FRAZER, Pa., Feb. 12 /PRNewswire-FirstCall/ -- Cephalon, Inc. today reported 2006 revenue of $1.76 billion, a 46 percent increase compared with 2005 revenue of $1.21 billion. Adjusted sales for the year were $1.71 billion, a 48 percent increase over 2005 sales of $1.16 billion and $32 million higher than the company's previously issued guidance. Basic income per common share for the year was $2.39. Excluding amortization and certain other items, basic adjusted income per common share was $5.54, a 92 percent increase over the comparable figure in 2005 of $2.88 and $0.34 higher than the company's guidance.
Central nervous system (CNS) franchise adjusted sales for 2006 increased 34 percent to $786.3 million and pain franchise adjusted sales increased 59 percent to $656.2 million. Adjusted sales of other products were $264.4 million, an increase of 66 percent.
"We delivered exceptionally strong performance in 2006," said Frank Baldino, Jr., Ph.D., Chairman and CEO. "We successfully transitioned our pain franchise to FENTORA(TM), our next generation rapid-onset opioid, and accelerated the remarkable growth of PROVIGIL(R) even after eight years on the market. As we look to the future, we believe that the development of our promising oncology pipeline will provide an additional platform for our continued growth."
The company is raising its 2007 basic adjusted income per common share guidance by $0.03 per share to $3.90 - $4.00 (including the impact of SFAS 123R). Total sales guidance for 2007 remains at $1.675 - $1.725 billion and is now comprised of CNS franchise sales of $950 - $975 million, pain franchise sales of $375 - $400 million and other product sales of $325 - $350 million. SG&A and R&D guidance for 2007, including $30 million of SFAS 123R expense, is $695 - $725 million and $325 - $345 million, respectively. The company's adjusted net income guidance for 2007 is $259 - $265 million.
For the first quarter of 2007, the company is introducing sales guidance of $400 - $410 million, adjusted net income guidance of $59 - $66 million and basic adjusted income per common share guidance of $0.90 - $1.00.
Sales and basic adjusted income per common share guidance for the first- quarter of 2007 and full-year 2007 is reconciled below.
Cephalon's management will discuss the company's full-year 2006 performance in a conference call with investors beginning at 5:00 p.m. U.S. EST on Monday, February 12, 2007. To participate in the conference call, dial +1-913-981-4901 and refer to conference code number 7192405. Investors can listen to the call live by logging on to the company's website at http://www.cephalon.com and clicking on "Newsroom," 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 in four core therapeutic areas: central nervous system, pain, oncology and addiction. 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. Cephalon's European headquarters are located in Maisons-Alfort, France.
The company currently markets six proprietary products in the United States: PROVIGIL(R) (modafinil) Tablets [C-IV], FENTORA(TM) (fentanyl buccal tablet) [C-II], TRISENOX(R) (arsenic trioxide), VIVITROL(R) (naltrexone for extended-release injectable suspension), GABITRIL(R) (tiagabine hydrochloride), and ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II], and 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, including the development of its oncology pipeline; interpretation of clinical results; 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 the first quarter and full-year 2007; and other statements regarding matters that are not historical facts, including the Company's position and expected performance in 2007. 