8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported)            May 1, 2008

Cephalon, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-19119	23-2484489
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)

41 Moores Rd.
Frazer, Pennsylvania	19355
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code          (610) 344-0200

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02Results of Operations and Financial Condition.

The information under this caption is furnished by Cephalon, Inc. (the “Company”) in accordance with Securities Exchange Commission Release No. 33-8216. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On May 1, 2008, the Company issued a press release announcing certain financial results for the first quarter 2008 and guidance amounts for the second quarter of 2008 and full-year 2008.  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.

In the attached press release, the Company discloses “Adjusted net income” “Basic adjusted income per common share,” “Diluted adjusted income per common share,” “Basic adjusted income per common share guidance,” and “Adjusted net income guidance” for certain periods, all of which are considered “non-GAAP financial measures” under Securities and Exchange Commission rules.  A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP in the Company’s financial statements.  Management does not intend the presentation of non-GAAP financial measures to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

For all periods presented, the Company reconciles net income on a GAAP basis to adjusted net income.  Management believes that the presentation of these adjusted measures is useful to investors because it provides a means of evaluating the Company’s operating performance and results from period to period on a comparable basis not otherwise apparent on a GAAP basis, since many one-time or infrequent charges, including items that may not affect the Company’s operations, do not meet the strict GAAP definition of unusual non-recurring items.  Furthermore, in preparing operating plans, budgets and forecasts, and in assessing historical performance, management relies, in part, on trends in the Company’s historical results, exclusive of these items, and provides its forecasts to investors on this basis.   Finally, management believes that this presentation is useful in facilitating comparisons between the Company and other companies in its industry, many of whom exclude similar items.

Basic adjusted income per common share and diluted adjusted income per common share represent the Company’s adjusted net income, as described above, on a per share basis.  Management believes that the presentation of these measures is meaningful because it provides investors with a means of evaluating adjusted net income against the Company’s previously issued adjusted income per common share guidance.  In addition, in assessing the Company’s performance against its previously issued per share guidance, management uses these adjusted per share measures.  The presentation of guidance for adjusted net income and basic adjusted net income per common share reconciles the Company’s projected net income and basic income per common share on a GAAP basis to its current quarterly and full-year guidance.  Management believes the presentation of these measures is useful to investors because it will enable investors to assess and compare the Company’s guidance on an adjusted and a GAAP basis with adjusted actual results, when issued.  Moreover, these measures provide a straightforward view of the Company’s operations free from the complexity associated with determining the daily impact on the income per share calculation resulting from the Company’s outstanding convertible notes.  Finally, management utilizes the adjusted net income and basic adjusted income per common share measures in connection with its internal budgeting and forecasting.

Item 9.01Financial Statements and Exhibits.

(c) Exhibits.

Exhibit No.	Description of Document
99.1	Press Release dated May 1, 2008

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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 hereunto duly authorized.

	CEPHALON, INC.
Date: May 1, 2008	By:	/s/ J. Kevin Buchi
		J. Kevin Buchi
		Executive Vice President & Chief Financial Officer

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EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press Release dated May 1, 2008

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EX-99.1

Exhibit 99.1

	News
	Contacts:
	Media:
	Sheryl Williams
	610.738.6493
	swilliam@cephalon.com
	Investors:
	Robert (Chip) Merritt
	610.738.6376
	cmerritt@cephalon.com

Cephalon Reports Strong First Quarter Earnings

AMRIX Growing Rapidly

TREANDA Successfully Launched in April

Frazer, Pa. – May 1, 2008 – Cephalon, Inc. (Nasdaq: CEPH) today reported first quarter 2008 sales of $433.9 million, compared to sales of $423.9 million for the first quarter 2007 and the company’s sales guidance of $435 - $445 million.  Basic income per common share for the quarter was $0.57.  Excluding amortization expense and certain other items, basic adjusted income per common share for the quarter was $1.12, compared to $1.45 for the same period in 2007 and the company’s earnings guidance range of $1.00 to $1.10.

Central nervous system (CNS) franchise sales were $226.7 million during the quarter, a 4 percent increase compared to the same period last year.  Pain franchise reported strong sales of $125.7 million, a decrease of only 4 percent versus 2007, with sales of AMRIX^® (cyclobenzaprine hydrochloride extended-release capsules) and FENTORA^® (fentanyl buccal tablet) [C-II] largely offsetting the continued generic erosion of ACTIQ^® (oral transmucosal fentanyl citrate) [C-II]. Oncology franchise sales were $27.5 million and do not include sales of TREANDA^® (bendamustine hydrochloride), which was launched in April.

