<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 March 31, 1996
--------------
[ ] 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 May 1, 1996 were 67,548,447.
<PAGE>
Part I: Financial Information
- - -----------------------------
Item 1: Financial Statements
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1996 1995
- - ------------------------------------ ----------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents (Notes 4, 7 and 11) $132,985 $ 16,002
Short-term investments (Notes 4, 7 and 11) 114,619 115,435
Accounts and contracts receivable 18,725 11,489
Interest receivable 2,867 1,648
Inventory (Note 5) 20,475 20,783
Prepaid expenses 2,927 2,959
Other current assets 893 653
-------- --------
293,491 168,969
Property, Plant and equipment (Note 7):
Land and buildings 72,243 72,980
Equipment, furniture, fixtures and
improvements 68,479 69,884
-------- --------
140,722 142,864
Less accumulated depreciation (75,490) (74,727)
-------- --------
65,232 68,137
Long-term investments (Note 4) 9,698 5,769
Intangible and other assets (Note 6) 17,263 17,409
-------- --------
Total assets $385,684 $260,284
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT'D.)
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1996 1995
- - -------------------------------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $3,286 $4,126
Accrued expenses 25,017 26,139
Unearned revenues 395 83
Note payable (Note 7) 7,229 7,500
Current portion of
long-term debt (Note 7) 17,396 18,289
-------- --------
53,323 56,137
Long-term debt (Notes 7 and 11) 221,093 231,640
Other liabilities 1,237 1,286
Minority interest 1,336 617
Shareholders' equity (Notes 2 and 11):
Preferred Stock, $.01 par value,
10,000 shares authorized, none issued - -
Common Stock, $.01 par value,
100,000 shares authorized and
63,952 and 58,538 issued and
outstanding at March 31, 1996 and
December 31,1995, respectively 640 585
Additional paid-in capital 918,580 770,068
Deficit (818,537) (808,839)
Unrealized gain on marketable
securities 2,259 2,342
Cumulative foreign currency
translation adjustments 5,753 6,448
-------- --------
108,695 (29,396)
-------- --------
Total liabilities and
shareholders' equity $385,684 $260,284
======== ========
</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)
- - --------------------------------------------------------------------------------
For the three months ended March 31, 1996 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Revenues:
<S> <C> <C>
Sales $21,710 $19,319
Contracts 172 4,676
------- -------
21,882 23,995
Costs and expenses:
Cost of sales 10,554 8,625
Research and development 12,548 13,501
Marketing, general and administrative 7,403 7,494
------ ------
30,505 29,620
Other income (expenses):
Interest income 2,265 2,785
Interest expense (3,267) (4,964)
Other income (expense) (73) (438)
------- -------
(1,075) (2,617)
Net loss ($9,698) ($8,242)
======== ========
Net loss per share ($0.16) ($0.14)
======== ========
Weighted average number of shares
outstanding 59,944 57,769
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CENTOCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------
For the three months ended March 31, 1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows used for operating activities:
Net loss ($9,698) ($8,242)
Adjustments to reconcile net loss to net cash
used for operating activities:
Provisions for depreciation and amortization 3,647 4,454
Amortization of deferred income (60) (1,657)
Other 375 696
Changes in assets and liabilities:
Accounts and contracts receivable (7,342) (6,317)
Interest receivable (1,230) (775)
Inventory (216) (3,182)
Prepaid expenses (723) (271)
Other current assets (292) (225)
Intangible and other assets (525) (322)
Accounts payable (781) (1,422)
Unearned revenue - 158
Accrued expenses and other liabilities 213 915
Other long-term liabilities (49) 194
-------- --------
Net cash used for operating activities (16,681) (15,996)
Cash flows used for investing activities:
Purchases of investments (27,505) (76,602)
Sales of investments 24,740 26,300
Net purchases of fixed assets (637) (1,654)
-------- --------
Net cash (used for) from investing activities (3,402) (51,956)
Cash flows from financing activities:
Net proceeds from issuance of Common Stock relating
to Public offering 125,916 -
Net proceeds from other issuances of Common Stock 11,500 15,173
Reduction of long-term debt and notes payable (229) (275)
-------- --------
Net cash from financing activities 137,187 14,898
Effect of foreign currency translation (121) 551
-------- --------
Net (decrease) increase in cash and cash equivalents 116,983 (52,503)
Beginning cash and cash equivalents 16,002 78,925
-------- --------
Ending cash and cash equivalents $132,985 $26,422
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Note 1
Basis of Presentation
Centocor, Inc. ("Centocor" or "the Company") is a biotechnology company that
develops therapeutic and diagnostic human health care products for
cardiovascular, autoimmune and infectious diseases and cancer. The Company
concentrates on research and development, manufacturing and market development,
with a primary technological focus on monoclonal antibodies, with additional
programs in genetic vaccines and peptides.
