-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EGyVf/3/hbLFfvViEsxjBmNOUUBD7hMDCs0l7iWQdOVTT809WUckH/t7BcXr3zLK dsxx+9zcACNzQ0Zz1V8DbQ== /in/edgar/work/0001036050-00-002028/0001036050-00-002028.txt : 20001115 0001036050-00-002028.hdr.sgml : 20001115 ACCESSION NUMBER: 0001036050-00-002028 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEPHALON INC CENTRAL INDEX KEY: 0000873364 STANDARD INDUSTRIAL CLASSIFICATION: [2834 ] IRS NUMBER: 232484489 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19119 FILM NUMBER: 767466 BUSINESS ADDRESS: STREET 1: 145 BRANDYWINE PKWY CITY: WEST CHESTER STATE: PA ZIP: 19380 BUSINESS PHONE: 6103440200 MAIL ADDRESS: STREET 1: 145 BRANDYWINE PARKWAY CITY: WEST CHESTER STATE: PA ZIP: 19380 10-Q 1 0001.txt CEPHALON, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [_] For the Quarterly Period Ended September 30, 2000 -------------------- Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period from ______________ to _______________ Commission File Number 0-19119 ------------------- CEPHALON, INC. -------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 23-2484489 - --------------------------------------------- ----------------------------- (State Other Jurisdiction of Incorporation or (I.R.S. Employer Organization) Identification Number) 145 Brandywine Parkway, West Chester, PA 19380-4245 - --------------------------------------------- ----------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code (610) 344-0200 ----------------------------- Not Applicable --------------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ ----- Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of November 6, 2000 ---------------------------- ---------------------------------- Common Stock, par value $.01 41,407,375 Shares This Report Includes a Total of 30 Pages CEPHALON, INC. AND SUBSIDIARIES ------------------------------- INDEX -----
Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets - 3 September 30, 2000 and December 31, 1999 Consolidated Statements of Operations - 4 Three and nine months ended September 30, 2000 and 1999 Consolidated Statements of Cash Flows - 5 Nine months ended September 30, 2000 and 1999 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of 11 Financial Condition and Results of Operations Item 3 Quantitative and Qualitative Disclosure about Market Risk 28 PART II - OTHER INFORMATION Item 1. Legal Proceedings 29 Item 6. Exhibits and Reports on Form 8-K 29 SIGNATURES 30
CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (Unaudited)
September 30, December 31, 2000 1999 ------------------- ------------------- ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 16,300,000 $ 13,152,000 Short-term investments 111,040,000 188,410,000 Receivables, net 13,767,000 5,578,000 Inventory (Note 2) 16,843,000 4,258,000 Other 2,754,000 988,000 ------------- ------------- Total current assets 160,704,000 212,386,000 PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of $16,474,000 and $15,192,000 26,038,000 20,001,000 OTHER 1,694,000 1,666,000 ------------- ------------- $ 188,436,000 $ 234,053,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 3,227,000 $ 6,221,000 Accrued expenses 18,970,000 19,328,000 Current portion of long-term debt (Note 6) 2,043,000 31,906,000 ------------- ------------- Total current liabilities 24,240,000 57,455,000 LONG-TERM DEBT 13,514,000 14,034,000 OTHER 178,000 4,207,000 ------------- ------------- Total liabilities 37,932,000 75,696,000 ------------- ------------- COMMITMENTS AND CONTINGENCIES (Note 4) STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized, 2,500,000 shares issued and outstanding 25,000 25,000 Common stock, $.01 par value, 100,000,000 shares authorized, 34,914,830 and 32,560,938 shares issued and outstanding 349,000 326,000 Additional paid-in capital 531,902,000 505,702,000 Treasury stock (1,480,000) (1,290,000) Accumulated deficit (382,121,000) (347,135,000) Accumulated other comprehensive income 1,829,000 729,000 ------------- ------------- Total stockholders' equity 150,504,000 158,357,000 ------------- ------------- $188,436,000 $ 234,053,000 ============ =============
The accompanying notes are an integral part of these financial statements. 3 CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 2000 1999 2000 1999 ---------- ----------- ----------- ----------- REVENUES: (Note 5) Product sales - PROVIGIL $ 19,213,000 $ 7,865,000 $ 47,963,000 $ 15,117,000 Other revenues 3,407,000 3,691,000 12,663,000 11,418,000 ------------- ------------- ------------- ------------- 22,620,000 11,556,000 60,626,000 26,535,000 ------------- ------------- ------------- ------------- COSTS AND EXPENSES: Cost of product sales - PROVIGIL 4,111,000 874,000 9,185,000 1,713,000 Research and development 16,217,000 11,207,000 43,594,000 31,359,000 Selling, general and administrative 14,509,000 12,331,000 43,226,000 36,111,000 ------------- ------------- ------------- ------------- 34,837,000 24,412,000 96,005,000 69,183,000 ------------- ------------- ------------- ------------- LOSS FROM OPERATIONS (12,217,000) (12,856,000) (35,379,000) (42,648,000) ------------- ------------- ------------- ------------- OTHER INCOME (EXPENSE), NET 429,000 (556,000) 7,190,000 (2,206,000) ------------- ------------- ------------- ------------- LOSS (11,788,000) (13,412,000) (28,189,000) (44,854,000) Dividends on convertible exchangeable preferred stock (2,266,000) (1,107,000) (6,797,000) (1,107,000) ------------- ------------- ------------- ------------- LOSS APPLICABLE TO COMMON SHARES $ (14,054,000) $ (14,519,000) $ (34,986,000) $ (45,961,000) ============= ============= ============= ============= BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.40) $ (0.47) $ (1.04) $ (1.57) ============= ============= ============= ============= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 34,865,823 30,739,090 33,500,965 29,182,454 ============= ============= ============= =============
The accompanying notes are an integral part of these financial statements. 4 CEPHALON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited)
Nine Months Ended September 30, ----------------------------- 2000 1999 ---------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Loss $(28,189,000) $ (44,854,000) Adjustments to reconcile loss to net cash used for operating activities: Depreciation and amortization 1,282,000 3,269,000 Non-cash compensation expense 4,615,000 990,000 Other (429,000) 1,068,000 (Increase) decrease in operating assets: Receivables (6,841,000) 70,000 Inventory (12,585,000) (3,686,000) Other current assets (2,393,000) (877,000) Other long-term assets (29,000) (1,992,000) Increase (decrease) in operating liabilities: Accounts payable (2,994,000) (392,000) Accrued expenses (358,000) (2,273,000) Other long-term liabilities (4,029,000) 508,000 ------------ ------------- Net cash used for operating activities (51,950,000) (48,169,000) ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (5,834,000) (71,000) Sales and maturities (purchases) of investments, net 77,018,000 (120,003,000) ------------ ------------- Net cash provided by (used for) investing activities 71,184,000 (120,074,000) ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of convertible exchangeable preferred stock -- 120,352,000 Proceeds from sales of common stock and warrants -- 12,000,000 Proceeds from exercises of common stock options and warrants 21,349,000 33,197,000 Proceeds from issuance of long-term debt -- 30,000,000 Dividend payments on preferred stock (6,797,000) -- Principal payments on and retirements of long-term debt (32,091,000) (1,331,000) ------------ ------------- Net cash (used for) provided by financing activities (17,539,000) 194,218,000 ------------ ------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 1,453,000 24,000 ------------ ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,148,000 25,999,000 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,152,000 7,484,000 ------------ ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 16,300,000 $ 33,483,000 ============ =============
