CEPHALON INC - FORM 8-K - EX-99.1 - February 10, 2011

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8-K - 8-K - CEPHALON INCa11-5591_28k.htm

Exhibit 99.1

 

Cephalon Reported Record Sales, Adjusted Net Income and
Cash From Operations in 2010

 

2010 Sales Increased 28 Percent to $2.8 Billion

 

Adjusted Net Income Increased 40 Percent to $657 Million

 

Cash From Operations Totaled $782 Million

 

2011 Guidance Increased

 

Frazer, Pa. — February 10, 2011 — Cephalon, Inc. (Nasdaq: CEPH) today reported 2010 net sales of $2.761 billion, a 28 percent increase compared to net sales of $2.152 billion for 2009.  Basic income per common share for the year was $5.66.  Excluding amortization expense and certain other items, adjusted net income for full year 2010 was $657 million, a 40 percent increase over the previous year.  This exceeded the company’s adjusted net income guidance range of $617 to $632 million for 2010. Basic adjusted income per common share for the year was $8.74 in 2010, a 35 percent increase over the $6.48 in 2009.

 

Central nervous system (CNS) franchise net sales were $1.394 billion during the year, an 18 percent increase compared to 2009.  Pain franchise reported net sales of $526.3 million, a 6 percent increase versus last year.  Oncology franchise net sales were $513.6 million, a 53 percent increase over 2009 due to strong net sales of TREANDA® (bendamustine hydrochloride) of $393.5 million.  Sales of other products were $326.7 million, a 130 percent increase primarily due to the sales of the portfolio of products obtained through the acquisition of Mepha in April 2010.

 

During the fourth quarter 2010 Cephalon recorded net cash provided by operating activities of $131 million resulting in 2010 cash flow from operations of $782 million.

 

“As pleased as I am with our strong financial performance, I am as enthusiastic about the company we are building for tomorrow,” said Kevin Buchi, Chief Executive Officer. “We now have one of the premier late stage pipelines in the industry and a geographically diversified business.”

 

SOURCE:  Cephalon, Inc. · 41 Moores Road · Frazer, PA  19355 · (610) 344-0200 · Fax (610) 344-0065

 


 

The company is updating its guidance for 2011.  Total sales guidance for 2011 is increased to $3.015 -$3.095 billion as a result of an increase in CNS franchise sales to $1.45 -$1.49 billion.  Pain franchise sales of $540 - $570 million, oncology franchise sales of $570 - $600 million, and other product sales of $420 - $450 million remain unchanged. Full year R&D guidance is increased to $520 - $540 million and SG&A guidance remains unchanged at $970 million - $1.00 billion.  Adjusted net income guidance is increased to $665-$688 million.  Basic adjusted income per common share guidance is increased to $8.70 - $9.00, assuming 76.4 million basic shares outstanding.

 

Cephalon is introducing first quarter 2011 sales guidance of $725 - $755 million, adjusted net income guidance of $144 - $159 million and basic adjusted income per common share guidance of $1.90 - $2.10 assuming 75.8 million basic shares outstanding.

 

Basic adjusted income per common share for both the first quarter 2011 and full-year 2011 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 full year 2010 performance in a conference call with investors beginning at 5:00 p.m. U.S. EST today.  To participate in the conference call, dial +1-913-312-0724 and refer to conference code number 3115464. 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.

 

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 anticipated scientific progress on its research programs; development of potential pharmaceutical products; interpretation of clinical results;

 

2


 

prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products; sales, adjusted net income and basic adjusted income per common share guidance for first-quarter 2011 and full-year 2011 and SG&A and R&D guidance for the first-quarter 2011 and full-year 2011; 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.

 

Source: Cephalon, Inc.

