FRAZER, Pa., Nov. 1 /PRNewswire-FirstCall/ -- Cephalon, Inc. today reported third-quarter 2005 revenue of $309.5 million, an 18 percent increase compared to the third quarter of 2004. Diluted income per share for the third quarter of 2005 was $0.50. Excluding intangible amortization expense and certain other items, diluted adjusted income per share was $0.78.
Sales totaled $294.4 million, compared with third-quarter 2004 sales of $253.6 million, a 16 percent increase. Sales of PROVIGIL(R) (modafinil) Tablets [C-IV] were $134.5 million, sales of ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II] were $100.3 million, sales of GABITRIL(R) (tiagabine hydrochloride) Tablets were $16.5 million and sales of other products were $43.1 million.
Cephalon recently announced several important events that drove progress on two of its key product opportunities. The company received an approvable letter from the U.S. Food and Drug Administration (FDA) to market SPARLON(TM) (modafinil) Tablets [C-IV] for treating ADHD in children and adolescents. Cephalon also entered into a co-promotion agreement with the McNeil Consumer & Specialty Pharmaceuticals Division of McNeil-PPC, Inc. to accelerate the entry of SPARLON into this important pediatric market. In addition, the company’s New Drug Application (NDA) for OraVescent(R) fentanyl (effervescent buccal tablet) for breakthrough cancer pain was filed with the FDA.
SPARLON, OraVescent fentanyl, NUVIGIL(TM) (armodafinil) for wakefulness, VIVITREX(TM) (naltrexone long-acting injection) for treating alcohol dependence and GABITRIL for generalized anxiety disorder are the key initiatives in Cephalon’s plan for growth in 2006 and 2007.
“During the third quarter, our efforts resulted in significant progress in clinical trials, on the regulatory front and in pre-launch preparations, all of which serve to keep our new product launch plans on track,” said Frank Baldino, Jr., Ph.D., Chairman and CEO. “In addition, our drug discovery efforts and our progress in oncology will augment our extensive portfolio of new products.”
Cephalon is introducing guidance for 2006 for sales of $1.35-1.40 billion, an increase of $200 million over our 2005 sales guidance. This includes central nervous system (CNS) franchise sales of $665-715 million, pain franchise sales of $425-475 million and other product sales of $185-235 million. Guidance for 2006 diluted adjusted income per common share is $2.90- 3.00.
Cephalon is reiterating its guidance for 2005 diluted adjusted income per common share of $2.70-2.85. It is adjusting its 2005 sales guidance downward by $50 million to $1.15-1.20 billion to reflect achievement of its previously stated goal to reduce wholesaler inventory levels to 2-3 weeks by the end of the year. The adjusted 2005 sales guidance includes PROVIGIL sales of $500- 525 million, ACTIQ sales of $410-425 million, GABITRIL sales of $70-80 million and other sales of $160-170 million.
Cephalon’s management will discuss the company’s third-quarter 2005 performance in a conference call with investors beginning at 4:30 p.m. (EST) on Tuesday, November 1, 2005. To participate in the conference call, dial 913-981-5581 and refer to conference code number 3189624. 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 to treat sleep and neurological disorders, cancer and pain.
Cephalon currently employs approximately 2,300 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 and other European offices are located in Guildford, England, and Martinsried, Germany.
