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 March 31, 1996
--------------------------
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transaction Period from ______________ to _______________
Commission File Number 0-19119
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CEPHALON, INC.
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(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
- ------------------------------------------ -----------------------
(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 May 10, 1996
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Common Stock, par value $.01 24,326,241 Shares
This Report Includes a Total of 22 Pages
CEPHALON, INC. and SUBSIDIARIES
INDEX
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Page No.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - 1
March 31, 1996 and December 31, 1995
Consolidated Statements of Operations - 2
Three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows - 3
Three months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements 4-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 18
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
PART 1 - Financial Information
- ------------------------------
Item 1. Financial Statements
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
March 31, December 31,
1996 1995
-------------- --------------
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents ($5,625,000 and $6,250,000 in custodial account) (Note 2) $ 5,826,000 $ 6,565,000
Short-term investments (Note 2) 161,762,000 171,502,000
Related-party receivables (Note 5) 57,000 33,000
Other 9,353,000 10,382,000
-------------- --------------
Total current assets 176,998,000 188,482,000
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $10,610,000 and $9,652,000 29,447,000 30,002,000
OTHER 2,884,000 2,846,000
-------------- --------------
$ 209,329,000 $ 221,330,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 2,711,000 $ 4,379,000
Accrued expenses 10,696,000 10,116,000
Current portion of long-term debt 3,931,000 3,907,000
-------------- --------------
Total current liabilities 17,338,000 18,402,000
LONG-TERM DEBT 20,674,000 21,668,000
OTHER 1,199,000 1,055,000
-------------- --------------
Total liabilities 39,211,000 41,125,000
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COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY: (Note 4)
Preferred stock, $.01 par value,
5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value, 40,000,000 shares authorized,
24,228,036 and 23,837,204 shares issued and outstanding 242,000 238,000
Additional paid-in capital 289,496,000 284,649,000
Accumulated deficit (119,620,000) (104,682,000)
-------------- --------------
Total stockholders' equity 170,118,000 180,205,000
-------------- --------------
$ 209,329,000 $ 221,330,000
============== ==============
The accompanying notes are an integral part of these financial statements.
Page 1
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
Three Months Ended
March 31,
-----------------------------
1996 1995
------------ ------------
REVENUES (Note 5):
Related party $ - $ 831,000
Other 3,728,000 1,796,000
------------ ------------
3,728,000 2,627,000
OPERATING EXPENSES (Notes 5 and 6):
Research and development 14,293,000 13,529,000
Selling, general and administrative 5,495,000 3,074,000
------------ ------------
19,788,000 16,603,000
LOSS FROM OPERATIONS (16,060,000) (13,976,000)
INTEREST:
Income 1,741,000 1,863,000
Expense (619,000) (468,000)
------------ ------------
1,122,000 1,395,000
------------ ------------
LOSS $(14,938,000) $(12,581,000)
============ ============
LOSS PER SHARE $ (0.62) $ (0.69)
============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 24,044,615 18,287,281
============ ============
The accompanying notes are an integral part of these financial statements.
Page 2
CEPHALON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Three Months Ended
March 31,
---------------------------------------
1996 1995
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss $ (14,938,000) $ (12,581,000)
Adjustments to reconcile loss to net cash
used for operating activities:
Depreciation and amortization 958,000 1,479,000
(Increase) decrease in operating assets:
Related-party receivable (24,000) (1,176,000)
Other current assets 752,000 148,000
Other long-term assets (38,000) 212,000
Increase (decrease) in operating liabilities:
Accounts payable (1,668,000) (1,137,000)
Accrued expenses 1,249,000 1,165,000
Other long-term liabilities 144,000 240,000
------------- -------------
Net cash used for operating activities (13,565,000) (11,650,000)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (512,000) (12,885,000)
Sale leaseback of property and equipment -- 237,000
Sales and maturities (purchases) of investments, net 9,740,000 6,632,000
------------- -------------
Net cash provided by (used for) investing activities 9,228,000 (6,016,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options and warrants 4,568,000 68,000
Proceeds from long-term debt -- 19,744,000
Principal payments on long-term debt (970,000) (723,000)
------------- -------------
Net cash provided by financing activities 3,598,000 19,089,000
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (739,000) 1,423,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,565,000 11,063,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,826,000 $ 12,486,000
============= =============
The accompanying notes are an integral part of these financial statements.
3
CEPHALON, INC. & SUBSIDIARIES
-----------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
(Unaudited)
1. The Company and Summary of Significant Accounting Policies
----------------------------------------------------------
The Company
Cephalon, Inc. ("Cephalon" or the "Company") seeks to discover and
develop pharmaceutical products primarily for the treatment of neurological
disorders, such as ALS, narcolepsy, peripheral neuropathies, Alzheimer's
disease, head and spinal injury and stroke. The Company has not received
regulatory approval for the commercial sale of any of its products under
development. The Company markets and sells, to neurologists in the United
States, two proprietary drugs of Bristol-Myers Squibb ("BMS") under a co-
promotion agreement. The Company has funded its operations primarily from the
proceeds of public and private placements of its equity securities and the
receipt of payments under research and development agreements.
The Company's business of developing and marketing pharmaceutical
products is subject to a number of significant risks, including risks inherent
in research and development activities and in conducting business in a highly
regulated environment. The success of the Company depends to a large degree upon
obtaining FDA and foreign regulatory approval to market products currently under
development. There can be no assurance that any of the Company's product
candidates will be approved by any regulatory authority for marketing in any
jurisdiction.
Basis of presentation
These consolidated financial statements of Cephalon, Inc. are unaudited
and include all adjustments which, in the opinion of management, are necessary
to present fairly the financial condition and results of operations as of and
for the periods set forth in the Consolidated Balance Sheets, Consolidated
Statements of Operations and Consolidated Statements of Cash Flows. All such
adjustments are of a normal, recurring nature. The consolidated financial
statements do not include all of the information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles and should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K, filed with the Securities and Exchange Commission,
which includes financial statements as of and for the three years ended December
31, 1995. The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any other
interim period or for a full year.
