CENTOCOR INC, 424B1, 1996-03-12

CENTOCOR INC
424B1, 1996-03-12
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

Previous: DAILY TAX FREE INCOME FUND INC, 497J, 1996-03-12

Next: DEL TACO RESTAURANT PROPERTIES I, 10-K, 1996-03-12

<PAGE>
Filed pursuant to Rule 424(b)(1)
Registration Statement No. 333-00337

3,500,000 Shares

CENTOCOR, INC.
[LOGO OF CENTOCOR, INC. COMMON STOCK
APPEARS HERE] ----------------

OF THE 3,500,000 SHARES OF COMMON STOCK BEING OFFERED, 2,800,000 SHARES ARE
BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S.
UNDERWRITERS AND 700,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." ALL OF
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. THE
COMMON STOCK OF CENTOCOR, INC. IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER
THE SYMBOL "CNTO." ON MARCH 11, 1996, THE REPORTED LAST SALE PRICE OF THE
COMMON STOCK ON THE NASDAQ NATIONAL MARKET WAS $35 3/8 PER SHARE.
----------------

SEE "RISK FACTORS" COMMENCING ON PAGE 7 HEREOF FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
PRICE $33 A SHARE
----------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------ ------------- ------------
<S> <C> <C> <C>
Per Share.............................. $33.00 $1.65 $31.35
Total(3)............................... $115,500,000 $5,775,000 $109,725,000
</TABLE>
- --------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
525,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $132,825,000, $6,641,250 and $126,183,750, respectively.
See "Underwriters."
----------------

The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein, and subject to the approval of certain legal
matters by Davis Polk & Wardwell, counsel for the Underwriters. It is expected
that delivery of the Shares will be made on or about March 15, 1996, at the
office of Morgan Stanley & Co. Incorporated, New York, N.Y. against payment
therefor in immediately available funds.
----------------

MORGAN STANLEY & CO.
Incorporated
HAMBRECHT & QUIST
J.P. MORGAN & CO.

March 11, 1996
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
OFFER OR SALE MADE HEREBY SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY OR ANY UNDERWRITER THAT WOULD PERMIT
A PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK
AND THE DISTRIBUTION OF THIS PROSPECTUS.
----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <S> <C>
Prospectus Summary.................. 3 Business........................... 23
Risk Factors........................ 7 Management......................... 35
Use of Proceeds..................... 13 Description of Capital Stock....... 37
Price Range of Common Stock and Certain U.S. Federal Tax
Dividend Policy.................... 13 Considerations for Non-U.S.
Dilution............................ 14 Holders of Common Stock........... 40
Capitalization...................... 15 Underwriters....................... 43
Selected Consolidated Financial Da- Legal Matters...................... 45
ta................................. 16 Experts............................ 46
Management's Discussion and Analysis Incorporation of Certain Documents
of Financial Condition and Results by Reference...................... 46
of Operations...................... 17 Available Information.............. 46
</TABLE>
----------------

In this Prospectus, the terms "Centocor" and the "Company" include
Centocor, Inc. and its subsidiaries, and the term "Common Stock" refers to the
common stock, $.01 par value, of the Company, including the common stock
purchase rights attached thereto as described herein under the caption
"Description of Capital Stock--The Rights Agreement." The Company was
incorporated in Pennsylvania in 1979. The Company's corporate headquarters are
located at 200 Great Valley Parkway, Malvern, Pennsylvania 19355, and its
telephone number is (610) 651-6000.

----------------
Panorex, CenTNF, HA-1A, Myoscint, CA 125 II, CAPTIA Syphilis G, CA 19-9, CA
15-3, CA 72-4, P-glycoCHEK, CAPTIA CMV and RRED are trademarks of Centocor.
ReoPro is a trademark of Eli Lilly and Company. GeneVax is a trademark of
Apollon, Inc. Corsevin is a trademark of Corvas International, Inc. CYFRA 21-1
is a trademark of Boehringer Mannheim GmbH.
----------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITERS."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto included or
incorporated by reference in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes no exercise of the U.S. Underwriters'
over-allotment option.

THE COMPANY

Centocor is a biotechnology company that develops therapeutic and diagnostic
human health care products for cardiovascular, autoimmune and infectious
diseases and cancer. The Company's primary technological focus is on monoclonal
antibodies, with additional programs in genetic vaccines and peptides. The
Company's strategy is to identify proprietary high value-added product
opportunities, and to commercialize those opportunities by focusing on clinical
development, regulatory process, manufacturing and market development. The
Company seeks to license technology and product candidates from research
institutions and other biotechnology companies, in addition to conducting
selected basic research.

The Company has two therapeutic products approved for sale and several
product candidates in various stages of development. ReoPro is marketed and
sold in the United States and Europe for the reduction of acute ischemic
cardiac complications in patients undergoing angioplasty procedures who are at
high risk for abrupt artery closure. Panorex is marketed and sold in Germany as
an adjuvant therapy in the treatment of post-operative colorectal cancer. The
Company also markets several diagnostic products for cancer and infectious
disease in the United States, Europe and Japan.

ReoPro is effective in inhibiting blood clotting by inhibiting the
aggregation of platelets. Anticoagulation agents such as ReoPro are used in the
treatment of cardiovascular diseases to prevent blood clots. The three main
markets for these agents are angioplasty, unstable angina and myocardial
infarction (heart attack). Following the successful completion of the EPIC
Phase III clinical trial of ReoPro and subsequent Food and Drug Administration
("FDA") approval, the Company commenced commercial sales of ReoPro in January
1995 for patients who are at high risk for abrupt artery closure following
angioplasty. The Company estimates that in 1995 approximately 800,000
angioplasty procedures were conducted worldwide, with approximately 30% of
these procedures being performed in patients who are at high risk for abrupt
artery closure following the procedure. ReoPro is currently marketed in a
number of countries, including the United States, Germany, the United Kingdom
and France. Under a Sales and Distribution Agreement between Eli Lilly and
Company ("Lilly") and the Company, Lilly is the exclusive worldwide distributor
of ReoPro.

Due to positive findings at interim analyses, in December 1995 Centocor
halted two Phase III clinical trials of ReoPro, the EPILOG trial and the
CAPTURE trial. The EPILOG trial was a randomized, double-blind, placebo-
controlled trial to evaluate 30-day and 6-month clinical outcomes in all
patients following angioplasty procedures. Because an interim analysis of the
first 1,500 patients enrolled in the trial revealed approximately a 70%
reduction in death and heart attack rates within 30 days of the angioplasty
procedure for patients receiving ReoPro, the EPILOG study was halted on the
recommendation of the EPILOG independent Safety and Efficacy Monitoring
Committee. The CAPTURE trial was a randomized, double-blind, placebo-controlled
trial to evaluate ReoPro in patients scheduled for urgent angioplasty
procedures due to refractory unstable angina. Because of positive findings
after an analysis of the first 1,050 patients enrolled in the trial, the
CAPTURE study was halted on the recommendation of the CAPTURE independent
Safety and Efficacy Monitoring Committee. After completing data analyses for
these trials, the Company expects to seek additional regulatory approvals in
the United States and Europe for expanded indications. In addition, the Company
and Lilly have designed additional clinical trials to study the effects of
ReoPro in patients undergoing angioplasty procedures for acute myocardial
infarction and in conjunction with stents.

3
<PAGE>

In both the EPILOG and the CAPTURE trials, patient bleeding was markedly
lower than that experienced in the EPIC trial. The EPILOG and CAPTURE trials
were designed with a focus on reducing bleeding events by lowering the dosage
of heparin and implementing certain other procedures at the puncture site.
These adjustments resulted in a reduction of bleeding events in patients
receiving ReoPro to essentially the same level as in patients receiving
placebo.

Panorex is the first monoclonal antibody product approved for cancer.
Panorex binds to colon cancer cells and destroys them using various immunologic
mechanisms. In a Phase III trial conducted in Germany, Panorex showed a five-
year 30% mortality benefit and 27% reduction in tumor recurrences. In December
1994, the Paul Ehrlich Institute, the German regulatory body for vaccines and
antibodies, granted the Company marketing authorization for the use of Panorex
as an adjuvant therapy in the treatment of post-operative colorectal cancer.
Applications for marketing authorization have also been submitted in Austria,
Switzerland, Finland and Sweden. During 1993, the Company and Glaxo Wellcome
plc ("Glaxo 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. Pursuant to that agreement, Glaxo
Wellcome is the worldwide distributor of Panorex. Glaxo Wellcome is conducting
Phase III trials for Panorex in North America, Europe and certain other
countries. According to recent estimates, there are 380,000 cases of colorectal
cancer in the United States and Europe per year and 40,000 new colorectal
cancer patients per year in Germany.

The Company is currently developing CenTNF, a chimeric monoclonal antibody
that binds to tumor necrosis factor alpha, which is believed to be critical to
the human body's reaction to inflammation. The Company is conducting Phase II
clinical trials of CenTNF for the treatment of rheumatoid arthritis and the
inflammatory bowel condition known as Crohn's disease.

Sales of the Company's diagnostic products were approximately $43 million
and $40 million for the years ended December 31, 1995 and 1994, respectively.
These sales consisted principally of in-vitro diagnostic assays for ovarian,
pancreatic, breast and certain other cancers and for infectious diseases. On
January 26, 1996, Myoscint, a cardiac imaging agent currently sold in certain
European countries, was recommended for approval by the Cardiovascular and
Renal Drugs Advisory Committee of the FDA for imaging in the setting of chest
pain suspected to be caused by myocardial infarction. In addition, in February
1996, Myoscint was approved for sale by the Japanese Ministry of Health and
Welfare, subject to pricing approval.

Consistent with its strategy, the Company maintains and seeks strategic
alliances with major pharmaceutical companies for the commercialization and
marketing of each of its therapeutic products, pursuant to which the Company
and its respective partner jointly focus on the continued clinical and market
development for the product, while the Company's partner primarily conducts the
marketing, promotion and distribution of such product. The Company maintains
and seeks distribution agreements for its diagnostic products with companies
having established positions and distribution networks in applicable market
segments.

4
<PAGE>

THE OFFERING

<TABLE>
<CAPTION>
Common Stock offered:
<C> <S>
United States offering..................... 2,800,000 shares(1)
International offering..................... 700,000 shares
Total.................................... 3,500,000 shares(1)
Common Stock outstanding after the offering. 62,038,000 shares(1)(2)
Use of proceeds............................. Debt repayment, working capital
and other corporate purposes. See
"Use of Proceeds."
Nasdaq National Market symbol............... CNTO
</TABLE>
- --------
(1) Excludes up to 525,000 shares of Common Stock subject to the U.S.
Underwriters' over-allotment option.
(2) Based on approximately 58,538,000 shares of Common Stock outstanding on
December 31, 1995. Excludes (a) approximately 5,357,000 shares of Common
Stock issuable upon the exercise of outstanding stock options and warrants
with exercise prices ranging from $6.88 to $64.50 per share (b)
approximately 255,000 shares of Common Stock subject to unvested restricted
stock awards and (c) approximately 5,892,000 shares of Common Stock
issuable upon the conversion of the Company's 7 1/4% Convertible
Subordinated Notes Due February 1, 2001 (the "7 1/4% Convertible Notes")
and 6 3/4% Convertible Subordinated Debentures Due 2001 (the "6 3/4%
Convertible Debentures"). As of December 31, 1995, the Company had
outstanding options and warrants to purchase approximately 4,905,000 shares
of Common Stock at exercise prices below the public offering price of
$33.00 per share with a weighted average exercise price of $11.21 per
share.

5
<PAGE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Sales.................... $ 44,328 $ 58,394 $ 48,071 $ 39,984 $ 65,001
Contracts:
Related parties......... 4,902 16,071 10,109 1,652 --
Other................... 3,967 51,767 17,750 25,590 13,915
--------- --------- -------- --------- --------
Total revenues........... 53,197 126,232 75,930 67,226 78,916
Costs and expenses(1)..... 247,151 295,978 130,683 173,290 126,219
Other income (ex-
penses)(2)............... (1,601) (24,400) (19,626) (20,594) (9,829)
--------- --------- -------- --------- --------
Loss...................... $(195,555) $(194,146) $(74,379) $(126,658) $(57,132)
========= ========= ======== ========= ========
Loss per share............ $ (5.72) $ (4.90) $ (1.79) $ (2.55) $ (0.98)
========= ========= ======== ========= ========
Weighted average number of
shares outstanding(3).... 34,172 39,623 41,482 49,597 58,207
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED(5)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and investments(4)................................ $137,206 $136,455
Total assets........................................... 260,284 257,676
Long-term debt......................................... 231,640 125,000
Shareholders' equity (deficit)......................... (29,396) 74,636
</TABLE>
- --------

No dividends have been declared or paid during any of the periods presented.
(1) Costs and expenses include the following: (a) charges for acquired research
and development of $70,147 and $36,966 in 1991 and 1994, respectively, (b)
charges of $64,877 and $3,500 in 1992 and 1993, respectively, related to
HA-1A inventory, (c) restructuring charges of $15,266, $9,387 and $1,642 in
1992, 1993 and 1995, respectively, (d) a royalty buyout of $17,098 in 1994
and (e) a write-down of facilities and equipment of $7,870 in 1994.
(2) Other income (expenses) include charges of $11,245, $1,275 and $3,750 in
1992, 1994 and 1995, respectively, related to the settlement of certain
litigation.
(3) No shares of Common Stock issuable upon the exercise of stock options or
warrants or the vesting of restricted stock awards have been included as
their inclusion would have an antidilutive effect because the Company has
incurred a net loss in each period presented.
(4) Cash and investments at December 31, 1995 include equity investments
classified as available for sale of $5,769, and $27,500 of investments
maintained at certain banks as collateral for certain debt outstanding at
December 31, 1995.
(5) Adjusted to give effect to the sale of 3,500,000 shares of Common Stock
offered by the Company in this offering at the public offering price of
$33.00 per share, and the application of the net proceeds therefrom, after
deducting underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds."

6
<PAGE>

RISK FACTORS

Before purchasing the shares of Common Stock offered hereby, prospective
investors should consider carefully the risk factors set forth below as well
as the other information set forth elsewhere in this Prospectus or
incorporated herein by reference in evaluating the Company and its business.

LIQUIDITY AND CAPITAL RESOURCES; NEED FOR AND UNCERTAINTY OF ADDITIONAL
CAPITAL

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 year ended December 31, 1995, sales of the Company's products,
including ReoPro and Panorex, did not 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 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.

Agreements covering $18,289,000 of Centocor'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. Centocor is currently not in compliance with certain of
these covenants; however, Centocor has obtained waivers of such covenants on
the condition that it maintains certain investments at the lending bank, which
at December 31, 1995 totalled $20,000,000. There can be no assurance that
Centocor will be able to continue to collateralize such loans and,
accordingly, Centocor has classified this $18,289,000 of debt as short-term.
Additionally, $7,500,000 of Centocor's short-term debt is secured by
investments maintained at the lending bank of $7,500,000. If cash flows
continue to be negative, Centocor's ability to service its debt may be
impaired.