The accompanying notes are an integral part of these financial statements. 5 CEPHALON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Cephalon, Inc. is a biopharmaceutical company dedicated to the discovery, development and marketing of products to treat neurological disorders and cancer. We have had negative cash flow from operations since inception and have funded our operations primarily from the proceeds of public and private placements of our securities and, more recently, from product sales and collaboration revenue. We market and sell PROVIGIL(R) (modafinil) Tablets [C-IV] in the United States, the United Kingdom and the Republic of Ireland, and we promote the product in Austria and Switzerland under a different tradename. In addition, we market PROVIGIL in Italy with our partner, Dompe S.p.A. PROVIGIL is approved in those countries for use by those suffering from excessive daytime sleepiness associated with narcolepsy. In addition to the territories mentioned above, we also hold rights to market PROVIGIL in Latin America, Japan, South Korea and Taiwan. We entered into a collaborative agreement with Abbott Laboratories in June 1999 to market in the United States and further develop GABITRIL(R) (tiagabine hydrochloride), an adjunctive treatment for partial seizures associated with epilepsy, and in October 2000 Abbott agreed to transfer to Cephalon all U. S. product rights to GABITRIL. Also in October 2000 we completed the acquisition of Anesta Corp., which develops and markets products using its patented oral transmucosal system (OTS (TM)) for drug delivery. ACTIQ(R) (oral transmucosal fentanyl citrate) is marketed and sold in the United States for the treatment of breakthrough cancer pain, and recently was approved in the United Kingdom for the same indication. Our business is subject to a number of significant risks, including the risks inherent in pharmaceutical research and development activities. We are highly dependent upon the commercial success of PROVIGIL and our other marketed products in the United States, but we cannot be sure that we will achieve profitability based upon sales of these products. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our annual report on Form 10-K, filed with the Securities and Exchange Commission, which includes financial statements as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999. The results of our operations for any interim period are not necessarily indicative of the results of our operations for any other interim period or for a full year. Concentrations of Credit Risk At September 30, 2000, four pharmaceutical wholesalers represented 86% of our U.S. trade accounts receivable. We control credit risk through credit approvals, credit limits and by performing ongoing credit evaluations of our customers. Recent Accounting Pronouncements In December 1999, the Securities and Exchange Commission, or SEC, issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," or SAB 101, which is effective for fiscal years beginning 6 CEPHALON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) after December 15, 1999. The bulletin provides guidance on how accounting rules should be applied for, among other things, revenue recognition for non- refundable technology access fees in the biotechnology industry. We expect that we will be required to defer non-refundable technology fees recorded in prior periods and recognize the related revenue over future periods. The SEC has extended the implementation date of SAB 101 until the fourth quarter of fiscal years beginning after December 15, 1999. In accordance with SAB 101, we expect to report a change in accounting principle and to record the impact of this change as a cumulative effect in our statement of operations in the fourth quarter of 2000. 2. INVENTORY Inventory consists solely of PROVIGIL and is stated at the lower of cost or market value using the first-in, first-out method:
September 30, December 31, 2000 1999 ---- ---- Raw material......................................... $ 5,327,000 $1,570,000 Work-in-process...................................... 4,431,000 1,616,000 Finished goods....................................... 7,085,000 1,072,000 ----------- ---------- $16,843,000 $4,258,000 =========== ==========
3. LEGAL PROCEEDINGS In November 1999 we received a federal grand jury subpoena in connection with an investigation under the supervision of the Office of Consumer Litigation of the U.S. Department of Justice. The grand jury also issued subpoenas to certain of our former and current employees. We believe that the investigation relates to the release of certain lots of MYOTROPHIN(R) (mecasermin) Injection used in clinical trials and related reports filed with the FDA during the period 1994-96. We have not been identified as a target of the investigation, and we are cooperating with the inquiry. We cannot predict the outcome of this investigation, but we do not believe it will have a material negative effect on our financial condition or results of operations. 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 alleging 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. 7 CEPHALON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. COMMITMENTS AND CONTINGENCIES Related party In August 1992 we exclusively licensed our rights to MYOTROPHIN for human therapeutic use within the United States, Canada and Europe to Cephalon Clinical Partners, L.P., or CCP. We perform development and clinical testing of MYOTROPHIN on behalf of CCP under a research and development agreement. CCP has granted us an exclusive license to manufacture and market MYOTROPHIN for human therapeutic use within the United States, Canada and Europe in return for royalty payments equal to a percentage of product sales and a milestone payment of approximately $16,000,000 that will be made if MYOTROPHIN receives regulatory approval. We have a contractual option to purchase all of the limited partnership interests of CCP. To exercise this purchase option, we are required to make an advance payment of $40,275,000 in cash or, at our election, shares of common stock with a value of $42,369,000 or a combination thereof. The purchase option will become exercisable upon the occurrence of certain events once sales activity commences. Should we discontinue development of MYOTROPHIN or if we do not exercise the purchase option, our license will terminate and all rights to manufacture or market MYOTROPHIN in the United States, Canada and Europe will revert to CCP, which may then commercialize MYOTROPHIN itself or license or assign its rights to a third party. In that event, we would not receive any benefits from such commercialization, license or assignment of rights. 5. REVENUES Product sales of PROVIGIL were accounted for as follows:
For the three months ended For the nine months ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- Gross product sales of PROVIGIL $19,301,000 $8,233,000 $46,619,000 $20,515,000 Adjustment to the reserve for returns and allowances (88,000) (368,000) 1,344,000 (5,398,000) ----------- ---------- ----------- ----------- Net product sales of PROVIGIL $19,213,000 $7,865,000 $47,963,000 $15,117,000 =========== ========== =========== ===========
Four pharmaceutical wholesalers accounted for 87% of U.S. gross product sales of PROVIGIL during the nine months ending September 30, 2000. At September 30, 2000, the balance in the reserve for returns and allowances was $2,861,000. Of this amount $1,944,000 was reserved for product returns at September 30, 2000 compared with a balance of $2,706,000 and $5,169,000 at June 30, 2000 and December 31, 1999, respectively. Our return reserve calculation is based upon inventory levels at the wholesalers and at the retail pharmacies, as well as product reorder history as measured at each reporting period. The reserve balance is directly affected by product movement through the supply chain or changes in wholesaler and retailer inventory levels. To date, returns against the reserve have been negligible. Should this trend continue, we would expect to reverse a significant portion of our remaining reserve during the fourth quarter of 2000. 8 CEPHALON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Other revenues The major sources of other revenues include reimbursement of research and development costs under our collaborative agreements with H. Lundbeck A/S and TAP Holdings, Inc., and reimbursement under our copromotion agreement with Abbott for sales of GABITRIL. 