CEPHALON, INC. 
By FRAZER, Pa., May 3, 2011 /PRNewswire/ -- Cephalon, Inc. (Nasdaq: CEPH) today reported first quarter 2011 net sales of $736.0 million, a 28 percent increase compared to net sales of $576.7 million for the first quarter of 2010. Basic income per common share for the period was $2.79. Excluding amortization expense and certain other items, adjusted net income for the first quarter of 2011 was $158.4 million, a 10 percent increase over the same period in 2010. Basic adjusted income per common share for the quarter was $2.09, a 9 percent increase over the $1.92 for the first quarter of 2010. Sales and earnings were within the previously announced guidance range.
Central nervous system (CNS) franchise net sales were $334.7 million during the quarter, a 7 percent increase compared to the same period last year. Pain franchise reported net sales of $130.5 million, a 13 percent increase versus first quarter 2010. Oncology franchise net sales were $149.1 million, a 35 percent increase over the same period last year due to strong net sales of TREANDA® (bendamustine hydrochloride) of $117.7 million. Sales of other products increased to $121.6 million, from $38.3 million in 2010, primarily due to the addition of Mepha products sales.
During the first quarter 2011 Cephalon recorded net cash provided by operating activities of $147.8 million and ended the period with $1.16 billion of cash and cash equivalents.
On May 2, 2011 Cephalon announced the signing of a definitive agreement under which Teva Pharmaceutical Industries Ltd. will acquire all of the outstanding shares of Cephalon for $81.50 per share in cash.
"After analyzing a full range of strategic options our Board concluded that the Teva offer provides the maximum shareholder value for Cephalon shareholders," said Kevin Buchi, Chief Executive Officer. "Based on these 2011 quarterly earnings, Cephalon is once again off to another very strong start. Given this performance, we expect that our full year earnings will meet or even exceed our previous guidance. However, due to our pending merger with Teva announced on Monday, we will no longer be providing 2011 guidance."
About Cephalon, Inc.
Cephalon is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. Since its inception in 1987, Cephalon has brought first-in-class and best-in-class medicines to patients in several therapeutic areas. Cephalon has the distinction of being one of the world's fastest-growing biopharmaceutical companies, now among the Fortune 1000 and a member of the S&P 500 Index, employing approximately 4,000 people worldwide. The company sells numerous branded and generic products around the world. In total, Cephalon sells more than 150 products in approximately 100 countries. More information on Cephalon and its products is available at http://www.cephalon.com
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 Teva's proposed acquisition of Cephalon; 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; 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: Investors:
Fritz Bittenbender Robert (Chip) Merritt
610-883-5855 610-738-6376
fbittenb@cephalon.com cmerritt@cephalon.com
Natalie deVane Joseph Marczely
610-727-6536 610-883-5894
ndevane@cephalon.com jmarczely@cephalon.com
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
------------------
2011 2010
---- ----
REVENUES:
Net Sales $736,002 $576,681
Other revenues 9,111 19,904
745,113 596,585
------- -------
COSTS AND EXPENSES:
Cost of sales 157,983 105,043
Research and development 122,313 105,377
Selling, general and administrative 250,686 204,641
Change in fair value of contingent consideration 1,801 -
Restructuring charges 858 744
Acquired in-process research and development 30,000 -
Impairment and (gain) loss on sale of assets 5,648 -
569,289 415,805
------- -------
INCOME FROM OPERATIONS 175,824 180,780
------- -------
OTHER INCOME (EXPENSE):
Interest income 1,017 1,930
Interest expense (24,207) (26,791)
Change in fair value of investments 164,735 -
Other income (expense), net (3,028) (7,271)
------ ------
138,517 (32,132)
------- -------
INCOME BEFORE INCOME TAXES 314,341 148,648
INCOME TAX EXPENSE 102,731 48,311
------- ------
NET INCOME 211,610 100,337
NET (INCOME) LOSS ATTRIBUTABLE TO THE
NONCONTROLLING INTEREST (522) 10,228
---- ------
NET INCOME ATTRIBUTABLE TO CEPHALON, INC. $211,088 $110,565
======== ========
BASIC INCOME PER COMMON SHARE $2.79 $1.47
===== =====
DILUTED INCOME PER COMMON SHARE $2.64 $1.35
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ATTRIBUTABLE TO CEPHALON,
INC. 75,743 74,990
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING DILUTION
ATTRIBUTABLE TO CEPHALON, INC. 79,836 81,811
====== ======
CEPHALON, INC. AND SUBSIDIARIES
Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income
(Unaudited)
Three Months Ended
March 31,
---------
2011 2010
---- ----
GAAP NET INCOME ATTRIBUTABLE TO
CEPHALON, INC. $211,088 $110,565
-------- --------
Cost of sales adjustments 29,118 (1) 30,966 (1)
Research and development
adjustments - 359 (2)
Selling, general and
administrative adjustments 930 (3) 2,277 (3)
Change in contingent
consideration adjustments 1,801 (4) -
Restructuring charges 858 (5) 744 (5)
Acquired in-process research and
development 30,000 (6) -
Impairment and (gain) loss on
sale of assets 5,648 (7) -
Interest expense 15,675 (8) 17,579 (8)
Change in fair value of
investment (164,735) (9) -
Other income (expense) 506 (10) 6,169 (10)
Income taxes 27,484 (11) (24,673) (11)
*Noncontrolling Interest
adjustments:
Other revenues - (31)
Research and development 203 8,112
Selling, general and
administrative 357 3,022
Other income (expense) - 165
Interest income - (7)
Interest expense 299 157
Income taxes - (1,190)
Less amount attributable to
noncontrolling interest (859) (10,228)
(52,715) 33,421
------- ------
ADJUSTED NET INCOME $158,373 $143,986
======== ========
BASIC ADJUSTED INCOME PER COMMON
SHARE $2.09 $1.92
===== =====
DILUTED ADJUSTED INCOME PER
COMMON SHARE $1.98 $1.76
===== =====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 75,743 74,990
====== ======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING-ASSUMING
DILUTION 79,836 81,811
====== ======
Notes to Reconciliation of GAAP Net Income (Loss) to Adjusted Net
Income
*Amounts recorded by our Variable Interest Entities that have been
excluded from net income attributable to Cephalon, Inc.