 

Contacts:

 

 

Media:

 

Investors:

Natalie deVane

 

Robert (Chip) Merritt

610-727-6536

 

610-738-6376

ndevane@cephalon.com

 

cmerritt@cephalon.com

 

 

 

 

 

Joseph Marczely

 

 

610-883-5894

 

 

jmarczely@cephalon.com

 

3


 

CEPHALON, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

December 31,

 

 

 

2010

 

2009

 

2010

 

2009

 

REVENUES:

 

 

 

 

 

 

 

 

 

Net sales

 

$

764,759

 

$

562,938

 

$

2,760,952

 

$

2,151,548

 

Other revenues

 

5,810

 

12,177

 

50,105

 

40,760

 

 

 

770,569

 

575,115

 

2,811,057

 

2,192,308

 

COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

Cost of sales

 

150,142

 

105,204

 

577,863

 

398,837

 

Research and development

 

122,391

 

91,165

 

439,995

 

395,431

 

Selling, general and administrative

 

268,504

 

203,738

 

958,404

 

822,052

 

Change in fair value of contingent consideration

 

205

 

—

 

6,519

 

—

 

Restructuring charges

 

3,081

 

9,881

 

10,719

 

13,825

 

Impairment charge

 

—

 

182,080

 

—

 

182,080

 

Acquired in-process research and development

 

100,000

 

—

 

100,000

 

46,118

 

 

 

644,323

 

592,068

 

2,093,500

 

1,858,343

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) FROM OPERATIONS

 

126,246

 

(16,953

)

717,557

 

333,965

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

Interest income

 

1,188

 

1,808

 

5,326

 

5,263

 

Interest expense

 

(20,362

)

(27,123

)

(99,257

)

(90,336

)

Change in fair value of investments

 

7,931

 

—

 

7,931

 

—

 

Other income (expense), net

 

6,691

 

(1,903

)

(12,758

)

40,515

 

 

 

(4,552

)

(27,218

)

(98,758

)

(44,558

)

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

121,694

 

(44,171

)

618,799

 

289,407

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE (BENEFIT)

 

28,289

 

(43,979

)

201,116

 

78,680

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

93,405

 

(192

)

417,683

 

210,727

 

 

 

 

 

 

 

 

 

 

 

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

 

211

 

96,750

 

8,062

 

131,900

 

 

 

 

 

 

 

 

 

 

 

NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

 

$

93,616

 

$

96,558

 

$

425,745

 

$

342,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

 

$

1.24

 

$

1.29

 

$

5.66

 

$

4.74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DILUTED INCOME PER COMMON SHARE ATTRIBUTABLE TO CEPHALON, INC.

 

$

1.16

 

$

1.23

 

$

5.27

 

$

4.41

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ATTRIBUTABLE TO CEPHALON, INC.

 

75,355

 

74,720

 

75,185

 

72,342

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION ATTRIBUTABLE TO CEPHALON, INC.

 

80,964

 

78,508

 

80,712

 

77,733

 

 


 

CEPHALON, INC. AND SUBSIDIARIES

 

Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc.

(Unaudited)

 

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

 

$

93,616

 

$

96,558

 

 

 

 

 

 

 

Cost of sales adjustments

 

30,488

(1)

34,875

(1)

Research and development adjustments

 

2,013

(2)

343

(2)

Selling, general and administrative adjustments

 

8,245

(3)

232

(3)

Change in fair value of contingent consideration adjustment

 

205

(4)

—

 

Restructuring charges

 

2,067

(5)

9,881

(5)

Impairment charges

 

—

 

7,080

(6)

Acquired in-process research and development adjustments

 

100,000

(7)

—

 

Interest expense adjustment

 

15,413

(8)

17,307

(8)

Change in fair value of investments adjustment

 

(7,931

)(9)

—

 

Other income adjustment

 

(8,522

)(10)

—

 

Income tax adjustment

 

(58,491

)(11)

(35,787

)(11)

*Noncontrolling Interest adjustments:

 

 

 

 

 

Impairment charges

 

—

 

175,000

 

Other revenue

 

(244

)

(11

)

Research and development

 

26

 

7,140

 

Selling, general and administrative

 

531

 

1,411

 

Interest income

 

(21

)

(5

)

Interest expense

 

—

 

97

 

Restructuring charges

 

1,014

 

—

 

Income taxes

 

(1,004

)

(12,647

)

Impairment charge tax benefit

 

—

 

(74,235

)

Less amount attributable to noncontrolling interest

 

(302

)

(96,750

)

 

 

83,487

 

33,931

 

 

 

 

 

 

 

ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

 

$

177,103

 

$

130,489

 

 

 

 

 

 

 

BASIC ADJUSTED INCOME PER COMMON SHARE

 

$

2.35

 

$

1.75

 

 

 

 

 

 

 

DILUTED ADJUSTED INCOME PER COMMON SHARE

 

$

2.19

 

$

1.66

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

75,355

 

74,720

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION

 

80,964

 

78,508

 

 

* Amounts recorded by our Variable Interest Entities that have been excluded from net income attributable to Cephalon, Inc.

