##### Table of Contents



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, 2002

Commission File Number 0-12042

BIOGEN, INC.

(Exact name of registrant as specified in its charter)


|                                                                             |  |                                                
|---------------------------------------------------------------------------- |  | -----------------------------------------------
|Massachusetts
(State or other jurisdiction of
incorporation or organization) |  | 04-3002117
(I.R.S. Employer
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 (XBox) |  | No (Box)

The number of shares of the registrants Common Stock, $0.01 par value,
outstanding as of July 22, 2002 was 148,527,345 shares.

1



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TABLE OF CONTENTS



|                                                  |                                                                                       |  |  |  |  |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION                   
|                                                  | CONDENSED CONSOLIDATED STATEMENTS OF INCOME                                          
|                                                  | CONDENSED CONSOLIDATED BALANCE SHEETS                                                
|                                                  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                      
|                                                  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                 
|                                                  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|PART II  OTHER INFORMATION                      
|SIGNATURES                                       
|EX-3.1 By-Laws (as amended and restated)         
|EX-10.1 1985 Non-Qualified Stock Option Plan     
|EX-10.2 Agreement & Amendment to Rights Agreement
|EX-99.1 Certification Pursuant to Section 906    



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##### Table of Contents



BIOGEN, INC.

INDEX

|                                                                                                |  |             |    | 
|----------------------------------------------------------------------------------------------- |  | ----------- | -- | 
|                                                                                                |  | Page Number
|PART I  FINANCIAL INFORMATION                                                                  |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Condensed Consolidated Statements of Income  Three and six months ended June 30,
2002 and 2001 |  |             | 3  | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Condensed Consolidated Balance Sheets  June 30, 2002 and December 31, 2001                     |  |             | 4  | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Condensed Consolidated Statements of Cash Flows 
Six months ended June 30, 2002 and 2001       |  |             | 5  | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Notes to Condensed Consolidated Financial Statements                                            |  |             | 6  | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Managements Discussion and Analysis of Financial Condition and Results of Operations           |  |             | 11 | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                |  |             |    | 
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|PART II  OTHER INFORMATION                                                                     |  |             | 18 | 



Note concerning trademarks: AVONEX® and AMEVIVE® are registered trademarks of
Biogen, Inc.

2



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##### Table of Contents






PART I  FINANCIAL
INFORMATION




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,        
|                           |                                     |   | 2002               |         | 2001             |   | 2002    |         | 2001
|                           |                                     |   |                    |         |                  |   |         |         |     
|REVENUES:                  |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|                           | Product                             |   | $                  | 250,542 |                  |   | $       | 243,140 |      |   | $       | 516,527 |  |   | $       | 463,137 | 
|                          
|                          
|                          
|                          
|                           | Royalties                           |   |                    | 18,721  |                  |   |         | 17,445  |      |   |         | 41,079  |  |   |         | 34,495  | 
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|Total revenues             |                                     |   | 269,263            |         |                  |   | 260,585 |         |      |   | 557,606 |         |  |   | 497,632 |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|COSTS AND EXPENSES:        |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|                           | Cost of revenues                    |   |                    | 36,209  |                  |   |         | 35,202  |      |   |         | 75,527  |  |   |         | 64,348  | 
|                          
|                          
|                          
|                          
|                           | Research and development            |   |                    | 89,348  |                  |   |         | 79,118  |      |   |         | 171,815 |  |   |         | 151,888 | 
|                          
|                          
|                          
|                          
|                           | Selling, general and administrative |   |                    | 91,567  |                  |   |         | 55,189  |      |   |         | 164,957 |  |   |         | 103,749 | 
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|Total costs and expenses   |                                     |   | 217,124            |         |                  |   | 169,509 |         |      |   | 412,299 |         |  |   | 319,985 |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|Income from operations     |                                     |   | 52,139             |         |                  |   | 91,076  |         |      |   | 145,307 |         |  |   | 177,647 |        
|                          
|                          
|                          
|                          
|Other income, net          |                                     |   | 8,104              |         |                  |   | 11,533  |         |      |   | 15,132  |         |  |   | 27,996  |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|INCOME BEFORE INCOME TAXES |                                     |   | 60,243             |         |                  |   | 102,609 |         |      |   | 160,439 |         |  |   | 205,643 |        
|                          
|                          
|                          
|                          
|Income taxes               |                                     |   | 16,868             |         |                  |   | 30,757  |         |      |   | 44,923  |         |  |   | 61,668  |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|NET INCOME                 |                                     | $ | 43,375             |         |                  | $ | 71,852  |         |      | $ | 115,516 |         |  | $ | 143,975 |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|BASIC EARNINGS PER SHARE   |                                     | $ | 0.29               |         |                  | $ | 0.48    |         |      | $ | 0.78    |         |  | $ | 0.97    |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|DILUTED EARNINGS PER SHARE |                                     | $ | 0.29               |         |                  | $ | 0.47    |         |      | $ | 0.76    |         |  | $ | 0.94    |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|SHARES USED IN COMPUTING:  |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|                          
|                          
|                          
|                          
|Basic earnings per share   |                                     |   | 149,231            |         |                  |   | 148,602 |         |      |   | 148,945 |         |  |   | 148,395 |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        
|Diluted earnings per share |                                     |   | 152,033            |         |                  |   | 153,337 |         |      |   | 152,118 |         |  |   | 153,414 |        
|                           |                                     |   |                    |         |                  |   |         |         |      |   |         |         |  |   |         |        

See Notes to Condensed Consolidated Financial Statements.