2. Cash, Cash Equivalents and Investments
--------------------------------------
Cash, cash equivalents and investments as of the indicated dates were as
follows:
March 31, 1996 December 31, 1995
-------------- -----------------
Cash and cash equivalents.............. $ 5,826,000 $ 6,565,000
Repurchase agreements collateralized by
U.S. Treasury securities............... 11,152,000 23,126,000
U.S. Treasury bills and notes.......... 133,336,000 140,966,000
Commercial paper....................... 17,274,000 7,410,000
------------ ------------
$167,588,000 $178,067,000
============ ============
The Company considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents. As of the
indicated periods, the Company is in compliance with all financial covenants
required under certain of its debt and lease agreements that obligate the
Company to maintain a custodial account and certain minimum cash and investment
balances and financial ratios.
4
3. Commitments and Contingencies
-----------------------------
Leases
The Company leases certain of its offices, automobiles, manufacturing
facilities and certain manufacturing equipment under operating leases. The
Company's future annual minimum payments under the facilities and equipment
leases are approximately $2,475,000 for the remainder of 1996, $3,400,000 in
each of the years 1997 to 1998, $550,000 in 1999, $425,000 in 2000 and $50,000
in 2001.
Other
The Company maintains agreements to fund research at a number of
educational and scientific institutions. These agreements are generally
renewable on an annual basis and provide the Company with the right to obtain
exclusive, royalty bearing licenses to the results of the research. The Company
is obligated under several other cancelable agreements including those entered
into for the purpose of conducting clinical trials. The Company has funding
obligations under its co-promotion agreement with BMS including an obligation of
$1,500,000 in 1996. The Company is obligated to make royalty, license fee and
milestone payments under certain of its other licensing and research and
development agreements, including in 1996, payments to Lafon of $1,633,000 to
maintain the license to modafinil.
Related party
In 1992, the Company entered into a research and development agreement
(the "Partnership Development Agreement") with Cephalon Clinical Partners, L.P.
(the "Partnership") under which the Company granted the Partnership an exclusive
license in the United States, Canada and Europe (''the Territory'') to certain
technology, principally Myotrophin, and received a non-refundable license fee of
$500,000.
The Partnership exclusively licensed the Company to manufacture and
market Myotrophin within the Territory in return for certain royalty payments
and a payment of approximately $16,000,000 (the ''Milestone Payment'') that is
to be made if Myotrophin receives regulatory approval in certain countries
within the Territory. The Company has the option to pay the Milestone Payment in
cash, common stock, or a combination thereof. The Company also entered into an
agreement with each of the Partnership's limited partners under which it
received an option (the "Purchase Option") to purchase all the limited
partnership interests in the Partnership.
If the Company elects to exercise the Purchase Option, it will be
required to make a payment of $40,275,000 in cash or, at the Company's election,
$42,369,000 in shares of the Company's common stock, valued at the market price
at the time of the exercise. If exercised, the Company would then also make
future payments to the former limited partners for eleven years at a rate of
10.1% on Myotrophin sales in the Territory (subject to certain maximums and
reducing to 5.0% after a specified return is earned by the former limited
partners).
Legal proceedings
The Company and certain of its officers have been named as defendants in
a number of civil actions filed in the U.S. District Court for the Eastern
District of Pennsylvania, which the Company will seek to have consolidated into
one action. Although the complaints differ in some respects, they allege, in
general, that the Company and the officers violated the federal securities laws
by failing to disclose material information about the methods and results of the
North American and European clinical studies of Myotrophin for use in treating
ALS. The plaintiffs seek to maintain these actions as class actions on behalf of
purchasers of the Company's common stock during specified periods between June
1995 and January 19, 1996. The plaintiffs in the actions seek unspecified
damages and other relief. The Company believes that it has meritorious defenses
to the allegations of the actions filed to date and intends to vigorously defend
the actions. The Company does not currently expect the ultimate resolution of
these actions to have a material adverse effect on the Company's financial
position .
5
4. Stockholders' Equity
--------------------
At March 31, 1996, the Company had 2,864,601 stock options outstanding
at exercise prices ranging from $0.15 per share to $31.00 per share, of which
1,317,064 options were exercisable, including 450,000 options exercisable at
prices below $10.00 per share.
At March 31, 1996, warrants to purchase 3,152,285 shares of the
Company's common stock were outstanding as follows:
Number of shares issuable Exercise Price
upon exercise of warrants Exercise Period per share
------------------------- ----------------------------------- --------------
1,965,682 September 1, 1993 - August 31, 1997 $11.32
September 1, 1997 - August 31, 1999 $13.82
411,200 September 1, 1994 - August 31, 1999 $13.70
25,403 September 1, 1993 - August 31, 1999 $11.77
750,000 February 9, 1994 - February 8, 2002 $18.50
During the quarter ended March 31, 1996, 328,633 warrants and 58,744
stock options were exercised for an aggregate exercise price of $3,844,000 and
$447,000, respectively.
5. Revenues
--------
Related Party - Cephalon Clinical Partners, L.P.
Under the Partnership Development Agreement, the Company is performing
the development and clinical testing of Myotrophin within the Territory and was
reimbursed by the Partnership for 110% of the Company's incurred costs, subject
to the Partnership's available funding. Effective late in 1995, the Partnership
depleted all of its available funding and will not provide further funding of
Myotrophin development costs to the Company. The January 1994 collaboration
between the Company and Chiron is subject to the rights of the Partnership (see
Note 6).
Revenue - Other
Other revenues for the periods below consisted primarily of the revenue
recorded under the Company's collaboration agreements as follows:
Three months ended March 31,
----------------------------
1996 1995
---- ----
TAP Holdings......... $1,328,000 $1,101,000
SmithKline Beecham... 706,000 693,000
Schering-Plough...... 750,000 --
Chiron (see Note 6).. 944,000 --
TAP Holdings
Although the research funding under the TAP Agreement expired at the end
of 1995, the Company and TAP are actively discussing the terms of an extension
of the funding arrangement. TAP has agreed to reimburse the Company for expenses
incurred in connection with the program during the first quarter of 1996.
