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Cephalon Reports Strong Sales and Earnings for the First Quarter 2009

Posted on: Tuesday, 5 May 2009, 15:10 CDT

TREANDA and AMRIX Lead Sales Growth of 19 Percent over First Quarter 2008

Oncology Sales Climb 179 Percent to Reach 15 Percent of Total Sales

Success in Business Development and Research & Development Bolster Pipeline

NUVIGIL OSA Comorbid Major Depressive Disorder Study is Positive

FRAZER, Pa., May 5 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported first quarter 2009 sales of $514.4 million, compared to sales of $433.9 million for the first quarter 2008 and the company's sales guidance of $510 - $530 million. Basic income per common share for the quarter was $0.85. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $1.47, an increase of 31 percent over the comparable figure of $1.12 for the same period in 2008. This exceeded the company's earnings guidance range of $1.30 to $1.40.

Central nervous system (CNS) franchise sales were $269.6 million during the quarter, a 19 percent increase compared to the same period last year. Pain franchise reported sales of $122.2 million, a 3 percent decrease versus first quarter 2008, with growing sales of AMRIX(R) (cyclobenzaprine hydrochloride extended-release capsules) largely offsetting the continued generic erosion of the company's fentanyl-based products. Oncology franchise sales were $76.6 million, a 179 percent increase over the same period last year due to the strong launch of TREANDA(R) (bendamustine hydrochloride) that began in April 2008.

During the quarter the company announced three transactions. The first was an option agreement to acquire Ception Therapeutics and its lead product candidate reslizumab for the treatment of pediatric eosinophilic esophagitis and eosinophilic asthma in adults. The second was the exercise of an option to license worldwide rights to ImmuPharma's product, Lupuzor(TM), for the treatment of Systemic Lupus Erythematosus. The third was the launch of a takeover offer for Australian biotechnology company Arana Therapeutics, and its pipeline of biologic compounds for inflammatory diseases and cancer.

The company also recently obtained statistically significant results from three clinical trials studying NUVIGIL(R) (armodafinil) Tablets [C-IV]. The Phase 4 study of NUVIGIL in obstructive sleep apnea (OSA) patients with comorbid depression was positive. In addition the company previously announced positive results from a Phase 2 clinical trial of NUVIGIL as adjunctive therapy for treating major depressive disorder in adults with bipolar I disorder and its plan to advance to Phase 3 clinical trials for this indication. The company also announced positive results from a Phase 3 clinical trial of NUVIGIL as a treatment of excessive sleepiness associated with jet lag disorder and its plan to file a supplemental new drug application with the FDA during the third quarter of 2009 for this indication.

"While the economy and various healthcare reform proposals create uncertainty for investors, we are taking steps to continue to build a world class biopharmaceutical company," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "In the short run, AMRIX and TREANDA will supply growth. Longer term, we expect that our recent business development transactions will enable us to create a new franchise in inflammatory diseases and our clinical development work with NUVIGIL will allow it to reach new markets."

The company is updating its guidance for 2009. Total sales guidance remains $2.175-$2.225 billion. This includes CNS franchise sales of $1.16-$1.19 billion, pain franchise sales which were decreased to $530-$555 million, oncology franchise sales which were increased to $300-$320 million, and other product sales which were decreased to $150-$175 million. Full year R&D and SG&A guidance remains at $440-$460 million and $840-$860 million, respectively. Adjusted net income guidance remains at $452-$459 million and basic adjusted income per common share guidance remains at $6.50-$6.60.

For the second quarter 2009, Cephalon is introducing sales guidance of $515-$535 million, adjusted net income guidance of $96.6-$103.5 million and basic adjusted income per common share guidance of $1.40-$1.50.

