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Cephalon Reports Strong First Quarter Earnings
Date:5/1/2008

AMRIX Growing Rapidly

TREANDA Successfully Launched in April

FRAZER, Pa., May 1 /PRNewswire-FirstCall/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported first quarter 2008 sales of $433.9 million, compared to sales of $423.9 million for the first quarter 2007 and the company's sales guidance of $435 - $445 million. Basic income per common share for the quarter was $0.57. Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $1.12, compared to $1.45 for the same period in 2007 and the company's earnings guidance range of $1.00 to $1.10.

Central nervous system (CNS) franchise sales were $226.7 million during the quarter, a 4 percent increase compared to the same period last year. Pain franchise reported strong sales of $125.7 million, a decrease of only 4 percent versus 2007, with sales of AMRIX(R) (cyclobenzaprine hydrochloride extended-release capsules) and FENTORA(R) (fentanyl buccal tablet) [C-II] largely offsetting the continued generic erosion of ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II]. Oncology franchise sales were $27.5 million and do not include sales of TREANDA(R) (bendamustine hydrochloride), which was launched in April.

"We are receiving overwhelmingly positive feedback from the TREANDA launch," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "In addition, prescriptions for AMRIX doubled compared to last quarter as acceptance of this product in the market continues to grow. These two products will continue to drive Cephalon sales growth."

The company is updating its guidance for 2008. Total sales guidance is $1.83-$1.88 billion. This includes CNS franchise sales of $975-$1,000 million, pain franchise sales of $500-$525 million, oncology franchise sales of $125- $150 million, and other product sales of $200-$225 million. Full year SG&A and R&D guidance is $740-$760 million and $340-$360 million, respectivel Stock-based compensation expense 10,950 11,699

Loss on disposals of property and

equipment 252 -

Changes in operating assets and

liabilities:

Receivables (11,126) (36,850)

Inventory (9,567) (14,585)

Other assets (7,961) (12,523)

Accounts payable, accrued expenses

and deferred revenues (18,572) (9,160)

Other liabilities 13,639 2,584

Net cash provided by operating

activities 64,244 58,548

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment (18,295) (21,384)

Acquisition of intangible assets (25,046) -

Sales and maturities of

available-for-sale investments 7,596 18,023

Purchases of available-for-sale

investments - (4,786)

Net cash used for investing

activities (35,745) (8,147)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercises of common

stock options 5,277 17,479

Windfall tax benefits from stock-based

compensation 234 1,431

Acquisition of treasury stock (24) (128)

Payments on and retirements of

long-term debt (1,029) (953)

Net cash provided by financing

activities 4,458 17,829

EFFECT OF EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS 4,220 2,688

NET INCREASE IN CASH AND CASH EQUIVALENTS 37,177 70,918

CASH AND CASH EQUIVALENTS, BEGINNING OF

PERIOD 818,669 496,512

CASH AND CASH EQUIVALENTS, END OF PERIOD $855,846 $567,430

CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of Projected GAAP Basic Income per Common Share

to Basic Adjusted Income Per Common Share Guidance

(Unaudited)

Three Months Ended Twelve Months Ended

June 30, 2008 December 31, 2008

Projected GAAP basic income

per common share $0.81 - $0.91 $3.75 - $3.85

Amortization of current intangibles $0.40 - $0.40 $1.58 - $1.58

Accelerated depreciation adjustment $0.03 - $0.03 $0.10 - $0.10

Research and development adjustments $- - $- $0.11 - $0.11

Selling, general and administrative

adjustments $- - $- $0.04 - $0.04

In-process research and development

adjustment $- - $- $0.15 - $0.15

Restructuring adjustments $0.02 - $0.02 $0.10 - $0.10

Interest expense adjustment $- - $- $0.06 - $0.06

Tax effect of pre-tax adjustments at

the applicable tax rates $(0.16)- $(0.16) $(0.79)- $(0.79)

Basic adjusted income per common share

guidance $1.10 - $1.20 $5.10 - $5.20

The company's guidance is being issued based on certain assumptions including:

-- Entrance into the market of an additional generic version of ACTIQ in

the second half of 2008;

-- Adjusted effective tax rate of approximately 36 to 37 percent; and

-- Weighted average number of common shares outstanding of 67.8 million

shares for the three months ended June 30, 2008 and for the twelve

months ended December 31, 2008, respectively.

y. Adjusted net income guidance is $346-$353 million and basic adjusted income per common share guidance is $5.10-$5.20.

For the second quarter of 2008, Cephalon is introducing sales guidance of $455-$465 million, adjusted net income guidance of $74.6-$81.4 million and basic adjusted income per common share guidance of $1.10-$1.20.

Basic adjusted income per common share guidance for both the second quarter 2008 and full-year 2008 is reconciled below and is subject to the assumptions set forth therein.

Cephalon's management will discuss the company's second quarter 2008 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today. To participate in the conference call, dial +1-913-981-5581 and refer to conference code number 7561641. Investors can listen to the call live by logging on to the company's website at http://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. A member of the Fortune 1000, Cephalon currently employs close to 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, TRISENOX(R) (arsenic trioxide), AMRIX, TREANDA, VIVITROL(R) (naltrexone for extended-release injectable suspension), GABITRIL(R) (tiagabine hydrochloride), and ACTIQ. 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, including the growth and acceptance of AMRIX in the market and the relative success of the recent launch of Treanda; sales, adjusted net income and basic adjusted income per common share guidance for the second quarter and full-year 2008 and SG&A and R&D guidance for the full-year 2008; 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

March 31,

2008 2007

REVENUES:

Sales $433,897 $423,879

Other revenues 9,322 13,155

443,219 437,034

COSTS AND EXPENSES:

