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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 02549
________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 12, 1998
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CENTOCOR, INC.
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 0-11103 23-2117202
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
200 Great Valley Parkway, Malvern, Pennsylvania 19355
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code (610) 651-6000
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Item 5. Other Events
On February 12, 1998, Centocor, Inc. ("Centocor") announced that it
had entered into a definitive agreement to acquire the U.S. and Canadian product
rights for RETAVASE (TM) (reteplase), a leading acute care cardiovascular drug,
from Roche Healthcare Limited, an affiliate of Roche Holding Ltd. (the
"Acquisition"). Centocor's press release, dated February 12, 1998, announcing
the Acquisition is attached hereto as Exhibit 99.1.
On February 12, 1998, Centocor announced that it proposes to offer a
new issue of $350 million of Convertible Subordinated Debentures due 2005 in an
unregistered offering. Centocor's press release, dated February 12, 1998,
relating to the proposed offering and issued pursuant to Rule 135c under the
Securities Act of 1933, as amended, is attached hereto as Exhibit 99.2.
Attached hereto as Exhibit 99.3 is Unaudited Pro Forma Consolidated
Financial Data of Centocor which gives effect to the Acquisition and the related
financing as if they had occurred January 1, 1997. The Unaudited Pro Forma
Consolidated Financial Data attached hereto as Exhibit 99.3 is not being filed
with Item 7 of Form 8-K under the Securities Exchange Act of 1934, as amended,
and is not intended to meet all of the requirements of Item 7.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
(99.1) Press Release of Centocor, Inc., dated February 12, 1998
(99.2) Press Release of Centocor, Inc., dated February 12, 1998 issued
pursuant to Rule 135c under the Securities Act of 1933, as
amended
(99.3) Unaudited Pro Forma Consolidated Financial Data
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTOCOR, INC.
Dated: February 13, 1998 By: /s/ George D. Hobbs
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Name: George D. Hobbs
Title: Vice President, Corporate
Development and General
Counsel
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Index to Exhibits
Exhibit Exhibit
Number
(99.1) Press Release of Centocor, Inc., dated February 12, 1998
(99.2) Press Release of Centocor, Inc., dated February 12, 1998,
issued pursuant to Rule 135c under the Securities Act of
1933, as amended
(99.3) Unaudited Pro Forma Consolidated Financial Data
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Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACTS:
INVESTORS: Bill Newbould (610)651-6122
Paul Wulfing (610)889-4422
MEDIA: Elliot Sloane (212)704-8126
(Edelman)
Ellena Friedman (212)704-8221
(Edelman)
CENTOCOR AGREES TO ACQUIRE U.S. AND
CANADIAN RIGHTS FOR RETAVASE(TM)
MALVERN, Pa., February 12, 1998 - Centocor, Inc. (Nasdaq: CNTO) announced today
that it has entered into a definitive agreement to acquire the U.S. and Canadian
product rights for RETAVASE(TM) (reteplase), a leading acute-care cardiovascular
drug, from Roche Healthcare Limited, an affiliate of Roche Holding Ltd., for
$335 million in cash. In addition, Centocor is offering to employ, upon closing
of the transaction, many U.S.-based sales and marketing personnel who currently
commercialize the product.
RETAVASE, A FIBRINOLYTIC DRUG
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RETAVASE in a recombinant biologic cardiology care product administered for the
treatment of acute myocardial infarction (heart attack) to improve blood flow in
the heart. It is among the class of drugs known as "clot busters." Sales of
these drugs in the United States in 1997 were approximately $300 million.
RETAVASE received marketing authorization from the FDA in October 1996 and was
launched in January 1997. Centocor believes, based on industry data, that
RETAVASE achieved a 12% share of the U.S. market in 1997.