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," "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 December 31, 2006 GAAP Adjustments "Adjusted" REVENUES: Sales $473,347 $473,347 Other revenues 11,335 11,335 484,682 $- 484,682 COSTS AND EXPENSES: Cost of sales 67,213 67,213 Research and development 123,602 (39,218)(1) 84,384 Selling, general and administrative 215,508 (3,718)(2) 211,790 Depreciation and amortization 30,522 (20,958)(3) 9,564 Impairment charge - - Acquired in-process research and development 5,000 (5,000)(4) - 441,845 (68,894) 372,951 INCOME (LOSS) FROM OPERATIONS 42,837 68,894 111,731 OTHER INCOME (EXPENSE): Interest income 8,702 8,702 Interest expense (5,399) (5,399) Debt exchange expense (48,122) 48,122 (5) - Write-off of deferred debt issuance costs - - Other income (expense), net (1,056) (1,056) (45,875) 48,122 2,247 INCOME (LOSS) BEFORE INCOME TAXES (3,038) 117,016 113,978 INCOME TAX EXPENSE (BENEFIT) 1,871 33,736 (6) 35,607 NET INCOME (LOSS) $(4,909) $83,280 $78,371 BASIC INCOME (LOSS) PER COMMON SHARE $(0.08) $1.27 DILUTED INCOME (LOSS) PER COMMON SHARE $(0.08) $1.06 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 61,783 61,783 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 61,783 73,633 CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended December 31, 2005 GAAP Adjustments "Adjusted" REVENUES: Sales $322,930 $322,930 Other revenues 13,474 13,474 336,404 $- 336,404 COSTS AND EXPENSES: Cost of sales 50,130 50,130 Research and development 99,235 (3,944)(1) 95,291 Selling, general and administrative 140,957 (13,192)(2) 127,765 Depreciation and amortization 23,154 (15,473)(3) 7,681 Impairment charge 20,820 (20,820)(7) - Acquired in-process research and development 71,200 (71,200)(4) - 405,496 (124,629) 280,867 INCOME (LOSS) FROM OPERATIONS (69,092) 124,629 55,537 OTHER INCOME (EXPENSE): Interest income 6,612 6,612 Interest expense (5,924) (5,924) Debt exchange expense - - Write-off of deferred debt issuance costs (27,109) 27,109 (8) - Other income (expense), net (55) (55) (26,476) 27,109 633 INCOME (LOSS) BEFORE INCOME TAXES (95,568) 151,738 56,170 INCOME TAX EXPENSE (BENEFIT) (113,641) 127,097 (6) 13,456 NET INCOME (LOSS) $18,073 $24,641 $42,714 BASIC INCOME (LOSS) PER COMMON SHARE $0.31 $0.74 DILUTED INCOME (LOSS) PER COMMON SHARE $0.30 $0.71 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,099 58,099 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 60,351 60,351 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to "Adjusted" Net Income Three Months Ended December 31, 2006 and December 31, 2005 (1) In 2006, to exclude charges related to payments for several research and development collaborations ($35.5 million) and the net impact of the adoption of the new stock compensation accounting rules ($3.7 million, representing half of the total stock option compensation expense recorded based on the employees' compensation allocation). In 2005, to exclude the write-off of an investment in a development stage company ($1.0 million) and the restructuring of certain research and development activities at Cephalon France ($2.9 million). (2) In 2006, to exclude charges related to the net impact of the adoption of the new stock compensation accounting rules (representing half of the total stock option compensation expense recorded based on the employees' compensation allocation). In 2005, to exclude charges relating to the termination of Salmedix's facility lease ($2.6 million) and the settlement of the PROVIGIL patent litigation ($10.6 million). (3) To exclude the on-going amortization of acquired intangible assets. (4) In 2006, to exclude the write-off of other acquired in-process research and development. In 2005, to exclude the write-off of acquired in-process research and development related to the acquisition of Zeneus. (5) To exclude the debt exchange expense associated with the December 2006 exchanges of $337.0 million of zero coupon convertible subordinated notes and $100.0 million of 2% senior subordinated convertible notes. (6) In 2006, 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 liabilities. In 2005, to reflect the tax effect of adjustments at the applicable tax rates and $95.5 million of tax benefits due to the reassessment of the realizability of deferred tax assets. (7) To exclude the write-off of an intangible asset due to the expected termination of a distribution agreement in the United Kingdom. (8) To exclude the write-off of deferred debt issuance costs related to the 2% senior subordinated convertible notes. