Cephalon Reports Continued Strong
Growth in Second Quarter
Earnings Exceed Top End of Guidance;
Company Introduces Third Quarter
Sales and Earnings Guidance;
Diversification of Company
Continues with Recent Transactions
Frazer, PA – August 2, 2005
– Cephalon, Inc. [Nasdaq: CEPH] today reported second quarter 2005 revenue of
$286.0 million, a 19 percent increase over the second quarter of 2004. Diluted loss per share for the second quarter
2005 was $4.29. Excluding intangible
amortization expense and acquired in-process research and development charges
of $290.1 million from the Salmedix acquisition and Alkermes transaction,
diluted adjusted income per share was $0.69, a 53 percent increase over the
comparable figure of $0.45 in the second
quarter of 2004.
Sales totaled $272.6 million, compared with second
quarter 2004 sales of $235.0 million, a 16 percent increase. Sales of PROVIGIL
®
(modafinil)
Tablets [C-IV] were $129.9 million, a 26 percent increase; sales of ACTIQ
®
(oral transmucosal fentanyl citrate) [C-II] were $91.8 million, a 7 percent
increase; and sales of GABITRIL
®
(tigabine hydrochloride) Tablets
were $15.7 million, a 36 percent decrease. Sales of other products increased 61
percent to $35.2 million, primarily as a result of recent acquisitions.
The company announced several important
transactions during the quarter. In
June, Cephalon acquired Salmedix, providing it with TREANDA™ (bendamustine
hydrochloride), an oncology product in late-stage clinical development for
treating non-Hodgkin’s lymphoma. Also in
June, Cephalon signed an agreement with Alkermes, Inc. to commercialize
VIVITREX
®
(naltrexone long-acting injection), a product candidate for
the treatment of alcohol dependence.
Finally, the company acquired TRISENOX
®
(arsenic trioxide) injection, a marketed
product that accelerates the company’s entry into the oncology market.
—more—
SOURCE: Cephalon, Inc.
•
41 Moores Road
•
Frazer, PA 19355
•
(610) 344-0200
•
Fax (610) 344-0065
“There have been few quarters in Cephalon’s
history that have been as transforming as this past quarter,” said Frank
Baldino, Jr., Ph.D., Chairman and CEO. “We are creating an outstanding portfolio of
late stage clinical opportunities. The
addition of TREANDA, TRISENOX, and VIVITREX to a pipeline that already includes
ATTENACE for ADHD, NUVIGIL™ for wakefulness, ORAVESCENT
®
fentanyl for breakthrough pain, and GABITRIL for generalized anxiety disorder
sets the stage for continued strong growth of Cephalon.”
Cephalon is reiterating its guidance for 2005
sales of $1.2-1.25 billion, which includes: PROVIGIL sales of $550-600 million,
ACTIQ sales of $390-420 million, GABITRIL sales of $80-90 million and other
sales of $140-155 million. As a
consequence of the Salmedix transaction, Cephalon’s 2005 guidance for diluted
adjusted income per share is being reduced by $0.10 to $2.70-2.85.
Cephalon is introducing third quarter 2005
guidance for sales of $310-320 million and diluted adjusted income per common share
of $0.65-0.70.
Cephalon’s management will discuss the
company’s second quarter 2005 performance in a conference call with investors
beginning at 5 p.m. (EDT) on Tuesday, August 2, 2005. To participate in the conference call, dial 913-981-5543
and refer to conference code number 9743669. Investors can listen to the call
live by logging on to the company’s website at www.cephalon.com and clicking on
“Investor Relations,” then “Webcast.”
The conference call will be archived and available to investors for one
week after the call.
Cephalon, Inc.
Founded in 1987, Cephalon, Inc. is an international
biopharmaceutical company dedicated to the discovery, development and marketing
of innovative products to treat sleep and neurological disorders, cancer and
pain. Cephalon currently employs approximately 2,300 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 Salt
Lake City, Utah, and suburban Minneapolis, Minnesota. Cephalon’s European
headquarters are located in Maisons-Alfort, France and other European offices
are located in Guildford, England, and Martinsried, Germany.
