TREANDA and AMRIX Off to Strong Starts
Cephalon Advances NUVIGIL Launch to 2009
Maintains 2008 Earnings Guidance Despite New Spending for Pre-Launch
NUVIGIL Activity and Increased AMRIX Investment
FRAZER, Pa., July 29 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq:
CEPH) today reported second quarter 2008 sales of $485.0 million, compared
to sales of $435.2 million for the second quarter 2007 and the company's
sales guidance of $455 - $465 million. Net income for the quarter was $60.1
million and basic income per common share was $0.89. Excluding amortization
expense and certain other items, adjusted net income was $84.5 million and
basic adjusted income per common share for the quarter was $1.25, compared
to $1.14 for the same period in 2007 and the company's earnings guidance
range of $1.10 to $1.20.
Central nervous system (CNS) franchise sales were $251.2 million during
the quarter, a new quarterly record and 9 percent increase compared to the
same period last year. Pain franchise reported sales of $134.6 million, an
increase of 3 percent versus 2007. Oncology franchise sales were $44.1
million, an increase of 86 percent versus 2007, due to robust sales of
TREANDA(R) (bendamustine hydrochloride), which was launched in April and
strong European sales of Myocet(R) (doxorubicin hydrochloride).
"With so many companies suffering from a myriad of economic problems, I
am proud that Cephalon is reporting another solid quarter of sales and
earnings growth," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "In
particular, it is extremely gratifying to know that patients are benefiting
from our recent launches of TREANDA and AMRIX and that both of these unique
products are off to great starts. An earlier launch of NUVIGIL and higher
spending on AMRIX this year should provide a foundation for even stronger
growth in the years ahead."
The company is updating its guidance for 2008. Total sales guidance is
increased by $30 million to $1.86 - $1.91 billion. This includes CNS
franchise sales of $975 - $1,000 million, pain franchise sales of $500 -
$525 million, oncology franchise sales of $155 - $180 million, and other
product sales of $200 - $225 million. Full year SG&A and R&D guidance is
$770 - $790 million and $340 - $360 million, respectively, and reflects a
$30 million increase in SG&A guidance. Adjusted net income guidance for
2008 is $346 - $353 million and basic adjusted income per common share
guidance is $5.10 - $5.20.
For the third quarter of 2008, Cephalon is introducing sales guidance
of $480 - $490 million, adjusted net income guidance of $85 - $92 million
and basic adjusted income per common share guidance of $1.25 - $1.35.
Basic adjusted income per common share guidance for both the third
quarter 2008 and full-year 2008 is reconciled below and is subject to the
assumptions set forth therein.
Cephalon's management will discuss the company's second quarter 2008
performance in a conference call with investors beginning at 5:00 p.m. U.S.
EDT today. To participate in the conference call, dial +1-913-312-9303 and
refer to conference code number 6640353. Investors can listen to the call
live by logging on to the company's website at http://www.cephalon.com and
clicking on "Investor Information," then "Webcast." The conference call
will be archived and available to investors for one week after the call.
About Cephalon, Inc.
Founded in 1987, Cephalon, Inc. is an international biopharmaceutical
company dedicated to the discovery, development and commercialization of
innovative products in four core therapeutic areas: central nervous system,
pain, oncology and addiction. A member of the Fortune 1000, 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. The company's European headquarters are located in
Maisons-Alfort, France.
