<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 0-11103
-------
CENTOCOR, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2117202
- - ---------------------------------------- --------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Great Valley Parkway Malvern, Pennsylvania 19355-1307
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
610-651-6000
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
------ ------
Shares of Common Stock outstanding at August 1, 1994 were 51,042,447.
<PAGE>
Part I: Financial Information
- - -----------------------------
Item 1: Financial Statements
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
- - -------------------------------------------------------- --------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Notes 4, 6 and 8) $41,232 $46,210
Short-term investments (Notes 4, 6 and 8) 94,967 76,662
Accounts and contracts receivable 10,295 12,078
Interest receivable 1,336 471
Inventory (Note 5) 15,674 13,874
Prepaid expenses 1,828 2,392
Other current assets 1,237 1,024
------------- -------------
166,569 152,711
Fixed assets (Note 6):
Land and buildings 65,784 64,284
Equipment, furniture, fixtures and
improvements 81,725 78,932
------------- -------------
147,509 143,216
Less accumulated depreciation (66,333) (58,533)
------------- -------------
81,176 84,683
Long-term investments (Note 4) 24,548 17,156
Intangible and other assets 18,117 26,489
------------- -------------
Total assets $290,410 $281,039
============= =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D.)
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
- - ------------------------------------- -------------- ---------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,272 $7,133
Accrued expenses 23,429 23,127
Unearned revenues 1,817 2,690
Notes payable (Note 6) 6,667 6,186
Current portion of
long-term debt (Note 6) 26,975 20,468
------------- ------------
63,160 59,604
Long-term debt (Note 6) 231,640 238,100
Other liabilities 2,878 2,023
Minority interest 507 506
Shareholders' equity (Notes 2 and 8):
Preferred Stock, $.01 par value,
10,000 shares authorized, none issued - -
Common Stock, $.01 par value,
100,000 shares authorized and
50,972 and 43,672 issued and
outstanding at June 30, 1994
and December 31, 1993, respectively 510 437
Additional paid-in capital 679,719 601,138
Deficit (691,104) (625,049)
Unrealized loss on marketable
securities (2,380) (635)
Cumulative foreign currency
translation adjustments 5,480 4,915
------------- ------------
(7,775) (19,194)
------------- ------------
Total liabilities and
shareholders' equity $290,410 $281,039
============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
For the three months ended June 30, 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales $12,114 $10,918
Contracts (including related
party revenues of $2,573 in 1993)
(Note 7) 4,270 2,835
---------- ----------
16,384 13,753
Costs and expenses:
Cost of sales 4,471 3,983
Research and development (including contract
revenue-related expenses of $2,413 in 1993) 16,666 16,760
Marketing, general and administrative (including
contract revenue-related expenses of
$576 in 1993) 6,809 9,664
Restructuring charges (Note 11) - 5,114
---------- ----------
27,946 35,521
Other income (expense):
Interest income 1,561 1,026
Interest expense (4,933) (5,003)
Minority interest and other (484) (277)
---------- ----------
(3,856) (4,254)
Net loss ($15,418) ($26,022)
========== ==========
Net loss per share ($0.30) ($0.63)
========== ==========
Weighted average number of shares
outstanding 50,835 41,293
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
For the six months ended June 30, 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales $21,943 $22,602
Contracts (including related
party revenues of $1,652
in 1994 and $5,543 in 1993)
(Note 7) 9,714 6,129
--------- ---------
31,657 28,731
Costs and expenses:
Cost of sales 8,101 7,877
Research and development (including contract
revenue-related expenses of $1,572 in 1994
and $4,990 in 1993) 31,055 35,472
Marketing, general and administrative (including
contract revenue-related expenses of $343
in 1994 and $1,449 in 1993) 13,627 19,294
Charge for acquired research and
development (Note 8) 36,966 -
Restructuring charges (Note 11) - 9,387
--------- ---------
89,749 72,030
Other income (expense):
Interest income 2,669 2,236
Interest expense (9,893) (10,024)
Minority interest and other (739) (463)
--------- ---------
(7,963) (8,251)
Net loss (66,055) (51,550)
========= =========
Net loss per share ($1.38) ($1.25)
========= =========
Weighted average number of shares
outstanding 47,813 41,279
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
For the six months ended June 30, 1994 1993
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows used for operating activities:
Net loss ($66,055) ($51,550)
Adjustments to reconcile net loss to net cash
used for operating activities:
Charge for acquired research and development 36,966 -
Restructuring charges - 9,387
Net loss on long-term investments 1,091 -
Depreciation and amortization 8,963 14,397
Amortization of deferred income (1,930) (2,187)
Minority interest and other 1 510
Changes in assets and liabilities:
Accounts and contracts receivable 1,825 (1,158)
Interest receivable (728) 1,298
Inventory (1,484) (106)
Prepaid expenses (648) 187
Other current assets (146) 856
Intangible and other assets (665) (518)
Accounts payable (2,988) (126)
Unearned revenues 1,000 -
Accrued expenses and other liabilities (4,407) (2,602)
Other long-term liabilities 855 166
--------- ---------
Net cash used for operating activities (28,350) (31,446)
Cash flows from investing activities:
Net sales of investments 18,777 54,235
Net purchases of fixed assets (2,039) (435)
Acquisition of Tocor II 3,991 -
--------- ---------
Net cash from investing activities 20,729 53,800
Cash flows from financing activities:
Net proceeds from issuance of Common Stock 3,113 494
Proceeds from issuance of long-term debt and notes payable - 2,500
Reduction of long-term debt and notes payable (1,344) (2,417)
--------- ---------
Net cash from financing activities 1,769 577
Effect of foreign currency translation 874 (891)
--------- ---------
Net increase (decrease) in cash and cash equivalents (4,978) 22,040
Beginning cash and cash equivalents 46,210 28,496
--------- ---------
Ending cash and cash equivalents $41,232 $50,536
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
6
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Note 1
Basis of Presentation
The accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles applicable to
interim periods. These financial statements do not include all disclosures
required for annual financial statements and should be read in conjunction with
the more complete disclosures contained in Centocor, Inc.'s (the "Company")
audited financial statements in the Company's Annual Report on Form 10-K for the
year ended December 31, 1993.