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Year Ended December 31, 2006 GAAP Adjustments "Adjusted" REVENUES: Sales $1,720,172 $(13,273)(1) $1,706,899 Other revenues 43,897 43,897 1,764,069 (13,273) 1,750,796 COSTS AND EXPENSES: Cost of sales 257,061 (8,610)(2) 248,451 Research and development 403,367 (95,772)(3) 307,595 Selling, general and administrative 675,576 (25,259)(4) 650,317 Depreciation and amortization 116,511 (81,723)(5) 34,788 Impairment charges 12,417 (12,417)(6) - Acquired in-process research and development 5,000 (5,000)(7) - 1,469,932 (228,781) 1,241,151 INCOME (LOSS) FROM OPERATIONS 294,137 215,508 509,645 OTHER INCOME (EXPENSE): Interest income 25,438 25,438 Interest expense (18,922) (18,922) Debt exchange expense (48,122) 48,122 (8) - Write-off of deferred debt issuance costs (13,105) 13,105 (9) - Gain on early extinguishments of debt - - Other income (expense), net (1,172) (1,172) (55,883) 61,227 5,344 INCOME (LOSS) BEFORE INCOME TAXES 238,254 276,735 514,989 INCOME TAX EXPENSE (BENEFIT) 93,438 86,583 (10) 180,021 NET INCOME (LOSS) $144,816 $190,152 $334,968 BASIC INCOME (LOSS) PER COMMON SHARE $2.39 $5.54 DILUTED INCOME (LOSS) PER COMMON SHARE $2.08 $4.81 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 60,507 60,507 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 69,672 69,672 CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Year Ended December 31, 2005 GAAP Adjustments "Adjusted" REVENUES: Sales $1,156,518 $1,156,518 Other revenues 55,374 55,374 1,211,892 $- 1,211,892 COSTS AND EXPENSES: Cost of sales 164,223 164,223 Research and development 354,826 (3,944)(3) 350,882 Selling, general and administrative 443,861 (13,192)(4) 430,669 Depreciation and amortization 84,305 (57,651)(5) 26,654 Impairment charges 20,820 (20,820)(6) - Acquired in-process research and development 366,815 (366,815)(7) - 1,434,850 (462,422) 972,428 INCOME (LOSS) FROM OPERATIONS (222,958) 462,422 239,464 OTHER INCOME (EXPENSE): Interest income 26,171 26,171 Interest expense (25,235) (25,235) Debt exchange expense - - Write-off of deferred debt issuance costs (27,109) 27,109 (9) - Gain on early extinguishments of debt 2,085 (2,085)(11) - Other income (expense), net 1,928 1,928 (22,160) 25,024 2,864 INCOME (LOSS) BEFORE INCOME TAXES (245,118) 487,446 242,328 INCOME TAX EXPENSE (BENEFIT) (70,164) 145,375 (10) 75,211 NET INCOME (LOSS) $(174,954) $342,071 $167,117 BASIC INCOME (LOSS) PER COMMON SHARE $(3.01) $2.88 DILUTED INCOME (LOSS) PER COMMON SHARE $(3.01) $2.76 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 58,051 58,051 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION 58,051 62,073 CEPHALON, INC. AND SUBSIDIARIES Notes to Reconciliation of GAAP Net Income (Loss) to "Adjusted" Net Income Years Ended December 31, 2006 and December 31, 2005 (1) To exclude the U.S. Department of Defense ("DoD") Tricare program reversal as a result of the U.S. Court of Appeals September 2006 ruling. (2) To exclude the reserve for SPARLON capitalized inventory costs. (3) In 2006, to exclude charges related to payments for several research and development collaborations ($80.5 million) and the net impact of the adoption of the new stock compensation accounting rules ($15.3 million, representing half of the total stock option compensation expense recorded based on the employees' compensation allocation). In 2005, to exclude the write-off of an investment in a development stage company ($1.0 million) and the restructuring of certain research and development activities at Cephalon France ($2.9 million). (4) In 2006, to exclude charges associated with the settlement of the PROVIGIL patent litigation ($6.0 million), employee severance costs associated with the European integration and restructuring ($4.0 million) and the net impact of the adoption of the new stock compensation accounting rules ($15.3 million, representing half of the total stock option compensation expense recorded based on the employees' compensation allocation). In 2005, to exclude charges relating to the termination of Salmedix's facility lease ($2.6 million) and the settlement of the PROVIGIL patent litigation ($10.6 million). (5) To exclude the on-going amortization of acquired intangible assets. (6) In 2006, to exclude charges related to the impairment