HISTORY OF OPERATING LOSSES; RISKS ASSOCIATED WITH PRODUCTS UNDER DEVELOPMENT

Centocor has recorded significant losses from operations. Many of
Centocor's product candidates are in various stages of research, development
or clinical testing, and cannot be sold commercially without first

7
<PAGE>

obtaining a license for marketing from the FDA and, outside the United States,
other regulatory authorities. The process of obtaining such licenses usually
takes a number of years to complete and requires significant expenditures to
conduct clinical trials of the safety and efficacy of a potential product.
There can be no assurance that any of the Company's products currently under
development will obtain the required approvals or, if approved, will obtain
sufficient market acceptance to become commercially successful. Even if one or
more of its products under development is licensed for marketing by the FDA
and achieves substantial market acceptance, there can be no assurance that the
Company will achieve profitability. Additionally, the Company has in the past
recorded substantial special charges for acquired research and development,
inventory reserves for one of the Company's products that was withdrawn from
the market, restructurings, a royalty buyout, and a writedown of certain
facilities and equipment. There can be no assurance that Centocor will not
record additional special charges in the future or that product sales will be
sufficient to cover its future operating expenses.

LITIGATION

The Company is subject to litigation, including those matters described
elsewhere herein. See "Business-- Legal Proceedings." Litigation to which the
Company is currently or has been subjected relates to, among other things, the
Company's patent and intellectual property rights, licensing arrangements with
other persons and financing activities. The Company cannot predict with
certainty the eventual outcome of pending litigation, and could be required to
incur substantial expense in defending these lawsuits. The Company has in the
past taken substantial special charges relating to certain litigation, and
there can be no assurance that pending, or future, legal proceedings will not
result in additional special charges or have a material adverse effect on the
Company's financial condition and results of operations.

DEPENDENCE ON COLLABORATIVE PARTNERS; CUSTOMER CONCENTRATION

Centocor's strategy for research, development and commercialization of
certain of its products entails entering into various arrangements with
corporate partners and others, including those discussed below. The success of
these products is dependent, in part, upon the subsequent success of these
outside parties in performing their responsibilities. The Company's
collaborators may also compete with the Company. Although Centocor believes
its collaborators have an economic incentive to succeed in performing their
contractual responsibilities, the amount and timing of resources that they
devote to these activities is not within the control of Centocor. There can be
no assurance that such parties will perform their obligations as expected or
that any revenue will be derived from such arrangements. If any of Centocor's
collaborators breaches or terminates its agreement with the Company or
otherwise fails to conduct its collaborative activities in a timely manner,
the development or commercialization of the product candidate or research
program under such collaborative arrangement may be delayed, the Company may
be required to undertake unforeseen additional responsibilities or to devote
unforeseen additional funds or other resources to such development or
commercialization, or such development or commercialization could be
terminated. The termination or cancellation of collaborative arrangements
could also adversely affect the Company's financial condition, intellectual
property position and operations. In addition, disagreements between
collaborators and the Company could lead to delays in the collaborative
research, development or commercialization of certain products or could
require or result in formal legal process or arbitration for resolution. These
consequences could be time-consuming and expensive and could have material
adverse effects on the 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.

8
<PAGE>

Centocor may be required to make a payment to Lilly of $40 million through
December 31, 1996, or decreasing amounts through December 31, 1999, in the
event of any change in control of Centocor or in the event of any governmental
action or determination that 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.

In November 1993, Centocor and 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
continuing clinical development of Panorex, and Centocor is responsible
principally for manufacturing Panorex and securing regulatory approvals.

The Company may seek additional collaborative arrangements to develop and
commercialize its products in the future. There can be no assurance that the
Company will be able to negotiate acceptable collaborative arrangements in the
future or that any such collaborative arrangements will be successful. In
addition, there can be no assurance that the Company's collaborative partners
will not pursue alternative technologies or develop alternative compounds
independently or in collaboration with others as a means of developing
treatments for the diseases targeted by their collaborative programs with
Centocor.

During 1995, approximately 50% of the Company's total product sales were to
three customers, as follows: 24% to Lilly, 11% to Glaxo Wellcome and 15% to
Toray-Fuji Bionics, Inc. During 1994, approximately 60% of the Company's total
product sales were to four customers, as follows: 10% to Abbott Laboratories,
12% to Boehringer Mannheim GmbH, 13% to CIS bio International and 25% to
Toray-Fuji Bionics, Inc.

PATENTS AND LICENSING ARRANGEMENTS; CPIII PURCHASE OPTION

Products currently being marketed, developed or considered for development
by the Company are in the area of biotechnology, an area in which there are
extensive patent filings. The patent position of biotechnology firms generally
is highly uncertain and involves complex legal and factual questions. To date,
no consistent policy has emerged regarding the breadth of claims allowed in
biotechnology patents. Accordingly, there can be no assurance that patent
applications owned or licensed by the Company will result in patents being
issued or that, if issued, such patents will afford protection against
competitors with similar technology. In addition, there can be no assurance
that products covered by such patents, or any other products developed by the
Company or subject to licenses acquired by the Company, will not be covered by
third party patents, in which case continued development and marketing of such
products would require a license under such patents. There can be no assurance
that such required licenses will be available to the Company or its licensees
on acceptable terms.

Other entities have filed applications for or have been issued patents and
are expected to obtain additional patents to which Centocor may need to
acquire rights. The extent to which Centocor may need to obtain rights to any
such patents or to contest their scope or validity will depend on final
product formulation and other factors. The ability to license any such patents
and the likelihood of successfully contesting the scope or validity of such
patents are uncertain and the costs associated therewith may be significant.
If Centocor is required to acquire rights to valid and enforceable patents but
cannot do so at a reasonable cost, Centocor's ability to manufacture or market
its products in the country of issuance of any such patent may be materially
adversely affected.

There has been substantial litigation regarding patent and other
intellectual property rights in the biotechnology industry. Litigation may be
necessary to enforce certain intellectual property rights of the Company. Any
such litigation could result in substantial cost to and diversion of effort by
the Company. See "--Litigation."

ReoPro is being developed by Centocor for Centocor Partners III, L.P.
("CPIII"). Centocor has an exclusive option to purchase the limited
partnership interests in CPIII. There can be no assurance that Centocor

9
<PAGE>

will exercise its option to purchase the limited partnership interests in
CPIII. If Centocor does not or is unable to exercise such option, it will have
no rights to the technology or products developed on behalf of CPIII,
including ReoPro. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

GOVERNMENTAL REGULATION

Substantially all of the Company's products require regulatory approval by
governmental agencies. In particular, human therapeutic products are subject
to rigorous preclinical and clinical testing for safety and efficacy and
approval processes by the FDA, as well as regulatory authorities in foreign
countries. The process of obtaining such approvals is costly and time-
consuming. There can be no assurance that required approvals will be obtained.
Any failure to obtain, or delay in obtaining, such approvals could adversely
affect the ability of the Company or its collaborators to market products
successfully and to generate revenues from sales.

Any approved products are subject to continuing regulation, and non-
compliance with applicable requirements can result in fines, recall or seizure
of products, total or partial suspension of production, refusal of the
government to approve product license applications, restrictions on the
Company's ability to enter into supply contracts and criminal prosecution. The
FDA also has the authority to revoke product licenses and establishment
licenses previously granted. Further, the regulation of recombinant DNA
technologies and the regulation of manufacturing facilities by state, local
and other authorities is subject to change. See "Business--Governmental
Regulation."

UNCERTAINTIES REGARDING HEALTH CARE REIMBURSEMENT AND REFORM

The Company's ability to commercialize products successfully may depend in
part on the extent to which reimbursement for the costs of such products and
related treatments will be available from governmental health administration
authorities, private health insurers and other organizations. Significant
uncertainty exists as to the reimbursement status of newly approved health
care products, and there can be no assurance that adequate third party
coverage will be available for the Company to maintain price levels sufficient
for realization of an appropriate return on its investment in developing new
products. Government and other third party payors are increasingly attempting
to contain health care costs by limiting both coverage and the level of
reimbursement for new products approved for marketing by the FDA, and by
refusing, in some cases, to provide any coverage for uses of approved products
for indications for which the FDA has not granted marketing approval.
Currently Medicare reimburses for angioplasty procedures on a per procedure
basis regardless of whether additional drugs, such as ReoPro, are used in
conjunction with the therapy. Although the Company is seeking to have
angioplasty with ReoPro reimbursed at a higher rate than angioplasty without
ReoPro, the Company believes the benefits of using ReoPro will outweigh its
cost and accordingly believes that Medicare's current non-reimbursement policy
will not adversely affect sales of ReoPro. Recent initiatives to reduce
governmental deficits in the United States and elsewhere and to reform health
care delivery are increasing these cost containment efforts. As managed care
organizations continue to expand as a means of containing health care costs,
the Company believes there may be attempts by such organizations to restrict
use or delay authorization to use new products, such as those being developed
by the Company, pending completion of cost/benefit analyses of such products
by those managed care organizations. If adequate coverage and reimbursement
levels are not provided by government and other third party payors for uses of
the Company's products, the market acceptance of these products would be
adversely affected.

SIGNIFICANT COMPETITION AND TECHNOLOGICAL CHANGE

Monoclonal antibody, genetic vaccine and peptide technology and other
innovations in biotechnology are being examined, evaluated and practiced in
biology research laboratories throughout the United States and in many other
countries, including laboratories of other biotechnology companies and major
pharmaceutical firms, many of which have greater resources than Centocor.

10
<PAGE>

Several established pharmaceutical companies have internal research and
development groups, and alliances with other biotechnology companies, and are
seeking to develop monoclonal antibody-based, genetic vaccine-based, peptide-
based and other biological products. In addition, a number of companies have
recently entered the biological products field, some through acquisition or
merger, and more may be expected to do so in the future. As a result, Centocor
anticipates that new biological products will be developed by others.

Centocor's management believes that its ability to compete in its targeted
markets will depend upon, among other things, its ability to develop, produce
and market innovative products. Centocor's management also believes that
significant competition will come from established pharmaceutical companies
that have greater capital resources, manufacturing and marketing experience,
research and development staffs, sales forces and production facilities than
Centocor. Such competition is expected to be in the form of a variety of
therapeutic products, which may include monoclonal antibody-based, genetic
vaccine-based and peptide-based products. There can be no assurance that the
activities of others will not render Centocor's products or technologies
obsolete or uncompetitive.

EXPOSURE TO CURRENCY FLUCTUATIONS

Centocor maintains a pharmaceutical manufacturing facility in Leiden, The
Netherlands and an in-vitro diagnostic products manufacturing facility in
Guildford, England. In addition, product sales include sales in foreign
currencies. As a result, Centocor's operating results are subject to currency
fluctuations. Currency fluctuations may result in variations in the costs of
products produced which may affect the Company's gross margin from sales.
Furthermore, currency fluctuations may cause reported sales to fluctuate from
period to period regardless of the fluctuation in the volume of such sales in
foreign currencies.

CHANGE IN CONTROL

Certain provisions of Centocor's charter documents (including cumulative
voting provisions for electing directors and provisions permitting Centocor to
issue preferred stock in the future), the terms of Centocor's shareholders
rights plan, pursuant to which the holders of the Common Stock have certain
rights to purchase shares of the Company's preferred stock, the terms relating
to the acceleration of the exercisability of certain options and the vesting
of certain restricted stock awards and the terms of certain convertible
securities relating to the purchase of such securities by Centocor, may have
the effect of delaying, deferring or preventing a change in control of
Centocor, thereby possibly having the effect of depriving shareholders of
receiving a premium for their shares of Common Stock. Certain provisions of
Pennsylvania law relating to the acquisition of shares representing voting
control over 20% or more of Centocor's stock may have a similar effect. See
"Description of Capital Stock."

Additionally, in the event of a change in control of Centocor, Centocor may
be required to make a payment to Lilly of $40 million through December 31,
1996 or decreasing amounts through December 31, 1999. See "--Dependence on
Collaborative Partners; Customer Concentration."

SKILLED PERSONNEL AND KEY RELATIONSHIPS

The success of Centocor will depend, in large part, on Centocor's continued
ability to attract and retain highly qualified management, scientific,
manufacturing and sales and marketing personnel, and on its ability to develop
and maintain important relationships with leading research institutions and
key distributors. Competition for such personnel and relationships is intense.
There can be no assurance that Centocor will be able to attract or retain such
personnel or maintain such relationships.

PRODUCT LIABILITY

The testing and marketing of medical products entail an inherent risk of
product liability. Centocor 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.

11
<PAGE>

VARIATION IN QUARTERLY OPERATING RESULTS

The Company's results of operations can be expected to be subject to
quarterly fluctuations. Quarterly results can fluctuate as a result of a
number of factors, including timing of research and development expenses, the
level of product sales, the completion or commencement of significant
contracts and foreign exchange fluctuations. The Company believes that
quarterly comparisons of its financial results should not be relied upon as an
indication of future performance.

VOLATILITY OF CENTOCOR COMMON STOCK PRICE; ABSENCE OF DIVIDENDS

The market prices for securities of biotechnology companies in general, and
Centocor in particular, have been highly volatile and may continue to be
highly volatile in the future. See "Price Range of Common Stock and Dividend
Policy." Announcements of technological innovations or new commercial products
by Centocor or its competitors, developments concerning proprietary rights,
including patents, publicity regarding actual or potential medical results
relating to products under development by Centocor, regulatory developments in
both the United States and foreign countries, public concern as to the safety
of biotechnology products and economic and other external factors or other
calamity or crisis, as well as period-to-period fluctuations in financial
results, may have a significant impact on the market price of the Common
Stock. Centocor has not paid any dividends and does not expect to pay any
dividends in the foreseeable future.

DILUTION

As of December 31, 1995, approximately 5,612,000 shares of Common Stock
were issuable upon exercise of outstanding options and warrants and upon
vesting of restricted stock awards. Additionally, approximately 3,843,000 and
2,049,000 shares of Common Stock were issuable upon conversion of Centocor's 7
1/4% Convertible Notes and 6 3/4% Convertible Debentures, respectively.
Centocor also holds an exclusive option under an arrangement with CPIII under
which Centocor may issue additional shares of Common Stock to effect the
purchase of the limited partnership interests in CPIII. To the extent such
options and warrants are exercised and such securities are converted, the
interests of holders of Common Stock will be diluted. As of December 31, 1995,
there were approximately 58,538,000 shares of Common Stock issued and
outstanding.

As of December 31, 1995, Centocor had a net tangible book value per share
of Common Stock of $(.77). Based on the public offering price of $33.00 per
share, purchasers of Common Stock in this offering will experience an
immediate dilution of $32.02 per share. See "Dilution."

12
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be $109,325,000 ($125,783,750 if the U.S.
Underwriters' over-allotment option is exercised in full), after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company.

Upon the completion of the offering, the Company intends to call for
redemption the 7 1/4% Convertible Notes at a redemption price of 103.222% of
the outstanding principal amount. At December 31, 1995, the outstanding
principal amount of the 7 1/4% Convertible Notes was $106,640,000. If, at the
time of redemption, the market price of Centocor's Common Stock exceeds the
$28.64 per share effective conversion price of the 7 1/4% Convertible Notes,
Centocor anticipates that some or all of the holders of the 7 1/4% Convertible
Notes will exercise their rights to convert the 7 1/4% Convertible Notes into
the Company's Common Stock. To the extent the holders do not exercise such
rights, the Company intends to use the proceeds from this offering to redeem
the 7 1/4% Convertible Notes remaining outstanding. If the U.S. Underwriters'
over-allotment option is not exercised and none of the 7 1/4% Convertible
Notes are converted, the Company intends to use approximately $751,000 of cash
on hand in addition to the net proceeds from the offering to redeem the 7 1/4%
Convertible Notes.