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 audited financial statements
in the Company's Annual Report on Form 10-K for the year ended December 31,
1995.
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 March 31, 1996 and December 31, 1995 and the
consolidated results of operations for the three months ended March 31, 1996 and
1995 and consolidated cash flows for the three months ended March 31, 1996 and
1995. The results of operations and the cash flows 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 has incurred significant operating expenses attempting to develop
therapeutic and diagnostic products. The Company's product sales have not
produced sufficient revenues to cover the Company's operating costs.
Consequently, the Company has experienced substantial net cash outflows, which
have been only partially offset by significant contract revenues received
through collaborative alliances with pharmaceutical companies and the Company's
financing activities.
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 therapeutic product sales.
During the year ended December 31, 1996, sales of the Company's products,
including ReoPro and Panorex, are not expected to generate sufficient revenue to
result in positive cash flow for the year. Under the Company's strategy of
entering into collaborative alliances with established pharmaceutical companies,
the Company generally shares sales revenues from products
6
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
covered by such arrangements with its partners. There can be no assurance that
those products, in conjunction with the Company's therapeutic product candidates
under development and diagnostic products, will achieve a level of sales
sufficient to generate positive cash flow from operations for the Company, given
the current and currently anticipated future scope of the Company's operations.
The level of future sales of both diagnostic and therapeutic products will be
dependent upon several factors, including, but not limited to, the timing and
extent of future regulatory approvals of the Company's products, approval and
commercialization of competitive products and ultimately the degree of
acceptance of the Company's products in the marketplace. There can be no
assurance that U.S. Food and Drug Administration ("FDA") or other regulatory
approvals expanding the authorized use of ReoPro and Panorex or permitting the
commercial sale of any of the Company's product candidates under development
will be obtained. Failure to obtain additional timely FDA or other regulatory
approvals for the use of ReoPro and Panorex or other product candidates will
have a material adverse effect on the Company.
Until significant and sustained levels of therapeutic product sales are
achieved, the Company expects that it will need to secure significant additional
funding in the future from collaborative arrangements with pharmaceutical
companies or from the capital markets. There can be no assurance that sufficient
additional funding will be available to the Company or that the Company can
obtain additional collaborations with established pharmaceutical companies and
receive payments for product rights and/or the achievement of milestones under
such collaborative agreements. Even if the Company obtains such funding, there
can be no assurance that such funding will be sufficient to sustain the
Company's operations until it generates positive cash flows from operations.
Legal Proceedings
-----------------
In October 1992, the Company was served with a complaint filed by the Velos
Group, a Maryland partnership ("Velos") in the U.S. District Court for the
District of Maryland. The complaint primarily alleged 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, as well
as various patent application and foreign patents. The patents and applications
include claims relating to monoclonal antibodies used in treating manifestations
of Gram-negative bacterial infections, the targeted indication of Centoxin. The
complaint also alleges that the Company failed to use its best efforts to
perfect and market Centoxin. The complaint sought declaratory relief and
monetary relief in excess of $100,000,000, and requested that the Company place
in escrow one-half of the amounts received by the Company in 1992 pursuant to
its agreements with Eli Lilly and Company ("Lilly"). The complaint did 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 on June 22, 1993 with leave to replead. On July 28,
1993, the Court permitted plaintiff to file an amended complaint that
7
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
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, to the
amended complaint. 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. On February 6, 1995, the motion was denied. Discovery is in progress,
and trial is scheduled for November 1996. The Company has moved for partial
summary judgment with respect to the plaintiff's claim that under its license
agreement, Lilly is allegedly a sublicensee of Centocor, thereby purportedly
entitling plaintiff to a significant part of the funds paid by Lilly to
Centocor. Plaintiff has moved for partial summary judgment with respect to
certain of the affirmative defenses and the Company's counterclaims. In
addition, the Company has moved for partial summary judgment dismissing the so-
called best efforts claim. The Company believes that the allegations of Velos
are without merit and intends to vigorously defend this suit and to pursue its
counterclaim.
On December 23, 1993, a purported class action captioned Peter Cordaro v.
Hubert J.P. Schoemaker, Stelios Papadopoulos, Marc Feldmann, David Golden,
Centocor and Tocor II Inc. ("Tocor II") was filed in the Court of Common Pleas
of Chester County, Pennsylvania. The complaint alleges that the defendants
breached their fiduciary duties to Tocor II Unitholders by, among other things,
making an offer to exchange shares of the Company's Common Stock for Tocor II
Units, 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 the retention of a financial advisor to
consider the exchange offer, and an award of damages (including rescissionary
damages), costs and plaintiff's counsel fees. Plaintiff took no additional
action to obtain an injunction and the exchange offer was made and consummated.