The statements reflect, in the opinion of management, all adjustments
of a normal and recurring nature necessary to present fairly the Company's
consolidated financial position at June 30, 1994 and December 31, 1993 and the
consolidated results of operations for the three and six months ended June 30,
1994 and 1993 and the consolidated cash flows for the six months ended June 30,
1994 and 1993. The results of operations for the three and six months ended June
30, 1994 and the cash flows for the six months ended June 30, 1994 are not
necessarily indicative of the results to be expected for the entire year.
Note 2
Commitments and Contingencies
LIQUIDITY AND CAPITAL RESOURCES
The Company's future financial condition is highly dependent upon the
reduction of the Company's rate of net cash outflows and, ultimately, upon the
achievement of significant and sustained levels of pharmaceutical product sales.
The Company will need to secure significant additional capital in the future
from collaborative arrangements with pharmaceutical companies or from the
capital markets until significant and sustained levels of pharmaceutical sales
are achieved. There can be no assurance that significant additional capital will
be available to the Company. There also can be no assurance that the Company
will materially reduce its current rate of net cash outflows or generate
significant and sustained levels of pharmaceutical product sales. The United
States Food and Drug Administration ("FDA") has not approved any of the
Company's pharmaceutical products for marketing. There can be no assurance that
FDA or other regulatory approvals of any of the Company's products will be
obtained. Failure to obtain timely FDA or other regulatory approvals of
pharmaceutical products will have a material adverse effect on the Company. The
status of two of the Company's major pharmaceutical products which have been
submitted for regulatory approval is discussed below.
7
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
The Company's ability to further reduce its current rate of net cash
outflows is also dependent upon the extent to which it can expand collaborations
with established pharmaceutical companies and achieve milestones under such
collaborative agreements. No assurance can be given that such collaborations can
be expanded or that such milestones can be achieved.
At June 30, 1994, the Company had cash, cash equivalents and investments of
$160,747,000, including equity investments of $5,993,000. During the six months
ended June 30, 1994, the Company had negative cash flows from operations of
$28,350,000. The Company's total cash, cash equivalents and investments
increased by $20,719,000 from December 31, 1993, principally as a result of the
exchange offer, which is discussed in Note 8, partially offset by the cash used
for operations.
Agreements covering $20,482,000 of the Company's outstanding debt balances
contain certain financial and non-financial covenants, including the maintenance
of minimum equity and cash balances and compliance with certain financial
ratios. The Company has obtained waivers of certain of such covenants on the
condition that it maintain certain investments at the lending bank, which at
June 30, 1994 totalled $20,000,000. There can be no assurance that the Company
will be able to continue to collateralize such loans and, accordingly, the
Company has classified $20,482,000 of debt as short-term. Additionally,
$6,667,000 of the Company's short-term debt is secured by investments at the
lending bank of $6,500,000. If cash flows continue to be negative, the Company's
ability to service its debt may be impaired.
STATUS OF REOPRO (formerly CentoRx)
The Company's therapeutic products under development include ReoPro, a
product intended to treat or prevent the formation of blood clots in the
cardiovascular system. The Company filed product license applications for ReoPro
in the United States, Canada and in several countries in Europe. On June 9,
1994, the FDA Cardiovascular and Renal Drugs Advisory Committee recommended
approval of ReoPro for the indication of high-risk angioplasty. There can be no
assurance that ReoPro will be approved for commercial sale in the United States,
Europe or elsewhere. A patent infringement action was filed against the Company
by Genentech, Inc. ("Genentech") which involves ReoPro. See "Other Litigation".
8
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
STATUS OF PANOREX
The Company has completed the filing of an application requesting marketing
approval for Panorex in Germany. Panorex is a product intended to treat
colorectal cancer. There can be no assurance that Panorex will be approved for
commercial sale in Germany or elsewhere.
SHAREHOLDER LITIGATION
On December 23, 1993, a purported class action captioned Peter Cordaro v.
Hubert J.P. Schoemaker, Stelios Papadopoulos, Marc Feldmann, David Golden,
Centocor, Inc., and Tocor II, Inc. ("Tocor II") was filed in the Court of Common
Pleas of the Commonwealth of Pennsylvania, in and for Chester County. The
complaint alleges that the defendants breached their fiduciary duties to Tocor
II Unitholders by, among other things, making an exchange offer (as defined in
Note 8, the "Exchange Offer"), recommending acceptance of the Exchange Offer,
and failing to maximize shareholder value. The complaint sought, among other
relief, an injunction against consummation of the Exchange Offer, the
establishment of a "truly independent" special committee and financial advisor
to consider the Exchange Offer, and an award of damages (including rescissionary
damages), costs and plaintiff's counsel fees. No injunction was, in fact,
sought, and the Exchange Offer was made and consummated. The defendants filed a
motion to dismiss the complaint on the ground that the Pennsylvania court should
not exercise jurisdiction over a matter relating to the internal affairs of a
foreign corporation. No decision on the motion has been rendered. The Company
believes that the allegations set forth in the complaint are without merit and
intends to vigorously defend the suit. The Company does not expect the effect,
if any, of the outcome of this litigation to be material to the Company's
financial condition.
