Cephalon’s New Product Launches Pace Record 2008 Sales
Company Exceeds Sales and Earnings Guidance
Company Reiterates 2009 Earnings Guidance and Introduces Q1 2009 Guidance
Central nervous system (CNS) franchise sales for 2008 increased 15 percent compared to 2007 to
“The growth of AMRIX and the launch of TREANDA helped 2008 sales achieve a new record for the company,” said
The company is reiterating its guidance for 2009 total sales of
Cephalon is introducing first quarter 2009 sales guidance of
Basic adjusted income per common share guidance for both the first quarter 2009 and full-year 2009 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 2008 performance in a conference call with investors beginning at
About Cephalon, Inc.
Founded in 1987, Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and commercialization of many unique products in three core therapeutic areas: central nervous system, pain, and oncology. A member of the Fortune 1000 and the S&P 500 Index, Cephalon currently employs approximately 3,000 people in
The company’s proprietary products in
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 our opportunities in the field of inflammatory disease, current or potential drivers for our future growth, 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. 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,” “Adjusted Net Income Guidance,” “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 Year Ended
December 31, December 31,
------------ ------------
As As
adjusted adjusted
2008(a,b) 2007(b) 2008(a,b) 2007(b)
-------- --------- -------- ---------
REVENUES:
Sales $534,861 $439,497 $1,943,464 $1,727,299
Other revenues 5,277 10,474 31,090 45,339
----- ------ ------ ------
540,138 449,971 1,974,554 1,772,638
------- ------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 99,523 93,721 412,234 345,691
Research and
development 112,039 95,037 362,208 369,115
Selling, general and
administrative 209,041 207,837 840,873 735,799
Settlement reserve - - 7,450 425,000
Restructuring charge 1,442 - 8,415 -
Impairment charge 99,719 - 99,719 -
Acquired in-process
research and
development 31,955 - 41,955 -
Loss on sale of
equipment 17,178 - 17,178 1,022
------ - ------ -----
570,897 396,595 1,790,032 1,876,627
------- ------- --------- ---------
INCOME (LOSS) FROM
OPERATIONS (30,759) 53,376 184,522 (103,989)
------- ------ ------- --------
OTHER INCOME
(EXPENSE):
Interest income 1,386 9,331 16,901 32,816
Interest expense (2,796) (4,561) (28,493) (19,833)
Gain on extinguishment
of debt - - - 5,319
Gain on sale of
investment - - - 5,791
Other income
(expense), net 6,392 2,884 7,880 7,653
----- ----- ----- -----
4,982 7,654 (3,712) 31,746
----- ----- ------ ------
INCOME (LOSS) BEFORE
INCOME TAXES AND
MINORITY INTEREST (25,777) 61,030 180,810 (72,243)
INCOME TAX EXPENSE
(BENEFIT) (16,290) 19,269 (20,665) 121,882
------- ------ ------- -------
NET INCOME (LOSS)
BEFORE MINORITY
INTEREST (9,487) 41,761 201,475 (194,125)
NET LOSS ATTRIBUTABLE
TO MINORITY INTEREST 21,073 - 21,073 -
------ -- ------ --
NET INCOME (LOSS) $11,586 $41,761 $222,548 $(194,125)
======= ======= ======== =========
BASIC INCOME (LOSS)
PER COMMON SHARE $0.17 $0.62 $3.27 $(2.91)
===== ===== ===== ======
DILUTED INCOME (LOSS)
PER COMMON SHARE $0.15 $0.53 $2.92 $(2.91)
===== ===== ===== ======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 68,505 67,187 68,018 66,597
====== ====== ====== ======
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING-
ASSUMING DILUTION 77,823 78,734 76,097 66,597
====== ====== ====== ======
a) We have included the operating results for Acusphere in our
consolidated statements of operations beginning on November 3, 2008
because Acusphere is considered a variable interest entity to which we
are the primary beneficiary. However, we do not have an equity interest
in Acusphere and, therefore, we have allocated the losses attributable to
the minority interest in Acusphere to minority interest. For 2008, the
losses allocated to the minority interest have been limited to the value
of the minority interest recorded as of November 3, 2008 but will not be
limited starting January 1, 2009. For the year ended December 31, 2008,
a total of $21.1 million of net losses were allocated to the minority
interest and $11.7 million of net losses exceeded the minority interest
value.
