-----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, DC1f+e+I7XV+oxbWeCXZnY0F+Gm/EW2qh7uMA5wNusOdGK9TvY6RWc/yGkK9ERDc SKAmB49O2lhjLd2CiJlQVw== 0000950135-99-002264.txt : 19990503 0000950135-99-002264.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950135-99-002264 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990430 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-K/A SEC ACT: SEC FILE NUMBER: 000-12042 FILM NUMBER: 99607076 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-K/A 1 BIOGEN, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 0-12042 BIOGEN, INC. (Exact name of Registrant as specified in its charter) Massachusetts 04-3002117 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 14 Cambridge Center, Cambridge, Massachusetts 02142 (Address of principal executive offices)(zip code) Registrant's telephone number, including area code: (617) 679-2000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value (Title of class) 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of Common Stock held by nonaffiliates of the Registrant at March 9, 1999 (excludes shares held by directors): $8,018,804,742. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of management or policies of the Registrant, or that such person is controlled by or under common control with the Registrant. Common Stock outstanding at March 9, 1999: 75,111,450 shares. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 1998 Annual Report to Shareholders are incorporated by reference into Parts II and IV of this Report. 2 PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT INFORMATION ABOUT THE DIRECTORS The Company's Board of Directors consists of twelve members divided into three equal classes serving staggered three-year terms. Information concerning the Company's Directors is set forth below. Alexander G. Bearn, M.D. Director since 1991; Member of the class of (age 76) directors with term ending in 2000; Executive Officer of the American Philosophical Society since 1997; Visiting Physician, Adjunct Professor at the Rockefeller University in New York since 1966 and Trustee of the Rockefeller University since 1970; Trustee of Howard Hughes Medical Institute since 1987; from 1979 to 1988, Senior Vice President for Medical and Scientific Affairs of the International Division of Merck & Co.; Director of Vasomedical, Inc.; member of the Scientific Board of the Company and nominated as a director pursuant to designation by the Scientific Board. Alan Belzer Director since 1990; Member of the class of (age 66) directors with term ending in 2001; President, Chief Operating Officer and Director, Allied-Signal, Inc. from 1988 to 1993; from 1983 to 1988, Executive Vice President and President, Engineered Materials Sector, Allied-Signal, Inc. Harold W. Buirkle Director since 1986; Member of the class of (age 78) directors with term ending in 2000; Managing Director, The Henley Group, Inc. from 1986 to 1990; from 1983 to 1985, Executive Vice President, Finance and Planning, Allied Corporation (now Allied-Signal, Inc.). Mary L. Good, Ph.D. Director since 1997; Member of the class of (age 67) directors with term ending in 2001; Managing Member, Venture Capital Investors, LLC since 1997; Donaghey University Professor at University of Arkansas at Little Rock since September 1998; Under Secretary for Technology, United States Department of Commerce from 1993 to 1997; Senior Vice President, Technology, Allied Signal, Inc. from 1988 to 1993; Director of IDEXX Laboratories and Whatman Co. plc. Thomas F. Keller, Ph.D. Director since 1996; Member of the class of (age 67) directors with term ending in 1999; R.J. Reynolds Professor of Business Administration, Duke University, since 1974; Dean, Fuqua School of Business, Duke University, from 1974 until 1996; Director of American Business Products, LADD Furniture Co., Inc., Dimon, Inc., Wendy's International, Nations Funds and Mentor Series Trust. Roger H. Morley Director since 1987; Member of the class of (age 67) directors with term ending in 1999; Vice President, Schiller International University, Heidelberg, Germany since 1983; Co-Managing Director, R&R Inventions Ltd., Birmingham, U.K; Advisory Director of Bank of America, Illinois; Director, Blyth Industries. 2 3 James C. Mullen Director since April 1999; Member of the class of (age 40) directors with term ending in 1999; President and Chief Operating Officer of Biogen, Inc. since January 1999; Vice President-International of Biogen, Inc. from 1996 until January 1999; Vice President-Operations of Biogen, Inc. from 1991 to 1996. Prior to joining Biogen in 1989, Mr. Mullen held various positions of responsibility at Smith Kline-Beckman Corporation (now SmithKline Beecham) from 1984 to 1988, including Director Engineering SmithKline and French Laboratories Worldwide. Sir Kenneth Murray, Ph.D. Director since 1980; Member of the class of (age 68) directors with term ending in 2001; Biogen Professor of Molecular Biology, University of Edinburgh, Scotland since 1984 (Emeritus since 1998); during 1985 and 1986, Interim Research Director of Biogen S.A; Fellow of the Royal Society; Vice Chairman of the Scientific Board of the Company and nominated as a director pursuant