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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 September 30, 2003

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 [ X ]       No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934)

Yes [ X ]       No [  ]

The number of shares of the registrants Common Stock, $0.01 par value,
outstanding as of September 30, 2003 was 149,497,141 shares.





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|                                               |                                                                                       |  |  |  |  |  |  | 
|---------------------------------------------- | ------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                               | 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-31.1 SECTION 302 CERTIFICATION OF THE CEO  
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO  
|EX-32.1 SECTION 906 CERTIFICATION OF CEO & CFO



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BIOGEN, INC.

INDEX

|                                                                                                      |                                                                                            |  |        |  | 
|----------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ |  | ------ |  | 
|                                                                                                      |                                                                                            |  | Page  
|                                                                                                      |                                                                                            |  | Number
|                                                                                                      |                                                                                            |  |       
|PART I  FINANCIAL INFORMATION                                                                        |                                                                                            |  |        | 
|Condensed Consolidated Statements of Income  Three and nine months ended September 30, 2003 and 2002 |                                                                                            |  | 3      | 
|Condensed Consolidated Balance Sheets  September 30, 2003 and December 31, 2002                      |                                                                                            |  | 4      | 
|Condensed Consolidated Statements of Cash Flows  Nine months ended September 30, 2003 and 2002       |                                                                                            |  | 5      | 
|Notes to Condensed Consolidated Financial Statements                                                  |                                                                                            |  | 6      | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                 |                                                                                            |  | 15     | 
|PART II  OTHER INFORMATION                                                                           |                                                                                            |  | 26     | 
|                                                                                                     
|                                                                                                     
|                                                                                                      | Note concerning trademarks: AVONEX® and AMEVIVE® are registered trademarks of
Biogen, Inc. |  |        |  | 
|                                                                                                     

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BIOGEN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)

|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |         | 
|--------------------------- | ----------------------------------- | - | ------------------ | ------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                            |                                     |   | Three months ended |         | Nine months ended
|                            |                                     |   | September 30,      |         | September 30,    
|                            |                                     |   | 2003               |         | 2002              |   | 2003    |         | 2002
|                            |                                     |   |                    |         |                   |   |         |         |     
|REVENUES:                   |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|                            | Product                             |   | $                  | 310,109 |                   |   | $       | 261,563 |      |   | $       | 881,435 |  |   | $       | 778,090 | 
|                            | Royalties                           |   |                    | 28,556  |                   |   |         | 26,765  |      |   |         | 100,439 |  |   |         | 67,844  | 
|                            | Contract                            |   |                    | 3,117   |                   |   |         |        |      |   |         | 6,253   |  |   |         |        | 
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|Total revenues              |                                     |   | 341,782            |         |                   |   | 288,328 |         |      |   | 988,127 |         |  |   | 845,934 |        
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|COSTS AND EXPENSES:         |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|                            | Cost of product revenues            |   |                    | 52,325  |                   |   |         | 40,304  |      |   |         | 139,612 |  |   |         | 113,240 | 
|                            | Cost of royalty revenues            |   |                    | 1,939   |                   |   |         | 1,746   |      |   |         | 6,564   |  |   |         | 4,337   | 
|                            | Research and development            |   |                    | 124,434 |                   |   |         | 104,551 |      |   |         | 325,623 |  |   |         | 276,366 | 
|                            | Selling, general and administrative |   |                    | 89,379  |                   |   |         | 72,646  |      |   |         | 276,949 |  |   |         | 237,603 | 
|                            | Merger related
expenses             |   |                    | 2,839   |                   |   |         |        |      |   |         | 6,643   |  |   |         |        | 
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |         | 
|Total costs and expenses    |                                     |   | 270,916            |         |                   |   | 219,247 |         |      |   | 755,391 |         |  |   | 631,546 |        
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|Income from operations      |                                     |   | 70,866             |         |                   |   | 69,081  |         |      |   | 232,736 |         |  |   | 214,388 |        
|Other income (expense), net |                                     |   | 5,809              |         |                   |   | (10,459 | )       |      |   | 12,556  |         |  |   | 4,673   |        
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|INCOME BEFORE INCOME TAXES  |                                     |   | 76,675             |         |                   |   | 58,622  |         |      |   | 245,292 |         |  |   | 219,061 |        
|Income taxes                |                                     |   | 21,469             |         |                   |   | 16,414  |         |      |   | 68,682  |         |  |   | 61,337  |        
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|NET INCOME                  |                                     | $ | 55,206             |         |                   | $ | 42,208  |         |      | $ | 176,610 |         |  | $ | 157,724 |        
|                            |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|BASIC EARNINGS PER SHARE    |                                     | $ | 0.37               |         |                   | $ | 0.28    |         |      | $ | 1.18    |         |  | $ | 1.06    |        
|DILUTED EARNINGS PER SHARE  |                                     | $ | 0.36               |         |                   | $ | 0.28    |         |      | $ | 1.17    |         |  | $ | 1.04    |        
|SHARES USED IN COMPUTING:   |                                     |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        
|Basic earnings per share    |                                     |   | 150,134            |         |                   |   | 149,521 |         |      |   | 149,746 |         |  |   | 149,137 |        
|Diluted earnings per share  |                                     |   | 151,823            |         |                   |   | 151,397 |         |      |   | 151,586 |         |  |   | 151,878 |        

See Notes to Condensed Consolidated Financial Statements.

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

|                                     |                                        |   |               |           |              |   |           |           |  
|------------------------------------ | -------------------------------------- | - | ------------- | --------- | ------------ | - | --------- | --------- | -
|                                     |                                        |   | September 30, |           | December 31,
|                                     |                                        |   | 2003          |           | 2002        
|                                     |                                        |   |               |           |             
|                                     |                                        |   | (unaudited)   |           |              |   |          
|ASSETS                               |                                        |   |               |           |              |   |           |          
|Current assets                       |                                        |   |               |           |              |   |           |          
|                                     | Cash and cash equivalents              |   | $             | 114,360   |              |   | $         | 45,113    |  
|                                     | Marketable securities                  |   |               | 811,185   |              |   |           | 821,996   |  
|                                     | Accounts receivable, net               |   |               | 211,747   |              |   |           | 171,067   |  
|                                     | Deferred tax assets                    |   |               | 28,315    |              |   |           | 38,592    |  
|                                     | Inventory                              |   |               | 93,983    |              |   |           | 95,378    |  
|                                     | Other current assets                   |   |               | 37,169    |              |   |           | 43,878    |  
|                                     |                                        |   |               |           |              |   |           |          
|                                     | Total current assets                   |   |               | 1,296,759 |              |   |           | 1,216,024 |  
|                                     |                                        |   |               |           |              |   |           |          
|Property, plant and equipment        |                                        |   |               |           |              |   |           |          
|                                     | Cost                                   |   |               | 1,039,355 |              |   |           | 953,805   |  
|                                     | Less accumulated depreciation          |   |               | 259,976   |              |   |           | 215,746   |  
|                                     |                                        |   |               |           |              |   |           |          
|                                     | Property, plant and equipment, net     |   |               | 779,379   |              |   |           | 738,059   |  
|                                     |                                        |   |               |           |              |   |           |          
|Patents, net                         |                                        |   | 17,245        |           |              |   | 15,994    |          
|Other assets                         |                                        |   | 56,864        |           |              |   | 36,911    |          
|                                     |                                        |   |               |           |              |   |           |          
|                                     |                                        | $ | 2,150,247     |           |              | $ | 2,006,988 |          
|                                     |                                        |   |               |           |              |   |           |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY |                                        |   |               |           |              |   |           |          
|Current liabilities                  |                                        |   |               |           |              |   |           |          
|                                     | Accounts payable                       |   | $             | 34,345    |              |   | $         | 64,876    |  
|                                     | Current portion of long-term debt      |   |               | 4,888     |              |   |           | 4,888     |  
|                                     | Current taxes payable                  |   |               | 89,208    |              |   |           | 73,824    |  
|                                     | Accrued expenses and other             |   |               | 155,188   |              |   |           | 182,745   |  
|                                     |                                        |   |               |           |              |   |           |          
|                                     | Total current liabilities              |   |               | 283,629   |              |   |           | 326,333   |  
|                                     |                                        |   |               |           |              |   |           |          
|Long-term debt, less current portion |                                        |   | 34,161        |           |              |   | 37,410    |          
|Long-term deferred tax liabilities   |                                        |   | 33,696        |           |              |   | 33,678    |          
|Other long-term liabilities          |                                        |   | 21,835        |           |              |   | 14,146    |          
|Commitments and contingencies        |                                        |   |              |           |              |   |          |          
|Shareholders equity                 |                                        |   |               |           |              |   |           |          
|                                     | Common stock                           |   |               | 1,517     |              |   |           | 1,517     |  
|                                     | Additional paid-in capital             |   |               | 842,427   |              |   |           | 829,993   |  
|                                     | Treasury stock, at cost                |   |               | (58,695   | )            |   |           | (90,844   | )
|                                     | Retained earnings                      |   |               | 957,484   |              |   |           | 838,756   |  
|                                     | Accumulated other comprehensive income |   |               | 34,193    |              |   |           | 15,999    |  
|                                     |                                        |   |               |           |              |   |           |          
|                                     | Total shareholders equity             |   |               | 1,776,926 |              |   |           | 1,595,421 |  
|                                     |                                        |   |               |           |              |   |           |          
|                                     |                                        | $ | 2,150,247     |           |              | $ | 2,006,988 |          
|                                     |                                        |   |               |           |              |   |           |           |  

See Notes to Condensed Consolidated Financial Statements.