The balance of the proceeds not used to redeem 7 1/4% Convertible Notes, if
any, 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 uses, the Company intends to
invest the net proceeds from this offering in short-term, investment grade,
interest-bearing securities.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is traded publicly on the Nasdaq National Market
under the trading symbol CNTO. The table below sets forth the high and low
sale prices for the Company's Common Stock for the periods indicated as
reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Year ended December 31, 1994
First Quarter............................................... $14 $10
Second Quarter.............................................. 14 3/8 8 7/8
Third Quarter............................................... 18 1/2 9 5/8
Fourth Quarter.............................................. 18 3/4 15 1/2
Year ended December 31, 1995
First Quarter............................................... 21 14 1/2
Second Quarter.............................................. 16 3/8 12 1/8
Third Quarter............................................... 14 35/64 10 7/8
Fourth Quarter.............................................. 33 1/8 9 5/8
Year ended December 31, 1996
First Quarter (through March 11, 1996)...................... 40 27 5/8
</TABLE>

On March 11, the reported last sale price for the Common Stock, as reported
on the Nasdaq National Market, was $35.375 per share. On December 31, 1995,
there were approximately 4,520 holders of record of the Common Stock.

The Company has never declared or paid any dividends on its Common Stock.
The Company does not anticipate paying any dividends in the foreseeable future
and intends to retain future earnings for the development and expansion of its
business.

13
<PAGE>

DILUTION

The net tangible book value of the Company at December 31, 1995 was
$(45,090,000) or $(.77) per share of Common Stock. Net tangible book value per
share represents the amount of total tangible assets less total liabilities of
the Company, divided by the number of shares of Common Stock outstanding.
After giving effect to (a) the proposed sale by Centocor of 3,500,000 shares
of Common Stock in this offering at the offering price of $33.00 per share
(calculated after deduction of underwriting discounts and commissions and
estimated expenses associated with the offering) and (b) the application of
the net proceeds received from this offering and approximately $751,000 of
cash on hand to redeem all $106,640,000 of outstanding 7 1/4% Convertible
Notes, the pro forma net tangible book value of the Company at December 31,
1995 would have been $60,799,000 or $.98 per share of Common Stock. This
represents an immediate increase in net tangible book value of $1.75 per share
to existing shareholders and an immediate dilution in net tangible book value
of $32.02 per share to the purchasers of the Common Stock in the offering.

The following table illustrates the calculation of the per share dilution
described above:

<TABLE>
<CAPTION>
<S> <C> <C>
Public offering price per share........................... $33.00
Net tangible book value per share prior to the offering... $(.77)
Increase in net tangible book value per share attributable
to new investors......................................... 1.75
-----
Pro forma net tangible book value per share after giving
effect to the offering................................... .98
------
Dilution per share to new investors in the offering....... $32.02
======
</TABLE>

14
<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at December 31, 1995, and as adjusted to give effect to the sale of
the shares of Common Stock in this offering (at the offering price of $33.00
per share and after deducting underwriting discounts and commissions and
estimated offering expenses). The following table assumes that the proceeds of
this offering are used to redeem the 7 1/4% Convertible Notes and that no such
notes are converted. See "Use of Proceeds."

<TABLE>
<CAPTION>
(IN THOUSANDS)
DECEMBER 31, 1995
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
<S> <C> <C>
Long-term debt including current portion:
7 1/4% Convertible Notes............................ $ 106,640 $ --
6 3/4% Convertible Debentures....................... 125,000 125,000
Other............................................... 18,289 18,289
--------- ---------
Total long-term debt including current portion..... 249,929 143,289
Minority interest.................................... 617 617
Shareholders' equity:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized, none issued and outstanding............ -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized, approximately 58,538,000 shares issued
and outstanding, 62,038,000 shares issued and
outstanding as adjusted(2)......................... 585 620
Additional paid-in capital........................... 770,068 879,358
Deficit.............................................. (808,839) (814,132)
Unrealized gain on marketable securities............. 2,342 2,342
Cumulative foreign currency translation adjustments.. 6,448 6,448
--------- ---------
Total shareholders' equity (deficit)............... (29,396) 74,636
--------- ---------
Total capitalization.............................. $ 221,150 $ 218,542
========= =========
</TABLE>
- --------

(1) Reflects the application of the net proceeds received from this offering
and approximately $751,000 of cash on hand to redeem all $106,640,000 of
outstanding 7 1/4% Convertible Notes. In the event some or all of the
holders elect to convert such 7 1/4% Convertible Notes into Common Stock,
which is probable if the market price of the Common Stock is above the
effective conversion price of $28.64 per share, then such funds will be
used for working capital and other corporate purposes. See "Use of
Proceeds."
(2) Based on approximately 58,538,000 shares of Common Stock outstanding on
December 31, 1995. Excludes (a) approximately 5,357,000 shares of Common
Stock issuable upon the exercise of outstanding stock options and
warrants, (b) approximately 255,000 shares of Common Stock subject to
unvested restricted stock awards and (c) approximately 5,892,000 shares of
Common Stock issuable upon the conversion of the 7 1/4% Convertible Notes
and 6 3/4% Convertible Debentures.

15
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The Consolidated Statement of Operations Data set forth below for each of
the years in the five-year period ended December 31, 1995 and the Consolidated
Balance Sheet Data set forth below as of the years ended December 31, 1991
through 1995 are derived from the consolidated financial statements of the
Company which have been audited by KPMG Peat Marwick LLP. The Consolidated
Statement of Operations Data for each of the years in the four-year period
ended December 31, 1995 and the Consolidated Balance Sheet Data as of December
31, 1993, 1994 and 1995 are derived from the audited consolidated financial
statements of the Company and notes thereto incorporated by reference in this
Prospectus. The selected consolidated financial data presented below should be
read in conjunction with the Company's audited consolidated financial
statements and notes thereto incorporated by reference herein and Management's
Discussion and Analysis of Financial Condition and Results of Operations
appearing elsewhere in this Prospectus.

(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Sales.................... $ 44,328 $ 58,394 $ 48,071 $ 39,984 $ 65,001
Contracts:
Related parties......... 4,902 16,071 10,109 1,652 --
Other................... 3,967 51,767 17,750 25,590 13,915
--------- --------- -------- --------- --------
Total revenues........... 53,197 126,232 75,930 67,226 78,916
Costs and expenses(1)..... 247,151 295,978 130,683 173,290 126,219
Other income
(expenses)(2)............ (1,601) (24,400) (19,626) (20,594) (9,829)
--------- --------- -------- --------- --------
Loss...................... $(195,555) $(194,146) $(74,379) $(126,658) $(57,132)
========= ========= ======== ========= ========
Loss per share............ $ (5.72) $ (4.90) $ (1.79) $ (2.55) $ (0.98)
========= ========= ======== ========= ========
Weighted average number of
shares outstanding (3)... 34,172 39,623 41,482 49,597 58,207
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and investments(4). $233,598 $163,083 $140,028 $184,507 $137,206
Total assets............ 472,929 349,268 281,039 305,915 260,284
Long-term debt.......... 259,368 238,166 238,100 231,640 231,640
Shareholders' equity
(deficit).............. 144,027 30,721 (19,194) 5,278 (29,396)
</TABLE>
- --------
No dividends have been declared or paid during any of the periods presented.
(1) Costs and expenses include the following: (a) charges for acquired
research and development of $70,147 and $36,966 in 1991 and 1994,
respectively, (b) charges of $64,877 and $3,500 in 1992 and 1993,
respectively, related to HA-1A inventory, (c) restructuring charges of
$15,266, $9,387 and $1,642 in 1992, 1993 and 1995, respectively, (d) a
royalty buyout of $17,098 in 1994, and (e) a write-down of facilities and
equipment of $7,870 in 1994.
(2) Other income (expenses) include charges of $11,245, $1,275 and $3,750 in
1992, 1994 and 1995, respectively, related to the settlement of certain
litigation.
(3) No shares of Common Stock issuable upon the exercise of stock options or
warrants or the vesting of restricted stock awards have been included, as
their inclusion would have an antidilutive effect because the Company has
incurred a net loss in each period presented.
(4) Cash and investments at December 31, 1995 include equity investments
classified as available for sale of $5,769, and $27,500 of investments
maintained at certain banks as collateral for certain debt outstanding at
December 31, 1995.

16
<PAGE>

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.

In June 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to Be Disposed of" ("Statement
121"), which requires companies to review long-lived assets and certain
identifiable intangibles to be held, used or disposed of, for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company is required to adopt Statement
121 for 1996. The Company believes that the adoption of Statement 121 will not
have a significant effect on its financial statements.

Year ended December 31, 1995 compared to year ended December 31, 1994

The increase in sales for the year ended December 31, 1995 as compared to
the year ended December 31, 1994 is principally due to the commencement of
sales of ReoPro in January 1995 and Panorex in February 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 year
ended December 31, 1995, ReoPro sales to Lilly were $15,545,000 and Lilly's
announced sales to end-users were $22,800,000. During the same period, the
Company's sales of Panorex to Glaxo Wellcome were $6,531,000 and Glaxo
Wellcome reported to the Company that sales to end-users were approximately
$3,400,000. 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 1995
included initial launch period quantities.

Diagnostic product sales for the year ended December 31, 1995 were
$42,859,000 as compared to $39,697,000 for the year ended December 31, 1994.
The increase in sales for the year ended December 31, 1995 as compared to the
year ended December 31, 1994 is primarily related to a third quarter reagent
sale to a new customer within the oncology product line.

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 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

17
<PAGE>

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 year ended December 31, 1995 as
compared to the year ended December 31, 1994 was primarily due to the
achievement of certain milestones and expansion of certain marketing and
distribution rights with Glaxo Wellcome in 1994, which in the aggregate
amounted to $14,000,000. Contract revenues for the year ended December 31,
1995 and 1994 included $10,000,000 and $9,500,000, respectively, recognized
pursuant to the Company's agreements with Lilly as a result of the Company's
achievement of milestones in the development of ReoPro. Contract revenues for
the year ended December 31, 1994 also included $1,652,000 recognized pursuant
to the Company's development agreement with Tocor II, Inc. ("Tocor II"). As a
result of an exchange offer which was completed in March 1994 and pursuant to
which the Company acquired all of the outstanding callable common stock of
Tocor II (the "Exchange Offer"), the revenues under the Tocor II research
program terminated in 1994. 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 year ended December 31, 1995 as compared to
the year ended December 31, 1994 due to the initiation of sales of ReoPro and
Panorex. The Company is required to make certain royalty payments, based on
sales of products, which payments represent a significant percentage of cost
of sales. The Company expects an increase in cost of sales in 1996, the extent
of which will depend primarily on the amount and mix of products sold.
Beginning in 1997, the Company is required to make certain royalty payments to
Lilly up to a designated level of sales of ReoPro. See "Business--Marketing
and Sales." The Company's gross margins from sales of its therapeutic products
were approximately 45% of such sales for the year ended December 31, 1995.
There were no sales of therapeutic products in 1994. The Company's gross
margins from sales of its diagnostic products were approximately 60% of such
sales for the years ended December 31, 1995 and 1994, respectively.

Research and development expenses for the year ended December 31, 1995
decreased as compared to the year ended December 31, 1994 due principally to
the capitalization as inventory in 1995 of certain costs associated with the
manufacture of ReoPro and Panorex. In 1994, such costs were not associated
with the production of inventory and therefore were expensed as research and
development expenses. Clinical trial expenses increased in 1995 as compared to
1994 because of the Company's efforts to obtain regulatory approvals for
additional indications of therapeutic products and further developing other
therapeutic and diagnostic product opportunities. The level of the Company's
total research and development expenses in future periods is dependent upon
the extent of clinical trial-related activities.

Marketing, general and administrative expenses for the year ended December
31, 1995 increased as compared to the year ended December 31, 1994 due
principally to increases in facilities, insurance and market development
expenses. The levels of the Company's marketing, general and administrative
expenses may increase in future periods as compared to 1995 levels if the
Company expands its market development activities in connection with sales of
therapeutic and diagnostic products.

Interest income increased for the year ended December 31, 1995 as compared
to the year ended December 31, 1994 due principally to an increase in interest
rates on investments and an increase in the Company's average cash and
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 year ended December 31, 1995 as compared
to the year ended December 31, 1994 due principally to a one-time adjustment
of $2,200,000 on a loan which was renegotiated with the Commonwealth of
Pennsylvania. Interest expense in future periods will depend upon the level of
debt outstanding. If the offering made hereby is consummated and the 7 1/4%
Convertible Notes are redeemed by the Company and/or the holders of the 7 1/4%
Convertible Notes elect to convert the 7 1/4% Convertible Notes into Common
Stock, the Company's interest expense will be reduced.

18
<PAGE>

Other income increased for the year ended December 31, 1995 as compared to
the year ended December 31, 1994 due to the Company's equity in earnings of a
company in which Centocor has invested. The Company does not expect any
significant additional income from this investment in the near future.

Other income (expenses) also includes a charge to operations of $3,750,000
for the year ended December 31, 1995 relating to the settlement of certain
class action securities litigation. The results of operations for the year
ended December 31, 1995 also included a charge to costs and expenses of
$1,642,000 for severance costs related to a reduction in the level of the
Company's personnel in the fourth quarter of 1995.

Year ended December 31, 1994 compared to year ended December 31, 1993

The decrease in sales for the year ended December 31, 1994 as compared to
the year ended December 31, 1993 is principally due to lower sales of certain
diagnostic reagents and the discontinuance of certain diagnostic product
lines.

Contract revenues for the year ended December 31, 1994 included $1,652,000
recognized pursuant to the Company's agreements with Tocor II, as compared to
$10,109,000 for the year ended December 31, 1993. As a result of the Exchange
Offer, the revenues under the Tocor II research program terminated in 1994.
The decrease in contract revenue from Tocor II was principally offset by an
increase in contract revenues recognized from Lilly and Glaxo Wellcome in
connection with the achievement of milestones and the expansion of certain
marketing and distribution rights. Contract revenues for the year ended
December 31, 1994 included $9,500,000, as compared to $5,000,000 for the year
ended December 31, 1993, recognized pursuant to the Company's agreements with
Lilly. The Company recorded $14,000,000 and $10,000,000 of contract revenues
for the years ended December 31, 1994 and 1993, respectively, pursuant to the
Company's agreements with Glaxo Wellcome.

Cost of sales increased for the year ended December 31, 1994 as compared to
the year ended December 31, 1993 due to 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.
Gross margins decreased from 67% in 1993 to 60% in 1994. Such decrease was due
to the higher percentage of diagnostic reagent sales in 1993 as compared to
1994, on which the Company realizes higher margins than on sales of its
diagnostic kits.

Research and development expenses increased for the year ended December 31,
1994 as compared to the year ended December 31, 1993 due principally to costs
associated with increased clinical trials and regulatory activities related to
products under development.

Marketing, general and administrative expenses for the year ended December
31, 1994 decreased as compared to the year ended December 31, 1993 due
principally to reductions in sales and administrative staffs, marketing
expenses and other cost reductions.