(1) To exclude the on-going amortization of acquired intangible
assets ($29.1M in 2011; $25.8M in 2010) and accelerated depreciation
related to restructuring ($5.2M in 2010).
(2) To exclude accelerated depreciation related to restructuring.
(3) To exclude charges related to the acquisition of Mepha GmbH
($0.7M in 2011; $2.3M in 2010), Mesoblast Limited
($0.1M in 2011) and GeminX Pharmaceuticals ($0.1M in 2011).
(4) In 2011, to exclude the change in fair value of the Ception
Therapeutics, Inc. ($1.3M) and BioAssets Development Company ($0.5M)
contingent consideration.
(5) To exclude costs related to restructurings.
(6) In 2011, to exclude costs related to the acquisition of worldwide
license rights to Mesoblast Limited's proprietary technology
platform.
(7) In 2011, to exclude costs associated with our plan to sell our
manufacturing facility in Mitry Mory, France ($6.1M), offset by a
gain on the sale of our facility in Savigny le Temple, France
($0.4M).
(8) To exclude imputed interest expense associated with convertible
debt.
(9) In 2011, to exclude the change in fair value of our investments
in Mesoblast Limited ($159.6M) and ChemGenex Pharmaceuticals Limited
($5.1M).
(10) To exclude losses on currency forward contracts and options used
to manage foreign exchange rate risk related to the Mesoblast
acquisition in 2011 and the Mepha GmbH acquisition in 2010.
(11) 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,
---------
2011
----
United
States Europe Total
------- ------ -----
Sales:
CNS
Proprietary CNS
PROVIGIL $243,343 $15,053 $258,396
NUVIGIL 52,032 - 52,032
GABITRIL 11,038 1,089 12,127
Other Proprietary CNS - 2,353 2,353
Generic CNS - 9,775 9,775
--- ----- -----
CNS 306,413 28,270 334,683
Pain
Proprietary Pain
FENTORA 39,043 7,358 46,401
AMRIX 23,032 - 23,032
Other Proprietary Pain - 61 61
Generic Pain
ACTIQ 15,486 12,669 28,155
Generic OTFC 9,023 - 9,023
Other Generic Pain - 23,866 23,866
--- ------ ------
Pain 86,584 43,954 130,538
Oncology
Proprietary Oncology
TREANDA 117,725 - 117,725
Other Proprietary
Oncology 5,503 19,734 25,237
Generic Oncology - 6,178 6,178
--- ----- -----
Oncology 123,228 25,912 149,140
Other
Other Proprietary 6,005 2,214 8,219
Other Generic 7,151 106,271 113,422
----- ------- -------
Other 13,156 108,485 121,641
$529,381 $206,621 $736,002
======== ======== ========
Three Months Ended
March 31,
---------
2010
----
United
States Europe Total
------- ------ -----
Sales:
CNS
Proprietary CNS
PROVIGIL $244,601 $17,850 $262,451
NUVIGIL 34,922 - 34,922
GABITRIL 8,299 1,462 9,761
Other Proprietary CNS - 3,006 3,006
Generic CNS - 2,311 2,311
--- ----- -----
CNS 287,822 24,629 312,451
Pain
Proprietary Pain
FENTORA 38,480 3,729 42,209
AMRIX 25,135 - 25,135
Other Proprietary Pain - 59 59
Generic Pain
ACTIQ 14,940 18,491 33,431
Generic OTFC 12,779 - 12,779
Other Generic Pain - 2,142 2,142
--- ----- -----
Pain 91,334 24,421 115,755
Oncology
Proprietary Oncology
TREANDA 81,257 - 81,257
Other Proprietary
Oncology 4,555 20,191 24,746
Generic Oncology - 4,154 4,154
--- ----- -----
Oncology 85,812 24,345 110,157
Other
Other Proprietary 5,364 100 5,364
Other Generic 4,096 28,858 32,954
----- ------ ------
Other 9,460 28,858 38,318
$474,428 $102,253 $576,681
======== ======== ========
%
Increase
(Decrease)
----------
United
States Europe Total
------- ------ -----
Sales:
CNS
Proprietary CNS
PROVIGIL (1%) (16%) (2%)
NUVIGIL 49 - 49
GABITRIL 33 (26) 24
Other Proprietary CNS - (22) (22)
Generic CNS - 323 323
CNS 6 15 7
Pain
Proprietary Pain
FENTORA 1 97 10
AMRIX (8) - (8)
Other Proprietary Pain - 3 3
Generic Pain
ACTIQ 4 (31) (16)
Generic OTFC (29) - (29)
Other Generic Pain - 1014 1014
Pain (5) 80 13
Oncology
Proprietary Oncology
TREANDA 45 - 45
Other Proprietary
Oncology 21 (2) 2