The company's proprietary products in the United States include:
AMRIX(R) (cyclobenzaprine hydrochloride extended-release capsules),
TREANDA, FENTORA(R) (fentanyl buccal tablet) [C-II], PROVIGIL(R)
(modafinil) Tablets [C-IV], TRISENOX(R) (arsenic trioxide) injection,
VIVITROL(R) (naltrexone for extended-release injectable suspension),
GABITRIL(R) (tiagabine hydrochloride), NUVIGIL(TM) (armodafinil) Tablets
[C-IV] and ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II]. The
company also markets 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, including the growth and acceptance of Amrix in the market
and the relative success of the recent launch of Treanda; sales, adjusted
net income and basic adjusted income per common share guidance for the
third quarter and full-year 2008 and SG&A and R&D guidance for the
full-year 2008; and other statements regarding matters that are not
historical facts. 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," "Adjusted Net Income Guidance," "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 Six Months Ended
June 30, June 30,
2008 2007 2008 2007
REVENUES:
Sales $485,042 $435,194 $918,939 $859,073
Other revenues 7,673 12,018 16,995 25,173
492,715 447,212 935,934 884,246
COSTS AND EXPENSES:
Cost of sales 101,318 83,166 191,234 169,712
Research and development 80,409 96,593 161,844 180,551
Selling, general and
administrative 209,900 189,052 408,884 341,506
Settlement reserve - 56,000 - 56,000
Restructuring charges 1,565 - 5,476 -
In-process research and
development - - 10,000 -
393,192 424,811 777,438 747,769
INCOME FROM OPERATIONS 99,523 22,401 158,496 136,477
OTHER INCOME (EXPENSE):
Interest income 4,912 8,041 11,513 14,617
Interest expense (7,872) (5,017) (16,866) (9,612)
Gain on sale of investment - 5,791 - 5,791
Other income (expense), net (1,543) (1,502) 3,772 1,254
(4,503) 7,313 (1,581) 12,050
INCOME BEFORE INCOME TAXES 95,020 29,714 156,915 148,527
INCOME TAX EXPENSE 34,952 34,022 57,996 77,650
NET INCOME (LOSS) $ 60,068 $ (4,308) $ 98,919 $ 70,877
BASIC INCOME (LOSS)
PER COMMON SHARE $0.89 $(0.06) $1.46 $1.07
DILUTED INCOME (LOSS)
PER COMMON SHARE $0.80 $(0.06) $1.33 $0.90
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 67,777 66,445 67,721 66,127
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING-ASSUMING DILUTION 74,852 66,445 74,569 78,656
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)
Three Months Ended
June 30,
2008 2007
GAAP NET INCOME $ 60,068 $ (4,308)
Cost of sales adjustments 28,892(1) 21,016(1)
Research and development adjustments - 16,500(2)
Settlement reserve - 56,000(3)
Gain on sale of investment - (5,791)(4)
Interest expense adjustment 3,750(5) -
Restructuring adjustment 1,565(6) -
Income tax adjustment (9,814)(7) (7,784)(7)
24,393 79,941
ADJUSTED NET INCOME $ 84,461 $ 75,633
BASIC ADJUSTED INCOME PER COMMON SHARE $1.25 $1.14
DILUTED ADJUSTED INCOME PER COMMON SHARE $1.13 $0.93
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 67,777 66,445
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 74,852 81,209
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($26.8 million in 2008; $21.0 million in 2007), and accelerated
depreciation related to restructuring ($2.1 million in 2008).
(2) To exclude charges related to payments for several research and
development collaborations.
(3) To exclude the reserve established for the minimum liability related
to the potential settlement of the investigations by the U.S.
Attorney's Office.
(4) To exclude the pre-tax gain related to the sale of certain
investments.
(5) To exclude an estimate of accrued interest related to the agreement
in principle reached with the U.S. Attorney's Office in Philadelphia.
(6) To exclude costs related to the CIMA Labs restructuring announced in
January 2008.
(7) 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 tax assets and
liabilities.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)
Six Months Ended
June 30,
2008 2007
GAAP NET INCOME $ 98,919 $ 70,877
Cost of sales adjustments 56,780(1) 41,981(1)
Research and development adjustments 7,754(2) 26,500(2)
Selling, general and administrative
adjustments 2,955(3) -
Settlement reserve - 56,000(4)
Gain on sale of investment - (5,791)(5)
Interest expense adjustment 7,500(6) -
Restructuring adjustment 5,476(7) -
In-process research and development
adjustments 10,000(8) -
Income tax adjustment (29,329)(9) (18,766)(9)
61,136 99,924
ADJUSTED NET INCOME $160,055 $170,801
BASIC ADJUSTED INCOME PER COMMON SHARE $2.36 $2.58
DILUTED ADJUSTED INCOME PER COMMON SHARE $2.15 $2.17
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 67,721 66,127
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 74,569 78,656
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($53.0 million in 2008; $42.0 million in 2007), and accelerated
depreciation related to restructuring ($3.8 million in 2008).