The results of operations for the year ended December 31, 1994 included a
charge to earnings of $36,966,000 for acquired research and development in
connection with the Exchange Offer. The results of operations for the year
ended December 31, 1994 also included charges of $7,870,000 related to the
writedown of certain facilities and equipment and $17,098,000 representing a
royalty buyout relating to ReoPro. Additionally, a charge of $1,275,000
related to a litigation settlement was recorded in the fourth quarter of 1994.

The results of operations for the year ended December 31, 1993 included
restructuring charges of $4,273,000 related to reserves for certain fixed
assets no longer used or subsequently disposed of and $5,114,000 principally
related to severance. A charge of $3,500,000 related to HA-1A inventory was
recorded in the fourth quarter of 1993. The Company commenced sales of HA-1A,
a therapeutic product intended for the treatment of patients with severe
sepsis resulting from Gram-negative bacterial infections, in Europe in 1990.
The Company voluntarily discontinued sales of HA-1A in 1993, as a result of
data from a U.S. clinical trial of HA-1A.

Interest income increased in the year ended December 31, 1994 as compared
to the year ended December 31, 1993 due principally to an increase in the
Company's cash and investment balances as a result of the Exchange Offer.
During 1994, the Company recorded unrealized losses of $3,649,000 compared to
$2,477,000 for 1993, due to other than temporary reductions in the market
value of marketable equity investments below the Company's cost for such
investments.

19
<PAGE>

QUARTERLY RESULTS

The following table sets forth certain unaudited consolidated statement of
operations data for the three years ended December 31, 1995:
<TABLE>
<CAPTION>
(IN THOUSANDS)
QUARTER ENDED
-----------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1993 1993 1993 1993 1994 1994 1994 1994
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total revenues... $ 14,978 $ 13,753 $ 16,729 $30,470 $ 15,273 $ 16,384 $ 12,927 $ 22,642
Cost and
expenses:
Cost of sales... 3,894 3,983 3,842 4,100 3,630 4,471 3,652 4,231
Research and
development.... 18,711 16,760 15,964 14,678 14,389 16,666 15,701 23,247
Marketing,
general and
administrative. 9,630 9,664 8,420 8,150 6,818 6,809 7,159 4,583
Special charges. 4,273 5,114 -- 3,500 36,966 -- -- 24,968
-------- -------- -------- ------- -------- -------- -------- --------
Total costs and
expenses........ 36,508 35,521 28,226 30,428 61,803 27,946 26,512 57,029
Other income
(expense)....... (3,999) (4,254) (4,307) (7,066) (4,107) (3,856) (3,994) (8,637)
-------- -------- -------- ------- -------- -------- -------- --------
Net loss......... $(25,529) $(26,022) $(15,804) $(7,024) $(50,637) $(15,418) $(17,579) $(43,024)
======== ======== ======== ======= ======== ======== ======== ========
</TABLE>

<TABLE>

-----------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Total revenues... $ 23,995 $ 20,754 $ 19,155 $15,012
Cost and
expenses:
Cost of sales... 8,625 8,071 7,271 5,199
Research and
development.... 13,501 17,008 18,376 17,350
Marketing,
general and
administrative. 7,494 7,120 7,643 6,919
Special charges. -- -- -- 1,642
-------- -------- -------- --------
Total costs and
expenses........ 29,620 32,199 33,290 31,110
Other income
(expense)....... (2,617) (5,864) 1,980 (3,328)
-------- -------- -------- --------
Net loss......... $ (8,242) $(17,309) $(12,155) $(19,426)
======== ======== ======== ========
</TABLE>

The Company's losses, as a percentage of total revenues, have fluctuated on a
quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. Quarterly results can fluctuate as a result of a number of
factors, including the timing of research and development expenses, the level
of product sales, the completion or commencement of significant contracts, and
foreign exchange fluctuations. See "Risk Factors--Variation in Quarterly
Operating Results."

LIQUIDITY AND CAPITAL RESOURCES

20
<PAGE>

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 December 31, 1995, the Company had cash, cash equivalents and
investments of $137,206,000, including equity investments of $5,769,000. For
the year ended December 31, 1995, the Company had negative cash flows from
operations of $56,551,000. The Company's total cash flows for the year ended
December 31, 1995 included the receipt of $18,557,000 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 decreased by $47,301,000 from December 31, 1994,
principally as a result of cash used for operations, debt repayments, and
purchases of fixed assets partially offset by cash received from the exercise
of warrants and options as discussed above. 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 $18,289,000 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 not in compliance with certain of
these covenants; however, the Company has obtained waivers of such covenants
on the condition that it maintain certain investments at the lending bank,
which at December 31, 1995 totaled $20,000,000. The Company has classified
this $18,289,000 of debt as short-term. Additionally, $7,500,000 of the
Company's short-term debt is secured by investments at the lending bank of
$7,500,000. If cash flows continue to be negative, the Company's ability to
service its debt may be impaired.

Inventory at December 31, 1995 increased as compared to December 31, 1994
due primarily to the production of ReoPro and Panorex.

Gross fixed assets at December 31, 1995 increased as compared to December
31, 1994, principally due to the investment of $4,845,000 for the purchase of
fixed assets, in addition to the impact of exchange rates on fixed assets
denominated in foreign currencies. The Company expects to make investments in
fixed assets of approximately $4,100,000 in 1996. 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 fixed assets will not be required in the future.

Long-term investments at December 31, 1995 increased as compared to
December 31, 1994, principally due to the increase in market value of a
certain equity investment classified as available for sale.

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 and, as of December 31, 1995, the
limited partners of CPIII had received cumulative distributions of
approximately $1,796,000. 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.

21
<PAGE>

The Company has entered into indemnity agreements with CPIII, 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 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.

Upon the completion of this offering, the Company anticipates calling the 7
1/4% Convertible Notes for redemption. See "Use of Proceeds." Interest on these
notes will cease to accrue from the date fixed for redemption, and the
Company's cash outflows in future periods will be reduced accordingly.

LEGAL PROCEEDINGS

The Company is subject to certain litigation, as more fully described under
"Business--Legal Proceedings." 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.

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. 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.

FOREIGN CURRENCY

Certain of the Company's sales are denominated in currencies other than the
U.S. dollar. Additionally, the Company conducts operations in countries other
than the United States, primarily its manufacturing facility in Leiden, The
Netherlands. The Company's consolidated financial statements are denominated in
U.S. dollars, and, accordingly, changes in the exchange rate between foreign
currencies and the U.S. dollar will affect the translation of financial results
of foreign subsidiaries into U.S. dollars for purposes of reporting the
Company's consolidated financial results. To date, exchange rate fluctuations
have not had a material net effect on the Company's financial results. The
Company does not currently engage in any derivatives transactions as a hedge
against foreign currency fluctuations.

INFLATION

The Company believes the effects of inflation generally do not have a
material adverse impact on its operations or financial condition.

22
<PAGE>

BUSINESS

GENERAL

Centocor 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 Company has two therapeutic products approved for sale and several
product candidates in various stages of development. ReoPro is marketed and
sold in the United States and Europe for the reduction of acute ischemic
cardiac complications in patients undergoing angioplasty procedures who are at
high risk for abrupt artery closure. Panorex is marketed and sold in Germany
as an adjuvant therapy in the treatment of post-operative colorectal cancer.
The Company also markets several diagnostic products for cancer and infectious
disease in the United States, Europe and Japan.

COMPANY STRATEGY

The Company's strategy is to identify proprietary high value-added product
opportunities, and to commercialize those opportunities by focusing on
clinical development, regulatory process, manufacturing and market
development. The Company seeks to license technology and product candidates
from research institutions and other biotechnology companies, in addition to
conducting selected basic research.

In an effort to reach the market in an expeditious manner, create
competitive barriers and establish itself as the market leader, the Company's
clinical development and regulatory strategy for its therapeutic products is
to pursue initial approval for a narrowly defined indication. The Company also
seeks to expand the indications for which the products may be marketed by
conducting additional clinical trials. The Company maintains and seeks
strategic alliances with major pharmaceutical companies for the
commercialization and marketing of each of its therapeutic products, pursuant
to which the Company and its respective partner jointly focus on the continued
clinical and market development for the product, while the Company's partner
primarily conducts the marketing, promotion and distribution of such product.

In the diagnostics area, the Company seeks to expand the markets for its
existing products while focusing on the development of unique assays that
complement the automated diagnostic instruments developed by its marketing
partners. The Company believes that experience it acquires in developing
therapeutic products may help it define diagnostic product opportunities and
vice versa. Based on this experience, the Company is seeking to develop
diagnostic products that can increase the effectiveness, and thereby the
utilization of, its therapeutic products. The Company maintains and seeks
distribution agreements for its diagnostic products with companies having
established positions and distribution networks in applicable market segments.

23
<PAGE>

PRODUCTS AND PRODUCTS UNDER DEVELOPMENT

The following table summarizes Centocor's products and selected product
candidates. This table is qualified in its entirety by reference to the more
detailed descriptions included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DEVELOPMENT
AND/OR
MARKETING
PRODUCT/PRODUCT CANDIDATE INDICATION STATUS(1) PARTNER(2)
- ------------------------- ------------------------ ------------------------ --------------
<S> <C> <C> <C>
THERAPEUTIC:
ReoPro.................. High-risk angioplasty Marketed (U.S., Europe) Lilly
Phase II (Japan) Lilly
All angioplasty Phase III Lilly
Unstable angina Phase III Lilly
Acute myocardial Phase III Lilly
infarction
Adjuvant therapy with Phase III planned Lilly
stents
Panorex................. Adjuvant therapy for Marketed (Germany) Glaxo Wellcome
post-operative Phase III Glaxo Wellcome
colorectal cancer Phase IA planned (Japan) Glaxo Wellcome
CenTNF.................. Rheumatoid arthritis Phase II --
Phase I (Japan) Tanabe
Crohn's disease Phase II --
Phase I (Japan) Tanabe
Corsevin M.............. Deep vein thrombosis Phase I --
GeneVax................. Colorectal cancer Phase I planned --
Prostate cancer Phase I planned --
DIAGNOSTIC:
CA 125 II............... Ovarian cancer detection Marketed (U.S., Europe, (3)
Japan)
CA 19-9................. Pancreatic cancer Marketed (Europe, Japan) (3)
monitoring
CA 15-3................. Breast cancer monitoring Marketed (Europe, Japan) (3)
CA 72-4................. Gastrointestinal cancer Marketed (Europe, Japan) (3)
monitoring
P-glycoCHEK............. Resistance to chemo- Sold for investigational (3)
therapeutic drug use (Europe, Japan)
detection
CYFRA 21-1.............. Non-small cell lung Marketed (Europe, Japan) (3)
cancer
CAPTIA Syphilis G....... Syphilis antibody Marketed (U.S., Europe, (3)
detection South America)
CAPTIA CMV.............. Cytomegalovirus antibody Marketed (U.S., Europe) (3)
detection
Myoscint................ Cardiac imaging Marketed (Europe) Mallinckrodt
FDA review pending --
Approved (Japan) Daiichi
</TABLE>

(Footnotes on following page)

24
<PAGE>

- --------
(Footnotes for preceding page)
(1) Phase III clinical trial indicates that the product is being tested in
humans for safety and efficacy in an expanded patient population at
multiple clinical sites. Phase I and Phase II clinical trials indicate
that the product is being tested in humans to evaluate safety, dosage and
to some extent, efficacy, in a limited patient population.
(2) Diagnostic products generally are only marketed and sold by the Company's
marketing partners. With respect to therapeutic products, the Company's
strategic alliance partners play an extensive role in the clinical and
market development of the Company's products in addition to selling and
marketing those products.
(3) This product is sold by the Company to established diagnostic companies,
the most significant of which are: Abbott Laboratories, Boehringer
Mannheim GmbH, CIS bio International, Toray-Fuji Bionics, Inc. and
Hoffmann-La Roche.

THERAPEUTIC PRODUCTS

ReoPro. Anticoagulation agents such as ReoPro are used in the treatment of
cardiovascular disease to prevent blood clots. The three main markets for
these agents are angioplasty, unstable angina and myocardial infarction (heart
attack). Better platelet mediation is needed in angioplasty to prevent abrupt
reclosure and restenosis and in unstable angina to prevent the serious
complications of heart attacks and death. Abrupt reclosure, which occurs in
about 5-8% of angioplasty cases and in 12-14% of more complicated high-risk
cases, can result in death, myocardial infarction or the need for emergency
bypass surgery. More powerful agents are also needed to enhance treatment of
myocardial infarction by more effectively opening the clotted artery and
preventing reocclusion following drug therapy. ReoPro is effective in
inhibiting blood clotting by inhibiting the aggregation of platelets. When
platelets are stimulated, a number of different types of surface receptors are
exposed that cause further platelet aggregation, including the glycoprotein
("GP") IIb/IIIa receptors. ReoPro is a chimeric monoclonal antibody fragment
that binds to GP IIb/IIIa receptors on the surface of platelets, thereby
inhibiting platelet aggregation.

Following the successful completion of the EPIC Phase III clinical trial of
ReoPro and subsequent FDA approval, the Company commenced commercial sales of
ReoPro in January 1995 for patients who are at high risk for abrupt artery
closure following angioplasty. ReoPro is currently marketed in a number of
countries, including the United States, Germany, the United Kingdom and
France. Under a Sales and Distribution Agreement between Lilly and the
Company, Lilly is the exclusive worldwide distributor of ReoPro. See
"Business--Marketing and Sales." Pursuant to that agreement, Lilly is
assisting the Company in the regulatory filings and continuing development of
ReoPro for additional clinical indications. ReoPro is being developed by
Centocor for CPIII.

The following summarizes the results of pivotal clinical trials to date:

EPIC Trial for High-Risk Angioplasty. Based on the results of a Phase
III clinical trial known as "EPIC," in December 1994 the FDA approved
ReoPro as a product indicated for the reduction of acute ischemic cardiac
complications in patients undergoing angioplasty procedures who are at high
risk for abrupt artery closure. High-risk patients are characterized as
those suffering a recent heart attack, experiencing severe unstable angina,
or having certain high-risk clinical characteristics or features of their
coronary arteries. Also in December 1994, the Committee for Proprietary
Medicinal Products of the European Union issued a positive opinion
regarding the granting of marketing authorization for ReoPro for the same
indication.

In the EPIC trial, a randomized, double-blind, placebo-controlled trial
involving approximately 2,100 patients who were at high risk of abrupt
artery closure, administration of ReoPro resulted in a 35% reduction in
serious complications such as heart attacks, death or the need for
emergency repeat procedures within 30 days following the angioplasty
procedure. This benefit was sustained at 6 months. By reducing the risk of
acute cardiac ischemic complications, ReoPro reduces the occurrence of
post-angioplasty heart attacks, as well as the need for emergency coronary
bypass surgery or repeat angioplasty.

The primary side-effect associated with ReoPro in the EPIC trial was an
increase in bleeding compared to patients who received placebo, typically
at the puncture site where the catheter is inserted. Because of

25
<PAGE>

this side-effect, the Company, in designing the next two clinical trials of
ReoPro, focused on a reduction of the bleeding events, through a
combination of: (i) lowering the dosage of heparin, an anticoagulant which
is part of the conventional therapy for patients scheduled for the
angioplasty procedure; (ii) better remedial treatment of the puncture site
and (iii) earlier removal of the arterial sheath inserted at the puncture
sight. In subsequent trials, these adjustments have resulted in a reduction
of bleeding events in patients receiving ReoPro to essentially the same
level as in patients receiving placebo.

