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                                                Filed Pursuant to Rule 424B3
                                                Registration No. 333-62234

PROSPECTUS

                                 CEPHALON, INC.
          $400,000,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006
                        5,405,405 SHARES OF COMMON STOCK

                            ------------------------

     Under this prospectus, the selling securityholders named in this prospectus
or in any prospectus supplements may offer and sell the notes and the common
stock issued upon conversion of the notes.

     The notes:

        - are convertible into common stock;

        - are subordinated to our senior indebtedness; and

        - are redeemable on or after May 5, 2003.

     We may be required to repurchase the notes if our common stock is delisted
or a change of control occurs.

     Our common stock is quoted on the Nasdaq National Market under the symbol
"CEPH." On July 17, 2001, the last reported closing price of our common stock
was $61.58 per share.

                            ------------------------

     INVESTING IN THE SECURITIES OFFERED BY THIS PROSPECTUS INVOLVES RISKS. YOU
SHOULD READ THIS PROSPECTUS CAREFULLY BEFORE YOU INVEST. PLEASE REFER TO THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION
OF THE MATERIAL RISKS INVOLVED IN INVESTING IN THE NOTES AND THE COMMON STOCK
ISSUED UPON CONVERSION OF THE NOTES.

                            ------------------------

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                            ------------------------

                 THE DATE OF THIS PROSPECTUS IS AUGUST 6, 2001.
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                               TABLE OF CONTENTS



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SUMMARY.....................................................    1
RISK FACTORS................................................    4
USE OF PROCEEDS.............................................   12
RATIO OF EARNINGS TO FIXED CHARGES..........................   12
DIVIDEND POLICY.............................................   12
DESCRIPTION OF NOTES........................................   13
DESCRIPTION OF CAPITAL STOCK................................   26
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.............   28
SELLING SECURITYHOLDERS.....................................   31
PLAN OF DISTRIBUTION........................................   34
WHERE YOU CAN FIND MORE INFORMATION.........................   35
FORWARD-LOOKING STATEMENTS..................................   36
LEGAL MATTERS...............................................   36
EXPERTS.....................................................   36


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                                    SUMMARY

     The following summary highlights some information from this prospectus. You
should read this entire prospectus, including the "Risk Factors" section and the
other more detailed information appearing elsewhere or incorporated by reference
in this prospectus.

                                    CEPHALON

     Cephalon, Inc. is an international biopharmaceutical company focused on the
discovery, development and marketing of products to treat sleep disorders,
neurological disorders, cancer and pain. In addition to an active research and
development program, we market three products in the United States and eight
products in various countries in Europe.

     In the United States, we maintain our corporate and research and
development headquarters and market three products: PROVIGIL(R) (modafinil)
Tablets [C-IV] for treating excessive daytime sleepiness associated with
narcolepsy, ACTIQ(R) (oral transmucosal fentanyl citrate) [C-II] for the
management of breakthrough cancer pain in opioid tolerant patients and
GABITRIL(R) (tiagabine hydrochloride) for the treatment of partial seizures
associated with epilepsy. We market these products through our two specialty
sales forces: the first, numbering approximately 130 representatives, details
PROVIGIL and GABITRIL to neurologists, psychiatrists and sleep specialists; the
second, numbering approximately 50 representatives, details ACTIQ to oncologists
and pain specialists.

     In the United Kingdom, we market PROVIGIL and five other products,
including TEGRETOL(R) (carbamazepine), a treatment for epilepsy and RITALIN(R)
(methylphenidate), a treatment for attention deficit hyperactivity disorder
(ADHD). We also market other products in France, Germany, Austria and
Switzerland. In support of our European sales and marketing efforts, we have
established a European sales and marketing organization comprised of
approximately 30 persons.

     Much of our research and development is focused on expanding the uses for
PROVIGIL, ACTIQ and GABITRIL. We have an ongoing clinical program to explore the
utility of PROVIGIL in treating excessive daytime sleepiness and fatigue
associated with disorders other than narcolepsy as well as to explore its
utility in the treatment of certain psychiatric disorders. We have completed
initial clinical studies of PROVIGIL in patients suffering from fatigue
associated with multiple sclerosis, in patients suffering from excessive daytime
sleepiness due to obstructive sleep apnea, and in patients suffering from
tiredness and decreased alertness in a simulated shift work environment. Based
on positive results obtained in such studies and with the objective of marketing
PROVIGIL to a broader population suffering from excessive sleepiness, we have
initiated two additional studies to investigate the use of PROVIGIL to treat
excessive sleepiness in patients with obstructive sleep apnea and in shift
workers. We also are conducting a number of exploratory studies with all three
products to determine additional populations of patients who could benefit from
therapy with these products.

     In addition to our clinical programs focused on our marketed products, we
have other significant research programs that seek to discover and develop
treatments for neurological and oncological disorders. With respect to
neurology, we have a program with a molecule, CEP-1347, that we are preparing to
enter into Phase 2 clinical studies for the treatment of Parkinson's disease. In
the cancer area, we have a program with a lead molecule, CEP-701, that is
currently in Phase 2 clinical studies to treat prostate and pancreatic cancer,
and a program with a molecule in late preclinical studies for the treatment of
solid tumors. As part of our corporate strategy, we seek to share the risk of
our research and development activities with corporate partners and, to that
end, we have entered into a number of agreements to share the costs of
developing and commercializing these compounds.

     We were incorporated in Delaware in 1987. The mailing address and telephone
number of our principal executive offices are 145 Brandywine Parkway, West
Chester, PA 19380, (610) 344-0200.

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                            SECURITIES TO BE OFFERED

     This prospectus relates to the offer and sale by the selling
securityholders of the following securities:

     - $400,000,000 5 1/4% Convertible Subordinated Notes

     - 5,405,405 shares of Common Stock.

     We issued and sold $300,000,000 of the notes in May 2001 and an additional
$100,000,000 of the notes in June 2001 pursuant to the exercise of an option
granted in May 2001 to the initial purchasers in transactions that were exempt
from the registration requirements imposed by the Securities Act of 1933.

     The initial purchasers reasonably believed that the persons to whom they
resold the notes were "qualified institutional buyers", as defined in Rule 144A
under the Securities Act.

     The following is a summary of the material terms of the securities offered
under this prospectus.

Securities offered............   Up to $400,000,000 aggregate principal amount
                                 of 5 1/4% Convertible Subordinated Notes due
                                 2006.

Interest......................   Interest is payable on May 1 and November 1 of
                                 each year, beginning on November 1, 2001.

Maturity......................   May 1, 2006.

Conversion....................   The notes are convertible at the option of the
                                 holder at any time prior to maturity into
                                 common stock at a conversion price of $74.00
                                 per share, subject to adjustment upon certain
                                 events.

Provisional redemption........   We may redeem some or all of the notes at any
                                 time prior to May 5, 2003 if the closing price
                                 of our common stock has exceeded 150% of the
                                 conversion price for at least 20 trading days
                                 in the consecutive 30-day trading period
                                 immediately prior to the delivery of a
                                 redemption notice. If we redeem some or all of
                                 the notes prior to May 5, 2003 we will also
                                 make an additional payment on the redeemed
                                 notes equal to $100.27 per $1,000 note, minus
                                 the amount of any interest we actually paid on
                                 the notes. See "Description of
                                 Notes -- Provisional Redemption."

Optional redemption...........   We may redeem some or all of the notes on or
                                 after May 5, 2003 at the redemption prices
                                 listed in this prospectus, plus accrued and
                                 unpaid interest. See "Description of
                                 Notes -- Optional Redemption."

Repurchase at holder's option
upon a repurchase event.......   You may require us to repurchase your notes
                                 upon the occurrence of certain events in cash,
                                 or, at our option, in common stock, at 105% of
                                 the principal amount of the notes, plus accrued
                                 and unpaid interest. See "Description of
                                 Notes -- Repurchase at Option of Holders upon a
                                 Repurchase Event."

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Ranking.......................   The notes are subordinated to our senior
                                 indebtedness. As of December 31, 2000, if the
                                 notes had been issued, we would have had
                                 approximately $98.1 million of senior
                                 indebtedness outstanding. The terms of the
                                 indenture under which the notes are issued do
                                 not limit our ability to incur additional
                                 indebtedness, senior or otherwise.

Use of proceeds...............   We will not receive any of the proceeds from
                                 the sale of the securities covered by this
                                 prospectus.

Registration rights...........   We have filed with the SEC a shelf registration
                                 statement, of which this prospectus forms a
                                 part, with respect to the resale of the notes
                                 and the common stock issuable upon conversion
                                 of the notes. We have agreed to keep the shelf
                                 registration statement effective until two
                                 years after the latest date of the initial
                                 offering of the notes. If we do not comply with
                                 these registration obligations, we will be
                                 required to pay liquidated damages to the
                                 holders of the notes or the common stock
                                 issuable upon conversion.

Trading.......................   Our common stock is traded on the Nasdaq
                                 National Market under the symbol "CEPH."

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     Cephalon and the Cephalon logo are trademarks of Cephalon, Inc. registered
in the U.S. and trademarks of Cephalon, Inc., registered or otherwise, in
certain other countries. PROVIGIL is a registered trademark of Genelco, S.A. and
is licensed to Cephalon. Gabitril is a registered trademark of Cephalon. ACTIQ
is a registered trademark of Anesta Corp., a wholly-owned subsidiary of
Cephalon. "(R)" indicates U.S. trademark registration. Other third party logos
and product/trade names are registered trademarks or trade names of their
respective companies.

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                                  RISK FACTORS

     An investment in the securities offered by this prospectus involves a high
degree of risk. You should consider carefully the following risk factors in
addition to the remainder of this prospectus, including the information
incorporated by reference, before making an investment decision.

RISKS RELATED TO OUR BUSINESS.

DURING THE NEXT SEVERAL YEARS WE WILL BE VERY DEPENDENT UPON THE COMMERCIAL
SUCCESS OF OUR PRODUCTS, ESPECIALLY PROVIGIL, AND WE MAY NOT BE ABLE TO
CONSISTENTLY AND MEANINGFULLY INCREASE SALES OF THESE PRODUCTS DURING THIS
PERIOD, OR TO ATTAIN PROFITABILITY ON THE BASIS OF SUCH SALES.

     The commercialization of our pharmaceutical products involves a number of
significant challenges. In particular, our ability to meaningfully increase
sales depends, in large part, on the success of our clinical development
programs, and our sales and marketing efforts to physicians, patients and
third-party payors. A number of factors could impact these efforts, including
our ability to demonstrate clinically that our products have utility beyond
current indications, our limited financial resources and sales and marketing
experience relative to our competitors, perceived differences between our
products and those of our competitors, the availability and level of
reimbursement of our products by third-party payors, incidents of adverse
reactions, side effects or misuse of our products and the unfavorable publicity
that could result, or the occurrence of manufacturing, supply or distribution
disruptions.

     Ultimately, our efforts may not prove to be as effective as the efforts of
our competitors. In the United States and elsewhere, our products face
significant competition in the marketplace. The conditions that our products
treat, and some of the other disorders for which we are conducting additional
studies, are currently treated with several drugs, many of which have been
available for a number of years or are available in inexpensive generic forms.
Thus, we will need to demonstrate to physicians, patients and third party payors
that the cost of our products is reasonable and appropriate in the light of
their safety and efficacy, the price of competing products and the related
health care benefits to the patient. Even if we are able to increase sales over
the next several years, we cannot be sure that such sales and other revenue will
reach a level at which we will attain profitability.

WE MAY BE UNSUCCESSFUL IN OUR EFFORTS TO EXPAND THE NUMBER AND SCOPE OF
AUTHORIZED USES OF PROVIGIL, WHICH WOULD HAMPER SALES GROWTH AND MAKE IT MORE
DIFFICULT TO ATTAIN PROFITABILITY.

     PROVIGIL is approved for sale in the United States and abroad for use by
those suffering from excessive daytime sleepiness associated with narcolepsy.
Under current FDA regulations, we are limited in our ability to promote the use
of PROVIGIL outside of this approved indication. The market for the use of
PROVIGIL in narcolepsy patients is relatively small; it is limited to
approximately 125,000 persons in the United States, of which we estimate
approximately 50,000 seek treatment from a physician.

     We have initiated clinical studies to examine whether or not PROVIGIL is
effective and safe when used to treat disorders other than narcolepsy. Although
some study data has been positive, additional studies in these disorders will be
necessary before we can apply to expand the authorized uses of PROVIGIL. We do
not know whether these studies will demonstrate safety and efficacy, or if they
do, whether we will succeed in receiving regulatory approval to market PROVIGIL
for additional disorders. If the results of some of these studies are negative,
or if adverse experiences are reported in these clinical studies or otherwise in
connection with the use of PROVIGIL by patients, this could undermine physician
and patient comfort with the product, limit the commercial success of the
product and diminish the acceptance of PROVIGIL in the narcolepsy market. Even
if the results of these studies are positive, the impact on sales of PROVIGIL
may be minimal unless we are able to obtain FDA approval to expand the
authorized use of PROVIGIL. FDA regulations restrict our ability to communicate
the results of additional clinical studies to patients and physicians without
first obtaining approval from the FDA to expand the authorized uses for this
product.

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AS OUR PRODUCTS ARE USED COMMERCIALLY, UNINTENDED SIDE EFFECTS, ADVERSE
REACTIONS OR INCIDENTS OF MISUSE MAY OCCUR WHICH COULD RESULT IN ADDITIONAL
REGULATORY CONTROLS, AND REDUCE SALES OF OUR PRODUCTS.