 

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

 

(1)

To exclude the on-going amortization of acquired intangible assets ($30.3M in 2010; $26.9M in 2009), accelerated depreciation related to restructuring ($0.2M in 2010; $5.0M in 2009) and the reserve for modafinil purchase commitments in excess of requirements ($3.0M in 2009).

 

 

(2)

In 2010, to exclude costs associated with our collaboration with Ambit Biosciences Corporation. In 2009, to exclude accelerated depreciation related to restructuring.

 

 

(3)

In 2010, to exclude charges related to the acquisition of Mepha GmbH, Mesoblast Limited and ChemGenex Pharmaceuticals Limited ($5.0M, $3.0M and $0.2M, respectively). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($0.2M).

 

 

(4)

In 2010, to exclude the change in fair value of the Ception Therapeutics, Inc. (-$0.3M) and BioAssets Development Corporation ($0.5M) contingent consideration.

 

 

(5)

To exclude costs related to restructurings.

 

 

(6)

In 2009, to exclude the impairment of our investment in SymBio Pharmaceuticals Limited.

 

 

(7)

In 2010, to exclude the acquisition of worldwide license rights to Mesoblast Limited’s proprietary technology platform.

 

 

(8)

To exclude imputed interest expense associated with convertible debt.

 

 

(9)

In 2010, to exclude the change in fair value of our investment in Mesoblast Limited ($12.0M), offset by the change in fair value of our investment in ChemGenex Pharmaceuticals Limited ($4.1M).

 

 

(10)

In 2010, to exclude a gain on foreign exchange of Australian Dollar acquisition funds ($2.0M) and proceeds received in a settlement ($6.5M).

 

 

(11)

To reflect the tax effect of pre-tax adjustments at 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

 

Reconciliation of GAAP Net Income to Adjusted Net Income Attributable to Cephalon, Inc.

(Unaudited)

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

GAAP NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

 

$

425,745

 

$

342,627

 

 

 

 

 

 

 

Cost of sales adjustments

 

154,713

(1)

113,021

(1)

Research and development adjustments

 

4,715

(2)

4,747

(2)

Selling, general and administrative adjustments

 

17,815

(3)

14,611

(3)

Change in fair value of contingent consideration adjustment

 

6,519

(4)

—

 

Restructuring charges

 

9,704

(5)

13,825

(5)

Impairment charge

 

—

 

7,080

(6)

Acquired in-process research and development adjustments

 

100,000

(7)

46,118

(7)

Interest expense adjustment

 

65,485

(8)

57,766

(8)

Change in fair value of investments adjustment

 

(7,931

)(9)

—

 

Other (income) expense adjustment

 

3,045

(10)

(40,011

)(10)

Arana noncontrolling interest adjustments

 

—

 

(819

)(11)

Income tax adjustment

 

(122,784

)(12)

(89,979

)(12)

 

 

 

 

 

 

*Noncontrolling Interest adjustments:

 

 

 

 

 

Impairment charge

 

—

 

175,000

 

Other revenue

 

(276

)

19

 

Research and development

 

6,403

 

32,659

 

Selling, general and administrative

 

3,994

 

8,784

 

Restructuring charges

 

1,014

 

—

 

Interest income

 

(29

)

(187

)

Interest expense

 

154

 

1,396

 

Other expense

 

166

 

33

 

Impairment charge tax benefit

 

—

 

(74,235

)

Income taxes

 

(4,852

)

(12,600

)

Less amount attributable to noncontrolling interest

 

(6,574

)

(130,869

)

 

 

231,281

 

126,359

 

 

 

 

 

 

 

ADJUSTED NET INCOME ATTRIBUTABLE TO CEPHALON, INC.