3



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##### Table of Contents






BIOGEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                     |                                        |   |             |           |              |   |           |           |  
|------------------------------------ | -------------------------------------- | - | ----------- | --------- | ------------ | - | --------- | --------- | -
|                                     |                                        |   | June 30,    |           | December 31,
|                                     |                                        |   | 2002        |           | 2001        
|                                     |                                        |   |             |           |             
|                                     |                                        |   | (unaudited) |           |              |   |          
|ASSETS                               |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Current assets                       |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents              |   | $           | 30,235    |              |   | $         | 54,042    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Marketable securities                  |   |             | 763,230   |              |   |           | 744,065   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net               |   |             | 181,904   |              |   |           | 177,582   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred tax assets                    |   |             | 50,426    |              |   |           | 44,108    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other current assets                   |   |             | 105,331   |              |   |           | 77,930    |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     | Total current assets                   |   |             | 1,131,126 |              |   |           | 1,097,727 |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Property, plant and equipment        |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Cost                                   |   |             | 844,522   |              |   |           | 727,825   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Less accumulated depreciation          |   |             | 191,689   |              |   |           | 171,827   |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     | Property, plant and equipment, net     |   |             | 652,833   |              |   |           | 555,998   |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Patents, net                         |                                        |   | 17,179      |           |              |   | 16,562    |          
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                        |   | 44,986      |           |              |   | 50,759    |          
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        | $ | 1,846,124   |           |              | $ | 1,721,046 |          
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|LIABILITIES AND SHAREHOLDERS EQUITY |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Current liabilities                  |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                       |   | $           | 59,682    |              |   | $         | 50,944    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Current portion of long-term debt      |   |             | 4,888     |              |   |           | 4,888     |  
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued expenses and other             |   |             | 226,645   |              |   |           | 239,110   |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     | Total current liabilities              |   |             | 291,215   |              |   |           | 294,942   |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Long-term debt, less current portion |                                        |   | 39,854      |           |              |   | 42,297    |          
|                                    
|                                    
|                                    
|                                    
|Other long-term liabilities          |                                        |   | 32,179      |           |              |   | 34,975    |          
|                                    
|                                    
|                                    
|                                    
|Commitments and contingencies        |                                        |   |            |           |              |   |          |          
|                                    
|                                    
|                                    
|                                    
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|Shareholders equity                 |                                        |   |             |           |              |   |           |          
|                                     | Common stock                           |   |             | 1,517     |              |   |           | 1,517     |  
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital             |   |             | 823,393   |              |   |           | 808,076   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Treasury stock, at cost                |   |             | (125,293  | )            |   |           | (176,123  | )
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                      |   |             | 780,601   |              |   |           | 705,893   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income |   |             | 2,658     |              |   |           | 9,469     |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        |   |             |           |              |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Total shareholders equity             |   |             | 1,482,876 |              |   |           | 1,348,832 |  
|                                     |                                        |   |             |           |              |   |           |          
|                                     |                                        | $ | 1,846,124   |           |              | $ | 1,721,046 |          
|                                     |                                        |   |             |           |              |   |           |          

See Notes to Condensed Consolidated Financial Statements.

4



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##### Table of Contents






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

|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |          |          |         |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------------------------------------------ | -------- | ---------------- | ------- | ------ | -------- | -------- | ------- | -
|                                                     |                                                                                     |                                                                   |                                                                                |          | Six Months Ended
|                                                     |                                                                                     |                                                                   |                                                                                |          | June 30,        
|                                                     |                                                                                     |                                                                   |                                                                                |          | 2002             |         | 2001  
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |       
|CASH FLOWS FROM OPERATING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                                                                          |                                                                   | $                                                                              | 115,516  |                  |         | $      | 143,975  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to
net cash provided from operating activities: |                                                                   |                                                                                |          |                  |         |        |          |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Depreciation and amortization                                     |                                                                                |          | 20,530           |         |        |          | 18,200   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Deferred income taxes                                             |                                                                                |          | (105             | )       |        |          | 86       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Tax benefit of stock options                                      |                                                                                |          | 14,294           |         |        |          | 22,622   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Other                                                             |                                                                                |          | 3,851            |         |        |          | 649      |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Realized loss (gain) on sale of non-current marketable securities |                                                                                |          | 301              |         |        |          | (3,321   | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Write-down of non-current marketable securities                   |                                                                                |          | 2,182            |         |        |          |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     | Changes in:                                                       |                                                                                |          |                  |         |        |          |          |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     |                                                                   | Accounts receivable                                                            |          |                  | (833    | )      |          |          | (24,785 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     |                                                                   | Other current and other assets                                                 |          |                  | (43,627 | )      |          |          | 4,711   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     |                                                                   | Accounts payable, accrued expenses and
other current and long-term liabilities |          |                  | (11,211 | )      |          |          | 10,792  |  
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     | Net cash flows from operating activities                          |                                                                                |          | 100,898          |         |        |          | 172,929  |        
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|CASH FLOWS FROM INVESTING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of current marketable securities                                          |                                                                   |                                                                                | (220,539 | )                |         |        | (624,483 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sales and maturities of current marketable securities                 |                                                                   |                                                                                | 201,957  |                  |         |        | 575,863  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sales of non-current marketable securities                            |                                                                   |                                                                                | 493      |                  |         |        | 3,652    |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions of property and equipment                                              |                                                                   |                                                                                | (113,436 | )                |         |        | (91,204  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Additions to patents                                                                |                                                                   |                                                                                | (1,574   | )                |         |        | (2,424   | )       
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     | Net cash flows from investing activities                          |                                                                                |          | (133,099         | )       |        |          | (138,596 | )      
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|CASH FLOWS FROM FINANCING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments on long-term debt                                                        |                                                                   |                                                                                | (2,443   | )                |         |        | (2,444   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of treasury stock                                                         |                                                                   |                                                                                | (8,384   | )                |         |        | (21,443  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of treasury stock related to stock option exercises                        |                                                                   |                                                                                | 18,406   |                  |         |        | 17,192   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                               |                                                                   |                                                                                | 84       |                  |         |        | 12       |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     | Net cash flows from financing activities                          |                                                                                |          | 7,663            |         |        |          | (6,683   | )      
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Effect
of exchange rate changes on cash                                             |                                                                   |                                                                                | 731      |                  |         |        | (415     | )       
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                     |                                                                   | (23,807                                                                        | )        |                  |         | 27,235 |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       |                                                                                     |                                                                   | 54,042                                                                         |          |                  |         | 48,737 |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|CASH AND CASH EQUIVALENTS, END OF PERIOD             |                                                                                     | $                                                                 | 30,235                                                                         |          |                  | $       | 75,972 |         
|                                                     |                                                                                     |                                                                   |                                                                                |          |                  |         |        |         

See Notes to Condensed Consolidated Financial Statements.

