FRAZER, Pa., Oct. 28 /PRNewswire-FirstCall/ -- Cephalon, Inc.
(Nasdaq: CEPH) today reported third quarter 2008 sales of $489.7 million,
compared to sales of $428.7 million for the third quarter of 2007, and at the
high end of the company's guidance of $480 - $490 million. Net income for the
quarter was $112.0 million and basic income per common share was $1.64.
Excluding amortization expense and certain other items, adjusted net income
was $92.9 million and basic adjusted income per common share for the quarter
was $1.36, compared to $1.08 for the same period in 2007, exceeding the
company's guidance of $1.25 to $1.35.
Central nervous system (CNS) franchise sales were $273.7 million during
the quarter, a 19 percent increase compared to the same period last year. The
Pain franchise sales were $117.2 million compared to $121.8 million in the
third quarter of 2007. AMRIX(R) (cyclobenzaprine hydrochloride extended-
release capsules) sales increased 20 percent over the second quarter 2008.
Oncology franchise sales were $52.4 million, an increase of 131 percent versus
2007. Sales of TREANDA(R) (bendamustine hydrochloride) for Injection were
$24.6 million for the quarter, an increase of 71 percent over the second
quarter of 2008.
"More and more patients are benefiting from the novel therapies that we
offer. This has resulted in record sales, and adjusted earnings that exceeded
the high end of our guidance. These solid results, and our confidence in our
current product portfolio, enabled us to raise our guidance for the remainder
of this year and issue adjusted net income guidance for 2009 that exceeds
today's First Call consensus," said Frank Baldino, Jr., Ph.D., Chairman and
CEO. "Despite troubled economic conditions around the world, our business
remains solid. We continue to invest in our pipeline while simultaneously
generating strong sales, earnings, and cash flow."
The company is updating its guidance for 2008. Total sales guidance is
increased to $1.90 - $1.94 billion. This includes CNS franchise sales of $1.02
- $1.04 billion, pain franchise sales of $500 - $520 million, oncology
franchise sales of $175 - $185 million, and other product sales of $200 - $210
million. Full year SG&A and R&D guidance is $800 - $815 million and $340 -
$355 million, respectively. Adjusted net income guidance for 2008 is $354 -
$360 million and basic adjusted income per common share guidance is increased
by $0.10 per share to $5.20 - $5.30.
Cephalon is introducing 2009 sales guidance of $2.175 - $2.225 billion.
This includes CNS franchise sales of $1.15 - $1.18 billion, pain franchise
sales of $535 - $560 million, oncology franchise sales of $265 - $280 million,
and other product sales of $180 - $205 million. SG&A and R&D guidance for 2009
are $840 - $860 million and $390 - $410 million, respectively.
The company also is introducing adjusted net income guidance for 2009 of
$452 - $459 million. This represents growth of approximately 27 percent over
our increased 2008 guidance. Cephalon is introducing 2009 basic adjusted
income per common share guidance of $6.50 - $6.60.
Basic adjusted income per common share guidance for both the full-year
2008 and full-year 2009 is reconciled below and is subject to the assumptions
set forth therein.
Cephalon's management will discuss the company's third 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 +1-913-312-9315 and
refer to conference code number 8454517. 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
innovative products in four core therapeutic areas: central nervous system,
pain, oncology and addiction. A member of the Fortune 1000, 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. The
company's European headquarters are located in Maisons-Alfort, France.
The company's proprietary products in the United States include: AMRIX,
TREANDA, FENTORA(R) (fentanyl buccal tablet) [C-II], PROVIGIL(R) (modafinil)
Tablets [C-IV], TRISENOX(R) (arsenic trioxide) injection, VIVITROL(R)
(naltrexone for extended-release injectable suspension), GABITRIL(R)
(tiagabine hydrochloride), NUVIGIL(TM) (armodafinil) Tablets [C-IV] 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;
interpretation of clinical results; prospects for regulatory approval;
manufacturing development and capabilities; market prospects for its products;
characterizations of our business, sales, earnings and cash flow in light of
current general economic conditions; sales, SG&A, R&D, adjusted net income and
basic adjusted income per common share guidance for full-year 2008 and 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.