Basic adjusted income per common share guidance for both the second 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 first quarter 2009 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today. To participate in the conference call, dial +1-913-312-1232 and refer to conference code number 9819274. 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 commercialization of many unique products in four core therapeutic areas: central nervous system, inflammatory diseases, pain and oncology. A member of the Fortune 1000 and the S&P 500 Index, 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 has a growing presence in Europe, the Middle East and Africa. The Cephalon European headquarters and pre-clinical development center are located in Maisons-Alfort, France, just outside of Paris. Key business units are located in England, Ireland, France, Germany, Italy, Spain, the Netherlands for the Benelux countries, and Poland for Eastern and Central European countries. Cephalon Europe markets more than 30 products in four areas: central nervous system, pain, primary care and oncology.

The company's proprietary products in the United States include: AMRIX(R), TREANDA(R) for Injection, FENTORA(R) (fentanyl buccal tablet) [C-II], PROVIGIL(R) (modafinil) Tablets [C-IV], TRISENOX(R) (arsenic trioxide) injection, GABITRIL(R) (tiagabine hydrochloride), NUVIGIL(R) 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; creation of a new therapeutic focus on inflammatory diseases; interpretation of clinical results, including recent results of NUVIGIL clinical studies; prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products, including the growth and acceptance of Amrix and Treanda in the market; sales, adjusted net income and basic adjusted income per common share guidance for the second quarter and full-year 2009 and SG&A and R&D guidance for the full-year 2009; 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.

