-----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, EXKntuMmEQZ0GGRJs/GCLM+xeMpcRmJFvVjS7Pe5wY3W/VwfPj6e7di86uRVUizg TJbIc+i4sBdS91YtIGhf9Q== /in/edgar/work/20000803/0000950135-00-003743/0000950135-00-003743.txt : 20000921 0000950135-00-003743.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950135-00-003743 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000803 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOGEN INC CENTRAL INDEX KEY: 0000714655 STANDARD INDUSTRIAL CLASSIFICATION: [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: 685055 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 e10-q.txt BIOGEN INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 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 incorporation or organization) Identification No.) 14 CAMBRIDGE CENTER, CAMBRIDGE, MA 02142 (617) 679-2000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) 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 [ ] The number of shares of the registrant's Common Stock, $0.01 par value, outstanding as of July 20, 2000 was 147,976,357 shares. 1 2 BIOGEN, INC. INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER Condensed Consolidated Statements of Income - Three and six months ended June 30, 2000 and 1999 3 Condensed Consolidated Balance Sheets - June 30, 2000 and December 31, 1999 4 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION 16
Note concerning trademarks: AVONEX(R) is a registered trademark of Biogen, Inc. 2 3 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited) (in thousands, except per share amounts)
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 --------- --------- --------- --------- REVENUES: Product $ 190,009 $ 145,852 $ 364,605 $ 277,172 Royalties 40,505 43,077 82,757 83,477 --------- --------- --------- --------- Total revenues 230,514 188,929 447,362 360,649 --------- --------- --------- --------- COSTS AND EXPENSES: Cost of revenues 30,795 26,961 59,418 51,831 Research and development 71,701 50,941 134,707 101,928 Selling, general and administrative 40,921 36,999 82,104 70,860 --------- --------- --------- --------- Total costs and expenses 143,417 114,901 276,229 224,619 --------- --------- --------- --------- Income from operations 87,097 74,028 171,133 136,030 Other income, net 16,737 (9,270) 115,761 (3,086) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 103,834 64,758 286,894 132,944 Income taxes 31,774 21,370 93,468 43,872 --------- --------- --------- --------- NET INCOME $ 72,060 $ 43,388 $ 193,426 $ 89,072 ========= ========= ========= ========= BASIC EARNINGS PER SHARE $ 0.48 $ 0.29 $ 1.29 $ 0.59 ========= ========= ========= ========= DILUTED EARNINGS PER SHARE $ 0.47 $ 0.28 $ 1.24 $ 0.57 ========= ========= ========= ========= SHARES USED IN COMPUTING: Basic earnings per share 148,643 150,047 149,501 149,722 ========= ========= ========= ========= Diluted earnings per share 154,150 157,575 155,931 157,553 ========= ========= ========= =========
See Notes to Condensed Consolidated Financial Statements. 3 4 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December 31, 2000 1999 ----------- ------------ (unaudited) ASSETS Current assets Cash and cash equivalents $ 67,462 $ 56,920 Marketable securities 584,725 597,619 Accounts receivable, net 154,301 137,363 Deferred tax assets 59,731 50,565 Other current assets 75,613 67,759 ----------- ----------- Total current assets 941,832 910,226 ----------- ----------- Property, plant and equipment Cost 427,514 351,566 Less accumulated depreciation 124,715 111,789 ----------- ----------- Property, plant and equipment, net 302,799 239,777 ----------- ----------- Patents, net 13,562 13,871 Marketable securities 46,422 98,017 Other assets 16,646 16,082 ----------- ----------- $ 1,321,261 $ 1,277,973 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 23,467 $ 30,125 Current portion of long-term debt 4,888 4,888 Accrued expenses and other 183,804 155,257 ----------- ----------- Total current liabilities 212,159 190,270 ----------- ----------- Long-term debt, less current portion 49,630 52,073 Other long-term liabilities 56,279 56,100 Commitments and contingencies -- -- Shareholders' equity Common stock 1,514 1,507 Additional paid-in capital 752,747 676,673 Retained earnings 435,481 352,016 Accumulated other comprehensive income 29,599 45,618 Treasury stock, at cost (216,148) (96,284) ----------- ----------- Total shareholders' equity 1,003,193 979,530 ----------- ----------- $ 1,321,261 $ 1,277,973 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 4 5 BIOGEN, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
Six Months Ended June 30, 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 193,426 $ 89,072 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization 16,321 15,496 Deferred income taxes 268 2,119 Other 2,697 379 Gain on sale of non-current marketable securities (101,129) -- Write-down of non-current marketable securities -- 15,287 Changes in: Accounts receivable (16,938) (11,887) Other current and other assets (2,781) (7,384) Accounts payable, accrued expense and other current and long-term liabilities 22,263 (11,704) --------- --------- Net cash from operating activities 114,127 91,378 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities (360,510) (329,515) Proceeds from sales and maturities of marketable securities 374,940 258,276 Proceeds from sales of non-current marketable securities 120,199 -- Acquisitions of property and equipment (80,468) (25,992) Additions to patents (2,182) (1,605) --------- --------- Net cash from investing activities 51,979 (98,836) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Payments of long-term debt (2,443) (2,444) Purchases of treasury stock (250,727) (68,584) Proceeds from put warrants -- 8,332 Issuance of common stock, stock option exercises and related tax benefits 97,606 97,329 --------- --------- Net cash from investing activities (155,564) 34,633 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 10,542 27,175 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 56,920 25,445 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 67,462 $ 52,620 ========= =========
See Notes to Condensed Consolidated Financial Statements. 5 6 BIOGEN, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION 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 the Consolidated Financial Statements in the Company's 1999 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. Certain amounts for the three and six months ended June 30, 1999 have been reclassified to conform to the current period presentation. INVENTORIES Inventories are stated at the lower of cost or market with cost determined under the first-in/first-out ("FIFO") method and are included 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 are as follows:
June 30, December 31, (in thousands) 2000 1999 -------- ------------ Raw materials $ 6,397 $ 5,679 Work in process 13,035 15,110 Finished goods 20,423 19,242 ------- ------- $39,855 $40,031 ======= =======
2. FINANCIAL INSTRUMENTS On June 15, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). The Company elected to adopt SFAS 133 in the fourth quarter of 1998. All derivatives are recognized on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company assesses, both at its inception and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in cash flows of hedged items. The Company assesses hedge ineffectiveness on a quarterly basis and records the gain or loss related to the ineffective portion to current earnings to the extent significant. If the Company determines that a hedged forecasted transaction is no longer probable of occurring, the Company discontinues hedge accounting for the affected portion of the transaction, and any unrealized gain or loss on the contract is recognized in current earnings. As of June 30, 2000, the Company had $16.7 million outstanding under a floating rate loan secured by the Company's laboratory and office building in Cambridge, Massachusetts and $37.8 million outstanding under a floating rate loan agreement for financing the construction of its biological manufacturing facility in North Carolina. The Company uses interest rate swap agreements to mitigate the risk associated with its floating rate debt. The fair value of the interest rate swap agreements at June 30, 2000, representing the cash the Company would receive to settle the agreements, was approximately $561,000. The Company has 6 7 designated the interest rate swaps as cash flow hedges. There were no amounts of hedge ineffectiveness related to the Company's interest rate swaps during the three and six months ended June 30, 2000 or in the comparable period of 1999, and no gains or losses were excluded from the assessment of hedge effectiveness. The Company records the differential to be paid or received on the interest rate swaps as incremental interest expense. The Company has foreign currency forward contracts to hedge specific forecasted transactions denominated in foreign currencies. All foreign currency forward contracts have durations of ninety days to 18 months. These contracts have been designated as cash flow hedges and accordingly, to the extent effective, any unrealized gains or losses on these foreign currency forward contracts are reported in other comprehensive income. Realized gains and losses for the effective portion are recognized with the underlying hedge transaction. The notional settlement amount of the foreign currency forward contracts outstanding at June 30, 2000 was approximately $127.9 million. These contracts had a fair value of approximately $10.9 million, representing an unrealized gain, and were included in other current assets at June 30, 2000. For the three and six months ended June 30, 2000 and 1999, there were no significant amounts recognized in earnings due to hedge ineffectiveness for outstanding foreign currency forward contracts. For the three and six months ended June 30, 2000, approximately $388,000 and $392,000, respectively, in gains were recognized as a result of the discontinuance of cash flow hedge accounting because it was no longer probable that the hedge forecasted transaction would occur. For the three and six months ended June 30, 1999, there were no significant amounts recognized as a result of the discontinuance of cash flow hedge accounting because it was no longer probable that the hedge forecasted transaction would occur. The Company recognized $2.3 million and $4.8 million of gains in product revenue for the settlement of certain effective cash flow hedge instruments for the three and six months period ended June 30, 2000, respectively. The Company recognized $426,000 and $1.1 million of gains in royalty revenue for the settlement of certain effective cash flow hedge instruments for the three and six months period ended June 30, 2000, respectively. For the three and six months ended June 30, 1999, the Company recognized $1.9 million and $2.8 million of gains in product revenue for the settlement of certain cash flow hedge instruments, respectively. For the three and six months ended June 30, 1999, the Company recognized $778,000 and $1.3 million, respectively of gains in royalty revenue for the settlement of certain cash flow hedge instruments during the period. These settlements were recorded in the same period as the related forecasted transactions affecting earnings. 3. COMPREHENSIVE INCOME Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income, such as translation adjustments and unrealized holding gains and losses on available-for-sale marketable securities, net of tax and certain derivative instruments, net of tax. Comprehensive income for the three months ended June 30, 2000 and 1999 was $77.1 million and $58.1 million, respectively. Comprehensive income for the six months ended June 30, 2000 and 1999 was $177.4 million and $107.2 million, respectively. 4. EARNINGS PER SHARE The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards No. 128, "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. Options to purchase approximately 1.7 million shares were outstanding at June 30, 2000 but not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the Company's common stock during the period. The put warrants sold in connection with the Company's stock repurchase program did not have a material additional dilutive effect. 7 8 Shares used in calculating basic and diluted earnings per share are as follows:
Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2000 1999 2000 1999 ------- ------- ------- ------- Weighted average number of shares of common stock outstanding 148,643 150,047 149,501 149,722 Dilutive stock options 5,507 7,528 6,430 7,831 ------- ------- ------- ------- Shares used in calculating diluted earnings per share 154,150 157,575 155,931 157,553 ======= ======= ======= =======
5. SHARE REPURCHASE PROGRAM On February 22, 1999, the Company announced that its Board of Directors had authorized the repurchase of up to 8 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 through 2000. The stock repurchase program may be discontinued at any time. During the first six months of 2000, the Company repurchased approximately 3.7 million shares of its common stock at a cost of $250.7 million. To enhance the 1999 stock repurchase program, the Company sold put warrants to and purchased call options from independent third parties for a total of 4 million shares, of which 1 million were outstanding at June 30, 2000 at a strike price of $49.47. All of the Company's put warrants outstanding are exercisable only at the date of expiration, with expiration dates ranging from July through November of 2000. The outstanding put warrants permit a net-share settlement at the Company's option and, therefore, did not result in a put obligation on the Company's Consolidated Balance Sheets. 6. OTHER INCOME, NET Other income, net consists of the following (in thousands):
Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Interest income $ 10,370 $ 8,466 $ 21,107 $ 16,263 Interest expense (1,080) (1,170) (2,185) (2,356) Other income (expense) 7,447 (16,566) 96,839 (16,993) --------- --------- --------- --------- Total other income, net $ 16,737 $ (9,270) $ 115,761 $ (3,086) ========= ========= ========= =========
Other income for the three and six months ended June 30, 2000 includes non-recurring gains on the sale of certain non-current marketable securities totaling approximately $8.7 million and $101.1 million, respectively. Other expense for the three and six months ended June 30, 1999 includes a $15.3 million write-down of certain non-current marketable securities. The Company had determined that the decline in fair value below cost of the marketable securities was other than temporary. 7. INCOME TAX EXPENSE Income tax expense as a percentage of pre-tax income for the three months ended June 30, 2000 and 1999 was approximately 31% and 33%, respectively. Income tax expense as a percentage of pre-tax income for the six months ended June 30, 2000 and 1999 was approximately 33%, respectively. During the three and 8 9 six months ended June 30, 2000, the Company recognized non-recurring gains on the sale of certain non-current marketable securities. Excluding the tax effect on these non-recurring gains the Company's effective tax rate for the three and six months ended June 30, 2000 was approximately 30%. The effective tax rate varied from the U.S. statutory rates for the first six months of 2000 and 1999 primarily due to increasing European sales and to the utilization of research and development credits. The Company's effective tax rate outside the U.S. is lower than the U.S. tax rate, and the Company expects that the U.S. tax rate will decline as a percentage of its total tax rate as international sales increase. 8. LITIGATION 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 (U.S. Patent No. 5,376,567) in the United States in the production of Biogen's AVONEX(R) (Interferon beta-1a) product. In November 1996, Berlex's New Jersey action was transferred to the United States District Court in Massachusetts and consolidated for pre-trial purposes with a related declaratory judgment action previously filed by Biogen. On August 18, 1998, Berlex filed a second suit against Biogen alleging infringement by Biogen of a patent which was issued to Berlex in August 1998 and which is related to the McCormick patent (U.S. Patent No. 5,795,779). On September 23, 1998, the cases were consolidated for pre-trial and trial purposes. 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 claims, but the ultimate outcome is not currently determinable. As a result, an estimate of any potential loss or range of loss cannot be made at this time. A hearing on the parties' summary judgment motions was completed in March 2000. Biogen moved for summary judgment of non-infringement of certain claims of the `567 patent, non-infringement of the `779 patent, as well as a determination of the invalidity of certain claims of the `567 patent and all of the claims of the `779 patent. Berlex moved to dismiss Biogen's inequitable conduct defenses and counterclaims. Berlex also moved for a declaration of literal infringement of certain claims of the `567 and the `779 patents. No decisions have been rendered to date. The Company expects a trial to occur in the first half of 2001. In 1995, the Company filed an opposition with the Opposition Division of the European Patent Office to oppose a European patent (the "Rentschler I Patent") issued to Dr. Rentschler Biotechnologie GmbH ("Rentschler") relating to compositions of matter of beta interferon. In 1997, the European Patent Office issued a decision to revoke the Rentschler I Patent. Rentschler has appealed that decision and the appeal is still pending. A hearing on the appeal has been scheduled for December 2000. On October 13, 1998, the Company filed another opposition with the Opposition Division of the European Patent Office to oppose a second European patent issued to Rentschler (the "Rentschler II Patent") with certain claims regarding compositions of matter of beta interferon with specific regard to the structure of the glycosylated molecule. A hearing on the Company's opposition has been scheduled for October 2000. While Biogen believes that the Rentschler II Patent will be revoked and that the revocation of the Rentschler I Patent will be upheld on appeal, if either the Rentschler I Patent or the Rentschler II Patent were to be upheld and if Rentschler were to obtain, through legal proceedings, a determination that the Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such result could have a material adverse effect on the Company's results of operation and financial position. 9. SEGMENT INFORMATION The chief operating decision makers review the profit and loss of the Company on an aggregate basis and manage the operations of the Company as a single operating segment. Accordingly, the Company operates in one segment, which is the business of developing, manufacturing and marketing drugs for human health care. The Company currently derives product revenues from sales of its AVONEX(R) (Interferon beta-1a) product for the treatment of relapsing forms of multiple sclerosis. The Company also derives revenue 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. 9 10 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 its AVONEX(R) (Interferon beta-1a) product for the treatment of relapsing forms of multiple sclerosis ("MS"). The Company also derives revenue 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 June 30, 2000, the Company reported net income of $72.1 million or $0.47 per diluted share as compared to $43.4 million or $0.28 per diluted share for the comparable period of 1999. For the six months ended June 30, 2000, the Company reported net income of $193.4 million or $1.24 per diluted share as compared to $89.1 million or $0.57 per diluted share for the comparable period of 1999. Total revenues for the quarter ended June 30, 2000 were $230.5 million, as compared to $188.9 million in the same period of 1999, an increase of $41.6 million or approximately 22%. Total revenues for the six months ended June 30, 2000 were $447.4 million, as compared to $360.6 million in the same period of 1999, an increase of $86.8 million or approximately 24%. Product revenues in the current quarter were $190 million as compared to $145.9 million for the same period of 1999, an increase of $44.1 million or approximately 30%. Product revenues in the six months ended June 30, 2000 were $364.6 million as compared to $277.2 million for the same period of 1999, an increase of $87.4 million or approximately 32%. Product revenues from AVONEX(R) represent approximately 82% of the Company's total revenues in the current quarter and six months ended June 30, 2000 as compared to 77% for the three and six month periods of 1999. The growth in the three and six month periods ended June 30, 2000 over the comparable periods in 1999 was primarily attributable to increases in the sales volume of AVONEX(R) in the United States and in the fifteen member countries of the European Union ("EU"). AVONEX(R) sales outside of the United States were approximately $51.2 million and $99.5 million in the three and six months ended June 30, 2000 as compared to $42.1 million and $78 million in the same periods of 1999, respectively. Revenues from royalties in the three months ended June 30, 2000 were $40.5 million, a decrease of $2.6 million or approximately 6% as compared to $43.1 million of royalty revenue for the same period in 1999. Revenues from royalties in the six months ended June 30, 2000 were $82.8 million, a decrease of approximately 1% as compared to $83.5 million of royalty revenue for the same period in 1999. Revenues from royalties represented approximately 18% of total revenues for the three and six months ended June 30, 2000 as compared to 23% for the same periods in 1999. The Company expects product sales as a percentage of total revenues to continue to increase in the near term as the Company continues to market AVONEX(R) worldwide. The Company, however, expects to face increasing competition in the MS marketplace from existing and new MS treatments that may impact sales of AVONEX(R). The Company expects to experience declining royalty revenues as a result of patent expirations. In 2000, the Company expects the decline in royalty revenues to be partially offset by increasing overall sales of licensed products. In addition, sales levels of products sold by the Company's licensees may also fluctuate from quarter to quarter due to the timing and extent of major events such as new indication approvals or government sponsored programs. 10 11 COSTS AND EXPENSES Total costs and expenses for the three months ended June 30, 2000 were $143.4 million as compared to $114.9 million in the same period of 1999, an increase of approximately 25%. Total costs and expenses for the six months ended June 30, 2000 were $276.2 million as compared to $224.6 million in the same period of 1999, an increase of approximately 23%. Cost of revenues in the three months ended June 30, 2000 totaled $30.8 million compared to $27 million in the same period of 1999, an increase of $3.8 million or 14%. Cost of revenues in the six months ended June 30, 2000 totaled $59.4 million compared to $51.8 million in the same period of 1999, an increase of $7.6 million or 15%. The increase in cost of revenues was attributable to the higher sales volume of AVONEX(R). Included in cost of revenues for the three months ended June 30, 2000 and 1999 is $27.5 million and $22.9 million, respectively, of costs related to product revenues and $3.3 million and $4.1 million, respectively, of costs related to royalty revenue. Included in cost of revenues for the six months ended June 30, 2000 and 1999 is $53.5 million and $44.2 million, respectively, of costs related to product revenues and $5.9 million and $7.6 million, respectively, of costs related to royalty revenue. Gross margins on product revenues increased to approximately 86% for the three months ended June 30, 2000 compared to 84% in the same period in 1999. Gross margins on product revenues increased to approximately 85% for the six months ended June 30, 2000 compared to 84% in the same period in 1999. Gross margins on royalty revenue increased to approximately 92% for the three months ended June 30, 2000 compared to 90% in the same period in 1999. Gross margins on royalty revenue increased to approximately 93% for the six months ended June 30, 2000 compared to 91% in the same period in 1999. The Company expects that gross margins on royalty revenue will fluctuate in the future based on changes in sales volumes for specific products. Research and development expenses in the current quarter were $71.7 million, an increase of $20.8 million or 