to designation by the Scientific Board. Phillip A. Sharp, Ph.D. Director since 1982; Member of the class of (age 54) directors with term ending in 1999; Institute Professor, Center for Cancer Research Massachusetts Institute of Technology since March 1999; from 1991 until March 1999, Salvador E. Luria Professor and Head of the Department of Biology, Center for Cancer Research, MIT; Director of the Center for Cancer Research at MIT from 1985 to 1991; Chairman of the Scientific Board of the Company and nominated as a director pursuant to designation by the Scientific Board; Nobel Laureate. Alan K. Simpson Director since 1997; Member of the class of (age 67) directors with term ending in 2000; United States Senator from Wyoming from 1979 to 1997; Director of PacifiCorp. and I.D.S.-American Express. James W. Stevens Director since 1986; Member of the class of (age 62) directors with term ending in 2001; Chairman, Prudential Asset Management Group from 1993 to 1995; Executive Vice President, The Prudential Insurance Company of America and Prudential Investment Corporation from 1987 to 1995; Managing Director, Dillon, Read & Company Inc. from 1985 until 1987; from 1984 until 1985, Group Executive of Citicorp and Citibank N.A. and Chairman of Citicorp Venture Capital, Ltd; Director of Maxcor Financial Group Inc. and Pen-Tab Industries, Inc. James L. Vincent Director since 1985; Member of the class of (age 59) directors with term ending in 2000; Chairman of the Board of Directors of Biogen, Inc. since 1985; Chief Executive Officer of Biogen, Inc. since December 1998 and from 1985 until February 1997, and President from 1985 to February 1994; from 1982 to 1985, Group Vice President, Allied Corporation (now Allied-Signal, Inc.) and President, Allied Health and Scientific Products Company; from 1979 through 1980, Executive Vice President, Chief Operating Officer and a Director of Abbott Laboratories, Inc.; Director of CuraGen Corporation. 3 4 INFORMATION ABOUT THE EXECUTIVE OFFICERS Information concerning the Company's Executive Officers is set forth in Part I of this Annual Report. SECTION 16(a) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The Company's officers, directors and greater-than-ten-percent stockholders are required to file reports of ownership and change of ownership with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Based solely on information provided to the Company by the individual directors and officers, the Company believes that, during the fiscal year ended December 31, 1998, all such parties complied with all applicable filing requirements except for late reporting of the following transactions: (i) re-sent filings for Harold Buirkle, Kenneth Murray, Alexander Bearn and Roger Morley to address a legibility problem in faxed copies sent in October 1998, (ii) an amended filing for Frank Burke showing an additional transaction in August 1998, (iii) late filings for Harold Buirkle (option exercise) in December 1998, Joseph M. Davie (purchase in July 1998) and Alexander Bearn (exercise and sale transactions in April and October of 1998), (iv) a late filing of Form 3 for Michael Bonney upon his becoming an executive officer. 4 5 ITEM 11 - EXECUTIVE COMPENSATION The following table sets forth the compensation of those persons who served as the Company's Chief Executive Officer in 1998 and the four other most highly compensated executive officers (the "Named Executive Officers") during the three fiscal years ended December 31, 1998. SUMMARY COMPENSATION TABLE
Long Term Annual Compensation Compensation ---------------------------------------------------- ------------ Shares Name and Principal Other Annual Underlying All Other Position(1) Year Salary Bonus Compensation(2) Options(#)(1) Compensation(3) - ------------------ ---- ---------- -------- --------------- ------------- --------------- - --------------------------------------------------------------------------------------------------------------------- James L. Vincent, 1998 $1,014,000 $ 0 $ 0 60,000 $19,279 Chairman of the 1997 975,000 0 0 150,000 33,564 Board and Chief 1996 860,000 750,000 0 0 31,167 Executive Officer - --------------------------------------------------------------------------------------------------------------------- James R. Tobin, 1998 634,998 540,000 21,626 220,000 4,602 Former President and 1997 573,575 400,000 43,447 240,000 5,355 Chief Executive Officer 1996 460,000 275,000 161,707 0 4,618 - --------------------------------------------------------------------------------------------------------------------- Joseph M. Davie 1998 329,992 80,000 0 10,000 8,530 Senior Vice President - 1997 310,000 74,500 25,000 10,000 8,685 Research 1996 296,000 58,000 25,000 10,000 6,964 - --------------------------------------------------------------------------------------------------------------------- Irving H. Fox 1998 265,980 64,500 0 5,000 9,106 Former Vice President- 1997 256,000 61,500 0 10,000 6,760 Medical Affairs 1996 246,500 66,500 35,000 10,000 6,032 - --------------------------------------------------------------------------------------------------------------------- James C. Mullen 1998 260,000 70,900 0 30,000 4,010 President and Chief 1997 245,000 59,000 67,757 20,000 3,472 Operating Officer 1996 216,500 64,000 0 20,000 3,137 - --------------------------------------------------------------------------------------------------------------------- Michael J. Astrue 1998 250,000 76,500 0 15,000 4,030 Vice President - General 1997 225,000 61,000 0 12,000 4,081 Counsel 1996 210,000 53,000 19,818 10,000 3,667 - ---------------------------------------------------------------------------------------------------------------------