Contacts: Media: Sheryl Williams 610.738.6493 swilliam@cephalon.com Investors: Robert (Chip) Merritt 610.738.6376 cmerritt@cephalon.com CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 31, ------------------ As adjusted 2009 2008* ---- ------------ REVENUES: Sales $514,366 $433,897 Other revenues 5,602 9,322 ----- ----- 519,968 443,219 ------- ------- COSTS AND EXPENSES: Cost of sales 97,770 89,916 Research and development 103,024 81,435 Selling, general and administrative 200,590 198,988 Restructuring charges 1,637 3,911 Acquired in-process research and development 30,750 10,000 ------ ------ 433,771 384,250 ------- ------- INCOME FROM OPERATIONS 86,197 58,969 ------ ------ OTHER INCOME (EXPENSE): Interest income 704 6,601 Interest expense (16,604) (22,278) Other income, net 6,539 5,319 ----- ----- (9,361) (10,358) ------ ------- INCOME BEFORE INCOME TAXES 76,836 48,611 INCOME TAX EXPENSE 33,054 18,169 ------ ------ NET INCOME 43,782 30,442 NET LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST 14,801 - ------ --- NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $58,583 $30,442 ======= ======= BASIC INCOME PER COMMON SHARE $0.85 $0.45 ===== ===== DILUTED INCOME PER COMMON SHARE $0.75 $0.41 ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO CEPHALON, INC. 68,792 67,665 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION ATTRIBUTABLE TO CEPHALON, INC. 77,993 74,286 ====== ====== * As adjusted for FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements." CEPHALON, INC. AND SUBSIDIARIES Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (Unaudited) Three Months Ended March 31, ---------------------------- 2009 2008 ---- ---- GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $58,583 $30,442 ------- ------- Cost of sales adjustments 25,708 (1) 27,888 (1) Research and development adjustments 1,296 (2) 7,754 (2) Selling, general and administrative adjustments 870 (3) 2,955 (3) Restructuring charges 1,637 (4) 3,911 (4) Acquired in-process research and development 30,750 (5) 10,000 (5) Other income (expense) (6,919) (6) - (6) Interest expense 10,535 (7) 17,034 (7) Income taxes (21,376) (8) (24,390) (8) ------- ------- 42,501 45,152 ------ ------ ADJUSTED NET INCOME $101,084 $75,594 ======== ======= BASIC ADJUSTED INCOME PER COMMON SHARE $1.47 $1.12 ===== ===== DILUTED ADJUSTED INCOME PER COMMON SHARE $1.30 $1.02 ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 68,792 67,665 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 77,993 74,286 ====== ====== Notes to Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income (1) To exclude the on-going amortization of acquired intangible assets ($21.2M in 2009; $26.2M in 2008) and accelerated depreciation related to restructuring ($4.5M in 2009; $1.7M in 2008). (2) To exclude accelerated depreciation related to restructuring ($0.3M in 2009), charges related to payment for research and development collaboration ($1.0M in 2009; $6.0M in 2008), as well as other charges ($1.8M in 2008) related to severance. (3) To exclude charges related to the acquisition of Arana Therapeutics Limited stock in 2009 and employee severance costs in 2008. (4) To exclude costs related to CIMA restructuring. (5) To exclude charges related to the acquisition of worldwide license rights related to LUPUZOR(TM) from ImmuPharma ($30.0M) and license rights for bendamustine hydrochloride in China and Hong Kong ($0.8M) in 2009 and the license of Acusphere HDDS technology for use in oncology therapeutics in 2008. (6) To exclude gains on currency forward contracts and options used to manage foreign exchange rate risk related to the Arana takeover offer and Arana dividend income. (7) To exclude interest expense associated with the implementation of APB 14-1 ($10.5M in 2009 and $13.3M in 2008) and accrued interest related to the agreement in principle reached with U.S. Attorney's Office in Philadelphia ($3.8M in 2008). (8) 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 ($19.5M in 2008) and the applicable tax impact related to the implementation of APB 14-1 ($4.9M in 2008). CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended March 31, ------------------------------------------------------ 2009 2008 --------------------------- ------------------------ United United States Europe Total States Europe Total ------- ------ ----- ------- ------ ----- Sales: PROVIGIL $238,429 $14,933 $253,362 $198,469 $14,766 $213,235 GABITRIL 14,749 1,505 16,254 11,131 2,293 13,424 ------ ----- ------ ------ ----- ------ CNS 253,178 16,438 269,616 209,600 17,059 226,659 ACTIQ 26,417 11,747 38,164 37,517 12,203 49,720 Generic OTFC 24,112 - 24,112 27,318 - 27,318 FENTORA 33,290 423 33,713 38,933 - 38,933 AMRIX 26,237 - 26,237 9,768 - 9,768 ------ --- ------ ----- --- ----- Pain 110,056 12,170 122,226 113,536 12,203 125,739 TREANDA 50,197 - 50,197 - - - Other Oncology 5,326 21,032 26,358 5,188 22,270 27,458 ----- ------ ------ ----- ------ ------ Oncology 55,523 21,032 76,555 5,188 22,270 27,458 Other 11,155 34,814 45,969 13,527 40,514 54,041 ------ ------ ------ ------ ------ ------ $429,912 $84,454 $514,366 $341,851 $92,046 $433,897 ======== ======= ======== ======== ======= ======== % Increase (Decrease) --------------------------- United States Europe Total ------- ------ ----- Sales: PROVIGIL 20% 1% 19% GABITRIL 33 (34) 21 CNS 21 (4) 19 ACTIQ (30) (4) (23) Generic OTFC (12) - (12) FENTORA (14) - (13) AMRIX 169 - 169 Pain (3) 0 (3) TREANDA - - - Other Oncology 3 (6) (4) Oncology 970 (6) 179 Other (18) (14) (15) 26% (8%) 19% CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) As adjusted March 31, December 31, 2009 2008* ---- ---- CURRENT ASSETS: Cash and cash equivalents $614,576 $524,459 Receivables, net 351,098 409,580 Inventory, net 121,337 117,297 Deferred tax assets, net 220,033 224,066 Other current assets 69,398 54,120 ------ ------ Total current assets 1,376,442 1,329,522 INVESTMENTS 60,677 8,081 PROPERTY AND EQUIPMENT, net 458,647 467,449 GOODWILL 559,954 445,332 INTANGIBLE ASSETS, net 970,305 607,332 DEFERRED TAX ASSETS, net 334 46,074 OTHER ASSETS 151,807 179,152 ------- ------- $3,578,166 $3,082,942 ========== ========== CURRENT LIABILITIES: Current portion of long-term debt, net $794,230 $781,618 Accounts payable 95,169 87,079 Accrued expenses 329,857 304,415 ------- ------- Total current liabilities 1,219,256 1,173,112 LONG-TERM DEBT 5,466 3,692 DEFERRED TAX LIABILITIES, net 165,384 77,932 OTHER LIABILITIES 159,877 163,123 ------- ------- Total liabilities 1,549,983 1,417,859 --------- --------- REDEEMABLE EQUITY 238,404 248,403 ------- ------- EQUITY: Cephalon Stockholders' Equity Common stock, $0.01 par value 718 717 Additional paid-in capital 2,121,773 2,095,324 Treasury stock, at cost (201,734) (201,705) Accumulated deficit (462,703) (521,286) Accumulated other comprehensive income 39,610 43,630 ------ ------ Total Cephalon stockholders' equity 1,497,664 1,416,680 Noncontrolling Interest 292,115 - ------- --- Total equity 1,789,779 1,416,680 --------- --------- $3,578,166 $3,082,942 ========== ========== * As adjusted for FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements." CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, --------------------- As adjusted 2009 2008* ------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $43,782 $30,442 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax expense (benefit) (9,036) 1,266 Depreciation and amortization 41,952 41,577 Stock-based compensation expense 11,560 10,950 Loss on disposals of property and equipment 109 252 Amortization of debt discount and debt issuance costs 10,558 13,344 Gain on foreign exchange contracts (13,084) - Changes in operating assets and liabilities: Receivables 55,668 (11,126) Inventory (7,697) (9,567) Other assets 9,683 (7,961) Accounts payable, accrued expenses and deferred revenues 27,458 (18,572) Other liabilities 1,756 13,639 ----- ------ Net cash provided by operating activities 172,709 64,244 ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (14,958) (18,295) Acquisition of intangible assets - (25,046) Cash balance from consolidation of variable interest entity 52,563 - Investment in Ception (75,000) - Purchases of investments (9,082) - Proceeds from foreign exchange contract 7,732 - Sales and maturities of available-for-sale investments - 7,596 Purchases of available-for-sale investments (41,390) - ------- --- Net cash used for investing activities (80,135) (35,745) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from exercises of common stock options 4,540 5,277 Windfall tax benefits from stock-based compensation 351 234 Acquisition of treasury stock (29) (24) Payments on and retirements of long-term debt (3,283) (1,029) ------ ------ Net cash provided by financing activities 1,579 4,458 ----- ----- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (4,036) 4,220 ------ ----- NET INCREASE IN CASH AND CASH EQUIVALENTS 90,117 37,177 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 524,459 818,669 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $614,576 $855,846 ======== ======== * As adjusted for FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" and SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements." 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 June 30, 2009 December 31, 2009 ------------- ----------------- Projected GAAP basic income per common share $1.02 - $1.12 $4.81 - $4.91 ===== ===== ===== ===== Amortization of current intangibles $0.31 - $0.31 $1.22 - $1.22 Accelerated depreciation adjustment-CIMA $0.02 - $0.02 $0.09 - $0.09 Accelerated depreciation adjustment-Mitry-Mory $0.06 - $0.06 $0.21 - $0.21 Research and development adjustments $- - $- $0.01 - $0.01 Selling, general and administrative adjustments $- - $- $0.01 - $0.01 Restructuring adjustments $0.02 - $0.02 $0.07 - $0.07 Acquired in-process research and development adjustments $- - $- $0.44 - $0.44 Other income (expense) adjustments $- - $- $(0.10) - $(0.10) Interest expense adjustments $0.16 - $0.16 $0.62 - $0.62 Tax effect of pre-tax adjustments at the applicable tax rates $(0.19) - $(0.19) $(0.88) - $(0.88) ------ ------ ------ ------ Basic adjusted income per common share guidance $1.40 - $1.50 $6.50 - $6.60 ===== ===== ===== ===== The company's guidance is being issued based on certain assumptions including: - Adjusted effective tax rate of approximately 34.0 percent in 2009; and - Weighted average number of common shares outstanding of 69.0 and 69.5 million shares for the three months ended June 30, 2009 and the twelve months ended December 31, 2009, respectively.

SOURCE Cephalon, Inc.

Source: PR Newswire

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