6. SUBSEQUENT EVENTS Revenue Sharing Notes In February 1999 we completed a private placement of $30,000,000 of revenue-sharing notes. The notes were retired in the first quarter of 2000 for an aggregate cash payment of $35,500,000. However, the former holders of the notes were to receive a payment of 6% of U.S. net sales of PROVIGIL through December 31, 2001. Under an amendment dated October 31, 2000, the Company agreed to pay the noteholders $6.6 million in cash and, in exchange, the noteholders agreed to relinquish royalty payments on all PROVIGIL net sales occurring after December 31, 2000. Transfer of GABITRIL Product Rights On November 2, 2000 Cephalon and Abbott announced that, subject to the approval of regulatory authorities, Abbott will transfer to Cephalon its U.S. product rights to GABITRIL(R) (tiagabine hydrochloride), an anti-epileptic product. The agreement gives Cephalon the exclusive rights to manufacture, market, sell and further develop the drug in the United States. Under the terms of the agreement, Cephalon will pay Abbott $100 million over the next four years, and also will make an additional payment if Abbott obtains an extension of the composition patent covering the active drug substance contained in GABITRIL. Abbott will continue to manufacture GABITRIL for Cephalon under a tolling agreement, although Cephalon intends to assume direct responsibility for manufacturing within the next several years. Anesta Acquisition On October 10, 2000, Cephalon and Anesta Corp. completed a merger under which Cephalon acquired all of the outstanding shares of Anesta in a tax-free, stock-for-stock transaction. Under the terms of the merger agreement, each stockholder of Anesta received 0.4765 shares of Cephalon stock for each share of Anesta stock. The merger has been accounted for using the pooling-of-interests method of accounting and accordingly, all prior period consolidated statements have been restated to include Cephalon's and Anesta's combined results of operations, financial position and cash flows. In connection with the merger, we expect to record a non-recurring charge of approximately $12.0 million in the fourth quarter of 2000 for transaction costs, including investment banking, legal and accounting fees, and for other estimated costs associated with the merger. The table below reflects unaudited pro forma combined results of Cephalon and Anesta for the three and nine months ended September 30, 2000 and 1999. The balance sheet data presented below is as of September 30, 2000 and December 31, 1999. 9 CEPHALON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Pro Forma Combined Statement of Operations Data: (In thousands except per share data) Three Months Ended Nine Months Ended September 30, September 30, ------------ ------------ Revenues: 2000 1999 2000 1999 ---- ---- ---- ---- Product sales - PROVIGIL $19,213 $ 7,865 $ 47,963 $ 15,117 Product sales - ACTIQ 5,052 525 9,045 1,653 Other revenues 3,500 5,258 13,434 13,636 ------------ -------------- ------------ -------------- 27,765 13,648 70,442 30,406 ------------ -------------- ------------ -------------- Costs and Expenses: Cost of product sales 5,277 988 11,374 2,198 Research and development 18,690 13,572 51,232 38,559 Selling, general and administrative 20,035 14,984 58,453 42,826 ------------ -------------- ------------ -------------- 44,002 29,544 121,059 83,583 ------------ -------------- ------------ -------------- Loss from operations (16,237) (15,896) (50,617) (53,177) Other income, net 890 341 9,236 740 ------------ -------------- ------------ -------------- Loss before provision for income taxes (15,347) (15,555) (41,381) (52,437) Benefit (provision) for income taxes 26 (4) (5) (19) Loss (15,321) (15,559) (41,386) (52,456) Dividends on convertible exchangeable preferred stock (2,266) (1,107) (6,797) (1,107) ------------ -------------- ------------ -------------- Loss applicable to common shares ($17,587) ($16,666) ($48,183) ($53,563) ============ ============== ============ ============== Basic and diluted loss per common share ($0.43) ($0.45) ($1.21) ($1.51) ============ ============== ============ ============== Weighted average number of shares outstanding 41,298 37,058 39,893 35,472 ============ ============== ============ ==============
September 30, December 31, Pro Forma Combined Balance Sheet Data: 2000 1999 ---- ---- Cash, cash equivalents and investments $ 163,118 $ 272,340 Total assets 257,280 312,262 Long-term debt 17,224 47,940 Accumulated deficit (453,486) (414,302) Stockholders' equity 212,543 221,783 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain Risks Related to Cephalon's Business In addition to historical facts or statements of current condition, this report contains forward-looking statements. 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, prospects for regulatory approval, manufacturing capabilities, market prospects for our products, sales and earnings projections, 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 above and in our reports to the SEC on Forms 8-K and 10-K. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such forward-looking statements. Furthermore, we do not intend (and we are not obligated) to update publicly any forward-looking statements. This discussion is permitted by the Private Securities Litigation Reform Act of 1995. 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 and other revenues of these products during this period, or to attain profitability on the basis of such sales and other revenues. The commercialization of our pharmaceutical products involves a number of significant challenges. In particular, our ability to meaningfully increase sales and other revenue 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 demonstate 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, these 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 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 and other revenue 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 all of 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 impact 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. 11 We may not be able to maintain market exclusivity for PROVIGIL, 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 the commercial success of PROVIGIL. We hold exclusive license rights to a composition-of-matter patent covering modafinil as the active drug substance in PROVIGIL; this patent was to have expired in 1998 in the United States, but we have applied for a patent extension that, if granted, would extend the term of this patent until November 18, 2001. In addition, we own a U.S. patent covering the particle size of modafinil that was issued in 1997 and expires on October 6, 2014. However, we may not succeed in obtaining any extension for the composition-of-matter patent, and we cannot guarantee that any of our patents will be found to be valid if their validity is challenged by a third party. Additionally, we cannot be sure that a potential competitor will not develop a competing product or product formulation that would avoid infringement of these patents or any patent owned or licensed by us. In the United States, the Orphan Drug Act provides incentives to drug manufacturers to develop and manufacture drugs for the treatment of rare disorders. The FDA has granted orphan drug status to PROVIGIL for its use in the treatment of excessive daytime sleepiness associated with narcolepsy. The grant of orphan drug status to PROVIGIL allows us a seven-year period of marketing exclusivity for the product in that indication. While the marketing exclusivity provided by the orphan drug law should prevent other sponsors from obtaining approval of the same compound for the same indication (unless the other sponsor can demonstrate clinical superiority or we are unable to provide or obtain adequate supplies of PROVIGIL), it would not prevent approval of other compounds for other indications that otherwise are non-exclusive, or approval of other kinds of compounds for the same indication. 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 and other products. We must comply with all applicable regulatory requirements of the FDA and foreign authorities, including current Good Manufacturing Practice, or cGMP, regulations. 