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
REVENUES:
Sales $489,664 $428,729 $1,408,603 $1,287,802
Other revenues 8,818 9,692 25,813 34,865
498,482 438,421 1,434,416 1,322,667
COSTS AND EXPENSES:
Cost of sales 121,477 82,258 312,711 251,970
Research and development 88,325 93,527 250,169 274,078
Selling, general and
administrative 222,948 186,456 631,832 527,962
Settlement reserve 7,450 369,000 7,450 425,000
Restructuring charges 1,497 - 6,973 -
In-process research and
development - - 10,000 -
441,697 731,241 1,219,135 1,479,010
INCOME (LOSS) FROM
OPERATIONS 56,785 (292,820) 215,281 (156,343)
OTHER INCOME (EXPENSE):
Interest income 4,002 8,868 15,515 23,485
Interest expense (8,831) (5,660) (25,697) (15,272)
Gain on extinguishment of
debt - 5,319 - 5,319
Gain on sale of investment - - - 5,791
Other income (expense), net (2,284) 2,493 1,488 3,747
(7,113) 11,020 (8,694) 23,070
INCOME (LOSS) BEFORE INCOME
TAXES 49,672 (281,800) 206,587 (133,273)
INCOME TAX EXPENSE (BENEFIT) (62,371) 24,963 (4,375) 102,613
NET INCOME (LOSS) $112,043 $(306,763) $210,962 $(235,886)
BASIC INCOME (LOSS) PER
COMMON SHARE $1.64 $(4.58) $3.11 $(3.55)
DILUTED INCOME (LOSS) PER
COMMON SHARE $1.42 $(4.58) $2.79 $(3.55)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 68,118 66,931 67,855 66,398
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING-
ASSUMING DILUTION 78,920 66,931 75,580 66,398
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income to Adjusted Net Income
(Unaudited)
Three Months Ended
September 30,
2008 2007
GAAP NET (LOSS) INCOME $112,043 $(306,763)
Cost of sales adjustments 54,569 (1) 22,255 (1)
Research and development adjustments 259 (2) 15,000 (2)
Selling, general and administrative
adjustments 27,169 (3) -
Settlement reserve 7,450 (4) 369,000 (4)
Gain on extinguishment of debt - (5,319) (5)
Interest expense adjustment 3,750 (6)
Restructuring charges 1,497 (7)
Income tax adjustment (113,832) (8) (21,693) (8)
(19,138) 379,243
ADJUSTED NET INCOME $92,905 $72,480
BASIC ADJUSTED INCOME PER COMMON
SHARE $1.36 $1.08
DILUTED ADJUSTED INCOME PER COMMON
SHARE $1.18 $0.92
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 68,118 66,931
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 78,920 79,030
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets ($24.0
million in 2008; $22.3 million in 2007), accelerated depreciation related to
the CIMA LABS restructuring ($1.6 million in 2008), accelerated depreciation
related to the proposed divestiture at the Mitry-Mory facility ($2.9 million
in 2008), and the write-off of purchase commitments in excess of estimated
requirements ($26.0 million in 2008).
(2) In 2008, to exclude accelerated depreciation related to the proposed
divestiture at the Mitry-Mory facility. In 2007, to exclude the recognition
of a milestone related to the FDA's acceptance of our NDA filing for TREANDA
(bendamustine HCl).
(3) To exclude charges related to the estimated termination payments due
to Takeda Pharmaceuticals North America, Inc.
(4) 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. In 2007, to exclude the
reserve established for the minimum liability related to the potential
settlement of the investigations by the U.S. Attorney's Office.
(5) To exclude the forgiveness of a mortgage loan by the Pennsylvania
Industrial Development Board ("PIDA").
(6) To exclude the accrued interest related to the settlement reached
with the U.S. Attorney's Office.
(7) To exclude costs related to the CIMA LABS restructuring announced in
January 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, the settlement of the investigations by the U.S.
Attorney's Office and other changes in tax assets and liabilities. The 2008
amount includes $84.5 million of tax benefits for the settlement with the U.S.