EPILOG Trial for All Angioplasty. The EPILOG trial was a randomized,
double-blind, placebo-controlled trial, originally designed to enroll 4,800
patients at 65 sites in the United States and Canada, to evaluate 30-day
and 6-month clinical outcomes in all patients following angioplasty
procedures. This trial excluded the heart attack and unstable angina
patient groups that were evaluated in the EPIC trial because ReoPro had
already demonstrated efficacy in these patients and was already approved
for use in these groups. Because an interim analysis of the first 1,500
patients enrolled in the trial revealed approximately a 70% reduction in
death and heart attack rates within 30 days of the angioplasty procedure
for patients receiving ReoPro, the EPILOG study was halted in December 1995
on the recommendation of the EPILOG independent Safety and Efficacy
Monitoring Committee. This result was highly statistically significant
(p<.0001). Additionally, the EPILOG independent Safety and Efficacy
Monitoring Committee concluded that major bleeding events in patients
receiving ReoPro were at essentially the same level as patients receiving
placebo. After completing data analyses for this trial, the Company expects
to seek additional regulatory approvals in the United States and Europe for
expanded indications.

CAPTURE Trial for Unstable Angina. Unstable angina is a condition that
commonly precedes a heart attack. It is caused by inadequate blood supply
to the heart due to the build-up of atherosclerotic plaque in the coronary
artery. The CAPTURE trial was a randomized, double-blind, placebo-
controlled trial originally designed to enroll 1,400 patients at 75 sites
in Europe, to evaluate ReoPro in patients scheduled for urgent angioplasty
procedures due to refractory unstable angina. Because of positive findings
after an analysis of the first 1,050 patients enrolled in the trial, the
CAPTURE study was halted in December 1995 on the recommendation of the
CAPTURE independent Safety and Efficacy Monitoring Committee. The CAPTURE
independent Safety and Efficacy Monitoring Committee determined that
efficacy exceeded the predetermined stopping point, p<.0072, on the trial's
primary end-point, which was defined as a reduction in a composite of
death, heart attacks and the need for urgent intervention within 30 days.
Additionally, in patients receiving ReoPro, the rate of major bleeding was
markedly lower than in the EPIC trial. After completing data analyses for
this trial, the Company expects to seek additional regulatory approvals in
the United States and Europe for expanded indications.

The Company and Lilly are evaluating other potential indications for
ReoPro, including acute myocardial infarction, peripheral vascular disease,
patients suffering thrombotic strokes and patients suffering deep vein
thrombosis. The Company and Lilly have designed the RAPPORT Phase III trial to
study the effect of ReoPro in patients undergoing angioplasty procedures for
acute myocardial infarction. Additionally, the Company and Lilly have designed
the ERASER Phase III trial to evaluate the effects of ReoPro in conjunction
with stents. The Company is also currently conducting Phase II clinical trials
of ReoPro in Japan.

The Company estimates that in 1995 approximately 800,000 angioplasty
procedures were conducted worldwide, with approximately 30% of these
procedures being performed in patients who are at high risk for abrupt artery
closure following the procedure. The Company estimates that approximately
2,000,000 patients annually are admitted to hospitals worldwide for treatment
of unstable angina, and approximately 20% of these patients are refractory to
conventional therapy for unstable angina.

Although some patients with unstable angina will be referred for immediate
angioplasty and therefore may be eligible for ReoPro under the already
approved high-risk indication, the Company believes that current treatment of
many of these patients consists of a period of medical stabilization before
referral to angioplasty. The CAPTURE trial provides data that supports the use
of ReoPro during such period of medical stabilization and therefore may
potentially broaden the use of ReoPro in the treatment of unstable angina.

26
<PAGE>

In addition to conducting studies to test the efficacy of ReoPro, the
Company has conducted a health economic study, based on the EPIC trial, which
has been approved by the FDA and which indicates that the use of ReoPro is
cost effective and may allow hospitals to manage their resources more
effectively and reduce the amount of time patients spend in the hospital. The
health economic study included the cost of blood transfusions required by
ReoPro-treated patients in the EPIC trial. In the recently halted EPILOG
trial, major bleeding events in patients receiving ReoPro were at essentially
the same level as in patients receiving placebo. The decreased need for blood
transfusions may result in additional cost savings to hospitals.

Panorex. Panorex is a monoclonal antibody that targets metastatic colon
cancer cells. The Panorex antibody binds to colon cancer cells and destroys
them using various immunologic mechanisms including complement and/or antibody
dependent cellular cytotoxicity. Both mechanisms result in the death of the
cancer cells. In patients with colorectal cancer, it is thought that small
numbers of cells break away from the primary tumor and spread to other sites
such as bone marrow, where they can be detected as "micrometastatic cells." It
is thought that the Panorex antibody binds to these "micrometastatic cells"
and destroys them, leading to the prolonged survival observed in patients
treated with Panorex. Panorex is the first monoclonal antibody product
approved for cancer. In December 1994, the Paul Ehrlich Institute, the German
regulatory body for vaccines and antibodies, granted the Company marketing
authorization for the use of Panorex as an adjuvant therapy in the treatment
of post-operative colorectal cancer. Applications for marketing authorization
have also been submitted in Austria, Switzerland, Finland and Sweden. During
1993, the Company and Glaxo 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. Pursuant to that
agreement Glaxo Wellcome is the worldwide distributor of Panorex. See "--
Marketing and Sales." The Company commenced commercial sales of Panorex in
Germany in February 1995.

In a Phase III trial conducted in Germany, Panorex showed a five-year 30%
mortality benefit and 27% reduction in tumor recurrences. Glaxo Wellcome is
conducting additional Phase III trials for Panorex, with a three-year survival
end-point, in North America, Europe and certain other countries, evaluating
patients with colorectal cancer, and also is conducting earlier stage trials
in Japan. According to recent estimates, there are 150,000 cases of colorectal
cancer and 58,000 deaths in the United States and 230,000 cases and 87,000
deaths in Europe per year. There are approximately 40,000 new colorectal
cancer patients per year in Germany. Preliminary studies indicate that Panorex
may also prove useful in the treatment of solid tumors associated with
pancreatic cancer and certain types of lung, breast, ovary and gastric cancer.

CenTNF. The Company is currently developing CenTNF, a chimeric monoclonal
antibody that binds to tumor necrosis factor alpha, which is believed to be
critical to the human body's reaction to inflammation. CenTNF primarily is
targeted for the treatment of rheumatoid arthritis and inflammatory bowel
diseases such as Crohn's disease. In addition, the Company also believes
CenTNF may also prove useful as an immuno-suppressant in transplant patients.

In rheumatoid arthritis, the membrane surrounding the joints becomes
inflamed, causing swelling, pain, disfigurement, and in severe cases,
destruction of the joints. Results of a Phase II randomized, placebo-
controlled, double-blind trial of 73 patients were published in December 1994.
The data showed the rapid onset of a highly significant (p=0.001) clinical
response in 44% of patients receiving a single infusion of low dose CenTNF and
in 79% of patients receiving a high dose of CenTNF. The beneficial clinical
response persisted for eight weeks following the single high dose infusion.
The Company is currently conducting advanced placebo-controlled, multi-dose
Phase II trials in the United States and Europe.

Phase I/II open label trials of CenTNF in patients with severe Crohn's
disease requiring steroid therapy showed the rapid onset of clinical benefit
which persisted for over two months following a single infusion. Randomized,
placebo-controlled, Phase II trials are being completed in the United States
and Europe. The Company expects to initiate Phase III trials during 1996.

27
<PAGE>

The Company has entered into an agreement with Tanabe Seiyaku Co., Ltd.
("Tanabe") under which Tanabe has commenced Phase I clinical testing and has
the right to distribute CenTNF in Japan. Additionally, the Company is seeking
to enter into an alliance arrangement with a partner regarding CenTNF for
other parts of the world.

According to recent estimates, in the United States and Western Europe
there are approximately six million patients undergoing treatment for
rheumatoid arthritis. The Company believes that up to one-third of these
patients may be candidates for treatment with CenTNF. The Company believes
that in the United States and Western Europe there are approximately 250,000
Crohn's patients who may benefit from treatment with CenTNF.

Corsevin M. The Company is developing Corsevin M, an anti-factor VII
chimeric monoclonal antibody product intended to be used as an anticoagulant.
Factor VII is one of the primary factors that play a role in the blood
clotting process. The Company has completed a Phase I clinical trial and is
evaluating protocols for additional clinical trials.

GeneVax. The Company is developing genetic DNA-based vaccines employing
commonly available methods to direct the injected DNA to its target site. The
Company has licensed this GeneVax technology from Apollon, Inc., in which the
Company holds a significant equity investment. Under that license, the Company
has rights to develop the GeneVax technology in the cancer field. The Company
expects to initially focus its development efforts on vaccines for prostate,
breast and colorectal cancer. In 1996, the Company expects to commence Phase I
clinical trials to evaluate vaccines for colorectal and prostate cancer.

DIAGNOSTIC PRODUCTS

Sales of the Company's diagnostics products were approximately $43 million
and $40 million for the years ended December 31, 1995 and 1994, respectively.

In-vitro diagnostic products are used to test patient blood samples outside
the body to detect or monitor disease. In this area, the Company has focused
principally on developing cancer diagnostic assays, and other in-vitro
diagnostic products for infectious disease. The Company currently manufactures
and sells the following in-vitro diagnostic products:

CA 125 II Ovarian Cancer Test. CA 125 II, a second generation assay which
aids in the detection of residual epithelial ovarian cancer following first-
line therapy, is sold in the United States, certain European countries and
Japan. CA 125 II is one of only five cancer diagnostics products approved for
sale in the United States.

CA 19-9 Pancreatic Cancer Test. CA 19-9, which aids in the monitoring of
pancreatic cancer, is sold in certain European countries and Japan.

CA 15-3 Breast Cancer Test. CA 15-3, which aids in the monitoring of breast
cancer, is sold in certain European countries and Japan.

CA 72-4 Gastric Cancer Test. CA 72-4, which aids in the monitoring of
gastrointestinal cancer, is sold in certain European countries and Japan.

P-glycoCHEK Multidrug Resistance Test. P-glycoCHEK, which detects a
cellular protein associated with resistance to chemotherapeutic drugs, is sold
for investigational use in certain European countries and Japan.

CYFRA 21-1 Non-Small Cell Lung Cancer Test. CYFRA 21-1, which aids in the
monitoring of non-small cell lung cancer, is sold in certain European
countries and Japan.

28
<PAGE>

CAPTIA Syphilis G. In 1995, the Company received clearance from the FDA to
market CAPTIA Syphilis G, an infectious disease serology test for use as a
primary screening method for the detection of Treponema pallidum antibodies in
human serum or plasma, as performed in blood bank or plasma center testing
laboratories. CAPTIA Syphilis G is offered for sale in the United States and
certain European and South American countries.

CAPTIA CMV. In 1995, the Company received clearance from the FDA to market
CAPTIA CMV, an infectious serology test for use as a primary screening method
for the detection of cytomegalovirus antibodies in human serum or plasma, as
performed in blood bank or plasma center testing laboratories. CAPTIA CMV is
offered for sale in the United States and certain European countries.

The Company has developed techniques for modifying monoclonal antibodies so
that they may be coupled with radioactive isotopes and used as contrast agents
in diagnostic imaging procedures. After injection, antibodies labelled with a
radioactive isotope travel to the disease site, allowing the site to be
visualized or "imaged" with nuclear medicine equipment in a procedure similar
to an X-ray. The Company's focus in this area is primarily on developing
imaging agents for cardiovascular disease.

Myoscint. Myoscint is an anti-myoscin monoclonal antibody that, when radio-
labeled, may be useful in the detection of damage to heart tissue caused by
transplantation, myocardial infarction, chemotherapy and viral infection. The
Company has received marketing approvals for Myoscint in several European
countries. A product license application ("PLA") for Myoscint was submitted to
the FDA in July 1995, and on January 26, 1996, the Cardiovascular and Renal
Drugs Advisory Committee of the FDA recommended approval of Myoscint for
imaging in the setting of chest pain suspected to be caused by myocardial
infarction. In addition, in February 1996, Myoscint was approved for sale by
the Japanese Ministry of Health and Welfare, subject to pricing approval.
Revenues from the sale of Myoscint in Europe have not been significant. There
can be no assurance that Myoscint will be approved by the FDA or that sales,
if any, in the United States will be significant.

CELLULAR DIAGNOSTICS

Based upon the Company's experience with Panorex, the Company believes that
the ability to rapidly detect rare cancer cells in blood, bone marrow and
other tissues could be useful to oncologists as a tool to enable them to
select appropriate treatments for cancer patients and then monitor the
effectiveness of those treatments. To the Company's knowledge no such tool is
currently available in the market. The Company is collaborating with a
computer software company to develop a computer-driven high-powered microscope
known as the Rapid Rare Event Detection ("RRED") System that utilizes reagents
developed by the Company. The Company and its partner have developed a working
prototype of the RRED System that will enter clinical trials in 1996 for
validation. In addition, the Company has commenced discussions with other
diagnostic companies that may be interested in manufacturing and marketing the
RRED System.

Although the Company's initial focus with respect to the RRED System is the
oncology field, the Company believes that the RRED System technology may be
equally useful in the fields of infectious disease and prenatal testing. There
can be no assurances that the Company will be able to complete the development
of the RRED System or obtain the regulatory approvals necessary for the sale
of the RRED System.

PLATELET FUNCTION DIAGNOSTICS

In connection with the development and marketing of ReoPro, the Company has
recognized the importance of platelet assessment in cardiovascular disease.
Based upon its knowledge in this area, the Company is developing a point-of-
care test that is intended to enable interventional cardiologists to rapidly
assess platelet function at the bedside. This device will permit medical
experts to monitor platelet activity and the effect of drugs such as ReoPro
with the same precision with which they currently evaluate other aspects of
blood coagulation and treatment. The Company believes that the availability of
this type of monitoring therefore addresses a currently unmet medical need.

MARKETING AND SALES

In the therapeutic area, the Company maintains a separate strategic
alliance with a major pharmaceutical company for each of its two
commercialized products, pursuant to which, in each case, the Company and its
respective partner jointly focus on the continued clinical and market
development for the product, while the

29
<PAGE>

Company's partner primarily conducts the marketing, promotion and distribution
of such product. In the diagnostics area, the Company maintains distribution
agreements with companies having established positions and distribution
networks in applicable market segments for the Company's products. The Company
is highly dependent upon the ability of its marketing partners to develop and
expand markets for the Company's products.

Pursuant to its Sales and Distribution Agreement with Lilly, Lilly is the
exclusive worldwide distributor of ReoPro. The Company sells ReoPro to Lilly
for Lilly's further sale to the end market. The Company is principally
responsible for developing and manufacturing ReoPro and for securing
regulatory approvals. Lilly is principally responsible for the marketing,
selling and distribution 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.