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 cGMP regulations are complex, and failure to be in compliance could lead to remedial action, civil and criminal penalties and delays in production of material. We rely on third parties to manufacture, distribute, provide customer service activities and accept and process returns. In addition, we depend upon sole suppliers for the active drug substance contained in PROVIGIL and in other products, and we depend upon single manufacturers that are qualified to manufacture finished commercial product. 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 also maintain inventories of bulk compound and finished product 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. 12 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 could 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 which could limit the circumstances under which the product is prescribed or even lead to the withdrawal of the product from the market. Our products contain controlled substances. The active ingredients in PROVIGIL and ACTIQ are controlled substances regulated by the U. S. Drug Enforcement Administration, or 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. The results and timing of future clinical trials cannot be predicted and future setbacks may materially affect our business. We must demonstrate through preclinical testing and clinical trials 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. One 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 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. 13 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 our products are actually at fault for causing an injury. Furthermore, our products may cause, or may appear to have caused, adverse side effects 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 the product is 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 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. If third party payors focus their cost control efforts on our products, this could limit the commercial success of the products. We may not be able to obtain adequate patent protection either in the United States or abroad, which could impact our ability to compete effectively. We place considerable importance on obtaining patent and trade secret protection for new technologies, products and processes. We file applications for patents covering the composition of matter or uses of our drug candidates or our proprietary processes. 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. We also could incur substantial costs in defending any patent infringement suits or in asserting any patent rights, including those licensed to us by third parties, and in defending suits against us or our employees relating to ownership of or rights to intellectual property. Such disputes could substantially delay our drug development or commercialization. The U.S. Patent and Trademark Office, or PTO, 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 PTO 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. 14 Our research and development activities 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. 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 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; . the design and execution of clinical studies; . the process of obtaining regulatory approval to market the product; and . the 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. 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. Many of these companies and institutions have substantially greater capital resources, research and development staffs and facilities than us, 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 any sales of our current products or any that might be developed or are currently being sold by us or make them obsolete. Advances in current treatment methods also may adversely affect the market for such products. 15 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 anticipate that we will incur additional losses. To date, we have not been profitable and our accumulated deficit was approximately $382 million at September 30, 2000. 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. We expect to continue to incur losses until such time as product revenue from PROVIGIL or other products and product candidates exceed expenses of operating our business. While we seek to attain profitability, we cannot be sure that we will ever achieve product revenues from PROVIGIL or from any of our other product candidates sufficient for us to attain this objective. We cannot be sure that we or our collaborators will obtain required regulatory approvals, or successfully develop, commercialize, manufacture and market any other product candidates. 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 November 6, 2000, our common stock traded at a high price of $83.63 and a low price of $29.88. Negative announcements (such as adverse regulatory decisions, 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 flows of investor funds 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 November 1999, we received a federal grand jury subpoena in connection with an investigation under the supervision of the Office of Consumer Litigation of the U.S. Department of Justice. The grand jury also issued subpoenas to certain of our former and current employees. We believe that the investigation relates to the release of certain lots of MYOTROPHIN used in clinical trials and related reports filed with the FDA during the period 1994-96. We have not been identified as a target of the investigation, and we are cooperating with this inquiry. We cannot predict the outcome of this investigation, but we do not believe it will have a material negative effect on our financial condition or results of operations. 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 16 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. 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 III study, and we have no current plans to conduct such a study. Even if we chose to conduct an additional study, the results of a new study may not be sufficient to obtain regulatory approval. We have discussed with Kyowa Hakko the preliminary results of the clinical study being conducted in Japan and, based upon these discussions, do not believe that the final results of the study will support FDA approval of our pending NDA. If MYOTROPHIN is not approved for the treatment of ALS, then it is unlikely that we would 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 CCP. 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 resulting from their use, 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. 17 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 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. Liquidity and Capital Resources Cash, cash equivalents, and investments at September 30, 2000 were $127,340,000, representing 68% of total assets. The following is a summary of selected cash flow information:
Nine Months Ended September 30, -------------------- 2000 1999 ---- ---- Net cash used for operating activities................ $ (51,950,000) $ (48,169,000) Net cash provided by (used for) investing activities.. 71,184,000 (120,074,000) Net cash (used for) provided by financing activities.. (17,539,000) 194,218,000
18 Net Cash Used for Operating Activities --Operating Cash Inflows The following is a summary of the major sources of cash receipts reflected in net cash used for operating activities:
Nine Months Ended September 30, ------------------- 2000 1999 ---- ---- PROVIGIL sales............................................... $41,486,000 $16,830,000 TAP Holdings Inc............................................. 3,608,000 5,260,000 Abbott Laboratories, Inc..................................... 3,288,000 -- H. Lundbeck A/S.............................................. 3,674,000 3,813,000 Bristol-Myers Squibb Company................................. 607,000 1,008,000 Medtronic, Inc............................................... -- 1,015,000 Interest..................................................... 8,056,000 2,669,000