b) Effective October 1, 2008, we changed our method of accounting for
inventories previously valued using the last-in, first-out (LIFO) method
to the first-in, first-out (FIFO) method and adjusted our results for all
of the periods presented.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended
December 31,
-------------
As adjusted
2008 2007*
---- -----------
GAAP NET INCOME $11,586 $41,761
------- -------
Cost of sales adjustments 27,804 (1) 26,306 (1)
Research and development
adjustments 255 (2) 2,000 (2)
Selling, general and administrative
adjustments 13,215 (3) 11,191 (3)
Restructuring charges 1,442 (4) -
Acquired in-process research and
development 31,955 (5) -
Impairment charges 99,719 (6) -
Minority interest (14,567)(7) -
Loss on sale of equipment 17,178 (8) -
Income taxes (74,918)(9) (18,149)(9)
------- -------
102,083 21,348
ADJUSTED NET INCOME $113,669 $63,109
======== =======
BASIC ADJUSTED INCOME PER COMMON SHARE $1.66 $0.94
===== =====
DILUTED ADJUSTED INCOME PER COMMON SHARE $1.46 $0.80
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 68,505 67,187
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 77,823 78,734
====== ======
* As adjusted for the retrospective application of a change in accounting
method for inventory from LIFO to FIFO.
Notes to Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($23.7 million in 2008; $26.3 million in 2007), accelerated depreciation
related to the CIMA LABS restructuring ($1.6 million in 2008), and
accelerated depreciation related to the proposed divestiture at the
Mitry-Mory facility ($2.5 million in 2008).
(2) To exclude charges related to payments for research and development
collaborations ($2.0 million in 2007) and accelerated depreciation related
to the proposed divestiture at the Mitry-Mory facility ($0.2 million in
2008).
(3) To exclude charges related to certain employee severance costs ($7.2
million in 2007), charges related to the termination payments due to
Takeda Pharmaceuticals North America, Inc. ($1.0 million in 2008), charges
related to the termination payment due to Alkermes ($11.0 million in 2008)
and related severance ($1.2 million in 2008), and a significant one-time
charitable contribution ($4.0 million in 2007).
(4) To exclude costs related to the CIMA LABS restructuring announced in
January 2008.
(5)To exclude charges related to the acquisition of licensed technology
from Acusphere ($17.0 million) and license rights to LUPUZOR from
ImmuPharma PLC ($15.0 million).
(6) To exclude the impairment of the VIVITROL intangible assets ($90.4
million) and charges related to the impairment of Acusphere fixed assets
($9.3 million).
(7) To exclude the portion of non-cash charges related to our agreement
with Acusphere that are reflected in adjustments (5) and (6) above but do
not affect net income because they are attributed to minority interests.
(8) To exclude the loss on sale of equipment related to the VIVITROL
termination.
(9) 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 tax assets and liabilities.
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(In thousands, except per share data)
(Unaudited)
Year Ended
December 31
-----------
As adjusted
2008 2007*
---- -------------
GAAP NET INCOME (LOSS) $222,548 $(194,125)
======== =========
Cost of sales adjustments 139,153 (1) 90,542 (1)
Research and development adjustments 8,268 (2) 43,500 (2)
Selling, general and administrative
adjustments 43,339 (3) 11,191 (3)
Settlement reserve 7,450 (4) 425,000 (4)
Gain on sale of investment - (5) (5,791)(5)
Gain on extinguishment of debt - (6) (5,319)(6)
Interest expense adjustment 11,250 (7) -
Restructuring expense 8,415 (8) -
Acquired in-process research and
development 41,955 (9) -
Impairment charge 99,719 (10) -
Minority interest (14,567)(11) -
Loss on sale of equipment 17,178 (12) -
Income taxes (218,080)(13) (58,608)(13)
-------- -------
144,080 500,515
ADJUSTED NET INCOME $366,628 $306,390
======== ========
BASIC ADJUSTED INCOME PER
COMMON SHARE $5.39 $4.60
===== =====
DILUTED ADJUSTED INCOME PER
COMMON SHARE $4.82 $3.89
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 68,018 66,597
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 76,097 78,684
====== ======
* As adjusted for the retrospective application of a change in accounting
method for inventory from LIFO to FIFO.