The opportunity to acquire RETAVASE has arisen because it is expected that
Roche, as part of its purchase of Corange Ltd. (parent company of Boehringer
Mannheim, the manufacturer and marketer of RETAVASE), will divest RETAVASE due
to Roche's majority ownership in Genentech, maker of a competing product. The
divestiture and the purchase agreement will be subject to Federal Trade
Commission approval. The transaction is also subject to the closing of the Roche
acquisition of Corange and satisfaction of other regulatory requirements and
customary closing conditions. Subject to satisfaction of these conditions, the
transaction is expected to close during the first quarter of 1998. The company
plans to finance the acquisition through the issuance of convertible debt
securities, subject to market conditions.
REASONS FOR TRANSACTION
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"This acquisition is a transforming transaction for Centocor," said David P.
Holveck, chief executive officer. "Centocor has been an emerging biotechnology
company with several promising products and a strategic
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intent to integrate forward into the commercial arena. This transaction will
allow immediate forward integration, while adding a fourth innovative product,
RETAVASE, to Centocor's existing portfolio of ReoPro(R), Panorex(R) and
Avakine(TM), the latter a product in development. In addition, it provides the
company with an opportunity to enhance its operational profitability in the near
term without the risks inherent in the long-term development cycle typically
associated with such innovative products."
"This is a rare combination of strategic fit and financial opportunity for
Centocor," continued Joseph C. Scodari, president and chief operating officer.
"The company believes that RETAVASE, an approved and launched cardiovascular
product early in its life cycle, positions Centocor as a leader in acute
cardiovascular care. RETAVASE is the second recombinant plasminogen activator
drug to enter the established fibrinolytic market. It has the important
advantage of being administered through bolus injections rather than the more
complicated infusion administration required for tPA. Centocor now will be
positioned with products in the two most significant therapeutic alternatives
for acute myocardial infarction (AMI, or heart attack) patients: fibrinolytic
therapy (RETAVASE) and percutaneous coronary intervention (ReoPro), the latter
in conjunction with Eli Lilly and Company."
Scodari went on to note that, "The company believes that the complementary
nature of RETAVASE and ReoPro will allow Centocor to accelerate the penetration
of these products in the emergency medicine and clinical cardiology fields,
respectively."
Two Phase II trials are currently underway to evaluate the combination of ReoPro
and fibrinolytics in the therapy of acute myocardial infarction. The TIMI 14
trial is assessing combinations of ReoPro and tPA or streptokinase. The SPEED
trial is evaluating the combination of ReoPro and RETAVASE. These trials will
help determine the potential value of fibrinolytic and GPIIb/IIIa combination
therapy in the medical management of AMI patients, and may guide future planning
for a Phase III trial. The company also may explore an additional opportunity
for therapy in stroke patients.
Centocor may also benefit from additional ReoPro sales in light of an agreement
in principle to have the RETAVASE sales force jointly promote ReoPro in the U.S.
with Eli Lilly. In addition, RETAVASE will complement the current plans of the
company's subsidiary, Centocor Diagnostics, Inc., to develop and commercialize a
platelet-activation diagnostic test that is intended to aid in the
identification of heart attack patients.
MARKETING PLANS
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Approximately 200 employees are expected to be involved in the commercialization
of RETAVASE. As part of Centocor's agreement with Roche, many of Boehringer
Mannheim's existing U.S. sales, marketing and support organization employees are
being offered positions with Centocor, conditioned on FTC approval and closing
of the RETAVASE transaction.
"The proposed joint promotion of ReoPro by both Centocor and Lilly would enable
the companies to expand the selling effort Lilly is already placing behind the
brand. This would enable us to maximize the recently expanded label for ReoPro,"
said William R. Ringo, president, internal medicine business unit at Lilly. "The
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possibility of expanding our collaboration with Centocor to eventually include
joint promotion will further strengthen an already successful relationship."
"The new elements of our proposed agreement with Lilly build upon our very
strong and productive relationship and set the stage for maximizing the
potential of ReoPro in the marketplace," said Scodari. "This will take the Lily-
Centocor relationship to a new level. In addition, Centocor will be adding a
strong cardiovascular sales and marketing arm from Boehringer Mannheim that has
successfully launched and commercialized RETAVASE in a very competitive
environment."