In January 1993, purported security holders of the Company and/or Tocor II
filed complaints in the United States District Court for the Eastern District of
Pennsylvania against the Company, Tocor II, and certain present and former
directors and/or officers of the Company and/or Tocor II, and Eli Lilly and
Company ("Lilly"). The cases were consolidated pursuant to an order, and a
Consolidated Class Action Complaint captioned In Re Centocor Securities
Litigation II, No. 93-CV-0236 (the "Complaint") was filed in May 1993, based on
alleged violations of securities laws and alleged breaches of the named
individual defendants of fiduciary duties to Centocor. All claims against all
defendants, except the Company and two of its officers/directors, were
voluntarily dismissed when the Complaint was filed. The Complaint alleges that
defendants knowingly or recklessly omitted certain material facts and made false
and misleading statements of material facts about the Company in violation of
Sections 10(b) and 20 of the Securities Exchange Act of 1934 and Rule 10b-5
thereunder, and also alleges violations of the common law of negligent
9
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
misrepresentation. The action has been conditionally certified as a class action
on behalf of persons who purchased common stock of the Company from April 21,
1992 through January 15, 1993 and who were allegedly damaged thereby. The
Complaint seeks compensatory damages in unspecified amounts, counsel fees,
interest, costs of suit, and such other relief that the court deems appropriate.
Defendants answered the Complaint and denied the allegations therein. The
Company believes that the allegations set forth in the Complaint are without
merit and intends to vigorously defend the suit. The Company does not expect the
effect, if any, of the outcome of this litigation to be material to the
Company's financial condition.
OTHER LITIGATION
On April 21, 1994, a complaint was filed against the Company in the United
States District Court for the Northern District of California by Genentech,
charging infringement of a patent held by Genentech. The complaint asks that the
alleged infringement be enjoined preliminarily and permanently and seeks damages
and counsel fees in an unspecified amount. While the complaint does not identify
any allegedly infringing product or conduct, it purportedly asserts claims
regarding ReoPro(TM) and other of the Company's products. The Company filed a
motion to dismiss for failure to state a claim, for summary judgment, or, in the
alternative, for a more definite statement. That motion is scheduled to be
argued on August 26, 1994. The Company believes that its products do not
infringe any valid claim of the patent in question. Accordingly, unless the
matter can be resolved amicably, the Company expects to defend the action
vigorously. The Company does not expect the effect, if any, of the outcome of
this litigation to be material to the Company's financial condition.
In May 1993, the Company was served with a complaint filed earlier in the
United States District Court for the Southern District of California at San
Diego. The plaintiff, who allegedly had purchased shares of Corvas
International, Inc. ("Corvas") in its initial public offering on January 30,
1992, brought suit against Corvas and certain of its directors, the Company, and
one of the Company's directors and a former director (the "Centocor
defendants"), on behalf of similarly situated investors. The complaint alleges
the defendants violated the federal securities laws by disclosing to Corvas'
investors that Centocor and Corvas had entered into a "strategic alliance" to
develop one of Corvas' products, but failing to disclose that the Company
allegedly would not be able to perform on that agreement because of events
relating to Centoxin (HA-1A). The Complaint sought to proceed as a class action
on behalf of all those who purchased Corvas common stock during the period from
January 30, 1992 through January 15, 1993. A motion to dismiss the complaint in
its entirety as to the Centocor defendants was filed in early June 1993. Corvas
and its directors had also filed a motion to dismiss. In September the Court
dismissed a number of plaintiff's claims including claims relating to the period
after April 14, 1992 and, in effect, the
10
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
claim brought against the Company under Section 10(b) of the Securities Exchange
Act of 1934. As to the remaining claims, the Court has conditionally certified a
class of all purchasers of Corvas common stock during the period January 30,
1992 through April 14, 1992. The Company believes the allegations which remain
are without merit and intends to vigorously defend the suit. The Company does
not expect the effect, if any, of the outcome of this litigation to be material
to the Company's financial condition.
In October 1992, the Company was served with a complaint filed by the Velos
Group, a Maryland partnership ("Velos"), in the United States District Court for
the District of Maryland. The complaint alleges, principally, that the Company
breached certain provisions of a license agreement between Velos and the Company
pursuant to which the Company has exclusive rights to U.S. Patent No. 5,057,598,
which includes claims relating to monoclonal antibodies used in treating
manifestations of Gram-negative bacterial infections. The complaint seeks
declaratory relief, monetary relief in excess of $100,000,000, and requests that
the Company place in escrow one-half of the amounts received by the Company
pursuant to its agreements with Lilly. The complaint does not seek to terminate
or rescind any of the Company's rights under the license agreement. The Company
answered the complaint and asserted affirmative defenses and counterclaims on
January 7, 1993, but the counterclaims and certain affirmative defenses were
dismissed with leave to replead on June 22, 1993. On July 28, 1993, the Court
permitted plaintiff to file an amended complaint that updated some of the claims
in the original complaint but otherwise reasserted the basic factual allegations
and, with one minor exception, relied upon the same legal theories. On August
27, 1993, the Company filed its Answer, Affirmative Defenses and Counterclaim
for Damages and Equitable Relief (the "Amended Answer"). In the Amended Answer,
the Company again denied all of the allegations made by Velos and stated certain
affirmative defenses and counterclaims against Velos with respect to the license
agreement, based on theories of (i) failure of consideration, (ii) fraud in the
inducement, and (iii) unilateral mistake as to facts, which mistake was induced
by the fraudulent misrepresentation of Velos. On September 22, 1993, plaintiff
moved to dismiss the Company's counterclaims and to strike certain of the
Company's affirmative defenses. The Company has responded to that motion. No
decision on the motion has been rendered. The Company believes that the
allegations of Velos are without merit and intends to vigorously defend the
suit. The Company does not expect the effect, if any, of the outcome of this
litigation to be material to the Company's financial condition.
