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Cephalon Net Sales Increase 9% and Net Cash from Operations Surpasses $200 Million in the Third Quarter 2009

Posted on: Tuesday, 27 October 2009, 15:10 CDT

FRAZER, Pa., Oct. 27 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported third quarter 2009 net sales of $535.2 million, a 9 percent increase compared to net sales of $489.7 million for the third quarter 2008. Basic income per common share for the quarter was $1.38. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $1.70, an increase of 25 percent over the comparable figure of $1.36 for the same period in 2008. Adjusted net income for the third quarter of 2009 was $126.7 million, a 36 percent increase over the comparable $92.9 million for the third quarter of 2008. This exceeded the company's adjusted net income guidance range of $108 to $116 million.

Central nervous system (CNS) franchise net sales were $291.9 million during the quarter, a 7 percent increase compared to the same period last year. Pain franchise reported net sales of $116.3 million, a 1 percent decrease versus third quarter 2008. Oncology franchise net sales were $83.1 million, a 58 percent increase over the same period last year due to strong sales of TREANDA® (bendamustine hydrochloride) of $54.5 million.

During the quarter Cephalon recorded net cash provided by operating activities of $203.6 million bringing the year-to-date cash flow from operations to $517.1 million.

"The exceptional launch of NUVIGIL was the highlight of the quarter," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "In addition, we have assembled the deepest and most diverse pipeline in our history with a variety of small molecules and biologics being studied for pain, oncology, and inflammatory diseases. We look forward to developing this diverse pipeline with the goal of creating important new medicines for patients."

The company is updating its guidance for 2009. Total net sales guidance is now $2.125-$2.175 billion. This includes CNS franchise net sales of $1.150-$1.170 billion, pain franchise net sales of $480-$500 million, oncology franchise net sales of $315-$335 million, and other product net sales of $160-$175 million. Full year R&D and SG&A expense guidance is now $400-$415 million and $800-$815 million, respectively. Adjusted net income guidance remains unchanged at $457-$464 million. Basic adjusted income per common share guidance also remains unchanged at $6.30-$6.40.

Cephalon is introducing 2010 net sales guidance of $2.325 - $2.400 billion. This includes CNS franchise net sales of $1.180 - $1.220 billion, pain franchise net sales of $535 - $570 million, oncology franchise net sales of $400 - $430 million, and other product net sales of $200 - $220 million. R&D and SG&A guidance for 2010 are $470 - $490 million and $840 - $860 million, respectively.

The company also is introducing adjusted net income for 2010 of $495 - $510 million. This represents growth of approximately 9 percent over our 2009 guidance. Cephalon is introducing 2010 adjusted net income per common share guidance of $6.50 - $6.70.

Basic adjusted income per common share for both the full-year 2009 and full-year 2010 is reconciled below and is subject to the assumptions set forth therein. References in this press release to basic income per common share, basic adjusted income per common share, basic adjusted income per common share guidance, adjusted net income, adjusted net income guidance, adjusted net income per common share, adjusted net income per common share guidance refers to those metrics on an "attributable to Cephalon" basis and does not include any income or losses attributable to noncontrolling interests.