6
6. Research and Development
------------------------
Chiron Corporation
The Company and Chiron are currently developing Myotrophin for the
treatment of ALS and certain peripheral neuropathies. Under the collaboration,
each party funded its own collaboration-related expenses through 1994. Chiron
provided the Company with a revolving credit facility (the "Note") to assist the
Company in funding its costs incurred. During the first quarter of 1995, the
Company drew down $5,274,000 against the Note. In September 1995, the Company
and Chiron adjusted their contributions to the collaboration program to result
in equal aggregate funding by each party through that date and, agreed to fund
equal amounts of Myotrophin program costs thereafter. At March 31, 1996,
$1,328,000 was receivable from Chiron for estimated first quarter 1996 costs
incurred by the Company that exceeded one-half of the quarter's total program
costs incurred.
7
ITEM 2. Management's Discussion and Analysis of Financial Condition And
---------------------------------------------------------------
Results Of Operations
---------------------
The discussion under this caption contains forward-looking statements
about the business and financial condition of Cephalon, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in this discussion. Factors which could affect
the business and financial condition of the Company include, but are not limited
to, the factors identified under the caption "Certain Risks Associated with
Cephalon's Business." Shareholders and potential investors are urged to consider
those factors in evaluating the forward-looking statements and other information
about the Company in this Report.
The following discussion also should be read in conjunction with the
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements on pages 1 to 7 of this Form 10-Q.
Since its inception in 1987, Cephalon has been engaged in the discovery
and development of pharmaceutical products to treat neurological disorders. The
Company has not received regulatory approval of, or any revenue from the sale of
any product developed by the Company, and has been unprofitable since inception.
As of March 31, 1996, the Company had an accumulated deficit of $119,620,000.
The Company has funded its operations primarily from the proceeds of
public and private placements of its equity securities and the receipt of
payments under research and development agreements. The Company entered into a
collaborative research agreement (the "Schering-Plough Agreement") with
Schering-Plough Corporation ("Schering-Plough" or "SP") in May 1990. In
May 1992, the Company licensed from Kyowa Hakko Kogyo Co., Ltd. ("Kyowa Hakko")
a class of small molecules that the Company refers to as tyrosine kinase ("TK")
modulators. In August 1992, the Company formed Cephalon Clinical Partners,
L.P. (the "Partnership") and entered into agreements with the Partnership
including an agreement (the "Partnership Development Agreement") for the
research and development of Myotrophin (rhIGF-1) in the United States, Canada
and Europe (the "Territory"). In January 1993, the Company entered into a
licensing agreement with Laboratoire L. Lafon ("Lafon"), in which the Company
received the exclusive rights to market and sell Provigil(TM) (modafinil) in
the United States, Mexico, the United Kingdom, Ireland and Japan. In June 1993,
the Company entered into a collaborative research, development and
commercialization agreement (the "SmithKline Beecham Agreement" or "SB") with
SmithKline Beecham. In July 1993, the Company entered into an agreement (the
"Kyowa Hakko Myotrophin Agreement") with Kyowa Hakko to develop and market
Myotrophin in Japan. In January 1994, the Company entered into a collaboration
with Chiron Corporation ("Chiron") for the development of Myotrophin and
certain other compounds in the neurology field worldwide, excluding Japan and
subject to the rights of the Partnership. In May 1994, the Company and TAP
Holdings Inc. ("TAP") entered into a research and development and license
agreement (the "TAP Agreement") to develop and commercialize specific compounds
for the treatment of prostate disease in the United States. In July 1994, the
Company and Bristol-Myers Squibb Company ("BMS") entered into a co-promotion
agreement (the "BMS Agreement") to market the BMS proprietary product, Stadol
NS(R) (butorphanol tartrate) Nasal Spray ("Stadol NS"), to neurologists in the
United States. The arrangement was expanded in February 1996 to include the
co-promotion of another BMS proprietary product, Serzone(R) (nefazodone
hydrochloride), to neurologists in the United States.
Certain Risks Associated with Cephalon's Business
The statements under this caption should be read in conjunction with
the forward-looking statements in this Report as well as statements presented
elsewhere by management of the Company and are intended to serve as cautionary
statements within the meaning of the Private Securities Litigation Reform Act of
1995. The following information is not intended to limit in any way the
characterization of other statements or information in this Report as cautionary
statements for such purpose.
The Company's business of developing and marketing pharmaceutical
products is subject to a number of significant risks, including risks inherent
in research and development activities and in conducting business in a regulated
environment. The success of the Company depends to a large degree upon obtaining
favorable action by the U.S. Food and Drug Administration ( the "FDA") and
foreign regulatory authorities in the process of obtaining
-8-
approvals to clinically test and ultimately market products currently under
development by the Company. The Company has had only limited experience in
filing and pursuing applications necessary to gain such regulatory approvals.
The Company's analysis of the results of its clinical studies is subject to
confirmation and interpretation by regulatory authorities, which may differ from
the Company's analysis. In addition, there can be no assurance that any
application by the Company to test or market a product will be reviewed in a
timely manner, will be accepted as adequate for filing, or that approval to test
or market a product will be received from the appropriate regulatory authority.
The Company is developing Myotrophin (rhIGF-1) in collaboration with
Chiron Corporation for use in the treatment of ALS and other neurological
indications. During 1995, the Company and Chiron announced that, based on their
analysis and interpretation of data from two Phase III studies of Myotrophin in
patients suffering from ALS, Myotrophin showed a beneficial effect in slowing
the progression of the disease. The first such study was conducted in North
America and the second study was conducted in Europe. In October 1995, the
Company submitted the results of the North American study to the FDA in support
of a treatment investigational new drug application ("T-IND") which, if
accepted, would permit the Company and Chiron to provide expanded access to
Myotrophin to patients suffering from ALS. While the FDA was reviewing that
application, the Company and Chiron announced certain results of the European
study, which were also supplied to the FDA. The FDA subsequently requested
additional information from the European study as part of its review of the
T-IND.