     Prior to 1999, the use of our products had been limited principally to
clinical trial patients under controlled conditions and under the care of expert
physicians. We cannot predict whether the widespread commercial use of our
products will produce undesirable or unintended side effects that have not been
evident in our clinical trials or the relatively limited commercial use to date.
In addition, in patients who take multiple medications, drug interactions could
occur which can be difficult to predict. Additionally, incidents of product
misuse may occur. These events, among others, could result in additional
regulatory controls that could limit the circumstances under which the product
is prescribed or even lead to the withdrawal of the product from the market.
More specifically, ACTIQ has been approved under regulations concerning drugs
with certain safety profiles, under which the FDA has established special
restrictions to ensure safe use. Any violation of these special restrictions
could lead to the imposition of further restrictions or withdrawal of the
product from the market.

WE MAY NOT BE ABLE TO MAINTAIN ADEQUATE PATENT PROTECTION OR MARKET EXCLUSIVITY
FOR OUR PRODUCTS AND THEREFORE POTENTIAL COMPETITORS MAY DEVELOP COMPETING
PRODUCTS, WHICH COULD RESULT IN A DECREASE IN SALES AND MARKET SHARE, CAUSE US
TO REDUCE PRICES TO COMPETE SUCCESSFULLY, AND LIMIT OUR COMMERCIAL SUCCESS.

     We place considerable importance on obtaining patent protection for new
technologies, products and processes. To that end, we file applications for
patents covering the composition of matter or uses of our drug candidates or our
proprietary processes. We could incur substantial costs in asserting our patent
rights, including those licensed to us by third parties, and in defending patent
infringement suits against us or our employees relating to ownership of, or
rights to, patents and other intellectual property of third parties. Such
disputes could substantially delay our drug development or commercialization.
The Patent Trademark Office or a private party could institute an interference
proceeding involving us in connection with one or more of our patents or patent
applications. Such proceedings could result in an adverse decision as to
priority of invention, in which case we would not be entitled to a patent on the
invention at issue in the interference proceeding. The Patent Trademark Office
or a private party could also institute reexamination proceedings involving us
in connection with one or more of our patents, and such proceedings could result
in an adverse decision as to the validity or scope of the patents. We could be
forced to either seek a license to intellectual property rights of others, which
may not be available to us on acceptable terms, if at all, or alter our products
or processes so that they no longer infringe on the proprietary rights of
others.

     We also rely on trade secrets, know-how and continuing technological
advancements to support our competitive position. Although we have entered into
confidentiality and invention rights agreements with our employees, consultants,
advisors and collaborators, we cannot be sure that such agreements will be
honored or that we will be able to effectively protect our rights to our
unpatented trade secrets and know-how. Moreover, we cannot be sure that others
will not independently develop substantially equivalent proprietary information
and techniques or otherwise gain access to our trade secrets and know-how. In
addition, many of our scientific and management personnel have been recruited
from other biotechnology and pharmaceutical companies where they were conducting
research in areas similar to those that we now pursue. As a result, we could be
subject to allegations of trade secret violations and other claims.

MANUFACTURING, SUPPLY AND DISTRIBUTION PROBLEMS MAY CREATE SUPPLY DISRUPTIONS
THAT COULD RESULT IN A REDUCTION OF PRODUCT SALES REVENUE, AND DAMAGE COMMERCIAL
PROSPECTS FOR PROVIGIL, ACTIQ, GABITRIL AND OTHER PRODUCTS.

     We must comply with all applicable regulatory requirements of the FDA and
foreign authorities, including current Good Manufacturing Practice regulations.
In addition, we must comply with all applicable regulatory requirements of the
Drug Enforcement Administration, and foreign authorities for PROVIGIL (Schedule
IV controlled substance) and ACTIQ (Schedule II controlled substance). The
facilities used to manufacture, store and distribute our products are subject to
inspection by regulatory authorities at any time to determine compliance with
regulations. The current Good Manufacturing
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Practice and controlled substance regulations are complex, and any failure to
comply with them could lead to remedial action, civil and criminal penalties and
delays in production of material.

     Except for the in-house manufacture of ACTIQ for international markets, we
rely on third parties to manufacture our products. Abbott is required to supply
us with ACTIQ for the United States for up to 36 months from March 2000. After
that date, we will have to make other arrangements for supply, which could
include the manufacture of ACTIQ in-house for the United States, or establishing
supply arrangements with third parties. We also rely on third parties to
distribute, provide customer service activities and accept and process returns.
In addition, we depend upon sole suppliers for active drug substances contained
in our products, and we depend upon single manufacturers that are qualified to
manufacture finished commercial products. Although we employ a small number of
persons to coordinate and manage the activities undertaken by these third
parties, we have relatively limited experience in this regard. We maintain
inventories of active drug substances and finished products to protect against
supply disruptions, and are qualifying an additional manufacturer of finished
product for PROVIGIL. Nevertheless, any disruption in these activities could
impede our ability to sell our products and could reduce sales revenue.

     A non-active ingredient used in PROVIGIL is no longer manufactured or
commercially available. At anticipated levels of demand, we have several years
supply of this ingredient. We have prepared a new formulation of PROVIGIL that
does not include the now unavailable ingredient; however, the introduction of
any such new formulation requires regulatory approval. If we are unable to
obtain approval for our new formulation, we could face supply disruptions that
would result in significant costs and delays, undermine goodwill established
with physicians and patients, and damage commercial prospects for PROVIGIL.

THE EFFORTS OF GOVERNMENT ENTITIES AND THIRD PARTY PAYORS TO CONTAIN OR REDUCE
THE COSTS OF HEALTH CARE MAY ADVERSELY AFFECT OUR SALES AND LIMIT THE COMMERCIAL
SUCCESS OF OUR PRODUCTS.

     In certain foreign markets, pricing or profitability of pharmaceutical
products is subject to various forms of direct and indirect governmental
control. In the United States, there have been, and we expect there will
continue to be, various federal and state proposals to implement similar
government controls. The commercial success of our products could be limited if
federal or state governments adopt any such proposals. In addition, in the
United States and elsewhere, sales of pharmaceutical products depend in part on
the availability of reimbursement to the consumer from third party payors, such
as government and private insurance plans. Third party payors increasingly
challenge the prices charged for products, and limit reimbursement levels
offered to consumers for such products. Third party payors could focus their
cost control efforts on our products, thereby limiting the commercial success of
the products.

WE EXPERIENCE INTENSE COMPETITION IN OUR FIELDS OF INTEREST, WHICH MAY ADVERSELY
AFFECT OUR BUSINESS.

     Large and small companies, academic institutions, governmental agencies,
and other public and private research organizations conduct research, seek
patent protection, and establish collaborative arrangements for product
development in competition with us. Products developed by any of these entities
may compete directly with those we develop or sell. Competing products may
provide greater therapeutic benefits for a specific indication, or may offer
comparable performance at a lower cost. Many of these companies and institutions
have substantially greater capital resources, research and development staffs
and facilities than we have, and substantially greater experience in conducting
clinical trials, obtaining regulatory approvals and manufacturing and marketing
pharmaceutical products. These entities represent significant competition for
us. In addition, competitors who are developing products for the treatment of
neurological or oncological disorders might succeed in developing technologies
and products that are more effective than any that we develop or sell or that
would render our technology and products obsolete or noncompetitive. Competition
and innovation from these or other sources potentially could negatively affect
sales of our products or make them obsolete. Advances in current treatment
methods also may adversely affect the market for such products. In addition, we
may be at a competitive marketing disadvantage against companies that have
broader product lines and whose sales personnel are able to offer more
complementary products than we can.
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OUR PRODUCTS CONTAIN CONTROLLED SUBSTANCES.

     The active ingredients in PROVIGIL and ACTIQ are controlled substances
regulated by the DEA. As controlled substances, the manufacture, shipment, sale
and use of these products is subject to a high degree of regulation and
accountability. These regulations also are imposed on prescribing physicians and
other third parties, making the use of such products relatively complicated and
expensive. Future products also may contain substances regulated by the DEA. In
some cases, products containing controlled substances have generated public
controversy which, in extreme cases, have resulted in further restrictions on
marketing or even withdrawal of regulatory approval. In addition, negative
publicity may bring about rejection of the product by the medical community. If
the DEA or FDA withdrew the approval of, or placed additional significant
restrictions on, the marketing of any of our products, our business could be
materially and adversely affected.

WE FACE SIGNIFICANT PRODUCT LIABILITY RISKS, WHICH MAY HAVE A NEGATIVE EFFECT ON
OUR FINANCIAL PERFORMANCE.

     The administration of drugs to humans, whether in clinical trials or
commercially, can result in product liability claims whether or not the drugs
are actually at fault for causing an injury. Furthermore, our products may
cause, or may appear to have caused, serious adverse side effects (including
death) or potentially dangerous drug interactions that we may not learn about or
understand fully until the drug has been administered to patients for some time.
As our products are used more widely and in patients with varying medical
conditions, the likelihood of an adverse drug reaction may increase. Product
liability claims can be expensive to defend and may result in large judgments or
settlements against us, which could have a negative effect on our financial
performance. We maintain product liability insurance in amounts we believe to be
commercially reasonable, but claims could exceed our coverage limits.
Furthermore, we cannot be certain that we will always be able to purchase
sufficient insurance at an affordable price. Even if a product liability claim
is not successful, the adverse publicity and time and expense of defending such
a claim may interfere with our business.

THE RESULTS AND TIMING OF OUR RESEARCH AND DEVELOPMENT ACTIVITIES, INCLUDING
FUTURE CLINICAL TRIALS ARE DIFFICULT TO PREDICT, SUBJECT TO FUTURE SETBACKS AND,
ULTIMATELY, MAY NOT RESULT IN ANY ADDITIONAL PHARMACEUTICAL PRODUCTS, WHICH MAY
ADVERSELY AFFECT OUR BUSINESS.

     We are focused on the search for new pharmaceutical products. These
activities include engaging in discovery research and process development,
conducting preclinical and clinical studies, and seeking regulatory approval in
the United States and abroad. In all of these areas, we have relatively limited
resources and compete against larger multinational pharmaceutical companies.
Moreover, even if we undertake these activities in an effective and efficient
manner, regulatory approval for the sale of new pharmaceutical products remains
highly uncertain since, in our industry, the majority of compounds discovered do
not enter clinical studies and the majority of therapeutic candidates fail to
show the human safety and efficacy necessary for regulatory approval and
successful commercialization.

     Preclinical testing and clinical trials must demonstrate that a product
candidate is safe and efficacious. The results from preclinical testing and
early clinical trials may not be predictive of results obtained in subsequent
clinical trials, and we cannot be sure that these clinical trials will
demonstrate the safety and efficacy necessary to obtain regulatory approval for
any product candidates. A number of companies in the biotechnology and
pharmaceutical industries have suffered significant setbacks in advanced
clinical trials, even after obtaining promising results in earlier trials. In
addition, certain clinical trials are conducted with patients having the most
advanced stages of disease. During the course of treatment, these patients often
die or suffer other adverse medical effects for reasons that may not be related
to the pharmaceutical agent being tested. Such events can have a negative impact
on the statistical analysis of clinical trial results.

     The completion of clinical trials of our product candidates may be delayed
by many factors. Once such factor is the rate of enrollment of patients. Neither
we nor our collaborators can control the rate at which patients present
themselves for enrollment, and we cannot be sure that the rate of patient
enrollment will be consistent with our expectations or be sufficient to enable
clinical trials of our product

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candidates to be completed in a timely manner or at all. Any significant delays
in, or termination of, clinical trials of our product candidates may have a
material adverse effect on our business.

     We cannot be sure that we will be permitted by regulatory authorities to
undertake additional clinical trials for any of our product candidates, or that
if such trials are conducted, any of our product candidates will prove to be
safe and efficacious or will receive regulatory approvals. Any delays in or
termination of these clinical trial efforts may have a material adverse effect
on our business.

OUR RESEARCH AND DEVELOPMENT AND MARKETING EFFORTS ARE OFTEN DEPENDENT ON
CORPORATE COLLABORATORS AND OTHER THIRD PARTIES WHO MAY NOT DEVOTE SUFFICIENT
TIME, RESOURCES AND ATTENTION TO OUR PROGRAMS, WHICH MAY LIMIT OUR EFFORTS TO
SUCCESSFULLY DEVELOP AND MARKET POTENTIAL PRODUCTS.

     Because we have limited resources, we have entered into a number of
collaboration agreements with other pharmaceutical companies. These agreements
call for our partner to control the supply of bulk or formulated drugs for
commercial use or for use in clinical trials; design and execution of clinical
studies; process of obtaining regulatory approval to market the product; and/or
marketing and selling of any approved product.

     In each of these areas, our partners may not support fully our research and
commercial interests since our program may compete for time, attention and
resources with the internal programs of our corporate collaborators. As such, we
cannot be sure that our corporate collaborators will share our perspectives on
the relative importance of our program, that they will commit sufficient
resources to our program to move it forward effectively, or that the program
will advance as rapidly as it might if we had retained complete control of all
research, development, regulatory and commercialization decisions. We also rely
on several of these collaborators and other third parties for the production of
compounds and the manufacture and supply of pharmaceutical products.
Additionally, we may find it necessary from time to time to seek new or
additional partners to assist us in commercializing our products. It is
uncertain whether we would be successful in establishing any such new or
additional relationships.

OUR PRODUCT SALES AND RELATED FINANCIAL RESULTS WILL FLUCTUATE AND THESE
FLUCTUATIONS MAY CAUSE OUR STOCK PRICE TO FALL, ESPECIALLY IF THEY ARE NOT
ANTICIPATED BY INVESTORS.

