Quarterly Earnings Exceed Guidance
Company Reiterates Recently Increased 2007 Guidance
FRAZER, Pa., May 1 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq:
CEPH) today reported first quarter 2007 sales of $423.9 million, a 23
percent increase compared to first quarter 2006 sales of $345.6 million.
Basic income per common share for the quarter was $1.14. Excluding
amortization expense and certain other items, basic adjusted income per
common share was $1.45, an 86 percent increase over the comparable figure
of $0.78 in the first quarter of 2006 and exceeding by $0.45 the high end
of the company's guidance issued in February 2007.
Central nervous system (CNS) franchise sales increased 35 percent to
$217.5 million and pain franchise sales increased 12 percent to $131.4
million. Sales of other products were $74.9 million, an increase of 12
percent.
"We delivered remarkable earnings performance in the first quarter of
2007 as we continue to effectively execute across all aspects of our
business," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "We held
year-over-year operating expenses largely steady, while driving double
digit growth of both PROVIGIL and our European sales and continuing the
successful transition of our pain franchise from ACTIQ to FENTORA. This
year and beyond, we have substantial opportunities in each of our product
franchises to further enhance stockholder value."
Cephalon is reiterating its recently increased full-year 2007 guidance.
The company anticipates total sales of $1.675-$1.725 billion. This includes
CNS franchise sales of $925-$950 million, pain franchise sales of $425-$450
million and other product sales of $300-$325 million. SG&A and R&D guidance
for 2007 are $685-$715 million and $315-$335 million, respectively.
Full-year 2007 net income guidance is $292-$298 million and basic
adjusted income per common share guidance is $4.40-$4.50.
For the second quarter of 2007, the company is introducing sales
guidance of $415-$425 million, adjusted net income guidance of $69-$76
million and guidance for basic adjusted income per common share of
$1.05-$1.15.
Basic adjusted income per common share guidance for the second quarter
of 2007 and full-year 2007 is reconciled below and is subject to the
assumptions set forth therein.
Cephalon's management will discuss the company's first quarter 2007
performance in a conference call with investors beginning at 5:00 p.m. U.S.
EDT on Tuesday, May 1, 2007. To participate in the conference call, dial
+1-913-981-4911 and refer to conference code number 8754971. Investors can
listen to the call live by logging on to the company's website at
http://www.cephalon.com and clicking on "Newsroom" then "Webcast." The
conference call will be archived and available to investors for one week
after the call.
Cephalon, Inc.
Founded in 1987, Cephalon, Inc. is an international biopharmaceutical
company dedicated to the discovery, development and marketing of innovative
products in four core therapeutic areas: central nervous system, pain,
oncology and addiction. Cephalon currently employs approximately 3,000
people in the United States and Europe. U.S. sites include the company's
headquarters in Frazer, Pennsylvania, and offices, laboratories or
manufacturing facilities in West Chester, Pennsylvania, Salt Lake City,
Utah, and suburban Minneapolis, Minnesota. Cephalon's European headquarters
are located in Maisons-Alfort, France.
The company currently markets six proprietary products in the United
States: PROVIGIL(R) (modafinil) Tablets [C-IV], FENTORA(R) (fentanyl buccal
tablet) [C-II], TRISENOX(R), VIVITROL(R) (naltrexone for extended-release
injectable suspension), GABITRIL(R) (tiagabine hydrochloride), ACTIQ(R)
(oral transmucosal fentanyl citrate) [C-II], and numerous products
internationally. Full prescribing information on its U.S. products is
available at http://www.cephalon.com or by calling 1-800-896-5855.
In addition to historical facts or statements of current condition,
this press release may contain forward-looking statements. Forward-looking
statements provide Cephalon's current expectations or forecasts of future
events. These may include statements regarding anticipated scientific
progress on its research programs; development of potential pharmaceutical
products; interpretation of clinical results; prospects for regulatory
approval; manufacturing development and capabilities; market prospects for
its products; sales, adjusted net income and basic adjusted income per
common share guidance for the second quarter and full-year 2007; and other
statements regarding matters that are not historical facts, including the
Company's position and expected performance in 2007. You may identify some
of these forward-looking statements by the use of words in the statements
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe" or other words and terms of similar meaning. Cephalon's
performance and financial results could differ materially from those
reflected in these forward-looking statements due to general financial,
economic, regulatory and political conditions affecting the biotechnology
and pharmaceutical industries as well as more specific risks and
uncertainties facing Cephalon such as those set forth in its reports on
Form 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange
Commission. Given these risks and uncertainties, any or all of these
forward-looking statements may prove to be incorrect. Therefore, you should
not rely on any such factors or forward-looking statements. Furthermore,
Cephalon does not intend to update publicly any forward-looking statement,
except as required by law. The Private Securities Litigation Reform Act of
1995 permits this discussion.