In January 1996, the Company and Chiron announced that the FDA had
raised concerns as to whether the data submitted and reviewed by the FDA to date
from the European study confirm the results from the North American study. The
Company and Chiron agreed to meet with the FDA to discuss those concerns and
further agreed not to initiate the T-IND program pending the outcome of those
discussions. In preparation for the FDA meeting, the Company prepared and
submitted additional analyses of the studies to supplement the information
previously provided to the agency. Although the results of certain of the
supplemental analyses of the European study were not statistically significant,
the results favored Myotrophin on various measures of disease severity and
disease progression. Following the meeting with the FDA, the two companies
announced that they intend to submit an NDA to market Myotrophin for the
treatment of ALS in 1996. The FDA has indicated to the two companies that an
application based upon currently completed studies will be accepted for filing,
will receive a priority review and will be presented to an FDA advisory
committee for its recommendation. The companies also recently announced that the
FDA has scheduled Myotrophin (rhIGF-1) for review by the FDA's Peripheral and
Central Nervous System Drugs Advisory Committee on June 7, 1996, prior to the
filing of the NDA. The companies plan to present at the meeting findings from
the two completed clinical studies discussed above. It is not possible
to predict whether the advisory committee will recommend favorable FDA action on
the T-IND or an NDA following its review of the Myotrophin data. Furthermore,
even if a positive recommendation emerged from the meeting, the advisory
committee's recommendation is not binding on the FDA and there can be no
assurance that the panel meeting will resolve the FDA's concerns about the
adequacy of the European study. As a result, there can be no assurance that the
FDA ultimately will approve expanded access to patients under a T-IND or
authorization to commercialize Myotrophin in the United States. If the FDA were
to require additional data to support approval of Myotrophin for
commercialization, whether through an additional study or further analysis of
the completed studies, there can be no assurance that the Company can obtain
such data at all or in a timely manner. A delay or failure to obtain FDA
approval for Myotrophin would seriously adversely affect the Company's business
and the price of its common stock. A delay in obtaining approval to market
Myotrophin would also have a negative effect on the Company, because other
products are under development for use in the ALS market. The potential
competition, as well as existing competition and potential limitations on
reimbursement, discussed below, could reduce the volume of sales or the price of
Myotrophin, resulting in lower revenues to the Company.
The data from the North American and European studies have not yet been
reviewed by any regulatory authority outside the United States. If foreign
regulatory authorities do not agree with the Company's interpretation of the
results from the two studies, one or more additional studies might be required.
There can be no assurance that any regulatory authority will accept the North
American and European studies as sufficient for marketing approval or that
Myotrophin will receive marketing approval in any jurisdiction for any
indication.
-9-
Based on the Company's review to date of the safety data from the two
Phase III studies, the Company believes that Myotrophin was well-tolerated.
Generally mild injection site inflammation, changes in hair growth or texture,
sweating, mild knee pain, sinusitis and hip pain were observed in all study
groups but occurred more frequently in Myotrophin-treated patients. Because ALS
is a fatal disease, it is expected that some mortalities will occur while
conducting clinical trials in ALS patients. Mortalities have occurred during the
Company's Phase III studies of Myotrophin. During the double-blind portion of
the European study, an imbalance in death rates was observed in the drug-treated
group compared to the placebo-treated group. The Company believes those
mortalities generally are due to the normal progression of the disease or other
circumstances not attributable to Myotrophin. However, there can be no assurance
that the FDA or any other regulatory authorities will concur with the Company's
analysis of the safety data generated to date or that such authorities will
consider Myotrophin to be sufficiently safe to be marketed as a treatment for
ALS or any other indication. The Company is continuing to furnish Myotrophin to
patients who participated in the ALS studies and to patients in its Phase II
program in peripheral neuropathies. The FDA requires the Company to report all
patient mortalities and any adverse events experienced in ongoing trials. There
can be no assurance that the reporting of any such events will not result in any
subsequent FDA action adverse to the Company.
Chiron has completed a U.S. manufacturing facility to produce
recombinant proteins which it intends to use to produce Myotrophin. There can be
no assurance that Chiron will be able to produce adequate quantities of
Myotrophin in a cost-effective manner. The Company and Chiron also will be
required to demonstrate that the material produced from the Chiron facility is
equivalent to the material used in the ALS clinical trials. Although the
companies believe that the material is equivalent, if bioequivalence can not be
demonstrated to the satisfaction of regulatory authorities, regulatory approval
of Myotrophin could be delayed.
The manufacturing facilities of the Company and Chiron used to produce
Myotrophin are required to comply with all applicable FDA requirements,
including Good Manufacturing Practices, and are subject to FDA inspection to
determine compliance with those requirements. There can be no assurance that the
manufacturing facilities for Myotrophin will comply with applicable
requirements.
During the first quarter of 1996, the Company announced positive
results from two Phase III studies of Provigil(TM) (modafinil) in the treatment
of the excessive daytime sleepiness associated with narcolepsy. The results of
those clinical trials have not been reviewed by the FDA or any other regulatory
authority. There can be no assurance that the FDA or other regulatory
authorities will consider that the results generated from the Company's clinical
trials demonstrate sufficient safety and efficacy to allow the filing of an NDA
to obtain marketing approval, or that, if such application is filed that any
such approval could be obtained. In addition, Lafon's manufacturing facilities
for the active substance used in Provigil are required to comply with all
applicable FDA requirements, and are subject to an FDA inspection before an NDA
can be approved. There can be no assurance that the manufacturing facilities for
Provigil will comply with applicable requirements.
Lafon has filed for marketing approval of modafinil throughout the
European Union through the multi-state procedures promulgated by the Committee
for Proprietary Medicinal Products ("CPMP"), which includes applications in the
United Kingdom and the Republic of Ireland. As part of the CPMP review process,
Lafon has received questions from the CPMP regarding its application. There can
be no assurance that the questions can be answered to the satisfaction of the
CPMP countries, that the application will be reviewed by the CPMP in a timely
manner or that Provigil will be approved by the CPMP. Even if the CPMP approves
the application, the Company will be required to obtain the separate marketing
authorization from the applicable regulatory authorities in the United Kingdom
and the Republic of Ireland prior to marketing Provigil in those countries.
There can be no assurance that any such approvals will be obtained.