     A number of analysts and investors who follow our stock have developed
models to attempt to forecast future product sales and have established earnings
expectations based upon those models. Forecasting revenue growth is difficult,
especially when there is little commercial history and when the level of market
acceptance of the product is uncertain. Forecasting is further complicated by
the difficulties in estimating stocking levels at pharmaceutical wholesalers and
at retail pharmacies and in estimating potential product returns. As a result it
is likely that there will be significant fluctuations in revenues, which may not
meet with market expectations and which also may adversely affect our stock
price. Other factors which cause our financial results to fluctuate unexpectedly
include the cost of product sales, achievement and timing of research and
development milestones, co-promotion and other collaboration revenues, cost and
timing of clinical trials, marketing and other expenses and manufacturing or
supply disruption.

WE MAY INCUR ADDITIONAL LOSSES.

     To date, we have not been profitable and our accumulated deficit was
approximately $527 million at March 31, 2001. Our losses have resulted
principally from costs incurred in research and development, including clinical
trials, and from selling, general and administrative costs associated with our
operations. While we seek to attain profitability, we cannot be sure that we
will ever achieve product and other revenue sufficient for us to attain this
objective. We cannot be sure that we will obtain required regulatory approvals,
or successfully develop, commercialize, manufacture and market any other product
candidates.

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THE PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE.

     The market price of our common stock is volatile, and we expect it to
continue to be volatile for the foreseeable future. For example, during the
period January 1, 2000 through July 17, 2001, our common stock traded at a high
price of $83.625 and a low price of $29.875. Negative announcements (such as
adverse regulatory decisions, disappointing clinical trial results, disputes
concerning patent or other proprietary rights, or operating results that fall
below the market's expectations) could trigger significant declines in the price
of our common stock. In addition, external events, such as news concerning our
competitors, changes in government regulations that may impact the biotechnology
or pharmaceutical industries or the movement of capital into or out of our
industry, also are likely to affect the price of our common stock.

WE ARE INVOLVED IN LEGAL PROCEEDINGS THAT, IF ADVERSELY ADJUDICATED OR SETTLED,
COULD MATERIALLY IMPACT OUR FINANCIAL CONDITION.

     In August 1999, the U.S. District Court for the Eastern District of
Pennsylvania entered a final order approving the settlement of a class action in
which plaintiffs alleged that statements made about the results of certain
clinical studies of MYOTROPHIN were misleading. A related complaint has been
filed with the Court by a small number of plaintiffs who decided not to
participate in the settlement. This related complaint alleges that we are liable
under common law for misrepresentations concerning the results of the MYOTROPHIN
clinical trials, and that we and certain of our current and former officers and
directors are liable for the actions of persons who allegedly traded in our
common stock on the basis of material inside information. We believe that we
have valid defenses to all claims raised in this action. Even if there is a
judgment against us in this case, we do not believe it will have a material
negative effect on our financial condition or results of operations.

     Due to our past involvement in promoting STADOL NS(R)(butorphanol tartrate)
Nasal Spray, a product of Bristol-Myers Squibb Company, we are co-defendants in
several product liability actions brought against Bristol-Myers. Although we
cannot predict with certainty the outcome of this litigation, we believe that
any expenses or damages that we may incur will be paid by Bristol-Myers under
the indemnification provisions of our co-promotion agreement. As such, we do not
believe that these actions will have a material negative effect on our financial
condition or results of operations.

     In February 2001, a complaint was filed in Utah state court by Zars, Inc.
and one of its research scientists, against us and our subsidiary Anesta Corp.
The plaintiffs are seeking a declaratory judgment to establish their right to
develop transdermal or other products containing fentanyl and other
pharmaceutically active agents under a royalty and release agreement between
Zars and Anesta. The complaint also asks for unspecified damages for breach of
contract and interference with economic relations. We have filed a motion to
dismiss this complaint that is currently pending before the court. We believe
that we have valid defenses to all claims raised in this action. In any event,
we do not believe any judgment against us will have a material negative effect
on our financial condition or results of operations.

WE MAY NEVER OBTAIN APPROVAL TO MARKET MYOTROPHIN, IT MAY NOT BE COST-EFFECTIVE
TO PURSUE MYOTROPHIN FOR OTHER INDICATIONS, AND THEREFORE WE MAY NEVER DERIVE
REVENUE FROM MYOTROPHIN.

     We do not believe that the conditions for regulatory approval of MYOTROPHIN
imposed by the FDA can be met without conducting an additional Phase 3 study,
and we have no plans to conduct such a study at this time. However, we have had
discussions with certain physicians who are seeking to obtain governmental and
non-governmental funding to be used to conduct such a study. If this funding is
obtained and the study is undertaken, we may allow reference to our
Investigational New Drug Application, and supply MYOTROPHIN in quantities
sufficient to conduct the study in exchange for the rights to use any clinical
data generated by such study in support of FDA approval of our pending New Drug
Application. Even if an additional study is undertaken, the results will not be
available for several years and may not be sufficient to obtain regulatory
approval to market the product. If MYOTROPHIN is not approved for the treatment
of Amyotrophic Lateral Sclerosis, or ALS, then it is unlikely that we would

                                        9
   12

pursue approval for the use of MYOTROPHIN to treat other indications.
Additionally, if we do not obtain approval of MYOTROPHIN for ALS or pursue
approval for other indications, rights to the product may revert back to
Cephalon Clinical Partners, L.P.

OUR DEPENDENCE ON KEY EXECUTIVES AND SCIENTISTS COULD IMPACT THE DEVELOPMENT AND
MANAGEMENT OF OUR BUSINESS.

     We are highly dependent upon our ability to attract and retain qualified
scientific, technical and managerial personnel. There is intense competition for
qualified personnel in the pharmaceutical and biotechnology industries, and we
cannot be sure that we will be able to continue to attract and retain the
qualified personnel necessary for the development and management of our
business. Our research and development programs and our business might be harmed
by the loss of the services of existing personnel, as well as the failure to
recruit additional key scientific, technical and managerial personnel in a
timely manner. Much of the know-how we have developed resides in our scientific
and technical personnel and is not readily transferable to other personnel. We
do not maintain "key man" life insurance on any of our employees.

WE MAY BE REQUIRED TO INCUR SIGNIFICANT COSTS TO COMPLY WITH ENVIRONMENTAL LAWS
AND REGULATIONS AND OUR COMPLIANCE MAY LIMIT ANY FUTURE PROFITABILITY.

     Our research and development activities involve the controlled use of
hazardous, infectious and radioactive materials that could be hazardous to human
health, safety or the environment. We store these materials and various wastes
resulting from their use at our facility pending ultimate use and disposal. We
are subject to a variety of federal, state and local laws and regulations
governing the use, generation, manufacture, storage, handling and disposal of
these materials and wastes, and we may be required to incur significant costs to
comply with both existing and future environmental laws and regulations.

     We believe that our safety procedures for handling and disposing of these
materials comply with federal, state and local laws and regulations, but the
risk of accidental injury or contamination from these materials cannot be
eliminated. In the event of an accident, we could be held liable for any
resulting damages, which could adversely affect our financial condition or
results of operations.

ANTI-TAKEOVER PROVISIONS MAY DETER A THIRD PARTY FROM ACQUIRING US, LIMITING OUR
STOCKHOLDERS' ABILITY TO PROFIT FROM SUCH A TRANSACTION.

     Our Board of Directors has the authority to issue up to 5,000,000 shares of
preferred stock, $0.01 par value, of which 1,000,000 have been reserved for
issuance in connection with our stockholder rights plan, and to determine the
price, rights, preferences and privileges of those shares without any further
vote or action by our stockholders. Our stockholder rights plan could have the
effect of making it more difficult for a third party to acquire a majority of
our outstanding voting stock.

     We are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person becomes an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 could have the effect of
delaying or preventing a change of control of Cephalon. We also have adopted a
"poison pill" rights plan that will dilute the stock ownership of an acquirer of
our stock upon the occurrence of certain events. Section 203, the rights plan,
and the provisions of our certificate of incorporation, our bylaws and Delaware
corporate law, may have the effect of deterring hostile takeovers or delaying or
preventing changes in control of our management, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices.

                                        10
   13

RISKS RELATED TO THE SECURITIES OFFERED HEREBY.

THE NOTES ARE UNSECURED AND, IN THE EVENT OF OUR INSOLVENCY, LIQUIDATION OR
SIMILAR EVENT, WE MUST PAY IN FULL OUR SENIOR INDEBTEDNESS BEFORE WE CAN MAKE
PAYMENTS ON THE NOTES.

     The notes are unsecured and subordinated to our existing and future senior
indebtedness. In the event of our insolvency, liquidation, reorganization or
payment default on senior indebtedness, we will not be able to make payments on
the notes until we have paid in full all of our senior indebtedness. We may,
therefore, not have sufficient assets to pay the amounts due on the notes. We
are not prohibited from incurring debt under the indenture for the notes,
including debt senior to, on a parity with or subordinate to the notes. If we
incur additional debt, our ability to pay amounts due on the notes could be
adversely affected. As of December 31, 2000, if the notes had been issued, we
would have had approximately $98.1 million of senior indebtedness. We may also
incur additional debt in the future. In addition, under our senior indebtedness,
we must maintain minimum levels of unencumbered cash balances that could further
limit our ability to pay the amounts due on the notes.

WE MAY BE REQUIRED TO REPURCHASE THE NOTES UPON A REPURCHASE EVENT.

     You may require us to repurchase all or any portion of your notes upon the
occurrence of certain events. We may not have sufficient cash funds to
repurchase the notes upon a repurchase event. We may elect, subject to certain
conditions, to pay the repurchase price in common stock. Although there are
currently no restrictions on our ability to pay the repurchase price, future
debt agreements may prohibit us from repaying the repurchase price in either
cash or common stock. If we are prohibited from repurchasing the notes, we could
seek consent from our lenders to repurchase the notes. If we are unable to
obtain their consent, we could attempt to refinance the notes. If we were unable
to obtain a consent or refinance, we would be prohibited from repurchasing the
notes. If we were unable to repurchase the notes upon a repurchase event, it
would result in an event of default under the indenture. An event of default
under the indenture could result in a further event of default under our other
then-existing debt. In addition, the occurrence of the repurchase event may be
an event of default under our other debt. As a result, we would be prohibited
from paying amounts due on the notes under the subordination provisions of the
indenture.

WE HAVE SUBSTANTIALLY INCREASED OUR INDEBTEDNESS.

     As a result of the sale of the notes, we incurred $400.0 million of
additional indebtedness, increasing our ratio of debt to equity (expressed as a
percentage) from approximately 59.4% to approximately 301.5% as of December 31,
2000, on a pro forma basis giving effect to the sale of the notes. Our other
indebtedness is principally comprised of amounts due to Abbott Laboratories and
Novartis Pharma AG under agreements whereby we acquired rights to certain
products. We may incur substantial additional indebtedness in the future. The
level of our indebtedness, among other things, could

     - make it difficult for us to make payments on the notes;

     - make it difficult for us to obtain any necessary financing in the future
       for working capital, capital expenditure, debt service requirements or
       other purposes;

     - limit our flexibility in planning for, or reacting to changes in, our
       business; and

     - make us more vulnerable in the event of a downturn in our business.

     We cannot assure you that we will be able to meet our debt service
obligations, including our obligations under the notes.

                                        11
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WE MAY NOT BE ABLE TO PAY OUR DEBT AND OTHER OBLIGATIONS.

     Historically, we have had negative cash flow from operations. For the year
ended December 31, 2000, net cash used for operating activities was
approximately $106.5 million. The annual debt service on the notes will be
approximately $21.0 million. Unless we are able to generate sufficient operating
cash flow to service the notes, we will be required to raise additional funds.

THERE IS NO PUBLIC MARKET FOR THE NOTES AND TRANSFERS OF THE NOTES WILL BE
RESTRICTED.

     The notes are a new issue of securities for which there is currently no
public market. Although the initial purchasers of the notes have advised us that
they intend to make a market in the notes, they are not obligated to make a
market in the notes. The initial purchasers could stop making a market at any
time without notice. Accordingly, no market for the notes may develop, and any
market that develops may not last. We do not intend to apply for listing of the
notes on any securities exchange or other stock market.

                                USE OF PROCEEDS

     We will not receive any of the proceeds from the sale of the securities
covered by this prospectus.

                       RATIO OF EARNINGS TO FIXED CHARGES

     Because of our historic losses, we have experienced a deficiency of
earnings available to cover fixed charges throughout our existence. We have
computed the deficiency of earnings available to cover fixed charges by
subtracting fixed charges from loss from operations. Fixed charges consist of
interest on all indebtedness and amortization of discount on all indebtedness.



                                                                                         THREE MONTHS
                                                YEAR ENDED DECEMBER 31,                     ENDED
                                 -----------------------------------------------------    MARCH 31,
                                   2000        1999       1998       1997       1996         2001
                                 ---------   --------   --------   --------   --------   ------------
                                                            (IN THOUSANDS)
                                                                       
Deficiency of earnings
  available to cover fixed
  charges and preferred stock
  dividends....................  ($115,702)  ($80,898)  ($77,865)  ($82,934)  ($82,269)    ($13,315)
Ratio of earnings to fixed
  charges and preferred stock
  dividends(1).................         --         --         --         --         --           --


- ---------------
(1) Because earnings were insufficient to cover fixed charges, no ratios are
    provided.

