FRAZER, Pa., Aug. 3 /PRNewswire-FirstCall/ -- Cephalon, Inc. today reported second-quarter 2006 sales of $430.7 million, a 58 percent increase compared with second-quarter 2005 sales of $272.6 million. As previously announced, sales for the quarter significantly exceeded guidance of $380-390 million, driven largely by strong gross sales of PROVIGIL(R) (modafinil) Tablets [C-IV] and ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II] and favorable trends in gross-to-net sales discounts. Basic income per common share was $0.91. Excluding amortization expense and certain other items, basic adjusted income per common share was $1.61, a 124 percent increase over the comparable figure of $0.72 in the second quarter of 2005 and exceeding the high end of the guidance range by 53 percent.
Central nervous system (CNS) franchise sales increased 34 percent to $194.6 million, and pain franchise sales increased 87 percent to $172.2 million. Sales of other products were $64.0 million.
“Both sales and earnings for the second quarter were exceptional, in part due to our decision earlier this year to reinvigorate PROVIGIL marketing activity,” said Frank Baldino Jr., Ph.D., Chairman and CEO. “We also made significant strides in executing our long-term diversification strategy, with the launch of VIVITROL(R) for treating alcohol dependence, and are approaching key FDA decisions on our pending applications for SPARLON(R), NUVIGIL(TM) and FENTORA(TM). These opportunities, and our expanded presence in the primary care market from our PROVIGIL co-promotion agreement with Takeda Pharmaceuticals, position Cephalon for strong future growth.”
Cephalon is increasing its 2006 sales guidance by $50 million to $1.525- 1.575 billion. This includes CNS franchise sales of $725-775 million, pain franchise sales of $475-525 million and other product sales of $285-305 million. SG&A and R&D guidance for 2006 are $315-335 million and $590-610 million, respectively.
The company also is increasing its adjusted net income guidance for 2006 to $250-260 million, and its 2006 basic adjusted income per common share guidance to $4.10-4.30.
For the third quarter of 2006, the company is introducing sales guidance of $425-440 million, adjusted net income guidance of $77-83 million and guidance for basic adjusted income per common share of $1.25-1.35.
Sales and basic adjusted income per common share guidance for the third 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 second-quarter 2006 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT on Thursday, August 3, 2006. To participate in the conference call, dial +1 (913) 981-5543 and refer to conference code number 5643710. 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 five proprietary products in the United States: PROVIGIL, GABITRIL(R) (tiagabine hydrochloride), ACTIQ, TRISENOX(R) (arsenic trioxide) injection, VIVITROL(R) (naltrexone for extended-release injectable suspension) 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, 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 progress in executing its long-term diversification strategy and the opportunities presented therein, the impact of an expanded presence in the primary care market and the outlook for strong growth in the future. 