FINANCIAL IMPACT
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On a pro forma basis, assuming the transaction had closed on January 1, 1997,
the transaction would have reduced operating earnings before interest expense
and taxes for the year ended December 31, 1997, by approximately $24 million,
without giving effect to any costs of financing or special charges associated
with the transaction. Such pro forma results include expenses associated with
the initial launch of the product. The company currently expects the transaction
to contribute to operating earnings before interest expense and taxes in 1999
and to contribute to pretax earnings in 2000.
In connection with the acquisition, Centocor expects to record a one-time,
pretax charge of approximately $135-145 million in the first quarter of 1998,
representing the acquisition of in-process research and development. Also during
the first quarter, the company expects to record a one-time tax benefit of
approximately $20 million from the recognition of certain deferred tax assets.
TERMS OF AGREEMENT WITH ROCHE
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Among the assets being acquired by Centocor are U.S. and Canadian intellectual
property rights related to RETAVASE, including those necessary for the
manufacture and development of the product, and various marketing and related
assets. At closing, Centocor will also acquire, at an agreed price per unit,
Boehringer Mannheim's then-existing U.S. inventory of RETAVASE.
Under a supply agreement, Boehringer Mannheim will continue to manufacture
RETAVASE in Germany; however, Centocor ultimately will assume responsibility for
manufacturing. Of the purchase price, $20 million will be placed in escrow at
closing, to be refunded to Centocor upon Centocor's successful completion of
certain milestones in the transfer of manufacturing from Boehringer Mannheim.
Centocor will assume responsibility for the defense of certain RETAVASE-related
patent litigation initiated against Boehringer Mannheim by Genentech in the U.S.
and Germany. The expenses of such litigation will be shared by Roche, subject to
certain limitations. In addition, Centocor will be reimbursed for certain
liabilities that could result from this litigation and, under certain
circumstances, will be refunded some or all of the purchase price.
Centocor plans to distribute RETAVASE in Canada through a partner, and currently
is evaluating possible alliances.
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Centocor's mission is to develop or otherwise acquire and commercialize novel
therapeutic and diagnostic products and services that solve critical needs in
human health care, with a primary technology focus on monoclonal antibodies and
DNA-based products.
The Securities to be issued by the Company have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
Any statements released by Centocor that are forward looking are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are based on current expectations,
estimates and protections about the Company's industry, management's beliefs and
certain assumptions made by the Company's management. Investors are cautioned
that matters subject to forward-looking statements involve risks and
uncertainties which may affect the Company's business and prospects, including
economic, competitive, government, technological and other factors discussed in
the Company's filings with the Securities and Exchange Commission. Investors are
cautioned, in particular, that there can be no assurance of favorable regulatory
action by the Federal Trade Commission in connection with the Roche-Corange
transaction; and there can be no assurance of favorable regulatory action by the
Food and Drug Administration or its Canadian counterpart based on the results of
any clinical trial or application for expanded label indications for a product
already approved for a more limited indication.
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ReoPro(R) is a registered trademark of Eli Lilly and Company.
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Exhibit 99.2
[LOGO OF CENTOCOR APPEARS HERE] News Release
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For Immediate Release
CENTOCOR CONTACTS:
Bill Newbould (610) 651-6122
Paul Wulfing (610) 889-4422
CENTOCOR ANNOUNCES PROPOSED $350 MILLION
CONVERTIBLE DEBENTURE OFFERING
MALVERN, Pa. February 12, 1998 - Centocor, Inc. (Nasdaq: CNTO) today announced
that it proposes to offer a new issue of $350 million of Convertible
Subordinated Debentures due 2005 (the "Debentures").
The Debentures will be convertible into Centocor common stock, at the option of
the holder, at a price to be determined. The Company also may issue up to an
additional $50 million of Debentures to cover over-allotments in connection with
the offering.
The Company intends to use the proceeds from the sale of the Debentures for the
acquisition of the U.S. and Canadian product rights for RETAVASE/TM/
(reteplase).
The Debentures have not been registered under the Securities Act of 1933 and may
not be offered or sold in the United States, absent registration or an
applicable exception from the Securities Act registration requirements.
