Cephalon, Inc. Reports First-Quarter Financial Results

FRAZER, Pa., May 2 /PRNewswire-FirstCall/ -- Cephalon, Inc. today reported first-quarter 2006 sales of $345.6 million, a 30 percent increase compared with first-quarter 2005 sales of $266.6 million. Basic income per common share was $0.06. Excluding amortization expense and certain other items, basic adjusted income per common share was $0.86, a 37 percent increase over the comparable figure of $0.63 in the first quarter of 2005 and exceeding the guidance range of $0.65-0.70.

Central nervous system (CNS) franchise sales increased 28 percent to $161.3 million, and pain franchise sales increased 15 percent to $117.5 million. Sales of other products were $66.7 million, an increase of 75 percent.

"We expect this to be another high-performance year for Cephalon. PROVIGIL(R) prescription growth accelerated during the quarter and we are reinvigorating our commercial and clinical programs for this brand," said Frank Baldino Jr., Ph.D., Chairman and CEO. "The recent approval of VIVITROL(TM) for treating alcohol dependence further diversifies our portfolio and gives us access to an entirely new segment of patients and health care providers. We look forward to launching the drug in late June."

Cephalon is increasing its 2006 sales guidance by $25 million to $1.475- 1.525 billion. This includes CNS franchise sales of $665-715 million, pain franchise sales of $450-500 million and other product sales of $285-335 million. SG&A and R&D guidance for 2006 are $545-575 million and $315-335 million, respectively.

The company also is increasing its adjusted net income guidance for 2006 to $240-250 million, and its 2006 basic adjusted income per common share guidance to $3.90-4.10.

For the second quarter of 2006, the company is introducing sales guidance of $380-390 million, adjusted net income guidance of $59-65 million and guidance for basic adjusted income per common share of $0.95-1.05.

Sales and basic adjusted income per common share guidance for the second quarter of 2006 and full-year 2006 is reconciled below and is subject to the assumptions set forth therein.

Cephalon's management will discuss the company's first-quarter 2006 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT on Tuesday, May 2, 2006. To participate in the conference call, dial +1 (719) 457-2626 and refer to conference code number 6962924. 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.