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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 2001 Annual Report on Form
10-K. Interim results are not necessarily indicative of the operating results
for the full year.

Effective January 1, 2002, the Company adopted the provisions of Emerging
Issues Task Force Issue No. 01-09 (EITF 01-09) Accounting for Consideration
Given by a Vendor to a Customer or Reseller of the Vendors Products. EITF
01-09 requires the cost of certain vendor consideration to be classified as a
reduction of revenue rather than a sales and marketing expense. The impact of
EITF 01-09 is not significant.

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.

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)  |  | 2002     |        | 2001        
|                |  |          |        |             
|                |  |          |        |              |  |   |        | 
|               
|               
|               
|               
|Raw materials   |  | $        | 20,212 |              |  | $ | 14,754 | 
|               
|               
|               
|               
|Work in process |  |          | 34,204 |              |  |   | 17,004 | 
|               
|               
|               
|               
|Finished goods  |  |          | 25,713 |              |  |   | 20,161 | 
|                |  |          |        |              |  |   |        | 
|                |  | $        | 80,129 |              |  | $ | 51,919 | 
|                |  |          |        |              |  |   |        | 

Biogen capitalizes inventory costs associated with certain products prior to
regulatory approval, based on managements judgment of probable future
commercialization. Biogen would be required to expense previously capitalized
costs related to pre-approval inventory upon a change in such judgment, due to,
among other potential factors, a denial or delay of approval by necessary
regulatory bodies. At June 30, 2002 and December 31, 2001, capitalized
inventory related to AMEVIVE® (alefacept), which has not yet received
regulatory approval, was $20.7 million and $8.4 million, respectively.

Biogen writes down obsolete or otherwise unmarketable inventory to its
estimated net realizable value. If the actual realized value is less than
that estimated by Biogen, additional inventory write-downs may be required. The
Company has not had any material write-downs of inventory for the three and six
months ended June 30, 2002.

2.     FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, (SFAS 133) requires that all derivatives
be recognized on the balance sheet at their

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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 hedge instrument, and any unrealized
gain or loss on the contract is recognized in current earnings within
other income (expense).

As of June 30, 2002, the Company had $13.3 million outstanding under a floating
rate loan collateralized by one of the Companys laboratory and office
buildings in Cambridge, Massachusetts and $31.4 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, representing the cash
requirements of the Company to settle the agreements, was approximately $3.7
million and $3.3 million at June 30, 2002 and December 31, 2001,
respectively, and was included in accrued expenses and other. The
Company has 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, 2002 or in the comparable
period of 2001, 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 nine 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, 2002 was approximately $97.3 million. These contracts
had a fair value of approximately $8.9 million, representing an unrealized
loss, and were included in other current liabilities at June 30, 2002.

For the three and six months ended June 30, 2002, approximately $734,000 and
$620,000, respectively, were recognized as expenses due to hedge
ineffectiveness. For the three and six months ended June 30, 2001, there were
no significant amounts recognized in earnings due to hedge ineffectiveness. For
the three and six months ended June 30, 2002 and 2001, 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 approximately $1.2 million and
$468,000 of losses in product revenue for the settlement of certain effective
cash flow hedge instruments for the three and six months ended June 30, 2002,
respectively. The Company recognized approximately $403,000 and $294,000
of losses in royalty revenue for the settlement of certain effective
cash flow hedge instruments for the three and six months ended June 30, 2002,
respectively. The Company recognized $3.7 million and $6.7 million of gains in
product revenue for the settlement of certain effective cash flow hedge
instruments for the three and six months ended June 30, 2001, respectively.
The Company recognized $974,000 and $1.8 million of gains in royalty revenue
for the settlement of certain effective cash flow hedge instruments for the
three and six months ended June 30, 2001, respectively. 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, 2002 and 2001 was $42.9 million and $79.1 million, respectively.
Comprehensive income for the six months ended June 30, 2002 and 2001 was $108.7
million and $135.3 million, respectively.

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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.

Shares used in calculating basic and diluted earnings per share for the three
and six month periods ending June 30, are as follows:

|                                                              |  |                    |         |                  |  |      |         |      |  |  |         |  |  |  |         | 
|------------------------------------------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                                              |  | Three Months Ended |         | Six Months Ended
|(in thousands)                                                |  | June 30,           |         | June 30,        
|                                                              |  |                    |         |                 
|                                                              |  | 2002               |         | 2001             |  | 2002 |         | 2001
|                                                              |  |                    |         |                  |  |      |         |     
|                                                              |  |                    |         |                  |  |      |         |      |  |  |         |  |  |  |         | 
|                                                             
|                                                             
|                                                             
|                                                             
|Weighted average number of shares
of common stock outstanding |  |                    | 149,231 |                  |  |      | 148,602 |      |  |  | 148,945 |  |  |  | 148,395 | 
|                                                             
|                                                             
|                                                             
|                                                             
|Dilutive stock options                                        |  |                    | 2,802   |                  |  |      | 4,735   |      |  |  | 3,173   |  |  |  | 5,019   | 
|                                                              |  |                    |         |                  |  |      |         |      |  |  |         |  |  |  |         | 
|Shares used in calculating diluted
earnings per share         |  |                    | 152,033 |                  |  |      | 153,337 |      |  |  | 152,118 |  |  |  | 153,414 | 
|                                                              |  |                    |         |                  |  |      |         |      |  |  |         |  |  |  |         | 

Options to purchase approximately 8.4 million and 2.1 million shares were
outstanding at June 30, 2002 and 2001, respectively, but not included in the
computation of diluted earnings per share because the options exercise prices
were greater than the average market price during the period. The put warrants
sold in connection with the Companys stock repurchase program did not have a
material additional dilutive effect.