                                DIVIDEND POLICY

     We have not paid any dividends on our common stock since our inception and
we do not anticipate paying any dividends on our common stock in the foreseeable
future. For a discussion of dividends payable on our outstanding preferred
stock, see "Description of Capital Stock -- Description of Preferred Stock."

                                        12
   15

                              DESCRIPTION OF NOTES

     We issued the notes under an indenture dated as of May 7, 2001, between us
and State Street Bank and Trust Company, as trustee, and are registering the
resale of the notes and the common stock underlying the notes on the
registration statement, of which this prospectus is a part, pursuant to a
registration rights agreement with the initial purchasers. The following
summarizes some, but not all, of the provisions of the notes, the indenture and
the registration rights agreement. You should refer to the actual terms of the
notes, the indenture and the registration rights agreement for the definitive
terms and conditions. We will provide you, upon request, copies of the forms of
the notes, indenture and registration rights agreement. As used in this
description, the words "we," "us" or "our" do not include any current or future
subsidiary of Cephalon, and the words "you" and "your" refer to the
securityholders.

GENERAL

     The notes are unsecured general obligations that are subordinate in right
of payment as described under "Subordination." The notes are convertible into
common stock as described under "Conversion by Holders." The aggregate principal
amount of the notes is limited to $400,000,000. The notes were issued in fully
registered form and denominated in integral multiples of $1,000. The notes will
mature on May 1, 2006 unless earlier converted, redeemed or repurchased.

     The notes bear interest at the annual rate shown on the cover page of this
prospectus. Interest will be paid on each May 1 and November 1 of each year,
beginning November 1, 2001, subject to limited exceptions if the notes are
converted, redeemed or repurchased prior to the applicable interest payment
date. The record dates for payment of interest will be April 15 and October 15.
Interest will be computed on the basis of a 360-day year consisting of twelve
30-day months.

     We will maintain an office in the Borough of Manhattan in New York, New
York where the notes may be presented for registration, transfer, exchange or
conversion. Initially, this will be an office or agency of the trustee. We may,
at our option, pay interest on the notes by check mailed to the registered
holders of notes. However, holders of more than $2,000,000 in principal amount
of notes may elect in writing to be paid by wire transfer; provided that any
payment to the Depository Trust Company or its nominee will be made by wire
transfer of immediately available funds to the account of DTC or its nominee.

     We are not restricted from paying dividends or repurchasing securities or
incurring indebtedness under the indenture. The indenture has no financial
covenants. You are not protected in the event of a highly leveraged transaction
or a change in control of Cephalon except as described under "Repurchase at
Option of Holders upon a Repurchase Event" below.

     You will not be required to pay a service charge for registration or
transfer of your notes. We may, however, require you to pay any tax or other
governmental charge in connection with the transfer. We are not required to
exchange or register the transfer of:

     - any note for a period of 15 days before selection for redemption;

     - any note or portion selected for redemption;

     - any note or portion surrendered for conversion; or

     - any note or portion surrendered for repurchase but not withdrawn in
       connection with a repurchase event.

FORM, DENOMINATION AND REGISTRATION

  Global Security; Book-Entry Form

     The notes are evidenced by a global security initially deposited with DTC,
and registered in the name of Cede & Co. as DTC's partnership nominee. Except as
set forth below, the global security may be transferred only to another nominee
of DTC or to a successor of DTC or its nominee.

                                        13
   16

     Qualified institutional buyers, as defined in Rule 144A under the
Securities Act of 1933, may hold their interests in the global security directly
through DTC or indirectly through organizations which are participants in the
DTC system. DTC participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include other types of
organizations. Transfers between these DTC participants will be effected in the
ordinary way in accordance with DTC rules and will be settled in clearinghouse
funds. The laws of some states require that some persons take physical delivery
of securities in definitive form. As a result, you may be unable to transfer
beneficial interests in the global security to those persons.

     Qualified institutional buyers that are not DTC participants may
beneficially own interests in the global security held by DTC only through DTC
participants or banks, brokers, dealers, trust companies and other parties that
clear through or maintain a custodial relationship with a DTC participant,
either directly or indirectly. So long as Cede, as the nominee of DTC, is the
registered owner of the global security, Cede will be considered the sole holder
of the global security for all purposes. Except as provided below, owners of
beneficial interests in the global security will not:

     - be entitled to have certificates registered in their names;

     - be entitled to receive physical delivery of certificates in definitive
       form; or

     - be considered the registered holders thereof.

     We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global security to Cede, the nominee for
DTC as the registered holder of the global security. We will make these payments
by wire transfer of immediately available funds. Neither we, the trustee nor any
paying agent will have any responsibility or liability for:

     - any aspect of the records relating to, or payments made on account of,
       beneficial ownership interests in the global security; or

     - maintaining, supervising or reviewing any records relating to those
       beneficial ownership interests.

     We have been informed that DTC's practice is to credit its participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the notes represented by the global security
as shown on DTC's records, unless DTC has reason to believe that it will not
receive payment on the payment date. Payments by DTC participants to owners of
beneficial interests in notes represented by the global security held through
DTC participants will be the responsibility of those DTC participants, as is now
the case with securities held for the accounts of customers registered in
"street name."

     We will send any redemption notices to Cede. We understand that if less
than all of the notes are being redeemed, DTC's practice is to determine by lot
the amount of the holdings of each DTC participant to be redeemed.

     We also understand that neither DTC nor Cede will consent or vote with
respect to the notes. We have been advised that under its usual procedures, DTC
will mail an "omnibus proxy" to us as soon as possible after the record date.
The omnibus proxy assigns Cede's consenting or voting rights to those DTC
participants to whose accounts the notes are credited on the record date
identified in a listing attached to the omnibus proxy.

     A person having a beneficial interest in notes represented by the global
security may be unable to pledge that interest to persons or entities that are
not DTC participants, or to take other actions in respect of that interest,
because that beneficial interest is not represented by a physical certificate.

     We and the trustee have no responsibility for the performance by DTC, its
participants and its indirect participants, of their respective obligations
under the rules and procedures governing their operations. DTC has advised us
that it will take any action permitted to be taken by a holder of notes,
including the presentation of notes for conversion as described below, only at
the direction of one or more DTC participants whose DTC accounts are credited
with interests in the global security and only in
                                        14
   17

respect of the principal amount of the notes represented by the global security
as to which those DTC participants have given such a direction.

     DTC has advised us as follows:

     - DTC is a limited purpose trust company organized under the laws of the
       State of New York;

     - a member of the Federal Reserve System;

     - a "clearing corporation" within the meaning of the Uniform Commercial
       Code; and

     - a "clearing agency" registered pursuant to the provisions of Section l7A
       of the Exchange Act.

     DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between DTC participants
through electronic book-entry changes to accounts of its participants. DTC
participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include other types of organizations. Some of the
DTC participants, together with other entities, own DTC. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
participant, either directly or indirectly.

     DTC is under no obligation to perform or continue to perform the above
procedures, and these procedures may be discontinued at any time. If DTC is at
any time unwilling or unable to continue as depositary and a successor
depositary is not appointed by us within 90 days, we will cause notes to be
issued in definitive form in exchange for the global security.

  Certificated Notes

     Qualified institutional buyers may request that certificated notes be
issued in exchange for notes represented by the global security. In addition,
certificated notes may be issued in exchange for notes represented by the global
security if no successor depositary is appointed by us as set forth in the
preceding paragraph.

  Restrictions on Transfer; Legends

     The notes bear a restrictive legend.

CONVERSION BY HOLDERS

     You may, at your option, convert your notes, in whole or in part, at any
time prior to maturity into our common stock at an initial conversion price of
$74.00 per share. You may convert notes in denominations of $1,000 and multiples
of $1,000. The conversion price is subject to adjustment as described below. If
the notes are called for redemption, your conversion rights on the notes called
for redemption will expire at the close of business of the last business day
before the redemption date, unless we default in payment of the redemption
price. If you have submitted your notes for repurchase after a repurchase event,
you may only convert your notes if you deliver a withdrawal notice before the
close of business on the last business day before the repurchase date.

     Except as described below, we will not make any adjustment for accrued
interest or dividends on common stock upon conversion of the notes. If you
convert your notes after a record date and prior to the next interest payment,
you will have to pay us interest, unless the notes have been called for
redemption under the indenture. We will pay a cash adjustment for any fractional
shares based on the market price of our common stock on the last business day
before the conversion date.

     You can convert your notes by delivering the notes to an office or agency
of the Trustee in the Borough of Manhattan, The City of New York, along with a
duly signed and completed notice of conversion, a form of which may be obtained
from the trustee. In the case of a global security, DTC will effect the
conversion upon notice from the holder of a beneficial interest in the global
security in accordance with DTC's rules and procedures. See the description of
DTC's procedures under "Form,
                                        15
   18

Denomination and Registration." The conversion date will be the date on which
the notes and the duly signed and completed notice of conversion are delivered.
As promptly as practicable on or after the conversion date, but no later than
three business days after the conversion date, we will issue and deliver to the
conversion agent certificates for the number of full shares of common stock
issuable upon conversion, together with any cash payment for fractional shares.
In the event we fail to convert your notes into common stock in accordance with
the terms of the indenture, you may bring an action to enforce your right to
convert.

     If you deliver a note for conversion, you will not be required to pay any
taxes or duties for the issue or delivery of common stock on conversion.
However, we will not pay any transfer tax or duty payable as a result of the
issuance or delivery of the common stock in a name other than that of the holder
of the note. We will not issue or deliver common stock certificates unless we
have been paid the amount of any transfer tax or duty or we have been provided
satisfactory evidence that the transfer tax or duty has been paid.

     The conversion price of $74.00 per share will be adjusted if:

     1.  we dividend or distribute shares of our common stock to our common
stockholders;

     2.  we split, subdivide or combine our common stock;

     3.  we issue rights or warrants to all holders of our common stock to
purchase common stock at less than the current market price;

     4.  we dividend or distribute to all holders of our common stock capital
stock or evidences of indebtedness or assets, but excluding:

     - dividends, distributions and rights or warrants referred to in (1) and
       (3) above or to be exercised in connection with certain trigger events;

     - dividends and distributions paid exclusively in cash or paid in
       connection with our liquidation, dissolution or winding up; or

     - capital stock, evidence of indebtedness, cash or assets distributed in a
       merger or consolidation.

     5. we make a dividend or distribution consisting exclusively of cash to all
holders of common stock if the aggregate amount of these distributions combined
together with (A) all other all-cash distributions made within the preceding 12
months in respect of which we made no adjustment plus (B) any cash and the fair
market value of other consideration payable in any tender offers by us or any of
our subsidiaries for common stock concluded within the preceding 12 months in
respect for which we made no adjustment, exceeds 10% of our market
capitalization, being the product of the then current market price of the common
stock multiplied by the number of shares of our common stock then outstanding;

     6. the purchase of common stock pursuant to a tender offer made by us or
any of our subsidiaries involves an aggregate consideration that, together with
(A) any cash and the fair market value of any other consideration payable in any
other tender offer by us or any of our subsidiaries for common stock expiring
within the 12 months preceding such tender offer plus (B) the aggregate amount
of any such all-cash distributions referred to in (5) above to all holders of
common stock within the 12 months preceding the expiration of the tender offer
for which we have made no adjustment, exceeds 10% of our market capitalization
on the expiration of such tender offer; or

     7. payment on tender offers or exchange offers by a third party other than
Cephalon or our subsidiaries if, as of the closing date of the offer, our board
of directors does not recommend rejection of the offer. We will only make this
adjustment if a tender offer increases the person's ownership to more than 25%
of our outstanding common stock and the payment per share is greater than the
current market price of the common stock. We will not make this adjustment if
the tender offer is a merger or transaction described below, under "--
Consolidation, Merger or Transfer of Assets."

                                        16
   19

     If we implement a new stockholder rights plan or amend our existing
stockholder rights plan, we will be required under the indenture to provide that
the holders of notes will receive the rights upon conversion of the notes,
whether or not these rights were separated from the common stock prior to
conversion.

     If we reclassify our common stock, consolidate, merge or combine with
another person or sell or convey our property and assets as an entirety or
substantially as an entirety, each note then outstanding will, without the
consent of the holder of any note, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
reclassification, consolidation, merger, combination, sale or conveyance by a
holder of the number of shares of common stock into which the note was
convertible immediately prior to the reclassification, consolidation, merger,
combination, sale or conveyance. This calculation will be made based on the
assumption that the holder of common stock failed to exercise any rights of
election that the holder may have to select a particular type of consideration.
The adjustment will not be made for a consolidation, merger or combination that
does not result in any reclassification, conversion, exchange or cancellation of
our common stock.

     You may, in some circumstances, be deemed to have received a distribution
or dividend subject to United States federal income tax as a result of an
adjustment (or the nonoccurrence of an adjustment) to the conversion price. See
"United States Federal Income Tax Considerations."

     We are permitted to reduce the conversion price of the notes for limited
periods of time, if our board of directors deems it advisable in the exercise of
their fiduciary duties to all stockholders. Although as of the date of this
prospectus we are not contemplating any specific circumstances under which we
would reduce the conversion price, a reduction would result in the issuance of
additional shares of common stock above that which would be issued upon the
conversion of the notes at their current conversion price of $74.00 per share.
Any such reduction shall be effective for not less than 20 days. We are required
to give at least 15 days' prior notice of any such reduction. We may also reduce
the conversion price to avoid or diminish income tax to holders of our common
stock in connection with a dividend or distribution of stock or similar event.

     No adjustment in the conversion price will be required unless it would
result in a change in the conversion price of at least one percent. Any
adjustment not made will be taken into account in subsequent adjustments.