Pursuant to its alliance agreement with Glaxo Wellcome, Glaxo Wellcome is
the exclusive worldwide distributor for Panorex. The Company sells Panorex to
Glaxo Wellcome for Glaxo Wellcome's further sale to the end market. Glaxo
Wellcome is responsible for the continuing clinical development, marketing,
sales and distribution of Panorex. The Company is principally responsible for
manufacturing Panorex and securing regulatory approvals.

RESEARCH AND DEVELOPMENT

Centocor's research and development activities focus primarily on
monoclonal antibody technology and proprietary techniques to modify monoclonal
antibodies in search of optimal therapeutic agents. Centocor believes that
there is significant potential for using monoclonal antibodies to develop
human health care products. While the specificity of monoclonal antibodies
makes them attractive candidates for therapeutic product development,
antibody-based products generally must be administered by injection, usually
in a hospital setting, and are therefore used principally to treat acute
diseases. The Company's ability to select effective hybridomas and to produce
antibodies from them is central to its business. An understanding of the
structure and function of antibodies is necessary in order to modify them for
incorporation into diagnostic or therapeutic products. The Company has
developed techniques for characterizing an antibody with respect to its
structure, specificity and binding ability which are used in an effort to
select the best antibody for a particular application.

The Company carries out research efforts in the use of recombinant DNA
techniques to manipulate the genetic structure of antibody-producing cells.
These efforts are intended to create re-engineered antibodies that combine the
desired properties of more than one antibody, or the desired properties of
antibodies and other system-regulating biochemicals such as enzymes.

The Company has also expanded its research platform to include the field of
genetic vaccines and peptides. Efforts in the genetic cancer vaccine field are
currently in the pre-clinical stage. Phase I trials are planned for 1996 for
colorectal and prostate cancer vaccines.

PATENTS AND LICENSING ARRANGEMENTS

30
<PAGE>

subject to licenses acquired by the Company, will not be covered by third
party patents, in which case continued development and marketing of such
products would require a license under such patents. There can be no assurance
that such required licenses will be available to the Company or its licensees
on acceptable terms.

Other entities have filed applications for or have been issued patents and
are expected to obtain additional patents to which the Company may need to
acquire rights. The extent to which the Company may need to obtain rights to
any such patents or to contest their scope or validity will depend on final
product formulation and other factors. The ability to license any such patents
and the likelihood of successfully contesting the scope or validity of such
patents are uncertain and the costs associated therewith may be significant.
If the Company is required to acquire rights to valid and enforceable patents
but cannot do so at a reasonable cost, the Company's ability to manufacture or
market its products in the country of issuance of any such patent may be
materially adversely affected.

Centocor currently licenses the majority of the cell lines used to produce
its monoclonal antibodies from research institutions pursuant to long-term
licenses for which it is generally obligated to pay royalties based upon sales
of products incorporating such antibodies. There can be no assurance that
others will not acquire rights to such cell lines in the future.

The Company has been informed by the Research Foundation of the State
University of New York ("SUNY"), which licensed certain rights to the Company
with respect to ReoPro, that SUNY does not agree with the Company regarding
the amount of royalties due to SUNY. The Company is engaged in discussions
with SUNY with respect to this matter and does not believe that the outcome
thereof will have a material adverse effect on the Company's financial
position.

The Company organized CPIII, Tocor II and other entities to fund the
research and development of certain products and/or technology. Under
agreements with each of these entities, Centocor licensed certain technology
to the entity and performed or continues to perform research and development
in such technology areas on behalf of the entity. The Company purchased the
ownership interests of all of these entities prior to 1995, with the exception
of CPIII, to which the Company has granted an exclusive license to use all
patent rights, know-how, technical information and biological materials owned
or controlled by the Company within CPIII's field of activity, which includes
ReoPro. CPIII also retains the rights to the results of research and
development efforts conducted on its behalf. The Company has the ability to
acquire such rights through an exclusive option to purchase the partnership
interests in CPIII for cash or shares of Common Stock. See "Risk Factors--
Patents and Licensing Arrangements; CPIII Purchase Option" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."

GOVERNMENTAL REGULATION

Regulation by governmental authorities in the United States and other
countries is a significant factor in the manufacture and marketing of the
Company's products and in ongoing research and product development activities.
All of the Company's therapeutic products and most of the Company's diagnostic
products will require regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products are subject to
rigorous preclinical and clinical testing and other premarket approval
requirements by the FDA and regulatory authorities in other countries. Various
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, recordkeeping and marketing of such products. The lengthy
process of seeking these approvals, and the subsequent compliance with
applicable statutes and regulations, require the expenditure of substantial
resources. The Company believes it is currently in compliance with such
statutes and regulations. Any failure by the Company to obtain, or any delay
in obtaining, regulatory approvals could

31
<PAGE>

materially adversely affect the Company and the Company's marketing partners'
ability to market the Company's products.

The activities required before a pharmaceutical product may be marketed in
the United States begin with preclinical testing. Preclinical tests include
laboratory evaluation of product chemistry and animal studies to assess the
potential safety and efficacy of the product and its formulations. The results
of these studies must be submitted to the FDA as part of an Investigational
New Drug application, which must be reviewed by the FDA before proposed
clinical testing can begin. Typically, clinical testing involves a three-phase
process. In Phase I, clinical trials are conducted with a small number of
subjects to determine the early safety profile and the pattern of drug
distribution and metabolism. In Phase II, clinical trials are conducted with
groups of patients afflicted with a specified disease in order to determine
preliminary efficacy, optimal dosages and expanded evidence of safety. In
Phase III, large scale, multicenter, comparative clinical trials are conducted
with patients afflicted with a target disease in order to provide enough data
to statistically evaluate the efficacy and safety of the product, as required
by the FDA. The results of the preclinical and clinical testing of a chemical
pharmaceutical product are then submitted to the FDA in the form of a New Drug
Application ("NDA"), or for a biological pharmaceutical product in the form of
a PLA, for approval to commence commercial sales. In responding to an NDA or
PLA, the FDA may grant marketing approval, request additional information or
deny the application if it determines that the application does not satisfy
its regulatory approval criteria. There can be no assurance that any approval
required by the FDA will be obtained on a timely basis, if at all.

Among the conditions for NDA or PLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures
conform on an ongoing basis with Good Manufacturing Practices ("GMP"). Before
approval of the PLA, the FDA will perform a prelicensing inspection of the
facility to determine its compliance with GMP and other rules and regulations.
In complying with GMP, manufacturers must continue to expend time, money and
effort in the area of production and quality control to ensure full
compliance. After the establishment is licensed for the manufacture of any
product, it is subject to periodic inspections by the FDA.

The requirements such as those described above which the Company must
satisfy to obtain regulatory approval by governmental agencies in other
countries prior to commercialization of its products in such countries can be
as rigorous, costly and uncertain.

The Company is also subject to various laws and regulations relating to
safe working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous or
potentially hazardous substances, including radioactive compounds and
infectious disease agents, used in connection with the Company's research. The
Company believes it is currently in compliance with all such laws and
regulations. The extent of governmental regulation which might result from any
legislative or administrative action cannot be accurately predicted.

The levels of revenues and profitability of biopharmaceutical companies may
be affected by the continuing efforts of government and third party payors to
contain or reduce the costs of health care through various means. For example,
in certain foreign markets pricing or profitability of therapeutic and other
pharmaceutical products is subject to governmental control. In the United
States, there have been, and the Company expects that there will continue to
be, a number of federal and state proposals to implement similar governmental
control. While the Company cannot predict whether any such legislative or
regulatory proposals will be adopted, the adoption of such proposals could
have a material adverse effect on the Company's business, financial condition
and profitability. In addition, in both the United States and elsewhere, sales
of therapeutic and other pharmaceutical products are dependent in part on the
availability of reimbursement to the consumer from third party payors, such as
government and private insurance plans. Third party payors are increasingly
challenging the prices charged for medical products and services. There can be
no assurance that either of the therapeutic products the Company has brought
to market or any therapeutic product candidates the Company may bring to
market in the future will be considered cost effective and that reimbursement
to the consumer will be available or will be sufficient to allow the Company
to sell its products on a competitive and profitable basis.

32
<PAGE>

PROPERTIES AND MANUFACTURING

The Company owns four buildings in Malvern, Pennsylvania, and leases space
in other buildings at this location. These buildings contain Centocor's
corporate offices, research and development laboratories, marketing offices,
and certain manufacturing facilities. Space is available in these buildings
for future expansion.

The Company owns a biopharmaceutical manufacturing facility in Leiden, The
Netherlands, for the production of monoclonal antibody-based products using a
proprietary cell-culture system. This facility has been inspected and approved
by the FDA and the equivalent European regulatory agencies. The Company also
leases research and development laboratories and office space at this
location. The Company manufactures diagnostics products at its facilities in
Malvern, Pennsylvania and at a facility which it leases in Guildford, England.
Each of the Company's diagnostic manufacturing facilities has received ISO-
9001 certification.

Each of the Company's lease agreements with respect to its leased
facilities is a triple net lease with a remaining term of at least nine years,
under which the Company is responsible for all operating expenses of the
facility.

At the Company's present level of operations, portions of the Company's
facilities and equipment in Malvern are idle. The Company continually
evaluates the future needs for its facilities and equipment.

EMPLOYEES

At December 31, 1995, Centocor had approximately 500 full-time employees.
To complement its own expertise in various fields, Centocor utilizes
scientific consultants and other advisors, many of whom have formal consulting
agreements with Centocor.

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 applications 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 HA-1A. 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 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 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 (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. 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. The Company
believes that the allegations of Velos are without merit and intends to
vigorously defend this suit and to pursue its counterclaim.

33
<PAGE>

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 was filed in the Court of Common Pleas for 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 ("PaineWebber"), 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
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 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 has moved to dismiss the New York suit on the ground that it was
brought in an inconvenient forum. 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 ("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. 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. The two Delaware suits have
been consolidated and discovery is proceeding. No trial date has been fixed.
In addition, on February 13, 1996, an additional suit was filed in the Court
of Common Pleas for Chester County, Pennsylvania by an alleged former limited
partner in CPII, against the Company, Lilly and an officer and a director of
the Company. The complaint purports to be a class action on behalf of former
limited partners of CPII and limited partners of PaineWebber R&D Partners,
L.P. and asserts claims of breach of contract, breach of fiduciary duty and
breach of a duty of good faith and fair dealing and states theories of
recovery similar to those asserted by PaineWebber R&D Partners, L.P., as
described above. The Company believes that the allegations of the plaintiffs
in these suits are without merit and intends to vigorously defend them.

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.

34
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David P. Holveck........ 50 President, Chief Executive Officer and Director
Warren C. Bogard........ 46 Senior Vice President and General Manager--Diagnostics Division
Martin R. Page.......... 51 Senior Vice President--Regulatory Affairs and Quality Assurance
James N. Woody.......... 53 Senior Vice President--Research and Development and
Chief Scientific Officer
Dominic J. Caruso....... 38 Vice President--Finance and Chief Financial Officer
Hubert J.P. Schoemaker.. 45 Chairman of the Board
Anthony B. Evnin(1)(2).. 55 Director
William F. Hamil- 56 Director
ton(1)(2)..............
Antonie T. Knoppers(2).. 81 Director
Ronald A. Matricaria(2). 53 Director
Richard D. Spizzirri.... 63 Director
Lawrence Steinman....... 48 Director
Jean C. Tempel(1)....... 52 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee

Mr. Holveck has been associated with the Company since June 1983. Mr.
Holveck has served as President and Chief Executive Officer of the Company
since November 1992. Mr. Holveck held the position of President and Chief
Operating Officer from April 1992 to October 1992 and Executive Vice President
and President--Diagnostics Division from December 1988 to April 1992. Mr
Holveck also has served as a director of the Company since 1994.

Dr. Bogard has been associated with the Company since January 1982. Dr.
Bogard has served as Senior Vice President and General Manager--Diagnostics
Division since October 1994. Previously, Dr. Bogard held the position of Vice
President, Program Management from April 1992 to October 1994 and Director,
Scientific Affairs--Pharmaceutical Division from November 1990 to April 1992.

Mr. Page has been associated with the Company since September 1987. Mr.
Page has served as Senior Vice President--Regulatory Affairs and Quality
Assurance since March 1994. Previously, Mr. Page held the position of Senior
Vice President--Worldwide Regulatory Affairs from August 1992 to March 1994,
Vice President--Worldwide Regulatory Affairs from June 1990 to August 1992,
and Vice President--International Regulatory Affairs from September 1987 to
June 1990.

Dr. Woody has been associated with the Company since August 1991. Dr. Woody
has served as Senior Vice President--Research and Development and Chief
Scientific Officer since August 1992, and Senior Vice President--Research and
Development since August 1991. Previously, Dr. Woody served as Commanding
Officer of the United States Navy Medical Research and Development Command
from 1988 to 1991.

Mr. Caruso has been associated with the Company since November 1985. Mr.
Caruso has served as Vice President--Finance and Chief Financial Officer of
the Company since December 1994. Previously, Mr. Caruso held the position of
Vice President and Corporate Controller from January 1991 to November 1994.

Dr. Schoemaker has been associated with the Company since 1980 and has
served as a director of the Company since 1983. Dr. Schoemaker has been
Chairman of the Board of the Company since November 1987 and served as Chief
Executive Officer of the Company from November 1987 to October 1992 and
President of the Company from 1983 to 1987. Dr. Schoemaker is also a director
of Apollon, Inc., Avitech, Inc., Myco Pharmaceuticals, Inc. and Safeguard
Scientifics Inc.

35
<PAGE>

Dr. Evnin has served as a director of the Company since 1980. Dr. Evnin is
currently General Partner of Venrock Associates, a venture capital limited
partnership. Dr. Evnin is also a director of AgriDyne Technologies Inc, Arris
Pharmaceutical Corporation, Athena Neurosciences, Inc., Genetics Institute,
Inc., IDEXX Laboratories, Inc., Escalon Medical Corp., Kopin Corporation, Opta
Food Ingredients, Inc. and Sugen, Inc.

Dr. Hamilton has served as a director of the Company since 1985. Dr.
Hamilton is currently the Landau Professor of Management and Technology at the
Wharton School of the University of Pennsylvania. Dr. Hamilton is also a
director of Hunt Manufacturing Co., Marlton Technologies, Inc. and Neose
Pharmaceuticals, Inc.

Dr. Knoppers has served as a director of the Company since 1986. Dr.
Knoppers is currently a self-employed business consultant. Dr. Knoppers
previously served as President, Chief Operating Officer and Vice Chairman of
Merck & Co., Inc., a research-based health products company. Dr. Knoppers is
also a director of Agouron Pharmaceuticals, Inc.

Mr. Matricaria has served as a director of the Company since 1994. Mr.
Matricaria has served as President and Chief Executive Officer of St. Jude
Medical, Inc., a medical products company, since April 1993 and Chairman of
the Board since 1995. From 1970 to 1993, Mr. Matricaria was employed by Eli
Lilly and Company, Inc., a research-based pharmaceutical company, where he
served in a variety of capacities, including President of the Medical Devices
and Diagnostics Division, Executive Vice President of the Pharmaceutical
Division and President of its North American operations. Mr. Matricaria is
also a director of St. Jude Medical, Inc., Diametrics Medical, Inc.,
InControl, Inc. and the Health Industry Manufacturers Association.