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

|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |          |          |         |  
|---------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | -------- | ----------------- | ------- | ------ | -------- | -------- | ------- | -
|                                                     |                                                                                     |                                                                   |                                                                                                       |          | Nine months ended
|                                                     |                                                                                     |                                                                   |                                                                                                       |          | September 30,    
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                  
|                                                     |                                                                                     |                                                                   |                                                                                                       |          | 2003              |         | 2002  
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |       
|CASH FLOWS FROM OPERATING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     | Net income                                                                          |                                                                   | $                                                                                                     | 176,610  |                   |         | $      | 157,724  |         
|                                                     | Adjustments to reconcile net income to net cash provided from operating activities: |                                                                   |                                                                                                       |          |                   |         |        |          |         
|                                                     |                                                                                     | Depreciation and amortization                                     |                                                                                                       |          | 44,894            |         |        |          | 31,357   |        
|                                                     |                                                                                     | Tax benefit of stock options                                      |                                                                                                       |          | 11,910            |         |        |          | 16,283   |        
|                                                     |                                                                                     | Equity in net loss of unconsolidated affiliate                    |                                                                                                       |          |                  |         |        |          | 3,740    |        
|                                                     |                                                                                     | Stock based compensation                                          |                                                                                                       |          | 524               |         |        |          | 1,552    |        
|                                                     |                                                                                     | Realized (gain) loss on sale of non-current marketable securities |                                                                                                       |          | (2,172            | )       |        |          | 301      |        
|                                                     |                                                                                     | Impairment of non-current investments or marketable securities    |                                                                                                       |          | 4,870             |         |        |          | 10,095   |        
|                                                     |                                                                                     | Writedown of inventory to net realizable value                    |                                                                                                       |          | 17,443            |         |        |          |         |        
|                                                     |                                                                                     | Loan loss reserve                                                 |                                                                                                       |          |                  |         |        |          | 10,500   |        
|                                                     |                                                                                     | Changes in:                                                       |                                                                                                       |          |                   |         |        |          |          |        
|                                                     |                                                                                     |                                                                   | Accounts receivable                                                                                   |          |                   | (37,006 | )      |          |          | 22,729  |  
|                                                     |                                                                                     |                                                                   | Inventory                                                                                             |          |                   | (16,048 | )      |          |          | (38,333 | )
|                                                     |                                                                                     |                                                                   | Other current and other assets                                                                        |          |                   | (12,799 | )      |          |          | (8,309  | )
|                                                     |                                                                                     |                                                                   | Accounts payable, accrued
expenses, current taxes payable
and other current and long-term
liabilities |          |                   | (36,136 | )      |          |          | (40,041 | )
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     |                                                                                     | Net cash flows from operating activities                          |                                                                                                       |          | 152,090           |         |        |          | 167,598  |        
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|CASH FLOWS FROM INVESTING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     | Purchases of current marketable securities                                          |                                                                   |                                                                                                       | (400,745 | )                 |         |        | (319,965 | )       
|                                                     | Proceeds from sales and maturities of current marketable securities                 |                                                                   |                                                                                                       | 416,156  |                   |         |        | 300,649  |         
|                                                     | Proceeds from sales of non-current marketable securities                            |                                                                   |                                                                                                       | 3,715    |                   |         |        | 493      |         
|                                                     | Proceeds from withdrawal from an equity fund                                        |                                                                   |                                                                                                       | 7,217    |                   |         |        |         |         
|                                                     | Acquisitions of property and equipment, net                                         |                                                                   |                                                                                                       | (77,990  | )                 |         |        | (162,268 | )       
|                                                     | Additions to patents                                                                |                                                                   |                                                                                                       | (2,527   | )                 |         |        | (406     | )       
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     |                                                                                     | Net cash flows from investing activities                          |                                                                                                       |          | (54,174           | )       |        |          | (181,497 | )      
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|CASH FLOWS FROM FINANCING ACTIVITIES                 |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     | Repayments on long-term debt                                                        |                                                                   |                                                                                                       | (3,249   | )                 |         |        | (3,249   | )       
|                                                     | Purchases of treasury stock                                                         |                                                                   |                                                                                                       | (45,785  | )                 |         |        | (8,384   | )       
|                                                     | Issuance of treasury stock related to stock option exercises                        |                                                                   |                                                                                                       | 20,055   |                   |         |        | 21,876   |         
|                                                     | Other                                                                               |                                                                   |                                                                                                       | 351      |                   |         |        | 69       |         
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     |                                                                                     | Net cash flows from financing activities                          |                                                                                                       |          | (28,628           | )       |        |          | 10,312   |        
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|                                                     | Effect of exchange rate changes on cash                                             |                                                                   |                                                                                                       | (41      | )                 |         |        | 52       |         
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                     |                                                                   | 69,247                                                                                                |          |                   |         | (3,535 | )       
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       |                                                                                     |                                                                   | 45,113                                                                                                |          |                   |         | 54,042 |         
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |         
|CASH AND CASH EQUIVALENTS, END OF PERIOD             |                                                                                     | $                                                                 | 114,360                                                                                               |          |                   | $       | 50,507 |         
|                                                     |                                                                                     |                                                                   |                                                                                                       |          |                   |         |        |          |         

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 AND SIGNIFICANT ACCOUNTING POLICIES

Biogen, Inc. (Biogen or the Company) is a global biopharmaceutical company
that develops, manufactures and markets novel human therapeutic products.
Biogens primary focus is developing pharmaceutical products that meet unmet
medical needs particularly in its core therapeutic areas of neurology,
dermatology and rheumatology. Biogen currently sells AVONEX® (Interferon
beta-1a) for the treatment of relapsing multiple sclerosis (MS) and AMEVIVE®
(alefacept) for the treatment of adult patients with moderate-to-severe chronic
plaque psoriasis who are candidates for systemic therapy or phototherapy.
Biogen also receives revenues from royalties on sales by its licensees of a
number of products covered under patents that Biogen controls and from contract
revenues related to a collaborative agreement with IDEC Pharmaceuticals
Corporation (IDEC).

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 and its subsidiaries. The Companys
accounting policies are described in the Notes to the Consolidated Financial
Statements in the Companys 2002 Annual Report on Form 10-K and updated, as
necessary, in this Form 10-Q. Interim results are not necessarily indicative of
the operating results for the full year.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

On June 20, 2003, Biogen entered into an Agreement and Plan of Merger with IDEC
and Bridges Merger Corporation, a wholly owned subsidiary of IDEC. Under the
merger agreement, if all of the applicable conditions are met, Biogen will
merge with and into Bridges Merger Corporation and become a wholly owned
subsidiary of IDEC and IDEC will change its name to Biogen Idec, Inc. If the
merger is completed, Biogen stockholders will receive 1.15 shares of IDEC
common stock for each share of Biogen common stock, plus cash in lieu of
fractional shares. The shares of the combined company are expected to be
traded on the NASDAQ National Market under a new trading symbol. IDEC will
account for the merger under the purchase method of accounting for business
combinations under accounting principles generally accepted in the United
States, which means that the assets and liabilities of Biogen will be recorded,
as of the completion of the merger, at their fair values and added to those of
IDEC. The merger has been unanimously approved by the board of directors of
both IDEC and Biogen. The transaction is subject to approval by the
stockholders of both companies and satisfaction of other customary closing
conditions. The transaction is expected to be completed in the fourth quarter
of 2003. The merger agreement provides for the payment of a termination fee of
up to $230 million under certain termination scenarios. In connection with the
proposed merger with IDEC, the Company has agreed to pay certain advisors up to
$15 million upon completion of the merger, in addition to amounts previously
paid, and a lesser amount should the merger terminate, contingent upon certain
conditions.

INVENTORIES

Inventories are stated at the lower of cost or market with cost determined
under the first-in/first-out (FIFO) method. 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:

|                |  |               |        |              |  |   |        | 
|--------------- |  | ------------- | ------ | ------------ |  | - | ------ | 
|                |  | September 30, |        | December 31,
|(in thousands)  |  | 2003          |        | 2002        
|                |  |               |        |             
|Raw materials   |  | $             | 34,010 |              |  | $ | 27,027 | 
|Work in process |  |               | 38,545 |              |  |   | 25,892 | 
|Finished goods  |  |               | 21,428 |              |  |   | 42,459 | 
|                |  |               |        |              |  |   |        | 
|                |  | $             | 93,983 |              |  | $ | 95,378 | 
|                |  |               |        |              |  |   |        | 

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Biogen writes down obsolete or otherwise unmarketable inventory to its
estimated net realizable value. If the actual realizable value is less than
that estimated by Biogen, additional inventory write-downs may be required. The
Company wrote down $7.9 million and $17.4 million of unmarketable inventory for
the three and nine months ended September 30, 2003, respectively, which was
charged to cost of product revenues. For the nine months ended September 30,
2003, Biogen wrote off $2.9 million of inventory to research and development
since it did not meet commercial specifications but will be utilized in
research and development activities.

REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE

SEC Staff Accounting Bulletin No. 101 (SAB 101) provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
SAB 101 establishes the SECs view that it is not appropriate to recognize
revenue until all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
sellers price to the buyer is fixed or determinable; and collectibility is
reasonably assured. Further, SAB 101 requires that both title and the risks and
rewards of ownership be transferred to the buyer before revenue can be
recognized. The Company believes that its revenue recognition policies are in
compliance with SAB 101.

Revenues from product sales are recognized when product is shipped and title
and risk of loss has passed to the customer. When customers have inspection and
approval rights for products, Biogen defers revenue until lapse of that right.
Revenues are recorded net of applicable allowances for returns, rebates and
other applicable discounts and allowances. The Company prepares its estimates
for sales returns and allowances, discounts and rebates quarterly based
primarily on historical experience updated for changes in facts and
circumstances, as appropriate.

In January 2003, Biogen received regulatory approval to market AMEVIVE in the
U.S. In connection with the introduction of AMEVIVE, Biogen implemented a
limited launch period initiative undertaken in cooperation with one of Biogens
distributors which provides a refund on purchases of AMEVIVE made after a
private payor has initially verified that it will cover the product but later
denies the claim after appeal and where the other requirements of the
initiative are met. Under this initiative, Biogens exposure is contractually
limited to 10% of the price of all AMEVIVE purchased by the distributor. As a
result, Biogen will defer recognition of revenue of 10% of AMEVIVE purchased by
the distributor while this initiative was in effect until such time as
sufficient history of insurance claims reimbursement becomes available. In
connection with the launch initiative, the Company has recorded $1.3 million of
deferred revenue in accrued expenses and other at September 30, 2003. This
launch initiative is applicable to purchases of AMEVIVE made on or before July
31, 2003 and was replaced with a new initiative undertaken in cooperation with
the same distributor. Under this new initiative, the distributor will provide a
purchaser with a discount on future purchases of AMEVIVE if a payor has
initially verified that it will cover the purchase of AMEVIVE by the purchaser
but later denies the claim after appeal and where the other requirements of the
initiative are met. Biogen will in turn provide the distributor with a discount
on its future purchases of AMEVIVE equal to the amount of the discount provided
by the distributor under the initiative, up to a maximum discount of 5% on any
purchase order submitted to Biogen by the distributor. This initiative is
applicable to purchases of AMEVIVE made on or after August 1, 2003 through July
31, 2004. As a result, effective as of August 1, 2003, Biogen will defer
recognition of revenue of 5% of AMEVIVE purchased by the distributor until such
time as sufficient history of insurance claims reimbursement becomes available.
In connection with this new initiative, the Company has recorded $0.4 million
of deferred revenue in accrued expenses and other at September 30, 2003.

In February 2002, the FASB Emerging Issues Task Force (EITF) released EITF
Issue No. 01-09 (EITF 01-09), Accounting for Consideration Given by a Vendor
to a Customer (Including a Reseller of the Vendors Products). EITF 01-09
states that cash consideration (including a sales incentive) given by a vendor
to a customer is presumed to be a reduction of the selling prices of the
vendors products or services and, therefore, should be characterized as a
reduction of revenue when recognized in the vendors income statement, rather
than a sales and marketing expense. The Company has various contracts with
distributors that provide for discounts and rebates. These contracts are
classified as a reduction of revenue. The Company also maintains select
customer service contracts with distributors and other customers in the
distribution channel. In accordance with EITF 01-09, the Company has
established the fair value of these contracts and, as provided by EITF 01-09,
classified these customer service contracts as sales and marketing expense. If
the Company should not be able to sustain the fair

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value of these contracts, the Company would be required to classify these costs
as a reduction of revenue. The adoption of EITF 01-09 did not have a
significant impact on the Companys financial statements.