“We are receiving overwhelmingly positive feedback from the TREANDA launch,” said Frank Baldino, Jr., Ph.D., Chairman and CEO.  “In addition, prescriptions for AMRIX doubled compared to last quarter as acceptance of this product in the market continues to grow.  These two products will continue to drive Cephalon sales growth.”

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

The company is updating its guidance for 2008.  Total sales guidance is $1.83-$1.88 billion. This includes CNS franchise sales of $975-$1,000 million, pain franchise sales of $500-$525 million, oncology franchise sales of $125-$150 million, and other product sales of $200-$225 million. Full year SG&A and R&D guidance is $740-$760 million and $340-$360 million, respectively.  Adjusted net income guidance is $346-$353 million and basic adjusted income per common share guidance is $5.10-$5.20.

For the second quarter of 2008, Cephalon is introducing sales guidance of $455-$465 million, adjusted net income guidance of $74.6-$81.4 million and basic adjusted income per common share guidance of $1.10-$1.20.

Basic adjusted income per common share guidance for both the second quarter 2008 and full-year 2008 is reconciled below and is subject to the assumptions set forth therein.

Cephalon’s management will discuss the company’s second quarter 2008 performance in a conference call with investors beginning at 5:00 p.m. U.S. EDT today.  To participate in the conference call, dial +1-913-981-5581 and refer to conference code number 7561641. Investors can listen to the call live by logging on to the company’s website at www.cephalon.com and clicking on “Investor Information,” then “Webcast.”  The conference call will be archived and available to investors for one week after the call.

About Cephalon, Inc.

Founded in 1987, Cephalon, Inc. is an international biopharmaceutical company dedicated to the discovery, development and marketing of innovative products in four core therapeutic areas: central nervous system, pain, oncology and addiction. A member of the Fortune 1000, Cephalon currently employs close to 3,000 people in the United States and Europe. U.S. sites include the company’s headquarters in Frazer, Pennsylvania, and offices, laboratories or manufacturing facilities in West Chester, Pennsylvania, Salt Lake City, Utah, and suburban Minneapolis, Minnesota. Cephalon’s European headquarters are located in Maisons-Alfort, France.

The company’s proprietary products in the United States include: PROVIGIL^® (modafinil) Tablets [C-IV], FENTORA, TRISENOX^® (arsenic trioxide), AMRIX, TREANDA, VIVITROL^® (naltrexone for extended-release injectable suspension), GABITRIL^® (tiagabine hydrochloride), and ACTIQ. The company also markets numerous products internationally. Full prescribing information on its U.S. products is available at http://www.cephalon.com or by calling 1-800-896-5855.

In addition to historical facts or statements of current condition, this press release may contain forward-looking statements. Forward-looking statements provide Cephalon’s current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress on its research programs; development of potential pharmaceutical products; interpretation of clinical results; prospects for regulatory approval; manufacturing development and capabilities; market prospects for its products, including the growth and acceptance of Amrix in the market and the relative success of the

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recent launch of Treanda; sales, adjusted net income and basic adjusted income per common share guidance for the second quarter and full-year 2008 and SG&A and R&D guidance for the full-year 2008; and other statements regarding matters that are not historical facts. You may identify some of these forward-looking statements by the use of words in the statements such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other words and terms of similar meaning. Cephalon’s performance and financial results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties facing Cephalon such as those set forth in its reports on Form 8-K, 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, Cephalon does not intend to update publicly any forward-looking statement, except as required by law. The Private Securities Litigation Reform Act of 1995 permits this discussion.

This press release and/or the financial results attached to this press release include “Adjusted Net Income,” “Basic Adjusted Income per Common Share,” “Adjusted Net Income Guidance,” “Basic Adjusted Income per Common Share Guidance,” and “Diluted Adjusted Income Per Common Share,” amounts that are considered “non-GAAP financial measures” under SEC rules. As required, we have provided reconciliations of these measures. Additional required information is located in the Form 8-K furnished to the SEC in connection with this press release.