5.     SHARE REPURCHASE PROGRAM

On December 18, 2000, the Company announced that its Board of Directors had
authorized the repurchase of up to 4 million shares of the Companys common
stock. The repurchased stock provides the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. The Company purchased 145,000 shares through
June 30, 2002 at a cost of $8.4 million. During 2001, the Company repurchased
approximately 1.5 million shares of its common stock under this program at a
cost of $88.3 million. Approximately 2.4 million shares remain authorized for
repurchase under this program at June 30, 2002.

6.     OTHER INCOME, NET

Other income, net consists of the following (in thousands):

|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|----------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                        |  | Three Months Ended |        | Six Months Ended
|                        |  | June 30,           |        | June 30,        
|                        |  |                    |        |                 
|                        |  | 2002               |        | 2001             |  | 2002 |        | 2001
|                        |  |                    |        |                  |  |      |        |     
|Interest income         |  | $                  | 10,466 |                  |  | $    | 10,694 |      |  | $ | 21,064 |   |  | $ | 22,479 |  
|                       
|                       
|                       
|                       
|Interest expense        |  |                    | (909   | )                |  |      | (1,051 | )    |  |   | (1,922 | ) |  |   | (2,089 | )
|                       
|                       
|                       
|                       
|Other income (expense)  |  |                    | (1,453 | )                |  |      | 1,890  |      |  |   | (4,010 | ) |  |   | 7,606  |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|                       
|                       
|                       
|                       
|Total other income, net |  | $                  | 8,104  |                  |  | $    | 11,533 |      |  | $ | 15,132 |   |  | $ | 27,996 |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  

Other income (expense) for the three and six months ended June 30, 2002
includes $2.9 million and $2.8 million, respectively, of losses attributable to
an equity method investee, offset by $1.9

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million of gains from foreign exchange translation. Other income
(expense) for the six months ended June 30, 2002 also includes a $2.2 million
write-down on unrealized losses in certain non-current marketable securities
that were determined to be other than temporary. Other income (expense) for the
three and six months ended June 30, 2001 includes realized gains on the sale of
certain non-current marketable securities totaling approximately
$781,000 and $3.3 million, respectively.

7.     INCOME TAX EXPENSE

Income tax expense as a percentage of pre-tax income was 28% for the three and
six months ended June 30, 2002 and was 30% for the three and six months ended
June 30, 2001. The effective tax rate varied from the U.S. statutory rates for
the first six months of 2002 and 2001 primarily due to higher sales in European
jurisdictions with lower tax rates 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 corporate tax rate will
decline 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®
(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 sought a judgment granting it damages, a
trebling of any damages awarded and a permanent injunction restraining Biogen
from the alleged infringement. A hearing on the parties summary judgment
motions in the case was completed in March 2000. In September 2000, the
District Court rendered final judgment in favor of Biogen and against Berlex
determining that Biogens production of AVONEX did not infringe any of the
claims of the Berlex patents. Berlex has appealed this decision with the Court
of Appeals for the Federal Circuit. Oral arguments were presented by the
parties to the Court of Appeals on November 7, 2001 and a decision is expected
in the second half of 2002. In January 2002, Biogen and Berlex reached a
settlement of the litigation pursuant to which the parties agreed to end the
dispute in return for a payment of $20 million from Biogen to Berlex and the
possibility of a second and final payment from Biogen to Berlex if the Court of
Appeals were to reverse the District Courts previous ruling granting summary
judgment in favor of Biogen. If the Court of Appeals were to rule against
Biogen and return the case to the District Court, Biogen believes that the most
likely decision would require it to make a second and final payment of $55
million to Berlex. In the event the ruling is significantly adverse to Biogen,
the second and final payment to Berlex would be $230 million. As part of the
settlement, Biogen and Berlex agreed not to pursue further litigation about
these patents. Biogen recorded a $20 million charge in Other Income, net in
the fourth quarter of 2001 to account for the first payment to Berlex. The
Company has determined that, based on information currently available, the most
probable outcome is that no additional payments will be required.

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 appealed that
decision and an oral hearing on the appeal took place in December 2000. At the
oral hearing in order to gain reinstatement of the patent, Rentschler narrowed
the patent claims so as to claim only a specific cell line. Biogen does not use
the specific cell line now claimed. 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 previously scheduled for October 2000 has
been set for November 6, 2002. While Biogen believes that the Rentschler II
Patent will be revoked, if the Rentschler II Patent were to be upheld and if

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Rentschler were to obtain, through legal proceedings, a determination that the
Companys sale of AVONEX in Europe infringes a valid Rentschler II Patent, such
result could have a material adverse effect on the Companys results of
operation and financial position.

9.     SEGMENT INFORMATION

The Company operates in one segment, which is the business of developing,
manufacturing and marketing drugs for human health care. 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. The
Company currently derives product revenues from sales of its AVONEX 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.

10.     SIGNIFICANT
EVENT

In the three months ended June 30, 2002, the
Company recorded a $5.8 million charge associated with the retirement
of James L. Vincent as Chairman of the Board and as Director of
Biogen. The severance and other benefits are consistent with his 1996
employment agreement. In July 2002, the Board elected James C. Mullen
as the new Chairman.

11.     NEW ACCOUNTING
PRONOUNCEMENT

In July 2002, the FASB issued SFAS 146, "Accounting
for Costs Associated with Exit or Disposal Activities." SFAS 146
requires that a liability for a cost associated with an exit or
disposal activity be recognized at its fair market value when the
liability is incurred, rather than at the date of an entity's
commitment to an exit plan. The provisions of SFAS 146 are effective
for exit or disposal activities that are initiated after December 31,
2002. The adoption of SFAS 146 is not expected to have a material
effect on the Company's financial statements.

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##### Table of Contents






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® (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.