- ---------------------------- (1) Mr. Vincent became Chief Executive Officer in December 1998 after the resignation of James R. Tobin. Mr. Vincent served as Chairman during all of 1998. Dr. Fox resigned as Vice President - Medical Affairs in January 1999. The options granted to Mr. Tobin and Dr. Fox in 1998 lapsed unvested upon their respective resignations. (2) Other Annual Compensation in 1998 for Mr. Tobin includes the portion of payments made under a contingent bonus and mortgage loan forgiveness program in connection with his hiring which became vested during the last fiscal year in the amount of $21,626. 5 6 (3) All Other Compensation in 1998 for all of the named individuals includes the dollar value of matching contributions made in shares of the Company's Common Stock during the last fiscal year under the Company's 401(k) plan in the amount of $2,400 for each of the named individuals, and matching amounts of less than $100 per officer made by the Company under its non-qualified Voluntary Executive Supplemental Savings Plan for compensation in excess of the amount that may be taken into account under the 401(k) plan. All Other Compensation also includes, for each of the named individuals, the dollar value of premiums paid by the Company during the last fiscal year with respect to term life insurance for their benefit under an executive life insurance program in the amount of $16,779 for Mr. Vincent, $2,102 for Mr. Tobin, $6,030 for Dr. Davie, $6,606 for Dr. Fox, $1,510 for Mr. Mullen and $1,530 for Mr. Astrue. OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth information regarding options granted to the Named Executive Officers in 1998.
Individual Grants ----------------------------- Number of Potential Realizable Value at Shares % of Total Assumed Annual Rates of Stock Price Underlying Options Granted Appreciation for Option Term(2) Options to Employees in Exercise Expiration ----------------------------------- Name Granted(1) Fiscal Year Price($/Sh) Date 5%($) 10%($) - ---- ---------- --------------- ----------- ---------- ----------- ----------- James L. Vincent 60,000 4.05 $81.4688 12/11/08 $ 3,074,113 $ 7,790,409 James R. Tobin(3) 220,000 14.80 81.4688 12/11/08 11,271,746 28,564,834 Joseph M. Davie 10,000 0.67 81.4688 12/11/08 512,352 1,298,402 Irving H. Fox(3) 5,000 0.34 81.4688 12/11/08 256,176 649,201 James C. Mullen 30,000 2.02 81.4688 12/11/08 1,537,056 3,895,205 Michael J. Astrue 15,000 1.01 81.4688 12/11/08 768,528 1,947,602
- ------------------------- (1) All options listed were granted pursuant to the 1985 Plan at the market price on the date of grant and have ten-year terms. All of the options, except those granted to Mr. Vincent, vest annually in equal installments over five years, commencing one year from the date of grant. The options granted to Mr. Vincent are immediately exercisable, but the shares issuable upon exercise of the options are subject to repurchase by the Company under certain conditions and for a specified period. (2) The potential realizable values for all stockholders at the assumed annual rates of stock price appreciation of 5% and 10% would be $3,769,346,668 and $9,552,270,167, respectively. These values assume increases in the value of the shares of Common Stock outstanding at December 31, 1998 at the stated percentages over a ten-year period from an initial value of $81.4688, the average of the high and low sales prices of the Company's Common Stock on December 31, 1998. (3) The options granted to Mr. Tobin and Dr. Fox in 1998 lapsed unvested upon their respective resignations from the Company. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES The following table sets forth information regarding options held by the Named Executive Officers of the Company in 1998. The table does not reflect transactions which have occurred to date in 1999. 6 7
Number of Shares Value of Unexercised In-the- Underlying Unexercised Money Options at Year- Options at Year-End End(1) ------------------------------ ------------------------------- Shares Acquired Name on Exercise(#) Value Realized Exercisable(2) Unexercisable Exercisable(2) Unexercisable - ---- ---------------- -------------- -------------- ------------- -------------- ------------- James L. Vincent 0 $ 0 627,500 0 $30,187,942 $ 0 James R. Tobin(3) 0 0 560,142 849,858 31,830,984 32,030,508 Joseph M. Davie 0 0 361,142 168,858 24,451,138 10,416,388 Irving H. Fox(3) 47,000 2,560,145 147,000 44,000 9,075,556 2,067,964 James C. Mullen 20,000 517,560 223,133 103,867 13,978,668 3,903,703 Michael J. Astrue 0 0 136,866 77,134 8,938,983 3,648,410