# # #

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CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
REVENUES:
Sales	$	433,897		$	423,879
Other revenues	9,322			13,155
	443,219			437,034
COSTS AND EXPENSES:
Cost of sales	89,916			86,546
Research and development	81,435			83,958
Selling, general and administrative	198,984			152,454
Restructuring charges	3,911			—
Acquired in-process research and development	10,000			—
	384,246			322,958
INCOME FROM OPERATIONS	58,973			114,076
OTHER INCOME (EXPENSE):
Interest income	6,601			6,576
Interest expense	(8,994		)	(4,595		)
Other income, net	5,315			2,756
	2,922			4,737
INCOME BEFORE INCOME TAXES	61,895			118,813
INCOME TAX EXPENSE	23,044			43,628
NET INCOME	$	38,851		$	75,185
BASIC INCOME PER COMMON SHARE	$	0.57		$	1.14
DILUTED INCOME PER COMMON SHARE	$	0.52		$	0.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	67,665			65,806
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION	74,286			75,835

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CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of GAAP Net Income to Adjusted Net Income

(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
GAAP NET INCOME	$	38,851		$	75,185
Cost of sales adjustments	27,888		(1)	20,965		(1)
Research and development adjustments	7,754		(2)	10,000		(2)
Selling, general and administrative adjustments	2,955		(3)	—
In-process research and development adjustments	10,000		(4)	—
Restructuring adjustments	3,911		(5)	—
Interest expense adjustment	3,750		(6)	—
Income tax adjustment	(19,515		)(7)	(10,982		)(7)
	36,743			19,983
ADJUSTED NET INCOME	$	75,594		$	95,168
BASIC ADJUSTED INCOME PER COMMON SHARE	$	1.12		$	1.45
DILUTED ADJUSTED INCOME PER COMMON SHARE	$	1.02		$	1.25
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING	67,665			65,806
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING-ASSUMING DILUTION	74,286			75,835

Notes to Reconciliation of GAAP Net Income to Adjusted Net Income

(1)	To exclude the on-going amortization of acquired intangible assets ($26.2M in 2008; $21.0M in 2007) and accelerated depreciation related to restructuring ($1.7M in 2008).
(2)	To exclude charges related to payment for research and development collaboration, as well as other charges ($1.8M) related to severance in 2008.
(3)	To exclude charges related to employee severance costs.
(4)	To exclude charges related to the acquisition of the licensed technology in the oncology field.
(5)	To exclude costs related to CIMA restructuring.
(6)	To exclude an estimate of accrued interest related to the agreement in principle reached with U.S. Attorney's Office in Philadelphia.
(7)	To reflect the tax effect of pre-tax adjustments at the applicable tax rates and certain other tax adjustments primarily related to changes in valuation allowances and other changes in tax assets and liabilities.

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CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED SALES DETAIL

(In thousands)

(Unaudited)

	Three Months Ended												%
	March 31,												Increase
	2008						2007						(Decrease)
	United States		Europe		Total		United States		Europe		Total		United States		Europe		Total
Sales:
PROVIGIL	$	198,469	$	14,766	$	213,235	$	188,727	$	12,562	$	201,289	5	%	18	%	6	%
GABITRIL	11,131		2,293		13,424		13,884		2,336		16,220		(20	)%	(2	)%	(17	)%
CNS	209,600		17,059		226,659		202,611		14,898		217,509		3	%	15	%	4	%
ACTIQ	37,517		12,203		49,720		57,157		8,571		65,728		(34	)%	42	%	(24	)%
Generic OTFC	27,318		—		27,318		34,020		—		34,020		(20	)%	0	%	(20	)%
FENTORA	38,933		—		38,933		31,690		—		31,690		23	%	0	%	23	%
AMRIX	9,768		—		9,768		—		—		—		100	%	0	%	100	%
Pain	113,536		12,203		125,739		122,867		8,571		131,438		(8	)%	42	%	(4	)%
Oncology	5,188		22,270		27,458		3,991		19,290		23,281		30	%	15	%	18	%
Other	13,527		40,514		54,041		13,181		38,470		51,651		3	%	5	%	5	%
	$	341,851	$	92,046	$	433,897	$	342,650	$	81,229	$	423,879	(0	)%	13	%	2	%

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CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