A motion for class certification is pending. No trial date has been fixed. The
Company believes that the allegations set forth in the complaint are without
merit and intends to vigorously defend this suit.
In July 1995, PaineWebber Development Corporation, a wholly-owned subsidiary
of Paine Webber Group Inc., caused suits to be filed against the Company by two
research and development partnerships formed in the mid-1980s by PaineWebber and
managed by it since then. The two PaineWebber partnerships (PaineWebber R&D
Partners, L.P. and PaineWebber R&D Partners II, L.P.) were, respectively,
investors in Centocor Partners II, L.P. ("CPII") and Centocor Partners III, L.P.
("CPIII"), research partnerships for which PaineWebber acted as the sales agent
and in other capacities. The Company purchased the limited partners' interests
in CPII in February 1992 and that partnership
8
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
was then dissolved.
The suit by PaineWebber R&D Partners, L.P., was filed in the Supreme Court of
the State of New York, County of New York, and purports to be a class action on
behalf of all former limited partners of CPII. The complaint charges that some
portion of the $100 million paid by Lilly to the Company in July 1992
constituted revenues to the Company for the licensing, sublicensing or sale of
HA-1A and that the Company is obligated to pay a percentage thereof to the
former limited partners of CPII, in addition to amounts already paid. The
theories of recovery are similar to those asserted by Velos in 1992, as
described above. The Company moved to dismiss the New York suit on the ground
that it was brought in an inconvenient forum and that motion was granted. The
suit has been refiled in the Delaware Superior Court. Prior to the dismissal of
the New York action, a similar suit was filed by another former CP II partner in
the Court of Common Pleas of Chester County, Pennsylvania. That suit is in its
earliest stage. In an Amended Complaint, the plaintiff has now also named Paine
Webber Group, Inc. and Paine Webber Development Corporation as defendants. The
Company believes that the allegations of the plaintiffs in these actions are
without merit and intends to vigorously defend them.
The suit by PaineWebber R&D II, L.P., was filed in the Court of Chancery of
the State of Delaware. In the complaint in this action, the plaintiff seeks to
sue derivatively on behalf of CPIII. CPIII is named as a nominal defendant and
the Company and Centocor Development Corporation III, L.P. ("CDC III"), a wholly
owned subsidiary of the Company which acts as the general partner of CPIII, are
named as defendants against whom relief is sought. The claim in this case is
that at least $25 million of the money paid by Lilly to the Company in 1992
represented profits from the marketing of ReoPro, obligating the Company to pay
a portion thereof to CPIII, and that the Company is obligated to pay an
increased percentage of the profits from ReoPro to CPIII going forward. The
Company answered the complaint in the Delaware action and filed a cross-claim
against nominal defendant CPIII and a third-party complaint against PaineWebber
Group Inc. and PaineWebber. The cross-claim seeks an offset against any damages
awarded the partners based on theories of unjust enrichment and quasi contract.
The third-party claims (since amended to add additional theories of liability
and to make PaineWebber, Inc. an additional third-party defendant) seek to hold
the PaineWebber entities liable for some or all of any alleged injury to the
partnership. On November 1, 1995, an additional suit was commenced in the
Delaware Court of Chancery by John E. Abdo, a limited partner of CPIII, against
the Company, CDC III and certain of their officers and directors. The complaint,
filed derivatively on behalf of CPIII, asserts claims, inter alia, for breach of
contract, breach of fiduciary duty, common law fraud, and conspiracy and aiding
and abetting. The Company answered this complaint and also filed a cross-claim
against nominal defendant CPIII and a third party complaint against PaineWebber
Group Inc. and PaineWebber, since amended to add additional theories of
liability and to name PaineWebber, Inc. as a further third-party defendant.
Discovery is proceeding. No trial date has been fixed. The Company believes
that the allegations of the plaintiffs in these suits are without merit and
intends to vigorously defend them.
9
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
While it is not possible to predict with certainty the eventual outcome of
these matters, the Company believes that the foregoing proceedings will not have
a material adverse effect on the Company.
Partnerships
------------
Centocor has an exclusive option to purchase the limited partnership
interests in CPIII. Centocor'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% of the total capital contributions of such limited partner (approximately
$7,926,000 in the aggregate) 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. Centocor commenced commercial
sales of ReoPro in January 1995. If the Company elects to exercise this option,
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 shares of the
Company's Common Stock, and future payments generally of six percent of sales of
products developed by CPIII. If Centocor does not exercise this option, it will
have no rights to the technology or products developed on behalf of CPIII,
including ReoPro.
The Company has entered into indemnity agreements with CPIII and the former
limited partners of Centocor Cardiovascular Imaging Partners, L.P. ("CCIP") and
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,
including payments based on any sales of ReoPro. Beginning in 1997, the Company
is required to make certain royalty payments to Lilly up to a designated level
of sales of ReoPro.