41% as compared to $50.9 million in the same period of 1999. Research and development expenses in the six months ended June 30, 2000 were $134.7 million, an increase of $32.8 million or 32% as compared to $101.9 million in the same period of 1999. The increase was primarily due to an increase in clinical trial costs and the costs associated with an increase in the Company's other development efforts related to its ongoing research and development programs. The Company expects that, in the near and long-term, research and development expenses will increase as the Company continues to expand its development efforts with respect to new products, conducts clinical trials of these products and continues work on new formulations and delivery methods for AVONEX(R). Selling, general and administrative expenses in the second quarter of 2000 were $40.9 million, an increase of $3.9 million or 11% as compared to the same period of 1999. Selling, general and administrative expenses in the six months ended June 30, 2000 were $82.1 million, an increase of $11.2 million or 16% compared to the same period of 1999. This increase was primarily due to an increase in selling and marketing expenses related to the sale of AVONEX(R). The Company expects that selling, general and administrative expenses will continue to increase in the near term as the Company continues to expand its sales and marketing organizations and efforts necessary to sell AVONEX(R) worldwide. OTHER INCOME, NET Other income, net consists primarily of interest income, partially offset by interest expenses and other non-operating income and expenses. Other income, net in the current quarter of 2000 was $16.7 million as compared to other expense, net of $9.3 million in 1999, an increase of $26 million. Other income, net in the six months ended June 30, 2000 was $115.8 million as compared to other expense, net of $3.1 million in 1999, an increase of $118.9 million. Interest income for the three months ended June 30, 2000 was $10.4 million compared to $8.5 million in the same period of 1999, an increase of $1.9 million or 22%. Interest income for the six months ended June 30, 2000 was $21.1 million compared to $16.3 million in the same period of 1999, an increase of $4.8 million or 29%. The increase in interest income for the three and six months ended June 30, 2000 is due primarily to an increase in funds invested. In the three months ended June 30, 2000 interest expense decreased to $1.1 million from $1.2 million compared to the same period in 1999. In the six months ended June 30, 2000 interest expense decreased to $2.2 million from $2.4 million 11 12 compared to the same period in 1999. Other non-operating income (expense) increased by $24 million in the three months ended June 30, 2000 from the same period in 1999. Other non-operating income (expense) increased by $113.8 million in the six months ended June 30, 2000 from the same period in 1999. The increase in non-operating income is due primarily to the sale of certain non-current marketable securities generating non-recurring gains of approximately $8.7 million and $101.1 million in the three and six months ended June 30, 2000. Additionally, other expense in the three and six months ended June 30, 1999 included the write-down of certain non-current marketable securities totaling $15.3 million. The Company expects interest income to vary based on changes in the amount of funds invested and fluctuations in interest rates. INCOME TAXES Income tax expense as a percentage of pre-tax income for the three months ended June 30, 2000 and 1999 was approximately 31% and 33%, respectively. Income tax expense as a percentage of pre-tax income for the six months ended June 30, 2000 and 1999 was approximately 33%, respectively. During the three and six months ended June 30, 2000, the Company recognized non-recurring gains on the sale of certain non-current marketable securities. Excluding the tax effect on these non-recurring gains the Company's effective tax rate for the three and six months ended June 30, 2000 was approximately 30%. The effective tax rate varied from the U.S. statutory rates for the first six months of 2000 and 1999 primarily due to increasing European sales and to the utilization of research and development credits. The Company's effective tax rate outside the U.S. is lower than the U.S. tax rate, and the Company expects that the U.S. tax rate will decline as a percentage of its total tax rate as international sales increase. FINANCIAL CONDITION At June 30, 2000, cash, cash equivalents and short-term marketable securities were $652.2 million compared with $654.5 million at December 31, 1999, a decrease of $2.3 million. Working capital increased $9.7 million to $729.7 million. Net cash from operating activities for the period ended June 30, 2000 was $114.1 million compared with $91.4 million for the same period in 1999. Significant cash inflows from investing activities during the first six months of 2000 included $120.2 million in proceeds from the sale of certain non-current marketable securities. Cash outflows during the first six months of 2000 included investments in property and equipment and patents of $82.7 million. Significant cash outflows from financing activities included $250.7 million for purchases of the Company's common stock under its stock repurchase program and $2.4 million for repayments on loan agreements with banks. Cash inflows included $97.6 million from common stock option exercises and related tax benefits and employee stock purchase plan activity. On February 22, 1999, the Company announced that its Board of Directors had authorized the repurchase of up to 8 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 through 2000. The stock repurchase program may be discontinued at any time. During the first six months of 2000, the Company repurchased approximately 3.7 million shares of its common stock at a cost of $250.7 million. To enhance the 1999 stock repurchase program, the Company sold put warrants to and purchased call options from independent third parties for a total of 4 million shares, of which 1 million were outstanding at June 30, 2000 at a strike price of $49.47. All of the Company's put warrants outstanding are exercisable only at the date of expiration, with expiration dates ranging from July through November of 2000. The outstanding put warrants permit a net-share settlement at the Company's option and, therefore, did not result in a put obligation on the Company's Consolidated Balance Sheets. On October 4, 1999, the Company began construction of its new research and development center in Cambridge, Massachusetts. The new 224,000 square foot building is expected to be completed in the spring 12 13 of 2001 at a total cost of approximately $95 million, of which $78 million had been committed at June 30, 2000. Additionally, the Company is building a large scale manufacturing plant in Research Triangle Park, North Carolina. The Company expects that construction will be completed at the end of 2001 at a total cost of approximately $175 million, of which $114 million had been committed at June 30, 2000. Several legal proceedings were pending during the current quarter which involve the Company. See Note 8 of the Notes to the Condensed Consolidated Financial Statements. 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, 1999 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 raise additional capital to take advantage of favorable conditions in the market or in connection with the Company's development activities. NEW ACCOUNTING PRONOUNCEMENTS In December 1999, the United States Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. The Company is currently assessing the impact, if any; however, the Company does not currently anticipate that SAB 101 will have a material effect on the Company's financial position and results of operations. In March 2000, the Financial Accounting Standard Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's financial position or results of operations. OUTLOOK SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996 In addition to historical information, this quarterly 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 and predictions as to the anticipated outcome of pending litigation and patent-related proceedings. 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 and elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations. 13 14 DEPENDENCE ON AVONEX(R) SALES AND ROYALTY REVENUE The Company's ability to sustain increases in revenues and profitability in the near term 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 and maintains reimbursement coverage; successful resolution of the lawsuit with Berlex related to the "McCormick" patents, which if decided in Berlex's favor could have a material adverse effect on the Company's financial position and results of operations; success in revoking the Rentschler patent since if the patent were to be upheld and if Rentschler were to obtain, through legal proceedings, a determination that the Company's sale of AVONEX(R) in Europe infringes a valid Rentschler patent, such result could have a material adverse effect on the Company's results of operation and financial condition; the Company's ability to sustain market share of AVONEX(R) in light of the impact of competitive products for the treatment of MS; the success of ongoing development work related to AVONEX(R) in expanded MS indications and the continued accessibility of third parties to vial, label, and distribute AVONEX(R) on acceptable terms. The Company also receives royalty revenues which contribute significantly to its overall profitability. The Company's ability to maintain the level of its royalty revenues will depend on a number of factors. 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 licensees, the Company is unable to predict the timing or potential impact of factors which may affect licensee sales. The Company's royalty revenue could also be negatively affected if there is an adverse decision in the appeal of a claim interpretation narrowing the scope of Biogen's alpha interferon patent. The appeal is part of an action between Schering-Plough Corporation and Amgen, Inc. but relates to Biogen's patent. In the long term, the Company expects its royalty revenue to be affected most significantly by patent expirations. 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" patents and the Amgen appeal, competition in the MS market and regulatory matters, see the Company's Annual Report on Form 10-K for the period ended December 31, 1999 under the headings "Business - Risks Associated with Drug Development", "Business - Patents and Other Proprietary Rights", "Business - - Competition and Marketing - AVONEX(R) (interferon beta-la)", "Business - Regulation", "Legal Proceedings" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Outlook." 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 overcome technical hurdles that may arise, to meet applicable regulatory standards, to receive required regulatory approvals, to be capable of producing drug candidates in 14 15 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. 15 16 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) The information set forth in this Item 4 relates to matters submitted to a vote at the Annual Meeting of Stockholders of Biogen, Inc. on June 16, 2000. (b) Not applicable. (c) A proposal to elect Harold W. Buirkle, Alan K. Simpson and James L. Vincent as directors to serve for a three year term ending in 2003 and until their successors are duly elected and qualified was approved with the following vote: Nominee For Abstains ------- --- -------- Harold W. Buirkle 116,423,421 991,570 Alan K. Simpson 116,430,206 984,785 James L. Vincent 116,438,117 976,874 A proposal to ratify the selection of PricewaterhouseCoopers LLP as the Company's independent accountants for the fiscal year ending December 31, 2000 was approved with 116,894,929 affirmative votes, 122,085 negative votes, 397,340 abstentions and 637 broker non-votes. (d) Not applicable. Item 5 - Other Information On July 10, 2000, the Company announced that Peter N. Kellogg had been appointed Vice President, Finance and Chief Financial Officer, effective August 7, 2000. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits No. 10.1 1982 Incentive Stock Option Plan (as amended through June 15, 2000). No. 10.2 1985 Non-Qualified Stock Option Plan (as amended through June 15, 2000). No. 10.3 1987 Scientific Board Stock Option Plan (as amended through June 15, 2000). No. 27 Financial Data Schedule (for EDGAR filing purposes only). 16 17 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: August 3, 2000 /s/ Michael A. Kelly -------------------------------------- Corporate Controller and Acting Chief Financial Officer EXHIBITS Index to Exhibit. No. 10.1 1982 Incentive Stock Option Plan (as amended through June 15, 2000). No. 10.2 1985 Non-Qualified Stock Option Plan (as amended through June 15, 2000). No. 10.3 1987 Scientific Board Stock Option Plan (as amended through June 15, 2000). No. 27 Financial Data Schedule (for EDGAR filing purposes only). 17 EX-10.1 2 ex10-1.txt 1982 INCENTIVE STOCK OPTION PLAN 1 EX: No. 10.1 BIOGEN, INC. 1982 INCENTIVE STOCK OPTION PLAN (AS AMENDED THROUGH JUNE 15, 2000) I. DEFINITIONS AND PURPOSE A. Definitions: References in this document to the "Company" are to Biogen, Inc., a Massachusetts corporation; reference to the "Plan" are to the Biogen, Inc. 1982 Incentive Stock Option Plan; references to the "Code" are to the United States Internal Revenue Code of 1986, as amended. Unless otherwise specified or unless the context otherwise requires, the following terms, as used in the Plan, have the following meanings: 1. "Affiliate" means a corporation which, for purposes of Section 422 of the Code, is a parent or subsidiary of the Company, direct or indirect. 2. "Disability" means permanent and total disability as defined in Section 105(d)(4) of the Code. 3. "Key Employee" means an employee of the Company or of an Affiliate (including, without limitation, an employee who is also serving as an officer of the Company or of an Affiliate), designated by the Committee to be eligible to be granted one or more Options under the Plan. 4. "Option" means a right or option granted under the Plan. 5. "Participant" means a Key Employee to whom one or more Options are granted under the Plan. As used herein, "Participant" shall include "Participant's Survivors" where the context requires. 6. "Participant's Survivors" means a deceased Participant's legal representatives and/or any person or persons who acquired the Participant's rights to an Option by will or by the laws of descent and distribution. 7. "Shares" mean those shares of the Common Stock, $.01 par value, of the Company as to which Options have been or may be granted under the Plan. B. Purposes Of The Plan: The Plan is intended to encourage ownership of the Shares of the Company by Key Employees in order to attract such Key Employees, to induce such Key Employees to remain in the employ of the Company or of an Affiliate and to provide additional incentive for such Key Employees to promote the success of the Company or its Affiliates. It is further intended that Options issued pursuant to the Plan shall be eligible to constitute "incentive stock options" within the meaning of Section 422 of the Code. 1 2 II. SHARES SUBJECT TO THE PLAN The aggregate number of Shares as to which Options may be granted from time to time shall be 44,208,000; provided, however that such aggregate number shall be reduced by the number of shares which have been sold under, or may be sold pursuant to options granted from time to time under the Company's 1985 Non-Qualified Stock Option Plan (the "1985 Plan"), to the same extent as if such sales had been made or options granted pursuant to this Plan. If any option granted under this Plan or the 1985 Plan ceases to be "outstanding", in whole or in part, other than by reason of the exercise of such option, the shares which were subject to such option shall be available for the granting of other Options. Any option shall be treated as "outstanding" until such option is exercised in full, terminates under the provisions of this Plan or the 1985 Plan, as the case may be, or expires by reason of lapse of time. The aggregate number of Shares as to which Options may be granted shall be subject to change only by means of an amendment of the Plan duly adopted by the Company and approved by the Shareholders of the Company within one year before or after the date of the adoption of any such amendment, subject to the provisions of Article VII. III. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Stock and Option Plan Administration Committee of the Company (the "Committee"). The membership of the Committee shall be determined and shall be subject to change without cause and without notice from time to time, by the Company. The Committee is authorized to interpret the provisions of the Plan or of any Option and to make all rules and determinations necessary or advisable for the administration of the Plan. It may from time to time determine which employees of the Company or of any Affiliate shall be designated as Key Employees and which of the Key Employees shall be granted Options and, subject to the other provisions of the Plan, the number of Shares for which an Option or Options shall be granted. Subject to the provisions of the Plan, Options may be granted upon such terms and conditions as the Committee may prescribe; provided, however, that such terms and conditions shall be prescribed in the context of preserving, to the extent reasonably possible, the United States tax status of the Options as incentive stock options. This Plan is intended to comply in all respects with Rule 16b-3 or its successors promulgated under the Securities Exchange Act of 1934 ("1934 Act") with respect to participants who are subject to Section 16 of the 1934 Act, and any provision in this Plan with respect to such persons contrary to Rule 16b-3 shall be deemed null and void to the extent permissible by law and deemed appropriate by the Committee. 2 3 IV. ELIGIBILITY FOR PARTICIPATION Each Participant must be a Key Employee of the Company or of an Affiliate at the time an Option is granted. The Committee may grant to one or more Key Employees one or more Options, and shall designate the number of Shares to be optioned under each Option so granted; provided, however, that no Options shall be granted after December 31, 2002, and provided further, that the fair market value (determined as of the date the Options are granted) of the Shares as to which incentive stock options granted on or after January 1, 1987 by the Company or its Affiliates to any individual employee under the Plan and/or under any other incentive stock option plans are exercisable for the first time in any one calendar year shall not exceed $100,000. Notwithstanding any of the foregoing provisions, the Committee may authorize the grant of an Option to a person not then in the employ of the Company or of an Affiliate, conditioned upon such person becoming eligible to be a Participant at or prior to the execution of the Option agreement evidencing such Option. In no event shall any employee be granted in any calendar year options to purchase or receive more than 2,400,000 shares of the Company's Common Stock pursuant to this Plan. V. TERMS AND CONDITIONS Each Option shall be set forth in writing in an Option agreement, duly executed on behalf of the Company and by the Participant to whom such Option is granted. No Option shall be deemed to have been granted and no purported grant of any Option shall be effective, until such Option shall have been approved by the Committee. The Committee may provide that Options be granted subject to such conditions as the Committee may deem appropriate, including without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto. Each such Option agreement shall be subject to at least the following terms and conditions: A. Option Price: If, including for this purpose the Shares which are the subject of Options previously granted and outstanding or proposed to be granted hereunder, the optionee owns 10% or less of the total combined voting power of all classes of share capital of the Company, the Option price (per share) of the Shares covered by each Option granted hereunder shall be not less than the fair market value (per share) of the Shares on the date of the grant of the Option; provided, however, that in no event shall the Option price be less than the par value per share of Common Stock. In all other cases, the Option price shall be not less than 110% of the said fair market value. For purposes hereof, the fair market value shall be the average between the high and low sale prices, as reported in the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for the date of the grant of the Option or, if none, for the most recent trading date thirty (30) days or less prior to the date of the grant of the Option 3 4 on which the Common Stock was traded. If the fair market value cannot be determined under the preceding sentence, it shall be determined in good faith by the Committee. B. Number of Shares: Each Option shall state the number of Shares to which it pertains. C. Term of Option: Each Option shall terminate at such date as the Committee, at the time it authorizes the grant of the Option, shall determine, and shall be subject to earlier termination as herein provided, except that if the option price is required under Paragraph A of this Article V to be at least 110% fair market value, each such Option shall terminate not more than five (5) years from the date of the grant hereof; and provided that in no case may the term of any Option exceed ten (10) years. D. Date of Exercise: The Committee may prescribe the date or dates on which the Option becomes exercisable, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the attainment of stated goals. The Committee may stipulate that any Option which becomes exercisable shall be subject to cancellation or that Shares purchased upon the exercise of such Option shall be subject to repurchase rights in favor of the Company. In such event, the Committee shall determine the date or dates, or event or events, upon which such cancellation or repurchase rights shall become effective or shall lapse, as the case maybe. E. Medium of Payment: The option price shall be payable upon the exercise of the Option. It shall be payable in cash, or, if permitted by the Committee and by Section 422 of the Code, in shares or other consideration. F. Prior Options: By its terms, each Option granted prior to January 1, 1987 under the Plan to a Participant, shall not be exercisable while there is"outstanding" any other incentive stock option (as defined in the predecessor to Section 422 of the Code), which was granted before the grant of such Option, to such Participant to purchase Shares in the Company or in an Affiliate or in a predecessor of the Company or of an Affiliate. G. Termination of Employment: A Participant who ceases (for any reason other than death or disability or termination by the Participant's employer for cause) to be an employee of the Company or of an Affiliate, may exercise any Option granted to such Participant, to the extent that the right to purchase Shares thereunder has accrued on the date of such termination of employment, but only within three (3) months, or such shorter period as may be determined by the Committee, after such date, or, if earlier, within the originally prescribed term of the Option. A Participant's employment shall not be deemed terminated by reason of a transfer to another employer which is the Company or an Affiliate. A Participant whose employment is terminated by the Participant's employer for cause shall forthwith upon such termination cease to have any right to exercise any Option. For purposes of this paragraph, "cause" shall be deemed to include dishonesty with respect to the 4 5 employer, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of cause shall be conclusive on the Participant and Company. A Participant to whom an Option has been granted under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability, or who is on leave of absence for any purpose permitted by any authoritative interpretation of Section 422, shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated his employment with the Company or with an Affiliate, except as the Committee may otherwise expressly provide. H. Disability: If a Participant ceases to be an employee of the Company or of an Affiliate by reason of Disability, any Option held by him or her on the date of Disability shall be exercisable as to all or any part of the Shares subject to the Option, all of