The Company receives royalty revenues under license agreements with a number of
third parties that sell products based on technology developed by the Company
or to which the Company has rights. There are no future performance obligations
on the part of the Company under these license agreements. The license
agreements provide for the payment of royalties to the Company based on sales
of the licensed product. The Company records these revenues based on estimates
of the sales that occurred during the relevant period. Differences between
actual royalty revenues and estimated royalty revenues are reconciled and
adjusted for in the period which they become known, typically the following
quarter. Historically, adjustments have not been material based on actual
amounts paid by licensees.

Revenue is not recognized in any circumstances unless collectibility is
reasonably assured.

Biogen maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of Biogens customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required, which could affect future earnings.

In January 2003, the Company signed a collaboration agreement (the IDEC
Agreement) with IDEC, under which Biogen and IDEC are collaborating on the
development of three oncology therapeutics from Biogens pipeline of
early-stage product candidates. Under the terms of the IDEC Agreement, IDEC
initially will be responsible for the development costs of the product
candidates, until that time, if any, when the Company exercises its opt-in
rights (which must be done within a certain timeframe) with respect to each
specific product candidate. Prior to exercising its opt-in rights, to the
extent that the Company incurs any development costs in relation to the
programs contained in the IDEC Agreement, they will be recorded as research and
development expense. The reimbursement by IDEC of these costs will be recorded
as contract revenue. For the three and nine months ended September 30, 2003,
the Company recorded $3.1 million and $6.3 million, respectively, for contract
revenue. Upon completion of the proposed merger, contract revenue related to
this collaboration agreement will be eliminated.

ACCOUNTING FOR STOCK BASED COMPENSATION

The Company has several stock-based compensation plans. The Company applies APB
Opinion No. 25 Accounting for Stock Issued to Employees in accounting for
qualifying options granted to its employees under its plans and applies
Statement of Financial Accounting Standards No. 123 Accounting for Stock
Issued to Employees (SFAS 123) for disclosure purposes only. The SFAS 123
disclosures include pro forma net income and earnings per share as if the fair
value method of accounting had been used. Stock issued to non-employees is
accounted for in accordance with SFAS 123 and related interpretations.

If compensation for employee options had been determined based on SFAS 123, the
Companys pro forma net income, and pro forma earnings per share for the three
and nine months ending September 30, would have been as follows:

|                                                 |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------- |  |  | - | ------- | 
|                                                 |  | Three months ended |        | Nine months ended
|                                                 |  | September 30,      |        | September 30,    
|                                                 |  |                    |        |                  
|(in thousands, except per share data)            |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                 |  |                    |        |                   |  |      |        |     
|Reported net income                              |  | $                  | 55,206 |                   |  | $    | 42,208 |      |  | $ | 176,610 |  |  | $ | 157,724 | 
|Pro forma stock compensation
expense, net of tax |  |                    | 10,456 |                   |  |      | 10,546 |      |  |   | 31,213  |  |  |   | 32,253  | 
|                                                 |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 
|Pro forma net income                             |  | $                  | 44,750 |                   |  | $    | 31,662 |      |  | $ | 145,397 |  |  | $ | 125,471 | 
|                                                 |  |                    |        |                   |  |      |        |      |  |   |         |  |  |   |         | 

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|                                     |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 
|------------------------------------ |  | ------------------ | ---- | ----------------- |  | ---- | ---- | ---- |  | - | ---- |  |  | - | ---- | 
|                                     |  | Three months ended |      | Nine months ended
|                                     |  | September 30       |      | September 30     
|                                     |  |                    |      |                  
|                                     |  | 2003               |      | 2002              |  | 2003 |      | 2002
|                                     |  |                    |      |                   |  |      |      |     
|Reported basic earnings per share    |  | $                  | 0.37 |                   |  | $    | 0.28 |      |  | $ | 1.18 |  |  | $ | 1.06 | 
|                                     |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 
|Pro forma basic earnings per share   |  | $                  | 0.30 |                   |  | $    | 0.21 |      |  | $ | 0.97 |  |  | $ | 0.84 | 
|                                     |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 
|Reported diluted earnings per share  |  | $                  | 0.36 |                   |  | $    | 0.28 |      |  | $ | 1.17 |  |  | $ | 1.04 | 
|                                     |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 
|Pro forma diluted earnings per share |  | $                  | 0.29 |                   |  | $    | 0.21 |      |  | $ | 0.96 |  |  | $ | 0.83 | 
|                                     |  |                    |      |                   |  |      |      |      |  |   |      |  |  |   |      | 

The fair value of options granted was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

|                                |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  
|------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                |  | Three months ended |       | Nine months ended
|                                |  | September 30,      |       | September 30,    
|                                |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                |  |                    |       |                   |  |      |       |     
|Expected dividend yield         |  |                    | 0     | %                 |  |      | 0     | %    |  |  | 0     | % |  |  | 0     | %
|Expected stock price volatility |  |                    | 45.44 | %                 |  |      | 43.88 | %    |  |  | 45.44 | % |  |  | 43.88 | %
|Risk-free interest rate         |  |                    | 3.50  | %                 |  |      | 4.25  | %    |  |  | 3.50  | % |  |  | 4.25  | %
|Expected option term in years   |  |                    | 7.4   |                   |  |      | 7.4   |      |  |  | 7.4   |   |  |  | 7.4   |  
|                                |  |                    |       |                   |  |      |       |      |  |  |       |   |  |  |       |  

The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 did not apply to awards prior to 1995.
Additional awards in future years are anticipated.

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 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 September 30, 2003, the Company had $11.7 million outstanding under a
floating rate loan collateralized by one of the Companys laboratory and office
buildings in Cambridge, Massachusetts and $27.4 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 $4.4
million and $5.1 million at September 30, 2003 and December 31, 2002,
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 nine months ended September 30, 2003 or in the comparable periods
of 2002, 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 September 30, 2003 was approximately $47.5

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million. These contracts had a fair value of approximately $5.3 million,
representing an unrealized loss, and were included in accrued expenses and
other at September 30, 2003.

For the three and nine months ended September 30, 2003, there were no
significant amounts recognized in earnings due to hedge ineffectiveness. For
the three months ended September 30, 2002, there were no significant amounts
recognized in earnings due to hedge ineffectiveness. For the nine months ended
September 30, 2002, approximately $0.6 million was recognized as expense due to
hedge ineffectiveness. For the three and nine months ended September 30, 2003
and 2002, 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 $2.7 million and $7.8 million of losses in product revenue for
the settlement of certain effective cash flow hedge instruments for the three
and nine months ended September 30, 2003, respectively. The Company recognized
approximately $1.4 million and $4.0 million of losses in royalty revenue for
the settlement of certain effective cash flow hedge instruments for the three
and nine months ended September 30, 2003, respectively. The Company recognized
approximately $2.3 million and $2.7 million of losses in product revenue for
the settlement of certain effective cash flow hedge instruments for the three
and nine months ended September 30, 2002, respectively. The Company recognized
approximately $0.6 million and $0.9 million of losses in royalty revenue for
the settlement of certain effective cash flow hedge instruments for the three
and nine months ended September 30, 2002, respectively. These settlements were
recorded in the same period as the related forecasted transactions affected
earnings.

3. COMPREHENSIVE INCOME

Comprehensive income comprises 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 derivative
instruments, net of tax. Comprehensive income for the three months ended
September 30, 2003 and 2002 was $60.9 million and $54.3 million, respectively.
Comprehensive income for the nine months ended September 30, 2003 and 2002 was
$194.8 million and $163 million, respectively.

4. EARNINGS PER SHARE

The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS
128 requires the presentation of basic earnings per share and diluted
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, as determined using the
treasury stock method.

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

|                                                              |  |                    |         |                   |  |      |         |      |  |  |         |  |  |  |         | 
|------------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | ------- | ---- |  |  | ------- |  |  |  | ------- | 
|                                                              |  | Three months ended |         | Nine months ended
|                                                              |  | September 30,      |         | September 30,    
|(in thousands)                                                |  | 2003               |         | 2002              |  | 2003 |         | 2002
|                                                              |  |                    |         |                   |  |      |         |     
|Weighted average number of shares of common stock outstanding |  |                    | 150,134 |                   |  |      | 149,521 |      |  |  | 149,746 |  |  |  | 149,137 | 
|Dilutive stock options and warrants                           |  |                    | 1,689   |                   |  |      | 1,876   |      |  |  | 1,840   |  |  |  | 2,741   | 
|                                                              |  |                    |         |                   |  |      |         |      |  |  |         |  |  |  |         | 
|Shares used in calculating diluted earnings per share         |  |                    | 151,823 |                   |  |      | 151,397 |      |  |  | 151,586 |  |  |  | 151,878 | 
|                                                              |  |                    |         |                   |  |      |         |      |  |  |         |  |  |  |         | 

Options to purchase approximately 13.2 million and 10.7 million shares were
outstanding at September 30, 2003 and 2002, 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.

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

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plans. During the first nine months of 2003, the Company repurchased
approximately 1.2 million shares of its common stock under this program at a
cost of $45.8 million. The Company purchased 145,000 shares during the first
nine months of 2002 at a cost of $8.4 million. During 2001, the Company
repurchased approximately 1.5 million shares of its common stock at a cost of
$88.3 million. Approximately 1.2 million shares remain authorized for
repurchase under this program at September 30, 2003.

6. OTHER INCOME, NET

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

|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                  |  | Three months ended |        | Nine months ended
|                                  |  | September 30,      |        | September 30,    
|                                  |  |                    |        |                   | 
|                                  |  | 2003               |        | 2002              |  | 2003 |         | 2002
|                                  |  |                    |        |                   |  |      |         |     
|Interest income                   |  | $                  | 8,833  |                   |  | $    | 10,255  |      |  | $ | 26,830  |   |  | $ | 31,320  |  
|Interest expense                  |  |                    | (952   | )                 |  |      | (733    | )    |  |   | (2,586  | ) |  |   | (2,655  | )
|Other expense                     |  |                    | (2,072 | )                 |  |      | (19,981 | )    |  |   | (11,688 | ) |  |   | (23,992 | )
|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Total other income (expense), net |  | $                  | 5,809  |                   |  | $    | (10,459 | )    |  | $ | 12,556  |   |  | $ | 4,673   |  
|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  

Other expense for the three months ended September 30, 2003 consists primarily
of $0.7 million of realized gains from the sale of noncurrent marketable
securities, a charge of $1.8 million related to the impairment of certain
noncurrent investments, and $0.5 million of foreign exchange remeasurement
losses. Other expense for the three months ended September 30, 2002 consisted
primarily of $0.9 million of losses attributable to a fund in which Biogen had
invested, a charge of $7.9 million related to the writedown of certain
investments, and a $10.5 million charge for the establishment of a reserve
related to an outstanding loan to a collaborator.

Other expense for the nine months ended September 30, 2003 consists primarily
of a $12.9 million charge related to the settlement of a patent infringement
dispute, a $3.1 million writedown of Biogens investment in Eos Biotechnology
Inc. (Eos) due to Protein Design Lab, Incs acquisition of Eos in the first
quarter of 2003, $1.7 million of foreign exchange remeasurement gains, $2.2
million of realized gains from the sale of noncurrent marketable securities,
$1.8 million related to the impairment of certain noncurrent investments, and
$1.5 million of gains on sales of current marketable securities. Other expense
for the nine months ended September 30, 2002 consisted primarily of $3.7
million of losses attributable to a fund in which Biogen had invested, a charge
of $10.1 million related to the writedown of certain investments, and a $10.5
million charge for the establishment of a reserve related to an outstanding
loan to a collaborator.

