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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-12042
BIOGEN, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3002117
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14 Cambridge Center, Cambridge, Massachusetts 02142
(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (617) 679-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value (Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of Common Stock held by nonaffiliates of the
Registrant at March 9, 1999 (excludes shares held by directors): $8,018,804,742.
Exclusion of shares held by any person should not be construed to indicate that
such person possesses the power, direct or indirect, to direct or cause the
direction of management or policies of the Registrant, or that such person is
controlled by or under common control with the Registrant. Common Stock
outstanding at March 9, 1999: 75,111,450 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its 1999 Annual
Meeting of Stockholders are incorporated by reference into Part III of this
Report, and portions of the Registrant's 1998 Annual Report to Shareholders are
incorporated by reference into Parts II and IV of this Report.
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PART I
ITEM 1 - BUSINESS
OVERVIEW
Biogen, Inc. ("Biogen" or the "Company") is a biopharmaceutical company
principally engaged in the business of developing, manufacturing and marketing
drugs for human health care. The Company currently derives revenues from sales
of its AVONEX(R) (Interferon beta-1a) for the treatment of relapsing forms of
multiple sclerosis and from sales by its licensees of a number of products,
including alpha interferon, hepatitis B vaccines and hepatitis B diagnostic
products. The Company's revenues from sales of AVONEX(R) in 1998 were
approximately $394.9 million. The Company's royalty revenues in 1998 were
approximately $162.7 million.
Biogen continues to devote significant resources to its ongoing research
and development efforts. The Company focuses its efforts on areas where it has
particular scientific strengths such as: multiple sclerosis, inflammatory
diseases, cardiovascular diseases, developmental biology, kidney diseases and
disorders and gene therapy. In 1998, Biogen completed early-stage clinical
trials of several of its product candidates, including the evaluation of results
of two Phase 2a clinical studies of AMEVIVE(TM) (Human LFA-3/IgG(1) fusion
protein), also known as LFA3TIP, in patients with moderate to severe psoriasis,
two Phase 2a studies of BG9719 (adenosine A1 antagonist), formerly known as
CVT-124, a small molecule being developed as a potential treatment for
congestive heart failure, and a Phase 1 safety study of ANTOVA(TM) (Humanized
anti-CD40 ligand monoclonal antibody), also known as humanized 5c8, in patients
with immune thrombocytopenic purpura. Additional clinical trials of AMEVIVE(TM),
ANTOVA(TM) and BG9719 are underway or planned. In addition, Biogen has many
earlier stage research programs. These include: a program directed toward
developing a novel inhibitor of a particular immune response pathway as a
potential therapy for several autoimmune diseases; a program focused on finding
oral small molecule drug candidates to inhibit the migration of white blood
cells into tissue as a potential treatment for multiple sclerosis and certain
chronic inflammatory diseases; a program in which the Company is exploring ways
to treat central nervous system disorders through use of proteins involved in
inducing the formation and regeneration of tissue; and a program directed at
developing products based on human gene therapy technology. The Company is also
exploring the use of functional genomics technology to find novel therapeutics.
AVONEX(R) INTERFERON BETA-1A
Biogen currently markets and sells AVONEX(R) (Interferon beta-1a) for the
treatment of relapsing forms of multiple sclerosis. Multiple sclerosis is a
progressive neurological disease in which the body loses the ability to transmit
messages among nerve cells, leading to a loss of muscle control, paralysis and,
in some cases, death. Patients with active relapsing multiple sclerosis
experience an uneven pattern of disease progression characterized by periods of
stability interrupted by flareups of the disease after which the patient returns
to a new baseline of functioning. AVONEX(R) is a recombinant form of a protein
produced by fibroblast cells in response to viral infection. AVONEX(R) has been
shown in a pivotal clinical trial both to slow the accumulation of disability
and to reduce the frequency of exacerbations in patients with relapsing forms of
multiple sclerosis.
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Biogen began selling AVONEX(R) in the United States in 1996, and in the
European Union (EU) in 1997. AVONEX(R) is also on the market in Canada,
Argentina, Norway, Israel, Cyprus, Australia, Chile, Columbia, Mexico, Hungary,
Turkey, the Czech Republic, Slovakia, and Switzerland.
In the United States, Canada and in most of the major countries of the EU,
Biogen uses its own sales force to market AVONEX(R). In those countries, Biogen
distributes AVONEX(R) principally through wholesale distributors of
pharmaceutical products or mail order or specialty distributors or using
shipping service providers. In other countries, including Spain, Sweden,
Finland, Norway, Denmark, Italy, Greece, Portugal, Israel and New Zealand,
Biogen sells AVONEX(R) to distribution partners who are then responsible for
most marketing and distribution activities. The Company has also entered into
distribution agreements covering Australia, Latin America, the Caribbean, South
Africa, Eastern Europe, Turkey, the Middle East and Japan. Under most of these
agreements the distribution partners are responsible for obtaining regulatory
approval for AVONEX(R) as well as marketing and distribution.
Biogen is currently conducting several additional clinical studies of
AVONEX(R). These include: a clinical study of AVONEX(R) in patients who have had
only one confirmed exacerbation, which was initiated in 1996; a dose comparison
study, also initiated in 1996, comparing the approved dosage of AVONEX(R) with a
higher dose; a four-year open-label follow-up study initiated in 1995 to obtain
long-term safety and antigenicity data; a clinical study of AVONEX(R) in
patients with secondary progressive multiple sclerosis, initiated in 1998; and a
Phase 2 clinical study of AVONEX(R) in the treatment of idiopathic pulmonary
fibrosis which also commenced in 1998.
Biogen is also exploring new ways to improve the formulation and delivery
of AVONEX(R). In February 1999, Biogen entered into a collaborative agreement
with Inhale Therapeutic Systems, Inc. under which the parties will work towards
development of a dry powder formulation of AVONEX(R) for pulmonary delivery
using Inhale's deep-lung delivery system. Biogen is also working towards
development of a pre-filled syringe formulation of AVONEX(R).
Revenues from sales of AVONEX(R) in 1998 were $394.9 million or
approximately 71% of total revenues. Revenues from sales of AVONEX(R) in 1997
were $240 million or approximately 58% of total revenues. Approximately 77% of
AVONEX(R) sales in 1998 and approximately 92% of AVONEX(R) sales in 1997 were
generated in the United States. Sales to three major wholesale distributors and
a specialty distributor in the United States accounted for 13%, 11%, 11% and
10%, respectively, of total revenues in 1998.
MAJOR RESEARCH AND DEVELOPMENT PROGRAMS
Biogen's research is focused on biological systems and processes where its
scientific expertise in molecular biology, cell biology, immunology and protein
chemistry can lead to a greater understanding of disease processes and, as a
result, to the creation of new pharmaceuticals. Biogen selects product
candidates from its research programs to test in clinical trials, focusing its
efforts on those agents which it believes have the greatest potential
competitive advantages and large commercial markets. Described below are
Biogen's major research programs.
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AMEVIVE(TM) (LFA3TIP)
Inflammation is the result of the body's immune response to infection and
injury. In many autoimmune diseases, the inflammation process is directed
inappropriately against the body's own tissues, causing temporary or permanent
damage. Biogen has focused the efforts of its inflammation programs on
developing drugs to inhibit specific cellular interactions critical to the
inflammation process. Central to inflammation is the activation of T-cells,
specialized white blood cells which initiate and control the immune response.
One of the cellular pathways which is important for the activation of T-cells is
the LFA-3/CD2 pathway. AMEVIVE(TM) (LFA3TIP) is a recombinantly engineered
protein designed to modulate immune responses by binding to the CD2 receptor.
Biogen is developing AMEVIVE(TM) as a treatment for certain autoimmune diseases.
In 1998, the Company completed evaluation of the results of two Phase 2a safety
studies of AMEVIVE(TM), and commenced a Phase 2b study of the safety and
efficacy of AMEVIVE(TM) compared to a placebo as a systemic therapy in patients
with moderate and severe psoriasis. The Company expects the Phase 2b study to be
completed in mid-1999. Psoriasis is a chronic autoimmune disease that is
characterized by inflammation and thickening of the skin. An estimated 500,000
psoriasis patients in the United States and Europe combined have a severe enough
form of the disease to need systemic therapies.
