Sales Exceed Company Guidance;
Company Reiterates 2007 Guidance;
Introduces Third Quarter 2007 Guidance
FRAZER, Pa., July 31 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq:
CEPH) today reported second quarter 2007 sales of $435.2 million, compared
to $430.7 million for the second quarter of 2006 and exceeding the top end
of the company's previously issued guidance by $10 million. Basic loss per
common share for the second quarter of 2007 was $0.06. Excluding
amortization expense and certain other items, basic adjusted income per
common share during the quarter was $1.14, which compares to $1.51 for the
second quarter 2006 and is at the high end of the company's guidance range
of $1.05 to $1.15.
Central nervous system (CNS) franchise sales increased 18 percent to
$230.2 million and pain franchise sales reported strong sales of $131.2
million, a decrease of only 24% despite generic competition to ACTIQ. Sales
of other products were $73.7 million, an increase of 15 percent over the
same period last year.
In accordance with U.S. GAAP, the company established during the
quarter a reserve of $56.0 million related to its estimate of the minimum
liability stemming from the resolution of the investigations by the U.S.
Attorney's Office and the Office of the Connecticut Attorney General and
related claims by other states. These Offices have not agreed that $56.0
million is sufficient to settle this matter and it is reasonably likely
that the amount of any settlement and/or fines stemming from the resolution
of these matters will materially exceed this minimum liability.
"We are pleased with the strong sales performance in the second quarter
of 2007, which more than offset the impact of generic erosion to the ACTIQ
franchise," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "During the
quarter, we accelerated investment in our NUVIGIL and oncology clinical
programs, and began preparation for an NDA filing for TREANDA in chronic
lymphocytic leukemia patients."
Cephalon is reiterating its 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 adjusted R&D
guidance for 2007 remains $685-$715 million and $315-$335 million,
respectively.
Full-year 2007 adjusted net income guidance is $292-$298 million and
basic adjusted income per common share guidance is $4.40-$4.50.
For the third quarter of 2007, the company is introducing sales
guidance of $420-$430 million, adjusted net income guidance of $57-$63
million and basic adjusted income per common share guidance of $0.85-$0.95.
Basic adjusted income per common share guidance for the third 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 second quarter 2007
performance in a conference call with investors beginning at 5:00 p.m. U.S.
EDT on Tuesday, July 31, 2007. To participate in the conference call, dial
+1-913-981-4901 and refer to conference code number 1428821. 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 marketing of innovative
products in four core therapeutic areas: central nervous system, pain,
oncology and addiction. Cephalon has delivered a seven-year compound annual
growth rate (CAGR) through 2006 greater than 75% and 2006 revenue of $1.760
billion. 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. Cephalon's
European headquarters are located in Maisons-Alfort, France.
The company's proprietary products in the United States include:
PROVIGIL(R) (modafinil) Tablets [C-IV], FENTORA(R) (fentanyl buccal tablet)
[C-II], TRISENOX (arsenic trioxide), VIVITROL(R) (naltrexone for extended-
release injectable suspension), GABITRIL(R) (tiagabine hydrochloride), 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, including the timing of an NDA filing for TREANDA; manufacturing
development and capabilities; market prospects for its products; sales,
adjusted net income and basic adjusted income per common share guidance for
the third 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 and whether the Company will be able to
resolve the ongoing investigations by the U.S. Attorney's Office and the
Office of the Connecticut Attorney General and, if so, the amount of any
settlement and/or fines related thereto. 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
REVENUES:
Sales $435,194 $430,725 $859,073 $776,312
Other revenues 12,018 9,386 25,173 20,742
447,212 440,111 884,246 797,054
COSTS AND EXPENSES:
Cost of sales 83,166 89,514 169,712 167,453
Research and development 96,593 98,999 180,551 208,460
Selling, general and
administrative 189,052 157,299 341,506 309,050
Settlement reserve 56,000 - 56,000 -
Impairment charge - 12,417 - 12,417
424,811 358,229 747,769 697,380
INCOME FROM OPERATIONS 22,401 81,882 136,477 99,674
OTHER INCOME (EXPENSE):
Interest income 8,041 4,648 14,617 9,690
Interest expense (5,017) (4,238) (9,612) (8,774)
Write-off of deferred debt
issuance costs - - - (13,105)
Gain on sale of investment 5,791 - 5,791 -
Other income (expense), net (1,502) (159) 1,254 (1,011)
7,313 251 12,050 (13,200)
INCOME BEFORE INCOME TAXES 29,714 82,133 148,527 86,474
INCOME TAX EXPENSE 34,022 31,716 77,650 32,490
NET INCOME (LOSS) $(4,308) $50,417 $70,877 $53,984
BASIC INCOME (LOSS) PER COMMON
SHARE $(0.06) $0.83 $1.07 $0.90
DILUTED INCOME (LOSS) PER COMMON
SHARE $(0.06) $0.76 $0.90 $0.78
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 66,445 60,738 66,127 60,239
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING
DILUTION 66,445 66,654 78,656 69,679
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 (Loss) to Adjusted Net Income
(Unaudited)
Three Months Ended
June 30,
2007 2006
GAAP NET INCOME (LOSS) $(4,308) $50,417
Cost of sales adjustments 21,016 (1) 29,525 (1)
Research and development adjustments 16,500 (2) 15,000 (2) (8)
Selling, general and administrative
adjustments - 1,432 (6) (8)
Settlement reserve 56,000 (3) -
Impairment charge - 12,417 (7)
Gain on sale of investment (5,791)(4) -
Income taxes (7,784)(5) (17,221)(5) (8)
79,941 41,153
ADJUSTED NET INCOME $75,633 $91,570
BASIC ADJUSTED INCOME PER COMMON SHARE $1.14 $1.51
DILUTED ADJUSTED INCOME PER COMMON SHARE $0.93 $1.37
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 66,445 60,738
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 81,209 66,654
Notes to Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(1) In 2007, to exclude the on-going amortization of acquired intangible
assets. In 2006, to exclude the reserve for SPARLON capitalized
inventory costs ($8.6 million) and the on-going amortization of
acquired intangible assets ($20.9 million).