Attorney's Office, 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
(Unaudited)
Nine Months Ended
September 30,
2008 2007
GAAP NET (LOSS) INCOME $210,962 $(235,886)
Cost of sales adjustments 111,349 (1) 64,236 (1)
Research and development adjustments 8,013 (2) 41,500 (2)
Selling, general and administrative
adjustments 30,124 (3) -
Settlement reserve 7,450 (4) 425,000 (4)
Gain on sale of investment - (5,791) (5)
Gain on extinguishment of debt - (5,319) (6)
Interest expense adjustment 11,250 (7)
Restructuring charges 6,973 (8)
In-process research and development 10,000 (9)
Income tax adjustment (143,162) (10) (40,459) (10)
41,997 479,167
ADJUSTED NET INCOME $252,959 $243,281
BASIC ADJUSTED INCOME PER COMMON
SHARE $3.73 $3.66
DILUTED ADJUSTED INCOME PER COMMON
SHARE $3.35 $3.09
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 67,855 66,398
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION 75,580 78,814
Notes to Reconciliation of GAAP Net Income to Adjusted Net Income
(1) To exclude the on-going amortization of acquired intangible assets
($77.0 million in 2008; $64.2 million in 2007), accelerated depreciation
related to the CIMA LABS restructuring ($5.4 million in 2008), accelerated
depreciation related to the proposed divestiture at the Mitry-Mory facility
($2.9 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 several research and
development collaborations ($6.0 million in 2008; $26.5 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 ($0.3 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 employee severance costs ($3.0 million)
and charges related to the estimated termination payments due to Takeda
Pharmaceuticals North America, Inc. ($27.2 million).
(4) 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. In 2007, to exclude the
reserve established for the minimum liability related to the potential
settlement of the investigations by 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 PIDA.
(7) To exclude the accrued interest related to the settlement reached
with 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
in the oncology field.
(10) 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 $84.5 million of tax benefits for the settlement with the U.S.
Attorney's Office, 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,
2008
United
States Europe Total
Sales:
PROVIGIL $241,366 $17,793 259,159
GABITRIL 12,176 2,337 14,513
CNS 253,542 20,130 273,672
ACTIQ 21,392 14,401 35,793
Generic OTFC 19,569 - 19,569
FENTORA 41,330 - 41,330
AMRIX 20,512 - 20,512
Pain 102,803 14,401 117,204
TREANDA 24,551 - 24,551
Other 4,691 23,195 27,886
Oncology 29,242 23,195 52,437
Other 11,351 35,000 46,351
$396,938 $92,726 $489,664
Three Months Ended
September 30,
2007
United
States Europe Total
Sales:
PROVIGIL $202,202 $14,904 217,106
GABITRIL 12,952 881 13,833
CNS 215,154 15,785 230,939
ACTIQ 45,946 10,007 55,953
Generic OTFC 32,689 - 32,689
FENTORA 33,193 - 33,193
AMRIX - - -
Pain 111,828 10,007 121,835
TREANDA - - -
Other 4,301 18,405 22,706
Oncology 4,301 18,405 22,706
Other 14,990 38,259 53,249
$346,273 $82,456 $428,729
%
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 19 19 19
GABITRIL (6) 165 5
CNS 18 28 19
ACTIQ (53) 44 (36)
Generic OTFC (40) - (40)
FENTORA 25 - 25
AMRIX - - -
Pain (8) 44 (4)
TREANDA - - -
Other 9 26 23
Oncology 580 26 131
Other (24) (9) (13)
15 12 14
Nine Months Ended
September 30,
2008
United
States Europe Total
Sales:
PROVIGIL $658,777 $48,428 707,205
GABITRIL 37,614 6,669 44,283
CNS 696,391 55,097 751,488
ACTIQ 96,960 40,734 137,694
Generic OTFC 75,845 - 75,845
FENTORA 116,637 - 116,637
AMRIX 47,399 - 47,399
Pain 336,841 40,734 377,575
TREANDA 38,932 - 38,932
Other 14,259 70,837 85,096
Oncology 53,191 70,837 124,028
Other 37,995 117,517 155,512
$1,124,418 $284,185 $1,408,603
Nine Months Ended
September 30,
2007
United
States Europe Total
Sales:
PROVIGIL $593,394 $39,171 632,565
GABITRIL 39,814 6,268 46,082
CNS 633,208 45,439 678,647
ACTIQ 157,097 28,638 185,735
Generic OTFC 97,562 - 97,562
FENTORA 101,224 - 101,224
AMRIX - - -
Pain 355,883 28,638 384,521
TREANDA - - -
Other 13,044 56,645 69,689
Oncology 13,044 56,645 69,689
Other 40,823 114,122 154,945
$1,042,958 $244,844 $1,287,802
%
Increase
(Decrease)
United
States Europe Total
Sales:
PROVIGIL 11 24 12
GABITRIL (6) 6 (4)
CNS 10 21 11
ACTIQ (38) 42 (26)
Generic OTFC (22) - (22)
FENTORA 15 - 15
AMRIX - - -