ANTOVA(TM) (HUMANIZED 5c8)
The human immune system generates two types of responses: humoral (also
known as antibody) responses and cell-mediated responses. When CD40 ligand
("CD40L") on the surface of an activated T-cell binds to CD40 on the surface of
a B-cell, the production of antibodies is triggered. When CD40L on the surface
of an activated T-cell binds to CD40 on the surface of a variety of other cells,
such as macrophages and dendritic cells, the cells become activated, triggering
an inflammatory response. The inhibition of the CD40-CD40L pathway offers a
unique target for modulating both types of immune responses.
Biogen is developing ANTOVA(TM), a humanized monoclonal antibody which
binds to CD40L, as a treatment for a variety of autoimmune diseases and as a
therapy for preventing organ and cellular transplant rejection. In 1998, the
Company completed a Phase 1 safety study of ANTOVA(TM) in patients with immune
thrombocytopenic purpura (ITP), and commenced a Phase 2 study in ITP. A Phase 2
study of ANTOVA(TM) in lupus nephritis which commenced in 1998 is currently
being re-designed to enhance patient accrual. The study and patient accrual are
expected to resume in 1999. In early 1999, Biogen commenced a Phase 2 study of
ANTOVA(TM) in renal transplantation. Phase 2 studies of ANTOVA(TM) in pancreatic
islet cell transplantation, Factor VIII inhibitor syndrome and multiple
sclerosis are also expected to commence in 1999.
BG9719
In March 1997, Biogen entered into a research collaboration and license
agreement with CV Therapeutics, Inc. ("CVT") under which the Company obtained
rights to develop and market BG9719 (formerly known as CVT-124). BG9719 is a
highly selective antagonist of the adenosine A1 receptor which is expressed
principally in the heart, brain and kidney, and which in the kidney mediates
vasoconstriction and reabsorption of fluids. Biogen is developing BG9719 as a
treatment for congestive heart failure. Congestive heart failure is a chronic
progressive disease that affects approximately four to
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five million people in the United States. Patients with the disease experience
both a chronic course as well as acute episodes that usually require
hospitalization. Reduction in kidney function and the formation of edema, or
fluid retention, in lungs and extremities are significant symptoms of chronic
heart failure, leading to increased morbidity and need for hospitalization. In
1998, Biogen completed two Phase 2a safety and dose finding clinical studies of
BG9719. A Phase 2 study comparing BG9719 with an existing therapy and in
combination with the existing therapy is ongoing and is expected to be completed
by the end of 1999.
LT-BETA RECEPTOR
The lymphotoxin (LT): lymphotoxin-beta receptor pathway is involved in
activation of dendritic cells and the formation of organized lymphoid tissue
both of which normally increase the efficiency of the immune response, but which
appear to be hyperactive in some autoimmune diseases. Blocking the pathway with
soluble LT-Beta Receptor may inhibit cell-mediated immune reactions particularly
in the skin, the gastrointestinal tract and joints. Biogen is developing its
LT-Beta Receptor as a potential treatment for certain autoimmune diseases.
VLA-4 INHIBITORS
VLA-4 (Very Late Antigen-4) is a receptor which appears on the surface of
most white blood cells except neutrophils and binds to VCAM-1, a protein found
on the surface of vascular endothelial cells. The VLA-4/VCAM-1 pathway
facilitates migration of white blood cells into tissue as part of the body's
normal response during inflammation. This inflammatory response can be severely
damaging or even life threatening when it is directed against the body's own
tissue in chronic inflammatory diseases such as asthma. Biogen scientists have
developed VLA-4-specific small molecule inhibitors designed to interrupt the
cell adhesion activity of VLA-4 as a means of blocking the inflammation process
in a highly specific manner.
In December 1997, Biogen entered into a collaborative research,
development and license agreement with Merck & Co., Inc. ("Merck") under which
Biogen and Merck are collaborating on developing oral and aerosolized small
molecule inhibitors of VLA-4. Under the agreement with Merck, Biogen has rights
to develop, market and sell small molecule inhibitors of VLA-4 for the treatment
of multiple sclerosis, kidney diseases and disorders, inflammatory bowel disease
and most diseases with small patient populations. Merck has rights to develop,
market and sell small molecule inhibitors of VLA-4 in all other indications,
including asthma. Merck commenced a Phase 2a clinical trial of an aerosolized
VLA-4 inhibitor in 1998.
HEDGEHOG PROTEINS
Hedgehog proteins are a class of novel human proteins that are responsible
for inducing the formation or regeneration of tissue. In 1996, the Company
entered into a research collaboration and license agreement with Ontogeny, Inc.
("Ontogeny") for the development of three specific "hedgehog" cell
differentiation proteins. Under its agreement with Ontogeny, Biogen has access
to exclusive worldwide rights to develop therapeutics directly based on
Ontogeny's proprietary family of sonic, indian and desert hedgehogs for most
disease indications. In 1998, Biogen and Ontogeny extended the hedgehog research
program and broadened the collaboration to include gene therapy. The Company's
current focus is the study of the hedgehog proteins for the treatment of central
nervous system disorders.
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GENE THERAPY
In 1995, the Company entered into a collaborative research agreement with
Genovo, Inc. ("Genovo") for the development of certain human gene therapy
treatments. Under its agreement with Genovo, Biogen received certain rights
related to diseases of the liver and lung.
OP-1
In 1998, Biogen amended its collaborative research and license agreement
with Creative BioMolecules, Inc. ("CBM") to return to CBM responsibility for
development of CBM's morphogenic protein, OP-1, for the treatment of kidney
diseases and disorders. OP-1 is a circulating human protein agonist expressed
during development and regeneration of the kidney, spinal cord and bone. Under
the terms of the amendment, Biogen has the option, exercisable prior to the end
of 1999, to resume responsibility for development of OP-1. If Biogen does not
exercise its option, the license agreement with CBM will terminate.
OTHER RESEARCH PROGRAMS
As part of its further research efforts, Biogen is exploring the use of
growth factors to prevent or treat the degeneration of the kidney which results
from renal failure. The Company is also investigating new ways to modify immune
responses more specifically in order to treat diseases of the immune system. In
addition, through its collaboration with CuraGen Corporation, Biogen is
exploring the use of functional genomics technology to find novel therapeutics.
RESEARCH AND DEVELOPMENT COSTS
During 1998, 1997 and 1996, Biogen's research and development costs were
approximately $177.2 million, $145.5 million and $132.4 million, respectively.
RISKS ASSOCIATED WITH DRUG DEVELOPMENT AND COMMERCIALIZATION
Certain of the statements set forth above regarding the Company's research
and development programs, such as statements regarding the anticipated
commencement of clinical trials of drugs in development, are forward-looking,
and are based upon the Company's current belief as to the outcome and timing of
such future events. These events are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. Many important factors affect the
Company's ability to successfully develop and commercialize drugs, including the
need to demonstrate the safety and efficacy of drug candidates at each stage of
the clinical trial process, to meet applicable regulatory standards and receive
required regulatory approvals, to be capable of producing drug candidates in
commercial quantities at reasonable costs, to obtain and maintain all necessary
patents or licenses, to compete successfully against other products, and to
market products successfully. There can be no assurance that any of the products
described in this section or resulting from Biogen's research and development
programs will be successfully developed, prove to be safe and efficacious at
each stage of clinical trials, meet applicable regulatory standards, be capable
of being produced in commercial quantities at reasonable costs, be successfully
marketed or successfully meet challenges from competitive products.
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For a detailed discussion of the outlook of the Company, see the "Outlook"
section of "Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference under Item 7.