(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 and the Connecticut Attorney General.
(4) To exclude the pre-tax gain related to the sale of certain
investments.
(5) 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.
(6) To exclude employee severance costs associated with the European
integration and restructuring.
(7) To exclude charges related to the impairment of an intangible asset.
(8) Amounts shown no longer exclude the impact of Financial Accounting
Standards Board Statement No. 123(R) "Share Based Payment" ("SFAS
123(R)"). The earnings press release issued on August 3, 2006
reflected adjustments of $4.8 million in each of Research and
development and Selling, general and administrative expenses and
$3.6 million in Income tax expense related to SFAS 123(R).
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)
Six Months Ended
June 30,
2007 2006
GAAP NET INCOME $70,877 $53,984
Cost of sales adjustments 41,981 (1) 48,571 (1)
Research and development adjustments 26,500 (2) 45,000 (2) (9)
Selling, general and administrative
adjustments - 7,987 (6) (9)
Settlement reserve 56,000 (3) -
Impairment charge - 12,417 (7)
Write-off of deferred debt issuance
costs adjustment - 13,105 (8)
Gain on sale of investment (5,791)(4) -
Income taxes (18,766)(5) (42,782)(5) (9)
99,924 84,298
ADJUSTED NET INCOME $170,801 $138,282
BASIC ADJUSTED INCOME PER COMMON SHARE $2.58 $2.30
DILUTED ADJUSTED INCOME PER COMMON SHARE $2.17 $1.99
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 66,127 60,239
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 78,656 69,679
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) In 2007, to exclude the on-going amortization of acquired intangible
assets. In 2006, to exclude the reserve for SPARLON capitalized
inventory costs ($8.6 million) and the on-going amortization of
acquired intangible assets ($40.0 million).
(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 and the Connecticut Attorney General.
(4) To exclude the pre-tax gain related to the sale of certain
investments.
(5) 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.
(6) 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
($4.0 million).
(7) To exclude charges related to the impairment of an intangible asset.
(8) To exclude the write-off of deferred debt issuance costs related to
the Zero Coupon convertible subordinated notes.
(9) Amounts shown no longer exclude the impact of SFAS 123(R). The
earnings press release issued on August 3, 2006 reflected adjustments
of $8.2 million in each of Research and development and Selling,
general and administrative expenses and $6.0 million in Income tax
expense related to SFAS 123(R).