We market and sell PROVIGIL tablets in the United States, the United Kingdom and the Republic of Ireland, and we promote the product in Austria and Switzerland under a different tradename. In addition, we market PROVIGIL in Italy with our partner, Dompe S.p.A. At September 30, 2000, $8,260,000 was receivable from U.S. sales of PROVIGIL. We have a research and development collaboration with TAP Holdings Inc. to develop and commercialize certain compounds for the treatment of human cancers and prostate disorders in the United States. Under the terms of the agreement, we perform research and preclinical development of these compounds for which we are compensated quarterly by TAP, based on a contract rate per individual assigned to the program for that quarter and reimbursement of certain external costs, all subject to annual budgetary maximums. At September 30, 2000, $776,000 was receivable from TAP. The $3,288,000 received from Abbott in the nine months ended September 30, 2000 represents compensation for our GABITRIL sales and marketing efforts from the commencement of the agreement in June 1999 to June 2000. In May 1999, we entered into a collaborative agreement with H. Lundbeck A/S to discover, develop and market products to treat neurodegenerative diseases. Included in the payments received from Lundbeck in the nine months ended September 30, 2000 is a license fee of $1,000,000 and reimbursement of research and development costs of $2,674,000. At September 30, 2000, $3,895,000 was receivable from Lundbeck for our research and development efforts. The decrease in amounts received from Bristol-Myers in 2000 as compared to 1999 is due to a reduction in STADOL NS sales. Our agreement with Bristol-Myers terminated in September, 2000 with no receivable due at September 30, 2000. Under a 1997 agreement with Medtronic, Inc., we co-promoted Intrathecal Baclofen Therapy (ITB(TM)) to neurologists and physiatrists in the United States for the treatment of intractable spasticity. This agreement terminated in April 1999. Under a separate agreement with Medtronic Europe S.A. entered into in March 2000, Cephalon (UK) Limited is copromoting ITB(TM) to neurologists and certain other rehabilitation specialists in the United Kingdom, France and Austria for the treatment of intractable spasticity. The increase in interest received in 2000 compared to 1999 was due to both higher average investment balances and higher average rates of return on investments. 19 --Operating Cash Outflows Operating cash outflows increased in the nine months ended September 30, 2000 as compared to the corresponding period in 1999 as a result of expenditures associated with PROVIGIL, including the commercialization of PROVIGIL in the United States, clinical studies of PROVIGIL in disorders other than narcolepsy, and the purchase of PROVIGIL inventories. Additionally, cash outflows increased over the prior year due to expenditures related to a 36% increase in headcount from period to period, primarily as a result of increases in our sales and marketing group, and as a result of a premium of $5,500,000 associated with the prepayment of the revenue-sharing notes. Net Cash Provided by (Used for) Investing Activities The following is a summary of net cash provided by (used for) investing activities:
Nine Months Ended September 30, ------------------ 2000 1999 ---- ---- Purchases of property and equipment.............................. $(5,834,000) $ (71,000) Sales and maturities (purchases) of investments, net............. 77,018,000 (120,003,000) ----------- ------------- Net cash provided by (used for) investing activities........ $71,184,000 $(120,074,000) =========== =============
Purchases of property and equipment has increased in 2000 due to the expansion and renovation of our West Chester facility. Sales and maturities of investments represent the liquidation of investments. Purchases of investments represent the accumulation of investments. Net Cash (Used for) Provided by Financing Activities The following is a summary of net cash (used for) provided by financing activities:
Nine Months Ended September 30, 2000 1999 ---- ---- Proceeds from issuance of convertible exchangeable preferred stock.... $ -- $120,352,000 Proceeds from sales of common stock and warrants...................... -- 12,000,000 Proceeds from exercises of common stock options and warrants.......... 21,349,000 33,197,000 Proceeds from issuance of long-term debt.............................. -- 30,000,000 Dividend payments on convertible exchangeable preferred stock......... (6,797,000) -- Principal payments on and retirements of long-term debt............... (32,091,000) (1,331,000) ------------ ------------ Net cash (used for) provided by financing activities......... $(17,539,000) $194,218,000 ============ ============
During August 1999, we completed a sale of 2,500,000 shares of convertible exchangeable preferred stock at $50 per share. Dividends are cumulative and paid quarterly at an annual rate of $3.625 per share of preferred stock. Preferred dividends totaling $6,797,000 were paid during the nine months ended September 30, 2000. In connection with the May 1999 collaborative agreement, Lundbeck purchased 1,000,000 shares of Cephalon's common stock at a price of $12.00 per share, which was the average market price for the five trading days prior to the closing of the agreement. During the nine months ended September 30, 2000, we received proceeds of $21,349,000 from the exercise of approximately 2,328,000 common stock options and warrants. At September 30, 2000, 4,269,000 common stock options and warrants remained outstanding. The extent and timing of future warrant and option 20 exercises, if any, are primarily dependent upon the market price of Cephalon's common stock, as well as the exercise prices and expiration dates of the warrants and options. Proceeds from the issuance of long-term debt for the nine months ended September 30, 1999 consist of a private placement of $30,000,000 of revenue- sharing notes. These notes were repaid in the first quarter of 2000. Principal payments on and retirements of long-term debt include payments on the revenue-sharing notes described above, as well as, on mortgage loans and capital lease obligations. --Cash and Funding Requirements Outlook We believe that our cash and investment balance as of September 30, 2000 will be adequate to fund our expected level of operations for at least the next several years. We expect cash flow from operating activities to continue to be negative until sales from PROVIGIL and our other marketed products generate cash inflows in excess of the level of cash outflows from operations. We cannot accurately predict the effect of certain developments on product sales such as the degree of market acceptance of our products, competition, the effectiveness of our sales and marketing efforts and our ability to demonstrate the utility of our products in indications beyond those already included in the FDA approved label. Cash inflows also include receipts from our collaborative research and development agreements and from co-promotion agreements. The continuation of funding under any of these agreements is subject to the achievement of certain milestones and periodic review by the parties involved. We expect our cash requirements to increase for the next several years due to efforts associated with the commercialization of our products, including sales and marketing activities, building inventory and conducting clinical studies in disorders beyond those already included in the FDA approved label. We expect to increase our expenditure of funds on research and development activities for our other products in development. We may seek sources of funding for a portion of these research programs through collaborative arrangements with third parties but since we intend to retain a portion of the commercial rights to these programs, we still expect to spend significant funds on our share of the cost of these programs, including the costs of research, preclinical development, clinical research and manufacturing. Additionally, we also will require substantial funds to: . pay quarterly convertible exchangeable preferred stock dividends; . make royalty payments to Laboratoire L. Lafon on net sales of PROVIGIL; . pay $6.6 million to the holders of the revenue sharing notes in exchange for their agreement to relinquish royalty payments on U.S. net sales of PROVIGIL occurring after December 31, 2000; . obtain additional product rights through licensing or acquisition (including payments to Abbott associated with the acquisition of all U.S. product rights to GABITRIL); . pay transaction costs associated with the acquisition of Anesta; . expand our marketing, manufacturing and distribution arrangements for PROVIGIL, ACTIQ and GABITRIL. Commitments and