PRINCIPAL PRODUCTS BEING MARKETED OR DEVELOPED BY BIOGEN'S LICENSEES
ALPHA INTERFERON
Alpha interferon is a naturally occurring protein produced by normal white
blood cells. Biogen has been granted patents covering the production of alpha
interferons through recombinant DNA techniques. See "Patents and Other
Proprietary Rights." Biogen's worldwide licensee for recombinant alpha
interferon, Schering-Plough Corporation ("Schering-Plough"), first began
commercial sales of its Intron(R) A brand of alpha interferon in the United
States in 1986 for hairy-cell leukemia. Schering-Plough now sells Intron(R) A
worldwide for as many as 16 indications. The FDA has approved Intron(R) A for
the treatment of chronic hepatitis B and hepatitis C, hairy cell leukemia,
AIDS-related Kaposi's sarcoma, condylomata acuminata, for injection as an
adjuvant treatment to surgery in patients at high risk for systemic recurrence
of malignant melanoma, and for use in conjunction with anthracycline-containing
combination chemotherapy for the initial treatment of patients with clinically
aggressive non-Hodgkin's lymphoma. In 1998, Schering-Plough also received
marketing clearance from the FDA for its REBETRON(R) product for the treatment
of chronic hepatitis C. REBETRON(R) is a product containing Intron(R) A and
REBETOL(R) (ribavirin, USP capsules). In late 1998, Biogen filed for arbitration
against Schering-Plough in a dispute over the method used by Schering Plough to
determine the amount of royalties payable to Biogen on sales of REBETRON(R).
Royalties from Schering-Plough on sales of Intron(R)A accounted for
approximately 16%, 19% and 27% of Biogen's revenues in 1998, 1997 and 1996,
respectively.
For a discussion of the length of Schering Plough's royalty obligation to
Biogen on sales of alpha interferon products, see "Patents and Other Proprietary
Rights - Recombinant Alpha Interferon."
HEPATITIS B VACCINES AND DIAGNOSTICS
Hepatitis B is a blood-borne disease which causes a serious infection of
the liver and substantially increases the risk of liver cancer. More than 250
million people worldwide have chronic hepatitis B virus infections. Biogen holds
several important patents related to hepatitis B antigens produced by genetic
engineering techniques. See "Patents and Other Proprietary Rights." These
antigens are used in recombinant hepatitis B vaccines and in diagnostic test
kits used to detect hepatitis B infection.
HEPATITIS B VACCINES
At least 20 countries around the world, including the United States,
recommend vaccination against hepatitis B for all infants. The United States
Centers for Disease Control and the American Academy of Pediatrics have also
recommended universal immunization of ten-year-old children and at-risk
adolescents. The United States Occupational Safety and Health Administration has
recommended
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that all persons with an occupational exposure to blood and other infectious
material receive the hepatitis B vaccine.
SmithKline Beecham Biologicals s.a. ("SmithKline") and Merck are the two
major worldwide marketers of hepatitis B vaccines. Biogen has licensed to
SmithKline exclusive rights under Biogen's hepatitis B patents to market
hepatitis B vaccines in the major countries of the world, excluding Japan.
SmithKline's vaccine is approved in the United States and in over 60 other
countries. In 1990, SmithKline and Biogen entered into a sublicense arrangement
with Merck under which Biogen currently receives royalties. Biogen has also
licensed rights under its hepatitis B patents to Merck and The Green Cross
Corporation on a non-exclusive basis in Japan. Royalties from SmithKline and
Merck together accounted for approximately 9%, 14% and 23% of Biogen's revenues
in 1998, 1997 and 1996, respectively.
HEPATITIS B DIAGNOSTICS
Biogen has licensed its proprietary hepatitis B rights, on an
antigen-by-antigen and nonexclusive basis, to diagnostic kit manufacturers.
Biogen currently has hepatitis B license or license and supply agreements for
diagnostic use with more than a dozen companies, including Abbott Laboratories,
the major worldwide marketer of hepatitis B diagnostic kits, Ortho Diagnostic
Systems, Inc., Roche Diagnostic Systems, Inc. and Organon Teknika B.V.
For a discussion of the length of the royalty obligation of SmithKline and
Merck on sales of hepatitis B vaccines and the obligation of Biogen's other
licensees on sales of hepatitis B-related diagnostic products, see "Patents and
Other Proprietary Rights - Recombinant Hepatitis B Antigens."
OTHER PRODUCTS
Under a license agreement with Eli Lilly and Company ("Lilly"), Biogen has
granted Lilly rights under certain of Biogen's patents related to gene
expression. Lilly uses the patented vectors and methods in several products that
are on the market or in development. Under the license agreement Biogen receives
royalties on sales of these products. See "Patents and Other Proprietary Rights
- - Other Patents".
In 1996, Biogen granted a sublicense to Pharmacia & Upjohn AB ("Pharmacia &
Upjohn") under certain patent rights to proprietary protein secretion technology
exclusively licensed to Biogen by Harvard University. Under the terms of the
license agreement, Biogen receives ongoing royalties on sales of Pharmacia &
Upjohn's recombinant human growth hormone product, Genotropin(R), in the United
States, Canada and Japan.
In March 1997, Biogen granted to The Medicines Company ("TMC") exclusive
worldwide rights to develop and market Hirulog(R) (bivalirudin) direct thrombin
inhibitor. Biogen will receive milestone and royalty payments from TMC if TMC is
successful in its efforts to develop and commercialize the drug.
Financial information about foreign operations and export sales is included
in Note 10 of the Notes to Consolidated Financial Statements incorporated by
reference under Item 8.
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PATENTS AND OTHER PROPRIETARY RIGHTS
Biogen has filed numerous patent applications in the United States and
various other countries seeking protection of a number of its processes and
products, and patents have been issued on a number of these applications. The
Company has also obtained rights to various patents and patent applications
under licenses with third parties which provide for the payment of royalties by
the Company. Issues remain as to the ultimate degree of protection that will be
afforded to Biogen by its patents. There is no certainty that Biogen's existing
patents or others, if obtained, will be of substantial protection or commercial
benefit to Biogen. Furthermore, it is not known to what extent Biogen's pending
patent applications or patent applications licensed from third parties will
ultimately be granted as patents or whether those patents that have been issued
or are issued in the future will prevail if they are challenged in litigation.
Trade secrets and confidential know-how are important to Biogen's
scientific and commercial success. Although Biogen seeks to protect its
proprietary information, there can be no assurance that others will not either
develop independently the same or similar information or obtain access to
Biogen's proprietary information.
RECOMBINANT ALPHA INTERFERON
Biogen has more than 50 patents in countries around the world, including
the United States and countries of the European Patent Office, covering the
production of recombinant alpha interferons. Biogen has granted an exclusive
worldwide license to Schering Plough under Biogen's alpha interferon patents,
and receives royalties from Schering-Plough on sales of its brand of alpha
interferon. See "Principal Products Being Marketed or Developed by Biogen's
Licensees - Alpha Interferon".
Schering-Plough's royalty obligation to Biogen on sales of alpha interferon
in Japan and Europe will terminate upon expiration of Biogen's alpha interferon
patent in such territories in 2001, except in France and Italy where Biogen has
obtained supplemental protection certificates extending the coverage in France
until 2003 and in Italy until 2007.
In 1998, Biogen and Schering-Plough entered into an agreement under which
Biogen assigned to Schering-Plough a Biogen patent application claiming
recombinant mature human alpha interferon. The Biogen patent application had
been the subject of a lawsuit by Biogen against Genentech, Inc. ("Genentech")
and F. Hoffman La Roche Inc. ("Roche") related to a decision in an interference
proceeding involving the Biogen patent application and a patent application
jointly owned by the two defendants. In consideration of assignment of the
patent to it by Biogen, Schering-Plough has agreed to pay to Biogen certain sums
on sales by Schering-Plough of alpha interferon products in the United States
from July 2002 (when Biogen's existing U.S. alpha interferon patent expires)
until expiration of the alpha interferon patent expected to be issued to Roche
and Genentech. The lawsuit by Biogen against Roche and Genentech has also been
settled.
In December 1996, Schering-Plough filed suit in its own name, as Biogen's
exclusive licensee, against Amgen, Inc. ("Amgen") to enforce Biogen's U.S. alpha
interferon patent claiming it to be infringed by Amgen's consensus interferon
product known as Infergen(R). In February 1999, a federal judge granted
Schering-Plough's request for a judgment against it and ruled that Amgen did not
infringe
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the Biogen patent. Schering-Plough requested the adverse judgement so
that it could begin its appeal of the judge's pretrial interpretation of one of
the claims of the Biogen patent.
Yamanouchi Pharmaceutical Co. Ltd., Amgen's licensee, has filed a
declaratory judgment action against Biogen in France, Italy and Germany seeking
a judgment that its consensus interferon product does not infringe Biogen's
alpha interferon patent.