11
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
PARTNERSHIPS
The Company has licensed certain technology related to ReoPro and Capiscint
to Centocor Partners III, L.P. ("CPIII") and performs research and development
with respect to such technology on CPIII's behalf. CPIII holds the rights to the
licensed technology and results of the research and development efforts related
thereto. The Company has the option to acquire such rights through its option to
purchase the limited partnership interests in CPIII. The Company's option to
purchase the limited partnership interests in CPIII is exercisable upon the
earlier of (a) each limited partner having received distributions related to
sales of the CPIII products equal to $15,000 per full limited partnership
interest and the expiration of at least 24 months after the first commercial
sale of a CPIII product or (b) the expiration of at least 48 months after the
first commercial sale of a CPIII product; but, in any event, not prior to the
expiration of the then applicable long-term capital gains holding period after
the expenditure by the Company of all funds paid to it pursuant to the
Development Agreement with CPIII. There have not as yet been any commercial
sales of CPIII products. If the Company elects to exercise its option to
purchase the limited partnership interests in CPIII, the Company must make an
advance payment of approximately $13,598,000 in cash or, at the Company's
election, approximately $15,229,000 in the Company's Common Stock, and future
payments generally of six percent of sales of products developed by CPIII.
The Company and CPIII have formed a joint venture for the purpose of
commercializing ReoPro. Joint venture profits, if any, are allocated 75% to the
Company and 25% to CPIII. The joint venture will terminate upon the occurrence
of certain events including the exercise or expiration of the purchase option.
If the Company exercises its CPIII purchase option, the Company expects that it
would record a significant charge to earnings representing the purchase of in-
process research and development. See Note 3 for a discussion of the option that
Lilly has exercised to become the exclusive distributor for ReoPro, a
cardiovascular product being developed by the Company for CPIII.
The Company has entered into indemnity agreements with CPIII and the former
limited partners of Centocor Cardiovascular Imaging Partners ("CCIP") and
Centocor Partners II, L.P. ("CPII") pursuant to which the Company would be
obligated, under certain circumstances, to compensate these parties for the fair
market value of their respective interests under any license agreements with the
Company relating to their respective products which are lost through the
exercise by the United States Government of any of its rights relating to the
licensed technology. The amount of any such loss would be determined annually by
independent appraisal.
ROYALTIES
The Company is required to make certain future payments to the former
limited partners of CCIP and CPII based on sales of products developed by each
of the respective partnerships. Upon any exercise by the Company of its option
to acquire the limited partnership interests in CPIII, the Company would be
required to make future payments to the former limited partners of CPIII,
12
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
including payments based on any sales of ReoPro.
The Company has entered into agreements to support research at certain
research institutions. These agreements, which grant the Company licenses and/or
options to license certain technology resulting from the research, generally
require the Company to pay royalties to such institutions on the sales of any
products that utilize the licensed technology. Further, the Company has licenses
under certain patents, patent applications and technology and pays the licensors
or their licensees royalties under such agreements.
All royalties are reflected in cost of sales as incurred. Royalty costs
represent a significant percentage of sales.
PRODUCT LIABILITY
The testing and marketing of medical products entails an inherent risk of
product liability. The Company maintains limited product liability insurance
coverage. Such insurance is becoming increasingly difficult and expensive to
obtain. The Company's business may be adversely affected by a successful product
liability claim in excess of its insurance coverage.
Under various contractual agreements, the Company has agreed to indemnify
third parties against certain losses, including losses arising from product
liability and patent infringement claims pertaining to the Company's products.
Note 3
Collaborative Arrangements
Relationship with Eli Lilly and Company
During the second quarter of 1993, Lilly exercised its option to become the
exclusive worldwide distributor of ReoPro. Under a Sales and Distribution
Agreement, the Company is principally responsible for developing and
manufacturing HA-1A and ReoPro.
For the three and six months ended June 30, 1994, the Company recognized
revenue of $3,000,000 and $6,500,000, respectively, under an Agreement with
Lilly for the achievement of certain milestones related to ReoPro. Lilly may
make certain future payments based on the achievement of additional milestones.
Under agreements with Lilly, the Company and Lilly share equally in the profits
from ReoPro and the Company may be required to pay Lilly additional
13
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
amounts based on the level of sales of ReoPro. The Company may be required to
make a payment to Lilly of $60 million through December 31, 1994, or decreasing
amounts through December 31, 1999, in the event of any change in control of the
Company or in the event of any governmental action or determination which
results in the Sales and Distribution Agreement not being in full force and
effect in all material respects in major jurisdictions, excluding the United
States, and the subsequent termination of the Sales and Distribution Agreement
by Lilly based solely on such events.
Relationship with Wellcome plc
In 1993, the Company and Wellcome entered into an alliance agreement for the
development and marketing of certain of the Company's monoclonal antibody-based
cancer therapeutic products, including Panorex. Centocor is responsible for the
develop and manufacture of Panorex and for securing regulatory approvals for
Panorex. Wellcome has the option to continue the clinical development of up to
six other potential drugs. Wellcome will then market and sell any of such
approved drugs, including Panorex, in most parts of the world.
Wellcome may make certain future payments to the Company based on the
achievement of milestones and the acquisition of certain manufacturing
technologies.
Note 4
Cash Equivalents and Investments
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"), which establishes a new accounting principle
for the valuation and classification of investments. The adoption of SFAS 115,
which has not been applied retroactively to prior years' financial statements,
requires the Company to report an unrealized loss of $2,380,000 associated with
the equity investment portfolio as a separate component of shareholders' equity.
There can be no assurance that a reduction in the carrying value of such
investments through a charge to earnings will not be required in the future.
Such unrealized loss represents the excess of the Company's adjusted cost over
the market value of securities classified as available for sale. The Company's
investments in U.S. Treasury securities and corporate bonds which the Company
has the ability and intent to hold to maturity are carried at amortized cost.
14
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
At June 30, 1994, securities classified as available for sale and held to
maturity are summarized below.