 

$

657,026

 

$

468,986

 

 

 

 

 

 

 

BASIC ADJUSTED INCOME PER COMMON SHARE

 

$

8.74

 

$

6.48

 

 

 

 

 

 

 

DILUTED ADJUSTED INCOME PER COMMON SHARE

 

$

8.14

 

$

6.03

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

75,185

 

72,342

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION

 

80,712

 

77,733

 

 

* Amounts recorded by our Variable Interest Entities that have been excluded from net income attributable to Cephalon, Inc.

 

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

 

(1)

To exclude the on-going amortization of acquired intangible assets ($119.7M in 2010; $97.5M in 2009), accelerated depreciation related to restructuring ($15.1M in 2010; $19.0M in 2009), amortization of inventory revaluation related to Mepha GmbH ($10.5M in 2010) and the reserve for modafinil purchase commitments in excess of estimated requirements ($9.4M in 2010; $6.0M in 2009), 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 ($0.7M in 2010; $1.3M in 2009), the impairment of an investment ($2.0M in 2010), charges related to our collaboration with Ambit BioSciences Corporation ($2.0M in 2010), charges related to payments for several research and development collaborations ($2.0M in 2009) and charges related to our transaction with Arana Therapeutics Limited ($1.5M in 2009).

 

 

(3)

In 2010, to exclude charges charges related to the acquisition of Mepha GmbH, Ception Therapeutics, Inc. noncontrolling interest, Mesoblast Limited and ChemGenex Pharmaceuticals Limited ($15.3M, $1.4M, $3.0M and $0.2M, respectively), offset by proceeds related to the settlement of litigation in Europe ($2.1M). In 2009, to exclude charges related to the acquisition of Arana Therapeutics Limited ($8.1M) and charges related to our settlement with Takeda Pharmaceutical Company Limited ($6.5M) to resolve our remaining contractual arrangements.

 

 

(4)

In 2010, to exclude the change in fair value of the Ception Therapeutics, Inc. ($6.0M) and BioAssets Development Company ($0.5M) contingent consideration.

 

 

(5)

To exclude costs related to restructurings.

 

 

(6)

In 2009, to exclude the loss on sale of equipment related to the VIVITROL termination.

 

 

(7)

In 2010, to exclude the acquisition of worldwide license rights to Mesoblast Limited’s proprietary technology platform. In 2009, to exclude charges related to the deconsolidation of Acusphere, Inc. ($9.3M), the acquisition of worldwide license rights related to LUPUZOR from ImmuPharma AG ($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).

 

 

(8)

To exclude imputed interest expense associated with convertible debt.

 

 

(9)

In 2010, to exclude the change in fair value of our investment in Mesoblast Limited ($12.0M), offset by the change in fair value of our investment in ChemGenex Pharmaceuticals Limited ($4.1M).

 

 

(10)

In 2010, to exclude the following:

 

· $2.0M gain on foreign exchange of Australian Dollar acquisition funds;

 

· $6.5M proceeds received in a settlement

 

· $9.1M net loss on foreign exchange derivative instruments related to the acquisition of Mepha GmbH; and

 

· $2.5M loss on foreign exchange of Swiss Franc acquisition funds.

 

 

 

In 2009, to exclude the following gains and losses related to the acquisition of Arana Therapeutics Limited:

 

· $6.6M gain on pre-bid Arana Therapeutics Limited holding;

 

· $2.8M loss on contingent consideration (90% ownership incentive payment);

 

· $10.0M gain on excess of net assets over consideration;

 

· $19.0M gain on foreign exchange derivative instruments;

 

· $5.6M gain on foreign exchange of Australian Dollar acquisition funds; and

 

· $1.6M gain on dividend income related to our initial purchase of Arana Therapeutics Limited shares.

 

 

(11)

In 2009, to exclude the portion of non-cash charges related to our acquisition of Arana Therapeutics Limited that are reflected in (10) above but do not affect net income because they are attributed to noncontrolling interests.