Cephalon's management will discuss the company's third 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 +1-785-830-1926 and refer to conference code number 8349052. Investors can listen to the call live by logging on to the company's website at www.cephalon.com and clicking on "Investors" 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® (cyclobenzaprine hydrochloride extended-release capsules), TREANDA® for Injection, FENTORA® (fentanyl buccal tablet) [C-II], PROVIGIL® (modafinil) Tablets [C-IV], TRISENOX® (arsenic trioxide) injection, GABITRIL® (tiagabine hydrochloride), NUVIGIL® (armodafinil) Tablets [C-IV] and ACTIQ® (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; manufacturing development and capabilities; market prospects for its products; net sales, adjusted net income and basic adjusted income per common share guidance for the full-year 2009 and full-year 2010 and SG&A and R&D guidance for the full-year 2009 and full-year 2010; 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 Nine Months Ended Ended September 30, September 30, ------------- ------------- As As adjusted adjusted 2009 2008* 2009 2008* ------- --------- --------- ---------- REVENUES: Net sales $535,223 $489,664 $1,588,610 $1,408,603 Other revenues 14,189 8,818 28,583 25,813 ------- ------- --------- --------- 549,412 498,482 1,617,193 1,434,416 ------- ------- --------- --------- COSTS AND EXPENSES: Cost of sales 90,456 121,477 293,633 312,711 Research and development 99,157 88,325 304,266 250,169 Selling, general and administrative 194,068 222,948 618,314 631,832 Restructuring charges 1,062 1,497 3,944 6,973 Settlement reserve - 7,450 - 7,450 Acquired in-process research and development 6,000 - 46,118 10,000 ------- ------- --------- --------- 390,743 441,697 1,266,275 1,219,135 ------- ------- --------- --------- INCOME FROM OPERATIONS 158,669 56,785 350,918 215,281 ------- ------ ------- ------- OTHER INCOME (EXPENSE): Interest income 1,821 4,002 3,455 15,515 Interest expense (26,495) (19,013) (63,213) (62,080) Other income (expense), net 3,775 (2,284) 42,418 1,488 ------ ------ ------ ----- (20,899) (17,295) (17,340) (45,077) ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 137,770 39,490 333,578 170,204 INCOME TAX EXPENSE (BENEFIT) 42,673 (66,108) 122,659 (17,727) ------ ------- ------- ------- NET INCOME 95,097 105,598 210,919 187,931 NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST 7,625 - 35,150 - ----- ------- ------ ------- NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $102,722 $105,598 $246,069 $187,931 ======== ======== ======== ======== BASIC INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC. $1.38 $1.55 $3.44 $2.77 ===== ===== ===== ===== DILUTED INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC. $1.31 $1.34 $3.17 $2.49 ===== ===== ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO CEPHALON, INC. 74,647 68,118 71,541 67,855 ====== ====== ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- ASSUMING DILUTION ATTRIBUTABLE TO CEPHALON, INC. 78,431 78,920 77,552 75,580 ====== ====== ====== ====== *As adjusted in accordance with the transition provisions of accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) and accounting for noncontrolling interests in consolidated financial statements. CEPHALON, INC. AND SUBSIDIARIES Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc. (Unaudited) Three Months Ended September 30, ------------- 2009 2008 ---- ---- GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $102,722 $105,598 ======== ======== Cost of sales adjustments 21,968 (1) 54,569 (1) Research and development adjustments 1,318 (2) 259 (2) Selling, general and administrative adjustments 635 (3) 27,169 (3) Restructuring charges 1,062 (4) 1,497 (4) Settlement reserve - (5) 7,450 (5) Interest expense adjustment 16,959 (6) 13,932 (6) Other (income) expense adjustment (484) (7) - (7) In-process research and development adjustments 6,000 (8) - (8) Income tax adjustment (23,475) (9) (117,569) (9) ------- -------- 23,983 (12,693) ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $126,705 $92,905 ======== ======= BASIC ADJUSTED INCOME PER COMMON SHARE $1.70 $1.36 ===== ===== DILUTED ADJUSTED INCOME PER COMMON SHARE $1.62 $1.18 ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 74,647 68,118 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 78,431 78,920 ====== ====== Notes to Reconciliation of GAAP Net Income to Adjusted Net Income (1) To exclude the on-going amortization of acquired intangible assets ($26.4M in 2009; $24.0M in 2008), accelerated depreciation related to restructuring ($5.0M in 2009; $4.5M in 2008) and the reserve for modafinil purchase commitments in excess of estimated requirements ($26.0M in 2008), offset by the gain recognized in connection with an agreement to reduce our excess modafinil purchase commitments ($9.5M in 2009). (2) To exclude accelerated depreciation related to restructuring ($0.3M in 2009 and 2008) and charges related to payment for research and development collaboration ($1.0M in 2009). (3) To exclude charges related to the acquisition of Arana Therapeutics Limited ($0.6M in 2009) and charges related to the estimated termination payments due to Takeda Pharmaceuticals North America, Inc. ($27.2M). (4) To exclude costs related to the CIMA restructuring. (5) In 2008, to exclude charges related to the settlement of investigations by the Offices of the Attorney General of Connecticut and Massachusetts and estimated relator attorney fees. (6) In 2009, to exclude non-cash interest expense associated with our convertible debt ($17.0M in 2009; $10.2M in 2008) and accrued interest related to the agreement in principle reached with the U.S. Attorney's Office in Philadelphia ($3.7M in 2008). (7) In 2009, to exclude foreign exchange gains on Australian Dollar acquisition funds related to the acquisition of Arana Therapeutics Limited. (8) To exclude charges incurred in exchange for license rights to certain of XOMA Ltd.'s proprietary antibody library materials. (9) To reflect the tax effect of pre-tax adjustments at applicable tax rates and certain other tax adjustments primarily related to the tax benefits for the settlement with the U.S. Attorney's Office ($13.8M in 2009; $84.5M in 2008), for which the related expense was recorded in 2007 and for the states of Connecticut and Massachusetts, for which the related expense was recorded in the third quarter of 2008. CEPHALON, INC. AND SUBSIDIARIES Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc. (Unaudited) Nine Months Ended September 30, ------------- 2009 2008 ---- ---- GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $246,069 $187,931 ======== ======== Cost of sales adjustments 78,146 (1) 111,349 (1) Research and development adjustments 4,404 (2) 8,013 (2) Selling, general and administrative adjustments 14,379 (3) 30,124 (3) Restructuring charges 3,944 (4) 6,973 (4) Settlement reserve - 7,450 (5) Interest expense adjustment 40,459 (6) 47,633 (6) Other (income)expense adjustment (40,011) (7) - In-process research and development adjustments 46,118 (8) 10,000 (8) Adjustment to noncontrolling interest (819) (9) - Income tax adjustment (54,192) (10) (156,513) (10) ------- -------- 92,428 65,029 ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $338,497 $252,960 ======== ======== BASIC ADJUSTED INCOME PER COMMON SHARE $4.73 $3.73 ===== ===== DILUTED ADJUSTED INCOME PER COMMON SHARE $4.36 $3.35 ===== ===== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 71,541 67,855 ====== ====== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING- ASSUMING DILUTION 77,552 75,580 ====== ====== Notes to Reconciliation of GAAP Net Income to Adjusted Net Income (1) To exclude the on-going amortization of acquired intangible assets ($70.6M in 2009; $77.0M in 2008) and accelerated depreciation related to restructuring ($14.0M in 2009; $8.3M in 