which shares shall be fully vested as of the date of such Disability. A Disabled Participant may exercise such Option only within a period of one (1) year after the date as of which the Committee determines that he or she became Disabled, or, if earlier, within the originally prescribed term of the Option. I. Death: If a Participant dies while the Participant is an employee of the Company or of an Affiliate, any Option held by him or her at the date of death shall be exercisable as to all or any part of the Shares subject to the Option, all of which shares shall be fully vested as of the date of the Participant's death. A deceased Participant's Survivors may exercise such Option only within a period of one (1) year after the date of death, or, if earlier, within the originally prescribed term of the Option. J. Exercise of Option and Issue of Shares: Options shall be exercised by giving written notice to the Company, addressed to the Company at the address specified in the Option agreement, with which the Participant shall tender the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of Shares with respect to which the Option is being exercised, and shall contain any warranty required by Article VI. The issuance of the Shares may be delayed by the Company if any law or regulation requires the Company to take any action with respect to the shares prior to the issuance thereof. Without limiting the generality of the foregoing, nothing contained herein shall be deemed to require the Company to issue any Shares if prohibited by law or applicable regulation. The Shares shall, upon delivery, be evidenced by an appropriate certificate or certificates in respect of paid-up, non-assessable Shares. K. Rights as a Shareholder: No Participant to whom an Option has been granted shall have rights as a shareholder with respect to any Shares covered by such Option except as to such Shares as have been registered in the Company's share register in the name of such Participant upon the due exercise of the Option. 5 6 L. Assignability and Transferability of Options: By its terms, an Option granted to a Participant shall not be transferable by the Participant otherwise than by will or by the laws of descent and distribution and shall be exercisable, during the Participant's lifetime, only by such Participant. Such Option shall not be assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment, or similar process. Any attempted transfer, assignment, pledge, hypothecation, or other disposition of any Option or of any rights granted thereunder contrary to the provisions of this Paragraph L, or the levy of any attachment or similar process upon an Option or such rights, shall be null and void. M. Tax Withholding: In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Option holder's salary in connection with the exercise of an Option, the Option holder shall advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Option holder, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company's Common Stock, is authorized by the Committee (and permitted by law), provided, however, that with respect to persons subject to Section 16 of the 1934 Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934 Act. For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Section V.A. above, as of the most recent practicable date prior to the date of exercise. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Option holder may be required to advance the difference in cash to the Company or the Affiliate employer. N. Reload Options: Concurrently with the award of Options under the Plan, the Committee may authorize reload options ("Reload Options") to purchase for cash or shares a number of shares of Common Stock. The number of Reload Options shall equal (i) the number of shares of Common Stock used to exercise the underlying Options and (ii) to the extent authorized by the Committee, the number of shares of Common Stock used to satisfy any tax withholding requirement incident to the exercise of the underlying Options. The grant of a Reload Option will become effective upon the exercise of underlying Options or Reload Options through the use of shares of Common Stock held by the optionee for at least 6 months. Reload Options must be evidenced in Option agreements. The Option price per share of Common Stock deliverable upon the exercise of a Reload Option shall be determined in accordance with Paragraph V.A. hereof on the date the grant of the Reload Option becomes effective. The term of each Reload Option shall be equal to the remaining option term of the underlying Option. No additional Reload Options shall be granted to Option holders when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Option holder's employment or on account of death or total and permanent disability. All other provisions of this Plan with respect to Options shall apply equally to Reload Options. 6 7 O. Other provisions: The Option agreements authorized under the Plan shall be subject to such other terms and conditions, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. Any such Option agreement shall contain such limitations and restrictions upon the exercise of the Option as shall be necessary in order that such Option can be an "incentive stock option" within the meaning of the Section 442 of the Code. VI. PURCHASE FOR INVESTMENT If, and to the extent that, the issuance of Shares pursuant to the exercise of Options is deemed by the Company to be subject to the United States Securities Act of 1933, as now in force or hereafter amended, ("1993 Act"), or to the securities laws of any other jurisdiction, the Company shall be under no obligation to issue the Shares covered by such exercise unless the person or persons who exercises or who exercise such Option shall make such warranty as may be required by any applicable securities law of any applicable jurisdiction and shall, in the case of the applicability of the 1933 Act, in the absence of an effective registration under such Act with respect to such Shares, warrant to the Company, at the time of such exercise, that such person is or that they are acquiring the Shares to be issued to such person or to them, pursuant to such exercise of the Option, for investment and not with a view to, or for sale in connection with, the distribution of any such Shares; and in such events the person or persons acquiring such Shares shall be bound by the provisions of a legend endorsed upon any share certificates expressing the requirements of any applicable non-United States securities law, or, in cases deemed governed by the 1933 Act substantially the following legend, which shall be endorsed upon the certificate or certificates evidencing the Shares issued by the Company pursuant to such exercise: "The shares have not been registered under the securities laws of any country including the United States Securities Act of 1933, as amended, and the Company may refuse to permit the sale or transfer of all or any of the shares until (1) the Company has received an opinion of Counsel satisfactory to the Company that any such transfer is exempt from registration under all applicable securities laws or (2) in the case of sales or transfer to which the United States Securities Act of 1933 is applicable, unless a registration statement with respect to such shares shall be effective under such Act, as amended." Without limiting the generality of the foregoing, the Company may delay issuance of the Shares until completion of any action or obtaining of any consent which the Company deems necessary under any applicable law (including, without limitation, state securities or "blue sky" laws). VII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Common Stock, $.01 par value, of the Company is changed into or exchanged for a different number or kind of shares or other securities of the 7 8 Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividend payable in capital stock, or the like, appropriate adjustment shall be made in the number and kind of Shares for the purchase of which Options may be granted under the Plan, and, in addition, appropriate adjustment shall be made in the number and kind of Shares and in the Option price per share subject to outstanding Options so that each Option holder shall be in a position equivalent to the position the Option holder would have been in had the Option holder exercised the Options immediately prior to the applicable event. No such adjustment shall be made which shall, within the meaning of Section 424 of the Code, constitute such a modification, extension or renewal of any Option as to cause it to be considered as the grant of a new Option. VIII. DISSOLUTION OR LIQUIDATION OF THE COMPANY Upon the dissolution or liquidation of the company other than in connection with a transaction to which the preceding Article VII is applicable, all Options granted hereunder shall terminate and become null and void; provided, however, that if the rights of a Participant or the Participant's Survivors hereunder have not otherwise terminated and expired, the Participant or the Participant's Survivors shall have the right immediately prior to such dissolution or liquidation to exercise any Option granted hereunder to the extent that the right to purchase Shares thereunder has accrued as of the date of exercise immediately prior to such dissolution or liquidation. IX. TERMINATION OF THE PLAN The Plan shall terminate on December 31, 2002. The Plan may be terminated at an earlier date by vote of the Shareholders; provided, however, that expiration or any such earlier termination shall not affect any Option granted or Option agreements executed prior to expiration or the effective date of such termination. X. AMENDMENT OF THE PLAN The Plan may be amended by action of the Committee or the Board of Directors of the Company; provided, however, that if the scope of any amendment is such as to require shareholder approval in order to preserve incentive stock option treatment, then such amendments shall also require approval, within one (1) year before or after the adoption thereof, by the shareholders, and provided further that if the scope of any amendment is such as to require shareholder approval in order to comply with Rule 16b-3 under the 1934 Act, then such amendment shall also require approval by the shareholders. Any amendment shall not affect any Options theretofore granted and any Option agreements theretofore executed by the Company and a Participant, unless such amendment shall expressly so provide. No amendment shall adversely affect any Participant with respect to an outstanding Option without the written consent of such Participant. With the consent of the Option holder affected, the Committee may amend any outstanding Option agreement in a manner not inconsistent with the plan, including, without limitation, to accelerate the date of exercise of any installment of any Option. 8 9 XI. EMPLOYMENT RELATIONSHIP Nothing herein contained shall be deemed to prevent the Company or an Affiliate from terminating the employment of a Participant, nor to prevent a Participant from terminating the Participant's employment with the Company or an Affiliate. XII. EFFECTIVE DATE This Plan first became effective as of January 8, 1982, subject to the approval, within one (1) year after such adoption, of the shareholders of the Company. 9 EX-10.2 3 ex10-2.txt 1985 NON-QUALIFIED STOCK OPTION PLAN 1 EX: No. 10.2 BIOGEN, INC. 1985 NON-QUALIFIED STOCK OPTION PLAN (AS AMENDED THROUGH JUNE 15, 2000) I. PURPOSE OF THE PLAN The Plan is intended to encourage ownership of shares of Common Stock of the Company by certain employees and Directors of the Company and its Affiliates and to provide an additional incentive to those employees and Directors to promote the success of the Company and its Affiliates. II. DEFINITIONS 1. "Company" means Biogen, Inc., a Massachusetts corporation. 2. "Affiliate" means a corporation in respect of which the Company owns directly or indirectly fifty percent (50%) or more of the voting shares thereof or which is otherwise controlled by the Company. 3. "Committee" means the Stock and Option Plan Administration Committee of the Board of Directors of the Company. 