FRAZER, Pa., Feb. 14 /PRNewswire-FirstCall/ -- Cephalon, Inc. today reported 2005 revenue of $1.2 billion, a 19 percent increase over 2004. Diluted loss per share was $3.01. Excluding amortization expense and certain other items, diluted adjusted income per share was $2.76, a 14 percent increase over the comparable figure of $2.42 in 2004 and within the range of the company's previously issued 2005 guidance.
Sales totaled $1.16 billion in 2005, an 18 percent increase compared to 2004. In 2005, sales of PROVIGIL(R) (modafinil) Tablets [C-IV] increased 17 percent to $512.8 million; sales of ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II] increased 19 percent to $411.8 million; and sales of GABITRIL(R) (tiagabine hydrochloride) Tablets were $72.3 million, a 23 percent decrease. Sales of other products totaled $159.7 million in 2005.
"Cephalon delivered strong top- and bottom-line growth in 2005," said Frank Baldino Jr., Ph.D., Chairman and CEO. "We also completed a series of acquisitions and collaborations that created a fully integrated oncology business and expanded our business geographically. We continued to make progress in our plan to launch five new drugs. Finally, we eliminated uncertainty and added significant upside for our business by settling our litigation over PROVIGIL. As a result, we enter 2006 in a position of strength, poised to deliver our best performance ever."
For the fourth quarter of 2005, the company reported total revenue of $336.4 million, a 13 percent increase from the fourth quarter of 2004 and sales of $322.9 million, up 15 percent from the same quarter last year. Diluted income per share for the fourth quarter of 2005 was $0.30. Excluding amortization expense and certain other items, diluted adjusted income per share was $0.71.
Cephalon is updating its guidance for 2006 for sales of $1.55-1.60 billion, an increase of $200 million over its previously issued 2006 sales guidance. This includes central nervous system (CNS) franchise sales of $765- 815 million, pain franchise sales of $425-475 million and other product sales of $285-335 million. SG&A and R&D guidance for 2006 is estimated at $630-660 million and $315-335 million, respectively.
The company is introducing adjusted net income guidance for 2006 of $220- 230 million, which represents a 24 percent increase over the adjusted net income figure used in the calculation of its previously issued guidance. The company also is introducing basic adjusted income per common share guidance of $3.80-4.00. This new per share guidance is based on 58.1 million shares outstanding, which is the weighted average number of common shares outstanding as of December 31, 2005, and does not include any shares associated with the company's existing convertible notes and outstanding employee stock options. The number of diluted shares is affected by daily fluctuations in the market price of the company's common stock. For this reason, the company believes the use of basic shares in the calculation of income per share provides a better measure of the underlying performance of the business.
The company is introducing first-quarter 2006 sales guidance of $355-365 million and basic adjusted income per share of $0.65-0.70. Basic adjusted income per common share guidance for the first-quarter 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 fourth-quarter and full- year 2005 performance in a conference call with investors beginning at 5:00 p.m. U.S. EST on Tuesday, February 14, 2006. To participate in the conference call, dial +1-(913) 981-5543 and refer to conference code number 9425834. 