 

 

(12)

To reflect the tax effect of pre-tax adjustments at 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

 

%

 

 

 

December 31

 

Increase

 

 

 

2010

 

2009

 

(Decrease)

 

 

 

United
States

 

Europe

 

Total

 

United
States

 

Europe

 

Total

 

United
States

 

Europe

 

Total

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary CNS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROVIGIL

 

$

278,796

 

$

17,387

 

$

296,183

 

$

234,757

 

$

16,507

 

$

251,264

 

19

%

5

%

18

%

NUVIGIL

 

58,863

 

—

 

58,863

 

35,614

 

—

 

35,614

 

65

 

—

 

65

 

GABITRIL

 

10,734

 

1,249

 

11,983

 

14,042

 

1,515

 

15,557

 

(24

)

(18

)

(23

)

Other Proprietary CNS

 

—

 

2,698

 

2,698

 

—

 

3,647

 

3,647

 

—

 

(26

)

(26

)

Generic CNS

 

—

 

8,763

 

8,763

 

—

 

2,707

 

2,707

 

—

 

224

 

224

 

CNS

 

348,393

 

30,097

 

378,490

 

284,413

 

24,376

 

308,789

 

22

 

23

 

23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 FENTORA

 

44,876

 

7,098

 

51,974

 

36,877

 

1,676

 

38,553

 

22

 

324

 

35

 

 AMRIX

 

28,768

 

—

 

28,768

 

30,628

 

—

 

30,628

 

(6

)

—

 

(6

)

Other Proprietary Pain

 

—

 

72

 

72

 

—

 

50

 

50

 

—

 

44

 

44

 

Generic Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACTIQ

 

18,349

 

16,538

 

34,887

 

18,726

 

18,949

 

37,675

 

(2

)

(13

)

(7

)

Generic OTFC

 

8,529

 

—

 

8,529

 

16,198

 

—

 

16,198

 

(47

)

—

 

(47

)

Other Generic Pain

 

—

 

20,406

 

20,406

 

—

 

2,696

 

2,696

 

—

 

657

 

657

 

Pain

 

100,522

 

44,114

 

144,636

 

102,429

 

23,371

 

125,800

 

(2

)

89

 

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TREANDA

 

108,573

 

—

 

108,573

 

61,563

 

—

 

61,563

 

76

 

—

 

76

 

Other Proprietary Oncology

 

4,935

 

18,966

 

23,901

 

4,752

 

21,627

 

26,379

 

4

 

(12

)

(9

)

Generic Oncology

 

—

 

7,588

 

7,588

 

—

 

6,255

 

6,255

 

—

 

21

 

21

 

Oncology

 

113,508

 

26,554

 

140,062

 

66,315

 

27,882

 

94,197

 

71

 

(5

)

49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Proprietary

 

3,890

 

1,701

 

5,591

 

4,268

 

—

 

4,268

 

(9

)

100

 

31

 

Other Generic

 

2,540

 

93,440

 

95,980

 

2,546

 

27,338

 

29,884

 

—

 

242

 

221

 

Other

 

6,430

 

95,141

 

101,571

 

6,814

 

27,338

 

34,152

 

(6

)

248

 

197

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

568,853

 

$

195,906

 

$

764,759

 

$

459,971

 

$

102,967

 

$

562,938

 

24

%

90

%

36

%

 

 

 

Year Ended

 

%

 

 

 

December 31,

 

Increase

 

 

 

2010

 

2009

 

(Decrease)

 

 

 

United
States

 

Europe

 

Total

 

United
States

 

Europe

 

Total

 

United
States

 

Europe

 

Total

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CNS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary CNS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROVIGIL

 

$

1,059,698

 

$

64,796

 

$

1,124,494

 

$

961,070

 

$

63,618

 

$

1,024,688

 

10

%

2

%

10

%

NUVIGIL

 

186,190

 

—

 

186,190

 

73,391

 

—

 

73,391

 

154

 

—

 

154

 

GABITRIL

 

39,728

 

4,760

 

44,488

 

51,100

 

5,386

 

56,486

 

(22

)

(12

)

(21

)

Other Proprietary CNS

 

—

 

10,936

 

10,936

 

—

 

13,292

 

13,292

 

—

 

(18

)

(18

)

Generic CNS

 

—

 

28,257

 

28,257

 

—

 

10,785

 

10,785

 

—

 

162

 

162

 

CNS

 

1,285,616

 

108,749

 

1,394,365

 

1,085,561

 

93,081

 

1,178,642

 

18

 

17

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FENTORA

 

159,585

 

22,037

 

181,622

 

136,563

 

4,114

 

140,677

 

17

 

436

 

29

 