4. "Option" means a stock option granted under this Plan. III. SHARES SUBJECT TO THE PLAN The aggregate number of shares as to which Options may be granted from time to time shall be 44,208,000 of the shares of Common Stock of the Company (par value $.01); provided, however that such aggregate number shall be reduced by the number of shares which has been sold under, or may be sold pursuant to options granted from time to time under, the Company's 1982 Incentive Stock Option Plan (the "ISO Plan"), to the same extent as if such sales had been made or options granted pursuant to this Plan. If any option granted under this Plan or the ISO Plan ceases to be "outstanding", in whole or in part, other than by reason of the exercise of such option, the shares which were subject to such option shall be available for the granting of other Options. Any option shall be treated as "outstanding" until such option is exercised in full, terminates under the provisions of this Plan or the ISO Plan, as the case may be, or expires by reason of lapse of time. The aggregate number of shares as to which Options may be granted shall be subject to change only by means of an amendment adopted in accordance with Article XI below, subject to the provisions of Article VIII. IV. ADMINISTRATION OF THE PLAN 2 The Plan shall be administered by the Committee. The membership of the Committee shall be determined, and shall be subject to change without cause and without notice from time to time, by the Board of Directors of the Company. The Committee is authorized to interpret the provisions of the Plan or of any Option and to make all rules and determinations necessary or advisable for the administration of the Plan. Subject to the provisions of the Plan, Options may be granted upon such terms and conditions as the Committee may prescribe. This Plan is intended to comply in all respects with Rule 16b-3 or its successors promulgated under the Securities Exchange Act of 1934 ("1934 Act") with respect to participants who are subject to Section 16 of the 1934 Act, and any provision in this Plan with respect to such persons contrary to Rule 16b-3 shall be deemed null and void to the extent permissible by law and deemed appropriate by the Committee. V. ELIGIBILITY FOR PARTICIPATION The Committee shall determine which employees and Directors shall be eligible to participate in the Plan. Without limiting the generality of the foregoing, Options may be awarded for reasons of performance, merit, promotion, bonus or upon new employees joining the Company or any Affiliate. An individual shall not be eligible to participate in the Plan if the individual is classified as a consultant or contractor under the Company's or any Affiliate's regular personnel classifications and practices, or he is a party to an agreement to provide services to the Company or any Affiliate without participating in the Plan, notwithstanding that such individual may be treated as a common law employee for payroll tax or other legal purposes. The Committee may grant to one or more such employees or Directors one or more Options, and shall designate the number of shares to be optioned under each Option so granted; provided, however, that no Options shall be granted after December 31, 2002. In no event shall any employee be granted in any calendar year options to purchase or receive more than 2,400,000 shares of the Company's Common Stock pursuant to this Plan. VI. TERMS AND CONDITIONS OF OPTIONS No Option issued pursuant to this Plan shall be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. Each Option shall be set forth in writing in an Option agreement, duly executed on behalf of the Company and by the person to whom such Option is granted. No Option shall be deemed to have been granted and no purported grant of any Option shall be effective until such Option shall have been approved by the Committee. The Committee may provide that Options be granted subject to such conditions as the Committee may deem appropriate, including without limitation, subsequent approval by the shareholders of the Company of this Plan or any amendments thereto. Each such Option agreement shall be subject to at least the following terms and conditions: 2 3 A. Option Price: Except as otherwise determined by the Committee, the Option price per share for Options granted under the Plan shall be equal to the fair market value per share of Common Stock on the date of grant of the Option; provided, however, that in no event shall the Option price be less than the par value per share of Common Stock. Fair market value shall be the average of the "high" and "low" sale prices as reported in the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for the date of grant of the Option or, if none, for the most recent trading date thirty (30) days or less prior to the date of grant of the Option on which the Common Stock was traded. B. Term of Option: Each Option shall terminate not more than ten (10) years from the date of the grant thereof, or at such earlier or later time as the Committee shall expressly resolve. C. Date of Exercise: The Committee may prescribe the date or dates on which the Option becomes exercisable, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the attainment of stated goals. D. Cancellation and Repurchase Rights: The Committee may stipulate that any Option which becomes exercisable shall be subject to cancellation or that shares purchased upon the exercise of such Option shall be subject to repurchase rights in favor of the Company. In such event the Committee shall determine the date or dates, or event or events, upon which such cancellation or repurchase rights shall become effective or shall lapse, as the case may be. E. Medium of Payment: The Option price shall be payable upon the exercise of the Option. It shall be payable in cash, or, if permitted by the Committee, in shares or other consideration. F. Termination of Employment: An Option holder who ceases (for any reason other than death or total and permanent disability or termination of employment for cause) to be an employee or Director of the Company or of an Affiliate may exercise any Option granted to the extent that the right to purchase shares thereunder has accrued on the date of such termination. Such Option shall be exercisable only within three (3) months after such date of termination, or, if earlier, within the originally prescribed term of the Option, unless the Committee shall authorize a different period. Employment shall not be deemed terminated by reason of a transfer to another employer which is the Company or an Affiliate. An Option holder whose employment with the Company or an Affiliate is terminated by his/her employer for cause or a Director who is removed from the Board of Directors for cause shall forthwith upon such termination cease to have any right to exercise any Option. For purposes of this paragraph, "cause" shall be deemed to include dishonesty with respect to the employer, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of cause shall be conclusive. 3 4 An Option holder to whom an Option has been granted under the Plan who is absent from work with the Company or with an Affiliate because of temporary disability, or who is on a permitted leave of absence for any purpose, shall not, during the period of any such absence, be deemed by virtue of such absence alone, to have terminated his employment with the Company or with an Affiliate except as the Committee may otherwise expressly provide. G. Total and Permanent Disability: If an Option holder ceases to be an employee or Director of the Company or of an Affiliate by reason of total and permanent disability, as determined by the Committee, any Option held by him or her on the date of disability shall be exercisable as to all or any part of the shares subject to the Option, all of which shares shall be fully vested as of the date of such disability. A disabled Option holder may exercise such Option only within a period of one (1) year after the date as of which the Committee determines that he or she became disabled or within such different period as may be determined by the Committee, or, if earlier, within the originally prescribed term of the Option. H. Death: If an Option holder dies while the Option holder is an employee or Director of the Company or of an Affiliate, any Option held by him or her at the date of death shall be exercisable as to all or any part of the shares subject to the Option, all of which shares shall be fully vested as of the date of the Option holder's death. A deceased Option holder's legal representatives or one who acquires the Option by will or by the laws of descent and distribution may exercise such Option only within a period of one (1) year after the date of death or within such different period as may be determined by the Committee, or, if earlier, within the originally prescribed term of the Option. I. Exercise of Option and Issue of Shares: Options shall be exercised by giving written notice to the Company, addressed to the Company at the address specified in the Option agreement, with which the Option holder shall tender the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of shares with respect to which the Option is being exercised, and shall contain any warranty required by Article VII of the Plan. The issuance of the Option shares may be delayed by the Company if any law or regulation requires the Company to take any action with respect to the Option shares prior to the issuance thereof. Without limiting the generality of the foregoing, nothing contained herein shall be deemed to require the Company to issue any Option shares if prohibited by law or applicable regulation. The shares shall, upon issuance, be evidenced by an appropriate certificate or certificates in respect of paid-up, non-assessable shares. J. Assignability and Transferability of Option: By its terms, an Option granted to an Option holder shall not be transferable by such Option holder other than (i) by will or by the laws of descent and distribution or (ii) pursuant to a qualified domestic relations order, as defined by the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder, or (iii) as otherwise determined by the Committee and set forth in the applicable Option agreement. The designation of a beneficiary of an Option by an Option holder shall not be deemed a transfer prohibited by this paragraph. Except as provided in the preceding sentence, an Option shall be 4 5 exercisable, during an Option holder's lifetime, only by the Option holder (or by his or her legal representative) and shall not be assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation, or other disposition of any Option or of any rights granted thereunder contrary to the provisions of this Paragraph, or the levy of any attachment or similar process upon an Option or other such rights, shall be null and void. K. Other Provisions: The Option agreements authorized under the Plan shall be subject to such other terms and conditions, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. L. Non-Employee, Non-Scientific Board Directors' Options: Each Director who is not (i) an employee of the Company or any of its Affiliates, or (ii) a member of the Scientific Board of the Company, or (iii) elected pursuant to an agreement or arrangement between shareholders of the Company or between the Company and its shareholders, upon first being appointed or elected to the Board of Directors, and upon every third anniversary thereof, shall be granted an Option to purchase 30,000 shares of Common Stock. Each such Option shall have an exercise price equal to the fair market value per share of Common Stock on the date of grant, as determined under Section VI.A. above, and a term of ten (10) years, and shall be exercisable as to one-third (1/3) of the shares subject thereto upon completion of one full year of service on the Board of Directors after the date of grant, and as to an additional one-third (1/3) upon completion of each full year of service thereafter. For any such Director serving in office on December 6, 1991, the first such Option shall be granted on the date on which the most recent Option previously granted to him, the vesting of which is contingent upon continued service on the Board of Directors, becomes fully vested, and subsequent Options under this Paragraph shall be granted on every third anniversary of such date. Notwithstanding the provision of Section XI concerning amendment of the Plan, the provisions of this Section VI.L. shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act, or the rules thereunder. The grants of options under this Paragraph L are intended to be non-discretionary formula awards within the meaning of Rule 16b-3(c)(2)(ii). Paragraph F of Article VI, which cancels the Options of any Participant determined by the Committee to have been terminated for cause, shall not apply to the awards under this Paragraph L. M. Tax Withholding: In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Option holder's salary in connection with the exercise of an Option, the Option holder shall advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Option holder, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company's Common Stock, is authorized by the Committee (and permitted by law), provided, however, that with respect to persons subject to Section 16 of the 1934 Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934 Act. For purposes hereof, the fair market value of the 5 6 shares withheld for purposes of payroll withholding shall be determined in the manner provided in Section VI.A. above, as of the date of exercise. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Option holder may be required to advance the difference in cash to the Company or the Affiliate employer. N. Reload Options: The Committee may authorize reload options ("Reload Options") to purchase for cash or shares a number of shares of Common Stock. The number of Reload Options shall equal (i) the number of shares of Common Stock used to exercise the underlying Options and (ii) to the extent authorized by the Committee, the number of shares of Common Stock used to satisfy any tax withholding requirement incident to the exercise of the underlying Options. The grant of a Reload Option will become effective upon the exercise of underlying Options through the use of shares of Common Stock held by the optionee for at least 6 months. Reload Options must be evidenced in Option agreements or amendments to those agreements. The Option price per share of Common Stock deliverable upon the exercise of a Reload Option shall be the fair market value of a share of Common Stock on the date the grant of the Reload Option becomes effective. The term of each Reload Option shall be equal to the remaining option term of the underlying Option. No additional Reload Options shall be granted to Option holders when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Option holder's employment or on account of death or total and permanent disability. All other provisions of this Plan with respect to Options shall apply equally to Reload Options. O. Rights as a Shareholder: No Option holder shall have rights as a shareholder with respect to any shares covered by such Option except as to such shares as have been registered in the Company's share register in the name of such person upon the due exercise of the Option. VII. PURCHASE FOR INVESTMENT If and to the extent that the issuance of shares pursuant to the exercise of Options is deemed by the Company to be subject to the United States Securities Act of 1933, as now in force or hereafter amended ("1933 Act"), or to the securities law of any other jurisdiction, the Company shall be under no obligation to issue shares covered by such exercise unless the person or persons who exercises or who exercise such Option shall make such warranty or take such action as may be required by any applicable securities law of any applicable jurisdiction and shall, in the case of the applicability of the 1933 Act, in the absence of an effective registration under such Act with respect to such shares, warrant to the Company, at the time of such exercise, that such person is or that they are acquiring the shares to be issued to such person or to them, pursuant to such exercise of the Option, for investment and not with a view to, or for sale in connection with, the distribution of any such shares; and in such events the person or persons acquiring such shares shall be bound by the provisions of a legend endorsed upon any share certificates expressing the requirements of any applicable non-United States securities law, or, in cases deemed governed by the 1933 Act, substantially the following legend, which shall be endorsed upon the certificate or certificates evidencing the shares issued by the Company pursuant to such exercise: 6 7 "The shares have not been registered under the securities laws of any country, including the United States Securities Act of 1933, as amended, and the Company may refuse to permit the sale or transfer of all or any of the shares until (1) the Company has received an opinion of Counsel satisfactory to the Company that any such transfer is exempt from registration under all applicable securities laws or (2) in the case of sales or transfers to which the United States Securities Act of 1933 is applicable, unless a registration statement with respect to such shares shall be effective under such Act, as amended." Without limiting the generality of the foregoing, the Company may delay issuance of the shares until completion of any action or obtaining of any consent which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws). VIII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Common Stock, $.01 par value, of the Company is changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividend payable in capital stock, or the like, appropriate adjustment shall be made in the number and kind of shares for the purchase of which Options may be granted under the Plan, including Options to be granted pursuant to Article VI L hereof, and, in addition, appropriate adjustment shall be made in the number and kind of shares and in the Option price per share subject to outstanding Options so that each Option holder shall be in a position equivalent to the position the Option holder would have been in had the Option holder exercised the Options immediately prior to the applicable event. IX. DISSOLUTION OR LIQUIDATION OF THE COMPANY Upon the dissolution or liquidation of the Company other than in connection with transactions to which the preceding Article VIII is applicable, all Options granted hereunder shall terminate and become null and void; provided, however, that if the rights hereunder of an Option holder or one who acquired an Option by will or by the laws of descent and distribution have not otherwise terminated and expired, the Option holder or such person shall have the right immediately prior to such dissolution or liquidation to exercise any Option granted hereunder to the extent that the right to purchase shares thereunder has accrued as of the date of exercise immediately prior to such dissolution or liquidation. X. TERMINATION OF THE PLAN Unless the Committee shall decide to reduce or, subject to shareholder approval, if required under Article XI, to extend the duration of the Plan, the Plan shall terminate on December 31, 2002. Termination of the Plan shall not affect any Options granted or any Option agreements executed prior to the effective date of termination. 7 8 XI. AMENDMENT OF THE PLAN The Plan may be amended by the Committee or the Board of Directors of the Company provided, however, that if the scope of any amendment is such as to require shareholder approval in order to comply with Rule 16b-3 under the 1934 Act such amendment shall require approval by the shareholders. Any amendment shall not affect any Options theretofore granted and any Option agreements theretofore executed by the Company and any Option holder unless such amendment shall expressly so provide. No amendment shall adversely affect any Option holder with respect to an outstanding Option without the written consent of such Option holder. With the consent of the Option holder affected, the Committee may amend any outstanding Option agreement in a manner not inconsistent with the Plan, including, without limitation, to accelerate the date of exercise of any installment of any Option. XII. EMPLOYMENT RELATIONSHIP Nothing herein contained shall be deemed to prevent the Company or an Affiliate from terminating the employment of any employee, nor to prevent any employee from terminating his/her employment with the Company or an Affiliate. XIII. EFFECTIVE DATE This Plan first became effective on January 2, 1985. 8 EX-10.3 4 ex10-3.txt 1987 SCIENTIFIC BOARD STOCK OPTION 1 EX: No. 10.3 BIOGEN, INC. 1987 SCIENTIFIC BOARD STOCK OPTION PLAN (AS AMENDED THROUGH JUNE 15, 2000) 1. PURPOSE OF THE PLAN The Biogen, Inc. 1987 Scientific Board Stock Option Plan (the "Plan") is intended to encourage ownership of shares of the common stock, $.01 par value (the "Common Stock"), of the Company by members of the Scientific Board of the Company and to provide an additional incentive to those Scientific Board members to promote the success of the Company and its Affiliates. 2. DEFINITIONS 2.1 "Company" means Biogen, Inc. and any successor to its business. 2.2 "Affiliate" means a corporation in respect of which the Company owns directly or indirectly fifty percent (50%) or more of the voting shares thereof or which is otherwise controlled by the Company. 2.3 "Committee" means the Stock and Option Plan Administration Committee of the Board of Directors of the Company. 2.4 "Option" means a stock option granted under this Plan. 3. SHARES SUBJECT TO THE PLAN The aggregate number of shares as to which Options may be granted from time to time under this Plan shall be 4,200,000 of the shares of Common Stock. If an Option ceases to be "outstanding", in whole or in part, other than by reason of the exercise of such Option, the shares which were subject to such Option shall be available for the granting of other Options. Any Option shall be treated as "outstanding" until such Option is exercised in full, terminates under the provisions of the Plan or expires by reason of lapse of time. The aggregate number of shares as to which Options may be granted shall be subject to change only by means of an amendment of the Plan in accordance with Article 11 below or pursuant to the provisions of Article 8 below. 2 4. ADMINISTRATION OF THE PLAN The Plan shall be administered by the Committee. The membership of the Committee shall be determined, and shall be subject to change without cause and without notice from time to time, by the Board of Directors of the Company. The Committee is authorized to interpret the provisions of the Plan or of any Option and to make all rules and determinations necessary or advisable for the administration of the Plan. Subject to the provisions of the Plan, Options may be granted upon such terms and conditions as the Committee may prescribe. This Plan is intended to comply in all respects with Rule 16b-3 or its successors promulgated under the Securities Exchange Act of 1934 ("1934 Act") with respect to participants who are subject to Section 16 of the 1934 Act, and any provision in this Plan with respect to such persons contrary to Rule 16b-3 shall be deemed null and void to the extent permissible by law and deemed appropriate by the Committee. 5. ELIGIBILITY FOR PARTICIPATION The Committee shall determine which Scientific Board members shall be eligible to participate in the Plan, may grant to one or more such Scientific Board members one or more Options, and shall designate the number of shares to be optioned under each Option so granted; provided, however, that no Options shall be granted after December 31, 2002. 6. TERMS AND CONDITIONS OF OPTIONS No Option issued pursuant to this Plan shall be an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Each Option shall be set forth in an Option agreement, duly executed on behalf of the Company and by the person to whom such Option is granted. No Option shall be deemed to have been granted and no purported grant of any Option shall be effective until such Option shall have been approved by the Committee. The Committee shall determine the terms and conditions of Options granted, including provisions relating to termination of the Option holder's consultancy, death and disability; provided, however, that each such Option agreement shall be subject to at least the following terms and conditions: 6.1 Option Price: Except as otherwise determined by the Committee, the Option price per share for Options granted under the Plan shall be equal to the fair market value per share of Common Stock on the date of grant of the Option; provided, however, that in no event shall the Option price be less than the par value per share of the Common Stock. Fair market value shall be the average of the "high" and "low" sale prices as reported in the National Association of Securities Dealers Automated Quotation System ("NASDAQ") for the date of grant of the Option or, if none, for the most recent trading date thirty (30) days or less prior to the date of grant of the Option on which the Common Stock was traded. 