7. INCOME TAX EXPENSE

Income tax expense as a percentage of pre-tax income was 28% for the three and
nine months ended September 30, 2003 and 2002. The effective tax rate varied
from the U.S. statutory rates for the first nine months of 2003 and 2002
primarily due to higher sales in European jurisdictions with lower tax rates
and to the utilization of research and development credits.

8. LITIGATION

On October 13, 1998, the Company filed an opposition with the Opposition
Division of the European Patent Office opposing the grant of a European patent
(the Rentschler II Patent) issued to Dr. Rentschler Biotechnologie GmbH
(Rentschler) claiming compositions of matter of beta interferon having
specific glycosylation patterns. On November 6, 2002, a hearing took place with
regard to the Companys opposition of the Rentschler II Patent in the European
Patent Office. The Opposition Board of the European Patent Office ruled that
the present claims of the Rentschler II Patent should be maintained. Following
this decision, Rentschler Biotechnologie GmbH & Co. KG sued the Companys
German subsidiary, Biogen GmbH, for infringement of the Rentschler II Patent in
Germany. In April 2003, the Company and Rentschler settled their litigation
which brought to a close all pending legal proceedings in the German district
court and the European Patent Office. Under the Settlement and License
Agreement, the Company agreed to pay Rentschler $12.9 million as a one-time
payment in settlement of litigation and has agreed to an ongoing royalty on
sales of AVONEX in the relevant European countries in which the Rentschler II
patent is in effect. As part of the settlement, both parties agreed not to
pursue further litigation on these patents, including any appeal of the
decision in the European Patent Office.

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Because the substantive terms of the Rentschler settlement arrangement were
agreed to in the first quarter of 2003, the Company determined that the
provisions of SFAS 5, Accounting for Contingencies, required that the Company
account for this settlement in the first quarter of 2003. As a result, the
Company recorded a charge of $12.9 million related to the settlement in other
income (expense), net in its March 31, 2003 financial statements.

Along with most other major pharmaceutical and biotechnology companies, the
Company has been named as a defendant in a lawsuit filed by each of the County
of Suffolk, New York, the County of Westchester, New York, and the County of
Rockland, New York. The Suffolk County case is pending in the U.S. District
Court for the District of Massachusetts. The Westchester County case and the
Rockland County case were brought in the third quarter of 2003 in the U.S.
District Court for the Southern District of New York; it is
anticipated that these cases will be transferred to the U.S. District
Court for the District of Massachusetts. The complaints allege
that the defendants overstated the Average Wholesale Price (AWP) for drugs
for which Medicaid provides reimbursement (Covered Drugs), marketed and
promoted the sale of Covered Drugs to providers based on the providers ability
to collect inflated payments from the government and Medicaid beneficiaries
that exceeded payments possible for competing drugs, provided financing
incentives to providers to over-prescribe Covered Drugs or to prescribe Covered
Drugs in place of competing drugs, and overcharged Medicaid for illegally
inflated Covered Drugs reimbursements. The complaint further alleges that the
defendants failed to accurately report the best price on the Covered Drugs to
New Yorks Medicaid program. Under Medicaid, pharmaceutical and biotechnology
companies agree to pay Medicaid programs a rebate for each product reimbursed
by Medicaid. The amount of the rebate is often the difference between the
average manufacturers price and the best price reported by companies to the
Medicaid program. Plaintiffs claim that they were harmed because they could
have allotted the dollars that they wrongfully spent on Medicaid to other
public needs. Plaintiffs have brought the action under the Racketeering
Influence and Corrupt Organizations Act (RICO), and for breach of contract,
unjust enrichment, unfair trade practices, Medicaid fraud, common law fraud,
and violation of each of the federal Medicaid Statute, the New York Social
Services Law and the New York Department of Health Regulations. In September
2003, the Company joined other named defendants in filing with the U.S.
District Court for the District of Massachusetts a Motion to Dismiss the
Amended Suffolk County Complaint. The Company intends to vigorously defend
itself against all of the allegations and claims in these lawsuits. As a
result, an estimate of any potential loss or range of loss cannot be made at
this time.

On June 25, 2003, a suit was filed in the Superior Court of California, County
of San Diego, on behalf of a purported class of Biogen stockholders against
Biogen, IDEC and certain members of Biogens board of directors alleging, among
other things, that the members of Biogens board of directors breached their
fiduciary duties of candor, loyalty, due care, independence, good faith and
fair dealing by tailoring the structural terms of the merger to meet the
specific needs of IDEC rather than attempting to obtain the highest price
reasonably available for Biogen. An agreement in principal to resolve the suit
has been reached based upon the disclosure of certain additional information in
the joint proxy statement/prospectus in the registration statement on Form S-4
filed by IDEC in connection with the proposed merger between the Company and
IDEC and the payment of attorneys fees in an amount to be determined by the
court. The settlement and related attorney fees are not expected to
be material.

On July 15, 2003, Biogen filed suit against Trustees of Columbia University in
the City of New York (Columbia) in the United States District Court for the
District of Massachusetts, contending that Biogen no longer has any obligation
to pay royalties to Columbia on sales of AVONEX in the U.S. under a 1993
License Agreement between Biogen and Columbia related to U.S. Patent Nos.
4,399,216; 4,634,665; and 5,179,017 (the Original Patents) or under a newly
issued patent, U.S. Patent No. 6,455,275 (the 275 Patent). In its suit,
Biogen is seeking a declaratory judgment that it has no obligation to pay any
further royalties under the license agreement because the Original Patents have
expired and the 275 Patent is invalid and unenforceable; and that Columbia
should be permanently enjoined from demanding any further royalties based on
the 275 Patent or on any pending continuations, continuations-in-part, or
divisional applications of the Original Patents. Columbia has taken the
position that Biogen still owes it royalties under the license agreement on the
basis of the 275 Patent which was issued on September 24, 2002, over two years
after the expiration of the Original Patents. Genzyme Corporation and Abbott
Bioresearch Center, Inc. have joined Biogen in its suit against Columbia. In
the event that Biogen is unsuccessful in the present litigation, Biogen may be
liable for damages suffered by Columbia with respect to withheld royalties and
such other relief as Columbia may seek and be granted by the Court. In the
second quarter 2003, as a result of the Companys assessment of the invalidity
of the 275 Patent, the Company determined that it was probable that no
additional amounts would be paid to Columbia. As a result, the Company
eliminated a related accrual of $8 million in cost of product revenues and no
longer provides for any royalties related to the 275 Patent.

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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 primarily from sales of its AVONEX
product for the treatment of relapsing forms of MS, and to a lesser extent,
from sales of its AMEVIVE product, approved by the U.S. Food and Drug
Administration in January 2003 for the treatment of adult patients with
moderate-to-severe chronic plaque psoriasis who are candidates for systemic
therapy or phototherapy. The Company also derives revenue from royalties on
sales by the Companys licensees of a number of products covered under patents
controlled by the Company and from contract revenues related to a collaborative
agreement with IDEC.

10. GUARANTEES

Under its charter, the Company has agreed to indemnify any person who is made a
party to any action or threatened with any action as a result of such persons
serving or having served as an officer or director of the Company or having
served, at the Companys request, as an officer or director of another company.
The indemnification does not apply if the person is adjudicated not to have
acted in good faith in the reasonable belief that his or her actions were in
the best interests of the Company. The indemnification obligation survives
termination of the indemnified partys involvement with the Company but only as
to those claims arising from such persons role as an officer or director. The
Company has separate indemnification agreements with certain of its officers
and directors that do not provide any greater coverage than that found in the
charter provisions. The maximum potential amount of future payments that the
Company could be required to make under the charter provision and the
corresponding indemnification agreements is unlimited; however, the Company has
Director and Officer insurance policies that, in most cases, would limit its
exposure and enable it to recover a portion of any future amounts paid. The
estimated fair value of these indemnification provisions is minimal.
Accordingly, we have no liabilities recorded for these provisions as of
September 30, 2003.

The Company enters into indemnification provisions under its agreements with
other companies in its ordinary course of business, typically with business
partners, financial advisors, contractors, clinical sites and customers. Under
these provisions the Company generally indemnifies and hold harmless the
indemnified party for losses suffered or incurred by the indemnified party as a
result of the Companys activities. These indemnification provisions generally
survive termination of the underlying agreement. The maximum potential amount
of future payments the Company could be required to make under these
indemnification provisions is unlimited. The Company has not incurred material
costs to defend lawsuits or settle claims related to these indemnification
agreements. As a result, the estimated fair value of these agreements is
minimal. Accordingly, the Company has no liabilities recorded for these
agreements as of September 30, 2003.

11. NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. Variable interest entities that
effectively disperse risk will not be consolidated unless a single party holds
an interest or combination of interests that effectively recombines risks that
were previously dispersed. FIN 46 also requires enhanced disclosure
requirements related to variable interest entities. FIN 46 applies immediately
to variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after
December 15,
2003 to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of FIN 46 is
not expected to have a material effect on the Companys financial statements.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging

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Activities. The adoption of SFAS 149 is not expected to have a material effect
on the Companys financial statements.

In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS 150 did not have a material
effect on the Companys financial statements.

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BIOGEN, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW

Biogen, Inc. (Biogen or the Company) is a global biopharmaceutical company
that develops, manufactures and markets novel human therapeutic products.
Biogens primary focus is developing pharmaceutical products that meet unmet
medical needs, particularly in its core therapeutic areas of neurology,
dermatology and rheumatology. Biogen currently sells AVONEX® (Interferon
beta-1a) for the treatment of relapsing multiple sclerosis (MS) and AMEVIVE®
(alefacept) for the treatment of adult patients with moderate-to-severe chronic
plaque psoriasis who are candidates for systemic therapy or phototherapy.
Biogen also receives revenues from royalties on sales by the Companys
licensees of a number of products covered under patents that Biogen controls.
In addition, Biogen has a pipeline of development stage products and a number
of research programs in its core therapeutic areas and in other areas of
interest.

On June 20, 2003, Biogen entered into an Agreement and Plan of Merger with IDEC
Pharmaceuticals Corporation (IDEC) and Bridges Merger Corporation, a wholly
owned subsidiary of IDEC. Under the merger agreement, if all of the applicable
conditions are met, Biogen will merge with and into Bridges Merger Corporation
and become a wholly owned subsidiary of IDEC and IDEC will change its name to
Biogen Idec, Inc. If the merger is completed, Biogen stockholders will receive
1.15 shares of IDEC common stock for each share of Biogen common stock, plus
cash in lieu of fractional shares. The shares of the combined company are
expected to be traded on the NASDAQ National Market under a new trading symbol.
IDEC will account for the merger under the purchase method of accounting for
business combinations under accounting principles generally accepted in the
United States, which means that the assets and liabilities of Biogen will be
recorded, as of the completion of the merger, at their fair values and added to
those of IDEC. The merger has been unanimously approved by the board of
directors of both IDEC and Biogen. The transaction is subject to approval by
the stockholders of both companies and satisfaction of other customary closing
conditions. The transaction is expected to be completed in the fourth quarter
of 2003. The merger agreement provides for the payment of a termination fee of
up to $230 million under certain termination scenarios. In connection with the
proposed merger with IDEC, the Company has agreed to pay certain advisors up to
$15 million upon completion of the merger, in addition to amounts previously
paid, and a lesser amount should the merger terminate, contingent upon certain
conditions.