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 (Loss),” “Adjusted Net Income Guidance,” “Basic Adjusted Income (Loss) 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 June 30, 2006 GAAP Adjustments “Adjusted” REVENUES: Sales $430,725 $430,725 Other revenues 9,386 9,386 440,111 $- 440,111 COSTS AND EXPENSES: Cost of sales 59,989 59,989 Research and development 93,777 (19,784)(1) 73,993 Selling, general and administrative 153,817 (6,216)(2) 147,601 Depreciation and amortization 29,619 (20,915)(3) 8,704 Impairment charge 12,417 (12,417)(4) - Acquired in-process research and development - - - 349,619 (59,332) 290,287 INCOME (LOSS) FROM OPERATIONS 90,492 59,332 149,824 OTHER INCOME (EXPENSE): Interest income 4,648 4,648 Interest expense (4,238) (4,238) Other income (expense), net (159) (159) 251 - 251 INCOME (LOSS) BEFORE INCOME TAXES 90,743 59,332 150,075 INCOME TAX EXPENSE (35,392) (17,109)(5) (52,501) NET INCOME (LOSS) $55,351 $42,223 $97,574 BASIC INCOME (LOSS) PER COMMON SHARE $0.91 $1.61 DILUTED INCOME (LOSS) PER COMMON SHARE $0.83 $1.46 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 60,738 60,738 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - ASSUMING DILUTION 66,654 66,654 Three Months Ended June 30, 2005 GAAP Adjustments “Adjusted” REVENUES: Sales $272,608 $272,608 Other revenues 13,363 13,363 285,971 $- 285,971 COSTS AND EXPENSES: Cost of sales 35,350 35,350 Research and development 82,891 82,891 Selling, general and administrative 101,422 101,422 Depreciation and amortization 20,155 (13,397)(3) 6,758 Impairment charge - - Acquired in-process research and development 290,115 (290,115)(6) - 529,933 (303,512) 226,421 INCOME (LOSS) FROM OPERATIONS (243,962) 303,512 59,550 OTHER INCOME (EXPENSE): Interest income 7,453 7,453 Interest expense (6,266) (6,266) Other income (expense), net 686 686 1,873 - 1,873 INCOME (LOSS) BEFORE INCOME TAXES (242,089) 303,512 61,423 INCOME TAX EXPENSE (6,943) (12,461)(5) (19,404) NET INCOME (LOSS) $(249,032) $291,051 $42,019 BASIC INCOME (LOSS) PER COMMON SHARE $(4.29) $0.72 DILUTED INCOME (LOSS) PER COMMON SHARE $(4.29) $0.69 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,046 58,046 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 58,046 64,986 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to “Adjusted” Net Income Three Months Ended June 30, 2006 and June 30, 2005 (1) To exclude charges related to the payment for a collaboration agreement ($15.0 million) and the net impact of the adoption of the new stock compensation accounting rules ($4.8 million, representing half of the total stock option compensation expense recorded). (2) To exclude employee severance costs associated with the European integration ($1.4 million) and the net impact of the adoption of the new stock compensation accounting rules ($4.8 million, representing half of the total stock option compensation expense recorded). (3) To exclude the on-going amortization of acquired intangible assets. (4) To exclude charges related to the impairment of an intangible asset. (5) To reflect the tax effect of adjustments at the applicable tax rates. (6) To exclude in-process research and development charges related to the acquisition of Salmedix ($130.1 million) and Vivitrol ($160.0 million). CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Six Months Ended June 30, 2006 GAAP Adjustments “Adjusted” REVENUES: Sales $776,312 $776,312 Other revenues 20,742 20,742 797,054 $- 797,054 COSTS AND EXPENSES: Cost of sales 118,882 118,882 Research and development 198,753 (53,186)(1) 145,567 Selling, general and administrative 302,578 (16,173)(2) 286,405 Depreciation and amortization 56,140 (39,961)(3) 16,179 Impairment charge 12,417 (12,417)(4) - Acquired in-process research and development - - - 688,770 (121,737) 567,033 INCOME (LOSS) FROM OPERATIONS 108,284 121,737 230,021 OTHER INCOME (EXPENSE): Interest income 9,690 9,690 Interest expense (8,774) (8,774) Write-off of deferred debt issuance costs (13,105) 13,105 (5) - Other income (expense), net (1,011) (1,011) (13,200) 13,105 (95) INCOME (LOSS) BEFORE INCOME TAXES 95,084 134,842 229,926 INCOME TAX EXPENSE (36,166) (45,069)(6) (81,235) NET INCOME (LOSS) $58,918 $89,773 $148,691 BASIC INCOME (LOSS) PER COMMON SHARE $0.98 $2.47 DILUTED INCOME (LOSS) PER COMMON SHARE $0.85 $2.14 