RECOMBINANT HEPATITIS B ANTIGENS
Biogen has more than 75 patents in countries around the world, including
three in the United States and two in countries of the European Patent Office,
and several patent applications, covering the recombinant production of
hepatitis B surface, core and "e" antigens. Biogen has licensed its recombinant
hepatitis B antigen patent rights to manufacturers and marketers of hepatitis B
vaccines and diagnostic test kits, and receives royalties on sales of the
vaccines and test kits by its licensees. See "Principal Products Being Marketed
or Developed by Biogen's Licensees - Hepatitis B Vaccines and Diagnostics." The
obligation of SmithKline and Merck to pay royalties on sales of hepatitis B
vaccines and the obligation of Biogen's other licensees under its hepatitis B
patents to pay royalties on sales of diagnostic products will terminate upon
expiration of Biogen's existing hepatitis B patents. Biogen's existing United
States hepatitis B patents will expire in 2004. Biogen's European hepatitis B
patents will expire at the end of 1999, except in those countries in which
Biogen has or is able to obtain supplemental protection certificates. To date,
Biogen has received supplemental protection certificates in France, Italy,
Luxembourg, The Netherlands, Sweden, Switzerland and Ireland, and has a number
of additional applications pending. The additional coverage afforded by the
supplemental protection certificates ranges from two to six years.
RECOMBINANT BETA INTERFERON
In 1997, the Technical Board of Appeal of the European Patent Office
revoked Biogen's European patent covering the production of recombinant beta
interferon. Although no formal appeal procedure exists, Biogen has asked the
European Patent Office to overturn the revocation. A patent application in the
United States with similar claims is still pending. The Company also has a
patent with similar claims in Israel. In July 1997, Biogen sued InterPharm
Laboratories Ltd. ("Interpharm"), an affiliate of Ares Serono, S.A. ("Serono"),
and related defendants, claiming that the manufacture by InterPharm of Serono's
Rebif(R) (Interferon Beta-1a) infringes Biogen's Israeli patent. In Germany, a
patent with similar claims was the subject of a nullity proceeding instituted by
Schering AG in the German Federal Patent Court. In March 1998, the German
Federal Patent Court upheld the German patent but with substantially narrower
claims. The Company has appealed the decision.
Other parties have pending patent applications or issued patents in the
United States, Europe and other countries with claims to key intermediates in
the production of beta interferon (the "Taniguchi patents") and to beta
interferon itself (the "Roche patents"). Biogen has obtained non-exclusive
rights in various countries of the world, including the United States, Japan and
most European countries, to manufacture, use and sell AVONEX(R) under the
Taniguchi patents and has obtained worldwide, non-exclusive rights under the
Roche patents.
In October 1998, Biogen filed an opposition with the Opposition Division of
the European Patent Office to oppose a European patent issued to Dr. Rentschler
Biotechnologie GmbH ("Rentschler") with
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certain claims regarding compositions of matter of beta interferon with specific
regard to the structure of the glycosylated molecule. Rentschler has appealed
the decision of the Opposition Division to revoke an earlier Rentschler patent
with claims related to a specific cell line, production method and form of
recombinant beta interferon.
On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen
in the United States District Court for the District of New Jersey alleging
infringement by Biogen of Berlex's "McCormick" patent in the United States in
the production of AVONEX(R). In November 1996, Berlex's New Jersey action was
transferred to the U.S. District Court in Massachusetts and consolidated for
pretrial purposes with a related declaratory judgment action previously filed by
Biogen. In August 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. In September 1998, the cases were
consolidated for pretrial and trial purposes. Berlex seeks a judgment granting
it damages, a trebling of any damages awarded and a permanent injunction
restraining Biogen from alleged infringement. A trial is currently scheduled for
fall of 1999, but may be postponed until a later date. For a further discussion,
see Item 3 - Legal Proceedings and Note 8 of the Notes to Consolidated Financial
Statements incorporated by reference under Item 8.
OTHER PATENTS
Biogen has granted Lilly a non-exclusive license under certain of Biogen's
patents for gene expression. Lilly uses the patented vectors and methods in
several products that are on the market or in development. Biogen's European
patent relating to gene expression was opposed by Biotechnology General Corp. in
December 1993. A hearing was held by the Opposition Division of the European
Patent Office in March 1996. In March 1997, the Opposition Division decided to
revoke Biogen's patent. Biogen has appealed the decision.
In March 1995, Biogen filed suit in the U.S. District Court for the
District of Massachusetts seeking to enjoin Amgen from manufacturing and selling
its Neupogen(R) human granulocyte colony stimulating factor in the United States
and asking for damages for infringing activities. Biogen believes that to make
Neupogen(R) Amgen uses technology claimed in certain of Biogen's gene expression
patents. In 1998, the court made a decision as to interpretation of the claims
of the Biogen patent in such a way as to preclude Amgen's literal infringement
of the patent. Amgen has filed a motion for summary judgment based on the
court's decision. The court has requested briefs on whether Amgen is entitled to
summary judgment on its claim that its vector is not an infringing equivalent.
In July 1997, Biogen filed suit in the U.S. District Court for the District
of Massachusetts to enjoin Amgen from manufacturing and selling its Infergen(R)
consensus interferon in the United States and asking for damages for infringing
activities. Biogen believes that to make Infergen(R) Amgen uses technology
claimed in certain of Biogen's gene expression patents. Biogen's request to have
the case consolidated with the Neupogen(R) suit was denied by the court. Biogen
does not expect a trial in the case prior to the early part of 2000.
In March 1999, Biogen was added as a plaintiff in a lawsuit filed by Plant
Genetic Systems, N.V. ("PGS") against Dekalb Genetics Corporation in the United
States District Court in Connecticut. PGS, the licensee of certain Biogen plant
gene patents, is claiming that DeKalb infringes the patents in its production of
genetically-engineered seeds.
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THIRD PARTY PATENTS
Biogen is aware that others, including various universities and companies
working in the biotechnology field, have also filed patent applications and have
been granted patents in the United States and in other countries claiming
subject matter potentially useful or necessary to Biogen's business. Some of
those patents and applications claim only specific products or methods of making
such products, while others claim more general processes or techniques useful or
now used in the biotechnology industry. For example, Genentech has been granted
patents and is prosecuting other patent applications in the United States and
certain other countries which it may allege are currently used by Biogen and the
rest of the biotechnology industry to produce recombinant proteins in microbial
hosts. Genentech has offered to Biogen and others in the industry non-exclusive
licenses under those patents and patent applications for various proteins and in
various fields of use, but not for others. Schering-Plough, Biogen's exclusive
licensee for recombinant alpha interferon, is licensed under certain of these
patents for the manufacture, use and sale of recombinant alpha interferon. The
ultimate scope and validity of Genentech's patents, of other existing patents,
or of patents which may be granted to third parties in the future, the extent to
which Biogen may wish or be required to acquire rights under such patents, and
the availability and cost of acquiring such rights currently cannot be
determined by Biogen.
There has been, and Biogen expects that there may continue to be,
significant litigation in the industry regarding patents and other intellectual
property rights. Such litigation could create uncertainty and consume
substantial resources.
COMPETITION AND MARKETING
IN GENERAL
Competition in the biotechnology and pharmaceutical industries is intense
and comes from many and varied sources. Biogen does not believe that it or any
of the other industry leaders can be considered dominant in view of the rapid
technological change in the industry. Biogen experiences significant competition
from specialized biotechnology firms in the United States, Europe and elsewhere
and from many large pharmaceutical, chemical and other companies. Certain of
these companies have substantially greater financial, marketing, research and
development and human resources than Biogen. The pharmaceutical companies have
considerable experience in undertaking clinical trials and in obtaining
regulatory approval to market pharmaceutical products. In addition, certain of
Biogen's products may be subject to competition from products developed using
alternatives to biotechnology techniques.
Much competition is directed towards establishing proprietary positions
through research and development. A key aspect of such competition is recruiting
and retaining qualified scientists and technicians. Biogen believes that it has
been successful in attracting skilled and experienced scientific personnel.