Notes to Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($100.7 million in 2008; $90.5 million in 2007), accelerated depreciation
related to the CIMA LABS restructuring ($7.0 million in 2008), accelerated
depreciation related to the proposed divestiture at the Mitry-Mory
facility ($5.4 million in 2008), and the write-off of purchase commitments
in excess of estimated requirements ($26.0 million in 2008).
(2) To exclude charges related to payments for research and development
collaborations ($6.0 million in 2008; $28.5 million in 2007), other
charges related to employee severance costs ($1.8 million in 2008), and
accelerated depreciation related to the proposed divestiture at the
Mitry-Mory facility ($0.5 million in 2008). In 2007, we also excluded the
recognition of a milestone ($15.0 million) related to the FDA's acceptance
of our NDA filing for TREANDA.
(3) To exclude charges related to certain employee severance costs ($3.0
million in 2008; $7.2 million in 2007), charges related to the
termination payments due to Takeda Pharmaceuticals North America, Inc.
($28.2 million in 2008), charges related to the termination payment due
to Alkermes ($11.0 million in 2008) and related severance ($1.2 million
in 2008), and a significant one-time charitable contribution ($4.0 million
in 2007).
(4) In 2008, to exclude charges related to the settlement of
investigations by the Offices of the Attorney General of Connecticut and
Massachusetts and relator attorney fees. In 2007, to exclude the reserve
related to the terms of the agreement in principle reached with the U.S.
Attorney's Office.
(5) To exclude the pre-tax gain related to the sale of certain
investments.
(6) To exclude the forgiveness of a mortgage loan by the Pennsylvania
Industrial Development Board.
(7) To exclude the accrued interest related to the settlement reached with
the U.S. Attorney's Office.
(8) To exclude costs related to the CIMA LABS restructuring announced in
January 2008.
(9) To exclude charges related to the acquisition of licensed technology
from Acusphere ($27.0 million) and license rights to LUPUZOR from
ImmuPharma PLC ($15.0 million).
(10) To exclude the impairment of the VIVITROL intangible assets ($90.4
million) and charges related to the impairment of Acusphere fixed assets
($9.3 million).
(11) To exclude the portion of non-cash charges related to our agreement
with Acusphere that are reflected in adjustments (9) and (10) above but
do not affect net income because they are attributed to minority
interests.
(12) To exclude the loss on sale of equipment related to the VIVITROL
termination.
(13) 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, the settlement of the investigations by the U.S.