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 60,239 60,239 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 69,679 69,679 Six Months Ended June 30, 2005 GAAP Adjustments “Adjusted” REVENUES: Sales $539,217 $539,217 Other revenues 26,735 26,735 565,952 $- 565,952 COSTS AND EXPENSES: Cost of sales 76,464 76,464 Research and development 163,657 163,657 Selling, general and administrative 199,651 199,651 Depreciation and amortization 38,805 (26,727)(3) 12,078 Impairment charge - - Acquired in-process research and development 290,115 (290,115)(7) - 768,692 (316,842) 451,850 INCOME (LOSS) FROM OPERATIONS (202,740) 316,842 114,102 OTHER INCOME (EXPENSE): Interest income 12,312 12,312 Interest expense (11,817) (11,817) Write-off of deferred debt issuance costs - - Other income (expense), net 2,021 2,021 2,516 - 2,516 INCOME (LOSS) BEFORE INCOME TAXES (200,224) 316,842 116,618 INCOME TAX EXPENSE (22,146) (16,173)(6) (38,319) NET INCOME (LOSS) $(222,370) $300,669 $78,299 BASIC INCOME (LOSS) PER COMMON SHARE $(3.83) $1.35 DILUTED INCOME (LOSS) PER COMMON SHARE $(3.83) $1.28 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,020 58,020 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 58,020 65,012 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to “Adjusted” Net Income Six Months Ended June 30, 2006 and June 30, 2005 (1) To exclude charges related to payments for several product development collaborations ($45.0 million) and the net impact of the adoption of the new stock compensation accounting rules ($8.2 million, representing half of the total stock option compensation expense recorded). (2) To exclude charges associated with the settlement of the PROVIGIL patent litigation ($4.0 million), employee severance costs associated with the European integration and restructuring ($4.0 million) and the net impact of the adoption of the new stock compensation accounting rules ($8.2 million, representing half of the total stock option compensation expense recorded). (3) To exclude the on-going amortization of acquired intangible assets. (4) To exclude charges related to the impairment of an intangible asset. (5) To exclude the write-off of deferred debt issuance costs related to the Zero Coupon convertible subordinated notes. (6) To reflect the tax effect of adjustments at the applicable tax rates. (7) To exclude in-process research and development charges related to the acquisition of Salmedix ($130.1 million) and Vivitrol ($160.0 million). CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended June 30, 2006 United States Europe Total Sales: Provigil $167,928 $9,116 $177,044 Gabitril 16,206 1,371 17,577 CNS Disorders 184,134 10,487 194,621 Pain 165,694 6,460 172,154 Other 13,299 50,651 63,950 $363,127 $67,598 $430,725 Three Months Ended June 30, 2005 United States Europe Total Sales: Provigil $119,993 $9,925 $129,918 Gabitril 14,144 1,540 15,684 CNS Disorders 134,137 11,465 145,602 Pain 87,752 4,088 91,840 Other 11,550 23,616 35,166 $233,439 $39,169 $272,608 % Increase (Decrease) United States Europe Total Sales: Provigil 40% (8%) 36% Gabitril 15% (11%) 12% CNS Disorders 37% (9%) 34% Pain 89% 58% 87% Other 15% 114% 82% 56% 73% 58% Six Months Ended June 30, 2006 United States Europe Total Sales: Provigil $307,479 $18,138 $325,617 Gabitril 27,562 2,787 30,349 CNS Disorders 335,041 20,925 355,966 Pain 278,028 11,628 289,656 Other 28,369 102,321 130,690 $641,438 $134,874 $776,312 Six Months Ended June 30, 2005 United States Europe Total Sales: Provigil $212,142 $17,906 $230,048 Gabitril 38,845 3,229 42,074 CNS Disorders 250,987 21,135 272,122 Pain 186,620 7,145 193,765 Other 20,744 52,586 73,330 $458,351 $80,866 $539,217 % Increase (Decrease) United States Europe Total Sales: Provigil 45% 1% 42% Gabitril (29%) (14%) (28%) CNS