The company currently markets four proprietary products in the United
States: PROVIGIL, GABITRIL, ACTIQ and TRISENOX, and more than 20 products
internationally. Full prescribing information for all U.S. products is available
at www.cephalon.com or by calling 1-800-896-5855 (PROVIGIL, GABITRIL, and
ACTIQ) or 1-800-715-0944 (TRISENOX).
* * *
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
2
expectations
or forecasts of future events. These may include statements regarding
anticipated scientific progress on its research programs, development of
potential pharmaceutical products, including TREANDA, VIVITREX and GABITRIL for
generalized anxiety disorder (GAD), interpretation of clinical results,
prospects for regulatory approval of our product candidates, including TREANDA,
VIVITREX, ATTENACE, NUVIGIL, ORAVESCENT fentanyl and GABITRIL for GAD,
manufacturing development and capabilities, market prospects for our products,
including our ability to attain continued strong growth in the future, yearly and quarterly sales and diluted
adjusted income per common share guidance for 2005, 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 risk
factors and other 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 amounts
that are considered “non-GAAP financial measures” under SEC rules, such as “Net
income (loss), as adjusted,” “Basic income (loss) per common share, as
adjusted,” “Diluted income (loss) per common share, as adjusted,” (also
referred to as “Diluted adjusted income per share”) and guidance for “Diluted
adjusted income per common share.” As required, we have provided
reconciliations of these measures in the financial results attached to this
press release. Additional required information is located in the Form 8-K
furnished to the SEC in connection with this press release.
# # #
3
Cephalon, Inc.
and Subsidiaries
Consolidated
Statement of Operations
(Amounts in Thousands, Except per Share)
(Unaudited)
Three Months Ended
Three Months Ended
June 30, 2005
June 30, 2004
GAAP
Adjustments
“Adjusted”
GAAP
Adjustments
“Adjusted”
Revenues:
Sales
$
272,608
$
272,608
$
234,990
$
234,990
Other revenues
13,363
13,363
4,487
4,487
285,971
—
285,971
239,477
—
239,477
Costs and Expenses:
Cost of sales
35,350
35,350
29,840
29,840
Research and development
82,891
82,891
74,043
74,043
Selling, general and administrative
101,422
101,422
85,202
85,202
Depreciation and amortization
20,155
(13,397
)(1)
6,758
11,646
(8,394
)(1)
3,252
Impairment charge on investment in MDS
Proteomics Inc.
—
—
30,071
(30,071
)(4)
—
Acquired in-process research and
development
290,115
(290,115
)(2)
—
—
—
529,933
(303,512
)
226,421
230,802
(38,465
)
192,337
Income (Loss) from operations
(243,962
)
303,512
59,550
8,675
38,465
47,140
Other Income and Expense:
Interest income
7,453
7,453
3,589
3,589
Interest expense
(6,266
)
(6,266
)
(5,822
)
(5,822
)
Other income (expense), net
686
686
(1,336
)
(1,336
)
1,873
—
1,873
(3,569
)
—
(3,569
)
Income (Loss) before income taxes
(242,089
)
303,512
61,423
5,106
38,465
43,571
Income tax expense
(6,943
)
(12,461
)(3)
(19,404
)
(13,489
)
(2,830
)(3)
(16,319
)
Net Income (Loss)
$
(249,032
)
$
291,051
$
42,019
$
(8,383
)
$
35,635
$
27,252
Basic income (loss) per common share *
$
(4.29
)
$
0.72
$
(0.15
)
$
0.48
Diluted income (loss) per common share *
$
(4.29
)
$
0.69
$
(0.15
)
$
0.45
Weighted average number of common shares
outstanding
58,046
58,046
56,110
56,110
Weighted average number of common shares
outstanding-assuming dilution
58,046
64,986
56,110
64,677
* Prior period EPS shown reflects the
adoption of guidance from EITF 04-8.