RESULTS OF OPERATIONS

For the quarter ended September 30, 2003, the Company reported net income of
$55.2 million or $0.36 per diluted share as compared to $42.2 million or $0.28
per diluted share for the comparable period of 2002. For the nine months ended
September 30, 2003, the Company reported net income of $176.6 million or $1.17
per diluted share as compared to $157.7 million or $1.04 per diluted share for
the comparable period of 2002.

Revenues

|                  |               |       |       |                    |       |        |       |       |       |                   |     |        |    |   |       |       |       |   |       |       |       |  |     |    |    |  
|----------------- | ------------- | ----- | ----- | ------------------ | ----- | ------ | ----- | ----- | ----- | ----------------- | --- | ------ | -- | - | ----- | ----- | ----- | - | ----- | ----- | ----- |  | --- | -- | -- | -
|                  |               |       |       | Three months ended |       |        |       |       |       | Nine months ended |     |        |    |  
|                  |               |       |       | September 30,      |       |        |       |       |       | September 30,     |     |        |    |  
|                  |               |       |       |                    |       | %      |       |       |       | %                
|(in millions)     |               | 2003  |       | 2002               |       | Change |       | 2003  |       | 2002              |     | Change
|                  |               |       |       |                    |       |        |       |       |       |                   |     |       
|Product revenues  |               |       |       |                    |       |        |       |       |       |                   |     |        |    |   |       |       |       |   |       |       |       |  |     |   
|                  | United States |       | $     | 215.7              |       |        | $     | 186.2 |       |                   |     | 16     | %  |   | $     | 612.2 |       |   | $     | 559.3 |       |  |     | 9  | % 
|                  | Rest of world |       |       | 94.4               |       |        |       | 75.3  |       |                   |     | 25     | %  |   |       | 269.2 |       |   |       | 218.8 |       |  |     | 23 | % 
|                  |               |       |       |                    |       |        |       |       |       |                   |     |        |    |   |       |       |       |   |       |       |       |  |     |   
|                  |               | Total |       |                    | 310.1 |        |       |       | 261.5 |                   |     |        | 19 | % |       |       | 881.4 |   |       |       | 778.1 |  |     |    | 13 | %
|Royalty revenues  |               |       | 28.6  |                    |       |        | 26.8  |       |       |                   | 7   | %      |    |   | 100.4 |       |       |   | 67.8  |       |       |  | 48  | % 
|Contract revenues |               |       | 3.1   |                    |       |        |      |       |       |                   | 100 | %      |    |   | 6.3   |       |       |   |      |       |       |  | 100 | % 
|                  |               |       |       |                    |       |        |       |       |       |                   |     |        |    |   |       |       |       |   |       |       |       |  |     |   
|Total revenues    |               | $     | 341.8 |                    |       | $      | 288.3 |       |       |                   | 19  | %      |    | $ | 988.1 |       |       | $ | 845.9 |       |       |  | 17  | % 
|                  |               |       |       |                    |       |        |       |       |       |                   |     |        |    |   |       |       |       |   |       |       |       |  |     |   

Product revenues

Product revenues related to AVONEX for the three and nine months ended
September 30, 2003 were $297.7 million and $858.4 million, respectively.
Product revenues related to AMEVIVE for the three and nine months ended
September 30, 2003 were $12.4 million and $23 million, respectively. All
product revenue in 2002 related

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to AVONEX. Product revenues, consisting primarily of revenues from sales of
AVONEX, represented approximately 91% and 89% of the Companys total revenues
in the three and nine months ended September 30, 2003, respectively. Product
revenues from sales of AVONEX represented approximately 91% and 92%,
respectively, of the Companys total revenues in the three and nine months
ended September 30, 2002. The 16% and 9% growth in U.S. product revenue for the
three and nine months ended September 30, 2003, respectively, over the
comparable periods in 2002 was primarily attributable to price increases on
AVONEX and sales of AMEVIVE. Product revenues growth in the U.S. was affected
by increased competition and a softening of the MS marketplace growth rate for
the three and nine month periods ended September 30, 2003 over the comparable
periods of 2002. For the three and nine months ending September 30, 2003,
product revenues outside of the U.S. increased 25% and 23%, respectively,
compared to the three and nine months ended September 30, 2002. For the three
months ended September 30, 2003, the 25% growth in product revenues outside the
U.S. represented 14% growth on a local currency basis, primarily attributable
to a higher sales volume of AVONEX, and 11% growth due to foreign exchange rate
changes in the period ended September 30, 2003 over the comparable period in
2002. For the nine months ended September 30, 2003, the 23% growth in product
revenues outside the U.S. represented 10% growth on a local currency basis,
primarily attributable to a higher sales volume of AVONEX, and 13% growth due
to foreign exchange rate changes in the period ended September 30, 2003 over
the comparable period in 2002.

The Company expects to face increasing competition in the MS marketplace in and
outside the U.S. from existing and new MS treatments that may impact sales of
AVONEX. The Company 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 slowing growth in the MS
market. See Outlook  Dependence on AVONEX and AMEVIVE Sales and Outlook 
Competition. The Company is pursuing a variety of AMEVIVE sales initiatives.
Some of these programs, such as sampling, could have a short-term adverse impact
on AMEVIVE revenues, but are designed to drive growth in the long term. AMEVIVE
was approved by the U.S. Food and Drug Administration (FDA) in January 2003
for the treatment of adult patients with moderate-to-severe chronic plaque
psoriasis who are candidates for systemic therapy or phototherapy. For further
discussion of AMEVIVE and the factors that may affect the revenues generated by
AMEVIVE sales, see Critical Accounting Estimates, Outlook  Competition and
Outlook  Dependence on AVONEX and AMEVIVE Sales.

Royalty revenues

Revenues from royalties represented approximately 8% and 10%, respectively, of
total revenues for the three and nine months ended September 30, 2003. Revenues
from royalties represented approximately 9% and 8%, respectively, of total
revenues for the three and nine months ended September 30, 2002. The increase
in royalty revenues in the three and nine months ended September 30, 2003 over
the comparable periods in 2002 is primarily attributable to the resumption of
royalty payments by Schering-Plough Corporation (Schering-Plough) starting in
the fourth quarter of 2002 on U.S. sales of its alpha interferon products

Royalty revenues may fluctuate as a result of fluctuations in sales levels of
products sold by the Companys licensees from quarter to quarter. For a
discussion of some of the factors that may affect royalty revenues in the
future, see Outlook  Royalty Revenue and Outlook  Patents and Other
Proprietary Rights. The Company expects royalty revenues as a percentage of
total revenues to continue to decrease in the near and long term as the Company
continues to market and sell AVONEX and AMEVIVE worldwide. See Outlook 
Royalty Revenue and Outlook  Patents and Other Proprietary Rights.

Contract revenues

In January 2003, the Company signed a collaboration agreement with IDEC under
which Biogen and IDEC are collaborating on the development of three oncology
therapeutics from Biogens pipeline of early-stage product candidates. Under
the terms of the IDEC Agreement, IDEC initially will be responsible for the
development costs of the product candidates until that time, if any, when the
Company exercises its opt-in rights (which must be done within a certain
timeframe) with respect to each specific product candidate. Prior to exercising
its opt-in rights, to the extent that the Company incurs any development costs
in relation to these programs, they will be recorded as research and
development expenses. The reimbursement by IDEC of these costs will be recorded
as contract revenue. For the three and nine months ended September 30, 2003,
the Company recorded $3.1 million and $6.3 million, respectively, for contract
revenue. Upon completion of the proposed merger, contract revenue related to

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|this collaboration agreement will be eliminated.
|------------------------------------------------

COSTS AND EXPENSES

|                                  |  |                    |       |      |  |        |       |                   |  |      |     |        |  |   |       |  |  |   |       |  |  |  |     |  
|--------------------------------- |  | ------------------ | ----- | ---- |  | ------ | ----- | ----------------- |  | ---- | --- | ------ |  | - | ----- |  |  | - | ----- |  |  |  | --- | -
|                                  |  | Three months ended |       |      |  |        |       | Nine months ended |  |      |     |       
|                                  |  | September 30,      |       |      |  |        |       | September 30,     |  |      |     |       
|                                  |  |                    |       | %    |  |        |       | %                
|(in millions)                     |  | 2003               |       | 2002 |  | Change |       | 2003              |  | 2002 |     | Change
|                                  |  |                    |       |      |  |        |       |                   |  |      |     |       
|Cost of product revenues          |  | $                  | 52.4  |      |  | $      | 40.3  |                   |  |      | 30  | %      |  | $ | 139.6 |  |  | $ | 113.2 |  |  |  | 23  | %
|Cost of royalty revenues          |  |                    | 1.9   |      |  |        | 1.7   |                   |  |      | 12  | %      |  |   | 6.6   |  |  |   | 4.3   |  |  |  | 53  | %
|Research and development          |  |                    | 124.4 |      |  |        | 104.6 |                   |  |      | 19  | %      |  |   | 325.6 |  |  |   | 276.4 |  |  |  | 18  | %
|Selling, general & administrative |  |                    | 89.4  |      |  |        | 72.6  |                   |  |      | 23  | %      |  |   | 277.0 |  |  |   | 237.6 |  |  |  | 17  | %
|Merger related expenses           |  |                    | 2.8   |      |  |        |      |                   |  |      | 100 | %      |  |   | 6.6   |  |  |   |      |  |  |  | 100 | %
|                                  |  |                    |       |      |  |        |       |                   |  |      |     |        |  |   |       |  |  |   |       |  |  |  |     |  
|                                  |  | $                  | 270.9 |      |  | $      | 219.2 |                   |  |      | 24  | %      |  | $ | 755.4 |  |  | $ | 631.5 |  |  |  | 20  | %
|                                  |  |                    |       |      |  |        |       |                   |  |      |     |        |  |   |       |  |  |   |       |  |  |  |     |  