(2) To exclude charges related to payments for several research and
development collaborations, as well as other charges ($1.8 million)
related to employee severance costs in 2008.
(3) To exclude charges related to employee severance costs.
(4) To exclude the reserve established for the minimum liability related
to the potential settlement of the investigations by the U.S.
Attorney's Office.
(5) To exclude the pre-tax gain related to the sale of certain
investments.
(6) To exclude an estimate of accrued interest related to the agreement
in principle reached with U.S. Attorney's Office in Philadelphia.
(7) To exclude costs related to the CIMA Labs restructuring announced in
January 2008.
(8) To exclude charges related to the acquisition of licensed technology
in the oncology field.
(9) 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 tax assets and
liabilities.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2008 2007
United United
States Europe Total States Europe Total
Sales:
PROVIGIL $218,942 $15,869 $234,811 $202,465 $11,705 $214,170
GABITRIL 14,307 2,039 16,346 12,978 3,051 16,029
CNS 233,249 17,908 251,157 215,443 14,756 230,199
ACTIQ 38,051 14,130 52,181 53,994 10,060 64,054
Generic OTFC 28,958 - 28,958 30,853 - 30,853
FENTORA 36,374 - 36,374 36,341 - 36,341
AMRIX 17,119 - 17,119 - - -
Pain 120,502 14,130 134,632 121,188 10,060 131,248
TREANDA 14,381 - 14,381 - - -
Other 4,380 25,372 29,752 4,752 18,950 23,702
Oncology 18,761 25,372 44,133 4,752 18,950 23,702
Other 13,117 42,003 55,120 12,652 37,393 50,045
$385,629 $99,413 $485,042 $354,035 $81,159 $435,194
%
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 8% 36% 10%
GABITRIL 10% (33%) 2%
CNS 8% 21% 9%
ACTIQ (30%) 40% (19%)
Generic OTFC (6%) - (6%)
FENTORA 0% - 0%
AMRIX 100% - 100%
Pain (1%) 40% 3%
TREANDA 100% - 100%
Other (8%) 34% 26%
Oncology 295% 34% 86%
Other 4% 12% 10%
9% 22% 11%
Six Months Ended
June 30,
2008 2007
United United
States Europe Total States Europe Total
Sales:
PROVIGIL $417,411 $30,635 $448,046 $391,192 $24,267 $415,459
GABITRIL 25,438 4,332 29,770 26,862 5,387 32,249
CNS 442,849 34,967 477,816 418,054 29,654 447,708
ACTIQ 75,568 26,333 101,901 111,151 18,631 129,782
Generic OTFC 56,276 - 56,276 64,873 - 64,873
FENTORA 75,307 - 75,307 68,031 - 68,031
AMRIX 26,887 - 26,887 - - -
Pain 234,038 26,333 260,371 244,055 18,631 262,686
TREANDA 14,381 - 14,381 - - -
Other 9,568 47,642 57,210 8,743 38,240 46,983
Oncology 23,949 47,642 71,591 8,743 38,240 46,983
Other 26,644 82,517 109,161 25,833 75,863 101,696
$727,480 $191,459 $918,939 $696,685 $162,388 $859,073
%
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 7% 26% 8%
GABITRIL (5%) (20%) (8%)
CNS 6% 18% 7%
ACTIQ (32%) 41% (21%)
Generic OTFC (13%) - (13%)
FENTORA 11% - 11%
AMRIX 100% - 100%
Pain (4%) 41% (1%)
TREANDA 100% - 100%
Other 9% 25% 22%
Oncology 174% 25% 52%
Other 3% 9% 7%
4% 18% 7%
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
June 30, December 31,
2008 2007
CURRENT ASSETS:
Cash and cash equivalents $673,371 $818,669
Investments - 7,596
Receivables, net 338,142 276,776
Inventory, net 114,479 99,098
Deferred tax assets, net 154,381 176,619
Other current assets 47,782 43,267
Total current assets 1,328,155 1,422,025
PROPERTY AND EQUIPMENT, net 512,449 500,396
GOODWILL 484,029 476,515
INTANGIBLE ASSETS, net 793,066 817,828
DEFERRED TAX ASSETS, net 176,148 141,752
OTHER ASSETS 163,042 147,753
$3,456,889 $3,506,269
CURRENT LIABILITIES:
Current portion of long-term debt $823,131 $1,237,169
Accounts payable 82,265 91,437