Mr. Spizzirri has served as a director of the Company since 1994. Mr.
Spizzirri has served as Senior Counsel to the law firm of Davis Polk &
Wardwell since January 1995. He was previously a Partner with Davis Polk &
Wardwell from 1967 to 1994. Mr. Spizzirri is also a director of Sugen, Inc.

Dr. Steinman has served as a director of the Company since 1991. Dr.
Steinman has been Professor of Immunology, Weizmann Institute of Science,
Rehovot, Israel since 1994, and Professor of Neurology and Neurological
Sciences and Pediatrics at Stanford University School of Medicine since 1991.
Dr. Steinman was previously Associate Professor of Neurology, Pediatrics and
Genetics at Stanford University School of Medicine from 1985 to 1991.

Ms. Tempel has served as a director of the Company since 1993. Ms. Tempel
has served as General Partner of Technology Leaders, L.P., an affiliate of
Safeguard Scientifics Inc., an entrepreneurial technology company, since
November 1993. Ms. Tempel previously served as President and Chief Operating
Officer of Safeguard Scientifics Inc. from January 1992 to November 1993. Ms.
Tempel was also a Principal of Tempel Partners Inc., a management consulting
firm, from 1991 to January 1992 and Executive Vice President of The Boston
Company, a bank trust company, from 1985 to 1990. Ms. Tempel is also a
director of Cambridge Technology Partners Inc., Safeguard Scientifics Inc. and
Sonesta International, Inc. and a Trustee of the Scudder Family of Mutual
Funds.

The standing committees of the Board of Directors are the Audit Committee
and the Compensation Committee. The Audit Committee is responsible for
determining the adequacy of the Company's internal accounting and financial
controls. The Compensation Committee is responsible for reviewing matters
pertaining to the compensation of the executive officers of the Company.

The directors and executive officers of the Company as a group, as of
December 31, 1995, owned an aggregate of 3,557,523 shares of Common Stock,
including shares that they have the right to acquire upon vesting of
restricted stock awards and the exercise of stock options as follows: David P.
Holveck--678,200; Warren C. Bogard--101,790; Martin R. Page--212,700; James N.
Woody--359,800; Dominic J. Caruso--72,067; Hubert J.P. Schoemaker--1,028,600;
Anthony B. Evnin--130,000; William F. Hamilton--145,000; Antonie T. Knoppers--
125,000; Ronald A. Matricaria--27,500; Richard D. Spizzirri--20,000; Lawrence
Steinman--120,000; and Jean C. Tempel--43,850.

36
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.01 per share, and 10,000,000 shares of Preferred
Stock, par value $.01 per share, 2,000,000 of which have been designated as
Series A Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock").

Under the Company's Articles of Incorporation, as amended, the Board of
Directors is authorized to make divisions of authorized shares of the capital
stock of the Company into classes and into series within any class and to make
determinations of the designation and the number of shares of any class or
series and the voting rights, preferences, limitations and special rights, if
any, of the shares of any class or series, including the power to increase the
previously determined number of shares of any class or series to a number not
greater than the aggregate number of shares of all classes and series that the
Company is authorized to issue and to decrease the previously determined
number of shares of any class or series to a number not less than that then
outstanding. Accordingly, the issuance of Preferred Stock or new classes or
series of Common Stock, while promoting flexibility in connection with
possible acquisitions and other corporate purposes, could adversely affect the
voting rights of holders of Common Stock and, under certain circumstances,
make it more difficult for a third party to gain control of the Company or
remove incumbent members of the Company's Board of Directors.

COMMON STOCK

As of December 31, 1995, there were approximately 58,538,000 shares of
Common Stock outstanding held of record by approximately 4,520 shareholders.

The holders of shares of Common Stock are entitled to one vote per share on
all matters to be voted on by shareholders, except that the holders of shares
of Common Stock are entitled to cumulate their votes in the election of
directors. The holders of shares of Common Stock are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors, in its discretion, from funds legally available therefor. See
"Price Range of Common Stock and Dividend Policy."

Except as described below under "The Rights Agreement," the holders of
Common Stock are not entitled to preemptive, subscription or conversion
rights, and there are no redemption or sinking fund provisions applicable to
the Common Stock. Upon the liquidation, dissolution or winding up of the
Company, the holders of shares of Common Stock are entitled to receive all
assets available for distribution to shareholders, subject to the rights of
any holders of shares of the Company's Preferred Stock that may be then
outstanding. The holders of Common Stock are not subject to further calls or
assessments by the Company. All outstanding shares of Common Stock are validly
issued, fully paid and non-assessable.

PREFERRED STOCK

The Company currently has no shares of Preferred Stock outstanding. Of the
10,000,000 shares of Preferred Stock authorized, 2,000,000 shares have been
designated as Series A Preferred Stock.

SERIES A PREFERRED STOCK

The Series A Preferred Stock was designated in connection with the
Company's stock rights plan. See "The Rights Agreement" below. Holders of
Series A Preferred Stock are entitled to receive a quarterly dividend at a
rate per share equal to the greater of (i) $1.00 or (ii) 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
amount of all non-cash dividends or distributions (payable in kind) except for
a dividend payable in shares of Common Stock or a subdivision of the
outstanding Common Stock, declared on the Common Stock since the preceding
quarterly dividend payment date for the Series A Preferred Stock. The amount
set forth in the preceding clause (ii) is subject to adjustment in the event
of any dividend on the Common Stock payable in shares of Common Stock and any
subdivision or combination of the outstanding Common Stock. In the event of
any liquidation, dissolution or winding up of the Company, the holders of
Series

37
<PAGE>

A Preferred Stock then outstanding are entitled to be paid out of the assets
and funds of the Company legally available for distribution, before any
payment shall be made to holders of Common Stock, the amount of $100 per share
plus any accrued but unpaid dividends on the Series A Preferred Stock. Upon
any consolidation, merger, combination or other transaction in which shares of
Common Stock are exchanged for or changed into other securities, cash or other
property, the shares of the Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share (subject to adjustment
in the events described above) equal to 100 times the aggregate amount of
securities, cash or other property into which or for which the Common Stock is
changed or exchanged.

The holders of the Series A Preferred Stock are entitled to vote together
with the holders of the Common Stock as a single class on all matters
presented to the Company's shareholders, including the election of directors,
and each share of Series A Preferred Stock is entitled to 100 votes on all
matters submitted to the shareholders. This number of votes is subject to
adjustment in the event of any dividend on the Common Stock payable in shares
of Common Stock and any subdivision or combination of the outstanding Common
Stock, such that the number of votes per share of Series A Preferred Stock
after such event shall equal the number of votes per share before such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock outstanding immediately prior to
such event. In the event dividends on the Series A Preferred Stock fall in
arrears in an amount equal to six quarterly dividend payments, the holders of
the Series A Preferred Stock, together with the holders of any other
outstanding Preferred Stock of the Company, have certain rights to elect two
persons as directors of the Company. In addition, the Company is restricted
from taking certain actions with respect to dividends or other distributions
on, or acquisitions or redemptions of, any shares of stock ranking junior to
or on a parity with the Series A Preferred Stock, whenever any dividends or
distributions payable on the Series A Preferred Stock are in arrears.

The Series A Preferred Stock is not redeemable, and will rank junior with
respect to payment of dividends and on liquidation to all other series of the
Company's Preferred Stock, except to the extent that any such series
specifically provides that it shall rank on a parity with or junior to the
Series A Preferred Stock.

CERTAIN ARTICLES OF INCORPORATION AND BY-LAW PROVISIONS AND PENNSYLVANIA ANTI-
TAKEOVER PROVISIONS

The Articles of Incorporation and By-laws of the Company and Pennsylvania
law contain certain provisions that may enhance the likelihood of continuity
and stability in the composition of the Board of Directors and may discourage
a future unsolicited takeover of the Company. These provisions could have the
effect of discouraging certain attempts to acquire the Company or remove
incumbent management, including incumbent members of the Board of Directors,
even if some or a majority of the Company's shareholders deemed such an
attempt to be in their best interests.

The Company's Articles of Incorporation, as amended, or By-laws, as
applicable, among other things (i) provide that the number of directors will
not be fewer than five nor more than eleven, with the exact number of
directors to be determined from time to time by resolution adopted by a
majority of the Board of Directors; (ii) permit vacancies on the Board of
Directors that may occur between annual meetings and newly created seats to be
filled only by the Board of Directors and not by the shareholders; (iii) do
not permit the shareholders to call special meetings of shareholders; (iv)
prohibit the shareholders from taking action by less than unanimous written
consent; and (v) provide that the Board of Directors, without action by the
shareholders, may issue and fix the rights and preferences of shares of
Preferred Stock and new classes or series of Common Stock. These provisions
may have the effect of delaying, deferring or preventing a change of control
of the Company without further action by the shareholders, may discourage bids
for the Common Stock at a premium over the market price of the Common Stock
and may adversely affect the market price of, and the voting or other rights
of the holders of, the Common Stock.

The Pennsylvania Business Corporation Law ("BCL") contains certain
statutory "anti-takeover" provisions. The BCL provides that a merger,
consolidation, share exchange or sale of assets between a public

38
<PAGE>

corporation, or a subsidiary thereof, and a shareholder be approved by a
majority of voting shares outstanding other than those held by the "interested
shareholder" (which includes a shareholder who is a party to the proposed
transaction or who is treated differently from other shareholders) unless (i)
the transaction has been approved by a majority of the corporation's directors
who are not affiliated with the interested shareholder and first elected to
the board within 24 months of the vote to approve such transaction, or (ii)
the transaction results in the payment to all other shareholders of an amount
not less than the highest amount paid for the same class of shares by the
interested shareholder. In addition, subject to certain exceptions, a
"business combination" with a shareholder or group of shareholders
beneficially owning more than 20% of the voting power of a public corporation
(excluding certain shares) is prohibited for a five-year period following the
date on which the holder acquired the 20% or greater voting power and, unless
certain other conditions are satisfied, requires approval of a majority of
voting shares outstanding other than those held by such interested
shareholder. Moreover, the BCL entitles shareholders to vote upon a change in
control resulting from the acquisition of shares representing voting control
over 20% or more of a corporation's stock, by providing that the voting rights
of such "control shares" are, in certain circumstances, suspended until the
shareholders approve a resolution to restore the voting rights of such control
shares, and provides that any profit realized from the disposition of an
equity security of a corporation by a shareholder who disposes of such
security within 18 months after obtaining control must be returned to the
corporation. These and other related BCL provisions may discourage open market
purchases of a corporation's stock or a non-negotiated tender or exchange
offer for such stock and, accordingly, may limit a shareholder's ability to
realize a premium over the market price of the Common Stock in connection with
any such transaction.

THE RIGHTS AGREEMENT

Each outstanding share of the Common Stock is, and each share of Common
Stock to be issued prior to the earliest of (i) the Distribution Date (as
defined below), (ii) the date on which the Rights (as defined below) are
redeemed or (iii) the expiration of the Rights on September 26, 1998, will be,
accompanied by one-half of one right (a "Right") to purchase one one-hundredth
of a share of Series A Preferred Stock, in accordance with the terms and
conditions of the Rights Agreement (the "Rights Agreement"), dated as of
September 26, 1988, between the Company and The First National Bank of Boston,
as Rights Agent. The Rights are attached to the certificates representing
shares of the Common Stock and will continue to be so attached until the date
(the "Distribution Date") that is the earlier to occur of (i) ten days
following a public announcement that a person or group has acquired beneficial
ownership of 20% or more of the outstanding shares of Common Stock (an
"Acquiring Person") or (ii) ten business days following the commencement of a
tender offer or exchange offer that would, if consummated, result in a person
or group owning 30% or more of the outstanding shares of Common Stock.

In the event a Distribution Date occurs, each holder of a Right will be
entitled to purchase one one-hundredth of a share of Series A Preferred Stock
at a price of $170 (the "Rights Exercise Price"). If, following an acquisition
of 20% or more of the outstanding shares of Common Stock by an Acquiring
Person, the Company is acquired by any person or group, or sells 50% or more
of its assets or earning power to any person or group, the holder of each
Right will be entitled to purchase, at the Rights Exercise Price, shares of
common stock of such person or group having a market value equal to twice the
Rights Exercise Price. In addition, if any person or group acquires 30% or
more of the outstanding shares of Common Stock or if an Acquiring Person
merges into the Company or engages in certain self-dealing transactions, then
the holder of each Right, other than the Acquiring Person, will be entitled to
purchase, at the Rights Exercise Price, shares of Common Stock having a market
value equal to twice the Rights Exercise Price.

The Rights will become exercisable only upon the terms and conditions set
forth in the Rights Agreement and may be redeemed by the Company at $.02 per
Right at any time prior to the tenth day following a public announcement that
an Acquiring Person has acquired beneficial ownership of 20% or more of the
outstanding shares of Common Stock (which date may be extended under certain
conditions set forth in the Rights Agreement). Until a Right is exercised, the
holder thereof will have no additional rights as a shareholder of the Company.
The offering made by this Prospectus will not cause the Rights to become
exercisable.

39
<PAGE>

Prior to a Distribution Date, the terms of the Rights Agreement may be
amended by the Board of Directors without the approval of the holders of
shares of Common Stock, including an amendment to lower the thresholds for
exercisability of the Rights to not less than the greater of (i) the largest
percentage of the outstanding shares of Common Stock then known to the Company
to be beneficially owned by any person or group or (ii) 10%. After the
Distribution Date, the terms of the Rights Agreement may be amended by the
Board of Directors without the approval of the holders of the Rights, except
that no such amendment may change the redemption price, the final expiration
date of the Rights Agreement, the Rights Exercise Price or the number of the
one-hundredths of a share of Series A Preferred Stock for which a Right is
exercisable or otherwise adversely affect the interests of the holders of the
Rights (other than an Acquiring Person or an affiliate or associate thereof).

The Rights may have certain anti-takeover effects. The Rights are designed
to cause substantial dilution to a person or group that attempts to acquire
the Company on terms not approved by the Board of Directors. The Company does
not believe that the Rights will interfere with any merger or other business
combination approved by the Board of Directors since the Rights may be
redeemed by the Company as described above. To the extent the Rights may
discourage potential acquirors from obtaining equity positions in the Company,
shareholders may be deprived of receiving a premium for their shares of Common
Stock.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston c/o Boston EquiServe. Its address for such purposes is Mail
Stop: 45-02-09, Blue Hills Office Park, 150 Royall Street, Canton,
Massachusetts 02021, and its telephone number at that address is (617) 575-
2900.

CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following discussion describes certain U.S. federal income and estate
tax consequences of the ownership and disposition of shares of Common Stock
applicable to Non-U.S. Holders of such shares of Common Stock. In general, a
"Non-U.S. Holder" is any person holding shares of Common Stock other than (i)
a citizen or resident, as specifically defined for U.S. federal income and
estate tax purposes, of the United States; (ii) a corporation, partnership or
any entity treated as a corporation or partnership for U.S. federal income tax
purposes created or organized in the United States or under the laws of the
United States or of any state of the United States; or (iii) an estate or
trust whose income is includible in gross income for U.S. federal income tax
purposes regardless of its source. The discussion is based on current law,
which is subject to change retroactively and prospectively, and is for general
information only. The discussion does not address all aspects of U.S. federal
income and estate taxation and does not address any aspects of state, local or
foreign taxation. The discussion does not consider any specific facts or
circumstances that may apply to a particular Non-U.S. Holder. Accordingly,
prospective investors are urged to consult their tax advisors regarding the
U.S. federal, state and local and foreign income, estate and other tax
consequences of holding and disposing of shares of Common Stock.