Cephalon currently markets four proprietary products in the United States: PROVIGIL (modafinil) Tablets [C-IV], GABITRIL(R) (tiagabine hydrochloride), ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II], and TRISENOX(R) (arsenic trioxide) injection. In addition, VIVITROL (naltrexone for extended-release injectable suspension) was recently approved in the United States and is expected to be available in June 2006. Cephalon also markets numerous products internationally. Full U.S. prescribing information 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, net income and basic adjusted income per common share guidance for the second quarter and full-year 2006; and other statements regarding matters that are not historical facts, including the Company's position and expected performance in 2006. 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," "Diluted Adjusted Income Per Common Share," and "Diluted Adjusted Income Per Share Guidance" 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, 2006 GAAP Adjustments "Adjusted" REVENUES: Sales $345,587 $345,587 Other revenues 11,356 11,356 356,943 $- 356,943 COSTS AND EXPENSES: Cost of sales 58,893 58,893 Research and development 104,976 (33,402)(1) 71,574 Selling, general and administrative 148,761 (9,957)(2) 138,804 Depreciation and amortization 26,521 (19,046)(3) 7,475 339,151 (62,405) 276,746 INCOME FROM OPERATIONS 17,792 62,405 80,197 OTHER INCOME (EXPENSE): Interest income 5,042 5,042 Interest expense (4,536) (4,536) Write-off of deferred debt issuance costs (13,105) 13,105 (4) - Other income (expense), net (852) (852) (13,451) 13,105 (346) INCOME BEFORE INCOME TAXES 4,341 75,510 79,851 INCOME TAX EXPENSE (774) (27,960)(5) (28,734) NET INCOME $3,567 $47,550 $51,117 BASIC INCOME PER COMMON SHARE $0.06 $0.86 DILUTED INCOME PER COMMON SHARE $0.05 $0.70 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 59,734 59,734 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 73,508 73,160 (6) Three Months Ended March 31, 2005 GAAP Adjustments "Adjusted" REVENUES: Sales $266,609 $266,609 Other revenues 13,372 13,372 279,981 $- 279,981 COSTS AND EXPENSES: Cost of sales 41,114 41,114 Research and development 80,766 80,766 Selling, general and administrative 98,229 98,229 Depreciation and amortization 18,650 (13,330)(3) 5,320 238,759 (13,330) 225,429 INCOME FROM OPERATIONS 41,222 13,330 54,552 OTHER INCOME (EXPENSE): Interest income 4,859 4,859 Interest expense (5,551) (5,551) Write-off of deferred debt issuance costs - - Other income (expense), net 1,335 1,335 643 - 643 INCOME BEFORE INCOME TAXES 41,865 13,330 55,195 INCOME TAX EXPENSE (15,203) (3,712)(5) (18,915) NET INCOME $26,662 $9,618 $36,280 BASIC INCOME PER COMMON SHARE $0.46 $0.63 DILUTED INCOME PER COMMON SHARE $0.44 $0.59 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 57,994 57,994 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 65,065 65,071 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income to "Adjusted" Net Income Three Months Ended March 31, 2006 and March 31, 2005 (1) To exclude charges related to up-front payments for several product development collaborations ($30.0 million) and the net impact of the adoption of the new stock compensation accounting rules ($3.4 million, representing half of the total stock-based compensation expense recorded). (2) To exclude charges associated with the settlement of the PROVIGIL patent litigation ($4.0 million), European integration and restructuring charges ($2.6 million) and the net impact of the adoption of the new stock compensation accounting rules ($3.4 million, representing half of the total stock-based compensation expense recorded). (3) To exclude the on-going amortization of acquired intangible assets. (4) To exclude the write-off of deferred debt issuance costs related to the Zero Coupon convertible subordinated notes. (5) To reflect the tax effect of adjustments at the applicable tax rates. (6) Excludes the impact of Financial Accounting Standards Board Statement No. 123(R) "Share Based Payment" ("SFAS 123(R)"). CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended March 31, 2006 United States Europe Total Sales: Provigil $139,551 $9,022 $148,573 Gabitril 11,356 1,416 12,772 CNS Disorders 150,907 10,438 161,345 Pain 112,334 5,168 117,502 Other 15,070 51,670 66,740 $278,311 $67,276 $345,587 Three Months Ended March 31, 2005 United States Europe Total Sales: Provigil $92,149 $7,981 $100,130 Gabitril 24,701 1,689 26,390 CNS Disorders 116,850 9,670 126,520 Pain 98,868 3,057 101,925 Other 9,194 28,970 38,164 $224,912 $41,697 $266,609 % Increase (Decrease) United States Europe Total Sales: Provigil 51% 13% 48% Gabitril (54%) (16%) (52%) CNS Disorders 29% 8% 28% Pain 14% 69% 15% Other 64% 78% 75% 24% 61% 30% CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, December 