- -------------------------- (1) The value of unexercised in-the-money options at year-end assumes a fair market value for the Company's Common Stock of $81.4688, the average of the high and low sales prices of the Company's Common Stock on December 31, 1998. (2) The options granted to Mr. Vincent are immediately exercisable, but the shares issuable upon exercise of the options are subject to repurchase by the Company under certain conditions and for a specified period. (3) The options granted to Mr. Tobin and Dr. Fox in 1998 lapsed unvested upon their respective resignations from the Company. PENSION PLAN The Company has a defined benefit pension plan in which all regular U.S. employees participate as of the first day of the quarter following date of hire. Benefits are expressed as cash balance accounts. At the end of each plan year, the Company makes a contribution to the participant's account in the form of a basic credit ranging from 2% to 15% of the participant's compensation during the year depending on participant's age. In addition, a participant may receive a supplemental credit equal to 3% (or the participant's basic credit percentage, if less) of compensation during the year in excess of the participant's Social Security covered compensation level. Account balances grow each year at a specified rate of interest equal to the average of the One-Year Treasury Bill (T-bill) rate for the prior year plus 1%. The plan's interest credit will not be less than 5.25% nor more than 10%. A participant is eligible to retire and begin receiving his or her vested benefit from the plan as early as age 55. The total account balance is converted to a monthly pension at retirement. Alternatively, a participant may elect to receive his or her account balance as a lump sum. For 1995 and earlier years, the benefit formula provided at different times varying amounts of benefit accrual. A participant's vested interest in the plan is subject to a graded vesting schedule based on years of service with Biogen and fully vests after seven years of service. The Company also maintains a Supplemental Executive Retirement Plan ("SERP"). The SERP provides benefits that, due to tax law limits, cannot be paid from the qualified pension plan. For certain executive officers, the SERP also preserves the level of retirement benefits provided under the pension plan's benefit formula before its amendment effective in 1989 to comply with the Tax Reform Act of 1986. The following table shows estimated annual benefits payable upon normal retirement (age 65) for life under the pension plan and the SERP. These estimates assume that account balances will grow 7% each year, that an employee will work for the Company until normal retirement age with no change from 7 8 1998 compensation, and that the participant's Social Security covered compensation level will not change.
Current Salary Plus Bonus 15 20 25 30 35 - -------------- ------- ------- ------- --------- --------- 300,000....................... 94,000 131,000 176,000 231,000 299,000 400,000....................... 128,000 178,000 239,000 315,000 409,000 500,000....................... 161,000 225,000 302,000 400,000 518,000 600,000....................... 194,000 271,000 365,000 484,000 628,000 700,000....................... 227,000 318,000 429,000 568,000 738,000 800,000....................... 260,000 365,000 492,000 652,000 847,000 900,000....................... 293,000 411,000 555,000 736,000 957,000 1,000,000....................... 326,000 458,000 618,000 820,000 1,067,000 1,100,000....................... 359,000 505,000 682,000 905,000 1,176,000 1,200,000....................... 393,000 551,000 745,000 989,000 1,286,000 1,300,000....................... 426,000 598,000 809,000 1,074,000 1,415,000
The (i) current pensionable earnings (salary and bonus), (ii) current years of service, and (iii) projected total service at age 65 are as follows for each of the current executive officers named in the compensation and option tables: Mr. Vincent ($1,014,000, 13.5 years, 19 years (projected)); Dr. Davie ($409,992, 6.0 years, 11.5 years (projected)); Mr. Mullen ($330,900, 10 years, 34 years (projected)) and Mr. Astrue ($326,500, 6 years, 28 years (projected). The 1998 pensionable earnings (salary and bonus) and years of service as of date of resignation for Mr. Tobin and Dr. Fox are $1,174,998, 5 years and $320,480, 9 years, respectively. DIRECTOR COMPENSATION Non-employee members of the Company's Board of Directors receive a $20,000 per year retainer, $1,500 for each Board meeting attended and $500 for attending each meeting of Committees of the Board on which they serve, except for Committee chairmen, who receive $1,000 per Committee meeting attended. Those directors who are members of the Company's Scientific Board and who are not Company employees also received in 1998 an annual consulting fee of $20,000, $2,000 per day for Scientific Board meetings, and $500 per day for each full working day spent in the Company's laboratories, except for the Chairman of the Scientific Board whose annual consulting fee in 1998 was $75,000. Directors who are not members of the Company's Scientific Board are eligible to participate in the Company's 1985 Non-Qualified Stock Option Plan (the "1985 Plan"). In 1998, James W. Stevens, Harold W. Buirkle and Roger H. Morley were each granted options for