This press release shall not constitute an offer to sell or the solicitation of
an offer to buy the Debentures. This press release is being issued pursuant to
and in accordance with Rule 135c under the Securities Act.
Centocor's mission is to develop or otherwise acquire and commercialize novel
therapeutic and diagnostic products and services that solve critical needs in
human health care, with a primary technology focus on monoclonal antibodies and
DNA-based products.
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Exhibit 99.3
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations data
has been derived by the application of pro forma adjustments to the historical
financial statements of the Company for 1997. The unaudited pro forma statement
of operations for the year ended December 31, 1997 assumes the acquisition of
Retavase and the related financing had occurred as of the beginning of the year.
The pro-forma adjustments are based upon certain historical unaudited
financial information of the Retavase business and on certain Company
estimates of expenses it would have incurred had the acquisition occurred as
of the beginning of the year, and exclude the effects of (i) the write off of
acquired in-process research and development of approximately $138,500,000 and
(ii) a tax benefit of approximately $20,000,000. The pro forma adjustments
are described in the accompanying notes.
The unaudited pro forma consolidated statement of operations data is subject
to numerous assumptions and estimates that are subject to change and, in many
cases, are beyond the control of the Company. The unaudited pro forma
consolidated statement of operations data do not purport to represent what the
Company's results of operations would have been if the Acquisition had occurred
as of the date indicated or what actual results will be for any future periods.
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CENTOCOR, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
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CENTOCOR, INC. PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
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<S> <C> <C> <C>
Revenues:
Sales........................... $196,354 $44,800 (1) $241,154
Contracts....................... 4,430 -- 4,430
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200,784 44,800 245,584
Costs and Expenses:
Costs of sales.................. 77,958 5,400 (2) 83,358
Research and development........ 68,623 3,900 (3) 72,523
Marketing, general and
administrative................. 40,917 59,600 (4) 100,517
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187,498 68,900 256,398
Other income (expenses):
Interest income................. 9,607 -- 9,607
Interest expense................ (3,938) (21,000)(5) (24,938)
Loss on sale of facility and
related business............... (4,565) -- (4,565)
Other........................... (3,260) -- (3,260)
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(2,156) (21,000) (23,156)
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Net income (loss)................. $ 11,130 $(45,100) $(33,970)
======== ======== ========
Basic earnings (loss) per share... $ 0.16 $ (0.49)
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Diluted earnings (loss) per
share............................ $ 0.16 $ (0.49)
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Weighted average number of shares
outstanding...................... 69,809 69,809
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Weighted average common and
dilutive equivalent shares
outstanding...................... 71,770 69,809 (6)
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(1) Based on historical sales information for 1997.
(2) Based on (i) the pricing structure in the supply agreement to be entered
into by Centocor and Boehringer Mannheim and (ii) royalty agreements
currently in place with respect to the product.
(3) Based on estimated increases in costs associated with additional quality
assurance and regulatory personnel.
(4) Adjustments to marketing, general and administrative expenses reflect the
following:
(i) $21,700 represents the estimated increase in product salesforce and
related costs.
(ii) $17,000 represents 1997 historic external marketing and promotional
costs.
(iii) $13,300 represents (a) increased amortization expense related to
$176,500 of intangible assets acquired (based on the product purchase
price of $335,000 less the $20,000 escrow deposit less an estimated
one time charge for in-process research and development of $138,500
and an average useful life of fifteen years) and (b) amortization of
$10,500 in assumed debt issuance costs over 7 years.
(iv) $6,100 represents estimated 1997 expenses based on the co-promotional
agreement currently in place with DuPont Merck.
(v) $1,500 represents estimated 1997 expenditures related to patent
litigation.
(5) Represents interest expense on $350,000 of convertible subordinated
debentures at an assumed interest rate of 6%; does not reflect any interest
expense that would be incurred upon exercise of any over-allotment option.
(6) The as adjusted share amount does not assume the exercise of stock options
or warrants as their effect would be antidilutive.
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