AMRIX

 

109,235

 

—

 

109,235

 

114,435

 

—

 

114,435

 

(5

)

—

 

(5

)

Other Proprietary Pain

 

—

 

271

 

271

 

—

 

267

 

267

 

—

 

1

 

1

 

Generic Pain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACTIQ

 

63,930

 

66,951

 

130,881

 

75,418

 

71,527

 

146,945

 

(15

)

(6

)

(11

)

Generic OTFC

 

41,138

 

—

 

41,138

 

83,032

 

—

 

83,032

 

(50

)

—

 

(50

)

Other Generic Pain

 

—

 

63,144

 

63,144

 

—

 

8,954

 

8,954

 

—

 

605

 

605

 

Pain

 

373,888

 

152,403

 

526,291

 

409,448

 

84,862

 

494,310

 

(9

)

80

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary Oncology

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TREANDA

 

393,473

 

—

 

393,473

 

222,112

 

—

 

222,112

 

77

 

—

 

77

 

Other Proprietary Oncology

 

20,866

 

76,256

 

97,122

 

18,281

 

75,360

 

93,641

 

14

 

1

 

4

 

Generic Oncology

 

—

 

22,998

 

22,998

 

—

 

20,940

 

20,940

 

—

 

10

 

10

 

Oncology

 

414,339

 

99,254

 

513,593

 

240,393

 

96,300

 

336,693

 

72

 

3

 

53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Proprietary

 

15,112

 

5,809

 

20,921

 

17,545

 

—

 

17,545

 

(14

)

100

 

19

 

Other Generic

 

13,220

 

292,562

 

305,782

 

15,436

 

108,922

 

124,358

 

(14

)

169

 

146

 

Other

 

28,332

 

298,371

 

326,703

 

32,981

 

108,922

 

141,903

 

(14

)

174

 

130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

2,102,175

 

$

658,777

 

$

2,760,952

 

$

1,768,383

 

$

383,165

 

$

2,151,548

 

19

%

72

%

28

%

 

Europe- Primarily Europe, Middle East and Africa

Proprietary products are products which are sold under patent coverage.

Generic products are products sold without patent coverage in the primary sales territory. Patent coverage may exist in other territories.

 


 

CEPHALON, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

December 31,

 

 

 

2010

 

2009

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

 

$

1,160,239

 

$

1,647,635

 

Receivables, net

 

431,333

 

376,076

 

Inventory, net

 

291,360

 

240,576

 

Deferred tax assets, net

 

213,798

 

243,246

 

Other current assets

 

54,845

 

58,423

 

Total current assets

 

2,151,575

 

2,565,956

 

 

 

 

 

 

 

INVESTMENTS ($155,808 at fair value in 2010)

 

168,494

 

12,427

 

PROPERTY AND EQUIPMENT, net

 

502,856

 

451,879

 

GOODWILL

 

822,071

 

590,284

 

INTANGIBLE ASSETS, net

 

1,212,387

 

981,857

 

DEBT ISSUANCE COSTS

 

14,196

 

18,862

 

OTHER ASSETS

 

20,254

 

36,830

 

 

 

$

4,891,833

 

$

4,658,095

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Current portion of long-term debt, net

 

$

651,997

 

$

818,925

 

Accounts payable

 

104,477

 

88,829

 

Accrued expenses

 

460,141

 

430,209

 

Total current liabilities

 

1,216,615

 

1,337,963

 

 

 

 

 

 

 

LONG-TERM DEBT

 

391,416

 

363,696

 

DEFERRED TAX LIABILITIES, net

 

172,589

 

159,328

 

OTHER LIABILITIES

 

273,438

 

111,728

 

Total liabilities

 

2,054,058

 

1,972,715

 

 

 

 

 

 

 

REDEEMABLE EQUITY

 

170,183

 

207,307

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

Cephalon Stockholders’ Equity

 

 

 

 

 

Common stock, $0.01 par value

 

791

 

780

 

Additional paid-in capital

 

2,428,450

 

2,534,070

 

Treasury stock, at cost

 

(225,870

)

(208,427

)

Accumulated earnings (deficit)

 

247,086

 

(178,659

)

Accumulated other comprehensive income

 

182,975

 

114,194

 