Contingencies --Related Party In August 1992, we exclusively licensed our rights to MYOTROPHIN for human therapeutic use within the United States, Canada and Europe to CCP. We perform any development and clinical testing of MYOTROPHIN on behalf of CCP under a research and development agreement with CCP. CCP has granted us an exclusive license to manufacture and market MYOTROPHIN for human therapeutic use within the United States, 21 Canada and Europe in return for royalty payments equal to a percentage of product sales and a milestone payment of approximately $16,000,000 that will be made if MYOTROPHIN receives regulatory approval. We have a contractual option to purchase all of the limited partnership interests of CCP. To exercise this purchase option, we are required to make an advance payment of $40,275,000 in cash or, at our election, shares of common stock with a value of $42,369,000 or a combination thereof. The purchase option will become exercisable upon the occurrence of certain events once sales activity commences. Should we discontinue development of MYOTROPHIN or if we do not exercise the purchase option, our license will terminate and all rights to manufacture or market MYOTROPHIN in the United States, Canada and Europe will revert to CCP, which may then commercialize MYOTROPHIN itself or license or assign its rights to a third party. In that event, we would not receive any benefits from such commercialization, license or assignment of rights. Results of Operations This section should be read in conjunction with the more detailed discussion under "Liquidity and Capital Resources." The following table is a summary of revenues and expenses for the three and nine months ended September 30, 2000 and 1999:
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- % % 2000 1999 change 2000 1999 change ---- ---- ------ ---- ---- ------ Product sales, net - PROVIGIL........................ $19,213,000 $ 7,865,000 144% $47,963,000 $15,117,000 217% Other revenues........................................ 3,407,000 3,691,000 (8%) 12,663,000 11,418,000 11% Cost of product sales - PROVIGIL...................... 4,111,000 874,000 370% 9,185,000 1,713,000 436% Research and development expenses..................... 16,217,000 11,207,000 45% 43,594,000 31,359,000 39% Selling, general and administrative expenses.......... 14,509,000 12,331,000 18% 43,226,000 36,111,000 20% Other income (expense), net........................... 429,000 (556,000) 177% 7,190,000 (2,206,000) 426% Convertible exchangeable preferred stock dividends.... 2,266,000 1,107,000 105% 6,797,000 1,107,000 514%
PROVIGIL Product sales are recognized upon shipment of product and are recorded net of reserves for returns and allowances. We market and sell PROVIGIL tablets in the United States, the United Kingdom and the Republic of Ireland, and we promote the product in Austria and Switzerland under a different tradename. In addition, we market PROVIGIL in Italy with our partner, Dompe S.p.A. Product sales of PROVIGIL were accounted for as follows:
For the three months ended For the nine months ended September 30, September 30, ------------ ------------ 2000 1999 2000 1999 ----------- ---------- ----------- ----------- Gross product sales of PROVIGIL $19,301,000 $8,233,000 $46,619,000 $20,515,000 Adjustment to the reserve for returns and allowances (88,000) (368,000) 1,344,000 (5,398,000) ----------- ---------- ----------- ----------- Net product sales of PROVIGIL $19,213,000 $7,865,000 $47,963,000 $15,117,000 =========== ========== =========== ===========
Four pharmaceutical wholesalers accounted for 87% of U.S. gross product sales of PROVIGIL during the nine months ended September 30, 2000. At September 30, 2000, the balance in the reserve for returns and allowances was $2,861,000. Of this amount $1,944,000 was reserved for product 22 returns at September 30, 2000 compared with a balance of $2,706,000 and $5,169,000 at June 30, 2000 and December 31, 1999, respectively. Our return reserve calculation is based upon inventory levels at the wholesalers and at the retail pharmacies, as well as product reorder history as measured at each reporting period. The reserve balance is directly affected by product movement through the supply chain or changes in wholesaler and retailer inventory levels. To date, returns against the reserve have been negligible. Should this trend continue, we would expect to reverse a significant portion of our remaining reserve during the fourth quarter of 2000. For the three and nine months ended September 30, 2000, cost of product sales was 21% and 19%, respectively. For both the three and nine months ended September 30, 1999, cost of product sales was 11% of sales and consisted primarily of royalties and supply payments due to Lafon. All of the PROVIGIL sold in the United States during 1999 was produced prior to its December 1998 FDA approval and, in accordance with Statement of Financial Accounting Standards No. 2 "Accounting for Research and Development Costs," the costs of producing that material were recorded as research and development expense in prior periods. Three months ended September 30, 2000 compared to the three months ended September 30, 1999 Other revenues decreased in the three months ended September 30, 2000 from the 1999 period due primarily to a decrease in reimbursable expenses incurred under our collaboration agreement with TAP offset in part by increases in revenue received from our collaboration agreements with Lundbeck and Schwarz Pharma AG. For the three months ended September 30, 2000, research and development expenses increased from the same 1999 period due primarily to expenditures associated with an increase in headcount and other compensation costs, expenditures associated primarily with clinical studies of PROVIGIL in areas other than narcolepsy and increases related to drug development and manufacturing costs in other research and development programs. The increase in selling, general and administrative expense for the three months ended September 30, 2000 as compared to the corresponding 1999 period was due primarily to increases in our field sales force and to marketing expenses associated with the commercialization of PROVIGIL. Other income, net increased by $1.0 million for the three months ended September 30, 2000 mainly due to increased interest income attributable to both higher average investment balances and higher average rates of return on investments, as well as, to a decrease in interest expense due to lower outstanding debt balances. Partially offsetting the increase in other income was an increase in the exchange rate loss of $0.6 million in 2000 due to a decline in currency exchange value of the Pound Sterling (GBP) relative to both the U.S. dollar and to our other foreign operations' currencies that are remeasured into the GBP for financial reporting purposes. Preferred dividends of approximately $2.3 million were recognized in the third quarter of 2000 in connection with the August 1999 private offering of 2,500,000 shares of convertible exchangeable preferred stock. Nine months ended September 30, 2000 compared to the nine months ended September 30, 1999 Other revenues increased in the nine months ended September 30, 2000 from the 1999 period due primarily to revenue recognized under our collaboration agreement with Lundbeck which was initiated in May 1999 and revenue recognized under our collaboration agreement with Abbott which was entered into in June 1999. This increase was partially offset by a decrease in revenue recognized under the U.S. Medtronic co-promotion agreement which terminated in April 1999, a decrease in reimbursable expenses incurred under our collaboration agreement with TAP and from a decrease in revenue recognized from Kyowa Hakko as a result of the completion of the MYOTROPHIN clinical studies being conducted by Kyowa Hakko in Japan. For the nine months ended September 30, 2000, research and development expenses increased from the same 1999 period due primarily to expenditures associated with an increase in headcount and other compensation costs, 23 an increase in drug development and manufacturing costs in other research and development programs, and from increased expenditures associated primarily with clinical development studies of PROVIGIL in areas other than narcolepsy. The increase in the