UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

 

FORM 10-Q

 

(Mark One)

 

ý                                 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2004

 

OR

 

o                                 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        000-19119

 

CEPHALON, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

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 ý No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

 

 

CEPHALON, INC. AND SUBSIDIARIES

 

INDEX

 

Cautionary Note Regarding Forward-Looking Statements
PART I – FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets - June 30, 2004 and December 31, 2003
		Consolidated Statements of Income - Three and six months ended June 30, 2004 and 2003
		Consolidated Statements of Stockholders’ Equity - June 30, 2004 and December 31, 2003
		Consolidated Statements of Cash Flows - Six months ended June 30, 2004 and 2003
		Notes to Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk
	Item 4.	Controls and Procedures
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 6.	Exhibits and Reports on Form 8-K
SIGNATURES

 

2

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

In addition to historical facts or statements of current condition, this report and the documents into which this report is and will be incorporated contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements contained in this report constitute our expectations or forecasts of future events as of the date this report was filed with the SEC and are not statements of historical fact. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “will,” “estimate,” “expect,” “project,” “intend,” “should,” “plan,” “believe,” “hope,” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and product development. In particular, these forward-looking statements include, among others, statements about:

 

•                  our dependence on sales of PROVIGIL® (modafinil) tablets [C-IV], ACTIQ® (oral transmucosal fentanyl citrate) [C-II] and GABITRIL® (tiagabine hydrochloride) in the United States and the market prospects and future marketing efforts for these products, including with respect to expected new indications for PROVIGIL;

•                  any potential expansion of the authorized uses of our existing products;

•                  our anticipated scientific progress in our research programs and our development of potential pharmaceutical products including our ongoing or planned clinical trials, the timing and costs of such trials and the likelihood or timing of revenues from these products, if any;

•                  the timing and unpredictability of regulatory approvals in the pharmaceutical industry;

•                  our ability to adequately protect our technology and enforce our intellectual property rights and the future expiration of patent and/or regulatory exclusivity on certain of our products;

•                  our future cash flow, our ability to service or repay our existing debt and our ability to raise additional funds, if needed, in light of our current and projected level of operations;

•                  our ability to close the CIMA LABS INC. transaction and the timing thereof; and

•                  other statements regarding matters that are not historical facts or statement of current condition.

 

Any or all of our forward-looking statements in this report and in the documents we have referred you to may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Therefore, you should not place undue reliance on any such forward-looking statements. The factors that could cause actual results to differ from those expressed or implied by our forward-looking statements include, among others:

 

•                  the acceptance of our products by physicians and patients in our current markets and new markets;

•                  our ability to obtain regulatory approvals of our product candidates or of expanded indications for certain of our existing products;

•                  scientific or regulatory setbacks with respect to research programs, clinical trials, manufacturing activities and/or our existing products;

•                  unanticipated cash requirements to support current operations, expand our business or incur capital expenditures;

•                  the inability to adequately protect our key intellectual property rights, including as a result of an adverse adjudication with respect to the PROVIGIL litigation;

•                  the loss of key management or scientific personnel;

•                  the activities of our competitors in the industry, including the filing of Abbreviated New Drug Applications (ANDAs) with a Paragraph IV certification for any product containing modafinil;

•                  market conditions in the biotechnology industry that make raising capital or consummating acquisitions difficult, expensive or both;

•                  our ability to obtain the necessary regulatory approvals to complete the CIMA transaction; and

•                  enactment of new government regulations, court decisions, regulatory interpretations or other initiatives that are adverse to us or our interests.

 

3

 

We do not intend to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. We discuss in more detail the risks that we anticipate in the section above included in Part I, Item 2 hereof and entitled “Certain Risks Related to our Business.” This discussion is permitted by the Private Securities Litigation Reform Act of 1995.

 

4

 

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

 

CEPHALON, INC.  AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

 

		June 30,			December 31,
(In thousands, except share data)		2004			2003
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	1,045,994		$	1,115,699
Investments		162,836			39,464
Receivables, net		97,558			86,348
Inventory, net		68,184			61,249
Deferred tax asset		59,870			57,972
Other current assets		23,862			9,198
Total current assets		1,458,304			1,369,930
PROPERTY AND EQUIPMENT, net		136,590			126,442
GOODWILL		298,769			298,769
OTHER INTANGIBLE ASSETS, net		308,074			326,445
DEBT ISSUANCE COSTS, net		30,848			35,250
DEFERRED TAX ASSET, net		144,131			168,506
OTHER ASSETS		23,376			56,314
		$	2,400,092		$	2,381,656
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt		$	41,374		$	9,637
Accounts payable		35,248			28,591
Accrued expenses		105,530			99,038
Current portion of deferred revenues		380			422
Total current liabilities		182,532			137,688
LONG-TERM DEBT		1,363,843			1,409,417
DEFERRED REVENUES		1,576			1,736
DEFERRED TAX LIABILITIES		44,532			45,665
OTHER LIABILITIES		16,557			16,780
Total liabilities		1,609,040			1,611,286
COMMITMENTS AND CONTINGENCIES		—			—
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares authorized, 2,500,000 shares issued, and none outstanding		—			—
Common stock, $.01 par value, 200,000,000 shares authorized, 56,155,557 and 55,842,510 shares issued, and 55,846,493 and 55,533,682 shares outstanding		562			558
Additional paid-in capital		1,065,915			1,052,059