PROVISIONAL REDEMPTION

     We may redeem some or all of the notes at any time prior to May 5, 2003, at
a redemption price equal to $1,000 per note plus accrued and unpaid interest to
the redemption date if (1) the closing price of our common stock has exceeded
150% of the conversion price for at least 20 trading days in the consecutive
30-trading day period ending on the trading day immediately prior to the mailing
of the notice of redemption and (2) the shelf registration statement covering
resales of the notes and the common stock is effective and expected to remain
effective and available for use for the 30 days following the redemption date.

     If we redeem some or all of the notes prior to May 5, 2003, we will also
make an additional payment on the redeemed notes equal to $100.27 per $1,000
note, minus the amount of any interest we actually paid on the notes prior to
the date we mailed the notice. We must make these additional payments on all
notes called for redemption, including notes converted after the date we mailed
the notice.

OPTIONAL REDEMPTION

     At any time on or after May 5, 2003, we may redeem some or all of the
notes, at our option, at the redemption prices specified below. The redemption
price, expressed as a percentage of the principal

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amount, is as follows for the 12-month periods beginning on May 1 of the year
indicated (May 5, 2003 through April 30, 2004, in the case of the first such
period):



                                                              REDEMPTION
YEAR                                                            PRICE
- ----                                                          ----------
                                                           
2003........................................................    103.15%
2004........................................................    102.10
2005........................................................    101.05


and 100% of the principal amount on May 1, 2006 and thereafter. In each case we
will also pay accrued and unpaid interest to, but excluding, the redemption
date. If the redemption date is an interest payment date, we will pay interest
to the record holders as of the relevant record date. We are required to give
notice of redemption not more than 60 and not less than 20 days before the
redemption date under the indenture.

     No "sinking fund" is provided for the notes, which means that the indenture
does not require us to redeem or retire the notes periodically. We may not
redeem the notes if there is a default under the indenture. See "Events of
Default and Remedies."

REPURCHASE AT OPTION OF HOLDERS UPON A REPURCHASE EVENT

     If a repurchase event occurs, you will have the right, at your option, to
require us to repurchase all or any portion of your notes 40 days after we mail
holders a notice of repurchase event. The repurchase price we are required to
pay will be 105% of the principal amount of the notes submitted for repurchase,
plus accrued and unpaid interest to, but excluding, the repurchase date. If a
repurchase date is an interest payment date, we will pay the repurchase price to
the record holder determined as of the record date.

     At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in common stock, valued at 95% of the average of the
closing prices for the five trading days immediately before and including the
third trading day preceding the repurchase date. We may only pay the repurchase
price in common stock if we satisfy conditions provided in the indenture.

     A repurchase event will be considered to have occurred if:

     1. our common stock or other common stock into which the notes are
convertible is neither listed for trading on a United States national securities
exchange nor approved for trading on an established automated over-the-counter
trading market in the United States, or

     2. one of the following "change in control" events occurs:

     - any person or group becomes the beneficial owner of more than 50% of the
       voting power of our outstanding securities entitled to generally vote for
       directors;

     - our stockholders approve any plan or proposal for our liquidation,
       dissolution or winding up;

     - we consolidate with or merge into any other corporation or any other
       corporation merges into us and, as a result, our outstanding common stock
       is changed or exchanged for other assets or securities unless our
       stockholders immediately before the transaction own, directly or
       indirectly, immediately following the transaction at least 51% of the
       combined voting power of the corporation resulting from the transaction
       in substantially the same proportion as their ownership of our voting
       stock immediately before the transaction;

     - we convey, transfer or lease all or substantially all of our assets to
       any person; or

     - the continuing directors do not constitute a majority of our board of
       directors at any time.

     However, a change in control will not be deemed to have occurred if:

     - the last sale price of our common stock for any five trading days during
       the 10 trading days immediately before the change in control is equal to
       at least 105% of the conversion price, or

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   21

     - all of the consideration, excluding cash payments for fractional shares
       in the transaction constituting the change in control, consists of common
       stock traded on a United States national securities exchange or quoted on
       the Nasdaq National Market, and as a result of the transaction the notes
       become convertible solely into that common stock.

     The term "continuing director" means at any date a member of our board of
directors:

     - who was a member of our board of directors on December 31, 2000; or

     - who was nominated or elected by at least a majority of the directors who
       were continuing directors at the time of the nomination or election or
       whose election to our board of directors was recommended by at least a
       majority of the directors who were continuing directors at the time of
       the nomination or election or by the nominating committee comprised of
       our independent directors.

     Under the above definition of continuing director, if the current board of
directors approved a new director or directors and then resigned, no change in
control would occur. The interpretation of the phrase "all or substantially all"
used in the definition of change in control would likely depend on the facts and
circumstances existing at such time. As a result, there may be uncertainty as to
whether or not a sale or transfer of "all or substantially all" of our assets
has occurred.

     We will be required to mail you a notice within 15 days after the
occurrence of a repurchase event. The notice must describe, among other things,
the repurchase event, your right to elect repurchase of the notes and the
repurchase date. We must deliver a copy of the notice to the trustee and cause a
copy, or a summary of the notice, to be published in a newspaper of general
circulation in New York, New York. You may exercise your repurchase rights by
delivering written notice to us and the trustee. The notice must be accompanied
by the notes duly endorsed for transfer to us. You must deliver the exercise
notice on or before the close of business on the thirty-fifth calendar day after
the mailing date of the repurchase notice.

     You may require us to repurchase all or any portion of your notes upon a
repurchase event. We may not have sufficient cash funds to repurchase the notes
upon a repurchase event. We may elect, subject to certain conditions, to pay the
repurchase price in common stock. Certain of our existing debt agreements, as
well as future debt agreements, may prohibit us from paying the repurchase price
in either cash or common stock. If we are prohibited from repurchasing the
notes, we could seek consent from our lenders to repurchase the notes. If we are
unable to obtain their consent, we could attempt to refinance the notes. If we
were unable to obtain a consent or refinance, we would be prohibited from
repurchasing the notes. If we were unable to repurchase the notes upon a
repurchase event, it would result in an event of default under the indenture. An
event of default under the indenture could result in a further event of default
under our other then-existing debt. In addition, the occurrence of the
repurchase event may be an event of default under our other debt. As a result,
we would be prohibited from paying amounts due on the notes under the
subordination provisions of the indenture.

     The change in control feature may not necessarily afford you protection in
the event of a highly leveraged transaction, a change in control or similar
transactions involving us. We could, in the future, enter into transactions,
including recapitalizations, that would not constitute a change in control but
that would increase the amount of our senior indebtedness or other debt. We are
not prohibited from incurring senior indebtedness or debt under the indenture.
If we incur significant amounts of additional debt, this could have an adverse
effect on our ability to make payments on the notes.

     In addition, our management could undertake leveraged transactions that
could constitute a change in control. The board of directors does not have the
right under the indenture to limit or waive the repurchase right in the event of
these types of leveraged transaction. Our requirement to repurchase notes

                                        19
   22

upon a repurchase event could delay, defer or prevent a change of control. As a
result, the repurchase right may discourage:

     - a merger, consolidation or tender offer;

     - the assumption of control by a holder of a large block of our shares; and

     - the removal of incumbent management.

     The repurchase feature was a result of negotiations between us and the
initial purchasers in the initial private placement. The repurchase feature is
not the result of any specific effort to accumulate shares of common stock or to
obtain control of us by means of a merger, tender offer or solicitation, or part
of a plan by us to adopt a series of anti-takeover provisions. We have no
present intention to engage in a transaction involving a change of control,
although it is possible that we would decide to do so in the future.

     The Securities Exchange Act and the SEC rules thereunder require the
distribution of specific types of information to securityholders in the event of
issuer tender offers. These rules may apply in the event of a repurchase. We
will comply with these rules to the extent applicable.

SUBORDINATION

     The notes are unsecured and subordinated to the prior payment in full of
all existing and future senior indebtedness as provided in the indenture. Upon
any distribution of our assets upon our dissolution, winding up, liquidation or
reorganization, payments on the notes will be subordinated to the prior payment
in full of all senior indebtedness. If the notes are accelerated following an
event of default under the indenture, the holders of any senior indebtedness
will be entitled to payment in full before the holders of the notes are entitled
to receive any payment on the notes.

     We may not make any payments on the notes if:

     - we default in the payment on senior indebtedness beyond any grace period;
       or

     - any other default occurs and is continuing under any designated senior
       indebtedness that permits holders of the designated senior indebtedness
       to accelerate its maturity, and we and the trustee receive a notice known
       as a payment blockage notice from a person permitted to give this notice
       under the indenture.

     We may resume making payments on the notes:

     - in the case of a payment default, when the default is cured or waived or
       ceases to exist; and

     - in the case of a nonpayment default, the earlier of when the default is
       cured or waived or ceases to exist or 179 days after receipt of the
       payment blockage notice.

     No new period of payment blockage may be commenced unless:

     - 365 days have elapsed since our receipt of the prior payment blockage
       notice; and

     - all scheduled payments on the notes have been paid in full, or the
       trustee or the holders of notes shall not have begun proceedings to
       enforce the right of the holders to receive payments.

     No default that existed on any senior indebtedness on the date of delivery
of any payment blockage notice may be the basis for a subsequent payment
blockage notice.

     The term "senior indebtedness" means the principal, premium, if any, and
interest on, including bankruptcy interest, and any other payment on the
following current or future incurred:

     - indebtedness for money borrowed or evidenced by notes, debentures, bonds
       or other securities;

     - reimbursement obligations under letters of credit, bank guarantees or
       bankers' acceptances;

                                        20
   23

     - indebtedness under interest rate and currency swap agreements, cap, floor
       and collar agreements, currency spot and forward contracts and other
       similar agreements and arrangements;

     - indebtedness consisting of commitment or standby fees under our credit
       facilities or letters of credit;

     - obligations under leases required or permitted to be capitalized under
       generally accepted accounting principles;

     - obligations of the type listed above that have been assumed or guaranteed
       by us or in effect guaranteed, directly or indirectly, by us through an
       agreement to purchase; and

     - any amendment, modification, renewal, extension, refunding or deferral of
       any indebtedness or obligation of type listed in the bullet points above.

     Senior indebtedness will not include:

     - any indebtedness or amendment or modification that expressly provides
       that it is subordinate to or is not senior to or is on the same basis as
       the notes;

     - any indebtedness to any subsidiary;

     - indebtedness for trade payables or the deferred purchase price of assets
       or services incurred in the ordinary course of business; or

     - the notes.

     If the trustee or any holder of the notes receives any payment or
distribution of our assets of any kind on the notes in contravention of any of
the terms of the indenture, then such payment or distribution will be held
recipient in trust for the benefit of the holders of senior indebtedness, and
will be immediately paid or delivered to the holders of senior indebtedness or
their representative or representatives.

     In the event of our insolvency, liquidation, reorganization or payment
default on senior indebtedness, we will not be able to make payments on the
notes until we have paid in full all of our senior indebtedness. We may,
therefore, not have sufficient assets to pay the amounts due on the notes.
Neither we nor our subsidiaries are prohibited from incurring debt under the
indenture. If we incur additional debt, our ability to pay amounts due on the
notes could be adversely affected. As of December 31, 2000, if the notes had
been issued, we would have had approximately $98.1 million of senior
indebtedness. We may also incur additional debt in the future. The subordination
provisions will not prevent the occurrence of any default or event of default or
limit the rights of any holder of notes to pursue any other rights or remedies
with respect to the notes.

     As a result of the subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceedings, holders of the notes may receive less than other creditors on a
ratable basis.

EVENTS OF DEFAULT AND REMEDIES

     The following events constitute "events of default" under the indenture:

     - we fail to pay the principal or premium, if any, on any of the notes when
       due, whether or not prohibited by the subordination provisions of the
       indenture;

     - we fail to pay interest or liquidated damages on the notes when due if
       such failure continues for 30 days, whether or not prohibited by the
       subordination, provisions of the indenture;

     - we fail to perform any covenant in the indenture if such failure
       continues for 45 days after notice is given in accordance with the
       indenture;

     - we fail to repurchase any notes after a repurchase event;

     - we fail to provide timely notice of a repurchase event;

                                        21
   24

     - we fail or any of our significant subsidiaries fail to make any payment
       at maturity on any indebtedness, including any applicable grace periods,
       in an amount in excess of $10,000,000, and such amount has not been paid
       or discharged within 30 days after notice is given in accordance with the
       indenture;

     - a default by us or any significant subsidiary on any indebtedness that
       results in the acceleration of indebtedness in an amount in excess of
       $10,000,000 without this indebtedness being discharged or the
       acceleration being rescinded or annulled for 30 days after notice is
       given in accordance with the indenture; or

     - certain events involving bankruptcy, insolvency or reorganization of us
       or any significant subsidiary.

     The trustee is generally required under the indenture, within 90 days after
its becoming aware of a default, to provide holders written notice of all
incurred default. However, the trustee may, except in the case of a payment
default on the notes, withhold this notice of default if it determines that
withholding the notice is in the best interest of the holders.

     If an event of default has occurred and is continuing, the trustee or the
holders of not less than 25% in principal amount of outstanding notes, may
declare the principal and premium, if any, on the notes to be immediately due
and payable. After acceleration, but before a judgment or decree based on
acceleration, the holders of a majority in aggregate principal amount of
outstanding notes may, under circumstances set forth in the indenture, rescind
the acceleration of the principal of and premium, if any, on the notes, other
than the payment of principal of the notes that has become due other than
because of the acceleration. If an event of default arising from events of
bankruptcy, insolvency or reorganization occurs and is continuing with respect
to us, all unpaid principal of and accrued interest on the outstanding notes
would become due and payable immediately without any declaration or other act on
the part of the trustee or holders of notes.