selling, general and administrative expense for the nine months ended September 30, 2000 as compared to the corresponding 1999 period was due primarily to marketing expenses associated with the commercialization of PROVIGIL and our collaboration agreement with Abbott to market GABITRIL and an increase in the size of our sales force to fully support both PROVIGIL and GABITRIL. This increase was partially offset by the recording of a $4,300,000 provision in the first quarter of 1999 associated with the settlement of the then-current securities litigation. Other income, net increased by $9.4 million in 2000 mainly due to increased interest income of $8.5 million effected in part by the recognition of $4,008,000 of interest income associated with the Commonwealth of Pennsylvania waiving an interest rate penalty on a loan used to finance the purchase of our West Chester facilities. In addition, interest income increased due to both higher average investment balances and higher average rates of return on investments. Interest expense decreased by $2.4 million in 2000 due to the retirement in the first quarter of 2000 of the revenue-sharing notes. Partially offsetting the increase in other income was an increase in the exchange rate loss of $1.4 million in 2000 due to a decline in currency exchange value of the pound Sterling (GBP) relative to both the U. S. dollar and to our other foreign operations' currencies that are remeasured into the GBP for financial reporting purposes. Preferred dividends totaling approximately $6.8 million were recognized to date in 2000 in connection with the August 1999 private offering of 2,500,000 shares of convertible exchangeable preferred stock. SUBSEQUENT EVENTS Revenue Sharing Notes In February 1999 we completed a private placement of $30,000,000 of revenue-sharing notes. The notes were retired in the first quarter of 2000 for an aggregate cash payment of $35,500,000. However, the former holders of the notes were to receive a payment of 6% of U.S. net sales of PROVIGIL through December 31, 2001. Under an amendment dated October 31, 2000, the Company agreed to pay the noteholders $6.6 million in cash and, in exchange, the noteholders agreed to relinquish royalty payments on all PROVIGIL net sales occurring after December 31, 2000. Transfer of GABITRIL Product Rights On November 2, 2000 Cephalon and Abbott announced that, subject to the approval of regulatory authorities, Abbott will transfer to Cephalon its U.S. product rights to GABITRIL(R) (tiagabine hydrochloride), an anti-epileptic product. The agreement gives Cephalon the exclusive rights to manufacture, market, sell and further develop the drug in the United States. Under the terms of the agreement, Cephalon will pay Abbott $100 million over the next four years, and also will make an additional payment if Abbott obtains an extension of the composition patent covering the active drug substance contained in GABITRIL. Abbott will continue to manufacture GABITRIL for Cephalon under a tolling agreement, although Cephalon intends to assume direct responsibility for manufacturing within the next several years. Anesta Acquisition On October 10, 2000, Cephalon and Anesta Corp. completed a merger under which Cephalon acquired all of the outstanding shares of Anesta in a tax-free, stock-for-stock transaction. Under the terms of the merger agreement, each stockholder of Anesta received 0.4765 shares of Cephalon stock for each share of Anesta stock. The merger has been accounted for using the pooling-of-interests method of accounting and accordingly, all prior period consolidated statements have been restated to include Cephalon's and Anesta's combined results of operations, financial position and cash flows. In connection with the merger, we 24 expect to record a non-recurring charge of approximately $12.0 million in the fourth quarter of 2000 for transaction costs, including investment banking, legal and accounting fees, and for other estimated costs associated with the merger. The table below reflects unaudited pro forma combined results of Cephalon and Anesta for the three and nine months ended September 30, 2000 and 1999. The balance sheet data presented below is as of September 30, 2000 and December 31, 1999.
Pro Forma Combined Statement of Operations Data: (In thousands except per share data) Three Months Ended Nine Months Ended September 30, September 30, ----------- ----------- Revenues: 2000 1999 2000 1999 ---- ---- ---- ---- Product sales - PROVIGIL $ 19,213 $ 7,865 $ 47,963 $ 15,117 Product sales - ACTIQ 5,052 525 9,045 1,653 Other revenues 3,500 5,258 13,434 13,636 --------- --------- --------- --------- 27,765 13,648 70,442 30,406 --------- --------- --------- --------- Costs and Expenses: Cost of product sales 5,277 988 11,374 2,198 Research and development 18,690 13,572 51,232 38,559 Selling, general and administrative 20,035 14,984 58,453 42,826 --------- --------- --------- --------- 44,002 29,544 121,059 83,583 --------- --------- --------- --------- Loss from operations (16,237) (15,896) (50,617) (53,177) Other income, net 890 341 9,236 740 --------- --------- --------- --------- Loss before provision for income taxes (15,347) (15,555) (41,381) (52,437) Benefit (provision) for income taxes 26 (4) (5) (19) Loss (15,321) (15,559) (41,386) (52,456) Dividends on convertible exchangeable preferred stock (2,266) (1,107) (6,797) (1,107) --------- --------- --------- --------- Loss applicable to common shares ($17,587) ($16,666) ($48,183) ($53,563) ========= ========= ========= ========= Basic and diluted loss per common share ($0.43) ($0.45) ($1.21) ($1.51) ========= ========= ========= ========= Weighted average number of shares outstanding 41,298 37,058 39,893 35,472 ========= ========= ========= =========
September 30, December 31, Pro Forma Combined Balance Sheet Data: 2000 1999 ---- ---- Cash, cash equivalents and investments $ 163,118 $ 272,340 Total assets 257,280 312,262 Long-term debt 17,224 47,940 Accumulated deficit (453,486) (414,302) Stockholders' equity 212,543 221,783
25 The following discussion addresses changes in the pro forma combined results of operations of Cephalon and Anesta. Three months ended September 30, 2000 compared to the three months ended September 30, 1999 Total revenue from product sales increased by $15.9 million or approximately 189%. Sales of PROVIGIL increased by $11.3 million or approximately 144% due principally to higher U.S. sales and to increased promotion and marketing activity in Switzerland, Austria and through our partner Dompe S.p.A. in Italy. Sales of ACTIQ increased by $4.5 million or approximately 862% due to increased U.S. market penetration, increased promotional activity, and the financial effect of reacquiring ACTIQ product marketing rights from Abbott. Other revenues decreased by $1.8 million, or approximately 33%, due principally to our receipt in 1999 of a non-recurring license payment from Elan which was offset in part by increased revenue from collaborative agreements with Lundbeck and Schwarz Pharma. Research and development expense increased by $5.1 million or approximately 38% for the three months ended September 30, 2000, as compared to the same period in 1999, due principally to increases in headcount and compensation costs, expenditures associated primarily with clinical development studies of PROVIGIL in areas other than narcolepsy, and increases associated with drug development and manufacturing costs in our other research and development programs. Selling, general and administrative expense increased by $5.1 million or approximately 34% for the three months ended September 30, 2000 due mainly to increases in the size of our field sales forces and to marketing expenses associated with the commercialization of PROVIGIL and ACTIQ. Other income, net increased by $0.5 million for the three months ended September 30, 2000 due to a decrease in interest expense resulting from lower debt balances outstanding. Partially offsetting the increase in other income was an increase in the exchange rate loss of $0.6 million in 2000 due to a decline in the currency exchange value of the Pound Sterling (GBP) relative to both the U.S. dollar and to our other foreign operations' currencies that are remeasured into the GBP for financial reporting purposes. Preferred dividends of approximately $2.3 million were recognized in the