2008) and the reserve for modafinil purchase commitments in excess of estimated requirements ($3.0M in 2009; $26.0M in 2008), offset by the gain recognized in connection with an agreement to reduce our excess modafinil purchase commitments ($9.5M in 2009). (2) To exclude accelerated depreciation related to restructuring ($0.9M in 2009; $0.3M in 2008), charges related to payments for several research and development collaborations ($2.0M in 2009; $6.0M in 2008), charges related to our transaction with Arana Therapeutics Limited ($1.5M in 2009) and other charges ($1.8M in 2008) related to employee severance costs. (3) In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($7.8M) and charges related to our settlement with Takeda ($6.5M) which resolves our remaining contractual arrangements. In 2008, to exclude charges related to employee severance costs ($3.0M) and charges related to the estimated termination payments due to Takeda Pharmaceuticals North America, Inc. ($27.2M). (4) To exclude costs related to the CIMA restructuring. (5) To exclude charges related to the settlement of investigations by the Offices of the Attorney General of Connecticut and Massachusetts and estimated relator attorney fees. (6) To exclude non-cash interest expense associated with our convertible debt ($40.5M in 2009; $36.3M in 2008) and accrued interest related to the agreement in principle reached with the U.S. Attorney's Office in Philadelphia ($11.3M in 2008). (7) In 2009, to exclude the following gains and losses related to the acquisition of Arana Therapeutics Limited: - $6.6M gain on pre-bid Arana holdings; - $2.8M loss on contingent consideration (90% ownership incentive payment); - $10.0M gain on the excess of net assets over consideration; - $19.0M gains on foreign exchange derivative instruments; - $5.6M foreign exchange gain on Australian Dollar acquisition funds; and - $1.6M dividend income related to our initial purchase of Arana shares. (8) To exclude charges related to the deconsolidation of Acusphere ($9.3M), the acquisition of worldwide license rights related to LUPUZOR from ImmuPharma ($30.0M), license rights for bendamustine hydrochloride in China and Hong Kong ($0.8M) and license rights to certain of XOMA Ltd.'s proprietary antibody library materials ($6.0M) in 2009 and the license of Acusphere HDDS technology for use in oncology therapeutics in 2008. (9) In 2009 to exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in adjustments (7) above but do not affect net income because they are attributed to noncontrolling interests. (10) To reflect the tax effect of pre-tax adjustments at applicable tax rates and certain other tax adjustments primarily related to the tax benefits for the settlement with the U.S. Attorney's Office ($13.8M in 2009; $84.5M in 2008), for which the related expense was recorded in 2007 and for the states of Connecticut and Massachusetts, for which the related expense was recorded in the third quarter of 2008. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended September 30, ------------- 2009 2008 ---- ---- United United States Europe Total States Europe Total ------- ------ ----- ------- ------ ----- Net sales: PROVIGIL $241,301 $16,693 $257,994 $241,366 $17,793 $259,159 NUVIGIL 20,991 - 20,991 - - - GABITRIL 11,560 1,340 12,900 12,176 2,337 14,513 ------ ----- ------ ------ ----- ------ CNS 273,852 18,033 291,885 253,542 20,130 273,672 ACTIQ 19,578 13,663 33,241 21,392 14,401 35,793 Generic OTFC 19,332 - 19,332 19,569 - 19,569 FENTORA 35,779 1,201 36,980 41,330 - 41,330 AMRIX 26,703 - 26,703 20,512 - 20,512 ------ ----- ------ ------ - ------ Pain 101,392 14,864 116,256 102,803 14,401 117,204 TREANDA 54,532 - 54,532 24,551 - 24,551 Other 4,010 24,526 28,536 4,691 23,195 27,886 ----- ------ ------ ----- ------ ------ Oncology 58,542 24,526 83,068 29,242 23,195 52,437 Other 6,632 37,382 44,014 11,351 35,000 46,351 ------- ------ ------ ------ ------ ------ $440,418 $94,805 $535,223 $396,938 $92,726 $489,664 ======== ======= ======== ======== ======= ======== % Increase (Decrease) ---------- United States Europe Total ------- ------ ----- Net sales: PROVIGIL -% (6%) -% NUVIGIL - - - GABITRIL (5) (43) (11) CNS 8 (10) 7 ACTIQ (8) (5) (7) Generic OTFC (1) - (1) FENTORA (13) - (11) AMRIX 30 - 30 Pain (1) 3 (1) TREANDA 122 - 122 Other (15) 6 2 Oncology 100 6 58 Other (42) 7 (5) 11% 2% 9% Nine Months Ended September 30, ------------- 2009 2008 ---- ---- United United States Europe Total States Europe Total ------- ------ ------- ------- ------ ----- Net sales: PROVIGIL $726,313 $47,111 $773,424 $658,777 $48,428 $707,205 NUVIGIL 37,777 - 37,777 - - - GABITRIL 37,058 3,871 40,929 37,614 6,669 44,283 ------ ----- ------ ------ ----- ------ CNS 801,148 50,982 852,130 696,391 55,097 751,488 ACTIQ 71,148 38,122 109,270 96,960 40,734 137,694 Generic OTFC 66,834 - 66,834 75,845 - 75,845 FENTORA 99,686 2,438 102,124 116,637 - 116,637 AMRIX 83,807 - 83,807 47,399 - 47,399 ------ ------ ------ ------ - ------ Pain 321,475 40,560 362,035 336,841 40,734 377,575 TREANDA 160,549 - 160,549 38,932 - 38,932 Other 13,529 67,726 81,255 14,259 70,837 85,096 ------ ------ ------ ------ ------ ------ Oncology 174,078 67,726 241,804 53,191 70,837 124,028 Other 26,167 106,474 132,641 37,995 117,517 155,512 ------ ------- ------- ------ ------- ------- $1,322,868 $265,742 $1,588,610 $1,124,418 $284,185 $1,408,603 ========== ======== ========== ========== ======== ========== % Increase (Decrease) ---------- United States Europe Total ------- ------ ----- Net sales: PROVIGIL 10% (3%) 9% NUVIGIL - - - GABITRIL (1) (42) (8) CNS 15 (7) 13 ACTIQ (27) (6) (21) Generic OTFC (12) - (12) FENTORA (15) - (12) AMRIX 77 - 77 Pain (5) - (4) TREANDA 312 - 312 Other (5) (4) (5) Oncology 227 (4) 95 Other (31) (9) (15) 18% (6%) 13% CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) As adjusted September 30, December 31, 2009 2008* ---- ---- CURRENT ASSETS: Cash and cash equivalents $1,453,814 $524,459 Short term investments 131,403 - Receivables, net 329,330 409,580 Inventory, net 240,349 117,297 Deferred tax assets, net 255,136 224,066 Other current assets 67,104 54,120 ------ ------ Total current assets 2,477,136 1,329,522 INVESTMENTS 17,333 8,081 PROPERTY AND EQUIPMENT, net 459,381 467,449 GOODWILL 570,417 445,332 INTANGIBLE ASSETS, net 1,080,791 607,332 DEFERRED TAX ASSETS, net 1,224 46,074 DEBT ISSUANCE COSTS 20,112 11,838 OTHER ASSETS 32,313 167,314 ------ ------- $4,658,707 $3,082,942 ========== ========== CURRENT LIABILITIES: Current portion of long-term debt, net $810,081 $781,618 Accounts payable 94,982 87,079 Accrued expenses 408,752 304,415 ------- ------- Total current liabilities 1,313,815 1,173,112 LONG-TERM DEBT 357,555 3,692 DEFERRED TAX LIABILITIES, net 197,333 77,932 OTHER LIABILITIES 144,877 163,123 ------- ------- Total liabilities 2,013,580 1,417,859 --------- --------- REDEEMABLE EQUITY 217,861 248,403 ------- ------- EQUITY: Cephalon Stockholders' Equity Common stock, $0.01 par value 776 717 Additional paid-in capital 2,505,552 2,095,324 Treasury stock, at cost (201,734) (201,705) Accumulated deficit (275,217) (521,286) Accumulated other comprehensive income 114,146 43,630 ------- ------ Total Cephalon stockholders' equity 2,143,523 1,416,680 Noncontrolling Interest 283,743 - ------- - Total equity 2,427,266 1,416,680 --------- --------- $4,658,707 $3,082,942 ========== ========== *As adjusted in accordance with the transition provisions of accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) and accounting for noncontrolling interests in consolidated financial statements. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30, ------------- As adjusted 2009 2008* ---- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $210,919 $187,931 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 136,403 128,772 Deferred income tax benefit (40,182) (22,761) Stock-based compensation expense 36,710 32,543 Amortization of debt discount and debt issuance costs 41,273 36,383 Gain on foreign exchange contracts (26,754) - Gain on acquisition of Arana (10,008) - Loss on disposals of property and equipment - 2,740 Impairment charges - 1,164 Acquired in-process research and development from Acusphere deconsolidation 8,366 - Shortfall tax benefits from stock- based compensation (38) (451) Other (5,041) (396) Changes in operating assets and liabilities: Receivables 94,204 (74,258) Inventory (7,060) (14,557) Other assets 32,206 (99,008) Accounts payable, accrued expenses and deferred revenues 89,192 34,526 Other liabilities (43,059) 70,149 ------- ------ Net cash provided by operating activities 517,131 282,777 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (43,647) (55,689) Acquisition of intangible assets - (25,575) Cash balance from consolidation of variable interest entity 52,563 - Investment in Ception (75,000) - Acquisition of Arana, net of cash acquired (232,527) - Purchases of investments (9,292) (6,242) Proceeds from foreign exchange contracts 26,754 - Sales and maturities of available-for-sale investments 5,074 7,596 ----- ----- Net cash used for investing activities (276,075) (79,910) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from sale of common stock 288,000 - Proceeds from exercises of common stock options 6,701 37,185 Windfall tax benefits from stock-based compensation 1,259 4,592 Acquisition of treasury stock (29) (24) Payments on and retirements of long-term debt (11,246) (216,093) Net proceeds from issuance of convertible subordinated notes 484,719 - Proceeds from sale of warrants 37,640 - Purchase of convertible note hedge (121,040) - -------- - Net cash provided by (used for) financing activities 686,004 (174,340) ------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 2,295 (601) ----- ---- NET INCREASE IN CASH AND CASH EQUIVALENTS 929,355 27,926 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 524,459 818,669 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $1,453,814 $846,595 ========== ======== *As adjusted in accordance with the transition provisions of accounting for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) and accounting for 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) Twelve Months Twelve Months Ended Ended December 31, December 31, 2009 2010 ------------- ------------ Projected GAAP basic income per common share $4.69 - $4.79 $4.95 - $5.15 ===== ===== ===== ===== Amortization of current intangibles $1.34 - $1.34 $1.20 - $1.20 Accelerated depreciation adjustment- CIMA $0.09 - $0.09 $0.08 - $0.08 Accelerated depreciation adjustment- Mitry-Mory $0.18 - $0.18 $0.09 - $0.09 Research and development adjustments $0.05 - $0.05 $- - $- Selling, general and administrative adjustments $0.20 - $0.20 $- - $- Cost of goods sold adjustments $(0.09) - $(0.09) $- - $- Restructuring adjustments $0.07 - $0.07 $0.08 - $0.08 Acquired in-process research and development adjustments $0.64 - $0.64 $- - $- Other income (expense) adjustments $(0.56) - $(0.56) $- - $- Interest expense adjustments $0.80 - $0.80 $0.86 - $0.86 Tax effect of pre-tax adjustments at the applicable tax rates $(1.11) - $(1.11) $(0.76) - $(0.76) ------ ------ ------ ------ Basic adjusted income per common share guidance $6.30 - $6.40 $6.50 - $6.70 ===== ===== ===== ===== The company's guidance is being issued based on certain assumptions including: - Adjusted effective tax rate of approximately 34.0 percent in 2009 and 33.0 percent in 2010; and - Weighted average number of common shares outstanding of 72.5 and 76.2 million shares for the twelve months ended December 31, 2009 and 2010, respectively.

Contacts: Media: Sheryl Williams 610-738-6493 swilliam@cephalon.com Investors: Robert (Chip) Merritt 610-738-6376 cmerritt@cephalon.com

SOURCE Cephalon, Inc.

Source: PR Newswire

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