the purchase of 30,000 shares of the Company's Common Stock under the 1985 Plan. Directors who are members of the Scientific Board are eligible to participate in the Company's 1987 Scientific Board Stock Option Plan (the "1987 Plan"). In 1998, Alexander G. Bearn and Kenneth Murray were each granted options for the purchase of 30,000 shares of the Company's Common Stock under the 1987 Plan, and Phillip A. Sharp was granted an option for the purchase of 75,000 shares. Directors may defer all or part of their cash compensation pursuant to the Company's Voluntary Board of Directors Savings Plan. EMPLOYMENT ARRANGEMENTS WITH THE COMPANY Dr. Davie, Mr. Mullen and Mr. Astrue each has an employment agreement with the Company under which he receives executive life insurance and tax preparation services. The employment agreements for Dr. Davie, Mr. Mullen and Mr. Astrue each further provides for compensation in the event of termination by the Company, other than for cause, in the amount of base salary and certain medical benefits, for twelve months or until alternative employment is obtained, if earlier. The employment 8 9 agreements for each of Dr. Davie, Mr. Mullen and Mr. Astrue also provide for a specified target bonus each year. Mr. Vincent has an employment agreement under which he receives term life, disability, and personal liability insurance, personal income tax preparation and tax audit services. Mr. Vincent's agreement was amended in 1996. Under Mr. Vincent's amended employment agreement, in the event of a non-cause termination (whether by the Company or by Mr. Vincent in certain circumstances, including following a change of control of the Company), Mr. Vincent will be entitled to receive a payment equal to at least 2.5 times and no more than 6.5 times his average annual cash compensation for the three years preceding termination, depending upon the date of termination. In the event of termination, under certain circumstances, Mr. Vincent will be entitled to the continuation of certain benefits until age 65 as well as continued service credit and possible accelerated payment under the Company's SERP. Termination payments will be made together with the amount of certain excise taxes imposed on the termination payments. The amended agreement also includes a three-year non-competition provision and a two-year non-solicitation provision. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In 1998, the members of the Compensation and Management Resources Committee, which determines cash remuneration and benefits for senior executives and reviews executive development and succession, were Roger H. Morley, (Chairman), Harold W. Buirkle, Phillip A. Sharp and James L. Vincent, the Chairman of the Board and Chief Executive Officer of the Company. JOINT REPORT ON COMPENSATION PHILOSOPHY BY THE COMPENSATION AND MANAGEMENT RESOURCES COMMITTEE AND STOCK AND OPTION PLAN ADMINISTRATION COMMITTEE Having attained its goal of moving from a development-stage company to a fully-integrated pharmaceutical company, Biogen is now focused on achieving continued growth and development. The Company's current strategy towards this objective is to grow the worldwide market for its AVONEX(R) (Interferon Beta-1a) product, develop drugs from its current pipeline, fill its pipeline so that there are new drugs to bring to market in the future, continue to foster the creative energies of the internal research group as a source of new development programs, and do all of this in a financially responsible way so as to maximize value for shareholders. The Company's achievements in 1998 reflect its efforts toward fulfilling this strategy. These achievements included maintaining the position of AVONEX(R) as the market leader in the United States multiple sclerosis market, launching AVONEX(R) in several new geographic markets and achieving market leadership with AVONEX(R) in several European countries, accelerating development of the Company's clinical pipeline and reporting record revenues, net income and earnings per share. The goals that Biogen has set and the strategy it has adopted are challenging. The Company's success in achieving its mission to date and the magnitude of this success are due in large part to the Company's philosophy and practice of recruiting, motivating and retaining senior executives with demonstrated talent and managerial leadership skills typically gained from successful experiences in positions of greater scope and responsibility in pharmaceutical and other industry settings. A competitive compensation program has been a crucial part of the Company's efforts. The Biogen executive compensation program consists of three parts: base salary and benefits, annual bonus and stock options. The Company's target for total compensation is to be competitive with major biotechnology companies, generally those peer companies with significant revenues and at least one product successfully developed and marketed, and with pharmaceutical industry companies, on a size-adjusted basis. In 1998, the total compensation package paid to executive officers, other than the Chairman and Chief Executive Officer, was about average compared to the major biotechnology companies with respect to cash compensation and the value of stock options granted. Individual compensation decisions are made with reference to progress toward goals tailored for Biogen's stage of development. 