RESULTS OF OPERATIONS

Effective January 1, 2002, the Company adopted the provisions of Emerging
Issues Task Force Issue No. 01-09 (EITF 01-09) Accounting for Consideration
Given by a Vendor to a Customer or Reseller of the Vendors Products. EITF
01-09 requires the cost of certain vendor consideration to be classified as a
reduction of revenue rather than a sales and marketing expense. The
impact of EITF 01-09 is not significant.

For the quarter ended June 30, 2002, the Company reported net income of $43.4
million or $0.29 per diluted share as compared to $71.9 million or $0.47 per
diluted share for the comparable period of 2001. For the six months ended June
30, 2002, the Company reported net income of $115.5 million or $0.76 per
diluted share as compared to $144 million or $0.94 per diluted share for the
comparable period of 2001.

Total revenues for the quarter ended June 30, 2002 were $269.3 million, as
compared to $260.6 million in the same period of 2001, an increase of $8.7
million or approximately 3%. Total revenues for the six months ended June 30,
2002 were $557.6 million, as compared to $497.6 million in the same period of
2001, an increase of $60 million or approximately 12%.

Product revenues in the current quarter were $250.5 million as compared to
$243.1 million for the same period of 2001, an increase of $7.4 million or
approximately 3%. Product revenues in the six months ended June 30, 2002 were
$516.5 million as compared to $463.1 million for the same period of 2001, an
increase of $53.4 million or approximately 12%. Product revenues from AVONEX
represent approximately 93% of the Companys total revenues in the three and
six months ended June 30, 2002. Product revenues from AVONEX also represented
approximately 93% of the Companys total revenues in the three and six months
ended June 30, 2001. The growth in product revenues in the three and six months
ended June 30, 2002 over the comparable period in 2001 was primarily attributable
to increases in the sales volume of AVONEX in the United States and in the
fifteen member countries of the European Union (EU).
Product revenues in the United States were approximately $175.8 million
for the three months ended June 30, 2002 compared to $173.1 million for
the same period in 2001. Product revenues in the United States were
approximately $373.1 million and $334.9 million for the six months ended
June 30, 2002 and 2001, respectively. The slower than expected growth
in product revenues in the United States was primarily attributable
to inventory reductions by some wholesalers, increased competition
and a softening of the MS marketplace in the United States. AVONEX sales outside of
the United States were approximately $74.7 million and $143.4 million for the
three months and six months ended June 30, 2002 as compared to $70 million and
$128.2 million for the same periods of 2001, respectively.

The Company faces increasing competition in the MS
marketplace worldwide from existing and new MS treatments that may
impact sales of AVONEX. Biogen expects future growth in AVONEX
revenues to be dependent to a large extent on the Companys
ability to compete successfully. Biogen also expects that future
AVONEX sales may be affected by possible slowing of growth in the MS
market. See Outlook-Dependence on AVONEX Sales; see also
the Companys Annual Report on Form 10-K for the period ended on
December 31, 2001 under the headings Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Outlook  Competition.

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Revenues from royalties in the three months ended June 30, 2002 were $18.7
million, an increase of $1.3 million or approximately 7% as compared to $17.4
million of royalty revenue for the same period in 2001. Revenues from royalties
in the six months ended June 30, 2002 were $41.1 million, an increase of $6.6
million or approximately 19% as compared to $34.5 million of royalty revenue
for the same period in 2001. Revenues from royalties represented approximately
7% of total revenues for the three and six months ended June 30, 2002. Revenues
from royalties also represented approximately 7% for the three and six months ended
June 30, 2001. The growth in royalty revenues for the three and six month
periods of 2002 over the comparable periods in 2001 was primarily attributable
to royalties received on increased sales of alpha interferon products. For a
more detailed discussion of royalties, including a discussion on the Companys
current arbitration with Schering-Plough Corporation (Schering-Plough), see
Outlook  Royalty Revenue.

COSTS AND EXPENSES

Total costs and expenses for the three months ended June 30, 2002 were $217.1
million as compared to $169.5 million in the same period of 2001, an increase
of approximately 28%. Total costs and expenses for the six months ended June
30, 2002 were $412.3 million as compared to $320 million in the same period of
2001, an increase of approximately 29%.

Cost of revenues in the three months ended June 30, 2002 totaled $36.2 million
compared to $35.2 million in the same period of 2001, an increase of $1 million
or 3%. Cost of revenues in the six months ended June 30, 2002 totaled $75.5
million compared to $64.3 million in the same period of 2001, an increase of
$11.2 million or 17%. The increase in cost of revenues was attributable to the
higher sales volume of AVONEX. Included in cost of revenues for the three
months ended June 30, 2002 and 2001 is $35 million and $33.9 million,
respectively, of costs related to product revenues and $1.2 million and $1.3
million, respectively, of costs related to royalty revenue. Included in cost of
revenues for the six months ended June 30, 2002 and 2001 is $72.9 million and
$62.2 million, respectively, of costs related to product revenues and $2.6
million and $2.1 million, respectively, of costs related to royalty revenue.
Gross margins on product revenues were approximately 86% for the three months
ended June 30, 2002 and 2001. Gross margins on product revenues decreased to
approximately 86% for the six months ended June 30, 2002 compared to 87% for
the same period in 2001. Gross margins on royalty revenue increased to
approximately 94% for the three months ended June 30, 2002
compared to 93% for
the same period in 2001. Gross margins on royalty revenue were approximately
94% for the six months ended June 30, 2002 and 2001. 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 $89.3 million, an
increase of $10.2 million, or 13%, as compared to $79.1 million for the same
period of 2001. Research and development expenses for the six months ended June
30, 2002 were $171.8 million, an increase of $19.9 million, or 13%, as compared
to $151.9 million for the same period of 2001. The increase was due primarily
to an increase in development costs related to the Companys ongoing
collaborative development programs and increases in clinical trial costs. The Company
expects that, in the near and long-term, research and development
expenses may
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 for AVONEX.