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 four proprietary products in the United States: PROVIGIL, GABITRIL, ACTIQ and TRISENOX(R) (arsenic trioxide) injection, 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 and earnings guidance; 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 (Amounts in Thousands, Except per Share) (Unaudited) Three Months Ended December 31, 2005 GAAP Adjustments "Adjusted" REVENUES: Sales $322,930 $322,930 Other revenues 13,474 13,474 336,404 $- 336,404 COSTS AND EXPENSES: Cost of sales 50,130 50,130 Research and development 99,235 (3,944)(1) 95,291 Selling, general and administrative 140,957 (13,192)(2) 127,765 Depreciation and amortization 23,154 (15,473)(3) 7,681 Impairment charges 20,820 (20,820)(4) - Acquired in-process research and development 71,200 (71,200)(5) - 405,496 (124,629) 280,867 INCOME (LOSS) FROM OPERATIONS (69,092) 124,629 55,537 OTHER INCOME AND (EXPENSE): Interest income 6,612 6,612 Interest expense (5,924) (5,924) Debt exchange expense - - Write-off of deferred debt issuance costs (27,109) 27,109 (6) - Gain (charge) on early extinguishment of debt - - - Other income (expense), net (55) (55) (26,476) 27,109 633 INCOME (LOSS) BEFORE INCOME TAXES (95,568) 151,738 56,170 INCOME TAX (EXPENSE) BENEFIT 113,641 (127,097)(7) (13,456) NET INCOME (LOSS) $18,073 $24,641 $42,714 BASIC INCOME PER COMMON SHARE $0.31 $0.74 DILUTED INCOME PER COMMON SHARE $0.30 $0.71 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,099 58,099 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 60,351 60,351 Three Months Ended December 31, 2004 GAAP Adjustments "Adjusted" REVENUES: Sales $281,400 $281,400 Other revenues 17,599 17,599 298,999 $- 298,999 COSTS AND EXPENSES: Cost of sales 30,374 30,374 Research and development 75,764 75,764 Selling, general and administrative 95,569 95,569 Depreciation and amortization 15,871 (11,297)(3) 4,574 Impairment charges - - Acquired in-process research and development - - - 217,578 (11,297) 206,281 INCOME (LOSS) FROM OPERATIONS 81,421 11,297 92,718 OTHER INCOME AND (EXPENSE): Interest income 4,847 4,847 Interest expense (5,298) (5,298) Debt exchange expense - - - Write-off of deferred debt issuance costs - - - Gain (charge) on early extinguishment of debt - - - Other income (expense), net (2,931) (2,931) (3,382) - (3,382) INCOME (LOSS) BEFORE INCOME TAXES 78,039 11,297 89,336 INCOME TAX (EXPENSE) BENEFIT 66 (38,276)(7) (38,210) NET INCOME (LOSS) $78,105 $(26,979) $51,126 BASIC INCOME PER COMMON SHARE $1.35 $0.89 DILUTED INCOME PER COMMON SHARE $1.23 $0.82 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 57,754 57,754 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 64,889 64,889 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to "Adjusted" Net Income Three Months Ended December 31, 2005 and December 31, 2004 (1) To exclude the write-off of an investment in a development stage company ($1.0 million) and the restructuring of certain research and development activities at Cephalon France ($2.9 million). (2) To exclude charges relating to the termination of Salmedix's facility lease ($2.6 million) and agreements executed with Teva and Ranbaxy related to the settlement of the PROVIGIL patent litigation ($10.6 million). (3) To exclude the ongoing amortization of acquired intangible assets. (4) To exclude the write-off of an intangible asset due to the expected termination of a distribution agreement in the United Kingdom. (5) To exclude the write-off of acquired in-process research and development related to the acquisition of Zeneus. (6) To exclude the write-off of deferred debt issuance costs related to the 2% senior subordinated convertible notes. (7) To reflect the tax effect of adjustments at the applicable tax rates and $95.5 million and $24.3 million of tax benefits due to the reassessment of the realizability of deferred tax assets in 2005 and 2004, respectively. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except per Share) (Unaudited) Year Ended December 31, 2005 GAAP Adjustments "Adjusted" REVENUES: Sales $1,156,518 $1,156,518 Other revenues 55,374 55,374 1,211,892 $- 1,211,892 COSTS AND EXPENSES: Cost of sales 164,223 164,223 Research and development 354,826 (3,944)(1) 350,882 Selling, general and administrative 443,861 (13,192)(2) 430,669 Depreciation and amortization 84,305 (57,651)(3) 26,654 Impairment charges 20,820 (20,820)(4) - Acquired in-process research and development 366,815 (366,815)(5) - 1,434,850 (462,422) 972,428 INCOME (LOSS) FROM OPERATIONS (222,958) 462,422 239,464 OTHER INCOME AND (EXPENSE): Interest income 26,171 26,171 Interest expense (25,235) (25,235) Debt exchange expense - - Write-off of deferred debt issuance costs (27,109) 27,109 (6) - Gain (charge) on early extinguishment of debt 2,085 (2,085)(7) - Other income (expense), net 1,928 1,928 (22,160) 25,024 2,864 INCOME (LOSS) BEFORE INCOME TAXES (245,118) 487,446 242,328 INCOME TAX (EXPENSE) BENEFIT 70,164 (145,375)(8) (75,211) NET INCOME (LOSS) $(174,954) $342,071 $167,117 BASIC INCOME (LOSS) PER COMMON SHARE $(3.01) $2.88 DILUTED INCOME (LOSS) PER COMMON SHARE $(3.01) $2.76 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,051 58,051 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 58,051 62,073 Year Ended December 31, 2004 GAAP Adjustments "Adjusted" REVENUES: Sales $980,375 $980,375 Other revenues 35,050 35,050 1,015,425 $- 1,015,425 COSTS AND EXPENSES: Cost of sales 119,973 119,973 Research and development 273,972 273,972 Selling, general and administrative 339,477 4,214 (2) 343,691 Depreciation and amortization 52,798 (37,753)(3) 15,045 Impairment charges 30,071 (30,071)(4) - Acquired in-process research and development 185,700 (185,700)(5) - 1,001,991 (249,310) 752,681 INCOME (LOSS) FROM OPERATIONS 13,434 249,310 262,744 OTHER INCOME AND (EXPENSE): Interest income 16,486 16,486 Interest expense (22,186) (22,186) Debt exchange expense (28,230) 28,230 (9) - Write-off of deferred debt issuance costs - - - Gain (charge) on early extinguishment of debt (2,313) 2,313 (7) - Other income (expense), net (5,375) (5,375) (41,618) 30,543 (11,075) INCOME (LOSS) BEFORE INCOME TAXES (28,184) 279,853 251,669 INCOME TAX (EXPENSE) BENEFIT (45,629) (56,737)(8) (102,366) NET INCOME (LOSS) $(73,813) $223,116 $149,303 BASIC INCOME (LOSS) PER COMMON SHARE $(1.31) $2.63 DILUTED INCOME (LOSS) PER COMMON SHARE $(1.31) $2.42 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 56,489 56,489 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 56,489 64,358 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to "Adjusted" Net Income Years Ended December 31, 2005 and December 31, 2004 (1) To exclude the write-off of an investment in a development stage company ($1.0 million) and the restructuring of certain research and development activities at Cephalon France ($2.9 million). (2) In 2005, to exclude charges relating to the termination of Salmedix's facility lease ($2.6 million) and agreements executed with Teva and Ranbaxy related to the settlement of the PROVIGIL patent litigation ($10.6 million). In 2004, to exclude the gain resulting from the cancellation of postretirement health care benefits for current employees at Cephalon France. (3) To exclude the ongoing amortization of acquired intangible assets. (4) In 2005, to exclude the write-off of an intangible asset due to the expected termination of a distribution agreement in the United Kingdom. In 2004, to exclude the impairment charge for the write-off of an investment in MDS Proteomics, Inc. (5) In 2005, to exclude the write-off of acquired in-process research and development related to the acquisition of Salmedix ($130.1 million), VIVITROL product rights ($160.0 million), Zeneus ($71.2 million), and other ($5.5 million). In 2004, to exclude the write-off of acquired in-process research and development related to the acquisition of CIMA LABS INC. (6) To exclude the write-off of deferred debt issuance costs related to the 2% senior subordinated convertible notes. (7) In 2005, to exclude the gain on early extinguishment of debt related to the tender offer of $511.7 million of the 2.5% convertible subordinated notes due 2006. In 2004, to exclude the charge on early extinguishment of debt related to the repurchase of $10 million and $33 million of the 3.875% convertible subordinated notes in March and August 2004, respectively. (8) To reflect the tax effect of adjustments at the applicable tax rates and $46.0 million and $7.1 million of tax benefits due to the reassessment of the realizability of deferred tax assets in 2005 and 2004, respectively. (9) To exclude the expense related to the exchange of $78.3 million of the 2.5% convertible subordinated notes into common stock. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED SALES DETAIL (Amounts in Thousands) (Unaudited) Three Months Ended December 31, 2005 United States Europe Total Sales: Provigil $137,028 $11,239 $148,267 Actiq 112,571 5,198 117,769 Gabitril 12,494 1,179 13,673 Other 13,376 29,845 43,221 $275,469 $47,461 $322,930 Three Months Ended December 31, 2004 United States Europe Total Sales: Provigil $130,167 $10,208 $140,375 Actiq 83,942 2,575 86,517 Gabitril 19,977 2,156 22,133 Other 8,046 24,329 32,375 $242,132 $39,268 $281,400 % Increase (Decrease) United States Europe Total Sales: Provigil 5% 10% 6% Actiq 34% 102% 36% Gabitril (37%) (45%) (38%) Other 66% 23% 34% 14% 21% 15% Year Ended December 31, 2005 United States Europe Total Sales: Provigil $475,557 $37,248 $512,805 Actiq 394,676 17,102 411,778 Gabitril 66,517 5,741 72,258 Other 49,695 109,982 159,677 $986,445 $170,073 $1,156,518 Year Ended December 31, 2004 United States Europe Total Sales: Provigil $406,238 $33,429 $439,667 Actiq 337,072 7,925 344,997 Gabitril 87,349 6,815 94,164 Other 13,270 88,277 101,547 $843,929 $136,446 $980,375 % Increase (Decrease) United States Europe Total Sales: Provigil 17% 11% 17% Actiq 17% 116% 19% Gabitril (24%) (16%) (23%) Other 274% 25% 57% 17% 25% 18% CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in Thousands, Except Share Data) (Unaudited) December 31, * December 31, 2005 2004 CURRENT ASSETS: Cash and cash equivalents $205,060 $574,244 Investments 279,030 217,432 Receivables, net 199,086 208,225 Inventory, net 137,886 86,629 Deferred tax asset 202,573 47,118 Other current assets 40,339 39,915 Total current assets 1,063,974 1,173,563 PROPERTY AND EQUIPMENT, net 323,830 244,834 GOODWILL 471,051 372,534 INTANGIBLE ASSETS, net 742,874 449,402 DEBT ISSUANCE COSTS, net 13,172 25,401 DEFERRED TAX ASSET, net 243,488 163,620 OTHER ASSETS 18,813 22,549 $2,877,202 $2,451,903 CURRENT LIABILITIES: Current portion of long-term debt $933,160 $5,114 Accounts payable 53,699 52,488 Accrued expenses 291,744 170,436 Total current liabilities 1,278,603 228,038 LONG-TERM DEBT 763,097 1,284,410 DEFERRED TAX LIABILITIES 168,699 94,100 OTHER LIABILITIES 54,632 15,311 Total liabilities 2,265,031 1,621,859 STOCKHOLDERS' EQUITY: Common stock, $0.01 par value 584 580 Additional paid-in capital 1,166,166 1,172,499 Treasury stock, at cost (17,125) (14,860) Accumulated deficit (570,072) (395,118) Accumulated other comprehensive income 32,618 66,943 Total stockholders' equity 612,171 830,044 $2,877,202 $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) Year Ended December 31, 2005 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(174,954) $(73,813) Adjustments to reconcile net loss to net cash provided by operating activities: Deferred income tax (benefit) expense (79,825) 40,081 Tax benefit from equity compensation 5,826 8,017 Debt exchange expense - 28,230 Tax effect on conversion of convertible notes - (10,100) Depreciation and amortization 89,967 59,016 Amortization of debt issuance costs 34,410 8,275 Stock-based compensation expense 10,784 5,372 Non-cash (gain) charge on early extinguishment of debt (4,549) 2,313 Pension curtailment - (4,214) Loss on disposals of property and equipment 1,107 1,423 Impairment charges 20,820 30,071 Acquired in-process research and development 201,815 185,700 Other 531 - Changes in operating assets and liabilities, net of effect from acquisitions: Receivables 35,070 (105,523) Inventory (44,167) (16,699) Other assets 8,894 (27,042) Accounts payable, accrued expenses and deferred revenues 91,955 47,864 Other liabilities (11,953) (367) Net cash provided by operating activities 185,731 178,604 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (118,050) (50,244) Acquisition of CIMA, net of cash acquired - (482,521) Acquisition of Salmedix, net of cash acquired (130,733) - Acquisition of TRISENOX (69,722) - Acquisition of Zeneus,