Total Cephalon stockholders’ equity

 

2,633,432

 

2,261,958

 

Noncontrolling Interest

 

34,160

 

216,115

 

Total equity

 

2,667,592

 

2,478,073

 

 

 

$

4,891,833

 

$

4,658,095

 

 


 

CEPHALON, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2010

 

2009

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net income

 

$

417,683

 

$

210,727

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Deferred income tax expense (benefit)

 

(36,889

)

(84,155

)

Shortfall tax benefits from stock-based compensation

 

(3,915

)

(38

)

Depreciation and amortization

 

212,823

 

186,192

 

Stock-based compensation expense

 

49,890

 

50,410

 

Changes in fair value of investments

 

(7,931

)

—

 

Impairment charges

 

—

 

182,080

 

Amortization of debt discount and debt issuance costs

 

67,274

 

59,145

 

Loss (gain) on foreign exchange contracts

 

9,499

 

(26,754

)

Gain on acquisition of Arana Therapeutics Limited

 

—

 

(10,008

)

Acquired in-process research and development

 

—

 

8,366

 

Other

 

2,368

 

(3,503

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

Receivables

 

16,888

 

81,022

 

Inventory

 

36,114

 

(8,604

)

Other assets

 

54,726

 

(14,348

)

Accounts payable, accrued expenses and deferred revenues

 

19,229

 

99,013

 

Other liabilities

 

(56,002

)

(48,194

)

Net cash provided by operating activities

 

781,757

 

681,351

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Purchases of property and equipment

 

(57,761

)

(60,927

)

Proceeds from sale of property and equipment

 

4,748

 

—

 

Cash balance from consolidation of variable interest entities

 

—

 

53,706

 

Acquisition of intangible assets

 

—

 

(53,324

)

Investment in Ception Therapeutics, Inc.

 

—

 

(75,000

)

Investment in BioAssets Development Corporation

 

—

 

(30,000

)

Purchases of investments

 

(148,987

)

(11,797

)

Acquisition of Arana Therapeutics Limited, net of cash acquired

 

—

 

(232,527

)

Acquisition of Mepha GmbH, net of cash acquired

 

(549,463

)

—

 

(Cash settlements of) proceeds from foreign exchange contracts

 

(9,499

)

26,754

 

Sales and maturities of available-for-sale investments

 

—

 

125,026

 

Net cash used for investing activities

 

(760,962

)

(258,089

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from sale of common stock

 

—

 

288,000

 

Proceeds from exercises of common stock options

 

27,391

 

10,211

 

Windfall tax benefits from stock-based compensation

 

4,644

 

2,017

 

Acquisition of treasury stock

 

(9,306

)

(6,722

)

Acquisition of Ception Therapeutics, Inc. noncontrolling interest

 

(299,289

)

—

 

Acquisition of BioAssets Development Corporation noncontrolling interest

 

(16,342

)

 

 

Payments on and retirements of long-term debt

 

(222,959

)

(13,412

)

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

 

(515,861

)

681,413

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

7,670

 

18,501

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(487,396

)

1,123,176

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

1,647,635

 

524,459

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

1,160,239

 

$

1,647,635

 

 


 

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

 

 

 

March 31, 2011

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected GAAP basic income per common share

 

$

1.50

 

—

 

$

1.70

 

$

7.14

 

—

 

$

7.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of current intangibles

 

0.37

 

—

 

0.37

 

1.44

 

—

 

1.44

 

Restructuring adjustments

 

0.01

 

—

 

0.01

 

0.04

 

—

 

0.04

 

Interest expense adjustments

 

0.21

 

—

 

0.21

 

0.85

 

—

 

0.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax effect of pre-tax adjustments at the applicable tax rates

 

(0.19

)

—

 

(0.19

)

(0.77

)

—

 

(0.77

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic adjusted income per common share guidance

 

$

1.90

 

—

 

$

2.10

 

$

8.70

 

—

 

$

9.00

 

 

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

 

· Adjusted effective tax rate of approximately 33.0% in 2011;

· Weighted average number of common shares outstanding of 75.8 and 76.4 million shares for the three months ended March 31, 2011 and year ended December 31, 2011, respectively; and

· No generic competition for AMRIX and FENTORA in 2011.