Selling, general and administrative expenses in the second quarter of 2002 were
$91.6 million, an increase of $36.4 million or 66% as compared to the same
period of 2001. Selling, general and administrative expenses in the six months
ended June 30, 2002 were $165 million, an increase of $61.2 million or 59% as
compared to the same period of 2001. These increases were primarily due to an
increase in selling and marketing expenses related to the sale of AVONEX and
increased costs in anticipation of the possible approval of AMEVIVE®
(alefacept). Selling, general and administrative expenses for the second
quarter of 2002 also include approximately $5.8 million of severance and other
benefits related to the retirement of Mr. Vincent as the Chairman of the Board.
If the Company receives regulatory approval to market AMEVIVE in the
United States and the EU, selling, general and administrative
expenses may increase in the near and long term.

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##### Table of Contents



OTHER INCOME, NET

Other income, net consists of the following (in thousands):

|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|----------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                        |  | Three Months Ended |        | Six Months Ended
|                        |  | June 30, 2002      |        | June 30, 2002   
|                        |  |                    |        |                 
|                        |  | 2002               |        | 2001             |  | 2002 |        | 2001
|                        |  |                    |        |                  |  |      |        |     
|Interest income         |  | $                  | 10,466 |                  |  | $    | 10,694 |      |  | $ | 21,064 |   |  | $ | 22,479 |  
|                       
|                       
|                       
|                       
|Interest expense        |  |                    | (909   | )                |  |      | (1,051 | )    |  |   | (1,922 | ) |  |   | (2,089 | )
|                       
|                       
|                       
|                       
|Other income (expense)  |  |                    | (1,453 | )                |  |      | 1,890  |      |  |   | (4,010 | ) |  |   | 7,606  |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  
|                       
|                       
|                       
|                       
|Total other income, net |  | $                  | 8,104  |                  |  | $    | 11,533 |      |  | $ | 15,132 |   |  | $ | 27,996 |  
|                        |  |                    |        |                  |  |      |        |      |  |   |        |   |  |   |        |  

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 2002 was $8.1 million as compared to $11.5
million in 2001, a decrease of $3.4 million. Other income, net in the six
months ended June 30, 2002 was $15.1 million as compared to $28 million in
2001, a decrease of $12.9 million.
Interest income for the three months ended June 30, 2002 was $10.5 million
compared to $10.7 million in the same period of 2001, a decrease of $0.2
million or 2%. Interest income for the first six months of 2002 was $21.1
million compared to $22.5 million in the same period of 2001, a decrease of
$1.4 million or 6%. The decreases in interest income for the three and six
months were due primarily to lower average yields on invested funds. The
Company expects interest income to vary based on changes in the amount of funds
invested and fluctuations in interest rates.

Interest expense in the three months ended June 30, 2002 was approximately $0.9
million compared to $1.1 million for the same period in 2001, a decrease of
$0.2 million or 14%. Interest expense for the six months ended June 30, 2002
was approximately $1.9 million compared to $2.1 million for the same period in
2001, a decrease of $0.2 million or 8% due to lower borrowings outstanding.

Other income (expense) decreased by $3.3 million for the second quarter of 2002
compared to the same period in 2001. Other income (expense) decreased by $11.6
million for the six months ended June 30, 2002 compared to the same period in
2001. The decrease in other income (expense) for the six months ended June 30,
2002 is due primarily to the Companys recognition of $2.8 million of losses
attributable to an equity method investee and realization of losses of
approximately $2.5 million from the writedown and sales of certain non-current
marketable securities in the first six months of 2002. This compares to realizing
$3.3 million of gains from sales of certain non-current marketable securities
in the first six months of 2001.

INCOME TAXES

Income tax expense as a percentage of pre-tax income was 28% for the three and
six months ended June 30, 2002 and was 30% for the three and six months ended
June 30, 2001. The effective tax rate varied from the U.S. statutory rates for
the first six months of 2002 and 2001 primarily due to higher sales in European
jurisdictions with lower tax rates 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 corporate tax rate will
decline as international sales increase.

FINANCIAL CONDITION

At June 30, 2002, cash, cash equivalents and short-term marketable securities
were $793.5 million compared with $798.1 million at December 31, 2001, a
decrease of $4.6 million. Working capital increased

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$37.1 million to $839.9 million. Net cash from operating activities (which
included net income) for the six month period ending June 30,
2002 was $100.9
million compared with $172.9 million for the same period in 2001, and included
tax benefits related to stock options of $14.3 million, and a non-cash
adjustment of $2.2 million related to the write-down of non-current marketable
securities. Cash outflows from investing activities during the six months ended
June 30, 2002 included investments in property and equipment and patents of
$115 million and net cash outflows from investing activities related to
marketable securities totaling $18.1 million. Significant cash outflows from
financing activities included $8.4 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 $18.4 million from common
stock option exercises and employee stock purchase plan activity.

On December 18, 2000, the Company announced that its Board of Directors had
authorized the repurchase of up to 4 million shares of the Companys common
stock. The repurchased stock provides the Company with treasury shares for
general corporate purposes, such as stock to be issued under employee stock
option and stock purchase plans. The Company purchased 145,000 shares during
the first six months of 2002 at a cost of $8.4 million. During 2001, the
Company repurchased approximately 1.5 million shares of its common stock under
this program at a cost of $88.3 million. Approximately 2.4 million shares
remain authorized for repurchase under this program at June 30, 2002.

The Companys construction of the large scale manufacturing plant in Research
Triangle Park, North Carolina was substantially completed in the first quarter
of 2002. The Company began further expansion of its Research Triangle Park,
North Carolina complex in 2001 with commencement of construction of a
laboratory office building and additional manufacturing capacity. These
additional projects are expected to be completed by the summer of 2003 at a
total cost of approximately $92 million. As of June 30, 2002, the Company had
committed $68 million for construction costs related to these additional
projects, of which $43 million had been spent. The Company is also completing
plans to build a manufacturing plant in Denmark. The Company expects that
construction will commence in 2003 at an estimated cost of $250 million. At
June 30, 2002, $32 million had been authorized for costs related to
the manufacturing plant in Denmark, of which $14 million had been spent.