Attorney's Office and other changes in tax assets and liabilities. The
2008 amount includes $82.3 million of tax benefits for the settlement with
the U.S. Attorney's Office, for which the related expense was recorded in
2007.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED SALES DETAIL
(In thousands)
(Unaudited)
Three Months Ended
December 31
-----------
2008 2007
----------------------- -------------------------
United United
States Europe Total States Europe Total
------ ------ ----- ------ ------ -----
Sales:
PROVIGIL $266,209 $15,004 $281,213 $208,245 $11,237 $219,482
GABITRIL 14,827 1,587 16,414 10,828 400 11,228
------ ----- ------ ------ --- ------
CNS 281,036 16,591 297,627 219,073 11,637 230,710
ACTIQ 26,020 12,807 38,827 42,310 12,027 54,337
Generic
OTFC 19,915 - 19,915 31,471 - 31,471
FENTORA 38,609 - 38,609 33,912 - 33,912
AMRIX 26,242 - 26,242 8,401 - 8,401
------ - ------ ----- - -----
Pain 110,786 12,807 123,593 116,094 12,027 128,121
TREANDA 36,200 - 36,200 - - -
Other
Oncology 4,307 21,082 25,389 3,517 19,671 23,188
----- ------ ------ ----- ------ ------
Oncology 40,507 21,082 61,589 3,517 19,671 23,188
Other 11,672 40,380 52,052 11,879 45,599 57,478
------ ------ ------ ------ ------ ------
$444,001 $90,860 $534,861 $350,563 $88,934 $439,497
======== ======= ======== ======== ======= ========
%
Increase
(Decrease)
----------
United
States Europe Total
------- ------ -----
Sales:
PROVIGIL 28 34 28
GABITRIL 37 297 46
CNS 28 43 29
ACTIQ (39) 6 (29)
Generic OTFC (37) - (37)
FENTORA 14 - 14
AMRIX 212 - 212
Pain (5) 6 (4)
TREANDA - - -
Other Oncology 22 7 9
Oncology 1052 7 166
Other (2) (11) (9)
27 2 22
Year Ended December 31
------------------------
2008 2007
------------------------ ---------------------------
United United
States Europe Total States Europe Total
------ ------ ----- ------ ------ -----
Sales:
PROVIGIL $924,986 $63,432 $988,418 $801,639 $50,408 $852,047
GABITRIL 52,441 8,256 60,697 50,642 6,668 57,310
------ ----- ------ ------ ----- ------
CNS 977,427 71,688 1,049,115 852,281 57,076 909,357
ACTIQ 122,980 53,541 176,521 199,407 40,665 240,072
Generic
OTFC 95,760 - 95,760 129,033 - 129,033
FENTORA 155,246 - 155,246 135,136 - 135,136
AMRIX 73,641 - 73,641 8,401 - 8,401
------ - ------ ----- - -----
Pain 447,627 53,541 501,168 471,977 40,665 512,642
TREANDA 75,132 - 75,132 - - -
Other
Oncology 18,566 91,919 110,485 16,561 76,316 92,877
------ ------ ------- ------ ------ ------
Oncology 93,698 91,919 185,617 16,561 76,316 92,877
Other 49,667 157,897 207,564 52,702 159,721 212,423
------ ------- ------- ------ ------- -------
$1,568,419 $375,045 $1,943,464 $1,393,521 $333,778 $1,727,299
========== ======== ========== ========== ======== ==========
%
Increase
(Decrease)
----------
United
States Europe Total
------- ------ -----
Sales:
PROVIGIL 15 26 16
GABITRIL 4 24 6
CNS 15 26 15
ACTIQ (38) 32 (26)
Generic OTFC (26) - (26)
FENTORA 15 - 15
AMRIX 777 - 777
Pain (5) 32 (2)
TREANDA - - -
Other
Oncology 12 20 19
Oncology 466 20 100
Other (6) (1) (2)
13 12 13
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
As adjusted
December 31, December 31,
2008 2007*
---- ----
CURRENT ASSETS:
Cash and cash equivalents $524,459 $818,669
Investments - 7,596
Receivables, net 409,580 276,776
Inventory, net 117,297 98,996
Deferred tax assets, net 224,066 182,268
Other current assets 54,120 43,267
------ ------
Total current assets 1,329,522 1,427,572
PROPERTY AND EQUIPMENT, net 467,449 500,396
GOODWILL 445,332 476,515
INTANGIBLE ASSETS, net 607,332 817,828
DEFERRED TAX ASSETS, net 142,775 141,752
OTHER ASSETS 176,778 132,463
------- -------
$3,169,188 $3,496,526
========== ==========
CURRENT LIABILITIES:
Current portion of long-term debt $1,030,021 $1,237,169
Accounts payable 87,079 91,437
Accrued expenses 304,415 677,184
------- -------
Total current liabilities 1,421,515 2,005,790
LONG-TERM DEBT 3,692 3,788
DEFERRED TAX LIABILITIES, net 77,932 56,540
OTHER LIABILITIES 163,123 138,084
------- -------
