.8 million as compared to $4 million in the comparable period of 1997, a decrease of $1.2 million, due to a higher proportion of royalty revenue with lower 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 for the current quarter were $37.1 million, a decrease of $0.8 million or 2% as compared to the quarter ended March 31, 1997. Included in research and development expenses in the quarter ended March 31, 1997 was a one-time license fee of $5 million to CV Therapeutics, Inc. Excluding the one-time license fee, research and development expenses increased $4.2 million, primarily due to an increase in clinical trial costs. The Company expects that, in the long-term, research and development expenses will increase as the Company expands its pipeline and related development efforts and clinical trials with respect to potential new product candidates and continues clinical trials of AVONEX(R). Selling, general and administrative expenses for the current quarter were $26 million, an increase of $4.8 million or 23% as compared to the quarter ended March 31, 1997. This increase was primarily due to the selling and marketing expenses related to sales of AVONEX(R), principally in support of the ongoing European launch. The Company expects that selling, general and administrative expenses will continue to increase in the near and long-term as the Company continues to expand the sales and marketing organizations and activities necessary to sell AVONEX(R)in additional European markets. Income tax expense as a percent of pre-tax income for the quarters ended March 31, 1998 and 1997 was 36% and 40.5%, respectively. The effective tax rate varied from U.S. statutory rates in the current quarter primarily due to an increase in European sales and to the utilization of research and development credits. The effective rate in the first quarter of 1997 varied from U.S. statutory rates primarily due to the benefit of research and development and investment tax credits partially offset by foreign losses for which the Company received no tax benefit. Financial Condition At March 31, 1998, cash, cash equivalents and short term marketable securities were $65.6 million compared with $70.4 million at December 31, 1997, a decrease of $4.8 million. Working capital increased $11.1 million to $483.3 million from December 31, 1997 to March 31, 1998. Net cash provided from operating activities for the current quarter was $42.3 million compared with $5.8 million for the first quarter of 1997. Cash outflows for the current quarter included investments in property and equipment and patents of $5.9 million and $5 million under collaborative research agreements. Cash outflows from financing activities included note Page 11 payable and loan repayments of $2.3 million, and repurchases of the Company's common stock at a total cost of $21.5 million. Cash inflows from financing activities included $7.3 million from common stock option and purchase plan activity. Several legal proceedings were pending during the current quarter which involve the Company. See Note 4 of the Notes to the Condensed Consolidated Financial Statements and Part II Item 1 - Legal Proceedings. See also Item 1 Business, "Patents and Other Proprietary Rights" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997 for discussions of these legal proceedings. 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 seek to raise additional capital to take advantage of favorable conditions in the market or in connection with the Company's development activities. Outlook Safe Harbor Statement under Private Securities Litigation Reform Act of 1995 In addition to historical information, this quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. Reference is made in particular to forward-looking statements regarding the anticipated level of future royalty revenues, product sales, expenses and profits and anticipated pricing approvals and predictions as to the anticipated outcome of pending litigation. These and all other forward-looking statements are made based on the Company's current belief as to the outcome and timing of such future events. Factors which could cause actual results to differ from the Company's expectations and which could negatively impact the Company's results of operations are discussed below and elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations. Dependence on AVONEX(R) Sales and Royalty Revenue 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 and the extent to which AVONEX(R) receives reimbursement coverage; market acceptance of AVONEX(R) outside the United States; successful resolution of the lawsuit with Berlex related to the "McCormick" patent, which if decided in Berlex's favor could have a material adverse effect on the Company's operations; the Company's ability to sustain market share of AVONEX(R) in light of the introduction of competitive products for the treatment of multiple sclerosis; the success of ongoing development work related to AVONEX(R) in expanded multiple sclerosis indications and the continued accessibility of third parties to vial, label, and distribute Page 12 AVONEX(R) on acceptable terms. The Company also receives royalty revenues which contributes significantly to its overall profitability. The Company's ability to maintain the level of its royalty revenues will depend on: sustaining the scope and validity of existing patents; the efforts of licensees in the clinical testing and marketing of products from which the Company derives revenue; and the timing and extent of royalties from additional licensing opportunities. 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. There can be no assurance that the Company will achieve a positive outcome with respect to any of the factors discussed in this Section or that the timing and extent of the Company's success with respect to any combination of these factors will be sufficient to result in sustained increases in revenues or profitability or the sustained profitability of the Company. For a further discussion of risks regarding drug development, patent matters, including the Berlex lawsuit on the "McCormick" patent, competition in the multiple sclerosis market and regulatory matters, see the Company's Annual Report on Form 10-K for the period ended December 31, 1997 under the headings "Business - Risks Associated with Drug Development", "Business - Patents and Other Proprietary Rights", "Business Competition and Marketing - -AVONEX(R)(interferon beta 1a)", "Business - Regulation", "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations Outlook." New Products AVONEX(R) is currently the only product sold by the Company. The Company's long-term viability and growth will depend on the successful development and commercialization of other products from its research activities and collaborations. The Company has begun to expand its development efforts related to other potential products in its pipeline. The expansion of the pipeline may include increases in spending on internal projects, the acquisition of third party technologies or products or other types of investments. Product development involves a high degree of risk. Many important factors affect the Company's ability to successfully develop and commercialize drugs, including the ability to obtain and maintain necessary patents and licenses, to demonstrate safety and efficacy of drug candidates at each stage of the clinical trial process, to meet applicable regulatory standards and receive required regulatory approvals, to be capable of producing drug candidates in commercial quantities at reasonable costs, to compete successfully against other products and to market products successfully. There can be no assurance that the Company will be successful in its efforts to develop and commercialize new products. Page 13 PART II - OTHER INFORMATION Item 1 - Legal Proceedings During the fourth quarter of 1994, a total of six class action lawsuits were initiated against Biogen 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 Biogen'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, Biogen filed a motion for summary judgment in the case. On September 4, 1997, the Court denied the motion but narrowed the plaintiff class. On May 6, 1998 a jury found in favor of Biogen -- rejecting all claims against the company. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit No. 27 Financial Data Schedule(for EDGAR filing purposes only). (b) On March 16, 1998, the Company filed a report on Form 8-K to disclose that it has received a decision from an International Chamber of Commerce arbitration panel in its dispute with ASTA Medica Aktiengesellschaft of Berlin, Germany regarding a 1989 agreement among Biogen, ASTA, and Bioferon Biochemische Substanzen GmbH & Co. Bioferon was a joint venture between Biogen and Rentschler Arzneimittel GmbH & Co. of Laupheim, Germany, which entered bankruptcy in 1993. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BIOGEN, INC. Dated: May 7, 1998 /s/Timothy M. Kish ---------------- ------------------------------- Timothy M. Kish Vice President-Finance and Chief Financial Officer Page 14 EXHIBITS Index to Exhibit. No. 27 Financial Data Schedule(for EDGAR filing purposes only). EX-27 2 FDS --
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 65,602 392,737 75,679 1,645 27,951 598,730 245,065 71,264 823,791 115,449 61,041 0 0 741 574,393 823,791 76,100 121,440 14,873 78,042 46 0 1,635 43,398 15,627 27,771 0 0 0 27,771 0.38 0.36
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