DIVIDENDS

In general, dividends paid to a Non-U.S. Holder will be subject to U.S.
withholding tax at a 30% rate (or a lower rate as may be prescribed by an
applicable tax treaty) unless the dividends are effectively connected with a
trade or business carried on by the Non-U.S. Holder within the United States
and the Non-U.S. Holder files certain forms annually with the payor of the
dividends. Effectively connected dividends will generally be subject to U.S.
federal income tax on a net income basis at the regular applicable rates. In
the case of effectively connected dividends paid to a Non-U.S. Holder which is
a corporation, such dividends also may be subject to the branch profits tax
(which is generally imposed on a foreign corporation on the repatriation from
the United States of effectively connected earnings and profits). The branch
profits tax may not apply if the recipient is a qualified resident of a
country with which the United States has an income tax treaty.

40
<PAGE>

Under current Treasury Regulations, in determining whether withholding is
required where a payor of dividends has no definite knowledge of the status of
a shareholder, the payor must assume that a shareholder is a Non-U.S. Holder
if the shareholder has an address outside the United States. If the
shareholder has an address inside the United States, the payor may assume the
shareholder is a person other than a Non-U.S. Holder. Moreover, in determining
whether to withhold at a lower rate under a treaty, a payor may be permitted
under the treaty or the regulations thereunder to assume that a shareholder
with an address in a foreign country is a resident of that country. Treasury
Regulations proposed in 1984, if finally adopted, however, would require Non-
U.S. Holders to file certain forms to obtain the benefit of any applicable tax
treaty providing for a lower rate of withholding tax on dividends. Such forms
would be required to contain the holder's name and address and, subject to a
de minimis payment exception, a statement by the competent authority in the
foreign country (as designated in the applicable tax treaty) attesting to the
holder's status as a resident thereof.

Under current regulations, the Company must report annually to the Internal
Revenue Service and to each Non-U.S. Holder the amount of dividends paid to,
and the tax withheld with respect to, each Non-U.S. Holder. These reporting
requirements apply regardless of whether withholding was reduced or eliminated
under an exemption or a tax treaty. If the United States and a foreign country
have entered into an income tax treaty that provides for the mutual exchange
of information, the Internal Revenue Service may also transmit the foregoing
information to the appropriate authority of such foreign country designated in
the treaty.

SALE OF COMMON STOCK

Generally, a Non-U.S. Holder will not be subject to U.S. federal income tax
on any gain realized upon the disposition of such holder's shares of Common
Stock unless (i) the gain is effectively connected with a trade or business
carried on by the Non-U.S. Holder within the United States and, if a tax
treaty applies, attributable to a permanent establishment maintained by the
Non-U.S. Holder in the United States; (ii) the Non-U.S. Holder is an
individual who holds the shares of Common Stock as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition, and the gain from the disposition is from sources in the United
States; (iii) the Non-U.S. Holder is subject to tax pursuant to the provisions
of U.S. tax law applicable to certain U.S. expatriates; or (iv) the Company is
or has been during certain periods a "U.S. real property holding corporation"
(which the Company does not believe that it is or is likely to become).

ESTATE TAX

Shares of Common Stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for U.S. federal estate tax
purposes) of the United States at the time of death will be includible in the
individual's gross estate for U.S. federal estate tax purposes, unless an
applicable tax treaty provides otherwise, and may be subject to U.S. federal
estate tax.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Under current U.S. federal income tax law, a backup withholding tax (which
generally is a withholding tax imposed at the rate of 31% on certain payments
to persons that fail to furnish certain information to the payor of such
payments) and information reporting requirements apply to payments of
dividends made to certain non-corporate U.S. persons. The U.S. backup
withholding tax and information reporting requirements will generally not
apply to dividends paid on Common Stock to a holder at an address outside the
United States.

The payment of the proceeds from the disposition of shares of Common Stock
to or through the U.S. office of a broker will be subject to information
reporting and backup withholding unless the holder, under penalties of
perjury, certifies, among other things, its status as a Non-U.S. Holder.
Generally, the payment of the proceeds from the disposition of shares of
Common Stock to or through a foreign office of a broker will not be subject to
backup withholding and will not be subject to information reporting if the
broker has evidence in its files that the holder is a Non-U.S. Holder,
provided the broker has no actual knowledge to the contrary. The backup
withholding and information reporting rules are currently under review by the
Treasury Department, and their

41
<PAGE>

application to the shares of Common Stock is subject to change. Non-U.S.
Holders should consult their tax advisors regarding the application of these
rules to their particular situations, the availability of an exemption
therefrom and the procedure for obtaining such an exemption, if available.

Any amounts withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's U.S.
federal income tax liability, if any, and may entitle such holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.

42
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist LLC
and J.P. Morgan Securities Inc. are serving as U.S. Representatives, and the
International Underwriters named below, for whom Morgan Stanley & Co.
International Limited, Hambrecht & Quist LLC and J.P. Morgan Securities Ltd.
are serving as International Representatives, have severally agreed to
purchase, and the Company has agreed to sell to them, the respective number of
shares of Common Stock set forth opposite the names of such Underwriters
below:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated............................. 666,668
Hambrecht & Quist LLC......................................... 666,666
J.P. Morgan Securities Inc.................................... 666,666
Bear, Stearns & Co. Inc....................................... 80,000
Cowen & Company............................................... 40,000
CS First Boston Corporation................................... 80,000
Dillon, Read & Co. Inc........................................ 80,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 80,000
Genesis Merchant Group Securities............................. 40,000
Gerard Klauer Mattison & Co., Inc............................. 40,000
Goldman, Sachs & Co........................................... 80,000
Josephthal Lyon & Ross Incorporated........................... 40,000
Montgomery Securities......................................... 80,000
Raymond James & Associates, Inc............................... 40,000
Schroder Wertheim & Co. Incorporated.......................... 80,000
Vector Securities International, Inc.......................... 40,000
---------
Subtotal................................................ 2,800,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited.................... 233,334
Hambrecht & Quist LLC......................................... 233,333
J.P. Morgan Securities Ltd.................................... 233,333
---------
Subtotal................................................ 700,000
---------
Total................................................... 3,500,000
=========
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively
referred to herein as the "Underwriters" and the "Representatives,"
respectively. The Underwriting Agreement provides that the obligations of the
several Underwriters to pay for and accept delivery of the shares of Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all the shares of Common Stock offered hereby (other than
those covered by the U.S. Underwriters' over-allotment option described below)
if any such shares are taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (a)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and
(b) it has not offered or sold, and will not offer or sell, directly or
indirectly, any U.S. Shares or distribute any prospectus relating to the U.S.
Shares outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Agreement Between U.S. and
International Underwriters, each International Underwriter has represented and
agreed that, with certain exceptions, (i) it is not purchasing any
International

43
<PAGE>

Shares (as defined below) for the account of any United States or Canadian
Person and (ii) it has not offered or sold, and will not offer or sell,
directly or indirectly, any International Shares or distribute any prospectus
relating to the International Shares within the United States or in any
province or territory of Canada or to any United States or Canadian Person.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Agreement Between U.S. and
International Underwriters. As used herein, "United States or Canadian Person"
means any national or resident of the United States or of any province or
territory of Canada, or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada
or of any political subdivision thereof (other than a branch located outside
the United States and Canada of any United States or Canadian Person) and
includes any United States or Canadian branch of a person who is otherwise not
a United States or Canadian Person. All shares of Common Stock to be purchased
by the U.S. Underwriters and the International Underwriters are referred to
herein as the U.S. Shares and the International Shares, respectively.

Pursuant to the Agreement Between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price of any
shares sold shall be the public offering price set forth on the cover page
hereof, in U.S. dollars, less an amount not greater than the per share amount
of the concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any shares of Common Stock, directly or
indirectly, in any province or territory of Canada in contravention of the
securities laws thereof and has represented that any offer of Common Stock in
Canada will be made only pursuant to an exemption from the requirement to file
a prospectus in the province or territory of Canada in which such offer is
made. Each U.S. Underwriter has further agreed to send to any dealer who
purchases from it any shares of Common Stock a notice stating in substance
that, by purchasing such Common Stock, such dealer represents and agrees that
it has not offered or sold, and will not offer or sell, directly or
indirectly, any of such Common Stock in Canada or to, or for the benefit of,
any resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer of Common Stock in any province or
territory of Canada will be made only pursuant to an exemption from the
requirement to file a prospectus in the province or territory of Canada in
which such offer is made, and that such dealer will deliver to any other
dealer to whom it sells any of such Common Stock a notice to the foregoing
effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that: (i) it has not
offered or sold and during the period of six months after the issuance of the
Common Stock will not offer or sell any shares of Common Stock to persons in
the United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995 (the "Regulations"); (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 and the
Regulations with respect to anything done by it in relation to the shares of
Common Stock in, from or otherwise involving the United Kingdom; and (iii) it
has only issued or passed on and will only issue or pass on to any person in
the United Kingdom any document received by it in connection with the issue of
the shares of Common Stock if that person is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom such document may otherwise
lawfully be issued or passed on.

The Underwriters initially propose to offer part of the Common Stock
directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price which represents a
concession not in excess of $1.00 a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $.10 a share to other Underwriters or to certain dealers. After the
initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.

44
<PAGE>

Pursuant to the Underwriting Agreement, the Company has granted the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an additional 525,000 shares of Common Stock at
the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The U.S. Underwriters may exercise
such option to purchase solely for the purpose of covering over-allotments, if
any, made in connection with this offering. To the extent such option is
exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such U.S. Underwriter's name in the
preceding table bears to the total number of shares of Common Stock offered by
the U.S. Underwriters hereby.

The Company, all of the Company's executive officers and directors, and two
other shareholders of the Company who own in the aggregate approximately
3,640,000 shares of Common Stock, have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated, they will not (a) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are then owned by
such person or are thereafter acquired directly from the Company), or (b)
enter into any swap or similar agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (a) or (b) of this paragraph is to be
settled by delivery of such Common Stock or such other securities, in cash or
otherwise, for a period of 90 days after the date of this Prospectus, other
than (i) the sale to the Underwriters of the shares of Common Stock under the
Underwriting Agreement, (ii) the issuance by the Company of shares of Common
Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date of this Prospectus, (iii) any shares of
Common Stock issued upon the exercise of any Right, (iv) any options granted
or shares of Common Stock issued pursuant to existing benefit plans of the
Company, or (v) the sale by the Company's executive officers and directors of
up to an aggregate of 200,000 shares of Common Stock.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by
this Prospectus or the time at which a stabilizing bid for such shares is
made. In general, on and after the date two business days prior to the
Commencement Date (1) such market maker's net daily purchases of the Common
Stock may not exceed 30% of the market maker's average daily trading volume in
such stock for the two full consecutive calendar months immediately preceding
the filing date of the registration statement of which this Prospectus forms a
part, (2) such market maker may not effect transactions in, or display bids
for, the Common Stock at a price that exceeds the highest independent bid for
the Common Stock by persons who are not passive market makers and (3) bids
made by passive market makers must be identified as such.

LEGAL MATTERS

Certain legal matters in connection with this offering will be passed upon
for the Company by Duane, Morris & Heckscher, One Liberty Place, Philadelphia,
Pennsylvania 19103-7396. Certain legal matters in connection with this
offering will be passed upon for the Underwriters by Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017. Richard D. Spizzirri, a
director of the Company, is Senior Counsel to the firm of Davis Polk &
Wardwell and owns 112,444 shares of Common Stock, including 20,000 shares that
he has the right to acquire upon exercise of stock options. Davis Polk &
Wardwell represented the Company in connection with the Exchange Offer and
certain independent members of the Board of Directors of the Company in
connection with an investigation of the Company by the FDA that was completed
in December 1992 and, from time to time, has acted as counsel to Paine Webber
Group Inc., including in connection with the organization of CPII and CPIII.

45
<PAGE>

EXPERTS

The consolidated financial statements and schedule of the Company as of
December 31, 1995, 1994 and 1993, and for each of the years in the four-year
period ended December 31, 1995, and the financial statements of CPIII as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, have been incorporated by reference herein and in the
registration statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K for the year ended December 31,
1994, the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995 and the Company's Current
Reports on Form 8-K dated July 12, 1995, January 26, 1996 and February 15,
1996 filed with the Securities and Exchange Commission (the "Commission") and
the description of the Company's Common Stock contained in its Registration
Statements on Form 8-A as filed with the Commission on April 28, 1983, as
amended, and October 11, 1988 are hereby incorporated by reference in this
Prospectus except as superseded or modified herein. All documents filed with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") after the date of this
Prospectus and prior to the termination of the offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in any document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus. The Company will provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the documents
that have been or may be incorporated by reference herein (other than exhibits
to such documents which are not specifically incorporated by reference into
such documents). Such requests should be directed to the Company's Corporate
Secretary at its principal executive offices at 200 Great Valley Parkway,
Malvern, Pennsylvania 19355, or by telephone at (610) 651-6000.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004, and at the
Commission's following Regional Offices: New York Regional Office, 7 World
Trade Center, New York, New York 10048; and Chicago Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material may also be obtained at prescribed rates from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549-1004. Quotations relating to the Company's
Common Stock appear on the Nasdaq National Market and such reports and other
information concerning the Company can also be inspected at the offices of the
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006-1506.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain
portions of which have been omitted as permitted by the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents
of any contract or other document referred to are not necessarily complete;
and with respect to each such contract or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matters involved, each such statement being qualified in
all respects by such reference. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and exhibits thereto. The information so omitted, including exhibits, may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the prescribed fees, or may be inspected without charge at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549-1004.

46
<PAGE>
Filed pursuant to Rule 424(b)(1)
Registration Statement No. 333-00337

3,500,000 Shares

CENTOCOR, INC.
[LOGO OF CENTOCOR, INC. COMMON STOCK
APPEARS HERE] ---------------

OF THE 3,500,000 SHARES OF COMMON STOCK BEING OFFERED, 700,000 SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND 2,800,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE
SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY. THE COMMON
STOCK OF CENTOCOR, INC. IS QUOTED ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "CNTO". ON MARCH 11, 1996, THE REPORTED LAST SALE PRICE OF THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET WAS $35 3/8 PER SHARE.

---------------

SEE "RISK FACTORS" COMMENCING ON PAGE 7 HEREOF FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

---------------

---------------
PRICE $33 A SHARE
---------------

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------------ ------------- ------------
<S> <C> <C> <C>
Per Share.............................. $33.00 $1.65 $31.35
Total(3)............................... $115,500,000 $5,775,000 $109,725,000
</TABLE>
- -------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
525,000 additional Shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the U.S. Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $132,825,000, $6,641,250 and $126,183,750, respectively.
See "Underwriters."
---------------

---------------

MORGAN STANLEY & CO.
International
HAMBRECHT & QUIST
J.P. MORGAN SECURITIES LTD.

March 11, 1996
<PAGE>

[LOGO OF CENTOCOR APPEARS HERE]