Total liabilities 1,666,262 2,204,202
--------- ---------
MINORITY INTEREST - -
-- --
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 717 700
Additional paid-in capital 2,071,607 1,934,965
Treasury stock, at cost (201,705) (158,173)
Accumulated deficit (411,323) (633,871)
Accumulated other comprehensive income 43,630 148,703
------ -------
Total stockholders' equity 1,502,926 1,292,324
--------- ---------
$3,169,188 $3,496,526
========== ==========
* As adjusted for the retrospective application of a change in accounting
method for inventory from LIFO to FIFO.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended
December 31,
As
adjusted
2008 2007*
---- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $222,548 $(194,125)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income tax benefit (50,889) (2,361)
Shortfall tax benefits from stock-
based compensation (511) (360)
Depreciation and amortization 172,457 141,358
Stock-based compensation expense 43,975 46,695
Gain on forgiveness of debt - (5,319)
Gain on sale of investment - (5,791)
Loss on sales of property and
equipment 17,178 1,022
Impairment charges 99,719 -
Acquired in-process research and
development 16,955 -
Minority interest in variable
interest entity (21,073) -
Changes in operating assets and
liabilities:
Receivables (144,975) (601)
Inventory (37,397) (2,328)
Other assets 11,792 (54,838)
Accounts payable and accrued
expenses (376,232) 385,463
Other liabilities 44,576 76,041
------ ------
Net cash provided by (used
for) operating activities (1,877) 384,856
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (75,871) (96,867)
Proceeds from sale of property and
equipment 16,000 -
Investment in third party (31,692) -
Cash balance from consolidation of
variable interest entity 1,654 -
Acquisition of intangible assets (25,825) (107,246)
Proceeds from sale of investment - 12,291
Sales and maturities of available-
for-sale investments 7,596 99,131
Purchases of available-for-sale
investments - (80,255)
- -------
Net cash used for investing
activities (108,138) (172,946)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of common stock
options 43,962 93,900
Windfall tax benefits from stock-based
compensation 7,834 13,993
Acquisition of treasury stock (6,947) (7,105)
Payments on and retirements of long-
term debt (217,743) (3,853)
-------- ------
Net cash (used for) provided by
financing activities (172,894) 96,935
-------- ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (11,301) 13,312
------- ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (294,210) 322,157
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 818,669 496,512
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $524,459 $818,669
======== ========
* As adjusted for the retrospective application of a change in accounting
method for inventory from LIFO to FIFO.
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
March 31, 2009 December 31, 2009
-------------- -----------------
Projected GAAP basic income per
common share $0.93 - $1.03 $5.02 - $5.12
===== ===== ===== =====
Amortization of current
intangibles $0.31 - $0.31 $1.23 - $1.23
Accelerated depreciation adjustment-
CIMA $0.02 - $0.02 $0.09 - $0.09
Accelerated depreciation
adjustment- Mitry-Mory $0.06 - $0.06 $0.22 - $0.22
Restructuring adjustments $0.02 - $0.02 $0.07 - $0.07
Interest expense adjustment for
APB 14-1 $0.16 - $0.16 $0.67 - $0.67
Tax effect of pre-tax adjustments
at the applicable tax rates $(0.20) - $(0.20) $(0.80) - $(0.80)
------ ------ ------ ------
Basic adjusted income per common
share guidance $1.30 - $1.40 $6.50 - $6.60
===== ===== ===== =====
The company's guidance is being issued based on certain assumptions
including:
-- Adjusted effective tax rate of approximately 35.0 percent in 2009;
and
-- Weighted average number of common shares outstanding of 69.0 and 69.5
million shares for the three months ended March 31, 2009 and the
twelve months ended December 31, 2009, respectively.
SOURCE Cephalon, Inc.