Several legal proceedings involving the Company were pending during the current
quarter. 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, 2001 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 PRONOUNCEMENT

In July 2002, the FASB issued SFAS 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized at its
fair market value when the liability is incurred, rather than at the
date of an entitys commitment to an exit plan. The provisions of
SFAS 146 are effective for exit or disposal activities that are
initiated after December 31, 2002. The adoption of SFAS 146 is not
expected to have a material effect on the Company's financial
statements.

OUTLOOK

SAFE HARBOR

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, timing of clinical trials, potential outcome of
clinical programs, regulatory approvals, marketing of additional products,
impact of competitive products, anticipated outcome of pending or anticipated
litigation, arbitration and patent-related proceedings, facility expansion and
the value of investments in certain marketable securities. These and all other
forward-looking statements are made based on Biogens current belief as to the
outcome and timing of such future events. Factors which could cause actual
results to differ from Biogens expectations and which could negatively impact
Biogen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

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Operations. Biogen does not undertake any obligation to publicly update
any forward-looking statements.

DEPENDENCE ON AVONEX® SALES

Biogens ability to sustain increases in
revenues and profitability until at least approval and successful
launch of a second product will be primarily dependent on the level
of revenues and profitability from AVONEX sales. The level of
revenues from sales of AVONEX will depend on a number of factors,
including: continued market acceptance of AVONEX worldwide;
Biogens ability to maintain a high level of patient
satisfaction with AVONEX; the nature of regulatory pricing decisions
related to AVONEX worldwide; the level of growth, if any, in the
overall MS marketplace; the extent to which AVONEX continues to
receive and maintains reimbursement coverage; the nature of
legislative actions affecting the pharmaceutical industry; the
success of ongoing development related to AVONEX in expanded MS
indications; the continued accessibility of third parties to vial,
label, and distribute AVONEX on acceptable terms; success in revoking
the Rentschler II patent since if the patent were to be upheld and if
Rentschler were to obtain, through legal proceedings, a determination
that Biogens sale of AVONEX in Europe infringes a valid
Rentschler II patent, such result could have a material adverse
effect on the Companys results of operation and financial
condition; and the Companys ability to sustain market share of AVONEX in light of the impact of competitive products for
the treatment of MS. AVONEX competes in the United States and EU
markets primarily with four products: COPAXONE®, sold by Teva
Neuroscience, Inc. (Teva) in the United States and
co-promoted by Teva and Aventis Pharma in the EU, BETASERON®,
sold by Berlex in the United States and sold under the name of
BETAFERON® by Schering A.G. in the EU, NOVANTRONE®, sold by
Amgen, Inc. and REBIF® which was launched in the United States
by Serono in March 2002. Serono announced in July 2002 that it
reached an agreement to co-promote REBIF in the United States with
Pfizer Inc. The Company expects there to be aggressive competition
among these companies in the MS market worldwide. AVONEX sales may
also be affected by a possible slowing in growth of the MS market.
See the Companys Annual Report on Form 10-K for the period
ended on December 31, 2001 under the headings Managements
Discussion and Analysis of Financial Condition and Results of
Operation  Outlook  Competition and  Business
 Patents and Other Proprietary Rights.

ROYALTY REVENUE

Biogen receives royalty revenues which, prior to 2001, contributed a
significant amount to its overall profitability. Royalty revenues have
decreased significantly in recent years primarily as the result of patent
expirations, see Outlook  Patents and Other Proprietary Rights, and a
royalty dispute with Schering-Plough. Biogen is currently in
arbitration with Schering-Plough on the issue of whether and to what extent
Schering-Plough has an obligation to pay royalties in the United States on
sales of its alpha interferon products. Schering-Plough has taken the position
that a Court of Appeals decision affirming a District Courts ruling which
narrowed the scope of the claims of Biogens United States alpha interferon
patent (the 901 Patent) allowed it to discontinue royalty payments to Biogen
in the United States on sales of its alpha interferon products. The Court of
Appeals decision came as part of a suit filed by Schering-Plough, as Biogens
exclusive licensee, against Amgen, Inc. (Amgen) to enforce the 901 Patent
which Schering-Plough claimed was infringed by Amgens consensus interferon
product. Biogen disagrees with Schering-Ploughs position and has filed for
arbitration to compel payment of unpaid past royalties and to ensure payment of
royalties due in the future under the license agreement. Given
Schering-Ploughs history of taking aggressive positions in contract
interpretation, Biogen has included claims in the arbitration which would
resolve issues related to future royalty payments to pre-empt any potential
challenges by Schering-Plough. These claims include asking the arbitration
panel to confirm Schering-Ploughs obligation to commence royalty payments in
July 2002 (the expiration date of the 901 Patent) based on a patent application
owned by F. Hoffman-LaRoche (Roche) and Genentech, Inc. (Genentech). The
agreement between Biogen and Schering-Plough extending Schering-Ploughs
royalty obligation beyond the expiration date of the 901 Patent was part of the
settlement of a lawsuit between Biogen and Roche/Genentech. In return for
Schering-Ploughs agreement to extend its royalty obligation, Biogen settled
the lawsuit with Roche/Genentech and Roche granted Schering-Plough an exclusive
license for Schering-Plough to sell its products under the Roche/Genentech
patent rights that were the subject of the dispute. Biogen intends to
vigorously pursue its claims against Schering-Plough, but there is no guarantee
that Biogen will be successful in its efforts.

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There are a number of other factors which could also cause the actual level of
royalty revenue to differ from Biogens expectations. For example, pricing
reforms, health care reform initiatives, other legal and regulatory
developments and the introduction of competitive products may have an impact on
product sales by Biogens licensees. In addition, sales levels of products sold
by Biogens licensees may fluctuate from quarter to quarter due to the timing
and extent of major events such as new indication approvals or government
sponsored programs. Since Biogen is not involved in the development or sale of
products by its licensees, it cannot be certain of the timing or potential
impact of factors which may affect sales by licensees. See Outlook  Patents
and Other Proprietary Rights.