Cost of sales 89,916 86,546

Research and development 81,435 83,958

Selling, general and administrative 198,984 152,454

Restructuring charges 3,911 -

Acquired in-process research and development 10,000 -

384,246 322,958

INCOME FROM OPERATIONS 58,973 114,076

OTHER INCOME (EXPENSE):

Interest income 6,601 6,576

Interest expense (8,994) (4,595)

Other income, net 5,315 2,756

2,922 4,737

INCOME BEFORE INCOME TAXES 61,895 118,813

INCOME TAX EXPENSE 23,044 43,628

NET INCOME $38,851 $75,185

BASIC INCOME PER COMMON SHARE $0.57 $1.14

DILUTED INCOME PER COMMON SHARE $0.52 $0.99

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING 67,665 65,806

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING-ASSUMING DILUTION 74,286 75,835

CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of GAAP Net Income to Adjusted Net Income

(Unaudited)

Three Months Ended

March 31,

2008 2007

GAAP NET INCOME $38,851 $75,185

Cost of sales adjustments 27,888 (1) 20,965 (1)

Research and development adjustments 7,754 (2) 10,000 (2)

Selling, general and administrative

adjustments 2,955 (3) -

In-process research and development

adjustments 10,000 (4) -

Restructuring adjustments 3,911 (5) -

Interest expense adjustment 3,750 (6) -

Income tax adjustment (19,515)(7) (10,982)(7)

36,743 19,983

ADJUSTED NET INCOME $75,594 $95,168

BASIC ADJUSTED INCOME PER COMMON SHARE $1.12 $1.45

DILUTED ADJUSTED INCOME PER COMMON SHARE $1.02 $1.25

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING 67,665 65,806

WEIGHTED AVERAGE NUMBER OF COMMON

SHARES OUTSTANDING-ASSUMING DILUTION 74,286 75,835

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

(1) To exclude the on-going amortization of acquired intangible assets

($26.2M in 2008; $21.0M in 2007) and accelerated depreciation related

to restructuring ($1.7M in 2008).

(2) To exclude charges related to payment for research and development

collaboration, as well as other charges ($1.8M) related to severance

in 2008.

(3) To exclude charges related to employee severance costs.

(4) To exclude charges related to the acquisition of the licensed

technology in the oncology field.

(5) To exclude costs related to CIMA restructuring.

(6) To exclude an estimate of accrued interest related to the agreement in

principle reached with U.S. Attorney's Office in Philadelphia.

(7) 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

CONSOLIDATED SALES DETAIL

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2008 2007

United United

States Europe Total States Europe Total

Sales:

PROVIGIL $198,469 $14,766 $213,235 $188,727 $12,562 $201,289

GABITRIL 11,131 2,293 13,424 13,884 2,336 16,220

CNS 209,600 17,059 226,659 202,611 14,898 217,509

ACTIQ 37,517 12,203 49,720 57,157 8,571 65,728

Generic OTFC 27,318 - 27,318 34,020 - 34,020

FENTORA 38,933 - 38,933 31,690 - 31,690

AMRIX 9,768 - 9,768 - - -

Pain 113,536 12,203 125,739 122,867 8,571 131,438

Oncology 5,188 22,270 27,458 3,991 19,290 23,281

Other 13,527 40,514 54,041 13,181 38,470 51,651

$341,851 $92,046 $433,897 $342,650 $81,229 $423,879

%

Increase

(Decrease)

United

States Europe Total

Sales:

PROVIGIL 5% 18% 6%

GABITRIL (20%) (2%) (17%)

CNS 3% 15% 4%

ACTIQ (34%) 42% (24%)

Generic OTFC (20%) 0% (20%)

FENTORA 23% 0% 23%

AMRIX 100% 0% 100%

Pain (8%) 42% (4%)

Oncology 30% 15% 18%

Other 3% 5% 5%

(0%) 13% 2%

CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

March 31, December 31,

2008 2007

CURRENT ASSETS:

Cash and cash equivalents $855,846 $818,669

Investments - 7,596

Receivables, net 295,035 276,776

Inventory, net 117,726 99,098

Deferred tax assets, net 150,456 176,619

Other current assets 41,828 43,267

Total current assets 1,460,891 1,422,025

PROPERTY AND EQUIPMENT, net 509,933 500,396

GOODWILL 486,865 476,515

INTANGIBLE ASSETS, net 822,342 817,828

DEFERRED TAX ASSETS, net 172,162 141,752

OTHER ASSETS 155,227 147,753

$3,607,420 $3,506,269

CURRENT LIABILITIES:

Current portion of long-term debt $1,037,163 $1,237,169

Accounts payable 94,547 91,437

Accrued expenses 665,746 677,184

Total current liabilities 1,797,456 2,005,790

LONG-TERM DEBT 203,317 3,788

DEFERRED TAX LIABILITIES, net 75,860 56,540

OTHER LIABILITIES 143,020 138,084

Total liabilities 2,219,653 2,204,202

STOCKHOLDERS' EQUITY:

Common stock, $0.01 par value 701 700

Additional paid-in capital 1,951,294 1,934,965

Treasury stock, at cost (158,197) (158,173)

Accumulated deficit (585,277) (624,128)

Accumulated other comprehensive income 179,246 148,703

Total stockholders' equity 1,387,767 1,302,067

$3,607,420 $3,506,269

CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Three Months Ended

March 31,

2008 2007

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $38,851 $75,185

Adjustments to reconcile net income

to net cash provided by operating

activities:

Deferred income tax expense 6,141 11,629

Shortfall tax benefits from stock-based

compensation - (83)

Depreciation and amortization 41,577 30,592

Amortization of debt issuance costs 60 60


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SOURCE Cephalon, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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