Biogen believes that leadership in the industry will be based on managerial and
technological superiority and may be influenced significantly by patents and
other forms of protection of proprietary information. See "Patents and Other
Proprietary Rights". The achievement of a leadership position depends largely
upon Biogen's continued ability to attract and retain skilled and experienced
personnel, its ability to identify and exploit commercially the products
resulting from biotechnology research and
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the availability of adequate financial resources to fund facilities, equipment,
personnel, clinical testing, manufacturing and marketing.
Many of Biogen's competitors are working to develop products similar to
those under development by Biogen. The timing of the entry of a new
pharmaceutical product into the market can be an important factor in determining
the product's eventual success and profitability. Early entry may have important
advantages in gaining product acceptance and market share. Moreover, for certain
diseases with limited patient populations, the FDA is prevented under the Orphan
Drug Act, for a period of seven years, from approving more than one application
for the "same" product for a single orphan drug designation, unless a later
product is considered clinically superior. The European Union and other
jurisdictions have or are considering similar laws. Accordingly, the relative
speed with which Biogen can develop products, complete the testing and approval
process and supply commercial quantities of the product to the market is
expected to have an important impact on Biogen's competitive position. In
addition, competition among products approved for sale may be based, among other
things, on patent position, product efficacy, safety, reliability, availability
and price.
AVONEX(R) (INTERFERON BETA - 1a)
As a treatment for multiple sclerosis, AVONEX(R) competes with interferon
beta-1b which is sold in the United States under the brand name Betaseron(R) by
Berlex Laboratories, Inc., a United States affiliate of Schering AG, and is sold
in Europe under the brand name Betaferon(R) by Schering AG. AVONEX(R) also faces
competition from Copaxone(R) glatiramer acetate (also known as copolymer-1). In
the United States, Copaxone(R) is marketed by a partnership between Teva
Pharmaceuticals ("Teva") and Hoechst Marion Roussel, Inc. In addition, in Europe
and Canada, AVONEX(R) competes with Rebif(R), a recombinant interferon beta 1a
product sold by Ares Serono S.A. ("Serono"). In response to Serono's application
for approval of Rebif(R) in the United States for relapsing multiple sclerosis,
the FDA has notified Serono that, based on the data from existing clinical
trials, Rebif(R) cannot be cleared for marketing in the United States for
relapsing multiple sclerosis while the orphan drug status afforded to AVONEX(R)
and Betaseron(R) for that indication is still in effect. Betaseron(R)'s orphan
drug status for relapsing multiple sclerosis expires in 2000. AVONEX(R)'s orphan
drug status for relapsing forms of the disease expires in 2003. AVONEX(R) also
competes in Italy and Spain with FRONE(R), an extracted form of beta interferon
sold by Serono and in Germany with Imurek(R) azathioprine sold by Glaxo Wellcome
GmbH. A number of other companies are working to develop products to treat
multiple sclerosis which may in the future compete with AVONEX(R). AVONEX(R) may
also in the future face competition from off-label uses of drugs approved for
other indications. Biogen believes that competition among treatments for
multiple sclerosis will be based on product performance, service and price.
REGULATION
Biogen's current and contemplated activities and the products and processes
that will result from such activities are, and will be, subject to substantial
government regulation.
Before new pharmaceutical products may be sold in the United States and
other countries, clinical trials of the products must be conducted and the
results submitted to appropriate regulatory agencies for approval. These
clinical trial programs generally involve a three-phase process. Typically, in
Phase 1, trials are conducted in volunteers or patients to determine the early
side effect profile and, perhaps, the pattern of drug distribution and
metabolism. In Phase 2, trials are conducted in groups of
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patients with a specific disease in order to determine appropriate dosages,
expand evidence of the safety profile and, perhaps, determine preliminary
efficacy. In Phase 3, large scale, comparative trials are conducted on patients
with a target disease in order to generate enough data to provide the
statistical proof of efficacy and safety required by national regulatory
agencies. The receipt of regulatory approvals often takes a number of years,
involving the expenditure of substantial resources and depends on a number of
factors, including the severity of the disease in question, the availability of
alternative treatments and the risks and benefits demonstrated in clinical
trials. On occasion, regulatory authorities may require larger or additional
studies, leading to unanticipated delay or expense.
In connection with the commercialization of products resulting from
Biogen's research and development projects, it is necessary, in a number of
countries, to comply with certain regulations relating to the manufacturing and
marketing of such products and to the products themselves. For example, the
commercial manufacturing, marketing and exporting of pharmaceutical products
require the approval of the FDA in the United States and of comparable agencies
in other countries. The FDA has established mandatory procedures and safety
standards which apply to the manufacture, clinical testing and marketing of
pharmaceutical products in the United States. The regulatory requirements and
approval processes for new products in the European Union operate under similar
principles as those applied in the United States. The process of seeking and
obtaining approval of the FDA or regulatory authorities in the European Union or
other regulatory authorities worldwide for a new product and licensing of the
facilities in which the product is produced are likely to take a number of years
and involve the expenditure of substantial resources. In addition, the
regulatory approval processes for products in the United States, the countries
of the European Union and other countries around the world are undergoing or may
undergo changes. Biogen cannot determine what effect any changes in regulatory
approval processes may have on its business.
In the United States, the federal government regularly considers reforming
health care coverage and costs. Resulting legislation or regulatory actions may
have a significant effect on the Company's business. Biogen's ability to
commercialize successfully human pharmaceutical products also may depend in part
on the extent to which reimbursement for the costs of such products and related
treatments will be available worldwide from government health administration
authorities, private health insurers and other organizations. Currently,
substantial uncertainty exists as to the reimbursement status of newly approved
health care products by third-party payors.
Biogen's policy is to conduct relevant research in compliance with the
current United States National Institutes of Health Guidelines for Research
Involving Recombinant DNA Molecules (the "NIH Guidelines") and all other
applicable federal and state regulations. By local ordinance, Biogen is
required, among other things, to comply with the NIH Guidelines in relation to
its facilities in Cambridge, Massachusetts, and is required to operate pursuant
to certain permits.
Various laws, regulations and recommendations relating to safe working
conditions, laboratory practices, the experimental use of animals and the
purchase, storage, movement, import and export and use and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with Biogen's research work are or
may be applicable to its activities. The extent of government regulation which
might result from future legislation or administrative action cannot accurately
be predicted. Certain agreements entered into by Biogen involving exclusive
license rights may be subject to national or supranational antitrust regulatory
control, the effect of which also cannot be predicted.
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EMPLOYEES
At December 31, 1998, Biogen employed 1,114 full-time employees worldwide,
of whom 970 are located in the United States. Of the 1,114 employees,
approximately 244 were engaged in, or directly supported, research and process
development, approximately 365 were involved in, or directly supported,
manufacturing, quality assurance/quality control, regulatory, medical operations
and preclinical and clinical development and approximately 216 were involved in
sales and marketing. In addition, Biogen maintains consulting arrangements with
a number of scientists at various universities and other research institutions
in Europe and the United States, including the nine outside members of its
Scientific Board.
ITEM 2 - PROPERTIES
Biogen's principal executive offices and a majority of its administrative,
manufacturing and research and development facilities are located in Cambridge,
Massachusetts. The Company owns a 150,000 square foot building in Cambridge
which houses laboratories and office space. The Company also leases a total of
approximately 300,992 square feet of additional office, manufacturing and
research and development space in all or part of four other buildings in
Cambridge, consisting of a 67,362 square foot building housing manufacturing
facilities, laboratories and office space, a building with 65,792 square feet of
space containing laboratories, purification and aseptic bottling facilities and
office space, a multi-tenant building where the Company leases approximately
150,838 square feet of office space, and a 17,000 square foot building housing
office space and distribution facilities. The lease expiration dates for the
leased sites range from 2000 to 2012. In 1999, Biogen intends to commence
construction of a new 200,000 square foot facility in Cambridge primarily to
house process development operations. The Company also has development options
for additional property in Cambridge.
In addition to its Cambridge facilities, the Company has a 100,000 square
foot biologics manufacturing facility in Research Triangle Park, North Carolina.
In 1998, the Company received approval from the FDA to use the Research Triangle
Park facility as an additional site for the manufacture of AVONEX(R). The
Company expects to commence construction in 1999 of a 170,000 square foot
addition to the Research Triangle Park facility to add large scale cell culture
manufacturing capacity.