     Holders of a majority in principal amount of outstanding notes may direct
the time, method and place of conducting any proceeding for any remedy available
to the trustee or exercising any trust or power conferred on the trustee,
subject to specified limitations. Before exercising any right or power under the
indenture at the direction of the holders, the trustee will be entitled to
receive from such holders reasonable security or indemnity against any costs,
expenses and liabilities that it might incur as a result.

     Before you may take any action to institute any proceeding relating to the
indenture, or to appoint a receiver or a trustee, or for any other remedy, each
of the following must occur:

     - you must have given the trustee written notice of a continuing event of
       default;

     - the holders of at least 25% of the aggregate principal amount of all
       outstanding notes must make a written request of the trustee to take
       action because of the default;

     - holders must have offered reasonable indemnification to the trustee
       against the cost, expenses and liabilities of taking action; and

     - the trustee must not have taken action for 60 days after receipt of such
       notice and offer of indemnification.

     These limitations do not apply to a suit for the enforcement of payment of
the principal of or any premium or interest on a note or the right to convert
the note in accordance with the indenture.

     Generally, the holders of not less than a majority of the aggregate
principal amount of outstanding notes may waive any default or event of default,
except if:

     - we fail to pay the principal of, premium or interest on any note when
       due;

     - we fail to convert any note into common stock; or

     - we fail to comply with any of the provisions of the indenture that would
       require the consent of the holder of each outstanding note affected.

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   25

     We will send the trustee annually a statement as to whether we are in
default and the nature of any default under the indenture.

CONSOLIDATION, MERGER OR TRANSFER OF ASSETS

     We may not consolidate or merge into another person or sell, lease, convey
or transfer all or substantially all of our assets to another person, whether in
a single or series of related transactions, unless:

     - either (A) we are the surviving entity, or (B) the resulting entity is a
       U.S. corporation, limited liability company, partnership or trust and
       expressly assumes in writing all of our obligations under the notes and
       the indenture;

     - no default or event of default exists or would occur; and

     - other conditions specified in the indenture are satisfied.

MODIFICATIONS OF THE INDENTURE

     The consent of the holders of a majority in principal amount of the
outstanding notes affected is required to make a modification or amendment to
the indenture. However, a modification or amendment requires the consent of the
holder of each outstanding note affected if it would:

     - extend the fixed maturity of any note;

     - reduce the interest rate or extend the time of payment of interest on any
       note;

     - reduce the principal amount or any premium of any note;

     - reduce any amount payable upon redemption or repurchase of any note;

     - adversely change our obligation to repurchase any note upon a repurchase
       event;

     - adversely change the holder's right to institute suit for the payment of
       any note;

     - change the currency in which any note is payable;

     - adversely modify the right to convert the notes;

     - adversely modify the subordination provisions of the notes; or

     - change the percentage required to consent to modifications and
       amendments.

SATISFACTION AND DISCHARGE

     We may discharge our obligations under the indenture while notes remain
outstanding if:

     - all notes will become due in one year or are scheduled for redemption in
       one year; and

     - we deposit sufficient funds to pay all outstanding notes on their
       scheduled maturity or redemption date.

REGISTRATION RIGHTS GRANTED TO THE INITIAL PURCHASERS OF THE NOTES

     We and the initial purchasers entered into the registration rights
agreement on May 7, 2001. Under the registration rights agreement, we are
required to:

     - file, within 45 days after May 7, 2001, a shelf registration statement
       covering the notes and the common stock issuable upon conversion of the
       notes;

     - use our reasonable best efforts to cause the shelf registration to be
       declared effective as promptly as practicable; and

                                        23
   26

     - use our reasonable best efforts to keep the shelf registration statement
       effective until the earlier of the resale of all the transfer restricted
       securities or two years after the latest date of original issuance.

     When we use the term "transfer restricted securities" in this section, we
mean the notes and the common stock issued upon conversion of the notes until
the earlier of the following events:

     - the date the note or common stock issued upon conversion has been
       effectively registered under the Securities Act and sold or transferred
       pursuant to the shelf registration statement; or

     - the date the note or common stock issued upon conversion is distributed
       to the public pursuant to Rule 144 under the Securities Act of 1933 or is
       saleable pursuant to Rule 144(k) under the Securities Act of 1933; or

     - the date the note or common stock issued upon conversion ceases to be
       outstanding.

     We will be required to pay predetermined liquidated damages if one of the
following "registration defaults" occurs:

     - we do not file the shelf registration statement within 45 days after May
       7, 2001;

     - the SEC does not declare the shelf registration statement effective
       within 180 days after such date; or

     - after it has been declared effective and during the period in which we
       are obligated to keep it effective, the shelf registration statement
       ceases to be effective or available for more than 90 days in any period
       of 365 consecutive days.

     If a registration default occurs, liquidated damages initially will accrue
(a) for the notes that are transfer restricted securities, at the rate of $.05
per week per $1,000 principal amount of the notes and (b) for any common stock
issued on conversion of the notes that are transfer restricted securities, at an
equivalent rate based on the conversion price. If the registration default has
not been cured within 90 days, the liquidated damages rate will increase by $.05
per week per $1,000 principal amount of the notes that are transfer restricted
securities (and an equivalent amount for any common stock issued upon conversion
of the notes that are transfer restricted securities) for each subsequent
continuing 90-day non-compliance period, up to a maximum rate of $.25 per week
per $1,000 principal amount of the notes that are transfer restricted securities
(and an equivalent amount for any common stock issued upon conversion of the
notes that are restricted securities). Liquidated damages generally will be
payable at the same time as interest payments on the notes.

     We may suspend the use of this prospectus, which is part of the shelf
registration statement, in certain circumstances described in the registration
rights agreement upon notice to the holders of the transfer restricted
securities. We will provide copies of this prospectus and notify registered
holders of notes and common stock issued upon conversion when the shelf
registration statement is filed and when it becomes effective.

     You will need to complete a notice and questionnaire (available upon
request to us) prior to any intended distribution of your transfer restricted
securities pursuant to the shelf registration statement. You are required to
complete and deliver the questionnaire prior to the effectiveness of the shelf
registration statement so that you can be named as a selling securityholder in
the prospectus. Upon receipt of your completed questionnaire after the
effectiveness of the shelf registration statement, we will, as promptly as
practicable but in any event within five business days of receipt, file any
amendments or supplements to the shelf registration statement so that you may
use the prospectus, subject to our right to suspend as set forth above. We will
pay liquidated damages to you if we fail to make this filing in the required
time. If this filing requires a post-effective amendment to the shelf
registration statement, we will pay liquidated damages if this amendment is not
declared effective within 45 business days of the filing of the post-effective
amendment. Under the registration rights agreement, you will be required to
deliver a prospectus to purchasers and will be bound by the provisions of the
agreement.

                                        24
   27

GOVERNING LAW

     The notes, the indenture and the registration rights agreement are governed
by the laws of the State of New York, without regard to conflicts of laws
principles.

CONCERNING THE TRUSTEE

     We have appointed the trustee as the initial paying agent, conversion
agent, registrar and custodian for the notes. We may maintain deposit accounts
and conduct other banking transactions with the trustee or its affiliates in the
ordinary course of business. In addition, the trustee and its affiliates may in
the future provide banking and other services to us in the ordinary course of
their business.

     If the trustee becomes one of our creditors, the indenture and the Trust
Indenture Act of 1939 may limit the right of the trustee to obtain payment on or
realize on security for its claims. If the trustee develops any conflicting
interest with the holders of notes or us, it must eliminate the conflict or
resign.

                                        25
   28

                          DESCRIPTION OF CAPITAL STOCK

GENERAL

     Our authorized capital stock consists of 100,000,000 shares of common
stock, $.01 par value, and 5,000,000 shares of preferred stock of which
2,500,000 shares have been designated $3.625 convertible exchangeable preferred
stock, $.01 par value (the "$3.625 preferred stock") and 1,000,000 shares have
been designated and reserved for issuance as Series A Junior Participating
Preferred Stock, $.01 par value per share, in connection with our stockholder
rights plan. As of December 31, 2000, there were 42,478,225 shares of common
stock outstanding, and 2,500,000 shares of the $3.625 preferred stock
outstanding.

     The following summary of the terms and provisions of our capital stock does
not purport to be complete and is qualified in its entirety by reference to our
restated certificate of incorporation and bylaws.

DESCRIPTION OF COMMON STOCK

     The majority of our authorized capital stock consists of 100,000,000 shares
of common stock, $.01 par value per share. Holders of shares of our common stock
are entitled to one vote per share on all matters to be voted upon by the
stockholders and are not entitled to cumulate votes for the election of
directors. Holders of shares of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event of our
liquidation, dissolution or winding up, the holders of shares of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities, subject to the distribution rights of shares of preferred stock, if
any, then outstanding. Shares of common stock have no preemptive, conversion or
other subscription rights and there are no redemption or sinking fund provisions
applicable to the common stock.

     As permitted by the Delaware General Corporation Law, our restated
certificate of incorporation provides that our directors shall not be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to us or our stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under section 174 of the Delaware General Corporation Law, relating
to prohibited dividends or distributions or the repurchase or redemption of
stock, or (iv) for any transaction from which the director derives an improper
personal benefit.

DESCRIPTION OF PREFERRED STOCK

     The board of directors has the authority, from time to time and without
further action by our stockholders, to divide our unissued capital stock into
one or more classes and one or more series within any class and to make
determinations of the designation and number of shares of any class or series
and determinations of the voting rights, preferences, limitations and special
rights, if any, of the shares of any class or series. The rights, preferences,
limitations and special rights of different classes of capital stock may differ
with respect to dividend rates, amounts payable on liquidation, voting rights,
conversion rights, redemption provisions, sinking fund provisions and other
matters.

  $3.625 preferred stock

     Holders of the $3.625 preferred stock are entitled to receive, when, as and
if declared by the board of directors, out of the funds of Cephalon legally
available therefor, cash dividends at an annual rate of $3.625 per share of
$3.625 preferred stock, payable in equal quarterly installments on February 15,
May 15, August 15 and November 15. Each share of $3.625 preferred stock is
convertible at the option of the holder at any time into such number of shares
of common stock determined by dividing the liquidation preference of the $3.625
preferred stock (currently $50 per share) by the conversion price of $17.92
(initially equivalent to a conversion rate of approximately 2.79 shares of
common stock for each share of $3.625 preferred stock). The $3.625 preferred
stock is not subject to any sinking fund or other obligation of ours to redeem
or retire the $3.625 preferred stock. Unless earlier converted, exchanged or
redeemed by us, the $3.625 preferred stock has a perpetual maturity. The $3.625
preferred stock is not redeemable by
                                        26
   29

us prior to August 17, 2001. At any time on or after that date the shares of
$3.625 preferred stock may be redeemed at our option, out of funds legally
available therefor. The $3.625 preferred stock is exchangeable in whole, but not
in part, at our option, for 7.25% Convertible Subordinated Debentures on any
dividend payment date beginning August 15, 2000 at the rate of $50 principal
amount of debentures for each share of $3.625 preferred stock outstanding at the
time of exchange. The holders of the $3.625 preferred stock have no voting
rights except with respect to certain additional stock issuances or as required
by law. In exercising any such vote, each outstanding share of $3.625 preferred
stock will be entitled to one vote, excluding shares held by us or any of our
affiliates, which shares shall have no voting rights.

     In the event of our voluntary or involuntary liquidation, dissolution or
winding up, before any distribution of assets is made to holders of our common
stock or any other stock of ours ranking junior to the shares of $3.625
preferred stock upon liquidation, dissolution or winding up, the holders of
$3.625 preferred stock shall receive a liquidation preference of $50 per share
and shall be entitled to receive all accrued and unpaid dividends through the
date of distribution, and the holders of any class or series of $3.625 preferred
stock ranking on a parity with the $3.625 preferred stock as to liquidation,
dissolution or winding up shall be entitled to receive the full respective
liquidation preferences (including any premium) to which they are entitled and
shall receive all accrued and unpaid dividends with respect to their respective
shares through and including the date of distribution. If, upon such a voluntary
or involuntary liquidation, dissolution or winding up, our assets are
insufficient to pay in full the amounts described above as payable with respect
to the $3.625 preferred stock and any class or series of our preferred stock
ranking on a parity with the $3.625 preferred stock as to liquidation,
dissolution or winding up, the holders of the $3.625 preferred stock and of such
other class or series of preferred stock will share ratably in any such
distributions of our assets first in proportion to their respective liquidation
preferences until such preferences are paid in full, and then in proportion to
their respective amounts of accrued but unpaid dividends. After payment of any
such liquidation preference and accrued dividends, the shares of $3.625
preferred stock will not be entitled to any further participation in any
distribution of assets by us. Neither the sale of all or substantially all of
our assets, nor our merger or consolidation into or with any other corporation,
nor our liquidation, dissolution, winding up or reorganization immediately
followed by reincorporation of another corporation, will be deemed to be a
liquidation, dissolution or winding up of Cephalon.