<TABLE>
<CAPTION>
(in thousands) Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Investments available for sale:
Equity securities $ 8,373 $ - $(2,380) $ 5,993
======= === ======== =======
Investments held to maturity:
Securities and obligations of
the U.S. Treasury and other
U.S. government agencies $98,712 $68 $(625) $98,155
Certificates of deposit 8,312 - - 8,312
Corporate Bonds and
Commercial Paper 15,807 5 (177) 15,635
-------- --- ----- --------
$122,831 $73 $(802) $122,102
======== === ====== ========
</TABLE>
At June 30, 1994, these securities were classified as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash equivalents $ 9,309
Short-term investments 94,967
Long-term investments 24,548
--------
$128,824
========
</TABLE>
The Company has agreed to maintain investments of $26,500,000 as of June 30,
1994 at certain banks as collateral for loans from those banks. See Notes 2 and
6.
15
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Note 5
Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
Raw materials $ 3,494 $ 3,791
Work in process 10,194 8,388
Finished goods 1,986 1,695
------- -------
$15,674 $13,874
======= =======
</TABLE>
Inventory at June 30, 1994 and December 31, 1993 includes $7,285,000 and
$5,920,000, respectively, of certain pharmaceutical products for which the
Company has not yet obtained marketing approval, including certain raw materials
to be used in the production of such inventories. See Note 2. Inventories have
various expiration dates. The Company continually evaluates the extent of
inventory reserves considered necessary based upon the future regulatory and
commercial status of such products. There can be no assurance that reserves for
inventories will not be required in the future.
Note 6
Debt
Notes Payable
Notes payable at June 30, 1994 and December 31, 1993 consist of $6,667,000
and $6,186,000, respectively, of borrowings under short-term notes at an
interest rate of 5.7 percent per annum at June 30, 1994, payable in Dutch
guilders no later than September 28, 1994. These borrowings are secured by
investments at the lending bank of $6,500,000.
16
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Long-term debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- ------------
<S> <C> <C>
7-1/4 percent Notes $106,640 $106,640
6-3/4 percent Debentures 125,000 125,000
Mortgage Debt 16,208 16,134
Long-term Note 10,767 10,794
-------- --------
258,615 258,568
Current Portion (26,975) (20,468)
-------- --------
$231,640 $238,100
======== ========
</TABLE>
7-1/4 Percent Notes
On January 28, 1991, the Company issued $106,645,000 principal amount of
7-1/4 percent Convertible Subordinated Notes (the "7-1/4 percent Notes") due
February 1, 2001. The 7-1/4 percent Notes are convertible by the holders into
approximately 3,843,000 shares of the Company's Common Stock at a conversion
price of $27.75 per share at any time prior to redemption or maturity. The 7-1/4
percent Notes are subordinated in right of payment to senior indebtedness at
June 30, 1994 of $33,643,000 and all future senior indebtedness of the Company,
and rank pari passu with the 6-3/4 percent Debentures described below. The 7-1/4
percent Notes are redeemable by the Company for cash in whole or in part until
February 1, 2001 at amounts ranging up to 105 percent of the principal amount of
the 7-1/4 percent Notes. The Company may be required to redeem the 7-1/4 percent
Notes at their principal amount at the option of the holders of the 7-1/4
percent Notes in certain limited circumstances, including a change in control of
the Company.
6-3/4 Percent Debentures
On October 16, 1991, the Company issued $125,000,000 principal amount of
6-3/4 percent Convertible Subordinated Debentures (the "6-3/4 percent
Debentures") due October 16, 2001. The 6-3/4 percent Debentures are convertible
by the holders into approximately 2,049,000 shares of the Company's Common Stock
at a conversion price of $61.00 per share at any time prior to redemption or
maturity. The 6-3/4 percent Debentures are subordinated in right of payment to
senior indebtedness at June 30, 1994 of $33,643,000 and all future senior
indebtedness of the
17
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Company, and rank pari passu with the 7-1/4 percent Notes. The 6-3/4 percent
Debentures are redeemable by the Company for cash in whole or in part until
October 16, 2001 at amounts ranging up to 104 percent of the principal amount of
the 6-3/4 percent Debentures, provided that prior to October 16, 1994, the 6-3/4
percent Debentures may not be redeemed unless for 30 successive trading days
ending within 15 days of the date of the redemption notice the closing price of
the Company's Common Stock as reported on the NASDAQ National Market System is
at least 130 percent of the then effective conversion price of the 6-3/4 percent
Debentures. The Company may be required to redeem the 6-3/4 percent Debentures
at their principal amount at the option of the holders of the 6-3/4 percent
Debentures in certain limited circumstances, including a change in control of
the Company.
Mortgage Debt
Mortgage loans have been used to finance a portion of the acquisition and
expansion of certain of the Company's facilities in the United States and The
Netherlands. These loans are generally secured by the related land and
buildings. In the United States, the Company has such a loan outstanding with a
balance of approximately $6,494,000 at June 30, 1994 which bears interest at an
annual rate of 10 percent through its maturity date of May 1, 1995. At June 30,
1994, this loan is classified as short-term. A Netherlands loan, with an
outstanding balance of approximately $5,819,000 at June 30, 1994, is payable in
Dutch guilders, bears interest at an annual rate of 8-1/4 percent through its
final maturity date of September 30, 2011, and is secured by certain equipment,
inventories, and accounts receivable. At June 30, 1994, this loan is classified
as short-term (see "Loan Covenants").
Long-term Note
The Company borrowed $10,767,000 under a 9-1/2 percent long-term note which
is payable in Dutch guilders. This loan is secured by the same assets as the
Netherlands loan discussed above. At June 30, 1994, this loan is classified as
short-term (see "Loan Covenants").