This press release and/or the financial results attached to this press
release include "Adjusted Net Income," "Basic Adjusted Income per Common
Share," "Basic Adjusted Income per Common Share Guidance," and "Diluted
Adjusted Income Per Common Share," amounts that are considered "non-GAAP
financial measures" under SEC rules. As required, we have provided
reconciliations of these measures. Additional required information is
located in the Form 8-K furnished to the SEC in connection with this press
release.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2007 2006
REVENUES:
Sales $423,879 $345,587
Other revenues 13,155 11,356
437,034 356,943
COSTS AND EXPENSES:
Cost of sales 86,546 77,939
Research and development 83,958 109,461
Selling, general and administrative 152,454 151,751
322,958 339,151
INCOME FROM OPERATIONS 114,076 17,792
OTHER INCOME (EXPENSE):
Interest income 6,576 5,042
Interest expense (4,595) (4,536)
Write-off of deferred debt issuance costs - (13,105)
Other income (expense), net 2,756 (852)
4,737 (13,451)
INCOME BEFORE INCOME TAXES 118,813 4,341
INCOME TAX EXPENSE 43,628 774
NET INCOME $75,185 $3,567
BASIC INCOME PER COMMON SHARE $1.14 $0.06
DILUTED INCOME PER COMMON SHARE $0.99 $0.05
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 65,806 59,734
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 75,835 73,508
Certain reclassifications of prior year amounts have been made to conform
to the current year presentation. Amounts reported in prior periods as
amortization are included now as a component of cost of sales; amounts
previously reported as depreciation (other than depreciation related to
facilities used in the production of commercial inventory and previously
included in cost of sales) are included as a component of research and
development or selling, general and administrative, as appropriate.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)
Three Months Ended
March 31,
2007 2006
GAAP NET INCOME $75,185 $3,567
Cost of sales adjustments 20,965 (1) 19,046 (1)
Research and development adjustments 10,000 (2) 30,000 (2) (6)
Selling, general and administrative
adjustments - 6,555 (4) (6)
Write-off of deferred debt issuance
costs adjustment - 13,105 (5)
Income tax adjustment (10,982)(3) (25,561)(3) (6)
19,983 43,145
ADJUSTED NET INCOME $95,168 $46,712
BASIC ADJUSTED INCOME PER COMMON
SHARE $1.45 $0.78
DILUTED ADJUSTED INCOME PER COMMON
SHARE $1.25 $0.63
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 65,806 59,734
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 75,835 73,631 (6)
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets.
(2) To exclude charges related to payments for several research and
development collaborations.
(3) To reflect the tax effect of pre-tax adjustments at the applicable
tax rates and certain other tax adjustments primarily related to
changes in valuation allowances and other changes in liabilities.
(4) To exclude charges associated with the settlement of the PROVIGIL
patent litigation ($4.0 million) and employee severance costs
associated with the European integration and restructuring
($2.6 million).
(5) To exclude the write-off of deferred debt issuance costs related to
the Zero Coupon convertible subordinated notes.