The Company has entered into agreements to support research at certain
research institutions.
10
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
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. Centocor's business may be materially adversely affected by a
successful product liability claim in excess of any insurance coverage. There
can be no assurance that product liability insurance coverage will continue to
be available to Centocor in the future on reasonable terms or at all.
Note 3
Collaborative Arrangements
Relationship with Eli Lilly and Company
- - ---------------------------------------
In July 1992, Centocor and Lilly entered into a Sales and Distribution
Agreement. Under that Agreement, Centocor is principally responsible for
developing and manufacturing ReoPro, and Lilly will assist Centocor in the
regulatory filings and continued development of ReoPro for various clinical
indications. Also, in the event Centocor cannot manufacture ReoPro or under
certain other circumstances, such as material breach of the agreement by or the
bankruptcy of Centocor, Lilly has the option to assume the manufacture of ReoPro
and assure the continued supply of the product, even to the extent of acquiring
Centocor's related manufacturing assets at their independently appraised values.
Relationship with Glaxo Wellcome plc
- - ------------------------------------
In November 1993, Centocor and Glaxo Wellcome plc ("Glaxo Wellcome") entered
into an alliance agreement for the development and marketing of certain of
Centocor's monoclonal antibody-based cancer therapeutic products, including
Panorex. In November 1994, Centocor and Glaxo Wellcome amended their alliance
agreement and Glaxo Wellcome became the exclusive worldwide distributor for
Panorex. Under the agreement, Glaxo Wellcome is responsible principally for the
11
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
continuing clinical development of Panorex, and Centocor is responsible
principally for manufacturing Panorex and securing regulatory approvals.
Note 4
Marketable Securities
The Company's equity investments classified as available for sale are carried
at estimated fair value with unrealized gains and losses recorded as a component
of shareholders' equity. The Company's other investments which the Company has
the ability and intent to hold to maturity are carried at amortized cost.
At March 31, 1996, securities classified as available for sale and held to
maturity are summarized below (in thousands):
<TABLE>
<CAPTION>
Estimated
Adjusted Unrealized Carrying
Cost Gains (Losses) Value
---- ----- -------- -----
<S> <C> <C> <C> <C>
Investments available for sale:
Equity securities $ 3,552 $ 2,259 $ - $ 5,811
===== ===== ==== =====
Estimated
Carrying Unrealized Fair
Value Gains (Losses) Value
----- --------- -------- -----
Investments held to maturity:
Securities and obligations
of the U.S. Treasury
and other U.S.
government agencies $ 71,978 $ 54 $(105) $ 71,927
Certificates of deposit 28,582 - - 28,582
Corporate bonds and
commercial paper 18,716 24 (13) 18,727
------ -- --- ------
$119,276 $ 78 $(118) $119,236
======= == === =======
At March 31, 1996, these securities were classified as follows
(in thousands):
Cash equivalents $ 770
Short-term investments 114,619
Long-term investments 9,698
-----
$125,087
=======
</TABLE>
12
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
The Company has agreed to maintain investments of $27,260,000 as of March 31,
1996 at certain banks as collateral for loans from those banks. See Note 7.
Note 5
Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials $ 5,083 $ 4,965
Work in process 9,286 9,382
Finished goods 6,106 6,436
------- -------
$20,475 $20,783
======= =======
</TABLE>
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
Intangibles and Other Assets
Intangibles and other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Licenses $ 3,977 $ 4,126
Goodwill 5,416 5,502
Debt issuance costs 3,677 3,854
Other 4,193 3,927
------- -------
$17,263 $17,409
======= =======
</TABLE>
Licensing agreements, goodwill and other assets are reviewed for impairment
whenever events or circumstances provide evidence that suggest that the carrying
amount of the asset may not be recoverable. Impairment is evaluated by using
identified or expected cashflows.
13
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
----------------------------------------------------------------------------
Note 7
Debt
Notes Payable
Notes payable at March 31, 1996 and December 31, 1995 consists of $7,229,000
and $7,500,000, respectively, of borrowings under short-term notes at an
interest rate of 4.25 percent per annum at March 31, 1996, payable in Dutch
guilders no later than September 19, 1996. These borrowings are secured by
investments at the lending bank of $7,260,000 (see "Loan Covenants").
Long-term debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -------------
<S> <C> <C>
7-1/4 percent Notes $96,093 $106,640
6-3/4 percent Debentures 125,000 125,000
Mortgage Debt 8,540 9,101
Long-term Note 8,856 9,188
----- -----
238,489 249,929
Current Portion (17,396) (18,289)
------- -------
$221,093 $231,640
======= =======
</TABLE>
7-1/4 Percent Notes
On January 28, 1991, the Company issued $106,645,000 principal amount of
7 1/4% Convertible Notes due February 1, 2001. The 7 1/4% Convertible 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% Convertible Notes are subordinated
in right of payment to senior indebtedness at March 31, 1996 of $24,625,000 and
all future senior indebtedness of the Company, and rank pari passu with the
6 3/4% Convertible Debentures described below.