Loan Covenants
Agreements covering $20,482,000 of the Company's outstanding debt balances
contain certain financial and non-financial covenants, including the maintenance
of minimum equity and cash balances and compliance with certain financial
ratios. The Company has obtained waivers of certain of such covenants on the
condition that it maintains certain investments at the lending bank, which at
June 30, 1994 totalled $20,000,000. There can be no assurance that the Company
will be able to
18
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
continue to collateralize such loans and, accordingly, the Company has
classified $20,482,000 of debt as short-term. Additionally, $6,667,000 of the
Company's notes payable are secured by investments at the lending bank of
$6,500,000. If cash flows continue to be negative, the Company's ability to
service its debt may be impaired.
Note 7
Contract Revenues
Lilly Related
-------------
For the three and six months ended June 30, 1994, the Company recognized
$3,000,000 and $6,500,000, respectively of revenues pursuant to the Company's
agreements with Lilly as further described in Note 3.
Related Party Research & Development
------------------------------------
During 1994 and 1993, the Company conducted research and development under
contract with Tocor II. Under the contract, the Company received reimbursement
of its costs plus a management fee and recorded revenue of $1,652,000 for the
six months ended June 30, 1994 and $2,573,000 and $5,543,000 for the three and
six months ended June 30, 1993, respectively. Such revenues were recorded net of
amortization of deferred costs resulting from the issuance of warrants to Tocor
II Unitholders. See Note 8 for a discussion of an exchange offer which resulted
in the termination of the Tocor II research and development contract and
services agreement.
Note 8
Charge for Acquired Research and Development
In February 1994, the Company initiated an Exchange Offer pursuant to
which the Company offered to exchange 3.2 shares of its Common Stock for each of
the 2,250,000 outstanding Tocor II Units tendered. Each Unit consisted of one
share of callable common stock of Tocor II, one callable warrant to purchase one
share of Centocor Common Stock and one Series T warrant to purchase one share of
Centocor Common Stock (the "Warrants"). The Exchange Offer expired at the close
of business on March 11, 1994, at which time the Company accepted all of the 94
percent of the Tocor II Units tendered in exchange for approximately 6,793,000
shares of its Common Stock, thereby increasing shareholders equity by
$81,607,000. The transaction was accounted for as a purchase and the Company
allocated the excess of the consideration paid over the net assets of Tocor II
to the value of the acquired research and development. The Company recorded a
charge to earnings in the first quarter of 1994 of approximately $36,966,000
representing principally the cost allocated to the acquired research and
development. In connection with the transaction, the Company acquired
$50,124,000 of cash and short-term investments and Warrants with a value of
$8,492,000 which were retired. The unaudited comparative statement of operations
19
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
data excluding the charge for acquired research and development, assuming the
Exchange Offer was consummated as of January 1, 1993, would have been as
follows:
<TABLE>
<CAPTION>
Statement of For the three months For the six months
Operations Data June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
--------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $16,384 $11,180 $30,005 $23,188
Loss $(15,418) $(28,157) $(30,360) $(56,072)
Loss per share $(.30) $(.58) $(.59) $(1.16)
</TABLE>
Effective March 30, 1994, the Company acquired the remaining shares of Tocor
II callable common stock through a merger of Tocor II into a wholly-owned
subsidiary of the Company. Each share of Tocor II callable common stock acquired
by the Company in the merger transaction is convertible into 2.88 shares of the
Company's Common Stock. The Company did issue 186,000 shares in connection with
such merger. If all of the remaining shares of Tocor II callable common stock
are so converted, the Company would be obligated to issue an additional 181,000
shares of its Common Stock. Warrants not tendered as part of Units in the
Exchange Offer remain outstanding.
Note 9
Income Taxes
At June 30, 1994, the tax effect of the Company's federal net tax operating
loss carryforwards was $127,300,000 with expiration dates ranging from 2005 to
2009. Additionally, at June 30, 1994, the Company had research and development
tax credits of $3,576,000 with expiration dates ranging from 1999 to 2002.
Further, the tax effect of inventory reserves that are not currently deductible
at June 30, 1994 was $20,376,000. Realization of net deferred tax assets
related to these items is dependent on future earnings, which are uncertain.
Accordingly, a valuation reserve was recorded by the Company and, therefore, the
Company has no net deferred tax assets at June 30, 1994.
Note 10
Supplemental Information on Cash Flows
Interest paid for the six months ended June 30, 1994 and 1993 was $9,545,000
and $9,582,000, respectively.
20
<PAGE>
Centocor, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Cash used for the purchases of investments as well as the cash received upon
the maturities and sales of investments was as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended June 30, 1994 1993
--------- ---------
<S> <C> <C>
Purchases $(44,590) $(73,065)
Maturities and sales 63,367 127,300
------ -------
$18,777 $54,235
======= =======
</TABLE>
During 1994, the Company issued 6,979,000 shares of Common Stock, resulting
in a noncash increase to additional paid-in capital of $25,146,000 in connection
with an exchange offer more fully described in Note 8.
During the first quarter of 1994, the Company acquired cash and short-term
investments of $50,124,000 in connection with an exchange offer more fully
described in Note 8.
Note 11
Restructuring Charges
During the second quarter of 1993, the Company recorded a restructuring
charge of $5,114,000 consisting principally of severance related costs incurred
in connection with the further downsizing of its workforce.
During the first quarter of 1993, the Company recorded a restructuring
charge of $4,273,000, principally related to reserves for certain fixed assets
which were subsequently disposed. As a result of the downsizing of the Company's
staff and present level of operations, the Company currently maintains idle
facilities and equipment. The Company continually evaluates the future needs for
its facilities and equipment. There can be no assurance that reserves to further
reduce the carrying value of certain fixed assets will not be required in the
future.