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 regarding the McCormick patents, and regulatory matters, see
the Companys Annual Report on Form 10-K for the period ended December 31, 2001
under the headings Business  Risks Associated with Drug Development,
Business Patents and Other Proprietary Rights, Business  Regulation,
Legal Proceedings and Managements Discussion and Analysis of Financial
Condition and Results of Operations  Outlook.

PRODUCTS

AVONEX is currently the only product sold by Biogen. Biogens long-term
viability and growth will depend on the successful development and
commercialization of other products from its research and development
activities and collaborations.

Biogen expects that its next product on the market will be AMEVIVE. The
applications for marketing approval of AMEVIVE are currently under review by
both the FDA and regulatory authorities in the EU. On May 23, 2002, the
Dermatologic and Ophthalmic Drugs Advisory Committee of the FDA voted to
recommend AMEVIVE for marketing approval. In June 2002, Biogen received a
Complete Response Letter from the FDA on the AMEVIVE filing. No new clinical
trials of AMEVIVE were requested prior to approval. The FDA proposed
post-marketing clinical studies to further profile the safety and effectiveness
of AMEVIVE. Biogen is working closely with the FDA to address the questions
raised in the letter and move forward rapidly in the approval process. Approval
of AMEVIVE is subject to Biogens ability to work with the FDA to adequately
address the questions and provide the clarification and information requested
in the Complete Response Letter. Approval is also subject to the other risks
and uncertainties inherent in drug development, including the risk of
unexpected new data or information. Even if approved, there is no assurance
that AMEVIVE will be free from technical issues affecting commercialization,
manufacturing, or intellectual property disputes or that it will achieve its
market potential.

Biogen 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, collaborations with third parties,
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. Many important factors affect Biogens ability to successfully
develop and commercialize AMEVIVE and its other potential products, 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 obtain reimbursement coverage for the
products, to receive required regulatory approvals, to be capable of producing
drug candidates in commercial quantities at reasonable costs, to compete
successfully against other products and to market products successfully.
Success in early stage clinical trials or preclinical work does not ensure that
later stage or larger scale clinical trials will be successful. Even if later
stage clinical trials are successful, the risk exists that unexpected concerns
may arise from analysis of data or from additional data or that obstacles may
arise or issues be identified in connection with review of clinical data with
regulatory authorities or that regulatory authorities may disagree with the
Companys view of the data or require additional data or information or
additional studies. There can be no assurance that Biogen will be successful in
its efforts to develop and commercialize new products.

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PATENTS AND OTHER PROPRIETARY RIGHTS

Biogen has numerous issued patents and patent applications pending on a number
of its processes and products. Biogen has also obtained rights to certain
patents under licenses with third parties which provide for the payment of
royalties. There can be no assurances that Biogens existing patents or others,
if obtained, will substantially protect or commercially benefit Biogen. In
addition, Biogen does not know to what extent its pending patent applications
or patent applications licensed from third parties will be granted or whether
any of Biogens patents will prevail if they are challenged in litigation.
Also, there is also no assurance that third parties have not or will not be
granted patents claiming subject matter necessary to Biogens business. 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 patent 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 host cells. Genentech has offered to Biogen and others in the
industry non-exclusive licenses under some of those patents and patent
applications for various proteins and in various fields of use, but not for
others. Biogen is also aware of certain patents held by Genentech relating to
immunoadhesin technology that Genentech may take the position are valid and
infringed by Biogens future commercial activities with AMEVIVE. Biogen is
evaluating these patents to determine if a license should be taken. 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, and 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.

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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 14,
2002.                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Not applicable.                                                                                                                                                                                                                                       
|   
|(c) |  | A proposal to elect Thomas F. Keller, Roger H. Morley, James C.
Mullen and Phillip A. Sharp as directors to serve for a three year term
ending in 2005 and until their successors are duly elected and qualified
was approved with the following vote:

|                 |  |     |             |          |  |  |           | 
|---------------- |  | --- | ----------- | -------- |  |  | --------- | 
|Nominee          |  | For |             | Abstains
|                
|Thomas F. Keller |  |     | 110,079,122 |          |  |  | 9,111,849 | 
|                
|                
|                
|                
|Roger H. Morley  |  |     | 110,692,346 |          |  |  | 8,498,625 | 
|                
|                
|                
|                
|James C. Mullen  |  |     | 110,753,355 |          |  |  | 8,437,616 | 
|                
|                
|                
|                
|Phillip A. Sharp |  |     | 110,799,693 |          |  |  | 8,391,278 | 



|    |  | A proposal to ratify the selection of PricewaterhouseCoopers LLP as the
Companys independent accountants for the fiscal year ending December 31,
2002 was approved with 113,018,285 affirmative votes, 3,243,940 negative
votes, and 2,925,456 abstentions.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(d) |  | Not applicable.                                                                                                                                                                                                                                             

Item 5  Other Information

None.

Item 6  Exhibits and Reports on Form 8-K



|(a)  |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                     
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|3.1  |  | By-Laws (as amended and restated through June 13, 2002).                                                                                                                                                                                                                                                                                                                                                     
|    
|10.1 |  | 1985 Non-Qualified Stock Option Plan (as amended and restated through
June 13, 2002, effective as of June 1, 2002).                                                                                                                                                                                                                                                                                          
|    
|10.2 |  | Agreement and Amendment to Rights Agreement dated as of May 31, 2002
between the Registrant, State Street Bank and Trust Company, as the old
Rights Agent, and EquiServe, Inc., as the new Rights Agent, amending the
Rights Agreement, dated as of May 8, 1999, between the Registrant and
State Street Bank and Trust Company (successor in interest to First
National Bank of Boston) as the Rights Agent.
|    
|99.1 |  | Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                      
|    
|(b)  |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                                          
|    
|     |  | None.                                                                                                                                                                                                                                                                                                                                                                                                        

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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 14, 2002 |  | /s/ Peter N. KelloggExecutive Vice President  Finance and
   Chief Financial Officer



19