Biogen financed construction of the buildings which it owns in Cambridge,
Massachusetts and Research Triangle Park, North Carolina with term loans. The
loans are secured by the buildings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" incorporated by reference under
Item 7.
The Company's European headquarters consists of 2,900 square meters of
office space in a multi-tenant building in Nanterre, France. The lease for this
space terminates in 2008 with Biogen having the right to terminate the lease
earlier under specified circumstances. The Company has also leased 3,000 square
meters of office and manufacturing space in The Netherlands, and leases small
offices in England, Germany, The Netherlands, Switzerland, Austria and Canada.
The Company believes that its production plants in Cambridge, Massachusetts
and Research Triangle Park, North Carolina and existing outside sources will
allow it to meet, in the near term, its production needs for clinical trials and
its production needs for AVONEX(R). Biogen believes that its
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existing facilities are in compliance with applicable regulatory standards. The
Company expects that additional facilities and outside sources will be required
to meet the Company's future research and production needs.
ITEM 3 - LEGAL PROCEEDINGS
On July 3, 1996, Berlex Laboratories, Inc. ("Berlex") filed suit against Biogen
in the United States District Court for the District of New Jersey alleging
infringement by Biogen of Berlex's "McCormick" patent in the United States in
the production of AVONEX(R). In November 1996, Berlex's New Jersey action was
transferred to the United States District Court in Massachusetts and
consolidated for pretrial purposes with a related declaratory judgment action
previously filed by Biogen. In August 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. In September 1998, the
cases were consolidated for pretrial and trial purposes. Berlex seeks a judgment
granting it damages, a trebling of any damages awarded and a permanent
injunction restraining Biogen from alleged infringement. An unfavorable ruling
in the Berlex suit could have a material adverse effect on the Company's results
of operations and financial condition. The Company believes that it has
meritorious defenses to the Berlex claims; however, the ultimate outcome is not
determinable at this time. A trial is currently scheduled for fall of 1999, but
may be postponed until a later date.
On December 28, 1998, Biogen settled its dispute with ASTA Medica ("ASTA")
of Frankfurt, Germany related to a terminated 1989 agreement among Biogen, ASTA
and Bioferon, a former Biogen joint venture, under which ASTA had obtained a
license to certain intellectual property rights related to recombinant beta
interferon for a number of European countries. Under the terms of the settlement
agreement, ASTA dismissed its lawsuit against Biogen in the U.S. District Court
in Massachusetts and released Biogen from all claims related to the 1989
agreement. As part of the settlement, Biogen made an insignificant cash payment
to ASTA.
In December, 1998, the plaintiffs in a class action suit filed in
Massachusetts Superior Court against CVS and a number of pharmaceutical
companies for alleged violations of privacy rights in connection with certain
marketing practices dismissed Biogen as a defendant in the suit.
For a description of legal proceedings relating to certain patent rights,
see Item 1, "Business-Patents and Other Proprietary Rights."
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company and their
principal positions with the Company. Each individual officer serves at the
pleasure of the Board of Directors.
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Name Age Positions
- ---- --- ---------
James L. Vincent ......... 59 Chairman of the Board of Directors and Chief Executive Officer
James C. Mullen .......... 40 President and Chief Operating Officer
Burt A. Adelman, ......... 46 Vice President - Medical Research
Michael J. Astrue ........ 42 Vice President - General Counsel, Secretary and Clerk
Michael W. Bonney ........ 41 Vice President - Sales and Marketing
Frank A. Burke, Jr........ 55 Vice President - Human Resources
Lawrence S. Daniels....... 56 Vice President - Strategic Planning
Joseph M. Davie .......... 59 Senior Vice President - Research
David C. Dlesk ........... 40 Vice President - Operations
Sylvie L. Gregoire........ 37 Vice President - Regulatory Affairs
Timothy M. Kish .......... 47 Vice President - Finance and Chief Financial Officer
Mark W. Leuchtenberger ... 42 Vice President - International
David D. Pendergast ...... 50 Vice President - Product Development and Quality Assurance
The background of these officers is as follows:
James L. Vincent has been Chairman of the Board of Directors of the Company
since October 1985. Mr. Vincent's current term as Chief Executive Officer began
in December 1998. He previously served as Chief Executive Officer of the Company
from October 1985 until February 1997. He served in the additional capacities of
Chief Operating Officer and President from April 1988 until February 1994.
Before joining Biogen, Mr. Vincent served as Group Vice President, Allied
Corporation and as President, Allied Health & Scientific Products Company, a
subsidiary of Allied Corporation. Before joining Allied Corporation, Mr. Vincent
was with Abbott Laboratories, Inc. where he served in various capacities,
including Executive Vice President, Chief Operating Officer and Director of the
parent corporation. Mr. Vincent is a director of CuraGen Corporation.
James C. Mullen was appointed President and Chief Operating Officer of the
Company in January 1999, after serving as Vice President - International since
August 1996. Mr. Mullen was the Company's Vice President - Operations from
December 1991 until August 1996 and served as Senior Director - Operations from
February 1991 to December 1991. Mr. Mullen joined the Company in 1989. Before
coming to Biogen, Mr. Mullen held various positions of responsibility from 1984
through 1988 at SmithKline-Beckman Corporation, most recently as Director,
Engineering, SmithKline and French Laboratories, Worldwide.
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Burt A. Adelman, M.D. was appointed Vice President - Medical Research in
January 1999 after serving as Vice President - Development Operations since
August 1996. Dr. Adelman served as Vice President - Regulatory Affairs of the
Company from May 1995 until August 1996. From 1991 until May 1995, Dr. Adelman
was Director of Medical Research at Biogen. Dr. Adelman has served as Lecturer
of Medicine at Harvard Medical School and Brigham and Women's Hospital since
1992.
Michael J. Astrue was appointed Vice President - General Counsel, Secretary
and Clerk of the Company in June 1993. Prior to joining the Company, Mr. Astrue
was a partner in the Boston law firm of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. and a managing director of its wholly-owned consulting firm, ML
Strategies, from November 1992 to June 1993. From June 1989 through November
1992, Mr. Astrue served as General Counsel of the United States Department of
Health and Human Services. From April 1988 through June 1989, Mr. Astrue served
as Associate Counsel to the President of the United States.
Michael W. Bonney was appointed Vice President - Sales and Marketing in
January 1999, after serving as Vice President - Sales since September 1995. Mr.
Bonney is also the Program Executive for the Company's AVONEX(R) program. Prior
to joining the Company, Mr. Bonney served as National Business Director for the
U.S. pharmaceutical business of Zeneca Inc. from October 1994 to September 1995
and as Director of Core Business Systems and Re-engineering of Zeneca Inc.'s
U.S. pharmaceutical business from January 1993 until January 1995.
Frank A. Burke, Jr., was appointed Vice President - Human Resources in May
1986 after serving for 12 years in various human resource management positions
at Allied-Signal, Inc., most recently as Director of Compensation and Employee
Benefits of the Engineered Materials Sector.
Lawrence S. Daniels was appointed Vice President - Strategic Planning of
the Company in August 1993 after serving as Vice President Marketing and
Business Development since November 1991. Prior to joining the Company, Mr.
Daniels served for nine years in planning and administrative functions for
Allied-Signal, Inc., most recently as Vice President, Corporate Strategy
Development.
Joseph M. Davie, M.D., Ph.D. was appointed Senior Vice President - Research
of the Company in January 1999 after serving as Vice President - Research since
April 1993. Prior to joining the Company, Dr. Davie was employed by Searle
Corporation where he served as Senior Vice President - Science and Technology
from January 1993 to April 1993, President - Research and Development from July
1987 to January 1993 and Senior Vice President - Discovery Research from January
1987 to July 1987. Dr. Davie is a director of Genovo, Inc.
David C. Dlesk was appointed Vice President - Operations of the Company in
August, 1996 after serving as Senior Director of Manufacturing and Engineering
since May 1996. Prior to joining Biogen, Mr. Dlesk was Chief Executive Officer
of Medical Media Systems, a developer of software for computer-aided surgery.
From 1981 to 1993, Mr. Dlesk held a number of positions with Baxter Healthcare
Corporation, including Director of Business Development, Venture Technology,
General Manager Bentley Laboratories B.V. and Manager of Drug Delivery
Technology Group for the I.V. Systems Division.