(6) The impact of Financial Accounting Standards Board Statement
No. 123(R) "Share Based Payment" ("SFAS 123(R)") is no longer
excluded as in the press release issued May 2, 2006 for comparability
of the financial statements presented. Therefore, 2006 adjustments
include $3.4 million in Research and development and Selling, general
and administrative expenses, respectively, $2.4 million in Income tax
expense and 471 thousand shares in Weighted average number of common
shares outstanding-assuming dilution.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2007
United
States Europe Total
Sales:
CNS $202,611 $14,898 $217,509
ACTIQ 57,157 8,571 65,728
Generic OTFC 34,020 - 34,020
FENTORA 31,690 - 31,690
Pain 122,867 8,571 131,438
Other 17,172 57,760 74,932
$342,650 $81,229 $423,879
Three Months Ended
March 31,
2006
United
States Europe Total
Sales:
CNS $150,907 $10,438 $161,345
ACTIQ 112,334 5,168 117,502
Generic OTFC - - -
FENTORA - - -
Pain 112,334 5,168 117,502
Other 15,070 51,670 66,740
$278,311 $67,276 $345,587
%
Increase
(Decrease)
United
States Europe Total
Sales:
CNS 34% 43% 35%
ACTIQ (49%) 66% (44%)
Generic OTFC 100% 0% 100%
FENTORA 100% 0% 100%
Pain 9% 66% 12%
Other 14% 12% 12%
23% 21% 23%
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March 31, December 31,
2007 2006
CURRENT ASSETS:
Cash and cash equivalents $567,430 $496,512
Investments 11,983 25,212
Receivables, net 307,494 270,045
Inventory, net 189,885 174,300
Deferred tax assets, net 194,040 184,518
Other current assets 53,338 47,278
Total current assets 1,324,170 1,197,865
PROPERTY AND EQUIPMENT, net 457,784 453,010
GOODWILL 468,062 467,167
INTANGIBLE ASSETS, net 774,034 793,037
DEFERRED TAX ASSETS, net 112,397 118,192
OTHER ASSETS 21,511 16,226
$3,157,958 $3,045,497
CURRENT LIABILITIES:
Current portion of long-term debt $1,023,284 $1,023,312
Accounts payable 77,035 90,586
Accrued expenses 245,835 263,478
Total current liabilities 1,346,154 1,377,376
LONG-TERM DEBT 224,294 224,992
DEFERRED TAX LIABILITIES, net 68,955 72,491
OTHER LIABILITIES 103,559 61,178
Total liabilities 1,742,962 1,736,037
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 682 678
Additional paid-in capital 1,811,271 1,780,749
Treasury stock, at cost (151,196) (151,068)
Accumulated deficit (357,239) (425,256)
Accumulated other comprehensive
income 111,478 104,357
Total stockholders' equity 1,414,996 1,309,460
$3,157,958 $3,045,497
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $75,185 $3,567
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Deferred income tax expense (benefit) 11,629 (745)
Shortfall tax benefits from stock-based
compensation (83) -
Depreciation and amortization 30,592 29,238
Amortization of debt issuance costs 60 129
Write-off of debt issuance costs
associated with convertible
subordinated notes - 13,105
Stock-based compensation expense 11,699 9,856
Changes in operating assets and
liabilities:
Receivables (36,850) (25,868)
Inventory (14,585) (12,020)
Other assets (12,523) (27,677)
Accounts payable, accrued expenses
and deferred revenues (9,160) (21,583)
Other liabilities 2,584 (1,767)
Net cash provided by (used for)
operating activities 58,548 (33,765)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (21,384) (31,759)
Acquisition of intangible assets - (5,000)
Sales and (purchases) of investments, net 13,237 27,040
Net cash used for investing activities (8,147) (9,719)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of common stock
options 17,479 107,738
Windfall tax benefits from stock-based
compensation 1,431 21,633
Acquisition of treasury stock (128) (407)
Payments on and retirements of long-term debt (953) (922)
Net cash provided by financing activities 17,829 128,042
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 2,688 (531)
NET INCREASE IN CASH AND CASH EQUIVALENTS 70,918 84,027
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 496,512 205,060
CASH AND CASH EQUIVALENTS, END OF PERIOD $567,430 $289,087
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of Projected GAAP Basic Income per Common Share
to Basic Adjusted Income Per Common Share Guidance
(Unaudited)
Three Months Twelve Months
Ended Ended
June 30, 2007 December 31, 2007
Projected GAAP basic income
per common share $0.85 -- $0.95 $3.48 -- $3.58
Amortization of current intangibles $0.32 -- $0.32 $1.28 -- $1.28
Research and development
collaboration agreement $- -- $- $0.15 -- $0.15
Tax effect of pre-tax adjustments at
the applicable tax rates $(0.12)--$(0.12) $(0.51)--$(0.51)
Basic adjusted income per common
share guidance $1.05 -- $1.15 $4.40 -- $4.50
The company's guidance is being issued based on certain assumptions
including:
-- Adjusted effective tax rate of approximately 36 percent for 2007; and
-- Weighted average number of common shares outstanding of 66.0 million
shares for the three months ended June 30, 2007 and 66.3 million shares
for the twelve months ended December 31, 2007.
SOURCE Cephalon, Inc.
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Related links:
http://www.cephalon.com
http://www.prnewswire.com/comp/134563.html /
CONTACT:
Media, Sheryl Williams, +1-610-738-6493,
swilliam@cephalon.com , or Investors, Robert (Chip) Merritt,
+1-610-738-6376, cmerritt@cephalon.com , both of Cephalon, Inc.
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