31, 2006 2005 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $289,087 $205,060 Investments 252,384 279,030 Receivables, net 225,352 199,086 Inventory, net 150,471 137,886 Deferred tax assets, net 186,835 187,436 Other current assets 50,519 40,339 Total current assets 1,154,648 1,048,837 PROPERTY AND EQUIPMENT, net 346,744 323,830 GOODWILL 464,681 471,051 INTANGIBLE ASSETS, net 729,695 742,874 DEBT ISSUANCE COSTS, net 49 13,172 DEFERRED TAX ASSETS, net 221,179 200,629 OTHER ASSETS 18,345 18,813 $2,935,341 $2,819,206 CURRENT LIABILITIES: Current portion of long-term debt $1,683,614 (1) $933,160 Accounts payable 87,155 53,699 Accrued expenses 231,252 291,744 Total current liabilities 2,002,021 1,278,603 LONG-TERM DEBT 12,331 763,097 DEFERRED TAX LIABILITIES, net 108,876 110,703 OTHER LIABILITIES 55,242 54,632 Total liabilities 2,178,470 2,207,035 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value 607 584 Additional paid-in capital 1,305,420 1,166,166 Treasury stock, at cost (17,532) (17,125) Accumulated deficit (566,505) (570,072) Accumulated other comprehensive income 34,881 32,618 Total stockholders' equity 756,871 612,171 $2,935,341 $2,819,206 (1) At March 31, 2006, all of our convertible debt was convertible and therefore is classified as a current liability. Convertibility of the debt is determined by reference to the price of our common stock at the balance sheet date. See our 2005 Form 10-K for a description of our convertible debt instruments. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,567 $26,662 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Deferred income tax (benefit) expense (745) 14,677 Tax benefit from equity compensation 21,386 652 Depreciation and amortization 29,238 26,586 Amortization of debt issuance costs 129 2,138 Write-off of debt issuance costs associated with Zero Coupon convertible subordinated notes 13,105 - Stock-based compensation expense 9,856 2,543 Changes in operating assets and liabilities, net of effect from acquisitions: Receivables (25,868) 60 Inventory (12,020) (11,164) Other assets (27,677) (23,650) Accounts payable, accrued expenses and deferred revenues (21,583) 6,486 Other liabilities (1,767) 1,172 Net cash (used for) provided by operating activities (12,379) 46,162 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (31,759) (24,164) Acquisition of intangible assets (5,000) (384) Sales and (purchases) of investments, net 27,040 (3,924) Net cash used for investing activities (9,719) (28,472) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercises of common stock options 107,738 1,341 Windfall tax benefits from stock- based compensation 247 - Acquisition of treasury stock (407) - Payments on and retirements of long-term debt (922) 119 Net cash provided by financing activities 106,656 1,460 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (531) (3,132) NET INCREASE IN CASH AND CASH EQUIVALENTS 84,027 16,018 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 205,060 574,244 CASH AND CASH EQUIVALENTS, END OF PERIOD $289,087 $590,262 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, December 31, 2006 2006 Projected GAAP basic income per common share $ 0.68 - $ 0.78 $ 2.28 - $ 2.48 Product development collaborations $ - - $ - $ 0.49 - $ 0.49 PROVIGIL patent litigation settlement costs $ - - $ - $ 0.07 - $ 0.07 European integration and restructuring charges $ - - $ - $ 0.04 - $ 0.04 Impact of SFAS 123(R) $ 0.12 - $ 0.12 $ 0.48 - $ 0.48 Amortization of current intangibles $ 0.31 - $ 0.31 $ 1.24 - $ 1.24 Write-off of deferred debt issuance costs $ - - $ - $ 0.21 - $ 0.21 Tax effect of adjustments at the applicable tax rates $ (0.16) - $ (0.16) $ (0.91) - $ (0.91) Basic adjusted income per common share guidance $ 0.95 - $ 1.05 $ 3.90 - $ 4.10 The Company's guidance is being issued based on the following assumptions: * NUVIGIL(R) is approved and launched in the second half of 2006; * PROVIGIL sales for the entire year 2006; * Fentanyl effervescent buccal tablet (FEBT) is approved and launched in the fourth quarter of 2006; * Barr Laboratories enters with a generic version of ACTIQ in the fourth quarter of 2006; * Adjusted effective tax rate of 36 percent for 2006; * Weighted average number of common shares outstanding of 61.7 million shares and 61.5 million shares for the three months ended June 30, 2006 and for the twelve months ended December 31, 2006, respectively; and * For SFAS 123(R) calculation, the assumed tax rate is 36.7 percent, other key assumptions remain constant since adoption and any stock option grants that may be made during 2006 are excluded.

Cephalon, Inc.

CONTACT: Media: Robert Grupp, +1-610-738-6402, rgrupp@cephalon.com, orInvestors: Robert (Chip) Merritt, +1-610-738-6376, cmerritt@cephalon.com,both of Cephalon

Back to news