Lafon has licensed rights to modafinil to third parties in Canada as
well as certain countries in Europe, and may license other territories to other
third parties in the future. There is no contractual requirement that the
licensees and Lafon coordinate their marketing activities related to modafinil.
Furthermore, individual reimbursement policies in each country and applicable
antitrust laws prohibit the coordination of the pricing of
-10-
modafinil in various jurisdictions. The marketing activities of the other
licensees therefore may affect the Company's marketing of Provigil in its
territories.
Additionally, the results of clinical studies of Myotrophin to be
conducted by the Company's licensee in Japan and the result of clinical studies
of modafinil being conducted by licensees of Lafon in other countries are
required to be reported by the Company to the FDA and other regulatory
authorities. The reporting of the results of these other studies, if negative,
could adversely affect the regulatory review of the Company's product approval
applications.
The major source of the Company's current revenue is derived from
collaborative research and development agreements that are subject to periodic
review by the respective parties and achievement of certain milestones by the
Company. Even if Myotrophin and Provigil are approved for commercialization, the
Company can not predict at this time the potential revenues to be received from
sales of Myotrophin for use in treating ALS or from sales of Provigil for use in
connection with narcolepsy. ALS and narcolepsy each qualify as orphan diseases
under the Orphan Drug Law, which generally means that the potential patient
population for each indication is limited. Furthermore, the FDA recently
approved Rilutek(R) (riluzole) for use in treating ALS, which is now being
commercialized in the United States by Rhone-Poulenc Rorer. It is not clear
whether ALS patients, given the constraints of drug reimbursement programs,
would be able to support both Rilutek and Myotrophin (as well as any other drugs
which may be approved in the future for use in treating ALS), especially if
Myotrophin has a higher price than competitive drugs. Competition for Provigil
also is likely, because narcolepsy is currently treated with several drugs, all
of which are available generically and have been available for a number of
years.
Negative results from any of its ongoing clinical trials or trials by
third parties or negative assessments from regulatory authorities or
termination of any of the Company's collaborative research agreements would
adversely affect the Company's business and the price of its common stock.
The Company's business is subject to additional significant risks,
including but not limited to the need to obtain additional funds to support its
research, development and commercialization efforts, the Company's dependence on
collaborative partners and third party suppliers and other manufacturing
uncertainties, the Company's relative inexperience in marketing and distributing
commercial products, uncertainties associated with obtaining and enforcing its
patents and uncertainties associated with the patent rights of others,
uncertainties regarding government reforms and of product pricing and
reimbursement levels, technological change and competition from companies and
institutions developing products for the same indications as the Company's
product candidates, the product liability risks associated with being the
manufacturer or seller of pharmaceutical products, and reliance by the Company
on key personnel.
Furthermore, future announcements concerning the Company's competitors
or other companies in the biopharmaceutical industry, including regulatory
delays, technological innovations or commercial products, patents, government
regulations, developments concerning proprietary rights, litigation or public
concern as to the safety or commercial value of the Company's products may have
a significant effect on the market price of the Company's common stock.
-11-
Liquidity and Capital Resources
Cash, cash equivalents and investments as of the indicated dates were as
follows:
March 31, 1996 December 31, 1995
-------------- -----------------
$167,588,000 $178,067,000
Percentage of total assets......... 80% 80%
Cash equivalents and investments consisted primarily of short to
intermediate term obligations of the United States government, repurchase
agreements collaterallized by such obligations and short term commercial paper.
Certain of the Company's debt and lease agreements contain covenants that
obligate the Company to maintain certain minimum cash and investment balances
and financial ratios, and under one of which, $5,625,000 was held in a custodial
account as of March 31, 1996.
The following is a summary of selected cash flow information for the
quarter ended March 31:
1996 1995
---- ----
Net cash used for operating activities.... $(13,565,000) $(11,650,000)
Net cash provided by (used for)
investing activities..................... 9,228,000 (6,016,000)
Net cash provided by financing
activities............................... 3,598,000 19,089,000
Net cash used for operating activities
Operating cash inflows
A summary of the major sources of receipts reflected in net cash used
for operating activities for the quarter ended March 31 is as follows:
1996 1995
---- ----
TAP Holdings............................. $1,415,000 $1,220,000
SmithKline Beecham....................... 707,000 687,000
Schering-Plough.......................... 750,000 --
Chiron Corporation....................... 2,803,000 --
Pursuant to the Partnership Development Agreement, the Company's share
of the costs to develop Myotrophin within the Territory were reimbursed by the
Partnership to the extent of the Partnership's available funds. The Company did
not receive any payments from the Partnership in the first quarter of 1995
because the related first quarter cost were reimbursed in the subsequent
quarter. The Company did not receive payments from the Partnership in the first
quarter of 1996 due to the depletion of the Partnership's available funding late
in 1995.
Pursuant to the BMS Agreement, BMS makes quarterly payments to the
Company based primarily on a percentage of sales within the neurology market in
excess of a predetermined base amount. At March 31, 1996, $2,027,000 was
receivable from BMS, representing fourth quarter 1995 and first quarter 1996
payments earned under the co-promotion agreement. Activity under the BMS
Agreement was initiated in the fourth quarter of 1994. The payment related to
the fourth quarter of 1994 was received in the second quarter of 1995.
Under the terms of the 1994 TAP Agreement, the Company performs
research and preclinical development for which it is 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. The payments received from TAP in the quarters ended March
31, 1996 and 1995, represent reimbursement of fourth quarter 1995 and 1994 costs
incurred by the Company.
-12-
Under the terms of the June 1993 SmithKline Beecham Agreement, the
Company performs research and preclinical development for which it is
compensated quarterly by SB, based on a contract rate per individual assigned to
the program for that quarter, and subject to annual budgetary maximums, periodic
review by SB and achievement of certain milestones by the Company. At March 31,
1996, $179,000 was receivable from SB.
Under the terms of the 1990 Schering-Plough Agreement, through May 1995,
the Company received annual milestone payments from SP, generally in the second
quarter. The agreement was renewed effective May 1995, under which the Company
performs research and development for which it is compensated quarterly by SP,
based on a contract rate per individual assigned to the program for that quarter
and certain external costs, all subject to budgetary maximums, periodic review
by SP and achievement of certain milestones by the Company.