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Sylvie L. Gregoire, Pharm.D. was appointed Vice President - Regulatory
Affairs in January 1999. She is also the Program Executive for the Company's
LT-Beta Receptor program, a role she assumed in July 1998. From 1995 until July
1998, Dr. Gregoire served as Director, European Regulatory Affairs of the
Company. Prior to joining Biogen, Dr. Gregoire was Associate Director of
European Regulatory Affairs for Merck Sharp and Dohme (Europe) Inc. from 1991
until the end of 1994.
Timothy M. Kish was appointed Vice President - Finance and Chief Financial
Officer of the Company in August 1993 after serving as Corporate Controller of
the Company since 1986. Prior to joining Biogen, Mr. Kish was Director of
Finance for Allied Health & Scientific Products Company, a subsidiary of Allied
Corporation. Before joining Allied, Mr. Kish served in various capacities at
Bendix Corp., most recently as Executive Assistant to the President.
Mark W. Leuchtenberger was appointed Vice President - International in
January 1999 after serving as Vice President - Sales, Marketing and Business
Development since January 1998. Mr. Leuchtenberger was the Company's Vice
President - Marketing and Sales from October 1996 until January 1998, Director
of Distributor Operations, Europe from September 1996 until October 1996,
Director of Marketing and the Program Executive for AVONEX(R) from 1993 until
September 1996, a Product Manager from 1992 to 1993, and a Market Development
Manager from 1990 to 1992. Prior to joining Biogen, Mr. Leuchtenberger worked
for the consulting firm of Bain & Company from 1987 to 1990.
David D. Pendergast, Ph.D. was appointed Vice President - Product
Development and Quality Assurance in January 1998 after serving as Vice
President - Quality Assurance and Quality Control of the Company since April
1996. Dr. Pendergast joined Biogen from Fisons Pharmaceuticals, Manchester U.K.
where he served as Director, Quality Assurance/Quality Control of Fisons PLC
from 1992 to 1996. Prior to joining Fisons, Dr. Pendergast served, over a twenty
year period, in various capacities at The Upjohn Company, including Vice
President - Quality Assurance from 1989 to 1992.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The section entitled "Market for Securities" in the Company's 1998 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The section entitled "Selected Financial Data" in the Company's 1998 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1998 Annual Report to
Shareholders is hereby incorporated by reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Outlook" in the Company's 1998 Annual
Report to Shareholders is hereby incorporated by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The sections entitled "Consolidated Statements of Income," "Consolidated
Balance Sheets," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Shareholders' Equity," "Notes to Consolidated Financial
Statements" and "Report of Independent Accountants" in the Company's 1998 Annual
Report to Shareholders are hereby incorporated by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
its 1999 Annual Meeting of Stockholders, which the Company intends to file with
the Commission no later than April 30, 1999, are hereby incorporated by
reference.
Information concerning the Company's Executive Officers is set forth in
Part I of this Annual Report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION
The sections entitled "Election of Directors" and "Executive Compensation",
in the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders, which the Company intends to file with the Commission no later
than April 30, 1999, are hereby incorporated by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Share Ownership" in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1999, is hereby incorporated
by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Executive Compensation-Employment Arrangements with
the Company and Certain Transactions" in the Company's definitive proxy
statement for its 1999 Annual Meeting of Stockholders, which the Company intends
to file with the Commission no later than April 30, 1999, is hereby incorporated
by reference.
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PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements and Financial Statement Schedules.
The following documents are filed as a part of this report:
(1) Financial Statements, as required by Item 8 of this Form, incorporated
by reference herein from the 1998 Annual Report to Shareholders attached
hereto as Exhibit 13:
Item Location
- ---- --------
Consolidated Statements of Income Annual Report under the caption "Biogen, Inc. and Subsidiaries Consolidated
Statements of Income."
Consolidated Balance Sheets Annual Report under the caption "Biogen, Inc. and Subsidiaries Consolidated
Balance Sheets."
Consolidated Statements of Cash Flows Annual Report under the caption "Biogen, Inc. and Subsidiaries Consolidated
Statements of Cash Flows."
Consolidated Statements of Shareholders' Equity Annual Report under the caption "Biogen, Inc. and Subsidiaries Consolidated
Statements of Shareholders' Equity."
Notes to Consolidated Financial Statements Annual Report under the caption "Biogen, Inc. and Subsidiaries Notes to
Consolidated Financial Statements."
Reports of Independent Accountants Annual Report under the caption "Report of Independent Accountants."
With the exception of the portions of the 1998 Annual Report to
Shareholders specifically incorporated herein by reference, such report shall
not be deemed filed as part of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts and Reserves
(3) Exhibits
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Exhibit No. Description
- ----------- -----------
(3.1) Articles of Organization, as amended (p)
(3.2) By-Laws, as amended (g)
(4.1) Form of Common Stock Share Certificate (i)
(4.2) Certificate of Designation of Series A Junior Participating
Preferred Stock (d)
(4.3) Rights Agreement dated as of May 8, 1989 between Registrant and
The First National Bank of Boston, as Rights Agent (d)
(10.1) Independent Consulting and Project Agreement dated as of June 29,
1979 between Company and Kenneth Murray (a)**
(10.2) Letter Agreement dated September 11, 1998 with Kenneth Murray
related to renewal of Independent Consulting Agreement *, **
(10.3) Minute of Agreement dated February 5, 1981 among Registrant, The
University Court of the University of Edinburgh and Kenneth Murray
(a)**
(10.4) Independent Consulting Agreement dated as of June 29, 1979 between
Registrant and Phillip A. Sharp (a)**
(10.5) Letter Agreement dated December 11, 1998 with Phillip A. Sharp
related to chairmanship of Scientific Board and renewal of
Independent Consulting Agreement *, **
(10.6) Project Agreement dated as of December 15, 1979 between Registrant
and Phillip A. Sharp (a)**
(10.7) Share Restriction and Repurchase Agreement dated as of December
15, 1979 between Registrant and Phillip A. Sharp (a)**
(10.8) Consulting Agreement dated as of April 1, 1991, as amended,
between Registrant and Alexander G. Bearn (f)**
(10.9) Letter Agreement dated March 24, 1998 with Alexander G. Bearn
relating to renewal of Independent Consulting Agreement *, **
(10.10) Form of Amendment dated July 1, 1988 to Independent Consulting
Agreement between Registrant and Scientific Board Members (c)**
(10.11) Letter regarding employment of James L. Vincent dated September
23, 1985 (b)**
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(10.12) Letter agreement amending employment arrangement between the
Registrant and James L. Vincent dated as of November 21, 1996
(q)**
(10.13) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (g)**
(10.14) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (1995) (o)**
(10.15) Form of Stock Option Agreement with James L. Vincent under 1985
Non-Qualified Stock Option Plan (1997) (s)**
(10.16) Letter dated April 7, 1993 regarding employment of Dr. Joseph M.
Davie (h)**
(10.17) Form of Indemnification Agreement between Registrant and each
Director and Executive Officer (c)**
(10.18) Cambridge Center Lease dated October 4, 1982 between Mortimer
Zuckerman, Edward H. Linde and David Barrett, as Trustees of
Fourteen Cambridge Center Trust, and B. Leasing, Inc. (a)
(10.19) First Amendment to Lease dated January 19, 1989 amending Cambridge
Center Lease dated October 4, 1982 (g)
(10.20) Second Amendment to Lease dated March 8, 1990 amending Cambridge
Center Lease dated October 4, 1982 (g)
(10.21) Third Amendment to Lease dated September 25, 1991 amending
Cambridge Center Lease dated October 4, 1982 (g)
(10.22) Fourth Amendment to Lease dated October 6, 1993, amending
Cambridge Center Lease dated October 4, 1982 (s)
(10.23) Fifth Amendment to Lease dated October 9, 1997, amending Cambridge
Center Lease dated October 4, 1982 (s).