On March 20, 1996 the Company called for redemption the 7 1/4% Convertible
Notes at a redemption price of 103.222% of the outstanding principal amount. The
outstanding principal amount of the 7 1/4% Convertible Notes was $106,640,000
at December 31, 1995 and $96,093,000 at March 31, 1996. In April 1996, the
Company issued approximately 3,450,000 shares of common stock upon conversion of
approximately $95,755,000 principal amount of the 7 1/4% Convertible Notes and
paid $338,000 in cash to redeem the remaining 7 1/4% Convertible Notes
outstanding at March 31, 1996 which were not converted. See Note 11.
14
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
----------------------------------------------------------------------------
6 3/4% Convertible Debentures
On October 16, 1991, the Company issued $125,000,000 principal amount of
6 3/4% Convertible Debentures due October 16, 2001. The 6 3/4% Convertible
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% Convertible Debentures are
subordinated in right of payment to senior indebtedness at March 31, 1996 of
$24,625,000 and all future senior indebtedness of the Company, and rank pari
passu with the 7 1/4% Convertible Notes. The 6 3/4% Convertible Debentures
are redeemable by the Company for cash in whole or in part until October 16,
2001 at amounts ranging up to 102 percent of the principal amount of the 6 3/4%
Convertible Debentures. The Company may be required to redeem the 6 3/4%
Convertible Debentures at their principal amount at the option of the holders of
the 6 3/4% Convertible Debentures in certain limited circumstances, including a
change in control of the Company.
Long-term Notes
The Company borrowed $8,856,000 under a 9 1/2% percent long-term note which
is payable in Dutch guilders. A Netherlands loan, with an outstanding balance of
approximately $5,768,000 at March 31, 1996, is payable in Dutch guilders and
bears interest at an annual rate of 8 1/4% percent through its final maturity
date of September 30, 2011. At March 31, 1996 and December 31, 1995, these loans
are classified as short-term debt (see "Loan Covenants").
Loan Covenants
Agreements covering $17,396,000 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 is currently in compliance with certain financial
covenants; however, if the Company continues to incur losses its ability to meet
these covenants may be impaired. Therefore, the Company is required to maintain
certain investments at the lending bank, which at March 31, 1996 totaled
$20,000,000. The Company has classified the $17,396,000 of debt as short-term.
Additionally, $7,229,000 of the Company's short-term debt is secured by
investments at the lending bank of $7,260,000. If cash flows continue to be
negative, the Company's ability to service its debt may be impaired.
15
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
- - --------------------------------------------------------------------------------
Note 8
Contract Revenues
Pursuant to the Company's agreements with Lilly, the Company recognized
revenues of $3,000,000, for the three months ended March 31, 1995 related to the
achievement of ReoPro milestones.
Note 9
Income Taxes
The Company has net operating loss carryforwards available in the United
States for federal income tax purposes of approximately $600,000,000 which will
begin to expire at various dates from the year 2005 to 2011. Net operating loss
carryforwards may be also be subject to various annual and other limitations on
the amounts to be utilized.
Realization of net deferred tax assets related to the Company's loss
carryforwards and other items is dependent on future earnings, which are
uncertain. Accordingly, a valuation reserve was recorded by the Company,
therefore, the Company had no net deferred tax assets at March 31, 1996.
Note 10
Supplemental Information on Cash Flows
Interest paid for the three months ended March 31, 1996 and 1995 was
$4,516,000 and $4,657,000, respectively.
Income tax payments for the three months ended March 31, 1996 and 1995 were
$4,600 and $9,000, respectively.
16
<PAGE>
Centocor, Inc. And Subsidiaries
Condensed Notes to Consolidated Financial Statements
(Unaudited)
----------------------------------------------------------------------------
Note 11
Subsequent Event
On March 15, 1996, the Company completed a public offering of 4,025,000
shares of the Company's Common Stock, par value $.01 per share, including
525,000 shares to cover over-allotments, at $33.00 per share. The net proceeds
to the Company from the offering were approximately $125,900,000 after deducting
stock issuance.
On March 20, 1996 the Company called for redemption the 7 1/4% Convertible
Notes at a redemption price of 103.222% of the outstanding principal amount. The
outstanding principal amount of the 7 1/4% Convertible Notes was $106,640,000
at December 31, 1995 and $96,093,000 at March 31, 1996. In April 1996, the
Company issued approximately 3,450,000 shares of common stock upon conversion of
approximately $95,755,000 principal amount of the 7 1/4% Convertible Notes and
paid $338,000 in cash to redeem the remaining 7 1/4% Convertible Notes
outstanding at March 31, 1996 which were not converted.