Cephalon, Inc.
and Subsidiaries
Notes to
Reconciliation of GAAP Net Loss to “Adjusted” Net Income
Three Months Ended June 30,
2005 and June 30, 2004
(1)
To exclude the ongoing amortization of acquired intangible assets
including technology, trademark and marketing rights acquired from Group Lafon
and CIMA LABS INC., Gabitril marketing rights, Actiq marketing rights, and
product marketing rights acquired in conjunction with our Novartis
collaboration.
(2)
To exclude in-process research and development charges related to the
acquisition of Salmedix ($130.1 million) and Vivitrex ($160.0 million).
(3)
To reflect the tax effect of adjustments at the applicable tax rates.
(4)
To exclude the impairment charge for the write-off of our investment in
MDS Proteomics, Inc. for which no corresponding tax benefit was recorded.
4
Cephalon, Inc.
and Subsidiaries
Consolidated
Statement of Operations
(Amounts in Thousands, Except per Share)
(Unaudited)
Six Months Ended
Six Months Ended
June 30, 2005
June 30, 2004
GAAP
Adjustments
“Adjusted”
GAAP
Adjustments
“Adjusted”
Revenues:
Sales
$
539,217
$
539,217
$
445,381
$
445,381
Other revenues
26,735
26,735
9,078
9,078
565,952
—
565,952
454,459
—
454,459
Costs and Expenses:
Cost of sales
76,464
76,464
55,817
55,817
Research and development
163,657
163,657
130,525
130,525
Selling, general and administrative
199,651
199,651
167,704
4,214
(4 )
171,918
Depreciation and amortization
38,805
(26,727
)(1)
12,078
23,143
(16,754
)(1)
6,389
Impairment charge on investment in MDS
Proteomics Inc.
—
—
30,071
(30,071
)(5)
—
Acquired in-process research and
development
290,115
(290,115
)(2)
—
—
—
768,692
(316,842
)
451,850
407,260
(42,611
)
364,649
Income (Loss) from operations
(202,740
)
316,842
114,102
47,199
42,611
89,810
Other Income and Expense:
Interest income
12,312
12,312
6,835
6,835
Interest expense
(11,817
)
(11,817
)
(11,712
)
(11,712
)
Charge on early extinguishment of debt
—
—
(961
)
961
(6)
—
Other income (expense), net
2,021
2,021
(1,802
)
(1,802
)
2,516
—
2,516
(7,640
)
961
(6,679
)
Income (Loss) before income taxes
(200,224
)
316,842
116,618
39,559
43,572
83,131
Income tax expense
(22,146
)
(16,173
)(3)
(38,319
)
(26,231
)
(4,898
)(3)
(31,129
)
Net Income (Loss)
$
(222,370
)
$
300,669
$
78,299
$
13,328
$
38,674
$
52,002
Basic income (loss) per common share *
$
(3.83
)
$
1.35
$
0.24
$
0.92
Diluted income (loss) per common share *
$
(3.83
)
$
1.28
$
0.23
$
0.86
Weighted average number of common shares
outstanding
58,020
58,020
56,007
56,007
Weighted average number of common shares
outstanding-assuming dilution
58,020
65,012
57,228
64,636
* Prior period EPS shown reflects the
adoption of guidance from EITF 04-8.
Cephalon, Inc.
and Subsidiaries
Notes to
Reconciliation of GAAP Net Income (Loss) to “Adjusted” Net Income
Six Months Ended June 30,
2005 and June 30, 2004
(1)
To exclude the ongoing amortization of acquired intangible assets
including technology, trademark and marketing rights acquired from Group Lafon
and CIMA LABS INC., Gabitril marketing rights, Actiq marketing rights, and
product marketing rights acquired in conjunction with our Novartis
collaboration.
(2)
To exclude in-process research and development charges related to the
acquisition of Salmedix ($130.1 million) and Vivitrex ($160.0 million).