21
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- - --------------------------------------------------------------------------------
Financial Condition
LIQUIDITY AND CAPITAL RESOURCES
The Company's future financial condition is highly dependent upon the
reduction of the Company's rate of net cash outflows and, ultimately, upon the
achievement of significant and sustained levels of pharmaceutical product sales.
The Company will need to secure significant additional capital in the future
from collaborative arrangements with pharmaceutical companies or from the
capital markets until significant and sustained levels of pharmaceutical sales
are achieved. There can be no assurance that significant additional capital will
be available to the Company. There also can be no assurance that the Company
will materially reduce its current rate of net cash outflows or generate
significant and sustained levels of pharmaceutical product sales. The United
States Food and Drug Administration ("FDA") has not approved any of the
Company's pharmaceutical products for marketing. There can be no assurance that
FDA or other regulatory approvals of any of the Company's products will be
obtained. Failure to obtain timely FDA or other regulatory approvals of
pharmaceutical products will have a material adverse effect on the Company. The
status of two of the Company's major pharmaceutical products which have been
submitted for regulatory approval is discussed below.
The Company's ability to further reduce its current rate of net cash
outflows is also dependent upon the extent to which it can expand collaborations
with established pharmaceutical companies and achieve milestones under such
collaborative agreements. No assurance can be given that such collaborations can
be expanded or that such milestones can be achieved.
At June 30, 1994, the Company had cash, cash equivalents and investments of
$160,747,000, including equity investments of $5,993,000. During the six months
ended June 30, 1994, the Company had negative cash flows from operations of
$28,350,000. The Company's total cash, cash equivalents and investments
increased by $20,719,000 from December 31, 1993, principally as a result of the
exchange offer, which is discussed in Note 8, partially offset by the cash used
for operations.
Agreements covering $20,482,000 of the Company's outstanding debt balances
contain certain financial and non-financial covenants, including the maintenance
of minimum equity and cash balances and compliance with certain financial
ratios. The Company has obtained waivers of certain of such covenants on the
condition that it maintain certain investments at the lending bank, which at
June 30, 1994 totalled $20,000,000. There can be no assurance that the Company
will be able to continue to collateralize such loans and, accordingly, the
Company has classified $20,482,000 of debt as short-term. Additionally,
$6,667,000 of the Company's short-term debt is secured by investments at the
lending bank of $6,500,000. If cash flows continue to be negative, the Company's
ability to service its debt may be impaired.
See Note 2 to the Company's Consolidated Financial Statements for a
discussion of litigation and other factors which may affect the Company's future
liquidity and capital resources.
22
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- - --------------------------------------------------------------------------------
STATUS OF REOPRO (formerly CentoRx)
The Company's therapeutic products under development include ReoPro, a
product intended to treat or prevent the formation of blood clots in the
cardiovascular system. The Company filed product license applications for ReoPro
in the United States, Canada and in several countries in Europe. On June 9,
1994, the FDA Cardiovascular and Renal Drugs Advisory Committee recommended
approval of ReoPro for the indication of high-risk angioplasty. There can be no
assurance that ReoPro will be approved for commercial sale in the United States,
Europe or elsewhere. A patent infringement action was filed against the Company
by Genentech, Inc. ("Genentech") which involves ReoPro. See Item 1 Note 2 to the
Company's Consolidated Financial Statements - "Other Litigation".
STATUS OF PANOREX
The Company has completed the filing of an application requesting marketing
approval for Panorex in Germany. Panorex is a product intended to treat
colorectal cancer. There can be no assurance that Panorex will be approved for
commercial sale in Germany or elsewhere.
ASSETS
The increase in the aggregate amount of cash and investments at June 30,
1994 as compared to December 31, 1993 is discussed under Liquidity and Capital
Resources.
Gross fixed assets at June 30, 1994 increased as compared to December 31,
1993 principally due to upgrading of manufacturing facilities. As a result of
the downsizing of the Company's staff and present level of operations, the
Company currently maintains idle facilities and equipment. The Company
continually evaluates the future needs for its facilities and equipment. There
can be no assurance that reserves to further reduce the carrying value of
certain fixed assets will not be required in the future.
LIABILITIES AND SHAREHOLDERS' EQUITY
The Company's deficit in shareholders' equity at June 30, 1994 was reduced
as compared to December 31, 1993 principally as a result of the Exchange Offer
consummated on March 11, 1994. See Note 8 to the Company's Consolidated
Financial Statements. Additionally, shareholders' equity increased by proceeds
from the exercise of options and warrants. These increases were partially offset
by the Company's loss for the six months ended June 30, 1994. The extent and
timing of future warrant and option exercises, if any, are primarily dependent
upon the market price of the Company's Common Stock and general financial market
conditions, as well as the exercise prices and expiration dates of the warrants
and options.
The Company expects that shareholders' equity will decrease in future
periods unless and until the Company is successful in securing additional
capital from collaborative arrangements with pharmaceutical companies or the
capital markets or significant and sustained levels of pharmaceutical product
sales are achieved. There can be no assurance that significant and sustained
23
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- - --------------------------------------------------------------------------------
levels of pharmaceutical products sales will be achieved or that any additional
capital will be available to the Company.
REVENUES
Product sales have not produced sufficient revenues to cover the Company's
operating expenses. The increase in sales for the three months ended June 30,
1994 as compared to the year earlier period is principally due to increased
sales of certain diagnostic reagents. The decrease in sales for the six months
ended June 30, 1994 as compared to the year earlier period is principally due to
lower sales of certain diagnostic reagents and the discontinuance of certain
diagnostic product lines. Any increase in the level of sales in future periods
is primarily dependent upon the timing and extent of regulatory approvals of
products, principally pharmaceutical products.