The Company and Chiron are currently developing Myotrophin for the
treatment of ALS and certain peripheral neuropathies. Under the collaboration,
each party funded its own collaboration-related expenses through 1994. Chiron
provided the Company with a revolving credit facility (the "Note") to assist the
Company in funding its costs incurred. During the first quarter of 1995, the
Company drew down $5,274,000 against the Note. In September 1995, the Company
and Chiron adjusted their contributions to the collaboration program to result
in equal aggregate funding by each party through that date and, agreed to fund
equal amounts of Myotrophin program costs thereafter. At March 31, 1996,
$1,328,000 was receivable from Chiron for estimated first quarter 1996 costs
incurred by the Company that exceeded one-half of the quarter's total program
costs incurred.
Effective late in 1995, the Partnership depleted all of its available funds
and therefore, the Company will not receive further payments from the
Partnership for the development of Myotrophin, although expenses associated with
Myotrophin development will continue. The Company expects to receive payments
under the BMS Agreement in 1996, but does not expect receipts to be in excess of
related expenses incurred. Although the research funding under the TAP
Agreement expired at the end of 1995, the Company and TAP are actively
discussing the terms of an extension of the funding arrangement. TAP has agreed
to reimburse the Company for expenses incurred in connection with the program
during the first quarter of 1996. There can be no assurance that a mutually
satisfactory agreement will be reached by the parties to extend the funding
arrangement. The agreement with SP calls for payments in 1996 and 1997 of
$3,000,000 and $1,250,000, respectively, or $3,300,000 in 1997 if SP extends the
agreement for a third year. Payments in 1996 under the SB Agreement are
budgeted under such agreement to approximate 1995 levels. The continuation of
the research funding under the agreements with SB and SP, during 1996 and
thereafter, are subject to the achievement of certain development milestones and
periodic review by those companies. Under the collaboration with Chiron, the
Company expects receipts in 1996 to be substantially less than 1995; depending
on the development of the Myotrophin program and the relative costs incurred by
the two companies in the development and commercialization of Myotrophin, the
Company may be required to make payments to Chiron.
Operating cash outflows
Net cash used for operating activities increased in the first quarter of
1996 as compared to the same 1995 period reflecting increases in the funding of
expenses due primarily to an increase in selling, general and administrative
expenses. The increase in the funding of selling, general and administrative
expenses is due primarily to the costs associated with the Company's sales and
marketing activities in conjunction with the BMS Agreement and pre-marketing
efforts in support of the products in development, increases in other external
costs and a 25% increase in staffing levels. Additionally, funding for research
and development expenses increased in the 1996 period from the 1995 period due
to a 25% staff increase and the funding of expenses associated with the
production of clinical supplies of Myotrophin at the Company's manufacturing
facility. The increase in the funding of research and development expenses was
offset by decreases in expenses associated with clinical trials of Myotrophin
and modafinil due to the completion of the double-blind portion of these
clinical studies.
The Company expects to continue substantial spending on research and
development.
The costs to develop modafinil are expected to continue to be significant
in 1996, even as the double-blind clinical studies are concluded, due to the
cost of conducting data analyses, the expected continuation of open label
-13-
extensions of those studies and preparing for the filing of an NDA.
Additionally, the Company expects to pay $1,633,000 in 1996 to Lafon to maintain
the license to modafinil. The overall funding of the modafinil program will be
assessed as the analyses of the results of the clinical trials are further
evaluated and are discussed with regulatory authorities (see "Certain Risks
Associated with Cephalon's Business").
The costs to develop Myotrophin are expected to continue to be significant
in 1996 due to the cost of conducting continuing data analyses, continuing open
label extensions of two Phase III ALS clinical studies, continuation of a
Phase II clinical program to test the potential utility of Myotrophin in the
treatment of peripheral neuropathies and preparing for the potential filing of
an NDA. The Company has decreased the level of operations required at its
Beltsville manufacturing facility as the collaboration's requirements of
Myotrophin are expected to be provided by Chiron. The Company intends to seek
third-party manufacturing contracts to partially defray the costs of operating
its Beltsville facility. There is no assurance the Company will be able to
obtain any such contract manufacturing. The Company may also seek to acquire
additional interests in the Partnership and may incur significant costs to
acquire such interests. In addition, if Myotrophin receives regulatory approval
in certain countries within the Territory, the Company will pay to the
Partnership a milestone payment of approximately $16,000,000 in cash, common
stock or a combination thereof. The amount the Company spends in 1996 on its
Myotrophin programs depends to a great degree on the results of dialogues with
regulatory authorities (see "Certain Risks Associated with Cephalon's
Business").
The Company also expects to incur significant expenses under the
collaborations with SB, TAP and SP which may exceed payments received under the
related agreements. The Company also expects to incur significant costs in its
other development programs.
The actual costs to develop Myotrophin, modafinil, and other potential
therapeutics are subject to a number of uncertainties which could greatly
influence the level and timing of development costs, including among other
items, the duration, size, and expense of the required preclinical and clinical
testing, costs of manufacturing clinical supplies, the level and timing of
patient enrollment and the expense of any filing for regulatory approval.
Pursuant to the BMS Agreement the Company is obligated to fund, in 1996,
$1,500,000 of promotional and support activities targeting neurologists.
Additionally, the Company may expand its selling, and general and administrative
activities in the United States and Europe. The Company will assess the degree
of expansion required in the selling, general and administrative area as the
Company evaluates the results and analyses of the Myotrophin and modafinil
programs. There can be no assurance that the Company will receive marketing
approval for any of its product candidates under development or that the funds
expended if the Company expands these areas, will be recovered in the future by
sales, if any, of such products (See "Certain Risks Associated with Cephalon's
Business").
Operating cash requirements
Net cash used for operating activities is expected to increase in 1996
principally due to decreases in payments the Company expects to receive under
its collaboration agreements, including the Chiron agreement and the Partnership
Development Agreement and, as further described above, operating cash outflows
are expected to increase in 1996.