	March 31,			December 31,
	2008			2007
CURRENT ASSETS:
Cash and cash equivalents	$	855,846		$	818,669
Investments	—			7,596
Receivables, net	295,035			276,776
Inventory, net	117,726			99,098
Deferred tax assets, net	150,456			176,619
Other current assets	41,828			43,267
Total current assets	1,460,891			1,422,025
PROPERTY AND EQUIPMENT, net	509,933			500,396
GOODWILL	486,865			476,515
INTANGIBLE ASSETS, net	822,342			817,828
DEFERRED TAX ASSETS, net	172,162			141,752
OTHER ASSETS	155,227			147,753
	$	3,607,420		$	3,506,269
CURRENT LIABILITIES:
Current portion of long-term debt	$	1,037,163		$	1,237,169
Accounts payable	94,547			91,437
Accrued expenses	665,746			677,184
Total current liabilities	1,797,456			2,005,790
LONG-TERM DEBT	203,317			3,788
DEFERRED TAX LIABILITIES, net	75,860			56,540
OTHER LIABILITIES	143,020			138,084
Total liabilities	2,219,653			2,204,202
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value	701			700
Additional paid-in capital	1,951,294			1,934,965
Treasury stock, at cost	(158,197		)	(158,173		)
Accumulated deficit	(585,277		)	(624,128		)
Accumulated other comprehensive income	179,246			148,703
Total stockholders’ equity	1,387,767			1,302,067
	$	3,607,420		$	3,506,269

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CEPHALON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	38,851		$	75,185
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax expense	6,141			11,629
Shortfall tax benefits from stock-based compensation	—			(83		)
Depreciation and amortization	41,577			30,592
Amortization of debt issuance costs	60			60
Stock-based compensation expense	10,950			11,699
Loss on disposals of property and equipment	252			—
Changes in operating assets and liabilities:
Receivables	(11,126		)	(36,850		)
Inventory	(9,567		)	(14,585		)
Other assets	(7,961		)	(12,523		)
Accounts payable, accrued expenses and deferred revenues	(18,572		)	(9,160		)
Other liabilities	13,639			2,584
Net cash provided by operating activities	64,244			58,548
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(18,295		)	(21,384		)
Acquisition of intangible assets	(25,046		)	—
Sales and maturities of available-for-sale investments	7,596			18,023
Purchases of available-for-sale investments	—			(4,786		)
Net cash used for investing activities	(35,745		)	(8,147		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercises of common stock options	5,277			17,479
Windfall tax benefits from stock-based compensation	234			1,431
Acquisition of treasury stock	(24		)	(128		)
Payments on and retirements of long-term debt	(1,029		)	(953		)
Net cash provided by financing activities	4,458			17,829
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	4,220			2,688
NET INCREASE IN CASH AND CASH EQUIVALENTS	37,177			70,918
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	818,669			496,512
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	855,846		$	567,430

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CEPHALON, INC. AND SUBSIDIARIES

Reconciliation of Projected GAAP Basic Income per Common Share

to Basic Adjusted Income Per Common Share Guidance

(Unaudited)

	Three Months Ended							Twelve Months Ended
	June 30, 2008							December 31, 2008
Projected GAAP basic income per common share	$	0.81		—	$	0.91		$	3.75		—	$	3.85
Amortization of current intangibles	$	0.40		—	$	0.40		$	1.58		—	$	1.58
Accelerated depreciation adjustment	$	0.03		—	$	0.03		$	0.10		—	$	0.10
Research and development adjustments	$	—		—	$	—		$	0.11		—	$	0.11
Selling, general and administrative adjustments	$	—		—	$	—		$	0.04		—	$	0.04
In-process research and development adjustment	$	—		—	$	—		$	0.15		—	$	0.15
Restructuring adjustments	$	0.02		—	$	0.02		$	0.10		—	$	0.10
Interest expense adjustment	$	—		—	$	—		$	0.06		—	$	0.06
Tax effect of pre-tax adjustments at the applicable tax rates	$	(0.16	)	—	$	(0.16	)	$	(0.79	)	—	$	(0.79	)
Basic adjusted income per common share guidance	$	1.10		—	$	1.20		$	5.10		—	$	5.20

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

· Entrance into the market of an additional generic version of ACTIQ in the second half of 2008;

· Adjusted effective tax rate of approximately 36 to 37 percent; and

· Weighted average number of common shares outstanding of 67.8 million shares for the three months ended June 30, 2008 and for the twelve months ended December 31, 2008, respectively.

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