The pro forma condensed balance sheet, assuming all of the 7 1/4%
Convertible Notes were converted and redeemed at March 31, 1996 would have been
as follows:
<TABLE>
<CAPTION>
(In thousands)
Balance Sheet Data March 31, 1996
------------------ --------------
<S> <C>
Cash and investments $251,153
Total Assets 385,346
Long- term debt 125,000
Shareholders' equity 204,450
</TABLE>
17
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
Results of Operations
General
Centocor is a biotechnology company, which, since inception, has
incurred significant operating expenses developing therapeutic and diagnostic
products. The Company has also incurred significant special charges. To date,
product sales have not produced sufficient revenues to cover the Company's
operating expenses. Consequently, the Company has experienced substantial
operating losses.
The Company commenced commercial sales of two therapeutic products in
1995: ReoPro in January 1995 and Panorex in February 1995. Because of positive
findings at interim analyses, in December 1995 the Company halted two clinical
trials of ReoPro designed to expand its authorized use. After completing the
data analyses for these trials, the Company expects to seek additional
regulatory approvals in the United States and Europe for expanded indications.
The level of the Company's research and development expenses has been primarily
dependent upon the extent of clinical trial activity. The Company does not
anticipate that the termination of the two ReoPro clinical trials will result in
any significant reduction in 1996 research and development expenses as compared
to 1995 levels due principally to continued follow-up of enrolled patients and
analysis of clinical trial data. Further, the impact on the level of sales of
ReoPro of the early termination of these two trials will depend upon the timing
and extent of any future regulatory approvals and the degree of market
acceptance of ReoPro.
Three months ended March 31, 1996 compared to the three months ended March 31,
1995
The increase in sales for the three months ended March 31, 1996 as
compared to the three months ended March 31, 1995 is principally due to the
increase in sales of ReoPro. ReoPro sales commenced in January 1995.
The Company is highly dependent upon the ability of its marketing
partners to develop and expand the markets for both ReoPro and Panorex. For the
three months ended March 31, 1996, ReoPro sales to Lilly were $9,924,000 and
Lilly's announced sales to end-users were $22,800,000. For the three months
ended March 31, 1995 ReoPro sales to Lilly were $7,900,000. The Company's sales
of Panorex to Glaxo Wellcome for the three months ended March 31, 1996 were
$1,364,000 as compared to $1,300,000 for the three months ended March 31, 1995.
The level of the Company's sales of ReoPro to Lilly and of Panorex to Glaxo
Wellcome is dependent upon the orders placed and the levels of inventory
maintained by each of these marketing partners, which in the three months ended
March 31, 1995 included initial launch period quantities. Diagnostic product
sales for the three months ended March 31, 1996 were approximately $10,300,000
as compared to $10,100,000 for the three months ended March 31, 1995.
The level of future sales of both diagnostic and therapeutic products
will be dependent upon several factors, including, but not limited to, the
timing and extent of future regulatory approvals of the Company's products,
approval and commercialization of competitive products and ultimately the degree
of acceptance of the Company's products in the marketplace. For the Company's
diagnostic products, the level of sales is also dependent upon the extent of and
timing of reagent sales to marketing partners
18
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
developing new automated instruments, as well as the mix of completed diagnostic
kit sales and sales of antibody to collaborative partners who pay the Company
for such antibody upon sales of their respective diagnostic kits incorporating
the Company's antibody. The Company is currently attempting to expand its
diagnostic distribution channels to include additional distributors on a non-
exclusive basis, which the Company expects will result in reduced sales prices
on certain diagnostic products. The Company's gross margins from sales of
antibodies to partners are higher than its gross margin from sales of its
completed diagnostic kits.
The decrease in contract revenues for the three months ended March 31,
1996 as compared to the three months ended March 31, 1995 was primarily due to
the achievement of certain milestones in 1995 primarily pursuant to the
Company's agreements with Lilly. The level of contract revenues in future
periods will depend primarily upon the extent to which the Company enters into
other collaborative contractual arrangements, if any, and its achievement of
milestones under current arrangements.
Cost of sales increased for the three months ended March 31, 1996 as
compared to the three months ended March 31, 1995 due primarily to an increase
in the volume of ReoPro, and the mix of diagnostic products, sold. The Company
is required to make certain royalty payments, based on sales of products, which
payments represent a significant percentage of cost of sales. Beginning in 1997,
the Company is required to make certain royalty payments to Lilly up to a
designated level of sales of ReoPro. The Company expects an increase in cost of
sales throughout 1996, the extent of which will depend primarily on the amount
and mix of products sold.