The increase in contract revenue for the three and six months ended June 30,
1994 as compared to the corresponding period of the prior year is principally
due to the recognition of $3,000,000 and $6,500,000, respectively, from Lilly in
connection with the achievement of certain milestones, partially offset by the
decrease in contract revenue from Tocor II as discussed below. The level of
contract revenues in future periods will primarily depend upon the extent to
which the Company enters into other collaborative contractual arrangements, if
any, and the achievement of milestones under current arrangements.
Contract revenues for the six months ended June 30, 1994 include $1,652,000,
net of warrant amortization costs, recognized pursuant to the Company's
agreements with Tocor II as compared to $2,573,000 and $5,543,000 for the three
and six months ended June 30, 1993, respectively. The decrease in contract
revenue is principally the result of the Exchange Offer, which is more fully
described in Note 8 to the Company's Consolidated Financial Statements. As a
result of the Exchange Offer, no further contract revenue will be recognized in
connection with the Tocor II research program.
COSTS AND EXPENSES
Cost of sales increased for the three and six months ended June 30, 1994 as
compared to the corresponding periods of 1993 due to the mix of products sold.
As further described in Note 2 to the Company's Consolidated Financial
Statements, the Company is required to make certain royalty payments based on
sales of products, which payments are reflected in cost of sales. Royalty costs
represent a significant percentage of sales.
Research and development expenses decreased for the three and six months
ended June 30, 1994 as compared to the year earlier period due principally to a
decrease in activities associated with clinical trials of products under
development. The Company expects research and development expenses to increase
in the remaining quarters of 1994 as compared to the first two quarters of 1994
as the Company expands clinical trials of products under development.
24
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- - --------------------------------------------------------------------------------
Marketing, general and administrative expenses for the three and six months
ended June 30, 1994 decreased as compared to the year earlier period due
principally to reductions in sales and administrative staffs, and marketing
costs.
OTHER INCOME AND EXPENSE
Interest income increased in the three and six months ended June 30, 1994 as
compared to the year earlier period due principally to an increase in the
Company's cash and investment balances as a result of the exchange offer, which
is discussed more fully in Note 8 to the Company's Consolidated Financial
Statements partially offset by reduced interest rates on investments during the
1994 period. Interest income in future periods will depend primarily on the
level of the Company's investments and the interest rates obtained on such
investments. Additionally, if the market value of certain equity investments
continues to decline in future periods, the Company may record a charge to
earnings in such future periods representing an unrealized loss on such
securities.
PER SHARE CALCULATIONS
At June 30, 1994, approximately 14,254,000 shares of the Company's Common
Stock were issuable upon exercise of outstanding options and warrants and upon
vesting of restricted stock awards. Options, warrants, and stock awards are
considered Common Stock equivalents for purposes of per share data. The Company
uses the modified treasury stock method of calculating per share data since the
number of shares of the Company's Common Stock issuable upon the exercise of
Common Stock equivalents is in excess of 20 percent of the Company's outstanding
Common Stock. Under the modified treasury stock method, the effect of Common
Stock issuable upon the exercise of Common Stock equivalents is reflected in the
per share data calculation only if the aggregate effect would be dilutive. The
3,843,000 shares issuable upon conversion of the 7-1/4 percent Notes and the
2,049,000 shares issuable upon conversion of the 6-3/4 percent Debentures are
not considered Common Stock equivalents and are not included in the calculation
of primary per share data but are included in the calculation of fully diluted
per share data if their effect is dilutive.
No Common Stock equivalents or shares issuable upon conversion of the 7-1/4
percent Notes and 6-3/4 percent Debentures were included in the per share
calculations for any periods presented since to do so would have been
antidilutive as the Company has recorded net losses in all periods presented. In
future periods, depending upon the market value of the Company's Common Stock
and its results of operations for such periods, the Company may be required to
include its then outstanding Common Stock equivalents as well as shares issuable
upon the conversion of the 7-1/4 percent Notes and the 6-3/4 percent Debentures
in its calculations of per share data for such periods if the effect would be
dilutive.
25
<PAGE>
Part II OTHER INFORMATION
Item 1: Legal Proceedings
See Note 2 to the Company's Consolidated Financial Statements, which is
incorporated herein by reference.
Item 4: Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Shareholders was held on June 29, 1994 at
the Company's principal office at 200 Great Valley Parkway,
Malvern, Pennsylvania.
(b) The only matter voted upon at the meeting was the election of
directors. Of 50,695,459 shares eligible to be voted at the
meeting, 4,582,442 shares remained unvoted. Each nominee was
elected with the following vote:
<TABLE>
<CAPTION>
Total Vote for Total Vote Withheld
Each Director From Each Director
------------- ------------------
<S> <C> <C>
Anthony B. Evnin 45,827,000 285,025
William F. Hamilton 45,827,103 284,922
David P. Holveck 45,814,121 297,904
Antonie T. Knoppers 45,818,751 293,274
Hubert J.P. Schoemaker 45,809,345 302,680
Lawrence Steinman 45,821,634 290,391
Jean C. Tempel 45,821,525 290,500
</TABLE>
Item 5: On July 27, 1994, Ronald A. Matricaria, President and Chief
Executive Officer of St. Jude Medical, Inc., was elected a
director of the Company.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
--------
None.
(b) Reports on Form 8-K
-------------------
The Registrant has filed the following reports on Form 8-K since
the beginning of the quarter ended June 30, 1994:
<TABLE>
<CAPTION>
Date of Report Items Covered
-------------- -------------
<S> <C>
April 21, 1994 5, 7
</TABLE>
26
<PAGE>
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.
Centocor, Inc.
(Registrant)
Date: August 12, 1994 /s/David P. Holveck
------------------ -------------------------
David P. Holveck
President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 12, 1994 /s/Dominic J. Caruso
------------------ -------------------------
Dominic J. Caruso
Vice President,
Corporate Controller and
Chief Accounting Officer
(Principal Financial and
Accounting Officer)