-14-
Net cash used for investment activities
A summary of net cash used for investment activities for the quarter ended
March 31 is as follows:
1996 1995
---- ----
Purchases of property and equipment............. $ (512,000) $(12,885,000)
Sale leaseback of property and equipment........ -- 237,000
Sales and maturities (purchases) of
investments, net............................... 9,740,000 6,632,000
---------- ------------
Net cash provided by (used for)
investment activities......................... $9,228,000 $ (6,016,000)
========== ============
Purchases of property and equipment decreased in 1996 as compared to the
same period in 1995 since the 1995 period includes the March 1995 purchase of
the two buildings currently housing the Company's administrative offices and
research facilities in West Chester, Pennsylvania and a third adjacent 49,000
square foot building, currently occupied by a third party, for a total purchase
price of $11,000,000.
The Company may incur additional capital expenditures in 1996 as it
continues to assess its facility and equipment requirements.
Sales and maturities (purchases) of investments, net represent the
investment of cash generated primarily from the Company's financing activities,
net of cash used to fund operations and other investing activities.
Net cash provided by financing activities
A summary of cash provided by financing activities for the quarter ended
March 31 is as follows:
1996 1995
---- ----
Proceeds from exercise of common stock
options and warrants................... $4,568,000 $ 68,000
Principal payments on long-term debt.... (970,000) (723,000)
Proceeds from long-term debt............ -- 19,744,000
---------- -----------
Net cash provided by financing
activities............................. $3,598,000 $19,089,000
========== ===========
During the first quarter of 1996, the Company received cash from the
exercise of 379,768 warrants and 36,962 stock options in the amount of
$4,453,000 and $115,000, respectively. The extent and timing of future warrant
and option exercises, if any, are primarily dependent upon the market price of
the Company's common stock and general financial market conditions, as well as
the exercise prices and expiration dates of the warrants and options.
Proceeds from long-term debt in the first quarter of 1995 include
$15,799,000 borrowed to finance the West Chester building purchase. The
building purchase was financed through the assumption of a $6,900,000 first
mortgage and from mortgage loans provided by the Commonwealth of Pennsylvania
(the "State Funding") in the amount of $11,600,000. The State Funding includes
a 2% interest rate that is subject to increase if the Company fails to hire a
specified number of new employees in Chester County, Pennsylvania by the end of
1999. A portion of the State Funding financed improvements previously made to
the buildings and the remaining $2,700,000, held in escrow, is earmarked to fund
future improvements. Of the total State Funding, $1,330,000 was received in
April 1995. The Company also drew $5,274,000 in the first quarter of 1995
against the Note provided by Chiron to fund collaboration-related expenses.
-15-
Commitments and contingencies
Leases
The Company leases certain of its offices, automobiles, manufacturing
facilities and certain manufacturing equipment under operating leases. The
Company's future annual minimum payments under the facilities and equipment
leases are approximately $2,475,000 for the remainder of 1996, $3,400,000 in
each of the years 1997 to 1998, $550,000 in 1999, $425,000 in 2000 and $50,000
in 2001.
Other
The Company maintains agreements to fund research at a number of
educational and scientific institutions. These agreements are generally
renewable on an annual basis and provide the Company with the right to obtain
exclusive, royalty bearing licenses to the results of the research. The Company
is obligated under several other cancelable agreements including those entered
into for the purpose of conducting clinical trials. The Company has funding
obligations under its co-promotion agreement with BMS including an obligation of
$1,500,000 in 1996. The Company is obligated to make royalty, license fee and
milestone payments under certain of its other licensing and research and
development agreements, including in 1996, payments to Lafon of $1,633,000 to
maintain the license to modafinil.
Related party
In 1992, the Company entered into the Partnership Development Agreement
with the Partnership under which the Company granted the Partnership an
exclusive license in the Territory to certain technology, principally
Myotrophin, and received a non-refundable license fee of $500,000.
The Partnership exclusively licensed the Company to manufacture and market
Myotrophin within the Territory in return for certain royalty payments and a
payment of approximately $16,000,000 (the ''Milestone Payment'') that is to be
made if Myotrophin receives regulatory approval in certain countries within the
Territory. The Company has the option to pay the Milestone Payment in cash,
common stock, or a combination thereof. The Company also entered into an
agreement with each of the Partnership's limited partners under which it
received an option (the "Purchase Option") to purchase all the limited
partnership interests in the Partnership.
If the Company elects to exercise the Purchase Option, it will be required
to make a payment of $40,275,000 in cash or, at the Company's election,
$42,369,000 in shares of the Company's common stock, valued at the market price
at the time of the exercise. If exercised, the Company would then also make
future payments to the former limited partners for eleven years at a rate of
10.1% on Myotrophin sales in the Territory (subject to certain maximums and
reducing to 5.0% after a specified return is earned by the former limited
partners).
Legal proceedings
The Company and certain of its officers have been named as defendants in a
number of civil actions filed in the U.S. District Court for the Eastern
District of Pennsylvania, which the Company will seek to have consolidated into
one action. Although the complaints differ in some respects, they allege, in
general, that the Company and the officers violated the federal securities laws
by failing to disclose material information about the methods and results of the
North American and European clinical studies of Myotrophin for use in treating
ALS. The plaintiffs seek to maintain these actions as class actions on behalf
of purchasers of the Company's common stock during specified periods between
June 1995 and January 19, 1996. The plaintiffs in the actions seek unspecified
damages and other relief. The Company believes that it has meritorious defenses
to the allegations of the actions filed to date and intends to vigorously defend
the actions.
Funding Requirements
The Company expects that more cash will be required to fund operations in
1996 than was required in 1995. The Company also expects to use cash to fund
purchases of property and equipment and to service its long-term debt.
The Company believes that its cash and investment resources are adequate to
fund its anticipated level of cash requirements for a period in excess of one
year. However, the Company's funding requirements may change
-16-
due to numerous factors including, but not limited to, the results of the
Company's ongoing clinical trials and other research and development programs,
the expansion of research and development and administrative facilities and the
ability to meet supply requirements, technological advances and competition and
regulatory requirements (see "Certain Risks Associated with Cephalon's
Business"). Additionally, the Company may seek to acquire some or all of the
partnership interests in the Partnership or may seek to acquire other entities,
additional technologies, product candidates or products.