     In May 2001, the holders of 2,344,586 shares of the 2,500,000 shares
outstanding of the $3.625 preferred stock converted their preferred shares into
an aggregate of 6,541,752 shares of our common stock, in accordance with the
terms of the $3.625 preferred stock. As an inducement to the holders to convert
their $3.625 preferred stock prior to August 2001, when we are initially
permitted to redeem the $3.625 preferred stock, we agreed to pay immediately all
dividends accrued through the date of conversion as well as all dividends that
would have accrued through the August 2001 redemption date in the aggregate
amount of $4,390,000, which will result in a charge of $3,257,000 in the second
quarter of 2001. As of July 17, 2001, 155,414 shares of $3.625 preferred stock
remained outstanding.

TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the common stock and the $3.625
preferred stock is StockTrans, Inc.

                                        27
   30

                UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     This section summarizes the material United States federal income tax
consequences of purchasing, owning and disposing of the notes and the common
stock into which you may convert the notes. This summary is not a complete
analysis of all the potential tax consequences that you may need to consider
before investing based on your particular circumstances.

     This summary is based on the Internal Revenue Code of 1986, as amended, the
applicable Treasury regulations promulgated or proposed under the Code, judicial
authority and administrative rulings. Any of these may change, possibly on a
retroactive basis.

     This summary deals only with beneficial owners of notes or common stock
into which notes may be converted who acquire the notes in this offering and
hold the notes or common stock as capital assets. It does not address tax
consequences under any special tax rules. Special tax rules may apply, for
example, to banks, tax-exempt organizations, pension funds, insurance companies,
investors subject to the alternate minimum tax, dealers in securities or foreign
currencies, persons participating in a hedging transaction or a "straddle" or
"conversion transaction," or persons that have a "functional currency" other
than the U.S. dollar. In addition, this discussion does not address the tax
consequences to non-U.S. holders. We have not sought any ruling from the IRS
with respect to the statements and conclusions in this summary. We cannot
guarantee that the IRS will agree with these statements and conclusions.

     Before you invest in the notes, you should consult your own tax adviser to
determine how the United States federal income tax laws apply to your particular
situation and for information about any tax consequences arising under other tax
laws, such as United States federal estate tax laws and the laws of any state,
local or foreign taxing jurisdiction or under any applicable tax treaty.

     This summary applies to you if you are a U.S. holder. For purposes of this
discussion, the term "U.S. holder" means a beneficial owner of a note or common
stock that is for United States federal income tax purposes:

     - an individual who is a citizen or resident of the United States,
       including an alien individual who is a lawful permanent resident of the
       United States or meets the "substantial presence" test under Section
       7701(b) of the Code;

     - a corporation or other entity created or organized in or under the laws
       of the United States or any political subdivision thereof;

     - an estate, the income of which is subject to United States federal income
       taxation regardless of its source; or

     - a trust if either (a) a United States court is able to exercise primary
       supervision over the administration of the trust and one or more United
       States persons have the authority to control all substantial decisions of
       the trust, or (b) the trust was in existence on August 20, 1996 and has a
       valid election in effect under applicable Treasury regulations to be
       treated as a United States person.

     If a partnership holds notes or common stock, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. Partners of partnerships holding notes or common
stock should consult their tax advisers.

TAXATION OF INTEREST

     You generally must include interest on the notes in your income as ordinary
income at the time you receive or accrue the interest based on your method of
accounting for United States federal income tax purposes. We must pay liquidated
damages to you in specified circumstances described in "Description of
Notes -- Registration Rights Granted to the Initial Purchasers of the Notes."
According to Treasury regulations, the possibility of liquidated damages being
paid to you will not affect the amount of interest income you recognize, in
advance of the payment of any liquidated damages, if there is only a remote

                                        28
   31

chance as of the date the notes were issued that you will receive liquidated
damages. We believe that the likelihood that we will pay liquidated damages is
remote. Therefore, we do not intend to treat the potential payment of liquidated
damages as part of the yield to maturity of any notes. If we pay you liquidated
damages, however, you would treat the payments as interest income when you
receive or accrue them. Similarly, we intend to take the position that the
likelihood of a redemption or repurchase of the notes is remote, and likewise do
not intend to treat the possibility of any premium payable on a redemption or
repurchase as affecting the yield to maturity of any notes. We can provide no
assurance that the Internal Revenue Service will agree with this position.

SALE, EXCHANGE OR REDEMPTION OF NOTES

     You generally will recognize gain or loss on the sale, exchange (other than
a conversion) or redemption of notes equal to the difference between (1) the
amount of cash proceeds and the fair market value of any property you receive on
the sale, exchange or redemption (except any portion that is accrued interest
income, not previously included in income, which is taxable as ordinary income,
or is accrued interest income that was previously included in income, which
amount may be received without generating further income) and (2) your adjusted
tax basis in the notes. Your adjusted tax basis generally will equal the cost of
the notes to you. Your gain or loss generally will be capital gain or loss.
Capital gain or loss will be long-term if you have held the notes for more than
one year and will be short-term if you have held the notes for one year or less.
Long-term capital gains for noncorporate taxpayers, including individuals, are
taxed at a maximum rate of 20%, (except for certain long-term capital gains from
assets acquired after December 31, 2000 and held for more than five years, in
which case the maximum rate is 18%) and short-term capital gains for such
taxpayers are taxable at ordinary income rates. If you recognize capital loss,
the deductibility of such capital loss is subject to limitations. Net capital
gains of corporate taxpayers are taxed at the same rates as ordinary income and
are subject to a maximum tax rate of 35% on all net capital gains and ordinary
income.

CONVERSION OF NOTES

     You generally will not recognize any income, gain or loss on the conversion
of notes into common stock, except for any cash you receive instead of a
fractional share of common stock as described below. Any gain so recognized will
generally be capital gain. Your tax basis in the common stock will be the same
as your adjusted tax basis in the notes at the time of conversion, reduced by
any basis attributable to fractional shares. For tax purposes, your holding
period for the common stock will generally include your holding period for the
notes you converted.

     You should treat cash you receive instead of a fractional share of common
stock as a payment in exchange for the fractional share of common stock. This
will result in capital gain or loss (measured by the difference between the cash
you receive for the fractional share and your adjusted tax basis in the
fractional share), and the rules for determining whether such gain or loss is
short-term or long-term are the same as those applicable to sales, exchanges, or
redemptions (as described above).

DIVIDENDS ON COMMON STOCK

     If we make a distribution on common stock after conversion, the
distribution generally will be treated as a dividend and taxed as ordinary
income to the extent of our current and/or accumulated earnings and profits. A
distribution in excess of earnings and profits is treated as a tax-free return
of capital to the extent of your tax basis in the common stock, on a
share-by-share basis, and then as gain from the sale or exchange of such stock.
A dividend to a corporate holder may qualify for a dividends received deduction,
subject to certain limitations.

ADJUSTMENTS TO CONVERSION PRICE

     The conversion price of the notes may change under certain circumstances.
In such a case, you may be treated as having received a constructive
distribution whether or not your notes are ever converted,

                                        29
   32

which may be treated as a taxable dividend under Section 305 of the Code. Such a
distribution will generally be deemed to occur if, and to the extent that, the
adjustment in the conversion price increases your proportionate interest in our
assets or earnings and profits. The constructive distribution may be taxed as
ordinary income, subject to a possible dividends received deduction if you are a
corporate holder, to the extent of our current and/or accumulated earnings and
profits. For example, an adjustment to reflect a taxable dividend to holders of
common stock will result in a constructive dividend. Holders who have converted
their notes into common stock will generally be treated as having received a
constructive distribution if there is not a full adjustment to the conversion
price of the notes to reflect a stock dividend or other event that would (absent
such adjustment) increase the proportionate interest of the common stockholders
in our assets or earnings and profits. In such an event, the constructive
distribution will be taxable as ordinary income, subject to a possible dividends
received deduction if you are a corporate holder, to the extent of our current
and/or accumulated earnings and profits.

SALE OF COMMON STOCK

     On the sale or exchange of common stock, you generally will recognize
capital gain or loss equal to the difference between (1) the amount of cash and
the fair market value of any property you receive on the sale or exchange and
(2) your adjusted tax basis in the common stock. This capital gain or loss will
be long-term if you have held the stock for more than one year and will be
short-term if you have held the stock for one year or less. Long-term capital
gains for noncorporate taxpayers, including individuals, are currently taxable
at a maximum rate of 20% (except for certain long-term capital gains from assets
acquired after December 31, 2000 and held for more than five years, in which
case the maximum rate is 18%), and short-term capital gains for such taxpayers
are taxable at ordinary income rates. A holder's basis and holding period in
common stock received upon conversion of notes are determined as discussed above
under "Conversion of Notes." If you recognize capital loss, the deductibility of
such loss is subject to limitations. Net capital gains of corporate taxpayers
are taxed at the same rates as ordinary income and are subject to a tax rate of
35%.

BACKUP WITHHOLDING AND INFORMATION REPORTING

     Backup withholding of United States federal income tax at a rate of 31% may
apply to payments pursuant to the terms of a note or common stock to a U.S.
holder that is not an "exempt recipient" and that fails to provide certain
identifying information, such as the holder's taxpayer identification number, in
the manner required. Generally, individuals are not exempt recipients, whereas
corporations and some other entities are exempt recipients. Payments made in
respect of a note or common stock must be reported to the IRS, unless the U.S.
holder is an exempt recipient or otherwise established an exemption. Any amounts
withheld under the backup withholding rules from a payment to a holder of a note
or common stock will be allowed as a refund or credit against such holder's
United States federal income tax liability provided that the required
information is furnished to the IRS in a timely manner.

     INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL TAX LAWS
TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION.

                                        30
   33

                            SELLING SECURITYHOLDERS

     We originally issued the notes in transactions exempt from the registration
requirements of the Securities Act to persons that the initial purchasers
believed to be qualified institutional buyers. As used in this prospectus, the
term selling securityholders includes their transferees, pledgees, donees and
their successors. The selling securityholders may from time to time offer and
sell pursuant to this prospectus any or all of the notes and the shares of
common stock issuable upon conversion of the notes, if issued.

     The following table sets forth information regarding (1) the beneficial
ownership of the notes, and the maximum principal amount of notes that each may
offer and (2) the number of shares of common stock that each selling
securityholder may sell under this prospectus. Because the selling
securityholders may offer all or a portion of the notes and the common stock, if
converted, under this prospectus, we cannot estimate the principal amount of the
notes or the common stock that the selling securityholders will hold upon
termination of any sale. The following table is based upon information furnished
to us by the selling securityholders.



                                                                                     NUMBER OF
                                                              PRINCIPAL AMOUNT     COMMON SHARES
                                                                  OF NOTES          ISSUED UPON
                                                                BENEFICIALLY      CONVERSION THAT
NAME OF SELLING SECURITYHOLDER                                    OWNED(1)         MIGHT BE SOLD
- ------------------------------                                ----------------    ---------------
                                                                            
AAM/Zazove Institutional Income Fund L.P....................    $  1,000,000            13,513
Alpine Associates...........................................    $  6,150,000            83,108
Alpine Partners L.P. .......................................    $  1,000,000            13,513
Argent Classic Convertible Arbitrage Fund (Bermuda) Ltd. ...    $  6,000,000            81,081
Argent Classic Convertible Arbitrage Fund L.P. .............    $  2,000,000            27,027
Argent Convertible Arbitrage Fund Ltd. .....................    $  1,500,000            20,270
Arkansas Teacher Retirement.................................    $  4,681,000            63,256
Banc of America Securities LLC..............................    $  1,640,000            22,162
Baptist Health of South Florida.............................    $    586,000             7,918
Bear, Stearns & Co., Inc. ..................................    $  1,000,000            13,513
Black Diamond Offshore Ltd. ................................    $    683,000             9,229
BNP CooperNeff Convertible Strategies Fund, L.P. ...........    $  2,595,000            35,067
BNP Paribas Equity Strategies, SNC..........................    $ 12,405,000           167,635
Boston Museum of Fine Art...................................    $     62,000               837
Century National Insurance Company..........................    $    300,000             4,054
Chrysler Corporation Master Retirement Trust................    $  2,965,000            40,067
CIBC World Markets..........................................    $  2,000,000            27,027
Clinton Multistrategy Master Fund, Ltd. ....................    $  3,500,000            47,297
Clinton Riverside Convertible Portfolio Limited.............    $  6,500,000            87,837
Delta Opportunity Fund, Ltd. ...............................    $  1,740,000            23,513
Delta Opportunity Fund (Institutional), LLC.................    $  1,260,000            17,027
Deutsche Banc Alex Brown Inc. ..............................    $ 29,151,000           393,932
D.E. Shaw Investments, L.P. ................................    $    800,000            10,810
D.E. Shaw Valence, L.P. ....................................    $  3,200,000            43,243
Double Black Diamond Offshore L.D.C. .......................    $  3,149,000            42,554
Engineers Joint Pension Fund................................    $    570,000             7,702
Enterprise Convertible Security Fund........................    $    164,000             2,216
Fidelity Financial Trust -- Fidelity Convertible Securities
  Fund......................................................    $  4,250,000            57,432
First Mercury Insurance Company -- Total Return.............    $     25,000               337
First Union International Capital Markets Inc. .............    $ 10,000,000           135,135
First Union Securities Inc. ................................    $  6,525,000            88,175
Forest Alternative Strategies Fund II L.P. A5M..............    $    100,000             1,351


                                        31
   34



                                                                                     NUMBER OF
                                                              PRINCIPAL AMOUNT     COMMON SHARES
                                                                  OF NOTES          ISSUED UPON
                                                                BENEFICIALLY      CONVERSION THAT
NAME OF SELLING SECURITYHOLDER                                    OWNED(1)         MIGHT BE SOLD
- ------------------------------                                ----------------    ---------------
                                                                            