of an intangible asset. In 2005, to exclude the write-off of an intangible asset due to the expected termination of a distribution agreement in the United Kingdom. (7) In 2006, to exclude the write-off of other acquired in-process research and development. In 2005, to exclude the write-off of acquired in-process research and development related to the acquisition of Salmedix ($130.1 million), VIVITROL product rights ($160.0 million), Zeneus ($71.2 million) and other ($5.5 million). (8) To exclude the debt exchange expense associated with the December 2006 exchanges of $337.0 million of zero coupon convertible subordinated notes and $100.0 million of 2% senior subordinated convertible notes. (9) In 2006, to exclude the write-off of deferred debt issuance costs related to the Zero Coupon convertible subordinated notes. In 2005, to exclude the write-off of deferred debt issuance costs related to the 2% senior subordinated convertible notes. (10) In 2006, 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 liabilities. In 2005, to reflect the tax effect of adjustments at the applicable tax rates and $46.0 million of tax benefits due to the reassessment of the realizability of deferred tax assets. (11) To exclude the gain on early extinguishment of debt related to the repurchase of $511.7 million of our 2.5% convertible subordinated notes due December 2006. CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended December 31, 2006 United States Europe Total Sales: PROVIGIL $190,838 $13,833 $204,671 GABITRIL 12,805 806 13,611 CNS 203,643 14,639 218,282 ACTIQ 100,882 8,039 108,921 Generic OTFC 46,630 - 46,630 FENTORA 29,250 - 29,250 Pain 176,762 8,039 184,801 Other 14,423 55,841 70,264 $394,828 $78,519 $473,347 CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Three Months Ended December 31, 2005 United States Europe Total Sales: PROVIGIL $137,028 $11,239 $148,267 GABITRIL 12,494 1,179 13,673 CNS 149,522 12,418 161,940 ACTIQ 112,571 5,198 117,769 Generic OTFC - - - FENTORA - - - Pain 112,571 5,198 117,769 Other 13,376 29,845 43,221 $275,469 $47,461 $322,930 CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) % Increase (Decrease) United States Europe Total Sales: PROVIGIL 39% 23% 38% GABITRIL 2% (32%) 0% CNS 36% 18% 35% ACTIQ (10%) 55% (8%) Generic OTFC 100% 100% 100% FENTORA 100% 100% 100% Pain 57% 55% 57% Other 8% 87% 63% 43% 65% 47% CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Year Ended December 31, 2006 United States Europe Total Sales: PROVIGIL $684,885 $43,052 $727,937 GABITRIL 54,096 4,316 58,412 CNS 738,981 47,368 786,349 ACTIQ 544,886 27,252 572,138 Generic OTFC 54,801 - 54,801 FENTORA 29,250 - 29,250 Pain 628,937 27,252 656,189 Other 56,084 208,277 264,361 $1,424,002 $282,897 $1,706,899 CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) Year Ended December 31, 2005 United States Europe Total Sales: PROVIGIL $475,557 $37,248 $512,805 GABITRIL 66,517 5,741 72,258 CNS 542,074 42,989 585,063 ACTIQ 394,676 17,102 411,778 Generic OTFC - - - FENTORA - - - Pain 394,676 17,102 411,778 Other 49,695 109,982 159,677 $986,445 $170,073 $1,156,518 CEPHALON, INC. AND SUBSIDIARIES "ADJUSTED" CONSOLIDATED SALES DETAIL (In thousands) (Unaudited) % Increase (Decrease) United States Europe Total Sales: PROVIGIL 44% 16% 42% GABITRIL (19%) (25%) (19%) CNS 36% 10% 34% ACTIQ 38% 59% 39% Generic OTFC 100% 100% 100% FENTORA 100% 100% 100% Pain 59% 59% 59% Other 13% 89% 66% 44% 66% 48% NOTE: For the year ended December 31, 2006, amounts exclude the impact of the DoD Tricare program reversal of $13.3 million which reduced GAAP U.S. sales of PROVIGIL, GABITRIL and ACTIQ by $6.9 million, $0.9 million and $5.5 million, respectively. CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) December 31, December 31, 2006 2005 CURRENT ASSETS: Cash and cash equivalents $496,512 $205,060 Investments 25,212 279,030 Receivables, net 270,045 199,086 Inventory, net 174,300 137,886 Deferred tax assets, net 184,518 187,436 Other current assets 47,278 40,339 Total current assets 1,197,865 1,048,837 PROPERTY AND EQUIPMENT, net 453,010 323,830 GOODWILL 467,167 471,051 INTANGIBLE ASSETS, net 793,037 742,874 DEFERRED TAX ASSE