Research and development expenses for the three months ended March 31,
1996 decreased as compared to the three months ended March 31, 1995 due
principally to the capitalization as inventory in 1996 of certain costs
associated with the manufacture of ReoPro and Panorex. For the three months
ended March 31, 1995 such costs were not associated with the production of
inventory and therefore were expensed as research and development expenses. The
level of the Company's total research and development expenses in future periods
will be dependent upon the extent of future clinical trial-related activities.
Marketing, general and administrative expenses for the three months
ended March 31, 1996 decreased as compared to the three months ended March 31,
1995. The levels of the Company's marketing, general and administrative expenses
may increase in future periods as compared to current levels if the Company
expands its market development activities in connection with sales of
therapeutic and diagnostic products.
Interest income decreased for the three months ended March 31, 1996 as
compared to the three months ended March 31, 1995 due principally to a decrease
in interest rates on investments and a decrease in the Company's average
investment balances. Interest income in future periods will depend primarily on
the level of the Company's investments and the rates of return obtained on such
investments.
Interest expense decreased for the three months ended March 31, 1996
as compared to the three months ended March 31, 1995 due principally to the
conversion of the Company's 7 1/4% Convertible Subordinated Notes due February
1, 2001. Interest expense in future periods will depend upon the level
19
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
of debt outstanding.
Other expenses decreased for the three months ended March 31, 1996 as
compared to the three months ended March 31, 1995 due to an increase in the
Company's equity in earnings of a company in which Centocor has an equity
investment. The Company does not expect any significant income from this
investment in the near future.
Per Share Calculations
At March 31, 1996, approximately 6,107,000 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 weighted average number of shares outstanding in calculating
per share data. The effect of Common Stock issuable upon the exercise of Common
Stock equivalents is reflected in the per share data calculation only if the
effect would be dilutive. The approximately 3,460,000 shares issuable upon
conversion of the 7 1/4% Convertible Notes and the 2,049,000 shares issuable
upon conversion of the 6 3/4% Convertible 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% Convertible Notes and 6 3/4% Convertible 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 March 1996 the Company completed a public offering of 4,025,000
shares and in April 1996 the Company issued 3,450,000 shares as a result of
conversion of the Company's 7 1/4% Convertible Notes. In future periods such
shares will be included in the per share calculations and, 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 6 3/4%
Convertible Debentures in its calculations of per share data for such periods if
the effect would be dilutive.
Liquidity and Capital Resources
The Company has incurred significant operating expenses attempting to
develop therapeutic and diagnostic products. The Company's product sales have
not produced sufficient revenues to cover the Company's operating costs.
Consequently, the Company has experienced substantial net cash outflows, which
have been only partially offset by significant contract revenues received
through collaborative alliances with pharmaceutical companies and the Company's
financing activities.
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 therapeutic product sales.
For the three months ended March 31, 1996, sales of the Company's products,
including ReoPro and Panorex, did not generate sufficient revenue to result in
positive cash flow. Under the Company's strategy of entering into collaborative
alliances with established
20
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
pharmaceutical companies, the Company generally shares sales revenues from
products covered by such arrangements with its partners. There can be no
assurance that those products, in conjunction with the Company's therapeutic
product candidates under development and diagnostic products, will achieve a
level of sales sufficient to generate positive cash flow from operations for the
Company, given the current and currently anticipated future scope of the
Company's operations. The level of future sales of both diagnostic and
therapeutic products will be dependent upon several factors, including, but not
limited to, the timing and extent of future regulatory approvals of the
Company's products, approval and commercialization of competitive products and
the degree of acceptance of the Company's products in the marketplace. There can
be no assurance that FDA or other regulatory approvals expanding the authorized
use of ReoPro and Panorex or permitting the commercial sale of any of the
Company's product candidates under development will be obtained. Failure to
obtain additional timely FDA or other regulatory approvals for the use of ReoPro
and Panorex or other product candidates will have a material adverse effect on
the Company.
Until significant and sustained levels of therapeutic product sales
are achieved, the Company expects that it will need to secure significant
additional funding in the future from collaborative arrangements with
pharmaceutical companies or from the capital markets. There can be no assurance
that sufficient additional funding will be available to the Company or that the
Company can obtain additional collaborations with established pharmaceutical
companies and receive payments for product rights and/or the achievement of
milestones under such collaborative agreements. Even if the Company obtains such
funding, there can be no assurance that such funding will be sufficient to
sustain the Company's operations until it generates positive cash flows from
operations.