Forest Global Convertible Fund A5 ..........................    $  5,900,000            79,729
Grace Brothers, Ltd. .......................................    $  2,500,000            33,783
Granville Capital Corporation...............................    $  5,000,000            67,567
Highbridge International LLC................................    $  4,500,000            60,810
Innovest Finanzdienstleistungs..............................    $    550,000             7,432
JMG Triton Offshore Fund, Ltd. .............................    $  7,500,000           101,351
KBC Financial Products USA..................................    $  1,000,000            13,513
KD Offshore Fund C.V. ......................................    $  1,500,000            20,270
Kellner, Dileo & Co. .......................................    $  1,500,000            20,270
Leonardo, LP................................................    $ 19,000,000         $ 256,756
Lipper Convertibles, L.P. ..................................    $  2,000,000            27,027
Lipper Offshore Convertibles, L.P. .........................    $  1,000,000            13,513
LLT Limited.................................................    $    290,000             3,918
Lumbermens Mutual Casualty..................................    $    586,000             7,918
Lyxor Master Fund c/o Forest Investment Management, LLC.....    $  1,560,000            21,081
McMahan Securities Co. L.P. ................................    $    500,000             6,756
Motion Pictures Industry....................................    $    657,000             8,878
Motion Picture Industry Health Plan -- Active Member Fund...    $    295,000             3,986
Motion Picture Industry Health Plan -- Retiree Member
  Fund......................................................    $    100,000             1,351
National Union Fire Insurance Company of Pittsburgh, PA.....    $    675,000             9,121
Nicholas Applegate Convertible Fund.........................    $  1,731,000            23,391
Nicholas Applegate Global Holdings Co. LP...................    $     36,000               486
New York Life Insurance and Annuity Company.................    $  1,500,000            20,270
New York Life Insurance Company.............................    $ 13,500,000           182,432
OCM Convertible Trust.......................................    $  2,405,000            32,500
Paloma Securities LLC.......................................    $ 24,500,000           331,081
Partner Reinsurance Company Ltd. ...........................    $    565,000             7,635
Physicians Life.............................................    $    447,000             6,040
Quattro Fund Ltd. ..........................................    $  2,000,000            27,027
RBC Capital Services Inc. c/o Forest Investment Management,
  LLC.......................................................    $     30,000               405
R2 Investments, LDC.........................................    $  7,500,000           101,351
San Diego City Retirement...................................    $  1,084,000            14,648
San Diego County Convertible................................    $  2,198,000            29,702
San Diego County Employees Retirement Association...........    $  2,000,000            27,027
Screen Actors Guild Pension Convertible.....................    $    607,000             8,202
Spear, Leads & Kellogg L.P. ................................    $  1,000,000            13,513
State Employees' Retirement Fund of the State of Delaware...    $  1,270,000            17,162
State of Connecticut Combined Investment Funds..............    $  3,110,000            42,027
Sylvan I.M.A. Ltd. c/o Forest Investment Management, LLC....    $    545,000             7,364
TQA Master Fund, Ltd. ......................................    $  2,625,000            35,472
TQA Master Plus Fund, Ltd. .................................    $    875,000            11,824
Tribeca Investments, L.L.C. ................................    $  7,000,000            94,594
Van Kampen Harbor Fund......................................    $  4,000,000            54,054
Vanguard Convertible Securities Fund, Inc. .................    $  3,630,000            49,054
Wake Forest Convertible Arbitrage...........................    $    399,000             5,391


                                        32
   35



                                                                                     NUMBER OF
                                                              PRINCIPAL AMOUNT     COMMON SHARES
                                                                  OF NOTES          ISSUED UPON
                                                                BENEFICIALLY      CONVERSION THAT
NAME OF SELLING SECURITYHOLDER                                    OWNED(1)         MIGHT BE SOLD
- ------------------------------                                ----------------    ---------------
                                                                            
Wake Forest University......................................    $    878,000            11,864
White River Securities LLC..................................    $    500,000             6,756
Worldwide Transactions Ltd. ................................    $    168,000             2,270
Writers Guild Convertible...................................    $    354,000             4,783
Wyoming State Treasurer.....................................    $  1,223,000            16,527
Zazove Hedged Convertible Fund L.P. ........................    $  1,600,000            21,621
Zola Partners L.P. .........................................    $    500,000             6,756
Zurich Institutional Benchmarks Master Fund Ltd. ...........    $  1,000,000            13,513
Zurich Master Hedge Fund c/o Forest Investment Management,
  LLC.......................................................    $    235,000             3,175
All Other Holders(2)........................................    $136,761,000(3)      1,848,121
Total(4)....................................................    $400,000,000         5,405,405
                                                                ============         =========


- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
    and generally includes voting or investment power with respect to
    securities.

(2) The names of any other selling securityholder who wishes to sell notes or
    common shares issued upon conversion of the notes will be specifically
    identified in an amendment to this registration statement or in a supplement
    to this prospectus, as appropriate.

(3) This number represents the difference between the aggregate principal
    amount of the notes sold ($400 million) and the aggregate principal amount
    of notes for which questionnaires were received by us from the
    securityholders. The questionnaires have been sent to us by certain
    securityholders since May 2001 and the information contained therein since
    our receipt may have changed without our knowledge. As a result, this
    number may not represent the correct remaining aggregate principal amount
    for which questionnaires are still to be received.

(4) Represents the aggregate amount of notes issued and sold by us to the
    initial purchasers and number of common shares issued upon conversion of
    the notes that may be sold pursuant to this prospectus.

                                        33
   36

                              PLAN OF DISTRIBUTION

     The selling securityholders may sell the notes and the common stock into
which the notes are convertible directly to purchasers or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the selling securityholders, which discounts,
concessions or commissions as to any particular underwriter, broker-dealer or
agent may be in excess of those customary in the type of transaction involved.

     The notes and the common stock into which the notes are convertible may be
sold from time to time in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined at
the time of sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (1) on any
national securities exchange or quotation service on which the notes or the
common stock may be listed or quoted at the time of sale, (2) in the over-the-
counter market, (3) in transactions otherwise than on such exchanges or services
or in the over-the-counter market, or (4) through the writing of options. In
connection with the sale of the notes and the common stock into which the notes
are convertible or otherwise, the selling securityholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
notes or the common stock in the course of hedging the positions they assume.
The selling securityholder may also sell the notes or the common stock short and
deliver such securities to close out such short positions, or loan or pledge the
notes or the common stock to broker-dealers that in turn may sell such
securities.

     The aggregate proceeds to the selling securityholders from the sale of the
notes or common stock into which the notes are convertible offered by them will
be the purchase price of the notes or common stock less discounts and
commissions, if any. Each of the selling securityholders reserves the right to
accept and, together with their agents from time to time, to reject, in whole or
in part, any proposed purchase of notes or common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering.

     Our common stock is quoted on the Nasdaq National Market under the symbol
"CEPH." We do not intend to list the notes for trading on any national
securities exchange of on the Nasdaq National Market and can give no assurance
about the development of any trading market for the notes.

     In order to comply with the securities laws of certain states, if
applicable, the notes and common stock into which the notes are convertible may
be sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain states, the notes and common stock into which
the notes are convertible may not be sold unless they have been registered or
qualified for sale in such state or an exemption for such registration or
qualification requirement is available and is complied with.

     The selling securityholders and any underwriters, broker-dealers or agents
that participate in the sale of the notes and common stock into which the notes
are convertible may be "underwriters" within the meaning of Section 2(11) of the
Securities Act. Any discounts, commissions, concessions or profit they earn on
any resale of the shares may be underwriting discounts and commissions under the
Securities Act. Selling securityholders who are "underwriters" within the
meaning of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. The selling securityholders have
acknowledged that they understand their obligations to comply with the
provisions of the Exchange Act and the rules thereunder relating to stock
manipulation, particularly Regulation M.

     In addition, any securities covered by this prospectus which qualify for
sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus. A selling
securityholder may not sell any notes or common stock described herein and may
not transfer, devise or gift such securities by other means not described in
this prospectus.

     To the extent required, the specific notes or common stock to be sold, the
names of the selling securityholders, the respective purchase prices and public
offering prices, the names of any agent, dealer or underwriter, and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part.

                                        34
   37

     We entered into a registration rights agreement for the benefit of holders
of the notes to register the resale of their notes and common stock under
applicable federal securities laws under certain circumstances and at certain
times. The registration rights agreement provides for cross-indemnification of
the selling securityholders and us and our respective directors, officers and
controlling persons against certain liabilities in connection with the offer and
sale of the notes and the common stock, including liabilities under the
Securities Act. We will pay substantially all of the expenses incurred by the
selling securityholders incident to the offering and sale of the notes and
common stock, provided that each selling securityholder will be responsible for
payment of commissions and discounts of underwriters, broker-dealers or agents.

                      WHERE YOU CAN FIND MORE INFORMATION

     Cephalon is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, under which we file periodic reports, proxy and
information statements and other information with the Securities and Exchange
Commission. Copies of the reports, proxy statements and other information may be
examined without charge at the Public Reference Section of the Securities and
Exchange Commission, 450 Fifth Street, N.W. Washington, D.C. 20549, or on the
Internet at http://www.sec.gov. Copies of all or a portion of such materials can
be obtained from the Public Reference Section of the Securities and Exchange
Commission upon payment of prescribed fees. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the Public
Reference Room. These reports, proxy and information statements and other
information may also be inspected at the offices of the Nasdaq Stock Market,
1735 K Street, N.W., Washington, D.C. 20006.

     We have "incorporated by reference" into this prospectus certain
information that we file with the Securities and Exchange Commission. This means
that we can disclose important business, financial and other information in this
prospectus by referring you to the documents containing this information. All
information incorporated by reference is part of this prospectus, unless and
until that information is updated and superseded by the information contained in
this prospectus or any information filed with the Securities and Exchange
Commission and incorporated later. Any information that we subsequently file
with the Securities and Exchange Commission that is incorporated by reference
will automatically update and supersede any previous information that is part of
this prospectus.

     We incorporate by reference our documents listed below and any future
filings we make with the Securities and Exchange Commission under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until this
offering is completed:

     - Annual Report on Form 10-K for the fiscal year ended December 31, 2000;

     - Quarterly Report on Form 10-Q for the period ended March 31, 2001;

     - Current Report on Form 8-K filed on May 3, 2001;

     - The description of our common stock that is contained in our Form 8-A
       Registration Statement filed with the SEC on March 15, 1991, including
       any amendment or reports filed for the purpose of updating such
       description; and

     - The description of our stockholder rights plan that is contained in our
       Form 8-A Registration Statement filed with the SEC on January 20, 1999,
       including any amendments or reports filed for the purpose of updating
       such description.

     We will provide without charge to each person to whom a copy of this
prospectus is delivered, including any beneficial owner, upon the written or
oral request of such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents, unless such exhibits are

                                        35
   38

specifically incorporated by reference into the information that this prospectus
incorporates). Requests should be directed to:

     Cephalon, Inc.
     145 Brandywine Parkway
     West Chester, PA 19380
     Attention: John E. Osborn,
     Senior Vice President, General Counsel and Secretary
     Telephone: (610) 344-0200

                           FORWARD-LOOKING STATEMENTS

     In addition to historical facts or statements of current condition, this
prospectus and the documents that are and will be incorporated into this
prospectus contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements provide our
current expectations or forecasts of future events. These may include statements
regarding anticipated scientific progress in our research programs, development
of potential pharmaceutical products, expansion of the authorized uses of our
products, prospects for regulatory approval, manufacturing capabilities, market
prospects for our products, sales and earnings projections, our use of the
proceeds from the sale of the notes and other statements regarding matters that
are not historical facts. Some of these forward-looking statements may be
identified 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. Our 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 such as those set forth in this report. Given the risks and
uncertainties, any or all of these forward-looking statements may prove to be
incorrect. Therefore, you should not rely on any such forward-looking
statements. Furthermore, we do not intend to update publicly any forward-looking
statements, except as required by law. Risks that we anticipate are discussed in
more detail in the section entitled "Risk Factors" and in certain of the
documents that we incorporate by reference into this prospectus. This discussion
is permitted by the Private Securities Litigation Reform Act of 1995.

                                 LEGAL MATTERS

     Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of the securities offered hereby.

                                    EXPERTS

     The consolidated financial statements of Cephalon, Inc. as of December 31,
2000 and 1999 and for each of the three years in the period ended December 31,
2000, incorporated by reference in this prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as stated in their reports with
respect thereto. Arthur Andersen LLP did not audit the financial statements of
Anesta Corp., a company acquired by Cephalon during 2000 in a transaction
accounted for as a pooling of interests. Such statements are included in the
consolidated financial statements of Cephalon, Inc. and reflect total assets and
total revenues of 25 percent and 13 percent in 1999, respectively, and total
revenues of 4 percent in 1998 of the related consolidated totals. Those
statements were audited by PricewaterhouseCoopers LLP whose report has been
furnished to us, and Arthur Andersen's opinion, insofar as it relates to amounts
included for Anesta Corp., is based solely upon the report of
PricewaterhouseCoopers LLP.

     The audited financial statements of Anesta Corp., not incorporated by
reference nor separately presented in this prospectus, have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report thereon is
incorporated by reference in this registration statement. Such financial
statements, to the extent they have been included in the financial statements of
Cephalon, Inc., have been so included in reliance on the report of such
independent accountants given on authority of such firm as experts in auditing
and accounting.

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   39

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                                 CEPHALON, INC.

          $400,000,000 5 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2006
                        5,405,405 SHARES OF COMMON STOCK

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                                   PROSPECTUS
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                                 August 6, 2001

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