Accrued expenses 677,911 677,184
Total current liabilities 1,583,307 2,005,790
LONG-TERM DEBT 202,834 3,788
DEFERRED TAX LIABILITIES, net 74,577 56,540
OTHER LIABILITIES 137,225 138,084
Total liabilities 1,997,943 2,204,202
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 708 700
Additional paid-in capital 2,007,582 1,934,965
Treasury stock, at cost (194,782) (158,173)
Accumulated deficit (525,209) (624,128)
Accumulated other comprehensive income 170,647 148,703
Total stockholders' equity 1,458,946 1,302,067
$3,456,889 $3,506,269
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 98,919 $ 70,877
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred income tax expense (benefit) (2,603) 9,490
Shortfall tax benefits from
stock-based compensation - (198)
Depreciation and amortization 84,006 63,441
Stock-based compensation expense 21,894 24,627
Gain on sale of investment - (5,791)
Loss on disposals of property
and equipment 1,031 -
Other (418) 120
Changes in operating assets
and liabilities:
Receivables (56,210) (32,715)
Inventory (7,933) (26,009)
Other assets (24,027) (15,945)
Accounts payable, accrued
expenses and deferred revenues (10,427) 14,716
Other liabilities 16,418 48,205
Net cash provided by
operating activities 120,650 150,818
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (42,898) (50,283)
Acquisition of intangible assets (25,575) -
Investment in third party (6,242) -
Proceeds from sale of investment
in third party - 12,291
Sales and (purchases) of investments, net 7,596 18,040
Net cash used for investing activities (67,119) (19,952)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of common
stock options 13,562 66,205
Windfall tax benefits from
stock-based compensation 480 8,681
Acquisition of treasury stock (24) (128)
Payments on and retirements of
long-term debt (215,129) (1,959)
Net cash provided by (used for)
financing activities (201,111) 72,799
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 2,282 3,821
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (145,298) 207,486
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 818,669 496,512
CASH AND CASH EQUIVALENTS, END OF PERIOD $673,371 $703,998
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of Projected GAAP Basic Income per Common Share
to Basic Adjusted Income Per Common Share Guidance
(Unaudited)
Three Months Ended Twelve Months Ended
September 30, 2008 December 31, 2008
Projected GAAP basic income
per common share $0.99 - $1.09 $3.71 - $3.81
Amortization of current
intangibles $0.37 - $0.37 $1.53 - $1.53
Accelerated depreciation
adjustment $0.02 - $0.02 $0.10 - $0.10
Research and development
adjustments $- - $- $0.11 - $0.11
Selling, general and
administrative adjustments $- - $- $0.04 - $0.04
In-process research and
development adjustments $- - $- $0.15 - $0.15
Restructuring adjustments $0.02 - $0.02 $0.13 - $0.13
Interest expense adjustment $- - $- $0.11 - $0.11
Tax effect of pre-tax
adjustments at the
applicable tax rates $(0.15) - $(0.15) $(0.78) - $(0.78)
Basic adjusted income
per common share
guidance $1.25 $1.35 $5.10 $5.20
The company's guidance is being issued based on certain assumptions
including:
-- Adjusted effective tax rate of approximately 35.5 to 36.5 percent; and
-- Weighted average number of common shares outstanding of 68.0 and 67.9
million shares for the three months ended September 30, 2008 and for
the twelve months ended December 31, 2008, respectively.
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
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