Pain (5) 42 (2)
TREANDA - - -
Other 9 25 22
Oncology 308 25 78
Other (7) 3 0
8 16 9
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
September 30, December 31,
2008 2007
CURRENT ASSETS:
Cash and cash equivalents $846,595 $818,669
Investments - 7,596
Receivables, net 350,280 276,776
Inventory, net 115,814 99,098
Deferred tax assets, net 167,368 176,619
Other current assets 108,106 43,267
Total current assets 1,588,163 1,422,025
PROPERTY AND EQUIPMENT, net 501,575 500,396
GOODWILL 471,127 476,515
INTANGIBLE ASSETS, net 753,286 817,828
DEFERRED TAX ASSETS, net 171,865 141,752
OTHER ASSETS 169,589 147,753
$3,655,605 $3,506,269
CURRENT LIABILITIES:
Current portion of long-term debt $1,023,104 $1,237,169
Accounts payable 81,323 91,437
Accrued expenses 723,728 677,184
Total current liabilities 1,828,155 2,005,790
LONG-TERM DEBT 2,729 3,788
DEFERRED TAX LIABILITIES, net 72,088 56,540
OTHER LIABILITIES 180,539 138,084
Total liabilities 2,083,511 2,204,202
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value 713 700
Additional paid-in capital 2,050,035 1,934,965
Treasury stock, at cost (194,782) (158,173)
Accumulated deficit (413,166) (624,128)
Accumulated other comprehensive
income 129,294 148,703
Total stockholders' equity 1,572,094 1,302,067
$3,655,605 $3,506,269
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $210,962 $(235,886)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred income tax
(benefit) expense (9,409) 8,750
Shortfall tax benefits from
stock-based compensation (451) (222)
Depreciation and amortization 128,772 101,206
Stock-based compensation expense 32,543 34,940
Gain on sale of investment - (5,791)
Gain on forgiveness of debt - (5,319)
Loss on disposals of property
and equipment 2,740 2,873
Impairment charges 1,164 -
Other (396) 180
Changes in operating
assets and liabilities:
Receivables (74,258) (26,218)
Inventory (14,557) (1,881)
Other assets (99,008) (28,552)
Accounts payable and
accrued expenses 34,526 380,776
Other liabilities 70,149 49,465
Net cash provided by operating
activities 282,777 274,321
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and
equipment (55,689) (70,887)
Acquisition of intangible assets (25,575) (99,152)
Investment in third party (6,242) -
Proceeds from sale of investment
in third party - 12,291
Sales and maturities of
available-for-sale investments 7,596 28,212
Purchases of available-for-sale
investments - (71,398)
Net cash used for investing
activities (79,910) (200,934)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of
common stock options 37,185 74,375
Windfall tax benefits from
stock-based compensation 4,592 9,934
Acquisition of treasury stock (24) (128)
Payments on and retirements of
long-term debt (216,093) (2,902)
Net cash (used for) provided
by financing activities (174,340) 81,279
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (601) 10,804
NET INCREASE IN CASH AND CASH
EQUIVALENTS 27,926 165,470
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 818,669 496,512
CASH AND CASH EQUIVALENTS, END OF
PERIOD $846,595 $661,982
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, 2008 December 31, 2009
Projected GAAP basic income per common
share $4.41 - $4.51 $4.95 - $5.05
Amortization of current intangibles $1.48 - $1.48 $1.36 - $1.36
Accelerated depreciation adjustment-
CIMA $0.10 - $0.10 $0.09 - $0.09
Accelerated depreciation adjustment-
Mitry-Mory $0.10 - $0.10 $0.24 - $0.24
Cost of goods sold adjustments $0.38 - $0.38 $- - $-
Research and development adjustments $0.12 - $0.12 $- - $-
Selling, general and administrative
adjustments $0.44 - $0.44 $- - $-
Settlement reserve adjustments $0.11 - $0.11 $- - $-
In-process research and development
adjustment $0.15 - $0.15 $- - $-
Restructuring adjustments $0.12 - $0.12 $0.07 - $0.07
Interest expense adjustment $0.17 - $0.17 $- - $-
Interest expense adjustment for
APB 14-1 $- - $- $0.63 - $0.63
Tax effect of pre-tax adjustments at
the applicable tax rates $(2.38)- $(2.38) $(0.84)- $(0.84)
Basic adjusted income per common share
guidance $5.20 - $5.30 $6.50 - $6.60
The company's guidance is being issued based on certain assumptions
including:
-- Adjusted effective tax rate of approximately 35.5 to 36.5 percent in
2008 and 35.0 percent in 2009; and
-- Weighted average number of common shares outstanding of 68.0 and 69.5
million shares for the twelve months ended December 31, 2008 and 2009,
respectively.
