By Jennifer Van Brunt
Senior Editor

Centocor Inc. has made a tender offer to acquire all 2.25 million outstanding units ofits financing vehicle Tocor II.

Under the proposal announced on Friday, Centocor will offer $40 per Tocor II unit(NASDAQ:TOCRZ), payable in shares of Centocor common stock (NASDAQ:CNTO). This puts avalue on the purchase of $90 million -- the exact amount that was raised when Centocorspun off Tocor II in January 1992 to fund its research programs in small peptide moleculesin five target areas, including inflammation and autoimmune disease.

The number of shares of Centocor stock to be issued per unit will not be less than 2.73or greater than 3.20 (and will be calculated based on the average closing price of thestock for 30 trading days preceding the fifth trading day prior to the offer'sexpiration). Thus, Centocor could be shelling out as much as $6.56 per share or $14.75million cash (based on a closing stock price of $12.25 on Friday) to make up thedifference, as well as the shares themselves.

By acquiring Tocor II, Centocor gets access to the products that are targeted at thesame disease indications that Centocor itself has singled out for monoclonalantibody-based drug development efforts.

Each unit of Tocor II consists of one share of Tocor II common stock, one callablewarrant to purchase a share of Centocor common stock (exercisable at $49.75 per share) andone series T warrant to purchase a share of Centocor common stock (exercisable at $64.50per share). These securities trade as a unit until Dec. 31. Centocor had the option topurchase all the Tocor II shares at $58 per share in 1993, $76 per share in 1994 and $106per share in 1995.

Offer More than Average Value

Even though Centocor's $40 offer is less than the 1993 option price, it's significantlymore than the $22 value (average) that the market has placed on Tocor II units since thebeginning in November. “The $40 offer places a more than acceptable premium“ onthe securities, said Wole Fayemi, a biotechnology analyst who follows Centocor forHambrecht & Quist. “This is clearly a good deal for Tocor II shareholders.“That sentiment was reflected in Friday's market activity on the units, in which sharesjumped $13.25 each to close at $36.25.

And since the built-in purchase price was only going up over the next several years,now is also the best time for Centocor to have made its tender offer, Fayemi told BioWorld.As well, Tocor II's R&D programs are well-advanced, with a peptide-based adhesionantagonist lead compound already identified and ready to go into the clinic in late 1994,Fayemi said.

Centocor of Malvern, Pa., is filing a registration statement with the Securities andExchange Commission for the shares of its common stock to be offered in exchange for theTocor II units. The offer will be outstanding for 20 business days once the registrationstatement becomes effective. On Friday, Tocor II's board of directors unanimouslyrecommended that holders of Tocor II stock accept the offer.