9 10 BASE SALARY AND BENEFITS Company philosophy is to maintain executive base salary at a competitive level sufficient to recruit individuals possessing the skills and values necessary to achieve the Company's vision and mission over the long term. Determinations of appropriate base salary levels and other compensation elements are generally made through participation in a variety of industry surveys and studies, as well as by monitoring developments in key industries such as the pharmaceutical industry. Periodic adjustments in base salary relate to competitive factors and to individual performance evaluated against pre-established objectives. Executive officers are also entitled to participate in benefit plans generally available to employees and receive executive life insurance and other benefits as described elsewhere in this Proxy Statement. ANNUAL BONUS The Compensation and Management Resources Committee of the Board, in its discretion, may award bonuses to executive officers, and the Company pays bonuses based on each executive officer's achievement of his or her performance goals. The intent of the annual bonus is to motivate and reward performance of senior executives measured against distinct and clearly articulated goals and also with a view to the competitive compensation practices of the biotechnology industry. The goals vary with responsibilities and are based on individual milestones rather than overall measures of the Company's performance. In 1998, these goals included: expansion of AVONEX(R) sales into new geographic markets, achievement of certain commercial milestones with respect to AVONEX(R), approval of the Company's Research Triangle Park facility as a new site for the manufacture of AVONEX(R), achievement of certain clinical milestones with respect to the Company's key development-stage products, achievement of certain research and development milestones with respect to the Company's product pipeline and completion of key recruiting and strategic planning efforts. STOCK OPTIONS Stock options are a fundamental element in the total compensation program because they emphasize long-term Company performance as measured by creation of stockholder value and foster a community of interest between stockholders and employees. Accordingly, the Company believes that the use of stock options is preferable to other forms of stock compensation such as restricted stock. Options are granted to all regular full-time employees, and particularly to key employees likely to contribute significantly to the Company. In determining the size of an option grant to an executive officer, the Company considers not only competitive factors, changes in responsibility and the executive officer's achievement of individual pre-established goals, but also the number and terms of options previously granted to the officer. In addition, the Company usually makes a significant grant of options when an executive officer joins the Company. The size of option grants to executive officers is determined by the Stock and Option Plan Administration Committee. Options are granted, as a matter of Company policy, at 100% of the fair market value on the date of grant. The Company generally awards options to officers on employment and at regular intervals, but other awards may be made. Some of the Company's stock option plans also provide for granting options to members of the Board of Directors and the Scientific Board. Options granted to employees generally vest over periods ranging from five to seven years after grant. CEO COMPENSATION 10 11 The compensation of Biogen's Chief Executive Officer reflects the Company's general compensation philosophy. James R. Tobin was Chief Executive Officer of the Company until December 1998. He was succeeded by James L. Vincent who is also the Chairman of the Board. Mr. Tobin's compensation in 1998 was not formula-based but rather was determined by the Compensation and Management Resources Committee and the Stock and Option Plan Administration Committee based on the Committees' assessment of Mr. Tobin's performance and review of data showing the compensation of Mr. Tobin's peers in the pharmaceutical industry. Mr. Tobin's performance was evaluated by the Committees by considering various factors, including the breadth of Mr. Tobin's responsibilities and progress made by the Company toward its goals as measured by the Committees' assessment of the performance of the key departments. In 1998, the Company's progress and the quality of Mr. Tobin's performance were reflected in the Company's various achievements. These achievements included maintaining the position of AVONEX(R) as the market leader in the multiple sclerosis market in the United States, achieving market leadership with AVONEX(R) in certain European countries, the launching of AVONEX(R) in several new geographic markets, progress on early stage clinical trials of several key development-stage products, and reporting record revenues, net income and earnings per share. In determining whether to