|The increase in cost of product revenues in the three and nine months ended
September 30, 2003 compared to the comparable periods of 2002 was primarily
attributable to the higher sales volume of AVONEX worldwide and sales
of AMEVIVE in the U.S. Included in cost
of product revenues for the three months ended September 30,
2003 was the writedown of approximately $7.9 million of
inventory to its net realizable value, consisting of
$2.4 million of AMEVIVE IV no longer being marketed,
$2.5 million of AMEVIVE bulk that did not meet commercial
specifications, and $3 million of AVONEX lyophilized that is no
longer being marketed. Included in
cost of product revenues for the nine months ended September 30, 2003 was the
elimination of an $8 million accrual related to Columbia University, based on
the Companys determination that the amount is not likely to be
paid, and $17.4 million of inventory writedowns to its net realizable value. Gross
margins on product sales for the three and nine months ended September 30, 2003
were approximately 83% and 84%, respectively, compared to 85% for the same
periods in 2002. The Company expects that gross margins on product revenues
will fluctuate in the future based on changes in product mix and new product
initiatives. In June 2003, the Company licensed from Genentech, Inc. worldwide
patent rights relating to fusion proteins, described as immunoadhesons. The
non-exclusive licenses will apply to AMEVIVE and other potential products in
the Companys product pipeline. The Company pays a royalty to Genentech on
sales of AMEVIVE.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The increases in cost of royalty revenues for the three and nine months ended
September 30, 2003 were primarily attributable to increased royalties from
sales on alpha interferon products sold in the third quarter and first nine
months of 2003 over the comparable periods of 2002. Gross margins on royalty
revenue were approximately 93% for the three and nine months ended September
30, 2003, and 93% and 94%, respectively for the three and nine months ended
September 30, 2002. The Company expects that gross margins on royalty revenues
will fluctuate in the future based on changes in sales volumes for specific
products from which the Company receives royalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The 19% increase in research and development expenses for the three months
ended September 30, 2003 versus the comparable period of 2002 was primarily due
to higher clinical trial costs of $9.9 million, primarily related to ANTEGREN®
(natalizumab), $11.8 million increase in costs related to collaborative
projects largely driven by the one-time non-refundable license fee of $26.7
million payment to Fumapharm AG (Fumapharm), increased depreciation of $4.6
million related to capitalization of several large projects in 2003, offset by
a decline of $6.4 million related to supply chain, manufacturing and
engineering costs. The 18% increase in research and development expenses for
the nine months ended September 30, 2003 versus the comparable period of 2002
was primarily due to higher clinical trial costs of $23.6 million, primarily
related to ANTEGREN, $19.6 million related to increased supply chain,
manufacturing and engineering costs, increased depreciation of $12.2 million
related to capitalization of several large projects in 2003, offset by a $6.2
million decline in costs related to collaborative projects. The Company expects
that, in the long-term, research and development expenses may increase as the
Company continues to expand its development efforts with respect to new
products and conducts clinical trials of these products. Costs for upfront fees
and milestone payments may cause variability in future research and development
expense.                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Selling, general and administrative expenses increased 23% in the third quarter
and 17% in the first nine months of 2003 compared to the same periods in 2002.
For the three and nine months ended September 30, 2003, the increases were
primarily due to an increase in selling and marketing expenses related to both
the sale of AVONEX and costs incurred for the launch of AMEVIVE, which received
FDA approval in the U.S., in January 2003. AVONEX-related increases were driven
by heightened competition in the U.S. market. The Company expects that selling,
general and administrative expenses will continue to increase in the near and
long term as the Company continues to expand its sales and marketing
organizations and efforts necessary to sell AVONEX worldwide in response to
increased competition, continues to expand its sales and marketing
organizations and efforts necessary to sell AMEVIVE in the U.S., and prepares
for the possible future approval of additional products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|For the three and nine months ended September 30, 2003, the Company incurred
approximately $2.8 million and $6.6 million, respectively, of expenses
primarily relating to legal, financial and accounting advisory services
performed in connection with the proposed merger with IDEC. The Company expects
to incur significant additional merger-related expenses in subsequent quarters
in connection with the proposed merger with IDEC.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                            
|OTHER INCOME, NET                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Total other income (expense), net consists of the following (in thousands):                                                                                                                                                                                                                                                                                                                                                                 

|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                  |  | Three months ended |        | Nine months ended
|                                  |  | September 30,      |        | September 30,    
|                                  |  |                    |        |                  
|                                  |  | 2003               |        | 2002              |  | 2003 |         | 2002
|                                  |  |                    |        |                   |  |      |         |     
|Interest income                   |  | $                  | 8,833  |                   |  | $    | 10,255  |      |  | $ | 26,830  |   |  | $ | 31,320  |  
|Interest expense                  |  |                    | (952   | )                 |  |      | (733    | )    |  |   | (2,586  | ) |  |   | (2,655  | )
|Other expense                     |  |                    | (2,072 | )                 |  |      | (19,981 | )    |  |   | (11,688 | ) |  |   | (23,992 | )
|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  
|Total other income (expense), net |  | $                  | 5,809  |                   |  | $    | (10,459 | )    |  | $ | 12,556  |   |  | $ | 4,673   |  
|                                  |  |                    |        |                   |  |      |         |      |  |   |         |   |  |   |         |  



|Total other income (expense), net consists primarily of interest income, offset
by interest expense and other non-operating income and expense. Total other
income, net in the third quarter of 2003 was $5.8 million as compared to $10.5
million of expenses in the third quarter of 2002, an increase of $16.3 million.
Total other income (expense), net for the nine months ended September 30, 2003
was $12.6 million as compared to $4.7 million in the first nine months of 2002,
an increase of $7.9 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Interest income for the three months ended September 30, 2003 was $8.8 million
compared to $10.3 million in the same period of 2002, a decrease of $1.5
million or 15%. Interest income for the nine months ended September 30, 2003
was $26.8 million compared to $31.3 million in the same period of 2002, a
decrease of $4.5 million or 14%. The decrease in interest income for the three
and nine months ended September 30, 2003 compared to the same periods in 2002
was due primarily to lower average yields on invested funds, offset by higher
average balances. 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 September 30, 2003 was approximately
$1.0 million compared to $0.7 million for the same period in 2002, an increase
of $0.3 million or 42%. Interest expense in the nine months ended September 30,
2003 was approximately $2.6 million compared to $2.7 million for the same
period in 2002, a decrease of $0.1 million or 4%. The decrease in interest
expense for the nine months ended September 30, 2003 was due to lower
borrowings outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Other expense for the three months ended September 30, 2003 consists primarily
of $0.7 million of realized gains from the sale of noncurrent marketable
securities, a charge of $1.8 million related to the impairment of certain
noncurrent investments, and $0.5 million of foreign exchange remeasurement
losses. Other expense for the three months ended September 30, 2002 consisted
primarily of $0.9 million of losses attributable to a fund in which Biogen had
invested, a charge of $7.9 million related to the writedown of certain
investments, and a $10.5 million charge for the establishment of a reserve
related to an outstanding loan to a collaborator.                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Other expense for the nine months ended September 30, 2003 consists primarily
of a $12.9 million charge related to the settlement of a patent infringement
dispute, a $3.1 million writedown of Biogens investment in Eos Biotechnology
Inc. (Eos) due to Protein Design Lab, Incs acquisition of Eos in the first
quarter of 2003, $1.7 million of foreign exchange remeasurement gains, $2.2
million of realized gains from the sale of noncurrent marketable securities,
$1.8 million related to the impairment of certain noncurrent investments, and
$1.5 million of gains on sales of current marketable securities. Other expense
for the nine months ended September 30, 2002 consisted primarily of $3.7
million of losses attributable to a fund in which Biogen had invested, a charge
of $10.1 million related to the writedown of certain investments, and a $10.5
million charge for the establishment of a reserve related to an outstanding
loan to a collaborator.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Income tax expense as a percentage of pre-tax income was 28% for the three and
nine months ended September 30, 2003 and 2002. The effective tax rate varied
from the U.S. statutory rates for the first nine months of 2003 and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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2002 primarily due to higher sales in European jurisdictions with lower tax
rates and to the utilization of research and development credits. The Company
expects its effective tax rate to remain consistent throughout 2003.

FINANCIAL CONDITION

At September 30, 2003, cash, cash equivalents and short-term marketable
securities were $925.5 million compared with $867.1 million at December 31,
2002, an increase of $58.4 million. Working capital increased $123.4 million to
$1,013.1 million. Net cash from operating activities which included net income,
for the nine month period ending September 30, 2003 was $152.1 million compared
with $167.6 million for the same period in 2002, and included tax benefits
related to stock options of $11.9 million, $4.9 million of writedown of certain
investments, a non-cash adjustment of $17.4 million related to the writedowns
of inventory to its net realizable value, and $2.2 million of gains on the sale
of noncurrent marketable investments. Cash outflows from investing activities
during the nine months ended September 30, 2003 included investments in
property and equipment and patents of $80.5 million. Cash inflows from
investing consisted of net cash inflows from investing activities related to
marketable securities totaling $19.1 million and $7.2 million of proceeds from
withdrawal from an equity fund investment. Significant cash outflows from
financing activities included $45.8 million for purchases of the Companys
common stock under its stock repurchase program in the first nine months of
2003 and $3.2 million for repayments under loan agreements with banks. Cash
inflows from financing included $20.1 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. During the first nine months of 2003, the
Company repurchased approximately 1.2 million shares of its common stock under
this program at a cost of $45.8 million. The Company purchased 145,000 shares
during the first nine months of 2002 at a cost of $8.4 million. During 2001,
the Company repurchased approximately 1.5 million shares of its common stock at
a cost of $88.3 million. Approximately 1.2 million shares remain authorized for
repurchase under this program at September 30, 2003.

The Company has commenced preliminary work on a large-scale manufacturing
facility (LSM) in Hillerod, Denmark, which is intended to have 90,000 liters
of bioreactor capacity. The estimated cost of the 340,000 square foot LSM is
$275 million. At September 30, 2003, approximately $77 million had been
committed and spent for costs related to the LSM. The Company is currently
evaluating the timing and continuation of the LSM project. In addition, the
Company is continuing further expansion of its Research Triangle Park, North
Carolina complex with ongoing construction of several projects to create
additional manufacturing capacity. These additional projects are expected to be
completed by the end of 2003 at a total cost of approximately $82 million. As
of September 30, 2003, the Company had committed approximately $81 million for
construction costs related to these additional projects, of which $80 million
had been spent.

In connection with the proposed merger with IDEC, the Company has agreed to pay
certain advisors up to $15 million upon completion of the merger in addition to
amounts previously paid, and a lesser amount should the merger terminate,
contingent upon certain conditions.

Several legal proceedings involving the Company were pending during the current
quarter. See Note 8 of the Notes to the Condensed Consolidated Financial
Statements.

The Company currently generates cash from operations primarily due to the sale
of AVONEX and AMEVIVE, and from royalties on sales generated by the Companys
licensees. In the future, the Company expects to continue generating cash from
these sources. 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.

In September 2003, the Company entered into a license agreement (the Fumapharm
Agreement) with Fumapharm, under which the Company obtained exclusive rights
to develop and market a second generation fumarate derivative with an
immunomodulatory mechanism of action, currently in clinical trials in Europe.
Under the terms of the Fumapharm Agreement, the Company paid a one-time
non-refundable license fee of $26.7 million

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in return for an exclusive worldwide marketing and distribution license,
excluding Germany, for psoriasis, and a production and exclusive marketing and
distribution license for the entire world for MS. The $26.7 million fee was
included in research and development expense in the third quarter of 2003 and
accrued expenses and other at September 30, 2003.

In August 2003, the Company entered into a collaboration agreement (the Vetter
Agreement) with Vetter Pharma-Fertigung GmbH & Co. KG (Vetter) for the
fill-finish of Biogen products. Under the terms of the Vetter Agreement,
Biogen will pay a partial advance payment to Vetter of 35 million Euros in
return for reserving certain capacity at Vetters fill-finish facility. Upon
signing the agreement in August 2003, the Company paid Vetter $5.7 million
(5.25 million Euros), which was recorded as a prepayment in other assets as of September 30, 2003. The remaining balance of advance payments
will become due and payable by Biogen upon the achievement of certain
milestones by Vetter. The next two milestones are expected to be achieved in the
first quarter of 2004, at which time the Company will make payments to Vetter
of 10.5 million Euros and 3.5 million Euros, respectively.