The company currently markets four proprietary products in the United States: PROVIGIL, GABITRIL, ACTIQ and TRISENOX(R) (arsenic trioxide) injection and more than 20 products internationally. Full prescribing information for all 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, including our clinical, regulatory and marketing progress with respect to our potential new product launches and near-term opportunities, and our product opportunities in oncology, interpretation of clinical results, prospects for regulatory approval, manufacturing development and capabilities, market prospects for our products, including our ability to successfully enter the ADHD market, yearly and quarterly sales and earnings guidance for 2005 and 2006, 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,” “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 (Amounts in Thousands, Except per Share) (Unaudited) Three Months Ended September 30, 2005 GAAP Adjustments “Adjusted” Revenues: Sales $294,371 $294,371 Other revenues 15,165 15,165 309,536 $- 309,536 Costs and Expenses: Cost of sales 37,629 37,629 Research and development 91,934 91,934 Selling, general and administrative 103,253 103,253 Depreciation and amortization 22,346 (15,451)(1) 6,895 Acquired in-process research and development 5,500 (5,500)(2) -- 260,662 (20,951) 239,711 Income (Loss) from operations 48,874 20,951 69,825 Other Income and Expense: Interest income 7,247 7,247 Interest expense (7,494) (7,494) Debt exchange expense -- -- Gain (charge) on early extinguishment of debt 2,085 (2,085)(3) -- Other income (expense), net (38) (38) 1,800 (2,085) (285) Income (Loss) before income taxes 50,674 18,866 69,540 Income tax expense (21,331) (2,105)(4) (23,436) Net Income (Loss) $29,343 $16,761 $46,104 Basic income (loss) per common share $0.51 $0.79 Diluted income (loss) per common share $0.50 $0.78 Weighted average number of common shares outstanding 58,064 58,064 Weighted average number of common shares outstanding-assuming dilution 59,398 59,408 Three Months Ended September 30, 2004 GAAP Adjustments “Adjusted” Revenues: Sales $253,594 $253,594 Other revenues 8,373 8,373 261,967 $- 261,967 Costs and Expenses: Cost of sales 33,782 33,782 Research and development 67,683 67,683 Selling, general and administrative 76,204 76,204 Depreciation and amortization 13,784 (9,702)(1) 4,082 Acquired in-process research and development 185,700 (185,700)(2) -- 377,153 (195,402) 181,751 Income (Loss) from operations (115,186) 195,402 80,216 Other Income and Expense: Interest income 4,804 4,804 Interest expense (5,176) (5,176) Debt exchange expense (28,230) 28,230 (5) 0 Gain (charge) on early extinguishment of debt (1,352) 1,352 (3) 0 Other income (expense), net (642) (642) (30,596) 29,582 (1,014) Income (Loss) before income taxes (145,782) 224,984 79,202 Income tax expense (19,464) (13,563)(4) (33,027) Net Income (Loss) $(165,246) $211,421 $46,175 Basic income (loss) per common share $(2.94) $0.82 Diluted income (loss) per common share $(2.94) $0.75 Weighted average number of common shares outstanding 56,178 56,178 Weighted average number of common shares outstanding-assuming dilution 56,178 63,510 Cephalon, Inc. and Subsidiaries Notes to Reconciliation of GAAP Net Loss to “Adjusted” Net Income Three Months Ended September 30, 2005 and September 30, 2004 (1) To exclude the ongoing amortization of acquired intangible assets. (2) To exclude in-process research and development charges. In 2004, in- process research and development expense was associated with the acquisition of CIMA LABS INC. (3) In 2005, to exclude the gain on early extinguishment of debt related to the tender offer of $511.7 million of our 2.5% Convertible Notes due 2006. In 2004, to exclude the charge on early extinguishment of debt related to the repurchase of $33 million of our 3.875% Convertible Subordinated Notes in August 2004. (4) To reflect the tax effect of adjustments and changes to the valuation allowance at the applicable tax rates. (5) To exclude the expense associated with the exchange of $78.3 million of Cephalon’s 2.5% Convertible Subordinated Notes into common stock. Cephalon, Inc. and Subsidiaries Consolidated Statements of Operations (Amounts in Thousands, Except per Share) (Unaudited) Nine Months Ended September 30, 2005 GAAP Adjustments “Adjusted” Revenues: Sales $833,588 $833,588 Other revenues 41,900 41,900 875,488 $- 875,488 Costs and Expenses: Cost of sales 114,093 114,093 Research and development 255,591 255,591 Selling, general and administrative 302,904 302,904 Depreciation and amortization 61,151 (42,178)(1) 18,973 Impairment charge on investment in MDS Proteomics Inc. -- -- Acquired in-process research and development 295,615 (295,615)(2) -- 1,029,354 (337,793) 691,561 Income (Loss) from operations (153,866) 337,793 183,927 Other Income and Expense: Interest income 19,559 19,559 Interest expense (19,311) (19,311) Debt exchange expense -- -- Gain (charge) on early extinguishment of debt 2,085 (2,085)(3) -- Other income (expense), net 1,983 1,983 4,316 (2,085) 2,231 Income (Loss) before income taxes (149,550) 335,708 186,158 Income tax expense (43,477) (18,278)(4) (61,755) Net Income (Loss) $(193,027) $317,430 $124,403 Basic income (loss) per common share $(3.33) $2.14 Diluted income (loss) per common share $(3.33) $2.04 Weighted average number of common shares outstanding 58,035 58,035 Weighted average number of common shares outstanding-assuming dilution 58,035 63,149 Nine Months Ended September 30, 2004 GAAP Adjustments “Adjusted” Revenues: Sales $698,975 $698,975 Other revenues 17,451 17,451 716,426 $- 716,426 Costs and Expenses: Cost of sales 89,599 89,599 Research and development 198,208 198,208 Selling, general and administrative 243,908 4,214 (5) 248,122 Depreciation and amortization 36,927 (26,456)(1) 10,471 Impairment charge on investment in MDS Proteomics Inc. 30,071 (30,071)(6) -- Acquired in-process research and development 185,700 (185,700)(2) -- 784,413 (238,013) 546,400 Income (Loss) from operations (67,987) 238,013 170,026 Other Income and Expense: Interest income 11,639 11,639 Interest expense (16,888) (16,888) Debt exchange expense (28,230) 28,230 (7) Gain (charge) on early extinguishment of debt (2,313) 2,313 (3) -- Other income (expense), net (2,444) (2,444) (38,236) 30,543 (7,693) Income (Loss) before income taxes (106,223) 268,556 162,333 Income tax expense (45,695) (18,461)(4) (64,156) Net Income (Loss) $(151,918) $250,095 $98,177 Basic income (loss) per common share $(2.71) $1.74 Diluted income (loss) per common share $(2.71) $1.60 Weighted average number of common shares outstanding 56,065 56,065 Weighted average number of common shares outstanding-assuming dilution 56,065 64,214 Cephalon, Inc. and Subsidiaries Notes to Reconciliation of GAAP Net Income (Loss) to “Adjusted” Net Income Nine Months Ended September 30, 2005 and September 30, 2004 (1) To exclude the ongoing amortization of acquired intangible assets. (2) In 2005, to exclude in-process research and development charges recorded related to the acquisition of Salmedix ($130.1 million), VIVITREX product rights ($160.0 million), and other ($5.5 million). In 2004, to exclude the write-off of in-process research and development associated with the acquisition of CIMA LABS INC. (3) In 2005, to exclude the gain on early extinguishment of debt related to the tender offer of $511.7 million of our 2.5% Convertible Notes due 2006. In 2004, to exclude the charge on early extinguishment of debt related to the repurchase of $33 million and $10 million of our 3.875% Convertible Subordinated Notes in August and March 2004, respectively. (4) To reflect the tax effect of adjustments and changes to the valuation allowance at the applicable tax rates. (5) To exclude the gain resulting from the cancellation of postretirement health care benefits for current employees at Cephalon France. (6) To exclude the impairment charge for the write-off of our investment in MDS Proteomics, Inc. for which no corresponding tax benefit was recorded. (7) To exclude the expense associated with the exchange of $78.3 million of Cephalon’s 2.5% Convertible Subordinated Notes into common stock. Cephalon, Inc. and Subsidiaries Consolidated Sales Detail (Amounts in Thousands) (Unaudited) Three Months Ended September 30, 2005 US Europe Total Sales: Provigil $126,387 $8,103 $134,490 Actiq 95,485 4,759 100,244 Gabitril 15,178 1,333 16,511 Other 15,575 27,551 43,126 $252,625 $41,746 $294,371 Three Months Ended September 30, 2004 US Europe Total Sales: Provigil $92,631 $9,347 $101,978 Actiq 100,753 1,941 102,694 Gabitril 23,046 1,577 24,623 Other 5,224 19,075 24,299 $221,654 $31,940 $253,594 % Increase (Decrease) US Europe Total Sales: Provigil 36% (13%) 32% Actiq (5%) 145% (2%) Gabitril (34%) (15%) (33%) Other 198% 44% 77% 14% 31% 16% Nine Months Ended September 30, 2005 US Europe Total Sales: Provigil $338,529 $26,009 $364,538 Actiq 282,105 11,904 294,009 Gabitril 54,023 4,562 58,585 Other 36,319 80,137 116,456 $710,976 $122,612 $833,588 Nine Months Ended September 30, 2004 US Europe Total Sales: Provigil $276,071 $23,221 $299,292 Actiq 253,130 5,350 258,480 Gabitril 67,372 4,659 72,031 Other 5,224 63,948 69,172 $601,797 $97,178 $698,975 % Increase (Decrease) US Europe Total Sales: Provigil 23% 12% 22% Actiq 11% 123% 14% Gabitril (20%) (2%) (19%) Other 595% 25% 68% 18% 26% 19% Cephalon, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in Thousands) (Unaudited) September 30, * December 31, 2005 2004 CURRENT ASSETS: Cash and cash equivalents $585,276 $574,244 Investments 230,348 217,432 Receivables, net 160,362 208,225 Inventory, net 119,342 86,629 Deferred tax asset 50,835 47,118 Other current assets 43,224 39,915 Total current assets 1,189,387 1,173,563 Property and equipment, net 274,020 244,834 Goodwill 369,534 372,534 Other intangible assets, net 512,991 449,402 Debt issuance costs, net 41,282 25,401 Deferred tax asset, net 286,077 163,620 Other assets 17,677 22,549 $2,690,968 $2,451,903 CURRENT LIABILITIES: Current portion of long-term debt $3,465 $5,114 Accounts payable 56,795 52,488 Accrued expenses 189,644 169,568 Current portion of deferred revenues 444 868 Total current liabilities 250,348 228,038 Long-term debt 1,692,630 1,284,410 Deferred revenues 1,174 1,769 Deferred tax liabilities 103,879 94,100 Other liabilities 55,602 13,542 Total liabilities 2,103,633 1,621,859 STOCKHOLDERS’ EQUITY: Common stock, $0.01 par value 581 580 Additional paid-in capital 1,151,933 1,172,499 Treasury stock, at cost (14,892) (14,860) Accumulated deficit (588,145) (395,118) Accumulated other comprehensive income 37,858 66,943 Total stockholders’ equity 587,335 830,044 $2,690,968 $2,451,903 * Certain reclassifications of prior period amounts have been made to conform with the current year presentation. Cephalon, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Amounts in Thousands) (Unaudited) Nine Months Ended September 30, 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(193,027) $(151,918) Adjustments to reconcile net loss to net cash provided by operating activities: Deferred income taxes 27,931 11,853 Tax benefit from equity compensation 3,956 3,109 Debt exchange expense -- 28,230 Tax effect on conversion of convertible notes -- (11,288) Depreciation and amortization 70,966 39,327 Amortization of debt issuance costs 6,521 6,420 Stock-based compensation expense 7,631 3,793 Non-cash (gain) charge on early extinguishment of debt (4,549) 2,313 Pension curtailment -- (4,214) Loss on disposals of property and equipment 949 430 Impairment charge -- 30,071 Acquired in-process research and development 130,615 185,700 Increase (decrease) in cash due to changes in assets and liabilities, net of effect from acquisition: Receivables 43,347 (40,085) Inventory (37,084) (4,504) Other assets (6,963) 18,122 Accounts payable, accrued expenses and deferred revenues 21,671 12,018 Other liabilities (3,555) 2,225 Net cash provided by operating activities 68,409 131,602 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (63,951) (27,283) Acquisition of CIMA LABS, net of cash acquired -- (482,521) Acquisition of Salmedix, net of cash acquired (130,733) -- Acquisition of TRISENOX (69,722) -- Acquisition of intangible assets (2,652) (308) Sales and (purchases) of investments, net (14,113) (93,088) Net cash used for investing activities (281,171) (603,200) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercises of common stock options 2,247 8,794 Acquisition of treasury stock (32) (14) Payments on and retirements of long-term debt (501,958) (45,924) Net proceeds from issuance of convertible subordinated notes 891,949 -- Proceeds from sale of warrants 217,071 -- Purchase of convertible note hedge (382,261) -- Net cash provided by (used for) financing activities 227,016 (37,144) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (3,222) (965) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 11,032 (509,707) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 574,244 1,115,699 CASH AND CASH EQUIVALENTS, END OF PERIOD $585,276 $605,992 Cephalon, Inc. and Subsidiaries Reconciliation of Projected GAAP Diluted Income (Loss) per Comm