Generic Oncology - 49 49
Oncology 44 6 35
Other
Other Proprietary 12 - 53
Other Generic 75 268 244
Other
12% 102% 28%
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
March December
31, 31,
2011 2010
---- ----
CURRENT ASSETS:
Cash and cash equivalents $1,160,657 $1,160,239
Receivables, net 506,437 431,333
Inventory, net 293,905 291,360
Deferred tax assets, net 211,523 213,798
Other current assets 72,360 54,845
------ ------
Total current assets 2,244,882 2,151,575
INVESTMENTS ($471,254 and $155,808 at fair
value in 2011 and 2010, respectively) 493,509 168,494
PROPERTY AND EQUIPMENT, net 499,672 502,856
GOODWILL 836,636 822,071
INTANGIBLE ASSETS, net 1,248,622 1,212,387
DEBT ISSUANCE COSTS 13,101 14,196
OTHER ASSETS 24,254 20,254
$5,360,676 $4,891,833
========== ==========
CURRENT LIABILITIES:
Current portion of long-term debt, net $663,684 $651,997
Accounts payable 119,777 104,477
Accrued expenses 550,443 460,141
------- -------
Total current liabilities 1,333,904 1,216,615
LONG-TERM DEBT 398,475 391,416
DEFERRED TAX LIABILITIES, net 182,100 172,589
OTHER LIABILITIES 258,952 273,438
------- -------
Total liabilities 2,173,431 2,054,058
--------- ---------
REDEEMABLE EQUITY 161,969 170,183
------- -------
EQUITY:
Cephalon Stockholders' Equity
Common stock, $0.01 par value 793 791
Additional paid-in capital 2,477,973 2,428,450
Treasury stock, at cost (225,874) (225,870)
Accumulated earnings 458,174 247,086
Accumulated other comprehensive income 246,528 182,975
Total Cephalon stockholders' equity 2,957,594 2,633,432
Noncontrolling Interest 67,682 34,160
------ ------
Total equity 3,025,276 2,667,592
$5,360,676 $4,891,833
========== ==========
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
---------
2011 2010
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $211,610 $100,337
Adjustments to reconcile net
income to net cash provided
by operating activities:
Deferred income tax expense
(benefit) 9,609 (1,045)
Shortfall tax benefits from
stock-based compensation (243) (16)
Depreciation and
amortization 47,469 48,353
Stock-based compensation
expense 5,870 8,830
Amortization of debt
discount and debt issuance
costs 16,217 18,144
Changes in fair value of
investments (164,735) -
Loss on foreign exchange
contracts 506 6,169
Impairment and (gain) loss
on sale of assets 5,648 -
Other (25) 255
Changes in operating assets
and liabilities:
Receivables (64,528) 20,308
Inventory 8,269 (2,383)
Other assets (16,795) (348)
Accounts payable and accrued
expenses 104,700 39,449
Other liabilities (15,814) (4,498)
------- ------
Net cash provided by
operating activities 147,758 233,555
------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (11,671) (9,613)
Proceeds from sale of
property and equipment 818 -
Cash balance from
consolidation of variable
interest entity 15,513 -
Purchases of investments (176,104) -
(Cash settlements of)
proceeds from foreign
exchange contracts 1,516 (6,155)
----- ------
Net cash used for investing
activities (169,928) (15,768)
-------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
common stock under the
employee stock purchase
plan 349 -
Proceeds from exercises of
common stock options 11,745 13,804
Windfall tax benefits from
stock-based compensation 1,505 23
Acquisition of treasury
stock (4) (33)
Payments on and retirements
of long-term debt (711) (2,577)
---- ------
Net cash provided by
financing activities 12,884 11,217
------ ------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS 9,704 (2,186)
----- ------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 418 226,818
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,160,239 1,647,635
--------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $1,160,657 $1,874,453
========== ==========
SOURCE Cephalon, Inc.