(10.24) Lease dated October 6, 1993 between North Parcel Limited
Partnership and Biogen Realty Limited Partnership (j)
(10.25) 1983 Employee Stock Purchase Plan, as amended and restated through
September 12, 1997 (s)**
(10.26) 1982 Incentive Stock Option Plan, as amended through April 25,
1995 and restated with form of Option Agreement (t)**
(10.27) 1985 Non-Qualified Stock Option Plan, as amended through December
6, 1996 and restated with form of Option Agreement (t) **
23
24
(10.28) 1987 Scientific Board Stock Option Plan, as amended through
September 12, 1997 (s)**
(10.29) Voluntary Executive Supplemental Savings Plan (m)**
(10.30) Amendment No. 1 dated April 25, 1997 to Voluntary Executive
Supplemental Savings Plan (s)**
(10.31) Amendment No. 2 dated March 11, 1998 to Voluntary Executive
Supplemental Savings Plan *,**
(10.32) Amended and Restated Supplemental Executive Retirement Plan (s)**
(10.33) Voluntary Board of Directors Savings Plan (m)**
(10.34) Amendment No. 1 dated April 25, 1997 to Voluntary Board of
Directors Savings Plan (s)**
(10.35) Amendment No. 2 dated March 11, 1998 to Voluntary Board of
Directors Savings Plan *,**
(10.36) Exclusive License and Development Agreement dated December 8, 1979
between Registrant and Schering Corporation (a)
(10.37) Amendatory Agreement dated May 14, 1985 to Exclusive License and
Development Agreement dated December 8, 1979 (b)
(10.38) Amendment and Settlement Agreement dated September 29, 1988 to
Exclusive License and Development Agreement dated December 8, 1979
(g)
(10.39) Amendment dated March 20, 1989 to Exclusive License and
Development Agreement dated December 8, 1979 (g)
(10.40) License Agreement (United States) dated March 28, 1988 between
Registrant and SmithKline Beecham Biologicals, s.a. (as successor
to Smith Kline-R.I.T, s.a.) (g)
(10.41) License Agreement (International) dated March 28, 1988 between
Registrant and SmithKline Beecham Biologicals, s.a. (as successor
to Smith Kline-R.I.T., s.a.) (g)
(10.42) Sublicense Agreement dated as of February 15, 1990 among
Registrant, SmithKline Beecham Biologicals, s.a (as successor to
SmithKline Biologicals, s.a.) and Merck and Co., Inc. (g)
(10.43) Supplemental Amendment and Agreement dated as of March 1, 1994
between the Registrant and Schering Corporation (l)
24
25
(10.44) Agreement and Amendment between the Registrant and Schering
Corporation dated May 1, 1998 (t).
(13) Incorporated portions from Biogen, Inc. 1998 Annual Report to
Shareholders *
(21) Subsidiaries of the Registrant *
(24.1) Consent of PricewaterhouseCoopers LLP *
(27) Financial Data Schedule
(a) Previously filed with the Commission as an exhibit to Registration
Statement on Form S-1, File No. 2-81689 and incorporated herein by
reference.
(b) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1985,
as amended, File No. 0-12042 and incorporated herein by reference.
(c) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988,
File No. 0-12042 and incorporated herein by reference.
(d) Previously filed with the Commission as an exhibit to Registration
Statement on Form 8-A, File No. 0-12042, filed May 26, 1989 and
incorporated herein by reference.
(e) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1990,
File No. 0-12042, and incorporated herein by reference.
(f) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991,
File No. 0-12042, and incorporated herein by reference.
(g) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, File No. 0-12042, and incorporated herein by
reference.
(h) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993, File No. 0-12042, and incorporated herein by
reference.
(i) Previously filed with the Commission as an exhibit to Registration
Statement on Form S-3, File No. 33-51639 filed December 21, 1993,
and incorporated herein by reference.
(j) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993,
File No. 0-12042, and incorporated herein by reference.
25
26
(k) Previously filed with the Commission as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994,
File No. 0-12042, and incorporated herein by reference.
(l) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994, File No. 0-12042, and incorporated herein by
reference.
(m) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, File No. 0-12042, and incorporated herein by
reference.
(n) Previously filed with the Commission as an exhibit to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, File No. 0-12042, and incorporated herein by
reference.
(o) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, File No. 0-12042, and incorporated herein by
reference.
(p) Previously filed with the Commission as an exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, File No. 0-12042, and incorporated herein by
reference.
(q) Previously filed with the Commission as an exhibit to an amendment
to the Registrant's Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1996, File No. 0-12042, and incorporated
herein by reference.
(r) Previously filed with the Commission as an exhibit to Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
File No. 0-12042, and incorporated herein by reference.
(s) Previously filed with the Commission as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File No. 0-12042, and incorporated herein by
reference.
(t) Previously filed with the Commission as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, File No. 0-12042, and incorporated herein by reference.
* Filed herewith
** Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
26
27
During the fourth quarter of 1998, the Company filed a report on Form 8-K
announcing the resignation of James R. Tobin as its President and Chief
Executive Officer.
27
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIOGEN, INC.
By: /s/ James L. Vincent
---------------------------------------
James L. Vincent, Chairman of the Board
Dated March 23, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ James L. Vincent Chairman of the Board and March 23, 1999
- ------------------------ Chief Executive Officer
James L. Vincent (principal executive officer)
/s/ Timothy M. Kish Vice President - Finance and Chief March 23, 1999
- ------------------------ Financial Officer (principal
Timothy M. Kish financial and accounting officer)
/s/ Alexander G. Bearn Director March 23, 1999
- ------------------------
Alexander G. Bearn
/s/ Harold W. Buirkle Director March 23, 1999
- ------------------------
Harold W. Buirkle
/s/ Alan Belzer Director March 23, 1999
- ------------------------
Alan Belzer
/s/ Mary L. Good Director March 23, 1999
- ------------------------
Mary L. Good
/s/ Thomas F. Keller Director March 23, 1999
- ------------------------
Thomas F. Keller
/s/ Roger H. Morley Director March 23, 1999
- ------------------------
Roger H. Morley
/s/ Kenneth Murray Director March 23, 1999
- ------------------------
Kenneth Murray
29
/s/ Phillip A. Sharp Director March 23, 1999
- ----------------------
Phillip A. Sharp
/s/ Alan K. Simpson Director March 23, 1999
- ---------------------
Alan K. Simpson
/s/ James W. Stevens Director March 23, 1999
- ----------------------
James W. Stevens
30
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.2 Letter Agreement dated September 11, 1998, with Kenneth Murray
related to renewal of Independent Consulting Agreement.
10.5 Letter Agreement dated December 11, 1998 with Phillip A. Sharp
related to chairmanship of Scientific Board and renewal of
Independent Consulting Agreement.
10.9 Letter Agreement dated March 24, 1998 with Alexander G. Bearn
related to renewal of Independent Consulting Agreement.
(10.31) Amendment No. 2 dated March 11, 1998 to Voluntary Executive
Supplemental Savings Plan
(10.35) Amendment No. 2 dated March 11, 1998 to Voluntary Board of
Directors Savings Plan
(13) Incorporated portions from Biogen, Inc. 1998 Annual Report to
Shareholders
(21) Subsidiaries of the Registrant
(24.1) Consent of PricewaterhouseCoopers LLP
(27) Financial Data Schedule
31
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Biogen, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 14, 1999 appearing in the 1998 Annual Report to Shareholders of
Biogen, Inc. (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 14, 1999
32
BIOGEN, INC.
Schedule II
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1998, 1997 and 1996
(in thousands)
Balance at Additions Charged
Beginning of to Costs and Balance at
Description Period Expenses Deductions End of Period
- --------------------------------------- ------------- ----------------- ---------- -------------
Allowance For Doubtful Accounts:
Year Ended December 31, 1998 $ 1,645 $ -- $ 3 $ 1,642
============= ================ ========== =============
Year Ended December 31, 1997 $ 1,480 $ 1,196 $ 1,031 $ 1,645
============= ================ ========== =============
Year Ended December 31, 1996 $ -- $ 1,480 $ -- $ 1,480
============= ================ ========== =============
Sales Returns & Allowances,
Discounts and Rebates:
Year Ended December 31, 1998 $ 3,789 $ 26,172 $ 24,369 $ 5,592
============= ================ ========== =============
Year Ended December 31, 1997 $ 1,350 $ 18,387 $ 15,948 $ 3,789
============= ================ ========== =============
Year Ended December 31, 1996 $ -- $ 3,640 $ 2,290 $ 1,350
============= ================ ========== =============