Disorders 33% (1%) 31% Pain 49% 63% 49% Other 37% 95% 78% 40% 67% 44% CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) June 30, December 31, 2006 2005 CURRENT ASSETS: Cash and cash equivalents $357,742 $205,060 Investments 127,748 279,030 Receivables, net 232,527 199,086 Inventory, net 164,835 137,886 Deferred tax assets, net 165,099 187,436 Other current assets 45,358 40,339 Total current assets 1,093,309 1,048,837 PROPERTY AND EQUIPMENT, net 368,392 323,830 GOODWILL 469,487 471,051 INTANGIBLE ASSETS, net 807,789 742,874 DEFERRED TAX ASSETS, net 215,723 200,629 OTHER ASSETS 17,828 31,985 $2,972,528 $2,819,206 CURRENT LIABILITIES: Current portion of long-term debt $933,403 $933,160 Accounts payable 50,653 53,699 Accrued expenses 225,390 291,744 Total current liabilities 1,209,446 1,278,603 LONG-TERM DEBT 762,535 763,097 DEFERRED TAX LIABILITIES, net 86,250 110,703 OTHER LIABILITIES 55,963 54,632 Total liabilities 2,114,194 2,207,035 STOCKHOLDERS’ EQUITY: Common stock, $0.01 par value 607 584 Additional paid-in capital 1,318,365 1,166,166 Treasury stock, at cost (17,558) (17,125) Accumulated deficit (511,154) (570,072) Accumulated other comprehensive income 68,074 32,618 Total stockholders’ equity 858,334 612,171 $2,972,528 $2,819,206 CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $58,918 $(222,370) Adjustments to reconcile net income (loss) to net cash (used for) provided by operating activities: Deferred income tax expense 23,452 8,399 Tax benefit from stock- based compensation - 733 Depreciation and amortization 62,199 47,612 Amortization of debt issuance costs 252 5,633 Write-off of debt issuance costs associated with Zero Coupon convertible subordinated notes 13,105 - Stock-based compensation expense 22,678 5,087 Loss on disposals of property and equipment 990 658 Impairment charge 12,417 - Acquired in-process research and development - 130,115 Changes in operating assets and liabilities, net of effect from acquisitions: Receivables (30,238) 48,539 Inventory (23,906) (28,580) Other assets (17,441) (18,710) Accounts payable, accrued expenses and deferred revenues (78,573) 17,291 Other liabilities (4,913) 731 Net cash (used for) provided by operating activities 38,940 (4,862) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (62,545) (45,837) Acquisition of Salmedix, net of cash acquired - (130,733) Acquisition of intangible assets (115,000) - Sales and (purchases) of investments, net 152,312 9,614 Net cash used for investing activities (25,233) (166,956) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercises of common stock options 107,962 1,866 Windfall tax benefits from stock-based compensation 21,526 - Acquisition of treasury stock (433) (32) Payments on and retirements of long-term debt (1,593) (1,687) Net proceeds from issuance of convertible subordinated notes - 776,000 Proceeds from sale of warrants - 194,047 Purchase of convertible note hedge - (339,052) Net cash provided by financing activities 127,462 631,142 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 11,513 (3,236) NET INCREASE IN CASH AND CASH EQUIVALENTS 152,682 456,088 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 205,060 574,244 CASH AND CASH EQUIVALENTS, END OF PERIOD $357,742 $1,030,332 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, December 31, 2006 2006 Projected GAAP basic income per common share $0.96 -- $1.06 $2.12 -- $2.32 Product development collaborations $- -- $- $0.74 -- $0.74 PROVIGIL patent litigation settlement costs $- -- $- $0.07 -- $0.07 European integration and restructuring charges $- -- $- $0.07 -- $0.07 Impact of SFAS 123(R) $0.12 -- $0.12 $0.51 -- $0.51 Amortization of current intangibles $0.33 -- $0.33 $1.31 -- $1.31 Impairment charge $- -- $- $0.20 -- $0.20 Write-off of deferred debt issuance