In June 2003, the Company signed a collaboration agreement (the Genentech
Agreement) with Genentech, Inc (Genentech), under which Biogen and Genentech
will collaborate on the development of a BR3 (BAFF-R) protein therapeutic from
Biogens pipeline of early-stage product candidates. Under the terms of the
Genentech Agreement, Genentech initially will be responsible for the
development costs of the product candidates, until that time, if any, when the
Company exercises its opt-in rights (which must be done within a certain
timeframe). Prior to exercising its opt-in rights, to the extent that the
Company incurs any development costs in relation to the programs covered by the
Genentech Agreement, they will be recorded as research and development
expenses. The Company has not recorded contract revenues related to the
collaboration.

In June 2003, the Company concluded its collaboration with ICOS Corporation
(ICOS) on the development and commercialization of orally active, small
molecule LFA-1 antagonists. Through September 30, 2003, the Company provided
$5.4 million to ICOS under a line of credit that was initially recorded as a
loan receivable and subsequently charged to research and development expenses
upon the achievement of certain clinical milestones by ICOS. The Company does
not expect to pay any additional material amounts in connection with this
collaboration.

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.
FIN 46 requires existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do not effectively
disperse risks among parties involved. Variable interest entities that
effectively disperse risk will not be consolidated unless a single party holds
an interest or combination of interests that effectively recombines risks that
were previously dispersed. FIN 46 also requires enhanced disclosure
requirements related to variable interest entities. FIN 46 applies immediately
to variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
It applies in the first fiscal year or interim period beginning after
December 15,
2003 to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The adoption of FIN 46 is
not expected to have a material effect on the Companys financial statements.

In April 2003, the FASB issued SFAS 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS 149 amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under FASB Statement No.
133, Accounting for Derivative Instruments and Hedging Activities. The
adoption of SFAS 149 is not expected to have a material effect on the Companys
financial statements.

In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. This Statement is effective
for financial instruments entered into or modified

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after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. The adoption of
SFAS 150 did not have a material effect on the Companys financial statements.

CRITICAL ACCOUNTING ESTIMATES

The Company incorporates by reference
the section Managements Discussion and Analysis of
Financial Condition and Results of Operation  Critical
Accounting Estimates of the Companys Annual Report on
Form 10-K for the fiscal year ended December 31, 2002.
Changes to the policies since December 31, 2002 are included
below.

REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE

SEC Staff Accounting Bulletin No. 101 (SAB 101) provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
SAB 101 establishes the SECs view that it is not appropriate to recognize
revenue until all of the following criteria are met: persuasive evidence of an
arrangement exists; delivery has occurred or services have been rendered; the
sellers price to the buyer is fixed or determinable; and collectibility is
reasonably assured. Further, SAB 101 requires that both title and the risks and
rewards of ownership be transferred to the buyer before revenue can be
recognized. The Company believes that its revenue recognition policies are in
compliance with SAB 101.

Revenues from product sales are recognized when product is shipped and title
and risk of loss has passed to the customer. When customers have inspection and
approval rights for products, Biogen defers revenue until lapse of that right.
Revenues are recorded net of applicable allowances for returns, rebates and
other applicable discounts and allowances. The Company prepares its estimates
for sales returns and allowances, discounts and rebates quarterly based
primarily on historical experience updated for changes in facts and
circumstances, as appropriate.

In January 2003, Biogen received regulatory approval to market AMEVIVE in the
U.S. In connection with the introduction of AMEVIVE, Biogen implemented a
limited launch period initiative undertaken in cooperation with one of Biogens
distributors which provides a refund on purchases of AMEVIVE made after a
private payor has initially verified that it will cover the product but later
denies the claim after appeal and where the other requirements of the
initiative are met. Under this initiative, Biogens exposure is contractually
limited to 10% of the price of all AMEVIVE purchased by the distributor. As a
result, Biogen will defer recognition of revenue of 10% of AMEVIVE purchased by
the distributor while this initiative was in effect until such time as
sufficient history of insurance claims reimbursement becomes available. In
connection with the launch initiative, the Company has recorded $1.3 million of
deferred revenue in accrued expenses and other at September 30, 2003. This
launch initiative is applicable to purchases of AMEVIVE made on or before July
31, 2003 and was replaced with a new initiative undertaken in cooperation with
the same distributor. Under this new initiative, the distributor will provide a
purchaser with a discount on future purchases of AMEVIVE if a payor has
initially verified that it will cover the purchase of AMEVIVE by the purchaser
but later denies the claim after appeal and where the other requirements of the
initiative are met. Biogen will in turn provide the distributor with a discount
on its future purchases of AMEVIVE equal to the amount of the discount provided
by the distributor under the initiative, up to a maximum discount of 5% on any
purchase order submitted to Biogen by the distributor. This initiative is
applicable to purchases of AMEVIVE made on or after August 1, 2003 through July
31, 2004. As a result, effective as of August 1, 2003, Biogen will defer
recognition of revenue of 5% of AMEVIVE purchased by the distributor until such
time as sufficient history of insurance claims reimbursement becomes available.
In connection with this new initiative, the Company has recorded $0.4 million
of deferred revenue in accrued expenses and other at September 30, 2003.

In February 2002, the FASB Emerging Issues Task Force (EITF) released EITF
Issue No. 01-09 (EITF 01-09), Accounting for Consideration Given by a Vendor
to a Customer (Including a Reseller of the Vendors Products). EITF 01-09
states that cash consideration (including a sales incentive) given by a vendor
to a customer is presumed to be a reduction of the selling prices of the
vendors products or services and, therefore, should be characterized as a
reduction of revenue when recognized in the vendors income statement, rather
than a sales and marketing expense. The Company has various contracts with
distributors that provide for discounts and rebates. These contracts are
classified as a reduction of revenue. The Company also maintains select
customer service contracts with distributors and other customers in the
distribution channel. In accordance with EITF 01-09, the Company has
established the fair value of these contracts and, as provided by EITF 01-09,
classified these customer service contracts as sales and marketing expense. If
the Company should not be able to sustain the fair value of these contracts,
the Company would be required to classify these costs as a reduction of
revenue. The adoption of EITF 01-09 did not have a significant impact on the
Companys financial statements.
The Company receives royalty revenues under license agreements with a number of
third parties that sell products based on technology developed by the Company
or to which the Company has rights. There are no future

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performance obligations on the part of the Company under these license
agreements. The license agreements provide for the payment of royalties to the
Company based on sales of the licensed product. The Company records these
revenues based on estimates of the sales that occurred during the relevant
period. Differences between actual royalty revenues and estimated royalty
revenues are reconciled and adjusted for in the period which they become known,
typically the following quarter. Historically, adjustments have not been
material based on actual amounts paid by licensees.

Revenue is not recognized in any circumstances unless collectibility is
reasonably assured.

Biogen maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of Biogens customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required, which could affect future earnings.

In January 2003, the Company signed a collaboration agreement with IDEC, under
which Biogen and IDEC are collaborating on the development of three oncology
therapeutics from Biogens pipeline of early-stage product candidates. Under
the terms of the IDEC Agreement, IDEC initially will be responsible for the
development costs of the product candidates, until that time, if any, when the
Company exercises its opt-in rights (which must be done within a certain
timeframe) with respect to each specific product candidate. Prior to exercising
its opt-in rights, to the extent that the Company incurs any development costs
in relation to the programs contained in the IDEC Agreement, they will be
recorded as research and development expense. The reimbursement by IDEC of
these costs will be recorded as contract revenue. For the three and nine months
ended September 30, 2003, the Company recorded $3.1 million and $6.3 million,
respectively, for contract revenue. Upon completion of the proposed merger,
contract revenue related to this collaboration agreement will be eliminated.

CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly
Report on Form 10-Q, have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Quarterly Report on Form 10-Q was being prepared.

(b)  Changes in Internal Controls. There were no changes in our internal control
over financial reporting, identified in connection with the evaluation of such
internal control that occurred during our last fiscal quarter, that have
materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.

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 Companys expectations about its level of future
product sales, profits, product revenues, royalty revenues, costs and expenses,
gross margins on product revenues and royalty revenues, its effective tax rate,
regulatory approvals, development and commercialization of additional products,
competition and the impact of competitive products, the outcome of pending or
anticipated litigation and patent-related proceedings, facility expansion, the
value of investments in certain marketable securities and the expected benefits
of its proposed merger with IDEC. These and all other forward-looking
statements in this report 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 Managements Discussion and Analysis of Financial Condition and
Results of Operations. Unless required by law, Biogen does not undertake any
obligation to publicly update any forward-looking statements.

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Dependence on AVONEX and AMEVIVE Sales

Biogens ability to sustain increases in revenues and profitability is
primarily dependent on the level of revenues and profitability from AVONEX and
AMEVIVE sales.

The level of revenues from sales of AVONEX will depend on a number of factors,
including: Biogens ability to sustain market share of AVONEX in light of
competitive products for the treatment of MS, continued market acceptance of
AVONEX worldwide; Biogens ability to maintain a high level of physician and
patient satisfaction with AVONEX; the nature of regulatory and pricing
decisions related to AVONEX worldwide; the overall growth of the MS market; the
extent to which AVONEX continues to receive and maintains reimbursement
coverage; the success of ongoing development related to AVONEX in expanded MS
indications; the success of its pre-filled syringe formulation of AVONEX; the
continued availability of sufficient supplies of AVONEX and accessibility of
third parties to vial, label, and distribute AVONEX on acceptable terms.

AMEVIVE was approved in the U.S. in January 2003. The level of revenues from
sales of AMEVIVE in the U.S. will depend on a number of factors, including: the
ability to gain and to sustain market share and to continue to increase market
share of AMEVIVE as the competitive landscape for AMEVIVE becomes more
challenging; Biogens ability to obtain and maintain a high level of physician
and patient satisfaction with AMEVIVE; the nature of regulatory and pricing
decisions related to AMEVIVE; the extent to which AMEVIVE receives and
maintains adequate reimbursement coverage; the continued availability of
sufficient supplies of AMEVIVE and the accessibility of third parties to vial,
label, and distribute AMEVIVE on acceptable terms. There is no assurance that
the Companys commercial efforts in the U.S. will be successful. In February
2003, Biogen withdrew its application for approval to market AMEVIVE in the EU.
Biogens decision was based on a determination by the Committee for Proprietary
Medicinal Products, the scientific advisory board of the regulatory authority
in the EU, that more clinical information is needed to approve AMEVIVE. Biogen
plans to develop the additional information necessary to obtain approval of
AMEVIVE for psoriasis patients in the EU. Developing the data and re-filing the
application may take several years and there is no assurance that Biogen will
ever obtain approval of AMEVIVE in the EU.

