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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 June 30, 2002

Commission File Number 0-12042

BIOGEN, INC.

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		No

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

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BIOGEN, INC.

INDEX

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

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PART I – FINANCIAL INFORMATION

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

         See Notes to Condensed Consolidated Financial Statements.

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

         See Notes to Condensed Consolidated Financial Statements.

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

         See Notes to Condensed Consolidated Financial Statements.

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BIOGEN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.     BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows of Biogen, Inc. and its subsidiaries (the “Company”). The Company’s accounting policies are described in the Notes to the Consolidated Financial Statements in the Company’s 2001 Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results for the full year.

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

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

INVENTORIES

Inventories are stated at the lower of cost or market with cost determined under the first-in/first-out (“FIFO”) method and are included in other current assets. Included in inventory are raw materials used in the production of pre-clinical and clinical products which are expensed as research and development costs when consumed. The components of inventories are as follows:

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

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

2.     FINANCIAL INSTRUMENTS

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

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fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company assesses, both at its inception and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting the changes in cash flows of hedged items. The Company assesses hedge ineffectiveness on a quarterly basis and records the gain or loss related to the ineffective portion to current earnings to the extent significant. If the Company determines that a hedged forecasted transaction is no longer probable of occurring, the Company discontinues hedge accounting for the affected portion of the hedge instrument, and any unrealized gain or loss on the contract is recognized in current earnings within other income (expense).

As of June 30, 2002, the Company had $13.3 million outstanding under a floating rate loan collateralized by one of the Company’s laboratory and office buildings in Cambridge, Massachusetts and $31.4 million outstanding under a floating rate loan agreement for financing the construction of its biological manufacturing facility in North Carolina. The Company uses interest rate swap agreements to mitigate the risk associated with its floating rate debt. The fair value of the interest rate swap agreements, representing the cash requirements of the Company to settle the agreements, was approximately $3.7 million and $3.3 million at June 30, 2002 and December 31, 2001, respectively, and was included in accrued expenses and other. The Company has designated the interest rate swaps as cash flow hedges. There were no amounts of hedge ineffectiveness related to the Company’s interest rate swaps during the three and six months ended June 30, 2002 or in the comparable period of 2001, and no gains or losses were excluded from the assessment of hedge effectiveness. The Company records the differential to be paid or received on the interest rate swaps as incremental interest expense.

The Company has foreign currency forward contracts to hedge specific forecasted transactions denominated in foreign currencies. All foreign currency forward contracts have durations of ninety days to nine months. These contracts have been designated as cash flow hedges and accordingly, to the extent effective, any unrealized gains or losses on these foreign currency forward contracts are reported in other comprehensive income. Realized gains and losses for the effective portion are recognized with the underlying hedge transaction. The notional settlement amount of the foreign currency forward contracts outstanding at June 30, 2002 was approximately $97.3 million. These contracts had a fair value of approximately $8.9 million, representing an unrealized loss, and were included in other current liabilities at June 30, 2002.

For the three and six months ended June 30, 2002, approximately $734,000 and $620,000, respectively, were recognized as expenses due to hedge ineffectiveness. For the three and six months ended June 30, 2001, there were no significant amounts recognized in earnings due to hedge ineffectiveness. For the three and six months ended June 30, 2002 and 2001, there were no significant amounts recognized as a result of the discontinuance of cash flow hedge accounting because it was no longer probable that the hedge forecasted transaction would occur. The Company recognized approximately $1.2 million and $468,000 of losses in product revenue for the settlement of certain effective cash flow hedge instruments for the three and six months ended June 30, 2002, respectively. The Company recognized approximately $403,000 and $294,000 of losses in royalty revenue for the settlement of certain effective cash flow hedge instruments for the three and six months ended June 30, 2002, respectively. The Company recognized $3.7 million and $6.7 million of gains in product revenue for the settlement of certain effective cash flow hedge instruments for the three and six months ended June 30, 2001, respectively. The Company recognized $974,000 and $1.8 million of gains in royalty revenue for the settlement of certain effective cash flow hedge instruments for the three and six months ended June 30, 2001, respectively. These settlements were recorded in the same period as the related forecasted transactions affecting earnings.

3.     COMPREHENSIVE INCOME

Comprehensive income is comprised of net income and other comprehensive income. Other comprehensive income includes certain changes in equity that are excluded from net income, such as translation adjustments and unrealized holding gains and losses on available-for-sale marketable securities, net of tax and certain derivative instruments, net of tax. Comprehensive income for the three months ended June 30, 2002 and 2001 was $42.9 million and $79.1 million, respectively. Comprehensive income for the six months ended June 30, 2002 and 2001 was $108.7 million and $135.3 million, respectively.

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4.     EARNINGS PER SHARE

The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per Share”. Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average number of shares of common stock outstanding. For purposes of calculating diluted earnings per share the denominator includes both the weighted average number of shares of common stock outstanding and the number of dilutive common stock equivalents such as stock options and warrants.

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