third quarter of 2000 in connection with the August 1999 private offering of 2,500,000 shares of convertible exchangeable preferred stock. Nine months ended September 30, 2000 compared to the nine months ended September 30, 1999 Total revenue from product sales increased by $40.2 million or approximately 240%. Sales of PROVIGIL increased by $32.8 million or approximately 217% due mainly to higher U.S. sales and to increased promotion and marketing activity in Switzerland and Austria, and in Italy through our partner Dompe S.p.A. Sales of ACTIQ increased by $7.4 million or approximately 447%, principally due to the financial effect of reacquiring ACTIQ marketing rights from Abbott, as well as to the effect of having an additional three months sales in 2000 as compared to the same period in 1999, and an overall product sales increase due to expanded product marketing and promotion efforts. Research and development expense increased by $12.7 million or approximately 33% for the nine months ended September 30, 2000 as compared to the same period in 1999, due principally to increases in headcount and compensation costs, expenditures associated primarily with clinical development studies of PROVIGIL in areas other than narcolepsy, and increases related to drug development and manufacturing costs in other research and development programs. Selling, general and administrative expense increased by $15.6 million or approximately 36% for the nine months ended September 30, 2000, due principally 26 to the expansion of the field sales force and to marketing expenses associated with the commercialization of PROVIGIL and ACTIQ. Other income, net increased by $8.5 million in 2000 due principally to increased interest income of $7.6 million resulting from the recognition of $4,008,000 of interest income associated with the Commonwealth of Pennsylvania waiving an interest rate penalty on a loan used to finance the purchase of our West Chester facilities. In addition, interest income increased due to both higher average investment balances and higher average rates of return on investments. Interest expense also decreased by $2.4 million in 2000 due to the retirement in the first quarter of 2000 of the revenue-sharing notes. Partially offsetting the increase in other income was an increase in the exchange rate loss of $1.4 million in 2000 due to a decline in currency exchange value of the Pound Sterling (GBP) relative to both the U. S. dollar and to our other foreign operations' currencies that are remeasured into the GBP for financial reporting purposes. Preferred dividends totaling $6.8 million were recognized to date in 2000 in connection with the August 1999 private offering of 2,500,000 shares of convertible exchangeable preferred stock. Results of operations outlook We expect to continue to incur operating losses unless and until sales of PROVIGIL, ACTIQ and GABITRIL and other revenues exceed operating expenses. We expect that sales of our products may be limited since we can only market them to treat disorders within their individual FDA approved labels, all of which represent relatively small patient populations. We may never be able to achieve profitability solely through sales of our products. Other revenues include revenue recognized under collaborative research and development agreements and co-promotion agreements. The continuation of any of these agreements is subject to the achievement of certain milestones and periodic review by the parties involved. We expect to continue to incur significant expenditures associated with the commercialization of our products in the United States, including sales and marketing activities, and conducting clinical trials with PROVIGIL, ACTIQ and GABITRIL beyond those currently approved in their respective labels. We expect to increase our expenditures on research and development activities for our other products in development. We may seek sources of funding for these research and development programs through collaborative arrangements with third parties but we still expect to have significant expenditures for our share of the costs of these programs, including the costs of research, preclinical development, clinical research and manufacturing. As a result of our sale of 2,500,000 shares of convertible exchangeable preferred stock during the third quarter of 1999, we will continue to recognize quarterly preferred stock dividends unless the preferred stock is converted into convertible debentures or shares of our common stock which is unlikely to occur before the third quarter of 2001. We expect to have significant fluctuations in quarterly results based primarily on the level and timing of: . product sales and cost of product sales; . achievement and timing of research and development milestones; . co-promotion and other collaboration revenues; . cost and timing of clinical trials; and . marketing and other expenses. 27 Additionally in the fourth quarter of 2000, we expect to incur certain one-time charges including: . approximately $12.0 million for transaction costs, including investment banking, legal and accounting fees, and for other estimated costs associated with the Anesta acquisition; . $6.6 million to eliminate royalty payments on PROVIGIL U.S. net sales occurring after December 31, 2000 to the holders of the revenue-sharing notes; and . charges for the purchase of in-process research and development associated with the transfer of U.S. product rights for GABITRIL from Abbott to Cephalon. In connection with the issuance in December 1999 of Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements," or SAB 101, we expect that we will be required to defer non-refundable license fees recorded in prior periods and recognize the related revenue over future periods. The SEC has extended the implementation date of SAB 101 until the fourth quarter of fiscal years beginning after December 15, 1999. In accordance with SAB 101, we expect to report a change in accounting principle and to record the impact of this change as a cumulative effect in our statement of operations in the fourth quarter of 2000. We do not believe that inflation has had a material impact on the results of our operations since our inception. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no material changes in quantitative and qualitative market risk from the disclosure included in the Annual Report on Form 10-K for the fiscal year ended December 31, 1999. 28 PART II - OTHER INFORMATION ---------------------------- Item 1. Legal Proceedings The information set forth in Footnote 3 to the Notes to Consolidated Financial Statements included herein is hereby incorporated by reference. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit No. Description of Exhibit --- ---------------------- 27.1 Financial Data Schedule ___________________ (b) Reports on Form 8-K: During the third quarter of 2000, the Registrant filed the following Current Reports on Form 8-K: (i) On July 21, 2000, Cephalon, Inc. filed the Agreement and Plan of Merger by and among Anesta Corp., a Delaware corporation, C Merger Sub, Inc., a Delaware corporation, and Cephalon, a Delaware corporation dated as of July 17, 2000. (ii) On July 31, 2000, Cephalon, Inc. filed the Press Release dated thereon relating to the results of a clinical study that showed PROVIGIL to have no benefit in reducing the symptoms of attention deficit hyperactivity disorder (ADHD) in adults as measured by the DSM-IV ADHD Rating Scale. 29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CEPHALON, INC. (Registrant) November 14, 2000 By /s/ Frank Baldino, Jr. ----------------------------- Frank Baldino, Jr., Ph.D. Chairman and Chief Executive Officer (Principal executive officer) By /s/ J. Kevin Buchi ------------------------- J. Kevin Buchi Senior Vice President and Chief Financial Officer (Principal financial and accounting officer) 30 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CEPHALON, INC.'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 JAN-01-2000 SEP-30-2000 16,300,000 111,040,000 13,767,000 0 16,843,000 160,704,000 42,512,000 16,474,000 188,436,000 24,240,000 13,514,000 0 25,000 349,000 150,130,000 188,436,000 47,963,000 60,626,000 9,185,000 9,185,000 43,594,000 0 3,377,000 (28,189,000) 0 (28,189,000) 0 0 0 (34,986,000) (1.04) (1.04)
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