Competition

AVONEX competes in the U.S. and EU markets primarily with four products:
COPAXONE® glatiramer acetate, sold by Teva Neuroscience, Inc. (Teva) in the
U.S. and co-promoted by Teva and Aventis Pharma in the EU; BETASERON®, sold by
Berlex in the U.S. and sold under the name BETAFERON® by Schering A.G. in the
EU; NOVANTRONE® (mitoxantrone for injection) sold by Amgen, Inc. (Amgen) and
Serono S.A. in the U.S. and sold by Amgen in the EU; and REBIF®, sold in the EU
by Serono and sold in the U.S. by Serono, with Pfizer Inc. as a co-promotion
partner. A number of companies, including Biogen, are working to develop
products to treat MS which may in the future compete with AVONEX. AVONEX also
faces competition from off-label uses of drugs approved for other indications.
Some of Biogens current competitors are also working to develop alternative
formulations for delivery of their products which may in the future compete
with AVONEX. Biogen believes that competition among treatments for MS will be
based on product performance, service and price.

AMEVIVE competes with existing therapies for moderate-to-severe psoriasis, such
as oral retinoids, steroids, methotrexate and cyclosporin, along with other
drugs, as discussed below, approved for other indications. In the future,
AMEVIVE will also compete with new drugs currently in development for
psoriasis, drugs now approved for other indications that may be approved for
psoriasis, and off-label uses of drugs approved for other indications.
Genentech and Xoma Corporation are co-developing RAPTIVA® (efalizumab), an
antibody designed to block certain immune cells as a potential treatment for
moderate-to-severe psoriasis. Genentech has filed for regulatory approval of
the drug in the U.S. In September 2003, the FDA Dermatology and Ophthalmic
Advisory Committee voted to recommend that RAPTIVA be approved for the
treatment of moderate-to-severe plaque psoriasis in adults age 18 or older.
Serono has an exclusive license to RAPTIVA in the EU and other countries and
has filed for regulatory approval of the drug in the EU. ENBREL® (etanercept),
a drug sold by Amgen, has been approved by the FDA as a treatment for psoriatic
arthritis, a joint disease that can be associated with the skin plaques of
moderate to severe chronic plaque psoriasis. In January 2003, Amgen announced
positive results from a Phase 3 clinical study of ENBREL in the treatment of
moderate to severe plaque psoriasis and is conducting a second Phase 3 clinical
study in psoriasis. Centocor, Inc., a subsidiary of Johnson & Johnson, sells
REMICADE® (infliximab) worldwide as a treatment for Crohns disease and
rheumatoid arthritis, and has initiated two Phase 3 trials in patients with
moderate-to-severe chronic plaque psoriasis. HUMIRA® (adalimumab), a drug sold
by

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Abbott Laboratories, was also recently approved by the FDA as a treatment for
rheumatoid arthritis. Abbott is undertaking clinical trials in psoriasis and
psoriatic arthritis. In addition, a number of other companies are working to
develop products to treat psoriasis which may ultimately compete with AMEVIVE.

See also the Competition section of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2002.

Royalty Revenue

Biogen receives royalty revenues which, prior to 2001, contributed a
significant amount to its overall profitability. Royalty revenues decreased
significantly in recent years and through the third quarter of 2002 primarily
as the result of patent expirations and a royalty dispute with Schering-Plough
Corporation, which was settled in October 2002. As a result of the settlement,
royalty revenues increased in the fourth quarter of 2002, and the first nine
months of 2003 as compared to the corresponding nine months of 2002. In the
future, royalty revenues may fluctuate as a result of future patent expirations
and other factors such as pricing reforms, health care reform initiatives,
other legal and regulatory developments and the introduction of competitive
products that 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. For a further discussion of future patent expirations affecting
royalty revenues, see the Business  Patents and Other Proprietary Rights,
section of the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2002.

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 by Biogen. 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 filed patent applications
and have been granted patents in the U.S. 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 U.S. 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. 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. See Outlook  Litigation and Government Regulation, and the
Business  Risks Associated with Drug Development and Business  Patents and
Other Proprietary Rights sections of the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2002.

Products

AVONEX and AMEVIVE are currently the only products 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 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

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projects, the acquisition of third-party technologies or products or other
types of investments. Product development involves a high degree of risk. Only
a small number of research and development programs result in the
commercialization of a product. Many important factors affect Biogens ability
to successfully develop and commercialize 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
Biogen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.

Risks Related to the Proposed Merger with IDEC

The Companys expectations with respect to the proposed merger transaction with
IDEC are subject to a number of risks and uncertainties that could cause actual
results to differ. For example, Biogen and IDEC may be unable to obtain
shareholder approvals required for the merger. Problems may arise in
successfully integrating the businesses of Biogen and IDEC. The merger may
involve unexpected costs. Biogen and IDEC may be unable to achieve cost-cutting
synergies. The businesses of Biogen and IDEC may suffer as a result of
uncertainty surrounding the merger.

Failure to complete the merger with IDEC could negatively impact Biogens stock
price and future business and operations. For example,



| |  |  | if the merger agreement is terminated, Biogen may be required
in specific circumstances, to pay a termination fee of up to $230
million to IDEC,                                                                                        
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the price of Biogen common stock may decline to the extent
that the current market price reflects an assumption that the merger
will be completed, and                                                                                  
|
| |  |  | Biogen must pay its expenses related to the merger, including
substantial legal and accounting fees, even if the merger is not
completed. This could affect our results of operations for the
period during which the fees are incurred.

Current and prospective employees may experience uncertainty about their future
role with the combined company until the combined companys strategies are
announced or executed. This may adversely affect Biogens ability to attract
and retain key management, research and development, manufacturing, sales and
marketing and other personnel.

Since Biogen stockholders will receive shares of IDEC common stock in the
merger, Biogen believes that the price of Biogens common stock may be affected
by changes in the price of IDEC common stock. The price of IDECs common stock
may be affected by factors different than those affecting the price of Biogen
common stock.

Pricing Pressures/Healthcare Reform

In the U.S., many pharmaceutical and biologic products are subject to
increasing pricing pressures, which could be significantly impacted by the
outcome of the current national debate over Medicare reform. If the Medicare
program provided outpatient pharmaceutical coverage for its beneficiaries, the
federal government, through its enormous purchasing power under the program,
could demand discounts from pharmaceutical and biotechnology companies that may
implicitly create price controls on prescription drugs. On the other hand, a
Medicare drug reimbursement provision may increase the volume of pharmaceutical
drug purchases, offsetting at least in part these potential price discounts. In
addition, Managed Care Organizations (MCOs), institutions and other
government agencies continue to seek price discounts. Government efforts to
reduce Medicare and Medicaid expenses are expected to increase the use of MCOs.
This may result in managed cares influencing prescription

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decisions for a larger segment of the population. In addition, certain states
have proposed and certain other states have adopted various programs to control
prices for their seniors drug programs, including price or patient
reimbursement constraints, restrictions on access to certain products,
importation from other countries and bulk purchasing of drugs. Biogen
encounters similar regulatory and legislative issues in most other countries.
In the EU and some other international markets, the government provides health
care at low direct cost to consumers and regulates pharmaceutical prices or
patient reimbursement levels to control costs for the government-sponsored
health care system. This international patchwork of price regulation may lead
to inconsistent prices and some third-party trade in Biogens products from
markets with lower prices. Such trade exploiting price differences between
countries could undermine sales of Biogen products in markets with higher
prices. See the Business  Regulation section of the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2002.

Manufacturing

Biogen currently produces all of its bulk drug products at its manufacturing
facilities located in Cambridge, Massachusetts and Research Triangle Park,
North Carolina. Problems with manufacturing processes could result in
variability in costs and expenses. They could also result in product defects,
which could require Biogen to delay shipment of products, recall products
previously shipped or be unable to supply products at all. In addition, any
prolonged interruption in the operations of Biogens manufacturing facilities
could result in cancellations of shipments or loss of product in the process of
being manufactured. Because Biogens manufacturing processes are highly complex
and are subject to a lengthy FDA approval process, alternative qualified
production capacity may not be available on a timely basis or at all. Biogen
sources all of its fill-finish and final product storage operations, along with
a substantial portion of its packaging operations, to a concentrated group of
third party contractors. Problems with the operations of these third party
contractors could also require Biogen to delay shipment of saleable products,
recall products previously shipped or be unable to supply products at all.
Difficulties or delays in Biogens manufacturing of existing or new products,
including difficulties or delays in the operations of third party contractors
retained by Biogen to perform fill-finish, packaging and storage of saleable
products, could increase Biogens costs, cause Biogen to lose revenue or market
share and damage Biogens reputation. See the Business  Manufacturing and Raw
Materials section of the Companys Annual Report on Form 10-K for the fiscal
year ended December 31, 2002.

Litigation and Governmental Regulation

Pharmaceutical companies have been the target of lawsuits and investigations
including: those with claims asserting antitrust violations, claims asserting
violations of the Federal False Claim Act, Anti-Kickback Act, the Prescription
Drug Marketing Act or other violations in connection with Medicare and/or
Medicaid reimbursement, derivative actions, product liability claims, disputes
over intellectual property rights (including patents), and claims under state
laws, including state anti-kickback and fraud laws. Public companies may also
be the subject of certain other types of claims, including those asserting
violations of securities laws or related to environmental matters. There is no
assurance that if Biogen were to be involved in any such lawsuits or
investigation, that Biogen would be successful in defending itself or asserting
its rights. There is also no assurance, for example, that Biogen will be
successful in defending itself in the current AWP litigation. Biogens business
is also subject to extensive government regulation and oversight. Biogen may
also become subject to other governmental actions which could adversely affect
its business or financial condition, including: (i) new laws, regulations and
judicial decisions related to health care availability, method of delivery and
payment for health care products and services, (ii) changes in the Federal Food
and Drug Administration and foreign regulatory approval processes that may
delay or prevent the approval of new products and result in lost market
opportunity, (iii) new laws, regulations and judicial decisions affecting
pricing or marketing and (iv) changes in the tax laws relating to Biogens
operations. See Outlook  Patents and Other Proprietary Rights, and the
Business  Risks Associated with Drug Development, Business  Patents and
Other Proprietary Rights, and Business  Legal Proceedings sections of the
Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2002.




Part II  OTHER INFORMATION

Item 1. Legal Proceedings.

The section Notes to Condensed Consolidated Financial Statements in Part I of
this Quarterly Report on Form 10-Q is incorporated into this item by reference.

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Item 6. Exhibits and Reports on Form 8-K



|(a)  |  | Exhibits                                                                                                                                                                                                                                                                                                                      
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|31.1 |  | Certification of the Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                       
|    
|31.2 |  | Certification of the Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                       
|    
|32.1 |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                      
|    
|(b)  |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                           
|    
|(i)  |  | On July 29, 2003, the Company filed a Current Report on Form 8-K to file
a press release under Item 5 of Form 8-K announcing that the Phase III
induction trial of ANTEGREN® (natalizumab) did not meet the primary
endpoint of response as defined by a 70-point decrease in the Crohns
Disease Activity Index at week 10.
|    
|(ii) |  | On July 24, 2003, the Company
furnished a Current Report on Form 8-K to
furnish a press release under Item 9 and Item 12 of Form 8-K that included
non-GAAP financial measures for completed fiscal periods.                                                                                                                  

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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.                    
|                 |  |                                 
|October 28, 2003 |  | /s/ Peter N. Kellogg            
|                 |  |                                 
|                 |  | Peter N. Kellogg                
|                 |  | Executive Vice PresidentFinance
|                 |  | and Chief Financial Officer     

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