FRAZER, Pa., July 31 /PRNewswire-FirstCall/ -- Cephalon, Inc. 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 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.
Cephalon, Inc.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.
Web site: http://www.cephalon.com/
Company News On-Call: http://www.prnewswire.com/comp/134563.html /