Because of the Company's long-term capital requirements it may seek to
access the public or private markets whenever conditions are favorable by
issuing debt, common or preferred stock, warrants or other securities. The
Company may also seek additional funding through corporate collaborations and
other financing vehicles, potentially including "off-balance sheet" financing
through limited partnerships or corporations. There can be no assurance that
such funding will be available at all or on terms acceptable to the Company.
Furthermore, market reaction to the Company's financing activities may
adversely affect the price of the Company's common stock. If adequate funds are
not available, the Company may be required to significantly curtail one or more
of its research, development or strategic initiatives or obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, product candidates or
products on terms less favorable than if it developed the product on its own.
Results of Operations
This section should be read in conjunction with the more detailed
discussion under "Liquidity and Capital Resources."
A summary of revenues and expenses for the quarter ended March 31 is as
follows:
% change
1996 1995 1996 vs. 1995
---- ---- -------------
Revenues............................... $ 3,728,000 $ 2,627,000 42%
Research and development expenses...... 14,293,000 13,529,000 6
Selling, general and administrative
expenses.............................. 5,495,000 3,074,000 79
Interest income, net................... 1,122,000 1,395,000 (20)
The aggregate increase in revenues in the 1996 period from the 1995 period
primarily resulted from increases in revenue recognized under the agreements
with TAP, SP and Chiron during the quarter ended March 31, 1996, which was
offset by the elimination of revenue recognized under the Partnership
Development Agreement.
In August 1995, the Partnership collected the final limited partner
subscription installment payments. The Company will not recognize revenue from
the Partnership under the Partnership Development Agreement in 1996. The
Company and Chiron are to share equally in collaboration-related costs in 1996.
The Company expects revenues under the Chiron collaboration in 1996 to be
substantially less than 1995 and, depending on the relative costs incurred by
the two companies, the Company may incur expenses from payments made to Chiron.
Under the BMS Agreement, the Company will only recognize revenue upon the
attainment of sales levels in excess of the base amount specified in the
agreement, which, if attained, is expected to occur in the later half of 1996.
Revenues to be recognized in 1996 under the agreements with TAP, SB and SP are
expected to approximate 1995 levels, however the extension of the funding
arrangement under the TAP Agreement is currently being negotiated.
The 6% increase in research and development expenses in the 1996 period as
compared to the 1995 period reflects increased expenses due to a 25% increase in
staffing levels in the period that were offset by decreases in the costs
associated with conducting clinical trials of Myotrophin and modafinil, due to
the completion of the double-blind portion of those studies.
-17-
The significant increase in the selling, general and administrative area in
the 1996 period as compared to the same 1995 period is primarily attributable to
the sales and marketing activities to co-promote Stadol NS and Serzone with BMS
and other products in development, increased staffing levels and other external
expenses.
Summary of Results of Operations
The Company expects that revenues will be substantially less in 1996 than
in 1995 due primarily to the reduction in revenues from the Chiron collaboration
and the Partnership. A substantial portion of the Company's revenues are
derived from collaboration agreements with TAP, SB and SP, the continuation of
which is subject to periodic review and achievement of certain milestones. The
Company expects that it will continue to incur significant research and
development costs which may increase in 1996 and also expects its selling,
general and administrative costs to increase as it continues to fulfill its
funding commitment pursuant to the BMS Agreement and further expands its
marketing efforts. The costs to be incurred by the Company depend to a large
degree on the results of regulatory actions with respect to Myotrophin, Provigil
and other product programs. In summary, the Company expects its loss in 1996
will be larger than losses incurred in prior years.
The Company does not believe that inflation has had a material impact on
the results of its operations since inception.
Loss Per Share
Options, restricted stock grants and warrants outstanding have been
excluded from the per share calculations, because their inclusion would be
antidilutive. At March 31, 1996, the Company had approximately 2,864,601
options outstanding under its stock option plan with exercise prices ranging
from $0.15 to $31.00 per share. As further described in the Notes to the
Consolidated Financial Statements, at March 31, 1996, warrants to purchase
3,152,285 shares of common stock were exercisable with prices ranging from
$11.32 to $18.50, with various exercise periods through February 2002.
-18-
PART II OTHER INFORMATION
- ------------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Restated Certificate of Incorporation of the
Registrant
10.6(a) Cephalon, Inc. Stock Option Plan, as amended
10.6(b) Cephalon, Inc. Equity Compensation Plan, as
amended
(b) Reports on Form 8-K:
During the quarter ended March 31, 1996, the Registrant
filed Current Reports on Form 8-K for the following events:
(i) January 19, 1996, announcing that the U.S. Food and
Drug Administration has concerns as to whether the data submitted to date for
the T-IND from the European study support the positive results from the North
American study. Cephalon and Chiron have agreed not to initiate the T-IND early
access program pending outcome of those discussions.
(ii) February 12, 1996, Cephalon, Inc. announced the
results from the first of two Phase III clinical trials of Provigil(TM)
(modafinil) in patients with narcolepsy.
(iii) February 20, 1996, Cephalon, Inc. announced the
1995 financial results and the co-promotion of Serzone(R) (nefazodone HCL),
which is manufactured by Bristol-Myers Squibb Company .
19
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)
May 13, 1996 By /s/ Frank Baldino, Jr., Ph.D.
---------------------------------
Frank Baldino, Jr., Ph.D.
President, Chief Executive Officer
and Director
(Principal executive officer)
By /s/ J. Kevin Buchi
-----------------------
J. Kevin Buchi
Senior Vice President, Finance and Chief
Financial Officer
(Principal financial and accounting officer)
20
EXHIBIT INDEX
Exhibit
Exhibit Page No.
- ------- --------
3.1 Restated Certificate of Incorporation of the Registrant
10.6(a) Cephalon, Inc. Stock Option Plan, as amended
10.6(b) Cephalon, Inc. Equity Compensation Plan, as amended