grant Mr. Tobin options, the Compensation and Management Resources Committee and the Stock and Option Plan Administration Committee considered not only competitive factors and Mr. Tobin's performance, but also the number and terms of options previously granted. Options were granted to Mr. Tobin in 1998 in recognition of his performance. The options granted to Mr. Tobin in 1998 lapsed unvested when he resigned in December 1998. IMPACT OF INTERNAL REVENUE CODE SECTION 162(m) Internal Revenue Code Section 162(m) ("Section 162(m)") precludes a public corporation from taking a deduction for compensation in excess of $1 million paid to its chief executive officer or any of its four other highest paid officers. Certain income is not subject to the limit. As a result, the Company was able to fully deduct compensation paid to its executive officers in 1998. At such time as this provision would affect the Company, the Board and Committees will assess the practical effect on executive compensation and determine what action, if any, is appropriate while maintaining the discretion to compensate its executive officers in a manner consistent with the Company's compensation policies without regard to deductibility. COMMITTEES' ROLES The stock option plans for senior executives are administered by the Stock and Option Plan Administration Committee (consisting of Messrs. Morley and Buirkle) of the Board of Directors. Other compensation decisions for senior executives are made by the Compensation and Management Resources Committee or, in the case of the Chief Executive Officer, by the Board based on recommendations from that Committee. Roger H. Morley, Chairman, Compensation and Management Resources Committee Harold W. Buirkle Phillip A. Sharp James L. Vincent 11 12 PERFORMANCE GRAPH The following graph compares the yearly percentage change in the Company's cumulative total shareholder return on its Common Stock during a period commencing on December 31, 1993 and ending December 31, 1998 (as measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the Company's share price at the end and the beginning of the period; by (ii) the share price at the beginning of the period) with the cumulative return of the Standard & Poor's 500 Stock Index and the NASDAQ Pharmaceutical Stocks Total Return Index. The NASDAQ Pharmaceutical Stocks Total Return Index, which is calculated and supplied by NASDAQ, represents all companies trading on NASDAQ under the Standard Industrial Classification (SIC) Code for pharmaceutical, including biotechnology, companies. Biogen has not paid dividends, and no dividends are included in the representation of the Company's performance. The share prices have been adjusted to reflect a two-for-one stock split effected by the Company in November 1996. The stock price performance on the graph below is not necessarily indicative of future price performance. - ----------------------------------------------------------------------------- 1998 1997 1996 1995 1994 1993 ----- ----- ----- ----- ----- ----- - ----------------------------------------------------------------------------- Biogen 416.2 182.4 194.3 154.2 104.7 100.0 - ----------------------------------------------------------------------------- S&P 500 295.7 229.6 172.0 139.5 101.4 100.0 - ----------------------------------------------------------------------------- NASDAQ 183.0 143.0 138.5 138.0 75.3 100.0 Pharm. Index - ----------------------------------------------------------------------------- 12 13 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT SHARE OWNERSHIP The following table sets forth information as of April 7, 1999 concerning the ownership of Common Stock by each stockholder known by the Company to be the beneficial owner of more than 5% of the Company's outstanding shares of Common Stock, each current member of the Board of Directors, each of the executive officers named in the Summary Compensation Table included in this Proxy Statement and all current directors and executive officers as a group. Except as otherwise noted, the persons or entities identified have sole voting and investment power with respect to their shares. SHARES BENEFICIALLY OWNED ------------------------- NAME AND ADDRESS** NUMBER(1) PERCENT(1) - ------------------ ----------- ---------- Alexander G. Bearn .................................. 30,200(2) * Alan Belzer ......................................... 104,000(3) * Harold W. Buirkle ................................... 201,500 * Mary L. Good ........................................ 20,000(3) * Thomas F. Keller .................................... 20,400(4) * Roger H. Morley ..................................... 40,000(3) * Kenneth Murray ...................................... 424,000(5) * Phillip A. Sharp .................................... 458,000(6) * Alan K. Simpson ..................................... 9,320(7) * James W. Stevens .................................... 152,000(8) * James R. Tobin ...................................... 0 0 James L. Vincent .................................... 825,513(9) 1.09% James C. Mullen ..................................... 236,974(10) * Joseph M. Davie ..................................... 