3 6.2 Term of Option: Each Option shall terminate upon a date determined at the time of grant by the Committee, but not later than ten (10) years from the date of the grant thereof. 6.3 Date of Exercise: The Committee may prescribe the date or dates on which the Option becomes exercisable, and may provide that the Option rights accrue or become exercisable in installments over a period of months or years, or upon the attainment of stated goals. The Committee may stipulate that any Option which becomes exercisable shall be subject to cancellation or that shares purchased upon the exercise of such Option shall be subject to repurchase rights in favor of the Company. In such event the Committee shall determine the date or dates, or event or events, upon which such cancellation or repurchase rights shall become effective or shall lapse, as the case may be. 6.4 Medium of Payment: The option price shall be payable upon the exercise of the Option. It shall be payable in cash or, if permitted by the Committee and permitted by law, in shares or other consideration. 6.5 Exercise of Option and Issue of Shares: Options shall be exercised by giving written notice to the Company, addressed to the Company at the address specified in the Option agreement, with which the Option holder shall tender the Option price. Such written notice shall be signed by the person exercising the Option, shall state the number of shares with respect to which the Option is being exercised, and shall contain any warranty required by Article 7 of the Plan. The issuance of the Option shares may be delayed by the Company if any law or regulation requires the Company to take any action with respect to the Option shares prior to the issuance thereof. Without limiting the generality of the foregoing, nothing contained herein shall be deemed to require the Company to issue any Option shares if prohibited by law or applicable regulation. The shares shall, upon issuance, be evidenced by an appropriate certificate or certificates in respect of paid-up, non-assessable shares. 6.6 Assignability and Transferability of Option: By its terms, an Option granted to an Option holder shall not be transferable by such Option holder other than (i) by will or by the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order, as defined by the Code or Title 1 of the Employee Retirement Income Security Act or the rules thereunder, or (iii) as otherwise determined by the Committee and set forth in the applicable Option Agreement. The designation of a beneficiary of an Option holder shall not be deemed a transfer prohibited by this paragraph. Except as provided in the preceding sentence, an Option shall be exercisable, during an Option holder's lifetime, only by the Option holder (or by his or her legal representative) and shall not be assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process. Any attempted transfer, assignment, pledge, hypothecation, or other disposition of any Option or of any rights granted thereunder contrary to the provisions of this Plan, or the levy of any attachment or similar process upon an Option or other such rights shall be null and void. 4 6.7 Other Provisions: The Option agreements authorized under the Plan shall be subject to such additional terms and conditions, including, without limitation, restrictions upon the exercise of the Option, as the Committee shall deem advisable. 6.8 Tax Withholding: In the event that any federal, state, or local income taxes, employment taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other amounts are required by applicable law or governmental regulation to be withheld from the Option holder's salary in connection with the exercise of an Option, the Option holder shall advance in cash to the Company, or to any Affiliate of the Company which employs or employed the Option holder, the amount of such withholdings unless a different withholding arrangement, including the use of shares of the Company's Common Stock, is authorized by the Committee (and permitted by law), provided, however, that with respect to persons subject to Section 16 of the 1934 Act, any such withholding arrangement shall be in compliance with any applicable provisions of Rule 16b-3 promulgated under Section 16 of the 1934 Act. For purposes hereof, the fair market value of the shares withheld for purposes of payroll withholding shall be determined in the manner provided in Article 6.1. above, as of the most recent practicable date prior to the date of exercise. If the fair market value of the shares withheld is less than the amount of payroll withholdings required, the Option holder may be required to advance the difference in cash to the Company or the Affiliate employer. 6.9 Reload Options: The Committee may authorize reload options ("Reload Options") to purchase for cash or shares a number of shares of Common Stock. The number of Reload Options shall equal (i) the number of shares of Common Stock used to exercise the underlying Options and (ii) to the extent authorized by the Committee, the number of shares of Common Stock used to satisfy any tax withholding requirement incident to the exercise of the underlying Options. The grant of a Reload Option will become effective upon the exercise of underlying Options through the use of shares of Common Stock held by the optionee for at least 6 months. Reload Options must be evidenced in Option agreements or amendments to those agreements. The Option price per share of Common Stock deliverable upon the exercise of a Reload Option shall be the fair market value of a share of Common Stock on the date the grant of the Reload Option becomes effective. The term of each Reload Option shall be equal to the remaining option term of the underlying Option. No additional Reload Options shall be granted to Option holders when Options and/or Reload Options are exercised pursuant to the terms of this Plan following termination of the Option holder's employment or on account of death or total and permanent disability. All other provisions of this Plan with respect to Options shall apply equally to Reload Options. 6.10 Rights as a Shareholder: No Option holder shall have rights as a shareholder with respect to any shares covered by such Option except as to such shares as have been registered in the Company's share register in the name of such person upon the due exercise of the Option. 7. PURCHASE FOR INVESTMENT If and to the extent that the issuance of shares pursuant to the exercise of Options is deemed by the Company to be subject to the United States Securities Act of 1933, as now in force or 5 hereafter amended (the "Act"), or to the securities law of any other jurisdiction, the Company shall be under no obligation to issue shares covered by such exercise unless the person or persons who exercises or who exercise such Option shall make such warranty or take such action as may be required by any applicable securities law or shall, in the case of the applicability of the Act, in the absence of an effective registration under the Act with respect to such shares, warrant to the Company, at the time of such exercise, that such person is or that they are acquiring the shares to be issued to such person or to them, pursuant to such exercise of the Option, for investment and not with a view to, or for sale in connection with, the distribution of any such shares; and in such events the person or persons acquiring such shares shall be bound by the provisions of a legend endorsed upon any share certificates expressing the requirements of any applicable non-United States securities law, or, in cases deemed governed by the Act, substantially the following legend, or such other legend as counsel for the Company shall deem appropriate, which shall be endorsed upon the certificate or certificates evidencing the shares issued by the Company pursuant to such exercise: "The securities represented by this certificate have not been registered under the Securities Act of 1933 and may not be sold, assigned or transferred in the absence of an effective registration statement under said Act or an opinion of counsel satisfactory to the Company that such registration is not, in the circumstances, required." Without limiting the generality of the foregoing, the Company may delay issuance of the shares until completion of any action or obtaining of any consent which the Company deems necessary under any applicable law (including without limitation state securities or "blue sky" laws and federal or state payroll tax withholding laws). 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION In the event that the outstanding Common Stock, $.01 par value, of the Company is changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, change in par value, stock split-up, combination of shares or dividend payable in capital stock, or the like, appropriate adjustment shall be made in the number and kind of shares for the purchase of which Options may be granted under the Plan, and, in addition, appropriate adjustment shall be made in the number and kind of shares and in the option price per share subject to outstanding Options so that each Option holder shall be in a position equivalent to the position the Option holder would have been in had the Option holder exercised the Options immediately prior to the applicable event. 9. DISSOLUTION OR LIQUIDATION OF THE COMPANY Upon the dissolution or liquidation of the Company other than in connection with a transaction to which the preceding Article 8 is applicable, all Options granted hereunder shall 6 terminate and become null and void; provided, however, that if the rights hereunder of an Option holder or one who acquired an Option by will or by the laws of descent and distribution have not otherwise terminated and expired, the Option holder or such person shall have the right immediately prior to such dissolution or liquidation to exercise any Option granted hereunder to the extent that the right to purchase shares thereunder has accrued as of the date of exercise immediately prior to such dissolution or liquidation. 10. TERMINATION OF THE PLAN Unless the Committee shall decide to reduce or, subject to shareholder approval if required under Section 11, extend the duration of the Plan, the Plan shall terminate on December 31, 2002. Termination of the Plan shall not affect any Options granted or any Option agreements executed prior to the effective date of termination. 11. AMENDMENT OF THE PLAN The Plan may be amended by the Committee or the Board of Directors of the Company, provided, however, that if the scope of any amendment is such as to require shareholder approval in order to comply with Rule 16b-3 under the 1934 Act, then such amendment shall require approval by the shareholders. Any amendment shall not affect any Options theretofore granted and any Option agreements theretofore executed by the Company and any Option holder unless such amendment shall expressly so provide. No amendment shall adversely affect any Option holder with respect to an outstanding Option without the written consent of such Option holder. With the consent of the Option holder affected, the Committee may amend any outstanding Option agreement in a manner not inconsistent with the Plan, including, without limitation, to accelerate the date of exercise of any installment of any Option. 12. EMPLOYMENT RELATIONSHIP Nothing herein contained shall be deemed to prevent the Company or an Affiliate from terminating the employment or consultancy of any Option holder, nor to present any Option holder from terminating his/her employment or consultancy with the Company or an Affiliate. 13. EFFECTIVE DATE This Plan became effective as of March 6, 1987. EX-27 5 ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS DEC-31-2000 APR-01-2000 JUN-30-2000 1 67,462 584,725 154,301 1,642 39,855 941,832 427,514 124,715 1,321,261 212,159 49,630 0 0 1,514 1,001,679 1,321,261 190,009 230,514 27,515 143,417 0 0 1,080 103,834 31,774 72,060 0 0 0 72,060 0.48 0.47
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