(3)
To reflect the tax effect of adjustments at the applicable tax rates.
(4)
To exclude the gain resulting from the cancellation of postretirement
health care benefits for current employees at Cephalon France.
(5)
To exclude the impairment charge for the write-off of our investment in
MDS Proteomics, Inc. for which no corresponding tax benefit was recorded.
(6)
To exclude the charge on early extinguishment of debt in 2004 related to
the repurchase of $10 million of our 3.875% Convertible Subordinated Notes in March 2004.
5
Cephalon, Inc.
and Subsidiaries
Consolidated
Sales Detail
(Amounts in Thousands)
(Unaudited)
Three Months Ended
%
June 30,
Increase
2005
2004
(Decrease)
US
Europe
Total
US
Europe
Total
US
Europe
Total
Sales:
Provigil
$
119,993
$
9,925
$
129,918
$
95,509
$
7,252
$
102,761
26
%
37
%
26
%
Actiq
87,752
4,088
91,840
83,718
1,912
85,630
5
%
114
%
7
%
Gabitril
14,144
1,540
15,684
23,292
1,405
24,697
(39
)%
10
%
(36
)%
Other
11,550
23,616
35,166
—
21,902
21,902
—
8
%
61
%
$
233,439
$
39,169
$
272,608
$
202,519
$
32,471
$
234,990
15
%
21
%
16
%
Six Months Ended
%
June 30,
Increase
2005
2004
(Decrease)
US
Europe
Total
US
Europe
Total
US
Europe
Total
Sales:
Provigil
$
212,142
$
17,906
$
230,048
$
183,440
$
13,874
$
197,314
16
%
29
%
17
%
Actiq
186,620
7,145
193,765
152,377
3,409
155,786
22
%
110
%
24
%
Gabitril
38,845
3,229
42,074
44,326
3,082
47,408
(12
)%
5
%
(11
)%
Other
20,744
52,586
73,330
—
44,873
44,873
—
17
%
63
%
$
458,351
$
80,866
$
539,217
$
380,143
$
65,238
$
445,381
21
%
24
%
21
%
6
Cephalon, Inc.
and Subsidiaries
Consolidated
Balance Sheets
(Amounts in Thousands)
(Unaudited)
June 30,
* December 31,
2005
2004
CURRENT ASSETS:
Cash and cash equivalents
$
1,030,332
$
574,244
Investments
207,196
217,432
Receivables, net
153,868
208,225
Inventory, net
109,981
86,629
Deferred tax asset
50,854
47,118
Other current assets
48,787
39,915
Total current assets
1,601,018
1,173,563
Property and equipment, net
264,397
244,834
Goodwill
369,534
372,534
Other intangible assets, net
412,954
449,402
Debt issuance costs, net
45,133
25,401
Deferred tax asset, net
275,251
163,620
Other assets
23,724
22,549
$
2,992,011
$
2,451,903
CURRENT LIABILITIES:
Current portion of long-term debt
$
4,299
$
5,114
Accounts payable
58,659
52,488
Accrued expenses
181,652
169,568
Current portion of deferred revenues
816
868
Total current liabilities
245,426
228,038
Long-term debt
2,081,092
1,284,410
Deferred revenues
902
1,769
Deferred tax liabilities
90,689
94,100
Other liabilities
15,420
13,542
Total liabilities
2,433,529
1,621,859
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value
581
580
Additional paid-in capital
1,150,847
1,172,499
Treasury stock, at cost
(14,892
)
(14,860
)
Accumulated deficit
(617,488
)
(395,118
)
Accumulated other comprehensive income
39,434
66,943
Total stockholders’ equity
558,482
830,044
$
2,992,011
$
2,451,903
* Certain reclassifications of prior period amounts
have been made to conform with the current year presentation.
7
Cephalon, Inc.
and Subsidiaries
Consolidated
Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Six Months Ended
June 30,
2005
2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)
$
(222,370
)
$
13,328
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
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