272,044(11) * Irving H. Fox ....................................... 13,236(12) * Michael J. Astrue ................................... 108,922(13) * All current executive officers and directors as a group (23 persons) ................................ 3,380,121(14) 4.36% FMR Corp. ........................................... 7,565,800(15) 10.6% 82 Devonshire St .................................... Boston, MA 02109 Neuberger Berman, LLC ............................... 4,156,665(16) 5.53% 605 Third Ave. New York, NY 10158-3698 - ------------------------------ * Represents beneficial ownership of less than 1% of the Company's outstanding shares of Common Stock. ** Addresses are given only for beneficial owners of more than 5% of the Company's outstanding shares of Common Stock. (1) All references to options in these notes mean those options which are held by the respective person on April 7, 1999 and which are exercisable on April 7, 1999 or become exercisable on or before 13 14 sixty days after April 7, 1999. The calculation of percentages is based upon the number of shares issued and outstanding at April 7, 1999, plus shares subject to options held by the respective person at April 7, 1999, which are exercisable on April 7, 1999 or become exercisable on or before sixty days after April 7, 1999. (2) Includes 30,000 shares which may be acquired pursuant to options. (3) Represents shares which may be acquired pursuant to options. (4) Includes 20,000 shares which may be acquired pursuant to options. Shares are held by a partnership of which Dr. Keller is a general partner. (5) Includes 72,000 shares which may be acquired pursuant to options. (6) Includes 102,000 shares which may be acquired pursuant to options. (7) Includes 9,320 shares which may be acquired pursuant to options, and includes option shares held by Mr. Simpson's wife. (8) Includes 72,000 shares which may be acquired pursuant to options. (9) Includes 792,500 shares which may be acquired pursuant to options. Certain of the shares acquired upon exercise of such options are subject to repurchase by the Company under certain circumstances. Includes 1,213 shares held under the Company's 401(k) plan. (10) Includes 223,133 shares which may be acquired pursuant to options and 851 shares held under the Company's 401(k) plan. (11) Includes 261,142 shares which may be acquired pursuant to options and 272 shares held under the Company's 401(k) plan. (12) Includes 936 shares held under the Company's 401(k) plan. (13) Includes 96,866 shares which may be acquired pursuant to options and 478 shares held under the Company's 401(k) plan. (14) Includes 2,258,543 shares which may be acquired pursuant to options. Does not include shares which may be purchased after March 1999 by executive officers who are currently participants in the 1983 Employee Stock Purchase Plan. Includes 8,250 shares held under the Company's 401(k) plan. (15) FMR Corp. ("FMR") is a holding company. Fidelity Management & Research Company ("Fidelity"), a wholly-owned subsidiary of FMR, is the beneficial owner of 7,434,000 shares as a result of acting as an investment adviser to several investment companies and as a result of acting as subadviser to Fidelity American Special Situations Trust ("FASST"). Fidelity Management Trust Company ("FMTC"), a wholly-owned subsidiary of FMR, is the beneficial owner of 96,700 shares as a result of its serving as an investment manager of institutional accounts. Also included are 36,000 shares held by Fidelity International Limited ("FIL") as the result of its acting as an investment advisor to several investment companies. The amount beneficially owned by FIL includes 900 shares owned by FASST which are also included in the amount reported as beneficially owned by Fidelity. FMR, Edward C. Johnson 3rd and Abigail P. Johnson, through their control of FMR, have sole power to dispose of 7,433,100 of the shares beneficially owned by Fidelity and all of the shares beneficially owned by FMTC and have sole power to vote 52,000 of the shares beneficially owned by FMTC. The power to vote the shares beneficially owned by Fidelity resides with the funds' Board of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds' Board of Trustees. FIL, FMR Corp, through its control of Fidelity, and FASST each has sole power to vote and to dispose of the 900 shares held by FASST. The above information was reported on Schedule 13G as of January 7, 1999. (16) Neuberger Berman, LLC and Neuberger Berman Management, Inc. serve as sub-adviser and investment manager, respectively, of Neuberger Berman's various mutual funds, and as such are 14 15 deemed to be beneficial owners of the shares held by the funds. Neuberger Berman has sole voting power over 2,775,200 of the shares, and shares dispositive power over all of the shares. The above information was reported on a Schedule 13-G as of February 5, 1999. ITEM 13- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not Applicable 15 16 Pursuant to the requirements of Section 13 or 15(d) 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. By: /s/ Michael J. Astrue ------------------------------------ Michael J. Astrue Vice President - General Counsel Dated April 29, 1999 16 -----END PRIVACY-ENHANCED MESSAGE-----