At March 31, 1996, the Company had cash, cash equivalents and
investments of $257,302,000, including equity investments of $5,811,000. For the
three months ended March 31, 1996, the Company had negative cash flows from
operations of $16,681,000. The Company's total cash flows for the three months
ended March 31, 1996 included the receipt of $125,916,000, net of stock issuance
costs, from a public offering of 4,025,000 shares of the Company's Common Stock
and the receipt of $11,500,000 from the exercise of warrants and options to
purchase shares of the Company's Common Stock. 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's total cash, cash equivalents and investments increased
by $120,096,000 from December 31, 1995, principally as a result of cash
received from the stock offering and the exercise of warrants and options as
discussed above, partially offset by cash used for operations and the purchase
of property improvements and equipment. On March 20, 1996 the Company called for
redemption the 7 1/4% Convertible Notes at a redemption price of 103.222% of
the outstanding principal amount. The outstanding principal amount of the
7 1/4% Convertible Notes was $106,640,000 at December 31, 1995 and $96,093,000
at March 31, 1996. In April 1996, the Company issued approximately 3,450,000
shares of common stock upon conversion of approximately $95,755,000 principal
amount of the 7 1/4% Convertible Notes and paid $338,000 in cash to redeem the
remaining 7 1/4% Convertible Notes outstanding at March 31, 1996 which were not
converted. The remaining proceeds from the offering, net of the amounts paid to
redeem the 7 1/4% Convertible Notes will be utilized for working capital and
other corporate purposes, which may include expenses associated with the
development and clinical testing of therapeutic products, reduction of debt,
purchase of the CPIII partnership interests and other acquisitions. The Company
is not currently in discussions with respect to any acquisitions. Pending such
21
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
uses, the Company intends to invest the net proceeds from this offering in
short-term, investment grade, interest-bearing securities. The Company believes
that its cash, cash equivalents and investments will be sufficient to fund its
operations through at least the end of 1996.
Agreements covering $17,396,000 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 is currently in compliance with certain financial
covenants; however, if the Company continues to incur losses its ability to meet
these covenants may be impaired. Therefore, the Company is required to maintain
certain investments at the lending bank, which at March 31, 1996 totaled
$20,000,000. The Company has classified the $17,396,000 of debt as short-term.
Additionally, $7,229,000 of the Company's short-term debt is secured by
investments at the lending bank of $7,260,000. If cash flows continue to be
negative, the Company's ability to service its debt may be impaired.
Gross plant and equipment at March 31, 1996 decreased as compared to
December 31, 1995, principally due to the impact of exchange rates on property
and equipment denominated in foreign currencies partially offset by the
investment of $637,000 for the purchase of property and equipment. At the
Company's 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 reduce
the carrying value of certain property, plant and equipment will not be required
in the future.
Long-term investments at March 31, 1996 increased as compared to
December 31, 1995, principally due to the purchase of securities with maturities
in excess of one year classified as held to maturity.
Centocor has an exclusive option to purchase the limited partnership
interests in CPIII. Centocor'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% of the total capital contributions of such limited partner (approximately
$7,926,000 in the aggregate) 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. Centocor commenced commercial
sales of ReoPro in January 1995. If the Company elects to exercise this option,
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 shares of the
Company's Common Stock, and future payments generally of six percent of sales of
products developed by CPIII. If Centocor does not exercise this option, it will
have no rights to the technology or products developed on behalf of CPIII,
including ReoPro.
The Company has entered into indemnity agreements with CPIII, the
former limited partners of CCIP and 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
22
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
- - --------------------------------------------------------------------------------
by the U.S. government of any of its rights relating to the licensed technology.
The amount of any such loss would be determined annually by independent
appraisal.
Legal Proceedings
The Company is subject to certain litigation, as more fully described
in Note 2 of the Company's Consolidated Financial Statements. While it is not
possible to predict with certainty the eventual outcome of these matters, the
Company believes that such legal proceedings will not have a material adverse
effect on the Company.
23
<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 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 March 31, 1996:
Date of Report Item Covered
-------------- ------------
January 26, 1996 5, 7
February 15, 1996 5, 7
24
<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: May 7, 1996 /s/David P. Holveck
----------- ------------------------------
David P. Holveck
President and
Chief Executive Officer
(Principal Executive Officer)
Date: May 7, 1996 /s/Dominic J. Caruso
----------- ------------------------------
Dominic J. Caruso
Vice President- Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CENTOCOR,
INC. CONSOLIDATED BALANCE SHEETS AND CENTOCOR, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 132,985
<SECURITIES> 114,619
<RECEIVABLES> 21,592
<ALLOWANCES> 0
<INVENTORY> 20,475
<CURRENT-ASSETS> 293,491
<PP&E> 140,722
<DEPRECIATION> 75,490
<TOTAL-ASSETS> 385,684
<CURRENT-LIABILITIES> 53,323
<BONDS> 221,093
0
0
<COMMON> 640
<OTHER-SE> 108,055
<TOTAL-LIABILITY-AND-EQUITY> 385,684
<SALES> 21,710
<TOTAL-REVENUES> 21,882
<CGS> 10,554
<TOTAL-COSTS> 10,554
<OTHER-EXPENSES> 19,951
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,267
<INCOME-PRETAX> (9,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,698)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,698)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