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
Three Months Ended
June 30,
2007
United
States Europe Total
Sales:
PROVIGIL $202,465 $11,705 $214,170
GABITRIL 12,978 3,051 16,029
CNS 215,443 14,756 230,199
ACTIQ 53,994 10,060 64,054
Generic OTFC 30,853 - 30,853
FENTORA 36,341 - 36,341
Pain 121,188 10,060 131,248
Other 17,404 56,343 73,747
$354,035 $81,159 $435,194
2006
United
States Europe Total
Sales:
PROVIGIL $167,928 $9,116 $177,044
GABITRIL 16,206 1,371 17,577
CNS 184,134 10,487 194,621
ACTIQ 165,694 6,460 172,154
Generic OTFC - - -
FENTORA - - -
Pain 165,694 6,460 172,154
Other 13,299 50,651 63,950
$363,127 $67,598 $430,725
%
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 21% 28% 21%
GABITRIL (20%) 123% (9%)
CNS 17% 41% 18%
ACTIQ (67%) 56% (63%)
Generic OTFC 100% 0% 100%
FENTORA 100% 0% 100%
Pain (27%) 56% (24%)
Other 31% 11% 15%
(3%) 20% 1%
Six Months Ended
June 30,
2007
United
States Europe Total
Sales:
PROVIGIL $391,192 $24,267 $415,459
GABITRIL 26,862 5,387 32,249
CNS 418,054 29,654 447,708
ACTIQ 111,151 18,631 129,782
Generic OTFC 64,873 - 64,873
FENTORA 68,031 - 68,031
Pain 244,055 18,631 262,686
Other 34,576 114,103 148,679
$696,685 $162,388 $859,073
2006
United
States Europe Total
Sales:
PROVIGIL $307,479 $18,138 $325,617
GABITRIL 27,562 2,787 30,349
CNS 335,041 20,925 355,966
ACTIQ 278,028 11,628 289,656
Generic OTFC - - -
FENTORA - - -
Pain 278,028 11,628 289,656
Other 28,369 102,321 130,690
$641,438 $134,874 $776,312
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 27% 34% 28%
GABITRIL (3%) 93% 6%
CNS 25% 42% 26%
ACTIQ (60%) 60% (55%)
Generic OTFC 100% 0% 100%
FENTORA 100% 0% 100%
Pain (12%) 60% (9%)
Other 22% 12% 14%
9% 20% 11%
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
June 30, December 31,
2007 2006
CURRENT ASSETS:
Cash and cash equivalents $703,998 $496,512
Investments 7,166 25,212
Receivables, net 305,313 270,045
Inventory, net 201,903 174,300
Deferred tax assets, net 198,156 184,518
Other current assets 52,510 47,278
Total current assets 1,469,046 1,197,865
PROPERTY AND EQUIPMENT, net 472,642 453,010
GOODWILL 470,491 467,167
INTANGIBLE ASSETS, net 757,376 793,037
DEFERRED TAX ASSETS, net 113,050 118,192
OTHER ASSETS 14,936 16,226
$3,297,541 $3,045,497
CURRENT LIABILITIES:
Current portion of long-term debt $1,237,197 $1,023,312
Accounts payable 90,699 90,586
Accrued expenses 294,207 263,478
Total current liabilities 1,622,103 1,377,376
LONG-TERM DEBT 10,195 224,992
DEFERRED TAX LIABILITIES, net 69,032 72,491
OTHER LIABILITIES 104,916 61,178
Total liabilities 1,806,246 1,736,037
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 691 678
Additional paid-in capital 1,880,051 1,780,749
Treasury stock, at cost (151,196) (151,068)
Accumulated deficit (361,547) (425,256)
Accumulated other comprehensive
income 123,296 104,357
Total stockholders' equity 1,491,295 1,309,460
$3,297,541 $3,045,497
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $70,877 $53,984
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred income tax expense 9,490 21,053
Shortfall tax benefits from stock-based
compensation (198) -
Depreciation and amortization 63,441 62,199
Amortization of debt issuance costs 120 252
Write-off of debt issuance costs
associated with convertible
subordinated notes - 13,105
Stock-based compensation expense 24,627 22,678
Gain on sale of investment (5,791) -
Loss on disposals of property and
equipment - 990
Impairment charge - 12,417
Changes in operating assets and
liabilities:
Receivables (32,715) (30,238)
Inventory (26,009) (15,296)
Other assets (15,945) (17,523)
Accounts payable, accrued expenses
and deferred revenues 14,716 (79,850)
Other liabilities 48,205 (4,831)
Net cash provided by operating
activities 150,818 38,940
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (50,283) (62,545)
Acquisition of intangible assets - (115,000)
Proceeds from sale of investment 12,291 -
Sales and (purchases) of available-for-sale
investments, net 18,040 152,312
Net cash used for investing
activities (19,952) (25,233)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of common stock
options 66,205 107,962
Windfall tax benefits from stock-based
compensation 8,681 21,526
Acquisition of treasury stock (128) (433)
Payments on and retirements of long-term debt (1,959) (1,593)
Net cash provided by financing
activities 72,799 127,462
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS 3,821 11,513
NET INCREASE IN CASH AND CASH EQUIVALENTS 207,486 152,682
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 496,512 205,060
CASH AND CASH EQUIVALENTS, END OF PERIOD $703,998 $357,742
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
September 30, 2007 December 31, 2007
Projected GAAP basic income per
common share $0.65 - $0.75 $2.86 - $2.96
Amortization of current intangibles $0.32 - $0.32 $1.28 - $1.28
Research and development collaboration
agreement $- - $- $0.38 - $0.38
Settlement reserve $- - $- $0.84 - $0.84
Gain on sale of investment $- - $- $(0.09) - $(0.09)
Tax effect of pre-tax adjustments at
the applicable tax rates $(0.12)- $(0.12) $(0.87) - $(0.87)
Basic adjusted income per common share
guidance $0.85 - $0.95 $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 66.6 million
shares for the three months ended September 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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